<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 11, 1998
GLOBAL CASINOS, INC.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Utah 0-15415 87-0340206
- ---------------------------------------------------------------------------
State or other jurisdiction Commission file (IRS Employer
of incorporation or number Identification No.
organization
4465 Northpark Drive, Colorado Springs, Colorado 80907
---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 756-3777
- ---------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
<PAGE>
ITEM 5: OTHER EVENTS
------------
On June 11, 1998, Global Casinos, Inc. (the "Company") and its wholly-owned
subsidiary Global Alaska Industries, Inc., an Alaska corporation ("GAI")
executed and delivered an Agreement to Convert Debt (the "Agreement") with
Mark Griffin ("Griffin").
In connection with the Company's acquisition of Alaska Bingo Supply, Inc.
("ABS") in August 1997, GAI issued its Promissory Note to Griffin, the sole
shareholder of ABS, in the principal amount of $4,000,000 representing payment
of a portion of the purchase price for the shares of ABS Common Stock acquired
in the acquisition. Pursuant to the terms of the Agreement, Griffin has
agreed to convert, and has converted, the principal balance due and owing
under the Note of $3,853,291, and accrued and unpaid interest thereon in the
amount of $15,202, into (i) 340,329 shares of the Company's Series B
Convertible Preferred Stock ("Series B Preferred Stock"), having a face value
of $10.00 per share, and (ii) a convertible Promissory Note in the principal
amount of $450,000 (the "Second Note"). By agreement of the parties, the
conversion was deemed effective March 31, 1998 (the "Effective Date"). Each
share of Series B Preferred Stock is convertible, at the option of the holder,
into one share of the Company's Common Stock at any time commencing the
earlier of (i) one year from the date of issue or (ii) upon the effective date
of a Registration Statement registering for sale under the Securities Act of
1933, as amended (the "Securities Act"), the shares of the Company's Common
Stock issuable upon such conversion ("Conversion Stock"); provided, however,
that in no event shall the Series B Preferred Stock be convertible into more
than 311,550 shares of Common Stock (the "Maximum Aggregate Conversion")
without the approval of the Company's shareholders. The Maximum Aggregate
Conversion is a number equal to 19.9% of the Company's total issued and
outstanding shares of Common Stock, without giving effect to the conversion.
The Company has the option, but not the obligation, to redeem all or any
portion of the Series B Preferred Stock at a redemption price of $10.00 per
share. Holders of the Series B Preferred Stock are entitled to receive an
annual dividend payable at the rate of 8% per annum. The outstanding shares
of Series B Preferred Stock are non-voting, except as required by law.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) Financial Statements
--------------------
None
(b) Pro Forma Financial Information
-------------------------------
Included herewith is a "pro forma" balance sheet of the Company
as of March 31, 1998 giving retroactive effect to March 31, 1998 of the
transactions provided for and consummated in connection with the Agreement.
(c) EXHIBITS
--------
Item Title
---- -----
1.0 Agreement to Convert Debt
2.0 Certificate of Designation of Rights and
Preferences of Series B Convertible Preferred Stock
3.0 Convertible Promissory Note
<PAGE>
<PAGE>
GLOBAL CASINOS, Inc. and Subsidiaries
Pro Forma Balance Sheet
as of March 31, 1998
<PAGE>
<PAGE>
Global Casinos, Inc. and Subsidiaries
Consolidated Pro Forma Balance Sheets
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
(unaudited) (audited)
------------- -------------
<S> <C> <C>
Assets
- ------
Current assets:
Cash $ 1,022,713 $ 1,048,371
Accounts receivable:
Related parties 41,028 11,199
Trade, net of allowance for doubtful
accounts of $11,609 at March 31, 1998
and $14,750 at June 30, 1997 273,695 62,710
Employees 20,314 -
Inventory 268,883 -
Marketable securities 37,821 -
Current portion of notes receivable 124,425 57,645
Other 57,167 138,792
------------- -------------
Total current assets 1,846,046 1,318,717
------------- -------------
Land, buildings and equipment:
Land 533,350 531,715
Buildings 4,893,107 3,913,510
Equipment 2,132,852 2,539,837
------------- -------------
7,559,309 6,985,062
Accumulated depreciation (2,100,337) (1,615,751)
------------- -------------
Net land, buildings and equipment 5,458,972 5,369,311
Other assets, net of amortization of
$31,264 at March 31, 1998 and
$17,000 at June 30, 1997 279,904 60,486
Leasehold and contract rights,
net of amortization of $1,321,774 at
March 31, 1998 and $1,077,424 at
June 30, 1997 1,731,626 2,050,976
Goodwill, net of amortization of
$154,425 at March 31, 1998 3,783,408 0
Notes receivable, net of current portion,
and including receivables in default 332,513 369,059
------------- -------------
$ 13,432,469 $ 9,168,549
============= =============<PAGE>
<PAGE>
Global Casinos, Inc. and Subsidiaries
Consolidated Pro Forma Balance Sheet
(Continued)
</TABLE>
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
(unaudited) (audited)
------------- -------------
<S> <C> <C>
Liabilities and stockholders' equity
- ------------------------------------
Current liabilities:
Accounts payable, including related party
payables of $31,421 at June 30, 1997 $ 333,628 $ 318,199
Accrued expenses 1,023,257 958,880
Accrued interest 243,017 154,995
Note payable 50,000 -
Current portion of long-term debt
including debt in default 1,746,893 557,450
Mandatory redeemable convertible
Class A preferred stock, in default 36,000 53,500
------------- -------------
Total current liabilities 3,432,795 2,043,024
------------- -------------
Long-term debt, less current portion 3,093,425 4,052,900
Other 18,546 -
------------- -------------
3,111,971 4,052,900
------------- -------------
Minority interest (19,349) 36,367
------------- -------------
Commitments and Contingencies
Stockholders' equity:
Class A preferred stock - Convertible
nonvoting, $2 par value:
Authorized - 10,000,000 shares
Issued and outstanding - 147,750 shares
at March 31, 1998 and at
June 30, 1997 268,538 268,538
Class B preferred stock - Convertible
nonvoting, $.01 par value:
Authorized - 10,000,000 shares
Issued and outstanding - 340,329 shares
at March 31, 1998 3,403 -
Common stock - $.05 par value:
Authorized - 50,000,000 shares
Issued and outstanding - 1,565,586 shares
at March 31, 1998 and 1,400,811
shares at June 30, 1997 11,217 7,004
Additional paid-in capital 12, 647,471 8,969,045
Accumulated deficit (6,023,577) (6,208,329)
------------- -------------
6,907,052 3,036,258
------------- -------------
$ 13,432,469 $ 9,168,549
============= =============
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GLOBAL CASINOS, INC.
Date: 06/11/98 By: /s/ Stephen G. Calandrella
-------- -------------------------------------
Stephen G. Calandrella, President
</TABLE>
<PAGE>
CONVERTIBLE PROMISSORY NOTE
---------------------------
$450,000.00 Anchorage, Alaska
March 31, 1998
FOR VALUE RECEIVED, GLOBAL ALASKA INDUSTRIES, INC., an Alaska
corporation, and its successors and assign, (the "Maker" or "Company")
promises to pay to the order of MARK GRIFFIN (the "Holder") at 3707 Woodland
Drive, #4, Anchorage, Alaska 99517, or at such other place as Holder may from
time to time designate in writing, the principal sum of Four Hundred Fifty
Thousand Dollars ($450,000) in lawful money of the United States of America,
together with interest on so such thereof as is from time to time outstanding
at the rate hereinafter provided, and payable as hereinafter provided.
1. NOVATION. This Note is given in substitution and lieu of that
certain promissory note made by Maker and given to Holder dated August 1, 1997
in the original principal amount of $4,000,000 (the "First Note"), which First
Note upon execution hereof shall be null and void.
2. INTEREST RATE. The unpaid principal balance of this Convertible
Promissory Note ("Note") shall bear interest commencing March 31, 1998 at the
rate of eight percent (8%) per annum, simple interest.
3. PAYMENT. Principal and interest due under this Note shall be
payable as follows:
a. Commencing upon (i) full payment of all dividends by Global
Casinos, Inc., a Utah corporation ("Global"), to Holder, accruing under
Global's Series B Convertible Preferred Stock ("Preferred Stock") and (ii)
redemption of all the Preferred Stock, owned by Holder, and continuing monthly
thereafter until the Note is paid in full, the principal and accrued interest
shall be payable in equal monthly installments of $63,383.72 each.
b. In addition, Maker shall be obligated to pay a amount equal to
fifty percent (50%) of its annual earnings before interest, taxes,
depreciation and amortization ("EBITDA"), in excess of $1,300,000 per year
(the "Mandatory Payment"). At Global's option, the Mandatory Payment shall
be treated as a redemption of a portion of Preferred Stock. Notwithstanding
the above, Maker shall not pay this Note in full by means of Mandatory
Payments, but shall be permitted to credit such payments as interest on the
outstanding principle balance.
4. MATURITY DATE. The total outstanding principal balance hereof,
together with accrued and unpaid interest, shall be due and payable September
15, 2004.
5. DEFAULT, PENALTY, INTEREST AND ATTORNEY FEES. Any default in the
provisions of that certain Stock Purchase and Sale Agreement dated August 1,
1997 as amended by the Agreement to Convert Debt executed and entered into
contemporaneous with this Note for which consideration is being given, shall
be deemed a breach of and default in the terms and conditions of this Note.
Said Stock Purchase and Sale Agreement and Agreement to Convert Debt are
incorporated herein by reference as stating Maker's obligations and continuing
responsibility during the term of this Note, in addition to the specific terms
and provisions stated herein.
Default shall include, but not be limited to:
a. non-payment of any monthly dividend payable pursuant to the
Certificate of Designations, Preferences, and Rights of Series B Convertible
Preferred Stock of Global Casinos, Inc. dated March 31, 1998 (the
"Certificate" and "Series B Preferred Stock" respectively) within ten (10)
days of the due date thereof;
b. non-payment of any respective installment and/or applicable
late payment penalty described in this Note within ten (10) days of the due
date thereof;
c. any default in the Stock Pledge Agreement dated August 1, 1997,
as amended March 31, 1998; or
d. any default in the General Security Agreement dated August 1,
1997 as amended;
e. in the event Global fails to redeem a number of shares of
Series B Preferred Stock pursuant to the Minimum Monthly Optional Redemption
described in the Certificate, and there does not exist a public trading market
for the Global common stock issuable upon conversion of the Series B Preferred
Stock satisfactory to Holder; or
f. any default under the Agreement to Convert Debt between Maker
and Holder.
In the event that any installment and/or applicable late payment
penalties have not been paid to and received by the Holder within ten (10)
days of date due, Holder may declare a default and may further declare the
entire then outstanding balance due and owing; fully accelerating total
payments of all principal, penalties, and interest thereon.
In the event any payment due hereunder shall not have been paid to and
received by the Holder hereof within seven (7) business days of the due date
of such payment, a late payment penalty of Ten Thousand Dollars ($10,000.00)
shall immediately become due and owing in addition to the payment, or payments
then overdue.
Upon default hereunder, the balance of the principal remaining unpaid,
interest accrued thereon, and all other costs and fees shall bear interest at
the rate of Twelve percent (12%) per annum from the date of default, or the
date of advance, as applicable. Holder shall have the right to immediately
seize, and take possession thereof, of any and all collateral, inventory,
furniture, fixtures and equipment, as well as accounts receivables and assets
given as security for the sale and purchase evidenced by the terms of this
Note and the Stock Purchase and Sales Agreement as amended by the Agreement to
Convert Debt incorporated herein. In the event of default, the Maker and all
other parties liable hereon agree to pay all costs of collection, seizure of
security interest given, including reasonable attorney's fees.
6. ESCROW. All original documents executed herewith, to include Stock
Purchase and Sales Agreement as amended by the Agreement to Convert Debt, this
Note, and the original executed stock in Alaska Bingo Supply, Inc. shall be
placed in escrow with the First National Bank of Anchorage, Main Branch, with
all payments made pursuant to the agreement of the parties being paid and
recorded through said escrow.
7. CONVERSION.
a. OPTIONAL CONVERSION RIGHT. Subject to and in compliance with
the provisions of this paragraph 6, all or any portion of the principal amount
outstanding on the Note may, at the option of the Holder, be converted into
fully-paid and non-assessable shares of common stock of Global ("Common
Stock"), $.005 par value.
b. TIME OF OPTIONAL CONVERSION. The date upon which the holder
may convert the Note to Common Stock shall be any time commencing the earlier
(i) one year from the date hereof or (ii) the effective date of a Registration
Statement registering for sale under the Securities Act of 1933, as amended,
the issuance of the Common Stock upon conversion through and including the
maturity date of the Note, or its prior pre-payment, whichever occurs first.
c. APPLICABLE CONVERSION VALUE. Subject to the adjustments
provided for herein, the price per share at which the Note may be converted
into common stock (the "Applicable Conversion Value") shall be Ten Dollars
($10.00) per share of Common Stock.
d. ADJUSTMENTS FOR CAPITAL REORGANIZATION, RECLASSIFICATION OR
TRANSFER OR ASSETS. In the event the Common Stock issuable upon conversion of
the Note shall be changed into the same or different number of shares of any
class or classes of stock, whether by capital reorganization, reclassification
or otherwise, or in the event Global shall at any time issue Common Stock by
way of dividend or other distribution on any stock of Global, or subdivide or
combine the outstanding shares of Common Stock, then in each such event the
Holder shall have the right thereafter, but not the obligation, to exercise
such Note and receive the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification
or other change by holders of the number of shares of Common Stock into which
such Note might have been exercised immediately prior to such organization,
reclassification or change. In the case of any such reorganization,
reclassification or change, the Conversion Value shall also be appropriately
adjusted so as to maintain the aggregate Conversion Value. Further, in case
of any such consolidation or merger of Global with or into another corporation
in which consolidation or merger Global is not the continuing corporation, or
in case of any sale or conveyance to another corporation of the property of
Global as an entirety, or substantially as an entirety, Global shall cause
effective provision to be made so that the Holder shall have the right
thereafter, by converting the Note, to purchase the kind and amount of shares
of stock and other securities and property receivable upon such consolidation,
merger, sale or conveyance by holders of the number of share of Common Stock
into which such Note might have been exercised immediately prior to such
consolidation, merger, sale or conveyance, which provision shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Note. The foregoing provisions shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. Notwithstanding the foregoing, no adjustment of the
Conversion Value shall be made as a result of or in connection with (1) the
issuance of Common Stock of Global pursuant to options, warrants and share
purchase agreements now in effect or hereafter outstanding or created, (2) the
establishment of option plans of Global, the modification, renewal or
extension of any plan now in effect or hereafter created, or the issuance of
Common Stock upon exercise of any options pursuant to such plans, (3) the
issuance of Common Stock in connection with an acquisition, consolidation or
merger of any type in which Global is the continuing corporation, or (4) the
issuance of Common Stock in consideration of such cash, property or service as
may be approved by the Board of Directors of Global and permitted by
applicable law.
e. CONTINUATION OF TERMS. Upon any reorganization, consolidation
or merger referred to in this paragraph 6, the Note shall continue in full
force and effect until conversion by the Holder and the terms hereof shall be
applicable to the shares of stock and other securities and property receivable
on the conversion of any note after the consummation of such reorganization,
consolidation, merger of any similar event and shall be binding upon the
issuer of any such stock or other securities, including, in the case of any
such transfer, the person acquiring all or substantially all of the properties
or assets of Global whether or not such person shall have expressly assumed
the terms of the Note.
f. EXERCISE OF CONVERSION PRIVILEGE. To exercise its conversion
privilege or in the event of the automatic conversion of the Note, the Holder
shall surrender such Note, or recognize partial prepayment therefor, being
converted to Global at its principal office, and shall give written notice to
Global at that office that Holder is delivering the Note for conversion or
recognizing partial prepayment. Such notice shall also state the name or
names (with address or addresses) in which the certificate or certificates for
shares of Common Stock issuable upon such conversion shall be issued. The
Note, if surrendered for conversion shall be accompanied by proper assignment
thereof to the Company or in blank.
g. NOTICE OF RECORD DATE. In the event of:
(1) any taking by Global of a record of the holders of any
class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(2) any capital reorganization of Global, any reclassification
or recapitalization of the capital stock of Global, any merger
or consolidating of Global or a transfer of all or
substantially all of the assets of the company to any other
corporation, or any other entity or person, or
(3) any voluntary or involuntary dissolution, liquidation or
winding up of Global,
then and in each such event Global shall mail or cause to be mailed to the
Holder a notice specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or right and a
description of said dividend, distribution or right, (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective and (iii) the time, if any, that is to be fixed, as to when
the holders of record of common stock (or other securities) shall be entitled
to exchange their shares of common stock (or other securities) for securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding up. Such notice shall be mailed at least thirty (30) days prior to
the date specified in such notice on which such action is to be taken.
h. In the event Holder exercises the right of conversion granted
herein, if the underlying shares of Common Stock (the "Conversion Shares") are
not eligible to be resold in market transactions in reliance upon Rule 144, or
a successor rule, under the Securities Act, then Holder shall have a one-time
demand registration right on Form S-3 to have registered for resale under the
Securities Act the Conversion Shares issuable upon such conversion.
8. INTEREST CALCULATION. Daily interest shall be calculated on a 365-
day year and the actual number of days in each month.
9. PREPAYMENT. This Note may not be prepaid, in whole or in part, at
any time without the prior written consent of Holder.
10. NONRECOURSE OBLIGATION. The obligation of Maker to pay all sums of
principal, interest and other amounts due and owing under this Note is secured
by Stock Pledge Agreement dated August 1, 1997 as amended on even date
covering one hundred percent (100%) of the issued and outstanding shares of
common stock of ALASKA BINGO SUPPLY, INC., an Alaskan corporation ("ABS"); and
a General Security Agreement and Financing Statement covering all of the
tangible and intangible assets of ABS. This Note and Maker's obligation
hereunder shall be deemed to be nonrecourse as to Maker; and in the event of
Maker's default hereunder, Holder's sole and exclusive remedies shall be to
exercise its rights under this Note and the Stock Pledge Agreement and General
Security Agreement, and under no circumstances shall Maker have any liability
for any deficiency which may result following Holder's exhaustion of such
remedies.
Upon default of any provision referenced herein, Holder may
immediately retake all documents held in escrow, with or without notice, seize
and take possession of all collateral and assets given as security for and in
consideration of the terms and conditions of this Note.
11. COSTS OF COLLECTION. Maker agrees that if, and as often as, this
Note is placed in the hands of an attorney for collection or to defend or
enforce any of the Holder's rights hereunder or under any instrument securing
payment of this Note, Maker shall pay to Holder its reasonable attorney's fees
and all court costs and other expenses incurred in connection therewith,
regardless of whether a lawsuit is ever commenced or whether, if commenced,
the same proceeds to judgment or not. Such costs and expenses shall include,
without limitation, all costs, reasonable attorneys' fees, and expenses
incurred by Holder in connection with any insolvency, bankruptcy, reorganiza-
tion, foreclosure, deed in lieu of foreclosure or similar proceedings
involving Maker or any endorser, surety, guarantor, or other person liable for
this Note which in any way affect the exercise by Holder of its rights and
remedies under this Note, or any other document or instrument securing,
evidencing, or relating to the indebtedness evidenced by this Note.
12. APPLICATION OF PAYMENTS. Any payment made against the indebtedness
evidenced by this Note shall be applied against the following items in the
following order: (1) costs of collection, including reasonable attorney's
fees incurred or paid and all costs, expenses, default interest, late charges
and other expenses incurred by Holder and reimbursable to Holder pursuant to
this Note (as described herein); (2) default interest accrued to the date of
said payment; (3) ordinary interest accrued to the date of said payment; and
finally, outstanding principal.
13. ASSIGNMENT OF NOTE . This Note may be assigned by Maker to any
entity that acquires Maker or substantially all Maker's assets.
14. NON-WAIVER. No delay or omission on the part of Holder in
exercising any rights or remedy hereunder shall operate as a waiver of such
right or remedy or of any other right or remedy under this Note. A waiver on
any one or more occasion.
15. MAXIMUM INTEREST. In no event whatsoever shall the amount paid, or
agreed to be paid, to Holder for the use, forbearance, or retention of the
money to be loaned hereunder ("Interest") exceed the maximum amount
permissible under applicable law. If the performance or fulfillment of any
provision hereof, or any agreement between maker and Holder shall result in
Interest exceeding the limit for Interest prescribed by law, then the amount
of such Interest shall be reduced to such limit. If, from any circumstance
whatsoever, Holder should receive as Interest an amount which would exceed the
highest lawful rate, the amount which would be excessive Interest shall be
applied to the reduction of the principal balance owing hereunder (or, at the
option of Holder, be paid over to Maker) and not to the payment of Interest.
16. PURPOSE. Maker certifies that the debt evidenced by this Note is
obtained for business or commercial purposes and that the proceeds thereof
will not be used primarily for person, family, household, or agricultural
purposes. This Note is issued "in substitution" for the Convertible
Promissory Note dated August 1, 1997 given by Maker to Holder, for the purpose
stated in the General Security Agreement dated August 1, 1997, and such
security agreement and related financing statement remain in full force and
effect.
17. WAIVER OF PRESENTMENT. Maker and the endorsers, sureties,
guarantors and all persons who become liable for all or any part of this
obligation shall be jointly and severally liable for such obligation and
hereby jointly and severally waive presentment and demand for payment, notice
of dishonor, protest and notice of protest, and any and all lack of diligence
of delays in collection or enforcement hereof.
18. GOVERNING LAW. As an additional consideration for the extension of
credit, Maker and each endorser, surety, guarantor, and any other person who
may become liable for all or any part of this obligation understand and agree
that the indebtedness evidenced by this Note is made in the State of Alaska
and the provisions hereof will be construed in accordance with the laws of the
State of Alaska, and such parties further agree that in the event of default,
this Note may be enforced in the Superior Court for the State of Alaska
sitting in Anchorage, Alaska, and they do hereby submit to the jurisdiction of
such court regardless of their residence or where this Note or any endorsement
hereof may be executed.
19. BINDING EFFECT. The term "Maker" as used herein shall include the
original Maker of this Note and any party who may subsequently become liable
for the payment hereof as an assumer with the consent of the Holder, provided
that Holder may, at its option, consider the original Maker of this Note alone
as Maker unless Holder has consented in writing to the substitution of another
party as Maker. The term "Holder" as used herein shall mean Holder or, if
this Note is transferred, the then Holder of this Note.
20. RELATIONSHIP OF PARTIES. Nothing herein contained shall create or
be deemed or construed to create a joint venture or partnership between Maker
and Holder, Holder is acting hereunder as a seller only.
21. SEVERABILITY. Invalidation of any of the provisions of this Note or
of any paragraph, sentence, clause, phrase, or word herein, or the application
thereof in any given circumstance, shall not affect the validity of the
remainder of this Note.
22. AMENDMENT. This Note may not be amended, modified, or changed,
except only by an instrument in writing signed by both of the parties.
23. TIME OF THE ESSENCE. Time is of the essence for the performance of
each and every obligation of Maker hereunder.
IN WITNESS WHEREOF, the undersigned has executed this Note effective as
of the 31st day of March, 1998.
GLOBAL ALASKA INDUSTRIES, INC.
an Alaska corporation
By: /s/ Stephen G. Calandrella
--------------------------------------
Stephen G. Calandrella, President
Consent as to Paragraphs 3, 5 and 7:
GLOBAL CASINOS, INC., a Utah corporation
By: /s/ Stephen G. Calandrella
---------------------------------
Stephen G. Calandrella, President
<PAGE>
CERTIFICATE OF DESIGNATIONS, PREFERENCES,
AND RIGHTS OF SERIES B CONVERTIBLE PREFERRED STOCK
OF GLOBAL CASINOS, INC.
- ---------------------------------------------------------------------------
Pursuant to the
General Corporation Law of the State of Utah
- ---------------------------------------------------------------------------
GLOBAL CASINOS, INC., a corporation organized and existing under the laws
of the State of Utah (the "Company"), DOES HEREBY CERTIFY that pursuant to the
authority contained in Article IV of its Articles of Incorporation, and in
accordance with the provisions of the General Corporation Law of the State of
Utah, the Company's Board of Directors has duly adopted the following
resolution creating a series of the class of its authorized Preferred Stock,
designated as Series B Convertible Preferred Stock:
RESOLVED THAT:
WHEREAS, by virtue of Article IV of its Articles of Incorporation,
the Company has the authority to issue ten million (10,000,000) shares of
Preferred Stock of the par value of $0.01 per share, the designation and
amount thereof and series, together with the powers, preferences, rights,
qualifications, limitations or restrictions thereof, to be determined by
the Board of Directors pursuant to the applicable law of the State of
Utah;
NOW THEREFORE, the Company's Board of Directors hereby establishes a
series of the class of Preferred Stock authorized to be issued by the
Company as above stated, with the designations and amounts thereof,
together with the voting powers, preferences and relative, participating,
optional and other special rights of the shares of each such series, and
the qualifications, limitations or restrictions thereof, to be as
follows:
1. DESIGNATIONS AND AMOUNTS.
------------------------
Four hundred thousand (400,000) shares of the Company's
authorized Preferred Stock are designated as Series B Convertible
Preferred Stock, having a face value of Ten Dollars ($10.00) per share.
2. DEFINITIONS.
-----------
For the purposes of this Resolution the following definitions
shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Company" shall mean Global Casinos, Inc., a Utah
corporation formed on June 8, 1978.
(c) "GAI" shall mean Global Alaska Industries, Inc., an Alaska
corporation and wholly-owned subsidiary of the Company
(d) "Original Issue Date" for a series of Preferred Stock
shall mean the date on which the first share of such series of
Preferred Stock was originally issued.
(e) "Preferred Stock" shall refer to Series B Convertible
Preferred Stock having a face value of Ten Dollars ($10.00) per
share.
(f) "Subsidiary" shall mean any corporation at least fifty
percent (50%) of whose outstanding voting stock shall at the
time be owned directly or indirectly by the Company or by one
or more Subsidiaries.
3. Dividends.
---------
(a) The holders of outstanding Preferred Stock shall be
entitled to receive dividends at the annual rate of 8% based on
the stated value per share computed on the basis of a 360-day
year and twelve 30-day months. Dividends shall be calculated
from the date of issue and payable, in each case monthly on the
fifteenth day of each month for the preceding month (the
"Dividend Payment Date"). Dividends shall be paid to
recordholders of shares of Preferred Stock as of the date one
business day prior to the Dividend Payment Date (the "Dividend
Record Date"). The right of the holder of shares of Preferred
Stock as of the Dividend Record Date to the relevant dividend
shall not be affected by the subsequent transfer or
cancellation of such shares; such dividend being payable to the
holder as of the Dividend Record Date notwithstanding such
transfer or cancellation.
(b) Dividends on the shares of Preferred Stock shall be
cumulative; therefore, a full dividend on the shares of this
series with respect to any dividend period shall be declared by
the Board of Directors of the Company and the Company shall be
obligated to pay full dividend on the shares of this series
with respect to such dividend period. Any outstanding and
unpaid dividends shall bear interest at the rate of twelve
(12%) per annum or the highest interest rate allowed by law.
(c) The obligation of the Company to declare and pay the
Preferred Stock dividend provided for in Paragraph 3(a) above
shall be secured by (i) a Security Agreement with GAI dated
August 1, 1997 granting to the holders of the Preferred Stock a
security interest in all of the tangible and intangible assets
of Alaska Bingo Supply, Inc., an Alaska corporation ("ABS"),
and (ii) a Stock Pledge Agreement dated August 1, 1997 by GAI
granting to the holders of the Preferred Stock a security
interest in one hundred percent (100%) of the issued and
outstanding shares of capital stock of ABS as amended by a
Stock Pledge Agreement with the Company and GAI of even date
granting a security interest all capital stock of ABS to secure
payment of the dividends on Preferred Stock. In the event the
Company defaults in the payment of the Preferred Stock dividend
provided for in Section 3(a) above, and such default continues
for a period of ten days, then and in such event the Promissory
Note in the principal amount of Four Hundred Fifty Thousand
Dollars ($450,000) of even date given by GAI shall be
immediately due and payable and the holder of the Preferred
Stock shall have the right to immediately seize and take
possession of all collateral, inventory, furniture, fixtures
and equipment as well as accounts receivable and other tangible
and intangible assets of ABS given as security as well as take
possession of the shares of ABS Common Stock pledged to secure
such payments. Should holder exercise his right under the
Security Agreement and Stock Pledge Agreement in accordance
with the foregoing, such exercise shall be deemed holder's sole
and exclusive remedy, it being understood that neither the
Company nor GAI shall have any further liability for any
deficiency, it being expressly understood that the holders of
Preferred Stock shall have as their sole and exclusive remedy
the exercise of their rights under the Security Agreement and
Stock Pledge Agreement. Upon exercise by the holders of the
Preferred Stock of the rights under the Security Agreement and
Stock Pledge Agreement, the holder shall have no further
recourse as against Global, GAI or their assets or affiliates,
and all outstanding shares of this Series B Preferred Stock
shall be deemed canceled and retired for all purposes.
(d) In addition to the Preferred Stock dividend, the holders
of outstanding Preferred Stock shall be entitled to
participate, "pro rata", in cash dividends paid on outstanding
shares of Common Stock, if, when and as the Board of Directors
shall in their sole discretion deem advisable, and only from
the net profits or surplus of the Company as such shall be
fixed and determined by the Board of Directors. The
determination of the Board of Directors at any time of the
amount of net profits or surplus available for dividend shall
be binding and conclusive on the holders of all the stock of
the Company at the time outstanding.
4. Liquidation Rights.
------------------
(a) In the event of any liquidation, dissolution, or winding
up of GAI or the Company, whether voluntary or involuntary, the
holders of each share of Preferred Stock then outstanding shall
be entitled to be paid out of the assets of GAI or the Company
available for distribution to its shareholders, before any
payment or declaration and setting apart for payment of any
amount shall be made in respect of any outstanding Preferred
Stock ranking junior to the Preferred Stock or the Common
Stock, an amount equal to Ten Dollars ($10.00) per share plus
an amount equal to all accrued and unpaid dividends thereon,
whether or not earned or declared, to and including the date
full payment shall be tendered to the holders of the Preferred
Stock with respect to such liquidation, dissolution, or winding
up, and no more. If upon any liquidation, dissolution, or
winding up of GAI or the Company, whether voluntary or
involuntary, the assets to be distributed to the holders of the
Preferred Stock shall be insufficient to permit the payment to
such shareholders of the full preferential amount aforesaid,
then all of the assets of GAI or the Company available to be
distributed shall be distributed ratably to the holders of the
Preferred Stock.
(b) After the payment or distribution to the holders of the
Preferred Stock of the full preferential amounts aforesaid, the
holders of any preferred stock ranked junior to the Preferred
Stock and the Common Stock then outstanding shall be entitled
to receive all the remaining assets of the Company.
(c) Neither a consolidation, merger or reorganization of GAI
or the Company, nor a sale of fifty percent (50%) or more of
the Company's capital stock then issued and outstanding nor the
purchase or redemption by GAI or the Company of stock of any
class, nor the payment of a dividend or distribution from net
profits or surplus of GAI or the Company shall be treated as or
deemed to be a liquidation hereunder.
5. Redemption.
----------
(a) At any time after issuance, the Company, by action of its
Board of Directors, may redeem the whole or any portion of the
Preferred Stock, at any time, or from time to time, in
accordance with the provisions of Paragraphs 5(c) and (d) below
(the "optional redemption"). Under no circumstance shall the
Company have any obligation to redeem any shares of Preferred
Stock.
(b) In the case of the optional redemption of a portion, but
not all of the issued and outstanding Preferred Stock, the
Company shall select by lot or pro rata, in such reasonable
manner as the Board of Directors may determine, the shares to
be redeemed. The Board of Directors shall have full power and
authority, subject to the limitations and provisions herein
contained, to prescribe the manner in which and the terms and
conditions upon which the Preferred Stock shall from time to
time be redeemable. On and after the date specified in the
notice provided for in Paragraph 5(d), each holder of the
Preferred Stock called for redemption as aforesaid, upon
presentation and surrender at the place designated in such
notice of the certificate or certificates evidencing said
Preferred Stock held by him, her or it, properly endorsed in
blank for transfer or accompanied by proper instruments of
assignment in blank, shall be entitled to receive therefor the
redemption price thereof. Notwithstanding the foregoing,
except in accordance with an offer made to all holders of
Preferred Stock, the Company shall not at any time redeem or
purchase less than the whole amount of its then outstanding
Preferred Stock unless all cumulative dividends upon all
Preferred Stock outstanding and not then to be redeemed or
purchased shall have been paid or declared and set apart for
payment.
(c) The redemption price for each share of Preferred Stock
shall be an amount in cash equal to the sum of Ten Dollars
($10.00) (such total amount being hereinafter referred to as
the "Redemption Price").
(d) At least ten (10) days and not more than twenty (20) days
prior to the date fixed for any such redemption of the
Preferred Stock (hereinafter referred to as the "Redemption
Date"), written notice (hereinafter referred to as the
"Redemption Notice") shall be mailed, first class postage
prepaid, to each holder of record of the Preferred Stock to be
redeemed at his post office address last shown on the records
of the Company.
(i) The Redemption Notice shall state:
(ii) That all or a portion of the holder's outstanding
shares of Preferred Stock are being called for redemption;
(iii) The number of shares of Preferred Stock held by the
holder that the Company intends to redeem;
(iv) The Redemption Date and the Redemption Price;
(v) The date upon which the holder's Conversion Rights
(as hereinafter defined) as to such shares terminate; and
(vi) That the holder is to surrender to the Company, in
the manner and at the place designated, his certificate or
certificates representing the shares of Preferred Stock to
be redeemed, if and to the extent such shares are
certificated.
(e) On or before the Redemption Date, each holder of Preferred
Stock to be redeemed, unless such holder has exercised his
right to convert the shares as provided in Paragraph 7 hereof,
shall surrender the certificate or certificates representing
such shares to the Company, in the manner and at the place
designated in the Redemption Notice, and thereupon the
Redemption Price for such shares shall be payable to the order
of the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired.
(f) If the Redemption Notice shall have been duly given, and
if on the Redemption Date the Redemption Price is either paid
or irrevocably made available for payment through the deposit
arrangement specified in Subparagraph 5(g) below, then
notwithstanding that the certificates evidencing any of the
shares of Preferred Stock so called for redemption shall not
have been surrendered, all rights with respect to such shares
shall forthwith after the Redemption Date terminate, except
only the right of the holders to receive the Redemption Price
without interest upon surrender of their certificate or
certificates therefore, if and to the extent such shares are
certificated.
(g) At least five (5) days prior to the Redemption Date, the
Company shall deposit with any bank or trust company a sum (or
an irrevocable letter of credit) equal to the aggregate
Redemption Price of all shares of Preferred Stock called for
redemption and not yet redeemed, with irrevocable instructions
and authority to the bank or trust company to pay, on or after
the Redemption Date or prior thereto, the Redemption Price to
the respective holders entitled thereto upon the surrender of
their share certificates. From and after the Redemption Date,
the shares so called for redemption and not previously
converted as provided in Paragraph 7 shall be redeemed if such
deposit shall have been made with such instructions or
authority on or before the tenth (10th) day prior to the
Redemption Date. The deposit shall on the Redemption Date
constitute full payment of the shares to their holders, and
from and after the Redemption Date the shares shall be deemed
to be no longer outstanding, and the holders thereof shall
cease to be shareholders with respect to such shares and shall
have no rights with respect thereto except the rights to
receive from the bank or trust company payment of the
Redemption Price of the shares, without interest, upon
surrender of their certificates therefor. Any funds so
deposited and unclaimed at the end of one (1) year from the
Redemption Date by any holder of shares called for redemption
(and not converted prior to the Redemption Date as provided in
Paragraph 7) shall be released or repaid to the Company, after
which the holders of such shares called for redemption and not
converted prior to the Redemption Date shall be entitled to
receive payment of the Redemption Price for such shares only
from the Company. In addition, any funds so deposited by the
Company as provided herein which are not required as at the
Redemption Date to pay the Redemption Price for any shares
called for redemption, by reason of the fact that certain, or
all, of such shares have been converted prior to the Redemption
Date as provided in Paragraph 7, shall be released or repaid to
the Company upon the date or dates of conversion of such
shares.
6. Voting Rights.
-------------
Holders of the Preferred Stock shall have no right to vote on
any matter voted upon by the holders of the outstanding shares of Common
Stock at any regular or special meeting of the shareholders of the
Company.
7. Conversion.
----------
The following of the Preferred Stock shall have the following
conversion rights (the "Conversion Rights"):
(a) RIGHT TO CONVERT. A number of shares of equivalent value
of Preferred Stock shall be convertible, at the option of the
holder thereof, at any time commencing the earlier of (i) one
(1) year from the date of issue or (ii) upon the effective date
of a Registration Statement registering for sale under the
Securities Act of 1933, as amended (the "Securities Act"), the
shares of the Company's Common Stock issuable upon such
conversion (the "Conversion Stock"), (and, if the Company has
exercised its redemption right as described in paragraph 5
hereof with respect to all or any of the Preferred Stock, in
the case of the Preferred Stock called for redemption, up to
the date prior to the Redemption Date as fixed in any
Redemption Notice), at the office of the Company or any
transfer agent for the Preferred Stock or Common Stock, into a
number of shares of equivalent value of fully paid and
nonassessable share of Common Stock.
(b) LIMITATION ON CONVERSION STOCK. Notwithstanding the
provisions of Paragraph 7(a) above, the maximum number of
shares of Conversion Stock issuable pursuant to the exercise by
Holders of the conversion rights set forth in Paragraph 7(a)
above shall be two hundred ninety-seven thousand four hundred
(297,400) shares of the Common Stock (the "Maximum Aggregate
Conversion") unless the shareholders of the Company, at a duly
convened meeting of the Company's shareholders ratify and
approve the conversion of up to all of the shares of Preferred
Stock of the Series into shares of Common Stock even if such
conversion results in the issuance of shares of the Company's
Common Stock in excess of the Maximum Aggregate Conversion.
(c) CONVERSION RATE. Each share of Preferred Stock shall be
convertible into a one (1) share of Common Stock at a
conversion value of Ten Dollars ($10.00) per share.
Notwithstanding the foregoing, attached hereto as Exhibit "A"
and incorporated herein by reference is a schedule setting
forth the minimum monthly optional redemption (the "Minimum
Monthly Optional Redemption") with respect to the Company's
exercise of its optional redemption right pursuant to Paragraph
5(a) hereof. In the event the Company does not redeem a number
of shares of Preferred Stock during any given month in
accordance with the Minimum Monthly Optional Redemption
schedule, then and in such event the shares of Preferred Stock
subject to such Minimum Monthly Optional Redemption may be
converted, at the option of the Holder, into shares of the
Company's Common Stock at a conversion value equal to the fair
market value of the Company's Common Stock on the first day of
such month for which the Minimum Monthly Optional Redemption is
not exercised. For the purposes of this Paragraph 7(c), the
"Fair Market Value" of the Company's Common Stock shall be
equal to the average closing bid and ask prices of the
Company's Common Stock on the over-the-counter market on such
date (hereafter referred to as the "Market Conversion Value").
The Market Conversion Value shall be applicable with respect to
such shares of Preferred Stock subject to the Minimum Monthly
Optional Redemption for a period of thirty (30) days following
the determination date.
(d) MECHANICS OF CONVERSION. Before any holder of Preferred
Stock shall be entitled to convert the same into shares of
Common Stock, he shall give written notice to the Company or to
the transfer agent, if appointed, that he elects to convert the
same and shall state therein the number of shares of Preferred
Stock being converted. Thereupon the Company shall promptly
issue and deliver at such office to such holder of Preferred
Stock a certificate or certificates for the number of shares of
Common Stock to which he shall be entitled. Such conversion
shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the shares
of Common Stock issuable upon such conversion shall be treated
for all purposes as the record holder or holders of such shares
of Common Stock on such date. All costs of conversion and
subsequent sale of Conversion Stock shall be paid by the
Company. The Company shall maintain an effective Registration
Statement for the sale of Conversion Stock throughout the life
of the Preferred Stock.
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Company shall at any time or from time to time after the
Original Issue Date for a series of the Preferred Stock effect
a subdivision of the outstanding Common Stock, the Conversion
Rate then in effect immediately before that subdivision shall
be proportionately decreased, and conversely, if the Company
shall at any time or from time to time after the Original Issue
Date for a series of the Preferred Stock combine the
outstanding shares of Common Stock, the Conversion Rate then in
effect immediately before the combination shall be
proportionately increased. Any adjustment under this paragraph
7(e) shall become effective at the close of business on the
date the subdivision or combination becomes effective.
(f) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In
the event the Company at any time, or from time to time after
the Original Issue Date for a series of Preferred Stock shall
make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional fully paid and
nonassessable shares of Common Stock, then and in each such
event the Conversion Price for such series of Preferred Stock
then in effect shall be decreased as of the time of such
issuance or, in the event such a record date shall have been
fixed, as of the close of business on such record date, by
multiplying the Conversion Rate for such series of Preferred
Stock then in effect by a fraction:
(1) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of
business on such record date, and
(2) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of
business on such record date plus the number of shares of
Common Stock issuable in payment of such dividend or
distribution; provided, however, if such record date shall
have been fixed and such dividend is not fully made on the
date fixed therefor, the Conversion Rate for such series
of Preferred Stock shall be recomputed accordingly as of
the close of business on such record date and thereafter
the Conversion Rate for such series of Preferred Stock
shall be adjusted pursuant to this Paragraph 7(f) as of
the time of actual payment of such dividends or
distributions.
(g) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, OR
SUBSTITUTION. If the Common Stock issuable upon the conversion
of the Preferred Stock shall be changed into the same or a
different number of shares of any class or classes of stock,
whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or
stock dividend provided for above, or a reorganization, merger,
consolidation, or sale of assets provided for elsewhere in this
Paragraph 7), then and in each such event the holder of each
share of Preferred Stock shall have the right thereafter to
convert such share into the kind and amount of shares of stock
and other securities and property receivable upon such
reorganization, reclassification, or other change, by holders
of the number of shares of Common Stock into which such shares
of Preferred Stock might have been converted immediately prior
to such reorganization, reclassification, or change, all
subject to further adjustments as provided herein.
(h) REORGANIZATION, MERGERS, CONSOLIDATIONS, OR SALES OF
ASSETS. If at any time or from time to time there shall be a
capital reorganization of the Common Stock (other than a
subdivision, combination, reclassification, or exchange of
shares provided for elsewhere in this Paragraph 7) or a merger
or consolidation of the Company with or into another
corporation, or the sale of all or substantially all of the
company's assets to any other person, then, as a part of such
reorganization, merger, consolidation, or sale, provision shall
be made so that the holders of the Preferred Stock shall
thereafter be entitled to receive upon conversion of the
Preferred Stock, the number of shares of stock or other
securities or property of the Company, or of the successor
corporation resulting form such merger or consolidation or
sale, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such capital
reorganization, merger, consolidation, or sale. In any such
case, appropriate adjustment shall be made in the application
of the provisions of this Paragraph 7 with respect to the
rights of the holders of the Preferred Stock after the
reorganization, merger, consolidation, or sale to the end that
the provisions of this Paragraph 7 (including adjustment of the
Conversion Rate then in effect and the number of shares
purchasable upon conversion of the Preferred Stock) shall be
applicable after that event as nearly equivalent as may be
practicable.
(i) NOTICES OF RECORD DATE. In the event of (i) any taking by
the Company of a record of the holders of any class or series
of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution or (ii) any reclassification or recapitalization
of the capital stock of the Company, any merger or
consolidation of the Company, or any transfer of all or
substantially all of the assets of the Company to any other
corporation, entity, or person, or any voluntary or involuntary
dissolution, liquidation, or winding up of the Company, the
Company shall mail to each holder of Preferred Stock at least
thirty (30) days prior to the record date specified therein, a
notice specifying (A) the date on which any such record is to
be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (B) the date on
which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation, or winding up
is expected to become effective, and (C) the time, if any is to
be fixed, as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other
property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation, or winding up.
(j) FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of Preferred Stock. In lieu of
any fractional shares to which the holder would otherwise be
entitled, the Company shall pay cash equal to the product of
such fraction multiplied by the fair market value of one share
of the Company's Common Stock on the date of conversion, as
determined in good faith by the Board.
(k) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the shares of the
Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Preferred Stock, and if at any
time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Preferred Stock, the Company
will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
(l) NOTICES. Any notice required by the provisions of this
Paragraph 7 to be given to the holder of shares of the
Preferred Stock shall be deemed given when personally delivered
to such holder or five (5) business days after the same has
been deposited in the United States mail, certified or
registered mail, return receipt requested, postage prepaid, and
addressed to each holder of record at his address appearing on
the books of the Company.
(m) PAYMENT OF TAXES. The Company will pay all taxes and
other governmental charges that may be imposed in respect of
the issue or delivery of shares of Common Stock upon conversion
of shares of Preferred Stock.
(n) NO DILUTION OR IMPAIRMENT. The Company shall not amend
its Articles of Incorporation or participate in any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue, or sale of securities or any other
voluntary action, for the purpose of avoiding or seeking to
avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all
times in good faith assist in carrying out all such action as
may be reasonably necessary or appropriate in order to protect
the conversion rights of the holders of the Preferred Stock
against dilution or other impairment.
8. No Preemptive Rights.
--------------------
No holder of the Series B Preferred Stock of the Corporation
shall be entitled, as of right, to purchase or subscribe for any part of
the unissued stock of the Corporation or of any stock of the Corporation
to be issued by reason of any increase of the authorized capital stock of
the Corporation, or to purchase or subscribe for any bonds, certificates
of indebtedness, debentures or other securities convertible into or
carrying options or warrants to purchase stock or other securities of the
Corporation or to purchase or subscribe for any stock of the Corporation
purchased by the Corporation or by its nominee or nominees, or to have
any other preemptive rights now or hereafter defined by the laws of the
State of Utah.
9. No Reissuance of Preferred Stock.
--------------------------------
No share or shares of Preferred Stock acquired by the Company
by reason of redemption, purchase, conversion, or otherwise shall be
reissued, and all such shares shall be canceled, retired, and eliminated
from the shares which the Company shall be authorized to issue.
10. No Senior Rights.
----------------
The Company currently has issued and outstanding without
default 147,750 shares of Series A Preferred Stock with rights senior to
the Preferred Stock. No other stock, common or preferred shall be
issued, nor shall any options be granted to obtain any stock in the
Company with rights senior to the Preferred Stock.
IN WITNESS WHEREOF, said GLOBAL CASINOS, INC., has caused this
Certificate of Designations, Preferences and Rights of Series B Convertible
Preferred Stock to be duly executed by its President and attested by its
Secretary and has caused its corporate seal to be affixed hereto, this
31st day of March, 1998.
GLOBAL CASINOS, INC.
Attest
/s/ Clifford L. Neuman By: /s/ Stephen G. Calandrella
- -------------------------------- ---------------------------------
Secretary
[Corporate Seal]
<PAGE>
<PAGE>
EXHIBIT A
MINIMUM MONTHLY OPTIONAL REDEMPTION
<TABLE>
<CAPTION>
Number of Shares
Date Preferred Stock
---- ---------------
<C> <C>
1998
April 3,636
May 3,745
June 3,770
July 3,878
August 3,822
September 3,848
October 3,954
November 3,901
December 4,006
1999
January 3,955
February 3,982
March 4,234
April 4,038
May 4,139
June 4,093
July 4,193
August 4,150
September 4,178
October 4,275
November 4,235
December 4,331
2000
January 4,293
February 4,323
March 4,480
April 4,382
May 4,474
June 4,443
July 4,533
August 4,504
September 4,534
October 4,622
November 4,596
December 4,683
2001
January 4,659
February 4,691
March 4,879
April 4,756
May 4,838
June 4,821
July 4,902
August 4,887
September 4,921
October 4,999
November 4,988
December 5,064
2002
January 5,056
February 5,091
March 5,243
April 5,161
May 5,233
June 5,231
July 5,302
August 5,303
September 5,339
October 5,406
November 5,412
December 5,478
2003
January 5,486
February 5,523
March 5,636
April 5,599
May 5,660
June 5,676
July 5,734
August 5,753
September 5,792
October 5,848
November 5,871
December 5,925
2004
January 5,952
February 5,980
-------
340,329
=======
</TABLE>
<PAGE>
AGREEMENT TO CONVERT DEBT
-------------------------
THIS AGREEMENT to Convert Debt ("Agreement") is made and entered into
this 31st day of March, 1998, by and between GLOBAL CASINOS, INC., a Utah
corporation ("Global" or the "Company"), and MARK GRIFFIN ("Claimant").
WITNESSETH:
WHEREAS, Claimant is the holder of a certain Convertible Promissory Note
dated August 1, 1997, in the original principal amount of Four Million Dollars
($4,000,000) (the "First Note") made and given by Global Alaska Industries,
Inc., an Alaska corporation and wholly-owned subsidiary of the Company
("GAI");
WHEREAS, this conversion is a result of Nasdaq rules applied to the
Company for the Company's benefit and to that end, the Company agrees to pay
all costs of Claimant required to accomplish the conversion required by this
Agreement;
WHEREAS, Global desires to satisfy the outstanding principal balance of
the First Note by the issuance to Claimant of a Convertible Promissory Note of
even date in the principal amount of Four Hundred Fifty Thousand Dollars
($450,000) made and given by GAI (the "Second Note") and shares of Global
Series B Convertible Preferred Stock (the "Preferred Stock" or the
"Securities"); and
WHEREAS, Claimant is willing to accept the Second Note and Preferred
Stock in full payment and satisfaction of the outstanding balance due and
owing under the First Note; and
WHEREAS, Claimant and GAI are parties to the Stock Purchase and Sale
Agreement dated August 1, 1997 ("Sale Agreement") and the parties hereto
desire to amend that agreement to the extent described in this Agreement.
SECTION I: CONVERSION OF DEBT
- -------------------------------
A. Claimant, GAI and Global affirm and agree that as of the
date of this Agreement, the total outstanding balance of all sums due and
owing to Claimant under the First Note is Three Million Eight Hundred Fifty-
Three Thousand Two Hundred Ninety-One Dollars ($3,853,291), together with all
accrued and unpaid interest of Fifteen Thousand Two Hundred Two Dollars
($15,202) for a total due of Three Million Eight Hundred Sixty-Eight Thousand
Four Hundred Ninety-Three Dollars ($3,862,846).
B. Claimant, for itself, successors in interest and assigns,
agrees to accept, as payment in full of the First Note (i) 340,329 shares of
Preferred Stock of the Company, such Preferred Stock having a face value of
Ten Dollars ($10.00) per share and (ii) a Convertible Promissory Note in the
original principal amount of Four Hundred Fifty Thousand Dollars ($450,000)
(the "Second Note").
C. Claimant agrees that upon delivery to it by GAI and Global,
respectively, of the Second Note and confirmation of the issuance of 340,329
uncertificated shares of Preferred Stock, such shares of Preferred Stock being
validly issued, fully paid and non-assessable, and Claimant's acceptance of
such Securities, Claimant, for itself, successors in interest and assigns,
agrees to release and forever discharge Global Alaska Industries, Inc., the
Company, its subsidiaries, officers, directors, shareholders, affiliates,
employees and agents, from any liability, payment or obligation whatsoever in
connection with or arising out of the First Note. Claimant's acceptance of
such Securities and the Second Note shall constitute a full and complete
release, settlement and discharge of any of GAI's or Global's obligation to
Claimant, in connection with the First Note, without the necessity of Claimant
executing any further documentation, release or settlement agreement; it being
the express understanding of the parties hereto that this Agreement, upon its
performance, shall constitute such evidence of release and discharge.
D. With respect to accepting the Second Note and Securities in
lieu of other forms of payment of the First Note, Claimant represents and
warrants as follows:
1. Claimant fully understands and agrees that the
Securities are offered by Global at a price which was arbitrarily determined
without regard to any value of the Securities.
2. Claimant fully understands that Global has a limited
net worth and lack of profitable operating history.
3. Claimant acknowledges receipt of such information as it
deems necessary or appropriate as a prudent and knowledgeable investor in
evaluating the conversion of the obligation. The Claimant acknowledges that
Global has made available to him the opportunity to obtain additional
information to evaluate its status a creditor and the alternatives available
to him. The Claimant acknowledges that it had an opportunity to ask questions
of Global and to the extent it availed itself of such opportunity, it received
satisfactory answers from Global, or its affiliates.
4. Claimant understands that there exist inherent risks in
accepting the Securities in lieu of payment of the obligation, which risks
include, but are not limited to, the lack of liquidity of the Securities, and
the Company's history of unprofitable operations.
5. Claimant has been provided with a copy of the
Certificate of Designations, Preferences and Rights of Series B Convertible
Preferred Stock of the Company (the "Certificate"), and, in consultation with
Claimant's advisors, fully understands the relative rights and preferences of
holders of shares of the Preferred Stock. Claimant understands that the
Company has no obligation to redeem any or all of the shares of Preferred
Stock at any time in the future, and that Claimant may be required to hold
such shares indefinitely or convert them into shares of the Company's Common
Stock.
6. Claimant understands that there can be no assurance
with respect to the tax consequences to Claimant under the execution and
delivery of this Agreement, and Claimant represents and warrants that to the
extent that Claimant so desires, he has obtained tax and legal advice
concerning this Agreement.
7. Claimant acknowledges that the Company has made no
representations or warranties to Claimant, other than stated in this
Agreement, and there can be no assurance regarding the Company's ability to
improve its operating results.
8. Claimant realizes that (i) acceptance of the Securities
is a long-term investment, (ii) Claimant must bear the economic risk of such
investment for an indefinite period of time because the Securities have not
been registered under the Securities Act or under the Securities Laws of any
state and cannot be resold unless they are subsequently registered under such
laws or exemptions from such registration requirements are available (iii) the
Securities are "restricted securities" within the meaning of Rule 144 under
the Securities Act and are subject to restrictions on transfer imposed by or
on account of federal and state securities laws.
E. Notwithstanding the provisions to the contrary contained in
this Agreement, the Certificate, the Second Note, the General Security
Agreement dated August 1, 1997, as amended, and the Amended Stock Pledge
Agreement dated March 31, 1998 (hereafter collectively the "Transaction
Documents"), to the contrary, in the event that prior to the redemption by the
Company of the Preferred Stock and retirement of the Note or the conversion
into Common Stock of the Preferred Stock and Second Note, there should occur a
change in the statutes, rules, regulations and other legal requirements
applicable to the business operations of Alaska Bingo Supply, Inc., an Alaska
corporation ("ABS") and wholly-owned subsidiary of GAI which, in the sole
opinion and judgment of the Company materially and adversely affects the
business operations of ABS, then and in such event, at GAI's sole option and
election, subject to ABS having no less than Four Hundred Thousand Dollars
($400,000) in net tangible working capital, GAI shall have the right upon
thirty days' prior written notice to Claimant may rescind all the transactions
contemplated by or included in the Sale Agreement and the Transaction
Documents, without any liability whatsoever. Upon recission, the collateral
covered by the General Security Agreement and shares of ABS Common Stock
covered by the Amended Stock Pledge Agreement shall be immediately delivered
to Claimant, free of any claim of the Company or GAI; and the Second Note
shall be canceled, null and void and all issued and outstanding shares of
Preferred Stock shall be deemed canceled, null and void and surrendered to the
Company, free of any claim of Claimant.
F. Claimant and GAI agree that the Sale Agreement is amended
consistent with this Agreement, and to the extent there are conflicts with the
Sale Agreement, this Agreement shall be controlling.
G. GAI and Global represent and warrant that (i) there are no
liens, actual or threatened, against the collateral described in the General
Security Agreement dated August 1, 1997 (the "Collateral"); (ii) Claimant has
a perfected first priority interest in the Collateral; and (iii) this
Agreement shall not adversely affect Claimant's rights in and to the
Collateral in any way whatsoever.
H. In consideration of the foregoing, GAI agrees to pay to
Claimant the sum of Thirty-Six Thousand Dollars ($36,000), which represents
payment in full to Claimant of all costs and expenses, including legal fees,
incurred by Claimant in connection with the execution and delivery of the
Transaction Documents, as well as payment of all other sums due and owing by
GAI or Global to Claimant. Such sum of Thirty-Six Thousand Dollars ($36,000)
shall be payable, without interest, at the rate of Six Thousand Dollars
($6,000) per month for six (6) consecutive months.
SECTION II: REPRESENTATIONS AND WARRANTIES BY GLOBAL
- ----------------------------------------------------
Global represents and warrants to Claimant that, as of the date of this
Agreement, and as of the date of closing:
A. ORGANIZATION AND CORPORATION POWER. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Utah; and has all required corporate power and authority
to own its property and to carry on its business as now being conducted, and
to carry out the transactions contemplated hereby.
B. AUTHORIZATION.
1. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby will not, violate
any provision of any charter, by-law, mortgage, lien, lease, agreement,
contract, instrument, order judgment, or decree to which the Company is a
party, or by which it is bound, and will not violate any other restriction of
any other kind or character of which Company is subject.
2. The Board of Directors of the Company has taken all
action required by law, the Company's Articles of Incorporation and By-Laws,
or otherwise, to authorize execution and delivery of this Agreement, the stock
and the consummation of the transactions described herein.
3. This Agreement, upon execution and delivery in
accordance herewith, is the valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to the terms of bankruptcy
and similar laws, and any rules and regulations adopted thereunder. The
execution, delivery and performance of this Agreement have been duly
authorized by all necessary corporate and other action.
C. CAPITALIZATION. There are sufficient authorized shares of
Common Stock of the Company to cover the issuance of all shares to be issued
and sold pursuant to this Agreement. There are no restrictions on the
transferability of shares of the Company's Common Stock imposed by or pursuant
to the Company's Articles of Incorporation, as amended, or the Company's By-
Laws, or by agreement to which the Company is a party, except for restrictions
imposed by or on account of federal and state securities laws. The common
shareholders of the Company have no preemptive rights with respect to the
issue or sale of the Company's Common Stock.
D. COMPLIANCE. The consummation of the transactions provided
for herein have and will be undertaken in compliance with all applicable
federal and state securities laws.
SECTION III: REPRESENTATIONS AND WARRANTIES BY CLAIMANT
- ------------------------------------------------------------
Claimant represents and warrants to Global that, as of the date of this
Agreement, and as of the date of closing, the following are true and accurate
to its knowledge and belief:
A. NO OTHER INFORMATION RELIED UPON. Claimant represents,
warrants and agrees that it has been afforded the opportunity to make, and has
made, all such investigation of Global and its financial condition, business,
affairs and prospects as it deems appropriate. Claimant acknowledges receipt
of such information as it deems necessary or appropriate as a prudent and
knowledgeable investor in evaluating the exchange of the shares. Claimant
acknowledges that Global has made available to it the opportunity to obtain
additional information to evaluate the merits and risks of this exchange.
Claimant acknowledges that it has had the opportunity to ask questions of
Global, and, to the extent it availed itself such opportunity, it received
satisfactory answers from Global, its affiliates, associates, officers and
directors.
B. NATURE OF THE RISK. Claimant represents, warrants and
agrees that it understands that Global's business is, by its nature,
speculative; that Claimant is aware that the financial resources of Global are
extremely limited and that it is very likely that the Company will require
additional capital, and there is no assurance that such capital will be
available if necessary; that Claimant is familiar with the high degree of risk
that is involved in the Company's business, and that Claimant is financially
able and willing to accept the substantial risk involved in such investment,
including the risk of loss of the entire amount invested.
C. UNREGISTERED STOCK. Claimant represents that it understands
that the Global stock has not been registered for sale under federal or state
securities laws and that said securities are being issued to Claimant pursuant
to a claimed exemption from the registration requirements of such laws which
is based upon the fact that said securities are not being offered to the
public. Claimant understands that in order to satisfy such requirement it
must be acquiring the stock with no view to making a public distribution of
said securities and the representations and warranties contained in this
Section III are given with the intention that Global may rely thereon for
purposes of claiming such exemption; and that it understands that it must bear
the economic risk of its investment in the stock for a substantial period of
time, because the stock has not been registered under the federal or state
securities laws, and cannot be sold unless subsequently registered under such
laws, or unless an exemption from such registration is available.
D. STOCK ACQUIRED FOR INVESTMENT; LIMITATIONS ON DISPOSITIONS.
Claimant represents that it is acquiring the stock for its own account and for
investment and not with a view to, or for sale in connection with, any
distribution thereof in violation of the Securities Act of 1933, as amended.
Claimant agrees that the stock will not be offered for sale, sold or otherwise
transferred for value and that no transfer thereof will be made by the
Claimant unless (a) a registration statement with respect thereto has become
effective under the Securities Act of 1933, as amended, or (b) there is
presented to the Company an opinion of counsel for Claimant reasonably
satisfactory to the Company that such registration is not required, or (c)
there is presented to the Company a letter from the Securities and Exchange
Commission (said Commission having been informed of all relevant
circumstances) to the effect that in the event either the stock is transferred
by Claimant without such registration the Commission or the staff will not
recommend any action. Claimant further agrees that the stock will not be
offered for sale, sold or otherwise transferred unless, in the opinion of
legal counsel for Global, such sale or disposition does not and will not
violate any provisions of any federal or state securities law or regulation.
Claimant consents that any transfer agent of the Company may be instructed not
to transfer any of the stock unless it receives satisfactory evidence of
compliance with the foregoing provisions and that there may be endorsed upon
any certificates (or instruments issued in substitution therefor), the
Company's regular legend regarding the sale of restricted securities.
SECTION IV: AGREEMENTS RESPECTING PREFERRED STOCK
- -------------------------------------------------
A. The parties acknowledge and agree that the Certificate
provides that the Company is under no obligation to redeem any shares of the
Preferred Stock issued hereunder and that the Claimant does not have the right
to compel the Company to redeem any shares of such Preferred Stock. However,
the parties recognize that the Certificate also provides that in the event the
Company does not exercise its option to redeem shares of Preferred Stock in
certain minimum monthly numbers as shown on the attached Exhibit A
incorporated herein by reference, (the "Minimum Monthly Optional Redemption"),
then and in such event Claimant shall have the right to convert that number of
shares subject to the Minimum Monthly Optional Redemption which were not so
redeemed into shares of the Company's Common Stock at a conversion price equal
to the Fair Market Value of the Company's Common Stock on the first day of
such month. For the purposes of this Agreement, the "Fair Market Value" of
the Company's Common Stock shall be the average of the bid and ask prices of
the Company's Common Stock as quoted on the over-the-counter market on such
date.
B. Notwithstanding the provisions of Section 4(A) above, the
parties acknowledge that the Rules of Governance of the Nasdaq Stock Market
preclude the conversion of the Preferred Stock by Claimant into more than
311,550 shares of the Company's Common Stock ("Maximum Aggregate Conversion")
(19.9% of the 1,565,586 shares of the Company's Common Stock issued and
outstanding on this date) without the approval of the Company's shareholders.
Claimant agrees that, notwithstanding any other provision of this Agreement or
the Certificate to the contrary, Claimant will not exercise his right of
conversion to acquire Common Stock of the Company in excess of the Maximum
Aggregate Conversion without the consent of the Company's shareholders.
C. As soon as practicable following the preparation, completion
and filing by the Company of its annual report on Form 10-KSB (the "Annual
Report"), for the fiscal year ending June 30, 1998, the Company agrees to
schedule and conduct an Annual Meeting of Shareholders (the "Annual Meeting")
and to seek at such Annual Meeting the approval of the Company's shareholders
of the conversion of the Preferred Stock into shares of the Company's Common
Stock in excess of the Maximum Aggregate Conversion permitted under the Nasdaq
Rules of Governance in the absence of such shareholder approval. In
connection with such Annual Meeting, the Company agrees to prepare and file
with the Securities and Exchange Commission (the "Commission") a Proxy
Statement for use in the solicitation of proxies and in such Proxy Statement
to recommend that the Company's shareholders approve the conversion of the
Preferred Stock by Claimant in excess of the Maximum Aggregate Conversion in
accordance with the terms and conditions of the Certificate.
D. No later than thirty (30) days following the effective date
of this Agreement, the Company agrees to prepare and file with the Commission
a Registration Statement on Form S-3 (the "Registration Statement"),
registering for sale under the Securities Act of 1933, as amended, (the
"Securities Act"), the shares of the Company's Common Stock issuable upon
conversion of the Preferred Stock (the "Conversion Shares"). In connection
with the filing of such Registration Statement, the Company agrees to use its
best efforts to cause such Registration Statement to be declared or ordered
effective by the Commission, to prepare and file with the Commission such
amendments or supplements to such Registration Statement and the Prospectus
used in connection with such Registration Statement as may be necessary to
keep such Registration Statement effective for the period ending the earlier
of (i) the redemption by the Company of all of the Preferred Stock; or (ii)
the conversion by Claimant of all of the shares of Preferred Stock. All costs
and expenses incurred in connection with the registration of the Conversion
Shares, including, without limitation, all registration and qualification
fees, and fees and disbursements of counsel, shall be borne by the Company.
The Company shall be responsible for any underwriter's discounts or broker's
commissions charged in connection with the sale of such Conversion Shares by
Claimant.
E. The Company agrees to comply with all applicable federal and
state securities laws and regulations in connection with the issuance of the
Preferred Stock and registration for sale of the Conversion Stock.
SECTION V: EVENTS OF DEFAULT
- ------------------------------
The following occurrences shall be deemed in default of this Agreement
and the Second Note, and Claimant may take all enforcement action authorized
by law or equity:
A. The Registration Statement is not effective on or before
sixty (60) days following the effective date of this Agreement;
B. The Company issues Preferred Stock or an option to acquire
Preferred Stock to any other person, or issues stock in the Company or an
option to acquire stock in the Company to any other person where such stock
would be senior to the Preferred Stock; or
C. The Company's failure to comply with or fulfill any
obligation under this Agreement, the Second Note, or the Certificate.
SECTION VI: MISCELLANEOUS
- --------------------------
A. PAYMENT OF EXPENSES OF PREVAILING PARTY IN DISPUTE. Unless
otherwise specifically provided for herein, in the event that there is a
dispute concerning this Agreement, including, without limitation, the issue of
compliance with any term of this Agreement, the court may in its discretion,
direct that the prevailing party shall be entitled to reimbursement from the
other party of reasonable attorneys' fees and other expenses incurred in
resolving the said dispute.
B. SURVIVAL AND INCORPORATION OF REPRESENTATIONS. The
representations, warranties, covenants and agreements made herein or in any
certificates or documents executed in connection herewith shall survive the
execution and delivery thereof, and all statements contained in any
certificate or other document delivered by the Company hereunder or in
connection herewith shall be deemed to constitute representations and
warranties made by the Company in this Agreement.
C. AMENDMENTS AND WAIVERS. This Agreement may not be amended,
nor may compliance with any term, covenant, agreement, condition or provision
set forth herein be waived (either generally or in a particular instance and
either retroactively or prospectively) unless such amendment or waiver is
agreed to in writing by all parties hereto.
D. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Alaska,
and venue for any legal action brought to enforce a party's rights under this
Agreement shall be in the Superior Court located in Anchorage, Alaska.
E. COUNTERPARTS. This Agreement may be executed by telex,
telecopy or other facsimile transmission, and such facsimile transmission
shall be valid and binding to the same extent as if it were an original.
Further, this Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which shall together constitute one
agreement.
F. SEVERABILITy. Wherever there is any conflict between any
provision of this Agreement and any statute, law, regulation or judicial
precedent, the latter shall prevail, but in such event the provisions of this
Agreement thus affected shall be curtailed and limited only to the extent
necessary to bring it within the requirement of the law. In the event that
any part, section, paragraph or clause of this Agreement shall be held by a
court of proper jurisdiction to be invalid or unenforceable, the entire
Agreement shall not fail on account thereof, but the balance of the Agreement
shall continue in full force and effect unless such construction would clearly
be contrary to the intention of the parties or would result in unconscionable
injustice.
IN WITNESS WHEREOF, the parties have signed the Agreement the date and
year first above written.
GLOBAL CASINOS, INC., a Utah corporation
By: /s/ Stephen G. Calandrella
---------------------------------------
Stephen G. Calandrella, President
GLOBAL ALASKA INDUSTRIES, INC.,
an Alaska corporation
By: /s/ Stephen G. Calandrella
--------------------------------------
Stephen G. Calandrella, President
CLAIMANT:
/s/ Mark Griffin
-----------------------------------------
Mark Griffin
