<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 5)*
STRATOSPHERE CORPORATION
- -------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE
- -------------------------------------------------------------------------------
(Title of Class of Securities)
86 3106 10 0
---------------------------------------------
(CUSIP Number)
BOB STUPAK
1213 LAS VEGAS BOULEVARD SOUTH
LAS VEGAS, NEVADA 89104
(702) 383-0764
(Name, Address and Telephone Number of Person Authorized to Received Notices
and Communications)
JULY 22, 1996
-----------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ]. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five person of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7).
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 863106 10 0 PAGE 2 OF ___ PAGES
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
BOB STUPAK
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
3) SEC USE ONLY
4) SOURCE OF FUNDS*
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E) [ ]
6) CITIZENSHIP OR PLACE OF ORGANIZATION U.S.
NUMBER OF (7) SOLE VOTING POWER 1,277,696
SHARES
BENEFICIALLY (8) SHARED VOTING POWER 5,257,500
OWNED BY
EACH REPORTING (9) SOLE DISPOSITIVE POWER 1,277,696
PERSON
WITH (10) SHARED DISPOSITIVE POWER 5,257,500
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,535,196
12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.2%
14) TYPE OF REPORTING PERSON* IN
*SEE INSTRUCTION BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
2
<PAGE> 3
SCHEDULE 13D
CUSIP NO. 863106 10 0 PAGE 3 OF ___ PAGES
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Bob Stupak Enterprises, Inc.
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
3) SEC USE ONLY
4) SOURCE OF FUNDS*
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
6) CITIZENSHIP OR PLACE OF ORGANIZATION
NEVADA
NUMBER OF (7) SOLE VOTING POWER 1,257,696
SHARES
BENEFICIALLY (8) SHARED VOTING POWER 5,257,500
OWNED BY
EACH REPORTING (9) SOLE DISPOSITIVE POWER 1,257,696
PERSON
WITH (10) SHARED DISPOSITIVE POWER 5,257,500
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,515,196
12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.2%
14) TYPE OF REPORTING PERSON* CO
*SEE INSTRUCTION BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
3
<PAGE> 4
SCHEDULE 13D
CUSIP NO. 863106 10 0 PAGE 4 OF ___ PAGES
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
DINE OUT CORP.
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
3) SEC USE ONLY
4) SOURCE OF FUNDS*
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
6) CITIZENSHIP OR PLACE OF ORGANIZATION
Nevada
NUMBER OF (7) SOLE VOTING POWER 0
SHARES
BENEFICIALLY (8) SHARED VOTING POWER 20,000
OWNED BY
EACH REPORTING (9) SOLE DISPOSITIVE POWER 0
PERSON
WITH (10) SHARED DISPOSITIVE POWER 20,000
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
20,000
12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.03%
14) TYPE OF REPORTING PERSON* CO
*SEE INSTRUCTION BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
4
<PAGE> 5
SCHEDULE 13D
CUSIP NO. 863106 10 0 PAGE 5 OF ___ PAGES
EXPLANATORY STATEMENT
This Amendment No. 5 ("Amendment No. 5") amends, pursuant to Rule
13d-2(a) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Statement on Schedule 13D filed by Bob Stupak ("Stupak"), Bob Stupak
Enterprises, Inc., a Nevada corporation ("BSE"), and Dine Out Corp., a Nevada
corporation ("Dine Out" and collectively with Stupak and BSE, the "Reporting
Persons" or the "Stupak Affiliates"), dated November 15, 1993, as previously
amended (the "Schedule 13D"), with respect to the common stock, par value $.01
per share (the "Common Stock"), of Stratosphere Corporation, a Delaware
corporation (the "Issuer" or the "Company"). Unless otherwise indicated,
capitalized terms used herein but not otherwise defined shall have the meanings
assigned to them in the Schedule 13D.
The Reporting Persons are making this joint filing because they may be
deemed to constitute a "group" within the meaning of Section 13(d)(3) of the
Exchange Act, although neither the fact of this filing nor anything contained
herein shall be deemed to be an admission by the Reporting Persons that a group
exists.
ITEM 4. PURPOSE OF TRANSACTION
Item 4 is hereby amended and supplemented by adding the following:
In March 1996, BSE and Dine Out established margin loan accounts with
PaineWebber, Inc. on customary terms. In connection therewith, 1,400,000
shares of Common Stock owned by BSE and 600,000 shares of Common Stock owned by
Dine Out were pledged to PaineWebber, Inc. to secure loans made pursuant to
such margin accounts. Due to a decline in the market value of the Common
Stock, PaineWebber, Inc. on July 22, 1996 called the margin loans, which then
totaled approximately $2.1 million. Without instruction from Mr. Stupak,
PaineWebber, Inc. sold a total of 641,000 of the pledged shares (411,300 shares
from BSE's account and 230,000 shares from Dine Out's account). The margins
loans were paid in full with proceeds from the sale of such pledged shares.
Effective July 22, 1996, Mr. Stupak resigned voluntarily as a member of
the Company's Board of Directors. The resignation was not precipitated by the
Company or its controlling stockholder, Grand Casinos, Inc. ("Grand"). To the
contrary, such action reflects Mr. Stupak's inability to conduct the customary
functions or exercise the influence commonly associated with his position either
as a director or as "Chairman of the Board," a position which he held from the
Company's inception until the date of his resignation. Mr. Stupak also has had
significant and increasing concerns over construction management controls and
unexplained project costs, marketing approaches and certain other Grand-directed
decisions that in his view adversely affected the Company, as well as with
respect to the general unwillingness of the Grand-appointed management and the
Grand-controlled Board of Directors to consider his advice and opinions.
Finally, Mr. Stupak has become increasingly troubled by what he believes to be a
growing conflict-of-interest between the objectives of Grand and the best
interests of the Company and its minority stockholders.
As previously disclosed, the Company, Grand, BSE and Mr. Stupak are
parties to that certain agreement dated November 15, 1993 and amended December
22, 1993 (as amended, the "Grand Agreement"). The Grand Agreement provides,
among other things, that so long as Mr. Stupak and his affiliates own an
aggregate of not less than five percent of the outstanding Common Stock, Mr.
Stupak or a person designated by him will be included in management's slate of
directors and Grand will vote its shares of Common Stock in favor of Mr. Stupak
or such designee. Mr. Stupak is currently considering various qualified
candidates and intends to advise the Company and Grand of the person he has
selected as his designee within the next few weeks.
The Stupak Affiliates have from time to time disposed of shares of
Common Stock. Pursuant to the terms of the Asset Purchase Agreement and FIB
Escrow Agreement, shares of Common Stock will periodically be sold from the
escrow account to satisfy the Outstanding Package Obligations. In
5
<PAGE> 6
SCHEDULE 13D
CUSIP NO. 863106 10 0 PAGE 6 OF ___ PAGES
addition, depending on working capital needs and other factors, the Stupak
Affiliates may from time to time sell shares of Common Stock, either in open
market transactions or otherwise.
Except as set forth above, the Stupak Affiliates have no present plans
or proposals which would result in or relate to any of the transactions
described in paragraphs (a) through (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Item 5 of the Schedule 13D is hereby amended and restated as follows:
As of August 2, 1996, BSE is the beneficial owner of 6,515,196 shares
of Common Stock, or approximately 11.2% of the outstanding Common Stock of the
Issuer. As of August 2, 1996, Dine Out is the beneficial owner of 20,000 shares
of Common Stock, or approximately 0.03% of the outstanding Common Stock. By
virtue of being the sole stockholder, director, president, treasurer and
secretary of BSE and Dine Out, Mr. Stupak may be deemed to have the power to
vote and dispose of the shares of Common Stock owned by BSE and Dine Out.
Accordingly, Mr. Stupak may be considered the beneficial owner of an aggregate
of 6,535,196 shares of Common Stock as of August 2, 1996, or approximately 11.2%
of the outstanding Common Stock.
Pursuant to the terms of the Asset Purchase Agreement and FIB Escrow
Agreement, certain shares of Common Stock (5,257,500 shares as of July 30,
1996) beneficially owned directly by BSE and indirectly by Mr. Stupak are held
in escrow and pledged to the Issuer to secure certain obligations of Mr.
Stupak. Under Rule 13d-3(d)(3) of the Exchange Act, the Issuer, as pledgee,
may be deemed to share the voting and dispositive power with respect to such
pledged shares. Except for such pledged shares, each Reporting Person has,
directly or indirectly, sole voting and dispositive power with respect to all
of the shares of Common Stock reported for it.
The Issuer, Nevada State Bank and Signal USA, as pledgees, have (i) the
right to receive and hold, as additional security, dividends paid on the pledged
shares and (ii) the right to receive the proceeds, subject to certain
limitations, from the sale of any of such pledged shares that are sold pursuant
to the terms of the agreements governing the respective pledges.
Transactions in the Common Stock effected by the Reporting Persons
since the most recent filing on Schedule 13D are set forth on Schedule A
hereto.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Item 6 is hereby amended and supplemented by adding the following:
Reference is made to Item 4 for a description of certain margin loan
accounts with PaineWebber, Inc.
6
<PAGE> 7
SCHEDULE 13D
CUSIP NO. 863106 10 0 PAGE 7 OF ___ PAGES
In April 1996, Mr. Stupak pledged 703,996 shares of Common Stock
(beneficially owned directly by BSE) as security for a $2 million revolving line
of credit loan from Nevada State Bank. Interest on the loan is payable monthly,
with the outstanding principal plus all accrued but unpaid interest due at
maturity on October 18, 1996. The terms of the loan are set forth in a
promissory note dated April 18, 1996 and a commercial pledge and security
agreement dated April 18, 1996, copies of which are filed as Exhibit 1 hereto
and incorporated herein by reference. On July 26, 1996, Mr. Stupak sold 300,000
of the pledged shares. The proceeds from such sale, together with personal
funds, will be used to reduce the principal amount outstanding under the loan to
approximately $1.2 million. As of July 31, 1996, 403,996 shares were pledged to
Nevada State Bank. Nevada State Bank may require additional shares of Common
Stock to be pledged pursuant to the terms of the pledge agreement.
In order to satisfy a margin call in July 1996, 20,000 shares of Common
Stock beneficially owned directly by Dine Out were transferred to a margin
account maintained by Mr. Stupak with Signal USA. The positions held in the
margin account are pledged as security for the repayment of debit balances in
such account. A copy of the agreement setting forth the terms of the margin
account is filed as Exhibit 2 hereto and incorporated herein by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1. Promissory Note dated April 18, 1996 of Bob Stupak in favor of
Nevada State Bank and Commercial Pledge and Security Agreement
dated April 18, 1996 among Bob Stupak, Bob Stupak Enterprises,
Inc. and Nevada State Bank.
Exhibit 2. Margin and Short Account Customer Agreement between Bob Stupak
and Southwest Securities, Inc.
7
<PAGE> 8
SCHEDULE 13D
CUSIP NO. 863106 10 0 PAGE 8 OF ___ PAGES
SCHEDULE A
BSE effected the following open market transactions in the Common
Stock since the most recent filing on Schedule 13D.
<TABLE>
<CAPTION>
DATE NUMBER OF SHARES PRICE PER SHARE DESCRIPTION
---- ---------------- --------------- -----------
<S> <C> <C> <C>
7/22/96 25,000 3.4375 Sale**
7/22/96 195,000 3.375 Sale**
7/22/96 35,000 3.3125 Sale**
7/22/96 100,000 3.25 Sale**
7/23/96 56,300 3.375 Sale**
7/24/96 35,000 2.946 Sale
7/25/96 205,000 2.89 Sale
7/26/96 300,000 2.625 Sale
7/26/96 50,000 2.8437 Sale
7/29/96 50,000 3.00 Sale
8/2/96 20,000 3.4375 Sale
8/2/96 75,000 3.125 Sale
</TABLE>
Dine Out effected the following open market transactions in the
Common Stock since the most recent filing on Schedule 13D.
<TABLE>
<CAPTION>
Date Number of Shares Price Per Share Description
---- ---------------- --------------- -----------
<S> <C> <C> <C>
7/2/96 50,000 6.375 Sale
7/2/96 15,000 6.3438 Sale
7/22/96 200,000 3.50 Sale**
7/22/96 30,000 3.375 Sale**
</TABLE>
** Represents sales by PaineWebber, Inc. on behalf of such Reporting
Person of pledged shares in satisfaction of margin indebtedness.
8
<PAGE> 9
SCHEDULE 13D
CUSIP NO. 863106 10 0 PAGE 9 OF ___ PAGES
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
August 2, 1996 /s/ BOB STUPAK
---------------- --------------------------
Date Bob Stupak
9
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SCHEDULE 13D
CUSIP NO. 863106 10 0 PAGE 10 OF ___ PAGES
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
BOB STUPAK ENTERPRISES, INC.
August 2, 1996 By: /s/BOB STUPAK
---------------- -------------------------------
Date Bob Stupak, President
10
<PAGE> 11
SCHEDULE 13D
CUSIP NO. 863106 10 0 PAGE 11 OF ___ PAGES
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
DINE OUT CORP.
August 2, 1996 By: /s/ BOB STUPAK
-------------------- -------------------------
Date Bob Stupak, President
11
<PAGE> 1
PROMISSORY NOTE
<TABLE>
<CAPTION>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICERS INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$2,000,000.00 04-18-1996 10-18-1996 9011 81 1100 8102864 15575
</TABLE>
References in the shaded area for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
BORROWER: BOB STUPAK (SSN: ###-##-####) LENDER: NEVADA STATE BANK
2000 LAS VEGAS BLVD. SOUTH CORPORATE BANKING
LAS VEGAS, NV 89101 201 SOUTH 4TH STREET
P.O. BOX 990
LAS VEGAS, NV 89125-0990
===============================================================================
PRINCIPAL AMOUNT:$2,000,000.00 INITIAL RATE:9.250% DATE OF NOTE: APRIL 18, 1996
PROMISE TO PAY. BOB STUPAK ("BORROWER") PROMISES TO PAY TO NEVADA STATE BANK
("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE
PRINCIPAL AMOUNT OF TWO MILLION & 00/100 DOLLARS ($2,000,000.00) OR SO MUCH AS
MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL
BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH
ADVANCE UNTIL REPAYMENT OF EACH ADVANCE. THE INTEREST RATE WILL NOT INCREASE
ABOVE 25.000%.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING PRINCIPAL
PLUS ALL ACCRUED UNPAID INTEREST ON OCTOBER 18, 1996. IN ADDITION, BORROWER
WILL PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID INTEREST BEGINNING MAY 18,
1996, AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE ON THE SAME DAY OF EACH MONTH
AFTER THAT. Interest on this Note is computed on a 365/365 simple interest
basis; that is, by applying the ratio of the annual interest rate over the
number of days in a year, multiplied by the outstanding principal balance,
multiplied by the actual number of days the principal balance is outstanding.
Borrower will pay Lender at Lender's address shown above or at such other place
as Lender may designate in writing. Unless otherwise agreed or required by
applicable law, payments will be applied first to any unpaid collection costs
and any late charges, then to any unpaid interest, and any remaining amount to
principal.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the NEVADA STATE BANK'S
base rate (the "Index"). Nevada State Bank's base rate shall be deemed to mean
an index which is determined daily by Nevada State Bank on the basis of the
published commercial loan variable rate index held by any two of the following
banks: Chemical Bank, Wells Fargo Bank N.A. and Bank of America N. T. & S. A.
In the event no two of the above banks have the same published rate, the bank
having the median rate will establish Nevada State Bank's base rate. If, for
any reason beyond the control of Nevada State Bank, any of the aforementioned
banks becomes unacceptable as a reference for the purpose of determining the
base rate used herein, Nevada State Bank may, five days after posting notice in
the bank, substitute another comparable bank for the one determined
unacceptable. As used in this paragraph, "comparable bank" shall mean one of
the ten largest banks headquartered in the United States of America. This
definition of base rate is to be strictly interpreted and is not intended to
serve any purpose other than providing an index to determine the variable
interest rate used in this agreement. The undersigned acknowledges that base
rate is not the lowest rate at which Nevada State Bank has made or may make
loans to any of its customers, either past, present or future. Additionally,
Nevada State Bank does not imply nor can any conclusions be drawn that the
published rate of any of the aforementioned banks is the lowest rate at which
those banks will loan money to any customers, either now or in the future. The
interest rate for this Note shall be calculated on the basis of the actual
number of days elapsed over a 365/365-day year (366 during leap years). Whenever
there is a default by Borrower under this Note, the interest rate on the unpaid
balance shall, at the option of the Bank, be at the Default Rate set forth
below. Lender will tell Borrower the current Index rate upon Borrower's
request. Borrower understands that Lender may make loans based on other rates
as well. The interest rate change will not occur more often than each DAY. THE
INDEX CURRENTLY IS 8.250% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE
UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE OF 1.000 PERCENTAGE
POINT OVER THE INDEX, ADJUSTED IF NECESSARY FOR THE MAXIMUM RATE LIMITATION
DESCRIBED BELOW, RESULTING IN AN INITIAL RATE OF 9.250% PER ANNUM.
NOTWITHSTANDING ANY OTHER PROVISION OF THIS NOTE, THE VARIABLE INTEREST RATE OR
RATES PROVIDED FOR IN THIS NOTE WILL BE SUBJECT TO THE FOLLOWING MAXIMUM RATE.
NOTICE: Under no circumstances will the interest rate on this Note be more than
(except for any higher default rate shown below) the lesser of 25.000% per annum
or the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Note, Borrower understands that Lender is entitled to a MINIMUM INTEREST
CHARGE OF $50.00. Other than Borrower's obligation to pay any minimum interest
charge, Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower dies or becomes insolvent, a
receiver is appointed for any part of Borrower's property, Borrower makes an
assignment for the benefit of creditors, or any proceeding is commenced either
by Borrower or against Borrower under any bankruptcy or insolvency laws. (f)
Any creditor tries to take any of Borrower's property on or in which Lender has
a lien or security interest. This includes a garnishment of any of Borrower's
accounts with Lender. (g) Any of the events described in this default section
occurs with respect to any guarantor of this Note. (h) A material adverse
change occurs in Borrower's financial condition, or Lender believes the prospect
of payment or performance of the Indebtedness is impaired. (i) Lender in good
faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, 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: (a) cures the default within ten (10) days; or (b) if the
cure requires more than ten (10) 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.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 4.000
percentage points over the Index. The interest rate will not exceed the maximum
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender that
amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including 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. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. THIS NOTE HAS BEEN DELIVERED TO
LENDER AND ACCEPTED BY LENDER IN THE STATE OF NEVADA. IF THERE IS A LAWSUIT,
BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE
COURTS OF CLARK COUNTY, THE STATE OF NEVADA (INITIAL HERE ). LENDER AND
BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER. THIS NOTE
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEVADA.
RIGHT TO SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account, including without
limitation to all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts, and, at Lender's option, to administratively freeze all such
accounts to allow Lender to protect lender's charge and setoff rights provided
on this paragraph.
COLLATERAL. This Note is secured by Seven Hundred Three Thousand Nine Hundred
Ninety Six (703,996) Shares of Stratosphere Corporation Stock.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested orally by Borrower or by an authorized person.
Lender may, but need not, require that all oral requests be confirmed in
writing. All communications, instructions, or directions by telephone or
otherwise to Lender are to be directed to Lender's office shown above. The
following party or parties are authorized to request advances under the line of
credit until Lender receives from Borrower at Lender's address shown above
written notice of revocation or their authority: BOB STUPAK. Borrower agrees
to be liable for all sums either: (a) advanced in accordance with the
instructions of an authorized person or (b) credited to any of Borrower's
account with Lender. The unpaid principal balance owing on this Note at any
time may be evidenced by endorsements on this Note or by Lender's internal
records, including daily computer print-outs. Lender will have no obligation to
advance funds under this Note if: (a) Borrower or any guarantor is in default
under the terms of this Note or any agreement that Borrower or any guarantor has
with Lender, including any agreement made in connection with the signing of this
note; (b) Borrower or any guarantor ceases doing business or is insolvent; (c)
any guarantor seeks, claims or otherwise attempts to limit, modify or revoke
such guarantor's guarantee of this Note or any other loan with Lender; (d)
Borrower has applied funds provided pursuant to this Note for purposes other
than those authorized by Lender; or (e) Lender in good faith deems itself
insecure under this Note or any other agreement between Lender and Borrower.
<PAGE> 2
04-18-1996 PROMISSORY NOTE PAGE 2
LOAN NO 9011 (CONTINUED)
============================================================================
REVOLVING FEATURE. This Note shall be a revolving line of credit under which
Borrower may repeatedly draw and repay funds, so long as no default has occurred
hereunder or under any agreement providing collateral for this indebtedness;
provided that the aggregate principal balance outstanding at any time shall not
exceed the Principal Amount as stated above in this Note. If at any time prior
to the maturity of the Note, this Note shall have a zero balance owing, this
Note shall not be deemed satisfied or terminated but shall remain in full force
and effect for future draws unless terminated upon other grounds.
CURE PROVISIONS. In the event that any amount due under this Note is reduced
to judgment, or if Borrower is ten (10) days late in making any payment
provided in this Note, or if any of the events of default shall occur and said
default is not cured within ten (10) days after the date of written notice sent
by Bank to Borrower at the address set forth herein notifying Borrower of the
default, the total of the unpaid balance of principal and the accrued unpaid
interest (past due interest being compounded) shall then begin accruing
interest at the rate stated above, plus Three Percent (3.0%) per annum (the
"Default Rate"), until such time as all past due payments and accrued interest
are paid. At that time the interest rate will revert to that rate stated
above. Borrower acknowledges that the effect of this Default Rate provision
could operate to compound some of the interest obligations due, and Borrower
hereby expressly assents to such compounding should it occur.
ARBITRATION. Lender and Borrower agree that:
(a) Any controversy or claim between or among the parties, including but not
limited to those arising out of or relating to this Agreement or any agreements
or instruments relating hereto or delivered in connection herewith, AND
including but not limited to a claim based on or arising from an alleged tort,
shall at the request of any party be determined by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
The arbitration proceedings shall be conducted in Las Vegas, Nevada. The
arbitrator(s) shall have the qualifications set forth in subparagraph (c)
hereto. All statutes of limitations which would otherwise be applicable in a
judicial action brought by a party shall apply to any arbitration or reference
proceeding hereunder.
(b) In any judicial action or proceeding arising out of or relating to this
Agreement or any agreements or Instruments relating hereto or delivered in
connection herewith, including but not limited to a claim based on or arising
from an alleged tort, if the controversy or claim is not submitted to
arbitration as provided and limited in subparagraph (a) hereto, all decisions
of fact and law shall be determined by a reference in accordance with Rule 53
of the Federal Rules of Civil Procedure or Rule 53 of the Nevada Rules of Civil
Procedure or other comparable, applicable reference procedure. The parties
shall designate to the court the referee(s) selected under the auspices of the
American Arbitration Association in the same manner as arbitrators are selected
in Association-sponsored arbitration proceedings. The referee(s) shall have
the qualifications set forth in subparagraph (c) hereto.
(c) The arbitrator(s) or referee(s) shall be selected in accordance with the
rules of the American Arbitration Association from panels maintained by the
Association. A single arbitrator or referee shall be knowledgeable in the
subject matter of the dispute. Where three arbitrators or referees conduct an
arbitration or reference proceeding, the claim shall be decided by a majority
vote of the three arbitrators or referees, at least one of whom must be
knowledgeable in the subject matter of the dispute and at least one of whom
must be a practicing attorney. The arbitrator(s) or referee(s) shall award
recovery of all costs and fees (including attorneys' fees, administrative fees,
arbitrator's fees and court costs). The arbitrator(s) or referee(s) also may
grant provisional or ancillary remedies such as, for example, injunctive
relief, attachment, or the appointment of a receiver, either during the
pendency of the arbitration or reference proceeding or as part of the
arbitration or reference award.
(d) Judgment upon an arbitration or reference award may be entered in any court
having jurisdiction, subject to the following limitation: the arbitration or
reference award is binding upon the parties only if the amount does not exceed
Two Million Dollars ($2,000,000); if the award exceeds that limit, either
party may commence legal action for a court trial de novo. Such legal action
must be filed within thirty (30) days following the date of the arbitration or
reference award; if such legal action is not filed within that time period, the
amount of the arbitration or reference award shall be binding. The computation
of the total amount of an arbitration or reference award shall include amounts
awarded for arbitration fees, attorneys' fees and all other related costs.
(e) At the Bank's option, foreclosure under a deed of trust or mortgage may be
accomplished either by exercise of a power of sale under the deed of trust or
mortgage or by judicial foreclosure. The institution and maintenance of an
action for judicial relief or pursuit of a provisional or ancillary remedy
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.
(f) Notwithstanding the applicability of other law to any other provision of
this Agreement, the Federal Arbitration Act, 9 U.S.C. Section 1 et seq., shall
apply to the construction and interpretation of this arbitration paragraph.
GENERAL PROVISIONS. 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, protest and notice of dishonor. 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;
and take any other action deemed necessary by Lender 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.
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 AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
x /s/ BOB STUPAK
-----------------------
BOB STUPAK
===============================================================================
<PAGE> 3
COMMERCIAL PLEDGE AND SECURITY AGREEMENT
<TABLE>
<CAPTION>
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$2,000,000.00 04-18-1996 10-18-1996 9011 81 1100 8102864 15575
</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.
BORROWER: BOB STUPAK (SSN: ###-##-####) LENDER: NEVADA STATE BANK
2000 LAS VEGAS BLVD. SOUTH CORPORATE BANKING
LAS VEGAS, NV 89101 201 SOUTH 4TH STREET
P.O. BOX 990
LAS VEGAS, NV 89125-0990
GRANTOR: BOB STUPAK ENTERPRISES, INC. (TIN: 88-0295282)
2000 LAS VEGAS BLVD. SOUTH
LAS VEGAS, NV 89101
================================================================================
THIS COMMERCIAL PLEDGE AND SECURITY AGREEMENT is entered into among Bob Stupak
(referred to below as "Borrower"); Bob Stupak Enterprises, Inc. (referred to
below as "Grantor"); and NEVADA STATE BANK (referred to below as "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.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement:
AGREEMENT. The word "Agreement" means this Commercial Pledge and Security
Agreement, as this Commercial Pledge and Security Agreement may be amended
or modified from time to time, together with all exhibits and schedules
attached to this Commercial Pledge and Security Agreement from time to time.
BORROWER. The word "Borrower" means each and every person or entity signing
the Note, including without limitation Bob Stupak.
COLLATERAL. The word "Collateral" means the following specifically
described property, which Grantor has delivered or agrees to deliver (or
cause to be delivered or appropriate book-entries made) immediately to
Lender, together with all income and Proceeds as described below:
50000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01699
50000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01700
50000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01701
50000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01702
50000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01703
50000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01704
50000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01705
50000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01706
25000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01707
25000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01708
25000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01709
25000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01710
25000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01711
25000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01712
25000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01713
25000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01714
25000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01715
25000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01716
25000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01717
25000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01718
2996.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01720
1000.000 SHARES OF STRATOSPHERE CORPORATION, CUSIP 863106 10 0
NUMBER S-01662
In addition, the word "Collateral" includes all property of Grantor, in the
possession of lender (or in the possession of a third party subject to the
control of Lender), whether now or hereafter existing and whether tangible
or intangible in character, including without limitation each of the
following:
(A) ALL PROPERTY TO WHICH LENDER ACQUIRES TITLE OR DOCUMENTS OF TITLE.
(B) ALL PROPERTY ASSIGNED TO LENDER.
(C) ALL PROMISSORY NOTES, BILLS OF EXCHANGE, STOCK CERTIFICATES, BONDS,
SAVING PASSBOOKS, TIME CERTIFICATES OF DEPOSIT, INSURANCE POLICIES, AND
ALL OTHER INSTRUMENTS AND EVIDENCES OF AN OBLIGATION.
(D) ALL RECORDS RELATING TO ANY OF THE PROPERTY DESCRIBED IN THIS
COLLATERAL SECTION, WHETHER IN THE FORM OF A WRITING, MICROFILM,
MICROFICHE, OR ELECTRONIC MEDIA.
EVENT OF DEFAULT. The words "Event of Default" means and include without
limitation any of the Events of Default set forth below in the section
tilted "Event of Default".
GRANTOR. The word "Grantor" means Bob Stupak Enterprises, Inc. Any Grantor
who signs this Agreement, but does not sign the Note, is signing this
Agreement only to grant a security interest in Grantor's interest in the
Collateral to Lender and is not personally liable under the Note except
as otherwise provided by contract or law (e.g., personal liability under
a guaranty or as a surety).
GUARANTOR. The work "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in connection
with the indebtedness.
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, distributions, 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, including all principal and interest, together with all other
indebtedness and costs and expenses for which Borrower or Grantor is
responsible under this Agreement or under any of the Related Documents. In
addition, the word "Indebtedness" includes all other obligations, debts and
liabilities, plus interest thereon, of Borrower, or any one or more of them,
to Lender, as well as all claims by Lender against Borrower, or any one or
more of them, whether existing now or later; whether they are voluntary or
involuntary, due or not due, direct or indirect, absolute or contingent,
liquidated or unliquidated; whether Borrower may be liable individually or
jointly with others; whether Borrower may be obligated as guarantor, surety,
accommodation party or otherwise; whether recovery upon such indebtedness
may be or hereafter may become barred by any statute of limitations; and
whether such indebtedness may be or hereafter may become otherwise
unenforceable.
LENDER. The word "Lender" means NEVADA STATE BANK, its successors and
assigns.
NOTE. The word "Note: means the note or credit agreement dated April 18,
1996 in the principal amount of $2,000,000.00 from Borrower to Lender,
together with all of renewals of, modifications of, refinancings of,
consolidations of and substitutions for the note of credit.
<PAGE> 4
04-18-1996 COMMERCIAL PLEDGE AND SECURITY AGREEMENT PAGE 2
LOAN NO 9011 (CONTINUED)
==============================================================================
agreement.
OBLIGOR. The word "Obligor" means and includes without limitation any and
all persons or entitles obligated to pay money or to perform some other act
under the Collateral.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
BORROWER'S WAIVERS AND RESPONSIBILITIES. Except as otherwise required under
this Agreement or by applicable law, (a) Borrower agrees that Lender need not
tell Borrower about any action or inaction Lender takes in connection with this
Agreement; (b) Borrower assumes the responsibility for being and keeping
informed about the Collateral; and (c) Borrower waives any defenses that may
arise because of any action or inaction of Lender, including without limitation
any failure of Lender to realize upon the Collateral or any delay by Lender in
realizing upon the Collateral; and Borrower agrees to remain liable under the
Note no matter what action Lender takes or fails to take under this Agreement.
GRANTOR'S REPRESENTATIONS AND WARRANTIES. Grantor warrants that: (a) this
Agreement is executed at Borrower's request and not at the request of Lender;
(b) Grantor has the full right, power and authority to enter into this
Agreement and to pledge the Collateral to Lender; (c) Grantor has established
adequate means of obtaining from Borrower on a continuing basis information
about Borrower's financial condition; and (d) Lender has made no representation
to Grantor about Borrower or Borrower's creditworthiness.
GRANTOR'S WAIVERS. Grantor waives all requirements of presentment, protest,
demand, and notice of dishonor or non-payment to Grantor, Borrower, or any
other party to the Indebtedness or the Collateral. Lender may do any of the
following with respect to any obligation of any Borrower, without first
obtaining the consent of Grantor: (a) grant any extension of time for any
payment, (b) grant any renewal, (c) permit any modification of payment terms or
other terms, or (d) exchange or release any Collateral or other security. No
such act or failure to act shall affect Lender's rights against Grantor or the
Collateral.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Grantor hereby forever waives and relinquishes in favor of
Lender and Borrower, and their respective successors, any claim or right to
payment Grantor may now have or hereafter have or acquire against Borrower, by
subrogation or otherwise, so that at no time shall Grantor 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.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory
security interest in and hereby assigns, conveys, delivers, pledges, and
transfers all of Grantor's right, title and interest in and to Grantor's
accounts with Lender (whether checking, savings, or some other account),
including all accounts held jointly with someone else and all accounts Grantor
may open in the future, excluding, however, all IRA and Keogh accounts, and all
trust accounts for which the grant of a security interest would be prohibited
by law. Grantor authorizes Lender, to the extent permitted by applicable law,
to charge or setoff all Indebtedness against any and all such accounts, and, at
Lender's option, to administratively freeze all such accounts to allow Lender
to protect Lender's charge and setoff rights provided in this paragraph.
GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. Grantor
represents and warrants 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.
BINDING EFFECT. This Agreement is binding upon Grantor, as well as
Grantor's heirs, successors, representatives and assigns, and is legally
enforceable in accordance with its terms.
NO FURTHER ASSIGNMENT. Grantor has not, and will 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 contained in the Collateral which are to be performed by
Grantor, if any.
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.
LENDER'S RIGHTS AND OBLIGATIONS WITH RESPECT TO COLLATERAL. Lender may hold
the Collateral until all the Indebtedness has been paid and satisfied and
thereafter may deliver the Collateral to any Grantor. Lender shall have the
following rights in addition to all other rights if 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
payment of any liens of claims against the Collateral. Lender may charge
any cost incurred in so doing to Grantor.
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 (a) extend time for payment or other
performance, (b) grant a renewal or change in terms of conditions, or (c)
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 and whether or not the office or branch where the
Indebtedness is created is aware of or relies upon the Collateral.
COLLECTION OF COLLATERAL. Lender, at Lender's option may, but need not,
collect directly from the Obligors on any of the Collateral all income and
Proceeds or other sums of money and other property due and to become due
under the Collateral, and Grantor authorizes and directs the Obligors, if
Lender exercises such option, to pay and deliver to Lender all Income and
Proceeds and other sums of money and other property payable by the terms of
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 and 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 request of Lender, 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 request of lender, Grantor will sign and deliver any
writings necessary to perfect Lender's security interest. If 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 its 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 or to
continue the security interest granted in this Agreement. THIS IS A
CONTINUING SECURITY AGREEMENT AND WILL CONTINUE IN EFFECT EVEN THOUGH ALL
OR ANY PART OF THE INDEBTEDNESS IS PAID IN FULL AND EVEN THOUGH FOR A
PERIOD OF TIME BORROWER MAY NOT BE INDEBTED TO LENDER.
EXPENDITURES BY LENDER, If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without
limitation all taxes, liens, security interests, encumbrances, and other
claims, at any time levied or placed on the collateral. Lender also may (but
shall not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender
for such purposes will then bear interest at the rate charged under the Note
from the date incurred or paid by Lender to the date of repayment by Grantor.
All such expenses shall 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 (i) the term of any applicable insurance policy or (ii) 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. This Agreement also will secure
payment of these amounts. Such
<PAGE> 5
04-18-1996 COMMERCIAL PLEDGE AND SECURITY AGREEMENT PAGE 3
LOAN NO 9011 (CONTINUED)
================================================================================
right shall be in addition to all other rights and remedies to which Lender may
be entitled upon the occurrences of an Event of 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, Lenders
shall have no liability for depreciation or deterioration of the Collateral.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due on
the Indebtedness.
OTHER DEFAULTS. Failure of Borrower or Grantor 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 failure of Borrower to comply with or to
perform any term, obligation, covenant or condition contained in any other
agreement between Lender and Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective obligations
under this Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or Grantor under this
Agreement, the Note or the Related Documents is false or misleading in any
material respect, either now or at the time made or furnished.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
documents to create a valid and perfected security interest or lien) at any
time and for any reason.
DEATH OR INSOLVENCY. The death of Borrower or Grantor or the dissolution or
termination of Borrower or Grantor's existence as a going business, the
insolvency of Borrower or Grantor, the appointment of a receiver for any part
of Borrower or 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 Borrower or
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 Borrower or Grantor or
by any governmental agency against the Collateral or any other Event of
Default shall not apply if there is a good faith dispute by Borrower or
Grantor as to the validity or reasonableness of the claim which is the basis
of the creditor or forfeiture proceeding and if Borrower or 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 any Guarantor of any of the Indebtedness or such Guarantor dies or becomes
incompetent. 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 the
Event of Default.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
INSECURITY. Lender, in good faith, deems itself insecure.
RIGHT TO CURE. If any default, other than a Default on Indebtedness, is
curable and if Borrower or Grantor has not been given a prior notice of a
breach of the same provision of this Agreement, it may be cured (and no Event
of Default will have occurred) if Borrower or Grantor, after Lender sends
written notice demanding cure of such default, (a) cures the default within
ten (10) days; or (b), if the cure requires more than ten (10) 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, including any prepayment
penalty which Borrower would be required to pay, immediately due and payable,
without notice of any kind to Borrower or 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,
or any of them, notice at least ten (10) days in advance of the time and place
of any public sale, or of the date after which any private sale may be made.
Grantor agrees that any requirement of reasonable notice is satisfied if
Lender mails notice by ordinary mail addressed to Grantor, or any of them,
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.
REGISTER SECURITIES. Register any securities included in the Collateral in
Lender's name and exercise any rights normally incident to the ownership of
securities.
SELL SECURITIES. Sell any securities included in the Collateral in a manner
consistent with applicable federal and state securities laws, notwithstanding
any other provision of this or any other agreement. If, because of
restrictions under such laws, Lender is or believes it is unable to sell the
securities in an open market transaction, Grantor agrees that Lender shall
have no obligation to delay sale until the securities can be registered, and
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, and such a sale shall 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 state securities departments
under state "Blue Sky" laws, or if Borrower or Grantor is an affiliate of the
issuer of the securities, Borrower and Grantor agree that neither Grantor nor
any agent of Grantor will sell or dispose of any securities of such issuer
without obtaining Lender's prior written consent.
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 its
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, attorney fees as
provided below, 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 Borrower to Lender, with any excess funds to be paid to Grantor as the
interests of Grantor may appear. Borrower agrees, to the extent permitted by
law, to pay any deficiency after application of the proceeds of the Collateral
to the Indebtedness.
CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether evidenced
by this Agreement 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 to 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.
APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF NEVADA. IF THERE IS A LAWSUIT, BORROWER AND GRANTOR
AGREE UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF
CLARK COUNTY, THE STATE OF NEVADA (INITIAL HERE _____). LENDER, BORROWER AND
GRANTOR HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM
<PAGE> 6
04-18-1996 COMMERCIAL PLEDGE AND SECURITY AGREEMENT PAGE 4
LOAN NO 9011 (CONTINUED)
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BROUGHT BY EITHER LENDER, BORROWER OR GRANTOR AGAINST THE OTHER. THIS
AGREEMENT SHALL BE GOVERNED BY CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEVADA.
ATTORNEY'S FEES; EXPENSES. Borrower and Grantor agree to pay upon demand
all of Lender's costs and expenses, including attorney's fees and Lender's
legal expenses, incurred in connection with the enforcement of this
Agreement. Lender may pay someone else to help enforce this Agreement, and
Borrower and Grantor shall pay the costs and expense of such enforcement.
Costs and expenses include Lender's attorneys' fees and legal expenses
whether or not there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (and including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgement collection services. Borrower and 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.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimilies, and shall be effective
when actually delivered or when deposited with a nationally recognized
overnight courier or deposited in the United States mail, first class,
postage prepaid, addressed to the party to whom the notice is to be given
at the address shown above. 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. To the extent permitted by applicable law, if there is more than
one Borrower or Grantor, notice to any Borrower or Grantor will constitute
notice to all Borrower and Grantors. For notice purposes, Borrower and
Grantor will keep Lender informed at all times of Borrower and Grantor's
current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validly; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
SUCCESSOR INTEREST. Subject to the limitations set forth above on the
Collateral, this Agreement shall be binding upon and inure to the benefit
of the parties, their successor and assigns.
WAIVER. 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.
ARBITRATION. Lender and Borrower agree that:
(a) Any controversy or claim between or among the parties, including but not
limited to those arising out of or relating to this Agreement or any agreements
or instruments relating hereto or delivered in connection herewith, AND
including but not limited to a claim based on or arising from an alleged tort,
shall at the request of any party be determined by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
The arbitration proceedings shall be conducted in Las Vegas, Nevada. The
arbitrator(s) shall have the qualifications set forth in subparagraph (c)
hereto. All statutes of limitations which would otherwise be applicable in a
judicial action brought by a party shall apply to any arbitration or reference
proceeding hereunder.
(b) In any judicial action or proceeding arising out of or relating to this
Agreement or any agreements or instruments relating hereto or delivered in
connection herewith, including but not limited to a claim based on or arising
from an alleged tort, if the controversy or claim is not submitted to
arbitration as provided and limited in subparagraph (a) hereto, all decisions
of fact and law shall be determined by a reference in accordance with Rule 53
of the Federal Rules of Civil Procedure or Rule 53 of the Nevada Rules of Civil
Procedure or other comparable, applicable reference procedure. The parties
shall designate to the court the referee(s) selected under the auspices of the
American Arbitration Association in the same manner as arbitrators are selected
in Association-sponsored arbitration proceedings. The referee(s) shall have the
qualifications set forth in subparagraph(c) hereto.
(c) The arbitrator(s) or referee(s) shall be selected in accordance with the
rules of the American Arbitration Association form panels maintained by the
Association. A single arbitrator or referee shall be knowledgeable in the
subject matter of the dispute. Where three arbitrators or referees conduct an
arbitration or reference proceeding, the claim shall be decided by a majority
vote of the three arbitrators or referees, at least one of whom must be
knowledgeable in the subject matter of the dispute and at least one of whom
must be a practicing attorney. The arbitrator(s) or referee(s) shall award
recovery of all costs and fees (including attorney's fees, administrative fees,
arbitrator's fees and court costs). The arbitrator(s) or referee(s) also may
grant provisional or ancillary remedies such as, for example, injunctive relief,
attachment, or the appointment of a receiver, either during the pendency of the
arbitration or reference proceeding or as part of the arbitration or reference
award.
(d) Judgment upon an arbitration or reference award may be entered in any
court having jurisdiction, subject to the following limitation: the
arbitration or reference award is binding upon the parties only if the amount
does not exceed Two Million Dollars ($2,000,000); if the award exceeds that
limit, either party may commence legal action for a court trial de novo. Such
legal action must be filed within thirty (30) days following the date of the
arbitration or reference award; if such legal action is not filed within that
time period, the amount of the arbitration of reference award shall be
binding. The computation of the total amount of an arbitration or reference
award shall include amounts awarded for arbitration fees, attorney's fees and
all other related costs.
(e) At the Bank's option, foreclosure under a deed of trust or mortgage may be
accomplished either by exercise of a power of sale under the deed of trust or
mortgage or by judicial foreclosure. The institution and maintenance of an
action for judicial relief or pursuit of a provisional or ancillary remedy
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.
(f) Notwithstanding the applicability of other law to any other provision of
this Agreement, the Federal Arbitration Act, 9 U.S.C. Section 1 et seq., shall
apply to the construction and interpretation of this arbitration paragraph.
BORROWER AND GRANTOR ACKNOWLEDGE HAVING READ ALL THE PROVISIONS OF THIS PLEDGE
AND SECURITY AGREEMENT, AND BORROWER AND GRANTOR AGREE TO ITS TERMS. THIS
AGREEMENT IS DATED APRIL 18, 1996.
BORROWER:
/s/ BOB STUPAK
- ----------------------------
BOB STUPAK
GRANTOR:
BOB STUPAK ENTERPRISES, INC.
/s/ ROBERT STUPAK
By:-------------------------
ROBERT STUPAK, PRESIDENT
<PAGE> 1
Exhibit 2
SOUTHWEST SECURITIES, INC.
Account Account Office/A.E.
Name BOB STUPAK Number 7549-0212 Number: 430 7773
--------------------- ------------------- ----------------
MARGIN AND SHORT ACCOUNT
CUSTOMER AGREEMENT
In consideration for Southwest Securities, Inc. (Southwest) and the
Broker/Dealer for whom it clears, if any, (hereinafter including Southwest and
called the Broker) opening or maintaining one or more accounts (the "Account")
for the undersigned (the "Customer"), the Customer agrees to the terms and
conditions contained in this Agreement. For the purposes of this Agreement,
"securities and other property" means, but is not limited to, money,
securities, financial instruments and commodities of every kind and nature and
related contracts and options. This definition includes securities or other
property currently or hereafter held, carried or maintained by the Broker or by
any of the Broker's affiliates, or in the Broker's possession or control, or in
the possession or control of any such affiliate, for any purpose, in and for
any of my accounts now or hereafter opened, including any account in which I
may have an interest.
1. APPLICABLE RULES AND REGULATIONS
All transactions in the Customer's Account shall be subject to the
constitution, rules, regulations, customs and usages of the exchange or market,
and its clearing house, if any, where the transactions are executed by the
Broker or its agents, including its subsidiaries and affiliates. Also, where
applicable, the transaction shall be subject (a) to the provisions of (1) the
Securities Exchange Act of 1934, as amended, and (2) the Commodities Exchange
Act, as amended; and (b) to the rules and regulations of (1) the Securities
Exchange Commission, (2) the Board of Governors of the Federal Reserve System
and (3) the Commodities Futures Trading Commission.
2. AGREEMENT CONTAINS ENTIRE UNDERSTANDING/ASSIGNMENT
This Agreement contains the entire understanding between the Customer
and the Broker concerning the subject matter of this Agreement. Customer may
not assign the rights and obligations hereunder without first obtaining the
prior written consent of a duly authorized officer of Southwest.
3. SEVERABILITY
If any provision of this Agreement is held to be invalid, void or
unenforceable by reason of any law, rule, administrative order or judicial
decision, that determination shall not affect the validity of the remaining
provisions of this Agreement.
4. WAIVER
Except as specifically permitted in this Agreement, no provision of
this Agreement can be, nor be deemed to be, waived, altered, modified or
amended unless such is agreed to in writing signed by a duly authorized officer
of Southwest.
5. DELIVERY OF SECURITIES
Without abrogating any of the Broker's rights under any other portion
of this Agreement and subject to any indebtedness of the Customer to the
Broker, the Customer is entitled, upon appropriate demand, to receive physical
delivery of fully paid securities in the Customer's Account.
6. LIENS
All securities and other property of the Customer in any account in
which the Customer has an interest shall be subject to a lien for the discharge
of any and all indebtedness or any other obligation of the Customer to the
Broker. All securities and other property of the Customer shall be held by the
Broker as security for the payment of any such obligations or indebtedness to
the Broker in any account that the Customer may have an interest, and the
Broker, subject to applicable law may, at any time and without prior notice to
the Customer, use and/or transfer any or all securities and other property
interchangeably in any account(s) in which the Customer has an interest.
7. PLEDGE OF SECURITIES AND OTHER PROPERTY
Within the limitations imposed by applicable laws, rules and
regulations, all securities and other property of the Customer may be pledged
and repledged and hypothecated and rehypothecated by Southwest from time to
time, without notice to the Customer, either separately or in common with such
other securities and other property of other bona fide Customers of Southwest,
for any amount due to Southwest in the Customer's Account(s). Southwest may do
so without retaining in its possession or under its control for delivery a like
amount of similar securities or other property.
8. INTEREST
Debit balances of the Account(s) of the Customer shall be charged with
interest in accordance with the Broker's established custom, as disclosed to
the Customer in the Customer Information Brochure pursuant to the provisions of
Rule 10b-16 of the Securities Exchange Act.
9. DISCLOSURES REGARDING LIQUIDATIONS AND COVERING POSITIONS
The Customer should clearly understand that, notwithstanding a general
policy of giving Customers notice of a margin deficiency, the Broker is not
obligated to request additional margin from the customer in the event the
Customer's account falls below minimum maintenance requirements. More
importantly, there may be circumstances where the Broker will liquidate
securities and/or other property in the account without notice to the customer
to ensure that minimum maintenance requirements are satisfied.
10. LIQUIDATIONS AND COVERING POSITIONS
The Broker shall have the right in accordance with its general policies
regarding margin maintenance requirements to require additional collateral or
the liquidation of any securities and other property whenever in the Broker's
discretion it considers it necessary for its protection including in the event
of, but not limited to: The failure of the Customer to promptly meet any call
for additional collateral; the filing of a petition in bankruptcy by or against
the customer; the appointment of a receiver is filed by or against customer; an
attachment is levied against any account of the Customer or in which the
Customer has an interest or; the Customer's death. In such event, the Broker
is authorized to sell any and all securities and other property which may be
short in such account(s), to cancel any open orders and to close any or all
outstanding contracts, all without demand for margin or additional margin,
other notice of sale or purchase, or other notice or advertisement each of
which is expressly waived by the customer. Any such sales or purchases may be
made at the Broker's discretion on any exchange or other market where such
business is usually transacted or at public auction or private sale, and the
Broker may be the purchaser for the Broker's own account. It is understood
that a prior demand, or call, or prior notice of the time and place of such
sale or purchase shall not be considered a waiver of the Broker's right to sell
or buy without demand or notice as herein provided.
By signing this agreement the customer acknowledges that:
1. The securities in the customer's margin account may be loaned
to the Broker or loaned out to others and;
2. That the customer has received and read a copy of this agreement
and;
3. Additional terms and conditions of this agreement are on the
reverse side.
THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE IN PARAGRAPH 12.
11. ARBITRATION DISCLOSURES
- ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
- THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT,
INCLUDING THE RIGHT TO JURY TRIAL.
- PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT
FROM COURT PROCEEDINGS.
- THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR
LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK
MODIFICATION OF RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED.
- THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF
ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
12. ARBITRATION
THE CUSTOMER AGREES, AND, BY CARRYING AN ACCOUNT FOR THE CUSTOMER,
BROKER AGREES THAT ALL CONTROVERSIES WHICH MAY ARISE BETWEEN US CONCERNING ANY
TRANSACTION OR THE CONSTRUCTION, PERFORMANCE, OR BREACH OF THIS OR ANY OTHER
AGREEMENT BETWEEN US PERTAINING TO SECURITIES AND OTHER PROPERTY, WHETHER
ENTERED INTO PRIOR, ON OR SUBSEQUENT TO THE DATE HEREOF, SHALL BE DETERMINED BY
ARBITRATION. ANY ARBITRATION UNDER THIS AGREEMENT SHALL BE CONDUCTED PURSUANT
TO THE FEDERAL ARBITRATION ACT AND THE LAWS OF THE STATE DESIGNATED IN PARAGRAPH
20, BEFORE THE NEW YORK STOCK EXCHANGE, INC. OR AN ARBITRATION FACILITY PROVIDED
BY ANY OTHER EXCHANGE OF WHICH THE BROKER IS A MEMBER, OR THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. OR THE MUNICIPAL SECURITIES RULEMAKING
BOARD AND IN ACCORDANCE WITH THE RULES THEN PREVAILING AT THE SELECTED
ORGANIZATION. THE CUSTOMER MAY ELECT IN THE FIRST INSTANCE WHETHER ARBITRATION
SHALL BE BY AN EXCHANGE OR SELF-REGULATORY ORGANIZATION OF WHICH THE BROKER IS A
MEMBER, BUT IF THE CUSTOMER FAILS TO MAKE SUCH ELECTION, BY REGISTERED LETTER OR
TELEGRAM ADDRESSED TO THE BROKER AT THE BROKER'S MAIN OFFICE, BEFORE THE
EXPIRATION OF TEN DAYS AFTER RECEIPT OF A WRITTEN REQUEST FROM THE BROKER TO
MAKE SUCH ELECTION, THEN THE BROKER MAY MAKE SUCH ELECTION. THE AWARD OF THE
ARBITRATORS, OR OF THE MAJORITY OF THEM, SHALL BE FINAL, AND JUDGMENT UPON THE
AWARD RENDERED MAY BE ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING
JURISDICTION. FURTHER, NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS
ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT
AGAINST ANY PERSON WHO HAS INITIATED IN COURT A PUTATIVE CLASS ACTION, WHO IS A
MEMBER OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO
ANY CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL: (i) THE CLASS
CERTIFICATION IS DENIED; (ii) THE CLASS IS DECERTIFIED; OR (iii) THE CUSTOMER IS
EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE TO ENFORCE AN AGREEMENT
TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THIS AGREEMENT
EXCEPT TO THE EXTENT STATED HEREIN.
13. MARGIN
The Customer agrees to maintain in all accounts with the Broker such
positions and margins as required by all applicable statutes, rules,
regulations, procedures and custom, or as the Broker deems necessary or
advisable. The Customer agrees to promptly satisfy all margin and maintenance
calls.
14. SATISFACTION OF INDEBTEDNESS
The Customer agrees to satisfy, upon demand, any indebtedness, and to
pay any debit balance remaining when the Customer's Account is closed, either
partially or totally. Customer Account(s) may not be closed without the Broker
first receiving all securities and other property for which the Account is short
and all funds to pay in full for all securities and other property in which the
Account(s) are long.
15. TRANSACTIONS AND SETTLEMENTS
All orders for the purchase or sale of securities and other property
will be authorized by the Customer and executed with the understanding that an
actual purchase or sale is intended and that it is the Customer's intention and
obligation in every case to deliver certificates or commodities to cover any and
all sales or to receive any pay for certificates or commodities upon the
Broker's demand. If the Broker makes a short sale of any securities and other
property at the Customer's direction; or if the Customer fails to deliver to the
Broker any securities and other property that the Broker has sold at the
Customer's direction, the Broker is authorized to borrow the securities and
other property necessary to enable the Broker to make delivery and the Customer
agrees to be responsible for any cost or loss the Broker may incur, or the cost
of obtaining the securities and other property if the Broker is unable to borrow
it. The Broker is the Customer's agent to complete all such transactions and is
authorized to make advances and expend monies as are required.
16. SALES BY CUSTOMER
The Customer understands and agrees any order to sell "short" will be
designated as such by the Customer, and that the Broker will mark the order as
"short". All other sell orders will be for securities owned ("long"), at that
time, by the Customer. By placing the order the Customer affirms that he will
deliver the securities on or before the settlement date.
17. BROKER AS AGENT
The Customer understands that the Broker is acting as the Customer's
agent unless the Broker notifies the Customer, in writing before the settlement
date for the transaction, that the Broker is acting as a dealer for its own
account or as agent for some other person.
18. CONFIRMATIONS AND STATEMENTS
Confirmations of transactions and statements for the Customer's
Account(s) shall be binding upon the Customer if the Customer does not object,
in writing, within ten days after receipt by the Customer. Notice or other
communications including margin and maintenance calls delivered to the
customer's address of record, until the Broker has received notice in writing of
a different address, shall be deemed to have been personally delivered to the
Customer whether actually received or not.
19. BINDING UPON CUSTOMER'S ESTATE
Customer hereby agrees that this Agreement and all the terms thereof
shall be binding upon Customer's heirs, executors, administrators, personal
representatives and assigns.
20. CHOICE OF LAWS
This agreement shall be deemed to have been made in the State of Texas
and shall be construed, and the rights and liabilities of the parties
determined, in accordance with the laws of the State of Texas.
21. CAPACITY TO CONTRACT, CUSTOMER AFFILIATION
By signing the agreement, the Customer represents that he/she is of
legal age, and that he/she is not an employee of any exchange, or of any
corporation of which any exchange owns a majority of the capital stock, or of a
member of any exchange, or of a member firm or member corporation registered on
any exchange, or of a bank, trust company, insurance company or of any
corporation, firm or individual engaged in the business of dealing, either as
broker or as principal, in securities, bills of exchange, acceptances or other
forms of commercial paper, and that the Customer will promptly notify the Broker
in writing if the Customer is now or becomes so employed. The Customer also
represents that no one except the Customer has an interest in the account or
accounts of the Customer with you.
22. LOAN OR PLEDGE OF SECURITIES
The Customer hereby authorizes Southwest to lend either to itself or to
others any securities held by Southwest in the Customer's margin account and to
carry such property in its general loans. Such property may be pledged,
repledged or hypothecated, either separately or in common with others such
property for any amounts due to Southwest thereon or for a greater sum, and
Southwest shall have no obligation to retain a like amount of similar property
in its possession and control.
DATED: (x) [SIG]
-------------------------------- -------------------------------------
Customer Signature
(x)
- -------------------------------------- -------------------------------------
(City) (State) Customer Signature (If Joint Account)
ORIGINAL TO: SOUTHWEST SECURITIES, INC. COPY: CUSTOMER'S COPY
