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                                                                [EXECUTION COPY]




     THIS LIMITED GUARANTY (this "Limited Guaranty"), dated as of March 28,
1997, is made by GRAND CASINOS, INC., a Minnesota corporation ("GCI"), in favor
of each the Beneficiaries (as defined below).


                              W I T N E S S E T H:

     WHEREAS, pursuant to a Participation Agreement, dated as of April 29, 1996
(as amended or otherwise modified to the date hereof, the  "Stratosphere
Participation Agreement"), among Stratosphere Gaming Corp., a Nevada
corporation, as Lessee; Stratosphere Corporation, a Delaware corporation, as
Guarantor; First Security Trust Company of Nevada, a Nevada trust company, not
in its individual capacity, except as expressly stated therein, but solely as
Lessor and Trustee; the persons listed therein, as Lenders; Bank of Scotland,
Wells Fargo Bank, National Association (successor by merger to First Interstate
Bank of Nevada), and Societe Generale, as Co-Agents; Credit Lyonnais, Los
Angeles Branch, as Lead Manager; and BA Leasing & Capital Corporation, a
California corporation, as Arranger and Agent, the Lenders made term loans to
the Trustee to enable the Trustee to make Advances (such term, and all other
capitalized terms used herein, shall have the meanings ascribed to them in
Section 18 hereof) to Lessee to finance the acquisition of certain Equipment;

     WHEREAS, pursuant to a Lease Agreement, dated as of April 29, 1996 (as
amended or otherwise modified to the date hereof, the "Lease"), between the
Trustee, as Lessor, and the Lessee, the Trustee leased the Equipment purchased
with the term loan proceeds to the Lessee;

     WHEREAS, Lessee, Guarantor and certain noteholders under the Indenture
entered into a Restructuring Agreement, dated as of January 6, 1997 (the
"Restructuring Agreement"), pursuant to which the parties thereto agreed to a
restructuring of the Lessee and the Guarantor to be implemented through a plan
of reorganization of the Lessee and the Guarantor (the "Plan of Reorganization")
under Chapter 11 of the Bankruptcy Code;


     WHEREAS, pursuant to a Stipulation Providing Adequate Protection dated as
of February 3, 1997 (the "Stipulation") among the parties to the Stratosphere
Participation Agreement and the Lease, the Trustee and the Lenders have agreed
not to exercise or instruct, authorize, or allow any other Person to exercise,
any 

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                                                                Limited Guaranty



action pursuant to Section 362(d) of the Bankruptcy Code with regard to the
Collateral, until among other things, a plan of reorganization is substantially
consummated, provided, that the Lessee continues to make scheduled payments of
Rent in accordance with the terms of the Stratosphere Participation Agreement
and the Lease and to perform and comply with its other obligations under the
Operative Documents;

     WHEREAS, in connection with the Stipulation, Lessee has requested the
Lenders and the Trustee to amend the Stratosphere Participation Agreement and
the Lease to extend the Lease Term and adjust certain financial covenants; and

     WHEREAS, certain parties are concurrently amending the Participation
Agreement dated as of May 10, 1996 among GCI, BL Development Corp., Hancock
Bank, not in its individual capacity, but solely as trustee, certain lenders
named therein and BA Leasing & Capital Corporation as Agent and the Lease
Agreement and Deed of Trust, dated as of May 10, 1996 between Hancock Bank, in
its trust capacity, as lessor, and BL Development Corp., as lessee, in certain
respects as provided in Amendment No. 1 to Participation Agreement, dated as of
the date hereof ("Amendment No. 1");

     NOW, THEREFORE, in consideration of the premises and in order to induce the
parties thereto to enter into Amendment No. 1, GCI covenants and agrees as
follows:

     SECTION 1.  GCI Guaranty.  GCI hereby absolutely, unconditionally and
irrevocably guarantees to Trustee (both individually and in its capacity as
Trustee), Agent, each Lender and each other Indemnitee and their respective
successors and assigns (individually, a "Beneficiary" and, collectively, the
"Beneficiaries") the due, punctual and full payment of all amounts (including
amounts payable as damages in case of default, any amounts due pursuant to
Articles VII and VIII of the Stratosphere Participation Agreement and interest
at the Overdue Rate on any amount due and owing from the date the same shall
have become due and payable to the date of payment) payable by Lessee pursuant
to the Lease, the Stratosphere Participation Agreement, or any other Operative
Document to which Lessee is a party, whether such obligations now exist or arise
hereafter, as and when the same shall become due and payable in accordance with
the terms thereof (including in all cases all such amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the
United States Bankruptcy Code, 11 U.S.C. Section 362(a), the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
Section 502(b) and Section 506(b) 

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                                                                Limited Guaranty



or the commencement or operation of any other bankruptcy, insolvency,
reorganization or like proceeding relating to Lessee) (such obligations subject
to the Maximum Limitation Amount being hereinafter called the "Guaranteed
Obligations"); provided, however, that except for amounts paid pursuant to the
next paragraph hereof, the maximum amount payable by GCI hereunder shall not
exceed Eight Million Six Hundred Eighty-four Thousand Three Hundred Sixty-two
Dollars ($8,684,362.00) (the "Maximum Limitation Amount"). Any payment by GCI
under Section 2(a) of the Option Agreement, dated the date hereof, between GCI
and the Trustee shall not constitute a payment by GCI under this Guaranty.  GCI
shall be treated as having made a payment under this Limited Guaranty only if
Agent or Trustee shall have made a written demand hereunder for payment, and
then only to the extent of the amount so demanded.

     In addition to the Maximum Limitation Amount, GCI further will pay any and
all reasonable costs and expenses (including reasonable fees and disbursements
of counsel, which may include allocated costs of staff counsel of any
Beneficiary) that may be paid or incurred by any Beneficiary in collecting any
amounts payable by GCI under this Limited Guaranty or in preserving or enforcing
any rights under this Limited Guaranty, it being understood that GCI shall not
be obligated to pay any amounts hereunder to the extent that Lessee has made
corresponding payments under the Operative Documents.

     This Limited Guaranty constitutes an unconditional and irrevocable guaranty
of payment and not of collectability, is in no way conditioned or contingent
upon any attempt to collect from or enforce performance or compliance by Lessee
or upon any other event, contingency or circumstance whatsoever, and shall be
binding upon and against GCI without regard to the validity or enforceability of
the Lease or any other Operative Document.

     SECTION 2.  GCI's Guaranteed Obligations Unconditional.

     The covenants and agreements of GCI set forth in this Limited Guaranty
shall be primary obligations of GCI, and shall be continuing, absolute and
unconditional, shall not be subject to any counterclaim, setoff, deduction,
diminution, abatement, recoupment, suspension, deferment, reduction or defense
(other than full and strict compliance by GCI with its obligations hereunder),
whether based upon any claim that Lessee, GCI, or any other Person may have
against any Beneficiary or any other Person or otherwise, and shall remain in
full force and effect without regard to, and shall not be released, discharged
or in any way affected by, any circumstance or condition whatsoever (whether or

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not GCI or Lessee shall have any knowledge or notice thereof) including, without
limitation:

          (a)  any amendment, modification, addition, deletion, supplement,
     renewal or any other change to or of the Guaranteed Obligations, the Lease
     or any Operative Document (whether by agreement of the parties thereto, a
     plan of reorganization of Lessee or otherwise), or any of the agreements
     referred to in any of the aforementioned documents, or any other instrument
     or agreement applicable to any such agreements or any of the parties to
     such agreements, or to the Equipment, or any assignment or transfer thereof
     or of any interest therein, or any furnishing or acceptance of additional
     security for, guaranty of or right of offset with respect to, any of the
     Guaranteed Obligations; or the failure of any security or the failure of
     any Beneficiary to perfect or insure any interest in any Collateral;

          (b)  any failure, omission or delay on the part of Lessee, any
     Beneficiary or any other Person to conform or comply with any term of any
     instrument or agreement referred to in clause (a) above;

          (c)  any waiver, consent, extension, indulgence, compromise, release
     or other action or inaction under or in respect of any instrument,
     agreement, guaranty, right of offset or security referred to in clause (a)
     above or any obligation or liability of Lessee or any Beneficiary, or any
     exercise or non-exercise by any Beneficiary or any other Person of any
     right, remedy, power or privilege under or in respect of any such
     instrument, agreement, guaranty, right of offset or security or any such
     obligation or liability;

          (d)  any bankruptcy, insolvency, reorganization, arrangement,
     readjustment, composition, liquidation or similar proceeding with respect
     to Lessee, any Beneficiary or any other Person, or any of their respective
     properties or creditors, the imposition of any stay or injunction in
     connection with any such proceeding, or any action taken by any trustee or
     receiver or by any court in any such proceeding;

          (e)  any limitation on (i) the liability or obligations of Lessee, GCI
     or any other Person under any agreement or instrument referred to in clause
     (a) above, or (ii) the Guaranteed Obligations or any collateral security
     for the Guaranteed Obligations;



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                                                                Limited Guaranty



          (f)  the Guaranty or any other guaranty of the Guaranteed Obligations
     or any discharge, termination, cancellation, frustration, irregularity,
     invalidity or unenforceability, in whole or in part, of any of the
     foregoing, or any other agreement or instrument, referred to in clause (a)
     above or any term of any agreement in clause (a) above;

          (g)  any defect in the title, compliance with specifications,
     condition, design, operation or fitness for use of, or any damage to or
     loss or destruction of, or any interruption or cessation in the use of the
     Equipment by Lessee or any other Person for any reason whatsoever
     (including any governmental prohibition or restriction, condemnation,
     requisition, seizure or any other act on the part of any governmental or
     military authority, or any act of God or of the public enemy) regardless of
     the duration thereof (even though such duration would otherwise constitute
     a frustration of the Lease), whether or not resulting from accident and
     whether or not without fault on the part of Lessee or any other Person;

          (h)  any merger or consolidation of Lessee or GCI into or with any
     other Person or any sale, lease or transfer of any of the assets of Lessee
     or GCI to any other Person;

          (i)  any change in the ownership of any shares of capital stock of
     Lessee or any corporate change in Lessee;

          (j)  a failure of the Lease to be effective;

          (k)  A failure to obtain confirmation of or otherwise to substantially
     consummate a Plan of Reorganization of Lessee:

          (l)  any assignments, transfers or subleases of the Lease or any of
     Lessee's rights thereunder including an assignment, transfer or sublease
     pursuant to Article IV of the Lease; or

          (m)  any other occurrence or circumstance whatsoever, whether similar
     or dissimilar to the foregoing and any other circumstance that might
     otherwise constitute a legal or equitable defense or discharge of the
     liabilities of a guarantor or surety or that might otherwise limit recourse
     against GCI.



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                                                                Limited Guaranty




     The unconditional obligations of GCI set forth herein constitute the full
recourse obligations of GCI enforceable against it to the full extent of all its
assets and properties.

     The rights of each Beneficiary set forth herein are in addition to the
rights of each such Beneficiary under the Guaranty, and nothing contained in
this Limited Guaranty shall limit or otherwise impair the rights, claims or
liens of any Beneficiary against the Guarantor under the Guaranty or be deemed
to require any Beneficiary to proceed against the Guarantor for payment of all
or any portion of the Guaranteed Obligations before exercising any remedies
permitted hereunder.

     SECTION 3.  Acceleration of Limited Guaranty.  GCI agrees that if (a) any
event described in Sections 4 or 5 of the Stipulation shall occur or (b) the
Stipulation shall terminate and cease to be effective for any reason (other than
by mutual written agreement of all of the parties to the Stipulation or
confirmation of a Plan of Reorganization to which Lenders as a class have voted
affirmatively to accept), it shall pay to the Beneficiaries forthwith the full
amount of the Guaranteed Obligations.

     SECTION 4.  Waiver and Agreement.  GCI waives any and all notice of the
creation, renewal, extension or accrual of any of the Guaranteed Obligations and
notice of or proof of reliance by any Beneficiary upon this Limited Guaranty or
acceptance of this Limited Guaranty, and the Guaranteed Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred
in reliance upon this Limited Guaranty.  GCI unconditionally waives, to the
extent permitted by law:  (a) acceptance of this Limited Guaranty and proof of
reliance by any Beneficiary hereon; (b) notice of any of the matters referred to
in Section 2, or any right to consent or assent to any thereof; (c) all notices
that may be required by statute, rule of law or otherwise, now or hereafter in
effect, to preserve intact any rights against GCI, including without limitation,
any demand, presentment, protest, proof or notice of nonpayment under any
agreement or instrument referred to in clause (a) of Section 2, and notice of
default or any failure on the part of Lessee to perform and comply with any
covenant, agreement, term or condition of any agreement or instrument referred
to in clause (a) of Section 2; (d) any right to the enforcement, assertion or
exercise against Lessee of any right, power, privilege or remedy conferred in
any agreement or instrument referred to in clause (a) of Section 2 or otherwise;
(e) any requirement of diligence on the part of any Person; (f) any requirement
of any Beneficiary to take any action whatsoever, to exhaust any remedies or to 


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mitigate the damages resulting from a default by any Person under any agreement
or instrument referred to in clause (a) of Section 2; (g) any notice of any
sale, transfer or other disposition by any Person of any right under, title to
or interest in any agreement or instrument referred to in clause (a) of Section
2 or the Collateral; and (h) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge, release or defense of a
guarantor or surety, or that might otherwise limit recourse against GCI.

     GCI agrees that this Limited Guaranty shall be automatically reinstated if
and to the extent that for any reason any payment by or on behalf of Lessee is
rescinded or must be otherwise restored by any of the Beneficiaries, whether as
a result of any proceedings in bankruptcy or reorganization or otherwise.

     GCI further agrees that, without limiting the generality of this Limited
Guaranty, if a Lease Event of Default shall have occurred and be continuing and
Trustee or its assignee is prevented by applicable law from exercising its
remedies under the Lease or if any agreement or instrument referred to in clause
(a) of Section 2 shall be terminated as a result of the rejection or
disaffirmance thereof by any trustee, receiver or liquidating agent of Lessee or
any other Person upon the insolvency, bankruptcy or reorganization of Lessee or
such other Person, or as a result of any modifications to the Lease contained in
a plan of reorganization to which the Lenders as a class have not voted to
accept,  GCI's Guaranteed Obligations hereunder shall continue to the same
extent as if Trustee had exercised any remedies available under the Lease and
any such agreement or instrument had not been rejected, disaffirmed or otherwise
modified .

     SECTION 5.  Assignment.  GCI hereby acknowledges that it is contemplated
that on the date hereof the Trustee will assign to the Agent for the benefit of
the Lenders all of the Trustee's rights, title and interest in and to this
Limited Guaranty in respect of any Guaranteed Obligations hereunder which are
part of the Trust Estate and GCI hereby agrees to such assignment.

     SECTION 6.  Subrogation.  GCI will not exercise any rights (including any
right to vote such claims in support of or against any plan of reorganization)
which it may acquire against the Lessee by way of subrogation under this Limited
Guaranty, by any payment made hereunder or otherwise, until such time as the
Lease Balance, all the Guaranteed Obligations and all other amounts payable
under this Limited Guaranty shall have been paid in full. If any amount shall be
paid to GCI on account of such subrogation rights in violation of the preceding
sentence and the Lease 

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Balance, the Guaranteed Obligations and all other amounts payable under this
Limited Guaranty shall not have been indefeasibly paid in full in cash, such
amount shall be deemed to have been paid to GCI for the benefit of, and held in
trust for, the Beneficiaries, and shall forthwith be paid to Agent to be
credited and applied pursuant to the terms of the Loan Agreement and the Trust
Agreement.  If (i) GCI shall make payment to Agent of all or any part of the
Lease Balance and the Guaranteed Obligations and (ii) the Lease Balance and the
Guaranteed Obligations and all other amounts payable under this Limited Guaranty
shall have been indefeasibly paid in full in cash, Agent on behalf of itself and
the Beneficiaries will, at GCI's request, execute and deliver to GCI appropriate
documents, without recourse and without representation or warranty, necessary to
evidence transfer by subrogation to GCI of an interest in the obligations
resulting from such payment by GCI.  If (x) GCI makes any payments under this
Limited Guaranty during the pendency of the Chapter 11 case of the Lessee (the
"Chapter 11 Guaranty Payments"), and (y) the Trustee, the Agent and the Lenders
receive a cash distribution on account of their claims in such Chapter 11 case
that exceeds the amount which is the then-outstanding Lease Balance immediately
prior to such cash distribution plus all other payments then due and payable
under the Operative Documents less the total Chapter 11 Guaranty Payments made
(the "Realized Net Balance"), then the Trustee, the Agent and the Lenders shall
retain only the Realized Net Balance from such distributions and pay to GCI the
excess.

     SECTION 7.  Rights of the Beneficiaries.  This Limited Guaranty is made for
the benefit of, and shall be enforceable by, each Beneficiary as its interest
may appear or by the Agent on behalf of the Beneficiaries.

     SECTION 8.  Term of Limited Guaranty.  This Limited Guaranty and all
guaranties, covenants and agreements of GCI contained herein shall continue in
full force and effect and shall not be discharged until such time as all the
Guaranteed Obligations and all other amounts payable under this Limited Guaranty
(including, but not limited to, all costs and expenses payable pursuant to
Section 1 hereof) shall be indefeasibly paid in full in cash and all the
agreements of GCI hereunder and the Lessee hereunder and under the Lease shall
have been duly performed. If, as a result of any bankruptcy, dissolution,
reorganization, insolvency, arrangement or liquidation proceedings (or
proceedings similar in purpose or effect), or if for any other reason any
payment received by any Beneficiary in respect of the Lease Balance and the
Guaranteed Obligations is rescinded or must be returned by such Beneficiary,
this Limited Guaranty shall continue to be

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effective as if such payment had not been made and, in any event, as provided in
the preceding sentence.

     SECTION 9.  Agreement of GCI.  GCI assumes the responsibility for being and
keeping itself informed of the financial condition of Lessee and of all other
circumstances with respect to the Lease Balance and any of the Guaranteed
Obligations, and GCI agrees that no Beneficiary shall be under any duty to
advise GCI of information known to it regarding such condition or any such
circumstance whether or not any Beneficiary has a reasonable opportunity to
communicate such information or has reason to believe that any such information
is unknown to GCI or materially increases the risk to GCI beyond the risk GCI
intends to assume hereunder.

     SECTION 10.  Representations and Warranties.  GCI hereby represents and
warrants to each Beneficiary as follows:

          (a)  GCI is a corporation duly organized, validly existing and in good
     standing under the laws of the jurisdiction of its incorporation, and has
     full corporate power and authority to enter into this Limited Guaranty and
     to carry out the transactions contemplated hereby.

          (b)  The execution and delivery by GCI of this Limited Guaranty and
     the consummation by GCI of the transactions contemplated hereby have been
     duly authorized by all necessary corporate action of GCI.  This Limited
     Guaranty has been duly executed and delivered by GCI and constitutes the
     legal, valid and binding obligation of GCI enforceable against GCI in
     accordance with its terms, subject to the effect of bankruptcy, insolvency,
     reorganization, moratorium or similar laws at the time in effect affecting
     the rights of creditors generally and subject to the effects of general
     principles of equity (regardless of whether considered in a proceeding in
     law or equity).

          (c)  The execution and delivery of this Limited Guaranty and the
     consummation by GCI of the transactions contemplated hereby do not (i)
     contravene or result in a default under GCI's articles of incorporation or
     bylaws, (ii) contravene or result in a default under any contractual
     restriction, law or governmental regulation or court decree or order
     binding on GCI, (iii) require any filings, consents or authorizations which
     have not been duly obtained or (iv) result in the creation or imposition of
     any Lien on GCI's properties, other than Permitted Liens.



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                                                                Limited Guaranty

     SECTION 11.  Further Assurances.  GCI hereby agrees to execute and deliver
all such instruments and take all such action as any Beneficiary may from time
to time reasonably request in order to fully effectuate the purposes of this
Limited Guaranty.

     SECTION 12.  Notices, Etc.  All notices, demands, requests, consents,
approvals and other instruments hereunder shall be in writing and shall be
deemed to have been properly given if given as provided for in Section 9.3 of
the Stratosphere Participation Agreement and addressed to GCI as provided below
its signature hereto, or to such other address as GCI may designate by written
notice to Agent.

     SECTION 13.  Amendments, Etc.  No amendment to or waiver of any provision
of this Limited Guaranty, nor consent to any departure by GCI herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Beneficiaries, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.

     SECTION 14.  Severability.  In case any provisions of this Limited Guaranty
or any application thereof shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions and statements
and any other application thereof shall not in any way be affected or impaired
thereby. To the extent permitted by law, GCI hereby waives any provision of law
that renders any term or provision hereof invalid or unenforceable in any
respect.

     SECTION 15.  Operative Document.  This Limited Guaranty is an Operative
Document executed pursuant to Amendment No. 1 and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in accordance
with the terms and provisions hereof and thereof.

     SECTION 16.  Governing Law.  THIS LIMITED GUARANTY HAS BEEN DELIVERED IN
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS LIMITED GUARANTY SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
NEW YORK, INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW BUT
EXCLUDING ALL OTHER CHOICE OF LAWS AND CONFLICTS RULES OF SUCH STATE.

     SECTION 17.  Successors and Assigns.  This Limited Guaranty shall be
binding upon GCI and its successors, transferees and assigns and inure to the
benefit of and be enforceable by the respective successors, transferees, and
assigns of the Beneficiaries; provided, however, that GCI may not delegate any 

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of its obligations hereunder without the prior written consent of the Trustee
and each Lender.

     SECTION 18.  Definitions.  Capitalized terms used and not otherwise defined
in this Limited Guaranty shall have the meaning assigned to such term in
Appendix 1 to the Stratosphere Participation Agreement.

                            [Signature page follows]





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                                                                Limited Guaranty


     IN WITNESS WHEREOF, GCI has caused this Guaranty to be executed as of the
date first above written.


                                             GRAND CASINOS, INC.


                                             By: /s/ Timothy J. Cope
                                                -------------------------------
                                             Name:  Timothy J. Cope
                                             Title: CFO

                                             Address: 13705 First Avenue North
                                                     --------------------------
                                                     Minneapolis, MN  55441
                                                     --------------------------

                                             Telephone: (612) 449-7030
                                                       ------------------------

                                             Facsimile: (612) 449-7064
                                                       ------------------------ 

                                             Attention: Timothy J. Cope
                                                       ------------------------