-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SNWbrdBfGpfWwB2xGBmGQObaWsuFFktU84eWROO58WbJd1UK1mGdSHhBK8PuZufO 9BFyV6BL2DibG2pNkgKY8A== 0000930661-96-001805.txt : 19961213 0000930661-96-001805.hdr.sgml : 19961213 ACCESSION NUMBER: 0000930661-96-001805 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19961212 SROS: NASD GROUP MEMBERS: SAM WYLY, CHARLES J. WYLY, JR., MAVERICK ENTRE. FU 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: 96679967 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. 26) Michaels Stores, Inc. (Name of Issuer) Common Stock, par value $0.10 per share (Title of Class of Securities) 594087-10-8 (CUSIP Number) Robert L. Estep Jones, Day, Reavis & Pogue 2300 Trammell Crow Center 2001 Ross Avenue Dallas, Texas 75201 (214) 220-3939 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) November 22, 1996 (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 the 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 less than five percent of such class. See Rule 13d-7.) (Continued on following pages) (Page 1 of 121 Pages) CUSIP NO. 594087-10-8 13D/A Page 2 of 121 Pages ================================================================================ 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Sam Wyly ###-##-#### - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* N/A - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 1,631,905 OWNED BY ------------------------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON WITH 300,000 ------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 2,265,238 ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 300,000 ------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,565,238 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*[_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.5% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN ================================================================================ CUSIP NO. 594087-10-8 13D/A Page 3 of 121 Pages ================================================================================ 1 NAME 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 OF A GROUP* (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* N/A - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 1,597,607 OWNED BY ------------------------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON WITH 300,000 ------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 1,865,024 ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 300,000 ------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,165,024 - -------------------------------------------------------------------------------- 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 ================================================================================ CUSIP NO. 594087-10-8 13D/A Page 4 of 121 Pages ================================================================================ 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Maverick Entrepreneurs Fund, Ltd. (f/k/a First Dallas Limited) 75-2319145 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* N/A - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Texas - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 300,000 OWNED BY ------------------------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON WITH 0 ------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 300,000 ------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 0 ------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 300,000 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*[_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.3% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN ================================================================================ CUSIP NO. 594087-10-8 13D/A Page 5 of 121 Pages This Schedule 13D/A Amendment No. 26 hereby amends the Schedule 13D, as amended by Amendment Nos. 1 through 25 (collectively the "Schedule 13D"), filed jointly by Sam Wyly, Charles J. Wyly, Jr. and Maverick Entrepreneurs Fund, Ltd. (f/k/a First Dallas Limited) ("Maverick Entrepreneurs" and collectively with Sam Wyly and Charles J. Wyly, Jr., the "Reporting Persons") with respect to the securities of Michaels Stores, Inc. (the "Company"). Defined terms used but not defined herein shall have the meanings as previously set forth in the Schedule 13D. Item 1. Security and Issuer. ------------------- Not amended. Item 2. Identity and Background. ----------------------- Not amended. Item 3. Source and Amount of Funds or Other Consideration. ------------------------------------------------- Item 3 is hereby amended to add the following at the end thereof: The source of funds to purchase a portion of the shares of Common Stock beneficially owned by the Reporting Persons was borrowings under revolving lines of credit maintained by Maverick Entrepreneurs and each of the trusts described in Item 5 of this Schedule 13D with each of NationsBank of Texas, N.A. ("NationsBank") and Citibank, N.A. ("Citibank"). See Item 6 below. The options described in Item 5 as held by Sam Wyly and Charles J. Wyly, Jr. were granted under stock option plans of the Company. 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: (a)-(c) Mr. Sam Wyly beneficially owns 2,565,238 shares, or approximately 10.5% of the outstanding Common Stock. Sam Wyly beneficially owns (i) 633,333 of such shares by virtue of this ownership of options to purchase Common Stock, (ii) 1,074,536 of such shares as general partner of Tallulah, Ltd., (iii) 300,000 of such shares as general partner of Maverick Entrepreneurs, (iv) 15,836 of such shares by virtue of his holding a power of attorney to vote the shares of two adult children, and (v) an aggregate of 541,533 of such shares as trustee of the trusts listed below:
Number of Shares Name of Trust Beneficially 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 5. The Kelly Wyly Elliot Trust 128,861
Sam Wyly possesses sole voting power with respect to 1,631,905 shares of Common Stock, sole dispositive power with respect to 2,265,238 shares of Common Stock and shared voting and dispositive power with respect to 300,000 shares of Common Stock held by Maverick Entrepreneurs. CUSIP NO. 594087-10-8 13D/A Page 6 of 121 Pages Charles J. Wyly, Jr. beneficially owns 2,165,024 shares, or approximately 9.0% of the outstanding Common Stock. Charles J. Wyly, Jr. beneficially owns (i) 267,417 of such shares by virtue of his ownership of options to purchase Common Stock, (ii) 755,000 of such shares as general partner of Brush Creek, Ltd., (iii) 300,000 of such shares as general partner of Maverick Entrepreneurs, (iv) 374 of such shares by virtue of his holding a power of attorney to vote the shares of two adult children, and (v) an aggregate of 842,233 of such shares as trustee of the trusts listed below:
Number of Shares Name of Trust Beneficially Owned ------------- ------------------ 1. The Martha Caroline Wyly Trust 170,000 2. The Charles J. Wyly, III Trust 224,247 3. The Emily Ann Wyly Trust 224,146 4. The Jennifer Lynn Wyly Trust 223,840
Charles J. Wyly, Jr. possesses sole voting power with respect to 1,597,607 shares of Common Stock, sole dispositive power with respect to 1,865,024 shares of Common Stock and shared voting and dispositive power with respect to 300,000 shares of Common Stock held by Maverick Entrepreneurs. Maverick Entrepreneurs beneficially owns and possesses sole voting and dispositive power with respect to 300,000 shares, or approximately 1.3% of the outstanding Common Stock. The Reporting Persons as a group beneficially own 4,430,262 shares of Common Stock, or approximately 18.0% of the outstanding Common Stock. The Reporting Persons as a group possess sole voting power with respect to 3,529,512 shares of Common Stock and sole dispositive power with respect to 4,430,262 shares of Common Stock. (d)-(e) Not amended. Item 6. Contracts, Arrangements, Understandings or Relationships with respect --------------------------------------------------------------------- to Securities of the Issuer. - --------------------------- Item 6 is hereby amended to add the following at the end thereof: Each of (i) the trusts described in Item 5 for which Sam Wyly is trustee (the "Sam Wyly Trusts") and Tallulah, Ltd., (ii) the trusts described in Item 5 for which Charles J. Wyly, Jr. is trustee (the "Charles Wyly Trusts") and Brush Creek, Ltd., and (iii) Maverick Entrepreneurs maintain separate revolving lines of credit with NationsBank (collectively, the "NationsBank Credit Facilities"). The obligations of each borrower to repay advances made under its NationsBank Credit Facilities are several, full-recourse obligations that are secured by the pledge of shares of Common Stock beneficially owned by the Reporting Persons as well as other securities. Each advance under a NationsBank Credit Facility bears interest at NationsBank's prime rate or at a floating rate, as elected by the borrower. Sam Wyly and Charles J. Wyly, Jr. have each guaranteed the obligations of Maverick Entrepreneurs under its NationsBank Credit Facility. The NationsBank Credit Facilities were amended and restated on November 22, 1996 to provide that all amounts outstanding under the NationsBank Credit Facilities will mature on November 22, 1998. Each of (i) Tallulah, Ltd., (ii) Brush Creek, Ltd., (iii) each of the Sam Wyly Trusts, and (iv) each of the Charles Wyly Trusts also maintains a separate revolving line of credit with Citibank (collectively, the "Citibank Credit Facilities"). The obligations of each borrower to repay advances made under its Citibank Credit Facility are full-recourse obligations that are secured by the borrower's pledge of certain shares of Common Stock beneficially owned by the Reporting Persons, as well as other securities and assets. Each advance under a Citibank Credit Facility bears interest at a rate of Citibank's announced base rate, plus 1.0%, or at a Eurodollar-based rate, minus 1.0%, as elected by the borrower, Sam Wyly and Charles J. Wyly, Jr. have guaranteed the obligations of Tallulah, Ltd. and Brush Creek, Ltd., respectively, under the applicable Citibank Credit Facility, and certain of the beneficiaries of each of the Sam Wyly Trusts and the Charles Wyly Trusts, have guaranteed the obligations of the respective trusts under the applicable Citibank Credit Facility. All amounts outstanding under the Citibank Credit Facilities mature on December 16, 1996. Each of the Sam Wyly Trusts, the Charles Wyly Trusts, Maverick Entrepreneurs, Tallulah, Ltd. and Brush Creek, Ltd. presently intends to renew its Citibank Credit Facility, or refinance such credit facility with another lender, prior to such maturity date. The foregoing description of the agreements relating to the NationsBank Credit Facilities and the Citibank Credit Facilities is qualified in its entirety by reference to such agreements, copies of which have been filed as exhibits to this Schedule 13D and are incorporated herein by reference. CUSIP NO. 594087-10-8 13D/A Page 7 of 121 Pages Item 7. Material to be Filed as Exhibits. -------------------------------- Exhibit 1. Agreement pursuant to Rule 13d-1(f)(1)(iii). Exhibit 2. Form of Amended and Restated Loan Agreement, dated November 22, 1996, among NationsBank and (i) the Sam Wyly Trusts and Tallulah, Ltd.; (ii) the Charles Wyly Trusts and Brush Creek Limited; and (iii) Maverick Entrepreneurs. Exhibit 3. Form of Pledge Agreement, dated November 22, 1994, between NationsBank and (i) Tallulah, Ltd.; (ii) each of the Sam Wyly Trusts; (iii) Brush Creek, Ltd.; (iv) each of the Charles Wyly Trusts; and (v) Maverick Entrepreneurs. Exhibit 4. Form of Collateral Maintenance Agreement, dated November 22, 1994, between NationsBank and (i) Tallulah, Ltd.; (ii) each of the Sam Wyly Trusts; (iii) Brush Creek, Ltd.; (iv) each of the Charles Wyly Trusts; and (v) Maverick Entrepreneurs. Exhibit 5. Guaranty, executed as of November 22, 1994, by Tallulah, Ltd., the Sam Wyly Trusts, Brush Creek, Ltd., the Charles Wyly Trusts, and Even Wyly, in favor of NationsBank. Exhibit 6. Form of Credit Agreement, dated as of December 16, 1994, as amended, between Citibank and (i) Tallulah, Ltd.; (ii) each of the Sam Wyly Trusts; (iii) Brush Creek, Ltd.; and (iv) each of the Charles Wyly Trusts. Exhibit 7. Form of Pledge Agreement, dated as of December 16, 1994, as amended, between Citibank, and (i) Tallulah, Ltd.; (ii) each of the Sam Wyly Trusts; (iii) Brush Creek, Ltd.; and (iv) each of the Charles Wyly Trusts. Exhibit 8. Form of Guaranty Agreement, dated as of December 16, 1994, in favor of Citibank by (i) the general partner of Tallulah, Ltd.; (ii) the general partner of Brush Creek, Ltd.; and (iii) certain of the beneficiaries of each of the Sam Wyly Trusts and the Charles Wyly Trusts. CUSIP NO. 594087-10-8 13D/A Page 8 of 121 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: December 10, 1996 /s/ SAM WYLY ----------------------------------------- Sam Wyly /s/ CHARLES J. WYLY, JR. ----------------------------------------- Charles J. Wyly, Jr. MAVERICK ENTREPRENEURS FUND, LTD. (f/k/a 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/A Page 9 of 121 Pages EXHIBIT INDEX Exhibit No. - ----------- 1. Agreement pursuant to Rule 13d-1(f)(1)(iii) 2. Form of Amended and Restated Loan Agreement, dated November 22, 1996, among NationsBank and (i) the Sam Wyly Trusts and Tallulah, Ltd.; (ii) the Charles Wyly Trusts and Brush Creek Limited; and (iii) Maverick Entrepreneurs. 3. Form of Pledge Agreement, dated November 22, 1994, between NationsBank and (i) Tallulah, Ltd.; (ii) each of the Sam Wyly Trusts; (iii) Brush Creek Ltd.; (iv) each of the Charles Wyly Trusts; and (v) Maverick Entrepreneurs. 4. Form of Collateral Maintenance Agreement, dated November 22, 1994 between NationsBank and (i) Tallulah, Ltd.; (ii) each of the Sam Wyly Trusts; (iii) Brush Creek, Ltd.; (iv) each of the Charles Wyly Trusts; and (v) Maverick Entrepreneurs. 5. Guaranty, executed as of November 22, 1994, by Tallulah, Ltd., the Sam Wyly Trusts, Brush Creek, Ltd., the Charles Wyly Trusts, and Even Wyly, in favor of NationsBank. 6. Form of Credit Agreement, dated as of December 16, 1994, as amended, between Citibank and (i) Tallulah, Ltd.; (ii) each of the Sam Wyly Trusts; (iii) Brush Creek, Ltd.; and (iv) each of the Charles Wyly Trusts. 7. Form of Pledge Agreement, dated as of December 16, 1994, as amended, between Citibank and (i) Tallulah, Ltd.; (ii) each of the Sam Wyly Trusts; (iii) Brush Creek, Ltd.; and (iv) each of the Charles Wyly Trusts. 8. Form of Guaranty Agreement, dated as of December 16, 1994 in favor of Citibank by (i) the general partner of Tallulah, Ltd.; (ii) the general partner of Brush Creek, Ltd.; and (iii) certain of the beneficiaries of each of the Sam Wyly Trusts and the Charles Wyly Trusts. EX-1 2 AGREEMENT PURSUANT TO RULE 13-D 1 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: December 10, 1996 /s/ SAM WYLY -------------------------------------------- Sam Wyly /s/ CHARLES J. WYLY, JR. -------------------------------------------- Charles J. Wyly, Jr. MAVERICK ENTREPRENEURS FUND, LTD. (f/k/a 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 3 FORM OF AMENDED AND RESTATED LOAN AGREEMENT Exhibit 2 --------- NationsBank Form of Amended and Restated Loan Agreement ================================================================================ Date November 22, 1996 Between - -------------------------------------------------------------------------------- Borrowers: Bank: NationsBank of Texas, N.A. - ----------------------------------- 901 Main Street 19th Floor - ----------------------------------- Dallas, Texas 75202 - ----------------------------------- - ----------------------------------- - ----------------------------------- - ----------------------------------- - ----------------------------------- - ----------------------------------- 8080 N. Central Expressway Suite 1300 Dallas, Texas 75206 - -------------------------------------------------------------------------------- This Amended and Restated Loan Agreement ("Agreement") is made on the above date by and between Borrowers and Bank. 1. THE LOAN. A. Bank agrees to lend and each Borrower severally agrees to borrow an amount not to exceed the amount set forth next to each such Borrower's name on Schedule I attached hereto (individually, a "Loan" and collectively, the "Loans") on the terms and conditions set forth herein and subject to the other limitations set forth herein and in the other Loan Documents (as defined herein). Each Loan will be evidenced by a Promissory Note in the form of Exhibit A attached hereto executed by the applicable Borrower, or any renewal thereof, with interest and principal payable as stated therein (the "Notes"). The loans are renewals and restatements of (and not novations of) those certain loans from Bank to Borrower, as evidenced by the Loan Agreement dated November 22, 1994 between Borrowers and Bank. B. Each Loan provides for a revolving line of credit under which a Borrower may from time to time borrow, repay and reborrow funds; provided, however, the aggregate amount of funds under any particular Loan that may be outstanding at any time shall in all events be subject to the limitations set forth on Schedule I and in the applicable Note and Collateral Maintenance Agreement (as defined herein). The Loans shall mature on November 22, 1998, unless sooner accelerated in accordance with the terms hereof. C. Bank and Borrowers acknowledge and agree that each Borrower's individual liability hereunder shall be limited to the amount set forth on Schedule I hereto, plus interest accrued thereon, plus any fees and expenses owing hereunder. 2. SECURITY. Each Loan is to be secured by a pledge of certain securities pursuant to a Pledge Agreement (the "Pledge Agreement") and a Collateral Maintenance Agreement (the "Collateral Maintenance Agreement"), each Agreement dated November 22, 1994 between a Borrower and Bank. -1- 3. REPRESENTATIONS AND WARRANTIES. Each Borrower represents and warrants as to itself to Bank as follows: A. Good Standing. Such Borrower (other than ____________________________) is a trust duly established and validly existing under the laws of the State of Texas and has all powers and permits, consents and authorizations necessary to own and operate its properties and to carry on its business as presently conducted. ______________ ("________") is a limited partnership duly organized and validly existing under the laws of the State of Texas and has all powers and permits, consents and authorizations necessary to own and operate its properties and to carry on its business as presently conducted. B. Trustee/General Partner. ________ is (i) the sole trustee ("Trustee") of such Borrower other than ____________ and (ii) the sole general partner ("General Partner") of ________. C. Authority and Compliance. The Trustee, on behalf of such Borrower other than ________, and _________ have full power and authority to enter into this Agreement, to make the borrowings hereunder, to execute and deliver the Notes and the other Loan Documents (as defined herein) to which such Borrower is or may be a party and to incur the obligations provided for herein, all of which have been duly authorized by all proper and necessary action on the part of such Borrower. No consent or approval of any public authority or person is required as a condition to the validity of this Agreement or the Notes or the performance hereunder, and Borrower is in compliance with all laws and regulatory requirements to which it is subject. D. Binding Agreement. This Agreement and the Notes constitute valid and legally binding obligations of Borrower, enforceable in accordance with their terms. E. Financial Statements. The books and records of Borrower properly reflect such Borrower's financial condition, and there has been no material change in such Borrower's financial condition as represented in the financial statements dated June 30, 1996 delivered to Bank. F. Litigation. There are no proceedings pending or, to the best knowledge of the Trustee, or _________, threatened before any court or administrative agency which will or may have a material adverse effect on the financial condition or operations of any such Borrower. G. No Conflicting Agreements. There are no provisions of Borrower's (other than _____________________) trust agreement or ________'s agreement of limited partnership and no provisions of any existing agreement, mortgage, indenture or contract binding on Borrower or affecting its respective property or business, which would conflict with or in any way prevent the execution, delivery or carrying out of the terms of this Agreement and the Notes. H. Taxes. All income taxes and other taxes due and payable by Borrower through the date of this Agreement have been paid prior to becoming delinquent. I. Use of Proceeds. The proceeds of the Loans will be used by Borrower to (i) refinance in part the indebtedness of Borrowers currently owing to The First Boston Corporation and (ii) invest in such securities as such Borrower deems reasonably prudent. Such Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying "margin stock" as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System; provided, however that proceeds of the Loans may also be used for the purpose of investing in other parties for the purpose of purchasing or carrying any such "margin stock," or for the purpose of reducing or retiring any indebtedness incurred for such purpose. Neither such Borrower, nor any person acting on behalf of Borrower, has taken or will take any action which might cause the Notes or this Agreement to violate Regulations G, T or U or any other regulation of the Board of Governors of the Federal Reserve -2- System or violate the Securities Exchange Act of 1934 or any rule or regulation thereunder, in each case as now in effect or as the same may hereafter be in effect. J. Continuation of Representations and Warranties. All representations and warranties made under this Agreement shall be deemed made at and as of the date hereof, and at and as of the date of any future advance under any Note. 4. CLOSING CONDITIONS A. Conditions to Initial Advance. The obligation of Bank to execute this Agreement and to make the initial advances hereunder shall be subject to the satisfaction of the following conditions precedent: 1) Loan Documents. Each of this Agreement, the Notes, and the reaffirmation of the Pledge Agreements and the Collateral Maintenance Agreements and such other ancillary documents and instruments in furtherance of the transaction contemplated herein as requested by Bank in connection with the Loans (the "Loan Documents") shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to Bank. 2) Necessary Action. All action (whether trust, partnership or otherwise) necessary for the valid execution, delivery and performance by each Borrower of this Agreement and the other Loan Documents to which it is a party shall have been duly and effectively taken, and evidence thereof satisfactory to Bank shall have been provided to Bank. 3) Validity of Liens. The Pledge Agreements shall be effective to create in favor of Bank a legal, valid and enforceable first priority security interest in and lien upon the collateral described therein. All filings, recordings, deliveries of instruments and other actions necessary or desirable in the opinion of Bank to protect and preserve such security interests shall have been duly effected. 4) Payment of Fees. Bank shall have received the commitment fees in the aggregate amount of $30,000, as contemplated by Section 6 below. B. Conditions to All Borrowings. The obligation of Bank to make any future advance under any Note shall be subject to the satisfaction of the following conditions precedent: 1) Representations and Warranties. The representations and warranties of Borrowers contained herein and in any other Loan Documents shall be true and correct as of the date of which they were made and shall also be true and correct at and as of the time of the advance with the same effect as if made at and as of that time (except to the extent such representations and warranties expressly relate to an earlier date) and Bank shall have received a certificate of a Subagent (as defined herein), to such effect. 2) No Event of Default. No event of default hereunder or under any of the other Loan Documents shall have occurred and be continuing and Bank shall have received a certificate of a Subagent, to such effect. 3) No Legal Impediment. No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of Bank would make it illegal for Bank to make such advance. 4) Proceedings and Documents. All proceedings in connection with the transactions contemplated hereby and the other Loan Documents shall be satisfactory in form and substance to Bank and Bank shall have received all information and documents as Bank may reasonably request. -3- 5. FEES. Each Borrower shall pay to Bank an annual commitment fee in the amount of 1/10 of one percent (0.10%) of the commitment amount set forth next to such Borrower's name on Schedule I, such fee to be due and payable on the date hereof and on each annual anniversary thereafter so long as the Loans are outstanding. 6. AFFIRMATIVE COVENANTS. So long as any Borrower may borrow hereunder and until payment in full of the Notes and performance of all other obligations of Borrowers hereunder, each Borrower will: A. Financial Statements. Maintain a system of accounting satisfactory to Bank and permit Bank's officers or authorized representatives to visit such Borrower's offices and inspect such Borrower's books of account and other records and make photocopies thereof at such reasonable times and as often as Bank may desire, and pay the reasonable fees and disbursements of any accountants or other agents of Bank selected by Bank for the foregoing purposes. Each Borrower agrees to provide Bank with the following statements and reports: 1) Within one hundred twenty (120) days after the end of each fiscal year, a balance sheet of such Borrower as of the end of such fiscal year, which shall be in reasonable detail, complete and correct in all material respects. 2) Within thirty (30) days after the end of each fiscal quarter and such other times as Bank may reasonably request, information or statements respecting each Borrower's trading activity in the collateral securing the Loans. B. Existence and Compliance. Maintain its existence and comply with all laws, regulations and governmental requirements applicable to it or to any of its property, business and transactions. C. Adverse Conditions or Events. Promptly advise Bank in writing of any condition, event or act which comes to its attention that would or might materially affect such Borrower's financial condition, Bank's rights in or to any collateral under this Agreement or the other Loan Documents, and of any litigation filed against such Borrower in which the potential loss reasonably could be anticipated to exceed $50,000. D. Taxes. Pay all taxes as the same become due and payable unless timely extensions have been filed or the same are being contested in good faith by appropriate proceedings and adequate reserves are maintained. E. Form U-1. If required by Bank, promptly furnish to Bank a statement that conforms with the requirements of Federal Reserve Form U-1 as referred to in Regulation U or in any other relevant Federal Reserve Form or Regulation provided for from time to time by the Board of Governors of the Federal Reserve System. 7. NEGATIVE COVENANTS. So long as any Borrower may borrow hereunder and until payment in full of the Notes and performance of all other obligations of Borrowers hereunder, no Borrower will, without the prior written consent of Bank: A. Transfer of Assets or Control. Permit any transfer of control or ownership of such Borrower. B. Amendment of Trust Agreement/Partnership Agreement. No Borrower that is a trust shall permit any amendment or modification of its trust agreement or a change of the trustee thereof and ________ shall not permit any amendment or modification of its agreement of limited partnership or a change of the general partner. 8. EVENTS OF DEFAULT. With respect to any particular Borrower, any one or more of the following events shall be deemed an event of default hereunder as to such Borrower: -4- A. Default shall be made in the payment of any installment of principal or interest upon any Note or any other obligation of a Borrower to Bank when due and payable, whether at maturity or otherwise and such default shall continue for three (3) business days thereafter; or B. Default shall be made by a Borrower in the performance of any term, covenant or agreement contained herein, any of the other Loan Documents, or in any other security agreement, deed of trust, mortgage, assignment or other contract securing payment of any indebtedness of such Borrower to Bank and such default shall continue for thirty (30) calendar days following notice thereof being given by Bank to such Borrower or Agent; or C. Any representation or warranty herein contained or in any financial statement, certificate, report or opinion or other agreement submitted to Bank in connection with the Loans or pursuant to the requirements of this Agreement shall prove to have been incorrect or misleading in any material respect when made; or D. Default shall be made by a Borrower in the performance of any term or covenant in any agreement or instrument with any other party which would have a material adverse effect on such Borrower or Bank's rights hereunder or under the other Loan Documents, and such default is not remedied within the applicable cure period; or E. A Borrower makes an assignment for the benefit of creditors, admits in writing its inability to pay its debts generally as they become due, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions or applies to any tribunal for the appointment of any receiver or any trustee for it or any substantial part of its property, commences any action relating to a Borrower or any reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect, or if there is commenced against a Borrower any such action, or a Borrower by any act indicates its consent to or approval of any trustee for such Borrower or any substantial part of its property, or suffers any such receivership or trustee to continue undischarged; or F. Without the prior written consent of Bank, a Borrower that is a trust is at any time revoked, terminated or liquidated or ________ is dissolved or liquidated or ______________ dies. Upon the happening of any of the foregoing events of default which shall be continuing, Bank may at its option declare all outstanding principal and unpaid interest on the applicable Loan and any other indebtedness of the particular defaulting Borrower to Bank to be immediately due and payable, and Bank shall have no further obligation to fund advances hereunder to such Borrower. Upon such declaration by Bank, Bank shall have all rights and remedies available under the Loan Documents as well as those available at law or in equity. Notwithstanding the foregoing, upon the occurrence of an event of default described in Section 8.E. to any particular Borrower, the entire outstanding principal and unpaid interest on the Loan and all other indebtedness of such Borrower to Bank shall be immediately and automatically due and payable, without notice to such Borrower of any kind and Bank's obligation to make advances to such Borrower shall immediately terminate. 9. APPOINTMENT OF AGENT. Each Borrower hereby appoints and designates _____________ as agent ("Agent") for and on behalf of such Borrower with respect to all matters arising under or in connection with this Agreement, the other Loan Documents and the applicable Loan hereunder including, without limitation, requesting and receiving advances, making payments on the applicable Loan, negotiating, executing and delivering modifications or renewals of the Loan Documents, receiving notices from Bank, delivering such other documents or instruments as the Bank may request in connection with the Loans, and generally communicating with Bank regarding such Borrower's obligations hereunder. Any funds advanced hereunder may be distributed to Agent who shall have responsibility to distribute such funds to the applicable Borrower. Agent is hereby granted full power and authority to bind each Borrower in respect of any term, condition, covenant or undertaking hereunder. Bank shall be entitled to rely on the appointment without any independent verification. Each Borrower hereby further appoints and designates each and any of Sharyl -5- Robertson, Amy Phillips and Rena Alexander as subagents ("Subagents") for and on behalf of such Borrower to perform all administrative functions under the Loan Documents, including submitting advance requests, receiving and sending notices and delivering certificates on behalf of such Borrower. Borrowers shall not remove or otherwise change the Agent without the prior written consent of Bank. The appointment hereunder is coupled with an interest and irrevocable. 10. MISCELLANEOUS. A. Expenses. Each Borrower severally agrees to pay all out-of-pocket expenses of Bank in connection with this Agreement and the other Loan Documents and the collection of its applicable Note including, without limitation, the administration, enforcement and realization upon any collateral or guaranty. Each Borrower severally also agrees to pay all reasonable attorneys' fees and all expenses incurred in recording the documents securing its applicable Loan. B. Cumulative Rights and No Waiver. Each and every right granted to Bank hereunder or under any other document delivered hereunder or in connection herewith, or allowed it by law or equity shall be cumulative of and may be exercised in addition to any and all other rights of Bank, and no delay in exercising any right shall operate as a waiver thereof, nor shall any single or partial exercise by Bank of any right preclude any other or future exercise thereof or the exercise of any other right. Any of the foregoing covenants and agreements may be waived by Bank but only in writing signed by a Vice President or higher level officer of Bank. Borrower expressly waives any presentment, demand, protest or other notice of any kind. No notice to or demand on a Borrower in any case shall, of itself, entitle such or any other Borrower to any other or further notice or demand in similar or other circumstances. No delay or omission by Bank in exercising any power or right hereunder shall impair any such right or power or be construed as a waiver thereof or any acquiescence therein, nor shall any single or partial exercise of any such power preclude other or further exercise thereof, or the exercise of any other right or power hereunder. C. Maximum Interest. Notwithstanding any other provision contained in this Agreement, Bank does not intend to charge and no Borrower shall be required to pay any amount of interest or other fees or charges that is in excess of the maximum permitted by applicable law. Each Borrower agrees that during the full term hereof, the maximum lawful interest rate for the obligations hereunder as determined under Texas law shall be the indicated rate ceiling as specified in Article 5069-1.04 of the V.A.T.S. Further, to the extent that any other lawful rate ceiling exceeds the rate ceiling so determined, then the higher rate ceiling shall apply. Any payment in excess of such maximum shall be refunded to the applicable Borrower or credited against principal, at the option of Bank. D. Applicable Law. This Agreement and the rights and obligations of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Texas (without regard to its conflicts of law provisions). E. Notice. Except as otherwise provided in this Agreement, any notices or communications required or permitted hereunder shall be in writing and shall be deemed to have been given (i) the day it is personally delivered, if sent by hand or expedited delivery service, or (ii) five days after it is mailed, if sent by certified or registered mail. F. Amendment. No modification, consent, amendment or waiver of any provision of this Agreement, nor consent to any departure by a Borrower therefrom, shall be effective unless the same shall be in writing and signed by a Vice President or higher level officer of Bank, and then shall be effective only in the specific instance and for the purpose for which given. This Agreement is binding upon each Borrower, its successors and assigns, and inures to be benefit of Bank, its successors and assigns. -6- G. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW). THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION. A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN DALLAS, TEXAS AND ------------- ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS. B. RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED TO --------------------- (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II) BE A WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE BANK (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES. H. NOTICE OF FINAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. -7- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. NATIONSBANK OF TEXAS, N.A. TRUST ----------------------------- By: By: ---------------------------------- ----------------------------- Marta O. Engram Vice President, Private Banking , Trustee ---------------- TRUST ----------------------------- By: ----------------------------- , Trustee ---------------- TRUST ----------------------------- By: ----------------------------- , Trustee ---------------- TRUST ----------------------------- By: ----------------------------- , Trustee ---------------- TRUST ----------------------------- By: ----------------------------- , Trustee ---------------- ---------------------------------- , LTD. ---------------------------- By: ----------------------------- , ------------------ General Partner The undersigned hereby acknowledges appointment as Agent for the Borrowers hereunder. ----------------------------- ------------------ -8- SCHEDULE I Borrower Maximum Loan Amount - -------- ------------------- $ - ---------------------------- ---------- $ - ---------------------------- ---------- $ - ---------------------------- ---------- $ - ---------------------------- ---------- $ - ---------------------------- ---------- $ - ---------------------------- ---------- $ - ---------------------------- ---------- $ ---------- -9- EX-3 4 FORM OF PLEDGE AGREEMENT DATED NOVEMBER 22, 1994 Exhibit 3 --------- NATIONSBANK OF TEXAS, N.A. FORM OF PLEDGE AGREEMENT ---------------- Date November 22, 1994 Between: and ================================================================================ BANK: (SECURED PARTY) PLEDGOR: NATIONSBANK OF TEXAS, N.A. __________________________ 901 Main, 19th Floor 8080 N. Central Expressway Dallas, Dallas County, Texas 75202 Suite 1300 Dallas, Texas 75206 (address including county) ================================================================================ Pledgor Is [_] Individual [_] Corporation [x] Partnership [_] Other _____ - -------------------------------------------------------------------------------- Address is Pledgor's: [_] Residence [X] Place of Business [_] Chief Executive Office if more than one place of business ================================================================================ (This Agreement contains some provisions preceded by boxes. Mark only those boxes beside provisions which will be applicable to this transaction. A box which is not marked means that the provision beside it is not applicable to this transaction.) A. Security Interest. For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Pledgor pledge, assign and grant to Bank a security interest and lien in the Collateral (hereinafter defined) to secure the payment and performance of the Obligation (hereinafter defined). B. Collateral. The security interest is granted in the following ("Collateral"): 1. [X] SPECIFIC SECURITIES: The following securities, together with all securities hereafter delivered to Bank in substitution for or in addition to those securities: _______ shares of common stock, $.10 par value, of Michaels Stores, Inc. The parties acknowledge that Pledgor may from time to time provide additional shares of stock of Michaels Stores, Inc. or Sterling Software, Inc. as collateral hereunder. [_] AGENCY ACCOUNT: All of Pledgor's property now or hereafter held in account(s) number ("Account") by the Trust Group of NationsBank of Texas, N.A. ("Agent") as agent or custodian for Pledgor under an agreement for custody, investment management, investment advisory or similar services between Pledgor and the Agent, specifically including but not limited to all documents, -1- instruments, ordinary goods, certificates of title, general intangibles, chattel paper, mineral interests, certificated and uncertificated securities, securities in book-entry form, mutual funds, U.S. government and state obligations, deposit accounts and cash (but excluding collective investment funds and anything construed as real property under applicable state law). [_] BROKERAGE ACCOUNT: All of Pledgor's property now or hereafter held by __________________ ("Broker") in cash account number(s) ___________________ ("Account") pursuant to the terms of any agreement for custody, investment management, investment advisory or similar services between Broker and Pledgor, specifically including but not limited to all documents, instruments, general intangibles, certificated and uncertificated securities, securities in book-entry form, mutual funds, U.S. government and state obligations, deposit accounts and cash. [_] OTHER: 2. Proceeds. All additions, substitutes and replacements for and proceeds of the above Collateral (including all income and benefits resulting from any of the above, such as dividends payable or distributable in cash, property or stock; interest, premium and principal payments; redemption proceeds and subscription rights; and shares or other proceeds of conversions or splits of any securities in Collateral). Any securities received by Pledgor which shall comprise such additions, substitutes and replacements for, or proceeds of, the Collateral, shall be held in trust for Bank and shall be delivered immediately to Bank. Any cash proceeds shall be held in trust for Bank and upon request shall be delivered immediately to Bank. 3. Deposit Accounts. The balance of every deposit account of Pledgor maintained with the Bank and any other claim of Pledgor against Bank, now or hereafter existing, liquidated or unliquidated, and all money, instruments, securities, documents, chattel paper, credits, claims, demands, income, and any other property, rights and interests of Pledgor which at any time shall come into the possession or custody or under the control of Bank or any of its agents, affiliates or correspondents, for any purpose, and the proceeds of any thereof. Bank shall be deemed to have possession of any of the Collateral in transit to or set apart for it or any of its agents, affiliates or correspondents. It is contemplated by the parties that Pledgor shall provide additional collateral from time to time hereunder as additional security for the Obligation, and may from time to time with the prior written consent of Bank sell or otherwise dispose of any Collateral provided that Pledgor provides Bank with substitute collateral. At the time of each addition or substitution of Collateral, the securities added or substituted shall be set forth on a Pledge Certificate, substantially in the form of Schedule I attached hereto (the "Pledge Certificate") delivered to Bank on or before any advances requested in connection therewith shall be made and such additional and/or substituted Collateral and the security interest granted to Bank therein shall be completed to the satisfaction of Bank. All such additional and/or substituted Collateral shall be Collateral for purposes of this Agreement, and shall secure the Obligation in the same manner as the Collateral for which it is added to and/or substituted. C. Obligation 1. Description of Obligation. The following obligations ("Obligation") are secured by this Agreement: a. [_] All Debt: All debts, obligations, liabilities and agreements of Pledgor to Bank, now or hereafter existing, arising directly or indirectly between Pledgor and Bank whether absolute or contingent, joint or several, secured or unsecured, due or not due, liquidated or unliquidated, arising by operation of law or otherwise, and all renewals, extensions or rearrangements of any of the above; -2- [x] Promissory Note: All debt arising under promissory note dated November 22, 1994 in the principal face amount of $__________ executed by Pledgor and payable to the order of Bank, and any and all renewals, extensions and rearrangements thereof. b. All costs incurred by Bank to obtain, preserve, perfect and enforce this Agreement and maintain, preserve, collect and realize upon the Collateral; c. All expenses of the Bank, including fees and expenses of the Bank's counsel, incident to the enforcement of payment of the Obligation; d. All amounts which may be owed by Pledgor to Bank pursuant to that certain Guaranty Agreement of even date herewith by Pledgor and certain other guarantors named therein with respect to indebtedness of Maverick Entrepreneurs Fund, Ltd.; and e. Interest on the above amounts as agreed between Bank and Pledgor. In the event any amount paid to Bank on any Obligation is subsequently recovered from Bank in or as a result of any bankruptcy, insolvency or fraudulent conveyance proceeding involving an obligor of the Obligation other than Pledgor, Pledgor shall be liable to Bank for the amounts so recovered up to the fair market value of the Collateral whether or not the Collateral has been released or the security interest terminated. In the event the Collateral has been released or the security interest terminated, the fair market value of the Collateral shall be determined, at Bank's option, as of the date the Collateral was released, the security interest terminated, or said amounts were recovered. 2. Use of Proceeds. The proceeds of any indebtedness or obligation secured by the Collateral [x] may be [_] will not be (check one box) used directly or indirectly to purchase or carry any "margin stock" as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System, or extend credit to or invest in other parties for the purpose of purchasing or carrying any such "margin stock," or to reduce or retire any indebtedness incurred for such purpose or otherwise in a manner which would violate Regulations G, T or U. D. Pledgor's Warranties. Pledgor hereby represents and warrants to Bank as follows: 1. Financing Statements. Except as may be noted by schedule attached hereto and incorporated herein by reference, no financing statement covering the Collateral is or will be on file in any public office, except the financing statements relating to this security interest, and no security interest, other than the one herein created, has attached or been perfected in the Collateral or any part thereof. 2. Ownership. Pledgor owns, or will use the proceeds of any loans by Bank to become the owner of, the Collateral free from any setoff, claim, restriction, lien, security interest or encumbrance except liens for taxes not yet due and payable and the security interest hereunder. 3. Claims of Pledgor on Collateral. All account debtors and other obligors whose debts or obligations are part of the Collateral have no right to setoffs, counterclaims or adjustments, and no defenses in connection therewith. 4. Power and Authority. Pledgor has full power and authority to make this Agreement, and all necessary consents and approvals of any persons, entities, governmental or regulatory authorities and securities exchanges have been obtained to effectuate the validity of this Agreement. 5. Solvency of Pledgor. The fair market value of Pledgor's assets exceeds its liabilities; Pledgor is currently paying its debts as the same become due; the execution of this Agreement and the pledge of the Collateral -3- hereunder will not render Pledgor insolvent; and Pledgor, in entering into this Agreement and performing its obligations hereunder, has no intent to hinder, delay or defraud any of its creditors. E. Pledgor's Covenants. Until full payment and performance of all of the Obligation and termination or expiration of any obligation or commitment of Bank to make advances or loans to Borrower, unless Bank otherwise consents in writing: 1. Obligation and This Agreement. Pledgor shall perform all of its agreements herein and in any other agreements between it and Bank. 2. Ownership of Collateral. Pledgor shall defend the Coll ateral against all claims and demands of all persons at any time claiming any interest therein adverse to Bank. Pledgor shall keep the Collateral free from all liens and security interests except those for taxes not yet due and payable and the security interest hereby created. 3. Bank's Costs. Pledgor shall pay all costs necessary to obtain, preserve, perfect, defend and enforce the security interest created by this Agreement, collect the Obligation, and preserve, defend, enforce and collect the Collateral, including but not limited to taxes, assessments, reasonable attorney's fees, legal expenses and expenses of sales. Whether Collateral is or is not in Bank's possession, and without any obligation to do so and without waiving Pledgor's default for failure to make any such payment, Bank at its option may pay any such costs and expenses and discharge encumbrances on Collateral, and such payments shall be a part of the Obligation and bear interest at the rate set out in the Obligation. Pledgor agrees to reimburse Bank on demand for any costs so incurred. 4. Information and Inspection. Pledgor shall (i) promptly furnish Bank any information with respect to Collateral requested by Bank that is otherwise publicly available pursuant to reporting requirements under the Security Exchange Act of 1934; (ii) allow Bank or its representatives to inspect and copy, or furnish Bank or its representatives with copies of, all records relating to the Collateral and the Obligation; and (iii) promptly furnish Bank or its representatives with any other information Bank may reasonably request. 5. Additional Documents. Pledgor shall sign and deliver any papers furnished by Bank which are necessary or desirable in the judgment of Bank to obtain, maintain and perfect the security interest hereunder and to enable Bank to comply with any federal or state law in order to obtain or perfect Bank's interest in Collateral or to obtain proceeds of Collateral. 6. Right of Bank to Notify Debtors. At any time Pledgor is in default hereunder, Bank may notify persons obligated on any Collateral to make payments directly to Bank and Bank may take control of all proceeds of any Collateral. Until Bank elects to exercise such rights, Pledgor, as agent of Bank, shall collect and enforce all payments owed on Collateral. 7. Notice of Changes. Pledgor will notify Bank immediately of (i) a change in Pledgor's place of business, or (ii) the occurrence of an event of default as defined herein. 8. Possession of Collateral. Pledgor shall deliver a copy of this Agreement (or other notice acceptable to Bank) to any Broker, financial intermediary, or any other person in possession of any of the Collateral or on whose books the interest of Pledgor in the Collateral appears, and such delivery shall constitute notice to such person of Bank's security interest in the Collateral and shall constitute Pledgor's instruction to such person to note the Bank's security interest on their books and records, or deliver to Bank certificates or other evidence of the Collateral promptly upon Bank's request. Pledgor will deliver all investment securities and other instruments and documents which are a part of the Collateral and in Pledgor's possession to Bank immediately, or if hereafter acquired, immediately following acquisition, in a form suitable for transfer by delivery or accompanied by duly executed instruments of transfer or assignment in blank with signatures appropriately guaranteed in form and substance suitable to Bank. -4- 9. Change of Name/Status. Pledgor shall give the Bank at least 30 days' prior written notice of a name change, change in corporate status, use of any trade name or engagement in any business in which it was not engaged on the date of this Agreement. 10. Change of Partnership Agreement. Without the prior consent of Bank, Pledgor shall not permit any amendment or modification of its Partnership Agreement or a change in its general partner. 11. Borrowings. Pledgor shall not create, incur, assume or become liable in any manner for any indebtedness (for borrowed money, deferred payment for the purchase of assets, lease payments, as surety or guarantor for the debt of another, or otherwise) except for debt incurred in the ordinary course of Pledgor's business. 12. Power of Attorney. Pledgor appoints Bank and any officer thereof as Pledgor's attorney-in-fact with full power in Pledgor's name and on Pledgor's behalf to do following an event of default hereunder every act which Pledgor is obligated to do or may be required to do hereunder; however, nothing in this paragraph shall be construed to obligate Bank to take any action hereunder nor shall Bank be liable to Pledgor for failure to take any action hereunder. This appointment shall be deemed a power coupled with an interest and shall not be terminable as long as the Obligation is outstanding and shall not terminate on the disability or incompetence of Pledgor. Without limiting the generality of the foregoing, Bank shall have the right and power to receive, endorse and collect all checks and other orders for the payment of money made payable to Pledgor representing any dividend, interest payment or other distribution payable in respect of the Collateral or any part thereof. 13. Other Parties and Other Collateral. No renewal or extensions of or any other indulgence with respect to the Obligation or any part thereof, no modification of the documents(s) evidencing the Obligation, no release of any security, no release of any person (including any maker, indorser, guarantor or surety) liable on the Obligation, no delay in enforcement of payment, and no delay or omission or lack of diligence or care in exercising any right or power with respect to the Obligation or any security therefor or guaranty thereof or under this Agreement shall in any manner impair or affect the rights of Bank under any law, hereunder, or under any other agreement pertaining to the Collateral. Bank need not file suit or assert a claim for personal judgment against any person for any part of the Obligation or seek to realize upon any other security for the Obligation, before foreclosing or otherwise realizing upon the Collateral. Pledgor waives any right that can be waived to the benefit of or to require or control application of any other security or proceeds thereof, and agrees that Bank shall have no duty or obligation to Pledgor to apply to the Obligation any such other security or proceeds thereof. 14. Waivers by Pledgor. Except as may be required hereunder or in any other document with respect to the Obligation, Pledgor waives notice of the creation, advance, increase, existence, extension or renewal of, and of any indulgence with respect to, the Obligation; waives presentment, demand, notice of dishonor, and protest; waives notice of the amount of the Obligation outstanding at any time, notice of any change in financial condition of any person liable for the Obligation or any part thereof, notice of any event of default, notice of intent to accelerate, notice of acceleration and all other notices respecting the Obligation; and agrees that maturity of the Obligation and any part thereof may be accelerated, extended or renewed one or more times by Bank in its discretion, without notice to Pledgor. Pledgor waives any right to require that any action be brought against any other person (including any other pledgor) or to require that resort be had to any other security or to any balance of any deposit account. Pledgor further waives any right of subrogation or to enforce any right of action against any other pledgor or obligor until the Obligation is paid in full. 15. Additional Provisions. If one or more Riders to this Agreement are executed by Pledgor, the covenants and provisions of each such Rider shall be incorporated by reference into this Agreement. (check applicable boxes) -5- [_] Collateral Maintenance Rider: Pledgor agrees to maintain collateral in accordance with the terms of the Collateral Maintenance Rider attached hereto and made a part hereof for all purposes. [x] Rule 144 Rider: The Collateral is comprised in whole or in part of Control and/or Restricted Stock, which shall be subject to the additional terms and provisions described on the Rule 144 Rider attached hereto and made a part hereof for all purposes. F. Rights and Powers of Bank 1. General. Bank, before or after default, without liability to Pledgor may: take control of proceeds, including stock received as dividends or by reason of stock splits; release Collateral in its possession to any Pledgor, temporarily or otherwise; require additional Collateral; reject as unsatisfactory any property hereafter offered by Pledgor as Collateral; take control of funds generated by the Collateral, such as cash dividends, interest and proceeds, and use same to reduce any part of the Obligation and exercise all other rights which an owner of such Collateral may exercise, except the right to vote or dispose of Collateral before an event of default; and at any time transfer any of the Collateral or evidence thereof into its own name or that of its nominee. Bank shall not be liable for failure to collect any account or instruments, or for any act or omission on the part of Bank, its officers, agents or employees, except for its or their own willful misconduct or gross negligence. The foregoing rights and powers of Bank will be in addition to, and not a limitation upon, any rights and powers of Bank given by law, elsewhere in this Agreement, or otherwise. 2. Convertible Collateral. Bank may present for conversion any Collateral which is convertible into any other instrument or investment security or a combination thereof with cash, but Bank shall not have any duty to present for conversion any Collateral unless it shall have received from Pledgor detailed written instructions to that effect at a time reasonably far in advance of the final conversion date to make such conversion possible. G. Default. 1. Event of Default. An event of default shall occur if Pledgor or any other obligor on all or part of the Obligation shall fail following any applicable cure period to timely and properly pay or observe, keep or perform any term, covenant, agreement or condition in this Agreement or in any other agreement between Pledgor and Bank or between Bank and any other obligor on the Obligation, including in any other note or instrument, loan agreement, security agreement, deed of trust, mortgage, promissory note, assignment or other agreement or instrument concerning the Obligation. 2. Rights and Remedies. If any event of default shall occur, then, in each and every such case, Bank may, without (a) presentment, demand, or protest, (b) notice of default, dishonor, demand, non-payment, or protest, (c) notice of intent to accelerate all or any part of the Obligation, (d) notice of acceleration of all or any part of the Obligation, or (e) notice of any other kind, all of which Pledgor hereby expressly waives (except for any notice required under this Agreement, any other loan document or which may not be waived under applicable law), at any time thereafter exercise and/or enforce any of the following rights and remedies, at Bank's option: i. Acceleration. The Obligation shall, at Bank's option, become immediately due and payable, and the obligation, if any, of Bank to permit further borrowings under the Obligation shall at Bank's option immediately cease and terminate. ii. Liquidation of Collateral. Sell, or instruct any Agent or Broker to sell, all or any part of the Collateral in a public or private sale, direct any Agent or Broker to liquidate all or any part of any Account and deliver all proceeds thereof to Bank, and apply all proceeds to the payment of any or all of the Obligation in such order and manner as Bank shall, in its discretion, choose. -6- iii. Uniform Commercial Code. All of the rights, powers and remedies of a secured creditor under the Uniform Commercial Code as adopted in the jurisdiction to which Bank is subject under this Agreement (the "UCC"). iv. Right of Set Off. Without notice or demand to Pledgor, set off and apply against any and all of the Obligation any and all deposits (general or special, time or demand, provisional or final) and any other indebtedness, at any time held or owing by the Bank to or for the credit of the account of Pledgor. Pledgor specifically understands and agrees that any sale by Bank of all or part of the Collateral pursuant to tnk terms of this Agreement may be effected by Bank at times and in manners which could result in the proceeds of such sale as being significantly and materially less than might have been received if such sale had occurred at different times or in different manners, and Pledgor hereby releases Bank and its officers and representatives from and against any and all obligations and liabilities arising out of or related to the timing or manner of any such sale. If, in the opinion of Bank, there is any question that a public sale or distribution of any Collateral will violate any state or federal securities law, Bank may offer and sell such Collateral in a transaction exempt from registration under federal securities law, and any such sale made in good faith by Bank shall be deemed "commercially reasonable." H. General 1. Parties Bound. Bank's rights hereunder shall inure to the benefit of its successors and assigns, and in the event of any assignment or transfer of any of the Obligation or the Collateral, Bank thereafter shall be fully discharged from any responsibility with respect to the Collateral so assigned or transferred, but Bank shall retain all rights and powers hereby given with respect to any of the Obligation or Collateral not so assigned or transferred. All representations, warranties and agreements of Pledgor are joint and several and all shall be binding upon the successors and assigns of Pledgor. 2. Waiver. No delay of Bank in exercising any power or right shall operate as a waiver thereof; nor shall any single or partial exercise of any power or right preclude other or further exercise thereof or the exercise of any other power or right. No waiver by Bank of any right hereunder or of any default by Pledgor shall be binding upon Bank unless in writing, and no failure by Bank to exercise any power or right hereunder or waiver of any default by Pledgor shall operate as a waiver of any other or further exercise of such right or power or of any further default. Each right, power and remedy of Bank as provided for herein or in any of the loan documents, or which shall now or hereafter exist at law or in equity or by statute or otherwise, shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by Bank of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by Bank of any or all other such rights, powers or remedies. 3. Agreement Continuing. This Agreement shall constitute a continuing agreement, applying to all future as well as existing transactions, whether or not of the character contemplated at the date of this Agreement, and if all transactions between Bank and Pledgor shall be closed at any time, shall be equally applicable to any new transactions thereafter. Provisions of this Agreement, unless by their terms exclusive, shall be in addition to other agreements between the parties. Time is of the essence of this Agreement. 4. Definitions. Unless the context indicates otherwise, definitions in the UCC apply to words and phrases in this Agreement; if a conflict exists between UCC definitions and words and phrases herein, UCC definitions shall apply. 5. Notice. Except as otherwise provided in this Agreement, any notices of communications required or permitted hereunder shall be in writing and shall be deemed to have been given (i) the day it is personally delivered, if delivered by hand or expedited delivery service, or (ii) five days after it is mailed, if sent by certified or registered mail. -7- 7. Modifications. No provision hereof shall be modified or limited except by a written agreement expressly referring hereto and to the provisions so modified or limited and signed by Pledgor and Bank. The provisions of this Agreement shall not be modified or limited by course of conduct or usage of trade. 8. Partial Invalidity. The unenforceability or invalidity of any provision of this Agreement shall not affect the enforceability or validity of any other provision herein and the invalidity or unenforceability of any provision of any loan document to any person or circumstance shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances. 9. Gender and Number. Where appropriate, the use of one gender shall be construed to include the others or any of them; and the singular number shall be construed to include the plural, and vice versa. 10. Applicable Law and Venue. This Agreement has been delivered in the State of Texas and shall be construed in accordance with the laws of the State of Texas (except for its conflict of laws principles). It is performable by Pledgor in the county or city of Bank's address set out above and Pledgor expressly waives any objection as to venue in any such location. Wherever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Agreement. 11. Financing Statement. To the extent permitted by applicable law, a carbon, photographic or other reproduction of this Agreement or any financing statement covering the Collateral shall be sufficient as a financing statement. 12. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be considered to be an original, but all of which shall constitute one and the same instrument. As used herein "this Agreement" shall include all attachments and addenda. 13. BINDING ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION. A. SPECIAL RULES THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF DALLAS, ------------- TEXAS AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS. -8- B. RESERVATIONS OF RIGHTS NOTHING IN THIS AGREEMENT SHALL BE DEEMED TO (I) ---------------------- LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II) BE A WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. AT BANK'S OPTION, FORECLOSURE UNDER A DEED OF TRUST OR MORTGAGE MAY BE ACCOMPLISHED BY ANY OF THE FOLLOWING: THE EXERCISE OF A POWER OF SALE UNDER THE DEED OF TRUST OR MORTGAGE, OR BY JUDICIAL SALE UNDER THE DEED OF TRUST OR MORTGAGE, OR BY JUDICIAL FORECLOSURE. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES. 14. NOTICE OF FINAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. -9- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal by their duly authorized representatives as of the date first above written. BANK/SECURED PARTY: PLEDGOR: NationsBank of Texas, N.A. ---------------------------- - ------------------- By: By: ------------------------------------ -------------------------------- Marta O. Engram --------------------- Vice President, Private Banking --------------------- -10- SCHEDULE I PLEDGE CERTIFICATE Reference is hereby made to that certain Pledge Agreement dated as of November 22, 1994 ("Pledge Agreement"), between ________________________________ ("Pledgor"), and NationsBank of Texas, N.A., a national banking association ("Bank"). This Pledge Certificate is delivered pursuant to Paragraph B of the Pledge Agreement. All capitalized terms used and not otherwise defined herein shall have their respective meanings as set forth in the Pledge Agreement. Pledgor hereby certifies that concurrently with the delivery of this Pledge Certificate, [_] Pledgor is delivering to Bank the following items of Collateral as additional Collateral for the Obligation (collectively, the "Additional Collateral"): --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- [_] Pledgor is selling or otherwise disposing of the following items of Collateral: --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- and Pledgor is delivering to Bank the following items of Collateral being substituted therefor: --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- (collectively, the "Substituted Collateral"). Pledgor hereby acknowledges that Pledgor has granted to Bank a security interest in the Additional Collateral and/or Substituted Collateral pursuant to the Pledge Agreement to secure the Obligation and that the Collateral covered by the Pledge Agreement includes, without limitation, the Substituted Collateral and Additional Collateral. Pledgor hereby represents and warrants that all of the representations and warranties contained in the Pledge Agreement are true and correct, including with respect to the Additional Collateral and Substituted Collateral, on the date hereof as though made as of the date hereof. EXECUTED this _____ day of ______________________, 19___. ----------------------------------- By: -------------------------------- Name: --------------------------- Title: -------------------------- -11- EX-4 5 FORM OF COLLATERAL MAINTENANCE Exhibit 4 --------- FORM OF COLLATERAL MAINTENANCE AGREEMENT -------------------------------- This Collateral Maintenance Agreement (this "Agreement") is made and entered into effective November 22, 1994, by and between _____________________ ("Pledgor") whose address is 8080 North Central Expressway, Suite 1300, Dallas, Texas 75206, and NATIONSBANK OF TEXAS, N.A., a national banking association ("Bank"), whose address is 901 Main Street, 19th Floor, Dallas, Texas 75202. W I T N E S S E T H: ------------------- WHEREAS, Pledgor has requested that Bank make a loan to it in the maximum principal amount of ____________________________________________ Dollars ($__________) (the "Loan") to be evidenced by a promissory note dated November 22, 1994 (as hereafter modified, renewed or extended, the "Note") and in accordance with the terms of that certain Loan Agreement of even date herewith between Pledgor and Bank (the "Loan Agreement"); and WHEREAS, as a condition to the making of the Loan, Bank has required Pledgor's promise to collateralize the Loan at all times in accordance with this Agreement; and NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Bank and Pledgor hereby agree as follows: 1. Loan. The Loan shall be evidenced by and subject to the terms, ---- conditions and covenants of the Loan Agreement, the Note, the Pledge Agreement (as defined herein), this Agreement and all other documents now or hereafter securing, guaranteeing or otherwise pertaining to the Loan, as renewed, extended, amended or supplemented from time to time (collectively, the "Loan Documents"), and shall be due and payable to Bank as provided therein. Pledgor agrees that the Collateral Value (as defined herein) shall equal or exceed 200% of the initial advance or any subsequent advance under the Loan. 2. Security for the Loan. To secure payment and satisfaction of the --------------------- Loan, and all renewals, extensions or rearrangements thereof, Pledgor has executed and delivered to Bank, contemporaneously with the execution of this Agreement, a Pledge Agreement of even date herewith (the "Pledge Agreement") pursuant to which Bank is granted a valid, perfected and enforceable first priority security interest in the securities identified in the Pledge Agreement (the "Collateral"). Pledgor agrees to execute any and all amendments or supplements to the Pledge Agreement and other Loan Documents and to take other actions which Bank deems reasonably necessary to evidence, perfect, or protect its security interest in any Collateral concurrently herewith or hereafter pledged to secure the Loan and to comply with all applicable laws, including without limitation, Regulation U of the Board of Governors of the Federal Reserve System. Pledgor also agrees to immediately deliver or cause to be delivered to Bank all Collateral pledged or to be pledged to Bank and such stock powers as are requested by Bank. 3. Maintenance of Collateral. Pledgor agrees at all times during the ------------------------- term of the Loan, and any renewals, extensions or rearrangements thereof, to maintain Collateral securing the Loan such that the Collateral Value will at all times equal or exceed 150% of outstanding principal balance of the Loan (the "Loan Balance"). 4. Value of Collateral. For the purposes of this Agreement, the ------------------- "Collateral Value" shall be determined at any given time by multiplying the per share price of such stock at the most recent close of trading on a trading exchange for such stock times (ii) the number of shares of such stock held by ----- Bank as Collateral. -1- In the event that stock held as Collateral is not traded on an exchange, the Collateral Value of such stock shall be determined by obtaining a quote of value of such stock from a reputable brokerage firm selected by Bank. 5. Events of Default. Pledgor and Bank understand and agree that if at any ----------------- time the Collateral Value is less than 150% of the Loan Balance, Bank shall notify Pledgor of such occurrence and Pledgor shall have five (5) business days to either: (i) pledge additional Collateral satisfactory to Bank, in Bank's sole opinion, such that the ratio of the Collateral Value to the Loan Balance equals or exceeds 166% or (ii) reduce the Loan Balance by an amount such that the ratio of the Collateral Value to the Loan Balance equals or exceeds 166%. Any such reduction in the Loan Balance shall not affect or reduce any future principal payments due on the Loan except to the extent such reductions are applied against Loan payments in accordance with the Loan Documents. In the event Pledgor fails to pledge additional Collateral or reduce the Loan Balance within said five (5) business day period so that the ratio of the Collateral Value to the Loan Balance equals or exceeds 166%, such occurrence shall constitute an event of default under the Loan Documents and at Bank's option, all obligations of Bank to extend credit pursuant to the Note and the other Loan Documents shall terminate, and notwithstanding any notice provisions in the Note or other Loan Documents, at Bank's option, the principal and interest accrued on the Note shall become due and payable without any presentment, acceleration, demand, protest, notice of intent to accelerate, notice of acceleration, notice of protest or notice of any kind, all of which are hereby expressly waived by Pledgor. In addition to any other remedies that may be available to Bank, upon an event of default as described herein, Bank may, and Pledgor hereby authorizes Bank to, sell all or any part of the Collateral and to apply the proceeds of such Collateral to payment of the principal, interest and any other costs or expenses due on the Loan. Pledgor specifically understands and agrees that any such sales by Bank of all or part of the Collateral pursuant to the terms of this Agreement may be effected by Bank at times and in manners which could result in the proceeds of such sales being significantly and materially less than might have been received if such sales had occurred at different times or in different manners, and Pledgor hereby indemnifies Bank from and against any and all obligations and liabilities arising out of or related to the timing or manner of any such sales. Unless Pledgor has no liability therefor otherwise than under this Agreement, Pledgor shall be liable to Bank for any deficiency that exists on the Loan if the application of such proceeds does not satisfy the principal, interest and other costs and expenses due on the Loan in full, and any proceeds in excess of the principal, interest and other costs and expenses due on the Loan (if any) shall be delivered by Bank to the person or persons legally entitled to it. To the extent necessary to enable Bank to sell the Collateral or any part thereof, Pledgor hereby grants Bank a power of attorney and designates Bank as Pledgor's attorney-in-fact to sell the Collateral and apply the proceeds as herein provided. This power of attorney is coupled with an interest, is irrevocable, and shall not terminate upon the disability of Pledgor. Bank may waive any default without waiving any other prior or subsequent default. 6. Sale or Substitution of Collateral. Subject to the provisions of ---------------------------------- paragraph 3 above, Bank and Pledgor understand and agree that at any time Pledgor is not in default on the Note, Pledge Agreement or other Loan Documents, Pledgor may sell or substitute any or all of the Collateral, provided that the entirety of the net proceeds (i.e., one hundred percent (100%) of the proceeds net of any brokerage firm sales commission) of any sale of any Collateral shall be delivered to Bank to be applied by Bank first to the payment of any unpaid interest then accrued on the Loan and then to principal of the Loan, or if a substitution of Collateral, that new Collateral shall be acceptable to Bank in its sole discretion and the ratio of the Collateral Value to the Loan Balance shall be as determined by Bank in its sole discretion. Notwithstanding anything in this paragraph to the contrary, any sales or substitutions of Collateral shall comply with Regulation U of the Board of Governors of the Federal Reserve System. 7. Term of Agreement. This Agreement shall remain in full force and effect ----------------- until the Loan, including all renewals, extensions and rearrangements thereof, has been paid in full. 8. Entire Agreement. This Agreement, the Note and the other Loan Documents ---------------- constitute the entire agreement, understanding, representations and warranties of the parties hereto and supersede all prior -2- agreements, arrangements and understandings between the parties. Should a conflict in any terms, conditions or covenants exist between this Agreement and any other document, this Agreement shall be controlling. 9. Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of Texas (without regard to its conflicts of law provisions) and federal laws governing national banking associations. 10. Controlling Agreement. The parties intend to comply with applicable --------------------- usury laws. All existing and future agreements regarding the debt evidenced by the Note are hereby limited and controlled by the provisions of this paragraph. In no event (including but not limited to prepayment, default, demand for payment, or acceleration) shall the interest taken, reserved, contracted for, charged or received under the Note or other Loan Documents or otherwise exceed the Maximum Amount. If from any possible construction of any document, interest would otherwise be payable in excess of the Maximum Amount, such document shall be automatically reformed and the interest payable automatically reduced to the Maximum Amount, without necessity of execution of any amendment or new document. If Bank ever receives interest in an amount which apart from this provision would exceed the Maximum Amount, the excess shall, without penalty, be applied to principal of the Note in inverse order of maturity of installments or be refunded to the payor if the Note is paid in full. Bank does not intend to charge or receive unearned interest on acceleration. All interest paid or agreed to be paid shall be spread throughout the full term (including extensions) of the debt so that the amount of interest does not exceed the Maximum Amount. For purposes of this paragraph "Maximum Amount" shall mean the maximum nonusurious amount of interest permitted by whichever of applicable United States federal law or Texas law permits the higher interest rate, including to the extent permitted by applicable law, any amendments thereof hereafter or any new law hereafter coming into effect to the extent a higher maximum rate is permitted thereby. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. BANK: PLEDGOR: NATIONSBANK OF TEXAS, N.A. --------------------------- By: By: ----------------------------------- ------------------------ Marta O. Engram --------------- Vice President, Private Banking -3- EX-5 6 GUARANTY, EXECUTED AS OF NOVEMBER 22, 1994 Exhibit 5 --------- NationsBank NationsBank of Texas, N.A. Continuing and Unconditional Guaranty - -------------------------------------------------------------------------------- 1. Guaranty. For Value Received, and to induce NationsBank of Texas, N.A. (Banking Center) 901 Main Street, 19th Floor, Dallas, Texas 75202 (Attn: Marta O. Engram) ("Bank"), to make loans or advances or to extend credit or other financial accommodations or benefits, with or without security, to or for the account of Maverick Entrepreneurs Fund, Ltd., a Texas limited partnership ("Borrower"), the undersigned (individually, a "Guarantor" and collectively, "Guarantors") severally become surety for and irrevocably and unconditionally guarantee to Bank the full and prompt payment when due, whether by acceleration or otherwise, of any and all Liabilities (as defined herein) of Borrower to Bank, together with reasonable attorney's fees, costs and expenses incurred by Bank in enforcing any and all of such indebtedness. This Guaranty is continuing but shall be limited as to the amount as provided herein. Guarantors further unconditionally guarantee the faithful, prompt and complete compliance by Borrower with all terms, conditions, covenants, agreements and undertakings of Borrower (herein collectively referred to as the "Obligations") under all notes and other documents evidencing the Liabilities and under all deeds to secure debt, deeds of trust, mortgages, security agreements and other agreements, documents and instruments executed in connection with the Liabilities or related thereto (all such deeds to secure debt, deeds of trust, mortgages, security agreements and other documents securing payment of the Liabilities and all notes and other agreements, documents, and instruments evidencing or relating to the Liabilities and Obligations being herein collectively called the "Loan Documents"). The undertakings of Guarantors hereunder are independent of the Liabilities and Obligations of Borrower and a separate action or actions for payment, damages or performance may be brought or prosecuted against any or all Guarantors, whether or not an action is brought against Borrower or to realize upon the security for the Liabilities and/or Obligations and whether or not Borrower is joined in any such action or actions, and whether or not notice is given or demand is made upon Borrower. Bank shall not be required to proceed first against Borrower, or any other person, firm or corporation, whether primarily or secondarily liable, or against any Collateral held by it, or any other guarantor (including any other Guarantor) before resorting to any Guarantor for payment, and no Guarantor or any other guarantor (including any other Guarantor) shall be entitled to assert as a defense to the enforceability of the Guaranty any defense of Borrower or any other person with respect to any Liabilities or Obligations. 2. Paragraph Headings and Governing Law. Guarantors agree that the paragraph headings in this Guaranty are for convenience only and that they will not limit any of the provisions of this Guaranty. Guarantors further agree that this Guaranty shall be governed by and construed in accordance with the laws of the State of Texas and applicable United States federal law. Guarantors further agree that this Guaranty shall be deemed to have been made in the State of Texas at Bank's address indicated herein, and shall be governed by, and construed in accordance with, the laws of the State of Texas, or the United States courts located within the State of Texas, and is performable in Dallas County, Texas. 3. Definitions. A. "Liability" or "Liabilities" as used herein shall include all liabilities, overdrafts, indebtedness, and obligations of Borrower to Bank, whether direct or indirect, absolute or contingent, joint or several, secured or unsecured, due or not due, liquidated or unliquidated, arising by operation of law or otherwise, now or hereafter existing, pursuant to that certain Loan Agreement of even date herewith between Maverick Entrepreneurs Fund, Ltd. and Bank and the indebtedness of Borrower thereunder, including but not limited to all extensions or renewals thereof, and all sums payable under or by virtue thereof, including without limitation, all amounts of principal and interest, all expenses (including attorney's fees and cost of collection as specified) incurred in the collection thereof or the enforcement of rights thereunder or in enforcing this Guaranty (including without limitation, any liability arising from failure to comply with state or federal laws, rules and regulations concerning the control of hazardous wastes or substances at or with respect to any real estate securing any loan guaranteed hereby), whether arising in the ordinary course of business or otherwise, and whether held or to be held by Bank for its own account or as agent for another or others. If Borrower is a partnership, corporation or other entity -1- the term "Liability" or "Liabilities" as used herein shall include all Liabilities to Bank of any successor entity or entities. B. "Guarantors" as used herein shall mean each Guarantor or any one or more of them. Anyone executing this Guaranty shall be bound by the terms hereof without regard to execution by anyone else. This Guaranty is binding upon each Guarantor, his, their or its executors, administrators, successors or assigns, and shall inure to the benefit of Bank, its successors, endorsees or assigns. "Guarantor" as used in this instrument shall be construed as singular or plural to correspond with the number of persons executing this instrument as Guarantor. The pronouns used in this Agreement are in the masculine gender but shall be construed as female or neuter as an occasion may require. C. "Collateral" means the property subject to a security interest, and includes accounts and chattel paper which have been sold, including but not limited to all additions and accessions thereto, all replacements or substitutes therefor, and all immediate and remote proceeds of the sale or other disposition thereof. 4. Waivers by Guarantors. Each Guarantor waives notice of acceptance of this Guaranty, notice of any Liability or Obligations to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or nonpayment of any Liabilities, waives notice of intent to accelerate, notice of acceleration and notice of any suit or the taking of other action by Bank against Borrower, any Guarantor or any other person and any other notice to any party liable thereon (including any other Guarantor) and any applicable statute of limitations. Each Guarantor also hereby waives any claim, right or remedy which such Guarantor may now have or hereafter acquire against Borrower that arises hereunder and/or from the performance by any Guarantor hereunder including, without limitation, any claim, remedy or right of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim, right or remedy of Bank against Borrower or any security which Bank now has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise. Each Guarantor hereby agrees to waive the benefits of any provision of law requiring that Bank exhaust any right or remedy, or take any action, against Borrower, any Guarantor, any other person and/or property including, without limitation, to the extent permitted by applicable law, the provisions of the Texas Civil Practice and Remedies Code ss.17.001, Texas Rules of Civil Procedure Rule 31 and the Texas Business and Commerce Code ss.34.03, as amended, or otherwise. Bank may at any time and from time to time (whether before or after revocation or termination of this Guaranty) without notice to Guarantors (except as required by law), without incurring responsibility to Guarantors, without impairing, releasing, or otherwise affecting the obligations of Guarantors, in whole or in part, and without the endorsement or execution by any Guarantor of any additional consent, waiver or guaranty: (a) change the manner, place or terms of payment of the Liabilities and/or the Obligations; (b) change or extend the time of or renew or alter, any Liability or Obligation or installment thereof, or any security therefor; (c) loan additional monies or extend additional credit to Borrower, with or without security, thereby creating new Liabilities or Obligations the payment or performance of which shall be guaranteed hereunder, and the Guaranty herein made shall apply to the Liabilities and Obligations as so changed, extended, surrendered, realized upon or otherwise altered; (d) sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property at any time pledged or mortgaged to secure the Liabilities or Obligations and any offset there against; (e) exercise or refrain from exercising any rights against Borrower or others (including any Guarantor) or act or refrain from acting in any other manner; (f) settle or compromise any liability or obligation or any security therefor and subordinate the payment of all or any part thereof to the payment of any liability or obligation of any other parties primarily or secondarily liable on any of the Liabilities or Obligations; (g) release or compromise any liability of any Guarantor hereunder or any liability or obligation of any other parties primarily or secondarily liable on any of the Liabilities or Obligations; or (h) apply any sums from any sources to any Liability or Obligation without regard to any Liabilities or Obligations remaining unpaid. -2- 5. Subordination. Upon demand of Bank, each Guarantor agrees that it will not demand, take or receive from Borrower, by set-off or in any other manner, payment of any liabilities and/or obligations, now and at any time or times hereafter owing by Borrower to such Guarantor unless and until all the Liabilities shall have been fully paid and all the Obligations have been performed, and any security interest, liens or encumbrances which such Guarantor now has and from time to time hereafter may have upon any of the assets of Borrower shall be made subordinate, junior and inferior and postponed in priority, operation and effect to any security interest of Bank in such assets. 6. Waivers by Bank. No delay on the part of Bank in exercising any of its options, powers or rights, or any partial or single exercise thereof, shall constitute a waiver thereof. No waiver of any of its rights hereunder, and no modification or amendment of this Guaranty, shall be deemed to be made by Bank unless the same shall be in writing, duly signed on behalf of Bank; and each such waiver, if any, shall apply only with respect to the specific instance involved, and shall in no way impair the rights of Bank or the obligations of any such Guarantor to Bank in any other respect at any other time. 7. Termination. This Guaranty shall continue until written notice of revocation signed by each respective Guarantor or until written notice of the death of such Guarantor shall actually have been received by Bank, notwithstanding change in name, location, composition or structure of, or the dissolution, termination or increase, decrease or change in personnel, owners or partners of Borrower, or any one or more of Guarantors, provided, however, that no notice of revocation or termination hereof shall affect in any manner rights arising under this Guaranty with respect to Liabilities or Obligations that shall have been created, contracted, assumed or incurred prior to receipt of such written notice pursuant to any agreement entered into by Bank prior to receipt of such notice, and the sole effect of such notice of revocation or termination hereof shall be to exclude from this Guaranty Liabilities or Obligations thereafter arising that are unconnected with Liabilities or Obligations theretofore arising or transactions entered into theretofore. In the event of the death of a Guarantor, the liabilities of the estate of the deceased Guarantor shall continue in full force and effect as to (i) the Liabilities existing at the date of death, and any renewals or extensions thereof, and (ii) loans or advances made to or for the account of Borrower after the date of death of the deceased Guarantor pursuant to the liabilities of Bank under a commitment made to Borrower prior to the date of such death. As to all surviving Guarantors, this Guaranty shall continue in full force and effect after the death of a Guarantor, not only as to the Liabilities existing at that time, but also as to Liabilities thereafter incurred by Borrower to Bank. This Guaranty shall automatically terminate when all Liabilities have been paid in full and Bank has no further obligation to advance funds to Borrower under the Loan Documents. 8. Partial Invalidity and/or Enforceability of Guaranty. The unenforceability or invalidity of any provision of this Guaranty shall not affect the enforceability or validity of any other provision herein and the invalidity or unenforceability of any provision of any Loan Document as it may apply to any person or circumstance shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances. In the event Bank is required to relinquish or return the payments, the Collateral or the proceeds thereof, in whole or in part, which had been previously applied to or retained for application against any Liability or Obligation, by reason of a proceeding arising under the Bankruptcy Code, or for any other reason, this Guaranty shall automatically continue to be effective notwithstanding any previous cancellation or release effected by Bank. 9. Obligations of Guarantors. In the event that Borrower fails to perform any of the Obligations or pay any of the Liabilities, Guarantors shall upon demand by Bank, promptly and with due diligence pay all Liabilities and perform and satisfy for the benefit of Bank all Obligations. No Guarantor will, without the prior written consent of Bank, become a party to a merger or consolidation with any other company, except where such Guarantor is the surviving corporation or entity, and all covenants under this Guaranty are assumed by the surviving corporation. Further, no Guarantor may change the status of or type -3- of entity that Guaranty is, without the written consent of Bank and all covenants under this Guaranty are assumed by the new or surviving entity. Each Guarantor further agrees that this Guaranty shall be binding, legal and enforceable against such Guarantor in the event Borrower changes its name, status or type of entity. 10. Financial and Other Information. Guarantors agree to furnish to Bank any and all financial information and any other information regarding Guarantors and/or Collateral requested in writing by Bank within ten (10) days of the date of the request. Each Guarantor has made an independent investigation of the financial condition and affairs of Borrower prior to entering into this Guaranty, and each Guarantor has made and will continue to make an independent appraisal of the creditworthiness of Borrower; and in entering into this Guaranty, no Guarantor has relied upon any representation of Bank as to the financial condition, operation or creditworthiness of Borrower. Guarantors further agree that Bank shall have no duty or responsibility now or hereafter to make any investigation or appraisal of Borrower on behalf of such Guarantor or to provide Guarantor with any credit or other information which may come to its attention now or hereafter. 11. Notices. All notices required or permitted to be given herein shall be sent by registered or certified mail, return receipt requested, to the Bank at the address shown in the preamble to this Guaranty and to Guarantors at 8080 North Central Expressway, Suite 1300, Dallas, Texas 75206 or such other address provided to Bank by like notice. The parties agree that the notice shall be considered received five (5) days after being placed in the United States mail. 12. Events of Default. The following are events of default hereunder: (a) the failure to pay or perform any Obligation or Liability of any Guarantor to Bank, or to any affiliate of Bank, whether under this Guaranty or any other agreement, note or instrument now or hereafter existing which relates to the Liabilities, as and when due (whether upon demand, at maturity or by acceleration); (b) the failure to pay or perform any other obligation, liability or indebtedness of any Guarantor as and when due, which results in the acceleration thereof, whether to Bank or some other party, the Collateral for which constitutes an encumbrance on the Collateral for this Guaranty; (c) death of a Guarantor (if an individual), revocation or termination (if a trust) without prior consent of Bank, or a proceeding being filed or commenced against any Guarantor for dissolution or liquidation, or any Guarantor voluntarily or involuntarily terminating or dissolving or being terminated or dissolved; (d) the insolvency of, the appointment of a custodian, trustee, liquidator or receiver for or for any of the property of, or an assignment for the benefit of creditors by, or the filing of a petition under any bankruptcy, insolvency or debtor's relief law or for any adjustment of indebtedness, composition or extension by or against any Guarantor; (e) any lien or additional security interest being placed upon any of the Collateral which is security for this Guaranty; (f) acquisition at any time or from time to time of title to the whole of or any part of the Collateral which is security for this Guaranty by any person, partnership, corporation or other entity; (g) Bank determining that any representation or warranty made by any Guarantor to Bank is, or was, untrue or materially misleading; (h) failure of any Guarantor to timely deliver such financial statements and other statements of condition; (i) any default under any Loan Documents; (j) entry of a judgment against any Guarantor which Bank deems to be of a material nature, in Bank's sole discretion; (k) the seizure or forfeiture of, or the issuance of any writ of possession, garnishment or attachment, or any turnover order for any property of any Guarantor; (l) termination of Guaranty by a Guarantor; or (m) the inability of any Guarantor to pay debts as they mature whether owing to Bank or any other party. 13. Remedies. Upon the occurrence of any event of default hereunder, Bank shall have all of the remedies of a creditor and, to the extent applicable, of a secured party, under all applicable law, and without limiting the generality of the foregoing, Bank may, at its option and without notice or demand: (a) declare any Liability accelerated and due and payable at once; and (b) take possession of any Collateral wherever located, and sell, resell, assign, transfer and deliver all or any part of said Collateral of any Guarantor at any public or private sale or otherwise dispose of any or all of the Collateral in its then condition, for cash or on credit or for future delivery, and in connection therewith Bank may impose reasonable conditions upon any such sale. Bank, unless prohibited by law the provisions of which cannot be waived, may purchase all or any part of said Collateral to be sold, free from and discharged of all trusts, claims, rights or redemption and equities of Borrower or Guarantors whatsoever; Guarantors acknowledge and agree that the sale of any Collateral through any nationally recognized broker-dealer, investment banker or any other method common in the securities industry shall be -4- deemed a commercially reasonable sale under the Uniform Commercial Code or any other equivalent statute or federal law, and expressly waives notice thereof except as provided herein; and (c) set-off against any or all liabilities of any Guarantor all money owed by Bank in any capacity to such Guarantor whether or not due, and also set-off against all other liabilities of Borrower to Bank all money owed by Bank in any capacity to Borrower or a Guarantor, and if exercised by Bank, Bank shall be deemed to have exercised such right of set-off and to have made a charge against any such money immediately upon the occurrence of such default although made or entered on the books subsequent thereto. 14. Attorney Fees, Costs and Expenses. Guarantors shall pay all costs of collection and reasonable attorney's fees, including fees in connection with any suit, mediation or arbitration proceeding, out of court payment agreement, trial, appeal, bankruptcy proceedings or otherwise, incurred or paid by Bank in enforcing the payment of any Liability or enforcing or preserving any right or interest of Bank hereunder, including the collection, preservation, sale or delivery of any Collateral from time to time pledged to Bank, and after deducting such fees, costs and expenses from the proceeds of sale or collection, Bank may apply any residue to pay any of the Liabilities and Guarantors shall continue to be liable for any deficiency with interest at the rate specified in any instrument evidencing the Liability or, at the Bank's option, equal to the highest lawful rate, which shall remain a liability. 15. Preservation of Property. Bank shall not be bound to take any steps necessary to preserve any rights in any of the property of Guarantors pledged to Bank to secure Guarantors' obligations against prior parties who may be liable in connection therewith, and Guarantors hereby agree to take any such steps. Bank, nevertheless, at any time, may (a) take any action it deems appropriate for the care or preservation of such property or of any rights of Guarantors or Bank therein, (b) demand, sue for, collect or receive any money or property at any time due, payable or receivable on account of or in exchange for any property of Guarantors, (c) compromise and settle with any person liable on such property, or (d) extend the time of payment or otherwise change the terms of the Loan Documents as to any party liable on the Loan Documents, all without notice to, without incurring responsibility to, and without affecting any of the obligations or liabilities of Guarantors. 16. Collateral. Bank at all times and from time to time shall have the right to require Guarantors to deliver to Bank Collateral satisfactory to Bank to secure Guarantors' undertakings hereunder and/or the liabilities of Guarantors hereunder. Bank is granted a contractual right of set-off and will not be liable for dishonoring checks or withdrawals where the exercise of Bank's contractual right of set-off results in insufficient funds in any Guarantor's account. As authorized by law, each Guarantor grants to Bank this contractual right of set-off in all deposits of such Guarantor now or at anytime hereafter in the possession of Bank, including but not limited to any joint account, special account, account by the entireties, tenancy in common, and all dividends and distributions now or hereafter in the possession or control of Bank. |_| Check if applicable. In addition to the provisions stated above, Guarantor hereby pledges, assigns and grants to Bank a security interest in and title to the Collateral described in the security agreement, deed of trust, deed to secure debt, mortgage or other Collateral instrument dated _____________, 19__ which Collateral, except for any margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), shall secure this Guaranty, whether currently existing or arising in the future. Guarantor agrees to execute such security agreements, financing statements and other documents as Bank may reasonably require or request to obtain and perfect its security interest in said Collateral. 17. Limitation on Liability. Each Guarantor's liability hereunder shall be limited to (i) the amount set forth next to such Guarantor's name on Schedule I attached hereto, which represents a percentage of the total loan commitment under the Loan Documents, plus (ii) accrued interest thereon as provided in the Loan Documents, and (iii) fees and expenses owing under the Loan Documents. The liability of each such Guarantor under this Guaranty shall not be reduced by any payments on the Liabilities except payments which reduce the principal balance of the loan and the total loan commitment to an amount less than the amount set forth on Schedule I. -5- Further, the liability on any Guarantor hereunder shall not be reduced by any amounts credited against the Liabilities on account of the purchase price paid upon the sale (whether at a foreclosure sale or otherwise) of property pledged or in which a security interest has been granted to Bank pursuant to any security agreement as part of the Loan Documents, except to the extent that the amounts credited against the Liabilities as a result of such sale reduce the principal balance of the loan and the total loan commitment to an amount less than the amount set forth on Schedule I. 18. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS GUARANTY MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS GUARANTY APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION. A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN DALLAS, TEXAS ------------- ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS. B. RESERVATION OF RIGHTS. NOTHING IN THIS GUARANTY SHALL BE DEEMED TO (i) --------------------- LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS GUARANTY; OR (ii) BE A WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. ss. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (iii) LIMIT THE RIGHT OF THE BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSURE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS GUARANTY. AT BANK'S OPTION, FORECLOSURE UNDER A DEED OF TRUST OR MORTGAGE MAY BE ACCOMPLISHED BY ANY OF THE FOLLOWING: THE EXERCISE OF A POWER OF SALE UNDER THE DEED OF TRUST OR MORTGAGE, OR BY JUDICIAL SALE UNDER THE DEED OF TRUST OR MORTGAGE, OR BY JUDICIAL FORECLOSURE. NEITHER THIS EXERCISE OR SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES. 19. NOTICE OF FINAL AGREEMENT. THIS WRITTEN CONTINUING AND UNCONDITIONAL GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL -6- AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. -7- IN WITNESS WHEREOF, the undersigned have caused this Guaranty to be executed as of November 22, 1994. BANK: GUARANTORS: NationsBank of Texas, N.A. Tallulah, Ltd. By: /s/ Marta O. Engram By: /s/ Sam Wyly --------------------------------------- ------------------------------- Marta O. Engram Sam Wyly Vice President, Private Banking General Partner Brush Creek, Ltd. By: /s/ Charles J. Wyly, Jr. ------------------------------- Charles J. Wyly, Jr. General Partner Laurie L. Wyly Revocable Trust By: /s/ Sam Wyly ------------------------------- Sam Wyly, Trustee Lisa Wyly Revocable Trust By: /s/ Sam Wyly ------------------------------- Sam Wyly, Trustee Kelly Wyly Elliot Trust By: /s/ Sam Wyly ------------------------------- Sam Wyly, Trustee Andrew David Sparrow Wyly Trust By: /s/ Sam Wyly ------------------------------- Sam Wyly, Trustee -8- Christiana Parker Wyly Trust By: /s/ Sam Wyly ----------------------------------------- Sam Wyly, Trustee Charles Joseph Wyly, III Trust By: /s/ Charles J. Wyly, Jr. ----------------------------------------- Charles J. Wyly, Jr., Trustee Martha Caroline Wyly Trust By: /s/ Charles J. Wyly, Jr. ----------------------------------------- Charles J. Wyly, Jr., Trustee Emily Ann Wyly Trust By: /s/ Charles J. Wyly Jr. ----------------------------------------- Charles J. Wyly, Jr., Trustee Jennifer Lynn Wyly Trust By: /s/ Charles J. Wyly ----------------------------------------- Charles J. Wyly, Trustee /s/ Sam Wyly ----------------------------------------- Sam Wyly /s/ Charles J. Wyly, Jr. ----------------------------------------- Charles J. Wyly, Jr. /s/ Evan Wyly ----------------------------------------- Evan Wyly -9- SCHEDULE I Guarantor Maximum Liability - --------- ----------------- Tallulah, Ltd. $ Brush Creek, Ltd. Evan Wyly Charles J. Wyly Sam Wyly Laurie L. Wyly Revocable Trust Lisa Wyly Revocable Trust Kelly Wyly Elliot Trust Andrew David Sparrow Wyly Trust Christiana Parker Wyly Trust Martha Caroline Wyly Trust Charles Joseph Wyly, III Trust Emily Ann Wyly Trust Jennifer Lynn Wyly Trust -10- EX-6 7 FORM OF CREDIT AGREEMENT, DATED AS OF DECEMBER 16, 1994 Exhibit 6 --------- U.S. $____________ REVOLVING CREDIT FACILITY FORM OF CREDIT AGREEMENT dated as of December 16, 1994 between --------------, as the Borrower, and CITIBANK, N.A., as the Bank TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS SECTION 1.01. Certain Defined Terms..........................................1 Advance..................................................................1 Agreement................................................................1 Base Rate................................................................1 Base Rate Advance........................................................2 Business Day.............................................................2 Cash and Cash Equivalents................................................2 Collateral...............................................................3 Collateral Account.......................................................3 Commitment...............................................................3 Confidential Information.................................................3 Continuation", "Continue", and "Continued................................3 Control Person Statement.................................................3 "Convert," "Conversion" and "Converted"..................................3 Eurodollar Rate..........................................................3 Eurodollar Rate Advance..................................................4 Event of Default.........................................................4 General Partner..........................................................4 Guarantor................................................................4 Guaranty Agreement.......................................................4 Hedge Agreement..........................................................4 Interest Period..........................................................4 LIBO Rate................................................................4 Loan Document............................................................4 Market Rate..............................................................4 Maverick.................................................................4 Michaels.................................................................5 Note.....................................................................5 Other Taxes..............................................................5 Partnership Agreement....................................................5 Partnership Certificate..................................................5 Person...................................................................5 Pledge Agreement.........................................................5 Pledged Collateral.......................................................5 Pledged Shares...........................................................5 Readily Marketable Securities............................................5 Rule 144.................................................................6 Sterling.................................................................6 Subsidiary...............................................................6 Taxes....................................................................7 Termination Date.........................................................7 Type.....................................................................7 SECTION 1.02. Accounting Terms...............................................7 SECTION 1.03. Articles, Sections, Etc........................................7 SECTION 1.04. Computation of Time Periods....................................7 (i) ARTICLE II AMOUNTS AND TERMS OF ADVANCES SECTION 2.01. The Advances....................................................7 SECTION 2.02. Making the Advances.............................................7 SECTION 2.03. Responsibility for Requests for Advances........................8 SECTION 2.04. Facility Fees...................................................9 SECTION 2.05. Reduction and Termination of the Commitment.....................9 SECTION 2.06. Repayment.......................................................9 SECTION 2.07. Interest........................................................9 (a) Ordinary Interest.................................................9 (i) Eurodollar Rate Advances............................9 (ii) Base Rate Advances................................10 (b) Default Interest.................................................10 (c) Interest Periods.................................................10 SECTION 2.08. Optional Prepayments...........................................11 (a) Base Rate Advances...............................................11 (b) Eurodollar Rate Advances.........................................11 SECTION 2.09. Certain Mandatory Prepayments..................................11 SECTION 2.10. Increased Costs................................................11 SECTION 2.11. Additional Interest............................................12 SECTION 2.12. Increased Capital..............................................12 SECTION 2.13. Voluntary Continuation of Advances.............................12 SECTION 2.14. Illegality, Etc................................................13 SECTION 2.15. Payments and Computations......................................14 SECTION 2.16. Taxes..........................................................14 SECTION 2.17. Hedge Agreements...............................................15 ARTICLE III CONDITIONS OF LENDING SECTION 3.01. Condition Precedent to Initial Advance.........................16 SECTION 3.02. Conditions Precedent to All Advances...........................17 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower.................19 ARTICLE V CERTAIN COVENANTS OF THE BORROWER SECTION 5.01. Certain Affirmative Covenants..................................20 (a) Use of Advances..................................................20 (b) Compliance with Laws, Etc........................................20 (c) Payment of Taxes, Etc............................................20 (d) Reporting Requirements...........................................21 SECTION 5.02. Certain Negative Covenants.....................................22 (a) Liens, Etc.......................................................22 (ii) ARTICLE VI CERTAIN OTHER COVENANTS SECTION 6.01. Collateral to Loan Coverage....................................23 ARTICLE VII EVENTS OF DEFAULT SECTION 7.01. Events of Default..............................................25 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc................................................27 SECTION 8.02. Notices, Etc...................................................27 SECTION 8.03. No Waiver; Remedies............................................27 SECTION 8.04. Costs, Expenses and Taxes......................................28 SECTION 8.05. Right of Set-Off...............................................28 SECTION 8.06. Binding Effect.................................................28 SECTION 8.07. Counterparts...................................................30 SECTION 8.08. Interest.......................................................30 SECTION 8.09. Governing Law; Consent to Jurisdiction.........................30 SECTION 8.10. WAIVER OF JURY TRIAL...........................................31 Exhibit A - Promissory Note Exhibit B - Pledge Agreement Exhibit C - Form of Legal Opinion of Jackson & Walker, L.L.P., Counsel for the Borrower (iii) FORM OF CREDIT AGREEMENT Dated as of December 16, 1994 ______________, a _________________________ (the "Borrower"), acting through its , and CITIBANK, N.A., a national banking association (the "Bank"), agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Certain Defined Terms. As used in this Credit Agreement --------------------- (this "Agreement"), the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Advance" means an advance by the Bank to the Borrower pursuant to Article II. "Agreement" means this Credit Agreement, as the same may from time to time be amended or supplemented. "Base Rate" means, for any Interest Period or any other period, a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall at all times be equal to: (a) the rate of interest announced publicly by the Bank in New York, New York, from time to time, as the Bank's base rate; or (b) if the rate referred to in clause (a) above is unavailable for any reason, then "Base Rate" shall mean a fluctuating interest rate per annum equal to the sum (adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent) of (i) 1/2 of one percent per annum, plus (ii) the rate per annum obtained by dividing (A) the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if any such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by the Bank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated on the basis of quotations for such rates received by the Bank from three New York certificate of deposit dealers of recognized standing selected by Citibank, N.A., by (B) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or -1- other marginal reserve requirement) for the Bank in respect of liabilities consisting of or including (among other liabilities) three-month U.S. dollar nonpersonal time deposits each at least $100,000, plus (iii) the average during such three-week period of the ---- daily net annual assessment rates estimated by the Bank for determining the then current annual assessment payable by the Bank to the Federal Deposit Insurance Corporation (or any successor) for insuring U.S. dollar deposits of Citibank, N.A. in the United States. "Base Rate Advance" means an Advance which bears interest as provided in Section 2.07 (a)(ii). "Business Day" means a day of the year on which banks are not required or authorized to close in New York City or Dallas, Texas, and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market. "Cash and Cash Equivalents" means the aggregate amount of the following, to the extent owned by the Borrower free and clear of all liens, security interests, charges, encumbrances and rights of others: (a) cash on hand; (b) United States dollar demand deposits maintained in the United States with any commercial bank and United States dollar time deposits maintained in the United States with, or certificates of deposit having a maturity of one year or less issued by, any commercial bank which has its head office in the United States and which has a combined capital and surplus of at least $100,000,000.00; (c) direct obligations of, or obligations unconditionally guaranteed by, the United States and having a maturity of one year or less; (d) readily marketable commercial paper having a maturity of one year or less, issued by any corporation organized and existing under the laws of the United States or any state thereof or the District of Columbia and rated by Standard & Poor's Corporation or Moody's Investors Service, Inc. (or, if neither such organization shall rate such commercial paper at any time, rated by any nationally recognized rating organization in the United States) with the highest rating assigned by such organization; (e) repurchase agreements which (i) are callable at any time or have a maturity date of one year or less, (ii) are entered into with any commercial bank that has its head office in the United States and has a combined capital and surplus of at least $100,000,000.00 and (iii) are secured by direct obligations of, or obligations unconditionally guaranteed by, the United States and having a maturity of one year or less; (f) mutual funds that invest exclusively in direct obligations of, or obligations unconditionally guaranteed by, the United States and having a maturity of one year or less; and (g) such other short-term investments as shall be acceptable to the Bank from time to time in its sole discretion. "Collateral" means, collectively, (a) the Pledged Collateral, (b) all additional shares of stock of any issuer of any of the Pledged Shares, or any successor to any such issuer, from -2- time to time acquired by the Borrower and pledged and delivered by the Borrower to the Bank pursuant to Section 6.01, and all certificates representing such additional shares and all dividends (including, but not limited to, stock dividends), cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such additional shares for any reason, including, but not limited to, any change in the number or kind of outstanding shares of any securities of any issuer of any of the Pledged Shares, or any successor to any such issuer, by reason of any recapitalization, merger, consolidation, reorganization, separation, liquidation, stock split, stock dividend, combination of shares or other similar corporate event, (c) all cash from time to time pledged and delivered by the Borrower to the Bank for deposit in any one or more of the Collateral Accounts pursuant to Section 6.01, and (d) all proceeds of any and all of the properties described in clauses (a), (b) and (c) of this definition. "Collateral Account" has the meaning assigned to that term in the Pledge Agreement. "Commitment" has the meaning assigned to that term in Section 2.01. "Confidential Information" means the information furnished to the Bank by the Borrower pursuant to clause (i) of Section 5.01(d) and any other information that is furnished to the Bank by the Borrower and is clearly identified by the Borrower to the Bank in writing as confidential information. "Continuation", "Continue", and "Continued" each refer to a continuation of a Eurodollar Rate Advance pursuant to Section 2.14. "Control Person Statement" means the Control Person Statement, dated as of a December 16, 1994, furnished by or on behalf of the Borrower to the Bank. "Convert," "Conversion" and "Converted" each refers to a conversion of an Advance of one Type into an Advance of another Type pursuant to Section 2.14. "Dollars" and "$" means lawful money of the United States of America. "Eurodollar Rate" means, for any Interest Period for any Advance, an interest rate per annum equal to the sum of the LIBO Rate for such Interest Period plus one percent (1.00%) per annum. "Eurodollar Rate Advance" means an Advance which bears interest as provided in Section 2.07(a)(i). "Event of Default" has the meaning assigned to that term in Section 7.01. -3- "General Partner" means ________, not individually but as general partner of the Borrower. "Guarantor" means ______________, as an individual. "Guaranty Agreement" means that certain Guaranty Agreement of Guarantor of even date herewith, as the same may from time to time be amended or supplemented. "Hedge Agreement" means any equity derivative (including, but not limited to, any equity swap, future or option agreement), any interest rate swap, cap or collar agreement, any interest rate future or option contract, any currency swap agreement, any currency future or option agreement, any future commodity contract or option or any other similar agreement designed to hedge against fluctuations in equity values, interest rates or foreign exchange rates. "Interest Period" means, for each Eurodollar Rate Advance, the period commencing on the date of such Advance or the date of the Conversion of any Advance into such a Eurodollar Rate Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions of Section 2.07(c) and, thereafter, each subsequent period commencing on the day following the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions of Section 2.07(c). "LIBO Rate" means, for any Interest Period for any Eurodollar Rate Advance, an interest rate per annum equal to the rate of interest per annum at which deposits in United States dollars are offered by the principal office of the Bank in London, England, to prime banks in the London interbank market at 11:00 a.m. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to such Advance and for a period equal to such Interest Period. "Loan Document" means any of this Agreement, the Note, the Pledge Agreement, the Guaranty Agreement and any other pledge and security agreements executed and delivered pursuant to Section 6.01, as the same may be amended or otherwise modified from time to time. "Market Rate" has the meaning assigned to that term in Section 8.04(b). "Maverick" means the current market value of partnership interests in Maverick Fund. "Michaels" means Michaels Stores, Inc., a corporation duly formed and validly existing under the laws of the State of Delaware. -4- "Note" means a promissory note of the Borrower payable to the order of the Bank, in substantially the form of Exhibit A, evidencing the aggregate indebtedness of the Borrower to the Bank resulting from the Advances and delivered to the Bank pursuant to Article III, as the same may be amended, extended, renewed or otherwise modified from time to time. "Other Taxes" has the meaning assigned to that term in Section 2.16(b). "Partnership Agreement" means that certain Limited Partnership Agreement entered into as of ___________, 1992, pursuant to which the Borrower was formed, as such "Partnership Agreement" may be from time to time amended, restated or modified. "Partnership Certificate" has the meaning assigned such term in Section 3.01(j). "Person" means an individual, a partnership (including a general partnership, a limited partnership and a limited liability partnership), a limited liability company, a corporation (including a business trust), a joint stock company, a trust, an unincorporated association, a joint venture or any other entity, or a government or any political subdivision or agency of any government. "Pledge Agreement" means a pledge agreement, duly executed by the Borrower in substantially the form of Exhibit B, as the same may be amended or otherwise modified from time to time. "Pledged Collateral" has the meaning assigned to that term in the Pledge Agreement. "Pledged Shares" has the meaning assigned to that term in the Pledge Agreement. "Readily Marketable Securities" means the aggregate current market value of marketable securities listed or admitted to trading on the New York Stock Exchange or the American Stock Exchange or quoted on the NASDAQ National Market and legally and beneficially owned by the Borrower and/or by the Guarantor free and clear of all liens, security interests, options, charges, encumbrances and restrictions, including, but not limited to, restrictions (contractual or otherwise) on the transferability of such securities, but excluding restrictions on the transferability of any such marketable securities imposed by Rule 144 so long as a minimum of three years has elapsed or is deemed to have elapsed pursuant to Rule 144 since the later of (a) the date of the acquisition by the Borrower of such marketable securities from the respective issuers thereof or from any affiliate (as that term is defined in paragraph (a)(1) of Rule 144) of any such issuers and (b) the date of payment by the Borrower of the full purchase price or other consideration paid or given to acquire such marketable -5- securities from the respective issuers thereof or from any affiliate (as that term is defined in paragraph (a)(1) of Rule 144). For the purposes of Section 5.02(b), the current market value of any marketable security quoted on the NASDAQ National Market shall mean the closing bid price as quoted for such security on the NASDAQ National Market on the Business Day immediately preceding the date of determination, and the current market value of any marketable security listed or admitted to trading on the New York Stock Exchange or the American Stock Exchange shall mean the last reported sale price of such security on the New York Stock Exchange or the American Stock Exchange, as the case may be, on the Business Day immediately preceding the date of determination or, if no such reported sale takes place on such immediately preceding Business Day, the average of the last reported bid and asked prices for such security on the New York Stock Exchange or the American Stock Exchange, as the case may be, on such immediately preceding Business Day. "Rule 144" means Rule 144 under the Securities Act of 1933, as amended from time to time. "Sterling" means Sterling Software, Inc., a corporation duly formed and validly existing under the laws of the State of Delaware. "Subsidiary" means, for any Person, any corporation, partnership (including a general partnership, a limited partnership and a limited liability partnership), limited liability company, joint venture, trust or estate of which, or in which, (a) in the case of a corporation, more than fifty percent of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), or (b) in the case of a partnership, a limited liability company or a joint venture, more than fifty percent of the interest in the capital or profits of such partnership, limited liability company or joint venture, or (c) in the case of a trust or estate, more than fifty percent of the beneficial interest of such trust or estate, is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries, or by one or more other Subsidiaries. "Taxes" has the meaning assigned to that term in Section 2.16(a). "Termination Date" means December 16, 1996, or the earlier date of termination in whole of the Commitment pursuant to Section 2.05, Section 2.09 or Section 7.01. "Type" refers to an Advance and means a Base Rate Advance or a Eurodollar Rate Advance, as the case may be. -6- SECTION 1.02. Accounting Terms. All accounting terms not specifically ---------------- defined herein shall be construed in accordance with generally accepted accounting principles consistently applied. SECTION 1.03. Articles, Sections, Etc. Unless stated otherwise in this ----------------------- Agreement, references to this Agreement to Articles, Sections, Schedules and Exhibits are references to Articles and Sections of, and Schedules and Exhibits attached to, this Agreement. Each Schedule to this Agreement is by this reference incorporated in this Agreement. SECTION 1.04. Computation of Time Periods. In this Agreement, the Note and --------------------------- the other Loan Documents, for the purpose of computing periods of time from a specified date to a later specified date, the word "from" means "from and including" and each of the words "to" and "until" means "to but excluding." ARTICLE II AMOUNTS AND TERMS OF ADVANCES SECTION 2.01. The Advances. The Bank agrees, on the terms and conditions ------------ set forth in this Agreement, to make Advances to the Borrower from time to time on any Business Day during the period from the date hereof until the Termination Date in an aggregate amount not to exceed __________________________________ and No/1OO Dollars ($____________), as such amount may be reduced pursuant to Section 2.05 (the "Commitment"). Subject to Section 2.02(b), each Eurodollar Rate Advance shall be in an amount not less than $100,000. Amounts borrowed hereunder and repaid or prepaid may be reborrowed. SECTION 2.02. Making the Advances. ------------------- (a) Each Eurodollar Rate Advance shall be made on notice given not later than 12:00 noon (New York City time) two Business Days prior to the date of the proposed Advance, by or on behalf of the Borrower to the Bank, specifying the date and amount thereof and selecting the interest rate therefor pursuant to Section 2.07 and, the initial Interest Period for such Advance. Not later than 2:00 p.m. (New York City time) on the date of such Advance and upon fulfillment of the applicable conditions set forth in Article III, the Bank will make such Advance available to the Borrower in same day funds at the Bank's address referred to in Section8.02. (b) Any other provision of this Agreement to the contrary notwithstanding, the Borrower may not select the Eurodollar Rate for any Advance if the principal amount of such Advance is less than $100,000, unless, on the date of such Eurodollar Rate Advance the Borrower also Continues one or more Advances pursuant to Section 2.13 into an Advance of the same Type and having the same Interest Period as such Eurodollar Rate Advance and the aggregate amount of such Eurodollar Rate Advances so made and Continued on such date is not less than $100,000. -7- (c) Each notice from or on behalf of the Borrower to the Bank requesting a Eurodollar Rate Advance shall be irrevocable and binding on the Borrower. If any Eurodollar Rate Advance is not made as a result of any failure to fulfill the applicable conditions to such Advance set forth in Article III on or before the date for such Advance specified in the notice from or on behalf of the Borrower to the Bank requesting such Advance, then the Borrower shall pay to the Bank, upon demand by the Bank, an amount equal to the loss or expense incurred or sustained by the Bank as a result of such failure as set forth in a statement prepared by the Bank in good faith and in reasonable detail. SECTION 2.03. Responsibility for Requests for Advances. ---------------------------------------- (a) The Borrower hereby authorizes the Bank to make Advances under this Agreement upon notice given by the Borrower or upon notice given on behalf of the Borrower by Sharyl Robertson, Amy Phillips or Rena Alexander and any other Person designated in writing by the Borrower to the Bank from time to time, each of whom shall at all times continue to be authorized by the Advance to request Advances on behalf of the Borrower under this Agreement until receipt by the Bank of written notice from the Borrower of the revocation of such authority of any such Person. Each Advance made by the Bank upon notice given by the Borrower or by Sharyl Robertson, Amy Phillips or Rena Alexander or any other Person designated in writing by the Borrower to the Bank shall be conclusively presumed to have been made to or for the benefit of the Borrower when made by the Bank in accordance with such notice and deposited in an account in the name of the Borrower pursuant to such notice, regardless of whether any Person (including, but not limited to, any Person authorized to request Advances on behalf of the Borrower) other than the Borrower also shall have authority to withdraw funds from such account. The Borrower agrees to repay, and to pay interest on, any Advance that is so made, deposited or credited by the Bank. (b) The Borrower acknowledges and agrees that the making by the Bank of Advances in response to notices given via telephone facsimile communications is in the interest of the Borrower and that the Bank cannot effectively determine whether a specific notice requesting an Advance and purporting to have been made by or on behalf of the Borrower is actually authorized or authentic. In order to induce the Bank to make Advances in response to notices given via telephone facsimile communications, the Borrower hereby assumes all risks regarding the validity, authenticity and due authorization of all notices requesting Advances that are purported to be given by or on behalf of the Borrower, whether or not the Person giving such notice has authority in fact to request Advances on behalf of the Borrower and whether or not the requested Advance or the application of the proceeds of such Advance constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both. The Bank shall incur no liability to the Borrower in acting upon any notice or other communication, whether given via telephone -8- facsimile or telex or otherwise in writing, which the Bank believes in good faith to have been given by any Person authorized to give notices requesting Advances on behalf of the Borrower or in otherwise acting in good faith under this Agreement. SECTION 2.04. Facility Fees. In consideration of the Commitment ------------- available on the terms of this Agreement, the Borrower agrees to pay to the Bank a facility fee equal to one tenth of one percent (0.10%) of the then outstanding Commitment, payable on the 16th day of December in each calendar year for so long as the Commitment is outstanding, commencing on December 16, 1994. SECTION 2.05. Reduction and Termination of the Commitment. ------------------------------------------- (a) The Borrower shall have the right, upon at least two Business Days notice to the Bank, to terminate in whole or reduce in part the unused portion of the Commitment; provided that each partial reduction shall be in an amount of not less than $1,200,000.00. (b) Any other provision of this Agreement to the contrary notwithstanding, the Commitment shall terminate in whole on February 28, 1995, if (i) the Borrower shall not have given notice of the initial Advance pursuant to Section 2.02(a) on or before February 28, 1995, and (ii) the applicable conditions to the initial Advance set forth in Article III shall not have been fulfilled on or before February 28, 1995. SECTION 2.06. Repayment. The Borrower shall repay the --------- aggregate unpaid principal amount of all Advances on or before the Termination Date. SECTION 2.07. Interest. -------- (a) Ordinary Interest. The Borrower shall pay interest on the ----------------- unpaid principal amount of each Advance from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum: (i) Eurodollar Rate Advances. During such periods as ------------------------ such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during the Interest Period for such Advance to the Eurodollar Rate for such Interest Period, payable monthly on the last day of each calendar month and on the last day of such Interest Period. (ii) Base Rate Advances. During such periods as such ------------------ Advance is a Base Rate Advance, a rate per annum equal to all times to the Base Rate in effect from time to time minus one percent (1.00%), payable monthly on the last day of each calendar month and on the date such Base Rate Advance shall be Converted or paid in full. -9- (b) Default Interest. The Borrower shall pay interest on the ---------------- unpaid principal amount of each Advance that is not paid when due and on the unpaid amount of all interest, fees and other amounts payable hereunder that is not paid when due, payable on demand, at a rate per annum equal at all times to (i) in the case of any amount of principal, the greater of (A) three percent (3.00%) per annum above the rate per annum required to be paid on such Advance immediately prior to the date on which such amount became due and (B) three percent (3.00%) per annum above the Base Rate in effect from time to time, and (ii) in the case of all other amounts, three percent (3.00%) per annum above the Base Rate in effect from time to time. (c) Interest Periods. The duration of each Interest Period ---------------- shall be (i) one, two, three or six months in the case of a Eurodollar Rate Advance as the Borrower may, upon notice received by the Bank not later than 12:00 noon (New York City time) two Business Days prior to the first day of such Interest Period, select; provided that: (A) the duration of any Interest Period which commences before the Termination Date, and would otherwise end after such date shall end on such date; and (B) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided that, in the case of -------- any Interest Period for a Eurodollar Rate Advance, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, then the last day of such Interest Period shall occur on the next preceding Business Day. If the Borrower shall fail to select an Interest Period, the Borrower shall be deemed to have selected the one (1) month Interest Period. SECTION 2.08. Optional Prepayments. -------------------- (a) Base Rate Advances. The Borrower may, upon at least two ------------------ Business Days notice to the Bank stating the proposed date and principal amount of the prepayment, and if such notice is given the borrower shall, prepay the outstanding principal amounts of the Base Rate Advances, in whole or in part, plus accrued interest to the date of such prepayment on the principal amount prepaid. (b) Eurodollar Rate Advances. The Borrower may, upon at least ------------------------ thirty days notice to the Bank specifying the Advance to be prepaid and stating the proposed date and principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the entire outstanding principal amount of any Eurodollar Rate Advance specified in such notice, plus accrued interest to the date of such prepayment on the principal amount prepaid; provided that -------- -10- the Borrower shall be obligated to pay the Bank in respect of such prepayment pursuant to Section 8.04(b). SECTION 2.09. Certain Mandatory Prepayments. Upon the death of the ----------------------------- Guarantor or the appointment by a court of competent jurisdiction of a guardian, conservator, committee or other similar appointee for the Borrower or Guarantor, then, and in any such event, (a) the obligation of the Bank to make Advances shall automatically be terminated and (b) the Advances, the Note, all interest thereon and all other amounts payable under this Agreement shall automatically become and be due and payable on the ninetieth day after the earlier to occur of the date of such death or the date of such appointment, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. SECTION 2.10. Increased Costs. If, due to either (a) the introduction --------------- of or any change (other than any change by way of imposition or increase of reserve requirements referred to in Section 2.11) in or in the interpretation of any law or regulation or (b) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to the Bank of agreeing to make or making, funding or maintaining Eurodollar Rate Advances to the extent not reflected in the Eurodollar Rate, then the Borrower shall from time to time, upon demand by the bank, pay to the Bank additional amounts sufficient to compensate the Bank for such increased cost incurred or accrued by the Bank not more than ninety days prior to the date of such demand by the Bank. A certificate as to the amount of such increased cost, submitted to the Borrower by the Bank, shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.11. Additional Interest. The Borrower shall pay to the Bank, ------------------- so long as the Bank shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency liabilities (as such term is defined in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time), additional interest on the unpaid principal amount of each Eurodollar Rate Advance, from the date of such Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (a) the LIBO Rate for the Interest Period for such Advance from (b) the rate obtained by dividing such LIBO Rate by a percentage equal to 100% minus the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve -11- requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for the Bank with respect to liabilities or assets consisting of or including Eurocurrency liabilities having a term equal to such Interest Period, payable on each date on which interest is payable on such Advance. Such additional interest shall be determined by the Bank and notified to the Borrower, and such determination by the Bank shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.12. Increased Capital. If the Bank determines that compliance ----------------- with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank and that the amount of such capital is increased by or based upon the existence of the Bank's commitment to lend hereunder and other commitments of this type, then, upon demand by the Bank within ninety days after such increase in capital, the Borrower shall immediately pay to the Bank, from time to time, as specified by such corporation in the light of such circumstances, to the extent that the Bank reasonably determines such increase in capital to be allocable to the existence of the Bank's commitment to lend hereunder. A certificate as to such amounts submitted to the Borrower by the bank shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.13. Voluntary Continuation of Advances. The Borrower may on ---------------------------------- any Business Day, upon notice given to the Bank not later than 12:00 noon (New York City time) on the second Business Day prior to the date of the proposed Continuation and subject to the provisions of Sections 2.07 and 2.14, Continue a Eurodollar Rate Advance with another Interest Period as selected pursuant to Section 2.07(c); provided that any Continuation of any Eurodollar Rate Advance -------- shall be made on, and only on, the last day of an Interest Period for such Eurodollar Rate Advance; provided, further, that the Borrower may not Continue a -------- ------- Eurodollar Rate Advance if the principal amount of the Eurodollar Rate Advance is less than $100,000. Each notice of a Continuation pursuant to this Section 2.13 shall, within the restrictions specified above, specify (a) the date of such Continuation, (b) the Advance to be Continued and (c) the duration of the Interest Period for such Advance. In the event that (i) the Borrower fails to provide the Bank with notice of Continuation on any Eurodollar Advance and (ii) such Advance is less than $100,000, but greater than $25,000, then such Advance will be Converted to a Base Rate Advance until the next Eurodollar Rate Advance that, when combined with all outstanding Base Rate Advances is equal to or greater than $100,000, is Continued at which time such Base Rate Advance will be aggregated with such Eurodollar Rate Advance and Continued with such Eurodollar Rate Advance. -12- SECTION 2.14. Illegality, Etc. --------------- (a) Any other provision of this Agreement to the contrary notwithstanding, if the Bank shall notify the Borrower that the introduction of, or any change in or in the interpretation of, any law or regulation makes it unlawful, or that any central bank or other governmental authority asserts that it is unlawful, for the Bank to perform its obligations hereunder to make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances hereunder, then (i) the obligation of the Bank to make Eurodollar Rate Advances shall be suspended until the Bank shall notify the Borrower that the circumstances causing such suspension no longer exist and (ii) the Borrower shall forthwith prepay in full all Eurodollar Rate Advances then outstanding, plus interest accrued thereon, unless the Borrower, within five Business Days of notice from the Bank, Converts all Eurodollar Rate Advances then outstanding into Base Rate Advances. (b) If, with respect to any Eurodollar Rate Advance, the Bank notifies the Borrower that (i) the Bank is unable to determine the Eurodollar Rate or (ii) the Eurodollar Rate for any Interest Period for such Advance will not adequately reflect the cost to the Bank of making, funding or maintaining such Eurodollar Rate Advance for such Interest Period, such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and the obligation of the Bank to make Eurodollar Rate Advances shall be suspended until the Bank shall notify the Borrower that the circumstances causing such suspension no longer exist. (c) Within five (5) Business Days after the Bank notifies the Borrower that the reason for the suspension of the Eurodollar Rate Advances has ended, the Borrower shall Convert all of the Base Rate Advances to Eurodollar Rate Advances pursuant to the terms of Section 2.02 as if such Conversion were a new Eurodollar Rate Advance. SECTION 2.15. Payments and Computations. ------------------------- (a) The Borrower shall make each payment under any Loan Document not later than 12:00 noon (New York city time) on the day when due in United States dollars to the Bank at its address referred to in Section 8.02 in same day funds. (b) The Borrower hereby authorizes the Bank, if and to the extent payment is not made when due under any Loan Document, to charge from time to time against any or all of the Borrower's accounts with the Bank any amount so due. (c) All computations of interest shall be made by the Bank on the basis of a year of 360 days, in each case for the actual number of days (including the first day, but excluding the last day) occurring in the period for which such interest or commitment fees are payable. Each determination by the Bank of an -13- interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. (d) Whenever any payment under any Loan Document shall be stated to be due on a day other than a Business Day, and such extension of time shall in such case be included in the computation of payment of interest or commitment fee, as the case may be; provided that if such extension would cause payment of interest on or principal of any Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. SECTION 2.16. Taxes. ----- (a) Any and all payments by the Borrower hereunder or under the Note shall be made, in accordance with Section 2.15, 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, in the case of the Bank, net income taxes that are imposed by the United States and franchise taxes and net income taxes that are imposed on the Bank by the state or foreign jurisdiction under the laws of which the Bank is organized or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable to the Bank hereunder or under the Note, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including, but not limited to, deductions applicable to additional sums payable under this Section 2.16) the Bank receives an amount equal to the sum the Bank would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower shall pay any present or future stamp, documentary, excise, property or similar taxes, charges or levies that arise from any payment made hereunder or under the Note or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the Note (all such taxes, charges and levies being hereinafter referred to as "Other Taxes"). (c) The Borrower shall indemnify the Bank for the full amount of Taxes and Other Taxes, and for the full amount of taxes imposed by any jurisdiction on amounts payable under this Section 2.16, paid by the Bank and any liability (including, but not limited to, penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within thirty days from the date the Bank makes written demand therefor. -14- (d) Within thirty days after the date of any payment of Taxes, the Borrower shall furnish to the Bank, at the Bank's address referred to in Section 8.02, the original receipt of payment thereof or a certified copy of such receipt. In the case of any payment hereunder or under the Note by the Borrower through an account or branch outside the United States or on behalf of the Borrower by a payor that is not a United States person, if the Borrower determines that no Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause such payor to furnish, to the Bank, at such address of the Bank, an opinion of counsel acceptable to the Bank stating that such payment is exempt from Taxes. For the purposes of this subsection (d) and subsection (a) of this Section 2.16, the terms "United States" and "United States person" shall have the respective meanings specified in section 7701 of the Internal Revenue Code. (e) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.16 shall survive the payment in full of principal and interest hereunder and under the Note. SECTION 2.17. Hedge Agreements. It is expressly contemplated that the ---------------- Bank may, in its sole discretion, enter into Hedge Agreements with the Borrower from time to time and that under any such Hedge Agreements the Bank shall be entitled to any and all benefits of which the Bank is entitled under the Loan Documents. ARTICLE III CONDITIONS OF LENDING SECTION 3.01. Condition Precedent to Initial Advance. The obligation of -------------------------------------- the Bank to make its initial Advance is subject to the condition precedent that the Bank shall have received on or before the day of such Advance the following, each dated such day, in form and substance satisfactory to the Bank: (a) The Note duly executed by the Borrower; (b) The Pledge Agreement duly executed by the Borrower, together with: (i) acknowledgement copies or stamped receipt copies of proper financing statements, duly filed under the Uniform Commercial Code of all jurisdictions that the Bank may deem necessary or desirable in order to perfect the security interests created by the Pledge Agreement; (ii) completed requests for information, listing the financing statements referred to in Section 3.01(b)(i) and all other effective financing statements filed in the jurisdictions referred to in Section 3.01(b)(i) that name the Borrower as debtor, together with copies of such other -15- financing statements (none of which shall cover the collateral purported to be covered by the Pledge Agreement); (iii) certificates, representing the Pledged Shares accompanied by the following: (A) a letter from each issuer of Pledged Shares (singularly, an "Issuer Letter") directing the transfer agent to remove the legend on such Pledged Shares; (B) a letter from the transfer agent for each issuer of such Pledged Shares stating that such transfer agent will (i) remove any restrictive legend on such Pledged Shares upon delivery of the certificates representing such issuer's Pledged Shares and the related Issuer Letter; (ii) hold such Pledged Shares as agent for the Bank while removing the legends; and (iii) deliver the reissued Pledged Shares to the Bank after removal of any such restrictive legend; and (C) undated stock powers executed in blank or registered in the name of the Bank or such nominee or nominees as the Bank shall specify; and (iv) evidence that all other actions (including, but not limited to, the giving of any and all notices) necessary or, in the opinion of the Bank, desirable to perfect and protect the security interests created by the Pledge Agreement have been taken; (c) Federal Reserve Form U-1 provided for in Regulation U issued by the Board of Governors of the Federal Reserve System, the statements made in which shall be such, in the opinion of the Bank, as to permit the transactions contemplated hereby in accordance with said Regulation U; (d) Certified copies of all documents evidencing necessary governmental approvals, if any, with respect to each Loan Document; (e) The balance sheet of the Guarantor as at June 30, 1994 in reasonable detail and day certified by the Guarantor as being accurate and fairly presenting the financial condition of the Guarantor as at such date and for such period; (f) The balance sheet of the Borrower as at June 30, 1994 in reasonable detail and duly certified by the Trustee as -16- being accurate and fairly presenting the financial condition of the Trust as at such date and for such period; (g) A certificate of the Borrower certifying the name and true signature of the Person authorized to request Advances on behalf of the Borrower pursuant to Section 2.03; (h) A favorable written opinion of the law firm of Jackson & Walker, L.L.P., counsel for the Borrower, substantially in the form of Exhibit C, and as to such other matters as the Bank may reasonably request; (i) The Guaranty Agreement duly executed by the Guarantor; (j) Receipt by the Bank of certificate (the "Partnership Certificate") from the Borrower certifying (i) that a true and complete copy of the Partnership Agreement has been provided to the Bank, and (ii) the general partner has all necessary power and authority to act on behalf of the Borrower; and (k) Receipt and review of any such documentation as the Bank may reasonably request concerning the Collateral. SECTION 3.02. Conditions Precedent to All Advances. The obligation of ------------------------------------ the Bank to make each Advance (including the initial Advance) shall be subject to the further conditions precedent that on the date of such Advance: (a) The following statements shall be true (and each of the giving of the applicable notice requesting such Advance and the acceptance by the Borrower of the proceeds of such Advance shall constitute a representation and warranty by the Borrower that on the date of such Advance such statements are true): (i) The representations and warranties contained in Section 4.01 of this Agreement, Section 4 of the Pledge Agreement and the Partnership Certificate are correct on and as of the date of such Advance, before and after giving effect to such Advance and to the application of the proceeds therefrom, as though made on and as of such date; (ii) The balance sheet of the Borrower then most recently furnished to the Bank pursuant to Section 5.01(d)(i) is accurate and fairly presents the financial condition of the Borrower as at the date of such balance sheet, and since the date of such balance sheet there has been no material adverse change in such condition; (iii) The balance sheet of the Guarantor then most recently furnished to the Bank pursuant to the Guaranty Agreement is accurate and fairly presents the financial condition of the Guarantor as at the date of such balance -17- sheet, and since the date of such balance sheet there has been no material adverse change in such condition; (iv) No event has occurred and is continuing, or would result from such Advance or from the application of the proceeds therefrom, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; (v) The ratio of the aggregate current market value of the Pledged Shares to the aggregate unpaid principal amount of the Advances (including the amount of the requested Advance) is not less than 2.0 to 1.0; and (b) The Bank shall have received such other approvals, opinions or documents as the Bank may reasonably request, including, without limitation, additional Federal Reserve Form U-1 provided for in Regulation U issued by the Board of Governors of the Federal Reserve System, the statements made in which shall be such, in the opinion of the Bank, as to permit the transactions contemplated hereby in accordance with said Regulation U to the extent required in connection with the pledge of additional shares. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower. ---------------------------------------------- The Borrower represents and warrants as follows: (a) The General Partner has the legal capacity to execute and deliver this Agreement and the other Loan Documents on behalf of the Borrower and to execute, deliver and perform the Loan Documents to which the Guarantor is or will be a party. (b) The execution, delivery and performance by the Borrower of each Loan Document to which the Borrower is or will be a party do not and will not (i) contravene any law or any contractual restriction or fiduciary duty binding on or affecting the Borrower or General Partner or (ii) result in or require the creation of any lien, security interest or other charge or encumbrance (other than pursuant to the Loan Documents) upon or with respect to any of the Trust's properties. (c) No consent, authorization or approval or other action by, and no notice to or filing or registration with, any governmental authority or regulatory body or any other Person is required for the due execution, delivery and performance by the Borrower of any Loan Document to which the Borrower is or will be a party. (d) This Agreement is, and each other Loan Document to which the Borrower will be a party when delivered hereunder will be, legal, valid and binding obligations of the Borrower, -18- enforceable against the Borrower in accordance with their respective terms. (e) The balance sheet of the Borrower as at June 30, 1994, a copy of which certified by the Borrower has been furnished to the Bank, is accurate and fairly presents the financial condition of the Trust as at such date, and since June 30, 1994, there has been no material adverse change in such condition. (h) There is no pending or threatened action, suit or proceeding affecting the Borrower or the General Partner before any court, any arbitrator or mediator or any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which may materially adversely affect the financial condition or operations of the Borrower or the General Partner or which purports to affect the legality, validity or enforceability of this Agreement, any other Loan Document to which the Borrower is or will be a party, or the Trust Agreement. (i) No proceeds of any Advance will be used to acquire any equity security of a class which is registered pursuant to Section 12 of the Securities Exchange Act of 1934 if the result of such acquisition is to effect a change in control of the issuer thereof. (j) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System). (k) The Borrower is not a party to any indenture, loan or credit agreement, lease or other instrument or agreement which could have a material adverse effect on the business, properties, assets, operations or condition, financial or otherwise, of the Borrower or on the ability of the Borrower to perform the Borrower's obligations under this Agreement or any other Loan Document. (l) The Borrower has provided the Bank with accurate and complete copies of all indentures, loan or credit agreements, leases or other instruments or agreements of any kind which have been submitted to the Bank pursuant to this Agreement. (m) All tax returns (federal, state and local) required to be filed on behalf of the Borrower have been filed and all taxes shown on such tax returns to be due, including, but not limited to, interest and penalties have been paid. (n) The address specified for the Borrower in Section 8.02 is a mailing address of the Borrower. -19- ARTICLE V CERTAIN COVENANTS OF THE BORROWER SECTION 5.01. Certain Affirmative Covenants. So long as the Note shall ----------------------------- remain unpaid in whole or in part or the Bank shall have any Commitment hereunder, the Borrower shall, unless the Bank shall otherwise consent in writing; (a) Use of Advances. Use and apply the proceeds of the Advances --------------- for commercial, business or investment purposes including the refinancing of existing margin debt and other lawful purposes. (b) Compliance with Laws, Etc. Comply, and cause the Trust to ------------------------- comply, in all material respects with all applicable laws, rules, regulations and orders. (c) Payment of Taxes, Etc. Without limiting the generality of --------------------- Section 5.01(b), pay and discharge before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon the Borrower or upon any property of the Borrower and (ii) all lawful claims which, if unpaid, might by law become a lien upon any property of the Borrower or the Trust; provided that the Borrower shall not be required to pay or discharge any such tax, assessment, charge or claim which is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained in accordance with generally accepted accounting principles consistently applied. (d) Reporting Requirements. Furnish to the Bank: ---------------------- (i) as soon as available and in any event within sixty days after the last day of the most recently ended fiscal quarter, a balance sheet of the Trust as at the end of such fiscal quarter, including a listing of all contingent liabilities of the Trust, in reasonable detail and in form satisfactory to the Bank and certified by the Borrower as being accurate and fairly presenting the financial condition of the Trust as at the end of such fiscal quarter, and accompanied by (A) a certificate of the Borrower stating that no Event of Default or other event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default has occurred and is continuing or, if an Event of Default or any such other event has occurred and is continuing, a statement as to the nature thereof and the action which the Borrower has taken and proposes to take with respect thereto, and (B) a certificate of compliance of the Borrower and accompanying schedule in form and detail satisfactory to the Bank of the computations used by the Borrower in determining compliance with the covenants set forth in Section 5.02(b) and Section 5.02(c); -20- (ii) as soon as available and in any event within sixty days after the end of each fiscal quarter of Michaels and Sterling, the 1OQ report of Michaels and Sterling, respectively; (iii) as soon as possible and in any event within five days after the occurrence of each Event of Default and each other event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default, continuing on the date of such statement, a statement of the Borrower setting forth details of such Event of Default or such other event and the action which the Borrower has taken and proposes to take with respect thereto; (iv) promptly after the sending or filing thereof, copies of all Forms 3 (Initial Statement of Beneficial Ownership of Securities), Forms 4 (Statement of Changes of Beneficial Ownership of Securities) and Forms 5 which the Borrower files with the Securities and Exchange Commission (or any governmental authority or regulatory body that may be substituted therefor) by reason or in respect of any securities of, or any relationship of the Borrower to, any issuer of any securities constituting any of the Collateral; (v) promptly after the sending or filing thereof, copies of all reports, filings and registration statements which the Borrower files with the Securities and Exchange Commission (or any governmental authority or regulatory body that may be substituted therefor) or any national securities exchange; (vi) promptly after the earlier of the commencement thereof or receipt by the Borrower of notice or knowledge thereof, notice of any pending or threatened action, suit, proceeding or investigation affecting the Borrower or the Trust by or before any court, any arbitrator or mediator or any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or of any claim for the payment of money asserted against the Borrower or the Trust which seeks or involves an amount exceeding $2,000,000.00 or which may materially adversely affect the properties assets, operations or condition, financial or otherwise, of the Borrower or the Trust; (vii) prompt notice of any material adverse change in the business, properties, assets, operations or condition, financial or otherwise, of the Borrower since the dates of the financial statements of the Trust then most recently furnished to the Bank pursuant to Section 5.01(d)(i); (viii) in the event any securities of any class of any issuer that are included in the Collateral at any time constitute ten percent or more of the issued and outstanding -21- securities of such issuer and such class, prompt notice of such event; and (ix) such other information respecting the business, properties, assets, operations or condition, financial or otherwise, of the Borrower or any Subsidiary of the Borrower as the Bank may from time to time reasonably request. SECTION 5.02. Certain Negative Covenants. So long as the Note shall -------------------------- remain unpaid in whole or in part or the Bank shall have any Commitment hereunder, the Borrower will not, without the written consent of the Bank: (a) Liens, Etc. Create or suffer to exist any lien, security ---------- interest or other charge or encumbrance, or any other type of preferential arrangement, upon or with respect to any of the Collateral, whether now owned or hereafter acquired, other than the security interest created by the Pledge Agreement and any other lien or security interest created in favor of the Bank pursuant to Section 6.01. (b) Liquidity. Permit the current market value of the --------- unpledged Cash and Cash Equivalents and/or Readily Marketable Securities (excluding any securities issued by Michaels or Sterling), but including interests in Maverick of the Borrower and the Guarantor, collectively, to be less than fifteen percent (15%) of the Commitment for a period of ten (10) consecutive Business Days; provided, that it is expressly contemplated that within such period of ten (10) consecutive Business Days the Borrower shall have the ability to increase such current market value of the unpledged Cash and Cash Equivalents and/or Readily Marketable Securities (excluding any securities issued by Michaels or Sterling), but including interests in Maverick in accordance with the provisions of subsection (ii) of Section 6.01. (c) Balancing. Permit the shares of either Michaels or --------- Sterling pledged by the Borrower to the Bank to represent more than sixty percent (60%) of the total market value of Collateral for a period of ten (10) consecutive Business Days; provided that it is expressly contemplated that -------- within such period of ten (10) consecutive Business Days the Borrower shall have the ability to increase the number of Michaels or Sterling shares pledged by the Borrower to the Bank in accordance with the provisions of subsection (ii) of Section 6.01 in order to prevent the shares of either Michaels or Sterling pledged by the Borrower to the Bank to represent more than sixty percent (60%) of the total market value of Collateral. ARTICLE VI CERTAIN OTHER COVENANTS SECTION 6.01. Collateral to Loan Coverage. If, at any time --------------------------- prior to payment in full in cash of all obligations of the Borrower now or hereafter existing under this Agreement, the Note and the -22- other Loan Documents (whether for principal, interest, fees, expenses or otherwise), or at any other time when the Bank shall have any Commitment under this Agreement, the ratio of the aggregate current market value of the Collateral to the aggregate unpaid principal amount of the Advances shall be less than 1.66 to 1.0 but equal to or greater than 1.50 to 1.0, then, within two Business Days of such event, the Borrower (i) shall prepay the outstanding principal amounts of the Advances, in whole or in part, plus accrued interest to the date of such prepayment on the principal amount prepaid, and/or (ii) shall (i) pledge, assign and deliver to the Bank cash for deposit in one or more of the Collateral Accounts and/or pledge and assign to the Bank, and grant to the Bank security interests in, such additional shares of stock owned by the Borrower as shall be acceptable to the Bank in its sole discretion, all as security for the payment of all obligations of the Borrower now or hereafter existing under this Agreement, the Note and the other Loan Documents (whether for principal, interest, fees, expenses or otherwise), (ii) duly execute and deliver to the Bank such pledge and security agreements (including, but not limited to, amendments to the Pledge Agreement), as specified by and in form and substance satisfactory to the Bank, securing the payment of all obligations of the Borrower now or hereafter existing under this Agreement, the Note and the other Loan Documents (whether for principal, interest, fees, expenses or otherwise) and constituting pledges and assignments of and security interests in such cash as shall be pledged and delivered by the Borrower to the Bank for deposit in one or more of the Collateral Accounts and in such additional shares of stock as shall be acceptable to the Bank in its sole discretion, (iii) take whatever action (including, but not limited to, the delivery to the Bank of original instruments, stock certificates and stock powers, the filing of Uniform Commercial Code financing statements and amendments to financing statements and the giving of notices and endorsements) may be necessary or advisable in the opinion of the Bank to vest in the Bank (or in any representative or nominee of the Bank designated by the Bank, including, but not limited to, any clearing corporation or custodian bank as those terms are defined in the Uniform Commercial Code in effect in the State of New York) valid, subsisting and perfected liens on and security interests in the properties purported to be subject to the pledge and security agreements delivered pursuant to this Section 6.01, enforceable against all third parties in accordance with their respective terms, (iv) deliver to the Bank a signed favorable opinion, addressed to the Bank, of counsel for the Borrower acceptable to the Bank as to the matters contained in clauses (i), (ii) and (iii), as to such pledge and security agreements being legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their -23- respective terms and as to such other matters as the Bank may reasonably request, and (v) execute and deliver to the Bank any and all further certificates, instruments and documents and take all such other action as the Bank may deem desirable in obtaining the full benefits of, or in preserving the security interests of, such pledge and security agreements, so that, immediately after giving effect to such prepayment and/or such other actions, the ratio of the aggregate current market value of the Collateral to the aggregate unpaid principal amount of the Advances shall be not less than 2.0 to 1.0. For the purposes of this Section 6.01 and 7.01(j), the term "current market value" shall have the meaning assigned to that term in Regulation U issued by the Board of Governors of the Federal Reserve System. ARTICLE VII EVENTS OF DEFAULT SECTION 7.01. Events of Default. If any of the following ----------------- events (individually, an "Event of Default" and collectively, "Events of Default") shall occur and be continuing: (a) Any principal of, or interest on, the Note shall not be paid on the date the same becomes due and payable or within three Business Days thereafter; or (b) Any representation or warranty made by the Borrower under or in connection with any Loan Document, or any representation or warranty made in the Control Person Statement, or any certification made by the Borrower or the Guarantor in connection with any financial statement furnished to the Bank under or in connection with any Loan Document, shall prove to have been incorrect in any material respect when made; or (c) The Borrower or the Guarantor shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on the Borrower's or the Guarantor's part to be performed or observed if such failure shall remain unremedied for ten days after written notice thereof shall have been given to the Borrower by the Bank; or (d) The Borrower or the Guarantor shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay is debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or the Guarantor seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of its or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), -24- either such proceeding shall remain undismissed or unstayed for a period of sixty days, or any of the actions sought in such proceeding (including, but not limited to, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Borrower or the Guarantor shall take any action to authorize any of the actions set forth above in this Section 7.01(d); or (e) Any judgment or order for the payment of money in excess of $5,000,000.00 shall be rendered against the Borrower or the Guarantor and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of ten consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (f) Any lawful claims for the payment of money in an aggregate amount exceeding $10,000,000.00 which, if unpaid, might by law become liens upon any property of the Borrower or the Guarantor shall be asserted against the Borrower or the Guarantor and shall not be contested by the Borrower or the Guarantor, as the case may be, in good faith and by proper proceedings and as to which appropriate reserves are not being maintained in accordance with generally accepted accounting principles consistently applied; or (g) Any material adverse change shall occur in the business, properties, assets, operations or condition, financial or otherwise, of the Borrower or the Guarantor; or (h) Any provision of the Pledge Agreement, the Guaranty Agreement or any other Loan Document after delivery thereof shall for any reason cease to be valid and binding on the Borrower or the Guarantor, or the Borrower or the Guarantor shall so state in writing; or (i) The Pledge Agreement or any other Loan Document after delivery thereof pursuant to Section 3.01 or Section 6.01 shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority security interest in any of the Collateral purported to be covered thereby; or (j) The ratio of the aggregate current market value of the Collateral to the aggregate unpaid principal amount of the Advances shall be less than 1.5 to 1.0; or (k) Any of the Pledged Shares shall cease to be (i) quoted on the Nasdaq National Market or (ii) listed or admitted to trading on the New York Stock Exchange or the American Stock Exchange; then, and in any such event, the Bank (A) may, by notice to the Borrower, declare the Bank's obligation to make Advances to be terminated, whereupon the same shall forthwith terminate, and -25- (B) may, by notice to the Borrower, declare the Note, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Note, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided that in the event of an actual or deemed entry of an order for relief - -------- with respect to the Borrower or the Guarantor under the United States Bankruptcy Code, (1) the obligation of the Bank to make Advances shall automatically be terminated and (2) the Advances, the Note, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision --------------- of this Agreement or the Note, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Bank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 8.02. Notices Etc. Except as expressly provided in Section ----------- 6.01, all notices and other communications provided for hereunder shall be in writing (including, but not limited to, telephone facsimile communications) and sent via certified or registered mail, return receipt requested, via telephone facsimile, via personal delivery or via express courier or delivery service to the Borrower or the Bank, as the case may be, at the respective addresses or telephone facsimile numbers of the Borrower and the Bank specified below or, as to either party, at such other address or telephone facsimile number as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section: if to the Borrower, at 8080 N. Central Expressway, Suite 1300, Dallas, Texas 75206, Attn: Shari Robertson, telephone facsimile number (214) 891-8245; and if to the Bank, at One Citicorp Center, 153 East 53rd Street, New York, New York 10043, Attention: Stephen Giannakakis, Vice President, telephone facsimile number (212) 793-6232, with a copy to Citicorp North America, Inc., Private Banking Division, 2100 Citicorp Center, 1200 Smith Street, Houston, Texas 77002, Attention: Trey Roberts, Vice President, telephone facsimile number (212) 793-6232. All such notices and other communications shall be deemed given (a) when receipted for (or upon the date of attempted delivery when delivery is refused) if sent via certified or registered mail, return receipt requested, via (b) when received if sent via telephone facsimile (confirmation of such receipt via telephone facsimile being deemed receipt). Without limiting the generality of the preceding sentence, notices to the Bank pursuant to the provisions -26- of Article II shall in no event be effective until received by the Bank. SECTION 8.03. No Waiver; Remedies. No failure on the part of the Bank ------------------- to exercise, and no delay in exercising, any right under any Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies provided in the Loan Documents are cumulative and not exclusive of any remedies provided by law. SECTION 8.04. Costs, Expenses and Taxes. ------------------------- (a) The Borrower agrees to pay on demand all costs and expenses in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents and the other documents to be delivered under the Loan Documents, including, but not limited to, the reasonable fees and out-of-pocket expenses of counsel for the Bank with respect thereto and with respect to advising the Bank as to the Bank's rights and responsibilities under the Loan Documents. The Borrower further agrees to pay on demand all costs and expenses, if any (including, but not limited to, reasonable counsel fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of the Loan Documents, including, but not limited to, reasonable counsel fees and expenses in connection with the enforcement of rights under this Section 8.04(a). (b) If any payment of principal of any Eurodollar Rate Advance is made other than on the last day of the Interest Period for such Advance, as a result of any payment pursuant to Section 2.08(b), Section 2.09, Section 2.14 or Section 6.01 or as a result of acceleration of the maturity of the Advances and the Note pursuant to Section 7.01 or for any other reason, the Borrower shall pay to the Bank, upon demand by the Bank, an amount equal to the loss or expense incurred or sustained by the Bank as a result of such payment as set forth in a statement prepared by the Bank in good faith and in reasonable detail. SECTION 8.05. Right of Set-Off. Upon the occurrence and during the ---------------- continuance of any Event of Default the Bank 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 the Bank to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under any Loan Document, whether or not the Bank shall have made any demand under such Loan Document and although such obligations may be unmatured. The Bank agrees promptly to notify the Borrower after any such set-off and application; provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Bank under this Section are in -27- addition to other rights and remedies (including, but not limited to, other rights of set-off) which the Bank may have. SECTION 8.06. Binding Effect. -------------- (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Bank, the respective successors and assigns of the Borrower and the Bank, and the heirs, executors, administrators and legal representatives of the Borrower, except that the Borrower shall not have the right to assign the Borrower's rights hereunder or any interest herein without the prior written consent of the Bank, which consent may be withheld for no reason or for any reason. (b) The Bank, without any notice to or consent of the Borrower, may sell participations to one or more Persons in or to all or any portion of the Bank's rights and obligations under this Agreement, the Note and any other Loan Document (including, but not limited to, all or any portion of the Commitment, the Advances and the Note); provided that (i) the Bank's obligations -------- under this Agreement (including, but not limited to, the commitment) shall remain unchanged, (ii) the Bank shall remain solely responsible to the Borrower for the performance of such obligations, (iii) the Bank shall remain the holder of the Note for all purposes of this Agreement and (iv) the Borrower shall continue to deal solely and directly with the Bank in connection with the Bank's rights and obligations under this Agreement. (c) The Bank, with the prior written consent of the Borrower, which consent shall not be unreasonably withheld, may assign, syndicate or otherwise transfer all or any portion of the Bank's rights and obligations under this Agreement, the Note and any other Loan Document (including, but not limited to, all or any portion of the Commitment, the Advances and the Note) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Bank in this Agreement or otherwise. (d) Any other provision of this Agreement to the contrary notwithstanding, the Bank may at any time create a security interest in all or any portion of the Bank's rights under this Agreement (including, but not limited to, the Advances owing to the Bank and the Note held by the Bank) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. (e) The Bank will use reasonable good faith efforts to hold in confidence any Confidential Information, except to the extent that any such Confidential Information can be shown to have been (i) previously known on a nonconfidential basis by the Bank, (ii) in the public domain through no fault of the Bank or (iii) later lawfully acquired by the Bank from sources other than the Borrower; provided that the Bank may disclose Confidential Information (A) -------- to the Bank's directors, officers, employees, -28- accountants, attorneys, consultants, advisors, agents and other representatives who are or reasonably are expected to be or become engaged in evaluating, approving, structuring, negotiating, documenting or administering the Loan Documents or the transactions contemplated by the Loan Documents, (B) to the Bank's attorneys and independent auditors, (C) to any actual or prospective participant, assignee or transferee under Section 8.06(b), Section 8.06(c) or Section 8.06(d) so long as such Persons are informed by the Bank of the confidential nature of such Confidential Information and are directed by the Bank to other Person if such disclosure is reasonably incidental to the administration of the Loan Documents or any of the transactions contemplated by the Loan Documents, (E) upon any order of directive of, or any request by, any court, arbitrator, mediator or governmental department, commission, board, bureau, agency or instrumentality, (F) in connection with any action, suit or proceeding to which the Bank or any affiliate of the Bank is a party, and (G) to the extent reasonably required in connection with the exercise of any right or remedy under this Agreement or another Loan Document. Without limiting the preceding sentence, the Bank may disclose to any actual or prospective participant, assignee or transferee under Section 8.06(b), Section 8.06(c) or Section 8.06(d) any financial statements, documents and other information that the Bank now or in the future has relating to the Advances, the Loan Documents, the Collateral, the Borrower, any Subsidiary of the Borrower or the business, properties, assets, operations or condition, financial or otherwise, of the Borrower, or any Subsidiary of the Borrower. SECTION 8.07. Counterparts. This Agreement may be executed in any ------------ number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 8.08. Interest. It is the intention of the parties hereto to -------- conform strictly to the usury laws applicable to the Bank. Accordingly, if the transactions contemplated hereby or by the Loan Documents would be usurious under applicable law (including, without limitation, the laws of the United States of America and the State of New York), then, in that event, notwithstanding anything to the contrary herein or in the Loan Documents, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest applicable to the Bank that is contracted for, taken, reserved, charged or received under this Agreement or any Loan Document shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be credited by the Bank on the principal amount outstanding under the Note, or, if no principal amount is outstanding under the Note, refunded to the Borrower; and (ii) in the event that the maturity of the principal is accelerated, then such consideration that constitutes interest under any law that is applicable to the Bank may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement or the Loan Documents or otherwise shall be cancelled automatically as of the date of such -29- acceleration or prepayment and, if theretofore paid, shall be credited by the Bank on the principal amount outstanding or, if the principal amount shall have been paid in full, refunded by the Bank to the Borrower. SECTION 8.09. Governing Law; Consent to Jurisdiction. This Agreement -------------------------------------- and the Note shall be governed by, and construed in accordance with, the laws of the State of New York. The Borrower hereby submits to the exclusive jurisdiction of the United States District Court for the Southern District of New York and of any court of the State of New York sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement, the Note, any other Loan Document or any transactions contemplated hereby or thereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which the Borrower may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Notwithstanding the preceding two sentences, the Bank retains the right to bring any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement, the Note, any other Loan Document or any of the transactions contemplated hereby or thereby in any court that has jurisdiction over the parties and subject matter. SECTION 8.10. WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY -------------------- IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THIS AGREEMENT, THE NOTE, THE PLEDGE AGREEMENT, ANY OTHER LOAN DOCUMENT, THE ADVANCES OR THE ACTIONS OF THE BANK IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. IN WITNESS WHEREOF, the Borrower and the Bank have executed this Agreement as of the date first above written. (Borrower) ______________, By: ____________________________________ ________, its ____________________ (Bank) CITIBANK N.A. -30- By:_______________________________________ Name: Stephen Giannakakis Title: Vice President -31- THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "First Amendment") dated as --------------- of September 30, 1996, is among _____________________, a _____________ ________________ (the "Borrower"), acting through _____________________, its -------- _____________________, and CITIBANK, N.A., a national banking association (the "Bank"). - ----- W I T N E S S E T H - - - - - - - - - - WHEREAS, the Borrower and the Bank entered into that certain Credit Agreement dated as of December 16, 1994 (the "Credit Agreement") pursuant to ---------------- which the Bank agreed to made certain Advances to the Borrower; and WHEREAS, the Borrower has requested and the Bank has agreed to amend certain provisions of the Credit Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Defined Terms. All capitalized terms which are defined in the ------------- Credit Agreement, but which are not defined in this First Amendment, shall have the same meanings as defined in the Credit Agreement. Unless otherwise indicated, all section references in this First Amendment refer to the Credit Agreement. Section 2. Amendments to the Pledge Agreement. ---------------------------------- 2.1 Section 1.01 is amended to add the following: "Sterling Commerce" means Sterling Commerce, Inc., a corporation duly formed and validly existing under the laws of the State of Delaware. 2.3 Section 1.01 of the Credit Agreement is hereby amended by deleting the defined term "Control Person Statement" in its entirety and inserting the following: "Control Person Statement" means the Control Person Statement, dated as of September 30, 1996, furnished by or on behalf of the Borrower to the Bank. 2.4 Section 3.02 is amended to add the following: (c) That in no event shall the aggregate of all advances made by the Bank to the Borrower: i. exceed ____________________ where such advances are made against Collateral consisting of Sterling stock or Sterling Commerce stock; and ii. exceed ____________________ where such advances are made against Collateral consisting of Michaels stock. (d) That in no event shall the aggregate of all of the stock of Sterling Commerce that is pledged to the Bank by the Borrower exceed ___________ % of the shares then outstanding. 2.5 Section 5.01(d)(ii) is restated in its entirety to read as follows: "As soon as available and in any event within sixty (60) days after the end of each fiscal quarter of Michaels, Sterling and Sterling Commerce, the 10-Q Report of Michaels, Sterling and Sterling Commerce, respectively;" 2.6 Sections 5.02(b) is restated in its entirety to read as follows: (b) Liquidity. Permit the current market value of the --------- unpledged Cash and Cash Equivalents and/or Readily Marketable Securities (excluding any securities issued by Michaels, Sterling or Sterling Commerce), but including interests in Maverick of the Borrower and the Guarantor, collectively, to be less than fifteen percent (15%) of the Commitment for a period of ten (10) consecutive Business Days; provided, that it is expressly contemplated that within such period of ten (10) consecutive Business Days the Borrower shall have the ability to increase such current market value of the unpledged Cash and Cash Equivalents and/or Readily Marketable Securities (excluding any securities issued by Michaels, Sterling or Sterling Commerce), but including interests in Maverick in accordance with the provisions of subsection (ii) of Section 6.01. 2.7 Section 5.02(c) is restated in its entirety to read as follows: (c) Collateral Limits. Permit the aggregate of the shares ----------------- pledged by the Borrower as Collateral to the Bank to exceed: (i) _____ % of Michaels' outstanding stock; -2- (ii) ____ % of Sterling's outstanding stock; or (iii) ____ % of Sterling Commerce's outstanding stock. 2.8 Section 6.01 is restated in its entirety to read as follows: Section 6.01. Collateral to Loan Coverage. (a) If, at any --------------------------- time prior to payment in full in cash of all obligations of the Borrower now or hereafter existing under this Agreement, the Note and the other Loan Documents (whether for principal, interest, fees, expenses or otherwise), or at any other time when the Bank shall have any Commitment under this Agreement, the ratio of the aggregate current market value of the Collateral to the aggregate unpaid principal amount of the Advances shall be less than 1.66 to 1.0 but equal to or greater than 1.50 to 1.0, then, within two Business Days of such event, the Borrower (i) shall prepay the outstanding principal amounts of the Advances, in whole or in part, plus accrued interest to the date of such prepayment on the principal amount prepaid, and/or (ii) shall (i) pledge, assign and deliver to the Bank cash for deposit in one or more of the Collateral Accounts and/or pledge and assign to the Bank, and grant to the Bank security interests in, such additional shares of stock owned by the Borrower as shall be acceptable to the Bank in its sole discretion, all as security for the payment of all obligations of the Borrower now or hereafter existing under this Agreement, the Note and the other Loan Documents (whether for principal, interest, fees, expenses or otherwise), (ii) duly execute and deliver to the Bank such pledge and security agreements (including, but not limited to, amendments to the Pledge Agreement), as specified by and in form and substance satisfactory to the Bank, securing the payment of all obligations of the Borrower now or hereafter existing under this Agreement, the Note and the other Loan Documents (whether for principal, interest, fees, expenses or otherwise) and constituting pledges and assignments of and security interests in such cash as shall be pledged and delivered by the Borrower to the Bank for deposit in one or more of the Collateral Accounts and in such additional shares of stock as shall be acceptable to the Bank in its sole discretion, (iii) take whatever action (including, but not limited to, the delivery to the Bank of original instruments, -3- stock certificates and stock powers, the filing of Uniform Commercial Code financing statements and amendments to financing statements and the giving of notices and endorsements) may be necessary or advisable in the opinion of the Bank to vest in the Bank (or in any representative or nominee of the Bank designated by the Bank, including, but not limited to, any clearing corporation or custodian bank as those terms are defined in the Uniform Commercial Code in effect in the State of New York) valid, subsisting and perfected liens on and security interests in the properties purported to be subject to the pledge and security agreements delivered pursuant to this Section 6.01, enforceable against all third parties in accordance with their respective terms, (iv) deliver to the Bank a signed favorable opinion, addressed to the Bank, of counsel for the Borrower acceptable to the Bank as to the matters contained in clauses (i), (ii) and (iii), as to such pledge and security agreements being legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms and as to such other matters as the Bank may reasonably request, and (v) execute and deliver to the Bank any and all further certificates, instruments and documents and take all such other action as the Bank may deem desirable in obtaining the full benefits of, or in preserving the security interests of, such pledge and security agreements, so that, immediately after giving effect to such prepayment and/or such other actions, the ratio of the aggregate current market value of the Collateral to the aggregate unpaid principal amount of the Advances shall be not less than 2.0 to 1.0. For the purposes of this Section 6.01 and 7.01(j), the term "current market value" shall have the meaning assigned to that term in Regulation U issued by the Board of Governors of the Federal Reserve System, except as the same may be adjusted by 6.01(b) below. (b) For purposes of calculating the value of the Collateral for Section 6.01(a) above: i. the value of the Michaels stock shall be excluded for such period of time as the share price of Michaels stock is below $7.50 per share; -4- ii. the value of the Sterling stock shall be excluded for such period of time as the share price of Sterling stock is below $10.00 per share; and iii. the value of the Sterling Commerce stock shall be excluded for such period of time as the share price of Sterling Commerce stock is below $10.00 per share. 2.9 Section 7.01 is amended to add the following after subparagraph (k) : or (l) The Borrower fails to execute and deliver any of the following documents: i. The Second Amendment to Pledge Agreement; ii. Federal Reserve Form U-1 relating to the pledged shares described on Schedule I of the Second Amendment to Pledge Agreement; and iii. The stock certificates evidencing the pledged shares (if certificated) as further described on Schedule I of the Second Amendment to Pledge Agreement, or otherwise cause perfection of the Bank's first and prior security interest in the pledged shares in the event that any of such pledged shares are uncertificated; and iv. The Financing Statement relating to the Collateral; and v. (Within 30 days after the date of the First Amendment) a favorable written opinion of the law firm of Jones, Day, Reavis & Pogue. Section 3. Additional Conditions Precedent to the Advances. The ----------------------------------------------- obligations of the Bank to make Advances after the date hereof shall be subject to the following conditions precedent: (a) The Bank shall have received multiple counterparts, as requested, of this First Amendment, executed and delivered by a duly authorized representative of the Borrower. (b) No Event of Default as defined in the Credit Agreement shall have occurred and be continuing as of the date of this First Amendment. -5- (c) The Bank shall have received within 30 days of the date hereof, a favorable written opinion of the law firm of Jones, Day, Reavis & Pogue as to such matters as the Bank may reasonably request. Section 4. Representations and Warranties. The Borrower hereby affirms ------------------------------ that as of the date of execution and delivery of this First Amendment, except as affected by the transactions contemplated in this First Amendment, all of the representations and warranties contained in the Credit Agreement are true and correct in all material respects as though made on and as of the date hereof and no Event of Default shall have occurred and be continuing. Section 5. Effectiveness. Upon the execution hereof by the Borrower and ------------- the Bank, this First Amendment shall be effective as of the date first written above. Section 6. Reference to and Effect on Credit Agreement. ------------------------------------------- (a) On or after the date first written above, each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import, and each reference to the Credit Agreement in any certificate or other document or instrument delivered in connection therewith, shall mean and be a reference to the Credit Agreement as amended hereby. (b) Except as specifically amended above, the Credit Agreement is and shall continue to be in full force and effect and is hereby ratified and confirmed. Section 7. Cost, Expenses and Taxes. The Seller agrees to pay on demand ------------------------ all reasonable costs and expenses of the Bank in connection with the preparation, execution and delivery of this First Amendment and any other documents to be delivered in connection herewith including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Bank with respect thereto. Section 8. Counterparts. This First Amendment may be executed by one or ------------ more of the parties hereto in any number of separate counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument. Section 9. No Oral Agreement. THIS WRITTEN FIRST AMENDMENT AND THE OTHER ----------------- DOCUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Section 10. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND ------------- CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. -6- (d) IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed effective as of the date first written above. Borrower: ------------------------------------------------ By: ------------------------------------------- , its ------------------ -------------- Witness: By: ------------------------------------------- Name: ----------------------------------------- Bank: CITIBANK, N.A. By: ------------------------------------------- Name: ----------------------------------------- Title: ----------------------------------------- -7- EX-7 8 FORM OF PLEDGE AGREEMENT, DATED AS OF DECEMBER 16, 1994 Exhibit 7 --------- FORM OF PLEDGE AGREEMENT This PLEDGE AGREEMENT, dated as of December 16,1994 (this "Agreement"), is made by ______________, a ______________________ (the "Borrower"), acting through ________, its ________________, to CITIBANK N.A., a national banking association (the "Bank"). PRELIMINARY STATEMENTS A. The Borrower and the Bank have entered into a Credit Agreement, dated as of December 16, 1994 (said Credit Agreement, as it may hereafter be amended or otherwise modified from time to time, being the "Credit Agreement"). Capitalized terms that are used in this Agreement but are not otherwise defined in this Agreement shall have the respective meanings assigned to those terms in the Credit Agreement. B. The Borrower is the owner of the shares of stock described in Schedule I and issued by the corporations named therein. C. It is a condition precedent to the making of Advances by the Bank under the Credit Agreement that the Borrower shall have made the pledge and assignment contemplated by this Agreement. NOW, THEREFORE, in consideration of the premises and in order to induce the Bank to make Advances under the Credit Agreement, the Borrower hereby agrees as follows: SECTION 1. Pledge. The Borrower hereby pledges and assigns to the Bank, ------ and hereby grants to the Bank a security interest in, the following property (the "Pledged Collateral") and all of the Borrower's right, title and interest in, to and under the Pledged Collateral: (a) the shares described in Schedule I and the certificates representing such shares (as hereinafter described in this paragraph (a), the "Pledged Shares"), and all dividends (including, but not limited to, stock dividends), cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares for any reason, including, but not limited to, any change in the number or kind of outstanding shares of any securities of any issuer of any of such shares, or any successor to any such issuer, by reason of any recapitalization, merger, consolidation, reorganization, separation, liquidation, stock split, stock dividend, combination of shares or other similar corporate event; provided, however, that in no event -------- ------- shall such shares include shares that when aggregated with any and all shares pledged in the aggregate by the other members of the Family Group (hereinafter defined) to the Bank represent -1- ten percent (10%) or more of the outstanding shares of any issuer; and (b) any and all cash collateral accounts and custody or safekeeping accounts now or hereafter established with the Bank in the name of the Borrower or the Bank but under the sole control and dominion of the Bank (individually, a "Collateral Account" and collectively, the "Collateral Accounts"), all funds and other property at any time delivered or transferred or credited to, or deposited or held in, any one or more of the Collateral Accounts and all certificates and instruments, if any, from time to time representing or evidencing any one or more of the Collateral Accounts; and (c) all proceeds of any and all of the foregoing Pledged Collateral (including, but not limited to, proceeds that constitute property of the types described above in this Section 1). For purposes of this Section 1, "Family Group" means Brush Creek, Ltd., a Texas limited partnership, Tallulah, Ltd., a Texas limited partnership, Evan Wyly, the Laurie L. Wyly Trust, the Lisa Lynn Wyly Trust, the Kelly Wyly Elliott Trust, the Andrew David Sparrow Wyly Trust, the Christiana Parker Wyly Trust, the Martha Caroline Wyly Trust, the Charles Joseph Wyly, III Trust, the Jennifer Lynn Wyly Trust and the Emily Ann Wyly Trust. SECTION 2. Security for Obligations. This Agreement secures the payment ------------------------ of all obligations of the Borrower now or hereafter existing under the Credit Agreement, the Note, any Hedging Agreement and this Agreement, whether for principal, interest, fees, expenses or otherwise (all such obligations of the Borrower being collectively the ("Obligations"). Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts which constitute part of the Obligations and would be owed by the Borrower to the Bank under the Credit Agreement and the Note but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Borrower. SECTION 3. Delivery of Pledged Collateral. All certificates or ------------------------------ instruments representing or evidencing the Pledged Collateral shall be delivered to and held by or on behalf of the Bank pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Bank. The Bank shall have the right, at any time in its discretion and without notice to the Borrower, to transfer to or to register in the name of the Bank or any of its nominees (including, but not limited to, any clearing corporation or custodian bank (as those terms are defined in the Uniform Commercial Code in effect in the State of New York) and any nominee of any such clearing corporation or custodian bank) any or all of the Pledged Collateral, subject only to the revocable rights specified in Section 7(a); provided - -------- -2- that the Bank shall not have the right at any time that the Pledged Shares are beneficially owned by the Borrower, to loan any of the Pledged Shares to any Person to cover a short position or for any other purpose or to create any security interest in any of the Pledged Shares. In addition, the Bank shall have the right at any time to exchange certificates or instruments representing or evidencing any Of the Pledged Collateral for certificates or instruments of smaller or larger denominations. SECTION 4. Representations and Warranties. The Pledgor ------------------------------ represents and warrants as follows: (a) The Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable and the Pledged Shares are "restricted securities" within the meaning of Rule 144 (hereinafter defined). (b) The Borrower is the sole legal and beneficial owner of the Pledged Collateral free and clear of any lien, security interest, option or other charge, encumbrance or restriction (including, but not limited to, any restriction (contractual or otherwise) on the transferability of the Pledged Shares) except for the security interest created by this Agreement and except for restrictions imposed by Rule 144 ("Rule 144") under the Securities Act of 1933, as from time to time amended (the "Securities Act"), upon the transferability of the Pledged Shares by the Borrower but not upon the transferability of the Pledged Shares by the Bank. (c) The Pledge and assignment of the Pledged Collateral pursuant to this Agreement creates a valid and perfected first priority security interest in the Pledged Collateral, securing the payment of the Obligations. (d) No consent of any other person or entity and no authorization, approval, consent or other action by, and no notice to or filing or registration with, any governmental authority or regulatory body is required for (i) the pledge and assignment by the Borrower of the Pledged Collateral pursuant to this Agreement, (ii) the execution, delivery or performance of this Agreement by the Borrower, (iii) the creation, perfection or maintenance of the security interest created hereby (including, but not limited to, the first priority nature of such security interest) or (iv) the exercise by the Bank of the voting or other rights provided for in this Agreement or the remedies in respect of the Pledged Collateral pursuant to this Agreement (except as may be required in connection with any disposition of any portion of the Pledged Collateral by laws affecting the offering and sale of securities generally). (e) The Pledged Shares of each respective issuer thereof indicated on Schedule I do not constitute ten percent or more of the issued and outstanding shares of stock of such issuer. -3- (f) The Borrower acquired the Pledged Shares on the respective dates, in the respective manners and for the respective payments or other considerations indicated on Schedule I. As calculated under paragraph (d) of Rule 144, a minimum of three years has elapsed or is deemed to have elapsed since the later of (i) the date of the acquisition by the Borrower of the Pledged Shares from the respective issuers thereof indicated on Schedule I or from any "affiliate" (such term being used in this Section 4(f) as that term is defined in paragraph (a)(1) of Rule 144) of any of such issuers and (ii) the date of payment by the Borrower of the full purchase price or other consideration paid or given to acquire the Pledged Shares from the respective issuers thereof indicated on Schedule I or from any affiliate of any of such issuers. (g) If so indicated on Schedule I with respect to any issuer of the Pledged Shares, the Borrower is a director on the board of directors of such issuer, and the Borrower's term as such a director expires on the date indicated on Schedule I with respect to such issuer. (h) If so indicated on Schedule I with respect to any issuer of the Pledged Shares, the Borrower beneficially owns shares of securities of such issuer that in the aggregate exceed ten percent of the issued and outstanding securities of such issuer. (i) As indicated on Schedule I with respect to any issuer of the Pledged Shares, the Pledged Shares issued by such issuer either are listed or admitted to trading on the national securities exchange, if any, indicated for such issuer on Schedule I or are quoted on the Nasdaq National Market as indicated for such issuer on Schedule I. (j) No order of the Securities and Exchange Commission and no provision of any federal or state securities laws or state "Blue Sky" laws is or will be violated or contravened by any of (i) the making of any Advance to the Borrower, (ii) the application of the proceeds of any Advance, (iii) the repayment by the Borrower of all or any portion of any Advance, (iv) the payment by the Borrower of any interest on any Advance, (v) the pledge and assignment by the Borrower of the Pledged Collateral pursuant to this Agreement, (vi) the execution, delivery or performance of this Agreement by the Borrower or (vii) the creation, perfection or maintenance of the security interest created hereby. (k) The Borrower's federal tax identification is __- ________. (l) There are no conditions precedent to the effectiveness of this Agreement that have not been satisfied or waived. -4- (m) The Borrower, independently and without reliance upon the Bank and based on such documents and information as the Borrower has deemed appropriate, has made the Borrower's own credit analysis and decision to enter into this Agreement. SECTION 5. Further Assurances. The Borrower agrees that at any ------------------ time and from time to time, at the expense of the Borrower, the Borrower will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Bank may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Bank to exercise and enforce its rights and remedies hereunder with respect to any of the Pledged Collateral. SECTION 6. Collateral Accounts. Without limiting the generality of ------------------- Section 5, the Borrower, promptly upon request by the Bank, shall establish with the Bank one or more Collateral Accounts and shall maintain each such Collateral Account with the Bank so long as the Note shall remain unpaid in whole or in part or the Bank shall have any Commitment under the Credit Agreement. It shall be a term and condition of each Collateral Account, notwithstanding any term or condition to the contrary in any other agreement relating to such Collateral Account and except as otherwise provided by the provisions of this Section and Section 12, that no amount (including, but not limited to, interest on any Collateral Account that is an interest-bearing account) shall be paid or released from such Collateral Account to or for the account of, or withdrawn from such Collateral Account by or for the account of, the Borrower or any other person or entity. Each Collateral Account shall be subject to such applicable regulations of the Board of Governors of the Federal Reserve System and of any other appropriate banking or governmental authority, as may now or hereafter be in effect. Any cash deposited from time to time in any one or more of the Collateral Accounts shall be held by the Bank as Pledged Collateral or as cash proceeds received by the Bank in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral and shall not constitute payment of any of the Obligations until applied by the Bank against the Obligations pursuant to Section 12. The Bank may release Collateral to the Borrower from time to time in the event the Bank determines in its sole discretion that after any such release of Collateral the Bank will be adequately secure; provided, however that any such release of Pledged Shares shall be to -------- ------- the transfer agent of the issuer of such Pledged Shares. SECTION 7. Voting Rights; Dividends; Etc. ----------------------------- (a) So long as no Event of Default or event which, with the giving of notice or the lapse of time, or both, would become an Event of Default shall have occurred and be continuing: -5- (i) The Borrower shall be entitled to exercise or retrain from a exercising any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Credit Agreement. (ii) The Borrower shall be entitled to receive and retain any and all dividends paid in respect of the Pledged Collateral; provided -------- that any and all (A) dividends (including, but not limited to, stock dividends) paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any of the Pledged Collateral for any reason, including, but not limited to, any change in the number or kind of outstanding shares of any securities of any issuer of any of the Pledged Shares, or any successor to any such issuer, by reason of any recapitalization, merger, consolidation, reorganization, separation, liquidation, stock split, stock dividend, combination of shares or other similar corporate event, (B) dividends and other distributions paid or payable in cash in respect of any of the Pledged Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and (C) cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for, any of the Pledged Collateral, shall be, and shall be forthwith delivered to the Bank to hold as, Pledged Collateral and shall, if received by the Borrower, be received in trust for the benefit of the Bank, be segregated from the other property or funds of the Borrower, and be forthwith delivered to the Bank as Pledged Collateral in the same form as so received (with any necessary indorsement or assignment). (iii) The Bank shall execute and deliver (or cause to be executed and delivered) to the Borrower all such proxies and other instruments as the Borrower may reasonably request for the purpose of enabling the Borrower to exercise the voting and other rights which the Borrower is entitled to exercise pursuant to Section 7(a)(i) and to receive the dividends which the Borrower is authorized to receive and retain pursuant to Section 7(a)(ii). -6- (b) Upon the occurrence and during the continuance of an Event of Default or an event which, with the giving of notice or the lapse of time, or both, would become an Event of Default: (i) All rights of the Borrower (A) to exercise or retrain from exercising the voting and other consensual rights which the Borrower would otherwise be entitled to exercise pursuant to Section 7(a)(i) shall, upon notice to the Borrower by the Bank, cease and (b) to receive the dividends which the Borrower would otherwise be authorized to receive and retain pursuant to Section 7(a) (ii) shall automatically cease, and all such rights shall thereupon become vested in the Bank which shall thereupon have the sole right to exercise or retrain from exercising such voting and other consensual rights and to receive and hold as Pledged Collateral such dividends. (ii) All dividends which are received by the Borrower contrary to the provisions of Section 7(b)(i) shall be received in trust for the benefit of the Bank, shall be segregated from other property and funds of the Borrower and shall be forthwith paid over to the Bank as Pledged Collateral in the same form as so received (with any necessary indorsement). SECTION 8. Transfers and Other Liens. The Borrower will not (a) sell, ------------------------- assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral, or (b) create or permit to exist any lien, security interest, option, right of first refusal or other charge or encumbrance upon or with respect to any of the Pledged Collateral, except for the security interest under this Agreement. SECTION 9. Bank Appointed Attorney-in-Fact. The Borrower hereby ------------------------------- appoints the Bank the Borrower's attorney-in-fact, with full authority in the place and stead of the Borrower and in the name of the Borrower or otherwise, from time to time in the Bank's discretion to take any action and to execute any instrument which the Bank may deem necessary or advisable to accomplish the purposes of this Agreement (subject to the rights of the Borrower under Section 7), including, without limitation, to receive, indorse and collect all instruments made payable to the Borrower representing any dividend or other distribution in respect of the Pledged Collateral or any part thereof and to give full discharge for the same and to file any reports or other filings required by Rule 144 with the Securities and Exchange Commission or any other governmental authority or regulatory body that may be substituted therefor or with any national securities exchange. SECTION 10. Bank May Perform. If the Borrower fails to perform any ---------------- agreement contained herein, the Bank may itself perform, or cause performance of, such agreement, and the expenses -7- of the Bank incurred in connection therewith shall be payable by the Borrower under Section 13. SECTION 11. Bank's Duties. The powers conferred on the Bank hereunder ------------- are solely to protect the Bank's interest in the Pledged Collateral and shall not impose any duty upon the Bank to exercise any such powers. Except for the safe custody of any Pledged Collateral in the Bank's possession and the accounting for moneys actually received by the Bank hereunder, the Bank shall have no duty as to any of the Pledged Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any of the Pledged Collateral, whether or not the Bank has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to any of the Pledged Collateral. The Bank shall be deemed to have exercised reasonable care in the custody and preservation of any of the Pledged Collateral in the Bank's possession if such Pledged Collateral is accorded treatment substantially equal to that which the Bank accords it own property. SECTION 12. Remedies upon Default. If any Event of Default shall have --------------------- occurred and be continuing: (a) The Bank may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to the Bank, all the rights and remedies of a secured party on default under the Uniform Commercial Code in effect in the State of New York at that time (the "Code") (whether or not the Code applies to the affected Collateral), and may also, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, at any broker's board or at any of the Bank's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Bank may deem commercially reasonable which may include block transactions and/or sales at prices which are below the current prices quoted on any open market. The Borrower agrees that, to the extent notice of sale shall be required by law, at least three days notice to the Borrower of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Bank shall not be obligated to make any sale of any of the Pledged Collateral regardless of notice of sale having been given. The Bank may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) The Bank also may, without notice to the Borrower except as required by law and at any time or from time to time, in addition to other rights and remedies provided for herein or otherwise available to the Bank, charge, set-off and -8- otherwise apply all or any part of any Collateral Account against all or any part of the Obligations in such order as the Bank shall elect. (c) Any cash held by the Bank as Pledged Collateral and all cash proceeds received by the Bank in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral may, in the discretion of the Bank, be deposited into one or more of the Collateral Accounts or otherwise held by the Bank as collateral for, and/or then or at any time thereafter be applied (after payment of any amounts payable to the Bank pursuant to Section 13) in whole or in part by the Bank against, all or any part of the Obligations in such order as the Bank shall elect. Any surplus of such cash or cash proceeds held by the Bank and remaining after payment in full of all the Obligations shall be paid over to the Borrower or to whomsoever may be lawfully entitled to receive such surplus. SECTION 13. Expenses. The Borrower will upon demand pay to the Bank the -------- amount of any and all reasonable expenses, including, but not limited to, the reasonable fees and expenses of the Bank's counsel and of any experts and agents, which the Bank may incur in connection with (a) the administration of this Agreement, (b) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (c) the exercise or enforcement of any of the rights of the Bank hereunder or (d) the failure by the Borrower to perform or observe any of the provisions hereof. SECTION 14. Amendments, Etc. No amendment or waiver of any provision of --------------- this Agreement, and no consent to any departure by the Borrower from any provision of this Agreement, shall in any event be effective unless the same shall be in writing and signed by the Bank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 15. Addresses for Notices. All notices and other communications --------------------- provided for hereunder shall be in writing (including, but not limited to, telephone facsimile communications) and sent via certified or registered mail, return receipt requested, via telephone facsimile, via personal delivery or via express courier or delivery service to the Borrower or the Bank, as the case may be, at the respective addresses or telephone facsimile numbers of the Borrower and the Bank specified in the Credit Agreement, or, as to either party, at such other address or telephone facsimile number as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section. All such notices and other communications shall be deemed given (a) when receipted for (or upon the date of attempted delivery when delivery is refused) if sent via certified or registered mail, return receipt requested, via personal delivery or via express courier or delivery service, -9- and (b) when received if sent via telephone facsimile (confirmation of such receipt via telephone facsimile being deemed receipt). SECTION 16. Continuing Security Interest; Assignments under Credit ------------------------------------------------------ Agreement. This Agreement shall create a continuing security interest in the - --------- Pledged Collateral and shall (a) remain in full force and effect until the later of (i) the payment in full in cash of the obligations and all other amounts payable under this Agreement and (ii) the expiration or termination of the Commitment, (b) be binding upon the Borrower and the heirs, executors, administrators, legal representatives, successors and assigns of the Borrower, and (c) inure to the benefit of, and be enforceable by, the Bank and the successors, transferees and assigns of the Bank. Without limiting the generality of the foregoing clause (c) and subject to the provisions of the Credit Agreement, (a) the Bank, without any notice to or consent of the Borrower, may sell participations to one or more persons or entities in or to all or any portion of the Bank's rights nd obligations under the Credit Agreement (including, but not limited to, all or any portion of the Commitment, the Advances and the Note), and (b) the Bank, with the prior written consent of the Borrower, which consent shall not be unreasonably withheld, may assign, syndicate or otherwise transfer all or any portion of the Bank's rights and obligations under the Credit Agreement (including, but not limited to, all or any portion of the Commitment, the Advances and the Note) to any other person or entity, and such other person or entity shall thereupon become vested with all the benefits in respect thereof granted to the Bank herein or otherwise; provided that, any other provision of this Agreement to the contrary notwithstanding, the Bank may at any time create a security interest in all or any portion of the Bank's rights under the Credit Agreement (including, but not limited to, the Advances owing to the Bank and the Note held by the Bank) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. Upon the later of the payment in full in cash of the Obligations and all other amounts payable under this Agreement and the expiration or termination of the Commitment the security interest granted hereby shall terminate. Upon any such termination, the Bank will at the Borrower's expense, (i) return stock certificates evidencing ownership in Michaels and Sterling as shall not have been sold or otherwise applied pursuant to the terms hereof to the then acting transfer agent for Michaels or Sterling, as appropriate, with instructions that restrictive legends by reapplied to such certificates after which such certificates are to be returned to the Borrower or its designee by the transfer agent and (i) return to the Borrower all other the Pledged Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof and execute and deliver to the Borrower such documents as the Borrower shall reasonably request to evidence such termination. SECTION 17. Sections and Schedules. Unless stated otherwise in this ---------------------- Agreement, references in this Agreement to Sections and Schedules are references to Sections of, and Schedules attached to, -10- this Agreement. Each Schedule attached to this Agreement is by this reference incorporated in this Agreement. SECTION 18. Governing Law; Terms. This Agreement shall be governed by, -------------------- and construed in accordance with, the laws of the State of New York, except as required by mandatory provisions of law and except to the extent that the validity or perfection of the security interest hereunder, or remedies hereunder, in respect of any particular Pledged Collateral are governed by the laws of a jurisdiction other than the State of New York. Unless otherwise defined herein or in the Credit Agreement, terms defined in Article 9 of the Code are used herein as therein defined. IN WITNESS WHEREOF, the Borrower has duly executed and delivered this Agreement as of the date first above written. ------------- By: ____________________________ ________, as its ________ ------- -11- Schedule I to Pledge Agreement by _______________, as Borrower, to Citibank, N.A., a national banking association A. Issuer: Michaels Stores, Inc., a Delaware corporation ("Michaels") The Pledged Shares issued by Michaels are quoted on the over-the-counter (NASDAQ). Borrower beneficially owns shares of securities of Michaels that in the aggregate exceed percent of the issued and outstanding securities of Michaels. (1) Stock Certificate No.: _____________ Class of Stock: Common Stock Number of Shares: ___________ Date acquired by Borrower: ______________ Manner of acquisition by Borrower: Acquisition from _____________ in a [private] transaction Nature of payment by Borrower: Transfer to __________ of ___________ (2) Stock Certificate No.: _______________ Class of Stock: Common Stock Number of Shares: ___________ Date acquired by Borrower: ___________ Manner of acquisition by Borrower: Acquisition from ________ in a [private] transaction Nature of payment by Borrower: Transfer to __________ of _____________ B. Issuer: Sterling Software, Inc., a Delaware corporation ("Sterling") The Pledged Shares issued by Sterling are quoted on the New York Stock Exchange (NYSE). Borrower beneficially owns shares of securities of Sterling that in the aggregate exceed - percent of the issued and outstanding securities of Sterling. -12- (1) Stock Certificate No.: ______________ Class of Stock: Common Stock Number of Shares: ___________ Date acquired by Borrower: ______________ Manner of acquisition by Borrower: Acquisition from _________ in a [private] transaction Nature of payment by Borrower: Transfer to __________ of __________ (2) Stock Certificate No.: ________________ Class of Stock: Common Stock Number of Shares: ___________ Date acquired by Borrower: ___________ Manner of acquisition by Borrower: Acquisition from _________ in a [private] transaction Nature of payment by Borrower: Transfer to __________ of __________ -13- =============================================================================== FORM OF FIRST AMENDMENT to PLEDGE AGREEMENT among ____________________, as the Borrower and CITIBANK, N.A. Effective as of May 5, 1995 =============================================================================== THIS FIRST AMENDMENT TO PLEDGE AGREEMENT (the "First Amendment") dated as of May 5, 1995, is among __________________, a _________________________ (the "Borrower"), acting through ________________ its _________________, and CITIBANK, N.A., a national banking association (the "Bank"). W I T N E S S E T H - - - - - - - - - - WHEREAS, the Borrower, the Bank entered into that certain Credit Agreement dated as of December 16, 1994 (the "Credit Agreement") pursuant to which the Borrower and the Bank also entered into that certain Pledge Agreement dated as of December 16, 1994 (the "Pledge Agreement") pursuant to which the Bank agreed to made certain Advances to the Borrower; and WHEREAS, the Borrower has requested and the Bank has agreed to amend certain provisions of the Pledge Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Defined Terms. All capitalized terms which are defined in the ------------- Pledge Agreement or the Credit Agreement, but which are not defined in this First Amendment, shall have the same meanings as defined in the Pledge Agreement or the Credit Agreement. Unless otherwise indicated, all section references in this First Amendment refer to the Pledge Agreement. Section 2. First Amendment Advance. The Bank agrees, provided that the ----------------------- additional conditions precedent hereto are satisfied, to make an initial Advance as defined in the Credit Agreement (the "First Amendment Advance"). Section 3. Amendments to the Pledge Agreement. ---------------------------------- 3.1 Schedule I. Schedule I to the Pledge Agreement is hereby deleted and ---------- Schedule I hereto is inserted in lieu thereof. 3.2 Section 1(a). Section 1(a) of the Pledge Agreement is hereby amended ------------ by inserting in the first line thereof after the phrase "Schedule I" and before the phrase "and the certificates" the following: "and any other shares delivered to the Bank pursuant hereto and any shares shown on the account of the Bank on the books of a clearing corporation and registered in the name of the clearing corporation, another clearing corporation, a custodian bank or a nominee of any of them". 3.3 Section 3. Section 3 of the Pledge Agreement is hereby amended by --------- inserting in at the end of the fourth line thereof after the phrase "in blank," and before the phrase "all in form" as such phrase appears in the fifth line thereof, the following: "or shall be shown on the account of the Bank on the books of a clearing corporation and registered in the name of the clearing corporation, another clearing corporation, a custodian bank or a nominee of any of them". Section 4. Additional Conditions Precedent to the Advance. ---------------------------------------------- 4.1 Conditions Precedent to the Advance. The obligation of the Bank to ----------------------------------- make the First Amendment Advance shall be subject to the following conditions precedent: (a) In addition to the conditions precedent as set forth in Article III of the Credit Agreement, the Borrower will execute and deliver the following items: (i) Federal Reserve Form U-1 relating to the pledged shares described on Schedule I hereto; and (ii) Undated stock powers relating to the pledged shares on Schedule I hereto executed in blank or registered in the name of the Bank or such nominee or nominees as the Bank shall specify. (b) The Borrower will deliver to the Bank the stock certificates evidencing the pledged shares (if certificated) as further described on Schedule I hereto, or otherwise cause perfection of the Bank's first and prior security interest in the pledged shares in the event that any of such pledged shares are uncertificated. (c) The Bank shall have received multiple counterparts, as requested, of this First Amendment, executed and delivered by a duly authorized representative of the Borrower. (d) No Event of Default as defined in the Credit Agreement shall have occurred and be continuing as of the date of this First Amendment. Section 5. Representations and Warranties. The Borrower hereby affirms ------------------------------ that as of the date of execution and delivery of this First Amendment, except as affected by the transactions contemplated in this First Amendment, all of the representations and warranties contained in the Credit Agreement and the Pledge Agreement are true and correct in all material respects as though -2- made on and as of the date hereof and no Event of Default shall have occurred and be continuing. Section 6. Miscellaneous. ------------- 6.1 Confirmation. The provisions of the Pledge Agreement (as amended by ------------ this First Amendment) shall remain in full force and effect in accordance with their terms following the effectiveness of this First Amendment. 6.2 Ratification and Affirmation of Guarantors. The Guarantor under the ------------------------------------------ Credit Agreement hereby expressly (i) acknowledges the terms of this First Amendment, (ii) ratifies and affirms his obligations under the Guaranty Agreement, (iii) acknowledges, renews and extends his continued liability under said Guaranty Agreement and agrees that said Guaranty Agreement remains in full force and effect. 6.3 Counterparts. This First Amendment may be executed by one or more of ------------ the parties hereto in any number of separate counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 6.4 No Oral Agreement. THIS WRITTEN FIRST AMENDMENT AND THE OTHER ----------------- DOCUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 6.5 GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND ------------- CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed effective as of the date first written above. BORROWER: ------------------------------------------------- By: ---------------------------------------------- , its -------------- -------------------------- GUARANTOR: ------------------------------------------------- , individually ----------------- ----------------- -3- Schedule I to First Amendment to Pledge Agreement among ______________, as Borrower, and Citibank, N.A. A. Issuer: Sterling Software, Inc., a Delaware corporation ("Sterling") The Pledged Shares issued by Sterling are quoted on the New York Stock Exchange (NYSE) . Borrower beneficially owns shares of securities of Sterling that in the aggregate exceed ____ percent of the issued and outstanding securities of Sterling. (1) Stock Certificate No.: ________ Class of Stock: Common Stock Number of Shares: ________ Date acquired by Borrower: _____________________ Manner of acquisition by Borrower: _____________________________________ Nature of payment by Borrower: Transfer to ________________ of __________________ B. Issuer: Michaels Stores, Inc., a Delaware corporation ("Michaels") The Pledged Shares issued by Michaels are quoted on the over-the- counter (NASDAQ). Borrower beneficially owns shares of securities of Michaels that in the aggregate exceed ____ percent of the issued and outstanding securities of Michaels. -4- (1) Stock Certificate No.: __________ Class of Stock: Common Stock Number of Shares: __________ Date acquired by Borrower: ____ Manner of acquisition by Borrower: ______________________________ Nature of payment by Borrower: Transfer to ________________ of __________________ (2) Stock Certificate No.: __________ Class of Stock: Common Stock Number of Shares: __________ Date acquired by Borrower: _____ Manner of acquisition by Borrower: ______________________________________ Nature of payment by Borrower: Transfer to ________________ of ____________________ -5- ================================================================================ FORM OF SECOND AMENDMENT to PLEDGE AGREEMENT among ______________________ as the Borrower and CITIBANK, N.A. Effective as of September 30, 1996 ================================================================================ THIS SECOND AMENDMENT TO PLEDGE AGREEMENT (the "Second Amendment") dated as ---------------- of September 30, 1996, is among ______________________, a ___________ ________________ (the "Borrower"), acting through ______________________ its -------- ______________________, and CITIBANK, N.A., a national banking association (the "Bank"). ---- W I T N E S S E T H - - - - - - - - - - WHEREAS, the Borrower and the Bank entered into that certain Credit Agreement dated as of December 16, 1994 (the "Credit Agreement") pursuant to ---------------- which the Borrower and the Bank also entered into that certain Pledge Agreement dated as of December 16, 1994 as amended by the First Amendment to Pledge Agreement dated as of May 5, 1995 (the "Pledge Agreement") pursuant to which the ---------------- Bank agreed to made certain Advances to the Borrower; and WHEREAS, the Borrower has requested and the Bank has agreed to amend certain provisions of the Pledge Agreement and the Credit Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Defined Terms. All capitalized terms which are defined in the ------------- Pledge Agreement or the Credit Agreement, but which are not defined in this Second Amendment, shall have the same meanings as defined in the Pledge Agreement or the Credit Agreement. Unless otherwise indicated, all section references in this Second Amendment refer to the Pledge Agreement. Section 2. Amendments to the Pledge Agreement. Schedule I. Schedule I to ---------------------------------- the Pledge Agreement is hereby deleted in its entirety and Schedule I hereto is inserted in lieu thereof. Section 3. Representations and Warranties. The Borrower hereby affirms ------------------------------ that as of the date of execution and delivery of this Second Amendment, all of the representations and warranties contained in the Credit Agreement and the Pledge Agreement are true and correct in all material respects as though made on and as of the date hereof and no Event of Default shall have occurred and be continuing. Section 4. Confirmation. The provisions of the Pledge Agreement (as ------------ amended by this Second Amendment) shall remain in full force and effect in accordance with their terms following the effectiveness of this Second Amendment. Section 5. Ratification and Affirmation of Guarantors. The Guarantor ------------------------------------------ under the Credit Agreement hereby expressly (i) acknowledges the terms of this Second Amendment and the amendment of even date herewith to the Credit Agreement, (ii) ratifies and affirms his obligations under the Guaranty Agreement, (iii) acknowledges, renews and extends his continued liability under said Guaranty Agreement and agrees that said Guaranty Agreement remains in full force and effect. Section 6. Counterparts. This Second Amendment may be executed by one or ------------ more of the parties hereto in any number of separate counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument. Section 7. No Oral Agreement. THIS WRITTEN SECOND AMENDMENT AND THE OTHER ----------------- DOCUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Section 8.5 GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY, ------------- AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed effective as of the date first written above. BORROWER: ------------------------------------------------- By: ---------------------------------------------- , Its -------------------------- -------------- GUARANTOR: By: ---------------------------------------------- , individually -------------------------------- WITNESS: By: ---------------------------------------------- Name: -------------------------------------------- 2 Schedule I to the Pledge Agreement between __________, as Borrower, and Citibank, N.A. A. Issuer: Sterling Software, Inc., a Delaware corporation (1) Stock Certificate No.: _________ Class of Stock: Common Stock Number of Shares: _______ Date acquired by Borrower: _________ Manner of acquisition by Borrower: _____________________________________ B. Issuer: Sterling Commerce, Inc., a Delaware corporation (1) Stock Certificate No.: _________ Class of Stock: Common Stock Number of Shares: _______ Date acquired by Borrower: _________ Manner of acquisition by Borrower: _____________________________________ C. Issuer: Michaels Stores, Inc., a Delaware corporation (1) Stock Certificate No.: __________ Class of Stock: Common Stock Number of Shares: _______ Date acquired by Borrower: ________ Manner of acquisition by Borrower: _____________________________________ (2) Stock Certificate No.: _________ Class of Stock: Common Stock Number of Shares: _________ Date acquired by Borrower: _____ Manner of acquisition by Borrower: _____________________________________ 4 (3) Stock Certificate No.: _________ Class of Stock: Common Stock Number of Shares: _________ Date acquired by Borrower: _____ Manner of acquisition by Borrower: ______________________________________ 5 EX-8 9 FORM OF GUARANTY AGREEMENT Exhibit 8 --------- FORM OF GUARANTY AGREEMENT -------------------------- This GUARANTY AGREEMENT by ______________ (hereinafter called "Guarantor"), is in favor of Citibank, N.A., a national banking association (the "Bank"). W I T N E S S E T H: WHEREAS, on even date herewith, ______________, acting through ___________, its ____________ (hereinafter called "Borrower") and Bank entered into that certain Credit Agreement (as the same may be amended from time to time, the "Credit Agreement"); and WHEREAS, one of the terms and conditions stated in the Credit Agreement for the making of the loans described therein is the execution and delivery to the Bank of this Guaranty Agreement; NOW, THEREFORE, (i) in order to comply with the terms and conditions of the Credit Agreement, (ii) to induce the Bank, at any time or from time to time, to loan monies, with or without security to or for the account of Borrower in accordance with the terms of the Credit Agreement, (iii) at the special insistence and request of the Bank, and (iv) for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Guarantor hereby agrees as follows: ARTICLE 1 --------- General Terms ------------- Section 1.1 Terms Defined Above. As used in this Guaranty Agreement, ------------------- the terms "Bank", "Borrower", "Guarantor" and "Credit Agreement" shall have the meanings indicated above. Section 1.2 Certain Definitions. As used in this Guaranty Agreement, ------------------- the following terms shall have the following meanings, unless the context otherwise requires: "Collateral" shall have the meaning indicated in Section 4.1 hereof. "Guarantor Claims" shall have the meaning indicated in Section 5.1 hereof. "Guaranty Agreement" shall mean this Guaranty Agreement, as the same may from time to time be amended or supplemented. "Liabilities" shall mean (a) any and all indebtedness, obligations and liabilities pursuant to the Credit Agreement, including without limitation (i) the unpaid principal of and interest on the Note, (ii) interest accruing subsequent to the filing -1- of a petition or other action concerning bankruptcy or other similar proceeding, and (iii) any and all indebtedness, obligations and liabilities pursuant to any Hedge Agreement; and (b) all renewals, rearrangements, increases, extensions for any period, amendments or supplement in whole or in part of the Note or any documents evidencing the above. "Loan Documents" shall mean the Credit Agreement, the Notes and the Loan Documents. Section 1.3 Credit Agreement Definitions. Unless otherwise defined ---------------------------- herein, all terms beginning with a capital letter which are defined in the Credit Agreement shall have the same meanings herein as therein. ARTICLE 2 --------- The Guaranty ------------ Section 2.1 Liabilities Guaranteed. Guarantor hereby irrevocably and ---------------------- unconditionally guarantees the prompt payment at maturity of the Liabilities. Section 2.2 Nature of Guaranty. This guaranty is an absolute, ------------------ irrevocable, completed and continuing guaranty of payment and not a guaranty of collection, and no notice of the Liabilities or any extension of credit already or hereafter contracted by or extended to Borrower need be given to Guarantor. This guaranty may not be revoked by Guarantor and shall continue to be effective with respect to debt under the Liabilities arising or created after any attempted revocation by Guarantor and after Guarantor's death and shall remain in full force and effect until the Liabilities are paid in full and the Commitment is terminated, notwithstanding that from time to time prior thereto no Liabilities may be outstanding. Borrower and the Bank may modify, alter, rearrange, extend for any period and/or renew from time to time, the Liabilities, and the Bank may waive any Default or Events of Default without notice to the Guarantor and in such event Guarantor will remain fully bound hereunder on the Liabilities. This guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of the Liabilities is rescinded or must otherwise be returned by the Bank upon the insolvency, bankruptcy or reorganization of Borrower or otherwise, all as though such payment had not been made. This Guaranty Agreement may be enforced by the Bank and any subsequent holder of the Liabilities and shall not be discharged by the assignment or negotiation of all or part of the Liabilities. Guarantor hereby expressly waives presentment, demand, notice of non-payment, protest and notice of protest and dishonor, notice of Event of Default, notice of intent to accelerate the maturity and notice of acceleration of the maturity and any other notice in connection with the Liabilities, and also notice of acceptance of this Guaranty Agreement, acceptance on the part of the Bank being conclusively presumed by its request for this Guaranty Agreement and delivery of the same to it. -2- Section 2.3 Bank's Rights. Guarantor authorizes the Bank, without ------------- notice or demand and without affecting Guarantor's liability hereunder, to take and hold security for the payment of this Guaranty Agreement and/or the Liabilities, and exchange, enforce, waive and release any such security; and to apply such security and direct the order or manner of sale thereof as the Bank in its discretion may determine; and to obtain a guaranty of the Liabilities from any one or more Persons and at any time or times to enforce, waive, rearrange, modify, limit or release any of such other Persons from their obligations under such guaranties. Section 2.4 Guarantor's Waivers. Guarantor waives any right to require ------------------- the Bank to (a) proceed against Borrower or any other person liable on the Liabilities, (b) enforce its rights against any other guarantor of the Liabilities (c) proceed or enforce its rights against or exhaust any security given to secure the Liabilities (d) have Borrower joined with Guarantor in any suit arising out of this Guaranty Agreement and/or the Liabilities, or (e) pursue any other remedy in the Bank's powers whatsoever. The Bank shall not be required to mitigate damages or take any action to reduce, collect or enforce the Liabilities. Guarantor waives any defense arising by reason of any disability, lack of authority or power, or other defense of Borrower or any other guarantor of the Liabilities, and shall remain liable hereon regardless of whether Borrower or any other guarantor be found not liable thereon for any reason. Until the Liabilities shall have been paid in full, Guarantor waives any right to enforce any remedy which the Bank now has or may hereafter have against Borrower, and waives any benefit of any right to participate in any security now or hereafter held by the Bank. Whether and when to exercise any of the remedies of the Bank under any of the Loan Documents shall be in the sole and absolute discretion of the Bank, and no delay by the Bank in enforcing any remedy, including delay in conducting a foreclosure sale, shall be a defense to the Guarantor's liability under this Guaranty Agreement. To the extent allowed by applicable law, the Guarantor hereby waives any good faith duty on the part of the Bank in exercising any remedies provided in the Loan Documents and any requirement of liquidation of any collateral pledged by the Borrower to be "commercially reasonable" under the Texas Business and Commerce Code. Section 2.5 Maturity of Liabilities; Payment. Guarantor agrees that if -------------------------------- the maturity of the Liabilities is accelerated by bankruptcy or otherwise, such maturity shall also be deemed accelerated for the purpose of this Guaranty Agreement without demand or notice to Guarantor. Guarantor will, forthwith upon notice from the Bank of Borrower's failure to pay the Liabilities at maturity, pay to the Bank at its banking quarters in New York, New York the amount due and unpaid by Borrower and guaranteed hereby. The failure of the Bank to give this notice shall not in any way release Guarantor hereunder. Section 2.6 Bank's Expenses. If Guarantor fails to pay the Liabilities --------------- after notice from the Bank of Borrower's failure to pay any Liabilities at maturity, and if the Bank obtains the services of an attorney for collection of amounts owing by Guarantor hereunder, or obtaining advice of counsel in respect of any of their rights under the guaranty, or if suit is filed to enforce this Guaranty Agreement, or if proceedings are had in any bankruptcy, probate, receivership or other judicial proceedings for the establishment or collection of any amount owing by Guarantor hereunder, or if any amount owing by Guarantor hereunder is -3- collected through such proceedings, Guarantor agrees to pay to the Bank at its banking quarters the Bank's reasonable attorneys' fees. Section 2.7 Liability. It is expressly agreed that the liability of the --------- Guarantor for the payment of the Liabilities guaranteed hereby shall be primary and not secondary. Section 2.8 Events and Circumstances Not Reducing or Discharging ---------------------------------------------------- Guarantor's Obligations. Guarantor hereby consents and agrees to each of the - ----------------------- following to the fullest extent permitted by law, and agrees that Guarantor's obligations under this Guaranty Agreement shall not be released, diminished, impaired, reduced or adversely affected by any of the following, and waives any rights (including without limitation rights to notice) which Guarantor might otherwise have as a result of or in connection with any of the following: (a) Modifications, etc. Any renewal, extension, modification, ------------------ increase, decrease, alteration or rearrangement of all or any part of the Liabilities, or of the Note, or the Credit Agreement or any instrument executed in connection therewith, or any contract or understanding between Borrower and the Bank, or any other Person, pertaining to the Liabilities; (b) Adjustment, etc. Any adjustment, indulgence, forbearance --------------- or compromise that might be granted or given by the Bank to Borrower or Guarantor or any Person liable on the Liabilities; (c) Condition of Borrower or Guarantor. The insolvency, ---------------------------------- bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution, death or lack of power of Borrower or Guarantor or any other Person at any time liable for the payment of all or part of the Liabilities; or any dissolution of Borrower or Guarantor, or any sale, lease or transfer of any or all of the assets of Borrower or Guarantor, or any changes in the composition of Borrower or Guarantor; or any reorganization of Borrower or Guarantor; (d) Invalidity of Liabilities. The invalidity, illegality or ------------------------- unenforceability of all or any part of the Liabilities, or any document or agreement executed in connection with the Liabilities, for any reason whatsoever, including without limitation the fact that the Liabilities, or any part thereof, exceed the amount permitted by Law, the act of creating the Liabilities or any part thereof is ultra vires the officers or representatives executing the documents or otherwise creating the Liabilities acted in excess of their authority, the Liabilities violate usury laws applicable to the Borrower has valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Liabilities wholly or partially uncollectible from Borrower, the creation, performance or repayment of the Liabilities (or the execution, delivery and performance of any document or instrument representing part of the Liabilities or executed in connection with the Liabilities, or given to secure the repayment of the Liabilities) is illegal, uncollectible or legally unenforceable, or the Credit Agreement or other documents or instruments pertaining to the Liabilities have been forged or otherwise are irregular or not genuine or authentic; -4- (e) Release of Obligors. Any full or partial release of the ------------------- liability of Borrower on the Liabilities or any part thereof, of any co-guarantors, or any other Person now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Liabilities or any part thereof, it being recognized, acknowledged and agreed by Guarantor that Guarantor may be required to pay the Liabilities in full without assistance or support of any other Person, and Guarantor has not been induced to enter into this Guaranty Agreement on the basis of a contemplation, belief, understanding or agreement that parties other than the Borrower will be liable to perform the Liabilities, or the Bank will look to other parties to perform the Liabilities. Notwithstanding the foregoing, Guarantor does not hereby waive or release (expressly or impliedly) any rights of subrogation, reimbursement or contribution which it may have, after payment in full of the Liabilities, against others liable on the Liabilities; Guarantor's rights of subrogation and reimbursement are however, subordinate to the rights and claims of the Bank. (f) Other Security. The taking or accepting of any other -------------- security, collateral or guaranty, or other assurance of payment, for all or any part of the Liabilities; (g) Release of Collateral, etc. Any release, surrender, -------------------------- exchange, subordination, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security, at any time existing in connection with, or assuring or securing payment of, all or any part of the Liabilities; (h) Care and Diligence. The failure of the Bank or any other ------------------ Person to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of such collateral, property or security; (i) Status of Liens. The fact that any collateral, security, --------------- security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Liabilities shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by Guarantor that Guarantor is not entering into this Guaranty Agreement in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of any of the collateral for the Liabilities. Notwithstanding the foregoing, Guarantor does not hereby waive or release (expressly or impliedly) any right to be subrogated to the rights of the Bank in any collateral or security for the Liabilities, after payment in full of the Liabilities; Guarantor's rights of subrogation are, however, subordinate to the rights, claims, liens and security interests of the Bank; (j) Payments Rescinded. Any payment by Borrower to the Bank is ------------------ held to constitute a preference under the bankruptcy laws, or for any reason the Bank is -5- required to refund such payment or pay such amount to Borrower or someone else; or (k) Other Actions Taken or Omitted. Any other action taken or ------------------------------ omitted to be taken with respect to the Credit Agreement, the Liabilities, or the security and collateral therefor, whether or not such action or omission prejudices Guarantor or increases the likelihood that Guarantor will be required to pay the Liabilities pursuant to the terms hereof; it being the unambiguous and unequivocal intention of Guarantor that Guarantor shall be obligated to pay the Liabilities when due, notwithstanding any occurrence, circumstance, event, action, or omission whatsoever, whether contemplated or uncontemplated, and whether or not otherwise or particularly described herein, except for the full and final payment and satisfaction of the Liabilities. ARTICLE 3 --------- Representations, Warranties and Covenants ----------------------------------------- Section 3.1 By Guarantor. In order to induce the Bank to accept this ------------ Guaranty Agreement, Guarantor represents, warrants and covenants to the Bank (which representations, warranties and covenants will survive the creation of the Liabilities and any extension of credit thereunder) that: (a) Benefit to Guarantor. The guaranty pursuant to this -------------------- Guaranty Agreement reasonably may be expected to benefit, directly or indirectly, G uarantor. (b) Capacity. Guarantor possesses the requisite legal -------- capacity to enter into the Guaranty Agreement. (c) Binding Obligations. This Guaranty Agreement constitutes ------------------- valid and binding obligations of Guarantor, enforceable in accordance with its terms (except that enforcement may be subject to any applicable bankruptcy, insolvency or similar laws generally affecting the enforcement of creditors' rights). (d) No Legal Bar or Resultant Lien. This Guaranty Agreement ------------------------------ will not violate any or any contract, agreement, law, regulation, order, injunction, judgment, decree or writ to which Guarantor is subject, or result in the creation or imposition of any Lien upon any Properties of Guarantor. (e) No Consent. Guarantor's execution, delivery and ---------- performance of this Guaranty Agreement does not require the consent or approval of any other Person, including without limitation any regulatory authority or governmental body of the United States or any state thereof or any political subdivision of the United States or any state thereof. -6- (f) No Contravention. Guarantor's execution, delivery and ---------------- performance of this Guaranty Agreement does not and will not contravene any law or any contractual restriction or fiduciary duty binding on or affecting the Guarantor. (g) Solvency. The Guarantor hereby represents that (i) it is -------- not insolvent as of the date hereof and will not be rendered insolvent as a result of this Guaranty Agreement, (ii) it is not engaged in business or a transaction, or about to engage in a business or a transaction, for which any property or assets remaining with such Guarantor is unreasonably small capital, and (iii) it does not intend to incur, or believe it will incur, debts that will be beyond its ability to pay as such debts mature. (h) Reporting Requirements. Guarantor will furnish to the Bank ---------------------- as soon as available and in any event within sixty days after the last day of the most recently ended calendar quarter, a balance sheet of the Guarantor as at the end of such calendar quarter, including a listing of all contingent liabilities of the Guarantor, in reasonable detail and in form satisfactory to the Bank and certified by the Guarantor as being accurate and fairly presenting the financial condition of the Guarantor as at the end of such calendar quarter, and accompanied by a certificate of the Guarantor stating that no Event of Default or other event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default has occurred and is continuing or, if an Event of Default or any such other event has occurred and is continuing, a statement as to the nature thereof and the action which the Guarantor has taken and proposes to take with respect thereto. Section 3.2 No Representation by Bank. Neither the Bank nor any other ------------------------- Person has made any representation, warranty or statement to the Guarantor in order to induce the Guarantor to execute this Guaranty Agreement. ARTICLE 4 --------- Security -------- Section 4.1 Grant of Security Interest. As security for Guarantor's -------------------------- obligations hereunder, Guarantor hereby grants to the Bank a security interest in, a general lien upon and/or right of set-off against the following (herein referred to as the "Collateral"): the balance of every deposit account, now or hereafter existing, of Guarantor with the Bank and any other claim of Guarantor against the Bank, now or hereafter existing, and all money, instruments, securities, documents, chattel paper, credits, claims, demands and any other property, rights and interest of Guarantor, which at any time shall come into the possession or custody or under the control of the Bank or any of its agents or affiliates, for any purpose, and shall include the Collateral in transit to or set apart for them. Section 4.2 Financing Statements. The right is expressly granted to -------------------- the Bank, at its discretion, to file one or more financing statements or a copy of this Guaranty Agreement -7- under the Uniform Commercial Code naming Guarantor as Debtor and the Bank as Secured Party and indicating therein the types or describing the items of Collateral. Section 4.3 Remedies. In the event of default under this Guaranty -------- Agreement, the Bank may sell or cause to be sold in New York, New York, or elsewhere, in one or more sales or parcels, at such price as the Bank may deem best, and for cash or on credit or for future delivery, without assumption of any credit risk, all or any of the Collateral at any broker's board or at public or private sale, without demand or performance or notice of intention to sell or of time or place of sale (except such notice as is required by applicable statute and cannot be waived), and the Bank or anyone else may be the purchaser of any or all of the Collateral so sold and thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any equity of redemption of Guarantor, any such demand, notice or right and equity being hereby expressly waived and released. Section 4.4 Rights. The grant of the above security interest and lien ------ shall not in anywise limit or be construed as limiting the Bank to collect payment of Guarantor's obligations hereunder only out of the Collateral, but it is expressly understood and provided that all such obligations shall constitute the absolute and unconditional obligations of Guarantor. The Bank shall not be required to take any steps necessary to preserve any rights against prior parties to any of the Collateral. ARTICLE 5 --------- Subordination of Indebtedness ----------------------------- Section 5.1 Subordination of All Guarantor Claims. As used herein, the ------------------------------------- term "Guarantor Claims" shall mean all debts and liabilities of Borrower to Guarantor, whether such debts and liabilities now exist or are hereafter incurred or arise, or whether the obligation of Borrower thereon be direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract, open account, or otherwise, and irrespective of the person or persons in whose favor such debts or liabilities may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by Guarantor. The Guarantor Claims shall include without limitation all rights and claims of Guarantor against Borrower arising as a result of subrogation or otherwise as a result of Guarantor's payment of all or a portion of the Liabilities. Until the Liabilities shall be paid and satisfied in full and Guarantor shall have performed all of its obligations hereunder, Guarantor shall not receive or collect, directly or indirectly, from Borrower or any other party any amount upon the Guarantor Claims. Section 5.2 Claims in Bankruptcy. In the event of receivership, -------------------- bankruptcy, reorganization, arrangement, debtor's relief, or other insolvency proceedings involving Borrower as debtor, the Bank shall have the right to prove its claim in any proceeding, so as to establish its rights hereunder and receive directly from the receiver, trustee or other court custodian, dividends and payments which would otherwise be payable upon Guarantor -8- Claims. Guarantor hereby assigns such dividends and payments to the Bank. Should the Bank receive, for application upon the Liabilities, any such dividend or payment which is otherwise payable to Guarantor, and which, as between Borrower and Guarantor, shall constitute a credit upon the Guarantor Claims, then upon payment in full of the Liabilities, Guarantor shall become subrogated to the rights of the Bank to the extent that such payments to the Bank on the Guarantor Claims have contributed toward the liquidation of the Liabilities, and such subrogation shall be with respect to that proportion of the Liabilities which would have been unpaid if the Bank had not received dividends or payments upon the Guarantor Claims. Section 5.3 Payments Held in Trust. In the event that notwithstanding ---------------------- Sections 5.1 and 5.2 above, Guarantor should receive any funds, payments, claims or distributions which is prohibited by such Sections, Guarantor agrees to hold in trust for the Bank an amount equal to the amount of all funds, payments, claims or distributions so received, and agrees that it shall have absolutely no dominion over the amount of such funds, payments, claims or distributions except to pay them promptly to the Bank, and Guarantor covenants promptly to pay the same to Bank. Section 5.4 Liens Subordinate. Guarantor agrees that any liens, ----------------- security interests, judgment liens, charges or other encumbrances upon Borrower's assets securing payment of the Guarantor Claims shall be and remain inferior and subordinate to any liens, security interests, judgment liens, charges or other encumbrances upon Borrower's assets securing payment of the Liabilities, regardless of whether such encumbrances in favor of Guarantor or the Bank presently exist of are hereafter created or attach. Without the prior written consent of the Bank, Guarantor shall not (a) exercise or enforce any creditor's right it may have against the Borrower, or (b) foreclose, repossess, sequester or otherwise take steps or institute any action or proceeding (judicial or otherwise, including without limitation the commencement of or joinder in any liquidation, bankruptcy, rearrangement, debtor's relief or insolvency proceeding) to enforce any lien, mortgages, deeds of trust, security interest, collateral rights, judgments or other encumbrances on assets of Borrower held by Guarantor. Section 5.5 Notation of Records. All promissory notes, accounts ------------------- receivable ledgers or other evidence of the Guarantor Claims accepted by or held by Guarantor shall contain a specific written notice thereon that the indebtedness evidenced thereby is subordinated under the terms of this Guaranty Agreement. ARTICLE 6 --------- Miscellaneous ------------- Section 6.1 Successors and Assigns. This Guaranty Agreement is and ---------------------- shall be in every particular available to the successors and assigns of the Bank and is and shall always be fully binding upon the legal representatives, heirs, successors and assigns of Guarantor, notwithstanding that some or all of the monies, the repayment of which this Guaranty -9- Agreement applies, may be actually advanced after any bankruptcy, receivership, reorganization, death, disability or other event affecting Guarantor. Section 6.2 Notices. Any notice or demand to Guarantor under or in ------- connection with this Guaranty Agreement may be given and shall conclusively be deemed and considered to have been given and received in accordance with Section 8.02 of the Credit Agreement, addressed to Guarantor at the address on the signature page hereof or at such other address provided to the Bank in writing. Section 6.3 Business and Financial Information. The Guarantor will ---------------------------------- promptly furnish to the Bank from time to time upon request such information regarding the business and affairs and financial condition of the Guarantor and its subsidiaries as the Bank may reasonably request. Section 6.4 Governing Law; Consent to Jurisdiction. This Guaranty -------------------------------------- Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. The Guarantor hereby submits to the exclusive jurisdiction of the United States District Court for the Southern District of New York and of any court of the State of New York sitting in New York City for purposes of all legal proceedings arising out of or relating to this Guaranty Agreement, any other Loan Document or any transactions contemplated hereby or thereby. The Guarantor irrevocably waives, to the fullest extent permitted by law, any objection which the Guarantor may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Notwithstanding the preceding two sentences, the Bank retains the right to bring any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Guaranty Agreement, any other Loan Document or any of the transactions contemplated hereby or thereby in any court that has jurisdiction over the parties and subject matter. Section 6.5 Counterparts. This Agreement may be executed in any number ------------ of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. Section 6.6 WAIVER OF JURY TRIAL. THE GUARANTOR AND THE BANK HEREBY -------------------- IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THIS GUARANTY AGREEMENT, ANY OTHER LOAN DOCUMENT, THE ADVANCES OR THE ACTIONS OF THE BANK IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. Section 6.7 ENTIRE AGREEMENT. THIS WRITTEN GUARANTY AGREEMENT ---------------- ------------------------------- EMBODIES THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE BANK AND THE - ------------------------------------------------------------------------ GUARANTOR AND SUPERSEDES ALL OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH - ----------------------------------------------------------------------------- PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF. THIS WRITTEN GUARANTY - -------------------------------------------------------------------------------- -10- AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE - --------------------------------------------------------------------------- CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL - ---------------------------------------------------------------------- AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE - ----------------------------------------------------------------------------- PARTIES. - ------- WITNESS THE EXECUTION HEREOF, as of this the 16th day of December, 1994. -------------- By: ___________________________________ 8080 N. Central Expressway Suite 1300 Dallas, Texas 75206 Telecopier No.: (214) 891-8341 Telephone No.: (214) 891-8245 Attention: Shari Robertson -11- -----END PRIVACY-ENHANCED MESSAGE-----