<PAGE>   1
                                                                EXHIBIT 2(5)
GORDON & SILVER, LTD.
GERALD M. GORDON, ESQ.
Nevada Bar No. 229
THOMAS H. FELL, ESQ.
Nevada Bar No.  3717
3800 Howard Hughes Parkway
14th Floor
Las Vegas, Nevada 89109
Tel:   (702) 796-5555

Counsel to STRATOSPHERE CORPORATION
and STRATOSPHERE GAMING CORP.,
Debtors-In-Possession


                      IN THE UNITED STATES BANKRUPTCY COURT
                           FOR THE DISTRICT OF NEVADA
In re:                           )
                                 )              In Proceedings Under Chapter 11
STRATOSPHERE CORPORATION,        )
 a Delaware corporation,         )              CASE NO. 97-20554 GWZ
                                 )
         Debtor.                 )              (Joint Administration Only)
_________________________________)
In re:                           )
                                 )              CASE NO. 97-20555 GWZ
STRATOSPHERE GAMING CORP.,       )
 a Nevada corporation,           )
                                 )              Date:  5/15/98
         Debtor.                 )              Time:  9:30 a.m.
_________________________________)


             DEBTORS' RESTATED SECOND AMENDED PLAN OF REORGANIZATION
                             DATED FEBRUARY 26, 1998








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                                TABLE OF CONTENTS


1.  DEFINITIONS, RULES OF INTERPRETATION AND COMPUTATION OF TIME.............7
    1.1. DEFINITIONS.........................................................7
         1.1.1.   ADMINISTRATIVE CLAIM.......................................7
         1.1.2.   ADMINISTRATIVE CLAIM BAR DATE..............................8
         1.1.3.   AFFILIATE..................................................8
         1.1.4.   ALLOWED CLAIM..............................................8
         1.1.5.   ALTERNATIVE TRANSACTIONS PROPOSAL..........................8
         1.1.6.   AMENDED CAPITAL LEASE AGREEMENT............................8
         1.1.7.   AMENDED HELLER CAPITAL LEASE...............................9
         1.1.8.   AMENDED PARTICIPATION AGREEMENT............................9
         1.1.9.   AMERICAN REAL ESTATE PARTNERS, L.P.........................9
         1.1.10.  APPROVED NOTEHOLDERS.......................................9
         1.1.11.  AVOIDANCE ACTIONS..........................................9
         1.1.12.  BALLOT.....................................................9
         1.1.13.  BANKRUPTCY CODE............................................9
         1.1.14.  BANKRUPTCY COURT...........................................9
         1.1.15.  BANKRUPTCY RULES...........................................9
         1.1.16.  BOARD OF DIRECTORS.........................................9
         1.1.17.  BAR DATE...................................................9
         1.1.18.  BUSINESS DAY ..... .......................................10
         1.1.19.  CAPITAL LEASE BANK GROUP .................................10
         1.1.20.  CAPITAL LEASE CLAIMS .....................................10
         1.1.21.  CASH......................................................10
         1.1.22.  CHAPTER 11 CASES .........................................10
         1.1.23.  CLAIM.... ................................................10
         1.1.24.  CLASS.... ................................................10
         1.1.25.  CONFIRMATION .............................................10
         1.1.26.  CONFIRMATION DATE ........................................11
         1.1.27.  CONFIRMATION HEARING......................................11
         1.1.28.  CONFIRMATION ORDER .......................................11
         1.1.29.  CONTINGENT CLAIM .........................................11
         1.1.30.  CREDITOR. ................................................11
         1.1.31.  CREDITORS' COMMITTEE .....................................11
         1.1.32.  CURE..... ................................................11
         1.1.33.  DEBT INSTRUMENT ..........................................11
         1.1.34.  DEBTORS.. ................................................11
         1.1.35.  DEBTORS-OWNED STANDBY EQUITY COMMITMENT CLAIMS ...........11
         1.1.36.  DISBURSING AGENT .........................................12
         1.1.37.  DISCLOSURE STATEMENT .....................................12
         1.1.38.  DISPUTED CLAIM ...........................................12
         1.1.39.  DISTRIBUTION DATE ........................................12
         1.1.40.  DISTRIBUTION RECORD DATE .................................12
         1.1.41.  EFFECTIVE DATE ...........................................12




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         1.1.42.  EFFECTIVE DATE CASH.......................................13
         1.1.43.  EQUITY INTEREST ..........................................13
         1.1.44.  EQUITY INTEREST - RELATED CLAIM ..........................13
         1.1.45.  ESTATE....................................................13
         1.1.46.  FINAL ORDER ..............................................13
         1.1.47.  FIRST SECURITY ...........................................13
         1.1.48.  GAMING AUTHORITIES .......................................13
         1.1.49.  GAMING BOARD .............................................13
         1.1.50.  GAMING COMMISSION ........................................13
         1.1.51.  GAMING CORP ..............................................13
         1.1.52.  GAMING CORP. COMMON STOCK ................................13
         1.1.53.  GENERAL UNSECURED CLAIM ..................................14
         1.1.54.  GRAND.....................................................14
         1.1.55.  GRAND SUBORDINATED CLAIM .................................14
         1.1.56.  HELLER....................................................14
         1.1.57.  HELLER CAPITAL LEASE .....................................14
         1.1.58.  HELLER CAPITAL LEASE CLAIMS ..............................14
         1.1.59.  HIGH RIVER LIMITED PARTNERSHIP ...........................14
         1.1.60.  INDENTURE TRUSTEE ........................................14
         1.1.61.  INTERIM MANAGEMENT AGREEMENT .............................14
         1.1.62.  INTERIM APPROVAL PERIOD ..................................15
         1.1.63.  IRS.......................................................15
         1.1.64.  LITIGATION CLAIMS ........................................15
         1.1.65.  LITIGATION LLC ...........................................15
         1.1.66.  LITIGATION LLC BOARD OF MANAGERS .........................15
         1.1.67.  LITIGATION LLC MEMBERS AGREEMENT .........................15
         1.1.68.  LITIGATION LLC SHARES.....................................15
         1.1.69.  MAJORITY ORIGINAL HOLDERS ................................15
         1.1.70.  NEW COMMON STOCK .........................................15
         1.1.71.  NEW COMMON STOCK REGISTRATION RIGHTS AGREEMENT. ..........16
         1.1.72.  NOTEHOLDERS COMMITTEE ....................................16
         1.1.73.  NOTEHOLDERS' LITIGATION CLAIMS ...........................16
         1.1.74.  NOTICE AND A HEARING .....................................16
         1.1.75.  OLD COMMON STOCK .........................................16
         1.1.76.  ORIGINAL CAPITAL LEASE AGREEMENT .........................16
         1.1.77.  ORIGINAL FIRST MORTGAGE INDENTURE ........................16
         1.1.78.  ORIGINAL FIRST MORTGAGE NOTES ............................16
         1.1.79.  ORIGINAL FIRST MORTGAGE SECURITY DOCUMENTS ...............16
         1.1.80.  ORIGINAL PARTICIPATION AGREEMENT .........................17
         1.1.81.  ORIGINAL SUBORDINATION AGREEMENT .........................17
         1.1.82.  ORIGINAL SUBSIDIARY GUARANTEE ............................17
         1.1.83.  PERSON ...................................................17
         1.1.84.  PETITION DATE ............................................17
         1.1.85.  PHASE II .................................................17
         1.1.86.  PLAN .....................................................17
         1.1.87.  PLAN DISTRIBUTED CASH ....................................17
         1.1.88.  PLAN SUPPLEMENT ..........................................17






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         1.1.89.  PRESERVED ORDINARY COURSE ADMINISTRATIVE CLAIM............18
         1.1.90.  PRIORITY BENEFIT PLAN CONTRIBUTION CLAIM .................18
         1.1.91.  PRIORITY CUSTOMER DEPOSITS CLAIM .........................18
         1.1.92.  PRIORITY TAX CLAIM .......................................18
         1.1.93.  PRIORITY WAGE CLAIM ......................................18
         1.1.94.  PROFESSIONAL FEE BAR DATE ................................18
         1.1.95.  PROFESSIONAL FEES ........................................18
         1.1.96.  PRO RATA. ................................................18
         1.1.97.  RECLAMATION CLAIMS .......................................18
         1.1.98.  REINSTATED OR REINSTATEMENT ..............................19
         1.1.99.  RELIABLE STEEL ADVERSARY ACTION ..........................19
         1.1.100. RELIABLE STEEL LIEN CLAIM ................................19
         1.1.101. REORGANIZED GAMING CORP ..................................19
         1.1.102. REORGANIZED GAMING CORP. ARTICLES ........................19
         1.1.103. REORGANIZED GAMING CORP. BY-LAWS .........................19
         1.1.104. REORGANIZED STRATOSPHERE .................................19
         1.1.105. REORGANIZED STRATOSPHERE ARTICLES ........................20
         1.1.106. REORGANIZED STRATOSPHERE BY-LAWS .........................20
         1.1.107. SCHEDULES ................................................20
         1.1.108. SEC ......................................................20
         1.1.109. SECURED CLAIM ............................................20
         1.1.110. SECURED TAX CLAIMS .......................................20
         1.1.111. SECURITIES ACT ...........................................20
         1.1.112. SKY HIGH. ................................................20
         1.1.113. STAND-BY EQUITY COMMITMENT ...............................20
         1.1.114. STATUTORY COMMITTEE ......................................20
         1.1.115. STOCKHOLDERS' AGREEMENT ..................................20
         1.1.116. STRATOSPHERE. ............................................20
         1.1.117. STUPAK ...................................................21
         1.1.118. SUBORDINATED CLAIM .......................................21
         1.1.119. TAXES ....................................................21
         1.1.120. VOTING RECORD DATE .......................................21
         1.1.121. UNAPPROVED NOTEHOLDERS ...................................21
    1.2. COMPUTATION OF TIME ...............................................21
    1.3. RULES OF INTERPRETATION ...........................................21


2.  TREATMENT OF UNCLASSIFIED CLAIMS .......................................22
    2.1. GENERAL ...........................................................22
    2.2. TREATMENT OF ADMINISTRATIVE CLAIMS ................................22
         2.2.1. GENERALLY...................................................22
         2.2.2. REQUESTS FOR PAYMENT .......................................22
    2.3. PRESERVED ORDINARY COURSE ADMINISTRATIVE CLAIMS....................22
    2.4. ALLOWED PRIORITY TAX CLAIMS .......................................23
    2.5. ALLOWED RECLAMATION CLAIMS ........................................23
         

3.  DESIGNATION OF CLASSES OF CLAIMS AND EQUITY INTERESTS...................23





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<TABLE>
<CAPTION>
                                                                               
<S><C>                                                                               
    3.1.     SUMMARY OF CLASSIFICATION............................................24    
    3.2.     SPECIFIC CLASSIFICATION .............................................24    
             3.2.1.   CLASS 1 - PRIORITY WAGE CLAIMS..............................24    
             3.2.2.   CLASS 2 - PRIORITY BENEFIT PLAN CONTRIBUTION CLAIMS ........25    
             3.2.3.   CLASS 3 - PRIORITY CUSTOMER DEPOSIT CLAIMS .................25    
             3.2.4.   CLASS 4 - SECURED TAX CLAIMS ...............................25    
             3.2.5.   CLASS 5 - MISCELLANEOUS SECURED CLAIMS .....................25    
             3.2.6.   CLASS 6 - ORIGINAL FIRST MORTGAGE NOTE CLAIMS ..............25    
             3.2.7.   CLASS 7 - HELLER CAPITAL LEASE CLAIMS ......................25    
             3.2.8.   CLASS 8 - CAPITAL LEASE CLAIMS .............................25    
             3.2.9.   CLASS 9 - GENERAL UNSECURED CLAIMS .........................25    
             3.2.10.  CLASS 10 - RELIABLE STEEL LIEN CLAIM .......................25    
             3.2.11.  CLASS 11 - GAMING CORP. COMMON STOCK .......................25    
             3.2.12.  CLASS 12 - EQUITY INTERESTS AND EQUITY INTEREST          
                      RELATED CLAIMS............................................. 25    
                                                                                        
                                                                                         
4.  DESIGNATION OF AND PROVISIONS FOR TREATMENT OF CLASSES OF                  
    CLAIMS NOT IMPAIRED BY THIS PLAN..............................................25
    4.1.     CLASS 1 - PRIORITY WAGE CLAIMS.......................................25
    4.2.     CLASS 2 - PRIORITY BENEFIT PLAN CONTRIBUTION CLAIMS .................26
    4.3.     CLASS 3 - PRIORITY CUSTOMER DEPOSIT CLAIMS ..........................26
    4.4.     CLASS 4 - SECURED TAX CLAIMS ........................................26
    4.5.     CLASS 5 - MISCELLANEOUS SECURED CLAIMS ..............................26
    4.6.     CLASS 11 - GAMING CORP. COMMON STOCK. ...............................27
                                                                               
                                                                               
5.  DESIGNATION OF AND PROVISIONS FOR TREATMENT OF CLASSES OF                  
    CLAIMS AND EQUITY INTERESTS IMPAIRED BY THIS PLAN.............................27
    5.1.     CLASS 6 - ORIGINAL FIRST MORTGAGE NOTES..............................27
             5.1.1.   DISTRIBUTIONS...............................................27
             5.1.2.   DISBURSING AGENT ...........................................28
             5.1.3.   SURRENDER OF SECURITIES OR DEBT INSTRUMENTS ................28
             5.1.4.   DISTRIBUTION RECORD DATE ...................................29
             5.1.5.   DELIVERY OF DISTRIBUTIONS ..................................29
             5.1.6.   FEES AND EXPENSES ..........................................30
             5.1.7.   SECTION 363 (K) RIGHT TO CREDIT BID ........................30
    5.2.     CLASS 7 - HELLER CAPITAL LEASE CLAIMS................................30
    5.3.     CLASS 8 - CAPITAL LEASE CLAIMS ......................................30
    5.4.     CLASS 9 - GENERAL UNSECURED CLAIMS ..................................31
    5.5.     CLASS 10 - RELIABLE STEEL LIEN CLAIM ................................31
    5.6.     CLASS 12 - EQUITY INTERESTS AND EQUITY INTERESTS RELATED          
                        CLAIMS ...................................................31
                                                                               
                                                                               
6.  MEANS FOR IMPLEMENTATION OF PLAN..............................................31
    6.1.     NEW COMMON STOCK.....................................................31
    6.2.     CANCELLATION OF OLD COMMON STOCK ....................................31
    6.3.     SATISFACTION OF ORIGINAL FIRST MORTGAGE NOTES AND ORIGINAL FIRST  
             MORTGAGE SECURITY DOCUMENTS .........................................32
             6.3.1. NO FRACTIONAL SHARES..........................................32
</TABLE>



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    6.4.     INTERIM MANAGEMENT AGREEMENT...................................32
    6.5.     PHASE II ......................................................32
    6.6.     NEW CERTIFICATE OF INCORPORATION AND BYLAWS ...................33
    6.7.     NO CORPORATE ACTION REQUIRED ..................................33
    6.8.     DIRECTORS AND OFFICERS ........................................33
    6.9.     POST-EFFECTIVE DATE FINANCING .................................34
    6.10.    DUTIES OF INDENTURE TRUSTEE ...................................34


7.  EXECUTORY CONTRACTS AND UNEXPIRED LEASES................................34
    7.1.     EXECUTORY CONTRACTS............................................34
    7.2.     UNEXPIRED LEASES ..............................................35
    7.3.     APPROVAL OF ASSUMPTION OR REJECTION ...........................35
    7.4.     CURE OF DEFAULTS ..............................................35
    7.5.     POST-PETITION DATE CONTRACTS AND LEASES .......................36
    7.6.     BAR DATE ......................................................36
    7.7.     INDEMNIFICATION OBLIGATIONS ...................................36


8.  LITIGATION LLC..........................................................36
    8.1.     PRESERVATION OF LITIGATION CLAIMS..............................36
    8.2.     ESTABLISHMENT OF LITIGATION LLC ...............................36
    8.3.     DISTRIBUTION OF LITIGATION LLC FUNDS ..........................37


9.  EFFECTIVE DATE TRANSACTIONS.............................................37

10. CONDITIONS PRECEDENT ...................................................37
    10.1.    CONDITIONS TO CONFIRMATION.....................................37
    10.2.    CONDITIONS TO EFFECTIVENESS ...................................38
    10.3.    WAIVER OF CONDITIONS ..........................................38


11. TITLE TO PROPERTY; DISCHARGE; INJUNCTION................................39
    11.1.    REVESTING OF ASSETS............................................39
    11.2.    DISCHARGE .....................................................39
    11.3.    INJUNCTION ....................................................39
    11.4.    EXCULPATION ...................................................40


12. RETENTION OF JURISDICTION...............................................40
    12.1.    JURISDICTION...................................................40

13. MODIFICATION AND AMENDMENT OF PLAN; ALTERNATIVE TRANSACTIONS............42
    13.1.    MODIFICATION AND AMENDMENT.....................................42
             13.1.1.  ALTERNATIVE TRANSACTIONS..............................42


14. MISCELLANEOUS...........................................................43
    14.1.    FILING OF OBJECTIONS TO CLAIMS.................................43





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    14.2.    RESOLUTION OF OBJECTIONS AFTER EFFECTIVE DATE; DISTRIBUTIONS...43
             14.2.1.  RESOLUTION OF OBJECTIONS..............................43
             14.2.2.  DISTRIBUTIONS.........................................43
    14.3.    EFFECTUATING DOCUMENTS; FURTHER TRANSACTIONS; TIMING...........44
    14.4.    EXEMPTION FROM TRANSFER TAXES .................................44
    14.5.    REVOCATION OR WITHDRAWAL OF THIS PLAN .........................44
    14.6.    BINDING EFFECT ................................................44
    14.7.    GOVERNING LAW .................................................44
    14.8.    INTERCOMPANY CLAIMS ...........................................45
    14.9.    MODIFICATION OF PAYMENT TERMS .................................45
    14.10.   PROVIDING FOR CLAIMS PAYMENTS .................................45
    14.11.   SET OFFS ......................................................45
    14.12.   NOTICES .......................................................46
    14.13.   STATUTORY COMMITTEE ...........................................47
    14.14.   SEVERABILITY ..................................................47
    14.15.   WITHHOLDING AND REPORTING REQUIREMENTS ........................48
    14.16.   POST CONFIRMATION REPORTING ...................................48
    14.17.   CRAMDOWN. .....................................................48
    14.18.   QUARTERLY FEES TO THE UNITED STATES TRUSTEE. ..................48

















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         Stratosphere Corporation ("Stratosphere") and Stratosphere Gaming Corp.
("Gaming Corp."), the debtors and debtors-in-possession in the above-captioned
Chapter 11 reorganization cases (collectively, the "Debtors") jointly propose
this Restated Second Amended Plan of Reorganization ("Plan") for the resolution
of the Debtors' outstanding Claims, Equity Interests and Gaming Corp. Common
Stock (as these terms are defined herein). All creditors and other
parties-in-interest should refer to the Disclosure Statement (as this term is
defined herein) for a discussion of the Debtors' history, business, properties,
results of operations and financial projections for future operations and for a
summary and analysis of this Plan and certain related matters.

         ALL HOLDERS OF CLAIMS AGAINST AND EQUITY INTERESTS IN THE DEBTORS ARE
         ENCOURAGED TO READ THIS PLAN, THE DISCLOSURE STATEMENT AND THE RELATED
         SOLICITATION MATERIALS IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR
         REJECT THIS PLAN.

         Subject to the restrictions on modifications set forth in Section 1127
of the Bankruptcy Code and Bankruptcy Rule 3019, and those restrictions on
modifications set forth in Article 13 to this Plan, the Debtors expressly
reserve the right to alter, amend, strike, withdraw or modify this Plan, one or
more times before its substantial consummation.

1.       DEFINITIONS, RULES OF INTERPRETATION AND COMPUTATION OF TIME

         1.1.     DEFINITIONS. For purposes of this Plan, except as expressly
                  provided or unless the context otherwise requires, all
                  capitalized terms not otherwise defined shall have the
                  meanings ascribed to them in this Article 1. Any term used in
                  this Plan that is not defined herein, but is defined in the
                  Bankruptcy Code or the Bankruptcy Rules, shall have the
                  meaning ascribed to that term in the Bankruptcy Code or the
                  Bankruptcy Rules. Whenever the context requires, such terms
                  shall include the plural as well as the singular, the
                  masculine gender shall include the feminine, and the feminine
                  gender shall include the masculine. As used in this Plan, the
                  following terms shall have the meanings specified below:

                  1.1.1.   ADMINISTRATIVE CLAIM. A Claim for any cost or expense
                           of administration of the Chapter 11 Cases allowed
                           under Sections 503(b), 507(b) or 546(c)(2) of the
                           Bankruptcy Code and entitled to priority under
                           Section 507(a)(1) of the Bankruptcy Code, including,
                           but not limited to: (i) fees payable pursuant to
                           Section 1930 of Title 28 of the United States Code;
                           (ii) the actual and necessary costs and expenses
                           incurred after the Petition Date of preserving the
                           Estates, including wages, salaries, or commissions
                           for services rendered after the commencement of the
                           Chapter 11 Cases; and (iii) all Professional Fees
                           approved by the Bankruptcy Court pursuant to interim
                           and final allowances. To the extent that a Claim is
                           allowed as an Administrative Claim pursuant to
                           Section 365(d)(3) of the Bankruptcy Code, such Claim
                           shall also be deemed an "Administrative Claim" under
                           this section.


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                  1.1.2.   ADMINISTRATIVE CLAIM BAR DATE. The date or dates
                           established by the Bankruptcy Court for the filing of
                           Administrative Claims, excepting therefrom Claims for
                           Professional Fees and Preserved Ordinary Course
                           Administrative Claims.

                  1.1.3.   AFFILIATE. This term will refer to and mean with
                           respect to any specified Person, any other Person
                           directly or indirectly controlling or controlled by
                           or under direct or indirect common control with such
                           Person, and, with respect to any specified natural
                           Person, any other Person having a relationship by
                           blood, marriage or adoption not more remote than
                           first cousins with such natural Person. For purposes
                           of this definition, "control" (including, with
                           correlative meanings, the terms "controlled by" and
                           "under common control with"), as used with respect to
                           any Person, shall mean the possession, directly or
                           indirectly, of the power to direct or cause the
                           direction of the management or policies of such
                           Person, whether through the ownership of voting
                           securities, by agreement or otherwise.

                  1.1.4.   ALLOWED CLAIM. Any Claim, or any portion thereof,
                           against the Debtors: (i) proof of which, requests for
                           payment of which, or application for allowance of
                           which, was filed or deemed to be filed on or before
                           the Bar Date, Administrative Claim Bar Date or the
                           Professional Fee Bar Date, as the case may be, for
                           filing proofs of Claim or requests for payment for
                           Claims of such type against the Debtors; (ii) if no
                           proof of Claim is filed, which has been or hereafter
                           is listed by the Debtors in the Schedules as
                           liquidated in amount and not disputed or contingent;
                           or (iii) that is allowed in any contract, instrument,
                           indenture or other agreement entered into in
                           connection with this Plan and, in any case, a Claim
                           as to which no objection to the allowance thereof has
                           been interposed within the applicable period of
                           limitation fixed by this Plan, the Bankruptcy Code,
                           the Bankruptcy Rules or the Bankruptcy Court. The
                           term "Allowed," when used to modify a reference in
                           this Plan to any Claim or Class of Claims, shall mean
                           a Claim (or any Claim in any such Class) that is so
                           allowed, e.g. an "Allowed Secured Claim" is a Claim
                           that has been allowed to the extent of the value, as
                           determined by the Bankruptcy Court pursuant to
                           Section 506(a) of the Bankruptcy Code, of any
                           interest in property of the Estate of the Debtors
                           securing such Claim.

                  1.1.5.   ALTERNATIVE TRANSACTION PROPOSAL. A written
                           restructuring proposal that is received by the
                           Debtors prior to the Confirmation Hearing as an
                           alternative to this Plan.

                  1.1.6.   AMENDED CAPITAL LEASE AGREEMENT. The Amended and
                           Restated Lease Agreement to be entered into on the
                           Effective Date by Reorganized Gaming Corp. and First
                           Security, which is one of the documents pursuant to
                           which the Capital Lease Claims will be restructured.
                           The Amended Capital Lease Agreement shall be
                           substantially in the form filed with the Bankruptcy
                           Court as part of the Plan Supplement.






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                  1.1.7.   AMENDED HELLER CAPITAL LEASE. The Amended and
                           Restated Lease Agreement Intended As Security
                           Agreement to be entered into on the Effective Date by
                           Reorganized Gaming Corp. and Heller, pursuant to
                           which the Heller Capital Lease Claims will be
                           restructured. The Amended Heller Capital Lease shall
                           be substantially in the form filed with the
                           Bankruptcy Court as part of the Plan Supplement.

                  1.1.8.   AMENDED PARTICIPATION AGREEMENT. The Amended and
                           Restated Participation Agreement to be entered into
                           on the Effective Date by Reorganized Stratosphere,
                           Reorganized Gaming Corp., First Security, and the
                           Capital Lease Bank Group, which is one of the
                           documents pursuant to which the Capital Lease Bank
                           Claims will be restructured. The Amended
                           Participation Agreement shall be substantially in the
                           form filed with the Bankruptcy Court as part of the
                           Plan Supplement.

                  1.1.9.   AMERICAN REAL ESTATE PARTNERS, L.P. American Real
                           Estate Partners, L.P., a Delaware limited
                           partnership, and its successors and assigns.

                  1.1.10.  APPROVED NOTEHOLDERS. Majority Original Holders of
                           Allowed Original First Mortgage Notes Claims who have
                           received the requisite approval of the Gaming
                           Authorities to own a Pro Rata share of the New Common
                           Stock issued under this Plan.

                  1.1.11.  AVOIDANCE ACTIONS. This term refers to and means all
                           actions preserved for the Estates set forth in
                           Sections 510, 542, 543, 544, 545, 547, 548, 549 and
                           550 of the Bankruptcy Code.

                  1.1.12.  BALLOT. The form of ballot or ballots that will be
                           distributed with the Disclosure Statement to holders
                           of Claims entitled to vote under this Plan in
                           connection with solicitation of acceptances of this
                           Plan.

                  1.1.13.  BANKRUPTCY CODE. The Bankruptcy Reform Act of 1978,
                           Title 11, United States Code, as applicable to the
                           Chapter 11 Cases, as now in effect or hereafter
                           amended, 11 U.S.C. Sections 101 et seq.

                  1.1.14.  BANKRUPTCY COURT. The Bankruptcy Court of the United
                           States District Court for the District of Nevada or
                           such other court as may have jurisdiction over the
                           Chapter 11 Cases.

                  1.1.15.  BANKRUPTCY RULES. Collectively, the Federal Rules of
                           Bankruptcy Procedure, the local rules of the
                           Bankruptcy Court and the Federal Rules of Civil
                           Procedure, as applicable to the Chapter 11 Cases, as
                           now in effect or hereinafter amended.

                  1.1.16.  BOARD OF DIRECTORS. This term refers to and means the
                           duly constituted and acting directors of
                           Stratosphere.

                  1.1.17.  BAR DATE. The date or dates established by the
                           Bankruptcy Court for






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                           the filing of proofs of Claim for all Creditors,
                           including the holders of Reclamation Claims, if any,
                           excepting therefrom, Administrative Claims, Preserved
                           Ordinary Course Administrative Claims, and Claims for
                           Professional Fees.

                  1.1.18.  BUSINESS DAY. Any day other than a Saturday, Sunday
                           or other day on which commercial banks in Clark
                           County, Nevada are authorized or required by law to
                           close.

                  1.1.19.  CAPITAL LEASE BANK GROUP. Collectively, Bank of
                           Scotland, Wells Fargo Bank, National Association
                           (successor by merger to First Interstate Bank of
                           Nevada), Societe Generale, Credit Lyonnais (Los
                           Angeles Branch), BA Leasing and Capital Corporation,
                           First Security, The CIT Group/Equipment Financing,
                           Inc., United States National Bank of Oregon, The
                           First National Bank of Boston, Imperial Bank, and
                           Trustmark National Bank and their respective
                           successors and assigns.

                  1.1.20.  CAPITAL LEASE CLAIMS. Any and all indebtedness of the
                           Debtors to First Security and the Capital Lease Bank
                           Group arising out of or evidenced by: (i) the
                           Original Participation Agreement; (ii) the Original
                           Capital Lease Agreement; (iii) that certain Loan
                           Agreement dated as of April 29, 1996; (iv) that
                           certain Standstill and Amendment Agreement dated as
                           of October 31, 1996; and (v) any and all loan and
                           security documents, including, but not limited to,
                           Debt Instruments, evidencing, securing, or relating
                           in any way to such Capital Lease Claims.

                  1.1.21.  CASH. Currency, checks, negotiable instruments and
                           wire transfers of immediately available funds.

                  1.1.22.  CHAPTER 11 CASES. The cases under Chapter 11 of the
                           Bankruptcy Code in which Stratosphere and Gaming
                           Corp. are the debtors and debtors-in-possession
                           pending before the Bankruptcy Court, including all
                           adversary proceedings pending in connection
                           therewith.

                  1.1.23.  CLAIM. Any right to payment from the Debtors, whether
                           or not such right is reduced to judgment, liquidated,
                           unliquidated, fixed, contingent, matured, unmatured,
                           disputed, undisputed, legal, equitable, secured or
                           unsecured arising at any time before the Effective
                           Date or relating to any event that occurred before
                           the Effective Date; or any right to an equitable
                           remedy for breach of performance if such breach gives
                           rise to a right of payment from the Debtors, whether
                           or not such right to an equitable remedy is reduced
                           to judgment, fixed, contingent, matured, unmatured,
                           disputed, undisputed, secured or unsecured.

                  1.1.24.  CLASS. A category of holders of Claims, Equity
                           Interests or Gaming Corp. Common Stock as classified
                           in this Plan.

                  1.1.25.  CONFIRMATION. The entry by the Bankruptcy Court of
                           the Confirmation





                                       10
<PAGE>   12



                           Order.

                  1.1.26.  CONFIRMATION DATE. The date upon which the Bankruptcy
                           Court enters the Confirmation Order confirming this
                           Plan.

                  1.1.27.  CONFIRMATION HEARING. The duly noticed hearing held
                           by the Bankruptcy Court on confirmation of this Plan
                           pursuant to Section 1128 of the Bankruptcy Code. The
                           Confirmation Hearing may be adjourned by the
                           Bankruptcy Court from time to time without further
                           notice other than the announcement of the adjourned
                           date at the Confirmation Hearing.

                  1.1.28.  CONFIRMATION ORDER. The order entered by the
                           Bankruptcy Court confirming this Plan.

                  1.1.29.  CONTINGENT CLAIM. A Claim which is either contingent,
                           unmatured or unliquidated on or immediately before
                           the Confirmation Date.

                  1.1.30.  CREDITOR. Any holder of a Claim, whether or not such
                           Claim is an Allowed Claim, encompassed within the
                           statutory definition set forth in Section 101(a)(10)
                           of the Bankruptcy Code.

                  1.1.31.  CREDITORS' COMMITTEE. Any Official Committee of
                           General Unsecured Creditors appointed by the United
                           States Trustee in the Chapter 11 Cases pursuant to
                           Section 1102(a)(1) of the Bankruptcy Code.

                  1.1.32.  CURE. The distribution on the Effective Date or as
                           soon thereafter as practicable of Cash, or such other
                           property as may be agreed upon by the parties or
                           ordered by the Bankruptcy Court, with respect to the
                           assumption of an executory contract or unexpired
                           lease, pursuant to Section 365(b) of the Bankruptcy
                           Code, in an amount equal to all unpaid monetary
                           obligations, without interest, or such other amount
                           as may be agreed upon by the parties, under such
                           executory contract or unexpired lease, to the extent
                           such obligations are enforceable under the Bankruptcy
                           Code and applicable bankruptcy law.

                  1.1.33.  DEBT INSTRUMENT. A debenture, bond, promissory note,
                           note or other transferable instrument or document
                           evidencing any payment obligation.

                  1.1.34.  DEBTORS. Collectively, Stratosphere and Gaming Corp.,
                           as the debtors-in-possession in the Chapter 11 Cases,
                           pursuant to Sections 1107 and 1108 of the Bankruptcy
                           Code.

                  1.1.35.  DEBTORS-OWNED STANDBY EQUITY COMMITMENT CLAIMS The
                           litigation (including any appeals) commenced by the
                           Motion of the Official Committee of Noteholders for
                           (1) Standing to Request Assumption on Behalf of
                           Debtors' Estate of Standby Equity Commitment with
                           Grand Casinos, Inc. and (2) an Order Authorizing Such
                           Assumption Pursuant to Section 365 of the Bankruptcy
                           Code and any other claims of the Estates





                                       11
<PAGE>   13



                           against Grand with respect to the Standby Equity 
                           Commitment.

                  1.1.36.  DISBURSING AGENT. Reorganized Stratosphere or such
                           other Person as may be retained by the Reorganized
                           Stratosphere and approved by the Bankruptcy Court, to
                           hold and distribute certain consideration to the
                           holders of Unclassified Claims and Allowed Claims in
                           Classes 1, 2, 3, 4, 5, 7, 8, 9 and 10 of this Plan.
                           With respect to distributions of New Common Stock to
                           the holders of Original First Mortgage Notes as part
                           of Class 6, the Indenture Trustee shall be the
                           Disbursing Agent.

                  1.1.37.  DISCLOSURE STATEMENT. The written disclosure
                           statement that relates to this Plan, as approved by
                           the Bankruptcy Court pursuant to Section 1125 of the
                           Bankruptcy Code and Bankruptcy Rule 3017, as such
                           disclosure statement may be amended, modified or
                           supplemented from time to time.

                  1.1.38.  DISPUTED CLAIM. A Claim which is: (i) subject to
                           timely objection interposed by the Debtors or any
                           party in interest entitled to file and prosecute such
                           objection in the Chapter 11 Cases, if at such time
                           such objection remains unresolved; (ii) a Claim that
                           is listed by the Debtors as disputed, unliquidated or
                           contingent in the Schedules; or (iii) if no objection
                           has been timely filed, a Claim which has been
                           asserted in a timely filed proof of Claim in an
                           amount greater than or in a Class different than that
                           listed by the Debtors in the Schedules as liquidated
                           in amount and not disputed or contingent; provided,
                           however, that the Bankruptcy Court may estimate a
                           Disputed Claim for purposes of allowance pursuant to
                           Section 502(c) of the Bankruptcy Code. The term
                           "Disputed", when used to modify a reference in this
                           Plan to any Claim or Class of Claims, shall mean a
                           Claim (or any Claim in such Class) that is a Disputed
                           Claim as defined herein. In the event there is a
                           dispute as to classification or priority of a Claim,
                           it shall be considered a Disputed Claim in its
                           entirety. Until such time as a Contingent Claim
                           becomes fixed and absolute, such Claim shall be
                           treated as a Disputed Claim and not an Allowed Claim
                           for purposes related to allocations and distributions
                           under this Plan.

                  1.1.39.  DISTRIBUTION DATE. The date, occurring as soon as
                           practicable after the Effective Date, upon which
                           distributions are made to holders of Allowed Claims
                           under this Plan.

                  1.1.40.  DISTRIBUTION RECORD DATE. The date or dates
                           established by the Bankruptcy Court, which shall be
                           the Record Date or Dates for determining the holders
                           of the Original First Mortgage Notes entitled to
                           receive distributions under this Plan in Class 6 and
                           Class 9.

                  1.1.41.  EFFECTIVE DATE. The last to occur of: (i) the first
                           Business Day that is at least eleven (11) days after
                           the Confirmation Date and on which no stay of the
                           Confirmation Order is in effect and (ii) the Business
                           Day on which all of the conditions set forth in
                           Article 12 to this Plan have been satisfied





                                       12
<PAGE>   14



                           or waived.

                  1.1.42.  EFFECTIVE DATE CASH. All Cash of the Debtors on the
                           Effective Date prior to distribution or reservation
                           of any amounts under this Plan.

                  1.1.43.  EQUITY INTEREST. Any interest in Stratosphere,
                           including Old Common Stock, represented by any class
                           or series of common or preferred stock issued by
                           Stratosphere prior to the Effective Date and any
                           warrants, options, redemption rights, dividend
                           rights, liquidation preferences or rights to purchase
                           any such common or preferred stock.

                  1.1.44.  EQUITY INTEREST - RELATED CLAIM. Any Claim arising
                           from the rescission of a purchase or sale of an
                           Equity Interest, or for damages arising from the
                           purchase or sale of an Equity Interest, or any Claim
                           by any Person that asserts equitable or contractual
                           rights of reimbursement, contribution or
                           indemnification arising from such Claim.

                  1.1.45.  ESTATE. Collectively, the estates created for the
                           Debtors in the Chapter 11 Cases, pursuant to Section
                           541 of the Bankruptcy Code.

                  1.1.46.  FINAL ORDER. An order or judgment which has not been
                           reversed, stayed, modified or amended and is no
                           longer subject to appeal, certiorari proceeding or
                           other proceeding for review or rehearing, and as to
                           which no appeal, certiorari proceeding, or other
                           proceeding for review or rehearing shall then be
                           pending.

                  1.1.47.  FIRST SECURITY. First Security Trust Company of
                           Nevada, and its successors and assigns.

                  1.1.48.  GAMING AUTHORITIES. Collectively, the Gaming Board,
                           the Gaming Commission, and any other regulatory
                           agency having the authority to regulate the gaming
                           activities of the Debtors.

                  1.1.49.  GAMING BOARD. The State of Nevada Gaming Control
                           Board established pursuant to Nev. Rev. Stat
                           Section 463.010, et seq., as amended from time to 
                           time.

                  1.1.50.  GAMING COMMISSION. The State of Nevada Gaming
                           Commission established pursuant to Nev. Rev. Stat.
                           Section 463.010, et seq., as amended from time to 
                           time.

                  1.1.51.  GAMING CORP. Stratosphere Gaming Corp., a Nevada
                           corporation, one of the debtors and
                           debtors-in-possession in the Chapter 11 Cases pending
                           before the Bankruptcy Court.

                  1.1.52.  GAMING CORP. COMMON STOCK. All of the common stock
                           issued by Gaming Corp. and held by Stratosphere,
                           including, if applicable, any warrants, options, or
                           rights to purchase any such common stock.





                                       13
<PAGE>   15




                  1.1.53.  GENERAL UNSECURED CLAIM. A Claim that is not secured
                           by a charge against or interest in property in which
                           the Debtors' Estate has an interest and not an
                           Administrative Claim, Priority Tax Claim, Reclamation
                           Claim, Priority Wage Claim, Priority Customer Deposit
                           Claim or Equity Interest- Related Claim.

                  1.1.54.  GRAND. Grand Casinos, Inc., a Minnesota corporation,
                           and Affiliates (other than Debtors and their
                           subsidiaries).

                  1.1.55.  GRAND SUBORDINATED CLAIM. Any and all indebtedness of
                           Stratosphere and Gaming Corp. to Grand, including but
                           not limited to, that indebtedness arising out of or
                           evidenced by: (i) that certain Notes Completion
                           Guarantee in the original amount of $50,000,000,
                           dated as of March 9, 1995; (ii) that certain
                           Completion Guarantor Subordination Agreement dated as
                           of March 9, 1995; (iii) any and all subordinated
                           notes issued to Grand by Stratosphere from time to
                           time; and (iv) any other loan and security documents,
                           including, but not limited to Debt Instruments,
                           evidencing, securing, or relating to such obligations
                           and Claims. In accordance with the Original
                           Subordination Agreement, the Grand Subordinated Claim
                           is owned by the Indenture Trustee for the benefit of
                           the holders of Original First Mortgage Notes.

                  1.1.56.  HELLER. Heller Financial Group, Inc., a Delaware
                           corporation.

                  1.1.57.  HELLER CAPITAL LEASE. The Lease Intended As Security
                           dated as of June 28, 1996 between Gaming Corp. and
                           Heller.

                  1.1.58.  HELLER CAPITAL LEASE CLAIMS. Any and all indebtedness
                           of the Debtors to Heller arising out of or evidenced
                           by: (i) the Heller Capital Lease; and (ii) any and
                           all loan and security documents, including, but not
                           limited to Debt Instruments, evidencing, securing, or
                           relating in any way to such Heller Capital Lease.

                  1.1.59.  HIGH RIVER LIMITED PARTNERSHIP. High River Limited
                           Partnership, a Delaware limited partnership, and its
                           successors and assigns.

                  1.1.60.  INDENTURE TRUSTEE. IBJ Schroder Bank and Trust
                           Company, as Successor Trustee to American National
                           Bank Association, or such other successor trustee
                           under the Original First Mortgage Indenture.

                  1.1.61.  INTERIM MANAGEMENT AGREEMENT. The management
                           agreement which (subject to requisite Gaming
                           Authority approvals) may be entered into prior to the
                           Confirmation Date by Stratosphere and Gaming Corp.
                           and an entity to be named by Stratosphere with each
                           of the Majority Original Holders' assistance and
                           consent pursuant to which the day-to-day operations
                           of Debtors shall be managed until the Effective Date.
                           The Interim Management Agreement shall be
                           substantially in the form filed with the Bankruptcy
                           Court as part of the Plan Supplement.


                                       14
<PAGE>   16




                  1.1.62.  INTERIM APPROVAL PERIOD. Any period of time from and
                           after the Effective Date when one, but not all, of
                           the Majority Original Holders is an Approved
                           Noteholder and has received its distribution of New
                           Common Stock under this Plan, until such date as all
                           Majority Original Holders become Approved Noteholders
                           and receive their distribution of New Common Stock
                           under this Plan.

                  1.1.63.  IRS. The Internal Revenue Service.

                  1.1.64.  LITIGATION CLAIMS. All rights, claims, torts, liens,
                           liabilities, obligations, actions, causes of action,
                           Avoidance Actions, avoiding powers, proceedings,
                           debts, contracts, judgments, damages and demands
                           whatsoever in law or in equity, whether known or
                           unknown, contingent or otherwise, that the Debtors or
                           the Estate may have against any Person, including but
                           not limited to, those listed on Exhibit "1" to this
                           Plan and the Debtors-Owned Standby Equity Commitment
                           Claims. Failure to list a Litigation Claim on Exhibit
                           1 to this Plan, shall not constitute a waiver or
                           release by the Debtors, Reorganized Stratosphere,
                           Reorganized Gaming Corp. of such Litigation Claim.

                  1.1.65.  LITIGATION LLC. The Litigation LLC created pursuant
                           to this Plan and the Litigation LLC Members Agreement
                           for the purpose of pursuing the Noteholders'
                           Litigation Claims, the Litigation Claims (including
                           the Debtors-Owned Standby Equity Commitment Claims)
                           and paying all related expenses and for holding,
                           liquidating and distributing the assets of the
                           Litigation LLC pursuant to the Litigation LLC Members
                           Agreement with no objective to engage in the conduct
                           of a trade or business.

                  1.1.66.  LITIGATION LLC BOARD OF MANAGERS. Three (3)
                           individuals who shall administer the Litigation LLC
                           pursuant to the terms of the Litigation LLC Members
                           Agreement.

                  1.1.67.  LITIGATION LLC MEMBERS AGREEMENT. The Agreement
                           substantially in the form filed with the Bankruptcy
                           Court as part of the Plan Supplement evidencing the
                           Litigation LLC.

                  1.1.68.  LITIGATION LLC SHARES. The Class A membership units
                           issued pursuant to this Plan and the Litigation LLC
                           Members Agreement evidencing the right to receive a
                           Pro Rata distribution from the Litigation LLC,
                           pursuant to the terms and conditions set forth in the
                           Litigation LLC Members Agreement which units shall be
                           freely transferable.

                  1.1.69.  MAJORITY ORIGINAL HOLDERS. As of the date of the
                           filing of the Plan High River Limited Partnership,
                           American Real Estate Partners, L.P and Sky High.

                  1.1.70.  NEW COMMON STOCK. The authorized shares of common
                           stock of Reorganized Stratosphere, par value of $.01
                           per share.






                                       15
<PAGE>   17




                  1.1.71.  NEW COMMON STOCK REGISTRATION RIGHTS AGREEMENT. The
                           agreement to be entered into on the Effective Date by
                           Reorganized Stratosphere and any holder of an Allowed
                           Original First Mortgage Notes Claim that will receive
                           more than ten percent (10%) of the New Common Stock
                           issued under this Plan upon receipt of requisite
                           approval from the Gaming Authorities. The New Common
                           Stock Registration Rights Agreement shall be
                           substantially in the form filed with the Bankruptcy
                           Court as part of the Plan Supplement.

                  1.1.72.  NOTEHOLDERS COMMITTEE. The committee appointed by the
                           United States Trustee pursuant to Section 1102(a)(2)
                           of the Bankruptcy Code comprised of certain holders
                           of the Original First Mortgage Notes and the
                           Indenture Trustee.

                  1.1.73.  NOTEHOLDERS' LITIGATION CLAIMS. All claims and causes
                           of action of the holders of Original First Mortgage
                           Notes and the Indenture Trustee that are assigned to
                           the Litigation LLC pursuant to Section 6.3 of this
                           Plan.

                  1.1.74.  NOTICE AND A HEARING. This phrase shall have the same
                           meaning as provided for in Section 102(1) of the
                           Bankruptcy Code.

                  1.1.75.  OLD COMMON STOCK. The shares of common stock, $.01
                           par value, of Stratosphere issued and outstanding
                           immediately prior to the Effective Date, and all
                           options, warrants and similar rights, whether
                           contractual or otherwise, to acquires such shares of
                           common stock, and all shares or other securities
                           convertible or otherwise exchangeable into such
                           shares of common stock.

                  1.1.76.  ORIGINAL CAPITAL LEASE AGREEMENT. The Lease
                           Agreement, dated as of April 29, 1996, between Gaming
                           Corp., as Lessee, and First Security, as Lessor.

                  1.1.77.  ORIGINAL FIRST MORTGAGE INDENTURE. The Indenture
                           dated as of March 9, 1995, among Stratosphere, Gaming
                           Corp., and IBJ Schroder Bank and Trust Company, as
                           Successor Trustee to American National Bank
                           Association, pursuant to which the Original First
                           Mortgage Notes were issued by Stratosphere.

                  1.1.78.  ORIGINAL FIRST MORTGAGE NOTES. The 14-1/4% First
                           Mortgage Notes due 2002 with Contingent Interest, in
                           the original principal amount of $203,000,000, issued
                           by Stratosphere under the Original First Mortgage
                           Indenture.

                  1.1.79.  ORIGINAL FIRST MORTGAGE SECURITY DOCUMENTS. The deed
                           of trust, security agreement, financing statements
                           and fixture filings dated as of March 9, 1995 and all
                           other documents executed by Debtors pursuant to the
                           Original First Mortgage Indenture to secure the
                           obligations evidenced


                                       16
<PAGE>   18



                           by the Original First Mortgage Notes.

                  1.1.80.  ORIGINAL PARTICIPATION AGREEMENT Agreement dated as
                           of April 29, 1996, among Stratosphere, Gaming Corp.,
                           First Security and the Capital Lease Bank Group.

                  1.1.81.  ORIGINAL SUBORDINATION AGREEMENT. The Subordination
                           Agreement dated as of March 9, 1995 between Grand and
                           the Indenture Trustee.

                  1.1.82.  ORIGINAL SUBSIDIARY GUARANTEE. The guarantee by
                           Gaming Corp. of the obligations of Stratosphere under
                           the Original First Mortgage Notes, which guarantee is
                           set forth in Section 11.01 of the Original First
                           Mortgage Notes Indenture.

                  1.1.83.  PERSON. An individual, corporation, limited liability
                           company, partnership, association, joint stock
                           company, joint venture, estate, trust, unincorporated
                           organization or government, governmental unit or any
                           subdivision thereof or any other entity.

                  1.1.84.  PETITION DATE. The date (i.e., January 27, 1997) on
                           which the Debtors filed their voluntary petitions
                           commencing the Chapter 11 Cases.

                  1.1.85.  PHASE II. Stratosphere's planned construction of
                           additional facilities and improvements to existing
                           facilities, at its resort complex located in Las
                           Vegas, Nevada, consisting (subject to the final
                           determination of Reorganized Stratosphere) of: (i)
                           completion of construction of a new guest room tower
                           of approximately 1,000 bays, including the
                           acquisition of all necessary furniture, fixtures and
                           equipment; (ii) completion of recreation and swimming
                           pool facilities; (iii) landscape and hardscape at
                           areas adjacent to the new guest tower, including
                           facade upgrade of floors one through three; (iv)
                           landscape and fencing at site of proposed aquarium
                           building; (v) mechanical connection and piping from
                           the existing Phase I central plant, (vi) renovation
                           of existing resort facilities, including baggage
                           storage, gift shop and gift kiosk remodel, Sister's
                           Coffee Shop remodel, tower queue remodel, and porte
                           cochere modifications; and (vii) other modifications
                           as determined by Reorganized Stratosphere's board of
                           directors.

                  1.1.86.  PLAN. This Second Amended Plan of Reorganization,
                           either in its present form or as it may be amended,
                           supplemented or modified from time to time, including
                           all exhibits and schedules annexed hereto or
                           referenced herein and the Plan Supplement.

                  1.1.87.  PLAN DISTRIBUTED CASH. The Cash to be paid pursuant
                           to this Plan to the holders of Allowed Claims in all
                           Classes and Allowed unclassified Claims hereunder.

                  1.1.88.  PLAN SUPPLEMENT. The supplement filed with the
                           Bankruptcy Court






                                       17
<PAGE>   19



                           which contains additional exhibits to this Plan, as
                           such exhibits may be subsequently amended, modified
                           or supplemented. The Plan Supplement shall be a part
                           of this Plan as if such exhibits were set forth more
                           fully herein.

                  1.1.89.  PRESERVED ORDINARY COURSE ADMINISTRATIVE CLAIM.
                           Administrative Claims that are based on liabilities
                           incurred by the Debtors in the purchase, lease or use
                           of goods and services in the ordinary course of their
                           business, including, but not limited to,
                           Administrative Claims due on account of services
                           provided to the Debtors after the Petition Date.

                  1.1.90.  PRIORITY BENEFIT PLAN CONTRIBUTION CLAIM. Any Claim
                           entitled to priority in payment under Section
                           507(a)(4) of the Bankruptcy Code.

                  1.1.91.  PRIORITY CUSTOMER DEPOSITS CLAIM. Any Claim entitled
                           to priority in payment under Section 507(a)(6) of the
                           Bankruptcy Code.

                  1.1.92.  PRIORITY TAX CLAIM. Any Claim entitled to priority in
                           payment under Section 507(a)(8) of the Bankruptcy
                           Code.

                  1.1.93.  PRIORITY WAGE CLAIM. Any Claim entitled to priority
                           in payment under Section 507(a)(3) of the Bankruptcy
                           Code.

                  1.1.94.  PROFESSIONAL FEE BAR DATE. The date, as set by order
                           of the Bankruptcy Court, on or before which
                           applications for compensation or expense
                           reimbursement, including Professional Fees receivable
                           pursuant to Section 503(b), must be filed with the
                           Bankruptcy Court, and served on Reorganized
                           Stratosphere, Reorganized Gaming Corp. and their
                           counsel.

                  1.1.95.  PROFESSIONAL FEES. The Administrative Claims for
                           compensation and reimbursement submitted pursuant to
                           Sections 330, 331 or 503(b) of the Bankruptcy Code of
                           Persons: (i) employed pursuant to an order of the
                           Bankruptcy Court under Sections 327 or 1103 of the
                           Bankruptcy Code; or (ii) for whom compensation and
                           reimbursement has been allowed by the Bankruptcy
                           Court pursuant to Section 503(b) of the Bankruptcy
                           Code, including, but not limited to, reasonable
                           professional fees and expenses incurred by the
                           Indenture Trustee and counsel to the Indenture
                           Trustee, that are not otherwise satisfied in
                           accordance with other provisions of this Plan.

                  1.1.96.  PRO RATA. The ratio of an Allowed Claim or Allowed
                           Equity Interest in a particular class to the
                           aggregate amount of all such Allowed Claims or
                           Allowed Equity Interests in any such Class.

                  1.1.97.  RECLAMATION CLAIMS. Any Claim against the Debtors by
                           any Person arising out of the sale of goods to the
                           Debtors, in the ordinary course of such Person's
                           business, provided that such Person has otherwise
                           satisfied the requirements of Section 546(c) of the
                           Bankruptcy Code and the






                                       18
<PAGE>   20



                           Uniform Commercial Code, as applicable.

                  1.1.98.  REINSTATED OR REINSTATEMENT. These terms shall mean:
                           (i) leaving unaltered the legal, equitable and
                           contractual rights of the holder of a Claim so as to
                           leave such Claim unimpaired in accordance with
                           Section 1124 of the Bankruptcy Code; or (ii)
                           notwithstanding any contractual provision or
                           applicable law that entitles the holder of such Claim
                           to demand or receive accelerated payment of such
                           Claim after the occurrence of a default: (a) Curing
                           any such default that occurred before or after the
                           Petition Date, other than a default of a kind
                           specified in Section 365(b)(2) of the Bankruptcy
                           Code; (b) reinstating the maturity of such Claim as
                           such maturity existed before such default; (c)
                           compensating the holder of such Claim for any damages
                           incurred as a result of any reasonable reliance by
                           such holder on such contractual provision or such
                           applicable law; and (d) not otherwise altering the
                           legal, equitable, or contractual rights to which such
                           Claim entitles the holder of such Claim; provided,
                           however, that any contractual right that does not
                           pertain to the payment when due of principal and
                           interest on the obligation on which such Claim is
                           based, including, but not limited to, financial
                           covenant ratios, negative pledge covenants, covenants
                           or restrictions on merger or consolidation, and
                           affirmative covenants regarding corporate existence
                           prohibiting certain transactions or actions
                           contemplated by this Plan, or conditioning such
                           transactions or actions on certain factors, shall not
                           be required in order to accomplish Reinstatement.

                  1.1.99.  RELIABLE STEEL ADVERSARY ACTION. The adversary action
                           commenced by Reliable Steel, Inc. before the
                           Bankruptcy Court, being Case No. 97-20554-GWZ to
                           foreclose upon the Reliable Steel Lien Claim.

                  1.1.100. RELIABLE STEEL LIEN CLAIM. The Claim of Reliable
                           Steel, Inc. for $249,322.85 plus interest, attorneys
                           fees and additional damages subject to the Second
                           Amended Notice and Claim of Lien recorded on January
                           22, 1997 and the Notice of Lien recorded on August
                           22, 1996, both with the County Recorder of Clark
                           County, Nevada

                  1.1.101. REORGANIZED GAMING CORP. Stratosphere Gaming Corp., a
                           Nevada corporation, on and after the Effective Date.

                  1.1.102. REORGANIZED GAMING CORP. ARTICLES. The Restated
                           Articles of Incorporation of Reorganized Gaming
                           Corp., which shall be substantially in the form filed
                           with the Bankruptcy Court as part of the Plan
                           Supplement.

                  1.1.103. REORGANIZED GAMING CORP. BY-LAWS. The Restated
                           By-Laws of Reorganized Gaming Corp., which shall be
                           substantially in the form filed with the Bankruptcy
                           Court as part of the Plan Supplement.

                  1.1.104. REORGANIZED STRATOSPHERE. Stratosphere Corporation, a
                           Delaware





                                       19
<PAGE>   21



                           corporation, on and after the Effective Date.

                  1.1.105. REORGANIZED STRATOSPHERE ARTICLES. The Restated
                           Certificate of Incorporation of Reorganized
                           Stratosphere, which shall be substantially in the
                           form filed with the Bankruptcy Court as part of the
                           Plan Supplement.

                  1.1.106. REORGANIZED STRATOSPHERE BY-LAWS. The Restated
                           By-Laws of Reorganized Stratosphere, which shall be
                           substantially in the form filed with the Bankruptcy
                           Court as part of the Plan Supplement.

                  1.1.107. SCHEDULES. The schedules of assets and liabilities
                           and any amendments thereto filed by the Debtors with
                           the Bankruptcy Court in accordance with Section
                           521(1) of the Bankruptcy Code.

                  1.1.108. SEC. The United States Securities and Exchange
                           Commission.

                  1.1.109. SECURED CLAIM. A Claim that is secured by a lien
                           against property of the Estate to the extent of the
                           value of any interest in property of the Estate
                           securing such Claim or to the extent of the amount of
                           such Claim subject to setoff in accordance with
                           Section 553 of the Bankruptcy Code, in either case as
                           determined pursuant to Section 506(a) of the
                           Bankruptcy Code.

                  1.1.110. SECURED TAX CLAIMS. The Claim of any state or local
                           governmental unit which is secured by a lien against
                           property owned by the Debtors by operation of
                           applicable law, including, but not limited to, every
                           such Claim for unpaid real and personal property
                           taxes together with statutory interests.

                  1.1.111. SECURITIES ACT. The Securities Act of 1933, as
                           amended, and the regulations promulgated thereunder.

                  1.1.112. SKY HIGH. Sky High, L.L.C. (successor in interest to
                           the Claims held by Grace Brothers, Ltd.) and its
                           successors and assigns.

                  1.1.113. STANDBY EQUITY COMMITMENT. The Standby Equity
                           Commitment dated March 9, 1995, by and between
                           Stratosphere and Grand.

                  1.1.114. STATUTORY COMMITTEE. Collectively, the Creditors
                           Committee, the Noteholders Committee (and any
                           successor committee) and any other committee
                           appointed pursuant to Section 1102 of the Bankruptcy
                           Code.

                  1.1.115. STOCKHOLDERS' AGREEMENT. The agreement the Majority
                           Original Holders have agreed amongst themselves to be
                           entered on the Effective Date which will determine
                           certain matters with respect to the management and
                           financing of Reorganized Stratosphere and Reorganized
                           Gaming Corp. The Shareholders Agreement shall be
                           substantially in the form filed with the Bankruptcy
                           Court as part of the Plan Supplement.

                  1.1.116. STRATOSPHERE. Stratosphere Corporation, a Delaware
                           corporation, one





                                       20
<PAGE>   22



                           of the debtors and debtors-in-possession in the
                           Chapter 11 Cases pending before the Bankruptcy Court.

                  1.1.117. STUPAK. Robert Stupak, individually, and Affiliates.

                  1.1.118. SUBORDINATED CLAIM. Any Claim or Equity Interest
                           subordinated, for purposes of distribution or
                           otherwise, pursuant to Section 510 of the Bankruptcy
                           Code.

                  1.1.119. TAXES. All income, gaming, franchise, excise, sales,
                           use, employment, withholding, property, payroll or
                           other taxes, assessments, or governmental charges,
                           together with any interest, penalties, additions to
                           tax, fines, and similar amounts relating thereto,
                           imposed or collected by any federal, state, local or
                           foreign governmental authority.

                  1.1.120. TERM SHEET. The term sheet executed by the Majority
                           Holders with respect to management and corporate
                           governance of Reorganized Stratosphere and
                           Reorganized Gaming Corp. A copy of the Term Sheet is
                           filed with the Bankruptcy Court as part of the Plan
                           Supplement. To the extent of inconsistencies between
                           the Term Sheet and the Stockholders' Agreement, New
                           Common Stock Registration Rights' Agreement,
                           Litigation LLC Members Agreement, Reorganized Gaming
                           Corp. Articles, Reorganized Gaming Corp. Bylaws,
                           Reorganized Stratosphere Articles and Reorganized
                           Stratosphere Bylaws, the latter documents shall
                           prevail. 

                  1.1.121. VOTING RECORD DATE. The date established by the
                           Bankruptcy Court for purposes of voting on this Plan
                           by holders of Allowed Claims arising out of the
                           Original First Mortgage Notes.

                  1.1.122. UNAPPROVED NOTEHOLDERS. Any A Majority Original
                           Holder of an Allowed Original First Mortgage Note
                           Claim who, as the Effective Date, has not received
                           the requisite approvals of the Gaming Authorities to
                           receive a Pro Rata share of New Common Stock under
                           this Plan.

         1.2.     COMPUTATION OF TIME. In computing any period of time
                  prescribed or allowed by this Plan, unless otherwise expressly
                  provided, the provisions of Bankruptcy Rule 9006(a) shall
                  apply.

         1.3.     RULES OF INTERPRETATION. For purposes of this Plan and the
                  Plan Supplement only; (i) any reference in this Plan or Plan
                  Supplement to a contract, instrument, release, indenture, or
                  other agreement or document's being in particular form or on
                  particular terms and conditions means that such document shall
                  be substantially in such form or substantially on such terms
                  and conditions; (ii) any reference in this Plan or Plan
                  Supplement to an existing document or exhibit filed or to be
                  filed means such document or exhibit as it may have been or
                  may be amended, modified, or supplemented; (iii) unless
                  otherwise specified, all references in this Plan or Plan
                  Supplement to Sections, Articles, Schedules and Exhibits are
                  references to Sections, Articles, Schedules and Exhibits of or
                  to this Plan; (iv) the words "herein," "hereof,"





                                       21
<PAGE>   23



                  "hereto," and "hereunder" refer to this Plan in its entirety
                  rather than to a particular portion of this Plan; (v) captions
                  and headings to Articles and Sections are inserted for
                  convenience of reference only and are not intended to be a
                  part of or to affect the interpretation of this Plan; and (vi)
                  the rules of construction set forth in Section 102 of the
                  Bankruptcy Code and in the Bankruptcy Rules shall apply unless
                  otherwise expressly provided.

2.       TREATMENT OF UNCLASSIFIED CLAIMS

         2.1.     GENERAL The Claims against the Debtors set forth in this
                  Article 2 are not designated as Classes pursuant to Section
                  1123(a)(1) of the Bankruptcy Code. The holders of such Claims
                  are not entitled to vote on this Plan. The treatment of the
                  Claims set forth below is consistent with the requirements of
                  Section 1129(a)(9)(A) of the Bankruptcy Code.

         2.2.     TREATMENT OF ADMINISTRATIVE CLAIMS.

                  2.2.1.   GENERALLY. Each Allowed Administrative Claim
                           (including all accrued U.S. Trustee quarterly fees),
                           other than Preserved Ordinary Course Administrative
                           Claims and Reclamation Claims, shall be paid in full
                           in Cash (or otherwise satisfied in accordance with
                           its terms) upon the latest of: (i) the Effective
                           Date, or as soon thereafter as practicable; (ii) such
                           date as may be fixed by the Bankruptcy Court, or as
                           soon thereafter as practicable; (iii) the tenth
                           (10th) Business Day after such Claim is Allowed, or
                           as soon thereafter as practicable; and (iv) such date
                           as the holder of such Claim and Reorganized
                           Stratosphere or Reorganized Gaming Corp., as the case
                           may be, have agreed or shall agree.

                  2.2.2.   REQUESTS FOR PAYMENT. All requests for payment of
                           Administrative Claims (except for Professional Fees
                           and Preserved Ordinary Course Administrative Claims)
                           must be filed by the Administrative Claims Bar Date
                           or the holders thereof shall be forever barred from
                           asserting such Administrative Claims against the
                           Debtors, Reorganized Stratosphere and Reorganized
                           Gaming Corp. All final applications for allowance and
                           disbursement of Professional Fees must be filed by
                           the Professional Fee Bar Date. All such applications
                           must be in compliance with all of the terms and
                           provisions of any applicable order of the Bankruptcy
                           Court, including the Confirmation Order, and all
                           other orders governing payment of Professional Fees.
                           Such applications may be later amended to include any
                           fees and costs incurred after the Confirmation Date.

         2.3.     PRESERVED ORDINARY COURSE ADMINISTRATIVE CLAIMS. Each Allowed
                  Preserved Ordinary Course Administrative Claim shall be paid,
                  performed or settled by Reorganized Stratosphere or
                  Reorganized Gaming Corp., as the case may be, pursuant to
                  either: (i) the terms and conditions under which such Claim
                  arose; or (ii) in the ordinary course of Reorganized
                  Stratosphere or Reorganized Gaming






                                       22
<PAGE>   24



                  Corp.'s business. Such payments shall be made by Reorganized
                  Stratosphere or Reorganized Gaming Corp., as the case may be,
                  without further action by the holder of such Claim.

         2.4.     ALLOWED PRIORITY TAX CLAIMS. Each Allowed Priority Tax Claim,
                  if any, will be paid in full in Cash on the Effective Date;
                  provided, however, that Reorganized Stratosphere or
                  Reorganized Gaming Corp., as the case may be, may elect to pay
                  such Claims (except for taxes owing on account of gaming
                  operations to the City of Las Vegas, County of Clark and State
                  of Nevada) through deferred Cash payments over a period not
                  exceeding six (6) years after the date of assessment of such
                  Claim, of a value as of the Effective Date, equal to the
                  Allowed amount of such Claim. In that event, such payments
                  shall be made in equal annual installments of principal, plus
                  interest accruing from the Effective Date at the rate on the
                  unpaid portion of Allowed Priority Tax Claim set forth in
                  Internal Revenue Code Sections 6621 and 6622. The first such
                  payment shall be payable on the latest of: (i) the Effective
                  Date; (ii) the tenth (10th) Business Day after the date on
                  which an order allowing such Claim becomes a Final Order; and
                  (iii) such other time as is agreed upon by the holder of such
                  Claim and Reorganized Stratosphere or Reorganized Gaming
                  Corp., provided, however, that Reorganized Stratosphere or
                  Reorganized Gaming Corp., as the case may be, shall have the
                  right to prepay any such Allowed Priority Tax Claim, or any
                  remaining balance of such Claim, in full or in part, at any
                  time on or after the Effective Date, without premium or
                  penalty.

         2.5.     ALLOWED RECLAMATION CLAIMS. All requests for payment of
                  Reclamation Claims must be filed by the Bar Date or the
                  holders thereof shall be forever barred from asserting such
                  Reclamation Claim against the Debtors, Reorganized
                  Stratosphere, and Reorganized Gaming Corp. Each Allowed
                  Reclamation Claim shall be paid in full in Cash upon the
                  latest of: (i) the Effective Date, or as soon thereafter as
                  practicable; (ii) such date as may be fixed by the Bankruptcy
                  Court, or as soon thereafter as practicable; (iii) the tenth
                  (10th) Business Day after such Claim is Allowed during the
                  Chapter 11 Cases, or as soon thereafter as practicable; and
                  (iv) such date as the holder of such Reclamation Claim and
                  Reorganized Stratosphere or Reorganized Gaming Corp., as the
                  case may be, have agreed or shall agree.


3.       DESIGNATION OF CLASSES OF CLAIMS AND EQUITY INTERESTS

         Pursuant to this Plan and in accordance with Section 1123(a)(1) of the
Bankruptcy Code, all Claims of Creditors and the holders of Equity Interests and
the Gaming Corp. Common Stock (except Administrative Claims, Priority Tax
Claims, Reclamation Claims, and Preserved Ordinary Course Administrative Claims)
are placed in the Classes described below. A Claim, Equity Interest and the
Gaming Corp. Common Stock, is classified in a particular Class only to the
extent that the Claim, Gaming Corp. Common Stock or Equity Interest qualifies
within the description of that Class and is classified in other Classes only to
the extent that any remainder of the Claim, Gaming Corp. Common Stock or Equity
Interest qualifies within the description of such other Classes. A Claim is also
classified in a particular Class only to the extent that such Claim is an
Allowed Claim in that Class and has not been paid, released or otherwise
satisfied prior to the Effective Date. With respect to Classes of Claims and
Gaming Corp. Common Stock described as unimpaired under the





                                       23
<PAGE>   25


Plan, except as otherwise provided under this Plan, nothing shall affect the
rights and legal and equitable defenses of the Debtors, Reorganized Stratosphere
or Reorganized Gaming Corp. in respect of such Claims and Gaming Corp. Common
Stock classified as unimpaired under this Plan, including but not limited to,
all rights in respect of legal and equitable defenses to setoff or recoupment
against such Claims and Gaming Corp. Common Stock.

3.1.     SUMMARY OF CLASSIFICATION

         Class 1:     Priority Wage Claims               Unimpaired
                                                         - no solicitation 
                                                         required

         Class 2:     Priority Benefit Plan              Unimpaired
                      Contribution Claims                - no solicitation 
                                                         required

         Class 3:     Priority Customer Deposit          Unimpaired
                      Claims                             - no solicitation 
                                                         required

         Class 4:     Secured Tax Claims                 Unimpaired
                                                         - no solicitation 
                                                         required

         Class 5:      Miscellaneous Secured Claims      Unimpaired
                                                         - no solicitation 
                                                         required

         Class 6:     Original First Mortgage Note       Impaired
                      Claims                             - entitled to vote

         Class 7:     Heller Lease Claims                Impaired
                                                         - entitled to vote

         Class 8:     Capital Lease Claims               Impaired
                                                         - entitled to vote

         Class 9:     General Unsecured Claims           Impaired
                                                         - entitled to vote

         Class 10:    Reliable Steel Lien Claim          Impaired
                                                         - entitled to vote

         Class 11:    Gaming Corp. Common Stock          Unimpaired
                                                         - not entitled to vote

         Class 12:    Equity Interests and               Impaired
                      Equity Interests - Related         - deemed rejected
                      Claims


3.2.     SPECIFIC CLASSIFICATION


         3.2.1.   CLASS 1 - PRIORITY WAGE CLAIMS. Class 1 consists of all 
                  Claims that are entitled to priority under Section 507(a)(3)
                  of the Bankruptcy Code.






                                       24
<PAGE>   26








                  3.2.2.   CLASS 2  - PRIORITY BENEFIT PLAN CONTRIBUTION CLAIMS.
                           Class 2 consists of all Claims that are entitled to
                           priority under Section 507(a)(4) of the Bankruptcy
                           Code.

                  3.2.3.   CLASS 3 - PRIORITY CUSTOMER DEPOSIT CLAIMS.  Class 3
                           consists of all Claims that are entitled to
                           priority under 507(a)(6) of the Bankruptcy Code 29

                  3.2.4.   CLASS 4 - SECURED TAX CLAIMS. Class 4 consists of all
                           Secured Tax Claims.  Each holder of a Secured Tax 
                           Claim shall be considered to be in its own separate
                           subclass within Class 4, and each such subclass 
                           shall be deemed to be a separate Class for purposes
                           of this Plan.

                  3.2.5.   CLASS 5 - MISCELLANEOUS SECURED CLAIMS. Class 5 
                           consists of all Secured Claims, other than Secured
                           Claims in Class 4, Class 6, Class 7, Class 8 and
                           Class 10. Each holder of a Miscellaneous Secured     
                           Claim shall be considered to be in its own separate
                           subclass within Class 5, and each such subclass
                           shall be deemed to be a separate Class for purposes
                           of this Plan.

                  3.2.6.   CLASS 6 - ORIGINAL FIRST MORTGAGE NOTE CLAIMS.  
                           Class 6 consists of the Allowed Secured Claims 
                           under the Original First Mortgage Notes.

                  3.2.7.   CLASS 7 - HELLER CAPITAL LEASE CLAIMS.  Class 7 
                           consists of the Heller Capital Lease Claims.

                  3.2.8.   CLASS 8 - CAPITAL LEASE CLAIMS. Class 8 consists of 
                           the Capital Lease Claims.

                  3.2.9.   CLASS 9 - GENERAL UNSECURED CLAIMS.  Class 9 
                           consists of all General Unsecured Claims, including
                           the Grand Subordinated Claims and the unsecured
                           deficiency Claim of the Indenture Trustee and
                           holders of the Original First Mortgage Notes.

                  3.2.10.  CLASS 10 - RELIABLE STEEL LIEN CLAIM. Class 10 
                           consists of the Reliable Steel Lien Claim

                  3.2.11.  CLASS 11 - GAMING CORP. COMMON STOCK.  Class 11 
                           consists of the Gaming Corp. Common Stock held by 
                           Stratosphere.

                  3.2.12.  CLASS 12 - EQUITY INTERESTS AND EQUITY INTEREST 
                           RELATED CLAIMS. Class 12 consists of all Equity 
                           Interests and all Equity Interest Related Claims.


4.       DESIGNATION OF AND PROVISIONS FOR TREATMENT OF CLASSES OF 
         CLAIMS NOT IMPAIRED BY THIS PLAN

         4.1.     CLASS 1 - PRIORITY WAGE CLAIMS. Each Allowed Priority Wage
                  Claim shall be paid in full in Cash upon the latest of: (i)
                  the Effective Date, or as soon thereafter






                                       25
<PAGE>   27



                  as practicable; (ii) such date as may be fixed by the
                  Bankruptcy Court, or as soon thereafter as practicable; (iii)
                  the tenth (10th) Business Day after such Claim is Allowed, or
                  as soon thereafter as practicable; and (iv) such date as the
                  holder of such Claim and Reorganized Stratosphere or
                  Reorganized Gaming Corp., as the case may be, have agreed or
                  shall agree. Class 1 is unimpaired under this Plan. Holders of
                  Allowed Claims in Class 1 are not entitled to vote on this
                  Plan.

         4.2.     CLASS 2 - PRIORITY BENEFIT PLAN CONTRIBUTION CLAIMS. Each
                  Allowed Priority Benefit Plan Contribution Claim, if any,
                  shall be paid in full in Cash upon the latest of: (i) the
                  Effective Date, or as soon thereafter as practicable; (ii)
                  such date as may be fixed by the Bankruptcy Court, or as soon
                  thereafter as practicable; (iii) the tenth (10th) Business Day
                  after such Claim is Allowed, or as soon thereafter as
                  practicable; and (iv) such date as the holder of such Claim
                  and Reorganized Stratosphere or Reorganized Gaming Corp., as
                  the case may be, have agreed or shall agree. Class 2 is
                  unimpaired under this Plan. Holders of Allowed Claims in Class
                  2 are not entitled to vote on this Plan.

         4.3.     CLASS 3 - PRIORITY CUSTOMER DEPOSIT CLAIMS. Each Allowed
                  Priority Customer Deposit Claim, if any, shall be paid in full
                  in Cash, unless the holder of such Priority Customer Deposit
                  Claim and Reorganized Stratosphere or Reorganized Gaming
                  Corp., whichever is applicable, agree to a different
                  treatment, upon the latest of: (i) the Effective Date, or as
                  soon thereafter as practicable; (ii) such date as may be fixed
                  by the Bankruptcy Court, or as soon thereafter as practicable;
                  (iii) the tenth (10th) Business Day after such Claim is
                  Allowed, or as soon thereafter as practicable; (iv) such date
                  as the holder of such Claim and Reorganized Stratosphere or
                  Reorganized Gaming Corp., as the case may be, have agreed or
                  shall agree; and (v) a date when such Priority Customer
                  Deposit Claim becomes due and owing. Class 3 is unimpaired
                  under this Plan. Holders of Allowed Claims in Class 3 are not
                  entitled to vote on this Plan.

         4.4.     CLASS 4 - SECURED TAX CLAIMS Each Allowed Secured Tax Claim
                  shall be paid in full in Cash upon the latest of: (i) the
                  Effective Date, or as soon thereafter as practicable; (ii)
                  such date as may be fixed by the Bankruptcy Court, or as soon
                  thereafter as practicable; (iii) the tenth (10th) Business Day
                  after such Claim is Allowed, or as soon thereafter as
                  practicable; (iv) the date on which such Secured Tax Claim is
                  scheduled to be paid in the ordinary course of business under
                  applicable law or regulation; and (v) such date as the holder
                  of such Claims and Reorganized Stratosphere or Reorganized
                  Gaming Corp., as the case may be, have agreed or shall agree.
                  Class 4 is unimpaired under this Plan. Holders of Allowed
                  Claims in Class 4 are not entitled to vote on this Plan.

         4.5.     CLASS 5 - MISCELLANEOUS SECURED CLAIMS. On the Effective Date,
                  at Reorganized Stratosphere's or Reorganized Gaming Corp.'s
                  option, the holder of any Allowed Secured Claim in Class 5
                  shall receive one (1) of the following alternative treatments:

                          a)   the holder of such Claim shall be treated in 
                  accordance with the










                                      26

<PAGE>   28



                  terms and conditions of all Debt Instruments  evidencing such
                  Claim and the legal, equitable or contractual rights to which
                  each holder of such Claim is entitled shall not otherwise be
                  altered;

                          b)   any default, other than a default of the kind
                  specified in Section 365(b)(2) of the Bankruptcy Code, shall
                  be Cured or Reinstated;

                               i) the maturity of the Claims shall be Reinstated
                          as such maturity before any default; and

                               ii) the other legal, equitable or contractual
                          rights to which the holder of the Claim is entitled
                          shall not otherwise be altered, provided, however,
                          that as to any Allowed Class 5 Claim which is a
                          nonrecourse Claim and exceeds the value of the
                          collateral securing the Claim, the collateral may be
                          sold at a sale at which the holder of such Claim has
                          an opportunity to bid;

                          c) on the Effective Date, or on such other date
                  thereafter as may be agreed to by Reorganized Stratosphere or
                  Reorganized Gaming Corp., as applicable, and the holder of
                  such Claim, the Estate shall abandon the collateral securing
                  such Claim to the holder thereof in full satisfaction and
                  release of such Claim; or

                          d) on the Effective Date, the holder of such Claim
                  shall receive, on account of such Claim, Cash equal to its
                  Allowed Secured Claim, or such lesser amount to which the
                  holder of such Claim shall agree, in full satisfaction and
                  release of such Claim.

                  Class 5 is unimpaired under this Plan. Holders of Allowed
                  Claims in Class 5 are not entitled to vote on this Plan.

         4.6.     CLASS 11 - GAMING CORP. COMMON STOCK. On the Effective Date,
                  Reorganized Stratosphere shall own the Gaming Corp. Common
                  Stock and Reorganized Gaming Corp. shall continue as a
                  wholly-owned subsidiary of Reorganized Stratosphere. Class 11
                  is unimpaired under this Plan. The holder of the Class 11
                  Gaming Corp. Common Stock is not entitled to vote on this
                  Plan.


5.       DESIGNATION OF AND PROVISIONS FOR TREATMENT OF CLASSES OF 
         CLAIMS AND EQUITY INTERESTS IMPAIRED BY THIS PLAN

         5.1.     CLASS 6 - ORIGINAL FIRST MORTGAGE NOTES The holders of Allowed
                  Secured Claims arising out of Original First Mortgage Notes
                  are impaired and shall receive the following treatment under
                  this Plan.


                  5.1.1.      DISTRIBUTIONS. From and after the Effective Date,
                              each holder of Original First Mortgage Notes as of
                              the Distribution Record Date shall receive (1) its
                              Pro Rata distribution of two million thirty
                              thousand (2,030,000) shares of New Common Stock
                              upon receipt of requisite


                                       27
<PAGE>   29




                              Gaming Authority approvals as provided for in
                              Section 5.1.2. below in consideration for the
                              Secured Claim portion of their Allowed Original
                              First Mortgage Note Claim; and (2) from the
                              Litigation LLC its Pro Rata distribution of
                              Litigation LLC Shares.


                  5.1.2.      DISBURSING AGENT. With respect to each holder of
                              an Allowed Original First Mortgage Note Secured
                              Claim that is not a Majority Original Holder,
                              Reorganized Stratosphere shall distribute such
                              holder's Pro Rata share of New Common Stock to the
                              Indenture Trustee, as Disbursing Agent, on the
                              Distribution Date. As soon as practicable after
                              the Indenture Trustee receives a notice of
                              compliance with the provisions of Section 5.1.3
                              below from the Litigation LLC, the Indenture
                              Trustee shall distribute such New Common Stock to
                              the holders of such claims in accordance with the
                              terms of this Plan and the Original First Mortgage
                              Indenture. With respect to Majority Original
                              Holders of Allowed Original First Mortgage Note
                              Secured Claims, upon approval of such holder by
                              the Gaming authorities (which shall be evidenced
                              by a written notice from the Gaming Authorities to
                              the Reorganized Debtor), whereupon such holder
                              shall become an Approved Noteholder, Reorganized
                              Stratosphere shall immediately distribute such
                              Approved Noteholder's Pro Rata Share of New Common
                              Stock, including dividends, rights, or other
                              distributions, if any, that shall have theretofore
                              been paid in respect of the New Common Stock, to
                              the Indenture Trustee. As soon as practicable
                              after the Indenture Trustee receives a notice of
                              compliance with the provisions of Section 5.1.3
                              below from the Litigation LLC, the Indenture
                              Trustee shall deliver the Pro Rata share of New
                              Common Stock to such Approved Noteholder in
                              accordance with the terms of the Plan and the
                              Original First Mortgage Indenture. Reorganized
                              Stratosphere shall hold in escrow all shares of
                              New Common Stock on account of Unapproved
                              Noteholders until such time as the Majority
                              Original Holder becomes an Approved Noteholder and
                              the new Common Stock is distributed to the
                              Indenture Trustee as set forth above; provided,
                              however, that if the Gaming Authorities notify a
                              Majority Original Holder that it will not be found
                              suitable, such holder may either, at its election
                              and to the extent allowed by gaming regulations,
                              (a) request the immediate distribution to it of
                              its Pro Rata share of New Common Stock, for
                              ultimate disposal in accordance with Gaming
                              authority regulations and laws, or (b) attempt to
                              sell, assign or otherwise dispose of sufficient
                              Original First Mortgage Notes to eliminate the
                              necessity of having to be found suitable by the
                              Gaming Authorities.

                  5.1.3.      SURRENDER OF SECURITIES OR DEBT INSTRUMENTS. On 
                              or before the Distribution Date, or as soon as
                              practicable thereafter, each holder of an Debt
                              Instrument evidencing an Allowed Secured  Claim
                              on account of Original First Mortgage Notes shall
                              surrender such Debt Instrument to the Litigation
                              LLC. No distribution of property hereunder shall
                              be made






                                       28
<PAGE>   30



                              to or on behalf of any such holder unless and
                              until such instrument is received by the
                              Litigation LLC, or the unavailability of such Debt
                              Instrument is reasonably established to the
                              satisfaction of the Litigation LLC Board of
                              Managers, and, with regard to New Common Stock,
                              Reorganized Stratosphere. In the event any holder
                              of an Allowed Original First Mortgage Note seeks
                              to establish the unavailability of the Debt
                              Instrument evidencing such Claim, the Litigation
                              LLC Board of Managers, shall, within the first
                              Business Day thirty (30) days after receipt of the
                              holders evidence of unavailability and statement
                              of indemnity of the Litigation LLC Board of
                              Managers, Reorganized Stratosphere and the
                              Indenture Trustee (i) provide the holder, in
                              writing, with a detailed description regarding the
                              unacceptableness of such evidence and statement of
                              indemnity; or (ii) deliver to the Indenture
                              Trustee and Reorganized Stratosphere a notice of
                              compliance and distribute to such holder its
                              Pro-Rata Share of Litigation LLC Shares. Any such
                              holder who fails to surrender or cause to be
                              surrendered such Debt Instrument or fails to
                              execute and deliver an affidavit of loss and
                              indemnity reasonably satisfactory to the
                              Litigation LLC Board of Managers and Reorganized
                              Stratosphere prior to the second anniversary of
                              the Effective Date, shall be deemed to have
                              forfeited all rights and Claims in respect of such
                              Debt Instrument and shall not participate in any
                              distribution hereunder, and all property in
                              respect of such forfeited distribution, including
                              interest accrued thereon, shall revert to
                              Reorganized Stratosphere notwithstanding any
                              federal or state escheat laws to the contrary.


                  5.1.4.      DISTRIBUTION RECORD DATE At the close of business
                              on the Distribution Record Date, the transfer
                              ledgers of the Indenture Trustee shall be closed,
                              and there shall be no further changes in the
                              record holders of the Original First Mortgage
                              Notes. Reorganized Stratosphere, the Litigation
                              LLC Board of Managers and the Indenture Trustee
                              shall have no obligation to recognize any transfer
                              of such Original First Mortgage Notes occurring
                              after the Distribution Record Date. Reorganized
                              Stratosphere, the Indenture Trustee and Litigation
                              LLC Board of Managers shall be entitled instead to
                              recognize and deal for all purposes hereunder with
                              only those record holders stated on the transfer
                              ledgers as of the close of business on the
                              Distribution Record Date.

                  5.1.5.      DELIVERY OF DISTRIBUTIONS.  Distributions of New
                              Common Stock will be made by Reorganized
                              Stratosphere to the Indenture Trustee and
                              distribution of Litigation LLC Shares shall be
                              made by the Litigation LLC to holders of Original
                              First Mortgage Notes in accordance with Sections
                              5.1.1, 5.1.2, 5.1.3 and   5.1.4 above at the
                              addresses contained in the official records of
                              the Indenture Trustee. If any holder's
                              distribution is returned as undeliverable, no
                              further distributions to such holder shall be
                              made unless and until the Indenture Trustee and
                              Litigation LLC are notified of such holder's then
                              current address, at which time all missed






                                       29
<PAGE>   31



                              distributions shall be made to such holder without
                              interest. Undeliverable distributions shall be
                              returned to Reorganized Stratosphere, until such
                              distributions are claimed. All claims for
                              undeliverable distributions shall be made on or
                              before the second anniversary of the Effective
                              Date. After such date, all unclaimed property
                              shall revert to Reorganized Stratosphere and the
                              Claim of any holder or successor to such holder
                              with respect to such property shall be discharged
                              and forever barred notwithstanding any federal or
                              state escheat laws to the contrary.


                  5.1.6.      FEES AND EXPENSES. All unpaid reasonable fees,
                              costs, charges, and any other expenses incurred
                              under the Original First Mortgage Indenture,
                              including any reasonable fees and expenses of
                              professionals retained by the Indenture Trustee as
                              of the Effective Date shall be paid by the Debtors
                              or Reorganized Stratosphere, as the case may be,
                              to the Indenture Trustee upon approval of the
                              Bankruptcy Court. After the Effective Date, all
                              reasonable fees, costs, charges and expenses
                              payable to the Indenture Trustee under the
                              Original First Mortgage Indenture including any
                              such items incurred by the Indenture Trustee in
                              its capacity as Disbursing Agent under this Plan,
                              shall be paid by Reorganized Stratosphere and
                              Reorganized Gaming Corporation in accordance with
                              the Original First Mortgage Indenture without
                              further Bankruptcy Court approval.

                  5.1.7.      SECTION 363(k) RIGHT TO CREDIT BID.  In the event
                              that an Alternative Transaction Proposal is
                              presented by Debtors and is considered by the
                              Bankruptcy Court at the   Confirmation Hearing,
                              the Indenture Trustee shall have the right (if
                              appropriate under the circumstances) pursuant to
                              Section 363(k) of the Bankruptcy Code to credit
                              bid all or a portion of the Allowed Claim of the
                              holders of Original First Mortgage Notes.


         5.2.     CLASS 7 - HELLER CAPITAL LEASE CLAIMS. On the Effective Date
                  Reorganized Stratosphere and Reorganized Gaming Corp. shall
                  execute and deliver to Heller the Amended Heller Capital
                  Lease. The Amended Heller Capital Lease shall provide for the
                  same payment schedule as the Heller Capital Lease but shall
                  not include the financial covenants as set forth in Section
                  13.16 of the Heller Capital Lease. In addition, Reorganized
                  Stratosphere and Reorganized Gaming Corp. shall execute and
                  deliver to Heller and any such other and further documentation
                  necessary to implement the terms and conditions of the Amended
                  Heller Capital Lease. In addition, any other terms,
                  conditions, warranty or covenant of the Heller Capital Lease
                  which would be deemed breached or violated by the transaction
                  proposed in this Plan shall be deemed cured on the Effective
                  Date. In all other respects, the legal, equitable and
                  contractual rights of Heller shall not otherwise be altered or
                  impaired.

         5.3.     CLASS 8 - CAPITAL LEASE CLAIMS. On the Effective Date
                  Reorganized Stratosphere and Reorganized Gaming Corp., as
                  applicable, shall execute and deliver to First Security and
                  the Capital Lease Bank Group the Amended Capital Lease
                  Agreement


                                       30
<PAGE>   32



                  and the Amended Participation Agreement. The Amended
                  Participation Agreement shall provide for the same payment
                  schedule as the Original Participation Agreement but shall not
                  include Section 5.16 of the Original Participation Agreement.
                  In addition, any other terms, conditions, warranty or covenant
                  of the Original Participation Agreement or Original Capital
                  Lease Agreement which would be deemed breached or violated by
                  the transaction proposed by this Plan shall be deemed cured on
                  the Effective Date. In all other respects, the legal,
                  equitable and contractual rights of Capital Lease Bank Group
                  shall not otherwise be altered or impaired.


         5.4.     CLASS 9 - GENERAL UNSECURED CLAIMS. Each holder of an Allowed
                  Class 9 General Unsecured Claim shall receive in full
                  satisfaction and settlement of its Allowed General Unsecured
                  Claim the lesser of such holder's Allowed General Unsecured
                  Claim or such holder's Pro Rata share of $6,000,000 Cash, upon
                  the latest of: (i) the Effective Date, or as soon thereafter
                  as practicable; (ii) the tenth (10th) Business Day after such
                  Claim is Allowed, or as soon thereafter as practicable; and
                  (iii) such date as the holder of such Claim and Reorganized
                  Stratosphere or Reorganized Gaming Corp., as the case may be,
                  have agreed or shall agree.

         5.5.     CLASS 10 - RELIABLE STEEL LIEN CLAIM The holder of the Allowed
                  Reliable Steel Lien Claim shall receive $125,000 Cash on the
                  Effective Date in full satisfaction and settlement of its
                  Reliable Steel Claim and the Reliable Steel Adversary Action


         5.6.     CLASS 12 - EQUITY INTERESTS AND EQUITY INTERESTS RELATED
                  CLAIMS Each holder of an Interest and each holder of an Equity
                  Interest Related Claim shall receive nothing, and the Equity
                  Interest shall be canceled and terminated without further act
                  or action under any applicable agreement, law, regulation,
                  order or rule.


6.       MEANS FOR IMPLEMENTATION OF PLAN


         6.1.     NEW COMMON STOCK. On the Effective Date, Reorganized
                  Stratosphere shall have Ten Million (10,000,000) shares of New
                  Common Stock authorized of which two million thirty thousand
                  (2,030,000) shares shall be issued and outstanding, all of
                  which shares of New Common Stock shall, in accordance with
                  this Plan, be issued to holders of Allowed Secured Original
                  First Mortgage Notes Claims in accordance with this Plan. Any
                  Person who receives ten percent (10%) or more of New Common
                  Stock under this Plan shall be deemed to have entered into the
                  New Common Stock Registration Rights Agreement with respect to
                  the New Common Stock.


         6.2.     CANCELLATION OF OLD COMMON STOCK. On the Effective Date, the
                  Old Common Stock (whether issued our outstanding or held in
                  the treasury of Stratosphere) shall be canceled and
                  extinguished, and holders of the Old Common Stock shall not
                  receive any equity or other interests in Reorganized
                  Stratosphere or any other consideration in exchange for the
                  cancellation and extinguishment of the Old Common Stock.

         6.3.     SATISFACTION OF ORIGINAL FIRST MORTGAGE NOTES AND ORIGINAL 
                  FIRST MORTGAGE





                                       31
<PAGE>   33




                  SECURITY DOCUMENTS. As set forth in Section 5.1.3 above,
                  commencing on the Effective Date, the Original First Mortgage
                  Notes shall be delivered to the Litigation LLC and the
                  Original First Mortgage Security Documents and Original
                  Subsidiary Guarantee released and reconveyed by the Indenture
                  Trustee and extinguished in part in exchange for the shares of
                  New Common Stock to be delivered to the holders of Original
                  First Mortgage Notes in accordance with this Plan. The
                  Original First Mortgage Notes and the instruments evidencing
                  Claims arising from Original First Mortgage Notes shall remain
                  in full force and effect, provided however, that by accepting
                  the distributions provided in Section 5.1 above (a) holders
                  thereof shall be deemed, on the Effective Date and without
                  further action by any party, to have transferred any and all
                  claims and causes of action they have, whether or not any
                  action has been commenced with respect thereto, relating to
                  Original First Mortgage Notes or the facts and circumstances
                  involved in their issuance and sale (including, without
                  limitation, the Standby Equity Commitment) to the Litigation
                  LLC and (b) holders thereof and the Litigation LLC and all
                  successors and assigns shall be deemed, on the Effective Date,
                  and without further action by any party, to have agreed to
                  forebear from exercising any rights against Reorganized
                  Stratosphere and Reorganized Gaming Corp. or their affiliates
                  whatsoever with respect to the Original First Mortgage Notes
                  and related documentation, except the right to receive
                  distributions from the Litigation LLC. Upon the dissolution of
                  the Litigation LLC, the Original First Mortgage Notes shall be
                  delivered to Reorganized Stratosphere. Other than (i) the
                  right to receive the two million thirty thousand (2,030,000)
                  shares of New Common Stock on the Distribution Date; (ii) the
                  right to participate in Class 9 distributions; and (iii) the
                  right to receive the Litigation LLC Shares, the holders of the
                  Original First Mortgage Notes shall not receive any equity or
                  other interest in Reorganized Stratosphere or any other
                  consideration in exchange for the Original First Mortgage
                  Notes, Original First Mortgage Security Documents and Original
                  Subsidiary Guarantee.


         6.4.     NO FRACTIONAL SHARES. No fractional shares of New Common Stock
                  shall be issued. The number of shares of New Common Stock
                  issuable to any holder of Original First Mortgage Notes will
                  be rounded to the nearest whole number with .50 shares being
                  rounded up.

         6.5.     INTERIM MANAGEMENT AGREEMENT On or before the Effective Date
                  subject to requisite Gaming Authority approvals, Stratosphere
                  may enter into the Interim Management Agreement pursuant to
                  which the designated manager shall manage the day-to-day
                  operations of Stratosphere until the Effective Date. In the
                  event that the Interim Management Agreement is not
                  effectuated, Debtors' management shall remain in place until
                  the Effective Date.

         6.6.     PHASE II. Subsequent to the Effective Date, the decision as to
                  construction and/or completion of Phase II, the scope and
                  design of Phase II and the means and method to finance Phase
                  II will rest with Reorganized Stratosphere. Nothing contained
                  in this Plan or the Confirmation Order is intended to or will
                  dictate or restrict Reorganized Stratosphere in this regard.
                  Approval of the Bankruptcy Court after





                                       32
<PAGE>   34



                  the Effective Date concerning Phase II will not be required
                  nor necessary.


         6.7.     NEW CERTIFICATE OF INCORPORATION AND BYLAWS. As of the
                  Effective Date, the certificates of incorporation and bylaws
                  of the Debtors shall be amended and restated substantially in
                  the forms of the Reorganized Stratosphere Articles,
                  Reorganized Stratosphere By-Laws, Reorganized Gaming Corp.
                  By-Laws, and Reorganized Gaming Corp. Articles, which provide
                  for, among other things, the authorization of any and all acts
                  necessary to effectuate this Plan including, without
                  limitation, the issuance of the New Common Stock. Such
                  restated certificates of incorporation and by-laws shall also
                  provide to the extent required by Section 1123(a) and (b) of
                  the Bankruptcy Code, for a provision prohibiting the issuance
                  of non-voting equity securities. The initial members of the
                  board of directors of Reorganized Stratosphere and Reorganized
                  Gaming Corp., as the case may be, shall serve until such
                  directors, or their successors are elected at a properly
                  noticed and constituted stockholders' meetings of Reorganized
                  Stratosphere and Reorganized Gaming Corp. After the Effective
                  Date, Reorganized Stratosphere and Reorganized Gaming Corp.
                  may amend and restate the Reorganized Stratosphere Articles,
                  Reorganized Stratosphere By-Laws, Reorganized Gaming Corp.
                  By-Laws and Reorganized Gaming Corp. Articles as permitted by
                  applicable law.

         6.8.     NO CORPORATE ACTION REQUIRED. As of the Effective Date: (i)
                  the adoption of the Reorganized Stratosphere Articles,
                  Reorganized Stratosphere By-Laws, Reorganized Gaming Corp.
                  Articles, Reorganized Gaming Corp. By-Laws or similar
                  constituent documents for Reorganized Stratosphere and
                  Reorganized Gaming Corp.; (ii) the initial selection of
                  directors and officers for Reorganized Stratosphere and
                  Reorganized Gaming Corp.; (iii) the adoption, execution,
                  delivery and implementation of all contracts, leases,
                  instruments, releases and other agreements related to or
                  contemplated by this Plan; and (iv) the other matters provided
                  for under or in furtherance of this Plan involving corporate
                  action to be taken by or required of the Debtors, Reorganized
                  Stratosphere or Reorganized Gaming Corp. shall be deemed to
                  have occurred and be effective as provided herein, and shall
                  be authorized and approved in all respects without further
                  order of the Bankruptcy Court or any requirement of further
                  action by the stockholders or directors of the Debtors,
                  Reorganized Stratosphere and Reorganized Gaming Corp. As of
                  the Effective Date, the term of each of the officers and
                  directors of the Debtors not continuing in office, if any,
                  shall terminate pursuant to the Confirmation Order without any
                  further action by the stockholders or directors of the
                  Debtors, Reorganized Stratosphere or Reorganized Gaming Corp.


         6.9.     DIRECTORS AND OFFICERS. On the Effective Date, the operation
                  of Reorganized Stratosphere and Reorganized Gaming Corp. shall
                  become the general responsibility of their respective boards
                  of directors, who shall thereafter have responsibility for the
                  management, control and operation or Reorganized Stratosphere
                  and Reorganized Gaming Corp, in accordance with this Plan,
                  applicable law, the Reorganized Stratosphere Articles,
                  Reorganized Stratosphere By-Laws, Reorganized Gaming Corp.
                  Articles, Reorganized Gaming Corp. By-Laws and the
                  Stockholders' Agreement. The names of the initial seven
                  members of the board of






                                       33
<PAGE>   35



                  directors and the chief executive officer of Reorganized
                  Stratosphere and the initial three members of the board of
                  directors of Reorganized Gaming Corp. shall be disclosed by
                  the Majority Original Holders by April 27, 1998, and if not so
                  nominated within two days thereafter, Stratosphere will
                  nominate the seven directors of Reorganized Stratosphere and
                  the three directors of Reorganized Gaming Corp. All such
                  directors and executive officers of Reorganized Stratosphere
                  and Reorganized Gaming Corp. shall be deemed to have been
                  elected or appointed, as the case may be, pursuant to the
                  Confirmation Order, but shall not take office until the
                  Effective Date. Those directors and officers not continuing in
                  office after the Effective Date, if any, shall be deemed
                  removed therefrom without cause as of the Effective Date
                  pursuant to the Confirmation Order and shall be indemnified by
                  Reorganized Stratosphere for all actions taken by such
                  directors and officers while acting as directors and officers
                  for the Debtors in accordance with the respective charters,
                  by-laws or contracts of Stratosphere or Gaming Corp. or
                  applicable state law on account of services provided by such
                  officers and directors to the Debtors, from the Petition Date
                  through and including the Effective Date. The existing
                  directors of Stratosphere and Gaming Corp., should they choose
                  to do so, will continue to serve as directors of Stratosphere
                  and Gaming Corp. from and after the Confirmation Date until
                  the Effective Date. During the period from the Confirmation
                  Date until the Effective Date, but not beyond the Effective
                  Date, all the existing directors of Stratosphere will be
                  compensated at $10,000 per quarter and $1,000 per meeting of
                  the Board of Directors for so long as they continue to serve
                  as directors of Stratosphere.


         6.10.    POST-EFFECTIVE DATE FINANCING. From and after the Effective
                  Date, Reorganized Stratosphere and Reorganized Gaming Corp.
                  shall have sole and complete discretion to raise capital for
                  any purpose authorized by the Reorganized Stratosphere
                  Articles in any manner provided, however, that during any
                  Interim Approval Period such efforts shall be in accordance
                  with the Shareholders Agreement.

         6.11.    DUTIES OF INDENTURE TRUSTEE. Following the Effective Date, the
                  Original First Mortgage Indenture shall remain in effect to
                  the extent required under this Plan and the Litigation LLC.
                  Except as set forth in this Plan with respect to its function
                  as Disbursing Agent, the Indenture Trustee shall take only
                  those actions as from time-to-time requested by the Litigation
                  LLC Board of Managers on behalf of the Litigation LLC, in
                  accordance with the Original First Mortgage Indenture. On the
                  Effective Date, the indemnity obligations to the Indenture
                  Trustee under the Original First Mortgage Indenture shall
                  become the obligations of Reorganized Stratosphere and
                  Reorganized Gaming Corporation, except that the Litigation LLC
                  shall in turn indemnify and hold harmless Reorganized
                  Stratosphere and Reorganized Gaming Corporation for all
                  actions taken by the Indenture Trustee at the request of the
                  Litigation LLC Board of Managers.


7.       EXECUTORY CONTRACTS AND UNEXPIRED LEASES


         7.1.     EXECUTORY CONTRACTS. All executory contracts set forth on the
                  schedule of rejected





                                       34
<PAGE>   36



                  executory contracts attached to this Plan as Exhibit "2," that
                  exist between the Debtors and any Person shall be deemed
                  rejected by Reorganized Stratosphere or Reorganized Gaming
                  Corp., as the case may be, as of the Effective Date, except
                  for any executory contract: (i) that has been rejected
                  pursuant to an order of the Bankruptcy Court entered prior to
                  the Confirmation Date; or (ii) as to which a motion for
                  approval of the rejection of such executory contract, if
                  applicable, has been filed with the Bankruptcy Court prior to
                  the Confirmation Date. Listing an Executory Contract on
                  Exhibit "2" shall not constitute an admission by the Debtors,
                  Reorganized Stratosphere or Reorganized Gaming Corp. that such
                  contract is an executory contract or that the Debtors,
                  Reorganized Stratosphere or Reorganized Gaming Corp. have any
                  liability thereunder. Listed on Exhibit "2" are those persons
                  who purchased vacation packages who have timely filed Proofs
                  of Claim in the Chapter 11 cases. While the Debtors do not
                  acknowledge that these vacation package holders are Creditors
                  of the Debtors or have executory contracts, to the extent that
                  the Bankruptcy Court determines that these persons have
                  executory contracts, such executory contracts shall be deemed
                  rejected.


         7.2.     UNEXPIRED LEASES. All unexpired leases set forth on the
                  schedule of rejected leases attached to this Plan as Exhibit
                  "3," that exist between the Debtors and any Person shall be
                  deemed rejected by Reorganized Stratosphere or Reorganized
                  Gaming Corp., as the case may be, as of the Effective Date,
                  except for any unexpired lease: (i) that has been rejected
                  pursuant to an order of the Bankruptcy Court entered prior to
                  the Confirmation Date; or (ii) as to which a motion for
                  approval of the rejection of such unexpired lease, if
                  applicable, has been filed with the Bankruptcy Court prior to
                  the Confirmation Date. Listing an Unexpired Lease on Exhibit
                  "3" shall not constitute an admission by the Debtors,
                  Reorganized Stratosphere or Reorganized Gaming Corp. that such
                  contract is an executory contract or that the Debtors,
                  Reorganized Stratosphere or Reorganized Gaming Corp. have any
                  liability thereunder.


         7.3.     APPROVAL OF ASSUMPTION OR REJECTION.  Entry of the
                  Confirmation Order as of the Effective Date shall constitute:
                  (i) the approval, pursuant to Section 365(a) of the Bankruptcy
                  Code, of the assumption of the executory contracts and
                  unexpired leases not listed on Exhibits "2" and "3" or
                  otherwise rejected during the Chapter 11 Cases; and (ii) the
                  approval, pursuant to Section 365(a) of the Bankruptcy Code,
                  of the rejection of the executory contracts and unexpired
                  leases rejected pursuant to this Plan or otherwise during the
                  Chapter 11 Cases. Notwithstanding anything contained herein to
                  the contrary, up to the Confirmation Date the Debtors shall
                  have the right to add to or delete from Exhibits "2" and "3"
                  any executory contract or unexpired lease.

         7.4.     CURE OF DEFAULTS. Reorganized Stratosphere or Reorganized
                  Gaming Corp., as the case may be, shall Cure any defaults
                  respecting each executory contract or unexpired lease assumed
                  pursuant to Section 7.3 of this Plan upon the latest of (i)
                  the Effective Date or as soon thereafter as practicable; (ii)
                  such dates as may be fixed by the Bankruptcy Court or agreed
                  upon by the parties, or as soon thereafter as practicable; or
                  (iii) the tenth (10th) Business Day after the entry of a Final
                  Order




                                       35
<PAGE>   37



                  resolving any dispute regarding (a) a Cure amount; (b) the
                  ability of Reorganized Stratosphere or Reorganized Gaming
                  Corp. to provide "adequate assurance of future performance;"
                  under the executory contract or unexpired lease assumed
                  pursuant to this Plan in accordance with Section 365(b)(1) of
                  the Bankruptcy Code; or (c) any matter pertaining to
                  assumption or the Cure of a particular executory contract or
                  an unexpired lease.


         7.5.     POST-PETITION DATE CONTRACTS AND LEASES. Executory contracts
                  and unexpired leases entered into and other obligations
                  incurred after the Petition Date by the Debtors shall be
                  performed by the Debtors, Reorganized Stratosphere, or
                  Reorganized Gaming Corp., as applicable, in the ordinary
                  course of their business.

         7.6.     BAR DATE. All proofs of Claims with respect to Claims arising
                  from the rejection of any executory contract or unexpired
                  lease shall be filed with the Bankruptcy Court no later than
                  thirty (30) days after the entry of the Confirmation Order.
                  Any Claim not filed within such time shall be forever barred.


         7.7.     INDEMNIFICATION OBLIGATIONS. Any obligations of the Debtors to
                  indemnify any officer, director or employee serving as a
                  fiduciary of any employee benefit plan or program of the
                  Debtors, pursuant to charter, by-laws, contract or applicable
                  state law shall be deemed to be, and shall be treated as, an
                  executory contract and assumed by Reorganized Stratosphere and
                  Reorganized Gaming Corp., as the case may be, on the Effective
                  Date. Any obligation of the Debtors to indemnify, reimburse,
                  or limit the liability of any officer, director, employee,
                  agent, professional, financial advisor, or underwriter of any
                  securities issued by the Debtors prior to the Petition Date
                  shall: (i) be rejected, canceled, and discharged pursuant to
                  this Plan as of the Effective Date; and (ii) be subordinated
                  pursuant to Section 510 of the Bankruptcy Code, provided
                  however, that the board of directors of Reorganized
                  Stratosphere is authorized to assume such obligation on or
                  after the Effective Date.


8.       LITIGATION LLC


         8.1.     PRESERVATION OF LITIGATION CLAIMS In accordance with Section
                  1123(b)(3) of the Bankruptcy Code, and except as otherwise
                  expressly provided herein, all Litigation Claims shall be
                  retained and reserved for the benefit of Reorganized
                  Stratosphere and Reorganized Gaming Corp.

         8.2.     ESTABLISHMENT OF LITIGATION LLC. On the Effective Date,
                  Reorganized Stratosphere and Reorganized Gaming Corp. shall
                  (i) execute the Litigation LLC Members Agreement (ii) take all
                  other steps necessary to establish the Litigation LLC; and
                  (iii) cause all Debtors-Owned Standby Equity Commitment Claims
                  to be assigned to the Litigation LLC as successor-in-interest
                  to Debtors. In addition, on the Effective Date the Litigation
                  LLC shall be appointed as representative and agent of the
                  Debtors to prosecute or compromise and/or abandon the
                  Litigation Claims on behalf of and with the consent of
                  Reorganized Stratosphere and Reorganized Gaming Corp. in
                  accordance with the Litigation LLC Members Agreement. At the
                  request of the Litigation LLC Board of Managers,






                                       36
<PAGE>   38



                  Reorganized Stratosphere, from time to time, shall advance
                  sums, not to exceed a cumulative total of Five Millions
                  Dollars ($5,000,000), to the Litigation LLC for payment of
                  reasonable expenses of the Litigation LLC as and when
                  incurred, provided, however, that the compliance of
                  Reorganized Stratosphere with the request of the Litigation
                  LLC for payments shall be subject to the approval of the board
                  of directors of Reorganized Stratosphere taking in
                  consideration cash requirements under this Plan and of
                  Reorganized Stratosphere and Reorganized Gaming Corp.


         8.3.     DISTRIBUTION OF LITIGATION LLC FUNDS.  All funds received by
                  the Litigation LLC shall be applied and distributed in
                  accordance with the Litigation LLC Members Agreement.

9.       EFFECTIVE DATE TRANSACTIONS

         Effective Date transactions, in addition to other matters as set forth
in this Plan, include the following: (a) a notice of effectiveness of this Plan
to be filed with the Bankruptcy Court and served; and (b) dismissal of the
Reliable Steel Adversary Action.


10.      CONDITIONS PRECEDENT



         10.1.    CONDITIONS TO CONFIRMATION. The following are conditions
                  precedent to confirmation of this Plan:

                         a) The Bankruptcy Court shall have entered a Final
                  Order approving the Disclosure Statement with respect to this
                  Plan; and

                         b) The Confirmation Order shall have been entered and
                  be in form and substance reasonably acceptable to the Debtors
                  and each of the Majority Original Holders. In the event that
                  Debtors and any or all of the Majority Original Holders are
                  unable to reach an agreement with regard to the form and
                  substance of the Confirmation Order, the Bankruptcy Court
                  shall resolve all such disputes between the parties.

                                   i) The provisions of the Confirmation Order
                         are nonseverable and mutually dependent;

                                   ii) All executory contracts or unexpired
                         leases assumed by Reorganized Stratosphere and
                         Reorganized Gaming Corp. during the Chapter 11 Cases or
                         under this Plan shall remain in full force and effect
                         for the benefit of Reorganized Stratosphere and
                         Reorganized Gaming Corp. notwithstanding any provision
                         in such contract or lease (including those described in
                         Sections 365(b)(2) and (f) of the Bankruptcy Code) that
                         prohibits such assignment or transfer or that enables,
                         permits or requires termination of such contract or
                         lease;

                                   iii) Except as expressly provided in this
                         Plan, the Debtors are




                                       37
<PAGE>   39



                         discharged effective upon the Effective Date from all
                         Claims and any "debt" (as that term is defined in
                         Section 101(12) of the Bankruptcy Code) that arose on
                         or before the Effective Date, and the Debtors'
                         liability in respect thereof is extinguished
                         completely, whether reduced to judgment or not,
                         liquidated or unliquidated, contingent or
                         noncontingent, asserted or unasserted, fixed or
                         unfixed, matured or unmatured, disputed or undisputed,
                         legal or equitable, or known or unknown, or that arose
                         from any agreement of the Debtors that has either been
                         assumed or rejected in the Chapter 11 Cases or pursuant
                         to this Plan, or obligation of the Debtors incurred
                         before the Effective Date, or from any conduct of the
                         Debtors prior to the Effective Date, or that otherwise
                         arose before the Effective Date, including, without
                         limitation, all interest, if any, on any such debts,
                         whether such interest accrued before or after the
                         Petition Date; and

                                   iv) This Plan does not provide for the
                         liquidation of all or substantially all of the property
                         of the Debtors and its confirmation is not likely to be
                         followed by the liquidation of Reorganized Stratosphere
                         or Stratosphere Gaming Corp. or the need for further
                         financial reorganization;


         10.2.    CONDITIONS TO EFFECTIVENESS. The following are conditions
                  precedent to the occurrence of the Effective Date:

                         a) The Confirmation Date shall have occurred;

                         b) The Confirmation Order shall be a Final Order,
                  except that Debtors reserve the right to cause the Effective
                  Date to occur notwithstanding the pendency of an appeal of the
                  Confirmation Order, under circumstances that would moot such
                  appeal;

                         c) No request for revocation of the Confirmation Order
                  under Section 1144 of the Bankruptcy Code shall have been
                  made, or, if made, shall remain pending;

                         d) The Bankruptcy Court in the Confirmation Order shall
                  have approved the retention of jurisdiction provisions in
                  Article 12 of this Plan;

                         e) All documents necessary to implement the
                  transactions contemplated by this Plan shall be in form and
                  substance reasonably acceptable to the Debtors and each of the
                  Majority Original Holders;

                         f) Sufficient Effective Date Cash exists to make
                  required distributions to holders of Allowed Claims required
                  on the Distribution Date; and

                         g) The Debtors shall have received any and all required
                  approvals by the Gaming Authorities to consummate this Plan.


         10.3.    WAIVER OF CONDITIONS The conditions to Confirmation and the
                  Effective Date, other than the conditions set forth above in
                  Section 10.2(g) may be waived in whole






                                       38
<PAGE>   40



                  or in part by the unanimous consent of each of the Debtors and
                  each of the Majority Original Holders at any time (which
                  consent shall not be unreasonably withheld), without notice,
                  an order of the Bankruptcy Court or any further action other
                  than proceeding to Confirmation and consummation of the Plan.
                  In the event that Debtors and any or all of the Majority
                  Original Holders are unable to reach an agreement with regard
                  to Sections 10.1(b), 10.2(d), 10.2(e), or 10.2(f) above, the
                  Bankruptcy Court shall resolve all such disputes between the
                  parties.

11.      TITLE TO PROPERTY; DISCHARGE; INJUNCTION

         11.1.    REVESTING OF ASSETS. Subject to the provisions of this Plan,
                  the property of the Estate shall revest in Reorganized
                  Stratosphere and Reorganized Gaming Corp. on the Effective
                  Date. As of the Effective Date, all such property of the
                  Debtors shall be free and clear of all Liens, Claims and
                  Equity Interests of holders thereof, except as otherwise
                  provided herein. From and after the Effective Date,
                  Reorganized Stratosphere and Reorganized Gaming Corp. may
                  operate their business, and may use, acquire and dispose of
                  their property free of any restrictions of the Bankruptcy
                  Code, including the employment of and payment to
                  professionals, except as otherwise provided in this Plan or
                  the Confirmation Order.


         11.2.    DISCHARGE. Except as provided in this Plan or the Confirmation
                  Order, the rights afforded under this Plan and the treatment
                  of Claims and Equity Interests under this Plan shall be in
                  exchange for and in complete satisfaction, discharge and
                  release of all Claims and termination of all Equity Interests,
                  including any interest accrued on Claims from the Petition
                  Date. Except as provided in this Plan or the Confirmation
                  Order, upon the Effective Date, Confirmation shall: (a)
                  discharge the Debtors, Reorganized Stratosphere, and
                  Reorganized Gaming Corp. from all Claims or other debts that
                  arose before the Confirmation Date including all claims
                  arising under and related to the Original First Mortgage Notes
                  and all debts of the kind specified in Sections 502(g), 502(h)
                  or 502(i) of the Bankruptcy Code, whether or not: (i) a proof
                  of Claim based on such debt is filed or deemed filed pursuant
                  to Section 501 of the Bankruptcy Code; (ii) a Claim based on
                  such debt is allowed pursuant to Section 502 of the Bankruptcy
                  Code; or (iii) the holder of a Claim based on such debt has
                  accepted this Plan; and (b) terminate all Equity Interests and
                  other rights of holders of Equity Interests in the Debtors.

         11.3.    INJUNCTION. Except as provided in this Plan or the
                  Confirmation Order, as of the Confirmation Date, all entities
                  that have held, currently hold or may hold a Claim or other
                  debt or liability that is discharged or an Equity Interest or
                  other right of an Equity Interest holder that is terminated
                  pursuant to the terms of this Plan are permanently enjoined
                  from taking any of the following actions on account of any
                  such discharged Claims, debts or liabilities or terminated
                  Equity Interests or rights: (i) commencing or continuing in
                  any manner any action or other proceeding against the Debtors,
                  Reorganized Stratosphere, Reorganized Gaming Corp. or their
                  respective property; (ii) enforcing, attaching, collecting or
                  recovering in any manner any judgment, award, decree or order
                  against the Debtors, Reorganized Stratosphere Reorganized
                  Gaming Corp. or their respective property; (iii) creating,
                  perfecting or





                                       39
<PAGE>   41



                  enforcing any lien or encumbrance against the Debtors,
                  Reorganized Stratosphere, Reorganized Gaming Corp. or their
                  respective property; (iv) asserting a setoff, right of
                  subrogation or recoupment of any kind against any debt,
                  liability or obligation due to the Debtors, Reorganized
                  Stratosphere, Reorganized Gaming Corp. or their respective
                  property; and (v) commencing or continuing any action, in any
                  manner or any place, that does not comply with or is
                  inconsistent with the provisions of this Plan or the
                  Bankruptcy Code. By accepting distributions pursuant to this
                  Plan, each holder of an Allowed Claim receiving distributions
                  pursuant to this Plan will be deemed to have specifically
                  consented to the injunction set forth in this section.


         11.4.    EXCULPATION. Neither Debtors, Reorganized Stratosphere,
                  Reorganized Gaming Corp., Majority Original Holders nor any
                  Statutory Committee, nor any of their respective present or
                  former members, directors, officers, employees, advisors,
                  attorneys or agents, shall have or incur any liability to any
                  holder of a Claim or Equity Interest, or any other party in
                  interest, or any of their respective agents, employees,
                  representatives, financial advisors, attorneys or Affiliates,
                  or any of their successors or assigns, for any act or omission
                  in connection with, relating to, or arising out of, the
                  Chapter 11 Cases, the pursuit of confirmation of this Plan,
                  the consummation of this Plan, except for their willful
                  misconduct, and in all respects shall be entitled to
                  reasonably rely upon the advice of counsel with respect to
                  their duties and responsibilities under this Plan or in the
                  context of the Chapter 11 Cases. No holder of a Claim or
                  Equity Interest, or any other party in interest, including
                  their respective agents, employees, representatives, financial
                  advisors, attorneys or Affiliates, shall have any right of
                  action against Debtors, Reorganized Stratosphere, Reorganized
                  Gaming Corp., Majority Original Holders, Statutory Committee
                  or any of their respective present or former members,
                  officers, directors, employees, advisors, attorneys or agents,
                  for any act or omission in connection with, relating to, or
                  arising out of, the Chapter 11 Cases, the pursuit of
                  confirmation of this Plan, the consummation of this Plan or
                  the administration of this Plan, except for their willful
                  misconduct.

12.      RETENTION OF JURISDICTION


         12.1.    JURISDICTION. Notwithstanding the entry of the Confirmation
                  Order and the occurrence of the Effective Date, the Bankruptcy
                  Court shall retain such jurisdiction over the Chapter 11 Cases
                  after the Effective Date as is legally permissible, including
                  jurisdiction to:

                         a) Allow, disallow, determine, liquidate, classify,
                  estimate or establish the priority or secured or unsecured
                  status of any Claim, including the resolution of any request
                  for payment of any Administrative Claim and the resolution of
                  any and all objections to the allowance or priority of Claims
                  and all issues regarding United States Trustee quarterly fees;

                         b) Grant or deny any applications for allowance of
                  compensation or reimbursement of expenses authorized pursuant
                  to the Bankruptcy Code or this Plan for periods ending on or
                  before the Effective Date;






                                       40
<PAGE>   42



                         c) Resolve any matters related to the assumption,
                  assignment or rejection of any executory contract or unexpired
                  lease to which the Debtors are a party and to hear, determine
                  and, if necessary, liquidate, any Claims arising therefrom or
                  cure amounts related thereto;

                         d) Ensure that distributions to holders of Allowed
                  Claims are accomplished pursuant to the provisions of this
                  Plan;

                         e) Decide or resolve any motions, adversary
                  proceedings, Litigation Claims, contested or litigated matters
                  and any other matters and grant or deny any applications or
                  motions involving the Debtors that may be pending on the
                  Effective Date;

                         f) Enter such orders as may be necessary or appropriate
                  to implement or consummate the provisions of this Plan and all
                  contracts, instruments, releases and other agreements or
                  documents created in connection with this Plan or the
                  Disclosure Statement or the Confirmation Order, except as
                  otherwise provided herein;

                         g) Resolve any cases, controversies, suits or disputes
                  that may arise in connection with the consummation,
                  interpretation or enforcement of this Plan or the Confirmation
                  Order or any Person's obligations incurred in connection with
                  this Plan or the Confirmation Order;

                         h) Modify this Plan before or after the Effective Date
                  pursuant to Section 1127 of the Bankruptcy Code or modify the
                  Disclosure Statement or any contract, instrument, release or
                  other agreement or document created in connection with this
                  Plan or the Disclosure Statement or the Confirmation Order; or
                  remedy any defect or omission or reconcile any inconsistency
                  in any Bankruptcy Court order, this Plan, the Disclosure
                  Statement or the Confirmation Order or any contract,
                  instrument, release or other agreement or document created in
                  connection with this Plan or the Disclosure Statement of the
                  Confirmation Order, in such manner as may be necessary or
                  appropriate to consummate this Plan, to the extent authorized
                  by the Bankruptcy Code;

                         i) Issue injunctions, enter and implement other orders
                  or take such other actions as may be necessary or appropriate
                  to restrain interference by any person with consummation,
                  implementation or enforcement of this Plan or Confirmation
                  Order, except as otherwise provided herein;

                         j) Enter and implement such orders as are necessary or
                  appropriate if the Confirmation Order is for any reason
                  modified, stayed, reversed, revoked or vacated;

                         k) Determine any other matters that may arise in
                  connection with or relate to this Plan, the Disclosure
                  Statement, the Confirmation Order or any contract, instrument,
                  release or other agreement or document created in connection
                  with this Plan or the Disclosure Statement or Confirmation
                  Order, except as






                                       41
<PAGE>   43



                  otherwise provided herein;

                         l) Enter an order closing the Chapter 11 Cases; and

                         m) Initiate and prosecute Avoidance Actions and
                  Litigation Claims and continue to prosecute pending Avoidance
                  Actions, Litigation Claims and any other claim or cause of
                  action of Debtors, including, but not limited to, those
                  against Stupak and any of his Affiliates and Grand and any of
                  its Affiliates.

13.      MODIFICATION AND AMENDMENT OF PLAN; ALTERNATIVE TRANSACTIONS

         13.1.    MODIFICATION AND AMENDMENT. Prior to Confirmation,
                  Stratosphere and Gaming Corp. may alter, amend, or modify this
                  Plan or any Exhibits thereto under Section 1127(a) of the
                  Bankruptcy Code at any time. After the Confirmation Date and
                  prior to substantial consummation of this Plan as defined in
                  Section 1101(2) of the Bankruptcy Code, Stratosphere and
                  Gaming Corp. may, under Section 1127(b), (c) and (d) of the
                  Bankruptcy Code, alter, amend or modify this Plan or institute
                  proceedings in the Bankruptcy Court to remedy any defect or
                  omission or reconcile any inconsistencies in this Plan, the
                  Disclosure Statement or the Confirmation Order, to make
                  appropriate adjustments and modifications to this Plan, the
                  Confirmation Order or the Plan Supplement exhibits as a result
                  of comments or actions of the SEC or Gaming Authorities, and
                  such matters as may be necessary to carry out the purposes and
                  effects of this Plan so long as such proceedings do not
                  materially adversely affect the treatment of holders of Claims
                  under this Plan.


         13.2.    ALTERNATIVE TRANSACTIONS. During the period commencing upon
                  the filing of this Plan with the Bankruptcy Court and up until
                  the commencement of the Confirmation Hearing, Stratosphere and
                  Gaming Corp., will, upon the execution of appropriate
                  confidentiality agreements, respond to inquiries from, engage
                  in discussions with and provide information to any Person
                  interested in the final restructuring of the Debtors in lieu
                  of the transaction contained in this Plan. At the Confirmation
                  Hearing, Debtors shall disclose to the Bankruptcy Court
                  information concerning all Alternative Transactions Proposals
                  received. In the event that prior to the Confirmation Hearing
                  an Alternative Transaction Proposal is received, Stratosphere
                  shall notify the Majority Original Holders of such Alternative
                  Transaction Proposal, whether written or oral, which notice
                  shall identify the parties to such Alternative Transaction
                  Proposal and set forth in reasonable detail the terms and
                  conditions of such Alternative Transaction Proposal and
                  Debtors reserve the right to submit such Alternative
                  Transaction Proposal to the Bankruptcy Court for determination
                  as to such Alternative Transaction Proposal containing
                  economic terms and conditions more favorable to the Debtors
                  and Creditors than the transaction proposed by this Plan.
                  Debtors reserve the right to alter, amend or modify this Plan
                  as provided for above in Section 13.1 prior to Confirmation or
                  during the Confirmation Hearing to reflect such Alternative
                  Transaction Proposal, it being understood and agreed that in
                  such event, each holder of a Claim who has accepted or
                  rejected this Plan shall have an opportunity within a time
                  period to be




                                       42
<PAGE>   44



                  fixed by the Bankruptcy Court, to change such holder's 
                  previous acceptance or rejection.


14.      MISCELLANEOUS

         14.1.    FILING OF OBJECTIONS TO CLAIMS. After the Effective Date,
                  objections to Claims shall be made and objections to Claims
                  made previous thereto shall be pursued by Reorganized
                  Stratosphere or Reorganized Gaming Corp., as the case may be,
                  or any other party properly entitled to do so after notice to
                  Reorganized Stratosphere , Reorganized Gaming Corp. and
                  approval by the Bankruptcy Court. Any objections made after
                  the Effective Date shall be filed and served not later than
                  ninety (90) days after the Effective Date; provided, however,
                  that such period may be extended by order of the Bankruptcy
                  Court for good cause shown.


         14.2.    RESOLUTION OF OBJECTIONS AFTER EFFECTIVE DATE; DISTRIBUTIONS


                  14.2.1 RESOLUTION OF OBJECTIONS. From and after the Effective
                  Date, Reorganized Stratosphere or Reorganized Gaming Corp., as
                  the case may be, may litigate to judgment, propose settlements
                  of, or withdraw objections to, all pending or filed Disputed
                  Claims, and Reorganized Stratosphere or Reorganized Gaming
                  Corp., as applicable, may settle or compromise any Disputed
                  Claim without Notice and a Hearing and without approval of the
                  Bankruptcy Court.


                  14.2.2 DISTRIBUTIONS. In order to facilitate distribution of
                  Pro Rata shares to holders of Allowed Claims, and if and to
                  the extent there are Disputed Claims in any Class, the
                  Disbursing Agent shall set aside in a separate designated
                  reserve account the payments or distributions applicable to
                  such Disputed Claims as if such Disputed Claims were Allowed
                  Claims, pending the allowance or disallowance of such Disputed
                  Claims. All amounts applicable to Disputed Claim in Class 9
                  shall be segregated in a separate interest bearing account
                  from which shall be deducted the reasonable costs, expenses,
                  and fees incurred by the a) Disbursing Agent in administering
                  distributions and b) Reorganized Stratosphere and Reorganized
                  Gaming Corp. in objecting to, litigating and settling on
                  Disputed Claims in Class 9. In the event that either
                  Reorganized Stratosphere or Reorganized Gaming Corp. wish to
                  deposit or hold a lesser amount than required herein and is
                  unable to reach an agreement with the holder of the Disputed
                  Claim or the Disbursing Agent, as the case may be, on the
                  amount to be deposited or held, the Bankruptcy Court shall fix
                  the amount after notice and hearing. Upon Final Order with
                  respect to a Disputed Claim, the holder of such Disputed
                  Claim, to the extent it has been determined to be an Allowed
                  Claim, shall receive from the Disbursing Agent that payment or
                  distribution to which it would have been entitled if the
                  portion of the Claim so allowed had been allowed as of the
                  Effective Date. Such payment or distribution shall be made as
                  soon as practical after the order allowing the Claim has
                  become a Final Order. The balance of the amount held by the
                  Disbursing Agent after such payment applicable to a previously
                  Disputed Claim that has been disallowed in whole and in part,
                  shall be returned to Reorganized Debtors, except with regard
                  to a previously Disputed Claim in Class 9, in which event, the
                  balance shall be




                                       43
<PAGE>   45



                  distributed Pro Rata amongst the holders of Allowed Claims in
                  Class 9 or continue to be held by Disbursing Agent with regard
                  to Disputed Claims not yet resolved.


         14.3.    EFFECTUATING DOCUMENTS; FURTHER TRANSACTIONS; TIMING. Each of
                  the officers of the Debtors, Reorganized Stratosphere, and
                  Reorganized Gaming Corp. is authorized to execute, deliver,
                  file or record such contracts, instruments, releases and other
                  agreements or documents and to take such actions as may be
                  necessary or appropriate to effectuate and further evidence
                  the terms and conditions of this Plan and any securities
                  issued pursuant to this Plan. All transactions that are
                  required to occur on the Effective Date under the terms of
                  this Plan shall be deemed to have occurred simultaneously. The
                  Debtors, Reorganized Stratosphere and Reorganized Gaming Corp.
                  are authorized and directed to do such acts and execute such
                  documents as are necessary to implement this Plan.

         14.4.    EXEMPTION FROM TRANSFER TAXES. Pursuant to Section 1146(c) of
                  the Bankruptcy Code, (i) the issuance, distribution, transfer
                  or exchange of the New Common Stock or other Estate property;
                  (ii) the creation, modification, consolidation or recording of
                  any deed of trust or other security interest, the securing of
                  additional indebtedness by such means or by other means in
                  furtherance of, or connection with this Plan or the
                  Confirmation Order; (iii) the making, assignment, modification
                  or recording of any lease or sublease;. or (iv) the making,
                  delivery or recording of a deed or other instrument of
                  transfer under, in furtherance of, or in connection with, this
                  Plan, Confirmation Order or any transaction contemplated
                  above, or any transactions arising out of, contemplated by or
                  in any way related to the foregoing shall not be subject to
                  any document recording tax, stamp tax, conveyance fee,
                  intangibles or similar tax, mortgage tax, stamp act or real
                  estate transfer tax, mortgage recording tax or other similar
                  tax or governmental assessment and the appropriate state of
                  local government officials or agents shall be, and hereby are,
                  directed to forego the collection of any such tax or
                  assessment and to accept for filing or recordation any of the
                  foregoing instruments or other documents without the payment
                  of any such tax or assessment.

         14.5.    REVOCATION OR WITHDRAWAL OF THIS PLAN. The Debtors reserve the
                  right to revoke or withdraw this Plan as to one of both
                  Debtors at any time prior to the Confirmation Date. If this
                  Plan is withdrawn or revoked, then this Plan shall be deemed
                  null and void and nothing contained herein shall be deemed to
                  constitute a waiver or release of any Claims by or against the
                  Debtors or any other Person nor shall the withdrawal or
                  revocation of this Plan prejudice in any manner the rights of
                  the Debtors or any Person in any further proceedings involving
                  the Debtors. In the event this Plan is withdrawn or revoked,
                  nothing set forth herein shall be deemed an admission of any
                  sort and this Plan and any transaction contemplated thereby
                  shall not be admitted into evidence in any proceeding.

         14.6.    BINDING EFFECT. This Plan shall be binding upon, and shall
                  inure to the benefit of, the Debtors, and the holders of all
                  Claims and Equity Interests and their respective successors
                  and assigns.

         14.7.    GOVERNING LAW. Except to the extent that the Bankruptcy Code
                  or other federal






                                       44
<PAGE>   46



                  law is applicable or as provided in any document contained in
                  the Plan Supplement, any contract, instrument, release or
                  other agreement entered into in connection with this Plan or
                  in any document which remains unaltered by this Plan, the
                  rights, duties and obligations of the Debtors and any other
                  Person arising under this Plan shall be governed by, and
                  construed and enforced in accordance with, the internal laws
                  of the State of Nevada without giving effect to Nevada's
                  choice of law provisions.

         14.8.    INTERCOMPANY CLAIMS. Except with respect to the Original
                  Subsidiary Guarantee, any intercompany Claims between or
                  against Stratosphere and Gaming Corp., as the case may be,
                  shall remain unaltered by this Plan, and such intercompany
                  Claims shall be paid or otherwise satisfied in the ordinary
                  course of business.

         14.9.    MODIFICATION OF PAYMENT TERMS. Reorganized Stratosphere and
                  Reorganized Gaming Corp. reserve the right to modify the
                  treatment of any Allowed Claim or Allowed Equity Interest in
                  any manner adverse only to the holder of such Claim or Equity
                  Interest at any time after the Effective Date upon the prior
                  written consent of the holder whose Allowed Claim or Allowed
                  Equity Interest treatment is being adversely affected. 

         14.10.   PROVIDING FOR CLAIMS PAYMENTS. Distributions to holders of
                  Allowed Claims in Classes 1, 2, 3 and 9 shall be made by the
                  Disbursing Agent: (i) at the addresses set forth on the proofs
                  of Claim filed by such holders (or at the last known addresses
                  of such holders if no proof of Claim is filed or if the Debtor
                  has been notified of a change of address); (ii) at the
                  addresses set forth in any written notices of address changes
                  delivered to the Disbursing Agent after the date of any
                  related proof of Claim; or (iii) at the addresses reflected in
                  the Schedules if no proof of Claim has been filed and the
                  Disbursing Agent has not received a written notice of a change
                  of address. If any holder's distribution is returned as
                  undeliverable, no further distributions to such holder shall
                  be made unless and until the Disbursing Agent is notified of
                  such holder's then current address, at which time all missed
                  distributions shall be made to such holder without interest.
                  Amounts in respect of undeliverable distributions made through
                  the Disbursing Agent shall be returned to Reorganized
                  Stratosphere until such distributions are claimed. All claims
                  for undeliverable distributions shall be made on or before the
                  second anniversary of the Effective Date. After such date, all
                  unclaimed property shall revert to Reorganized Stratosphere or
                  Reorganized Gaming Corp., as the case may be, and the Claim of
                  any holder or successor to such holder with respect to such
                  property shall be discharged and forever barred
                  notwithstanding any federal or state escheat laws to the
                  contrary. Nothing contained in this Plan shall require the
                  Debtors, Reorganized Stratosphere, Reorganized Gaming Corp. or
                  the Disbursing Agent to attempt to locate any holder of an
                  Allowed Claim.

         14.11.   SET OFFS. The Debtors, Reorganized Stratosphere, and
                  Reorganized Gaming Corp. may, but shall not be required to,
                  set off or recoup against any Claim or Equity Interest and the
                  payments or other distributions to be made pursuant to this
                  Plan in respect of such Claim (before any distribution is made
                  on account of such Claim), claims of any nature whatsoever
                  that the applicable Debtor, Reorganized






                                       45
<PAGE>   47



                  Stratosphere and Reorganized Gaming Corp. may have against the
                  holder of such Claim or Equity Interest to the extent such
                  Claims or Equity Interest may be set off or recouped under
                  applicable law, but neither the failure to do so nor the
                  allowance of any Claim or Equity Interest hereunder shall
                  constitute a waiver or release by the Debtors, Reorganized
                  Stratosphere or Reorganized Gaming Corp., of any such claim
                  that it may have against such holder.


         14.12.   NOTICES. Any notice required or permitted to be provided under
                  this Plan shall be in writing and served by either: (a)
                  certified mail, return receipt requested, postage prepaid; (b)
                  hand delivery or (c) reputable overnight courier service,
                  freight prepaid, to be addressed as follows:

                  If to the Debtors:        STRATOSPHERE CORPORATION
                                            Las Vegas Boulevard South
                                            Las Vegas, Nevada  89104
                                            Attn:    Andrew S. Blumen,
                                            Executive Vice President and
                                            General Counsel
                                            Tel: (702) 383-5298
                                            Fax: (702) 383-4733

                  With a copy to:           GORDON & SILVER, LTD.
                                            Howard Hughes Parkway, 14th Floor
                                            Las Vegas, Nevada  89109
                                            Attn:    Gerald M. Gordon, Esq.
                                            Thomas H. Fell, Esq.
                                            Tel:  (702) 796-5555
                                            Fax: (702) 369-2666

                  If to Majority Original   HIGH RIVER LIMITED PARTNERSHIP
                  Holders:                  AMERICAN REAL ESTATE PARTNERS, L.P.
                                            C/O ICAHN ASSOCIATES GROUP
                                            767 Fifth Avenue
                                            New York, NY  10153
                                            Attn:  Carl Icahn
                                            Tel:   (212)  702-4314
                                            Fax: (212)  750-5815

                                            SKY HIGH L.L.C.
                                            1560 Sherman Ave., #900
                                            Evanston, IL  60201
                                            Attn:  Bradford T. Whitmore
                                            Tel:  (847) 733-0232
                                            Fax:  (847) 733-0339




                                       46
<PAGE>   48



               With a copy to:              BERLACK, ISRAELS & LIBERMAN, LLP
                                            120 W. 45th Street
                                            New York, NY  10036
                                            Attn:  Robert J. Stark, Esq.
                                            Tel:  (212)  704-0100
                                            Fax:  (212)  704-0196
                                                     and
                                            JONES, DAY, REAVIS & POGUE
                                            77 West Wacker, 35th Floor
                                            Chicago, ILL  60601
                                            Attn:  Timothy A. Pohl, Esq.
                                            Tel:   (312) 782-3939
                                            Fax:  (312)  782-8585

               If to the Indenture Trustee: IBJ SCHRODER BANK AND TRUST
                                            COMPANY
                                            One State Street
                                            New York, New York 10004
                                            Attn:    Max Volmar
                                            Telephone: (212) 858-2428
                                            Fax: (212) 858-2156

               With a copy to:              BRYAN CAVE LLP
                                            Suite 3600
                                            211 N. Broadway
                                            St. Louis, Missouri 63102-2750
                                            Attn:    Gregory D. Willard, Esq.
                                            Telephone: (314) 259-2000
                                            Fax (314) 259-2020



         14.13.   STATUTORY COMMITTEE. Any Statutory Committee appointed in the
                  Chapter 11 Cases shall terminate on the Effective Date and
                  shall thereafter have no further responsibilities in respect
                  of the Chapter 11 Cases, except with respect to preparation of
                  filing of applications for compensation and reimbursement of
                  expenses.

         14.14.   SEVERABILITY. If any provision of this Plan is found by the
                  Bankruptcy Court to be invalid, illegal or unenforceable or
                  that this Plan is not confirmable pursuant to Section 1129 of
                  the Bankruptcy Code, the Bankruptcy Court, at the request of
                  the Debtors or the holders of the Original First Mortgage
                  Notes, shall have the power to alter and interpret such term
                  to make it valid or enforceable to the maximum extent
                  practicable, consistent with the original purpose of the term
                  or provision held be invalid, void or unenforceable, and such
                  term or provision shall then be applicable as altered or
                  interpreted. Notwithstanding any such holding, alteration or
                  interpretation , the remainder of the terms and provisions of
                  this Plan shall remain in






                                       47
<PAGE>   49



                  full force and effect and will in no way be affected, impaired
                  or invalidated by such holding, alteration or interpretation.
                  The Confirmation Order shall constitute a judicial
                  determination and shall provide that each term and provision
                  of this Plan, as it may have been altered or interpreted in
                  accordance with the foregone, is valid and enforceable
                  pursuant to its terms.


         14.15.   WITHHOLDING AND REPORTING REQUIREMENTS. In connection with
                  this Plan and all instruments and securities issued in
                  connection therewith and distributions thereon, Reorganized
                  Stratosphere, Reorganized Gaming Corp., the Disbursing Agent
                  and the Indenture Trustee, as the case may be, shall comply
                  with all withholding and reporting requirements imposed by any
                  federal, state, local, or foreign taxing authority, and all
                  distributions hereunder shall be subject to any such
                  withholding and reporting requirements. Reorganized
                  Stratosphere, Reorganized Gaming Corp., the Disbursing Agent
                  or the Indenture Trustee, as the case may be, shall be
                  authorized to take any and all action that may be necessary to
                  comply with such withholding and recording requirements.
                  Notwithstanding any other provision of this Plan, each holder
                  of an Allowed Claim that has received a distribution of New
                  Common Stock or Cash pursuant to this Plan, shall have sole
                  and exclusive responsibility for the satisfaction or payment
                  of any tax obligation imposed by any governmental unit,
                  including income, withholding and other tax obligation on
                  account of such distribution.

         14.16.   POST CONFIRMATION REPORTING. Until the entry of the final
                  decree closing the Chapter 11 Cases, Reorganized Stratosphere
                  and Reorganized Gaming Corp. shall file with the clerk of the
                  Bankruptcy Court, not later than four (4) months after the
                  entry of the Confirmation Order and every six (6) months
                  thereafter, a report of the action taken by Reorganized
                  Stratosphere and Reorganized Gaming Corp. and the progress
                  made toward consummation of the confirmed Plan.

         14.17.   CRAMDOWN. In the event that any impaired Class is determined
                  to have rejected this Plan in accordance with Section 1126 of
                  the Bankruptcy Code, the Debtors will invoke the provisions of
                  Section 1129(b) of the Bankruptcy Code to satisfy the
                  requirements for confirmation of this Plan. The Debtors
                  reserve the right to modify this Plan to the extent, if any,
                  that Confirmation pursuant to Section 1129(b) of the
                  Bankruptcy Code requires modification.

         14.18.   QUARTERLY FEES TO THE UNITED STATES TRUSTEE. Reorganized
                  Stratosphere and Reorganized Gaming Corp. shall pay all
                  quarterly fees payable to the Office of the United States
                  Trustee for the Debtors after Confirmation, consistent with
                  applicable







                                       48
<PAGE>   50



                  provisions of the Bankruptcy Code, Bankruptcy Rules and 28 USC
                  ss. 1930(a)(6).

             DATED:   February  _____, 1998

                                           Respectfully submitted,

                                           STRATOSPHERE CORPORATION,
                                           a Delaware corporation

                                           By: ____________________________
                                                    Andrew S. Blumen
                                                    Executive Vice President

                                           STRATOSPHERE GAMING CORP.,
                                           a Nevada corporation

                                           By:__________________________________
                                                    Andrew S. Blumen
                                                    Executive Vice President


                                           GORDON & SILVER, LTD.

                                           By: _________________________________
                                                    Gerald M. Gordon,
                                                    Attorney for the Debtors-In-
                                                    Possession







                                       49
<PAGE>   51

                                    EXHIBIT 1
                                       TO
                      SECOND AMENDED PLAN OF REORGANIZATION

                  CERTAIN PRESERVED POTENTIAL CAUSES OF ACTION

                  All defined terms used herein shall have the meanings set
forth in the Plan. The following is a non-exhaustive list of potential parties
against whom Debtors, Reorganized Stratosphere and/or Reorganized Gaming Corp.
may hold a claim or cause of action. Debtors, Reorganized Stratosphere and
Reorganized Gaming Corp. reserve their right to modify this list to amend or add
parties or causes of action, but disclaim any obligation to do so. In addition
to the possible causes of action and claims listed below, Debtors, Reorganized
Stratosphere and Reorganized Gaming Corp. have or may have, in the ordinary
course of their business, numerous causes of action and Claims or rights against
contractors, subcontractors, suppliers and others with whom they deal in the
ordinary course of their business (the "Ordinary Course Claims"). Debtors,
Reorganized Stratosphere and Reorganized Gaming Corp. reserve their right to
enforce, sue on, settle or compromise (or decline to do any of the foregoing)
the Ordinary Course Claims, as well as the claims and causes of action listed
below and all other clams and causes of action. Debtors. Reorganized
Stratosphere and Reorganized Gaming Corp. also have, or may have, and are
retaining, various claims or causes of action arising under or pursuant to its
insurance policies, and all rights arising under, relating to, or in connection
with such policies are expressly reserved and retained.

   1.  Robert E. Stupak                           Indemnification; Derivative; 
                                                  ContractuaL; Preference; 
                                                  Turnover

   2.  Bob Stupak Enterprises, Inc.               Indemnification; Derivative; 
                                                  Contractual Preference

   3.  Las Vegas Vacation Club, Inc.              Indemnification; Contractual

   4.  Grand Casinos, Inc.                        Derivative; Preference; 
                                                  Contractual

   5.  Taylor International Corporation           Negligence; Contractual
       (and any and all subcontractors)

   6.  Any and all construction consultants,      Negligence; Contractual
       engineering, designers and architects
       with respect to the Stratosphere Tower
       Hotel and Casino in Las Vegas, Nevada

   7.  Any underwriters employed by               Negligence; Contractual
       Stratosphere prior to Petition Date

   8.  Perini Construction                        Negligence; Contractual



<PAGE>   52



                                    EXHIBIT 2
                                       TO
                      SECOND AMENDED PLAN OF REORGANIZATION

                          REJECTED EXECUTORY CONTRACTS


         All Vacation Package Contracts of Robert E. Stupak, Bob Stupak
Enterprises, Inc. and Las Vegas Vacation Club, Inc. with individuals who have
filed Claims in these proceedings. The listing of all such contracts as rejected
executory contracts herein is not intended to be an admission that any such
contracts represent Claims in these proceedings. All such contracts are
disputed.








<PAGE>   53



                                    EXHIBIT 3
                                       TO
                      SECOND AMENDED PLAN OF REORGANIZATION

                                 REJECTED LEASES

                                      NONE