Document:

Archstone-Smith Trust

 

EXHIBIT 10.3

ARCHSTONE-SMITH OPERATING TRUST

SERIES G CUMULATIVE REDEEMABLE PREFERRED

UNITS OF BENEFICIAL INTEREST

Articles Supplementary Reclassifying

and Designating a Series of Preferred Units as

Series G Cumulative Redeemable Preferred Units of Beneficial Interest

and Fixing Distribution and Other Preferences and Rights of Such Series

                  Archstone-Smith Operating Trust, a Maryland real estate investment trust
(the “Trust”), hereby certifies to the State Department of Assessments and
Taxation of Maryland pursuant to section 8-203(b) of the Corporations and
Associations Article of the Annotated Code of Maryland that:

                  FIRST: Pursuant to the authority granted and vested in the sole trustee
of the Trust (the “Trustee”) by Article 2, Section 1(c) of the Declaration of
Trust of the Trust, (the “Declaration of Trust”), the Trustee has reclassified
600,000 unissued Series G Cumulative Convertible Redeemable Preferred Units of
Beneficial Interest of the Trust as Series G Cumulative Redeemable Preferred
Units of Beneficial Interest, $0.01 par value per share (the “Series G
Preferred Units”).

                  SECOND: The following is a description of the Series G Preferred Units,
including the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications, and terms and conditions of redemption thereof, which, upon any
restatement of the Declaration of Trust, shall be deemed to be a part of
Article 2 of the Declaration of Trust, with any necessary or appropriate
changes to the enumeration or lettering of any section or subsection thereof:

                  Section 1. Number of Units and Designation. This class of preferred Units
shall be designated as Series G Cumulative Redeemable Preferred Units of
Beneficial Interest (“Series G Preferred Units”) and the number of shares which
shall constitute such series shall be 600,000 Units, par value $0.01 per unit.

                  Section 2. Definitions. For purposes of the Series G Preferred Units, the
following terms shall have the meanings indicated:

		
	 	         “Beneficial
Ownership” shall mean, except as provided below in the
following sentence, ownership of shares of beneficial interest of the Trustee
by a Person (whether or not treated as an individual for purposes of Section
544 of the Code) who is or would be treated as an owner of such shares of
beneficial interest of the Trustee either directly or constructively through
the application of 544 of the Code, as modified by Section 658(h)(1)(B) of the
Code. “Beneficial Ownership” shall also mean beneficial ownership as defined
under Rule 13(d) under the Exchange Act and, with respect to such meaning,
Beneficial Ownership by any Person shall include Beneficial Ownership by other
Persons who are part of the same group as the original Person for purposes of
such Rule 13(d). The term Beneficially Own shall have correlative meanings.
	 
	 	         “Business
Day” shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New
York City, New York are not required to be open.
	 
	 	         “Call
Date” shall mean the date specified in the notice to holders
required under Section 5 below as the Call Date.
	 
	 	         “Code” shall mean the Internal Revenue Code of 1986, as amended from
time to time.
	 
	 	         “Common
Units” shall mean the Class A-1 Common Units, par value
$0.01 per unit, the Class A-2 Common Units, par value $0.01 per unit, and
the Class B Common Units, par value $0.01 per unit, of the Trust.

 

 

		
	 	         “Distribution
Payment Date” shall mean (i) the 25th day of March,
June, September and December in each year, commencing with September 25,
2002 and (ii) in the event of (A) an exchange of Series G Preferred Units
into Series G Preferred Shares, or (B) a redemption of Series G Preferred
Units, on the exchange date or redemption date, as applicable.
	 
	 	         “Distribution
Periods” shall mean quarterly distribution periods
commencing on the 26th day of March, June, September and December of each
year and ending on and including the day preceding the first day of the
next succeeding Distribution Period.
	 
	 	         “Distribution
Record Date” shall have the meaning set forth in
Section 3.
	 
	 	         “Exchange
Act” shall mean the Securities Exchange Act of 1934, as
amended from time to time.
	 
	 	         “Fully
Junior Units” shall mean the Common Units and any other class
or series of Units of the Trust now or hereafter issued and outstanding
to which the Series G Preferred Units have preference or priority in
both (i) the payment of distributions and (ii) the distribution of assets
on any liquidation, dissolution or winding up of the Trust.
	 
	 	         “Junior
Units” shall mean the Common Units and any other class or
series of Units of the Trust now or hereafter issued and outstanding to
which the Series G Preferred Units have preference or priority in either
(i) the payment of distributions or (ii) the distribution of assets on
any liquidation, dissolution or winding up of the Trust and, unless the
context clearly indicates otherwise, shall include Fully Junior Units.
	 
	 	         “Ownership
Limit” shall initially mean 9.8% in number of Shares or
value, of the outstanding Shares, and, after any adjustment provided for
in the Amended and Restated Declaration of Trust of the Trustee, shall
mean such lesser or greater percentage of the outstanding Shares as so
adjusted. The number and value of the outstanding Shares shall be
determined by the board of trustees of the Trustee in good faith, which
determination shall be conclusive for all purposes thereof.
	 
	 	         “Parity
Units” shall have the meaning set forth in Section 7.
	 
	 	         “Parity
Shares” shall mean Shares on parity with the Series G
Preferred Shares, in the payment of distributions and in the distribution
of assets on any liquidation, dissolution or winding up of the Trustee,
whether or not the distribution rates, distribution payment dates or
redemption or liquidation prices per share thereof are different from
those of the Series G Preferred Shares.
	 
	 	         “Person” shall mean an individual, corporation, partnership, estate,
trust (including a trust qualified under Section 401(a) or 501(c)(17) of
the Code), portion of a trust permanently set aside for or to be used
exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of
the Code, joint stock company or other entity.
	 
	 	         “PTP” shall mean a “publicly traded partnership” within the meaning
of Section 7704 of the Code.
	 
	 	         “Securities
Act” shall mean the Securities Act of 1933, as amended
from time to time.
	 
	 	         “Series G
Preferred Shares” shall mean Series G Cumulative
Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per
share, of the Trustee.
	 
	 	         “set
apart for payment” shall be deemed to include, without any
action other than the following, the recording by the Trust in its
accounting ledgers of any accounting or bookkeeping entry which
indicates, pursuant to authorization or declaration of distributions or
other distribution by the Trustee, the allocation of funds to be so paid
on any class or series of Units of the Trust; provided, however, that if
any funds for any Junior Units or any Parity Units are placed in a
separate account of the Trust or delivered to a disbursing, paying or
other similar agent, then “set apart for payment” with respect to the
Series G Preferred Units shall mean placing such funds in a separate
account or delivering such funds to a disbursing, paying or other similar
agent.
	 
	 	         “Shares” shall mean shares of beneficial interest of the Trustee.

 

 

		
	 	         “Trustee” shall mean Archstone-Smith Trust, a Maryland real estate
investment trust, the sole trustee of the Trust.
	 
	 	         “Units” shall mean the shares of beneficial interest, par value
$0.01 per share, of the Trust, which have been designated as Units in the
Declaration of Trust.

                  Section 3. Distributions.

                  (a) General. The holders of Series G Preferred Units shall be entitled to
receive, when, as and if authorized or declared by the Trustee, out of funds
legally available for such purpose, cash distributions in an amount per share
equal to 8.625% of the liquidation preference per annum (equivalent to $2.15625
per share). Such distributions shall be cumulative, shall accrue from the
original date of issuance and will be payable on each Distribution Payment
Date. The amount of the distribution payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months and for any period
shorter than a full quarterly period for which distributions are computed, the
amount of the distribution payable will be computed on the basis of the actual
number of days elapsed in such period. If any Distribution Payment Date is not
a Business Day, then payment of the distribution to be made on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date. Distributions on the Series G
Preferred Units will be made to the holders of record of the Series G Preferred
Units on the relevant record dates to be fixed by the Trustee, which record
dates shall in no event exceed fifteen (15) Business Days prior to the relevant
Distribution Payment Date.

                  (b) Cumulative Distributions. Distributions on the Series G Preferred
Units will accrue whether or not the terms and provisions of any agreement of
the Trust, including any agreement relating to its indebtedness, at any time
prohibit the current payment of distributions, whether or not the Trust has
earnings, whether or not there are funds legally available for the payment of
such distributions and whether or not such distributions are authorized.
Accrued but unpaid dividends on the Series G Preferred Units will accumulate as
of the Distribution Payment Date on which they first become payable.
Distributions on account of arrears for any past distribution periods may be
declared and paid at any time, without reference to a regular Distribution
Payment Date to holders of record of the Series G Preferred Units on the record
date fixed by the Trustee which date shall not exceed fifteen (15) Business
Days prior to the Distribution Payment Date. Accumulated and unpaid
distributions will not bear interest nor shall there be any accrual accounts
maintained for the Series G Preferred Shares.

                  (c) Priority as to Distributions. (i) So long as any Series G Preferred
Units are outstanding, no distribution of cash or other property shall be
authorized, declared, paid or set apart for payment on or with respect to any
class or series of Junior Units of the Trust, nor shall any cash or other
property be set aside for or applied to the purchase, redemption or other
acquisition for consideration of any Series G Preferred Units, any Parity Units
or any Junior Units, unless, in each case, all distributions accumulated on all
Series G Preferred Units and all classes and series of outstanding Parity Units
have been paid in full. The foregoing sentence will not prohibit (a)
distributions payable solely in Junior Units, (b) the conversion of Junior
Units or Parity Units into Units of the Trust ranking junior to the Series G
Preferred Units as to distributions, or (c) the redemption of Units
corresponding to any Series G Preferred Shares, Shares raking on parity with
the Series G Preferred Shares with respect to distributions or Shares ranking
junior to the Series G Preferred Shares to be purchased by the Trustee pursuant
to Sections 18 and 18A of Article II of the Declaration of Trust of the Trustee
to preserve the Trustee’s status as a real estate investment trust, provided
that such redemption shall be upon the same terms as the corresponding purchase
pursuant to said Section 18 and 18A of Article II of the Declaration of Trust
of the Trustee.

                  (ii) So long as distributions have not been paid in full (or a sum
sufficient for such full payment is not irrevocably deposited in trust for
payment) upon the Series G Preferred Units, all distributions authorized and
declared on the Series G Preferred Units and all classes or series of
outstanding Parity Units shall be authorized and declared so that the amount of
distributions authorized and declared per Series G Preferred Unit and such
other classes or series of Parity Units shall in all cases bear to each other
the same ratio that accrued distributions per Series G Preferred Unit and such
other classes or series of Parity Units (which shall not include any
accumulation in respect of unpaid distributions for prior distribution periods
if such class or series of Parity Units do not have cumulative distribution
rights) bear to each other.

                  (d) No Further Rights. Holders of Series G Preferred Units shall not be
entitled to any distributions, whether payable in cash, other property or
otherwise, in excess of the full cumulative distributions described herein.

 

 

                  Section 4. Liquidation Preference.

                  (a) Distributions upon Liquidation. Upon any liquidation, dissolution or
winding up of the Trust, whether voluntary or involuntary, before any payment
or distribution of the assets of the Trust (whether capital or surplus) is made
to or set apart for the holders of the Common Units or any other class or
series of Units of the Trust now or hereafter issued and outstanding to which
the Series G Preferred Units have preference or priority in the distribution of
assets on any liquidation, dissolution or winding up of the Trust, the holders
of Series G Preferred Units shall be entitled to receive out of assets of the
Trust legally available for such purpose, liquidating distributions in the
amount of $25.00 per Series G Preferred Unit, plus an amount equal to all
distributions (whether or not earned or authorized or declared) accrued and
unpaid thereon to the date of final distribution to such holders, if any; but
such holders shall not be entitled to any further payment. If, upon any
liquidation, dissolution or winding up of the Trust, the assets of the Trust,
or the proceeds thereof, distributable among the holders of Series G Preferred
Units are insufficient to pay in full such preferential amount with respect to
the Series G Preferred Units and the corresponding amounts with respect to all
Parity Units, then such assets, or the proceeds thereof, shall be distributed
among the holders of Series G Preferred Units and all such Parity Units in
proportion to the full liquidating distributions to which they would otherwise
be respectively entitled.

                  (b) Notice. Written notice of any such voluntary or involuntary
liquidation, dissolution or winding-up of the Trust, stating the payment date
or dates when, and the place or places where, the amounts distributable in such
circumstances shall be payable, shall be given by (i) fax and (ii) by first
class mail, postage pre-paid, not less than ten (10) and not more than sixty
(60) days prior to the payment date stated therein, to each record holder of
Series G Preferred Units at the respective addresses of such holders as the
same shall appear on the transfer records of the Trust.

                  (c) No Further Rights. Subject to the rights of the holders of shares of
any class or series of Units ranking on a parity with or senior to the Series G
Preferred Units in the distribution of assets on any liquidation, dissolution
or winding up of the Trust, upon any liquidation, dissolution or winding up of
the Trust, whether voluntary or involuntary, after payment has been made in
full to the holders of Series G Preferred Units, as provided herein, the
holders of any Junior Units shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the holders of Series G Preferred
Units shall not be entitled to share therein.

                  (d) Consolidation, Merger or Certain Other Transactions. The voluntary
sale, conveyance, lease, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
or assets of the Trustee to, or the consolidation or merger or other business
combination of the Trust with or into, any corporation, trust, partnership,
limited liability company or other entity (or of any corporation, trust,
partnership, limited liability company or other entity with or into the Trust)
shall not be deemed to constitute a liquidation, dissolution or winding-up of
the Trust.

                  Section 5. Redemption at the Option of the Trust.

                  (a) Right of Optional Redemption. Series G Preferred Units are not
redeemable by the Trust prior to March 3, 2005. On or after such date, the
Trust shall have the right to redeem the Series G Preferred Units, in whole or
in part, at any time or from time to time, upon not less than ten (10) nor more
than sixty (60) days’ written notice, for cash at a redemption price of $25.00
per Series G Preferred Unit plus the amount indicated in subsection (b) below
(the “Redemption Price”). If fewer than all of the outstanding Series G
Preferred Units are to be redeemed, the Series G Preferred Units to be redeemed
shall be selected pro rata (as nearly as practicable without creating
fractional units).

                  (b) Payment of Accrued and Unpaid Distributions. Upon any redemption of
Series G Preferred Units pursuant to this Section 5, the Trust shall pay all
distributions accrued and unpaid thereon, if any, in arrears for any
Distribution Period ending on or prior to the Call Date. If the Call Date
falls after a Distribution Record Date and prior to the corresponding
Distribution Payment Date, then each holder of such Series G Preferred Units at
the close of business on such Distribution Record Date shall be entitled to
receive the distribution payable on such Series G Preferred Units on the
corresponding Distribution Payment Date notwithstanding the redemption of such
Series G Preferred Units before such Distribution Payment Date. Except as
provided above, the Trust shall make no payment or allowance for unpaid
distributions, whether or not in arrears, on Series G Preferred Units called
for redemption.

                  (c) Limitation on Redemption. The Trust may not redeem fewer than all of
the outstanding Series G Preferred Units unless all accumulated and unpaid
distributions have been paid on all Series G Preferred Units for all quarterly
distribution periods terminating on or prior to the date of redemption.

 

 

                  (d) Procedures for Redemption.

		
	 	         (i) Notice of redemption will be (A) faxed, and (B) mailed by the
Trust, by certified mail, postage prepaid, not less than ten (10) nor
more than sixty (60) days prior to the redemption date, addressed to the
respective holders of record of the Series G Preferred Units at their
respective addresses as they appear on the records of the Trust. No
failure to give or defect in such notice shall affect the validity of the
proceedings for the redemption of any Series G Preferred Units except as
to the holder to whom such notice was defective or not given. In
addition to any information required by law, each such notice shall
state: (1) the redemption date, (2) the Redemption Price, (3) the
aggregate number of Series G Preferred Units to be redeemed and if fewer
than all of the outstanding Series G Preferred Units are to be redeemed,
the number of Series G Preferred Units to be redeemed held by such
holder, which number shall equal such holder’s pro rata share (based on
the percentage of the aggregate number of outstanding Series G Preferred
Units the total number of Series G Preferred Units held by such holder
represents) of the aggregate number of Series G Preferred Units to be
redeemed, (4) the place or places where such Series G Preferred Units are
to be surrendered for payment of the Redemption Price, (5) that
distributions on the Series G Preferred Units to be redeemed will cease
to accumulate on such redemption date and (6) that payment of the
Redemption Price will be made upon presentation and surrender of such
Series G Preferred Units.
	 
	 	         (ii) If the Trust gives a notice of redemption in respect of Series
G Preferred Units (which notice will be irrevocable) then, by 12:00 noon,
New York City time, on the redemption date, the Trust will deposit
irrevocably in trust for the benefit of the Series G Preferred Units
being redeemed funds sufficient to pay the applicable Redemption Price
and will give irrevocable instructions and authority to pay such
Redemption Price to the holders of the Series G Preferred Units upon
surrender of the Series G Preferred Units by such holders at the place
designated in the notice of redemption. If the Series G Preferred Units
are evidenced by a certificate and if fewer than all Series G Preferred
Units evidenced by any certificate are being redeemed, a new certificate
shall be issued upon surrender of the certificate evidencing all Series G
Preferred Units, evidencing the unredeemed Series G Preferred Units
without cost to the holder thereof. On and after the date of redemption,
distributions will cease to accumulate on the Series G Preferred Units or
portions thereof called for redemption, unless the Trust defaults in the
payment thereof. If any date fixed for redemption of Series G Preferred
Units is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day falls in the next calendar year,
such payment will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date fixed
for redemption. If payment of the Redemption Price is improperly
withheld or refused and not paid by the Trust, distributions on such
Series G Preferred Units will continue to accumulate from the original
redemption date to the date of payment, in which case the actual payment
date will be considered the date fixed for redemption for purposes of
calculating the applicable Redemption Price.

                  Section 6. Units to Be Retired. All Series G Preferred Units which are
issued and reacquired in any manner by the Trust (other than the exchange of
Series G Preferred Units for Series G Preferred Shares pursuant to Section 9
hereof whereby the Trustee shall hold all of such Series G Preferred Units so
exchanged) shall be restored to the status of authorized but unissued Units of
the Trust, without designation as to class or series.

                  Section 7. Ranking. Any class or series of Units of the Trust shall be
deemed to rank:

		
	 	         (i) senior to the Series G Preferred Units, in the payment of
distributions or in the distribution of assets on any liquidation,
dissolution or winding up of the Trust, if the holders of such class or
series are entitled to the receipt of distributions or amounts
distributable on any liquidation, dissolution or winding up of the Trust,
as the case may be, in preference or priority to the holders of Series G
Preferred Units;
	 
	 	         (ii) on a parity with the Series G Preferred Units, in the payment
of distributions and in the distribution of assets on any liquidation,
dissolution or winding up of the Trust, whether or not the distribution
rates, distribution payment dates or redemption or liquidation prices per
share thereof are different from those of the Series G Preferred Units,
if the holders of such class or series and the holders of Series G
Preferred Units are entitled to the receipt of distributions and amounts
distributable on any liquidation, dissolution or winding up of the Trust
in proportion to their respective amounts of distributions accrued and
unpaid per share or liquidation preferences, without preference or
priority to each other (“Parity Units”);

 

 

		
	 	         (iii) junior to the Series G Preferred Units, in the payment of
distributions or in the distribution of assets on any liquidation,
dissolution or winding up of the Trust, if such class or series is Junior
Units; and
	 
	 	         (iv) junior to the Series G Preferred Units, in the payment of
distributions and in the distribution of assets on any liquidation,
dissolution or winding up of the Trust, if such class or series is Fully
Junior Units.

                  Section 8. Voting.

                  (a) General. Holders of the Series G Preferred Units will not have any
voting rights or right to consent to any matter requiring the consent or
approval of the holders of Units, except as set forth in Sections 5.3 and 12.4
of Annex A to the Declaration of Trust and except as set forth below.

                  (b) Certain Voting Rights. So long as any Series G Preferred Units remain
outstanding, the Trust shall not, without the affirmative vote of the holders
of at least two-thirds of the Series G Preferred Units outstanding at the time
(i) authorize or create, or increase the authorized or issued amount of, any
class or series of Units senior to the Series G Preferred Units with respect to
payment of distributions or rights upon liquidation, dissolution or winding-up
or reclassify any Units of the Trust into any such senior Units, or create,
authorize or issue any obligations or security convertible into or evidencing
the right to purchase any such senior Units, (ii) authorize or create, or
increase the authorized or issued amount of any Parity Units or reclassify any
Units into any such Units or create, authorize or issue any obligations or
security convertible into or evidencing the right to purchase any such Units
but only to the extent such Parity Units are issued to an affiliate of the
Trust, other than the Trustee to the extent the issuance of such interests was
to allow the Trustee to issue corresponding preferred shares to persons who are
not affiliates of the Trustee or (iii) either (A) consolidate, merge into or
with, or convey, transfer or lease its assets substantially as an entirety to,
any corporation or other entity or (B) amend, alter or repeal the provisions of
the Declaration of Trust, whether by merger, consolidation or otherwise, that
would materially and adversely affect the powers, special rights, preferences,
privileges or voting power of the Series G Preferred Units or the holders
thereof; provided, however, that with respect to the occurrence of a merger,
consolidation or a sale or lease of all of the Trust’s assets as an entirety,
so long as (1) the Trust is the surviving entity and the Series G Preferred
Units remain outstanding with the terms thereof unchanged, or (2) the
resulting, surviving or transferee entity is a partnership, limited liability
company or other pass-through entity organized under the laws of any state and
substitutes the Series G Preferred Units for other interests in such entity
having substantially the same terms and rights as the Series G Preferred Units,
including with respect to distributions, voting rights and rights upon
liquidation, dissolution or winding-up, then the occurrence of any such event
shall not be deemed to materially and adversely affect such rights, privileges
or voting powers of the holders of the Series G Preferred Units; and provided
further that any increase in the amount of Units or the creation or issuance of
any other class or series of Units, in each case ranking (y) junior to the
Series G Preferred Units with respect to payment of distributions or the
distribution of assets upon liquidation, dissolution or winding-up, or (z) on a
parity with the Series G Preferred Units with respect to payment of
distributions and the distribution of assets upon liquidation, dissolution or
winding-up, to the extent such Units are issued to the Trustee and the issuance
of such Units was to allow the Trustee to issue corresponding preferred shares
to persons who are not affiliates of the Trust, shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
powers.

                  Section 9. Exchange Right.

		
	 	         (a) Right to Exchange. (i) Series G Preferred Units will be
exchangeable in whole or in part at anytime on or after March 3, 2010 at
the option of either the holders thereof or the Trustee, for authorized
but previously unissued Series G Preferred Shares at an exchange rate of
one Series G Preferred Share for one Series G Preferred Unit, subject to
adjustment as described below (the “Exchange Price”); provided, the
Series G Preferred Units will become exchangeable at any time, in whole
or in part, at the option of the holders of Series G Preferred Units for
Series G Preferred Shares if (x) at any time full distributions shall not
have been timely made on any Series G Preferred Unit with respect to six
(6) prior quarterly distribution periods, whether or not consecutive,
provided, however, that a distribution in respect of Series G Preferred
Units shall be considered timely made if made within two (2) Business
Days after the applicable Distribution Payment Date if at the time of
such late payment there shall not be any prior quarterly distribution
periods in respect of which full distributions were not timely made, or
(y) upon receipt by a holder or holders of Series G Preferred Units of
(1) notice from the Trustee that the Trustee or a subsidiary of the
Trustee has taken the position that the Trust is, or upon the occurrence
of a defined event which is likely to occur in the immediate future will
be, a PTP and (2) an opinion rendered by an outside nationally recognized
independent counsel familiar with such matters addressed to a holder or
holders of Series G Preferred Units, that the Trust is or likely is, or
upon the occurrence of a defined event which is likely to occur in the
immediate future will be or

 

 

		
	 	likely will be, a PTP. In addition, the Series G Preferred Units
may be exchanged for Series G Preferred Shares, in whole or in part, at
the option of any holder prior to March 3, 2010 and after March 3, 2003
if such holder of a Series G Preferred Unit shall deliver to the Trustee
either (i) a private letter ruling addressed to such holder of Series G
Preferred Units or (ii) an opinion of independent counsel reasonably
acceptable to the Trustee based on the enactment of a statute, temporary
or final Treasury Regulations or the publication of a Revenue Ruling or
other Internal Revenue Service release, in either case to the effect that
an exchange of the Series G Preferred Shares at such earlier time would
not cause the Series G Preferred Units to be considered “stock or
securities” within the meaning of section 351(e) of the Code for purposes
of determining whether the holder of such Series G Preferred Units is an
“investment company” under section 721(b) of the Code if an exchange is
permitted at such earlier date.
	 
	 	         (ii) Notwithstanding anything to the contrary set forth in Section
9(a)(i) hereof, if an Exchange Notice (as defined herein) has been
delivered to the Trustee, then the Trustee may, at its option, elect to
redeem or cause the Trust to redeem all or a portion of the outstanding
Series G Preferred Units for cash in an amount equal to the Redemption
Price that would be payable as of the date of such redemption in
accordance with the procedures set forth in Section 5(d) hereof. The
Trustee may exercise its option to redeem the Series G Preferred Units
for cash pursuant to this Section 9(a)(ii) hereof by giving each holder
of record of Series G Preferred Units notice of its election to redeem
for cash, within ten (10) Business Days after receipt of the Exchange
Notice, by (x) fax, and (y) registered mail, postage paid, at the address
of each holder as it may appear on the records of the Trust stating (A)
the redemption date, which shall be no later than sixty (60) days
following the receipt of the Exchange Notice, (B) the redemption price,
(C) the place or places where the Series G Preferred Units are to be
surrendered for payment of the redemption price, (D) that distributions
on the Series G Preferred Units will cease to accrue on such redemption
date, (E) that payment of the redemption price will be made upon
presentation and surrender of the Series G Preferred Units and (F) the
aggregate number of Series G Preferred Units to be redeemed, and if fewer
than all of the outstanding Series G Preferred Units are to be redeemed,
the number of Series G Preferred Units to be redeemed held by such
holder, which number shall equal such holder’s pro rata share (based on
the percentage of the aggregate number of outstanding Series G Preferred
Units the total number of Series G Preferred Units held by such holder
represents) of the aggregate number of Series G Preferred Units being
redeemed.
	 
	 	         (iii) In the event an exchange of all or a portion of Series G
Preferred Units pursuant to Section 9(a)(i) hereof would violate the
provisions on ownership limitation of the Trustee set forth in the
Declaration of Trust of the Trustee, the Trustee shall give written
notice thereof to each holder of record of Series G Preferred Units,
within ten (10) Business Days following receipt of the Exchange Notice,
by (x) fax, and (y) registered mail, postage prepaid, at the address of
each such holder set forth in the records of the Trust. In such event,
each holder of Series G Preferred Units shall be entitled to exchange,
pursuant to the provision of Section 9(b) a number of Series G Preferred
Units which would comply with the provisions on the ownership limitation
of the Trustee set forth in the Declaration of Trust and any Series G
Preferred Units not so exchanged (the “Excess Units”) shall be redeemed
by the Trust for cash in an amount equal to $25.00, plus any accrued and
unpaid distributions thereon, whether or not declared, to the date of
redemption. The written notice of the Trustee shall state (A) the number
of Excess Units held by such holder, (B) the redemption price of the
Excess Units, (C) the date on which such Excess Units shall be redeemed,
which date shall be no later than sixty (60) days following the receipt
of the Exchange Notice, (D) the place or places where such Excess Units
are to be surrendered for payment of the redemption price, (E) that
distributions on the Excess Units will cease to accrue on such redemption
date, and (F) that payment of the redemption price will be made upon
presentation and surrender of such Excess Units. In the event an
exchange would result in Excess Units, as a condition to such exchange,
each holder of such units agrees to provide representations and covenants
reasonably requested by the Trustee relating to (1) the widely held
nature of the interests in such holder, sufficient to assure the Trustee
that the holder’s ownership of shares of the Trustee (without regard to
the limits described above) will not cause any individual to Beneficially
Own in excess of the Ownership Limit; and (2) to the extent such holder
can so represent and covenant without obtaining information from its
owners, the holder’s ownership of tenants of the Trust and its
affiliates.
	 
	 	         (b) Procedure for Exchange. (i) Any exchange pursuant to the terms
herein (including Section 9(a)(i)) shall be exercised pursuant to a
notice of exchange (the “Exchange Notice”) delivered to the Trustee by
the holder who is exercising such exchange right, by (A) fax and (B) by
certified mail postage prepaid. The exchange of Series G Preferred
Units, or a specified portion thereof, may be effected after the fifth
(5th) Business Day following receipt by the Trustee of the Exchange
Notice by delivering certificates, if any, representing such Series G
Preferred Units to be exchanged together with, if applicable, written
notice of exchange and a proper assignment of such Series G Preferred
Units to the office of the Trustee maintained for

 

 

		
	 	such purpose. Currently, such office is 9200 E. Panorama, Suite
400, Englewood, Colorado 80112, Attention: Chief Financial Officer. Each
exchange will be deemed to have been effected immediately prior to the
close of business on the date on which such Series G Preferred Units to
be exchanged (together with all required documentation) shall have been
surrendered and notice shall have been received by the Trustee as
aforesaid and the Exchange Price shall have been paid. Any Series G
Preferred Shares issued by the Trustee in accordance with this Section 9
shall be delivered as shares which are duly authorized, validly issued,
fully paid and nonassessable, free of pledge, lien, encumbrance or
restriction other than those provided in the Amended and Restated
Declaration of Trust and the Bylaws of the Trustee, the Securities Act
and relevant state securities or blue sky laws.
	 
	 	         (ii) In the event of an exchange of Series G Preferred Units for
Series G Preferred Shares, an amount equal to the accrued and unpaid
distributions, whether or not declared, to the date of exchange on any
Series G Preferred Units tendered for exchange shall (A) accrue on the
shares of the Series G Preferred Shares into which such Series G
Preferred Units are exchanged, and (B) continue to accrue on such Series
G Preferred Units, which shall remain outstanding following such
exchange, with the Trustee as the holder of such Series G Preferred
Units. Notwithstanding anything to the contrary set forth herein, in no
event shall a holder of a Series G Preferred Unit that was validly
exchanged into Series G Preferred Shares pursuant to this Section 9
(other than the Trustee now holding such Series G Preferred Unit),
receive a cash distribution out of Available Cash of the Trust, if such
holder, after exchange, is entitled to receive a distribution out of
Available Cash with respect to the Series G Preferred Share for which
such Series G Preferred Unit was exchanged or redeemed.
	 
	 	         (iii) Fractional Series G Preferred Shares are not to be issued upon
exchange but, in lieu thereof, the Trustee will pay a cash adjustment
based upon the fair market value of the Series G Preferred Shares on the
day prior to the exchange date as determined in good faith by the Board
of Trustees of the Trustee.
	 
	 	         (c) Adjustment of Exchange Price. (i) The Exchange Price is
subject to adjustment upon certain events, including, (A) subdivisions,
combinations and reclassification of the Series G Preferred Shares, and
(B) distributions to all holders of Series G Preferred Shares of evidence
of indebtedness of the Trustee or assets (including securities, but
excluding dividends and distributions paid in cash out of equity
applicable to Series G Preferred Shares). In the event of a subdivision
or combination of the Series G Preferred Shares, the Exchange Price in
effect immediately prior to the subdivision or combination shall be
proportionately increased or decreased. In the event of a
reclassification, the Exchange Price shall be adjusted so that a Series G
Preferred Unit will be exchangeable for a proportionate interest in the
security into which a Series G Preferred Share was reclassified. In the
event of a distribution of evidences of indebtedness of the Trustee or
assets, the Exchange Price shall be increased or decreased so that the
same shall equal the price determined by multiplying the Exchange Price
immediately prior to the distribution by a fraction of which the
numerator shall be the fair market value (as determined by the Trustee)
of a Series G Preferred Share at the close of business on the date
immediately prior to the distribution and the denominator shall be the
fair market value (as determined by the Trustee) of a Series G Preferred
Share at the close of business on the day of the distribution less the
fair market value (as determined by the Trustee) of the distribution.
	 
	 	         (ii) In case the Trustee shall be a party to any transaction
(including, without limitation, a merger, consolidation, statutory share
exchange, tender offer for all or substantially all of the Trustee’s
shares of beneficial interest or sale of all or substantially all of the
Trustee’s assets), in each case as a result of which the Series G
Preferred Shares will be converted into the right to receive shares of
capital stock, other securities or other property (including cash or any
combination thereof), each Series G Preferred Unit will thereafter be
exchangeable into the kind and amount of shares of capital stock and
other securities and property receivable (including cash or any
combination thereof) upon the consummation of such transaction by a
holder of that number of Series G Preferred Shares or fraction thereof
into which one Series G Preferred Unit was exchangeable immediately prior
to such transaction. The Trustee may not become a party to any such
transaction unless the terms thereof are consistent with the foregoing.
In addition, so long as any Series G Preferred Units are outstanding, the
Trustee shall not, without the affirmative vote of the holders of at
least two-thirds of the Series G Preferred Units outstanding at the time:
(a) designate or create, or increase the authorized or issued amount of,
any class or series of shares ranking prior to the Series G Preferred
Shares with respect to the payment of distributions or rights upon
liquidation, dissolution or winding-up or reclassify any authorized
shares of the Trustee into any such shares, or create, authorize or issue
any obligations or security convertible into or evidencing the right to
purchase any such shares; (b) designate or create, or increase the
authorized or issued amount of, any Parity Shares or reclassify any
authorized shares of the Trustee into any such shares, or create,
authorize or issue any obligations or security convertible into or

 

 

		
	 	evidencing the right to purchase any such shares, but only to the
extent that such Parity Shares are issued to an Affiliate of the Trustee;
(c) amend, alter or repeal the provisions of the Amended and Restated
Declaration of Trust or Bylaws of the Trustee, whether by merger,
consolidation or otherwise, that would materially and adversely affect
the powers, special rights, preferences, privileges or voting power of
the Series G Preferred Shares or the holders of the Series G Preferred
Shares or the Series G Preferred Units; provided, however, that any
increase in the amount of authorized preferred shares of beneficial
interest of the Trustee (“Preferred Shares”) or the creation or issuance
of any other series or class of Preferred Shares, or any increase in the
amount of authorized shares of each class or series, in each case ranking
either (1) junior to the Series G Preferred Shares with respect to the
payment of distributions and the distribution of assets upon liquidation,
dissolution or winding-up, or (2) on a parity with the Series G Preferred
Shares with respect to the payment of distributions or the distribution
of assets upon liquidation, dissolution or winding-up to the extent such
Series G Preferred Shares are not issued to an affiliate of the Trustee,
shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.

                  (d) Restriction on Ownership. Following the exchange of all or any
portion of the Series G Preferred Units for Series G Preferred Shares in
accordance with to this Section 9, such Series G Preferred Units shall be owned
and held solely by the Trustee.

                  Section 10. Transfer Restrictions.

                  (a) Declaration of Trust. The provisions of Section 9.3 of Annex A to the
Declaration of Trust shall not be applicable to the Series G Preferred Units.

                  (b) General. Subject to the remaining provisions of this Section 10, a
holder of Series G Preferred Units may transfer all or any portion of his or
her Series G Preferred Units without the prior written consent of the Trust or
the Trustee, including a pledge to a lender to secure a loan to a holder of
Series G Preferred Units. In order to effect such transfer, the holder must
deliver to the Trustee a duly executed copy of the instrument making such
transfer and such instrument must evidence the written acceptance by the
assignee of all of the terms and conditions of the Declaration of Trust, as
supplemented hereby, and represent that such assignment was made in accordance
with all applicable laws and regulations. Such holder of Series G Preferred
Shares shall provide the Trustee twenty days prior written notice of a proposed
transfer that provides information sufficient to enable the Trustee to make the
determinations described under Section 10 (d) and (e).

                  (c) Incapacitated Limited Partners. If a holder of Series G Preferred
Units is subject to Incapacity (as defined in the Declaration of Trust), the
executor, administrator, trustee, committee, guardian, conservator or receiver
of such holder’s estate shall have all the rights of a holder of Series G
Preferred Units, but not more rights than those enjoyed by other holders of
Series G Preferred Units for the purpose of settling or managing the estate and
such power as the Incapacitated holder possessed to transfer all or any part of
his or its interest in the Series G Preferred Units.

                  (d) Transfers Contrary to Securities Laws. The Trustee may prohibit any
transfer otherwise permitted under this Section 10 by a holder of Series G
Preferred Units if, in the opinion of legal counsel to the Trust, such transfer
would require the filing of a registration statement under the Securities Act,
or would otherwise violate any Federal, state or foreign securities laws or
regulations applicable to the Trust or the Series G Preferred Units.

                  (e) Transfers Resulting in Corporation Status; Transfers Through
Established Securities or Secondary Markets. No transfer by a holder of Series
G Preferred Units may be made to any Person if (i) it would result in the Trust
being treated as a publicly traded partnership within the meaning of Section
7704 of the Code or as an association taxable as a corporation, or (ii) such
transfer is effectuated through an “established securities market” or a
“secondary market (or the substantial equivalent thereof)” within the meaning
of Section 7704 of the Code. Notwithstanding anything to the contrary in the
Declaration of Trust, as supplemented hereby, (x) no interests in the Trust
shall be issued in a transaction that is (or transactions that are) registered
or required to be registered under the Securities Act, and to the extent such
interests were not required to be registered under the Securities Act by reason
of Regulation S (17 CFR 230.901 through 230.904) or any successor thereto, such
issuances would not have been required to be registered under the Securities
Act if the interests so offered or sold had been offered and sold within the
United States, (y) any transfer or assignment (or purported transfer or
assignment) of any Series G Preferred Units (or any interest or right or
attribute therein), whether to another holder of Units or to a third party,
shall not be effective, and any such transfer or assignment (or purported
transfer or assignment) shall be void ab initio, and no Person shall otherwise
become a holder of Units in the Trust if at the time of such transfer or
assignment (or purported transfer or assignment) any Units in the Trust are
traded on an established securities market or readily tradeable on a

 

 

secondary market or the substantial equivalent thereof. For purposes of
the preceding sentence and clause (ii) above, an established securities market
is a national securities exchange that is either registered under Section 6 of
the Exchange Act or exempt from registration because of the limited volume of
transactions, a foreign securities exchange that, under the law of the
jurisdiction where it is organized, satisfies regulatory requirements that are
analogous to the regulatory requirements of the Exchange Act, a regional or
local exchange, or an interdealer quotation system that regularly disseminates
firm buy or sell quotations by identified brokers or dealers by electronic
means or otherwise. For purposes of the preceding sentence and such clause
(ii) above, Units in the Trust (or interests therein) are readily tradeable on
a secondary market or the substantial equivalent thereof if (i) Units in the
Trust (or interests therein) are regularly quoted by any person, such as a
broker or dealer, making a market in the interests; (ii) any person regularly
makes available to the public (including customers or subscribers) bid or offer
quotes with respect to Units in the Trust (or interests therein) and stands
ready to effect buy or sell transactions at the quoted prices for itself or on
behalf of others; (iii) the holder of Units in the Trust has a readily
available, regular, and ongoing opportunity to sell or exchange such interest
(or interests therein) through a public means of obtaining or providing
information of offers to buy, sell, or exchange such interests; or (iv)
prospective buyers and sellers otherwise have the opportunity to buy, sell, or
exchange Units in the Trust (or interests therein) in a time frame and with the
regularity and continuity that is comparable to that described in clauses (i),
(ii) an
d (iii) of this sentence.

                  (f) Transfers to Holders of Nonrecourse Liabilities. No transfer or
pledge of any Series G Preferred Units may be made to a lender to the Trust or
any Person who is related (within the meaning of Section 1.752-4(b) of the
Regulations) to any lender to the Trust whose loan constitutes a Nonrecourse
Liability without the prior written consent of the Trustee, in its sole and
absolute discretion, provided that as a condition to such consent the lender
will be required to enter into an arrangement with the Trust and the Trustee to
exchange or redeem for the Redemption Price any Series G Preferred Units in
which a security interest is held simultaneously with the time at which such
lender would be deemed to be a holders of Units in the Trust for purposes of
allocating liabilities to such lender under Section 752 of the Code.

                  Section 11. No Conversion Rights. Notwithstanding the provisions of
Section 9 hereof, the holders of the Series G Preferred Units shall not have
any rights to convert such shares into shares of any other class or series of
shares or into any other securities of, or interest in, the Trust.

                  Section 12. No Preemptive Rights. No holder of the Series G Preferred
Units shall, as such holder, have any preemptive rights to purchase or
subscribe for additional shares of the Trust or any other security of the
Trust which it may issue or sell.

                  Section 13. Record Holders. The Trust may deem and treat the record
holder of any Series G Preferred Units as the true and lawful owner thereof for
all purposes, and the Trust shall not be affected by any notice to the
contrary.

                  Section 14. Sinking Fund. The Series G Preferred Units shall not be
entitled to the benefit of any retirement or sinking fund.

                  Section 15. Dissolution. Without the affirmative vote of all of the
Series G Preferred Units issued and outstanding, the Trustee shall not have the
right to, nor shall the Trustee, make the election set forth in Section
11.1(iii) of Annex A to the Declaration of Trust.

                  THIRD: The Series G Preferred Units have been reclassified by the Trustee
under the authority contained in Article 2, Section 1(c), of the Declaration of
Trust.

                  FOURTH: These Articles Supplementary have been approved by the Trustee in
the manner and by the vote required by law.

                  FIFTH: The undersigned Vice President acknowledges these Articles
Supplementary to be the act of the Trust and further, as to all matters or
facts required to be verified under oath, the undersigned Vice President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and this statement is made
under the penalties of perjury.

 

 

                  IN WITNESS WHEREOF, the Trust has caused these Articles Supplementary to
be signed in its name and on its behalf by its Vice President and attested to
by its Assistant Secretary on this 30th day of August, 2002.

	 	 	 	 	 
	 	 	ARCHSTONE-SMITH OPERATING TRUST
	
	
	
	

	 	 	 	 	 
	
	
	
	

	 	 	
By:
	 	/s/ Thomas S. Reif

Thomas S. Reif

Vice President
	
	
	
	

	 	 	 	 	 
	
	
	
	

	ATTEST:	 	 	 	 
	
	
	
	

	 	 	 	 	 
	
	
	
	

	/s/ Erin McMahon

Erin McMahon

Assistant Secretary<PAGE>
                                                                   EXHIBIT 10.14

                            [FIRST UNITED BANK LOGO]
                                PROMISSORY NOTE

<Table>
<Caption>
PRINCIPAL       LOAN DATE       MATURITY        LOAN NO.        CALL/COLL       ACCOUNT         OFFICER         INITIALS
<S>             <C>             <C>             <C>             <C>             <C>             <C>             <C>
$500,050.00     10-21-2002      05-01-2004      65650A          4A/20                           RCB
</Table>

    References in the shaded area are for Lender's use only and do not limit
        the applicability of this document to any particular loan or item.
 Any item above containing "*" has been omitted due to text length limitations.

BORROWER: WESTECH CAPITAL CORP.            LENDER: FIRST UNITED BANK
          (TIN: 13-3577716)                        LUBBOCK SOUTHWEST BRANCH
          2700 VIA FORTUNA, SUITE 400              6004 FRANKFORD
          AUSTIN, TX 78746                         LUBBOCK, TX 79424

<Table>
<S>                               <C>                     <C>
PRINCIPAL AMOUNT: $500,050.00     INITIAL RATE: 6.250%    DATE OF NOTE: OCTOBER 21, 2002
</Table>

PROMISE TO PAY, WESTECH CAPITAL CORP. ("BORROWER") PROMISES TO PAY TO FIRST
UNITED BANK ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF
AMERICA, THE PRINCIPAL AMOUNT OF FIVE HUNDRED THOUSAND FIFTY & 00/100 Dollars
($500,05O.00), TOGETHER WITH INTEREST ON THE UNPAID PRINCIPAL BALANCE FROM
OCTOBER 21, 2002, UNTIL MATURITY.

PAYMENT, SUBJECT TO ANY PAYMENT CHANGES RESULTING FROM CHANGES IN THE INDEX,
BORROWER WILL PAY THIS LOAN ON DEMAND. PAYMENT IN FULL IS DUE IMMEDIATELY UPON
LENDER'S DEMAND. IF NO DEMAND IS MADE, BORROWER WILL PAY THIS LOAN IN 17 REGULAR
PAYMENTS OF $30,000.00 EACH AND ONE IRREGULAR LAST PAYMENT ESTIMATED AT
$15,841.42. BORROWER'S FIRST PAYMENT IS DUE DECEMBER 1, 2002, AND ALL SUBSEQUENT
PAYMENTS ARE DUE ON THE SAME DAY OF EACH MONTH AFTER THAT. BORROWER'S FINAL
PAYMENT WILL BE DUE ON MAY 1, 2004, AND WILL BE FOR ALL PRINCIPAL AND ALL
ACCRUED INTEREST NOT YET PAID. PAYMENTS INCLUDE PRINCIPAL AND INTEREST. UNLESS
OTHERWISE AGREED OR REQUIRED BY APPLICABLE LAW, PAYMENTS WILL BE APPLIED FIRST
TO ACCRUED UNPAID INTEREST, THEN TO PRINCIPAL, AND ANY REMAINING AMOUNT TO ANY
UNPAID COLLECTION COSTS. THE ANNUAL INTEREST RATE FOR THIS NOTE IS COMPUTED ON A
365/360 BASIS; THAT IS, BY APPLYING THE RATIO OF THE ANNUAL INTEREST RATE OVER A
YEAR OR 360 DAYS, MULTIPLIED BY THE OUTSTANDING PRINCIPAL BALANCE, MULTIPLIED BY
THE ACTUAL NUMBER OF DAYS THE PRINCIPAL BALANCE IS OUTSTANDING, UNLESS SUCH
CALCULATION WOULD RESULT IN A USURIOUS RATE, IN WHICH CASE INTEREST SHALL BE
CALCULATED ON A PER DIEM BASIS OF A YEAR OF 365 OR 366 DAYS, AS THE CASE MAY BE.
BORROWER WILL PAY LENDER AT LENDER'S ADDRESS SHOWN ABOVE OR AT SUCH OTHER PLACE
AS LENDER MAY DESIGNATE IN WRITING.

VARIABLE INTEREST RATE. The Interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the Wall Street
Journal Prime Rate (the "Index"). The Index is not necessarily the lowest rate
charged by Lender on its loans. If the Index becomes unavailable during the term
of this loan, Lender may designate a substitute Index after notice to Borrower.
Lender will tell Borrower the current Index rate upon Borrowers request. The
Interest rate change will not occur more often than each Day. Borrower
understands that Lender may make loans based on other rates as well. THE INDEX
CURRENTLY IS 4.750% PER ANNUM. THE INTEREST RATE TO BE APPLIED PRIOR TO MATURITY
TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE OF 1.500
PERCENTAGE POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 6.250% PER
ANNUM. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law. For purposes of this Note,
the "maximum rate allowed by applicable law" means the greater of (A) the
maximum rate of Interest permitted under federal or other law applicable to the
Indebtedness evidenced by this Note, or (B) Whenever Increases occur in the
Interest rate, Lender, at its option, may do one or more or the following: (A)
increase Borrower's payments to ensure Borrower's loan will pay off by its
original final maturity date, (B) Increase Borrower's payments to cover accruing
interest, (C) increase the number of Borrower's payments, and (D) continue
Borrower's payments at the same amount and Increase Borrower's final payment.

PREPAYMENT, Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Any partial
payment shall be in an amount equal to one or more full installments.
Prepayment in full shall consist of payment of the remaining unpaid principal
balance together with all accrued and unpaid interest and all other amounts,
costs and expenses for which Borrower is responsible under this Note or any
other agreement with Lender pertaining to this loan, and in no event will
Borrower ever be required to pay any unearned Interest. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation
to continue to make payments under the payment schedule. Rather, early payments
will reduce the principal balance due and may result in Borrower's making fewer
payments. Borrower agrees not to send Lender payments marked "paid in full",
"without recourse", or similar language. If Borrower sends such a payment,
Lender may accept it without losing any of Lenders rights under this Note, and
Borrower will remain obligated to pay any further amount owed to Lender. All
written communications concerning disputed amounts, including any check or other
payment instrument that indicates that the payment constitutes "payment in full"
of the amount owed or that is tendered with other conditions or limitations or
as full satisfaction of a disputed amount must be mailed or delivered to: First
United Bank, Lubbock Southwest Branch, 6604 Frankford, Lubbock, TX 79424.

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, the total sum due under this Note will bear interest from the date of
acceleration or maturity of the variable interest rate on this Note. The
interest rate will not exceed the maximum rate permitted by applicable law.

DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note.

         PAYMENT DEFAULT. Borrower fails to make any payment when due under this
         Note.

         OTHER DEFAULTS. Borrower fails to comply with or to perform any other
         term, obligation, covenant or condition contained in this note or in
         any of the related documents or to comply with or to perform any term,
         obligation, covenant or condition contained in any other agreement
         between Lender and Borrower.

         FALSE STATEMENTS. Any warranty, representation or statement made or
         furnished to Lender by Borrower or on Borrower's behalf under this Note
         or the related documents is false or misleading in any material
         respect, either now or at the time made or furnished or becomes false
         or misleading at any time thereafter.

         INSOLVENCY. The dissolution or termination of borrower's existence as a
         going business, the insolvency of borrower, the appointment of a
         receiver for any part of borrower's property, any assignment for the
         benefit of creditors, any type of creditor workout, or the commencement
         of any proceeding under any bankruptcy or insolvency laws by or against
         Borrower.

         CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
         forfeiture proceedings, whether by judicial proceeding, self-help,
         repossession or any other method, by any creditor or borrower or by any
         governmental agency against any collateral securing the loan. This
         includes a garnishment of any of Borrower's accounts, including deposit
         accounts, with Lender. However, this Event of Default shall not apply
         if there is a good faith dispute by Borrower as to the validity or
         reasonableness of the claim which is the basis of the creditor or
         forfeiture proceeding and if Borrower gives Lender written notice of
         the creditor or forfeiture proceeding and deposits with Lender monies
         or a surety bond for the creditor or forfeiture proceeding, in an
         amount determined by Lender, in its sole discretion, as being an
         adequate reserve or bond for the dispute.

         EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
         respect to any Guarantor of any of the indebtedness or any Guarantor
         dies or becomes incompetent, or revokes or disputes the validity of, or
         liability under, any guaranty of the indebtedness evidenced by this
         Note. In the event of a death, Lender, at its option, may but shall not
         be required to, permit the Guarantor's estate to assume unconditionally
         the obligations arising under the guaranty in a manner satisfactory to
         Lender, and, in doing so, cure any Event of Default.

         CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent
         (25%) or more of the common stock of Borrower.

         ADVERSE CHANGE. A material adverse change occurs in Borrower's
         financial condition, or Lender believes the prospect of payment or
         performance of this Note is impaired.

         INSECURITY. Lender in good faith believes itself insecure.

         CURE PROVISIONS. If any default, other than a default in payment or
         failure to satisfy Lender's requirement in the insufficient Market
         Value of Securities section is curable, it may be cured (and no event
         of default will have occurred) if Borrower, after receiving written
         notice from Lender demanding cure of such default: (1) cures the
         default within twenty (20) days; or (2) if the cure requires more than
         twenty (20) days, immediately initiates steps which Lender deems in
         Lender's sole discretion to be sufficient to cure the default and
         thereafter continues and completes all reasonable and necessary steps
         sufficient to produce compliance as soon as reasonably practical.

LENDERS RIGHTS. Upon default, Lender may declare the entire indebtedness,
including the unpaid principal balance on this Note, all accrued unpaid
interest, and all other amounts, costs and expenses for which Borrower is
responsible under this Note or any other agreement with Lender pertaining to
this loan, immediately due, without notice, and then Borrower will pay that
amount.

<PAGE>
                                 PROMISSORY NOTE
                                   (CONTINUED)
LOAN NO: 656504                                                           PAGE 2
================================================================================

ATTORNEYS' FEES; EXPENSES. Lender may hire an attorney to help collect this Note
if Borrower does not pay, and Borrower will pay Lender's reasonable attorneys'
fees. Borrower also will pay Lender all other amounts Lender actually incurs as
court costs, lawful fees for filing, recording, releasing to any public office
any instrument securing this Note; the reasonable cost actually expended for
repossessing, storing, preparing for sale, and selling any security; and fees
for noting a lien on or transferring a certificate of title to any motor vehicle
offered as security for this Note, or premiums or identifiable charges received
in connection with the sale of authorized insurance.

GOVERNING LAW. THIS NOTE WILL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF TEXAS. THIS NOTE HAS
BEEN ACCEPTED BY LENDER IN THE STATE OF TEXAS.

CHOICE OF VENUE. If there is a lawsuit, and if the transaction evidenced by this
Note occurred in Lubbock County, Borrower agrees upon Lender's request to submit
to the jurisdiction of the courts of Lubbock County, State of Texas.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.

PURPOSE OF LOAN. Working Capital.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.

NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES.
Please notify us if we report any inaccurate information about your account(s)
to a consumer reporting agency. Your written notice describing the specific
inaccuracy(ies) should be sent to us at the following address: FIRST UNITED BANK
P.O. Box 16500 Lubbock, TX 79490

GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. If any part of this Note cannot be
enforced, this fact will not affect the rest of the Note. Borrower does not
agree or intend to pay, and Lender does not agree or intend to contract for,
charge, collect, take, reserve or receive (collectively referred to herein as
"charge or collect"), any amount in the nature of interest or in the nature of a
fee for this loan, which would in any way or event (including demand,
prepayment, or acceleration) cause Lender to charge or collect more for this
loan than the maximum Lender would be permitted to charge or collect by federal
law or the law of the State of Texas (as applicable). Any such excess interest
or unauthorized fee shall, instead of anything stated to the contrary, be
applied first to reduce the principal balance of this loan, and when the
principal has been paid in full, be refunded to Borrower. The right to
accelerate maturity of sums due under this Note does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Lender does not intend to charge or collect any unearned
interest in the event of acceleration. All sums paid or agreed to be paid to
Lender for the use, forbearance or detention of sums due hereunder shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of the loan evidenced by this Note until payment in
full so that the rate or amount of interest on account of the loan evidenced
hereby does not exceed the applicable usury ceiling. Lender may delay or forgo
enforcing any of its rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or endorses this Note, to
the extent allowed by law, waive presentment, demand for payment, notice of
dishonor, notice of intent to accelerate the maturity of this Note, and notice
of acceleration of the maturity of this Note. Upon any change in the terms of
this Note, and unless otherwise expressly stated in writing, no party who signs
this Note, whether as maker, guarantor, accommodation maker or endorser, shall
be released from liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan or release any party or
guarantor or collateral; or impair, fail to realize upon or perfect Lender's
security interest in the collateral without the consent of or notice to anyone.
All such parties also agree that Lender may modify this loan without the consent
of or notice to anyone other than the party with whom the modification is made.
The obligations under this Note are joint and several.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

WESTECH CAPITAL CORP.

BY: /s/ JOHN GORMAN
    --------------------------------
    JOHN GORMAN, CHAIRMAN & CEO OF
    WESTECH CAPITAL CORP.

================================================================================
<PAGE>

                              COMMERCIAL GUARANTY

<Table>
<Caption>
PRINCIPAL       LOAN DATE       MATURITY        LOAN NO.        CALL/COLL       ACCOUNT         OFFICER         INITIALS
<S>             <C>             <C>             <C>             <C>             <C>             <C>             <C>
                                                                4A/20                           RCB
</Table>

    References in the shaded area are for Lender's use only and do not limit
        the applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.

BORROWER:  WESTECH CAPITAL CORP.            LENDER: FIRST UNITED BANK
           (TIN: 13-3577716)                        LUBBOCK SOUTHWEST BRANCH
           2700 VIA FORTUNA, SUITE 400              6604 FRANKFORD
           AUSTIN, TX 78746                         LUBBOCK, TX 79424

GUARANTOR: JOHN GORMAN (SSN: ###-##-####)
           2700 VIA FORTUNA SUITE 400
           AUSTIN, TX 78746
================================================================================

AMOUNT OF GUARANTY. THE AMOUNT OF THIS GUARANTY IS UNLIMITED.

CONTINUING UNLIMITED GUARANTY. FOR GOOD AND VALUABLE CONSIDERATION, JOHN GORMAN
("GUARANTOR") ABSOLUTELY AND UNCONDITIONALLY GUARANTEES AND PROMISES TO PAY TO
FIRST UNITED BANK ("LENDER") OR ITS ORDER, ON DEMAND, IN LEGAL TENDER OF THE
UNITED STATES OF AMERICA, THE INDEBTEDNESS (AS THAT TERM IS DEFINED BELOW) OF
WESTECH CAPITAL CORP. ("BORROWER") TO LENDER ON THE TERMS AND CONDITIONS SET
FORTH IN THIS GUARANTY. UNDER THIS GUARANTY, THE LIABILITY OF GUARANTOR IS
UNLIMITED AND THE OBLIGATIONS OF GUARANTOR ARE CONTINUING.

INDEBTEDNESS GUARANTEED. The Indebtedness guaranteed by this Guaranty includes
any and all of Borrower's indebtedness to Lender and is used in the most
comprehensive sense and means and includes any and all of Borrower's
liabilities, obligations and debts to Lender, now existing or hereinafter
incurred or created, including, without limitation, all loans, advances,
interest, costs, attorneys' fees, debts, overdraft indebtedness, credit card
indebtedness, lease obligations, other obligations, and liabilities of Borrower,
or any of them, and any present or future judgments against Borrower, or any of
them; and whether any such Indebtedness is voluntarily or involuntarily
incurred, due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined; whether Borrower may be liable individually or
jointly with others, or primarily or secondarily, or as guarantor or surety;
whether recovery on the Indebtedness may be or may become barred or
unenforceable against Borrower for any reason whatsoever; and whether the
Indebtedness arises from transactions which may be voidable on account of
infancy, insanity, ultra vires, or otherwise.

DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all Indebtedness incurred or
contracted before receipt by Lender of any notice of revocation shall have been
fully and finally paid and satisfied and all of Guarantor's other obligations
under this Guaranty shall have been performed in full. If Guarantor elects to
revoke this Guaranty, Guarantor may only do so in writing. Guarantor's written
notice of revocation must be mailed to Lender, by certified mail, at Lender's
address listed above or such other place as Lender may designate in writing.
Written revocation of this Guaranty will apply only to advances or new
Indebtedness created after actual receipt by Lender of Guarantor's written
revocation and Lender's written acknowledgment of receipt. For this purpose and
without limitation, the term "new Indebtedness" does not include Indebtedness
which at the time of notice of revocation is contingent, unliquidated,
undetermined or not due and which later becomes absolute, liquidated, determined
or due. This Guaranty will continue to bind Guarantor for all Indebtedness
incurred by Borrower or committed by Lender prior to receipt of Guarantor's
written notice of revocation, including any extensions, renewals, substitutions
or modifications of the Indebtedness. All renewals, extensions, substitutions,
and modifications of the Indebtedness granted after Guarantor's revocation, are
contemplated under this Guaranty and, specifically will not be considered to be
new Indebtedness. This Guaranty shall bind Guarantor's estate as to Indebtedness
created both before and after Guarantor's death or incapacity, regardless of
Lender's actual notice of Guarantor's death. Subject to the foregoing,
Guarantor's executor or administrator or other legal representative may
terminate this Guaranty in the same manner in which Guarantor might have
terminated it and with the same effect. Release of any other guarantor or
termination of any other guaranty of the Indebtedness shall not affect the
liability of Guarantor under this Guaranty. A revocation Lender receives from
any one or more Guarantors shall not affect the liability of any remaining
Guarantors under this Guaranty. IT IS ANTICIPATED THAT FLUCTUATIONS MAY OCCUR IN
THE AGGREGATE AMOUNT OF INDEBTEDNESS COVERED BY THIS GUARANTY, AND GUARANTOR
SPECIFICALLY ACKNOWLEDGES AND AGREES THAT REDUCTIONS IN THE AMOUNT OF
INDEBTEDNESS, EVEN TO ZERO DOLLARS ($0.00), PRIOR TO GUARANTOR'S WRITTEN
REVOCATION OF THIS GUARANTY SHALL NOT CONSTITUTE A TERMINATION OF THIS GUARANTY.
THIS GUARANTY IS BINDING UPON GUARANTOR AND GUARANTOR'S HEIRS, SUCCESSORS AND
ASSIGNS SO LONG AS ANY OF THE GUARANTEED INDEBTEDNESS REMAINS UNPAID AND EVEN
THOUGH THE INDEBTEDNESS GUARANTEED MAY FROM TIME TO TIME BE ZERO DOLLARS
($0.00).

GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before
or after any revocation hereof, WITHOUT NOTICE OR DEMAND AND WITHOUT LESSENING
OR OTHERWISE AFFECTING GUARANTOR'S LIABILITY UNDER THIS GUARANTY, FROM TIME TO
TIME: (A) prior to revocation as set forth above, to make one or more additional
secured or unsecured loans to Borrower, to lease equipment or other goods to
Borrower, or otherwise to extend additional credit to Borrower; (B) to alter,
compromise, renew, extend, accelerate, or otherwise change one or more times the
time for payment or other terms of the Indebtedness or any part of the
Indebtedness, including increases and decreases of the rate of interest on the
Indebtedness; extensions may be repealed and may be for longer than the original
loan term; (C) to take and hold security for the payment of this Guaranty or the
Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to
perfect, and release any such security, with or without the substitution of new
collateral; (D) to release, substitute, agree not to sue, or deal with any one
or more of Borrower's sureties, endorsers, or other guarantors on any terms or
in any manner Lender may choose; (E) to determine how, when and what application
of payments and credits shall be made on the Indebtedness (F) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(G) to sell, transfer, assign or grant participations in all or any part of the
Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.

GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (A) no representations or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(B) this Guaranty is executed at Borrower's request and not at the request of
Lender; (C) Guarantor has full power, right and authority to enter into this
Guaranty; (D) the provisions of this Guaranty do not conflict with or result in
a default under any agreement or other instrument binding upon Guarantor and do
not result in a violation of any law, regulation, court decree or order
applicable to Guarantor; (E) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor's assets, or any
interest therein; (F) upon Lender's request, Guarantor will provide to Lender
financial and credit information in form acceptable to Lender, and all such
financial information which currently has been, and all future financial
information which will be provided to Lender is and will be true and correct in
all material respects and fairly present Guarantor's financial condition as of
the dates the financial information is provided; (G) no material adverse change
has occurred in Guarantor's financial condition since the date of the most
recent financial statements provided to Lender and no event has occurred which
may materially adversely affect Guarantor's financial condition; (H) no
litigation, claim, investigation, administrative proceeding or similar action
(including those for unpaid taxes) against Guarantor is pending or threatened;
(I) Lender has made no representation to Guarantor as to the creditworthiness of
Borrower; and (J) Guarantor has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower's financial
condition. Guarantor agrees to keep adequately informed from such means of any
facts, events, or circumstances which might in any way affect Guarantor's risks
under this Guaranty, and Guarantor further agrees that, absent a request for
information, Lender shall have no obligation to disclose to Guarantor any
information or documents acquired by Lender in the course of its relationship
with Borrower.

GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (A) to continue lending money or to extend other
credit to Borrower; (B) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Indebtedness or in connection with the creation of new or
additional loans or obligations; (C) to resort for payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor; (D) to proceed directly against or exhaust any collateral held by
Lender from Borrower, any other guarantor, or any other person; (E) to give
notice of the terms, time, and place of any public or private sale of personal
property security held by Lender from Borrower or to comply with any other
applicable provisions of the Uniform Commercial Code; (F) to pursue any other
remedy within Lender's power; or (G) to commit any act or omission of any kind,
or at any time, with respect to any matter whatsoever.

In addition to the waivers set forth herein, if now or hereafter Borrower is or
shall become insolvent and the Indebtedness shall not at all times until paid be
fully secured by collateral pledged by Borrower, Guarantor hereby forever waives
and gives up in favor of Lender and Borrower, and Lender's and Borrower's
respective successors, any claim or right to payment Guarantor may now have or
hereafter have or acquire against Borrower, by subrogation or otherwise, so that
at no time shall Guarantor be or become a "creditor" of Borrower within the
meaning of 11 U.S.C. section 547(b), or any successor provision of the Federal
bankruptcy laws.

Guarantor waives all rights of Guarantor under Chapter 34 of the Texas Business
and Commerce Code. Guarantor also waives any and all rights or defenses arising
by reason of (A) any "one action" or "anti-deficiency" law or any other law
which may prevent Lender from bringing any action, including a claim for
deficiency, against Guarantor, before or after Lender's commencement or
completion of any foreclosure action, either judicially or by exercise of a
power of sale; (B) any election of remedies by Lender which destroys or
otherwise adversely affects Guarantor's subrogation rights or Guarantor's rights
to proceed against Borrower for reimbursement, including without limitation, any
loss of rights Guarantor may suffer by reason of any law limiting, qualifying,
or discharging the Indebtedness; (C) any disability or other defense of
Borrower, of any other guarantor, or of any other person, on by reason of the
cessation of Borrower's liability from any cause whatsoever, other than payment
in full in legal lender, of the Indebtedness; (D) Many right to claim discharge
of the Indebtedness on the basis of unjustified impairment of any collateral for
the Indebtedness; (E) any statute of

<PAGE>

                               COMMERCIAL GUARANTY
                                   (CONTINUED)
LOAN NO: 656504                                                           PAGE 2
================================================================================

limitations, if at any time any action or suit brought by Lender against
Guarantor is commenced, there is outstanding indebtedness of Borrower to Lender
which is not barred by any applicable statute of limitations; or (F) any
defenses given to guarantors at law or in equity other than actual payment and
performance of the indebtedness. If payment is made by Borrower, whether
voluntarily or otherwise, or by any third party, on the indebtedness and
thereafter Lender is forced to remit the amount of that payment to Borrower's
trustee in bankruptcy or to any similar parson under any federal or state
bankruptcy law or law for the relief of debtors, the indebtedness shall be
considered unpaid for the purpose of the enforcement of this Guaranty.

Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of setoff,
counterclaim, counter demand, recoupment or similar right, whether such claim,
demand or right may be asserted by the Borrower, the Guarantor, or both.

GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by law or public policy.

SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be superior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both Lender and Guarantor shall be paid to Lender and
shall be first applied by Lender to the indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor,
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions as
Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:

         AMENDMENTS. This Guaranty, together with any Related Documents,
         constitutes the entire understanding and agreement of the parties as to
         the matters set forth in this Guaranty. No alteration of or amendment
         to this Guaranty shall be effective unless given in writing and signed
         by the party or parties sought to be charged or bound by the alteration
         or amendment.

         ATTORNEYS' FEES; EXPENSES. Guarantor agrees to pay upon demand all of
         Lender's costs and expenses, including Lender's reasonable attorneys'
         fees and Lender's legal expenses, incurred in connection with the
         enforcement of this Guaranty. Lender may hire or pay someone else to
         help enforce this Guaranty, and Guarantor shall pay the costs and
         expenses of such enforcement. Costs and expenses include Lender's
         reasonable attorneys' fees and legal expenses whether or not there is a
         lawsuit, including Lenders reasonable attorneys' fees and legal
         expenses for bankruptcy proceedings (including efforts to modify or
         vacate any automatic stay or injunction), appeals, and any anticipated
         post-judgment collection services. Guarantor also shall pay all court
         costs and such additional fees as may be directed by the court.

         CAPTION HEADINGS. Caption headings in this Guaranty are for convenience
         purposes only and are not to be used to interpret or define the
         provisions of this Guaranty.

         GOVERNING LAW. THIS GUARANTY WILL BE GOVERNED BY, CONSTRUED AND
         ENFORCED IN ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF
         TEXAS. THIS GUARANTY HAS BEEN ACCEPTED BY LENDER IN THE STATE OF TEXAS.

         CHOICE OF VENUE. If there is a lawsuit, and if the transaction
         evidenced by this Guaranty occurred in Lubbock County, Guarantor agrees
         upon Lender's request to submit to the jurisdiction of the courts of
         Lubbock County, State of Texas.

         INTEGRATION. Guarantor further agrees that Guarantor has read and
         fully understands the terms of this Guaranty; Guarantor has had the
         opportunity to be advised by Guarantor's attorney with respect to this
         Guaranty; the Guaranty fully reflects Guarantor's intentions and parol
         evidence is not required to interpret the terms of this Guaranty.
         Guarantor hereby indemnifies and holds Lender harmless from all losses,
         claims, damages, and costs (including Lender's attorneys' fees)
         suffered or incurred by Lender as a result of any breach by Guarantor
         of the warranties, representations and agreements of this paragraph.

         INTERPRETATION. In all cases where there is more than one Borrower or
         Guarantor, then all words used in this Guaranty in the singular shall
         be deemed to have been used in the plural where the context and
         construction so require; and where there is more than one Borrower
         named in this Guaranty or when this Guaranty is executed by more than
         one Guarantor, the words "Borrower" and "Guarantor" respectively shall
         mean all and any one or more of them. The words "Guarantor,"
         "Borrower," and "Lender" include the heirs, successors, assigns, and
         transferees of each of them. If a court finds that any provision of
         this Guaranty is not valid or should not be enforced, that fact by
         itself will not mean that the rest of this Guaranty will not be valid
         or enforced. Therefore, a court will enforce the rest of the provisions
         of this Guaranty even if a provision of this Guaranty may be found to
         be invalid or unenforceable. If any one or more of Borrower or
         Guarantor are corporations, partnerships, limited liability companies,
         or similar entities, it is not necessary for Lender to inquire into the
         powers of Borrower or Guarantor or of the officers, directors,
         partners, managers, or other agents acting or purporting to act on
         their behalf, and any Loan indebtedness made or created in reliance
         upon the professed exercise of such powers shall be guaranteed under
         this Guaranty.

         NOTICES. Any notice required to be given under this Guaranty shall be
         given in writing, and, except for revocation notices by Guarantor,
         shall be effective when actually delivered, when actually received by
         telefacsimile (unless otherwise required by law), when deposited with a
         nationally recognized overnight courier, or, if mailed, when deposited
         in the United States mail, as first class, certified or registered mail
         postage prepaid, directed to the addresses shown near the beginning of
         this Guaranty. All revocation notices by Guarantor shall be in writing
         and shall be effective upon delivery to Lender as provided in the
         section of this Guaranty entitled "DURATION OF GUARANTY." Any party may
         change its address for notices under this Guaranty by giving formal
         written notice to the other parties, specifying that the purpose of the
         notice is to change the party's address. For notice purposes, Guarantor
         agrees to keep Lender informed at all times of Guarantor's current
         address. Unless otherwise provided or required by law, if there is more
         than one Guarantor, any notice given by Lender to any Guarantor is
         deemed to be notice given to all Guarantors.

         NO WAIVER BY LENDER. Lender shall not be deemed to have waived any
         rights under this Guaranty unless such waiver is given in writing and
         signed by Lender. No delay or omission on the part of Lender in
         exercising any right shall operate as a waiver of such right or any
         other right. A waiver by Lender of a provision of this Guaranty shall
         not prejudice or constitute a waiver of Lender's right otherwise to
         demand strict compliance with that provision or any other provision of
         this Guaranty. No prior waiver by Lender, nor any course of dealing
         between Lender and Guarantor, shall constitute a waiver of any of
         Lender's rights or of any of Guarantor's obligations as to any future
         transactions. Whenever the consent of Lender is required under this
         Guaranty, the granting of such consent by Lender in any instance shall
         not constitute continuing consent to subsequent instances where such
         consent is required and in all cases such consent may be granted or
         withheld in the sole discretion of Lender.

         SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this
         Guaranty on transfer of Guarantor's interest, this Guaranty shall be
         binding upon and inure to the benefit of the parties, their successors
         and assigns.

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Guaranty. Unless specifically stated to the contrary,
all references to dollar amounts shall mean amounts in lawful money of the
United States of America. Words and terms used in the singular shall include the
plural, and the plural shall include the singular, as the context may require.
Words and terms not otherwise defined in this Guaranty shall have the meanings
attributed to such terms in the Uniform Commercial Code:

         BORROWER. The word "Borrower" means WESTECH CAPITAL CORP., and all
         other persons and entities signing the Note in whatever capacity.

         GUARANTOR. The word "Guarantor" means each end every person or entity
         signing this Guaranty, including without limitation John Gorman.

         GUARANTY. The word "Guaranty" means the guaranty from Guarantor to
         Lender, including without limitation a guaranty of all or part of the
         Note.

         INDEBTEDNESS. The word "Indebtedness" means Borrower's indebtedness to
         Lender as more particularly described in this Guaranty.

         LENDER. The word "Lender" means First United Bank, its successors and
         assigns.

         NOTE. The word "Note" means the promissory note dated October 21, 2002,
         in the original principal amount of $500,050.00 from Borrower to
         Lender, together with all renewals of, extensions of, modifications of,
         refinancings of, consolidations of, and substitutions for the
         promissory note or agreement.

         RELATED DOCUMENTS. The words "Related Documents" mean all promissory
         notes, credit agreements, loan agreements, environmental agreements,
         guaranties, security agreements, mortgages, deeds of trust, security
         deeds, collateral mortgages, and all other instruments, agreements and
         documents, whether now or hereafter existing, executed in connection
         with the indebtedness.

<PAGE>

                               COMMERCIAL GUARANTY
                                   (CONTINUED)
LOAN NO: 656504                                                           PAGE 3
================================================================================

EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY". NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED OCTOBER 21, 2002.

GUARANTOR

By: /s/ JOHN GORMAN
    -----------------------------------
    JOHN GORMAN, INDIVIDUALLY

<PAGE>

                            [FIRST UNITED BANK LOGO]

                         COMMERCIAL SECURITY AGREEMENT

<Table>
<Caption>
PRINCIPAL       LOAN DATE       MATURITY        LOAN NO.        CALL/COLL       ACCOUNT         OFFICER         INITIALS
<S>             <C>             <C>             <C>             <C>             <C>             <C>             <C>
$500,050.00     10-21-2002      05-01-2004      656504          4A/20                           RCB
</Table>

    References in the shaded area are for Lender's use only and do not limit
       the applicability of this document to any particular loan or item.
      Any item above containing "***" has been omitted due to text length
                                  limitations.

GRANTOR:  WESTECH CAPITAL CORP.            LENDER: FIRST UNITED BANK
          (TIN: 13-3577716)                        LUBBOCK SOUTHWEST BRANCH
          2700 VIA FORTUNA, SUITE 400              6604 FRANKFORD
          AUSTIN, TX 78746                         LUBBOCK, TX 79424

THIS COMMERCIAL SECURITY AGREEMENT DATED OCTOBER 21, 2002, IS MADE AND EXECUTED
BETWEEN WESTECH CAPITAL CORP. ("GRANTOR") AND FIRST UNITED BANK ("LENDER").

GRANT OF SECURITY INTEREST. FOR VALUABLE CONSIDERATION, GRANTOR GRANTS TO LENDER
A SECURITY INTEREST IN THE COLLATERAL TO SECURE THE INDEBTEDNESS AND AGREES THAT
LENDER SHALL HAVE THE RIGHTS STATED IN THIS AGREEMENT WITH RESPECT TO THE
COLLATERAL, IN ADDITION TO ALL OTHER RIGHTS WHICH LENDER MAY HAVE BY LAW.

COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means
the following described property, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located, in which
Grantor is giving to Lender a security interest for the payment of the
Indebtedness and performance of all other obligations under the Note and this
Agreement;

         ALL ACCOUNTS, TOGETHER WITH THE FOLLOWING SPECIFICALLY DESCRIBED
         PROPERTY: 4,808,555 SHARES OF TEJAS SECURITIES GROUP, INC. CERTIFICATE
         NUMBER 78

In addition, the word "Collateral" also includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located;

         (A) All accessions, attachments, accessories, replacements of and
         additions to any of the collateral described herein, whether added now
         or later.

         (B) All products and produce of any of the property described in this
         Collateral section.

         (C) All accounts, general intangibles, instruments, rents, monies,
         payments, and all other rights, arising out of a sale, lease, or other
         disposition of any of the property described in this Collateral
         section.

         (D) All proceeds (including insurance proceeds) from the sale,
         destruction, loss, or other disposition of any of the property
         described in this Collateral section, and sums due from a third party
         who has damaged or destroyed the Collateral or from that party's
         insurer, whether due to judgment, settlement or other process.

         (E) All records and data relating to any of the property described in
         this Collateral section, whether in the form of a writing, photograph,
         microfilm, microfiche, or electronic media, together with all of
         Grantor's right, title, and interest in and to all computer software
         required to utilize, create, maintain, and process any such records or
         data on electronic media.

Despite any other provision of this Agreement, Lender is not granted, and will
not have, a nonpurchase money security interest in household goods, to the
extent such a security interest would be prohibited by applicable law. In
addition, if because of the type of any Property, Lender is required to give a
notice of the right to cancel under Truth in Lending for the indebtedness, then
Lender will not have a security Interest in such Collateral unless and until
such a notice is given.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Grantor's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Grantor holds
jointly with someone else and all accounts Grantor may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law, Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.

GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and promises to Lender that:

         PERFECTION OF SECURITY INTEREST. Grantor agrees to execute financing
         statements and to take whatever other actions are requested by Lender
         to perfect and continue Lender's security interest in the Collateral.
         Upon request of Lender, Grantor will deliver to Lender any and all of
         the documents evidencing or constituting the Collateral, and Grantor
         will note Lender's interest upon any and all chattel paper if not
         delivered to Lender for possession by Lender.

         NOTICES TO LENDER. Grantor will promptly notify Lender in writing at
         Lender's address shown above (or such other addresses as Lender may
         designate from time to time) prior to any (1) change in Grantor's name;
         (2) change in Grantor's assumed business name(s); (3) change in the
         management of the Corporation Grantor; (4) change in the authorized
         signer(s); (5) change in Grantor's principal office address; (6) change
         in Grantor's state of organization; (7) conversion of Grantor to a new
         or different type of business entity; or (8) change in any other aspect
         of Grantor that directly or indirectly relates to any agreements
         between Grantor and Lender. No change in Grantor's name or state of
         organization will take effect until after Lender has received notice

         NO VIOLATION. The execution and delivery of this Agreement will not
         violate any law or agreement governing Grantor or to which Grantor is a
         party, and its certificate or articles of Incorporation and bylaws do
         not prohibit any term or condition of this Agreement.

         ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of
         accounts, chattel paper, or general intangibles, as defined by the
         Uniform Commercial Code, the Collateral is enforceable in accordance
         with its terms, is genuine, and fully complies with all applicable laws
         and regulations concerning form, content and manner of preparation and
         execution, and all persons appearing to be obligated on the Collateral
         have authority and capacity to contract and are in fact obligated as
         they appear to be on the Collateral. At the time any Account becomes
         subject to a security interest in favor of Lender, the Account shall be
         a good and valid account representing an undisputed, bone fide
         indebtedness incurred by the account debtor, for merchandise held
         subject to delivery instructions or previously shipped or delivered
         pursuant to a contract of sale, or for services previously performed by
         Grantor with or for the account debtor. So long as this Agreement
         remains in effect, Grantor shall not, without Lender's prior written
         consent, compromise, settle, adjust, or extend payment under or with
         regard to any such Accounts. There shall be no setoffs or counterclaims
         against any of the Collateral, and no agreement shall have been made
         under which any deductions or discounts may be claimed concerning the
         Collateral except those disclosed to Lender in writing.

         LOCATION OF THE COLLATERAL. Except in the ordinary course of Grantor's
         business, Grantor agrees to keep the Collateral (or to the extent the
         Collateral consists of intangible property such as accounts or general
         intangibles, the records concerning the Collateral) at Grantor's
         address shown above or at such other locations as are acceptable to
         Lender. Upon Lender's request, Grantor will deliver to Lender in form
         satisfactory to Lender a schedule of real properties and Collateral
         locations relating to Grantor's operations, including without
         limitation the following: (1) all real property Grantor owns or is
         purchasing; (2) all real property Grantor is renting or leasing; (3)
         all storage facilities Grantor owns, rents, leases, or uses; and (4)
         all other properties where Collateral is or may be located.

         REMOVAL OF THE COLLATERAL. Except in the ordinary course of Grantor's
         business, Grantor shall not remove the Collateral from its existing
         location Without Lender's prior written consent. Grantor shall,
         whenever requested, advise Lender of the exact location of the
         Collateral.

         TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or
         accounts collected in the ordinary course of Grantor's business, or as
         otherwise provided for in this Agreement, Grantor shall not sell,
         offer to sell, or otherwise transfer or dispose of the Collateral.
         Grantor shall not pledge, mortgage, encumber or otherwise permit the
         Collateral to be subject to any lien, security interest, encumbrance,
         or charge, other than the security interest provided for in this
         Agreement, without the prior written consent of Lender. This includes
         security interests even if junior in right to the security interests
         granted under this Agreement. Unless waived by Lender, all proceeds
         from any disposition of the Collateral (for whatever reason) shall be
         held in trust for Lender and shall not be commingled with any other
         funds; provided however, this requirement shall not constitute consent
         by Lender to any sale or other disposition. Upon receipt, Grantor shall
         immediately deliver any such proceeds to Lender.

         TITLE. Grantor represents and warrants to Lender that Grantor holds
         good and marketable title to the Collateral, free and clear of all
         liens and encumbrances except for the lien of this Agreement. No
         financing statement covering any of the Collateral is on file in any
         public office other than those which reflect the security interest
         created by this Agreement or to which Lender has specifically
         consented. Grantor shall defend Lender's

<PAGE>

                          COMMERCIAL SECURITY AGREEMENT
                                   (CONTINUED)
LOAN NO: 656504                                                           PAGE 2
================================================================================

         rights in the Collateral against the claims and demands of all other
         persons.

         REPAIRS AND MAINTENANCE. Grantor agrees to keep and maintain, and to
         cause others to keep and maintain, the Collateral in good order, repair
         and condition at all times while this Agreement remains in effect.
         Grantor further agrees to pay when due all claims for work done on, or
         services rendered or material furnished in connection with the
         Collateral so that no lien or encumbrance may ever attach to or be
         filed against the Collateral.

         INSPECTION OF COLLATERAL. Lender and Lender's designated
         representatives and agents shall have the right at all reasonable times
         to examine and inspect the Collateral wherever located.

         TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes,
         assessments and liens upon the Collateral, its use or operation, upon
         this Agreement, upon any promissory note or notes evidencing the
         Indebtedness, or upon any of the other Related Documents. Grantor may
         withhold any such payment or may elect to contest any lien if Grantor
         is in good faith conducting an appropriate proceeding to contest the
         obligation to pay and so long as Lender's interest in the Collateral is
         not jeopardized in Lender's sole opinion. In any contest Grantor shall
         defend itself and Lender and shall satisfy any final adverse judgment
         before enforcement against the Collateral. Grantor shall name Lender as
         an additional obligee under any surety bond furnished in the contest
         proceedings. Grantor further agrees to furnish Lender with evidence
         that such taxes, assessments, and governmental and other charges have
         been paid in full and in a timely manner. Grantor may withhold any such
         payment or may elect to contest any lien if Grantor is in good faith
         conducting an appropriate proceeding to contest the obligation to pay
         and so long as Lender's interest in the Collateral is not jeopardized.

         COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply
         promptly with all laws, ordinances, rules and regulations of all
         governmental authorities, now or hereafter in effect, applicable to the
         ownership, production, disposition, or use of the Collateral, including
         all laws or regulations relating to the undue erosion of
         highly-erodible land or relating to the conversion of wetlands for the
         production of an agricultural product or commodity. Grantor may contest
         in good faith any such law, ordinance or regulation and withhold
         compliance during any proceeding, including appropriate appeals, so
         long as Lender's interest in the Collateral, in Lender's opinion, is
         not jeopardized.

         HAZARDOUS SUBSTANCES. Grantor represents and warrants that the
         Collateral never has been, and never will be so long as this Agreement
         remains a lien on the Collateral, used in violation of any
         Environmental Laws or for the generation, manufacture, storage,
         transportation, treatment, disposal, release or threatened release of
         any Hazardous Substance. The representations and warranties contained
         herein are based on Grantor's due diligence in investigating the
         Collateral for Hazardous Substances. Grantor hereby (1) releases and
         waives any future claims against Lender for indemnity or contribution
         in the event Grantor becomes liable for cleanup or other costs under
         any Environmental Laws, and (2) agrees to indemnify and hold harmless
         Lender against any and all claims and losses resulting from a breach of
         this provision of this Agreement. This obligation to indemnify shall
         survive the payment of the indebtedness and the satisfaction of this
         Agreement.

         MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain
         all risks insurance, including without limitation fire, theft and
         liability coverage together with such other insurance as Lender may
         require with respect to the Collateral, in form, amounts, coverages and
         basis reasonably acceptable to Lender. Grantor, upon request of Lender,
         will deliver to Lender from time to time the policies or certificates
         of insurance in form satisfactory to Lender, including stipulations
         that coverages will not be cancelled or diminished without at least ten
         (10) days' prior written notice to Lender and not including any
         disclaimer of the insurer's liability for failure to give such a
         notice. Each insurance policy also shall include an endorsement
         providing that coverage in favor of Lender will not be impaired in any
         way by any act, omission or default of Grantor or any other person. In
         connection with all policies covering assets in which Lender holds or
         is offered a security interest, Grantor will provide Lender with such
         loss payable or other endorsements as Lender may require. If Grantor at
         any time fails to obtain or maintain any insurance as required under
         this Agreement, Lender may (but shall not be obligated to) obtain such
         insurance as Lander deems appropriate, including if Lender so chooses
         "single interest insurance," which will cover only Lender's interest in
         the Collateral.

         APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender
         of any loss or damage to the Collateral. Lender may make proof of loss
         if Grantor fails to do so within fifteen (15) days of the casualty. All
         proceeds of any insurance on the Collateral, including accrued proceeds
         thereon, shall be held by Lender as part of the Collateral. If Lender
         consents to repair or replacement of the damaged or destroyed
         Collateral, Lender shall, upon satisfactory proof of expenditure, pay
         or reimburse Grantor from the proceeds for the reasonable cost of
         repair or restoration. If Lender does not consent to repair or
         replacement of the Collateral, Lender shall retain a sufficient amount
         of the proceeds to pay all of the Indebtedness, and shall pay the
         balance to Grantor. Any proceeds which have not been disbursed within
         six (6) months after their receipt and which Grantor has not committed
         to the repair or restoration of the Collateral shall be used to prepay
         the Indebtedness.

         INSURANCE RESERVES. Lender may require Grantor to maintain with Lender
         reserves for payment of insurance premiums, which reserves shall be
         created by monthly payments from Grantor of a sum estimated by Lender
         to be sufficient to produce, at least fifteen (15) days before the
         premium due date, amounts at least equal to the insurance premiums to
         be paid. If fifteen (15) days before payment is due, the reserve funds
         are insufficient, Grantor shall upon demand pay any deficiency to
         Lender. The reserve funds shell be held by Lender as a general deposit
         and shall constitute a non-interest-bearing account which Lender may
         satisfy by payment of the insurance premiums required to be paid by
         Grantor as they become due. Lender does not hold the reserve funds in
         trust for Grantor, and Lender is not the agent of Grantor for payment
         of the insurance premiums required to be paid by Grantor. The
         responsibility for the payment of premiums shall remain Grantor's sole
         responsibility.

         INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to
         Lender reports on each existing policy of insurance showing such
         information as Lender may reasonably request including the following:
         (1) the name of the insurer; (2) the risks insured; (3) the amount of
         the policy; (4) the property insured; (6) the then current value on the
         basis of which insurance has been obtained and the manner of
         determining that value; and (6) the expiration date of the policy. In
         addition, Grantor shall upon request by Lender (however not more often
         than annually) have an independent appraiser satisfactory to Lender
         determine, as applicable, the cash value or replacement cost of the
         Collateral.

         FINANCING STATEMENTS. Grantor authorizes Lender to file a UCC-1
         financing statement, or alternatively, a copy of this Agreement to
         perfect Lender's security interest. At Lender's request, Grantor
         additionally agrees to sign all other documents that are necessary to
         perfect, protect, and continue Lender's security interest in the
         Property. Grantor will pay all filing fees, title transfer fees, and
         other fees and costs involved unless prohibited by law or unless Lender
         is required by law to pay such fees and costs. Grantor irrevocably
         appoints Lender to execute financing statements and documents of title
         in Grantor's name and to execute all documents necessary to transfer
         title if there is a default. Lender may file a copy of this Agreement
         as a financing statement. If Grantor changes Grantor's name or address,
         or the name or address of any person granting a security interest under
         this Agreement changes, Grantor will promptly notify the Lender of such
         change.

GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness,

LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral. All such
expenditures paid by Lender for such purposes will then bear interest at the
Note rate from the date paid by Lender to the date of repayment by Grantor. To
the extent permitted by applicable law, all such expenses will become a part of
the Indebtedness and, at Lender's option, will (A) be payable on demand; (B) be
added to the balance of the Note and be apportioned among and be payable with
any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity. The Agreement also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon Default.

DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:

         PAYMENT DEFAULT. Grantor fails to make any payment when due under the
         indebtedness.

         OTHER DEFAULTS. Grantor fails to comply with or to perform any other
         term, obligation, covenant or condition contained in this Agreement or
         in any of the Related Documents or to comply with or to perform any
         term, obligation, covenant or condition contained in any other
         agreement between Lender and Grantor.

         FALSE STATEMENTS. Any warranty, representation or statement made or
         furnished to Lender by Grantor or on Grantor's behalf under this
         Agreement or the Related Documents is false or misleading in any
         material respect, either now or at the time made or furnished or
         becomes false or misleading at any time thereafter.

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                          COMMERCIAL SECURITY AGREEMENT
                                   (CONTINUED)
LOAN No: 656504                                                           PAGE 3
================================================================================

         DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
         Documents ceases to be in full force and effect (including failure of
         any collateral document to create a valid and perfected security
         interest or lien) at any time and for any reason.

         INSOLVENCY. The dissolution or termination of Grantor's existence as a
         going business, the insolvency of Grantor, the appointment of a
         receiver for any part of Grantor's property, any assignment for the
         benefit of creditors, any type of creditor workout, or the commencement
         of any proceeding under any bankruptcy or insolvency laws by or against
         Grantor.

         CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
         forfeiture proceedings, whether by Judicial proceeding, self-help,
         repossession or any other method, by any creditor of Grantor or by any
         governmental agency against any collateral securing the indebtedness.
         This includes a garnishment of any of Grantor's accounts, including
         deposit accounts, with Lender. However, this Event of Default shall not
         apply if there is a good faith dispute by Grantor as to the validity or
         reasonableness of the claim which is the basis of the creditor or
         forfeiture proceeding and if Grantor gives Lender written notice of the
         creditor or forfeiture proceeding and deposits with Lender monies or a
         surety bond for the creditor or forfeiture proceeding, in an amount
         determined by Lender, in its sole discretion, as being an adequate
         reserve or bond for the dispute.

         EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
         respect to Guarantor of any of the Indebtedness or Guarantor dies or
         becomes incompetent or revokes or disputes the validity of, or
         liability under, any Guaranty of the Indebtedness.

         ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
         condition, or Lender believes the prospect of payment or performance of
         the indebtedness is impaired.

         INSECURITY. Lender in good faith believes itself insecure.

         CURE PROVISIONS. If any default, other than a default in payment is
         curable, it may be cured (and no event of default will have occurred)
         if Grantor, after receiving written notice from Lender demanding cure
         of such default: (1) cures the default within twenty (20) days; or (2)
         if the cure requires more than twenty (20) days, immediately initiates
         steps which Lender deems in Lender's sole discretion to be sufficient
         to cure the default and thereafter continues and completes all
         reasonable and necessary steps sufficient to produce compliance as soon
         as reasonably practical.

RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Texas Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:

         ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness
         immediately due and payable, without notice of any kind to Grantor.

         ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender
         all or any portion of the Collateral and any and all certificates of
         title and other documents relating to the Collateral. Lender may
         require Grantor to assemble the Collateral and make it available to
         Lender at a place to be designated by Lender. Lender also shall have
         full power to enter, provided Lender does so without a breach of the
         peace or a trespass, upon the property of Grantor to take possession of
         and remove the Collateral. If the Collateral contains other goods not
         covered by this Agreement at the time of repossession, Grantor agrees
         Lender may take such other goods, provided that Lender makes reasonable
         efforts to return them to Grantor after repossession.

         SELL THE COLLATERAL. Lender shall have full power to sell, lease,
         transfer, or otherwise deal with the Collateral or proceeds thereof in
         Lender's own name or that of Grantor. Lender may sell the Collateral at
         public auction or private sale. Unless the Collateral threatens to
         decline speedily in value or is of a type customarily sold on a
         recognized market, Lender will give Grantor, and other persons as
         required by law, reasonable notice of the time and place of any public
         sale, or the time after which any private sale or any other disposition
         of the Collateral is to be made. However, no notice need be provided to
         any person who, after Event of Default occurs, enters into and
         authenticates an agreement waiving that person's right to notification
         of sale. The requirements of reasonable notice shall be met if such
         notice is given at least ten (10) days before the time of the sale or
         disposition. All expenses relating to the disposition of the
         Collateral, including without limitation the expenses of retaking,
         holding, insuring, preparing for sale and selling the Collateral, shall
         become a part of the indebtedness secured by this Agreement and shall
         be payable on demand, with interest at the Note rate from date of
         expenditure until repaid.

         APPOINT RECEIVER. Lender shall have the right to have a receiver
         appointed to take possession of all or any part of the Collateral, with
         the power to protect and preserve the Collateral, to operate the
         Collateral preceding foreclosure or sale, and to collect the Rents from
         the Collateral and apply the proceeds, over and above the cost of the
         receivership, against the indebtedness. The receiver may serve without
         bond if permitted by law. Lender's right to the appointment of a
         receiver shall exist whether or not the apparent value of the
         Collateral exceeds the indebtedness by a substantial amount. Employment
         by Lender shall not disqualify a person from serving as a receiver.

         COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a
         receiver, may collect the payments, rents, income, and revenues from
         the Collateral. Lender may at any time in Lender's discretion transfer
         any Collateral into Lender's own name or that of Lender's nominee and
         receive the payments, rents, income, and revenues therefrom and hold
         the same as security for the indebtedness or apply it to payment of the
         indebtedness in such order of preference as Lender may determine.
         Insofar as the Collateral consists of accounts, general intangibles,
         insurance policies, instruments, chattel paper, choses in action, or
         similar property, Lender may demand, collect, receipt for, settle,
         compromise, adjust, sue for, foreclose, or realize on the Collateral as
         Lender may determine, whether or not indebtedness or Collateral is then
         due. For these purposes, Lender may, on behalf of and in the name of
         Grantor, receive, open and dispose of mail addressed to Grantor; change
         any address to which mail and payments are to be sent; and endorse
         notes, checks, drafts, money orders, documents of title, instruments
         and items pertaining to payment, shipment, or storage of any
         Collateral. To facilitate collection, Lender may notify account debtors
         and obligors on any Collateral to make payments directly to Lender.

         OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the
         Collateral, Lender may obtain a judgment against Grantor for any
         deficiency remaining on the indebtedness due to Lender after
         application of all amounts received from the exercise of the rights
         provided in this Agreement. Grantor shall be liable for a deficiency
         even if the transaction described in this subsection is a sale of
         accounts or chattel paper.

         OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and
         remedies of a secured creditor under the provisions of the Uniform
         Commercial Code, as may be amended from time to time. In addition,
         Lender shall have and may exercise any or all other rights and remedies
         it may have available at law, in equity, or otherwise.

         ELECTION OF REMEDIES. Except as may be prohibited by applicable law,
         all of Lender's rights and remedies, whether evidenced by this
         Agreement, the Related Documents, or by any other writing, shall be
         cumulative and may be exercised singularly or concurrently. Election by
         Lender to pursue any remedy shall not exclude pursuit of any other
         remedy, and an election to make expenditures or to take action to
         perform an obligation of Grantor under this Agreement, after Grantor's
         failure to perform, shall not affect Lender's right to declare a
         default and exercise its remedies.

PURPOSE OF LOAN. Working Capital.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:

         AMENDMENTS. This Agreement, together with any Related Documents,
         constitutes the entire understanding and agreement of the parties as to
         the matters set forth in this Agreement. No alteration of or amendment
         to this Agreement shall be effective unless given in writing and signed
         by the party or parties sought to be charged or bound by the alteration
         or amendment,

         ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of
         Lender's costs and expenses, including Lender's reasonable attorneys'
         fees and Lender's legal expenses, incurred in connection with the
         enforcement of this Agreement. Lender may hire or pay someone else to
         help enforce this Agreement, and Grantor shall pay the costs and
         expenses of such enforcement. Costs and expenses include Lender's
         reasonable attorneys' fees and legal expenses whether or not there is a
         lawsuit, including Lender's reasonable attorneys' fees and legal
         expenses for bankruptcy proceedings (including efforts to modify or
         vacate any automatic stay or injunction), appeals, and any anticipated
         post-judgment collection services. Grantor also shall pay all court
         costs and such additional fees as may be directed by the court.

         CAPTION HEADINGS. Caption headings in this Agreement are for
         convenience purposes only and are not to be used to interpret or define
         the provisions of this Agreement.

         GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED AND
         ENFORCED IN ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF
         TEXAS. THIS AGREEMENT HAS BEEN ACCEPTED BY LENDER IN THE STATE OF
         TEXAS.

         CHOICE OF VENUE. If there is a lawsuit, and if the transaction
         evidenced by this Agreement occurred in Lubbock County, Grantor agrees
         upon Lenders request to submit to the jurisdiction of the courts of
         Lubbock County, State of Texas.

         NO WAIVER BY LENDER. Lender shall not be deemed to have waived any
         rights under this Agreement unless such waiver is given in writing and
         signed by Lender. No delay or omission on the part of Lender in
         exercising any right shall operate as a waiver of such right or any
         other right. A waiver by Lender of a provision of this Agreement shall
         not prejudice or constitute a waiver of Lender's right otherwise to
         demand strict compliance with that provision or any other provision of
         this Agreement. No prior waiver by Lender, nor any course of dealing
         between Lender and Grantor, shall constitute a waiver of any of
         Lender's rights or of any of Grantor's obligations as to any future
         transactions. Whenever the consent of Lender is required under this
         Agreement, the granting of such consent by Lender in any instance shall
         not constitute continuing consent to subsequent instances where such
         consent is required and in all cases such consent may be granted or
         withheld in the sole discretion of Lender.

<PAGE>

                          COMMERCIAL SECURITY AGREEMENT
                                   (CONTINUED)
LOAN No: 656504                                                           PAGE 4
================================================================================

         NOTICES. Any notice required to be given under this Agreement shall be
         given in writing, and shall be effective when actually delivered, when
         actually received by telefacsimile (unless otherwise required by law),
         when deposited with a nationally recognized overnight courier, or, if
         mailed, when deposited in the United States mail, as first class,
         certified or registered mail postage prepaid, directed to the addresses
         shown near the beginning of this Agreement. Any party may change its
         address for notices under this Agreement by giving formal written
         notice to the other parties, specifying that the purpose of the notice
         is to change the party's address. For notice purposes, Grantor agrees
         to keep Lender informed at all times of Grantor's current address.
         Unless otherwise provided or required by law, if there is more than one
         Grantor, any notice given by Lender to any Grantor is deemed to be
         notice given to all Grantors.

         POWER OF ATTORNEY. Grantor hereby appoints Lender as Grantor's
         irrevocable attorney-in-fact for the purpose of executing any documents
         necessary to perfect, amend, or to continue the security interest
         granted in this Agreement or to demand termination of filings of other
         secured parties. Lender may at any time, and without further
         authorization from Grantor, file a carbon, photographic or other
         reproduction of any financing statement or of this Agreement for use as
         a financing statement. Grantor will reimburse Lender for all expenses
         for the perfection and the continuation of the perfection of Lender's
         security interest in the Collateral.

         SEVERABILITY. If a court of competent Jurisdiction finds any provision
         of this Agreement to be illegal, invalid, or unenforceable as to any
         circumstance, that finding shall not make the offending provision
         illegal, invalid, or unenforceable as to any other circumstance. If
         feasible, the offending provision shall be considered modified so that
         it becomes legal, valid and enforceable. If the offending provision
         cannot be so modified, it shall be considered deleted from this
         Agreement. Unless otherwise required by law, the illegality,
         invalidity, or unenforceability of any provision of this Agreement
         shall not affect the legality, validity or enforceability of any other
         provision of this Agreement.

         SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this
         Agreement on transfer of Grantor's interest, this Agreement shall be
         binding upon and inure to the benefit of the parties, their successors
         and assigns. If ownership of the Collateral becomes vested in a person
         other than Grantor, Lender, without notice to Grantor, may deal with
         Grantor's successors with reference to this Agreement and the
         Indebtedness by way of forbearance or extension without releasing
         Grantor from the obligations of this Agreement or liability under the
         Indebtedness.

         SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
         warranties, and agreements made by Granter in this Agreement shall
         survive the execution and delivery of this Agreement, shall be
         continuing in nature, and shall remain in full force and effect until
         such time as Grantor's indebtedness shall be paid in full.

         TIME IS OF THE ESSENCE. Time is of the essence in the performance of
         this Agreement.

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code:

         ACCOUNT. The word "Account" means a trade account, account receivable,
         other receivable, or other right to payment for goods sold or services
         rendered owing to Grantor (or to a third party grantor acceptable to
         Lender).

         AGREEMENT. The word "Agreement" means this Commercial Security
         Agreement, as this Commercial Security Agreement may be amended or
         modified from time to time, together with all exhibits and schedules
         attached to this Commercial Security Agreement from time to time.

         BORROWER. The word "Borrower" means WESTECH CAPITAL CORP., and all
         other persons and entities signing the Note in whatever capacity.

         COLLATERAL. The word "Collateral" means all of Grantor's right, title
         and interest in and to all the Collateral as described in the
         Collateral Description section of this Agreement.

         DEFAULT. The word "Default" means the Default set forth in this
         Agreement in the section titled "Default".

         ENVIRONMENTAL LAWS. The words "Environmental Laws" mean any and all
         state, federal and local statutes, regulations and ordinances relating
         to the protection of human health or the environment, including without
         limitation the Comprehensive Environmental Response, Compensation, and
         Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.
         ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986,
         Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation
         Act, 49 U.S.C. Section 1801, of seq., the Resource Conservation and
         Recovery Act, 42 U.S.C. Section 6901, of seq., or other applicable
         state or federal laws, rules, or regulations adopted pursuant thereto.

         EVENT OF DEFAULT. The words "Event of Default" mean any of the events
         of default set forth in this Agreement in the default section of this
         Agreement.

         GRANTOR. The word "Grantor" means WESTECH CAPITAL CORP..

         GUARANTOR. The word "Guarantor" means any guarantor, surety, or
         accommodation party of any or all of the Indebtedness.

         GUARANTY. The word "Guaranty" means the guaranty from Guarantor to
         Lender, including without limitation a guaranty of all or part of the
         Note.

         HAZARDOUS SUBSTANCES. The words "Hazardous Substances" mean materials
         that, because of their quantity, concentration or physical, chemical or
         infectious characteristics, may cause or pose a present or potential
         hazard to human health or the environment when improperly used,
         treated, stored, disposed of, generated, manufactured, transported or
         otherwise handled. The words "Hazardous Substances" are used in their
         very broadest sense and include without limitation any and all
         hazardous or toxic substances, materials or waste as defined by or
         listed under the Environmental Laws. The term "Hazardous Substances"
         also includes, without limitation, petroleum and petroleum by-products
         or any fraction thereof and asbestos.

         INDEBTEDNESS. The word "Indebtedness" means the Indebtedness evidenced
         by the Note or Related Documents, including all principal and Interest
         together with all other indebtedness and costs and expenses for which
         Grantor is responsible under this Agreement or under any of the Related
         Documents.

         LENDER. The word "Lender" means First United Bank, its successors and
         assigns.

         NOTE. The word "Note" means the Note executed by WESTECH CAPITAL CORP.
         in the principal amount of $500,050.00 dated October 21, 2002, together
         with all renewals of, extensions of, modifications of, refinancings of,
         consolidations of, and substitutions for the note or credit agreement.

         PROPERTY. The word "Property" means all of Grantor's right, title and
         Interest in and to all the Property as described in the "Collateral
         Description" section of this Agreement.

         RELATED DOCUMENTS. The words "Related Documents" mean all promissory
         notes, credit agreements, loan agreements, environmental agreements,
         guaranties, security agreements, mortgages, deeds of trust, security
         deeds, collateral mortgages, and all other instruments, agreements and
         documents, whether new or hereafter existing, executed in connection
         with the Indebtedness.

GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED OCTOBER 21, 2002.

GRANTOR

WESTECH CAPITAL CORP.

By: /s/ JOHN GORMAN
    -----------------------------------
    JOHN GORMAN, CHAIRMAN & CEO OF
    WESTECH CAPITAL CORP.

<PAGE>

                           COMMERCIAL PLEDGE AGREEMENT

<Table>
<Caption>
PRINCIPAL       LOAN DATE       MATURITY        LOAN NO.        CALL/CALL       ACCOUNT         OFFICER         INITIALS
<S>             <C>             <C>             <C>             <C>             <C>             <C>             <C>
$500,050.00     10-21-2002      05-01-2004      656504          4A/20                           RCB
</Table>

    References in the shaded area are for Lender's use only and do not limit
        the applicability of this document to any particular loan or time.
Any item above containing "***" has been omitted due to text length limitations.

GRANTOR:  WESTECH CAPITAL CORP.            LENDER: FIRST UNITED BANK
          (TIN: 13-3577716)                        LUBBOCK SOUTHWEST BRANCH
          2700 VIA FORTUNA, SUITE 400              6604 FRANKFORD
          AUSTIN TX 78746                          LUBBOCK, TX 79424
================================================================================

THIS COMMERCIAL PLEDGE AGREEMENT DATED OCTOBER 21, 2002, IS MADE AND EXECUTED
BETWEEN WESTECH CAPITAL CORP. ("GRANTOR") AND FIRST UNITED BANK ("LENDER").

GRANT OF SECURITY INTEREST. FOR VALUABLE CONSIDERATION, GRANTOR GRANTS TO LENDER
A SECURITY INTEREST IN THE COLLATERAL TO SECURE THE INDEBTEDNESS AND AGREES THAT
LENDER SHALL HAVE THE RIGHTS STATED IN THIS AGREEMENT WITH RESPECT TO THE
COLLATERAL, IN ADDITION TO ALL OTHER RIGHTS WHICH LENDER MAY HAVE BY LAW.

COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means
Grantor's present and future rights, title and interest in and to, together with
any and all present and future additions thereto, substitutions therefore, and
replacements thereof, together with any and all present and future certificates
and/or instruments evidencing any Stock and further together with all Income and
Proceeds as described herein:

         4,808,555 SHARES OF TEXAS SECURITIES GROUP, INC. STOCK

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Grantor's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Grantor holds
jointly with someone else and all accounts Grantor may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.

REPRESENTATiONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. Grantor
represents and warrants to Lender that:

         OWNERSHIP. Grantor is the lawful owner of the Collateral free and clear
         of all security interests, liens, encumbrances and claims of others
         except as disclosed to and accepted by Lender in writing prior to
         execution of this Agreement.

         RIGHT TO PLEDGE. Grantor has the full right, power and authority to
         enter into this Agreement and to pledge the Collateral.

         AUTHORITY; BINDING EFFECT. Grantor has the full right, power and
         authority to enter into this Agreement and to grant a security interest
         in the Collateral to Lender. This Agreement is binding upon Grantor as
         well as Grantor's successors and assigns, and is legally enforceable in
         accordance with its terms. The foregoing representations and
         warranties, and all other representations and warranties contained in
         this Agreement are and shall be continuing in nature and shall remain
         in full force and effect until such time as this Agreement is
         terminated or cancelled as provided herein.

         NO FURTHER ASSIGNMENT. Grantor has not, and shall not, sell, assign,
         transfer, encumber or otherwise dispose of any of Grantor's rights in
         the Collateral except as provided in this Agreement.

         NO DEFAULTS. There are no defaults existing under the Collateral, and
         there are no offsets or counterclaims to the same. Grantor will
         strictly and promptly perform each of the terms, conditions, covenants
         and agreements, if any, contained in the Collateral which are to be
         performed by Grantor.

         NO VIOLATION. The execution and delivery of this Agreement will not
         violate any law or agreement governing Grantor or to which Grantor is a
         party, and its certificate or articles of incorporation and bylaws do
         not prohibit any term or condition of this Agreement.

         FINANCING STATEMENTS. Grantor authorizes Lender to file a UCC-1
         financing statement, or alternatively, a copy of this Agreement to
         perfect Lender's security interest. At Lender's request, Grantor
         additionally agrees to sign all other documents that are necessary to
         perfect, protect, and continue Lender's security interest in the
         Property. Grantor will pay all filing fees, title transfer fees, and
         other fees and costs involved unless prohibited by law or unless Lender
         is required by law to pay such fees and costs. Grantor irrevocably
         appoints Lender to execute financing statements and documents of title
         in Grantor's name and to execute all documents necessary to transfer
         title if there is a default. Lender may file a copy of this Agreement
         as a financing statement. If Grantor changes Grantor's name or address,
         or the name or address of any person granting a security interest under
         this Agreement changes, Grantor will promptly notify the Lender of such
         change.

LENDER'S RIGHTS AND OBLIGATIONS WITH RESPECT TO THE COLLATERAL. Lender may hold
the Collateral until all Indebtedness has been paid and satisfied. Thereafter
Lender may deliver the Collateral to Grantor or to any other owner of the
Collateral. Lender shall have the following rights in addition to all other
rights Lender may have by law:

         MAINTENANCE AND PROTECTION OF COLLATERAL. Lender may, but shall not be
         obligated to, take such steps as it deems necessary or desirable to
         protect, maintain, insure, store, or care for the Collateral, including
         paying of any liens or claims against the Collateral. This may include
         such things as hiring other people, such as attorneys, appraisers or
         other experts. Lender may charge Grantor for any cost incurred in so
         doing. When applicable law provides more than one method of perfection
         of Lender's security interest, Lender may choose the method(s) to be
         used. If the Collateral consists of stock, bonds or other investment
         property for which no certificate has been issued, Grantor agrees, at
         Lender's request, either to request issuance of an appropriate
         certificate or to give instructions on Lender's forms to the issuer,
         transfer agent, mutual fund company, or broker, as the ease may be, to
         record on its books or records Lender's security interest in the
         Collateral.

         INCOME AND PROCEEDS FROM THE COLLATERAL. Lender may receive all Income
         and Proceeds and add it to the Collateral. Grantor agrees to deliver to
         Lender immediately upon receipt, in the exact form received and without
         commingling with other property, all Income and Proceeds from the
         Collateral which may be received by, paid, or delivered to Grantor or
         for Grantor's account, whether as an addition to, in discharge of, in
         substitution of, or in exchange for any of the Collateral,

         APPLICATION OF CASH. At Lender's option, Lender may apply any cash,
         whether included in the Collateral or received as Income and Proceeds
         or through liquidation, sale, or retirement, of the Collateral, to the
         satisfaction of the Indebtedness or such portion thereof as Lender
         shall choose, whether or not matured.

         TRANSACTIONS WITH OTHERS. Lender may (1) extend time for payment or
         other performance, (2) grant a renewal or change in terms or
         conditions, or (3) compromise, compound or release any obligation, with
         any one or more Obligors, endorsers, or Guarantors of the Indebtedness
         as Lender deems advisable, without obtaining the prior written consent
         of Grantor, and no such act or failure to act shall affect Lender's
         rights against Grantor or the Collateral.

         ALL COLLATERAL SECURES INDEBTEDNESS. All Collateral shall be security
         for the Indebtedness, whether the Collateral is located at one or more
         offices or branches of Lender. This will be the case whether or not the
         office or branch where Grantor obtained Grantor's loan knows about the
         Collateral or relies upon the Collateral as security.

         COLLECTION OF COLLATERAL. Lender at Lender's option may, but need not,
         collect the Income and Proceeds directly from the Obligors. Grantor
         authorizes and directs the Obligors, if Lander decides to collect the
         Income and Proceeds, to pay and deliver to Lender all Income and
         Proceeds from the Collateral and to accept Lender's receipt for the
         payments.

         POWER OF ATTORNEY. Grantor irrevocably appoints Lender as Grantor's
         attorney-in-fact, with full power of substitution, (a) to demand,
         collect, receive, receipt for, sue and recover all Income and Proceeds
         and other sums of money and other property which may now or hereafter
         become due, owing or payable from the Obligors in accordance with the
         terms of the Collateral; (b) to execute, sign end endorse any and all
         instruments, receipts, checks, drafts and warrants issued in payment
         for the Collateral; (c) to settle or compromise any and all claims
         arising under the Collateral, and in the place and stead of Grantor,
         execute and deliver Grantor's release and acquittance for Grantor; (d)
         to file any claim or claims or to take any action or institute or take
         part in any proceedings, either in Lender's own name or in the name of
         Grantor, or otherwise, which in the discretion of Lender may seem to be
         necessary or advisable; and (e) to execute in Grantor's name and to
         deliver to the Obligors on Grantor's behalf, at the time and in the
         manner specified by the Collateral, any necessary instruments or
         documents.

         PERFECTION OF SECURITY INTEREST. Upon Lender's request, Grantor will
         deliver to Lender any and all of the documents evidencing or
         constituting the Collateral. When applicable law provides more than one
         method of perfection of Lender's security interest, Lender may choose
         the method(s) to be used. Upon Lender's request, Grantor will sign and
         deliver any writings necessary to perfect Lender's security interest.
         If any of the Collateral consists of securities for which no
         certificate has been issued, Grantor agrees, at Lender's option, either
         to request issuance of an appropriate certificate or to execute
         appropriate instructions on Lender's forms instructing the issuer,
         transfer agent, mutual fund company, or broker, as the case may be, to
         record on it's books or records, by book-entry or otherwise, Lender's
         security interest in the Collateral. Grantor hereby appoints Lender as
         Grantor's irrevocable attorney-in-fact for the purpose of executing any
         documents necessary to perfect, amend, or to continue the security
         interest granted in this Agreement or to demand termination of filings
         of other secured parties.

<PAGE>

                          COMMERCIAL PLEDGE AGREEMENT
                                   (CONTINUED)
LOAN No: 656504                                                           PAGE 2
================================================================================

LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral. All such
expenditures paid by Lender for such purposes will then bear interest at the
Note rate from the date paid by Lender to the date of repayment by Grantor. To
the extent permitted by applicable law, all such expenses will become a part of
the Indebtedness and, at Lender's option, will (A) be payable on demand; (B) be
added to the balance of the Note and be apportioned among and be payable with
any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note: or (C) be
healed as a balloon payment which will be due and payable at the Note's
maturity. The Agreement also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon Default.

LIMITATIONS ON OBLIGATIONS OF LENDER. Lender shall use ordinary reasonable care
in the physical preservation and custody of the Collateral in Lender's
possession, but shall have no other obligation to protect the Collateral or its
value. In particular, but without limitation, Lender shall have no
responsibility for (A) any depreciation in value of the Collateral or for the
collection or protection of any Income and Proceeds from the Collateral, (B)
preservation of rights against parties to the Collateral or against third
persons, (C) ascertaining any maturities, calls, conversions, exchanges, offers,
tenders, or similar matters relating to any of the Collateral, or (D)
informing Grantor about any of the above, whether or not Lender has or is deemed
to have knowledge of such matters. Except as provided above, Lender shall have
no liability for depreciation or deterioration of the Collateral.

DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:

         PAYMENT DEFAULT. Grantor fails to make any payment when due under the
         indebtedness.

         OTHER DEFAULTS. Grantor fails to comply with or to perform any other
         term, obligation, covenant or condition contained in this Agreement or
         in any of the Related Documents or to comply with or to perform any
         term, obligation, covenant or condition contained in any other
         agreement between Lender and Grantor.

         FALSE STATEMENTS. Any warranty, representation or statement made or
         furnished to Lender by Grantor or on Grantor's behalf under this
         Agreement or the Related Documents is false or misleading in any
         material respect, either now or at the time made or furnished or
         becomes false or misleading at any time thereafter.

         DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
         Documents ceases to be in full force and effect (including failure of
         any collateral document to create a valid and perfected security
         interest or lien) at any time and for any reason.

         INSOLVENCY. The dissolution or termination of Grantor's existence as a
         going business, the insolvency of Grantor, the appointment of a
         receiver for any part of Grantor's property, any assignment for the
         benefit of creditors, any type of creditor workout, or the commencement
         of any proceeding under any bankruptcy or insolvency laws by or against
         Grantor.

         CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
         forfeiture proceedings, whether by judicial proceeding, self-help,
         repossession or any other method, by any creditor of Grantor or by any
         governmental agency against any collateral securing the indebtedness.
         This includes a garnishment of any of Grantor's accounts, including
         deposit accounts, with Lender. However, this Event of Default shall not
         apply if there is a good faith dispute by Grantor as to the validity or
         reasonableness of the claim which is the basis of the creditor or
         forfeiture proceeding and if Grantor gives Lender written notice of the
         creditor or forfeiture proceeding and deposits with Lender monies or a
         surety bond for the creditor or forfeiture proceeding, in an amount
         determined by Lender, in its sole discretion, as being an adequate
         reserve or bond for the dispute.

         EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
         respect to Guarantor of any of the indebtedness or Guarantor dies or
         becomes incompetent or revokes or disputes the validity of, or
         liability under, any Guaranty of the indebtedness.

         ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
         condition, or Lender believes the prospect of payment or performance of
         the indebtedness is impaired.

         INSECURITY. Lender in good faith believes itself insecure.

         CURE PROVISIONS. If any default, other than a default in payment or
         failure to satisfy Lender's requirement in the insufficient Market
         Value of Securities section is curable, it may be cured (and no event
         of default will have occurred) it Grantor, after receiving written
         notice from Lender demanding cure of such default; (1) cures the
         default within twenty (20) days; or (2) if the cure requires more then
         twenty (20) days, immediately initiates steps which Lender deems in
         Lender's sole discretion to be sufficient to cure the default and
         thereafter continues and completes all reasonable and necessary steps
         sufficient to produce compliance as soon as reasonably practical.

RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender may exercise any one or more of the
following rights and remedies:

         ACCELERATE INDEBTEDNESS. Declare all indebtedness immediately due and
         payable, without notice of any kind to Grantor.

         COLLECT THE COLLATERAL. Collect any of the Collateral and, at Lender's
         option and to the extent permitted by applicable law, retain possession
         of the Collateral while suing on the indebtedness.

         SELL THE COLLATERAL. Sell the Collateral, at Lender's discretion, as a
         unit or in parcels, at one or more public or private sales. Unless the
         Collateral is perishable or threatens to decline speedily in value or
         is of a type customarily sold on a recognized market, Lender shall give
         or mail to Grantor, and other persons as required by law, notice at
         least ten (10) days in advance of the time and place of any public
         sale, or of the time after which any private sale may be made. However,
         no notice need be provided to any person who, after an Event of Default
         occurs, enters into and authenticates an agreement waiving that
         person's right to notification of sale. Grantor agrees that any
         requirement of reasonable notice as to Grantor is satisfied if Lender
         mails notice by ordinary mail addressed to Grantor at the last address
         Grantor has given Lender in writing. If a public sale is held, there
         shall be sufficient compliance with all requirements of notice to the
         public by a single publication in any newspaper of general circulation
         in the county where the Collateral is located, setting forth the time
         and place of sale and a brief description of the property to be sold.
         Lender may be a purchaser at any public sale.

         SELL SECURITIES. Sell any securities included in the Collateral in a
         manner consistent with applicable federal and state securities laws.
         If, because of restrictions under such laws, Lender is unable, or
         believes Lender is unable, to sell the securities in an open market
         transaction, Grantor agrees that Lender will have no obligation to
         delay sale until the securities can be registered. Then Lender may make
         a private sale to one or more persons or to a restricted group of
         persons, even though such sale may result in a price that is less
         favorable than might be obtained in an open market transaction. Such a
         sale will be considered commercially reasonable. If any securities held
         as Collateral are "restricted securities" as defined in the Rules of
         the Securities and Exchange Commission (such as Regulation D or Rule
         144) or the rules of state securities departments under state "Blue
         Sky" laws, or if Grantor or any other owner of the Collateral is an
         affiliate of the issuer of the securities, Grantor agrees that neither
         Grantor, nor any member of Grantor's family, nor any other person
         signing this Agreement will sell or dispose of any securities of such
         issuer without obtaining Lender's prior written consent.

         RIGHTS AND REMEDIES WITH RESPECT TO INVESTMENT PROPERTY, FINANCIAL
         ASSETS AND RELATED COLLATERAL. In addition to other rights and remedies
         granted under this Agreement and under applicable law, Lender may
         exercise any or all of the following rights and remedies: (1) register
         with any issuer or broker or other securities intermediary any of the
         Collateral consisting of investment property or financial assets
         (collectively herein, "investment property") in Lender's sole name or
         in the name of Lender's broker, agent or nominee; (2) cause any issuer,
         broker or other securities intermediary to deliver to Lender any of the
         Collateral consisting of securities, or investment property capable of
         being delivered; (3) enter into a control agreement or power of
         attorney with any issuer or Securities intermediary with respect to any
         Collateral consisting of investment property, on such terms as Lender
         may deem appropriate, in its sole discretion, including without
         limitation, an agreement granting to Lender any of the rights provided
         hereunder without further notice to or consent by Grantor; (4) execute
         any such control agreement on Grantor's behalf and in Grantor's name,
         and hereby irrevocably appoints Lender as agent and attorney-in-fact,
         coupled with an interest, for the purpose of executing such control
         agreement on Grantor's behalf; (5) exercise any and all rights of
         Lender under any such control agreement or power of attorney; (6)
         exercise any voting, conversion, registration, purchase, option, or
         other rights with respect to any Collateral; (7) collect, with or
         without legal action, and issue receipts concerning any notes, checks,
         drafts, remittances or distributions that are paid or payable with
         respect to any Collateral consisting of investment property. Any
         control agreement entered with respect to any investment property shall
         contain the following provisions, at Lender's discretion. Lender shall
         be authorized to instruct the issuer, broker or other securities
         intermediary to take or to refrain from taking such actions with
         respect to the investment property as Lender may instruct, without
         further notice to or consent by Grantor. Such actions may include
         without limitation the issuance of entitlement orders, account
         instructions, general trading or buy or sell orders, transfer and
         redemption orders, and stop loss orders. Lender shall be further
         entitled to instruct the issuer, broker or securities intermediary to
         sell or to liquidate any investment property, or to pay the cash
         surrender or account termination value with respect to any and all
         investment property, and to deliver all such payments and liquidation
         proceeds to Lender. Any such control agreement shall contain such
         authorizations as are necessary to place Lender in "control" of such
         investment collateral, as contemplated under the provisions of the
         Uniform Commercial Code, and shall fully authorize Lender to issue
         "entitlement orders" concerning the transfer, redemption, liquidation
         or disposition of investment collateral, in conformance with the

<PAGE>
                          COMMERCIAL SECURITY AGREEMENT
                                   (CONTINUED)
LOAN No: 656504                                                           PAGE 3
================================================================================

         provisions of the Uniform Commercial Code.

         FORECLOSURE. Maintain a judicial suit for foreclosure and sale of the
         Collateral.

         TRANSFER TITLE. Effect transfer of title upon sale of all or part of
         the Collateral. For this purpose, Grantor irrevocably appoints Lender
         as Grantor's attorney--in--fact to execute endorsements, assignments
         and instruments in the name of Grantor and each of them (if more than
         one) as shall be necessary or reasonable.

         OTHER RIGHTS AND REMEDIES. Have and exercise any or all of the rights
         and remedies of a secured creditor under the provisions of the Uniform
         Commercial Code, at law, in equity, or otherwise.

         APPLICATION OF PROCEEDS. Apply any cash which is part of the
         Collateral, or which is received from the collection or sale of the
         Collateral, to reimbursement of any expenses, including any costs for
         registration of securities, commissions incurred in connection with a
         sale, Lender's reasonable attorneys' fees and court costs, whether or
         not there is a lawsuit and including any fees on appeal, incurred by
         Lender in connection with the collection and sale of such Collateral
         and to the payment of the Indebtedness of Grantor to Lender, with any
         excess funds to be paid to Grantor as the Interests of Grantor may
         appear. Grantor agrees, to the extent permitted by law, to pay any
         deficiency after application of the proceeds of the Collateral to the
         indebtedness.

         ELECTION OF REMEDIES. Except as may be prohibited by applicable law,
         all of Lender's rights and remedies, whether evidenced by this
         Agreement, the Related Documents, or by any other writing, shall be
         cumulative and may be exercised singularly or concurrently. Election by
         Lender to pursue any remedy shall not exclude pursuit of any other
         remedy, and an election to make expenditures or to take action to
         perform an obligation of Grantor under this Agreement after Grantor's
         failure to perform, shall not affect Lender's right to declare a
         default and exercise its remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement;

         AMENDMENTS. This Agreement, together with any Related Documents,
         constitutes the entire understanding and agreement of the parties as to
         the matters set forth in this Agreement. No alteration of or amendment
         to this Agreement shall be effective unless given in writing and signed
         by the party or parties sought to be charged or bound by the alteration
         or amendment.

         ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of
         Lender's costs and expenses, including Lenders reasonable attorneys'
         fees and Lenders legal expenses, incurred in connection with the
         enforcement of this Agreement. Lender may hire or pay someone else to
         help enforce this Agreement, and Grantor shall pay the costs and
         expenses of such enforcement. Costs and expenses include Lender's
         reasonable attorneys' fees and legal expenses whether or not there is a
         lawsuit, including Lender's reasonable attorneys' fees end legal
         expenses for bankruptcy proceedings (including efforts to modify or
         vacate any automatic stay or injunction) appeals, and any anticipated
         post-judgment collection services. Grantor also shall pay all court
         costs and such additional fees as may be directed by the court.

         CAPTION HEADINGS. Caption headings in this Agreement are for
         convenience purposes only and are not to be used to interpret or define
         the provisions of this Agreement.

         GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED AND
         ENFORCED IN ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF
         TEXAS. THIS AGREEMENT HAS BEEN ACCEPTED BY LENDER IN THE SLATE OF
         TEXAS.

         CHOICE OF VENUE. If there is a lawsuit, and if the transaction
         evidenced by this Agreement occurred in Lubbock County, Grantor agrees
         upon Lender's request to submit to the jurisdiction of the courts of
         Lubbock County, State of Texas.

         NO WAIVER BY LENDER. Lender shall not be deemed to have waived any
         rights under this Agreement unless such waiver is given in writing and
         signed by Lender. No delay or omission on the part of Lender in
         exercising any right shall operate as a waiver of such right or any
         other right. A waiver by Lender of a provision of this Agreement shall
         not prejudice or constitute a waiver of Lender's right otherwise to
         demand strict compliance with that provision or any other provision of
         this Agreement. No prior waiver by Lender, nor any course of dealing
         between Lender and Grantor, shall constitute a waiver of any of
         Lender's rights or of any of Grantor's obligations as to any future
         transactions. Whenever the consent of Lander is required under this
         Agreement, the granting of such consent by Lender in any instance shall
         not constitute continuing consent to subsequent instances where such
         consent is required and in all cases such consent may be granted or
         withheld in the sole discretion of Lender.

         NOTICES. Any notice required to be given under this Agreement shall be
         given in writing, and shall be effective when actually delivered, when
         actually received by telefacsimile (unless otherwise required by law),
         when deposited with a nationally recognized overnight courier, or, if
         mailed, when deposited in the United States mail, as first class,
         certified or registered mail postage prepaid, directed to the addresses
         shown near the beginning of this Agreement. Any party may change its
         address for notices under this Agreement by giving formal written
         notice to the other parties, specifying that the purpose of the notice
         is to change the party's address. For notice purposes, Grantor agrees
         to keep Lender informed at all times of Grantor's current address.
         Unless otherwise provided or required by law, if there is more than one
         Grantor, any notice given by Lender to any Granter is deemed to be
         notice given to all Granters.

         SEVERABILITY. If a court of competent jurisdiction finds any provision
         of this Agreement to be illegal, invalid, or unenforceable as to any
         circumstance, that finding shall not make the offending provision
         illegal, invalid, or unenforceable as to any other circumstance. If
         feasible, the offending provision shall be considered modified so that
         it becomes legal, valid and enforceable. If the offending provision
         cannot be so modified, it shall be considered deleted from this
         Agreement. Unless otherwise required by law, the illegality,
         invalidity, or unenforceability of any provision of this Agreement
         shall not affect the legality, validity or enforceability of any other
         provision of this Agreement.

         SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this
         Agreement on transfer of Grantor's interest, this Agreement shall be
         binding upon and inure to the benefit of the parties, their successors
         and assigns. If ownership of the Collateral becomes vested in a person
         other than Grantor, Lender, without notice to Grantor, may deal with
         Grantors successors with reference to this Agreement and the
         indebtedness by way of forbearance or extension without releasing
         Grantor from the obligations of this Agreement or liability under the
         indebtedness.

         TIME IS OF THE ESSENCE. Time is of the essence In the performance of
         this Agreement.

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code:

         AGREEMENT. The word "Agreement" means this Commercial Pledge Agreement,
         as this Commercial Pledge Agreement may be amended or modified from
         time to time, together with all exhibits and schedules attached to this
         Commercial Pledge Agreement from time to time.

         BORROWER. The word "Borrower" means WESTECH CAPITAL CORP., and all
         other persons and entities signing the Note in whatever capacity.

         COLLATERAL. The word "Collateral" means all of Grantor's right, title
         and interest in and to all the Collateral as described in the
         Collateral Description section of this Agreement.

         DEFAULT. The word "Default" means the Default set forth in this
         Agreement in the section titled "Default".

         EVENT OF DEFAULT. The words "Event of Default" mean any of the events
         of default set forth In this Agreement in the default section of this
         Agreement.

         GRANTOR. The word "Grantor" means WESTECH CAPITAL CORP..

         GUARANTOR. The word "Guarantor" means any guarantor, surety, or
         accommodation party of any or all of the Indebtedness.

         GUARANTY. The word "Guaranty" means the guaranty from Guarantor to
         Lender, including without limitation a guaranty of all or part of the
         Note.

         INCOME AND PROCEEDS. The words "Income and Proceeds" mean all present
         and future income, proceeds, earnings, increases, and substitutions
         from or for the Collateral of every kind and nature, including without
         limitation all payments, interest, profits, distributions, benefits,
         rights, options, warrants, dividends, stock dividends, stock splits,
         stock rights, regulatory dividends, subscriptions, monies, claims for
         money due and to become due, proceeds of any insurance on the
         Collateral, shares of stock of different par value or no par value
         issued in substitution or exchange for shares included in the
         Collateral, and all other property Grantor is entitled to receive on
         account of such Collateral, including accounts, documents, instruments,
         chattel paper, and general intangibles.

         INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced
         by the Note or Related Documents, including all principal and interest
         together with all other indebtedness and costs and expenses for which
         Granter is responsible under this Agreement or under any of the Related
         Documents.

         LENDER. The word "Lender" means First United Bank, its successors and
         assigns.
<PAGE>

                          COMMERCIAL PLEDGE AGREEMENT
                                   (CONTINUED)
LOAN No: 656504                                                           PAGE 4
================================================================================

         NOTE. The word "Note" means the Note executed by WESTECH CAPITAL CORP.
         in the principal amount of $500,050.00 dated October 21, 2002, together
         with all renewals of, extensions of, modifications of, refinancings of,
         consolidations of, and substitutions for the note or credit agreement.

         OBLIGOR. The word "Obliger" means without limitation any and all
         persons obligated to pay money or to perform some other act under the
         Collateral.

         PROPERTY. The word "Property" means all of Grantor's right, title and
         interest in and to all the Property as described in the Collateral
         Description" section of this Agreement.

         RELATED DOCUMENTS. The words "Related Documents" mean all promissory
         notes, credit agreements, loan agreements, environmental agreements,
         guaranties, security agreements, mortgages, deeds of trust, security
         deeds, collateral mortgages, and all other instruments, agreements and
         documents, whether now or hereafter existing, executed in connection
         with the indebtedness.

GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL PLEDGE
AGREEMENT AND AGREES TO ITS TERMS, THIS AGREEMENT IS DATED OCTOBER 21, 2002.

GRANTOR:

WESTECH CAPITAL CORP.

By: /s/ JOHN GORMAN
    -----------------------------------
    JOHN GORMAN, CHAIRMAN & CEO OF
    WESTECH CAPITAL CORP.

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