As filed with the Securities and Exchange Commission on March 18, 1999
Registration No.: 333-72315
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Casino Resource Corporation
(Exact Name of Registrant as specified in its Charter)
Minnesota 7922
(State or other jurisdiction (Primary standard industrial
of incorporation) Classification code number)
41-0950482
(I.R.S. Employer
Identification Number)
707 Bienville Boulevard, Ocean Springs, MS 39564
(228) 872-5558
(Address, including Zip Code, and Telephone Number,
including Area Code, of Registrant's Principal Executive Offices)
John J. Pilger, Chief Executive Officer
Casino Resource Corporation, 707 Bienville Boulevard, Ocean Springs, MS 39564
Telephone: (228) 872-5558
(Name and Address, including Zip Code and Telephone Number,
including Area Code, of Agent for Service)
Copies of all communications to:
Steven B. King, Esquire
Mesirov Gelman Jaffe Cramer & Jamieson, LLP
1735 Market Street, 38th Floor
Philadelphia, PA 19103-7598
Telephone: (215) 994-1037 Telefax: (215) 994-1111
Approximate Date of Proposed Sale to the Public: As soon as practicable
after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis, pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend interest reinvestment plans, check the following: [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the SEC acting pursuant to said Section 8(a), may
determine.
<TABLE>
<CAPTION>
=================================================================================================================
Proposed Maximum Proposed Maximum
Title of Securities Amount to be Offering price per Aggregate Offering Amount of
To be Registered Registered Share(1) price(1) Registration Fee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock . . . . .
($.01) par value)) 2,920,050 shares $0.4564 $1,332,711 $370.00
- -----------------------------------------------------------------------------------------------------------------
(1) Estimated solely based for purposes of computing the registration fee. In
accordance with Rule 457(c), the price used is the average of the high and
low sales price of the common stock as quoted on the NASD National Market
System as of the close of trading on February 10, 1999.
(2) Calculated by multiplying the aggregate offering amount of $1,332,711 by
.000278.
</TABLE>
<PAGE>
Subject to Completion
March __, 1999
PROSPECTUS
2,920,050 SHARES
CASINO RESOURCE CORPORATION
COMMON STOCK
--------------------
This prospectus relates to the offering for sale of up to 2,920,050
shares of common stock of Casino Resource Corporation held by four selling
shareholders.
o The selling shareholders may offer their Casino Resource common stock through
public or private transactions, on or off the NASDAQ Stock Market, at prevailing
market prices, or at privately negotiated prices.
o Casino Resource's common stock is currently traded on the NASDAQ National
Market under the symbol CSNR.
--------------------
Please see "Risk Factors" beginning on page 3 for a discussion of
certain factors you should consider in connection with any decision to purchase
shares in this offering.
--------------------
Casino Resource's principal executive offices are located at 707
Bienville Boulevard, Ocean Springs, Mississippi 39564. Casino Resource's
telephone number is (228) 872-5558.
--------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed on the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is March ____, 1999.
<PAGE>
TABLE OF CONTENTS
WHERE YOU CAN FIND MORE INFORMATION......................................3
INCORPORATION OF DOCUMENTS BY REFERENCE..................................3
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS..........................4
ABOUT CASINO RESOURCE....................................................5
RISK FACTORS.............................................................5
MATERIAL DEVELOPMENTS...................................................10
USE OF PROCEEDS.........................................................11
SELLING SHAREHOLDERS....................................................12
PLAN OF DISTRIBUTION....................................................12
DESCRIPTION OF SECURITIES...............................................13
DISCLOSURE OF THE SEC'S POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES..........................................15
EXPERTS.................................................................15
2
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Casino Resource files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may copy any such documents
which Casino Resource has filed. You may do so at the SEC's public reference
room, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W, Washington, D.C. 20549.
These documents are also available at the following Regional Office: 7 World
Trade Center, Suite 1300, New York, New York 10048. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms.
Casino Resource's SEC filings are also available to the public on the
SEC web site at http://www.sec.gov.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows Casino Resource to "incorporate by reference" into this
registration statement some of the information Casino Resource has already filed
with the SEC. As a result, Casino Resource can disclose important information to
you by referring you to those documents. These incorporated documents contain
important business and financial information about Casino Resource that is not
included in or delivered with this prospectus. The information incorporated by
reference is considered to be part of this prospectus. Moreover, later
information filed with the SEC by CRC in the future will update and supersede
this information and similarly, be considered to be a part of this prospectus.
CRC incorporates by reference the documents listed below and any future filings
made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934:
o CRC's Quarterly Report on Form 10-QSB for the fiscal quarter ended
December 31, 1998;
o CRC's Annual Report on Form 10-KSB for the fiscal year ended September
30, 1998;
o CRC's Proxy Statement for its annual shareholder meeting held on May
26, 1998.
This prospectus is part of a registration statement Casino Resource
filed with the SEC (Registration No. 333-72315). This prospectus does not
include all information contained in the registration statement. To obtain a
copy of the complete registration statement, see "Where You Can Find More
Information" above.
Casino Resource will provide, without charge to each person to whom a
prospectus is delivered, a copy of the documents which are incorporated by
reference. You may request a copy of these filings by writing or telephoning
Casino Resource at the following address:
Karla Schlett, Controller
707 Bienville Boulevard
Ocean Springs, MS 39564
Telephone number: (228) 872-5558
3
<PAGE>
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This document contains forward-looking statements regarding, among
other items, Casino Resource's growth strategy and anticipated trends in Casino
Resource's business. These forward-looking statements are based largely on
Casino Resource's expectations and are subject to a number of risks and
uncertainties, some of which are beyond Casino Resource's control. Such risks
and uncertainties include those set forth below under "Risk Factors" and also
include those matters disclosed in prior filings made by Casino Resource with
the SEC. Actual results could differ materially from these forward-looking
statements as a result of the factors referred to above. In light of these risks
and uncertainties, there can be no assurance that the forward-looking
information contained in this prospectus will in fact transpire or prove to be
accurate.
4
<PAGE>
ABOUT CASINO RESOURCE
Casino Resource was organized in 1969 and merged into an inactive,
publicly held corporation in 1987. In 1993, Casino Resource changed its name to
"Casino Resource Corporation." In the early 1990s, Casino Resource entered the
hospitality and entertainment industries in geographic areas where third parties
were actively engaged in the gaming industry. In 1997, Casino Resource itself
entered the gaming industry when it opened Casino Caraibe, a casino in Tunisia,
North Africa. Casino Caraibe is a 42,000 square foot facility housing an
American-style gambling casino, restaurant, theatre, gift shop and related
facilities. It is located adjacent to a 425 room hotel owned and operated by
Samara Casinos Company which holds a 15% interest in the casino.
In 1998, Casino Resource sold its hospitality assets and left the
hospitality industry. Casino Resource operates and manages the Country Tonite
Theatres in Branson, Missouri and Pigeon Forge, Tennessee. In these locations,
Casino Resource stages a country and western style musical revue which has won
numerous awards. Casino Resource has entered into an asset purchase agreement
with On Stage Entertainment, Inc. (NASDAQ "ONST") to sell substantially all of
these entertainment industry assets. See "Material Developments." If the
transaction with On Stage is completed, Casino Resource's sole operating asset
will be its 85% interest in the Tunisian casino and Casino Resource will operate
solely in the gaming industry.
RISK FACTORS
Investment in the common stock of Casino Resource is highly speculative
and involves a high degree of risk. Prospective investors should be aware of the
following risk factors and should review carefully the financial and other
information about Casino Resource provided or incorporated in this prospectus.
Casino Resource May Not Survive Continuing, Significant Financial
Losses. In the recent past, Casino Resource has suffered the following
significant operating losses:
Fiscal Year Ended
September 30 Loss from Continuing Operations
------------- -------------------------------
1998 $ (7,008,284)
1997 (3, 279,240)
Casino Resource had a cumulative operating deficit at December 31, 1998
of $18.5 million. As a result, Casino Resource's total shareholder equity at
December 31, 1998 was only $3.9 million. 1998 losses relate in large part to the
development and pre-opening costs of Casino Resource's gaming casino in Tunisia
and the impairment of assets relating to the Pokagon Gaming Contract. The gaming
segment had operating losses for fiscal 1998 of approximately $4.0 million.
Significant pre-opening and start-up costs, which approximated $1.5 million,
contributed to the loss. However, significant operating overhead expenses also
contributed to the loss.
The Tunisian tourist industry is seasonal with heaviest patronage
between May and October. Similarly, the tourist industry in Branson, Missouri
and Pigeon Forge, Tennessee is also seasonal. The Company's entertainment
segments in Branson and Pigeon Forge which are
5
<PAGE>
being held for sale are closed from late December until early March. These
seasonal factors adversely affect Casino Resource's earnings and cash flow in
the first half of each fiscal year. In the first quarter of fiscal 1999, Casino
Resource had a loss from continuing operations of $1.0 million.
Casino Resource May Not Be Capable of Repaying Its Outstanding Debts.
Casino Resource owes approximately $7.0 million on a note which comes due on
October 31, 1999. The note is secured by Casino Resource's Branson, Missouri
theatre. If Casino Resource does not close its proposed sale transaction with On
Stage Entertainment, Inc. (see "Material Developments") with respect to Casino
Resource's entertainment segment, Casino Resource will not have the cash
resources necessary to repay the mortgage loan on the Branson property. In such
a circumstance, Casino Resource would be required to seek refinancing of the
loan. Casino Resource may not be able to obtain such a refinancing. If Casino
Resource is unable to refinance the mortgage loan with a third party, it will be
required to seek a refinancing from the current mortgage holder. If the current
mortgage holder is unable or unwilling to refinance the mortgage, Casino
Resource could offer the theatre for outright sale or for sale and leaseback. In
the unlikely event that none of these strategies is successful, Casino Resource
could lose the Branson theatre through foreclosure. The sale to On Stage is
subject to the buyer's obtaining adequate financing to complete the transaction.
However, On Stage has thus far been unable to do so, and there is no assurance
that it will be able to do so.
Under the terms of an Amended and Restated Debenture dated as of
February 1, 1999 held by Roy Anderson Holding Corp., Casino Resource is
obligated to repay in cash approximately $0.8 million in 18 monthly installments
beginning on June 1, 1999. See "Material Developments." There are no assurances
that Casino Resource will be able to do so.
Casino Resource May Be Unable to Compete Effectively in the Gaming
Industry. The gaming industry is highly competitive. Most operators have more
extensive experience, are larger and have significantly greater financial and
other resources than Casino Resource does. There are no assurances that Casino
Resource will be able to compete with more experienced and stronger operators.
In addition, there are no assurances that Casino Resource will be able to
compete effectively for experienced gaming management and other key operating
personnel.
Many gaming jurisdictions limit the number of licenses which they
permit for gaming facilities. In such jurisdictions where Casino Resource is not
currently engaged in the gaming business, such limitations may make it difficult
or impossible for Casino Resource to enter the industry because the licenses are
more likely to be awarded to those companies which are better capitalized and
more experienced than is Casino Resource. Consequently, Casino Resource has
adopted the strategy of forming partnerships with such companies. For example,
Casino Resource has entered into a Memorandum of Understanding to form a joint
venture with Lakes Gaming Company to pursue gaming opportunities with the
Pokagon Band. However, there is no assurance that this strategy will succeed, or
in particular, that the joint venture with Lakes Gaming Company will succeed in
obtaining the rights which it seeks.
Failure To Obtain Financing Will Prevent Casino Resource's Entrance
Into Bottled Water Business. Casino Resource is attempting to enter the bottled
water business. See "Material Developments." Casino Resource has thus far not
obtained the financing for the proposed business and there are no assurances
that it will succeed in doing so. Casino
6
<PAGE>
Resource's inability to obtain this financing could result in abandonment of
this project. Additionally, Casino Resource may be required to pledge a portion
of its future revenues or to dilute the equity investment of its shareholders to
accomplish its goals with respect to this proposed business. If Casino Resource
is unable to enter the bottled water business, management's plans for changing
the industries in which Casino Resource operates could be frustrated and
delayed.
Casino Resource has attempted to secure financing for the proposed
bottled water business through the issuance of equity and a combination of
equity and debt. The Company interviewed various investment banking houses and
venture capitalists in an effort to do so. Although Casino Resource received
some encouragement from one investment bank, financing was always contingent
upon the closing of the On Stage transaction. Because that transaction has not
closed, Casino Resource has been unable to provide its share of capital
investment, and therefore the investment bank's interest in providing or seeking
financing for the bottled water business has declined.
Operating Risks of the Proposed Bottled Water Business Are Substantial.
The bottled water industry is subject to the risk of a slow down in growth of
demand for bottled water and the risk inherent in competition from brand name
competitors which are better capitalized, experienced, and known than the
proposed bottling venture will be.
In addition, the proposed bottling venture faces the following specific
risks:
o possible impurities in its water source
o reduction in volume of its water source
Operating in Tunisia Poses Special Risks for Casino Resource. Casino
Resource's Casino Caraibe is located in Sousse, Tunisia, North Africa.
Operations outside the U.S. are subject to many inherent risks. In addition, the
operation of Casino Caraibe poses several additional, specific risks for Casino
Resource.
Tunisia imposes substantial tariffs on imports. As many operational
supplies for the casino are not manufactured in Tunisia, the casino must import
these supplies and is therefore adversely affected by the tariffs.
Tunisia is a Moslem nation whose laws dictate that only foreign
tourists are permitted to gamble. Local residents, including foreign nationals,
are prohibited from the casino which dramatically reduces, especially in the
off-season, a consistent source of patrons. To enforce this rule, local law
requires that all casino patrons present a passport or other identification and
register for entry into the casino. Gaming is only conducted in Tunisian
currency, the dinar. All casino guests must exchange their national currency
into dinars in order to gamble.
The Tunisian government and national bank permit the Company to
withdraw capital contributions and profits in U.S. funds. However, doing so is
an extremely cumbersome and lengthy process. The casino's operating profits may
only be released 90 days after each year end. Thus removing operating income
from Tunisia may only occur after a substantial time period has elapsed. As the
Company does not hedge its currency operations, it may be adversely affected by
the currently exchange rate changes during this long waiting period.
7
<PAGE>
Finally, Tunisia's location in North Africa may make it unattractive as
a tourist location because of its proximity to potentially volatile countries
such as Algeria and Libya, and thus Casino Resource is at the risk of rising
international tensions which could not only affect Tunisia directly, but other
countries in the region as well.
Casino Resource's Casualty Insurance May Be Inadequate. Casino Resource
maintains insurance coverage for the casino in Tunisia, but such coverage is
limited. Casino Resource does not have insurance against a number of risks
including: hurricanes, wind, floods, earthquakes and other catastrophic events
because such coverages are either not available or are cost-prohibitive. If an
uninsured disaster should occur, or should the actual loss sustained exceed the
amount of insurance proceeds, Casino Resource could suffer a material loss.
NASD Delisting of Common Stock Could Substantially Reduce Marketability
of Casino Resource Shares. Casino Resource has received notice from NASD warning
that if Casino Resource does not achieve minimum maintenance requirements under
NASD rules, Casino Resource's common stock will be delisted from the NASDAQ
National Market System. Currently Casino Resource's shares do not meet the
requirements of
o $1.00 per share minimum bid price
o $5,000,000 minimum market capitalization for shares owned by persons
who are not officers, directors, or 10 percent shareholders of Casino
Resource
o $4,000,000 minimum tangible net worth
Delisting of the common stock would probably have an adverse effect on the
marketability of the common stock. As a result of any such delisting, an
investor could find it more difficult to dispose of or to obtain accurate
quotations as to the market value of the common stock. Moreover loss of a NASDAQ
National Market listing could adversely affect Casino Resource's ability to
offer new shares for sale because of the resulting loss of state "Blue Sky"
exemptions which are based on such listing.
To satisfy the minimum per share bid price requirement, Casino Resource
is considering a reverse stock split of its shares. To satisfy the minimum
market capitalization requirement, Casino Resource is considering a sale of
shares, or an acquisition or merger which would increase the amount of Company
assets represented by the shares with an expected concomitant increase in market
capitalization. There is no assurance that Casino Resource will be able to sell
such shares in light of its low share price and poor earnings history.
Similarly, there is no assurance that Casino Resource will be able to identify
an acquisition or merger candidate and successfully complete such a transaction.
Finally, there is no assurance that any of these actions, even if successful,
will prevent NASD from delisting the common stock.
NASD has scheduled a hearing on the delisting matter on April 15, 1999,
after which NASD will further consider the matter of delisting.
If the Casino Resource common stock is delisted from the NASDAQ
National Market System, management will seek to list the shares on the NASDAQ
Small Cap Market. Requirements for such a listing are:
8
<PAGE>
Initial Requirement Maintenance Requirement
Minimum Bid Price per Share $4.00 $1.00
Minimum Net Tangible Assets $4 million $2 million
Casino Resource shares do not currently satisfy either requirement. However,
following a reverse stock split, management believes all such requirements will
be satisfied.
The SEC has adopted rules that regulate broker-dealer practices in
connection with transactions in "penny stocks." Penny stocks are defined
generally as equity securities with a price of less than $5.00 per share. The
penny stock rules, however, do not apply to securities quoted on the NASDAQ
system, provided that current price and volume information with respect to
transactions in such securities is provided by the system. The penny stock rules
place additional responsibilities on broker-dealers effecting transactions in
such securities. The requirements may have the effect of reducing the level of
trading activity in the secondary markets for a stock that becomes subject to
the penny stock rules. If the Casino Resource common stock is delisted from the
NASDAQ National Market System, and management is incorrect in believing that the
shares will qualify for listing under the NASDAQ Small Cap market, the penny
stock rules would probably apply. If the Casino Resource common stock becomes
subject to the penny stock rules, investors in this offering may find it more
difficult to resell their common stock.
Current Management`s Control of Casino Resource Might Render
Shareholders Impotent to Effect Changes in the Business. Casino Resource's
executive officers, directors and their affiliates own, or have the right to
vote, approximately 30% of the outstanding common stock. Accordingly, Casino
Resource directors and officers have significant voting influence in connection
with the election of the directors of Casino Resource and control Casino
Resource's business and affairs. Consequently, other shareholders are subject to
the risk that existing management will have the power to direct Casino Resource
to take actions which such other shareholders would view as disadvantageous to
Casino Resource.
Loss of John J. Pilger Could Adversely Affect Casino Resource. Casino
Resource is highly dependent on the personal efforts and abilities of its Chief
Executive Officer, John J. Pilger. Mr. Pilger is the Casino Resource executive
most knowledgeable about Casino Resource's business and most conversant with
executives in other companies with which Casino Resource deals Accordingly, the
loss of Mr. Pilger's services could have a material adverse effect on Casino
Resource. Casino Resource has entered into a three-year employment agreement
with Mr. Pilger commencing on May 20, 1996, and amended February 1998, and has
obtained key-person life insurance in the amount of $1 million on his life, with
the proceeds of such insurance payable to Casino Resource.
Potential Anti-Takeover Effects of Charter Provisions and Minnesota Law
May Make Casino Resource Less Attractive to Potential Investors.. Casino
Resource's Articles and Bylaws and the Minnesota Business Corporation Act
contain requirements and limitations that may have the effect of discouraging
unsolicited takeover bids from third parties. These include:
9
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o advance notice requirements for shareholder proposals and director
nominations
o limitations on shareholder action by written consent
o voting requirements for amendment of certain provisions of the charter
documents
o a classified board of directors o change of control provisions
These provisions could discourage a takeover bid or proposal for the common
stock of Casino Resource that might have benefited company shareholders.
MATERIAL DEVELOPMENTS
On Stage Entertainment, Inc. On September 21, 1998, Casino Resource
entered into an agreement to sell substantially all of the assets of its
entertainment segment to On Stage Entertainment, Inc. The purchase price is
$13.8 million payable $12.5 million, in cash and $1.3 million by delivery of a
purchase money note. The note will bear interest at 9.5% per year and will be
due two years after issuance. The sale includes operations and assets from
Casino Resource of Branson, Country Tonite Theater, d/b/a Country Tonite
Theatre, and Country Tonite Enterprises. The sale is subject to On Stage's
obtaining financing in the amount of $13 million. Thus far On Stage has not
obtained financing and there is no assurance that it will do so. Accordingly,
Casino Resource is preparing to continue to operate the Country Tonite Theatre
in Branson, Missouri and to produce the Country Tonite Show in Branson, Missouri
and Pigcon Forge, Tennessee.
Burkhart Ventures. On November 4, 1998, Casino Resource and Burkhart
Venture, LLC entered into an agreement, whereby Burkhart would acquire Casino
Resource's 60% ownership in Country Tonite Theatre, LLC for $20,000. Pursuant to
the agreement, which was effective December 31, 1998, Casino Resource continues
to manage Country Tonite Theatre for a fee of $2,000 per week in season and
$1,000 per week in the off-season. The agreement also provides that Country
Tonite Enterprises, Inc. will produce shows for the 1999 calendar season for a
fee of $36,000 per week.
Bottled Water Business. On August 25, 1998, Casino Resource executed a
Letter of Intent with Mark McKinney, a Bentonville, Arkansas businessman, to
build a spring water bottling plant in Bentonville, Arkansas. The estimated cost
of the facility is $27 million. Casino Resource is attempting to secure debt and
equity financing of $25 million for the project but thus far has been
unsuccessful. There is no assurance that Casino Resource will obtain such
financing.
Roy Anderson Holding Corp. Debenture. Roy Anderson Corp. was the holder
of a Casino Resource debenture in the principal amount of $1.5 million which was
due January 31, 1999. Casino Resource and the debenture holder exchanged the
existing debenture for an Amended and Restated Debenture dated as of February 1,
1999. The Amended and Restated Debenture, which will be held by Roy Anderson
Holding Corp., an affiliate of the original debenture holder, contains the
following material terms:
o Accrued interest of $360,000 as of January 31, 1999 was paid by the
delivery of 352,250 shares of Casino Resource common stock;
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o Interest on the debenture (at 6% per year) from February 1, 1999, to
and including May 31, 1999 is to be capitalized and added to the
principal balance of the debenture;
o Principal and interest (at 6% per year) is being amortized in 18 equal
monthly installments of $88,651.29 each beginning June 1, 1999;
o Casino Resource is required to pay the first 50% of each amortization
payment in cash;
o Casino Resource may pay the remaining 50% of each amortization payment
in cash or in common stock valued at the average of the closing prices
on the last 10 trading days in May, 1999;
o The then remaining balance of the debenture is accelerated and repaid
in full in cash if the On Stage transaction closes, or to the extent
of $750,000 if the Tunisia casino is sold, and in certain other
circumstances.
1.8 million shares of common stock, an amount anticipated to be sufficient to
satisfy the monthly amortization requirement, has been issued and is being held
in escrow until paid out in the manner described above. Any unused shares will
be canceled. Roy Anderson Holding Corp. has given a proxy to Robert Allen and
John Pilger to vote all such shares until they are released from escrow.
Development of Pokagon Band of Potawatomi Indians Casino. Casino
Resource asserts that it maintains a Right of First Refusal in regards to a
gaming management contract with the Pokagon Band of Potawatomi Indians, separate
and apart from a gaming management contract that was the subject of an agreement
between Casino Resource and Harrah's Entertainment, Inc., and in turn, between
Harrah's and the Pokagon Band. Casino Resource maintains that while the Harrah's
Pokagon contract may have been terminated on October 18, 1998, by an
announcement by the Pokagon Band, the Right of First Refusal that Casino
Resource held separately from the agreement with Harrah's reverted back to
Casino Resource and with it the right to participate in a different gaming
management contract with the Pokagon Band.
Casino Resource must, in any event, reconfirm its Right of First
Refusal with the Pokagon Tribe relative to Casino Resource's securing its right
to participate in a gaming management contract. There are no assurances that the
National Indian Gaming Commission ("NIGC") which must approve the agreement,
will in fact approve the agreement which is the subject of Casino Resource's
asserted Right of First Refusal, nor is there any guarantee that even if NIGC
approves the agreement that Casino Resource will be able to find an appropriate
partner to help finance the endeavor. However, Casino Resource has opened a
dialog with a casino operator in an effort to achieve this objective.
USE OF PROCEEDS
Casino Resource will receive no proceeds from the sale of the Common
stock offered by this prospectus because all of the shares are being offered for
the account of the selling shareholders.
11
<PAGE>
SELLING SHAREHOLDERS
Three of the selling shareholders acquired (or will acquire) their
shares of Casino Resource common stock as repayment for and pursuant to the
terms of debentures. The Gifford Fund, Ltd., and GPS Fund, Ltd. acquired their
debentures (issued on September 10, 1997 and September 9, 1997, respectively) as
part of an exempt offering by Casino Resource pursuant to Regulation D. Roy
Anderson Holding Corp. obtained 350,250 shares as payment for accrued interest
on a debenture which matured on January 31, 1999, and will obtain up to 1.8
million additional shares as partial payment of an Amended and Restated
Debenture dated as of February 1, 1999. Gaming Venture Corp., U.S.A., obtained
its shares under an agreement dated February 9, 1999, in which it agreed to take
payment of $35,000 owed to it under a consulting agreement dated July 21, 1997
in the form of Casino Resource common stock. Each of the selling shareholders
(other than Gaming Venture) is a party to an agreement by which Casino Resource
agreed to register its shares of Casino Resource common stock. Registration of
these shares does not necessarily mean that the selling shareholders will sell
all or any of the shares.
The shares listed in the table below represent all of the shares
covered by this prospectus. Except for the relationship of creditors and debtor,
no material relationships exist between any of the selling shareholders and
Casino Resource, nor has any such material relationship existed within the past
three years.
---------------------------------------- ----------------- -----------------
Number of Percentage of
Shares Class
---------------------------------------- ----------------- -----------------
The Gifford Fund, Ltd. 150,050 1.2%
---------------------------------------- ----------------- -----------------
GPS Fund, Ltd. (1) 547,750 4.4%
---------------------------------------- ----------------- -----------------
Roy Anderson Holding Corp. (2) 2,152,250 17.3%
---------------------------------------- ----------------- -----------------
Gaming Venture Corp. U.S.A. 70,000 0.6%
---------------------------------------- ----------------- -----------------
Total Shares to Register (2) 2,920,050 23.5%
---------------------------------------- ----------------- -----------------
(1) This number represents an estimate of the number of shares which will be
obtained by the selling shareholder pursuant to the terms of the debentures held
by such selling shareholder.
(2) Any shares which are not issued pursuant to the terms of the debentures
will be canceled, and withdrawn from registration under the Securities Act.
PLAN OF DISTRIBUTION
The shares offered by the selling shareholders may be sold from time to
time by the selling shareholders, or by pledgees, donees, transferees or other
successors in interest of the selling shareholders, at their sole discretion.
These sales may be made in the over-the-counter market or in private
transactions at prices and on terms then prevailing or at prices related to the
then current market price, or in negotiated transactions. The shares of common
stock offered by the selling shareholders are not being underwritten. Casino
Resource will not receive any proceeds from the sale of any common stock by the
selling shareholders. In general, the shares may be sold by one or more of the
following means:
o a block trade in which the broker or dealer engaged attempts to sell
the securities as agent, but may position and resell a portion of the
block as principal to facilitate the transaction
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o purchases by a broker or dealer as principal and resale by the same
broker or dealer for its account under this prospectus
o an exchange distribution under the rules of the exchange (if the
securities are then listed on an exchange)
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
In effecting sales, broker or dealers engaged by the selling
shareholders may arrange for other brokers or dealers to participate. Brokers or
dealers will receive commissions or discounts from the selling shareholders in
amounts to be negotiated immediately prior to the sale. Such brokers or dealers
and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. In addition, any securities covered by this prospectus which also qualify
for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to
this prospectus.
DESCRIPTION OF SECURITIES
Casino Resource is authorized to issue up to 35,000,000 shares of
capital stock, including 30,000,000 shares of common stock and 5,000,000 shares
of preferred stock. 12,402,399 (including the shares covered by this prospectus)
shares of common stock and no shares of preferred stock are outstanding (or will
be outstanding after the transactions described in this prospectus).
Holders of common stock are entitled to receive dividends as they are
declared by the Board of directors of Casino Resource out of legally available
funds for that purpose. Casino Resource has not declared or paid any cash
dividends on its capital stock since its incorporation and does not intend to
pay any cash dividends in the foreseeable future. In the event of any
liquidation, dissolution or winding-up of Casino Resource, the holders of shares
of common stock would be entitled to receive a pro rata share of the net assets
of Casino Resource remaining after payment, or provision for payment, of the
debts and other liabilities of Casino Resource. There is no assurance, however,
that under such circumstances there would be any net assets of Casino Resource
remaining for such a pro rata distribution.
Holders of shares of the common stock are entitled to one vote per
share in all matters to be voted upon by shareholders. Because there is no
cumulative voting for the election of directors, the holders of shares entitled
to exercise more than 50% of the voting rights in an election of directors are
able to elect all of the directors. Holders of shares of the common stock have
no preemptive rights to subscribe for or to purchase any additional shares of
common stock or other obligations convertible into shares of common stock which
may be issued by Casino Resource after the date of this prospectus.
Federal and state gaming authorities require that certain shareholders
of a company which is seeking a gaming license be investigated and be found
suitable by the gaming authority. If a gaming authority has reason to believe
that such ownership may be inconsistent with its policy, it may deny an
application for a license.
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Casino Resource's Restated Articles of Incorporation, provide that no
investor may become either a holder of 5% or more of Casino Resource's stock or
one of the 10 largest shareholders of Casino Resource without first agreeing to
consent to a background investigation, provide a financial statement and respond
to questions from gaming authorities. Furthermore, all shares of Casino
Resource's capital stock held by a beneficial owner will be subject to
redemption if (a) such beneficial owner refuses, upon request of the Board or
any gaming authority having jurisdiction over Casino Resource, to provide any of
the foregoing or such beneficial holder's holdings of capital stock either alone
or together with the capital stock holdings of any other beneficial holder of
Casino Resource's capital stock may, in the judgment of the Board of directors,
result in: (i) the disapproval, modification or non-renewal of any gaming
management contract (whether solely or by shared management) or (ii) the
disapproval, loss, modification, non-renewal or non-reinstatement of any
license, franchise, approval or consent from a gaming authority or other
governmental agency with respect to the conduct of any portion of the business
of Casino Resource where such license, franchise approval or consent is
conditioned upon holders of capital stock meeting certain criteria.
These restrictions may require some investors to provide information to
gaming authorities. As a consequence, those unwilling to comply may be required
to sell their shares or may be unwilling to buy more, or to invest at all in
Casino Resource, thereby resulting in a possible decline in the price of the
Common stock, which could be material, and having a possible anti-takeover
effect. Additionally, these restrictions could require Casino Resource to redeem
shares of its Common stock for cash, which could adversely affect its liquidity.
As a result of such restrictions, current or future state or Federal gaming
rules or regulations may materially restrict or prohibit certain persons from
owning Casino Resource's securities. Such restrictions could also have the
effect of requiring certain holders to liquidate their holdings of Casino
Resource's securities at a time when market conditions are not favorable to such
holders, or at a cost that is not favorable to such holders. In addition, at the
election of Casino Resource, such shareholder may receive redemption securities
wholly or partially in lieu of a cash payment. "Redemption securities" means any
debt or equity securities of Casino Resource, any subsidiary, or any other
corporation, or any combination thereof, having terms and conditions as approved
by the Board of directors which, together with a cash payment, if any, equals
the fair market value of the securities to be redeemed on the date the notice of
redemption is given, as determined by a nationally recognized investment banking
firm selected by the Board of directors. Furthermore, such redemption securities
may be securities, which have not been registered under the Securities Act and
therefore may not be eligible for trading in the public market, with a
consequent result of illiquidity to the holder.
Any required redemption by Casino Resource of shares of its common
stock held by a shareholder who violates the foregoing restrictions on ownership
may require a cash payment to such shareholder, which payment may have a
negative effect on the liquidity of Casino Resource.
Casino Resource's Articles of Incorporation also provide that directors
may be removed for cause by vote of the holders of a majority of the outstanding
shares entitled to vote or, other than for cause, by an 80% shareholder vote.
Also, an 80% shareholder vote is required to amend, alter or adopt any provision
inconsistent with, or repeal, the classified board and related provisions.
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A classified board and related provisions may discourage or make more
difficult a proxy contest, the removal of an incumbent board, or the assumption
of control of Casino Resource by tender offer or otherwise by a third party,
even under circumstances when such action might be beneficial to Casino Resource
and its shareholders.
DISCLOSURE OF THE SEC'S POSITION
ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Minnesota Business Corporation Act provides that officers and
directors of Casino Resource have the right to indemnification by Casino
Resource for liability arising out of certain actions. Such indemnification may
be available for liabilities arising in connection with this offering. Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of Casino Resource
pursuant to the foregoing provisions, or otherwise, Casino Resource has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In ss.3.02, of its Articles of Incorporation, Casino Resource limits
personal liability for breach of the fiduciary duty of its directors, to the
extent required by Section 302A.521 of the Minnesota Business Corporation Act.
Such provision eliminates the personal liability of directors for damages
occasioned by breach of fiduciary duty, except based on the director's duty of
loyalty to Casino Resource, liability for acts or omissions not made in good
faith, liability for acts or omissions involving intentional misconduct,
liability based on payments of improper dividends, liability based on violations
of state securities laws and liability for acts occurring prior to the date such
provision was added.
As permitted under Minnesota Statutes, the Articles of Incorporation of
Casino Resource provide that directors shall have no personal liability to
Casino Resource or its shareholders for monetary damages arising from breach of
the director's duty of care in the affairs of Casino Resource.
Minnesota Statutes do not permit elimination of liability for breach of
a director's duty of loyalty to Casino Resource or with respect to certain
enumerated matters, including payment of illegal dividends, acts not in good
faith and acts resulting in an improper personal benefit to the director.
EXPERTS
The financial statements incorporated by reference in this Prospectus
have been audited by BDO Seidman, LLP, independent certified public accountants,
to the extent and for the periods set forth in their report incorporated herein
by reference, and are incorporated herein in reliance upon such report given
upon the authority of said firm as experts in auditing and accounting.
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Dealer Prospectus Delivery Obligation
Until April __, 1999, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
the prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
The expenses of the offering, which are to be borne by Casino Resource,
are estimated as follows:
------------------------------------------------------
SEC registration fee $ 370
------------------------------------------------------
NASD registration fee 17,500
------------------------------------------------------
Legal services and expenses 12,500
------------------------------------------------------
Accounting services 6,000
------------------------------------------------------
Transfer Agent Fees 2,000
------------------------------------------------------
Printing 2,000
------------------------------------------------------
Total $40,370
------------------------------------------------------
* All of the above expenses except for registration fee are estimated.
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Indemnification of Directors and Officers
Under Section 302A.521, Minnesota Statutes, Casino Resource is required
to indemnify its directors, officers, employees and agents against liability
under certain circumstances, including liability under the Securities Act of
1933, as amended (the "Act"). Section 3.02 of Casino Resource's Articles of
Incorporation contains substantially similar provisions. The general effect of
such provisions is to relieve the directors and officers of Casino Resource from
personal liability which may be imposed for certain acts performed in the
capacity as directors or officers of Casino Resource, except where such persons
have not acted in good faith.
<TABLE>
<CAPTION>
EXHIBITS
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Exhibit No. Description Page
- --------------------------------------------------------------------------------------------------------------
4.1 $500,000 13% Cumulative Convertible Debenture, dated September 10, 1997
between Casino Resource and Gifford Fund, Ltd., (a)
- --------------------------------------------------------------------------------------------------------------
4.2 $300,000, 13% Cumulative Convertible Debenture, dated September 9, 1997,
between Casino Resource and GPS Fund, Ltd. (a)
- --------------------------------------------------------------------------------------------------------------
4.3 Amendment to the 13% Cumulative Convertible Debentures, dated August 11,
1998, between Casino Resource, The Gifford Fund, Ltd., and GPS Fund, Ltd. (b)
- --------------------------------------------------------------------------------------------------------------
4.4 Amended and Restated Debenture dated as of February 1, 1999 22
- --------------------------------------------------------------------------------------------------------------
5. Opinion Regarding Legality 33
- --------------------------------------------------------------------------------------------------------------
23. Consent of Independent Certified Public Accountants 34
- --------------------------------------------------------------------------------------------------------------
24. Power of Attorney (b)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Incorporated by reference to the Company's Registration Statement on Form
S-3, File No. 333-37267, originally declared effective November 19, 1997
(b) Filed with original filing of registration statement 333-72315
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UNDERTAKINGS
(a) Rule 415 Offering.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement (i) to include any prospectus required
by Section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; (iii) to
include any material information with respect to the plan of
distribution not previously disclosed in the registration or
any material change to such information in the registration
statement;
Provided, however, that paragraph (a)(1)(i) do and (a)(1)(ii) do not
apply if the information required to be included in the post-effective
amendment by those paragraphs is contained in periodic reports filed by
the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in
the Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of those securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
(b) Filings Incorporating Subsequent Exchange Act Documents by Reference. The
undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange At of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c)Request for Acceleration of Effective Date.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers, and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission, such
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<PAGE>
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the
Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy, as expressed in the Act and will be governed by the
final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Ocean Springs, State of Mississippi on March 17,
1999.
Casino Resource Corporation
Date: March 17, 1999 By:
/s/ John J. Pilger
John J. Pilger, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: Signature and Title
March 17, 1999 /s/ JOHN J. PILGER
John J. Pilger, Chief Executive Officer,
Chairman of the Board of Directors, and
Principal Financial and Accounting Officer
March 17, 1999 /s/ NOREEN POLLMAN
Noreen Pollman, Secretary and Director
March 17, 1999 /s/ ROBERT J. ALLEN
Robert J. Allen, Vice President of
Entertainment and Director
March 17, 1999 /s/ JOHN W. STEINER
By: John J. Pilger, Attorney-in-Fact
John W. Steiner, Director
March 17, 1999 /s/ DENNIS EVANS
By: John J. Pilger, Attorney-in-Fact
Dennis Evans, Director
March 17, 1999 /s/ DR. TIMOTHY MURPHY
By: John J. Pilger, Attorney-in-Fact
Dr. Timothy Murphy, Director
21
AMENDED AND RESTATED DEBENTURE
THIS AMENDED AND RESTATED DEBENTURE (this "Debenture") is entered into
as of the 1st day of February, 1999, by and between Casino Resource Corporation,
a Minnesota corporation (the "Company"), in favor of Roy Anderson Holding Corp.,
a Delaware corporation (the "Holder");
WHEREAS, the Company executed a debenture dated as of January 31, 1997
(the "Existing Debenture"), in favor of Maritime Group, LTD ("Maritime") in the
principal amount of $1,500,000.00;
WHEREAS, pursuant to an Instrument of Assignment dated as of May 2,
1997, Maritime sold, assigned, transferred and delivered all of its right, title
and interest in and to the Existing Debenture to Roy Anderson Corp, a
Mississippi corporation ("RAC");
WHEREAS, pursuant to an Instrument of Assignment dated as of January
31, 1999, RAC sold, assigned, transferred and delivered all of its right, title
and interest in and to the Existing Debenture to the Holder;
WHEREAS, the Existing Debenture matured according to its terms on
January 31, 1999, and, as of such date, $180,000.00 of accrued interest was due
and payable on the Existing Debenture;
WHEREAS, pursuant to certain letter agreements, the Company and RAC
extended the maturity date of the Existing Debenture to March 3, 1999;
WHEREAS, the Company has requested, and the Holder has agreed, to
modify the terms of the Existing Debenture in certain respects, including,
without limitation, (a) to extend the maturity date of the Existing Debenture to
November 1, 2000, (b) to capitalize the interest which accrues on the Existing
Debenture between February 1, 1999, and May 31, 1999, and to add the amount of
such capitalized interest to the principal amount of the Existing Debenture, (c)
to provide that principal and interest on the Existing Debenture will be paid in
a combination of cash and common stock of the Company and (d) to provide for the
acceleration and prepayment of the Existing Debenture upon the occurrence of
certain events;
WHEREAS, in order to accomplish the foregoing modifications, the
Company and the Holder have agreed to amend and restate the Existing Debenture
in its entirety;
NOW THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Holder hereby amend and
restate the Existing Debenture in its entirety as follows:
22
<PAGE>
AMENDED AND RESTATED DEBENTURE
$1,530,000.00 February 1, 1999
PROMISE TO PAY. CASINO RESOURCE CORPORATION, a Minnesota corporation (the
"Company"), promises to pay to the order of Roy Anderson Holding Corp., a
Delaware corporation (the "Holder"), a sum equal to One Million Five Hundred
Thirty Thousand and 00/100 United States Dollars (U.S. $1,530,000.00), together
with simple interest at the fixed rate per annum of six percent (6%), with
interest being assessed on the unpaid principal balance of this Debenture as
outstanding from time to time, commencing on June 1, 1999, and continuing until
this Debenture is paid in full.
PAYMENT. (a) The Company shall pay principal and interest on this Debenture in
equal monthly installments of $88,651.29 each (each an "Installment Payment"),
commencing on June 1, 1999, and continuing on the first day of each succeeding
month through and including November 1, 2000 (each such payment date being
referred to herein as a "Payment Date"). Any and all unpaid principal and
accrued but unpaid interest and any other amounts due hereunder shall be due and
payable at maturity on November 1, 2000.
(b) The Company shall pay fifty percent (50%) of each Installment
Payment in cash in lawful money of the United States of America (the "Cash
Payment"). The Company shall pay the balance of each Installment Payment, at the
Company's option, in (i) cash in lawful money of the United States of America,
(ii) common stock of the Company ("Company Common Stock") or (iii) a combination
of both cash and Company Common Stock. Any amounts remaining unpaid on this
Debenture on the maturity date hereof, whether principal, interest or other
amounts due hereunder, shall be paid in full in cash on such date. Any Company
Common Stock delivered to the Holder in payment of this Debenture as described
above will be valued on the basis of the average of the closing sale prices for
Company Common Stock on each official stock trading day during the period
commencing on May 17, 1999, and ending on May 28, 1999 (regardless of whether
any such stock trades on any such stock trading day), as reported by or on the
Company's Trading Market. The "Company's Trading Market" means the Nasdaq
National Market of the Nasdaq Stock Market or, if Company Common Stock is not
then listed on such market, the Nasdaq SmallCap Market of the Nasdaq Stock
Market or, if Company Common Stock is not then listed on such market, the OTC
Bulletin Board or, if Company Common Stock is not then quoted on such system,
any alternative stock trading market in which Company Common Stock is then
traded. Such average price shall be equitably adjusted in the case of a
Corporate Event (as hereinafter defined) in the manner provided in paragraph (d)
below. Between May 3, 1999, and May 28, 1999, inclusive, (i) the Holder agrees
that it will not, directly or indirectly (through RAC, or any affiliate of the
Holder or RAC, or otherwise), sell (or sell short) any shares of Company Common
Stock and (ii) the Company agrees that it will not, directly or indirectly
(through any affiliate of the Company or otherwise), purchase any shares of
Company Common Stock or warrants.
(c) In order to make any payments on this Debenture in Company Common
Stock as described in subparagraph (b) above, the Company will request its
transfer agent, as soon as reasonably possible but in no event later than March
9, 1999, to deliver certificates representing 1,800,000 shares of Company Common
23
<PAGE>
Stock into a special escrow account (the "Escrow Account") with Mesirov Gelman
Jaffe Cramer & Jamieson, LLP (the "Escrow Agent"), which Escrow Account is
subject to an escrow agreement among the Company, the Holder and the Escrow
Agent dated as of March 3, 1999 (the "Escrow Agreement"), and thereafter the
Company will use all reasonable efforts to cause such transfer agent to deliver
such certificates into the Escrow Account as promptly as reasonably practicable.
All such certificates will be registered in the name of the Holder. At least
three (3) business days prior to each Payment Date (other than June 1, 1999, as
to which such instruction shall be issued on June 1, 1999), the Company will, in
accordance with the terms of the Escrow Agreement, instruct the Escrow Agent in
writing (with a copy of such instruction concurrently delivered to the Holder)
as to the number of shares of Company Common Stock that will need to be released
from the Escrow Account and delivered to the Holder in order that the Holder
shall receive, on each Payment Date, the number of shares of Company Common
Stock which, when valued as described in subparagraph (b) above and when added
to the Cash Payment and any additional cash amount being paid by the Company as
part of the Installment Payment due on such Payment Date, discharges the full
amount of the Installment Payment due on such date. If the Company elects to pay
any portion of any Installment Payment by delivering shares of Company Common
Stock to the Holder, the Company shall promptly take all steps required under
the Escrow Agreement to cause the Escrow Agent to deliver to the Holder on the
applicable Payment Date the number of shares specified by the Company in its
instructions to the Escrow Agent. Notwithstanding anything herein to the
contrary, (i) if on May 31, 1999, the aggregate value of all of the shares of
Company Common Stock held in the Escrow Account, valued as provided in
subparagraph (b) above, does not equal or exceed $797,862.00, then on such date,
the Company shall deposit into the Escrow Account such number of shares of
Company Common Stock as shall be necessary to insure that the aggregate value of
all of the shares of Company Common Stock held in the Escrow Account, valued as
provided in subparagraph (b) above, equals at least $797,862.00 and (ii) no
fractional shares of Company Common Stock shall be delivered to the Holder as
payment under this Debenture.
(d) If, at any time after the date hereof and prior to the date this
Debenture is paid in full, the Company effects a dividend or other distribution
upon or in redemption of Company Common Stock payable in Company Common Stock,
other securities or other property, a combination of outstanding shares of
Company Common Stock into a smaller number of shares of Company Common Stock, or
any reorganization, split, exchange or reclassification of Company Common Stock,
or any consolidation or merger of the Company with another corporation, or the
sale of all or substantially all of its assets to another corporation, in such a
way that holders of outstanding Company Common Stock shall be entitled to
receive (either directly, or upon subsequent liquidation) stock, securities or
other property with respect to or in exchange for Company Common Stock (any such
event described in the foregoing clauses being referred to as a "Corporate
Event"), then as a condition of such Corporate Event, lawful, appropriate,
equitable and adequate provisions shall be made to the terms of paragraphs (b)
and (c) above whereby the Holder shall thereafter be entitled to receive on each
Payment Date (under the same terms otherwise applicable to its receipt of
Company Common Stock), in lieu of or in addition to, as the case may be, the
payments specified in paragraphs (b) and (c) above, such cash, stock, securities
or other property then held in the Escrow Account as may be necessary to be
released from the Escrow Account and delivered to the Holder in order that the
Holder shall receive, on each such Payment Date, the amount of cash, stock,
securities or other property which, when valued in a fair and equitable manner
24
<PAGE>
consistent with the purposes and intents of this Debenture and when added to the
Cash Payment and any additional cash amount being paid by the Company as part of
the Installment Payment due on such Payment Date, discharges the full amount of
the Installment Payment due on such date; provided, however, that in no event
whatsoever shall the Company be relieved of its obligation to pay at least 50%
of each Installment Payment in cash.
(e) As directed by the Company, the Holder has given a proxy to John J.
Pilger, Chairman of the Board, and Robert J. Allen, Vice President, or either of
them, to vote all of the shares of Company Common Stock held in the Escrow
Account for so long as they remain deposited therein. Such proxy shall
automatically terminate (without the delivery of any further documentation) with
respect to any shares released from the Escrow Account simultaneously with the
delivery of such shares to the Holder. Upon the Escrow Agent's receipt of
written acknowledgment by the Holder that the Company has satisfied all of its
obligations to the Holder under this Debenture, all shares then remaining in the
Escrow Account will be returned to the Company by the Escrow Agent for
cancellation.
(f) All payments due hereunder, whether made in the form of cash or
delivery of Company Common Stock, shall be made to the Holder's address for
notices set forth below or at such other place as the Holder may designate to
the Company in writing.
VOLUNTARY PREPAYMENT. The Company may prepay this Debenture in full or in part
at any time, provided that any such prepayment must be made in cash, unless
otherwise agreed to by the Holder. Early payments under this Debenture shall not
relieve the Company of its obligation to continue to make regularly scheduled
payments as required herein, but shall instead reduce the principal balance due,
and the Company may be required to make fewer payments under this Debenture.
MANDATORY PREPAYMENT. (a) The Company shall repay this Debenture in full,
including all principal, accrued interest and other amounts due hereunder, upon
the sale of substantially all of the assets of the Company's entertainment
business to On Stage Entertainment, Inc. pursuant to the agreement between the
Company and On Stage Entertainment, Inc. dated September 21, 1998, or any
amended, substitute or successor agreement thereto. Such repayment shall be made
in cash simultaneously with the closing of such sale transaction.
(b) Upon the sale of the Company's casino located in Tunisia, North
Africa (whether by the sale of stock or assets, by merger or otherwise), the
Company shall pay the Holder a sum equal to $750,000.00 or the remaining balance
due hereunder, including principal, accrued interest and any other amounts due
hereunder, whichever is less. Such repayment shall be made in cash
simultaneously with the closing of such sale transaction and shall be applied by
the Holder to payment of the Installment Payments due hereunder in the inverse
order of their maturity.
(c) In addition to the foregoing, in the event that the Company
receives any other one-time payment arising out of (i) a sale or other
disposition of assets (including the sale of the Company's entertainment
business in a transaction not covered by subparagraph (a) above), (ii) a
settlement of pending claims, (iii) a collection of notes receivable, (iv)
proceeds of litigation, (v) prepayment of any account receivable that arose out
of a transaction outside of the Company's ordinary course of business or (vi) a
sale of equity securities to more than one purchaser in exchange for cash (each
25
<PAGE>
an "Extraordinary Payment"), and the amount of such Extraordinary Payment
exceeds the then outstanding principal balance of this Debenture, then the
Company shall repay this Debenture in full in cash within five (5) business days
after receipt of such Extraordinary Payment. In the event that the Company
receives an Extraordinary Payment in an amount which is less than the then
outstanding principal balance of this Debenture, then the Company shall pay the
Holder a sum equal to fifty percent (50%) of the amount of such Extraordinary
Payment in cash within five (5) business days after receipt of such
Extraordinary Payment; such payment shall be applied by the Holder to payment of
the Installment Payments due hereunder in the inverse order of their maturity.
Nothing in this Debenture is intended to create, nor shall it be deemed to
create, a security interest in, lien on, or pledge or assignment of any of the
Company's notes or accounts receivable.
(d) From the date of this Debenture through the date this Debenture is
paid in full, the Company shall furnish to the Holder no later than the second
business day after the receipt by the Company of an Extraordinary Payment a
certificate signed by the Chief Financial Officer of the Company identifying the
nature, source and amount of such Extraordinary Payment and calculating the
amount of prepayment required to be made under the terms of the section of this
Debenture entitled "Mandatory Prepayment".
REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to the
Holder as of the date of this Debenture:
(a) Organization. The Company is a corporation which is duly organized,
validly existing and in good standing under the laws of the State of Minnesota.
(b) Authorization. The Company's execution, delivery and performance of
this Debenture has been duly authorized and does not conflict with, and will not
result in a violation of, or constitute or give rise to an event of default
under, the Company's articles of incorporation or by-laws. Furthermore, the
execution, delivery and performance by the Company of this Debenture does not
conflict with, and will not result in a violation of, or constitute or give rise
to an event of default under, any agreement or other instrument which may be
binding upon the Company or under any law or governmental regulation or court
decree or order applicable to the Company and/or its properties. The Company has
the power and authority to enter into the obligations evidenced by this
Debenture. The Company has the power and authority to own and to hold all of its
assets and properties and to carry on its business as presently conducted.
(c) Issued Shares. All shares of Company Common Stock to be delivered
to the Holder pursuant to the terms of this Debenture, when issued and delivered
in accordance with the terms hereof, will be duly authorized, validly issued,
fully paid, nonassessable and free of any pre-emptive or similar rights.
(d) Exchange Act Reports. The Company has duly filed with the
Securities and Exchange Commission (the "SEC") all reports, schedules, forms,
statements and other documents required to be filed by it under the Securities
Exchange Act of 1934 ("Exchange Act Reports") since January 1, 1998. As of their
respective dates, all such Exchange Act Reports filed by the Company since such
date complied in all material respects with the requirements of the Securities
Exchange Act of 1934 and the rules and regulations of the SEC promulgated
thereunder applicable to such Exchange Act Reports, and none of such Exchange
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Act Reports contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(e) Binding Effect. Each of this Debenture and the Escrow Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
generally and (ii) equitable principles that may limit the availability of
certain equitable remedies (such as specific performance) in certain instances..
The Company agrees that the foregoing representations and warranties shall be
continuing in nature and shall remain in full force and effect until such time
as this Debenture shall be paid in full. The Company agrees to notify the Holder
immediately of any breach by the Company of any representation, warranty or
agreement of the Company contained herein or should any representation, warranty
or agreement made herein become untrue or false at any time. The Company further
agrees to indemnify and hold the Holder harmless against any breach by the
Company of any representation, warranty or agreement of the Company contained in
this Debenture.
RESALES UNDER THE REGISTRATION STATEMENT. (a) The Company agrees to take all
reasonable actions (including preparing and filing with the SEC amendments and
supplements to the Registration Statement (as defined below) and the prospectus
forming a part thereof) as may be necessary to have the Registration Statement
declared effective by the SEC at the earliest date practicable and to keep the
Registration Statement effective until January 31, 2002, and to comply with the
provisions of the Securities Act of 1933 (the "Securities Act") and all
applicable rules and regulations promulgated thereunder in order to permit the
Holder during such period to resell or otherwise dispose of all of its
Registered Shares (as defined below), without further registration of the
Registered Shares under the Securities Act of 1933; provided that, before filing
any such amendment or supplement, the Company will furnish the Holder with
copies of all such documents proposed to be filed and will consider in good
faith any written comments or suggested changes thereto made by counsel
designated by the Holder. Without limiting the generality of the foregoing, the
Company shall amend or supplement the Registration Statement to increase the
number of shares subject to resale by the Holder thereunder in the event that
the number of Registered Shares exceeds the number disclosed thereunder as being
available for resale by the Holder. For purposes hereof, the "Registration
Statement" means the Registration Statement of the Company (Registration No.
333-72315) filed with the SEC pursuant to the Securities Act on February 12,
1999, which entitles the Holder and several other selling shareholders to resell
their shares of Company Common Stock; and "Registered Shares" means all shares
of Company Common Stock acquired by the Holder pursuant to the terms of this
Debenture in payment of the $180,000 of accrued interest due under the Existing
Debenture as of January 31, 1999, and any shares of Company Common Stock to be
acquired by the Holder in partial payment of any Installment Payment.
(b) Following any resale by the Holder of Registered Shares pursuant to
the Registration Statement, the Holder shall notify the Company of the number of
Registered Shares sold and the date thereof. Nothing herein shall be deemed to
require the Holder to notify the Company of any sale of Registered Shares
pursuant to Rule 144 promulgated under the Securities Act, an exemption from the
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registration requirements of the Securities Act or any other means (other than
pursuant to the Registration Statement).
(c) The Company agrees to take all other reasonable steps to ensure
that the Holder's resale of Registered Shares under the Registration Statement
is effected in accordance with the Securities Act and the regulations
promulgated thereunder, including:
(i) promptly filing all Exchange Act Reports as may
be necessary to update the information relating to the Company included
in the Registration Statement;
(ii) promptly furnishing to the Holder such number of
copies of such Registration Statement, each amendment and supplement
thereto, the prospectus included in such Registration Statement and
such other documents as the Holder may reasonably request in order to
facilitate the disposition of Registered Shares;
(iii) using its reasonable commercial efforts to
register or qualify the resales under state securities or "blue sky"
laws and taking any and all other acts that may be necessary or
advisable to enable the Holder to consummate such resales in such
jurisdictions, provided however, that the Company will not be required
to qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this subparagraph or
subject itself to taxation in any such jurisdiction;
(iv) notifying the Holder, at any time when a
prospectus relating thereto is required to be delivered by the Holder
under the Securities Act in connection with a resale of Registered
Shares, of the occurrence of any event as a result of which the
prospectus included in the Registration Statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of the Holder,
preparing a supplement or amendment to such prospectus or file an
Exchange Act Report so that, as thereafter delivered to the purchasers
of such stock, such prospectus will not contain an untrue statement of
a material fact or omit to state any fact necessary to make the
statements therein not misleading;
(v) otherwise using its reasonable commercial efforts
to comply with all applicable rules and regulations of the SEC; and
(vi) in the event of the issuance of any stop order
suspending the effectiveness of the Registration Statement, or of any
order suspending or preventing the use of any related prospectus or
suspending the qualification of any Company Common Stock registered
under such Registration Statement for sale in any jurisdiction, using
its reasonable commercial efforts promptly to obtain the withdrawal of
such order.
PAYMENT OF ACCRUED INTEREST. As full payment of the $180,000.00 of accrued
interest due and payable on the Existing Debenture as of January 31, 1999, the
Company shall, as soon as reasonably possible but in no event later than March
31, 1999, deliver to the Holder, at its address for notices set forth below, one
or more certificates representing 352,250 shares of Company Common Stock
registered in the name of the Holder.
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NEGATIVE PLEDGE. The Company shall not create, incur or suffer to exist any
lien, pledge, security interest or other encumbrance of any kind upon any of the
slot machines now or hereafter located at the Company's casino in Tunisia, North
Africa (the "Pledge Property"). The Company shall not remove any of the Pledge
Property from the Company's casino in Tunisia, North Africa without first
notifying the Holder thereof and of the location to which such Pledge Property
will be removed. Except for sales or other dispositions of obsolete or worn-out
items comprising the Pledge Property, the Company will not sell or otherwise
dispose of any of the Pledge Property without making the prepayment required
under subsection (b) of the section above entitled "Mandatory Prepayment".
MERGER. Notwithstanding any provision herein to the contrary, the Company shall
not consolidate or merge into or with any other person unless such person
expressly assumes all of the obligations of the Company under this Debenture.
DEFAULT. The following actions and/or inactions shall constitute events of
default under this Debenture:
(a) Default Under This Debenture. Should the Company (i) default in the
payment of any Installment Payment as and within five (5) days of when due, (ii)
default in the payment of any other payment due under this Debenture (including
any prepayment required to be made under this Debenture) as and when due or
(iii) default in the performance of any other covenant, condition or agreement
contained in this Debenture and such default shall remain unremedied fifteen
(15) days after the occurrence thereof.
(b) Default in Favor of Third Parties. Should the Company default under
any loan, extension of credit, security agreement, purchase or sales agreement
or any other agreement in favor of any other creditor or person that materially
impairs the ability of the Company to perform its obligations hereunder.
(c) Insolvency. Should the suspension, failure or insolvency, however
evidenced, of the Company occur or exist.
(d) Readjustment of Indebtedness. Should proceedings for readjustment
of indebtedness, reorganization, bankruptcy, composition or extension under any
insolvency law be brought by or against the Company, unless, if brought against
the Company, such proceedings are dismissed within sixty (60) days after the
filing thereof.
(e) Assignment for Benefit of Creditors. Should the Company file
proceedings for a respite from or make a general assignment for the benefit of
creditors.
(f) Receivership. Should a receiver of all or any part of the property
of the Company be applied for or appointed.
(g) Dissolution Proceedings. Should proceedings for the dissolution or
appointment of a liquidator of the Company be commenced.
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(h) False Statements. Should any representation, warranty or material
statement of the Company made in writing in connection with the obligations
evidenced by this Debenture prove to be incorrect or misleading in any material
respect when made.
HOLDER'S RIGHTS UPON DEFAULT. Should any one or more events of default occur or
exist under this Debenture as provided above, the Holder shall have the right,
at its sole option, to formally declare this Debenture to be in default and to
accelerate the maturity and insist upon immediate payment in full in cash of the
unpaid principal balance then outstanding under this Debenture, plus accrued
interest, together with reasonable attorney's fees, costs, expenses and other
fees and charges as provided herein.
WAIVERS. The Company hereby waives presentment for payment, protest, notice of
protest and notice of nonpayment. The Company agrees that the Holder's
acceptance of payment other than in accordance with the terms of this Debenture,
or the Holder's subsequent agreement to extend or modify such repayment terms,
or the Holder's failure or delay in exercising any rights or remedies granted to
the Holder, shall not have the effect of releasing the Company from its
obligations to the Holder. In addition, any failure or delay on the part of the
Holder to exercise any of the rights and remedies granted to the Holder shall
not have the effect of waiving any of the Holder's rights and remedies. Any
partial exercise of any rights and/or remedies granted to the Holder shall
furthermore not be construed as a waiver of any other rights and remedies, it
being the Company's intent and agreement that the Holder's rights and remedies
shall be cumulative in nature. The Company further agrees that, should any event
of default occur or exist under this Debenture, any waiver or forbearance on the
part of the Holder to pursue the rights and remedies available to the Holder
shall be binding upon the Holder only to the extent that the Holder specifically
agrees to any such waiver or forbearance in writing. A waiver or forbearance on
the part of the Holder as to one event of default shall not be construed as a
waiver or forbearance as to any other event of default.
ATTORNEYS' FEES. If the Holder refers this Debenture to an attorney for
collection, or files suit against the Company to collect this Debenture, or if
the Company files for bankruptcy or other relief from creditors, the Company
agrees to pay the Holder's reasonable attorneys' fees. In addition, the Company
shall reimburse the Holder for all fees and expenses of the Holder's outside
counsel incurred in connection with the preparation, negotiation, execution and
delivery of this Debenture, provided that the Company shall not be obligated to
reimburse the Holder for fees and expenses in excess of $12,500.00.
NOTICES. Any notice or demand which, by provision of this Debenture, is required
or permitted to be served by one party hereto to or on the other party hereto
shall be deemed to have been sufficiently given and served for all purposes (if
mailed) three (3) calendar days after being deposited, postage prepaid, in the
United States mail, registered or certified mail, or (if delivered by express
courier) one (1) business day after being delivered to such courier, or (if
delivered in person) the same day as delivery, in each case addressed (until
another address is given in writing by one party hereto to the other party
hereto) as follows:
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If to the Company:
Casino Resource Corporation
707 Bienville Boulevard
Ocean Springs, Mississippi 39564
Attn.: Mr. Jack Pilger
If to the Holder:
Roy Anderson Holding Corp.
11400 Reichold Road
Gulfport, Mississippi 39503
Attn: Mr. Roy Anderson, III
GOVERNING LAW. The Company agrees that this Debenture and the obligations
evidenced hereby shall be governed under the laws of the State of Mississippi.
SUCCESSOR AND ASSIGNS LIABLE. The Company's obligations and agreements under
this Debenture shall be binding upon the Company's successors and permitted
assigns. The rights and remedies granted to the Holder under this Debenture
shall inure to the benefit of the Holder's successors and assigns, as well as to
any subsequent holder or holders of this Debenture.
CAPTION HEADINGS. Caption headings of the sections of this Debenture are for
convenience purposes only and are not to be used to interpret or to define their
provisions. In this Debenture, whenever the context so requires, the singular
includes the plural and the plural also includes the singular.
SEVERABILITY. If any provision of this Debenture is held to be invalid, illegal
or unenforceable by any court, that provision shall be deleted from this
Debenture and the balance of this Debenture shall be interpreted as if the
deleted provision never existed.
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IN WITNESS WHEREOF, the Company and the Holder have each duly executed
this Amended and Restated Debenture on the 3rd day of March, 1999, and have
agreed that this Debenture will be effective as of the 1st day of February,
1999.
COMPANY:
CASINO RESOURCE CORPORATION
By: ____________________________
Name: John J. Pilger
Title: Chief Executive Officer
HOLDER:
ROY ANDERSON HOLDING CORP.
By: _____________________________
Name: Roy Anderson, III
Title: President, Chief Executive Officer
and Treasurer
32
EXHIBIT 5
MESIROV GELMAN JAFFE CRAMER & JAMIESON, LLP
(215) 994-1000
March __, 1999
Casino Resource Corporation
707 Bienville Blvd.
Ocean Springs, Mississippi 39564
Re: Casino Resource Corporation Registration Statement on Form S-3
No. 333-72315 (the "Registration Statement")
Ladies and Gentlemen:
As counsel to Casino Resource Corporation, a Minnesota corporation (the
"Company"), we are familiar with the corporate proceedings relating to the
proposed registration on Form S-3 of 2,920,050 shares of the Company's Common
Stock, $.01 par value, (the "Shares") to be offered and sold by the Selling
Shareholders named in the Registration Statement. We have examined the Company's
Certificate of Incorporation and By-Laws, as amended, and such other documents
and corporate records relating to the Company and the issuance and sale of the
Shares as we deemed appropriate for purposes of rendering this opinion. Based on
the foregoing, it is our opinion that the Shares, when issued by the Company and
released from escrow according to the terms of the governing documents, will be
validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the Registration
Statement.
Very truly yours,
DRAFT
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Exhibit 23
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Casino Resource Corporation
Ocean Springs, Mississippi
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated December
17, 1998, relating to the consolidated financial statements of Casino Resource
Corporation appearing in the Company's Annual Report on Form 10-KSB for the year
ended September 30, 1998.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO SEIDMAN, LLP
Chicago, Illinois
March 18, 1999
34
