CONVERTIBLE PROMISSORY NOTE
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$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 ▇▇▇▇ ▇▇▇▇▇▇▇ (the "Holder") at ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, #▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇.
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, ▇▇▇▇▇▇'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 ▇▇▇▇▇▇'s exhaustion of such
remedies.
Upon default of any provision referenced herein, ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, ▇▇▇▇▇▇ 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/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, President
Consent as to Paragraphs 3, 5 and 7:
GLOBAL CASINOS, INC., a Utah corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, President
