Grand Casinos, Inc. Letterhead
September 27, 1996
STRATOSPHERE CORPORATION
0000 Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
Gentlemen:
This letter sets forth certain understandings between Grand Casinos,
Inc. ("Grand") and Stratosphere Corporation ("Stratosphere") regarding amounts
owed by Stratosphere to Grand and amounts which will be loaned or refunded by
Grand to Stratosphere.
Stratosphere hereby acknowledges that an aggregate of $2,318,873.43 is
currently due and owing from Stratosphere to Grand and payable at this time
under that certain Management and Development Agreement dated July 1, 1994, as
amended and modified from time to time (the "Management Agreement"), consisting
of consulting fees in the amount of $526,999.37 and reimbursement for expenses
in the amount of $1,791,874.06. In accordance with the Management Agreement,
Xxxxx has demanded execution of this Letter Agreement by 10:00 a.m. (P.D.T.)
September 27, 1996 and timely payment of the amounts currently due thereunder.
In addition, Stratosphere has requested that Grand provide a loan to
Stratosphere in the amount of $2,300,000 to fund certain working capital
deficits that are expected to occur from the date hereof through December 31,
1996. In consideration for the payment by Stratosphere to Grand of the amounts
currently due and owing under the Management Agreement, Xxxxx agrees to make a
loan to Stratosphere or to refund to Stratosphere the sum of $2,300,000. If
Grand elects to make the loan rather than refund the $2,300,000, and unless
other terms are negotiated by Grand and the Ad Hoc Committee (as defined below),
such loan shall include the following terms: (i) such loan shall be subordinated
in right of payment pursuant to the terms and conditions set forth in that
certain Completion Guarantor Subordination Agreement dated as of March 9, 1995;
(ii) such loan shall have a maturity of no earlier than May 15, 2002 (provided
that principal and interest may be prepaid, without premium, so long as such
prepayment is permitted pursuant to Section 4.07 of Stratosphere's Indenture
dated as of March 9, 1995 (the "Indenture") and no Event of Default (as defined
therein) shall have occurred and be continuing or would occur as a consequence
thereof); and (iii) no payment with respect to such loan shall be payable at any
time a default or Event of Default has occurred and is continuing under the
Indenture. The applicable rate of interest on the loan will be mutually
agreeable to Stratosphere and Grand, and in no event greater than 14 1/4%. In
the event Grand elects to refund the sum of $2,300,000, Stratosphere
acknowledges that Grand shall have a valid and enforceable claim under the
Management Agreement against Stratosphere for payment of such amount.
Grand will either refund the sum of $2,300,000 or advance the proceeds
of the loan to Stratosphere on the earliest to occur of the following: (i) Grand
shall reach an agreement with the informal committee of the holders of a
majority of the First Mortgage Notes (the "Ad Hoc Committee") regarding the
funding of such loan, the terms and conditions of which shall be
reasonably satisfactory to Grand and Stratosphere; (ii) Stratosphere shall
demonstrate to Grand's reasonable satisfaction that such funds are needed by
Stratosphere for current working capital purposes; or (iii) November 5, 1996.
To permit Grand to have a meaningful opportunity to negotiate the terms
of the loan with the Ad Hoc Committee, Stratosphere agrees that the existence of
this document and the loan or refund (as applicable) which is the subject
hereof, and all information and details relating thereto (collectively the
"Information"), shall be kept strictly confidential, except as required by law,
regulation or debt covenants in any existing financing instrument of
Stratosphere, and except that Information may be disclosed to officers,
directors, employees and advisors of Stratosphere provided that such persons
agree to keep the Information confidential. If Stratosphere is requested or
believes that it is otherwise obligated to disclose the Information,
Stratosphere agrees to give Grand five (5) business days notice of such request
or obligation to disclose during which time Stratosphere shall not disclose the
Information.
In addition, Stratosphere has purchased certain equipment from
affiliates of Grand in the approximate amount of $3,600,000. In connection
therewith, Stratosphere acknowledges to Grand and its affiliates that: (a) the
debt owing from Stratosphere to Grand and its affiliates for such equipment is a
transaction in the ordinary course of Stratosphere's business; (b) the payment
by Stratosphere of the amounts owed to Grand and its affiliates in respect of
such equipment as required hereunder is in the ordinary course of Stratosphere's
business; and (c) such payment is an arm's length transaction between Grand, its
affiliates and Stratosphere and is made according to ordinary business terms.
Within ten (10) days following execution hereof, Stratosphere shall pay
or cause to be paid to Grand the sum of $2,318,873.43 due and owing under the
Management Agreement and the sum of $3,600,000 for the equipment purchase.
If the foregoing correctly sets forth our understandings with respect
to the matters contained herein, please so indicate by signing below.
Very truly yours,
GRAND CASINOS, INC.
By: /s/ Xxxxxxx Xxxx
Title: Chief Financial Officer
Acknowledged as agreed as of
October 2, 1996
STRATOSPHERE CORPORATION
By: /s/ Xxxxxx Xxxxxx
Title: Executive Vice President
