Document:

TERM SHEET

TERM SHEET

GLOBAL CASINOS, INC.

July 25, 2002

	
Purpose:
	
The purpose of the transactions contemplated is to provide for the ability of Global Casinos, Inc. ("Global") and its subsidiary, Casinos U.S.A., Inc. (owner of the Bull Durham) (hereafter, "Casinos"), to continue as a going concern through the

	 	 	
(i)
	
restructuring of the secured loans encumbering the Bull Durham Casino to provide for reductions in interest rates and moratoriums on payments, thus creating available cash flow to repair and refurbish the Bull Durham and reduce other payables;

	 	 	
(ii)
	
restructuring of the promissory note from Global to Astraea Investment Management. L.P. ("Astraea"), as trustee, in the principal amount of $500,000.00, (the "Astraea/Global Note"), and providing security for this note;

	 	 	
(iii)
	
assignment of the Astraea/Global Note to Casinos USA, Inc. ("Casinos USA") and securing the repayment of the Astraea/Casinos Note with a junior security interest in the assets of Casinos USA,

	 	 	
(iv)
	
granting of an option to Astraea to acquire all Casinos common stock in exchange for forgiveness of interest on the Astraea/Global Note, and the release of further liability under the Note;

	 	 	
(v)
	
restructuring payments under the Steinle Note to assist Global's ability to meet its obligations to Peak Bank;

	 	 	
(vi)
	
providing for the proper distributions of cash flow from the Bull Durham; and

	 	 	
(vii)
	
providing for the restructure of gaming equipment debt.

	
Astraea/Casinos Note:
	
The Astraea/Casinos Note shall be restructured as follows:

	 	 	
1.
	
Interest rate reduced to four percent (4%).

	 	 	
2.
	
Interest only payable monthly.

	 	 	
3.
	
Maturity date to be extended for five (5) years from the closing date.

	 	 	
4.
	
All past due interest (approximately $210,000.00) shall be forgiven.  The Note shall be secured by a collateral assignment of the Steinle Note and a Stock Pledge Agreement, and Astraea shall be given an option to purchase all stock of Casinos, as hereafter addressed in more detail.

	 	 	
5.
	
Reasonable fees and other charges assessable under the Note will be added to the principal amount of the
Astraea/Global Note.

	 	 	
6.
	
Subject to all holders of the remaining promissory notes of Global agreeing to convert all amounts outstanding and unpaid on the notes into equity securities of Global, Global will assign the Astraea/Casinos Note to Casinos USA and Casinos USA will assume and agree to pay the Astraea/Casinos Note. Astraea will consent to the assignment and assumption of the Note and agree to release Global from further liability thereon.

	
Collateral for Astraea/Casinos Note:
	
The obligation of Casinos USA to pay the Astraea/Casinos Note shall be secured by (i) a junior security interest in all of the tangible and intangible assets of Casinos USA, subject to existing liens and encumbrances; and (ii) a collateral assignment of the Steinle Note and a pledge of 100% of Casino USA stock.

	
Management of Bull Durham:
	
Global will continue to manage the Bull Durham for a management fee of $10,000 per month.  Expenses to be covered by the management fee will be delineated in a definitive agreement.  Astraea shall be provided with financial reporting covering the Bull Durham.  Financial reports shall be those prepared in the ordinary course of business.  Astraea shall have the right to review implementation of accounting procedures and all financial statements and underlying work papers. Astraea shall be entitled to an oversight fee of $1,500 per month for its accounting oversight at the Bull Durham.  The definitive agreement shall contain negative covenants covering the operation of the Bull Durham Casino to ensure appropriate cash management and propriety of all expenditures.  Global shall exercise reasonable efforts to have the retailer gaming license issued to the Bull Durham. If the Bull Durham obtains its gaming license, it shall engage the services of Global to perform licensing, accounting and administrative functions at the same rate of $10,000 per month, but cancelable upon 60 days' written notice at any time after (i) any default in payments to secured lienholders, or (ii) the exercise of the option by Astraea to purchase the Casinos stock.

	
Casinos Dividend:
	
No dividends shall be paid by Casinos to Global.  Any available cash flow of Casinos, after payment of all obligations of Casinos and establishment of reasonable operating reserves (and reasonable refurbishing of the Bull Durham) shall be used to accelerate payment on Casinos' debt obligations.

	
Casinos USA Secured Debt:
	
The junior secured mortgage notes encumbering the Bull Durham shall be restructured  to bear interest at the rate of four percent (4%) and to amortize in a straight line over a term of 30 years and maturing after seven (7) years. Those notes are held by the following: Donald Gardner ($4,825.59), Craig Hess ($12,133.18), James R. Sowell Estate ($12,120.30), Lisa Montrose ($730,610.28), Gary L. Shupp ($228,193.58), OBA, Inc., ($24,154.13), Marian Johnson ($79,795.04), Miller, McCarren & Helms ($49,870.18), James R. Sowell Trust ($12,120.30).  The warrants and cash flow entitlements issued to Astraea and the other secured noteholders shall be terminated.

	
Cross Default Agreement
	
Casinos USA shall enter into an agreement with Astraea and the holders of the Class 5, Class 6 and Class 8 claims under the Bankruptcy Plan pursuant to which any default of Global Central Corporation to repay its outstanding intercompany account payable to Casinos USA shall constitute a default for nonpayment under the notes held by Astraea and the holders of the Class 5, Class 6 and Class 8 claims which are secured by deeds of trust against the Bull Durham Casino.

	
Astraea Option:
	
Global shall grant Astraea a five-year option to purchase upon ninety (90) days' prior written notice all the issued and outstanding shares of Casinos USA stock for $100.00 with the understanding that the option cannot be exercised for 30 months from the closing date.  Global shall have the right to purchase the option from Astraea in consideration of (i) full payment of the unpaid principal balance on the Astraea/Global Note, and (2) full payment of all unpaid interest, and (3) an additional interest payment computed such that Astraea receives, in total, 12% interest on the unpaid principal from the date of the closing of the Transaction described in this term sheet up to the date the option is purchased by Global.

	
Astraea Mortgage Notes:
	
Astraea shall agree to a restructure of its two mortgage notes to provide for interest at the rate of 7% per annum with a 30-year amortization and an extended maturity date of 7 years from the closing date. Astraea shall also agree to a deferral on installment payments on its senior secured promissory note to the extent of 100% of each such installment up to an aggregate payment deferral totaling $100,000, but in no event more than one year.  Installment payments withheld as part of the deferral shall be set aside and used for working capital purposes (accounts payable), capital improvements and expenditures of the Bull Durham approved by Astraea.  Amounts subject to the moratorium shall be deferred and repaid as part of the balloon payment under the senior secured mortgage note.  Any reasonable expenses incurred by Astraea or the Class 5, Class 6 and Class 8 claims in connection with the restructure of the indebtednesses provided for in this Term Sheet shall be added to the principal balances of their respective secured mortgage notes (in the case of Astraea, its senior secured mortgage note) and repaid as part of the balloon payment under each such mortgage note.

	
Gaming Equipment Debt Restructure:
	
All debt associated with gaming equipment located at the Bull Durham shall be restructured in accordance with new agreements (subject to Astraea's approval) with IGT and Aristocrat.  Notwithstanding the fact that the gaming equipment is owned by Global, it is understood and agreed that any equity or future economic value derived from the sale, trade-in or other disposition of the gaming equipment shall inure to the benefit of Casinos USA, assuming that Casinos USA provided the capital to pay for or reduce the indebtedness against such gaming equipment.

	
Management Bonus Plan
	
Casinos USA shall establish a management bonus plan under the supervision of its Board of Directors pursuant to which an amount equal to 15% of Casinos USA's net cash flow, after debt service, shall be paid annually to the management and key employees of Casinos USA, Inc. as incentive compensation.

	
Restructure of Steinle Note
	
The Steinle Note  payable by  Casinos USA to Global shall be restructured to amortize so that monthly principal and interest payments  are sufficient to the extent available to pay the monthly installments of principal and interest payments due under the notes payable owed by Global to Peak National Bank. All payments received by Global under the Steinle Note shall be used to pay and retire the notes due to Peak National Bank.

	
Cancellation of Casinos USA Preferred Stock; Peak National Bank Note
	
All shares of Casinos USA, Inc. Preferred Stock shall be cancelled.  Global shall be liable for the balance that is due and owing under two promissory notes held by Peak National Bank, having a remaining principal balance of approximately $123,000.  To the extent available,  Casinos USA payments under the Steinle Note  shall be used to service the Peak Note.

	
Third Party Consents:
	
The parties will exercise reasonable effort to obtain the consents of the Colorado Division of Gaming and third parties having an interest in Casinos USA equity or cash flow, including the holders of the Class 5, 6 and 8 secured debt.

	
Documents Required:
	
The following documents will be required to implement the foregoing:

	 	 	
*
	
Amendment to the Astraea/Global Note

	 	 	
*
	
Assignment and Assumption of Astraea/Casinos Note

	 	 	
*
	
Stock pledge and option agreement covering Casinos USA common stock

	 	 	
*
	
Collateral assignment of Steinle Note

	 	 	
*
	
Modification to secured debt promissory notes

	 	 	
*
	
Modification to Steinle Note

	 	 	
Definitive agreements covering the above and other matters, including distribution of cash flow, review of financial statements, management agreement, collection of Casinos USA accounts receivable (including Global Central Corporation) and negative or restrictive covenants.

	
Interim Binding Agreement
	
By signing below, each party agrees that this Term Sheet shall constitute an interim binding agreement with respect to the subject matters contained herein until and unless superceded and modified by subsequent agreements in writing signed by the parties hereto.

	 	 	 	
GLOBAL CASINOS, INC.

	 	 	 	
By:/s/ Frank L. Jennings                                                                

	 	 	 	
Its: President

	 	 	 	 
	 	 	 	
CASINOS, U.S.A., INC.

	 	 	 	
By:/s/ Frank L. Jennings                                                                

	 	 	 	
Its: President

	 	 	 	 
	 	 	 	
ASTRAEA INVESTMENT MANAGEMENT, L.P., Trustee

	 	 	 	
By: /s/ Bruce Leadbetter                                                               

	 	 	 	
Its: CEO

	 	 	 	 
	 	 	 	
/s/ Lisa Paige Montrose                                                                

LISA PAIGE MONTROSE

	 	 	 	 
	 	 	 	
_____________________________________________

DONALD GARDNER

	 	 	 	 
	 	 	 	
____________________________________________

CRAIG HESS

	 	 	 	 
	 	 	 	
/S/ Marian Johnson                                                               
   

MARIAN JOHNSON

	 	 	 	 
	 	 	 	
____________________________________________

GARY L. SHUPP

	 	 	 	 
	 	 	 	
OBA, INC.

	 	 	 	 
	 	 	 	
BY:/s/ Bill M. Ohland                                         
                      

	 	 	 	 
	 	 	 	
JAMES R. SOWELL TRUST

	 	 	 	
By:_________________________________________

	 	 	 	 
	 	 	 	
JAMES R. SOWELL ESTATE

	 	 	 	
By:_________________________________________

	 	 	 	 
	 	 	 	
MILLER, MACCARREN & HELMS 

 MILLER & MACCARREN, P.C.

	 	 	 	
By: /s/ William J. McCarren                          

	 	 	 	
Its: PresidentAGREEMENT

        This Agreement is effective the 17th day of September, 2002 (the "Effective Date"), among GLOBAL CASINOS, INC., a Utah corporation ("Global"), CASINOS U.S.A., INC., a Colorado corporation ("Casinos") and ASTRAEA INVESTMENT MANAGEMENT L.P., as Trustee ("Note Holder").   Each of Global, Casinos and Note Holder is sometimes referred to as a "Party" and may be collectively referred to as the "Parties."

W I T N E S S E T H

        WHEREAS,
 Casinos owns and operates the Bull Durham Saloon and Casino in Black Hawk, Colorado (the "Casino"); and

        WHEREAS,  Casinos is a wholly-owned subsidiary of Global; and

        WHEREAS,  Global and Casino are indebted to the Note Holder pursuant to promissory notes.

        WHEREAS,  the Parties desire to restructure the promissory notes, provide additional security for repayment to the Note Holder, make arrangements regarding the operations of the Casino, and confirm related understandings.

        NOW, THEREFORE,  in consideration for the mutual covenants and agreements herein below set forth, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto, intending to be legally bound, agree as follows:

1.     Agreements.  Effective as of the Effective Date, Global, Casinos and the Note Holder have contemporaneously entered into the following agreements (the "Transaction Documents"):

	 	
(a)
	
Agreement and Amendment to Promissory Note - Casinos and Note Holder related to a Promissory Note in the original principal amount of $249,418.48;

	 	
(b)
	
Agreement and Amendment to Promissory Note - Casinos and Note Holder related to a Promissory Note in the original principal amount of $783,103.56;

	 	
(c)
	
Agreement and Amendment to Promissory Note - Global and Note Holder related to a Secured Convertible Promissory Note in the original principal amount of $750,000;

	 	
(d)
	
Assumption Agreement - Global, Casinos and Note Holder related to the Secured Convertible Promissory Note in the original principal amount of $750,000;

	 	
(e)
	
Security Agreement - Casinos and Note Holder related to the Secured Convertible Promissory Note in the original principal amount of $750,000;

	 	
(f)
	
Stock Pledge Agreement - Casinos and Note Holder related to the Secured Convertible Promissory Note in the original principal amount of $750,000;

	 	
(g)
	
Option Agreement - Global and Note Holder related to the common stock of Casinos (the "Common Stock"); 

	 	
(h)
	
Voting Agreement - Casinos and Global related to the Common Stock; and

	 	
(i)
	
Service Agreement - Global and Casinos.

		
(j)
	
[NEED TO ADD GAMING MACHINE AGREEMENT]

        The agreements specified above are sometimes referred to hereinafter as the "Other Agreements."

2.     Steinle Note.  

	 	
(a)
	
Casinos is obligated to make payments to Global pursuant to a promissory note dated January 17, 1997 in the original principal amount of $114,309.38 and originally made payable to Janice Steinle (the "Steinle Note"), which Steinle Note is currently held by Global.

	 	
(b)
	
Global is currently indebted to Peak National Bank pursuant to two promissory notes, one of which is dated October 29, 1998 and is in the original principal amount of $150,000 (with a remaining principal balance of $50,596.76 at August 31, 2002), and one of which is dated April 9, 1998 in the original principal amount of $245,000 (with a remaining principal balance of $55,953.82 at August 31, 2002) (collectively referred to hereinafter as the "Peak Notes").  Global entered into Extension and Modification Agreements, each dated June 27, 2000, regarding the Peak Notes, copies of which have been provided to Casinos and the Note Holder.  Pursuant to the Extension and Modification Agreements, payments pursuant to the Peak Notes have been re-amortized, the maturity dates changed to June 27, 2004 and the interest rates are to be adjusted on an annual basis at 2% over the highest prime rate published in the money section of The Wall Street Journal

		
(c)
	
The parties agree that the Steinle Note is hereby amended to provide for monthly payments in accordance with the Exhibit 1 Payment Schedule attached hereto.  This Payment Schedule approximates the present monthly payments required pursuant to the Peak Notes, as modified.  An event of default by Global of the Peak Notes, or an acceleration of the maturity of the Peak Notes, shall not affect the obligation hereunder of Casinos to make regular monthly installment payments pursuant to the Steinle Note, as amended hereby, to Global.  In no event shall Casinos' obligations hereunder increase the total amount due under the Steinle Note. 

3.     Representations and Warranties of Global and Casinos.
   Global and Casinos, jointly and severally,  represent and warrant to the Note Holder that as of the date hereof:

	 	
(a)
	
Each of Global and Casinos is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with full corporate power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own and use, and to perform all of its obligations under this Agreement and the Other Agreements;

	 	
(b)
	
Each of Global and Casinos has all requisite corporate power and authority to execute and deliver this Agreement and the Other Agreements, to consummate the transactions contemplated hereby and to perform all the terms and conditions hereof to be performed by it.  The execution and delivery of this Agreement and the Other Agreements by each of Global and Casinos, the performance by Global and Casinos of all the terms and conditions of this Agreement and the Other Agreements to be performed by each of it and the consummation of the transactions contemplated hereby and in the Other Agreements have been duly authorized and approved by all requisite corporate action.  This Agreement and the Other Agreements constitute the valid and legally binding obligation of each of Global and Casinos, enforceable in accordance with the terms of this Agreement and the Other Agreements, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity.  

4.     Affirmative Covenants.  Casinos and Global, jointly and severally, covenant to the Note Holder that:

	 	
(a)
	
The books and accounting records of Casinos shall be maintained in strict accordance with generally accepted accounting principles and in full compliance with any applicable state and/or federal regulations, expressly including without limitation the Colorado Division of Gaming;

	 	
(b)
	
The Note Holder may review, inspect and/or audit all the books and records (including accountants' work papers) of Casinos;

	 	
(c)
	
The Note Holder may review with the in-house and outside accountants for Casinos and Global the accounting procedures and practices to be followed and implementation of such accounting procedures and practices;

	 	
(d)
	
The following information will be provided to Note Holder :

	 	 	
(i)
	
monthly and year-to-date unaudited financial statements of Casino prepared in accordance with generally accepted accounting principles (except footnotes may be omitted) within 25 days after the end of each month;

	 	 	
(ii)
	
financial statements of Casinos prepared in accordance with generally accepted accounting principles and audits prepared in accordance with General Audit Standards and SEC regulations within 90 days of the year-end; and

	 	 	
(iii)
	
any reasonable requests of Note Holder for financial and operational information related to Casinos and/or the Casino on a timely basis.

		
(e)
	
Casinos and Global shall immediately notify Note Holder of any developments that would have a material adverse impact upon the financial condition of either Casinos or Global.

5.     Negative Covenants.    Casinos covenants to the Note Holder that it will not, and Global covenants to the Note Holder that it will not take any action that would cause Casino to (unless the Note Holder shall otherwise consent in writing):

	 	
(a)
	
Make any loans to Global or any other person;

	 	
(b)
	
Borrow any money from Global or any other person;

	 	
(c)
	
Engage in any business other than the ownership and operation of the Casino;

	 	
(d)
	
Issue additional stock (except for an issuance pursuant to the exercise of warrants issued in connection with Casinos' Second Amended Plan of Reorganization dated September 4, 1996), or change, in any way, the existing capital structure of Casinos;

		
(e)
	
Sell any of Casinos' assets except in the ordinary course of Casinos' business; or

		
(f)
	
Declare or pay dividends on Casinos' capital stock or make any other payments to Global, it being the intent that any excess cash flow generated by the operations of Casinos be used to accelerate payments in satisfaction of the debt obligations of Casinos, in the reverse order of seniority.

6.     Third Party Beneficiary.    Notwithstanding that it is not a party to the Voting Agreement and Service Agreement, because of this Agreement and the Note Holder's accommodations to Global and the obligations owed to the Note Holder by Global and Casinos, the Note Holder shall be deemed a third party beneficiary of the Voting Agreement and Service Agreement. 

7.     Term.
  The agreements set forth in Sections 4 and 5 hereof shall terminate upon the earlier to occur of (i) payment of the note referenced in Section 1(c) of this Agreement, (ii) the exercise by Note Holder of its rights of foreclosure under the Stock Pledge Agreement and/or Security Agreement or its purchase option under the Option Agreement, or (iii) September
17, 2012.

8.     Mutual General Release.    For and in consideration of the execution and delivery of the Transaction Documents, each party hereto, for itself, its officers, directors, principals, shareholders, equity holders, agents, representatives and attorneys (hereafter the "Party" and "Party Affiliates," respectively) hereby agrees to release, acquit and forever discharge each other Party and its Party Affiliates from and against any claim, debt, obligation, cause of action or liability, known or unknown, at law or in equity, which may now exist or which may in the future arise in connection with any fact, transaction or occurrence whatsoever from the beginning of time up to the date hereof.  This mutual general release shall not apply (1) to the covenants and undertakings of the Parties under the Transaction Documents, or (2) in the case where the Transaction Document is an Amendment to the covenants and undertakings in the document being amended.

9.     Governing Law.  This Agreement and the Other Agreements shall be construed in accordance with the laws of the State of Colorado.

10.    Exercise of Rights and Remedies.  Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any Party as a result of any breach or default by any other Party under this Agreement or the Other Agreements shall impair any such right, power or remedy, nor shall it be construed as a waiver or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver.

11.    Notices.  All notices and other communications hereunder shall be in writing and shall be deemed duly given (i) on the date of delivery if delivered personally, or facsimile upon confirmation of receipt, (ii) on the first business day following the date of dispatch if delivered by a recognized next-day courier service, or (iii) on the third business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage pre-paid.  All notices hereunder shall be delivered as set forth below each Party's signature to this Agreement, or pursuant to such other instructions as may be designated in writing by the Party to receive such notice.

12.    Remedies Cumulative.  No right, remedy or election given by any term of this Agreement shall be deemed exclusive, but each shall be cumulative with all other rights, remedies and elections available at law or in equity.

13.    Counterparts.    This Agreement may be executed in multiple counterparts, which collectively constitute one instrument.  

       EXECUTED, on this ___ day of September, 2002, to be effective as of the Effective Date set forth in the first paragraph of this Agreement.  

	
GLOBAL CASINOS, INC.
	
CASINOS U.S.A., INC.

	
By:/s/ Frank L. Jennings                
	
By:/s/ Frank L. Jennings              

	
Name: Frank L. Jennings
	
Name: Frank L. Jennings

	
Title: President
	
Title: President

	
Address: _________________________
	
Address: _______________________

	
ASTRAEA INVESTMENT MANAGEMENT L.P., as Trustee

	
By:/s/ Bruce Leadbetter                
	 
	
Name: Bruce Leadbetter
	 
	
Title: CEO
	 
	
Address: _________________________

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00047-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00047-of-00352.parquet"}]]