1
EXHIBIT 99.2
EXECUTION COPY
RESTRUCTURING AGREEMENT
REGARDING PRE-NEGOTIATED
PLAN OF REORGANIZATION
STRATOSPHERE CORPORATION
STRATOSPHERE GAMING CORP.
and
GRAND CASINOS, INC.
and
MEMBERS OF AD HOC COMMITTEE OF HOLDERS OF
$203,000,000 OF 14 1/4% FIRST MORTGAGE NOTES DUE 2002
January 6, 1997
Las Vegas, Nevada
2
TABLE OF CONTENTS
Page
Article 1
Definitions........................................................................... 1
Article 2
General Terms of Restructuring........................................................ 6
Article 3
Treatment of Notes and Existing Common Stock.......................................... 6
Section 3.1 Exchange of Notes for Restated Notes .......................... 6
Section 3.2 Interest on Notes ............................................. 7
Section 3.3 Cancellation of Existing Common Stock ......................... 7
Section 3.4 Forbearance by Noteholders..................................... 7
Section 3.5 Transfer by Noteholders ....................................... 7
Article 4
Restated Notes ........................................................................ 8
Section 4.1 Issuance of Restated Notes .................................... 8
Section 4.2 Terms of Restated Notes ....................................... 8
Principal Amount ........................................ 8
Maturity Date ........................................... 8
Fixed Interest .......................................... 8
Contingent Interest ..................................... 9
Priority ................................................ 11
Security ................................................ 11
Guarantee ............................................... 12
Optional Redemption ..................................... 12
Section 4.3 New Indenture ................................................. 12
Article 5
Rights Offering and Grand Investment ................................................. 12
Section 5.1 Terms of Rights Offering ..................................... 12
Section 5.2 Grand Participation in Rights Offering ....................... 13
Section 5.3 Conversion of Existing Grand Indebtedness
and Other Consideration ..................................... 13
Section 5.4 Discharge of Standby Equity Commitment ....................... 14
i
3
Page
Article 6
Phase II Completion Guarantee ......................................................... 14
Section 6.1 Terms of Phase II Completion Guarantee ........................ 14
Section 6.2 Procedures for Completion ..................................... 15
Section 6.3 Repayment Obligations and Subordination ....................... 15
Article 7
Escrow Arrangements ................................................................... 15
Section 7.1 Construction Escrow Account ................................... 15
Section 7.2 Amendments to Budget .......................................... 15
Article 8
Bankruptcy Process .................................................................... 16
Section 8.1 Bankruptcy Filing ............................................. 16
Section 8.2 Plan of Reorganization and Related Documents .................. 16
Section 8.3 Support of the Plan ........................................... 16
Section 8.4 No Improper Solicitation ...................................... 17
Section 8.5 Noteholder Committee .......................................... 17
Section 8.6 Conduct of Business Pending the Closing Date .................. 17
Section 8.7 Public Announcements .......................................... 18
Article 9
Other Agreements ...................................................................... 18
Section 9.1 Stratosphere Lease Facility ................................... 18
Section 9.2 Securities Litigation ......................................... 18
Section 9.3 Management Agreement .......................................... 18
Section 9.4 Alternative Transactions ...................................... 19
Section 9.5 Termination Fee ............................................... 20
Section 9.6 Professional Fees ............................................. 20
Section 9.7 Vacation Packages ............................................. 21
Article 10
Closing Conditions .................................................................... 21
Section 10.1 Conditions to Grand Obligations ............................... 21
Section 10.2 Conditions to Noteholder Obligations .......................... 24
Section 10.3 Conditions to Stratosphere Obligations ........................ 26
ii
4
Page
Article 11
Miscellaneous ......................................................................... 27
Section 11.1 Successors and Assigns ........................................ 27
Section 11.2 Settlement .................................................... 27
Section 11.3 Notices ....................................................... 27
Section 11.4 Amendments .................................................... 29
Section 11.5 Applicable Law ................................................ 30
Section 11.6 Headings ...................................................... 30
Section 11.7 Counterparts .................................................. 30
Section 11.8 Entire Agreement .............................................. 30
Section 11.9 Time Is of the Essence ........................................ 30
Section 11.10 Additional Noteholders......................................... 30
Section 11.11 Term of Agreement ............................................. 30
Exhibit A - Phase II Budget
iii
5
This RESTRUCTURING AGREEMENT dated as of January 6, 1997 (this "Agreement") is
by and among STRATOSPHERE CORPORATION, a Delaware corporation ("Stratosphere"),
STRATOSPHERE GAMING CORP., a Nevada corporation ("Gaming Corp."), GRAND
CASINOS, INC., a Minnesota corporation ("Grand"), CARGILL FINANCIAL SERVICES
CORPORATION ("Cargill"), M.D. SASS ASSOCIATES, INC. ("Sass"), and XXXXX
XXXXXXXX LTD. ("Grace") (together with Cargill, Sass, and any other holder of
Notes that may become a party to the Agreement pursuant to Section 11.10, the
"Noteholders").
RECITALS
WHEREAS, pursuant to that certain Indenture dated as of March 9, 1995 (the
"Indenture") by and among Stratosphere, Gaming Corp. and American Bank National
Association, a national banking association (the "Trustee"), as trustee
thereunder, Stratosphere has issued $203,000,000 principal amount of its
14-1/4% First Mortgage Notes due 2002 with Contingent Interest (the "Notes");
WHEREAS, Grand is the beneficial owner of a substantial equity interest in
Stratosphere and has executed that certain Notes Completion Guarantee dated as
of March 9, 1995 (the "Completion Guarantee") for the benefit of the holders of
the Notes (the "Holders"), pursuant to which Grand has previously advanced or
paid an aggregate of $50,000,000 thereunder;
WHEREAS, pursuant to the Completion Guarantee, all amounts advanced or
paid by Grand thereunder constitute subordinated loans to Stratosphere from
Grand and accrue interest at the rate of 14-1/4% per annum; and
WHEREAS, Stratosphere and Gaming Corp. are currently in default of certain
of their obligations with respect to the Notes including, among other things,
Stratosphere's failure to make an interest payment due thereunder on November
15, 1996, which failure constitutes an "Event of Default" under the Indenture.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby covenant and agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
"Agreement" means this Restructuring Agreement.
1
6
"Alternative Transaction" shall have the meaning set forth in Section
9.4(a).
"Approvals" shall have the meaning set forth in Section 10.1(m).
"Bankruptcy Code" means the Bankruptcy Reform Act of 0000, Xxxxx 00,
Xxxxxx Xxxxxx Code, as now in effect or hereafter amended, 11 U.S.C. Sections
101 et seq.
"Bankruptcy Court" means the United States Bankruptcy Court for the
District of Nevada.
"Chapter 11 Case" shall have the meaning set forth in Article 2.
"Closing" shall mean the completion of the transactions to occur on the
Closing Date as provided herein.
"Closing Date" means the date on which the Closing occurs.
"Completion Guarantee" shall have the meaning set forth in the Recitals to
this Agreement.
"Confirmation Date" means the date upon which the Bankruptcy Court enters
its order confirming the Plan.
"Consolidated Cash Flow" means, with respect to Stratosphere for any
period, the Consolidated Net Income of Stratosphere for such period plus (a) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an asset sale, to the extent such losses were deducted in computing
Consolidated Net Income, plus (b) provision for taxes based on income or
profits of Stratosphere for such period, to the extent such provision for taxes
was included in computing Consolidated Net Income, plus (c) Consolidated
Interest Expense of Stratosphere for such period, plus (d) Consolidated
Depreciation and Amortization Expense of Stratosphere for such period, to the
extent such depreciation and amortization were deducted in computing
Consolidated Net Income, plus (e) the amount of all fees, costs and expenses
(including legal, accounting and other advisory fees and expenses) incurred by
Stratosphere in connection with the Restructuring that would not have been
incurred but for the Restructuring, to the extent that such fees, costs and
expenses were deducted in computing Consolidated Net Income, plus (f) the
amount of all payments to Grand except for payments in the ordinary course of
Stratosphere's business which reflect market terms at least as favorable to
Stratosphere as terms available from a third-party vendor, to the extent that
such payments were deducted in computing Consolidated Net Income, in each case
on a consolidated basis for Stratosphere and its consolidated subsidiaries and
determined in accordance with GAAP, plus (g) the amount of any reserve taken by
Stratosphere against receivables due to Stratosphere from Xxx Xxxxxx
representing Stupak's obligations to reimburse Stratosphere for the cost of
servicing vacation packages previously sold by Stupak, plus (h) the amount of
any reserve established by Stratosphere representing the estimated future costs
of servicing designated vacation packages pursuant to the Stupak Agreement (as
defined in Section 9.7).
2
7
"Consolidated Depreciation and Amortization Expense" means with respect to
Stratosphere for any period, the total amount of depreciation and amortization
expense and other noncash charges (excluding any noncash item that represents
an accrual, reserve or amortization of a cash expenditure for a past, present
or future period) of Stratosphere and its consolidated subsidiaries for such
period on a consolidated basis as defined in accordance with GAAP.
"Consolidated Interest Expense" means, with respect Stratosphere for any
period, the sum of (a) consolidated interest expense of Stratosphere and its
consolidated subsidiaries for such period, whether paid or accrued, to the
extent such expense was deducted in computing Consolidated Net Income
(including amortization of original issue discount and deferred financing fees,
non-cash interest payments, the interest component of obligations under the
Stratosphere Lease Facility, and net payments (if any) pursuant to hedging
obligations, excluding amortization of deferred financing fees), (b)
consolidated capitalized interest of Stratosphere and its consolidated
subsidiaries for such period, whether paid or accrued, to the extent such
expense was deducted in computing Consolidated Net Income, (c) commissions,
discounts and other fees and charges paid or accrued with respect to letters of
credit and bankers' acceptance financing, (d) to the extent not included above,
the maximum amount of interest which would have to be paid by Stratosphere or
its consolidated subsidiaries under a guarantee of indebtedness of any other
person if such guarantee were called upon, and (e) to the extent not included
above, Contingent Interest (as defined in the Indenture), whether paid or
accrued, to the extent such expense was deducted in computing Consolidated Net
Income.
"Consolidated Net Income" means, with respect to Stratosphere for any
period, the aggregate of the Net Income of Stratosphere and its consolidated
subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that (i) the Net Income for such period of any
person that is not a consolidated subsidiary, or that is accounted for by the
equity method of accounting, shall be included only to the extent of the amount
of dividends or distributions paid in cash (or to the extent converted into
cash) to the referent person or a wholly owned subsidiary thereof in respect of
such period, (ii) the Net Income of any person acquired in a pooling of
interests transaction shall not be included for any period prior to the date of
such acquisition, (iii) the Net Income for such period of any consolidated
subsidiary shall be excluded to the extent that the declaration of payment of
dividends or similar distributions by that subsidiary of its Net Income is not
as of the date of determination permitted without any prior governmental
approval (which has not been obtained) or, directly or indirectly, by the
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
subsidiary or its stockholders, unless such restriction with respect to the
payment of dividends or in similar distributions has been legally waived, (iv)
the cumulative effect of a change in accounting principles shall be excluded,
(v) any extraordinary and non-recurring items shall be excluded, and (vi)
interest earned on cash or cash equivalents held by or for the benefit of
Stratosphere during the period from November 15, 1996 through the Closing Date
shall be excluded.
"Escrow Account" shall have the meaning set forth in Section 7.1
3
8
"Existing Common Stock" means the common stock, $0.01 par value, of
Stratosphere issued and outstanding on the Closing Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession.
"Gaming Corp." shall have the meaning set forth in the Preamble to this
Agreement.
"Grand" shall have the meaning set forth in the Preamble to this
Agreement.
"Holders" shall have the meaning set forth in the Recitals to this
Agreement.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the regulations promulgated thereunder.
"Indenture" shall have the meaning set forth in the Recitals to this
Agreement.
"Management Agreement" shall have the meaning set forth in Section 9.3.
"Net Income" means, with respect to any person, the net income (loss) of
such person, determined on accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with any asset sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) and any
disposition of securities or extinguishment of indebtedness of such person or
any of its consolidated subsidiaries, and (ii) excluding any extraordinary gain
(but not loss), together with any related provision for taxes on such
extraordinary gain (but not loss).
"Noteholders" shall have the meaning set forth in the Preamble to this
Agreement.
"Notes" shall have the meaning set forth in the Recitals to this
Agreement.
"Operating Pleadings" shall have the meaning set forth in Section 8.1.
"Petition Pleadings" shall have the meaning set forth in Section 8.1
"Phase II" shall mean Stratosphere's planned construction of additional
facilities, and improvements to existing facilities, at its resort complex
located in Las Vegas, Nevada, consisting of: (i) completion of construction of
a new guest room tower of at least 1,000 bays, including the acquisition of all
necessary furniture, fixtures and equipment; (ii) completion of recreation and
swimming pool facilities; (iii) landscape and hardscape at areas adjacent to
the new guest tower,
4
9
including facade upgrade of floors one through three; (iv) landscape and
fencing at site of proposed aquarium building; (v) mechanical connection and
piping from the existing Phase I central plant; (vi) build-out of Kids Quest
facility, consisting of at least 12,500 square feet; and (vii) renovation of
existing resort facilities, including baggage storage, gift shop and gift kiosk
remodel, Sisters remodel, tower queue remodel, and porte cochere modifications.
"Phase II Budget" shall have the meaning set forth in Section 7.3.
"Phase II Completion Guarantee" shall have the meaning set forth in
Section 6.1.
"Plan" shall mean the pre-negotiated plan of reorganization to be proposed
by Stratosphere and Gaming Corp. consistent with this Agreement.
"Plan Related Documents" shall have the meaning set forth in Section 8.2.
"Restated Indenture" means the Indenture, as amended and restated in
connection with the Restructuring as described herein.
"Restated Notes" means amended and restated Notes which shall be issued in
exchange and substitution for the Notes as provided in Article 4 hereof.
"Restated Notes Trustee" shall have the meaning set forth in Section 4.3.
"Restructuring" shall have the meaning set forth in Article 2.
"Rights Offering" shall have the meaning set forth in Section 5.1.
"SEC" shall have the meaning set forth in Section 5.1.
"Securities Act" means the Securities Act of 1933, as amended, and the
regulations promulgated thereunder.
"Standby Equity Commitment" means that certain Standby Equity Commitment
between Grand and Stratosphere dated March 9, 1995.
"Stratosphere" shall have the meaning set forth in the Preamble to this
Agreement.
"Stratosphere Lease Facility" shall have the meaning set forth in Section
9.1.
"Stratosphere Securities Claims" shall have the meaning set forth in
Section 9.2.
"Stupak Agreement" shall have the meaning set forth in Section 9.7.
"Subsidiary Guarantee" shall mean the unconditional guarantee by Gaming
Corp. of Stratosphere's obligations under the Notes and the Indenture, as
amended and restated in connection with the Restructuring as described in
Section 4.2, to provide for the unconditional
5
10
guarantee by Gaming Corp. of Stratosphere's obligations under the
Restated Notes and the Restated Indenture.
"Termination Fee" shall have the meaning set forth in Section 9.5.
"Trustee" shall have the meaning set forth in the Recitals to this
Agreement.
"Unit" shall have the meaning set forth in Section 3.1.
ARTICLE 2
GENERAL TERMS OF RESTRUCTURING
The parties to this Agreement have agreed in principle to a restructuring
of Stratosphere and Gaming Corp. which shall be implemented by a Chapter 11
filing by Stratosphere and Gaming Corp. in Las Vegas, Nevada (the
"Restructuring"). Specifically, Stratosphere and Gaming Corp. shall file a
petition for relief under Chapter 11 of the Bankruptcy Code (collectively, the
Chapter 11 Case) and shall propound a pre-negotiated plan of reorganization
that provides for, among other things: (a) the issuance of the Restated Notes
in exchange for the Notes; (b) the cancellation of the Existing Common Stock,
and any options, warrants or other rights to acquire any common stock of
Stratosphere; (c) a $75,000,000 rights offering to holders of the Existing
Common Stock to purchase one unit for each share of the Existing Common Stock
held, at a price of $1.31 per unit, with each unit consisting of one share of
the New Common Stock and, for each Unit other than the Units purchased by Grand
as its pro rata share of the Rights Offering, one three-year warrant to
purchase one-half of a share of the New Common Stock at a price of $1.50 for
each one-half share purchased; (d) the purchase by Grand of its pro rata share
in the rights offering and Grand's agreement to provide standby funding with
respect to any unpurchased Units; (e) the conversion of indebtedness owing from
Stratosphere to Grand in respect of reimbursement of advances under the
Completion Guarantee into shares of New Common Stock; (f) the resolution of
certain pending securities litigation against Stratosphere, certain of its
directors and officers and Grand; and (g) the execution of a management
agreement between Stratosphere and Grand pursuant to which Grand shall manage
the construction of Phase II and the day-to-day operations of Stratosphere.
The summary of the Restructuring set forth in this Article 2 is qualified in
its entirety by the other provisions of this Agreement, which provide a more
detailed description of the terms and conditions of the Restructuring.
ARTICLE 3
TREATMENT OF NOTES AND EXISTING COMMON STOCK
Section 3.1 Exchange of Notes for Restated Notes. On the Closing Date:
(a) the Notes shall be amended and restated to reflect the terms of the
Restructuring, and Restated Notes shall be issued to each registered holder of
Notes, with each such registered holder to receive Restated Notes having an
aggregate original principal amount equal to the principal amount of the Notes
6
11
held by such registered holder; (b) all Notes shall be canceled and the holders
thereof shall have no further rights thereunder, other than certain rights to
receive accrued interest, payable in kind by the issuance of Restated Notes, as
described in Section 3.2; (c) Stratosphere shall have no further obligation
under or in connection with the Notes of any kind whatsoever, other than
certain obligations to pay accrued interest in kind by the issuance of Restated
Notes as described in Section 3.2; (d) Gaming Corp. shall be released of all
liabilities and obligations of any kind whatsoever in respect of the Notes,
including its obligations under guaranties executed in favor of the holders of
the Notes; and (e) Grand shall be permanently discharged and released of all
liabilities and obligations of any kind whatsoever under or in connection with
the Standby Equity Commitment.
Section 3.2 Interest on Notes. The interest payment of $14,463,750 on the
Notes which was due on November 15, 1996 shall continue to accrue interest from
November 15, 1996 until the Closing Date at the rate of 14.25% per annum, and
the interest payment of $11,418,750 on the Notes which shall be due on May 15,
1997 shall be calculated at the rate of 11.25% and shall accrue interest from
May 15, 1997 until the Closing Date at the rate of 11.25% per annum. Such
payments of interest and accrued interest thereon shall be payable in kind by
the issuance on the Closing Date of Restated Notes having an aggregate original
principal amount equal to the amount of such payments and accrued interest
thereon, and Stratosphere shall thereafter have no further liability or
obligation of any kind with respect to the Notes.
Section 3.3 Cancellation of Existing Common Stock. On the Closing Date,
the Existing Common Stock shall be canceled and extinguished. The holders of
the Existing Common Stock shall receive rights to participate pro rata in the
Rights Offering as described in Article 5 of this Agreement. Other than rights
to participate in the Rights Offering and certain other rights to be received
by Grand as described in this Agreement, the holders of the Existing Common
Stock shall not receive any equity or other interest in Stratosphere (as
reorganized) or any other consideration in exchange for cancellation of the
Existing Common Stock.
Section 3.4 Forbearance by Noteholders. During the term of this
Agreement, the Noteholders shall (a) refrain from filing (or causing to be
filed) any notice of foreclosure or taking any other action to foreclose upon
any of the collateral securing the Notes or the obligations of Stratosphere
and/or Gaming Corp. under the Indenture or any guarantee relating thereto, and
(b) instruct the Trustee to refrain from filing any such notice or taking any
such action.
Section 3.5 Transfer by Noteholders. Each of the Noteholders agrees that
during the term of this Agreement, it shall not, directly or indirectly, sell,
assign, transfer, hypothecate or otherwise dispose of (a) any Note beneficially
owned by it or as to which it has investment authority or discretion (including
Notes acquired after the date hereof), (b) any "claim" (as that term is defined
in Section 101(5) of the Bankruptcy Code) arising from, based on or related to
the Notes, or (c) any option, interest in, or right to acquire any Note or
claim referred to in clauses (a) and (b) above unless, in each and every such
case, the Noteholder, as transferor, provides a complete copy of this Agreement
to transferee with the initial transaction statement governing the
7
12
transfer or sale of the Notes, and such statement incorporates by reference all
of the terms and conditions of this Agreement.
ARTICLE 4
RESTATED NOTES
Section 4.1 Issuance of Restated Notes. On the Closing Date, the Restated
Notes shall be issued in exchange for the Notes as described in Section 3.1.
Each registered holder of Notes shall be issued Restated Notes with an
aggregate principal amount equal to the principal amount of such holder's
Notes, plus such holder's pro rata share of Restated Notes issued pursuant to
Section 3.2.
Section 4.2 Terms of Restated Notes. The aggregate principal amount of
the Restated Notes to be issued on the Closing Date in exchange for the Notes
shall be $203,000,000, plus the amount of the Restated Notes to be issued
pursuant to Section 3.2. The principal terms and conditions of the Restated
Notes shall be as follows:
Principal Amount: $203,000,000 on the Closing Date, plus up to an
additional $25,000,000 after the Closing Date as
described below, plus the amount of interest on the
Notes to be payable in kind by the issuance of Restated
Notes pursuant to Section 3.2 of this Agreement.
Maturity Date: May 15, 2002
Fixed Interest: 11.25% per annum, payable in cash.
8
13
Contingent Interest: Contingent interest is payable, on each November 15
commencing with November 15, 1998 until the Restated
Notes are repaid in full, in an aggregate amount equal to
15% of the "consolidated cash flow" (as defined in a
manner reasonably acceptable to Stratosphere, Grand and
the Noteholders) in excess of $60,000,000 for the
twelve-month period ended on the most recent September
30, up to a limit of $80,000,000 of consolidated cash
flow during any twelve-month period. The maximum amount
of contingent interest payable in respect of any
twelve-month period is limited to $3,000,000 in the
aggregate. The aggregate amount of contingent interest
payable in respect of any twelve-month period shall be
reduced pro rata to reflect any reductions in the
outstanding principal amount of the Restated Notes prior
to the close of business on the record date immediately
preceding such payment of contingent interest.
9
14
Additional Issuances: Following the Closing Date, Stratosphere shall be
entitled to issue, in a single or multiple transactions,
up to an additional $25,000,000 in aggregate principal
amount of Restated Notes which shall rank pari passu with
the Restated Notes issued on the Closing Date. The
additional Restated Notes shall be issued pursuant to the
Restated Indenture, shall have the same terms and
conditions as, shall be secured by the same collateral
and Subsidiary Guarantee (as amended and restated) as,
and otherwise shall be identical in all respects to, the
Restated Notes issued on the Closing Date. The proceeds
of any such additional issuance of Restated Notes may be
used by Stratosphere for working capital or for any other
purpose not inconsistent with the terms of the Restated
Indenture; provided that the proceeds of any such
additional issuance of Restated Notes may not be used by
Stratosphere for costs of completion, including any cost
overruns, associated with the construction by
Stratosphere of Phase II. Except for issuances to Grand
as described in the next sentence, any premium or
discount from par on the issuance of any such additional
Restated Notes must reflect market rates at the time of
issuance. Any issuance of any additional Restated Notes
to Grand shall be subject to the following additional
conditions: (i) if and to the extent that Grand has made
cash expenditures or advances to satisfy any obligations
under a credit support of the Stratosphere Lease facility
described in Section 9.1 hereof or pursuant to Grand's
standby funding commitment to advance funds under Section
6 of the Stupak Agreement as described in Section 9.7
hereof, any such additional Restated Notes issued to
Grand in aggregate principal amount up to the amount of
such cash expenditures or advances, but not to exceed
$8,684,362 and $6,890,000, respectively, shall be issued
at par, and (ii) any such additional Restated Notes
issued to Grand, other than as described in the foregoing
clause (i), shall be issued at such premium or discount
from par as reflects market rates at the time of
issuance. All such additional Restated Notes, except to
the extent issued to Grand in exchange for cash
expenditures to satisfy obligations under a credit
support of the Stratosphere Lease Facility or pursuant to
Grand's standby funding commitment to advance funds under
Section 6 of the Stupak Agreement as described in clause
(i) of the preceding sentence, shall be offered as
follows, all on the same terms and conditions (including
price): first, all such
10
15
additional Restated Notes shall be offered to the
then-current holders of the additional Restated Notes,
pro rata in accordance with their holdings of Restated
Notes; second, the unpurchased portion of such additional
Restated Notes, if any, shall be offered to those holders
of the additional Restated Notes making purchases in
accordance with the preceding clause, pro rata in
accordance with their purchases of such additional
Restated Notes; third, the unpurchased portion of such
additional Restated Notes, if any, shall be offered to
the public; and fourth, the unpurchased portion of such
additional Restated Notes, if any, shall be offered to
Grand.
Priority: The Restated Notes shall retain the priority of the Notes
and shall be senior secured indebtedness of Stratosphere
ranking senior in right of payment to all subordinated
indebtedness of Stratosphere.
Security: The Restated Notes shall be secured by a first lien on
all assets of Stratosphere and Gaming Corp. which
currently secure the Notes, and the documentation
evidencing the collateral for the Notes shall be amended
and restated in a manner reasonably acceptable to
Stratosphere, Gaming Corp., Grand and the Noteholders.
In addition, the Restated Notes shall be secured by a
first lien on certain real property owned by Stratosphere
Land Corp.; provided, that such lien shall be
subordinated if and to the extent required to allow such
real property to secure any financing of improvements
thereon proposed by Stratosphere or Stratosphere Land
Corp.; and provided, further, that such lien shall be
released if and to the extent required to allow such real
property to be conveyed to a joint venture in which
Stratosphere or Stratosphere Land Corp. is a participant
so long as the interest of Stratosphere or Stratosphere
Land Corp. in such joint venture is pledged as security
for the Restated Notes and such joint venture constitutes
an arms length transaction on commercially reasonable
terms.
11
16
Guarantee: The Subsidiary Guarantee shall be amended and restated
in a manner reasonably acceptable to Stratosphere, Gaming
Corp., Grand and the Noteholders and shall provide for
the unconditional guarantee by Gaming Corp. of all of
Stratosphere's obligations with respect to the Restated
Notes.
Optional Redemption: From and after May 15, 1999, the Restated Notes may be
redeemed, in whole or in part, at a redemption price of
110% of the principal amount being redeemed, plus accrued
and unpaid interest, if any, thereon to the applicable
redemption date. At any time, if any holder or
beneficial owner of the Restated Notes is for any reason
required to be, but is not, licensed, qualified or found
suitable under applicable gaming laws, Stratosphere may,
at its option, either (i) require such holder or
beneficial owner to dispose of its holdings, or (ii)
redeem such holder's or beneficial owners's Restated
Notes at a redemption price equal to the lesser of 100%
of the principal amount of such Restated Notes or the
price at which such holder or beneficial owner acquired
such Restated Notes.
Cash Transfers: If Stratosphere becomes a wholly-owned subsidiary of
Grand and Grand becomes a guarantor of the Restated
Notes, then Stratosphere shall have the ability to
transfer cash and cash equivalents to Grand without
restriction
Section 4.3 New Indenture. The Indenture shall be amended and restated to
reflect the terms of the Restructuring set forth herein, and the Restated Notes
shall be issued pursuant to such indenture (as so amended and restated, the
"Restated Indenture") to which Stratosphere, as issuer, Gaming Corp., as
guarantor, and a trustee shall be parties. The trustee under the Restated
Indenture (the "Restated Notes Trustee") shall be a corporation reasonably
acceptable to Grand, Stratosphere, Gaming Corp. and the Noteholders that is
authorized to exercise corporate trustee power and that has combined capital
and surplus of at least $50,000,000 as set forth in its most recent annual
report. The Restated Indenture shall contain such covenants as are customary
for senior secured public debt issuances and as are reasonably acceptable to
Grand, Stratosphere and the Noteholders.
ARTICLE 5
RIGHTS OFFERING AND GRAND INVESTMENT
Section 5.1 Terms of Rights Offering. Stratosphere shall conduct a rights
offering (the "Rights Offering"), the net proceeds of which shall be not less
than $75,000,000, pursuant to
12
17
which each holder of Existing Common Stock shall receive for each share
of Existing Common Stock held by such holder the right to purchase one unit (a
"Unit") consisting of: (a) one share of New Common Stock, and (b) a warrant to
purchase one-half of a share of New Common Stock at an exercise price of $1.50
per one-half share; provided, however, that no such warrants will be issued to
Grand in respect of Units purchased by Grand as its pro rata share of the
Rights Offering except as provided in Section 5.2 below. The offering price in
the Rights Offering shall be $1.31 per Unit. Each holder of Existing Common
Stock shall receive the right to participate pro rata in the Rights Offering,
based on records of Stratosphere's transfer agent as of commencement of the
Rights Offering or such other record date as may be established in the Chapter
11 Case. No holder of Existing Common Stock other than Grand shall be
obligated to purchase any Units in the Rights Offering, and no holder of
Existing Common Stock other than Grand shall be allowed to purchase a share of
the Units offered in the Rights Offering greater than such holder's
proportionate holdings of Existing Common Stock. Prior to commencement of the
Rights Offering, Stratosphere shall file and obtain the effectiveness of a
registration statement with the United States Securities and Exchange
Commission (the "SEC") to register the Units under the Securities Act. The
Rights Offering shall commence contemporaneously with the Closing or as soon as
practicable thereafter.
Section 5.2 Grand Participation in Rights Offering. Grand shall purchase
at least its pro rata share of Units in the Rights Offering, which Units shall
not include stock purchase warrants, for an aggregate purchase price of
$31,900,000. Grand shall also agree to purchase any Units offered in the
Rights Offering which are not purchased by other holders of Existing Common
Stock, and any such Units purchased by Grand in excess of Grand's pro rata
share of the Rights Offering shall also include stock purchase warrants as
described in Section 5.1. Grand's obligations with respect to the purchase of
Units not purchased by other holders of Existing Common Stock shall be set
forth in a Standby Purchase Agreement to be entered into between Grand and
Stratosphere prior to commencement of the Rights Offering. Grand shall not be
required to place any funds in escrow or post any bond or other security in
respect of its obligation to purchase Units not purchased in the Rights
Offering by other holders of Existing Common Stock. The Confirmation Order
shall include a waiver by Grand of its right to contest or dispute the
enforceability of the Standby Purchase Agreement associated with the Rights
Offering under Section 365 of the Bankruptcy Code in any subsequent bankruptcy
filing by Stratosphere or Gaming Corp. Subject to compliance with applicable
laws and regulations, on the Closing Date Grand shall advance $31,900,000 cash
to the Escrow Account, which shall represent the purchase price for the Units
purchased by Grand as its pro rata share of the Units offered in the Rights
Offering. To the extent that the Rights Offering is not fully subscribed
within 90 days of commencement thereof, Grand shall advance to the Escrow
Account cash in an amount equal to the aggregate purchase price of the Units
not subscribed for by other holders of Existing Common Stock, in satisfaction
of Grand's obligations under the Standby Purchase Agreement. Any proceeds
received thereafter on account of purchases of Units in the Rights Offering
shall be immediately refunded to Grand.
Section 5.3 Conversion of Existing Grand Indebtedness and Other
Consideration. As of the Closing Date, all indebtedness of Stratosphere to
Grand arising from advances by Grand
13
18
under the Completion Guarantee (which indebtedness is evidenced by one
or more promissory notes in the aggregate principal amount of $50,000,000),
including principal, interest, fees and other charges with respect thereto,
shall be canceled and extinguished and, in exchange therefor, Grand shall
receive shares of the New Common Stock, which shall constitute approximately
39.66% of the equity in Stratosphere on the Closing Date (calculated after
giving effect to the issuance of the New Common Stock in the Rights Offering).
As additional consideration for the New Common Stock issuable under this Section
5.3, Grand shall (i) agree to purchase unpurchased units in the Rights Offering
as set forth in Sections 5.1 and 5.2, (ii) provide the Phase II Completion
Guarantee as set forth in Section 6.1, and (iii) use its reasonable best efforts
to provide credit support of the Stratosphere Lease Facility as set forth in
Section 9.1.
Section 5.4 Discharge of Standby Equity Commitment. On the Closing Date,
all obligations and liabilities of Grand under the Standby Equity Commitment
shall be permanently released and discharged in full. Grand shall have no
further liability or obligation to make any further advances to or investments
in Stratosphere, other than in connection with the Rights Offering as described
in Section 5.2 and pursuant to the Phase II Completion Guarantee as described
in Article 6.
ARTICLE 6
PHASE II COMPLETION GUARANTEE
Section 6.1 Terms of Phase II Completion Guarantee. On the Closing Date,
Grand shall enter into a guarantee agreement (the "Phase II Completion
Guarantee") in favor of the holders of the Restated Notes pursuant to which
Grand shall guarantee the payment of all costs necessary for the completion of
Phase II up to a maximum of $25,000,000 in the aggregate. The obligations of
Grand under the Phase II Completion Guarantee shall consist of the obligation:
(a) to cause all costs of constructing and completing Phase II, including,
without limitation, the costs of all labor, materials, supplies and equipment
related thereto, to be paid and satisfied as the same shall be come due; (b) to
cause any and all costs and cost overruns of constructing and completing Phase
II that are not paid by Stratosphere or Gaming Corp. to be paid, funded and
satisfied; and (c) to cause all costs relating to Phase II and any related real
property, including without limitation the payment of taxes, assessments,
utilities, insurance and maintenance expenses, to be funded, paid and satisfied
prior to delinquency to the extent necessary to cause Phase II to become
operating; provided, that Grand's obligations under the Phase II Completion
Guarantee shall be limited to $25,000,000 in the aggregate. Notwithstanding
the foregoing, Grand shall only be liable under the Completion Guarantee to the
extent that there are not sufficient funds on deposit in the Escrow Account (as
hereinafter defined) to finance completion of Phase II. The guarantee
agreement shall specifically provide that in no event shall Grand incur,
directly or indirectly, any obligation, contingent or otherwise, for payment of
the principal amount of the Restated Notes. Grand's obligations under the
Phase II Completion Guarantee shall be suspended during any force majeure event
which makes it physically impossible or unlawful to complete Phase II,
including without limitation: strikes, lockouts or other labor trouble; fire or
other casualty; governmental preemption in connection with a national
emergency; breakdown, accident or other acts of God; acts of war,
14
19
insurrection, civil strife and commotion; failure to supply despite
reasonable diligence of Stratosphere; and any statute, rule, order or regulation
of any legislature or governmental agency or any department or subdivision
thereof.
Section 6.2 Procedures for Completion. The Phase II Completion Guarantee
shall provide that if and to the extent that there are not sufficient funds on
deposit in the Escrow Account to finance the completion of Phase II, Grand
shall pay into the Escrow Account, within five (5) business days after receipt
of notice thereof, an amount equal to any costs incurred in connection with the
completion of Phase II and approved pursuant to Section 7.2 below; provided,
that in no event shall Grand's obligations under the Phase II Completion
Guarantee exceed $25,000,000 in the aggregate. Grand's obligations with
respect to the Phase II Completion Guarantee shall be set forth in a written
document reasonably acceptable to Grand and the Noteholders.
Section 6.3 Repayment Obligations and Subordination. Grand's obligations
under the Phase II Completion Guarantee shall be limited to $25,000,000 in the
aggregate. Funds made available by Grand under the Phase II Completion
Guarantee shall constitute loans to Stratosphere and shall (i) be evidenced by
promissory notes bearing interest at the same rate as the Restated Notes, (ii)
be subordinated to the full payment in cash or in kind, as applicable, of all
principal, premium (if any), interest and other payments under the Restated
Notes, and (iii) mature no earlier than one year after the maturity of the
Restated Notes. Payments of interest or principal on such subordinated loans
shall be payable to Grand if such payments are permitted under the terms of the
Restated Indenture.
ARTICLE 7
ESCROW ARRANGEMENTS
Section 7.1 Construction Escrow Account. Stratosphere shall establish an
escrow account (the "Escrow Account") and shall deposit in the Escrow Account
immediately upon receipt all net proceeds of the Rights Offering which, after
payment of reasonable expenses relating to the Rights Offering, shall equal not
less than $75,000,000 in the aggregate. The funds held in the escrow account
shall be beneficially owned by Stratosphere and Stratosphere shall provide a
security interest to the Restated Notes Trustee, on behalf of the holders of
the Restated Notes, in all of Stratosphere's right, title and interest in the
Escrow Account. Stratosphere, the Restated Notes Trustee and the escrow agent
shall enter into an agreement, in form and substance reasonably acceptable to
Stratosphere, the Noteholders and Grand, to set forth the terms upon which, and
the manner in which, funds shall be disbursed from the Escrow Account to fund
completion of Phase II. The parties hereto intend that the Escrow Account
operate in a manner consistent with customary construction terms and escrow
financing arrangements. The escrow agent shall be a party reasonably
acceptable to Grand, Stratosphere and the Noteholders.
Section 7.2 Amendments to Budget. A detailed budget of the estimated
costs of completing Phase II (the "Phase II Budget"), as prepared by
Stratosphere, is attached to this
15
20
Agreement as Exhibit A and is incorporated herein by this reference.
The estimated costs of completing Phase II as set forth in the Phase II budget
shall not exceed $75,000,000 in the aggregate. Any amendments to the Phase II
Budget must be approved in writing by Grand and the escrow agent.
ARTICLE 8
BANKRUPTCY PROCESS
Section 8.1 Bankruptcy Filing. Upon execution of this Agreement,
Stratosphere and Gaming Corp. shall promptly commence preparation of Chapter 11
petitions, statements of financial affairs, schedules of assets and
liabilities, and any and all other documents necessary to commence the Chapter
11 Case (collectively, the "Petition Pleadings"). Stratosphere shall consult
with Grand and the Noteholders in the preparation of the Petition Pleadings.
In addition, upon execution of this Agreement, Stratosphere and Gaming Corp.
shall promptly commence preparation of all required cash collateral and other
operating documents which shall be filed as of the commencement of the Chapter
11 Case (the "Operating Pleading"). The Operating Pleading shall be in form
and substance reasonably satisfactory to Grand, Stratosphere, the Noteholders,
and their respective counsel and advisors.
Section 8.2 Plan of Reorganization and Related Documents. Promptly
following execution of this Agreement, the parties hereto shall commence
preparation of the Plan, Disclosure Statement, Stock Purchase and
Reorganization Agreement, the Restated Indenture, and the Management Agreement
(as defined in Section 9.3 hereof) (collectively, the "Plan Related
Documents"). The Plan Related Documents shall be in form and substance
reasonably satisfactory in all respects to Stratosphere, Grand, the
Noteholders, and their respective counsel and advisors. The Plan Related
Documents shall be filed with the Bankruptcy Court upon commencement of the
Chapter 11 Case.
Section 8.3 Support of the Plan. Stratosphere, Gaming Corp., Grand and
each Noteholder shall use its reasonable best efforts to obtain confirmation of
the Plan in accordance with the Bankruptcy Code and on terms consistent with
this Agreement. Stratosphere, Gaming Corp., Grand and each Noteholder shall
take all necessary and appropriate actions to achieve confirmation of the Plan,
including recommending to the holders of impaired claims (including the other
holders of the Notes) and interests that the Plan be confirmed. No Noteholder
shall (a) object to the confirmation of the Plan or otherwise commence any
proceeding to oppose or alter the Plan or any other reorganization documents
containing terms and conditions consistent with those set forth in this
Agreement, (b) vote for, consent to, support or participate in the formulation
of any other plan of reorganization or liquidation proposed or filed or to be
proposed or filed in any Bankruptcy proceeding commenced with respect to
Stratosphere, other than one agreed to in writing by Grand, (c) directly or
indirectly seek, solicit, support or encourage any other plan, proposal or
offer of dissolution, winding up, liquidation, reorganization, merger or
restructuring of Stratosphere (other than one agreed to in writing by Grand)
that could reasonably be expected to prevent, delay or impede the successful
restructuring of Stratosphere as contemplated by this
16
21
Agreement, or (d) take any other action that is inconsistent with, or
that would delay confirmation of, the Plan; provided, however, that no
Noteholder shall be barred from (e) objecting to compliance with Section 1126 of
the Bankruptcy Code if the Disclosure Statement received by such Noteholder
contains a material misstatement or omission, or (f) taking any action with
respect to any matter which action is not inconsistent with the terms of this
Agreement.
Section 8.4 No Improper Solicitation. Notwithstanding Section 8.3 above,
this Agreement and the terms of the Plan Related Documents are the product of
negotiations among Stratosphere, Grand and the Noteholders. This Agreement is
not and shall not be deemed to be a solicitation for consents to the Plan.
Neither Grand's nor any Noteholder's acceptance of the Plan shall be solicited
until such party has received a Disclosure Statement approved by the Bankruptcy
Court and otherwise in compliance with Section 1126 of the Bankruptcy Code.
Section 8.5 Noteholder Committee. In conjunction with the Chapter 11 Case
and pursuant to Section 1102(2) of the Bankruptcy Code, Stratosphere, Gaming
Corp., and Grand shall support the appointment of an official committee
comprised of the Noteholders and such other holders of the Notes as may be
appointed by the Office of United States Trustee (the "Official Noteholder
Committee"). The Official Noteholder Committee shall, subject to compliance
with the applicable provisions of the Bankruptcy Code, be entitled to retain
the law firm of Milbank, Tweed, Xxxxxx & XxXxxx, L.L.P., to assist it in the
prosecution of the Plan and related matters. In the event the appointment of
an Official Noteholder Committee is not approved in the Chapter 11 Case, Grand,
Stratosphere, and Gaming Corp. shall actively support the approval, under
Section 503(b) of the Bankruptcy Code, of the payment of the reasonable costs
and fees incurred by the professionals retained by the Noteholders.
Section 8.6 Conduct of Business Pending the Closing Date. Stratosphere
and Gaming Corp. agree that, prior to Closing Date, unless Grand otherwise
agrees in writing or as otherwise expressly contemplated or permitted by this
Agreement:
(a) neither Stratosphere nor Gaming Corp. shall directly or indirectly, do
or permit to occur any of the following: (i) issue, sell, pledge, dispose of
or encumber any additional shares of, or any options, warrants, conversion
privileges or rights of any kind to acquire any shares of, any of their capital
stock; (ii) amend or propose to amend their articles of incorporation; (iii)
split, combine or reclassify any outstanding shares of their capital stock, or
declare, set aside or pay any dividend or other distribution payable in cash,
stock, property or otherwise with respect to shares of Existing Common Stock;
(iv) redeem, purchase or acquire or offer to acquire any shares of its capital
stock; (v) acquire (by merger, exchange, consolidation, acquisition of stock or
assets or otherwise) any corporation, partnership, joint venture or other
business organization or division or material assets thereof; (vi) incur any
indebtedness for borrowed money or issue any debt securities; or (vii) enter
into or propose to enter into, or modify or propose to modify, any agreement,
arrangement or understanding with respect to any of the matters set forth in
this Section 8.6(a); and
17
22
(b) Stratosphere and Gaming Corp. shall maintain their good standing under
the laws of their respective states of incorporation; and (ii) shall notify
Grand and the Noteholders of any governmental or third party complaints,
investigations or hearings (or communications indicating that the same may be
contemplated).
Section 8.7 Public Announcements. As soon as practicable after the
execution of this Agreement, a press release shall be made announcing the
material terms of the Restructuring as set forth herein, which press release
shall be in form and substance reasonably satisfactory to Stratosphere, Grand
and the Noteholders. Within 15 days after the end of each month ending between
the date hereof and the Closing Date, Stratosphere shall issue a press release
disclosing its Consolidated Cash Flow for such month, and its average
Consolidated Cash Flow for the months ended after October 1 and prior to the
date of such press release.
ARTICLE 9
OTHER AGREEMENTS
Section 9.1 Stratosphere Lease Facility. Grand shall use its reasonable
best efforts to provide credit support for Stratosphere's obligations under
that certain Participation Agreement dated as of April 29, 1996 (the
"Stratosphere Lease Facility") among Stratosphere, Gaming Corp., First Security
Trust Company of Nevada (both in its individual and trust capacities), the
Lenders named therein, Bank of Scotland, as a Co-Agent, Xxxxx Fargo Bank,
National Association (as successor by merger to First Interstate Bank of
Nevada), as Co-Agent, Societe Generale, as Co-Agent, and BA Leasing & Capital
Corporation, as Arranger and Agent. The credit support to be provided by Grand
shall be in form and substance acceptable to Grand in its sole and absolute
discretion. As a condition to providing such credit support, Grand shall
obtain the agreement of the Lenders and the Agent shall agree to support the
restructuring of Stratosphere as described in this Agreement.
Section 9.2 Securities Litigation. Promptly following filing of the
Petition Pleadings, Stratosphere shall seek a temporary restraining order and
preliminary injunction to suspend, pending confirmation of the Plan, all
federal and state lawsuits involving Stratosphere, its directors and officers,
and Grand based on alleged violations by Stratosphere and others of federal and
state securities laws (the "Stratosphere Securities Claims"). The Plan shall
provide for a mechanism to permanently resolve the Stratosphere Securities
Claims on terms and pursuant to conditions reasonably acceptable to Grand.
Section 9.3 Management Agreement. Effective on the Closing Date,
Stratosphere, as reorganized pursuant to the Plan, and Grand shall enter into a
management agreement (the "Management Agreement") pursuant to which Grand shall
manage the construction of Phase II and the day-to-day operations of
Stratosphere. The Management Agreement shall have an initial two-year term
commencing on the Closing Date. Grand shall receive a management fee of
$500,000 per year; provided, however, that Stratosphere may not make any
payments of management fees to Grand during the continuance of a default in the
payment of principal,
18
23
premium (if any) or interest under the Restated Notes; provided,
further, that any such unpaid management fees shall be paid by Stratosphere to
Grand immediately upon the cure of such payment default. During the term of the
Management Agreement, no other fees, charges, payments or expense reimbursement
shall be paid by Stratosphere to Grand in respect of the services which are the
subject of the Management Agreement.
Section 9.4 Alternative Transactions. (a) From and after execution of
this Agreement, except as otherwise specifically permitted by the terms hereof,
neither Stratosphere or any of its officers, directors, employees, agents,
representatives or affiliates (including any investment banker or financial
advisor retained by Stratosphere) shall, directly or indirectly, encourage,
solicit or initiate any inquiry or proposal from, or encourage, solicit,
initiate or participate in any discussions or negotiations with, or provide any
information to, any Person (other than Grand or an affiliate, associate,
representative or agent of Grand) concerning any tender or exchange offer,
rights offering, merger, business combination, sale of assets, sale of equity
interests or other securities or similar transaction which is (i) similar to or
in substitution for the exchange of the Notes for the Restated Notes as
contemplated pursuant to the terms hereof, or (ii) similar to or in
substitution for the Rights Offering, or (iii) similar to or in substitution
for the issuance by Stratosphere of any of the New Common Stock to Grand
pursuant to the terms hereof (each, an "Alternative Transaction"), or agree to
endorse or take any other action to facilitate any Alternative Transaction.
Stratosphere shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any person or entity conducted
heretofore with respect to any Alternative Transaction and shall take the
necessary steps to inform the persons referred to in the preceding sentence of
the obligations undertaken in this Section 9.4. Notwithstanding the foregoing,
nothing contained in this Section 9.4 shall prohibit the Board of Directors of
Stratosphere from furnishing information to, or entering into discussions with,
any person that makes an unsolicited bona fide Alternative Transaction inquiry
or proposal as set forth in Section 9.4(b); provided, that Stratosphere agrees
to notify Grand immediately if any such inquiries or proposals are received by,
or information requested from, or any negotiations or discussions are sought to
be initiated or continued with, Stratosphere regarding an Alternative
Transaction.
(b) If any person or entity makes an unsolicited bona fide Alternative
Transaction inquiry or proposal:
(i) Stratosphere may enter into discussions or negotiations with
such person or entity concerning an Alternative Transaction after
providing written notice of such discussions or negotiations to Grand
pursuant to Section 9.4(a);
(ii) Stratosphere may enter into a confidentiality agreement with
such person or entity, provided that such confidentiality agreement
permits Stratosphere to keep Grand informed of the status of such
discussions or negotiations; and
(iii) the Board of Directors of Stratosphere may consider the
Alternative Transaction and if the Board of Directors determines in good
faith, based on the advice
19
24
of an independent financial advisor, that such action is required for
the Board to comply with its fiduciary duties or is required to comply
with any orders of the Bankruptcy Court, the Board may recommend such
Alternative Transaction and, provided that the Termination Fee shall have
been paid to Grand in cash as set forth in Section 9.5, Stratosphere may
terminate this Agreement, subject to the provisions of Section 9.5.
(c) Stratosphere shall not consider, entertain or negotiate, or enter into
or consummate any agreement in furtherance of, any Alternative Transaction
except as expressly permitted by paragraph (b) above.
Section 9.5 Termination Fee. If this Agreement is terminated by
Stratosphere pursuant to Section 9.4(b) of this Agreement prior to the
commencement of the Chapter 11 Case, and Grand has not breached any of its
obligations under this Agreement in any material respect, then (a) Stratosphere
shall pay to Grand, prior to the commencement of the Chapter 11 Case, a
termination fee of $2,000,000 (the "Termination Fee") in consideration for
Grand's release of Stratosphere's obligations under this Agreement and as
reimbursement for Grand's costs and expenses incurred in conjunction with this
Restructuring; and (b) Stratosphere and the Noteholders shall release and
terminate (or cause to be released and terminated) Grand's obligations under
the Standby Equity Commitment. If this Agreement is terminated by Stratosphere
pursuant to Section 9.4(b) of this Agreement following the commencement of the
Chapter 11 Case, or if a competing plan of reorganization supported by a party
other than Grand (excluding affiliates of Grand) is confirmed by the Bankruptcy
Court and Grand has not breached any of its obligations under this Agreement in
any material respect, then Stratosphere shall pay to Grand the Termination Fee
and obtain an order of the Bankruptcy court rejecting and terminating the
Standby Equity Commitment. Within 15 days following the commencement of the
Chapter 11 Case, Stratosphere shall request that the Bankruptcy Court approve
the provisions of Section 9.4 and 9.5 of this Agreement. Stratosphere and
Gaming Corp. shall not be entitled to accept an Alternative Transaction unless
such Alternative Transaction provides for consideration to Stratosphere, Gaming
Corp., and their respective creditors and equity holders in an amount at least
equivalent to the sum of (i) the amount of consideration to be provided to
Stratosphere, Gaming Corp., and their respective creditors and equity holders
by Grand in connection with the Restructuring, plus (ii) the Termination Fee.
Section 9.6 Professional Fees. All reasonable out-of-pocket fees, costs
and expenses (including, without limitation, all legal and professional fees
and costs) incurred by or on behalf of the Noteholders in connection with the
restructuring through the date of the commencement of the Chapter 11 Case,
shall be paid in full by Stratosphere prior to the commencement thereof.
Subject to the approval of the Bankruptcy Court, Grand shall be entitled
pursuant to Section 503(b) of the Bankruptcy Code to seek reimbursement of all
reasonable out-of-pocket fees, costs and expenses (including, without
limitation, all legal and professional fees and costs) incurred by or on behalf
of Grand in connection with the restructuring. The Noteholders and
Stratosphere shall actively support the approval of Grand's contribution claim
under Section 503(b) of the Bankruptcy Code.
20
25
Section 9.7 Vacation Packages. The parties agree that Stratosphere may
enter into an agreement with Xxx Xxxxxx consistent in all material respects
with the draft agreement dated December 26, 1996 (the "Stupak Agreement"),
which has been delivered by Stratosphere to the Noteholders and Grand. The
final version of the Stupak Agreement and related documents shall be in form
and content reasonably acceptable to the Noteholders. Grand shall advance
funds to Stratosphere, not to exceed $6,890,000, to permit the subscription for
Stupak's pro rata share of the Rights Offering as provided in Section 6 of the
Stupak Agreement, but only to the extent that Stratosphere does not have
sufficient available cash or cash equivalents to make such advance as provided
therein. To the extent that Grand advances funds pursuant to such standby
funding commitment, Stratosphere shall issue to Grand Restated Notes in the
face amount of such advance, as provided in Section 4.2 hereof, from the
additional $25,000,000 in Restated Notes authorized to be issued following the
Closing Date. The Plan shall provide for assumption of the Stupak Agreement
and treatment of the above-described Grand standby funding commitment
consistent with the terms of this Section 9.7. Upon confirmation of the Plan,
Stratosphere shall fully reserve the estimated future costs of servicing the
designated vacation packages as provided in the Stupak Agreement in accordance
with GAAP.
ARTICLE 10
CLOSING CONDITIONS
Section 10.1 Conditions to Grand Obligations. Grand's obligations to
consummate the restructuring as described herein shall be subject to the
satisfaction as of the Closing Date, in all material respects, of each of the
following conditions:
(a) Compliance by Stratosphere. Stratosphere shall have performed
and complied with all of its material covenants and other material
obligations under this Agreement and the Plan Related Documents.
Stratosphere shall not be in default of its obligations under this
Agreement or the Plan Related Documents.
(b) Compliance by Noteholders. Each of the Noteholders shall have
complied with all of its material covenants and other material
obligations under this Agreement and the Plan Related Documents. None of
the Noteholders shall be in default of its obligations under this
Agreement or the Plan Related Documents.
(c) Proceedings Relating to the Chapter 11 Case. In connection with
the proceedings in the Chapter 11 Case:
(i) The Bankruptcy Court shall have confirmed the Plan, and
the Confirmation Order shall be in form and substance reasonably
acceptable to Grand.
(ii) There shall not be timely filed with the Bankruptcy Court
in the Chapter 11 Case any Claims for environmental expenses or
liabilities in excess of $1,000,000 in the aggregate.
21
26
(iii) No Trustee (as such term is defined under the Bankruptcy
Code) shall be appointed in the Chapter 11 Case.
(iv) The Chapter 11 Case shall not be converted to a
liquidation case under Chapter 7 of the Bankruptcy Code.
(v) Stratosphere shall have sufficient cash on the Closing
Date to make all cash payments required to be made on the Closing
Date pursuant to the Plan.
(vi) All claims of creditors, secured or unsecured, and equity
holders shall be treated consistent with the terms of the Plan or
as otherwise satisfactory to Grand.
(viii) Within sixty (60) days following the commencement of
the Chapter 11 Case, the Bankruptcy Court shall have entered an
order approving Sections 9.4 and 9.5 of this Agreement.
(d) Plan. A Confirmation Order and any other orders by the
Bankruptcy Court necessary to confirm the Plan or implement the
Confirmation Order and approve the Plan Related Documents, any documents
related hereto and the transactions contemplated hereby shall be entered,
each of which order or orders shall be a final order acceptable in form
and substance to Grand and its counsel in all material respects. The
Plan Related Documents shall be in the form approved by Grand for filing
by Stratosphere, with such modifications or amendments as are acceptable
in form and substance to Grand. The Plan shall provide for the
satisfaction or extinguishment of all claims against Stratosphere in a
manner satisfactory to Grand.
(e) Operating Results. Stratosphere's monthly Consolidated Cash
Flow for the periods between October 1, 1996 and June 30, 1997 shall
average not less than $2,267,000 per month.
(f) Release of Standby Equity Commitment. All obligations under and
in connection with the Standby Equity Commitment shall be permanently
discharged and released in full pursuant to documentation in form and
substance acceptable to Grand in all respects.
(g) Securities Litigation. The Plan shall provide for the
resolution of the Stratosphere Securities Claims on terms and conditions
acceptable to Grand in all respects.
(h) Waivers and Consents. Grand shall have all necessary waivers
and consents required under its existing debt instruments, including,
without limitation, any such consents, waivers, or opinions concerning
the fairness of Grand's contemplated investment in Stratosphere to permit
Grand's consummation of the restructuring as described herein,
22
27
which shall be identified by Grand with reasonable specificity in the
stock purchase agreement to be entered into between Grand and
Stratosphere.
(i) Capitalization. As of the Closing Date, only the shares to be
issued in connection in the Rights Offering and the shares to be issued
to Grand as described in Section 5.3 shall be issued and outstanding.
When issued in accordance with the Plan, all outstanding shares of New
Common Stock shall have been duly and validly issued and shall be fully
paid and nonassessable.
(j) No Prohibition of Transaction. There shall not be in force any
order, decree or ruling by any court or governmental body having
jurisdiction, or any threatened or pending complaint of a governmental
body or any person praying for an order, decree or ruling of a court
restraining or enjoining the consummation of or rendering illegal the
transactions contemplated by this Agreement, and there shall not be in
force any such order or decree (including any injunction or temporary
restraining order granted pursuant to a complaint filed under the federal
antitrust laws); provided, however, that nothing in this Agreement shall
require Stratosphere, Grand or any of the Noteholders to seek a stay
pending appeal of any such injunction, decree or order other than a
temporary restraining order.
(k) Material Adverse Change. There shall not have occurred,
directly or indirectly, after the date hereof and before the Closing Date
any material adverse change in Stratosphere's condition (financial or
otherwise), business, assets, liabilities, properties, prospects, results
of operations or relations with employees or suppliers.
(l) HSR Act. Stratosphere shall have complied with the HSR Act, if
such compliance is required. Neither the United States Department of
Justice nor the Federal Trade Commission shall have threatened or taken
any action to prohibit or enjoin the transactions contemplated by this
Agreement which has not been terminated or withdrawn.
(m) SEC Filings. (i) Stratosphere shall have filed with the SEC a
registration statement registering the Units to be offered in the Rights
Offering under the Securities Act, (ii) such registration statement shall
have been declared effective by the SEC, (iii) no action shall have been
taken (whether by Stratosphere or otherwise) or shall have occurred which
is designed to terminate, or likely to have the effect of terminating,
such registration or disqualifying such registration, and (iv) neither
the SEC nor any similar securities commission or regulatory authority of
any state or other jurisdiction has issued any order suspending the
effectiveness of such registration statement or which would have the
effect of preventing the registration or the trading of the Units.
(n) Regulatory Approvals. Stratosphere, and the Noteholders, as
applicable, shall have received all regulatory approvals, including
without limitation all approvals by the Nevada gaming authorities, which
shall have become final and nonappealable or any period of objection by
regulatory authorities shall have expired, as applicable, and all other
23
28
material approvals, permits, authorizations, consents, licenses and
agreements from other third parties that are necessary or appropriate to
permit the transactions contemplated hereby and by the Plan and any
related agreements and to permit Stratosphere to carry on its business
after the Closing Date in a manner consistent in all material respects
with the manner in which it was carried on prior to the Closing Date
(collectively, the "Approvals"), which Approvals shall not contain any
condition or restriction that materially impairs Stratosphere's ability
to carry on its business in a manner consistent in all respects with the
manner as proposed to be carried on by Stratosphere pursuant to the Plan.
(o) Filings and Service. The Plan Related Documents each shall not
have been modified in any respect or withdrawn without the prior consent
of Grand.
(p) Force Majeure. Since the date hereof, there shall have occurred
no outbreak or escalation of hostilities or other international or
domestic calamity, crisis or change in political, financial or economic
conditions or other adverse change in the financing markets that impairs
(or could reasonably be expected to impair) in any material respect
Stratosphere's ability to carry on its business in a manner consistent in
all material respects with prior practice, or impairs (or could
reasonably be expected to impair) in any material respect Grand's ability
to realize the intended benefits and value of this Agreement or any
related agreement.
The foregoing conditions contained in this Section 10.1 are intended solely for
the benefit of Grand. Grand shall at all times have the right to waive any
condition. All approvals given by Grand under this Section shall be in
writing. The waiver by Grand of any condition shall not relieve any other
party of any liability or obligation with respect to any covenant or agreement
set forth herein.
Section 10.2 Conditions to Noteholder Obligations. The obligations of the
Noteholders to consummate the Restructuring as described herein shall be
subject to the satisfaction as of the Closing Date, in all material respects,
of each of the following conditions:
(a) Compliance by Stratosphere. Stratosphere shall have performed
and complied with all of its material covenants and other material
obligations under this Agreement and the Plan Related Documents.
Stratosphere shall not be in default of its obligations under this
Agreement or the Plan Related Documents.
(b) Compliance by Grand. Grand shall have complied with all of its
material covenants and other material obligations under this Agreement
and the Plan Related Documents. Grand shall not be in default of its
obligations under this Agreement or the Plan Related Documents.
(c) Proceedings Relating to the Chapter 11 Case. In connection with
the proceedings in the Chapter 11 Case:
24
29
(i) The Bankruptcy Court shall have confirmed the Plan and the
Confirmation Order shall be in form and substance reasonably
acceptable to the Noteholders.
(ii) There shall not be timely filed with the Bankruptcy Court
in the Chapter 11 Case any Claims for environmental expenses or
liabilities in excess of $1,000,000 in the aggregate.
(iii) No Trustee (as such term is defined under the Bankruptcy
Code) shall be appointed in the Chapter 11 Case.
(iv) The Chapter 11 Case shall not be converted to a
liquidation case under Chapter 7 of the Bankruptcy Code.
(v) Stratosphere shall have sufficient cash on the Closing
Date to make all cash payments required to be made on the Closing
Date pursuant to the Plan.
(vi) All claims of creditors, secured or unsecured, and equity
holders shall be treated consistent with the terms of the Plan or
as otherwise satisfactory to the Noteholders.
(d) Plan. A Confirmation Order and any other orders by the
Bankruptcy Court necessary to confirm the Plan or implement the
Confirmation Order and approve the Plan Related Documents, any documents
related hereto and the transactions contemplated hereby shall be entered,
each of which order or orders shall be a final order acceptable in form
and substance to the Noteholders and their collective counsel in all
respects. The Plan shall be in the form approved by the Noteholders for
filing by Stratosphere, with such modifications or amendments as are
acceptable in form and substance to the Noteholders.
(e) No Prohibition of Transaction. There shall not be in force any
order, decree or ruling by any court or governmental body having
jurisdiction, or any threatened or pending complaint of a governmental
body or any person praying for an order, decree or ruling of a court
restraining or enjoining the consummation of or rendering illegal the
transactions contemplated by this Agreement, and there shall not be in
force any such order or decree (including any injunction or temporary
restraining order granted pursuant to a complaint filed under the federal
antitrust laws); provided, however, that nothing in this Agreement shall
require Stratosphere, Grand or any of the Noteholders to seek a stay
pending appeal of any such injunction, decree or order other than a
temporary restraining order.
(f) Regulatory Approvals. Stratosphere and Grand, as applicable,
shall have received all Approvals, which Approvals shall not contain any
condition or restriction that materially impairs Stratosphere's ability
to carry on its business in a manner consistent in
25
30
all respects with the manner as proposed to be carried on by
Stratosphere pursuant to the Plan.
(g) Filings and Service. The Plan Related Documents each shall not
have been modified or withdrawn without the prior consent of the
Noteholders.
The foregoing conditions contained in this Section 10.2 are intended solely for
the benefit of the Noteholders. The Noteholders shall at all times have the
right to waive any condition. All approvals given by the Noteholders under
this Section shall be in writing. The waiver by the Noteholders of any
condition shall not relieve any other party of any liability or obligation with
respect to any covenant or agreement set forth herein.
Section 10.3 Conditions to Stratosphere Obligations. The Closing and
Stratosphere's obligations hereunder shall be subject to the satisfaction as of
the Closing Date of each of the following conditions:
(a) Compliance by Grand. Grand shall have performed and complied
with all of its material covenants and other material obligations under
this Agreement and the Plan Related Documents. Grand shall not be in
default of its obligations under this Agreement or the Plan Related
Documents.
(b) Compliance by Noteholders. Each of the Noteholders shall have
complied with all of its material covenants and other material
obligations under this Agreement and the Plan Related Documents. None of
the Noteholders shall be in default of its obligations under this
Agreement or the Plan Related Documents.
(c) Proceedings Relating to the Chapter 11 Case. A Confirmation
Order and any other orders by the Bankruptcy Court necessary to confirm
the Plan and approve this Agreement and the Plan Related Documents, any
documents related hereto and the transactions contemplated hereby shall
be entered, each of which order or orders shall be a final order
reasonably acceptable in form and substance to Stratosphere and its
counsel.
(d) No Prohibition of Transaction. There shall not be in force any
order, decree or ruling by any court or governmental body having
jurisdiction, or any threatened or pending complaint of a governmental
body or any person praying for an order, decree or ruling of a court
restraining or enjoining the consummation of or rendering illegal the
transactions contemplated by this Agreement, and there shall not be in
force any such order or decree (including any injunction or temporary
restraining order granted pursuant to a complaint filed under the federal
antitrust laws); provided, however, that nothing in this Agreement shall
require Stratosphere, Grand or any Noteholder to seek a stay pending
appeal of any such injunction, decree or order other than a temporary
restraining order.
26
31
(e) Regulatory Approvals. Grand and the Noteholders, as applicable,
shall have received all Approvals, which Approvals shall have become
final and nonappealable or any period of objection by regulatory
authorities shall have expired, as applicable.
The foregoing conditions contained in this Section 10.3 are intended solely for
the benefit of Stratosphere. Stratosphere shall at all times have the right to
waive any condition. All approvals given by Stratosphere under this Section
shall be in writing. The waiver by Stratosphere of any condition shall not
relieve any other party of any liability or obligation with respect to any
covenant or agreement set forth herein.
ARTICLE 11
MISCELLANEOUS
Section 11.1 Successors and Assigns. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns; provided, however, that nothing contained in this
Section 11.1 shall be deemed to permit sales, assignments or transfers other
than in accordance with the provisions of Section 3.5.
Section 11.2 Settlement. This Agreement and the Plan are part of a
proposed settlement of disputes among the parties hereto. Except as expressly
provided herein, nothing in this Agreement is intended to in any manner waive,
limit, impair or restrict the ability of the Noteholders and Grand to protect
and preserve their respective rights, remedies and interests, including without
limitation their respective claims against Stratosphere and their respective
full participation in the Chapter 11 Case. Nothing in this Agreement shall be
deemed an admission of any sort. Nothing set forth herein effects a
modification of Grand's or any Noteholder's rights under any document or
agreement unless and until the Plan is confirmed and becomes effective. If the
transactions contemplated hereby are not consummated or if this Agreement is
terminated for any reason, the parties hereto fully reserve any and all of
their rights. Pursuant to Federal Rule of Evidence 408 and any applicable
state rules of evidence, this Agreement shall not be admitted into evidence in
any proceeding other than a proceeding to enforce its terms.
Section 11.3 Notices. Any notice by any party to another party hereunder
shall be deemed sufficiently given if in writing either served by personal
delivery or sent by overnight courier guaranteeing next-day delivery or by
telecopy, addressed (until further written notice of change of address), if to
Stratosphere, to:
27
32
STRATOSPHERE CORPORATION
0000 Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attn: Xxxxxx X. Xxxxxx,
Executive Vice President and
General Counsel
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
XXXXXX & SILVER, LTD.
0000 Xxxxxx Xxxxxx Xxxxxxx, 00xx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Xxxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Fax: (000) 000-0000
if to Grand:
GRAND CASINOS, INC.
000 Xxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxx Xxxxxx, General Counsel
Xxxxxx X. Xxxxxxxx, Vice President
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
XXXXXX XXXXXXX & XXXXXXX L.L.P.
Two Renaissance Square
00 X. Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Xxxxxxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Fax: (000) 000-0000
28
33
if to the Noteholders to:
CARGILL FINANCIAL SERVICES CORPORATION
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxxx
Xxxxxx Xxxxx, Esq.
Telephone: (000) 000-0000/3404
Fax: (000) 000-0000
XXXXX XXXXXXXX LTD.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
M.D. SASS ASSOCIATES, INC.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxx
Xxxxx Xxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Milbank, Tweed, Xxxxxx & XxXxxx
000 X. Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx, Esq.
Xxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Fax: (000) 000-0000
Notice given by personal delivery shall be effective upon delivery. Notice
transmitted by overnight courier guaranteeing next-day delivery shall be
effective on the business day following timely delivery to such courier.
Notice transmitted by telecopy shall be effective when receipt is acknowledged.
Section 11.4 Amendments. This Agreement shall not be modified, amended or
otherwise changed without the written agreement of all of the parties hereto.
29
34
Section 11.5 Applicable Law. This Agreement shall be governed by the laws
of the State of Nevada (without reference to the provisions thereof relating to
conflicts of laws) and applicable federal bankruptcy law and any questions
arising hereunder shall be construed or determined in accordance with such
laws. The parties hereby agree to retain jurisdiction in the Bankruptcy Court
with respect to questions arising under this Agreement.
Section 11.6 Headings. The table of contents and the headings at the
beginning of the articles, sections and subsections of this Agreement are
solely for the convenience of the parties and are not a part of this Agreement.
Section 11.7 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.8 Entire Agreement. This Agreement (including all Exhibits
hereto) contains the entire understanding between the parties relating to its
subject matter and supersedes all prior agreements, understandings,
representations and statements, oral or written.
Section 11.9 Time Is of the Essence. Time is of the essence under this
Agreement.
Section 11.10 Additional Noteholders. Any additional holder of any
portion of the Notes may become a party to this Agreement by duly executing a
written acknowledgment of such holder's agreement to be bound by the terms and
provisions of this Agreement and to be deemed to be a "Noteholder" for all
purposes hereof, and upon delivery of an executed copy of such acknowledgment
to Grand, Stratosphere and each other Noteholder, such holder shall be
thereafter deemed to be a Noteholder for all purposes hereof.
Section 11.11 Term of Agreement. Unless extended in writing by
Stratosphere, Gaming Corp., Grand and the Noteholders, this Agreement shall
terminate and be of no further force and effect upon the earlier to occur of
(i) June 30, 1997, (ii) withdrawal by Grand (as set forth in writing) of its
support of the Plan, in the event the conditions set forth in Section 10.1
hereof have not or cannot be satisfied, or (iii) the acceptance by Stratosphere
of an Alternative Transaction pursuant to Section 9.4 which is not acceptable
to the Noteholders. In the event this Agreement is terminated as set forth
herein, the exclusive period of Stratosphere and Gaming Corp. under Section
1121 of the Bankruptcy Code shall be automatically terminated without further
action by any party hereto.
[remainder of page intentionally left blank]
30
35
IN WITNESS WHEREOF, the parties have caused this Restructuring Agreement
to be executed as of the date first above written.
STRATOSPHERE CORPORATION
By
------------------------------------
Its
-----------------------------------
STRATOSPHERE GAMING CORP.
By
------------------------------------
Its
-----------------------------------
GRAND CASINOS, INC.
By
------------------------------------
Its
-----------------------------------
CARGILL FINANCIAL SERVICES CORPORATION
By
------------------------------------
Its
-----------------------------------
XXXXX XXXXXXXX LTD.
By
------------------------------------
Its
-----------------------------------
36
M.D. SASS ASSOCIATES, INC., on behalf of
client accounts for which it and/or its
affiliates act as investment manager and/or
general partner.
By
------------------------------------
Its
-----------------------------------
37
EXHIBIT A
---------
Phase II Budget
38
Exhibit A
---------
STRATOSPHERE PROJECT DEVELOPMENT ESTIMATE
ESTIMATE SUMMARY
BALANCE
TO FINISH
Design Costs $1,658,411
Construction Costs - Hotel and Casino $56,242,688
FF&E Costs $7,203,688
Signage/Graphics Costs $343,250
Permits and Fees $2,638,907
Gaming Equipment Costs $0
Other Equipment Costs $3,738,912
Soft Costs $250,000
-----------
Subtotal $72,075,855
Owners Contingency 4% $2,882,655
-----------
TOTAL COST ESTIMATE $74,598,510
-----------
PROJECT DESCRIPTION - INCLUSIONS
1 Completion of the Retail Shell Building (2nd floor) of Structure located
at the Southwest Corner of the property. This is the potential location of
the Rainforest and Arcade. Completion includes balance of drywall,
mechanical, electrical systems for shell only.
2 Build out of at least 12,500 SF of Kids Quest to be located on the 2nd
floor of the Hotel Tower.
3 Completion of Guest Room Tower (Typical Room Tower) including all
Furniture, Fixtures, and Equipment.
Tower Guest room count: 884 typical rooms, 68 Long Typical (Old E), 34
C Suites, 17 D Suites, 1F Suite
Tower Buildout Excludes: New Porte Cochere or Ballroom, New Front Desk
and any Interior Buildout of Floors 1 through 4.
4 Landscape and Hardscape at area North of New Tower to become temporary
entry to New Tower and Casino.
5 Completion of Swimming pool.
6 Landscape and Fence in the area of the proposed Aquarium Building.
7 Mechanical Piping connection from Phase I Central Plant to provide partial
air conditioning to the Retail Shell noted in #1 above.
8 Completion of the Following Casino Renovations: Sisters Remodel, Baggage
Storage, Gift Shop and Cart Remodel Tower Queue Remodel and Porte Cochere
Modifications
PAGE 1
39
STRATOSPHERE PROJECT DEVELOPMENT ESTIMATE
TOTAL TOTAL TOTAL BALANCE
PROJECT PAID TO BE TO
SECTION I - DESIGN COSTS BUDGET TO DATE PAID FINISH
Architect and Engineering Fees $2,513,000 $2,269,150 $115,200 $128,650
Architectural Services - Casino Remodel $150,000 $0 $0 $150,000
Executive Architect - Xxxx X. $50,000 $0 $0 $50,000
Kids Quest Design $100,000 $0 $100,000 $0
Architect Reimbursables $251,040 $131,645 $0 $119,395
Interior Design - Xxxxxx Xxxxxx $80,000 $49,388 $0 $30,612
Owner Construction Administration $500,000 $0 $0 $500,000
Owner Construction Administration - Facilities $75,750 $0 $0 $75,750
Cost Consultant Rider Xxxx LLC $175,000 $129,176 $35,000 $10,824
Civil Engineering Xxxxxx and Xxxxxx $150,950 $141,735 $3,000 $6,215
Structural Engineer Ralgsfad and Associates $350,000 $298,090 $19,900 $32,010
Mechanical/Electrical Engineers Xxxxxx $467,600 $378,095 $8,246 $73,259
Abatement Study SEL Consultants $25,000 $14,254 $0 $10,746
ADA Accessibility Pentacor $25,000 $17,360 $0 $7,650
Code/Life Safety ALLOWANCE $50,000 $0 $0 $50,000
Food Service Premiere (10% of K.E. cost) $47,000 $0 $0 $47,000
Curtain Wall Review $20,000 $0 $0 $20,000
Waterproofing Consultant - Pool Area $50,000 $0 $0 $50,000
Reproduction Costs $200,000 $3,700 $0 $196,300
Consultants Reimburseables $100,000 $0 $0 $100,000
-------------------------------------------------------------
SUBTOTAL DESIGN COSTS $6,370,340 3,432,583 $279,346 $1,658,411
TOTAL TOTAL TOTAL BALANCE
SECTION II - CONSTRUCTION PROJECT PAID TO BE TO
PHASE II BUDGET TO DATE PAID FINISHED
Retail Shell (includes truck dock) $21,459,509 $18,270,000 $385,000 $2,804,509
Kids Quest 1,666,644 $0 $300,000 $1,366,644
Increased SF Kids Quest $273,650 $0 $0 $273,650
Escalators from Casino to Broadway Showroom $360,000 $0 $0 $380,000
Prepare 7,500 SF Arcade for Tenant Buildout $262,500 $0 $0 $262,500
Relocate Vision Wall $15,000 $15,000 $0 $0
Perini Administration Exp, Phase II, III Reimbursables, Fee,
Aug thru Feb $412,991 $274,675 $138,316 $0
Retail Common Areas $198,000 $0 $0 $198,000
Aquarium Shell - (Finish Landscape, Grading and Fence) $5,140,000 $4,635,000 $255,000 $250,000
Pool/Recreation Area $5,846,403 $270,000 $140,000 $5,436,403
Sitework $1,239,706 $631,557 $0 $608,149
Central Plant $750,000 $697,000 $0 $53,000
Phase I Central Plant Modifications for Phase II $813,950 $0 $0 $613,950
Hotel Tower $58,624,050 $18,814,000 $245,000 $39,565,050
Porte Cochere and Ballroom Shell (COMMITTED COSTS) $35,000 $35,000 $0 $0
Tower Lowrise (COMMITTED COSTS) ALTERNATE $478,000 $478,000 $0 $0
PHASE II and III Fire Protection due to shutdown ALLOW $100,000 $0 $100,000 $0
Remobilization, Escalation and Startup Costs for Tower $2,258,722 $0 $0 $2,258,722
Porte Cochere and Ballroom Shell (Sitework Improvements
only) $500,000 $0 $0 $500,000
Facade Upgrades at area deleted by Ballroom $735,000 $0 $0 $735,000
Buyout construction Trailors $35,000 $0 $35,000 $0
Remodel High Limit Slot area (adjacent to Xxxxx) $310,000 $310,000 $0 $0
Sculpture Remodel $35,000 $35,000 $0 $0
Existing Porte Cochere Renovation $100,000 $24,035 $10,000 $85,965
Slaters Remodel $200,000 $0 $0 $200,000
Queue Remodel - Tower $300,000 $0 $0 $300,000
Remodel Casino Gift Shop and Gift Cart $85,000 $0 $85,000 $0
Remodel Baggage Storage $50,000 $0 $50,000 $0
Buildout 2000 SF Baggage Room - New Tower $120,000 $0 $0 $120,000
Relocate Kids Quest Mezzanine $25,000 $0 $0 $25,000
Miscellaneous Casino and Property Renovations $150,000 $52,484 $97,516 $0
New Corridor to Restrooms $14,000 $14,000 $0 $0
Xxxxxxx Xxx Xxxxx 0 glass Doors ASI #175 $20,000 $0 $20,000 $0
Electrical for Soft Count electronic doors $3,580 $0 $3,580 $0
Rework and Reconfigure Tower exterior staging system $130,000 $0 $130,000 $0
Miscellaneous NDOT Sitework $10,000 $0 $10,000 $0
Revisions to Showroom exhaust fans $40,000 $0 $40,000 $0
Code Blue Surveillance at Garages $200,000 $120,000 $80,000 $0
Offsite Construction
Black Seven Parking Lot - Demo and Temporary
Construction $405,590 $405,590 $0 $0
Paradise Parking Lot $42,533 $0 $0 $42,533
Repave Streets/Curb work/All other $353,013 $0 $150,000 $203,613
------------------------------------------------------------
SUBTOTAL CONSTRUCTION $103,598,441 $45,081,341 $2,274,412 $56,242,688
SECTION III - Furniture, Fixture, and Equipment Costs TOTAL TOTAL TOTAL BALANCE
PROJECT PAID TO BE TO FINISH
BUDGET TO DATE PAID
Pool/Recreation Area $433,000 $0 $0 $433,000
PAGE 2
40
STRATOSPHERE PROJECT DEVELOPMENT ESTIMATE
Hotel Tower - FFE $8,966,438 $0 $0 $8,966,438
Convert Suites to Typicals - FF&E $2,195,750 $0 $0 ($2,195,750)
New Room mix - 884 Typical, 68 Long
Typical (old E).17D Suites and 1 F Suite
Remodel High Limit Slot area $87,285 $87,285 $0 $0
Misc. $3,450 $3,450 $0 $0
------------------------------------------------------------------
SUBTOTAL FF&E $7,274,483 $70,715 $0 $7,203,688
SECTION IV - SIGNAGE AND GRAPHICS TOTAL TOTAL TOTAL BALANCE
PROJECT PAID TO BE TO FINISH
PHASE II BUDGET TO DATE PAID
Pool/Recreation Area $25,000 $0 $0 $25,000
Entertainment Shell, Valet Circ $5,000 $0 $0 $5,000
Hotel Tower - Guest Rooms $213,250 $0 $0 $213,250
Remodel High Limit Slot area $8,148 $8,148 $0 $0
Casino Signage $518,980 $518,980 $0 $0
Exterior Signage
Exterior Directional Signage $100,000 $0 $0 $100,000
Exterior Signage (Flags) $367,995 $367,995 $0 $0
----------------------------------------------------------------
SUBTOTAL SIGNAGE $1,238,371 $895,121 $0 $343,250
SECTION V - PERMITS AND FEES TOTAL TOTAL TOTAL BALANCE
PROJECT PAID TO BE TO FINISH
BUDGET TO DATE PAID
Permits and Plan Check Fees $583,614 $ 87,568 $0 $815,846
Testing and Inspections $310,000 $0 $0 $310,000
905 Inspection $100,000 $0 $0 $100,000
M.P.E. Commissioning $0 $0 $0 $0
Zoning Plan Check Fees $14,849 $0 $0 $14,849
Transportation Tax $426,384 $0 $0 $426,384
Sewer Connection Fees -
Incl Pool/Water Features $869,815 $0 $0 $869,815
Water Accessment Fees $0 $0 $0 $0
Public Works Fees $27,013 $0 $0 $27,013
Reissue Permits $75,000 $0 $0 $75,000
-----------------------------------------------------------------
SUBTOTAL PERMITS AND FEES $2,706,475 $87,568 $0 $2,638,507
>
SECTION VI - GAMING EQUIPMENT TOTAL TOTAL TOTAL BALANCE
PROJECT PAID TO BE TO
BUDGET TO DATE PAID FINISH
Casino Expansion under Tower 1st Floor $0 $0 $0 $0
Other $0 $0 $0 $0
-------------------------------------------------------------------
SUBTOTAL GAMING EQUIPMENT $0 $0 $0 $0
SECTION VII - OTHER EQUIPMENT TOTAL TOTAL TOTAL BALANCE
PROJECT PAID TO BE TO FINISH
BUDGET TO DATE PAID
MIS Equipment $25,000 $0 $0 $25,000
Cabling (Wire) $86,000 $0 $0 $85,000
Telephone Systems $200,000 $0 $0 $200,000
Card Key Locks (Material) $212,250 $0 $0 $212,250
Housekeeping Equipment $1,364,295 $0 $0 $1,364,295
Food Service Equipment $470,000 $0 $0 $470,000
Baggage Handling Equipment $16,000 $0 $0 $16,000
Wardrobe Equipment $100,000 $0 $0 $100,000
Uniforms $200,000 $0 $0 $200,000
Point of Sale Equipment $75,000 $0 $0 $75,000
Office Equipment $200,000 $0 $0 $200,000
Surveillance Equipment $558,100 $11,733 $0 $546,367
CCTV/MATV Equipment $70,000 $0 $0 $70,000
Paging/Sounding Systems $75,000 $0 $0 $75,000
Window Washing Equipment $100,000 $0 $0 $100,000
--------------------------------------------------------------------
SUBTOTAL OTHER EQUIPMENT $3,750,645 $11,733 $0 $3,738,912
SECTION X - SOFT COSTS TOTAL TOTAL TOTAL BALANCE
PROJECT PAID TO BE TO FINISH
BUDGET TO DATE PAID
Legal $0 $0 $0 $0
Accounting/Auditing $50,000 $0 $0 $50,000
Insurance $0 $0 $0 $0
Builders Risk Insurance 200,000 $0 $0 $200,000
Real Estate Taxes $0 $0 $0 $0
Business Incentives $0 $0 $0 $0
Other $0 $0 $0 $0
PAGE 3
41
STRATOSPHERE PROJECT DEVELOPMENT ESTIMATE
----------------------------------------------------------------
SUBTOTAL SOFT COSTS $250,000 $0 $0 $250,000
PAGE 4
