Dunes Hotels & Casinos Inc.
                                4600 Northgate Blvd., Suite 130
                                     Sacramento, CA 95834


Barney Kreutzer, President                                     January 26, 2000
USI Corp.
P.O. Box 8244
Wichita, Kansas 67208

     Re:  Letter of Intent for Proposed Acquisition of Series B Preferred Stock

Dear Mr. Kreutzer:

     This  letter sets forth the basic  terms and  conditions  under which Dunes
Hotels & Casinos  Inc.  ("Dunes")  will be willing  to enter  into a  definitive
"Stock Purchase Agreement" with USI Corp. ("USI") to purchase all of the shares,
but  not  less  than  3,000  shares,  of  Series  B  Preferred  Stock  of  Dunes
beneficially owned by USI. Subject to the terms and conditions  discussed herein
and the definitive Stock Purchase Agreement, the parties intend to complete this
acquisition as soon as practicable.

        Stock Purchase Agreement.

     USI shall sell to Dunes,  and Dunes  shall  purchase  from USI,  all of the
shares of Series B Preferred Stock of Dunes  beneficially  owned by USI, but not
less than 3,000 shares, in exchange for restricted shares of common stock of the
Dunes valued at $.70 per share.

2.      Valuation.

     For  purposes of the Stock  Purchase  Agreement,  the value of the Series B
Preferred  Stock  shall be $275 per share based upon the  liquidation  value and
accrued  but  unpaid  dividends  on such  shares.  A  valuation  of the Series B
Preferred  Stock and common stock shall be  determined by an  independent  third
party appraiser.

3.      Board Representation.

     Upon the execution of the Stock  Purchase  Agreement and  completion of the
transaction thereunder, USI will have the right to select two representatives to
the board of directors of Dunes.

4.      Conditions.

     The sale of the Series B Preferred Stock  beneficially owned by USI and the
purchase  of the Series B Preferred  Stock by Dunes is subject to the  following
conditions:  a) the parties entering into a definitive Stock Purchase Agreement;
b) an  independent  third party  appraiser  confirming the value of the Series B
Preferred  Stock  and  common  stock  and  the  overall   transaction;   and  c)
determination   by  the  U.S.   District   Court,   District   of  Nevada,   No.
CV-5-99-1470-PMP  (RJJ),  that this  transaction  is not subject to its order of
January 5, 2000.


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5.      Fees and Expenses.

        Each party shall pay the legal, accounting,  and other fees and expenses
incurred by it with respect to the  transaction,  whether or not closing occurs.
Notwithstanding  the foregoing,  Dunes and USI shall be equally  responsible for
the fees and expenses related to the independent appraiser.

6.      Confidentiality.

        The  existence  and  content  of this  letter  of  intent  are  strictly
confidential  and shall not be disclosed by any party  without the other party's
consent.  Notwithstanding  the  foregoing,  Dunes may file a copy of this letter
with the United States District Court,  District of Nevada if it determines that
it will assist the parties to complete the transaction.

7.      Closing Date.

        The  parties  intend  to  consummate  the  share  purchase  as  soon  as
practicable (the "Closing").

8.      Due Diligence.

        The  consummation of the transaction  contemplated  herein is subject to
the  satisfactory  completion of due diligence by both parties.  Dunes agrees to
provide  USI and its  agents  and  attorneys  complete  access to Dune's  books,
records, and personnel (excluding  information  protected by the attorney-client
privilege)  for purposes of conducting  USI's due diligence  investigation.  USI
agrees that such information  provided by Dunes and identified as "confidential"
by Dunes will be treated as confidential  and that USI will not make use of such
information   unless   the  same  shall   become   available   to  USI   through
non-confidential  means or shall otherwise come into the public domain, and that
if this letter of intent  shall be  terminated  without a  definitive  agreement
having been  executed,  USI will return all such  information  to Dunes (and all
copies  thereof)  in USI's  possession,  or will  certify to Dunes that all such
information which has not been returned has been destroyed.

9.      Definitive Agreement.

        The parties  mutually  agree to proceed in good faith and use their best
efforts  towards the  negotiation  and execution of a definitive  Stock Purchase
Agreement and other agreements which  incorporate the terms set forth herein and
which shall contain representations, conditions, covenants, and the like typical
in such transactions as contemplated hereby.

10.     Non-binding.

        This letter of intent is intended to be the  non-binding  expression  of
the parties' intent concerning the proposed transaction and is merely a guide in
the preparation of definitive  agreements  satisfactory to the parties.  Nothing
contained  herein  will be  construed  to  preclude  other  provisions  that are
inconsistent  with or in addition to the terms  contained from being included in
any definitive agreement(s),  provided such other provisions are satisfactory to
the  parties.  While the  parties  intend to  proceed  promptly  to  complete  a
definitive  agreement(s),  it is expressly  understood that this is a term sheet
and that no liability or obligation of any nature  whatsoever,  with the

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of any nature  whatsoever,  with the  exception  of Sections 5 and 6 hereof,  is
intended to be created between the parties hereto.

11.     Signatures.

        This Agreement may be executed and entered into in several  counterparts
(including  facsimile  signatures),  each of  which  shall  be  deemed  to be an
original, and all of which shall constitute but one and the same instrument.

                                                   Very truly yours,

                                                   Dunes Hotels & Casinos Inc.

                                               /s/ ED PASQUALE
                                                   ------------------------
                                                   Ed Pasquale, President


The foregoing letter of intent is hereby confirmed:

Dated:  January 28, 2000                           USI Corp.

                                              /s/  BARNEY KREUTZER
                                                   -------------------------
                                                   Barney Kreutzer, President