<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 4)*
STRATOSPHERE CORPORATION
(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE
(Title of Class of Securities)
86 3106 10 0
(CUSIP Number)
BOB STUPAK
1213 LAS VEGAS BOULEVARD SOUTH
LAS VEGAS, NEVADA 89104
(702) 383-0764
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
OCTOBER 11, 1995
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ]. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five persons of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7).
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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SCHEDULE 13D
CUSIP NO. 863103 10 0 PAGE 2 OF ___ PAGES
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
BOB STUPAK
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [ ] (B) [x]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
PF; OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
7 SOLE VOTING POWER
0
8 SHARED VOTING POWER
7,976,496
9 SOLE DISPOSITIVE POWER
0
10 SHARED DISPOSITIVE POWER
7,976,496
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON 7,976,496
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.7%
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTION BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE,
RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
2
<PAGE> 3
SCHEDULE 13D
CUSIP NO. 863103 10 0 PAGE 3 OF ___ PAGES
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
BOB STUPAK ENTERPRISES, INC.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [ ] (B) [x]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
AF; OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEVADA
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
7 SOLE VOTING POWER
0
8 SHARED VOTING POWER
7,661,496
9 SOLE DISPOSITIVE POWER
0
10 SHARED DISPOSITIVE POWER
7,661,496
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON 7,661,496
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.1%
14 TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTION BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE,
RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
3
<PAGE> 4
SCHEDULE 13D
CUSIP NO. 863103 10 0 PAGE 4 OF ___ PAGES
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
DINE OUT CORP.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [ ] (B) [x]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
AF; OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEVADA
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
7 SOLE VOTING POWER
0
8 SHARED VOTING POWER
315,000
9 SOLE DISPOSITIVE POWER
0
10 SHARED DISPOSITIVE POWER
315,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON 315,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.5%
14 TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTION BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE,
RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
4
<PAGE> 5
SCHEDULE 13D
CUSIP NO. 863103 10 0 PAGE 5 OF ___ PAGES
INTRODUCTION
This Amendment No. 4 ("Amendment No. 4") to the Statement on Schedule
13D dated November 15, 1993, as amended by Amendment No. 1 to the Schedule 13D
dated February 23, 1994, Amendment No. 2 to the Schedule 13D dated May 3, 1994
and Amendment No. 3 to the Schedule 13D dated June 1, 1994 (as amended, the
"Schedule 13D"), relates to the common stock, par value $.01 per share (the
"Common Stock"), of Stratosphere Corporation, a Delaware corporation (the
"Issuer" or the "Company"), and is being filed by Bob Stupak ("Stupak"), Bob
Stupak Enterprises, Inc., a Nevada corporation ("BSE"), and Dine Out Corp., a
Nevada corporation ("Dine Out" and collectively with Stupak and BSE, the
"Reporting Persons" or the "Stupak Affiliates") pursuant to Rule 13d-2(a) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Unless otherwise indicated, each capitalized term used herein but not
otherwise defined shall have the meaning assigned to such term in the Schedule
13D.
The information set forth in the Exhibits attached hereto and the
response to the applicable items of this Amendment No. 4 is qualified in its
entirety by the provisions of such Exhibits.
ITEM 2. IDENTITY AND BACKGROUND
Item 2 is hereby amended and restated as follows:
This Schedule 13D is filed on behalf of Bob Stupak Enterprises, Inc.,
a Nevada corporation ("BSE), Dine Out Corp., a Nevada corporation ("Dine Out")
and Bob Stupak (each a "Reporting Person" or "Stupak Affiliate" and,
collectively, the "Reporting Persons" or the "Stupak Affiliates"). The
Reporting Persons are making this joint filing because they may be deemed to
constitute a "group" within the meaning of Section 13(d)(3) of the Exchange
Act, although neither the fact of this filing nor anything contained herein
shall be deemed to be an admission by the Reporting Persons that a group
exists.
BSE. BSE is a Nevada corporation whose principal business is the
ownership of the Common Stock of the Issuer. The business address of BSE is
1213 Las Vegas Boulevard South, Las Vegas, Nevada 89104.
Dine Out. Dine Out is a Nevada corporation whose principal business
is the ownership of the Common Stock of the Issuer. The business address of
Dine Out is 1213 Las Vegas Boulevard South, Las Vegas, Nevada 89104.
Stupak. Bob Stupak is the sole director, president, secretary,
treasurer and stockholder of each of BSE and Dine Out. His principal
occupation is serving as Chairman of the Board of Directors of the Issuer. The
business address of Mr. Stupak is 1213 Las Vegas Boulevard South, Las Vegas,
Nevada 89104. Mr. Stupak is a citizen of the United States.
5
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SCHEDULE 13D
CUSIP NO. 863103 10 0 PAGE 6 OF ___ PAGES
During the past five (5) years, none of the Reporting Persons has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors), or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to such
laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Item 3 is hereby amended and supplemented by adding the following:
On October 11, 1995, Dine Out exercised its 500,000 Common Stock
Purchase Warrants, paid the aggregate exercise price thereunder of $2,915,000
and received 500,000 shares of Common Stock (the "Warrant Shares") upon such
exercise. Of the aggregate exercise price, $415,000 was paid from the personal
funds of Mr. Stupak and $2,500,000 was borrowed by the Reporting Persons from
Exber, Inc. The terms of the loan from Exber, Inc. were evidenced by a
promissory note dated October 11, 1995 (the "Exber Note") and a pledge
agreement dated October 11, 1995 between the Reporting Persons and Exber Inc.
(the "Exber Pledge Agreement"). A copy of the Exber Note and the Exber Pledge
Agreement is filed as Exhibit 1 hereto and is incorporated herein by reference.
The loan from Exber, Inc. accrued interest at a rate of 10% per annum and
matured on June 30, 1996. The loan was secured by a pledge of the 500,000
Warrant Shares plus an additional 500,000 shares of Common Stock (of which
300,000 were owned of record by Dine Out and 200,000 were owned of record by
BSE). In connection with the foregoing transaction, BSE and Dine Out assigned
all of their respective interests in the pledged shares of Common Stock to Mr.
Stupak for the term of the Exber Note. The Exber Note was paid in full on
March 8, 1996.
ITEM 4. PURPOSE OF TRANSACTION
Item 4 is hereby amended and supplemented by adding the following:
On November 1, 1994, in connection with the Option Closing, the Issuer
and Mr. Stupak entered into an Asset Purchase Agreement (the "Asset Purchase
Agreement"), which amended certain provisions of the Assignment Agreement with
respect to the Outstanding Package Obligations (as defined therein). Pursuant
to the terms of the Asset Purchase Agreement, 7,000,000 shares of Common Stock
owned by BSE were deposited into an escrow account with First Interstate Bank
of Nevada, N.A. ("FIB"). The escrow with FIB is governed by an escrow
agreement dated November 1, 1994 by and among the Issuer, Mr. Stupak and FIB
(the "FIB Escrow Agreement"). Copies of the Asset Purchase Agreement and the
FIB Escrow Agreement are filed herewith as Exhibits 2 and 3, respectively, and
are incorporated herein by reference. Pursuant to the terms of the FIB Escrow
Agreement, Mr. Stupak shall deposit in the escrow account additional cash
and/or Common Stock so that the value of the escrow account shall remain equal
to or greater than the sum of the Claims Reserve (as defined therein) and 150%
of the Outstanding Package Obligations. Shares of Common Stock are
periodically sold from the escrow account and the proceeds from such
6
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SCHEDULE 13D
CUSIP NO. 863103 10 0 PAGE 7 OF ___ PAGES
sales are used to satisfy the Outstanding Package Obligations. As of June 20,
1996, 5,257,500 shares of Common Stock remained in the escrow account.
On November 4, 1994, the Option Closing was consummated and Grand
acquired an additional 4,119,472 shares of Common Stock from BSE at a price per
share of approximately $.44.
On May 31, 1995, the Lease was terminated.
On October 11, 1995, Dine Out acquired the Warrant Shares. (See Item
3 for a description of such transaction.) Dine Out acquired the Warrant Shares
for investment purposes.
The Stupak Affiliates have from time to time disposed of shares of
Common Stock. Transactions in the Common Stock effected by the Stupak
Affiliates within the past 60 days are set forth on Schedule A hereto.
Pursuant to the terms of the Asset Purchase Agreement and FIB Escrow Agreement,
shares of Common Stock will periodically be sold from the escrow account to
satisfy the Outstanding Package Obligations. In addition, depending on working
capital needs and other factors, the Stupak Affiliates may from time to time
sell shares of Common Stock, either in open market purchases or otherwise.
The Stupak Affiliates have been engaged in discussions with the
Company and Grand Casinos, Inc., the Company's largest stockholder (together
with its subsidiaries and affiliates other than the Company, "Grand"), with
respect to possible transactions which, if consummated, would result in,
among other things, the acquisition by Grand of all of the Stupak Affiliates'
Common Stock in exchange for common stock of Grand and the resolution of
various monetary and non-monetary issues between the Stupak Affiliates and the
Company. No assurance can be given that these discussions will result in any
such transaction being effected.
Pursuant to an existing agreement between Mr. Stupak and Grand, a
merger or other form of business combination involving the Company and Grand
may not be consummated prior to November 1998 without Mr. Stupak's consent.
However, Mr. Stupak believes that the interests of the Company and its
stockholders can best be served through such a merger or other business
combination since such unification could provide an opportunity to consolidate
debt, reduce costs and maximize operating efficiencies while reducing competing
time demands and other potential conflict-of-interest situations, including
decisions as to the allocation or pursuit of expansion opportunities.
Accordingly, Mr. Stupak has advised Grand that he is willing to waive the
contractual prohibition in order to facilitate a business combination at this
time.
Mr. Stupak is also considering resigning as Chairman and as a member
of the Company's Board of Directors. In his opinion, because Grand currently
owns approximately 42% of the Common Stock and is the controlling stockholder,
Mr. Stupak's ability to influence the Company's operations and strategic
business decisions is extremely limited. Nevertheless, Mr. Stupak recognizes
that until a merger or other form of business combination is consummated, the
interests of the Company's stockholders other than Grand may best be served
by Mr. Stupak remaining as a member of the Board of Directors where he may
7
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SCHEDULE 13D
CUSIP NO. 863103 10 0 PAGE 8 OF ___ PAGES
continue to exercise some influence on decisions and actions, both as an
individual Board member and as a member of the Committee of Independent
Directors, which he could not do if he disassociated himself from deliberations
of the Board of Directors.
The Stupak Affiliates are also considering engaging an investment
banker or other financial advisors to advise them with respect to issues
involving the Company and Grand and the respective value of their securities,
including the Common Stock.
Except as set forth above, the Stupak Affiliates have no present plans
or proposals which would result in or relate to any of the transactions
described in paragraphs (a) through (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Item 5 of the Schedule 13D is hereby amended and restated as follows:
BSE is the beneficial owner of 7,661,496 shares of Common Stock, which
represented approximately 13.1% of the outstanding Common Stock of the Issuer
as of June 20, 1996. Dine Out is the beneficial owner of 315,000 shares of
Common Stock, which represented approximately 0.5% of the outstanding Common
Stock as of June 20, 1996. By virtue of being the sole stockholder, director,
president, treasurer and secretary of BSE and Dine Out, Mr. Stupak may be
deemed to have the power to vote and dispose of the shares of Common Stock
owned by BSE and Dine Out. Accordingly, Mr. Stupak may be considered the
beneficial owner of an aggregate of 7,976,496 shares of Common Stock, which
represented approximately 13.7% of the outstanding Common Stock of the Issuer
as of June 20, 1996.
Pursuant to the terms of the Asset Purchase Agreement and FIB Escrow
Agreement, certain shares of Common Stock (5,257,500 shares as of June 20,
1996) beneficially owned by BSE are held in escrow and pledged to the Issuer to
secure certain obligations of Mr. Stupak. Under Rule 13d-3(d)(3) of the
Exchange Act, the Issuer, as pledgee, may be deemed to share the voting and
dispositive power with respect to such pledged shares.
The Issuer, as pledgee, has (i) the right to receive and hold, as
additional security, dividends paid on the pledged shares and (ii) the right to
receive the proceeds, subject to certain limitations, from the sale of any of
such pledged shares that are sold pursuant to the terms of the agreements
governing the respective pledges.
Transactions in the Common Stock effected by the Reporting Persons
within the past 60 days are set forth on Schedule A hereto.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Item 6 is hereby amended and supplemented by adding the following:
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SCHEDULE 13D
CUSIP NO. 863103 10 0 PAGE 9 OF ___ PAGES
In November 1994, Mr. Stupak and the Issuer entered into the Asset
Purchase Agreement, and Mr. Stupak, the Issuer and FIB entered into the FIB
Escrow Agreement, copies of which are filed herewith as Exhibits 2 and 3,
respectively, and incorporated herein by reference. See Item 4 for a
description of such agreements.
In October 1995, the Reporting Persons and Exber, Inc. entered into
the Exber Note and Exber Pledge Agreement, copies of which are attached hereto
as Exhibit 1 and incorporated herein by reference. See Item 4 for a
description of such agreements.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The following documents are filed as exhibits to this Amendment No. 4:
Exhibit 1 $2,500,000 Secured Promissory Note dated October 11, 1995 of
Robert E. Stupak, Bob Stupak Enterprises, Inc. and Dine Out
Corp. in favor of Exber, Inc. and Stock Pledge Agreement,
dated October 11, 1995 between Robert E. Stupak, Dine Out
Corp. and Bob Stupak Enterprises, Inc., as pledgors, and
Exber, Inc., as pledgee.
Exhibit 2 Asset Purchase Agreement, dated November 1, 1994, between
Stratosphere Corporation and Bob Stupak, d/b/a Vegas World
Casino & Hotels.
Exhibit 3 Escrow Agreement, dated November 1, 1994, among Stratosphere
Corporation, Bob Stupak, d/b/a Vegas World Casino & Hotels,
and First Interstate Bank of Nevada, N.A.
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SCHEDULE 13D
CUSIP NO. 863103 10 0 PAGE 10 OF ___ PAGES
SCHEDULE A
BSE effected the following open market transactions in the Common
Stock during the past 60 days.
<TABLE>
<CAPTION>
DATE NUMBER OF SHARES PRICE PER SHARE DESCRIPTION
---- ---------------- --------------- -----------
<S> <C> <C> <C>
5/10/96 10,000 8.71875 SALE
5/31/96 100,000 8.59375 SALE
5/31/96 13,000 8.09375 SALE
6/3/96 13,000 8.21875 SALE
6/11/96 5,000 7.25 SALE
6/13/96 27,000 7.125 SALE
6/13/96 20,000 7.00 SALE
6/14/96 5,000 7.25 SALE
6/18/96 10,000 7.00 SALE
6/18/96 5,000 7.1875 SALE
6/18/96 35,000 7.25 SALE
6/18/96 5,000 7.375 SALE
</TABLE>
Dine Out effected the following open market transactions in the Common
Stock during the past 60 days.
<TABLE>
<CAPTION>
DATE NUMBER OF SHARES PRICE PER SHARE DESCRIPTION
---- ---------------- --------------- -----------
<S> <C> <C> <C>
5/28/96 5,000 7.75 SALE
5/28/96 6,900 7.875 SALE
5/28/96 5,000 7.96875 SALE
5/28/96 15,000 7.75416 SALE
5/28/96 47,550 7.875 SALE
5/28/96 20,550 8.00 SALE
6/11/96 5,000 8.00 SALE
6/13/96 20,000 7.00 SALE
6/13/96 13,000 7.125 SALE
6/19/96 10,000 7.00 SALE
6/19/96 50,000 6.75 SALE
6/24/96 25,000 6.75 SALE
</TABLE>
10
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SCHEDULE 13D
CUSIP NO. 863103 10 0 PAGE 11 OF ___ PAGES
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
June 28, 1996 /s/ BOB STUPAK
----------------- -------------------------------
Date Bob Stupak
11
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SCHEDULE 13D
CUSIP NO. 863103 10 0 PAGE 12 OF ___ PAGES
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
June 28, 1996 BOB STUPAK ENTERPRISES, INC.
-------------------
Date By: /s/ BOB STUPAK
------------------------------
Bob Stupak
President
12
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SCHEDULE 13D
CUSIP NO. 863103 10 0 PAGE 13 OF ___ PAGES
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
June 28, 1996 DINE OUT CORP.
---------------
Date By: /s/ BOB STUPAK
--------------------------------
Bob Stupak
President
13
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SCHEDULE 13D
CUSIP NO. 863103 10 0 PAGE ____ OF ____ PAGES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Description of Exhibit Numbered Page
- ---------------------- -------------
<S> <C>
1 $2,500,000 Secured Promissory Note dated October 11,
1995 of Robert E. Stupak, Bob Stupak Enterprises, Inc.
and Dine Out Corp. in favor of Exber, Inc. and Stock
Pledge Agreement, dated October 11, 1995 between
Robert E. Stupak, Dine Out Corp. and Bob Stupak
Enterprises, Inc., as pledgors, and Exber, Inc.,
as pledgee.
2 Purchase Agreement, dated November 1, 1994, among
Stratosphere Corporation and Bob Stupak, d/b/a Vegas
World Casino & Hotels.
3 Escrow Agreement, dated November 1, 1994, among
Stratosphere Corporation, Bob Stupak, d/b/a Vegas
World Casino & Hotels, and First Interstate Bank of
Nevada, N.A., as escrow agent.
</TABLE>
<PAGE> 1
EXHIBIT 99.1
AGREEMENT TO PLEDGE WITH ESCROW INSTRUCTIONS
October 11, 1995
William Singleton, Esq.
BECKLEY, SINGLETON,
JEMISON & LIST, CHTD.
530 Las Vegas Boulevard, South
Las Vegas, Nevada 89101
RE: PLEDGE OF STRATOSPHERE COMMON STOCK & WARRANTS
Dear Mr. Singleton:
The undersigned, Exber, Inc. as Pledgee ("Exber") and Robert E.
Stupak, Bob Stupak Enterprises, Inc., and Dine Out Corp. (collectively
"Borrower"), hereby request and authorize you and your firm to act as Escrow
Agent for the undersigned in connection with the pledge of 1,000,000 of the
outstanding shares in Stratosphere Corporation, which stock (the "Shares') is
subject to a Stock Pledge Agreement, dated October 11, 1995, attached hereto
and made a part hereof as Exhibit "A", and a loan reflected in a Secured Note,
which is attached hereto and made a part hereof as Exhibit "B". You will be
handed at closing (defined as the execution of all loan documents including the
Secured Note and the advancement of funds) or already have in your possession,
the following documents:
1. Stock Pledge Agreement, dated October 11, 1995;
2. Original Stock Certificates Nos. S-03337 to S-03339,
representing 300,000 shares in the name of Dine Out Corp.;
Original Stock Certificates Nos. S-01697 to S-01700,
representing 200,000 shares in the name of Bob Stupak
Enterprises, Inc.; and 500,000 shares represented by a
warrant, Certificate No. W-02768, in the name of Dine Out
Corp., which shares and warrants have been assigned to Bob
Stupak. The warrant, along with the loan funds, shall be
forwarded to the transfer agent and exchanged for shares in
Stratosphere Corporation, said shares being subject to this
escrow;
3. Stock Power dated October 11, 1995.
You are authorized to hold the above-described documents in accordance
with the terms of the loan documents. You are authorized to place whatever
restrictive legend you deem legally appropriate on the shares and to advise the
Corporation's transfer agent of the security interest of Exber.
The Escrow Agent shall not be deemed to have notice of any event
pertaining to this escrow
<PAGE> 2
William Singleton, Esq.
October 11, 1995
Page 2
unless and until notice of that event is given to Escrow Agent in writing. The
undersigned acknowledge that you are acting as Escrow Agent only and that you
have potentially conflicting responsibilities in that your firm acts as counsel
for Exber. The undersigned acknowledge and agree, however, you are acting as a
depository only, and should not be responsible or liable for any error of
judgment or for any act done or any step taken or omitted to be taken by you in
good faith, or for any mistake of fact or law, or for anything for which you
may do or refrain from doing in connection herewith, except your own wilful
misconduct, and to the fullest extent of the law hereby waive any claim of
conflict of interest that might otherwise prevent you from representing Exber
in a dispute arising out of the loan documents.
In the event of any dispute between the parties hereto, you shall have
the right to refrain from taking any further action until such time as the
parties have agreed upon a course of action or a court of competent
jurisdiction has entered its order. The undersigned hereby jointly and
severally agree to hold you harmless and indemnify you against any loss, cost
or damage which you may incur as Escrow Agent, including but not limited to
attorney's fees and costs. As between the parties signatory hereto, and
excluding yourself, in the event of any suit, the party to whom against a
decision is entered or judgment rendered shall pay all your costs, including
without limitation, reasonable attorney's fees in connection with such suit.
This Agreement inures to the benefit of and binds the parties hereto,
their heirs, successors and assigns.
BORROWER: EXBER, INC.
/S/ BOB STUPAK By: [SIG]
- ------------------------------ ------------------------------
Bob Stupak Its: President
---------------------
DINE OUT CORP.
By: [SIG]
------------------------------
Its: President
----------------------- William Singleton, Esq., on behalf of
Beckley, Singleton, Jemison, & List,
Chtd., hereby acknowledges receipt of
the foregoing instructions, together
with the instruments described
therein.
BOB STUPAK ENTERPRISES, INC. /s/ William Singleton
-----------------------------------
By: [SIG]
------------------------------
Its: President
-----------------------
<PAGE> 3
EXHIBIT A
<PAGE> 4
STOCK PLEDGE AGREEMENT
DATED as of October 11, 1995.
PARTIES: Borrower/Pledgor:
Name: Robert E. Stupak, Dine Out Corp.,
and Bob Stupak Enterprises, Inc.
Address: c/o Vegas World Hotel-Casino
1213 Las Vegas Boulevard, South
Las Vegas, Nevada 89104
and
Secured Party:
Name: Exber, Inc.
dba EL CORTEZ HOTEL & CASINO
Address: 600 E. Fremont Street
Las Vegas, Nevada 89101
RECITALS
Pursuant to certain loan documents of even date made by Robert E.
Stupak, Bob Stupak Enterprises, Inc., and Dine Out Corp. ("Borrower/Pledgor")
to Exber, Inc. ("Secured Party"), Borrower/pledgor has secured their
indebtedness to Secured Party in the principal amount of up to Two Million Five
Hundred Thousand and 00/100 Dollars ($2,500,000.00) as evidenced by and payable
according to the terms of a Secured Note (the "Secured Note") of even date made
by Borrower/Pledgor to the order of Secured Party. References to the Secured
Note mean the instrument itself, the underlying indebtedness which it
evidences, and any substitute or renewal note or notes, or extension or
modification of any such note. Borrower/Pledgor is making this pledge as an
inducement to Secured Party to make the loan to the Borrower/Pledgor
represented by the Secured Note, the proceeds of which are to be used for the
sole purpose of exercising a certain stock warrant, and other shares. The
shares received on exercise of the warrant shall become collateral hereunder.
IT IS AGREED:
1. PLEDGE. Borrower/Pledgor grants Secured Party a security
interest in the stock, warrant, and other properties and interests ("the
Shares") described in Paragraph 2 to secure the payment of the indebtedness
described in Paragraph 3.
2. STOCK AND PROPERTIES PLEDGED. Borrower/Pledgor grants Secured
Party a security interest in and pledges to Secured Party the following
described shares of stock, all rights and interests embodied in or represented
by the stock certificates therefor, warrant, and
<PAGE> 5
STOCK PLEDGE AGREEMENT Page 2
all other properties and interests described below. The stock, warrants, and
properties pledged are referred to in this Stock Pledge Agreement (the
"Agreement") as the Shares:
(a) The following described stock certificates, or
warrant to acquire the shares, of Stratosphere Corporation ("the
Corporation"):
<TABLE>
<CAPTION>
Certificate No.: Number of Shares Issued in the Name of:
- ---------------- ---------------- ----------------------
<S> <C> <C>
S-01697 50,000 Bob Stupak Enterprises, Inc.
S-01698 50,000 Bob Stupak Enterprises, Inc.
S-01699 50,000 Bob Stupak Enterprises, Inc.
S-01700 50,000 Bob Stupak Enterprises, Inc.
S-03337 100,000 Dine Out Corporation
S-03338 100,000 Dine Out Corporation
S-03339 100,000 Dine Out Corporation
Warrant No.:
W-02768 500,000 Dine Out Corporation
</TABLE>
(b) All other shares hereinafter acquired by
Borrower/Pledgor in the Corporation, upon exercise by Borrower/Pledgor
of the warrant or received in relation to the Shares.
Borrower/Pledgor covenants to (i) use the proceeds of the Secured Note
for the sole purpose of exercising the warrant, and (ii) exercise the
warrant when it becomes due on or before October 11, 1995.
(c) All dividends (including stock dividends), interest,
rights, income or other benefits arising out of or pertaining to the
items described in Paragraph 2(a) and (b).
(d) Stock powers, endorsed in blank, and all other
instruments necessary or convenient to transfer title to the items
described in Paragraphs 2(a) and 2(b). In addition, this Agreement,
of itself, constitutes Borrower/Pledgor's authorization to the Secured
Party, subject to approval of the Nevada Gaming Commission, to
transfer title upon default, whether or not such stock powers have
been executed as to any particular item or items.
(e) All notes, shares, securities, certificates of
deposits and other instruments from time to time hereafter delivered
to or otherwise possessed by the Escrow Agent for or on behalf of the
Borrower/Pledgor in substitution for, or in addition to all or part of
the items described in paragraphs 2(a), (b), and (c) above.
3. INDEBTEDNESS SECURED. The Shares are pledged to secure the
obligations of the Borrower/Pledgor under the Secured Note, which secures, among
other things, the payment
<PAGE> 6
STOCK PLEDGE AGREEMENT Page 3
of the indebtedness represented by the Secured Note, costs of enforcement of
Secured Party's collateral therefor as well as costs of collection, and
reasonable attorneys' fees.
4. COVENANTS. Borrower/Pledgor agrees to take no action which
would adversely affect the value of the Shares or which would encumber, dilute
or cloud Borrower/Pledgor's title or interest therein or interfere with the
Escrow Agent in the performance of the escrow.
(a) Negative Covenants. Borrower/Pledgor shall not do
any of the following without the prior written consent of the Secured
Party:
(i) No Transfers: Sell, give, transfer or agree
to sell, transfer, all or any part of the Shares or agree to
sell, give or transfer, all or any part of the Shares or any
interest therein.
(ii) No Liens: Mortgage, pledge, hypothecate, or
in any way encumber or attempt to encumber the Shares or any
interest therein, regardless of whether or not such action is
taken, or purports to be taken, as being subordinate or
without prejudice to this Agreement.
(iii) No Dissipation or Dilution: As stockholder,
owner, part-owner, director, corporate officer, or in any
other capacity, vote for, ratify, accept, accede to, or
approve any proposed transaction concerning the Shares which
would have the effect of destroying or of changing the
identity of any of the Shares or of reducing the net worth
thereof, or of diluting or reducing the proportionate interest
of Borrower/Pledgor therein, or of creating any equity or
interest which would be prior or superior in claim or right to
the title and interest of Borrower/Pledgor or to the rights of
Secured Party under this Agreement or cancel any of the
Shares, or issue any other class or series of stock or
securities, including those in addition to or in substitution
for the Shares.
(iv) Warrant. Obtain and retain possession of the
shares of stock issued upon exercise of the warrant, except
for purposes of an immediate transfer to Escrow Agent, which
transfer shall take place within one (1) day of receipt.
(v) Rule 144. Upon an event of default, not to
transfer or sell under any applicable securities laws any
shares of stock of the Corporation, or other interest therein,
owned, beneficially or otherwise, by the Borrower/Pledgor.
<PAGE> 7
STOCK PLEDGE AGREEMENT Page 4
(b) Affirmative Covenants. In the event the market price
of the stock of the Corporation listed on any stock exchange closes at
five dollars ($5.00) per share or less, for two (2) consecutive days,
Borrower/Pledgor shall, within fifteen (15) days, either (i) pay
one-half (1/2) of the principal owed under the Secured Note, or (ii)
submit to the Escrow Agent additional shares of stock of the
Corporation in an amount sufficient to raise the total value of
pledged shares to four and one-half (4 1/2) times the total amount
owed under the Secured Note, regardless of any subsequent price
movement during or after the fifteen (15) day period.
5. DELIVERY OF SHARES AND INSTRUMENTS: ADJUSTMENTS. Pursuant to
the Agreement to Pledge with Escrow Instructions ("Escrow Instructions"),
attached hereto as Exhibit "A" and by this reference incorporated herein,
Borrower/Pledgor shall deliver or cause to be delivered to the Escrow Agent
(defined therein), the Shares and all other documents evidencing any ownership
of the Shares or which are necessary or convenient for the Secured Party to
exercise any of Secured Party's rights. If during the term of this Agreement
any stock dividends, reclassification, readjustments or other changes are
declared or made in the capital structure of any corporation represented by the
Shares, or if any subscription or other options are exercisable with respect to
the Shares, all such new, substitute or additional shares or other securities,
rights or interests issued shall be delivered to and held by the escrow subject
to this Agreement, in the same manner as the Shares.
6. LOCATION OF SHARES. The Shares shall at all times remain
within the territorial boundaries of the State of Nevada.
7. VOTING. So long as Borrower/Pledgor is not in default under
this Agreement, the shares may be voted by the Borrower/Pledgor at all meetings
of stockholders, subject to the restrictions of paragraph 4(a)(iii).
8. EVENTS OF DEFAULT. Any one or more of the following will
constitute an event of default under this Agreement:
(a) Failure of Borrower/Pledgor to pay when due any
obligation secured hereby.
(b) (i) The withdrawal by Borrower/Pledgor or the
Corporation of any pending gaming application with the Nevada Gaming
Commission (the "Commission"), (ii) a finding by the Commission that
Borrower/Pledgor is unsuitable, or (iii) the loss, suspension,
forfeiture, surrender or termination of a finding of suitability or a
gaming license issued to Borrower/Pledgor or the Corporation by the
Commission.
(c) The breach of any warranty, representation, or
covenant (affirmative or negative) contained herein, or in any
document given in connection with the loan or used to carry out the
purpose of this Agreement,
<PAGE> 8
STOCK PLEDGE AGREEMENT Page 5
including without limitation, the Secured Note, the Escrow
Instructions, the Stock Power, and the Representation and Loan
Modification Letter given by Borrower/Pledgor to Secured Party to
secure the Secured Note.
(d) The failure of the Borrower/Pledgor to use the
proceeds of the Secured Note to exercise the warrant before it expires
or the failure to exercise the warrant on or before October 12, 1995,
and to effect the immediate transfer of the shares issued upon such
exercise to the Escrow Agent.
(e) Liquidation, dissolution, or merger of the
Corporation, or the purchase of the assets of another business entity
by Borrower/Pledgor or the Corporation when the same would result in
the impairment of the covenants described herein.
(f) Any act or condition by or against Borrower/Pledgor
or the Corporation which would adversely affect the Corporation's
ability to do business sufficiently to sustain the value of the
Shares.
(g) Issuance without the consent of the Secured Party of
any additional shares of the Corporation or any dilution of the
existing Shares, unless, in conjunction with any such action,
additional security is provided to the Secured Party such that in its
good faith opinion its secured interests do not suffer any dilution.
(h) Any change in the financial condition of
Borrower/Pledgor or the Corporation which could impair the value of
the Shares, or impair the prospect of payment on the Secured Note or
the interest payments thereon.
(i) If Borrower/Pledgor or the Corporation becomes
insolvent or bankrupt or admits in writing an inability to pay debts
as they mature, or makes an assignment for the benefit of creditors,
or applies for or consents to the appointment of a trustee or receiver
over a substantial Part of their property; or if either of them
commences any proceeding relating to any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding under the law of any
jurisdiction.
(j) If any such application or proceeding as mentioned in
the preceding paragraph 8(i) is commenced against Borrower/Pledgor or
the Corporation, and Borrower/Pledgor or the Corporation indicate his
or its approval, consent or acquiescence; or if any order is entered
appointing a trustee or receiver over any of Borrower/Pledgor's or the
Corporation's property or adjudicating any of them bankrupt or
insolvent, or approving the petition in any such proceeding, and such
order remains in effect for thirty (30) days.
<PAGE> 9
STOCK PLEDGE AGREEMENT Page 6
(k) If any judgment, writ of attachment or any other
legal process or proceeding for the execution upon, seizure of, or
likening of, any of Borrower/Pledgor's or the Corporation's assets or
the Shares is entered or issued, which process or proceeding remains
undismissed, unvacated, unbonded or unstayed for a period of thirty
(30) days.
(1) An Event of Default under the Secured Note.
9. REMEDIES ON DEFAULT. At any one or more times after any event
of default described in Paragraph 8 has occurred, Secured Party, without
demand, presentment, further notice or prerequisite action of any kind (all of
which are hereby expressly waived), may take any one or more of the following
actions, simultaneously or in any order subject at all times to the applicable
gaming laws of the State of Nevada:
(a) Declare immediately due and payable all obligations
of Borrower/Pledgor to Secured Party under this Agreement and the
Secured Note, and the same shall thereupon become immediately due and
payable without notice to or demand on the Borrower/Pledgor.
(b) Sell the whole or any part of the Shares, either at
public or private sale, or at broker's board, and deliver the Shares
sold to the purchaser or purchasers, without right of redemption.
Secured Party may become the purchaser. Secured Party agrees to give
Borrower/Pledgor at least ten (10) days prior notice of sale.
(c) Without offering the Shares for sale to any other
person, sell the Shares to Secured Party, in whole or in part, without
right of redemption, and credit on the indebtedness of
Borrower/Pledgor to Secured Party the then market value of the Shares
so sold. In establishing market value the Secured Party may rely upon
and use the opinion of any independent stock broker or recognized
dealer in similar properties. In any case, the value shall not be
greater than the closing price as listed on the Pacific Stock Exchange
or any other market on which the Shares are traded. Secured Party
agrees to give Borrower/Pledgor at least ten (10) days notice of sale.
(d) Exercise any and all voting rights or other rights or
privileges pertaining to the Shares.
(e) Exercise any other right or remedy given under or
described in the Secured Note, or given by this or any other
agreement, or given generally in law or inequity and to do so without
waiving Secured Party's rights under this Agreement or releasing any
of the Shares.
(f) Secured Party is specifically given all of the rights
and remedies available to secured parties under the Nevada Uniform
Commercial Code.
<PAGE> 10
STOCK PLEDGE AGREEMENT Page 7
(g) In view of the fact that there may not be a readily
available market for the Shares, or that federal or state securities,
gaming or other laws may impose certain restrictions on the method by
which the Shares may be disposed, Borrower/Pledgor agrees that upon
the occurrence of an event of default Secured Party may, from time to
time, attempt to sell all or part of the Shares by a private placement
restricting the bidder and prospective purchasers. In so doing,
Secured Party may solicit offers to buy the Shares, or any part of it
for cash, from a limited number of purchasers deemed by Secured Party,
in its reasonable judgment, to be responsible parties who might be
interested in purchasing the Shares, and if Secured Party solicits
such offers from not less than three (3) such investors one of whom
shall be Borrower/Pledgor, then the acceptance by Secured Party of the
highest and best offer obtained therefrom shall be deemed to be a
commercially reasonable method of disposition of such shares.
10. APPROVAL OF GAMING COMMISSION.
(a) The Escrow Agent shall not surrender possession of
the Shares without the prior approval of the Nevada Gaming Commission.
(b) The approval of the Nevada Gaming Commission of the
Borrower/Pledgor's granting to the Secured Party through the Escrow
Agent a possessory secured interest in the Shares does not constitute
permission to foreclose on said Shares without a further order of the
Nevada Gaming Commission.
11. APPLICATION OF PROCEEDS. If the Shares are sold, the proceeds
of disposition of the Shares shall be applied in the order following:
(a) Toward the reasonable expenses of retaking, holding,
preparing for sale, selling and the like, of the Shares and to the
reasonable attorneys' fees and legal expenses incurred by Secured
Party.
(b) Toward satisfaction of the indebtedness secured under
this Agreement.
12. WAIVERS AND CONSENTS. Borrower/Pledgor agrees to each of the
following:
(a) This Agreement shall remain in fun force and effect,
without waiver or surrender of any of the Secured Party's rights
hereunder, notwithstanding any one or more of the following:
(i) Extension of the time of payment of the whole
or any part of the Secured Note;
<PAGE> 11
STOCK PLEDGE AGREEMENT Page 8
(ii) Any change in the terms and conditions of the
Secured Note;
(iii) Substitution of any other note or evidence
of indebtedness for the Secured Note;
(iv) Acceptance by Secured Party of any shares or
security of any kind for the payment of the Secured Note; any
and all extensions, or renewals thereof;
(v) Surrender, release, exchange or alteration of
any collateral or other security, either in whole or in part;
(vi) Release, settlement, discharge, compromise,
change, or amendment, in whole or in part, of any claim of the
Secured Party against the Borrower/Pledgor, or of any claim
against any other party secondarily or additionally liable for
the payment of the Secured Note;
(vii) Any other circumstance or act or omission of
Secured Party permitted by or not prohibited by the Secured
Note, the Escrow Instructions, the Stock Power, and the
Representation and Loan Modification Letter;
(viii) Any lack of validity or enforceability of the
Secured Note, or any other agreement or instrument relating
thereto;
(ix) Any exchange, release or non-perfection of
any other collateral, or any other release or amendment or
waiver of or consent to departure from any guaranty, for all
or any of the obligations; or
(x) Any other circumstance which might
constitute a defense available to or a discharge of the
Borrower.
(b) Upon the occurrence of any event of default, the
Secured Party is empowered, irrevocably and with full power of
substitution and revocation, as Borrower/Pledgor's attorney in fact,
to sell, transfer, foreclose and deliver the shares and to complete
and deliver all stock powers or other related instruments, in the
Secured Party's own name or in the name of the Secured Party's nominee
or in the name of the Borrower/Pledgor, including the exclusive right
to sell the Shares under any exemptions, waivers, or exclusions
available to Borrower/Pledgor under any federal or state securities
laws, until all Shares have been disposed of. Shares under any
exemptions, waivers or exclusions available to Borrower/Pledgor under
any federal or state securities laws, until all Shares have been
disposed of.
<PAGE> 12
STOCK PLEDGE AGREEMENT
Page 9
(c) The Secured Party shall be under no duty to select
any of the items of the Shares over any other items, or to sell the
items of Shares pro rata or any order, but may select and sell such
items as the Secured Party in the Secured Party's sole discretion may
determine.
(d) No delay or failure of the Secured Party in the
exercise of any power or right shall operate as a waiver or as an
acquiescence, nor shall any single or partial exercise of any power or
right preclude any other or future exercise of the power or right or
any exercise of any other power or right; and the rights and remedies
of the Secured Party are cumulative.
13. TERM. This Agreement shall remain in full force and effect
for so long as Borrower/Pledgor is indebted to the Secured Party.
14. GAMING LAW REQUIREMENTS. Notwithstanding any other provisions
herein, if the Corporation is licensed as a publicly traded corporation, this
pledge is subject to Chapter 463 of the Nevada Revised Statutes and the
Regulations of the Commission and the State Gaming Control Board, including,
without limitation, NRS 463.635 through 463.645, inclusive, and specifically
including NRS 463.637, NRS 463.643, and Regulation 16, adopted thereunder, the
terms of which statutes and regulations are incorporated herein by reference.
Borrower/Pledgor covenants to comply with the aforementioned statutes and
regulations, and all licenses, orders, conditions, directives or requests for
information issued pursuant thereto.
15. REPRESENTATIONS AND WARRANTIES. The Borrower/Pledgor
represents and warrants that as of the date hereof:
(a) The Shares have been, and the shares issued pursuant
to the exercise of the warrant will be, duly authorized and validly
issued and are fully paid and non-assessable.
(b) Robert E. Stupak is the legal and beneficial owner of
the Shares, free and clear or any lien, security interest, option or
other charge or encumbrance, except for the security interest created
by this Agreement or the Secured Note.
(c) This Agreement creates a valid and perfected first
priority security interest in the Shares, securing payment of the
obligations set forth in paragraph 3 of this Agreement.
(d) Within five (5) days of executing this Agreement,
Borrower/Pledgor will give all necessary notice to the Commission,
providing a copy of the same to the Secured Party. Other than that,
no authorization, approval, or other action by, and no action to or
filing with a Governmental authority or regulatory body is required
either: (i) for the pledge by the Borrower/Pledgor of the Shares
pursuant to this Agreement; or (ii) for the execution, delivery or
performance of this Agreement by the Borrower/Pledgor; or (iii) for
the exercise by the Escrow Agent of the voting or other rights
provided for in this
<PAGE> 13
STOCK PLEDGE AGREEMENT
Page 10
Agreement or the remedies in respect of the Shares pursuant to this
Agreement other than any additional notice to the Commission. The
execution, delivery and performance of this Agreement does not
contravene any legal or contractual restriction binding on or
affecting the Borrower/Pledgor, the Corporation or the Shares.
(e) The Shares constitute less than five percent (5%) of
the issued and outstanding shares of stock of the Corporation.
(f) This Agreement has been duly executed and delivered
by the Borrower/Pledgor and constitutes the legal, valid and binding
obligations of the Borrower/Pledgor, enforceable against the
Borrower/Pledgor in accordance with its terms, subject to the
qualification; however, that the enforcement of the rights and
remedies herein are subject to the rules and regulations of the
Commission and to bankruptcy and other similar laws of general
application affecting the rights and remedies of creditors.
(g) The funds obtained by the Secured Note shall be used
for the sole purpose of exercising the warrant.
(h) Borrower/Pledgor shall furnish Secured Party with
copies of Borrower/Pledgor's Securities and Exchange Commission Form
10K for the years 1994 and 1995 (when filed), together with any Form 8
which shall be filed by the Corporation.
(i) Robert E. Stupak is the sole shareholder of both Dine
Out Corp. and Bob Stupak Enterprises, Inc. ("BSE"). The assignment of
the shares from Dine Out Corp. and BSE to Robert E. Stupak is valid,
binding and enforceable in accordance with its terms without regard to
any exceptions, reservations or qualification. Dine Out Corp. and BSE
have no business activity and their sole purpose is to hold shares of
stock of Stratosphere Corporation on behalf of Robert E. Stupak.
(j) Borrower/Pledgor shall indemnify, hold free and
harmless, assume legal responsibility for, and defend Secured Party
and the Escrow Agent for any claim relating to Borrower/Pledgor's
title to and ownership of the Shares.
16. MISCELLANEOUS
(a) This Agreement binds, and inures to the benefit of,
the respective parties and their heirs, successors, administrators and
assigns. This Agreement shall inure to the benefit of the Escrow
Agent and its successors, transferees and assigns.
(b) All communications under this Agreement shall be in
writing and shall be considered to have been given when delivered
personally, or when
<PAGE> 14
STOCK PLEDGE AGREEMENT
Page 11
received if sent by ordinary mail, or three (3) days after deposited
in the mail if sent by registered or certified mail. Communications
are to be sent to a party at the party's address shown on the first
page of this Agreement or to such other address as a party may
designate to the other in writing.
(c) This Agreement is executed and delivered in Nevada,
is intended to be performed in Nevada, and shall be construed and
enforced under the laws of Nevada.
(d) Dine Out Corp. and BSE have each assigned to Robert
E. Stupak their entire interest in the Shares by separate instrument
and to the extent such might be ineffective do hereby make such
assignment and covenant to take all other necessary actions to
complete the transactions set forth herein.
EXECUTED on the date and year first above written.
BORROWER/PLEDGOR: SECURED PARTY:
BOB STUPAK EXBER, INC.
/s/ BOB STUPAK /SIG/
- ------------------------------ ------------------------------
DINE OUT CORP.
By: /s/ BOB STUPAK
------------------------------
Its: President
--------------------
BOB STUPAK ENTERPRISES, INC.
By: /s/ BOB STUPAK
------------------------------
Its: President
--------------------
<PAGE> 15
ACKNOWLEDGMENT OF ASSIGNMENT AND PLEDGE OF STOCK
Stratosphere Corporation being the corporation whose corporate stock
is being pledged pursuant to this Agreement, hereby acknowledges the pledge of
the stock described below. Stratosphere Corporation further acknowledges that
the stock described below has been assigned by the below referenced
corporations to Robert E. Stupak:
<TABLE>
<CAPTION>
Certificate No.: Number of Shares Issued in the Name of:
- ---------------- ---------------- ----------------------
<S> <C> <C>
S-01697 50,000 Bob Stupak Enterprises, Inc.
S-01698 50,000 Bob Stupak Enterprises, Inc.
S-01699 50,000 Bob Stupak Enterprises, Inc.
S-01700 50,000 Bob Stupak Enterprises, Inc.
S-03337 100,000 Dine Out Corporation
S-03338 100,000 Dine Out Corporation
S-03339 100,000 Dine Out Corporation
Warrant No.:
- ------------
W-02768 500,000 Dine Out Corporation
</TABLE>
DATED this 11th day of October, 1995.
STRATOSPHERE CORPORATION
By:______________________________
Its: ____________________
<PAGE> 16
EXHIBIT B
<PAGE> 17
SECURED NOTE
$2,500,000.00 October 11, 1995
Las Vegas, Nevada
FOR VALUE RECEIVED, the undersigned, Robert E. Stupak, Bob Stupak
Enterprises, Inc., and Dine Out Corp., as co-makers (referred to collectively
herein as "Borrowers"), promise to pay in currently available funds to the
order of Exber, Inc. ("Exber"), or order, at 600 Fremont Street, Las Vegas,
Nevada 89101, or at such other place as Exber may from time to time designate
in writing, the principal sum of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS AND
00/100 DOLLARS ($2,500,000.00), together with interest thereon,
("Indebtedness") payable as set forth below.
Principal and interest shall be payable in lawful money of the United
States of America. Interest computed on the basis of a three hundred sixty
(360) day year shall accrue at ten percent (10%) per annum. Payments of
principal and accrued interest shall be paid in full in a single balloon
payment on June 30, 1996 (the "Maturity Date"). The Maturity Date may be
accelerated in the event the market price of Stratosphere Corporation's stock
closes on the exchange on which it is traded at five dollars ($5.00) per share
or less, for two (2) consecutive days. In such a circumstance, Borrowers
shall, within fifteen (15) days, either (i) pay one-half (1/2) of the principal
owed under the Secured Note, or (ii) submit to the Escrow Agent additional
shares of stock of the Corporation in an amount sufficient to raise the total
value of pledged shares to four and one-half (4 1/2) times the total amount owed
under the Secured Note, regardless of any subsequent price movement during or
after the aforementioned fifteen (15) day period.
This Note is secured by the Shares as provided and defined in the
Stock Pledge Agreement executed contemporaneously herewith.
Principal may be prepaid at any time without penalty; however,
payments received shall be applied as follows: 1) unpaid interest accrued under
this Note; 2) any other amounts due under any related security documents; 3)
principal or other amounts due under this Note. There is no right under this
Note, or any agreement related hereto, for Borrowers to extend the Maturity
Date.
Upon the happening of any one or more of the Events of Default, the
Indebtedness shall, at the option of Exber and without notice, demand, or
presentment, all of which are hereby expressly waived by Borrowers, become
immediately due and payable.
In the event that any amount due under this Note is reduced to
judgment, or if the Borrowers fail to pay in full the amounts due under this
Note by the Maturity Date, the total unpaid balance of principal and accrued
unpaid interest (past due interest being compounded) shall then begin accruing
interest at the rate stated herein (i.e., 10%), plus five percent (5%) per
annum, (for a total rate of 15% defined as the "Default Rate"), until such
time as all then past due payments and accrued interest are paid. The
Borrowers acknowledge that the effect of this Default Rate could operate to
compound some of the interest obligations due, and Borrowers hereby expressly
consent to such compounding should it occur.
Failure of Exber or any holder hereof to exercise any remedy shall not
constitute a waiver of the right to exercise the same in the event of any
subsequent Event of Default or in the event of continuance of any existing
Event of Default after demand for strict performance.
<PAGE> 18
SECURED NOTE Page 2
Borrowers, and each endorser, waive any homestead or exemption right
and additionally, waive presentment, protest, demand, diligence, notice of
dishonor and of nonpayment, and waive and renounce all its rights to the
benefits of any statute of limitations and any moratorium, appraisement,
exemption and homestead now provided or which may hereafter be provided by any
federal or state statute, including, but not limited to exemptions provided by
or allowed under Title 11 of the United States Code, as at any time amended,
against the enforcement and collection of the obligations evidenced by this
Note and any and all extensions, renewals and modifications hereof.
This Note shall be governed by and construed according to the laws of
the State of Nevada. Borrowers hereby submit to personal jurisdiction in said
State for the enforcement of Borrowers's obligations hereunder and waive any and
all rights under the law of any other state to object to jurisdiction within
such state for the purposes of litigation to enforce such obligations of
Borrowers.
If Exber employs an attorney to obtain enforcement or collection of
this Note it shall be entitled to collect reasonable attorneys fees and costs.
Any of the following events shall be deemed an Event of Default
hereunder:
(a) Default shall be made in the payment of the full
amount of principal and interest by the Maturity Date (as accelerated, if
required under this Secured Note and the Stock Pledge Agreement); or
(b) Any Borrower shall file a voluntary petition in
bankruptcy or shall be adjudicated bankrupt or insolvent, or shall file any
petition or answer seeking or acquiescing in any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief for
itself under any present or future federal, state or other statute, law or
regulation relating to bankruptcy, insolvency or other relief for debtors; or
shall seek or consent to or acquiesce in the appointment of any trustee,
receiver or liquidator of any Borrower, of any Borrowers' assets, or of all or
any part of the trust estate, or of any or all of the royalties, revenues,
rents, issues or profits thereof, or shall make any general assignment for the
benefit of creditors, or shall admit in writing its inability to pay its debts
Generally as they become due; or
(c) A court of competent jurisdiction shall enter an
order, judgment or decree approving a petition filed against any Borrower
seeking any reorganization, dissolution or similar relief under any present or
future federal, state or other statute, law or regulation relating, to
bankruptcy, insolvency or other relief for debtors, and such order, judgment or
decree shall remain unvacated and unstayed for an aggregate of sixty (60) days
(whether or not consecutive) from the first date of entry thereof; or
(d) Borrowers transfer or convey (voluntarily or
involuntarily), absolutely or for security purposes, any material interest in
all or any part of the Shares; or
(e) Borrowers materially fail, neglect or refuse to
comply with all statutes, ordinances and Governmental requirements that
materially affect Borrowers, including, but not limited to, Chapter 463 of the
Nevada Revised Statutes and the regulations adopted thereunder, and all federal
or state securities laws, whether or not with regard to the Shares; or
<PAGE> 19
SECURED NOTE Page 3
(f) Any event of default of Borrowers under the Stock
Pledge Agreement which remains uncured beyond the applicable grace period, if
any; or
(g) Any material representation or disclosure made to
Exber by the Borrowers proves to be materially false or misleading, whether or
not that representation or disclosure appears in this Note or Stock Pledge
Agreement; or
(h) Borrowers fail to deliver to the Escrow Agent, within
one (1) day of Borrowers receipt thereof, the shares issued upon exercise of
the warrants; or
(i) Borrowers fail to complete, within fifteen (15) days,
either of the actions set forth in the second paragraph of this Note upon an
acceleration of the Maturity Date; or
(j) Borrowers breach any representation, warranty or
covenant contained herein.
Reference is made to the Stock Pledge Agreement for additional rights
and obligations of the undersigned and holder hereof.
IN WITNESS WHEREOF, this Note has been executed on the date first above
written.
BORROWERS:
ROBERT E. STUPAK BOB STUPAK ENTERPRISES, INC.
- ------------------------------ By: /s/ ROBERT E. STUPAK
------------------------------
Its: President
----------------------
DINE OUT CORP.
By: /s/ ROBERT E. STUPAK
------------------------------
Its: President
----------------------
<PAGE> 20
STOCK POWER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, for value
received, does hereby irrevocably constitute and appoint EXBER, INC., his
attorney in fact, to be his true and lawful attorney, for him and in his name
and on his behalf, to sell, assign, and transfer unto or any other person or
persons, or entity, the shares in the capital stock of STRATOSPHERE CORPORATION
(the "Corporation"), standing in the names on the books of the Corporation as
follows:
<TABLE>
<CAPTION>
Certificate No.: Number of Shares Issued in the Name of
- ---------------- ---------------- ---------------------
<S> <C> <C>
S-01697 50,000 Bob Stupak Enterprises, Inc.
S-01698 50,000 Bob Stupak Enterprises, Inc.
S-01699 50,000 Bob Stupak Enterprises, Inc.
S-01700 50,000 Bob Stupak Enterprises, Inc.
S-03337 100,000 Dine Out Corporation
S-03338 100,000 Dine Out Corporation
S-03339 100,000 Dine Out Corporation
Warrant No.:
- ------------
W-02768 500,000 Dine Out Corporation
</TABLE>
The undersigned warrants that the above shares of stock have been
assigned to him by an Assignment executed contemporaneously herewith.
The undersigned does hereby authorize EXBER, INC., his attorney in
fact, to make and execute all necessary acts of assignment and transfer, with
full power of substitution in the premises.
IN WITNESS WHEREOF, the undersigned has executed this Stock Power as
of the 11th day of October, 1995.
DINE OUT CORP.
- ------------------------------ By: /s/ ROBERT E. STUPAK
ROBERT E. STUPAK ----------------------------
Its: President
----------------------
BOB STUPAK ENTERPRISES, INC.
By: /s/ ROBERT E. STUPAK
------------------------------
Its: President
--------------------
<PAGE> 21
REPRESENTATION AND LOAN MODIFICATION LETTER
October 11, 1995
EXBER, INC.
dba EL CORTEZ HOTEL & CASINO
600 E. Fremont Street
Las Vegas, Nevada 89101
ATTN: LARRY DOLESH
Gentlemen:
In consideration of the making of the new loan secured by stock
pledges, it is agreed that payments on my two existing loans will be increased
to $50,000 per month on the smaller loan and $100,000 per month on the larger
one. The new loan is made contemporaneous to the execution of this letter, is
in the amount of $2,500,000 and is evidenced by a Secured Note, Agreement to
Pledge With Escrow instructions, Stock Pledge Agreement, Stock Power, and other
documents, all executed contemporaneously and as a condition to the advancement
of funds.
I represent and warrant that the shares (including those issued upon
exercise of the warrants) given as security for the loan constitute less than
5% of the issued and outstanding shares of the Stratosphere Corporation. I
represent that by an assignment I am the sole owner of the shares. Upon
funding, I shall immediately exercise the warrants, instructing the transfer
agent to deliver the shares issued to the Escrow Agent. I shall obtain
execution of the Evidence of Authority by the Corporation's secretary or
transfer agent. Upon issuance I shall execute an additional Stock Power with
respect to those shares.
Very truly yours,
/s/ BOB STUPAK
Robert E.Stupak, individually
and on behalf of Dine Out Corporation,
as President.
<PAGE> 22
ASSIGNMENT OF SHARES
THE UNDERSIGNED, for and in consideration of the sum of Ten Dollars
($10.00), to them in hand paid, and other valuable consideration, receipt of
which is hereby acknowledged, do each hereby assign, transfer and set over to
Robert E. Stupak all their respective right, title and interest in and to the
following shares of stock, and warrant to acquire stock, of Stratosphere
Corporation:
<TABLE>
<CAPTION>
Certificate No.: Number of Shares Issued in the Name of:
- ---------------- ---------------- ----------------------
<S> <C> <C>
S-01697 50,000 Bob Stupak Enterprises, Inc.
S-01698 50,000 Bob Stupak Enterprises, Inc.
S-01699 50,000 Bob Stupak Enterprises, Inc.
S-01700 50,000 Bob Stupak Enterprises, Inc.
S-03337 100,000 Dine Out Corporation
S-03338 100,000 Dine Out Corporation
S-03339 100,000 Dine Out Corporation
Warrant No.:
- ------------
W-02768 500,000 Dine Out Corporation
</TABLE>
TO HAVE AND TO HOLD unto Robert E. Stupak, for the term of the loan
represented by the Secured Note dated October 11, 1995.
The undersigned each warrant that they are the legal owners of their
respective shares of Stratosphere Corporation, and, with respect to Dine Out
Corporation, the legal owner of its warrant for the purchase of 500,000 shares.
The undersigned further warrant that they each have full and complete authority
to assign their stock of Stratosphere Corporation, represented by the stock
certificates and warrant described above.
IN WITNESS WHEREOF, the undersigned have executed this document on
this 11th day of October, 1995.
DINE OUT CORP. BOB STUPAK ENTERPRISES, INC.
By: /s/ BOB STUPAK By: /s/ BOB STUPAK
--------------------------- ---------------------------
Its: President Its: President
----------------------- -----------------------
<PAGE> 23
ACKNOWLEDGEMENT OF ASSIGNMENT AND PLEDGE OF STOCK
Stratosphere Corporation being the corporation whose corporate stock
is being pledged pursuant to this Agreement, hereby acknowledges the pledge of
the stock described below. Stratosphere Corporation further acknowledges that
the stock described below has been assigned by the below referenced
corporations to Robert E. Stupak and states that it has not notice those
actions violate any corporate or legal power, restriction or requirement.
Stratosphere Corporation assumes no liability with regard to the assignment and
pledge as a result of this Acknowledgement:
<TABLE>
<CAPTION>
Certificate No.: Number of Shares Issued in the Name of:
- ---------------- ---------------- ----------------------
<S> <C> <C>
S-01697 50,000 Bob Stupak Enterprises, Inc.
S-01698 50,000 Bob Stupak Enterprises, Inc.
S-01699 50,000 Bob Stupak Enterprises, Inc.
S-01700 50,000 Bob Stupak Enterprises, Inc.
S-03337 100,000 Dine Out Corporation
S-03338 100,000 Dine Out Corporation
S-03339 100,000 Dine Out Corporation
Warrant No.:
- ------------
W-02768 500,000 Dine Out Corporation
</TABLE>
DATED this 11th day of October, 1995.
STRATOSPHERE CORPORATION
By: [SIG]
------------------------------
Its: General Counsel
<PAGE> 24
STOCK POWER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, for value
received, does hereby irrevocably constitute and appoint EXBER, INC., his
attorney in fact, to be his true and lawful attorney, for him and in his name
and on his behalf, to sell, assign, and transfer unto ______________________ or
any other person or persons, or entity, the shares in the capital stock of
STRATOSPHERE CORPORATION (the "Corporation"), standing in the names on the books
of the Corporation as follows:
<TABLE>
<CAPTION>
Certificate No.: Number of Shares Issued in the Name of:
- ---------------- ---------------- ----------------------
<S> <C> <C>
S-01697 50,000 Bob Stupak Enterprises, Inc.
S-01698 50,000 Bob Stupak Enterprises, Inc.
S-01699 50,000 Bob Stupak Enterprises, Inc.
S-01700 50,000 Bob Stupak Enterprises, Inc.
S-03337 100,000 Dine Out Corporation
S-03338 100,000 Dine Out Corporation
S-03339 100,000 Dine Out Corporation
Warrant No.:
W-02768 500,000 Dine Out Corporation
- -------
</TABLE>
The undersigned warrants that the above shares of stock have been
assigned to him by an Assignment executed contemporaneously herewith.
The undersigned does hereby authorize EXBER, INC., his attorney in
fact, to make and execute all necessary acts of assignment and transfer, with
full power of substitution in the premises.
IN WITNESS WHEREOF, the undersigned has executed this Stock Power as
of the 11th day of October, 1995.
<TABLE>
<S> <C>
DINE OUT CORP.
/s/ ROBERT E. STUPAK
- ------------------------------ By: /s/ BOB STUPAK
ROBERT E. STUPAK ------------------------------
Its: President
------------------------------
BOB STUPAK ENTERPRISES, INC.
By: /s/ BOB STUPAK
-----------------------------
Its: President
-----------------------------
</TABLE>
<PAGE> 25
REPRESENTATION AND LOAN MODIFICATION LETTER
October 11, 1995
EXBER, INC.
dba EL CORTEZ HOTEL & CASINO
600 E. Fremont Street
Las Vegas, Nevada 89101
ATTN: LARRY DOLESH
Gentlemen:
In consideration of the making of the new loan secured by stock
pledges, it is agreed that payments on my two existing loans will be increased
to $50,000 per month on the smaller loan and $100,000 per month on the larger
one. The new loan is made contemporaneous to the execution of this letter, is
in the amount of $2,500,000 and is evidenced by a Secured Note, Agreement to
Pledge With Escrow Instructions, Stock Pledge Agreement, Stock Power, and other
documents, all executed contemporaneously and as a condition to the advancement
of funds.
I represent and warrant that the shares (including those issued upon
exercise of the warrants) given as security for the loan constitute less than
5% of the issued and outstanding shares of the Stratosphere Corporation. I
represent that by an assignment I am the sole owner of the shares. Upon
funding, I shall immediately exercise the warrants, instructing the transfer
agent to deliver the shares issued to the Escrow Agent. I shall obtain
execution of the Evidence of Authority by the Corporation's secretary or
transfer agent. Upon issuance I shall execute an additional Stock Power with
respect to those shares.
Very truly yours,
/s/ BOB STUPAK
Robert E.Stupak, individually
and on behalf of Dine Out Corporation,
as President.
<PAGE> 26
ASSIGNMENT OF SHARES
THE UNDERSIGNED, for and in consideration of the sum of Ten Dollars
($10.00), to them in hand paid, and other valuable consideration, receipt of
which is hereby acknowledged, do each hereby assign, transfer and set over to
Robert E. Stupak all their respective right, title and interest in and to the
following shares of stock, and warrant to acquire stock, of Stratosphere
Corporation:
<TABLE>
<CAPTION>
Certificate No.: Number of Shares Issued in the Name of
- ---------------- ---------------- ----------------------------
<S> <C> <C>
S-01697 50,000 Bob Stupak Enterprises, Inc.
S-01698 50,000 Bob Stupak Enterprises, Inc.
S-01699 50,000 Bob Stupak Enterprises, Inc.
S-01700 50,000 Bob Stupak Enterprises, Inc.
S-03337 100,000 Dine Out Corporation
S-03338 100,000 Dine Out Corporation
S-03339 100,000 Dine Out Corporation
Warrant No.:
- ------------
W-02768 500,000 Dine Out Corporation
</TABLE>
TO HAVE AND TO HOLD unto Robert E. Stupak, for the term of the loan
represented by the Secured Note dated October 11, 1995.
The undersigned each warrant that they are the legal owners of their
respective shares of Stratosphere Corporation, and, with respect to Dine Out
Corporation, the legal owner of its warrant for the purchase of 500,000 shares.
The undersigned further warrant that they each have full and complete authority
to assign their stock of Stratosphere Corporation, represented by the stock
certificates and warrant described above.
IN WITNESS WHEREOF, the undersigned have executed this document on
this 11th day of October, 1995.
DINE OUT CORP. BOB STUPAK ENTERPRISES, INC.
By: /s/ BOB STUPAK By: /s/ BOB STUPAK
--------------------------- ---------------------------
Its: President Its: President
---------------------- ----------------------
<PAGE> 27
ACKNOWLEDGEMENT OF ASSIGNMENT AND PLEDGE OF STOCK
Stratosphere Corporation being the corporation whose corporate stock
is being pledged pursuant to this Agreement, hereby acknowledges the pledge of
the stock described below. Stratosphere Corporation further acknowledges that
the stock described below has been assigned by the below referenced
corporations to Robert E. Stupak and states that it has not notice those
actions violate any corporate or legal power, restriction or requirement.
Stratosphere Corporation assumes no liability with regard to the assignment and
pledge as a result of this Acknowledgement:
<TABLE>
<CAPTION>
Certificate No.: Number of Shares Issued in the Name of:
- ---------------- ---------------- ----------------------
<S> <C> <C>
S-01697 50,000 Bob Stupak Enterprises, Inc.
S-01698 50,000 Bob Stupak Enterprises, Inc.
S-01699 50,000 Bob Stupak Enterprises, Inc.
S-01700 50,000 Bob Stupak Enterprises, Inc.
S-03337 100,000 Dine Out Corporation
S-03338 100,000 Dine Out Corporation
S-03339 100,000 Dine Out Corporation
Warrant No.:
- ------------
W-02768 500,000 Dine Out Corporation
</TABLE>
DATED this 11th day of October, 1995.
STRATOSPHERE CORPORATION
By: [SIG]
--------------------------------
Its: General Counsel
<PAGE> 1
EXHIBIT 99.2
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 1st day of November, 1994, by and between Bob Stupak, d/b/a
Vegas World Hotel and Casino ("Seller"), and Stratosphere Corporation, a
Delaware corporation ("Buyer" and/or "Stratosphere").
Seller owns and operates the Vegas World Hotel and Casino in Las Vegas,
Nevada (the "Business") and certain assets which it uses in the conduct of the
Business.
Pursuant to a Letter Agreement dated November 15, 1993, as amended
December 22, 1993 and January 25, 1994 (the "November 15, 1993 Letter
Agreement") between Seller, Stratosphere, Grand Casinos Resorts, Inc., a
Minnesota corporation ("Resorts"), and Bob Stupak Enterprises, Inc., a Nevada
corporation ("BSE"), Seller granted Resorts an option (the "Option") to purchase
substantially all of the assets of the Business.
Pursuant to a Letter Agreement dated June 1, 1994, as amended, (the
"June 1, 1994 Letter Agreement" which together with the November 15, 1993 Letter
Agreement are collectively referred to as the "Letter Agreements"), between
Seller, BSE, Resorts, Grand Casinos, Inc., a Minnesota corporation and Buyer,
Resorts assigned the Option to Buyer and Buyer exercised the Option.
Accordingly, the parties agree as follows:
1. PURCHASE AND SALE OF ASSETS
1.1 Generally. On the terms and subject to the conditions of this
Agreement, Seller agrees to sell, transfer, convey and deliver to Buyer, and
Buyer agrees to purchase from Seller, on and as of the Closing Date (as defined
in Section 4 hereof) the "Assets" as defined in Section 1.2.
1.2 Assets. The Assets include all of the right, title and interest
in and to the business assets, properties and rights of any kind, whether
tangible or intangible, real or personal, wherever located and whether or not
reflected in its books and records, used in connection with,
1
<PAGE> 2
or related to the Business, including without limitation all right, title and
interest in the assets, property and rights described below:
1.2.1 The facilities of Seller located in Las Vegas, Nevada,
including the real property described in EXHIBIT 1.2.1 hereto (the "Real
Estate") together with all buildings, structures, installations, fixtures,
facilities and other improvements situated thereon and all easements, rights of
way and other rights, interests and appurtenances of Seller therein or
thereunto pertaining (hereinafter collectively referred to as the "Facilities");
1.2.2 All gaming devices and equipment, including but not
limited to the equipment set forth in EXHIBIT 1.2.2A ("Gaming Equipment"),
machinery, equipment, tools, motor vehicles, spare parts, supplies, tools,
accessories, furniture, and other miscellaneous tangible personal property owned
by Seller as of the date of this Agreement and utilized in, or related to the
Business, including, without limitation, the items listed on EXHIBIT 1.2.2B
hereto (collectively herein referred to as the "Equipment");
1.2.3 All rights of Seller under any warranty, representation
or guarantee by any manufacturer, supplier or other transferor of the Assets;
1.2.4 All inventory (including raw materials, work in process
and finished goods), wrapping, packaging materials and supplies and similar
items of Seller utilized in, related to or arising from, the Business, in each
case wherever the same may be located (the "Inventory"), including without
limitation the items listed on EXHIBIT 1.2.4;
1.2.5 All rights of Seller under any contract, indenture,
guarantee, lease, commitment, or other agreement related to the Business,
including without limitation those identified in EXHIBIT 1.2.5 hereto (the
"Contracts"), but not the obligations of Seller under the Contracts other than
those obligations under the Contracts set forth in Exhibit A to the Assumption
Agreement, the form of which is attached hereto as EXHIBIT 4.1.3;
1.2.6 All interests of Seller in any copyright, patent,
trademark, trade name, logo, trade secret, computer software and other
intellectual property utilized in, related to or arising
2
<PAGE> 3
from the Business, together with pending applications for any of the foregoing,
including without limitation, those identified in EXHIBIT 1.2.6;
1.2.7 All goodwill and other general intangibles of Seller
utilized in, related to or arising from the Business;
1.2.8 All rights of Seller under any franchise, approval,
authorization, consent, permit, license, order, registration, certificate,
variance, and similar rights obtained from governments and government agencies,
whether foreign, federal, state or local, or any other person, necessary or
desirable for the past, present or anticipated conduct of or relating to the
operation of the Business, including, without limitation, the licenses and
permits listed on EXHIBIT 1.2.8 hereto;
1.2.9 All sales records, purchase records, customer lists,
supplier and distributor lists, artwork, display units, telephone and fax
numbers, advertising and promotional materials, sales literature, production
records and other records relating to the Business; all deeds and other
instruments, maps, and profiles relating to the Business; all real estate and
engineering data, blueprints and other property records relating to the
Business; all records regarding the Occupational Safety and Health Act ("OSHA")
and other governmental examinations and clearances relating to the Business;
and all personnel records; provided, however, that Seller may make and retain
copies of any records transferred to Buyer;
1.2.10 All rights of Seller under any claim, deposit,
prepayment, refund, cause of action, chose in action, right of recovery, right
of set off and right of recoupment (including any such items relating to the
payment of taxes);
1.2.11 All rights to and under all contracts between Seller
and owners of any property or property rights with respect to property within
one mile in any direction of any of the Real Property, exclusive of that
property described in EXHIBIT 1.2.11; but excluding the Excluded Assets.
1.3 Excluded Assets. The following property and assets of Seller
are excluded from sale to Buyer (the "Excluded Assets"):
3
<PAGE> 4
1.3.1 Cash and cash equivalents;
1.3.2 Gambling "markers" of customers of Seller's Business
evidencing money owed Seller by customer arising out of gambling by customer at
Seller's Business;
1.3.3 All liquor, cigarette and food inventory;
1.3.4 All "gifts" used to satisfy Vacation Club packages as
listed in EXHIBIT 1.3.4.
1.3.5 All deposits including room deposits made by customers
of Seller in respect of vacation packages;
1.3.6 The property listed in EXHIBIT 1.3.6;
1.3.7 The trademarks set forth in EXHIBIT 1.3.7.
1.3.8 All accounts, notes and other receivables (whether
current or noncurrent), refunds, deposits, prepayments or prepaid expenses
(including without limitation any prepaid insurance premiums) in favor of Seller
arising from the operation of the Business and existing on the Closing Date,
together with all collateral security therefor (the "Accounts Receivable");
1.3.9 All rights under any insurance policies payable with
respect to any claims against or obligations of Seller that are not assumed by
Buyer.
1.3.10 The rights under the All-State Rental Lease, the Jockey
Club Lease, gift shop lease, beauty shop lease, T-shirt shop lease, jewelry
shop lease and ice cream shop lease;
1.3.11 All claims by Buyer against Perine Building Co. Inc. of
Phoenix for losses and damages arising out of Seller's loss or diminution of
stock ownership in Buyer due to construction delays;
1.3.12 All counter-claims by Seller against Zubel arising
under the pending case of Zubel v. Stupak, and all claims for improper use of
"Casino Poker" and/or "Caribbean Stud" games and/or trademarks; and
1.3.13 Any of the rights of Seller under this Agreement or any
other agreement between Seller and Buyer entered into on or after the date of
this Agreement in accordance with the terms hereof.
4
<PAGE> 5
1.4 Transfer of Gaming Equipment. If Buyer, Stratosphere Gaming
Corp., a Nevada corporation, or any entity in which Buyer owns more than 50% of
the voting interest has not obtained all of the necessary governmental licenses
and approvals (the "Approvals") to own and operate the Gaming Equipment as
defined in the inventory attached hereto as EXHIBIT 1.2.2A on or prior to the
Closing (as herein defined), Seller shall not sell the Gaming Equipment to Buyer
on the Closing Date (as herein defined) and the Purchase Price (as herein
defined) shall be reduced by One Million and No/100 Dollars ($1,000,000.00)
(the "Equipment Amount"). Within five business days after Buyer's receipt of
the Approvals, if such receipt occurs after the Closing, Seller shall deliver
to Buyer the Gaming Equipment and the documents necessary to transfer the
interest of Seller in the Gaming Equipment to Buyer including but not limited
to those referred to in Section 4 and Buyer shall pay Seller the Equipment
Amount as provided under Section 2.3.3. Seller, with Buyer's consent, may sell
some or all of the Gaming Equipment at a public or private auction. The
proceeds of the auction shall reduce dollar for dollar the One Million dollars
($1,000,000) due and owing for the Gaming Equipment.
1.5 Liens/Encumbrances. The Assets will be transferred by Seller
to Buyer in accordance with this Agreement free and clear of all liens, claims,
security interests, charges, restrictions, mortgages, deeds of trust,
contracts, leases, licenses, charges of others or any other encumbrances
(hereinafter, "Encumbrances"), other than those permitted Encumbrances
specifically set forth in EXHIBIT 1.5 for which there will be an adjustment of
the Purchase Price as provided below (the "Permitted Encumbrances").
2. PURCHASE PRICE
2.1 Generally. Subject to adjustment as provided in Section 2.2
and reduction as provided in Sections 1.4, 7 and 9.3 hereof, the total purchase
price to be paid to Seller at the Closing for the Assets (the "Purchase Price")
shall be $50,500,000.
2.2 Adjustment to Purchase Price.
2.2.1 The Purchase Price shall be reduced by the following
amounts:
5
<PAGE> 6
2.2.1.1 An amount equal to the sum of all Assumed
Liabilities (as herein defined) as of the Closing Date.
2.2.1.2 An amount equal to the cost of removing the
Permitted Encumbrances.
2.2.1.3 An amount equal to any debt or other
obligation owed by Seller or any affiliate (as defined in Section 11.1) to
Buyer as of the Closing whether or not such debt or other obligation is then
due and owing other than the amount of the Advances under the Advance Notes
pursuant to the Letter Agreements.
2.2.1.4 An amount equal to any costs, fees and
expenses incurred in connection with this Agreement which were advanced or paid
for by Buyer and which are the obligation of Seller, including but not limited
to the cost of any surveys, title insurance, taxes and recording fees.
2.2.2 The Purchase Price will be increased by an amount equal
to the reasonable cost of the Capital Expenditures referred to in and permitted
under the November 15, 1993 Letter Agreement which are set forth in EXHIBIT
2.2.2.
2.3 Payment of Purchase Price. The Purchase Price shall be payable
as follows:
2.3.1 An amount equal to unpaid interest and principal on the
mortgage secured by the Real Estate shall be paid to the mortgagee and its
assigns and successors.
2.3.2 An amount necessary to obtain the release of any
Encumbrance other than Permitted Encumbrances not paid by Seller shall be paid
to such releasor. Any encumbrance bonded or secured in a manner sufficient for
the title insurer to delete such claim as an exception to coverage will not
result in a reduction in the Purchase Price.
2.3.3 The balance of the Purchase Price shall be paid in
accordance with the terms of a promissory note (the "Promissory Note"),
substantially in the form attached hereto as EXHIBIT 2.3.3, payable to Seller
by Buyer and delivered by Buyer to the Escrow Agent pursuant to the terms of
the Escrow Agreement (as defined herein) to be delivered at Closing.
2.4 Allocation of Purchase Price. Buyer and Seller shall determine
an allocation of the Purchase Price among the Assets using the allocation
method required by Section 1060 of the
6
<PAGE> 7
Internal Revenue Code of 1986 (the "Code") and the Regulations thereunder. The
parties each agree to report the federal, state and local income and other tax
consequences of the transactions contemplated herein, and in particular to
report the information required by Code Section 1060(b) in a manner consistent
with such allocation and will not take any position inconsistent therewith upon
examination of any tax return, any refund claim, any litigation, investigation
or otherwise without prior notification to the other party explaining the
reasons therefore.
3. ASSUMPTION OF LIABILITIES. Notwithstanding any other provisions of
this Agreement, except for the liabilities assumed under the contracts, leases,
commitments and agreements described in EXHIBIT 3A hereto (collectively, the
"Assumed Liabilities"), Buyer shall not assume or otherwise be responsible for
any liabilities or obligations of Seller, whether actual or contingent, matured
or unmatured, liquidated or unliquidated or known or unknown, whether arising
out of occurrences prior to, at or after the date hereof ("Excluded
Liabilities") which Excluded Liabilities include without limitation those
liabilities set forth in EXHIBIT 3B and all obligations under the Contracts
(except those Contracts listed on EXHIBIT 3A).
4. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Lawyers Title
Insurance Company, Las Vegas, Nevada, at 12:00 noon Pacific Daylight Savings
Time (or such other location as Buyer and Seller shall mutually select), on the
earlier of the Closing of the Buyer's offering of securities pursuant to a
registration statement (the "Registration Statement") filed with the Securities
and Exchange Commission and assigned SEC No. 33-81286 (the "Offering"), or
October 18, 1994, or such later date as Buyer may determine (the "Closing
Date").
4.1 At the Closing Buyer shall
4.1.1 pay the Purchase Price as specified in Article 2 hereof;
4.1.2 deliver to Seller the various certificates, instruments
and documents referred to in Section 13 hereof;
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4.1.3 deliver to Seller an assumption in the form of EXHIBIT
4.1.3 hereto and such other assumptions as Seller may reasonably request to
evidence the assumption by Buyer of the Assumed Liabilities;
4.1.4 deliver to Seller a duly executed and legally
enforceable Promissory Note substantially in the form attached hereto as
EXHIBIT 2.3.3;
4.1.5 deliver to Seller a duly executed and legally binding
Lease for certain real property and other assets in the form attached hereto as
EXHIBIT 4.1.5;
4.1.6 deliver to Seller a duly executed and legally binding
license of the customer lists substantially in the form attached hereto as
EXHIBIT 4.1.6 giving Seller the nonexclusive right to use the customer lists
transferred to Buyer pursuant to this Agreement; and
4.1.7 deliver to Seller a duly executed and legally binding
Escrow Agreement substantially in the form attached hereto as EXHIBIT 4.1.7
(the "Escrow Agreement") as finally approved by the Nevada Gaming Commission.
4.2 At the Closing Seller shall deliver to Buyer:
4.2.1 Such warranty deeds, bills of sale, assignments,
releases and other documents required by Buyer to vest in Buyer all right,
title and interest in, to and under the Assets, free and clear of all
Encumbrances, other than the Permitted Encumbrances, including but not limited
to;
4.2.1.1 Duly executed warranty deeds in recordable form
for the Real Estate and the Facilities and such other documents as may be
reasonably required by Buyer which are legally sufficient to transfer all
right, title and interest in the Real Estate and the Facilities to Buyer free
and clear of all Encumbrances other than Permitted Encumbrances.
4.2.1.2 Duly executed quit claim deeds in recordable
form from all Affiliates transferring all of the Affiliates' right, title and
interest in the real Estate to Buyer.
4.2.1.3 Duly executed and legally enforceable releases
of any person or entity that may have an interest in or an Encumbrance against
the Assets, including but not limited to releases by the Affiliates.
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4.2.1.4 Bills of sale, assignments, releases and other
documents of transfer required by Buyer which are legally sufficient to
transfer to Buyer all right, title and interest in the Assets (other than the
Real Estate and the Facility) including but not limited to quit claim bills of
sale, assignments, releases and other documents executed by all Affiliates.
4.2.2 A duly executed and legally binding Escrow Agreement.
4.2.3 The various certificates, instruments, and documents
referred to in Section 12 hereof.
4.2.4 The acknowledgement and consent by Las Vegas Vacation
Club, Inc. of Seller's and Buyer's rights (after Closing) in the customer lists
pertaining to Vacation Club customers, in form and substance acceptable to
Buyer.
4.2.5 A duly executed and legally binding lease for certain
real property and other assets in the form attached hereto as EXHIBIT 4.1.5
(the "Lease").
4.2.6 A duly executed and legally enforceable license for use
of gaming tradenames and trademarks substantially in the form attached hereto
as EXHIBIT 4.2.6.
4.2.7 A duly executed and legally enforceable guaranty
substantially in the form attached hereto as EXHIBIT 4.2.7 (the "Guaranty").
4.2.8 Such documents, including but not limited to corporate
resolutions, as required by Buyer to substantiate the due authorization of the
transactions contemplated herein by such persons and entities as Buyer may
require, including but not limited to the Affiliates.
5. LABOR AND EMPLOYMENT MATTERS
5.1 Generally. Buyer is acquiring the Assets of Seller but will
not be operating the Business of Seller. Without limiting the generality of
Section 3 hereof, Buyer shall not, with respect to any present or former
employee of Seller or any predecessor, assume or otherwise be responsible for
any employment obligation, wage or salary payment obligation, including without
limitation those arising under any pension, profit sharing, deferred
compensation, severance, welfare, sick leave, accrued or earned vacation, wage
or other employee benefit plan, procedure, policy or practice of Seller
regardless of whether such plan, procedure, policy or practice is
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disclosed in this Agreement. Seller shall afford Buyer a reasonable
opportunity to interview its employees immediately prior to the termination of
the Lease for prospective employment by Buyer if so requested by Buyer or such
later date that Buyer commences operations on the Real Property and Facility.
Buyer shall be entitled (but shall have no obligation) to offer employment to
any such person, but in its discretion may offer employment to any such person
on terms and conditions established by Buyer. Seller shall furnish to Buyer
such information in its personnel files as is legally permissible immediately
prior to the Closing Date and again immediately prior to the termination of the
Lease as Buyer may reasonably request in connection with determining whether to
employ a person presently employed by Seller. Seller shall pay each such
person all accrued wages, salary, commission, bonus and other employee
compensation payments for all periods prior to the Closing Date. In addition,
Seller shall pay or provide for all other employee benefits maintained by
Seller for all periods before, during or after the Closing Date, all in
accordance with applicable law. Seller shall provide Buyer with evidence
satisfactory to Buyer that all employees have been paid all amounts due them
from Seller or under any employee benefit plan of Seller. Seller shall, upon
termination of the Lease or upon earlier termination of its Business, comply
with, at its sole cost and expense, any and all laws pertaining thereto,
including but not limited to any federal, state or local law governing plant or
other business closings or relocations.
6. EMPLOYEE BENEFIT MATTERS. Buyer is buying the Assets but will not
operate the Business of Seller. Buyer shall not assume, nor be responsible for
nor be required to make any payment of any contribution to any employee benefit
plan (including all "employee benefit plans" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974) and shall not have any
liability in any respect in connection with such plans. Seller will provide
Buyer with proof satisfactory to Buyer that Seller has fulfilled its
obligations under all such plans.
7. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE TO ASSETS. If between the
date of this Agreement and the Closing Date, any portion of the Assets are lost,
destroyed or condemned, or suffer any material damage Seller shall give written
notice to Buyer as soon as practicable thereafter but in any event within five
(5) calendar days after discovery of such damage
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or destruction, the amount of insurance, if any, covering such Assets and the
amount, if any, which Seller is otherwise entitled to receive as a
consequence. If this Agreement shall not have been terminated pursuant to
Section 21 hereof, if applicable, then, prior to the Closing, Buyer shall have
the option, which shall be exercised within ten (10) calendar days after
receipt of such notice from Seller or if there is less than ten (10) days prior
to Closing, as soon as possible prior to Closing, to either (a) reduce the
Purchase Price by the excess of (i) the fair market value of such Assets prior
to such loss, destruction, condemnation or damage, over (ii) the salvage value,
if any, of such Assets following such loss, destruction, condemnation or
damage, or (b) make no adjustment to the Purchase Price and Seller shall, on
the Closing Date, assign to Buyer all insurance and/or condemnation proceeds
and claims against persons or entities liable for such damage or destruction
payable to Seller on account of such loss, destruction, condemnation or damage
pursuant to an assignment in form and substance satisfactory to Buyer and pay
to Buyer the amount of any deductible under any such insurance.
8. PRORATIONS, ETC. On the Closing Date, utility charges, rents under
assumed leases, property taxes payable and other similar obligations to third
parties (to the extent not completely included as Assumed Liabilities) shall be
prorated between Seller and Buyer. Property taxes shall be prorated based upon
the year with respect for which such taxes are payable, determined in
accordance with local law. On the Closing Date Seller shall pay all real
property assessments and similar charges, and any accrued interest thereon,
including any special assessments.
9. TITLE EXAMINATION
9.1 Delivery of Commitments. Within ten (10) days after execution
of this Agreement, Seller shall, at its expense, cause to be prepared and
delivered to Buyer commitments for American Land Title Association ("ALTA")
Owner's Policy Form B-1970 title insurance polices by Lawyers Title Insurance
Company covering the Real Estate, in a form reasonably acceptable to Buyer.
Said commitments shall include endorsements deleting or limiting to the
reasonable satisfaction of Buyer the standard exceptions and agreeing to
provide affirmative insurance in respect of zoning, conditions, covenants, and
restrictions, ALTA Form 110.5
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Endorsement, and ALTA Form 107.4 Endorsement. The aggregate amount of such
commitments shall be $50,500,000, allocated in such manner as Buyer shall
determine. Seller shall pay the costs for such title insurance commitments,
including without limitation the premium for the policies and the cost of
continuing the abstracts for the Real Estate and the Facilities.
9.2 Survey. Within ten (10) days after the execution of this
Agreement, Seller shall, at its expense, furnish Buyer with a current, accurate
ALTA survey of the Real Estate, showing access to all adjacent roads and that
such roads are publicly dedicated, the locating of all points and lines
referred to in the legal description, the location and dimension of all
easements, buildings, improvements, parking spaces, encroachments, if any, and
utility lines to their point of connection with public systems, together with
the legal description of said real estate, certified to Buyer and to American
Bank National Association (or any party acting as trustee with respect to the
First Mortgage Notes due 2004, proposed to be issued by the Company pursuant to
the Registration Statement) by a registered land surveyor acceptable to Buyer
and to said title insurance company, and otherwise in the form acceptable to
Buyer and to said title insurance company. Such survey shall not reflect or
show any matters which materially and adversely affect the actual or proposed
use or value of the Real Estate or the Facilities or render title thereto
unmarketable.
9.3 Title Objections. Buyer shall examine the commitment provided
pursuant to Section 9.1 and the surveys provided pursuant to Section 9.2
hereof, and shall be allowed thirty (30) days after receipt of the last thereof
to notify Seller in writing of any objections to title to said property. If any
objections to title are made, Seller shall use reasonable efforts to cure such
objections within 60 days (or within such longer period of time as Buyer in its
sole discretion determines to be reasonable) following receipt of notice from
Buyer. Unless Buyer waives its objections, the Closing Date shall be extended
for sixty (60) days or until such earlier date, if any, as the objections have
been cured but in no event shall the Closing take place prior to the Closing
Date. In the event Seller is unable to cure such objections within such period,
then Buyer shall have the right and option to terminate this Agreement, or to
waive its objections, or to allow Seller additional time in which to cure such
objections, in which case the Closing Date shall be
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appropriately further extended. Notwithstanding the foregoing, in the event
Seller and Buyer agree upon a reduction in the Purchase Price so as to
compensate Buyer for such objections to title, the transactions contemplated by
this Agreement shall close in accordance with the terms of this Agreement,
except for the reduction in the Purchase Price and charges resulting from the
title defect that is the subject of the objection and any such other terms as
the parties may agree upon in writing.
9.4 Cooperation. Seller shall cooperate with Buyer both before and
after the Closing in connection with the efforts of Buyer, if any, to cure any
objections to title raised by Buyer which are not cured before the Closing
Date, if Buyer elects to close notwithstanding such objections.
10. ENVIRONMENTAL ASSESSMENT
10.1 Environmental Assessment. Buyer, with the consent of the
Seller, has obtained an environmental assessment (herein after sometimes
referred to individually as the "Assessment" which term shall also refer to all
other environmental assessments pursuant hereto) for the purposes of
determining whether any environmental risks would be associated with the
ownership of the Assets or the operation of the Business, a copy of which is
attached hereto as EXHIBIT 10.1.
11. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents and
warrants to Buyer that, except as set forth in the disclosure schedule
accompanying this Agreement (the "Disclosure Schedule"):
11.1 Organization/Affiliates. Seller is a sole proprietorship. Set
forth in EXHIBIT 11.1 is a complete list of all entities in which Seller has or
has had an interest of any kind or nature, including but not limited to all
sole proprietorships (listing the name under which each business was
conducted), partnerships, corporations and limited liability companies (the
"Affiliates"). Except as specifically delineated on EXHIBIT 11.1, no Affiliate
listed on EXHIBIT 11.1 has or has had any interest in any of the Assets,
including but not limited to any ownership interest or Encumbrance or any other
claim against or with respect to any of the Assets, whether at law or in equity.
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11.2 Authority. The execution and delivery of this Agreement, the
documents to be delivered at Closing, and the consummation of the transactions
contemplated herein have been or will be prior to Closing duly authorized by
Seller, to the extent necessary, and by the board of directors, shareholders,
and partners, as applicable, of all Affiliates and no other corporate,
partnership or other action of Seller or any Affiliate is necessary to authorize
this Agreement, the documents to be delivered at Closing, or the transactions
contemplated by this Agreement.
11.3 Conflicting Agreements, Governmental Consents. The execution
and delivery of this Agreement, and any other agreements contemplated by this
Agreement, by Seller or its Affiliates, the consummation of the transactions
contemplated hereby and thereby, and the performance or observance by the
Seller of any of the terms or conditions hereof or thereof, will not (a)
conflict with, or result in a breach or violation of the terms or conditions
of, or constitute a default under, or result in the creation of any lien on any
of the Assets pursuant to, any award of any arbitrator, or any indenture,
contract, lease or agreement, instrument, order, judgment, decree, statute,
law, rule, regulation, ordinance, code, ruling, injunction or award to which
Seller, the Business or the Assets is subject, (b) require any filing or
registration with, or any consent or approval of, any federal, state or local
governmental agency or authority, or (c) impose any Encumbrance on the Assets
or the Business.
11.4 Enforceability. Seller has the legal right, power and
authority to enter into this Agreement, perform its obligations hereunder and
consummate the transactions contemplated hereby. Seller has taken the
requisite action, corporate or otherwise, necessary to authorize the execution
and delivery of this Agreement and this Agreement has been duly executed and
delivered by Seller. This Agreement and all other instruments required hereby
to be executed and delivered by Seller are, or when delivered will be, legal,
valid and binding obligations of Seller, enforceable in accordance with their
respective terms.
11.5 Actions, Suits, Proceedings. EXHIBIT 11.5 sets forth all
actions, suits or proceedings pending or, to the best knowledge of Seller,
threatened or anticipated against or affecting Seller or any of the Assets or
the Business in any court or before any federal, state,
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municipal or other governmental agency (the "Proceedings"). None of the
Proceedings: (a) if decided adversely to Seller, would have an adverse effect
upon the Business or Assets, (b) seek to restrain or prohibit the transactions
contemplated by this Agreement or obtain any damages in connection therewith,
(c) in any way call into question the validity of this Agreement, or (d)
involve the risk of criminal liability. Seller is not in default with respect
to any order of any court or governmental agency entered against it in respect
of the Business or Assets, nor are there any unsatisfied judgments against
Seller, the Business or the Assets. There is not a reasonable likelihood of an
adverse determination of any pending actions, suits or proceeding. Seller has
not received notice of the initiation of any condemnation proceeding with
respect to the Real Estate or the Facilities, or offer or sale in lieu thereof,
or any judgments, orders, decrees, stipulations, settlement agreements, liens
or injunctions, relating in any way to the Real Estate or the Facilities, which
have not been wholly and completely settled, complied with and discharged.
11.6 Tangible Personal Property. Set forth in EXHIBIT 11.6 is a
complete and accurate list of all of the tangible personal property comprising
the Assets.
11.7 Leases or Other Agreements. Except for the Leases listed in
EXHIBIT 11.7, there are no leases, subleases, licenses, occupancy agreements,
options, rights, concessions or other agreements or arrangements, written or
oral, granting any person or entity the right to purchase, use or occupy any of
the Facilities or the Real Estate in connection with the Business or any
portion thereof or any interest in any such Facilities or the Real Estate.
Seller shall, prior to Closing, negotiate and deliver to Buyer duly executed
and legally enforceable agreements with all lessees of the Real Estate and
Facility in form and substance satisfactory to Buyer whereby all such lessees
agree to terminate their leases and release all claims to the Real Estate and
Facility they may have effective no later than the termination of the Lease.
11.8 No Material Violations. Seller in the conduct of the Business
has not violated and is in compliance with all applicable laws, rules or
regulations relating to the Business or Assets. There are no requests, claims,
notices, investigations, demands, administrative proceedings, hearings or other
governmental claims against Seller alleging the existence of any such violation,
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other than routine ongoing investigation by the Nevada Gaming Commission
conducted in the ordinary course of such Commission's routine investigations of
gaming establishments. Seller has provided to Buyer copies of all written field
inspection reports in its possession submitted to Seller by governmental
authorities since January 1, 1989.
11.9 Environmental Matters. Except as disclosed in EXHIBIT 11.9:
11.9.1 To the knowledge of Seller, there are not present in,
on or under the Real Estate or the Facilities any Hazardous Substances (as
hereinafter defined) in such form or quantities as to create any liability or
obligation for either Seller or Buyer under common law of any jurisdiction or
under any federal, state, local or other governmental statute, regulation, law
or ordinance dealing with the protection of human health and the environment
("Environmental Law"). "Hazardous Substances" means pollutants, contaminants,
hazardous substances, hazardous wastes, petroleum and fractions thereof, and
all other chemicals, wastes, substances and materials listed in, regulated by
or identified in any Environmental Law.
11.9.2 To the knowledge of Seller, no Hazardous Substances
have ever been stored, buried, spilled, leaked, discharged, emitted or released
in, on or under the Real Estate, the Facilities or any adjacent or nearby
properties in such a way as to create any liability under applicable common law
or under any Environmental Law.
11.9.3 To the knowledge of Seller, neither the Real Estate nor
the Facilities are being used nor have they ever been used in connection with
the business of manufacturing, storing, transporting, handling, disposing or
treating Hazardous Substances.
11.9.4 The Business is and has in the past always been
conducted in accordance with all Environmental Laws; the Real Estate, the
Facilities and all Assets comply with all Environmental Laws; and all licenses,
permits and other authorizations required pursuant to any Environmental Law and
necessary for the lawful and efficient operation of the Business at the Real
Estate and the Facilities are in Seller's possession and are in full force and
effect, where the failure to comply with such Environmental Laws or have such
licenses, permits and other authorizations has or would have a material adverse
effect on the Business, the Real Estate, the Facilities or the
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Assets. No permit required under any Environmental Law is schedule to expire
prior to December 31, 1994, and, to the knowledge of Seller, there is no threat
that any such permit will be withdrawn, terminated, limited or materially
changed.
11.9.5 To the knowledge of Seller, except as disclosed in the
Environmental Assessment, there are not now, nor have there ever been in the
past, any underground or aboveground storage tanks or other containment
facilities of any kind on the Real Estate or the Facilities which contain or
ever did contain Hazardous Substances.
11.9.6 To the knowledge of Seller, neither the Real Estate
nor the Facilities are nor never have been listed on the National Priorities
List, the Comprehensive Environmental Response, Compensation and Liability
Information System or any similar federal, state or local list, schedule, log,
inventory or database.
11.9.7 Seller has delivered to Buyer accurate copies of all
reports, authorizations, permits, licenses, disclosures and other documents,
either in its possession or of which it has knowledge, describing or relating in
any way to the Real Estate, the Facilities or any other Assets which describe or
mention the status of any of the Real Estate, the Facilities or any of the
Assets with respect to any Environmental Law.
11.9.8 Solely for purposes of this Section 11.9, the term
"knowledge" shall mean Seller's actual knowledge and Seller has not taken any
action to verify the truth or accuracy of the representations contained in this
Section other than permitting the Buyer to conduct the Environmental
Assessments.
11.10 Employees. EXHIBIT 11.10 hereto lists all employees of Seller
at the date hereof engaged in operation of the Business and in the case of each
such employee sets forth the position, level of compensation, earned and
accrued vacation, date of employment, and years of employment recognized for
determining eligibility for participation in, and vesting and credited service
under, each and every employee benefit plan sponsored by the Seller.
11.11 Employee Plans. EXHIBIT 11.11 hereto lists and generally
describes all employee benefit plans covering employees of Seller engaged in
operation of the Business. True
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and correct copies of each of the plans described in EXHIBIT 11.11 and of the
related agreements have been furnished by Seller to Buyer. Seller has also
furnished to Buyer with respect to each of the plans the most recent summary
plan description. The provisions, operation, and Seller's tax treatment of
such plans are not in violation of any material provision of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the Internal
Revenue Code, or any other statute, rule or regulation, agreement or instrument
by which they are governed. All applicable ERISA requirements as to the filing
of reports, documents and notices regarding such plans with the Department of
Labor, the Internal Revenue Service and the Pension Benefit Guaranty
Corporation, and the furnishing of such documents to participants and
beneficiaries on or prior to the date hereof, have been complied with in all
material respects. The Seller does not have and has never had any employee
pension benefit plan as defined under ERISA. There are no actions, suits or
proceedings pending or, to the knowledge of Seller threatened against such
plans or any fiduciaries thereof respecting their duties to the plans or the
assets or any of the trusts under any of the plans. No such plan is a
Multiemployer Plan, as defined in Section 4001(a)(3) of ERISA.
11.12 Labor Matters. There are no existing labor disputes or
disturbances which affect the Business or the future prospects of the Business,
except those by the Culinary Union. There are no existing employment
agreements or collective bargaining agreements between Seller and any of its
employees or any collective bargaining unit representing any such employees.
Except for the NLRB complaint by the Culinary Union, no petition has been filed
or is pending with the National Labor Relations Board by any labor organization
or any group of employees for an election or certification regarding the
representation of any group of Seller's employees by a labor organization.
There is no present solicitation or campaign by any labor organization or
employee for the representation of Seller's employees by a labor organization.
11.13 Title to Real Property. EXHIBIT 1.2.1 hereto correctly
identifies the real property included in the Assets. Seller has and will
transfer good and marketable fee simple title to such real property, free and
clear of all Encumbrances other than Permitted Encumbrances.
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11.14 Utilities. The Real Estate and the Facilities are presently
served by the following utilities, all of which are located in the public
streets adjacent to the Real Property or within existing easements adjacent to
the Real Property: (i) water, (ii) sanitary sewer, (iii) storm sewer, (iv)
electricity, (v) telephone, and (vi) gas. Such utilities are sufficient for
the operation of the Business and the Facilities as currently operated. Seller
has received no notice of actual or threatened reduction or curtailment of any
utility service now supplied to the Real Property.
11.15 Certificates of Occupancy. The Facilities have received all
required approvals of government authorities including without limitation all
permits and certificates of occupancy or other similar certificates permitting
lawful occupancy of the Facilities required in connection with the operation
thereof. The Facilities have been operated and maintained in accordance with
applicable laws, rules and regulations, orders and rulings. Seller has
received no notice of actual or threatened cancellation or suspension of any
certificates of occupancy for any portion of the Real Property.
11.16 Assessments. Except as disclosed on EXHIBIT 11.16, Seller has
received no notice of actual or threatened special assessments or reassessments
of the Real Property or any portion thereof other than for lights and curb ways.
11.17 Title to Personal Property. Except as set forth below, Seller
owns all right, title and interest in and to all personal property and has and
will transfer good and marketable title to all right, title and interest in all
personal property included in the Assets, free and clear of all Encumbrances
other than Permitted Encumbrances. No Affiliate has or has had any interest in
the personal property included in the Assets. The Assets include without
limitation all assets necessary for the conduct of the Business. Seller is
co-owner of the customer lists with Vacation Club, Inc.
11.18 Condition of Assets. All of the tangible Assets necessary for
the conduct of the Business are sold as is. To the best of Seller's knowledge,
the tangible Assets free from material defects, have been maintained in
accordance with normal industry practice, and are in generally good operating
condition and repair (subject to normal wear and tear).
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11.19 Contracts and Commitments.
11.19.1 Contracts. Schedule 1.2.5 sets forth a complete and
accurate list of all Contracts of the following categories:
11.19.1.1 Contracts not made in the ordinary
course of Seller's business;
11.19.1.2 Employment contracts and severance
agreements, including without limitation Contracts (a) to employ or terminate
executive officers or other personnel and other contracts with present or
former officers, directors or shareholders of Seller or (b) that will result in
the payment by, or the creation of any commitment or obligation (absolute or
contingent) to pay on behalf of Buyer or Parent of Seller any severance,
termination, "golden parachute," or other similar payments to any present or
former personnel following termination of employment or otherwise as a result
of the consummation of the transactions contemplated by this Agreement;
11.19.1.3 Labor or union contracts;
11.19.1.4 Distribution, franchise, license, sales
commission, consulting agency or advertising contracts related to the Assets or
the Business or which are not cancellable on thirty (30) calendar days notice;
11.19.1.5 Options with respect to any property,
real or personal, whether Seller shall be the grantor or grantee thereunder;
11.19.1.6 Contracts involving expenditures or
liabilities, actual or potential, in excess of $1,000.00 or otherwise material
to the Business or the Assets and not cancellable (without liability) within
thirty (30) calendar days;
11.19.1.7 Contracts or commitments relating to
commission arrangements with others;
11.19.1.8 Promissory notes, loans, agreements,
indentures, evidences of indebtedness, letters of credit, guarantees, or other
instruments relating to an obligation to pay money, individually in excess of
or in the aggregate in excess of $10,000.00, whether Seller shall be the
borrower, lender or guarantor thereunder or whereby any Assets are pledged
(excluding credit provided by Seller in the ordinary course of Seller's
business to purchasers of its products);
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11.19.1.9 Contracts containing covenants limiting
the freedom of Seller or any Affiliate or their officers, directors, or
shareholders, to engage in any line of business or compete with any person;
11.19.1.10 Any Contract with the United States,
state or local government or any agency or department thereof involving
expenditures or liabilities in excess of $10,000.00;
11.19.1.11 Leases of real property;
11.19.1.12 Leases of personal property not
cancellable (without liability) within thirty (30) calendar days;
11.19.1.13 Governmental or regulatory Permits
required to conduct the Business as presently conducted; and
11.19.1.14 Any and all other contracts pertaining
to the Business or the Assets.
Seller has delivered to Buyer true, correct and complete copies of all
of the Contracts listed on Schedule 1.2.5, including all amendments and
supplements thereto. Seller and, to the knowledge of Seller, each other party
thereto, have substantially performed all obligations required to be performed
by them to date, and are not in default in any material respect, under any of
the instruments or agreements described above, and neither Seller nor, to the
best knowledge of Seller, each other party thereto has repudiated any provision
thereof. The instruments and agreements described above which are to be
assigned to Buyer hereunder are each in full force and effect and are
assignable to Buyer without the consent of third parties, and Seller has not
waived or assigned to any other person any of its rights thereunder.
11.20 Intellectual Property Rights. EXHIBIT 1.2.6 hereto lists and
describes correctly all registered patents, trademarks, service marks,
copyrights, mask works, trade names and other intellectual property (and all
applications therefor) ("Intellectual Property") included in the Assets and
their respective patent and trademark registration numbers, if any. All
Intellectual Property is, except as noted on EXHIBIT 1.2.6, solely registered
in the name of Seller, is beneficially owned by Seller, and has not been
licensed or otherwise been made available by Seller for use by others.
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All such registered Intellectual Property rights are in full force and effect
and will not expire or require renewal until the date (if any) set forth in
EXHIBIT 1.2.6. Seller does not own or have any interest in or to any other
registered patents, trademarks, service marks, copyrights, mask works, trade
names or other intellectual properties (or applications therefor) and does not
license from others the right to use any industrial or intellectual property
rights. To the knowledge of Seller, Seller owns or possesses, is licensed under,
or otherwise has lawful access to, all patents, trade secrets, know-how, other
confidential information, trademarks, service marks, copyrights, mask works,
trade names, and other intellectual properties (or applications therefor)
necessary for the lawful conduct of the Business as now conducted or intended to
be conducted, without any infringement of or conflict with the industrial or
intellectual property rights of others. Seller does not know or have reason to
know of any unauthorized use or disclosure or misappropriation of any of the
Intellectual Property. Seller has no reason to believe that (i) any of the
registered intellectual properties listed in EXHIBIT 1.2.6 is invalid or
unenforceable (whether due to the existence of prior art, inequitable conduct
such as patent fraud or misuse, prior use or creation, or otherwise), (ii) any
payments to governmental agencies required to maintain the effectiveness of any
of such registered intellectual properties have not been timely paid, or (iii)
any of such pending applications will be denied or will be materially restricted
or conditioned or any prior art exists which would cause such denial,
restriction or condition. No person has a right to receive a royalty or similar
payment in respect of any such intellectual property rights whether or not
pursuant to any contractual arrangements entered into by Seller.
11.21. Licenses and Permits. EXHIBIT 1.2.8A hereto correctly describes
all licenses and permits granted to or by Seller in connection with the
operation of the Business. Seller has all licenses and permits required by law
or otherwise necessary for the proper operation of the Business. All licenses
and permits granted to Seller are valid and in full force and effect, and no
action to terminate any such license or permit is pending or has been threatened
by any governmental agency or other party. EXHIBIT 11.21 sets forth all consents
required for the
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assignment by Seller to Buyer of Buyer's rights, benefits and claims under the
Contracts assigned to Buyer hereby.
11.22 Financial Information. Seller has delivered to Buyer audited
balance sheets of the Business as of December 31, 1992, December 31, 1993 (the
"Balance Sheet Date") and profit and loss statement of the Business for the
periods then ended. Such financial statements have been prepared based upon the
books and records of Seller and fairly and accurately present in all material
respects the assets and liabilities of the Business at such dates and the
results of operations for the periods then ended and except as specifically set
forth therein, have been prepared in accordance with generally accepted
accounting principles. At the respective dates of such financial statements,
there were no liabilities of Seller, which, in accordance with generally
accepted accounting principles, should have been shown or reflected in such
financial statements or the notes thereto, which are not shown or reflected in
such financial statements or the notes thereto.
Except as disclosed in the financial reports provided to Buyer through
the date hereof, since the Balance Sheet Date:
11.22.1 there has not been any material adverse change in
the financial condition, the Assets or the liabilities of Seller;
11.22.2 there has not been any damage, destruction or loss
(whether or not covered by insurance) materially and adversely affecting the
Assets;
11.22.3 there has not been any sale or transfer or other
disposition of any of the assets used in or useful to the Business, except in
the ordinary course of business, or any Encumbrance placed on the Assets; and
11.22.4 there has not been any transaction affecting the
Assets entered into by Seller other than in the ordinary course of business,
except this Agreement.
11.23 Liabilities. Other than Excluded Liabilities, Seller has no
material liabilities, obligations or commitments of any nature (whether
absolute, accrued, contingent or otherwise and whether matured or unmatured),
including without limitation tax liabilities due or to become due, except (a)
liabilities which are reflected and reserved against on the Balance Sheet, which
have not
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been paid or discharged since the date thereof, (b) liabilities arising under
Contracts, Leases, letters of credit, purchase orders, licenses, Permits,
purchase agreements and other agreements, business arrangements and commitments
described in the Disclosure Schedule and (c) liabilities incurred since the
Interim Balance Sheet Date in the ordinary course of the Business and consistent
with Seller's past practice and in accordance with this Agreement (none of which
relates to any breach of Contract, breach of warranty, tort, infringement or
violation of law or arose out of any Action) and none of which, individually or
in the aggregate, has or would have a material adverse effect on the Business or
the Assets.
11.24 Taxes. Seller (i) timely filed with appropriate taxing
authorities all returns required to be filed through the date hereof which
returns are complete and accurate in all material respects, and (ii) has paid
all federal, state and local income, profits, franchise, sales, use, property,
excise, payroll, and other taxes and assessments (including interest and
penalties) to the extent that such have become due. No claims for additional
taxes have been asserted against Seller and no audits are pending or threatened
with respect to any tax liabilities of Seller. There are no liens for taxes on
any of the Assets. None of the Assets is property that is required to be treated
as being owned by any other person pursuant to the safe harbor lease provisions.
11.25 Capital Projects. Except as set forth in EXHIBIT 11.25, no
construction or other capital projects are in progress, have been contracted for
or, to the knowledge of Seller, are required by applicable law or regulation in
connection with the operation of the Business. All completed construction and
other capital projects are reflected in the balance sheet referred to in Section
11.22 hereof.
11.26 Composition of Assets. The Assets comprise all property and
assets used by Seller in and necessary for the conduct of the Business.
11.27 Insurance. Seller maintains property and casualty insurance on
all tangible Assets on an actual cash or replacement value basis and workers
compensation as required by law and general liability with respect to the
Business. EXHIBIT 11.27 shows each policy or binder, the carrier, policy number,
the coverage limits, expiration dates, annual premiums and a general
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description of the type of coverage provided. Such insurance provides, and
during such period provided, coverage to the extent and in the manner (a)
customary for the industry in which seller is engaged and (b) as may be
required by law and by any and all Contracts to which Seller is a party. Seller
is not in default under any of such policies or binders, and Seller has not
failed to give any notice or to present any claim under any such policy or
binder in a due and timely fashion. There are no outstanding unpaid claims
under any such policies or binders. All policies and binders provide sufficient
coverage for risks insured against, are in full force and effect on the date
hereof, and shall be kept in full force and effect through the Closing Date.
All policies providing such insurance are in full force and effect and Seller
has not received any notice of impending cancellation or nonrenewal thereof.
11.28 Brokers and Finders. Seller has not retained or engaged any
broker, finder, real estate agent or other financial intermediary in connection
with the transaction contemplated by this Agreement.
11.29 No Other Agreements to Sell the Assets. Seller nor any of
Seller's agents have any commitment or legal obligation, absolute or
contingent, to any other person or firm other than the Buyer to sell, assign,
transfer or effect a sale of any of the Assets (other than inventory in the
ordinary course of business), to effect any merger, consolidation, liquidation,
dissolution or other reorganization of Seller, or to enter into any agreement
or cause the entering into of an agreement with respect to any of the
foregoing.
11.30 Full Disclosure. No representation or warranty by Seller
contained in this Section 11 contains any untrue statement of a material fact,
or omits any material fact necessary to make the representations and warranties
herein contained not misleading. To the best of Seller's knowledge, Seller has
disclosed all events, conditions and facts materially affecting the Business,
the Assets, and the financial condition of Seller.
12. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and
warrants to Seller as follows:
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12.1 Organization. Buyer is a corporation duly organized and
existing and in good standing under the laws of the State of Delaware and has
the corporate power to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.
12.2 Conflicting Agreements, Governmental Consents. The execution
and delivery of this Agreement by Buyer, the consummation of the transactions
contemplated hereby, and the performance or observance by Buyer of any of the
terms or conditions hereof, will not (a) conflict with, or result in a breach
or violation of the terms or conditions of, or constitute a default under, the
Certificate of Incorporation or By-Laws of Buyer, any award of any arbitrator,
or any indenture, contract or agreement (including any agreement with
stockholders), instrument, order, judgment, decree, statute, law, rule or
regulation to which Buyer is subject, or (b) require any filing or registration
with, or any consent or approval of, any federal, state or local governmental
agency or authority.
12.3 Corporate Authority. The execution and delivery of this
Agreement by Buyer, and the consummation of transactions contemplated hereby
have been duly authorized by all necessary corporate action. This Agreement
and all other instruments required hereby to be executed and delivered by Buyer
are, or when delivered will be, legal, valid and binding obligations of Buyer,
enforceable in accordance with their respective terms.
12.4 Brokers and Finders. Buyer has not retained any broker,
finder, real estate agent of other financial intermediary in connection with
the transactions contemplated by this Agreement.
12.5 Actions, Suits, Proceedings. Schedule 12.5 sets forth all
actions, suits or proceedings pending or, to the knowledge of Buyer, threatened
or anticipated against Buyer or any of its property in any court or before any
federal, state, municipal or other governmental agency (a "Proceeding"). There
are no Proceedings pending or, to the knowledge of Buyer, threatened or
anticipated by Buyer or any of its property which, (a) seek to restrain or
prohibit the transactions contemplated by this Agreement or obtain any damages
in connection therewith, or (b) in any way call into question the validity of
this Agreement.
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13. CONDITIONS TO OBLIGATION OF BUYER TO CLOSE. The obligation of Buyer to
effect the closing of the transactions contemplated by this Agreement is
subject to the satisfaction prior to or at the Closing of the following
conditions:
13.1 Representations and Warranties. The representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects on the Closing Date, as if made on the Closing Date.
13.2 Observance and Performance. Seller shall have observed and
performed all covenants and agreements required by this Agreement to be
observed or performed by Seller on or prior to the Closing Date.
13.3 Seller's Certificate. Seller shall have delivered to Buyer a
certificate of Seller, dated the Closing Date, that Seller has complied with
the conditions set forth in this Section.
13.4 Searches. Buyer shall have received, as of a date no more than
five (5) days prior to the Closing Date, Uniform Commercial Code Searches
against Seller and its Affiliates from the Secretary of State of Nevada and
from such other states and/or counties as Buyer shall reasonably request,
together with tax lien and judgment searches, in each case certified by a
reporting service satisfactory to Buyer, and disclosing no Encumbrances
interests against the Assets other than Permitted Encumbrances.
13.5 Due Diligence Review. Buyer and its agents (including Buyer's
lender and its agents) shall have conducted a due diligence review of Seller's
books and records, financial statements, and other records and accounts of the
Business, and in the sole discretion of Buyer, Buyer shall be satisfied on the
basis of such review that there has been no breach of the representations and
warranties or the pre-closing covenants of Seller made pursuant to this
Agreement. Such review shall have no effect whatsoever on the liability of
Seller to Buyer under this Agreement or otherwise for breach of any
representations, warranties, or covenants of Seller or hereunder.
13.6 Title Matters. Title to the Real Estate and the Facilities
shall have been found acceptable, or been made acceptable, in accordance with
Section 9 hereof.
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13.7 Consents of Third Parties. Buyer shall have received duly
executed copies of any consents, permits or waivers necessary to permit the
assignment of the contracts, leases, commitments and agreements described in
EXHIBIT 1.2.5 hereto without breach thereof.
13.8 Copies of Documents. Buyer shall have received accurate and
complete copies of all documents and instruments listed in any of the exhibits
to this Agreement (and of any amendments, waivers or similar supplementary
materials related thereto).
13.9 No Legal Actions. No court or governmental authority of
competent jurisdiction shall have issued an order restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement, and no person, firm, corporation or governmental agency shall have
instituted an action or proceeding which shall not have been previously
dismissed seeking to restrain, enjoin or prohibit the consummation of the
transactions contemplated by this Agreement. No law, statute, ordinance, or
ruling shall have been proposed, passed or enacted that makes the purchase of
all or part of the Assets contemplated hereby or the proposed use of the Assets
by Buyer illegal or otherwise prohibited.
13.10 Environmental Condition Precedent. The Environmental
Assessment shall have been completed to the Buyer's satisfaction and any
Environmental Objection shall have been cured as provided in Section 10.
13.11 No Material Changes. Since the Interim Balance Sheet, there
shall not have occurred any material adverse change in the Business or the
Assets.
13.12 Staircase. Seller shall have transferred all right, title and
interest in the Eiffel Tower staircase to Buyer.
13.13 Close of Purchase Agreement for Additional Real Estate. Seller
and Buyer shall open Escrow and agree to close no later than the earlier of
February 1, 1995 or the close of this Agreement, the transactions contemplated
under that certain Purchase Agreement between them dated ______________, 1994,
for the purchase of specified additional real estate located in Las Vegas,
Nevada.
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13.14 Closing Documents. Buyer shall have received the warranty
deeds, bills of sale, assignments and other documents required to be delivered
by Seller or others under Section 4.
14. CONDITIONS TO OBLIGATION OF SELLER TO CLOSE. The obligation of Seller
to effect the transactions contemplated by this Agreement is subject to the
satisfaction prior to or at the Closing of the following conditions:
14.1 Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct on
the Closing Date, as if made on the Closing Date.
14.2 Observance and Performance. Buyer shall have observed and
performed all Covenants and agreements required by this Agreement to be
observed and performed by Buyer on or prior to or at the Closing Date.
14.3 Officer's Certificate. Buyer shall have delivered to Seller a
certificate of a responsible officer of Buyer dated the Closing Date that the
conditions set forth in this Section 14 have been satisfied.
14.4 Consents of Third Parties. Seller shall have received duly
executed copies of any material consents necessary to permit the assignment of
the contracts, leases, commitments and agreements described in EXHIBIT 1.2.5
hereto without breach thereof.
14.5 Regulatory Approvals. Seller shall have received all
authorizations, consents and approvals of governments and governmental agencies
required in connection with the purchase and sale contemplated by this
Agreement, other than gaming, liquor, cigarette or other licenses for assets
excluded or excludable pursuant to Section 1.3 or Section 1.2.2.
14.6 No Legal Actions. No court of governmental authority of
competent jurisdiction shall have issued an order restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement, and no person, firm, corporation or governmental agency shall have
instituted an action or proceeding which shall not have been previously
dismissed seeking to restrain, enjoin or prohibit the consummation of the
transactions contemplated by this Agreement.
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14.7 Buyer shall have paid Seller the amount of $83,523.89 in
consideration of the transfer of all right in and to the staircase from the
Eiffel Tower to Buyer.
15. OPERATION OF BUSINESS PRIOR TO CLOSING. Seller agrees that, except with
the prior written consent of Buyer, from the date of this Agreement to the
Closing:
15.1 Maintenance of Business. Seller will use reasonable efforts to
preserve intact the business organization of the Business, keep available the
services of key employees on terms no less favorable to Seller than those on
which such officers and employees are presently employed, and preserve for
Buyer the good will of suppliers, customers and others having business
relationships with the Business. Seller will maintain its books and records
during such period in a manner consistent with past practice.
15.2 Employees. Seller will not hire any new employees for the
Business other than in the ordinary course of business consistent with past
practices as reasonably necessary to employees and then only to the extent
necessary to meet the needs of Seller's customers and provided that Seller
notify Buyer of such hires within two business days of the specifics of each
hire, or effect any increase in compensation or employee benefits for its
employees engaged in operating the Business.
15.3 No Disposition of Assets. Seller will not sell, transfer,
dispose of or abandon any portion of the Assets, except in the ordinary course
of business and consistent with past practice.
15.4 No Additional Liens. Seller will not permit any of the Assets
to become subject to any mortgage, charge or encumbrance, other than Permitted
Encumbrances and purchase money security interest on new assets purchased to
replace damaged or destroyed Assets.
15.5 No Modification of Agreements. Seller will not modify or amend
any material contract, lease, commitment or agreement to be assigned to or
assumed by Buyer hereunder, or waive or assign to any third party any of its
rights under any such contract, lease, commitment or agreement.
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15.6 Maintenance of Tangible Assets. Seller will maintain all
tangible Assets in good order and repair, ordinary wear and tear excepted, in
accordance with normal industry practice and manufacturers specifications, if
any.
15.7 No Extraordinary Agreements. Seller will not enter into any
contract or agreement which relates to the Business or Assets and which
contains terms or conditions inconsistent with past business practices of
Seller or the continued operation of the Business as a going concern.
15.8 Maintenance of Insurance. Seller will continue to carry all
existing policies of insurance relating to the Assets, or will effect renewals
or replacements thereof in substantially the same form and amount, and
providing substantially the same coverage, as such existing policies.
15.9 Ordinary Operations. Without limiting the generality of the
foregoing, Seller will in all other respects operate the Business in the
ordinary course.
16. INSPECTION RIGHTS
16.1 Pre-Closing Inspection Rights. Seller will permit employees
and agents of Buyer or employees and agents and Buyer's lenders during normal
business hours and on reasonable notice to Seller to inspect the Assets and to
inspect all contracts, agreements, other documents and records reflecting or
reasonably relating to the Assets or the Business. All information and records
obtained by Buyer pursuant to this Section shall be maintained as confidential
and shall not be disclosed to any third party without the consent of Seller
except in response to legal process or to the extent required to comply with
applicable law. Buyer shall not be obligated to maintain as confidential any
information obtained from Seller which is publicly available, readily
ascertainable from public sources, known to Buyer at the time the information
was disclosed or which is rightfully obtained from a third party. The
obligations of confidentiality arising under this Section shall survive the
termination or abandonment of this Agreement.
16.2 Post-Closing Inspection Rights. Buyer agrees that all books
and records delivered to Buyer by Seller pursuant to the provisions of this
Agreement shall be open for inspection by
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representatives of Sellers' at any time during regular business hours on or
prior to the second anniversary of the Closing Date (or thereafter if such
inspection is necessary in order for Seller to respond to a bona fide claim or
law suit or a suit, inspection, audit or investigation by a governmental agency)
and that Seller may during such period at its expense make such excerpts
therefrom as it may deem desirable. Seller agrees that such documents and
materials retained by Seller and that are related to the Assets or Business
shall be open for inspection by representatives of Buyer at any time during
regular business hours on or prior to and that Buyer may during such period at
its expense make such excerpts therefrom as it may deem desirable. Thereafter,
each party shall offer an opportunity to copy any such documents and materials
prior to the destruction thereof.
17. BULK TRANSFER LAW. To the extent any bulk sales or similar law applies
to the transactions contemplated herein, Buyer hereby waives compliance by
Seller with the requirements of any applicable laws relating to bulk sales and
transfers and Seller agrees to indemnify Buyer and hold Buyer harmless from any
and all claims, liabilities or costs arising with respect thereto, including
reasonable attorneys' fees.
18. TAXES, FEES AND OTHER EXPENSES
18.1 Taxes and Fees. Seller shall be responsible for and shall pay
all sales, transfer or similar taxes or governmental charges, if any, all deed
taxes and recording fees, and the escrow closing fee of the title company with
respect to the sale and purchase of the Assets, whether levied against the
Assets, Seller or Buyer.
18.2 Expenses. Except as provided in Sections 18.1 and 18.3 each
party shall pay all of the costs and expenses incurred by it in negotiating and
preparing this Agreement (and all other agreements, certificates, instruments
and documents executed in connection herewith), in performing its obligations
under this Agreement, and in otherwise consummating the transactions
contemplated by this Agreement, including without limitation its attorneys' fees
and accountants' fees.
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18.3 Title Insurance Premiums. Seller shall pay the cost of the
Survey, Environmental Assessment and the premiums for the Title Insurance and
all endorsements thereto required under this Agreement other than the ALTA Form
110.5 Endorsement.
19. INDEMNIFICATION BY SELLER
19.1 Generally. Seller hereby agrees to indemnify and hold harmless
Buyer, its subsidiary corporations and their affiliates (together, "Buyer's
Indemnified Parties") against and with respect to:
19.1.1 Any and all liabilities and obligations of Seller
(including without limitation Excluded Liabilities or any liability imposed upon
Buyer by reason of Buyer's status as transferee of the Assets) except to the
extent of the Assumed Liabilities and agreed to be paid by Buyer pursuant to
Section 3 hereof, and any and all liabilities and obligations incurred in
connection with, arising out of, resulting from or incident to ownership of the
Assets, operation of the Business and incidents and occurrences on or prior to
the Closing Date, whether or not reflected in its books and records and whether
or not manifest on or prior to the Closing Date;
19.1.2 Any and all loss, injury, damage or deficiency incurred
in connection with, arising out of, resulting from or incident to any
misrepresentation, omission or breach of warranty on the part of Seller under
this Agreement;
19.1.3 Any and all loss, injury, damage or deficiency incurred
in connection with, arising out of, resulting from or incident to any
non-fulfillment of an covenant or agreement on the part of Seller under this
Agreement; and
19.1.4 Any and all demands, claims, actions, suits,
proceedings, assessments, judgments, costs and legal and other expenses incurred
in connection with, arising out of, resulting from or incident to any of the
foregoing.
19.2 Procedures. In the event any demands or claims are asserted
against Buyer's Indemnified Parties or any actions, suits or proceedings are
commenced against Buyer's Indemnified Parties for which Seller is obligated to
indemnify any of Buyer's Indemnified Parties under this Section 19, then Buyer
shall give written notice thereof to Seller within ten (10) business days
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after Buyer's Indemnified Parties receipt of any such written demand or claim,
in order to permit Seller the necessary time to evaluate the merits of such
demand, claim, action, suit or proceeding and defend, settle or compromise the
same so that Seller's interests are not materially prejudiced. Failure to give
such notice shall not affect rights to indemnification hereunder, except to the
extent the Seller demonstrates actual damage caused by such failure. Within ten
(10) business days after such notice, Seller shall assume the defense thereof
with counsel chosen by Seller or its insurer and reasonably acceptable to Buyer.
If Seller fails to assume the defense of such claim within ten (10) business
days after receipt of such notice, any of Buyer's Indemnified Parties will (upon
delivering notice to such effect to Seller) have the right to undertake, at
Seller's cost and expense, the defense, compromise or settlement of such claim
on behalf of and for the account and risk of Seller; provided, however, that
such claim shall not be compromised or settled without the written consent of
Seller, which consent shall not be unreasonably withheld. In the event any of
Buyer's Indemnified Parties assume the defense of the claim, Buyer will keep
Seller reasonably informed of the progress of any such defense, compromise or
settlement. Seller shall be liable for any settlement of any action effected
pursuant to and in accordance with this Section 19.2 and for any final judgment
(subject to any right of appeal), and Seller agrees to indemnify and hold
harmless Buyer's Indemnified Parties from and against any damages by reason of
such settlement or judgment.
19.3 Settlement and Compromise. Seller shall not settle or compromise
any demands, claims, actions, suits or proceedings for which Buyer has sought
indemnification from Seller without the written consent of Buyer, which consent
shall not be unreasonably withheld.
19.4 Limitations on Indemnification. No claim for indemnification
under this Section 19 shall be made by Buyer against Seller after the date that
is seven (7) years from the Closing Date, except for claims for indemnification
for breach of representations and warranties under Sections 11.9, 11.13, 11.17,
11.20, and 11.11. Further, no claim for indemnification shall be made by Buyer
against Seller unless the claim can reasonably be expected to exceed $10,000.00
in amount or the aggregate of the claim and all other known claims can
reasonably be expected to
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exceed $10,000.00 in amount. The aggregate amount of claims payable by Seller
under this Section shall not exceed the sum of (i) greater of (a) 150% of the
aggregate purchase price paid pursuant hereto, or (b) the aggregate amount of
any payments or claims paid or made against Buyer for which Buyer is entitled
to indemnification hereunder, plus (ii) the amount of reasonable attorneys fees
paid by Buyer in defending or paying any claim for which it is entitled to
indemnification hereunder plus the amount of reasonable attorneys fees paid by
Buyer in prosecuting and collecting its claim for indemnification hereunder.
20. INDEMNIFICATION BY BUYER
20.1 Generally. Buyer hereby agrees to indemnify and hold harmless
Seller at all times from and after the Closing Date against and with respect to:
20.1.1 Any and all liabilities and obligations of Seller with
respect to the Assumed Liabilities and any and all liabilities and obligations
incurred in connection with, arising out of, resulting from or incident to
ownership of the Assets and incidents and occurrences after the Closing Date,
except to the extent Seller is required to indemnify Buyer in respect thereof
pursuant to Section 19.1;
20.1.2 Any and all loss, injury, damage or deficiency incurred
in connection with, arising out of, resulting from or incident to any
misrepresentation, omission or breach of warranty on the part of Buyer under
this Agreement;
20.1.3 Any and all loss, injury, damage or deficiency incurred
in connection with, arising out of, resulting from or incident to any
non-fulfillment of any covenant or agreement on the part of Buyer under this
Agreement; and
20.1.4 Any and all demands, claims, actions, suits or
proceedings, assessments, judgments, costs and legal and other expenses incurred
in connection with, arising out of, resulting from or incident to any of the
foregoing.
20.2 Procedures. In the event any demands or claims are asserted
against Seller or any actions, suits or proceedings are commenced against Seller
for which Buyer is obligated to indemnify Seller under this Section 20, then
Seller shall give timely notice thereof to Buyer in order
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to permit Buyer the necessary time to evaluate the merits of such demand,
claim, action, suit or proceeding and defend, settle or compromise the same so
that Buyer's interest is not materially prejudiced. Failure to give such
notice shall not affect rights to indemnification hereunder, except to the
extent the Buyer demonstrates actual damage caused by such failure. Within ten
(10) business days after such notice, Buyer shall assume the defense thereof
with counsel chosen by Buyer and reasonably acceptable to Seller. If Buyer
fails to assume the defense of such claim within ten (10) business days after
receipt of such notice, the Seller will (upon delivering notice to such effect
to Buyer) have the right to undertake, at Buyer's cost and expense, the
defense, compromise or settlement of such claim on behalf of and for the
account and risk of Buyer; provided, however, that such claim shall not be
compromised or settled without the written consent of Buyer, which consent
shall not be unreasonably withheld. In the event the Seller assumes the
defense of the claim, Seller will keep Buyer reasonably informed of the
progress of any such defense, compromise or settlement. Buyer shall be liable
for any settlement of any action effected pursuant to and in accordance with
this Section 20 and for any final judgment (subject to any right of appeal),
and Buyer agrees to indemnify and hold harmless Seller from and against any
damages by reason of such settlement or judgment.
20.3 Settlement and Compromise. Buyer shall not settle or
compromise any demands, claims, actions, suits or proceedings for which Seller
has sought indemnification from Buyer without the written consent of Seller,
which consent shall not be unreasonably withheld.
20.4 Limitations on Indemnification. No claim for indemnification
under this Section 20 shall be made by Seller against Buyer after the date that
is seven (7) years from the Closing Date. Further, no claim for
indemnification shall be made by Seller against Buyer unless the claim can
reasonably be expected to exceed $10,000.00 in amount or the aggregate of the
claim and all other known claims can reasonably be expected to exceed
$10,000.00 in amount. The aggregate amount of any and all claims hereunder
shall not exceed the aggregate purchase price. Seller right's hereunder shall
at all times be subordinate to the rights of the holders of the First Mortgage
Notes due 2004 issued pursuant to the Registration Statement.
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20.5 Right of Set-Off. Buyer may set off against amounts otherwise
payable under the Buyer's Promissory Note any amount to which it may be
entitled under this Section 20 and any other obligation of Seller or Seller's
Affiliate's matured or unmatured, accrued or unaccrued including without
limitation all obligations of the Seller to Buyer under any Promissory notes
issued pursuant to the Letter Agreements, all advances and/or loans made by
Buyer to Seller pursuant to the Letter Agreements and any obligations,
if any, assumed by Buyer. The exercise of such right of set-off by Buyer
shall not constitute an event of default under the Buyer's Promissory Note.
Neither the exercise of, nor the failure to exercise, such right of set-off
shall constitute an election of remedies nor limit Buyer in any manner in the
enforcement of any other remedies that may be available to it.
21. TERMINATION OF AGREEMENT. This Agreement may be terminated at any time
prior to the Closing Date on the terms and conditions set forth below:
21.1 Mutual Consent. By mutual written consent of Buyer and Seller.
21.2 Breach of Agreement. By Buyer giving written notice to Seller
if Seller is in breach, or by Seller giving written notice to Buyer if Buyer is
in breach, in any material respect of any representation, warranty or covenant
contained in this Agreement and the breaching party's failure to cure breach
within ten (10) business days of the breaching parties receipt of such notice.
21.3 Delayed Closing. By Buyer giving written notice to Seller or
by Seller giving written notice to Buyer, if the transactions contemplated by
this Agreement shall not have been consummated by February 1, 1995, unless such
failure shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants, agreements and conditions hereof
to be performed or observed by such party at or before the Closing Date.
21.4 Consequences of Termination. Upon termination of this Agreement
as provided herein, each party shall return to the other the information such
party has pertaining to this Agreement and neither party shall have liability as
a result of such termination except that a breaching party shall be liable to a
non-breaching party if this Agreement is terminated pursuant Section 21.2 as a
result of the breaching party's breach.
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21.5 Government Action. By Buyer or Seller if any court of
competent jurisdiction in the United States or other United States governmental
body shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable.
21.6 Remedies. A parties termination of this Agreement pursuant to
the provisions hereof shall not preclude the terminating party from recovering
damages resulting from the other party's breach of any representation or
covenant contained in this Agreement. A party's right to terminate this
Agreement pursuant hereto shall not prevent the party from seeking specific
performance of the obligations hereunder in lieu of termination of this
Agreement.
22. ASSIGNMENT. This Agreement may not be assigned by either party hereto
without the prior written consent of the other except that Buyer may assign to
an affiliate as defined in Rule 405 of the Securities Act of 1933, as amended.
The terms and provisions of this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, their successors and assigns, and
no person, firm or corporation other than the parties, their successors and
assigns, shall acquire or have any rights under or by virtue of this Agreement.
23. COVENANT OF FURTHER ASSURANCES/COOPERATION. From time to time after
the Closing, at the request of Buyer and without further consideration, Seller
will execute and deliver such other instruments of transfer and take such other
actions as Buyer may reasonably require to transfer the Assets to, and vest
title of the Assets in, Buyer, and to put Buyer in possession of the Assets.
In the event that it shall be necessary for Seller to qualify to do business as
a foreign corporation in any state after the Closing in order for Buyer to
enforce any material claim, Seller shall so qualify promptly upon written
request of Buyer. Furthermore, Seller shall cooperate with Buyer with respect
to all condemnation proceedings and in obtaining all utilities and governmental
approvals necessary or appropriate for Buyer to construct its proposed project
in connection with the Real Property as outlined in the Buyer's filing with the
Securities and Exchange Commission.
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24. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each and every
certificate, schedule, exhibit or instrument or conveyance delivered by or on
behalf of the parties pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the parties hereunder. All representations and warranties
contained herein, and all other written representations and warranties of Buyer
and Seller contained in the instruments executed in connection with the
consummation of the transactions provided for herein, shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby for a period of seven (7) years, except that
the representations and warranties in Sections 11.9, 11.13, 11.17, 11.20, and
11.11 shall survive indefinitely. The termination of the representations and
warranties provided herein shall not affect the rights of a party in respect of
any claim made by such party against another in connection with, or arising out
of this Agreement or the transactions contemplated hereby if such claim was
made in writing and received by the other party prior to the expiration of the
applicable survival period provided herein.
25. PUBLIC ANNOUNCEMENT. Any and all public announcements of any kind or
nature whatsoever concerning the transactions contemplated hereby made on or
before the Closing Date shall require the prior written approval of Buyer and
Seller, which approval shall not be unreasonably withheld. Notwithstanding the
forgoing, either party may make any public announcement required by law, rule
or regulation, provided the party making the announcement provides the other
party with a copy of such proposed announcement for their comment as far in
advance of such announcement as practicable.
26. ENTIRE AGREEMENT. This Agreement, including the exhibits and schedules
attached to this Agreement, constitutes the entire agreement and understanding
between Seller and Buyer with respect to the sale and purchase of the Assets
and the other transactions contemplated by this Agreement. The Letter
Agreements are hereby modified to reflect this Agreement and to the extent not
inconsistent with this Agreement are hereby incorporated by reference and
restated herein and remain in full force and effect. Except as provided above,
all prior representations, understandings
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<PAGE> 40
and agreements between the parties with respect to the purchase and sale of the
Assets and the other transactions contemplated by this Agreement are superseded
by the terms of this Agreement.
27. AMENDMENT AND WAIVER/CONSTRUCTION. Any provision of this Agreement may
be amended or waived by a writing signed by the party against which enforcement
of the amendment or waiver is sought. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
28. HEADINGS. The headings of the Sections of this Agreement are solely
for convenience and reference and shall not limit or in any way affect the
meaning of the terms or provisions of this Agreement.
29. CHOICE OF LAW/JURISDICTION. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Nevada, as though all
acts and omissions related to this Agreement occurred in the State of Nevada,
without regard to its principles of laws. Any and all actions arising under
this Agreement shall be brought in the United States District Court, District
of Nevada, Las Vegas, Nevada unless such court is prohibited by law from
assuming jurisdiction over such actions, in which event any and all such
actions shall be brought in the District Court of the State of Nevada located
in Las Vegas, Nevada and all of the parties hereto consent to the jurisdiction
of such courts.
30. SEVERABILITY. The provisions of this Agreement shall, where possible,
be interpreted so as to sustain their legality and enforceability, and for that
purpose the provisions of this Agreement shall be read as if they cover only
the specific situation to which they are being applied. The invalidity or
unenforceability of any provision of this Agreement in a specific situation
shall not affect the validity or enforceability of that provision in other
situations or of other provisions of this Agreement.
31. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be considered an original, but all of which together shall
constitute one and the same agreement.
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32. NOTICES. All notices given pursuant to this Agreement shall be
delivered by hand or sent by United States registered mail, postage prepaid,
addressed as follows (or to another address or person as a party may specify
on notice to the other):
(i) If to Seller:
Mr. Bob Stupak
Stratosphere Corporation
200 Las Vegas Boulevard South
Las Vegas, Nevada 89104
With a copy to:
Denton & Denton Ltd.
626 South 7th Street
Las Vegas, Nevada 89101
Attention: Mark Denton
(ii) If to Buyer:
Stratosphere Corporation
200 Las Vegas Boulevard South
Las Vegas, Nevada 89104
Attention: Executive Vice President
With a copy to:
Grand Casino Resorts, Inc.
c/o Grand Casinos, Inc.
13705 First Avenue North
Suite 100
Plymouth, MN 55441-5451
Attention: Chief Financial Officer
Maslon Edelman Borman & Brand
A Professional Limited Liability Partnership
3300 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402-4140
Attention: Russell F. Lederman, Esq.
33. SATISFACTION OF CONDITIONS TO CLOSING. Seller and Buyer will use
commercially reasonable efforts to satisfy the respective conditions to the
obligations of the other
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<PAGE> 42
party to close hereunder, including the prosecution of any applications for
licenses or approvals necessary to satisfy such conditions to closing.
IN WITNESS WHEREOF, the parties have executed or in the case of party
who is not an individual have caused this Agreement to be executed and
delivered by their duly authorized officers as of the date and year first above
written.
BUYER: STRATOSPHERE CORPORATION,
By [SIG]
------------------------------------
Its
---------------------------------
SELLER: [SIG]
--------------------------------------
Bob Stupak
42
<PAGE> 1
Exhibit 99.3
ESCROW AGREEMENT
ESCROW AGREEMENT, dated Nov. 1, 1994, among STRATOSPHERE CORPORATION,
a Delaware corporation (herein, together with its successors and permitted
assigns, "Purchaser"), BOB STUPAK, d/b/a Vegas World Casino & Hotel (herein,
together with its successors and permitted assigns, "Seller"), and First
Interstate Bank of Nevada, N.A., as Escrow Agent (the "Escrow Agent").
A. Purchaser and Seller are parties to an Asset Purchase
Agreement, dated Nov. 1, 1994 (the "Asset Purchase Agreement") , pursuant to
which Purchaser is acquiring from Seller certain assets of the Business (as
defined in the Asset Purchase Agreement).
B. The Asset Purchase Agreement and the Letter Agreements (as
defined in the Asset Purchase Agreement) provide for the payment and delivery
of money and other property into the escrow hereby established, such money and
property to be held in trust, invested and distributed by the Escrow Agent as
herein provided.
C. Unless otherwise indicated, all capitalized terms used herein
shall have the meanings ascribed to them in the Asset Purchase Agreement.
D. The terms and conditions of the Asset Purchase Agreement and
the Letter Agreements, Including without limitation, section 3.b. of the
November 15, 1993 Letter Agreement (as defined in the Asset Purchase
Agreement) and section 2.g. of the June 1,
<PAGE> 2
1994 Letter Agreement (as defined in the Asset Purchase Agreement), are hereby
incorporated herein by reference.
E. In the event of any inconsistencies between the Letter
Agreements and the Asset Purchase Agreement, on the one hand, and this Escrow
Agreement, on the other hand, the terms and conditions of this Escrow Agreement
shall govern. The duties of the Escrow Agent, however, are limited to those
specified in this Agreement.
F. All references to currency herein are to lawful money of the
United States of America.
Accordingly, the parties agree as follows:
1. Establishment of the Escrow Fund. In accordance with the terms
of the Asset Purchase Agreement and the Letter Agreements, prior to the
execution and delivery of this Escrow Agreement, Seller deposited 7,000,000
shares of Stratosphere Corporation Common Stock, $0.01 par value per share,
beneficially owned by Seller (accompanied by a stock power duly executed in
blank and medallion guaranteed) (the "Shares") with American Bank National
Association ("American Bank") , as escrow agent under that certain Pledge and
Escrow Agreement dated effective as of June 1, 1994 by and among Seller, Bob
Stupak Enterprises, Inc., Purchaser and American Bank. Simultaneous with the
closing and pursuant to instructions from Seller and Purchaser, American Bank
has deposited the Shares with the Escrow Agent, and Seller has deposited the
Promissory Note with the Escrow Agent. The amount, if any, payable upon
maturity of the Promissory Note shall by the terms thereof be
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payable directly to the Escrow Agent to be held, invested and distributed in
accordance with this Escrow Agreement. In addition, Seller shall, from time to
time, deposit with the Escrow Agent additional cash and/or shares of Common
Stock, so that beginning on the date that the Business is closed to the public
(the "Business Closing Date"), and until the termination of this Agreement, the
Value (as defined in Section 8.1 hereof) of the Escrow Fund shall at all such
times be equal to or greater than the sum of the Claims Reserve (as defined in
Section 3.1.3 hereof) and 150% of the Outstanding Package Obligations (as
defined in the June 1, 1994 Letter Agreement) set forth on any Valuation
Statement (as defined in Section 2.3 hereof) accompanied by an Accountant's
Letter (as defined in Section 2.3 hereof). Such deposits (excluding any
interest or income earned thereon but including any gains or losses in the
principal amount thereof, less any payments or distributions pursuant to
Section 3 hereof, is herein called the "Escrow Fund."
1.1 The Escrow Agent shall hold, invest and dispose of
the Escrow Fund and any accrued but unpaid interest or income thereon in
accordance with the terms and conditions hereof and the Escrow Fund shall not
constitute property of Seller except to the extent Seller is entitled to a
distribution pursuant to the terms of this Agreement.
2. Investment of the Escrow Fund.
2.1.1 Investment. The Escrow Agent shall invest any or
all of the cash in the Escrow Fund in any of the following;
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(i) obligations issued or guaranteed by the United
States of America or any agency or instrumentality thereof;
(ii) certificates of deposit of or accounts with
national banks or corporations endowed with trust powers having capital and
surplus in excess of $100,000;
(iii) commercial paper at the time of investment
rated A-1 by Standard & Poor's Corporation or Prime-1 by Moody's Investor
Service, Inc.;
(iv) obligations issued by any state or municipality
of the United States;
(v) fixed income securities of the highest rating
available from Standard & Poor's Corporation or Moody's Investor's Service,
Inc., or of a comparable quality;
(vi) any mutual fund that invests at least 80
percent of its fund primarily in one or more of the obligations described in
paragraphs (i), (ii), (iii), (iv) and (v) above, including, without
limitation, that certain mutual fund known as "Westcore Treasury Fund" which is
operated by First Interstate Bank of Denver, N.A.; or
(vii) any other investment mutually agreed upon in
writing by Seller and Purchaser; provided, that no such obligations or other
investments shall mature later than three months from the date of Investment or
such earlier period as may be necessary to assure that the final maturity of
any such investments does not extend beyond the time when the amounts so
invested would be required for any payments or distributions
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<PAGE> 5
pursuant to Section 3.2 or 5 hereof and that each such investment is approved
administratively in writing by the Chairman (the "Chairman") of the Nevada
State Gaming Control Board (the "Gaming Control Board").
2.1.2 Treatment of Shares. The Shares in the
Escrow Fund shall only be sold or transferred as provided in this Agreement.
Seller shall have the right, from time to time, to instruct the Escrow Agent to
release Shares from the Escrow Fund so that Seller may sell such Shares or use
such Shares as collateral for a loan, provided that Seller, simultaneously with
the withdrawal of such Shares, deposits sufficient proceeds of such sale or
loan in the Escrow Fund and the Value of the Escrow Fund after such deposit is
greater than or equal to the sum of the Claims Reserve and 150% of the then
Outstanding Package Obligations.
2.2 Escrow Ledger. The Escrow Agent shall maintain a
ledger (the "Escrow Ledger") setting forth (i) the Value of the Escrow Fund;
(ii) all income earned on the Escrow Fund; (iii) all items charged against the
Escrow Fund; and (iv) with respect to any payment or distribution to Purchaser
or Seller pursuant to this Escrow Agreement, the amount of such distribution,
the date thereof and an indication of the extent to which, if any, such
distribution came from the Escrow Fund.
2.3 Monthly Statement. As soon as practicable, but no
later than ten (10) business days following the close of each Monthly Period
(as defined in Section 8.1 hereof) during the term
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of this Escrow Agreement, the Escrow Agent shall deliver to Seller and Purchaser
a statement (a "Monthly Statement") setting forth (i) the Value of the Escrow
Fund on such date; (ii) the amount of income earned on the Escrow Fund during
the period covered by such Monthly Statement; and (iii) the amount of any
payment or distribution to Purchaser, Seller or a Refund Claimant (as defined in
Section 3.4.3 hereof) pursuant to this Escrow Agreement during the period
covered by such Monthly Statement. For purposes of the Monthly Statement, the
Value of the Shares shall be the Fair Market Value (as defined in section 8.1
hereof). In addition, as soon as practicable, but no later than ten (10)
business days following the close of each Monthly Period during the term of this
Escrow Agreement, Seller shall deliver to Purchaser and the Escrow Agent a
statement (the "Valuation Statement") setting forth the amount (determined in
accordance with the terms of the letter dated , 1994 from Purchaser to
the Gaming Control Board attached hereto as Exhibit A (the "Valuation Letter")
of the existing Outstanding Package Obligations on such date, accompanied by a
letter from KPMG Peat Marwick LLP, or an independent accounting firm mutually
acceptable to both Purchaser and Seller (the "Independent Accountant"), setting
forth the procedures performed by it relating to the Valuation Statement and the
results of such procedures (an "Accountant's Letter"). Copies of all Monthly
Statements, Valuation Statements and Accountant's Letters shall also be
delivered to the Chairman.
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<PAGE> 7
3. Procedure with Respect to Claims.
3.1 Indemnification Claim Notices.
3.1.1 If Purchaser has a claim for indemnification
against Seller under the Asset Purchase Agreement (including, without
limitation, any claim arising from a suit, action or proceeding brought against
Purchaser by a third party (a "Third Party Claim") for which Purchaser is
required to, or seeks to, offset against the Escrow Fund (each an "Asserted
Indemnification Claim"), Purchaser shall give prompt written notice to Seller
and the Escrow Agent (a "Claim Notice") stating the amount (or a good faith
reasonable estimate thereof, in the case of a Third Party Claim) of such
Asserted Indemnification Claim. Any such Claim Notice shall specify in
reasonable detail the basis for such claim and shall specify: (i) the section of
the Asset Purchase Agreement upon which such Asserted Indemnification Claim is
based; (ii) with respect to a Third Party Claim, pertinent details thereof,
including, without limitation, the date by which any answer or other response
must be served; and (iii) instructions from Purchaser to the Escrow Agent as to
where payment shall be made, if and when required to be made hereunder. The
Claim Notice shall in all cases be accompanied by a certificate of an executive
officer of Purchaser stating that, to the best of such officer's knowledge and
belief, the statements set forth in the Claim Notice are true and correct.
Promptly following a final non-appealable judgment or settlement with respect to
any Third Party Claim, Purchaser shall deliver to the Escrow Agent and Seller a
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certificate of an executive officer of Purchaser setting forth the amount of
such judgment or settlement (a "Third Party Certificate").
3.1.2 Response by Seller. Within 10 days after
receipt of any Claim Notice (or after receipt of any Third Party Certificate),
Seller shall, by written notice to Purchaser and the Escrow Agent, (i) concede
liability in whole or in part; or (ii) deny liability in whole or in part, in
which case such amount of liability so denied shall be considered a Pending
Claim, as defined in, and for purposes of, Section 4 hereof. A failure by
Seller to respond in writing within such period shall be deemed a concession of
liability in whole.
3.1.3 Claims Reserve. The Escrow Agent shall hold
in the Escrow Fund as a reserve an amount equal to the aggregate of the amounts
of all Pending Claims (the "Claims Reserve") in excess of 150% of the
Outstanding Package Obligations. The Escrow Agent shall keep a record of all
Pending Claims which constitute the Claim Reserve.
3.2 Payment of Claims. Subject to the limitations, if
any, set forth in Section 19.4 of the Asset Purchase Agreement, and provided
(i) a Claim Notice has been delivered by Purchaser to Seller and the Escrow
Agent in accordance with the provisions of Section 3.1.1 hereof on or prior to
the time specified in the Asset Purchase Agreement with respect to such claim
and (ii) Purchaser has delivered to Seller, if such Asserted Indemnification
Claim is a Third Party Claim, a Third Party
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<PAGE> 9
Certificate in accordance with Section 3.1.1 hereof, the Escrow Agent shall
make payments to Purchaser from the Escrow Fund (A) promptly following the
determination of the amount of any liability as to which there has been any
concession of liability, in whole or in part by Seller, pursuant to Section
3.1.2 hereof, to the extent of the liability conceded, and (B) in accordance
with 4.4 hereof, with respect to any Pending Claim.
3.2.1 Payments in General. Any payments to
Purchaser under this Section 3.2 shall be made to Purchaser pursuant to the
instructions set forth in the Claim Notice.
3.2.2 Restrictions on Payment. Notwithstanding
anything to the contrary contained in this Agreement, no payments may be made to
Purchaser for claims other than those related to an Invoice (as defined in
Section 3.4.4 hereof) if as a result of such payment the Value of the Escrow
Fund will be less than 150% of the outstanding Package Obligations. Any payment
that is prohibited by this section 3.2.2 shall continue to be claim against the
Escrow Fund and shall be paid to Purchaser at the earliest time that the such
prohibition is no longer applicable.
3.3 With respect to any Pending Claim, the parties shall
negotiate in good faith to reach written agreement resolving any dispute as
promptly as possible. If, despite their best efforts, the parties are unable
to reach written agreement within 10 days after the claim has become a Pending
Claim under Section 3.1.2 or 3.4.2 hereof, the parties shall jointly submit any
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<PAGE> 10
remaining dispute to an arbitrator satisfactory to both of them (the
"Arbitrator"), such arbitration to be held at such time and in such place as
they shall mutually agree upon. If within 5 days following the expiration of
such 10-day period the parties have failed to agree in writing upon the
selection of an Arbitrator or any Arbitrator selected by them has not agreed to
perform the services called for hereunder, the Arbitrator shall thereupon be
selected by the American Arbitration Association). The decision of the
Arbitrator with respect to any such dispute shall be final, binding and
conclusive on both parties. Any such written agreement or Arbitrator's decision
resolving a Pending claim is herein referred to as a "Claim Resolution." The
fees and expense of the Arbitrator incurred in connection with any Claim
Resolution shall be shared equally by Purchaser and Seller.
3.4 Outstanding Package Obligations.
3.4.1 Prior to the Business Closing Date, Seller
will continue to honor or refund all Outstanding Package Obligations pursuant to
their terms. Seller shall pay all Refund Requests (as defined in section 3.4.2
hereof) within ten (10) business days of their receipt. If Seller instructs the
Escrow Agent to pay Refund Requests pursuant to Section 3.4.2 hereof, Seller
must deliver to the Escrow Agent and Purchaser the Refund Request List (as
defined in Section 3.4.2 hereof) within ten (10) business days of the date that
the first Refund Request listed on the Refund Request List was received. Any
Refund Request that the Escrow Agent is instructed to pay directly pursuant to
Section
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3.4.2 hereof, shall be paid by the Escrow Agent as soon as in practicable.
3.4.2. After such time as Seller is no longer
entitled to payments pursuant to the Asset Purchase Agreement, Seller may from
time to time submit to the Escrow Agent and Purchaser a list of all persons who
have requested and are entitled to a refund of their Outstanding Package
Obligation ("Refund Requests") specifying the name of such person, the amount
of the refund payable and the address to which a refund should be sent (a
"Refund Request List"). Simultaneous with the delivery of a Refund Request
List, Seller shall instruct the Escrow Agent to (i) release from the Escrow
Fund, in exchange for cash equal to the aggregate amount of the refunds
specified on the Refund Request List, the number of Shares obtained by dividing
the Coverage Amount (as herein defined) by the Fair Market Value, or (ii) sell,
on behalf of Seller, in a commercially reasonable manner which the Escrow Agent
may determine in its sole discretion, a sufficient number of Shares (after
deducting all fees, commissions, transfer taxes and other charges) to satisfy
in full the refunds specified on such Refund Request List. The Coverage Amount
shall be obtained by multiplying (A) the aggregate amount of either (u) the
refunds specified on a Refund Request List (for purposes of this section 3.4.2)
or (w) the Invoice (as defined in section 3.4.3 and for purposes of Section
3.4.4) by (B) the lesser of (x) i.5 or (y) the result obtained by dividing the
then Value of the Escrow Fund by the Outstanding Package Obligations. All cash
received by the
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Escrow Agent shall be promptly paid by the Escrow Agent to the persons listed
on such Refund Request List.
3.4.3 After the date the Stratosphere Tower, Casino
and Hotel opens, Purchaser may send to Seller and the Escrow Agent an itemized
invoice of Purchaser's cost (as determined in accordance with the Valuation
Letter) to service any Outstanding Package Obligations (including the cost of
any Refund Requests paid by Purchaser) during the period covered by such
invoice (the "Invoice"). The Invoice shall specify the customer name, the
goods and services provided, Purchaser's cost to provide such goods and
services and, if applicable, the cost of any Refund Requests, and shall be
signed by Purchaser's Chief Executive Officer or Chief Financial Officer.
Seller shall have the right to inspect during normal business hours Purchaser's
books and records relating to the Outstanding Package Obligations and the
computation of such Invoice.
3.4.4 Within 10 days after receipt of any Invoice,
Seller shall (i) pay Purchaser the amount due under such Invoice, or (ii)
instruct the Escrow Agent to release from the Escrow Fund, In exchange for cash
equal to the amount of such invoice, the number of Shares obtained by dividing
the Coverage Amount by the Fair Market Value, such cash to be paid by the
Escrow Agent to Purchaser to cover the Invoice, or (iii) instruct the Escrow
Agent to pay such Invoice with cash, if any, then deposited in the Escrow Fund,
or (iv) send a Dispute Notice (as herein defined). If Seller disputes all or
any portion of any Invoice,
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seller shall, by written notice to Purchaser and the Escrow Agent (a "Dispute
Notice"), identify the disputed amounts, in which case such amounts shall be
considered a Pending Claim, as defined in, and for purposes of Section 4
hereof. A failure by Seller to respond in writing within such period shall be
deemed a concession of liability in whole.
3.4.5 If, within 10 days after receipt of any
Invoice, Seller has not (i) paid such Invoice, (ii) instructed the Escrow Agent
to pay such Invoice and such Invoice has not been paid, (iii) instructed the
Escrow Agent to release Shares as contemplated by Section 3.4.4 (ii), or (iv)
delivered a Dispute Notice to Purchaser and the Escrow Agent, Purchaser may, at
Purchaser's option (x) instruct the Escrow Agent to sell, on behalf of Seller,
in a commercially reasonable manner which the Escrow Agent may determine in its
sole discretion, a sufficient number of Shares (after deducting all fees,
commissions, taxes and other charges) to satisfy the Invoice, or (y) instruct
the Escrow Agent to sell to Purchaser and Purchaser shall redeem a sufficient
number of Shares (after deducting all fees, commissions, taxes and other
charges) to satisfy the Invoice. Fair Market Value shall be the price per
share paid by Purchaser in the event that Purchaser elects to redeem Shares to
satisfy the Invoice. Seller shall cooperate with the Escrow Agent and
Purchaser in the sale or redemption of such Shares and Seller shall promptly
upon request execute such documentation as is necessary to effectuate such
transactions, including without limitation, the execution and
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timely filing of Form 144 with the Securities and Exchange Commission and
customary representation letters to brokers, Purchaser and Purchaser's transfer
agent.
4. Distributions
4.1. Interim Interest Distributions.
Within five business days after each Monthly Date, commencing November
30, 1994 (each such date an "Interim Interest Distribution Date"), the Escrow
Agent shall distribute to Seller the income earned and received to such date on
the Escrow Fund provided that the Value of the Escrow Fund will equal or exceed
the sum of the Claims Reserve and 150% of the Outstanding Package Obligations
after such distribution.
4.2 Escrow Distribution. After the distributions
described in Section 4.1 hereof are made and within two business days after the
later of (i) the date upon which any claim for indemnification under Section
19.4 of the Asset Purchase Agreement is barred by all applicable statutes of
limitation or (ii) the date upon which the amount of the Outstanding Package
Obligations equal zero as verified by the Independent Accountant (the "Escrow
Distribution Date"), the Escrow Agent shall distribute to Seller an amount
equal to the excess of the Value of the Escrow Fund on such date over the
Claims Reserve.
4.3. Subsequent Distributions. After the distributions
described in Sections 4.1 and 4.2 hereof are made and within two business days
after the date of each Claim Resolution, the Escrow Agent shall, with respect
to the amount held in the Claims
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Reserve for the Pending Claim to which such Claim Resolution relates, do the
following:
(a) pay to Purchaser such sum, if any, as it is entitled to
receive from the Claims Reserve pursuant to such Claim Resolution; and
(b) distribute the difference, if any, between the
Pending Claim and Claim Resolution (after the payment pursuant to paragraph (a)
above has been made) to Seller or set aside such amount in the Claims reserve
for remaining claims, if necessary.
4.4 Distribution Notice. Twenty days prior to the Escrow
Distribution Date, the Escrow Agent shall give notice to Purchaser in writing
(the "Distribution Notice") specifying the amount of the distribution to be
made pursuant to Section 4.2 hereof. By the last business day prior to the
Escrow Distribution Date as set forth in the Distribution Notice, Purchaser
shall deliver to Seller and the Escrow Agent a written notice (a "Distribution
Reply") stating (i) its agreement that the amount specified in the Distribution
Notice is properly distributable to Seller; or (ii) that it disputes that the
amount (or any lesser portion thereof) is properly distributable to Seller and
the reasons therefor, in which case such amount (or any portion thereof) so
disputed shall be considered a Pending Claim for the purposes of this Section
4; provided, however, that failure by Purchaser to deliver a Distribution Reply
to the Escrow Agent by the date set forth above shall be deemed an agreement by
Purchaser
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<PAGE> 16
that the amount specified in the Distribution Notice is properly distributable
to Seller.
4.5 Payment of Distributions. The Escrow Agent shall
make distributions of the Escrow Fund pursuant to and in accordance with this
Section 4 to Seller and/or Purchaser (i) within two business days after receipt
by the Escrow Agent of the Distribution Reply with respect to undisputed
amounts; and (ii) on the respective applicable distribution dates (x) if
Purchaser fails to give a timely Distribution Reply or (y) with respect to any
distribution under the provisions of this Section 4 not requiring a
Distribution Notice.
5. Termination. This Escrow Agreement shall terminate upon the
distribution of all of the Escrow Fund and any accrued but unpaid interest and
income earned thereon, which in no event shall be earlier than the date that
the Outstanding Package obligations equal zero.
6. Duties of the Escrow Agent; Fees and Expenses.
6.1 Duties Limited. The Escrow Agent shall perform only
the duties expressly set forth herein.
6.2 Instructions and Reliance. The Escrow Agent shall
act at any time upon joint written instructions from Purchaser and Seller that
are administratively approved in writing by the Chairman even if contrary to
any provision of this Escrow Agreement. The Escrow Agent may rely upon, and
shall be protected in acting or refraining from acting upon, any written
notice, instruction or request furnished to it hereunder and believed by
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<PAGE> 17
it to be genuine and to have been signed or presented by the proper party or
parties.
6.3 Good Faith. Seller and Purchaser shall, jointly and
severally, Indemnify the Escrow Agent and hold it harmless against any loss,
liability or expense incurred without gross negligence or bad faith on its
part, arising out of or in connection with this Escrow Agreement, including
the costs and expenses incurred in defending any such claim of liability. The
Escrow Agent may consult with its own counsel, and shall have full and complete
authorization and protection for any action taken or suffered in good faith and
in accordance with the opinion of such
6.4 Fees and Expenses. Seller and Purchaser shall each pay
one-half of the compensation of the Escrow Agent, pursuant to Exhibit B hereto
attached, for the Escrow Agent's services hereunder and all expenses,
disbursements and advances (including reasonable attorneys' fees and
disbursements) incurred by the Escrow Agent in carrying out its duties
hereunder (the "Escrow Agent's Fees"). Neither the Escrow Agent's compensation
nor the Escrow Agent's fees shall be paid out of the Escrow Fund or income
earned thereon.
7. Resignation and Termination of the Escrow Agent.
7.1 Resignation. The Escrow Agent may resign at any time
by giving 30 days' notice of such resignation to Purchaser and Seller.
Thereafter, the Escrow Agent shall have no further obligation hereunder except
to hold the Escrow Fund and income earned thereon as depositary. In such event,
the Escrow Agent
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<PAGE> 18
shall not take any action until Purchaser and Seller have designated a banking
corporation, trust company, attorney or other person as successor Escrow Agent;
provided, however, that if Purchaser and Seller fail to do so prior to the
expiration of the 30 day period described above, the Escrow Agent may designate
a banking corporation or trust company as successor Escrow Agent, and if
Purchaser or Seller fails to object to the Escrow Agent's selection within 30
days following written notice from Escrow Agent, such banking corporation or
trust company will be the successor Escrow Agent. If Purchaser or Seller does
object to such selection, each will exercise reasonable discretion in doing so
and will submit the reason(s) therefor in writing to the Escrow Agent upon
request. Upon receipt of instructions from Purchaser and Seller as to the
identity of the new Escrow Agent, or upon the expiration of the 30 day notice
period following the Escrow Agent's notice to the Purchaser and Seller of its
selection of a successor Escrow Agent, as the case may be, the Escrow Agent
shall promptly deliver the Escrow Fund and any income earned thereon held by
the Escrow Agent pursuant to this Escrow Agreement to such successor Escrow
Agent and shall thereafter have no further obligations hereunder. Purchaser,
Seller and the Escrow Agent, as the case may be, will each use reasonable
efforts to designate as a successor Escrow Agent a banking corporation, trust
company, attorney or other person located in the State of Nevada.
7.2 Termination. Purchaser and Seller together may terminate
the appointment of the Escrow Agent hereunder upon notice
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<PAGE> 19
specifying the date upon which such termination shall take effect. In the
event of such termination, Purchaser and Seller shall within 30 days of such
notice jointly appoint a successor Escrow Agent and the Escrow Agent shall
promptly deliver to such successor Escrow Agent the Escrow Fund and any Income
earned thereon. Purchaser and Seller will use reasonable efforts to designate
as such successor Escrow Agent a banking corporation, trust company, attorney
or other person located in the State of Nevada. Upon receipt of the funds, the
successor Escrow Agent shall thereupon be bound by all of the provisions
hereof.
8. Miscellaneous
8.1 Certain Definitions. As used in this Agreement, the
following terms have the following meanings unless the context otherwise
requires:
(i) "Fair Market Value" means the closing price per
share of Common Stock on such date. The closing price for each day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Common Stock or such other securities are not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Common Stock
or such other
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<PAGE> 20
securities are listed or admitted to trading or, if the common Stock is not
listed or admitted to trading on any national securities exchange, the last
quoted sale price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or such
other system then in use, or, if on any such date the Common Stock or such other
securities are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Common Stock or such other securities selected by the Board of Directors
of Purchaser. If the Common Stock are not publicly held or so listed or
publicly traded, Fair Market Value means the per share book value thereof
determined in accordance with GAAP consistently applied as of the end of the
most recent calendar quarter, as set forth in the Corporation's regularly
prepared financial statements.
(ii) "Monthly Period" means the period commencing on the
date hereof and ending November 30, 1994 and, each month thereafter.
(iii) "Value" means, with respect to the Escrow Fund, as at
any date, the sum of the Fair Market Value of the Shares and the market value
of all other assets therein (excluding any income thereon but including any
gains or losses in the principal amount thereof) determined by the Escrow
Agent, whose determination with respect thereto shall be final.
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<PAGE> 21
8.2 Notices. Any notice or other communication required
or which may be given hereunder shall be in writing and shall be delivered
personally, telegraphed, or sent by facsimile transmission with telephone
confirmation, or sent by certified, registered or express mail, postage
prepaid, and shall be deemed given when so delivered personally, telegraphed,
or sent by facsimile transmission, or, if mailed, three days after the date of
mailing, as follows:
(i) If to Seller:
Mr. Bob Stupak
Stratosphere Corporation
200 Las Vegas Boulevard South
Las Vegas, Nevada 89104
With a copy to:
Denton & Denton Ltd.
626 South 7th Street
Las Vegas, Nevada 89101
Attention: Mark Denton, Esq.
With a copy to the Chairman
(ii) If to Purchaser:
Stratosphere Corporation
200 Las Vegas Boulevard South
Las Vegas, Nevada 89104
Attention: Executive Vice President
With a copy to:
Maslon Edelman Borman & Brand
A Professional Limited Liability Partnership
3300 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402-4140
Attention: Russell F. Lederman, Esq.
With a copy to the Chairman
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<PAGE> 22
(iii) If to the Escrow Agent:
First Interstate Bank of Nevada, N.A.
3800 Howard Hughes Parkway, Suite 200
Las Vegas, NV 89109
Attention: Corporate Trust Department
With a copy to:
Streich Lang
3800 Howard Hughes Parkway, Suite 1500
Las Vegas, NV 89109
Attention: Michael B. Wixom, Esq.
With a copy to the Chairman
(iv) If to the Chairman:
State of Nevada
Gaming Control Board
1150 E. William Street
Carson City, Nevada 89710
Attention: Chairman
Any party may by notice given in accordance with this Section to the
other parties designate another address or person for receipt of notice
hereunder.
8.3 Entire Agreement. This Escrow Agreement is entered
into and delivered pursuant to the Asset Purchase Agreement and the Letter
Agreements and except as provided in this Agreement, as such contains the
entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, with respect thereto.
8.4 Waivers and Amendments. This Escrow Agreement may be
amended, modified, superseded, cancelled, renewed or extended, and the terms
and conditions hereof may be waived, only with the prior administrative
approval of the Chairman and only by
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<PAGE> 23
a written Instrument signed by the parties, or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any right, power or privilege
hereunder, nor any single or partial exercise of any right, power or privilege
hereunder, preclude any other or further exercise thereof or the exercise of
any other right, power or privilege hereunder.
8.5 Binding Agreement. This Escrow Agreement shall be
binding upon the successors, legal representatives and permitted assigns of the
parties. Except as otherwise provided herein, no assignment of any rights or
delegation of any obligations provided for herein may be made by any party
without the express written consent of all other parties hereto.
8.6 Further Assurances. Each of the parties shall
execute such documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and the
transactions contemplated hereby.
8.7 Variations in Pronouns. All pronouns and any
variations thereof refer to the masculine, feminine or neuter, singular or
plural, as the identity of the person or persons may require.
8.8 Counterparts. This Escrow Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
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<PAGE> 24
8.9 Governing Law. This Escrow Agreement shall be
governed and construed in accordance with the internal laws of the State of
Nevada applicable to agreements to be made and performed entirely within such
state.
8.10 Headings. The headings in this Escrow Agreement are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Escrow Agreement.
8.11 Arbitration. The parties expressly agree that,
should any dispute arise relating to this Agreement or its negotiation,
execution, performance or modification, it shall be resolved by binding
arbitration, with such arbitration administered by the American Arbitration
Association (the "AAA"), pursuant to the Commercial Arbitration Rules of the
AAA. Such arbitration shall proceed in Las Vegas, Nevada, shall be governed by
the provisions of the Federal Arbitration Act, and to the extent the foregoing
are inapplicable, unenforceable or invalid, the laws of the State of Nevada.
Any decision on the merits of any claim or portion thereof rendered by
arbitrators shall be made by way of a written opinion in which the reasons for
the decision be explained. Judgment upon the award rendered by the arbitrator
may be entered in any court having jurisdiction. Any party who fails to submit
to binding arbitration following a lawful demand of the opposing party shall
bear all costs and expenses, including reasonable attorneys fees, incurred by
the opposing party in compelling arbitration.
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<PAGE> 25
IN WITNESS WHEREOF, the parties have caused the execution of this
Escrow Agreement on the date first above written.
STRATOSPHERE CORPORATION
By: [SIG]
-----------------------------------
Name:
Title:
[SIG]
--------------------------------------
Bob Stupak
as Escrow Agent
By:
----------------------------------
Name:
Title:
STATE OF NEVADA
COUNTY OF CLARK
On November 1, 1994 , personally appeared before me, a Notary Public,
--------------------
BOB STUPAK
- -------------------------------------------------------------------------------
personally known (or proven) to me to be the person(s) whose name(s) subscribed
to the above instrument who acknowledged that __he__ executed the instrument.
[SIG]
-----------------------
NOTARY PUBLIC
[SEAL]
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<PAGE> 26
EXHIBIT A
VALUATION LETTER
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<PAGE> 27
STRATOSPHERE CORPORATION
October 17, 1994
Mark Clayton, Securities Division
Gaming Control Board
1150 E. William Street
Carson City, Nevada 89710
Re: Value Determination -
Stratosphere Club Packages/Vacation Packages
Dear Mark:
This letter is intended to provide you with an explanation as to how valuations
will be made for the refunding of Vacation Club Packages and Stratosphere Club
and Tower Packages and Peat Marwick's valuation procedure for the various
benefits associated with those packages that will be honored by Stratosphere
Corporation upon the opening of the Stratosphere Tower Resort.
All Vacation Club packages will either be used prior to the Hotel's closing on
February 1, 1995 or be given two alternatives. For those persons unable to use
their package prior to February 1, 1995, a choice of either receiving a refund
of their vacation package purchase price or, in the alternative, exchanging
their existing vacation package for a different vacation package to be offered
by Bob Stupak and honored by Stratosphere Corporation. These packages will
remain as Bob Stupak liabilities and be treated in the escrow the same as other
Stupak package liabilities.
Bob Stupak intends to offer all holders of current one time vacation packages
the option of exchanging their existing vacation package for the following
alternative vacation offer which will be honored by Stratosphere Corporation
once it is operating its Hotel and Casino:
1. A room for three days and two nights.*
2. Unlimited drinks in all casino bars.*
3. $400.00 in table action (one way action chips).*
4. $100.00 in cash.*
5. A choice of an additional $200.00 in table action or an
additional $100.00 in cash.
2000 Las Vegas Boulevard South / Las Vegas, Nevada 89104 / Phone (702) 383-5217
<PAGE> 28
Mark Clayton, Securities Division
Gaming Control Board
October 17, 1994
Page Two
6. $100.00 in Kolossal Keno Play.*
7. A second vacation to one of seven destinations for four days and
three nights (transportation not included).*
8. This package will be able to be used for a one (1) year period
beginning on the date that the Stratosphere Resort opens.*
* Please note that any holders of packages which were purchased
for a price of less than $398.00 will be offered a package
comparable to the one set forth above but based upon that
package price amount (i.e. if they paid $190.00 they would be
offered half of the benefits set forth above).
* All of the above benefits are liabilities of Bob Stupak. They
will be valued for purposes of the escrow at $398.00 per
package.
To summarize, one time vacation package holders will have a choice of three (3)
options regarding their existing vacation packages:
1. Receive a refund.
2. Use their package prior to February 1, 1995, or
3. Exchange their package for the package offered by Bob Stupak
which will be honored by Stratosphere Corporation.
In addition to one time vacation packages, there also exists both Stratosphere
Club and Stratosphere Tower packages. These packages entitle the holder to
multiple visits over a period of years. Each of these packages have time limits
on them prohibiting holders of these packages from visiting the Hotel and
obtaining their casino benefits more often than once every six (6) months with
regard to Club members and once every year with regard to Tower members. In
reviewing how refunds will be made to holders of Stratosphere Club and
Stratosphere Tower members, the following will be done:
1. Stratosphere Club - All Stratosphere Club members who have used
at least one (1) visit are not entitled to a refund of their
purchase price for the balance of their membership. This
provision was clearly set forth in the sales literature which
they relied upon when purchasing their membership. For the most
part, Stratosphere Club members purchased five (5) or six (6)
visit packages which entitled them to come one time no sooner
than every
<PAGE> 29
Mark Clayton, Securities Division
Gaming Control Board
October 17, 1994
Page Three
six (6) months and receive either casino action or cash upon
arrival in addition to various other benefits. These members
will all be offered an extension of time equal to the time
period Vegas World is closed in which to use their benefits.
This will compensate members for the period of time between
Vegas World's closure and the opening of Stratosphere. For
instance, should Vegas World be closed for one (1) year prior to
reopening as Stratosphere, every holder of a Stratosphere Club
package will be given one additional year within which to use
their benefits.
Any Stratosphere Club member who does not wish to extend his program but prefers
a refund will be accommodated by Mr. Stupak. The refund amount will be based
upon the total value of casino benefits or cash benefits received by that person
prior to the refund. For example, if a patron has come to Vegas World for three
(3) visits of their five (5) or six (6) visit package and has received $1,000.00
in action chips on each visit and paid $1,985.00 for their Stratosphere Club
Membership, they would be credited with their $1,985.00 purchase price for which
a deduction of fifty percent (50%) of the total dollar amount of action chips
received or one hundred percent (100%) of the cash they received on their three
(3) visits. Their refund would be based upon the difference between the purchase
price and the value of the cash or casino action benefits they received. In the
case of someone who has visited three (3) times and received $3,000.00 in chips,
they would receive as a refund $485.00 in cash. ($1,985.00 - (.50 x 3000) =
$485.00).
With regard to the Stratosphere Tower Club, the computation for refunds will
depend upon the terms of the contract that the particular member signed.
Attached for your information are the various terms of the contracts that
members entered into. In some contracts there was no mention of how a refund
would be calculated. In other contracts refund provisions are set out. For those
packages where there was no discussion of refund calculation, the calculation
will be done in the same way that the Club Membership is calculated. Therefore,
if a person purchased a ten (10) year Stratosphere Tower Club package for
$6,000.00 and has visited three (3) times and received $3,000.00 in action
chips, that person would receive back $4,500.00 in cash. (6,000 - (3000 x .50) =
$4,500.00).
With regard to those persons who entered into contracts setting forth the terms
and conditions for a refund, their refund will be done according to those terms.
Attached for your convenience is a copy of a contract setting forth those terms
and conditions.
<PAGE> 30
Mark Clayton, Securities Division
Gaming Control Board
October 17, 1994
Page Four
The last issue to be determined is the valuation of Stratosphere Club and Tower
packages for those persons who decide to keep their packages and use them when
Stratosphere reopens. After discussions with Peat Marwick, Bob Stupak, and
Stratosphere, the following is intended to be a fair and equitable valuation of
the various benefits:
1. Cash will be valued at one hundred percent (100%) of its value.
2. Casino action chips will be valued at fifty percent (50%) of the
total amount of chips given.
3. The keno benefits will be valued at ten cents (10 cents) per
play. (Based upon actual historical cost).
4. Slot tournament entries will be valued at eighty-one cents (81
cents) per entry. (Based upon actual historical cost).
5. Show tickets will be valued at one dollar ($1.00) per show
ticket.
6. The remaining benefits: room nights, elevator rides and drinks,
are being provided by Stratosphere Corporation at no cost to Mr.
Stupak. (This includes Tower Memberships). Therefore, since Mr.
Stupak will not be billed for these services, there is no need
to value these items.
I hope this letter sets forth the information you requested. I am of course
available to discuss this information with you should you feel it necessary.
Sincerely,
/sig/ Andrew S. Blumen
ANDREW S. BLUMEN
Executive Vice President/General Counsel
<PAGE> 31
Receipt
The undersigned hereby acknowledges receipt of the following documents
from Lawyers Title of Nevada.
1. The original Promissory Note
2. One copy of the Escrow Agreement
3. An originally signed Letter of Instruction addressed to
American Bank signed by Seller and Buyer
The undersigned hereby agrees to forward the Letter of Instruction
addressed to American Bank signed by Seller and Buyer to American Bank as soon
as practicable with instructions for delivery of the documents referred to
therein to the undersigned.
Executed this ______ day of November, 1994.
First Interstate Bank
By:
---------------------------------
Name:
-------------------------------
Its:
--------------------------------
