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EXHIBIT 10.69
CUSTODY AGREEMENT
CUSTODY AGREEMENT, effective as of the ____ day of _________, 1999, by
and among certain of the shareholders (the "Shareholders" or "Shareholder") of
LEISURE TIME CASINOS & RESORTS, INC., a Colorado corporation, (the "Company"),
XXXXXXXXX SECURITIES, INC. (the "Representative") and AMERICAN SECURITIES
TRANSFER & TRUST, INC. (the ""Custodian").
WHEREAS, the Shareholders are the record and beneficial owners of
certain of the Company's $0.001 par value common stock ("Common Stock") or of
options to purchase shares of Common Stock, all as more fully reflected on
Exhibit A to this Custody Agreement;
WHEREAS, the Company and the Representative of the several underwriters
(the "Underwriters") intend to enter into an underwriting agreement (the
"Underwriting Agreement") pursuant to which the Company will sell in a public
offering pursuant to the registration provisions of the Securities Act of 1933,
as amended (the "1933 Act");
WHEREAS, as a condition to closing the proposed public offering of the
Company (the "Offering"), the Representative has required the Shareholders to
deposit an aggregate of 500,000 shares of Common Stock and/or shares of Common
Stock underlying options to purchase Common Stock owned by such Shareholders in
custody with the Custodian as reflected on Exhibit A (the "Custodial Shares");
and
WHEREAS, the Shareholders wish to deposit the Custodial Shares in
custody in order to fulfill the requirements of the Underwriting Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, terms and conditions hereinafter set forth, the parties to this
Custody Agreement agree as follows:
SECTION 1. DESIGNATION AND DEPOSIT OF CUSTODIAL SHARES.
a. The Custodial Shares to be deposited in custody pursuant to
this Custody Agreement consist of 500,000 shares of Common Stock of the
Company and are owned of record as of the date of this Custody
Agreement by the Shareholders identified on Exhibit A.
b. On or before the date on which the Securities and Exchange
Commission declares the Company's Registration Statement on Form S-1
(Reg. No. 333-77737) effective under the 1933 Act (the "Effective
Date"), the Shareholders shall deliver to the Custodian any and all
certificates representing the Custodial Shares and a stock power
endorsed in blank. Promptly after the Effective Date, the Custodian
shall deliver a receipt therefor and, if requested by a Shareholder, a
new certificate representing each
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Shareholder's shares of Common Stock represented by the certificates
delivered but which are not subject to this Custody Agreement.
SECTION 2. TITLE OF ACCOUNT. All certificates representing the
Custodial Shares delivered to the Custodian pursuant to this Agreement shall be
deposited on the Effective Date by the Custodian in an account designated
substantially as follows: "Leisure Time Casinos & Resorts, Inc. Custodial Share
Account" (the "Custody Account").
SECTION 3. TRANSFER OF CUSTODIAL SHARES DURING CUSTODY PERIOD.
a. During the Custody Period (as defined below) none of the
Custodial Shares deposited in the Custody Account shall be sold,
pledged, hypothecated or otherwise transferred or delivered out of the
Custody Account except as follows:
i. transfers by operation of law occasioned by the
death or incapacity of the Shareholder shall be recorded upon
presentation to the Company by the personal representative or
guardian of a deceased or incapacitated Shareholder of
appropriate documents regarding the necessity for transfer and
of which transfer the Company has notified the Custodian and
the Representative; and
ii. transfers of ownership of certificates
representing the Custodial Shares, certificates for which have
been deposited to the Custody Account, shall remain subject to
the restrictions imposed hereby, including those persons, if
any, who become holders, by any means provided herein, of the
Custody Shares during the Custody Period.
SECTION 4. DURATION OF CUSTODY PERIOD.
a. The Custody Period shall commence on the Effective Date and
shall terminate on the earlier of the date on which all Custodial
Shares have been returned to the Shareholders pursuant to Sections
6(a), 6(b), 6(c), 6(d), 6(e), 6(f), or 6(g) below.
b. This Agreement shall be of no force or effect in the event
the Underwriting Agreement is not executed on the Effective Date in
accordance with its terms.
SECTION 5. RECEIPT OF DISTRIBUTIONS AND DIVIDENDS. During the term of
the Custody Period, if the Company issues any distributions, dividends, rights
or other property with respect to the Common Stock, then, in such event, the
Company shall be authorized to send evidence of such distributions, dividends,
rights or other property directly to the Custodian, which is hereby authorized
to hold and retain possession of all such evidences of distributions, dividends,
rights or other property until termination of the Custody Period in accordance
with Section 6 below. In the event the Custodial Shares are distributed to the
Shareholders pursuant to Sections 6(a), 6(b), 6(c), 6(d), 6(e), 6(f) or 6(g)
below, then the Custodian will distribute evidences of such distributions,
dividends, rights, or other property in the form the Custodian received such
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distributions, dividends, rights or other property from the Company. If the
Company recapitalizes, splits or combines its shares, such shares shall be
substituted, on a pro rata basis for the Custodial Shares.
SECTION 6. RELEASE AND DELIVERY OF CUSTODIAL SHARES.
a. In the event the Custodian receives written advice from the
Representative and the Company confirming the approval of the South
Carolina referendum on November 2, 1999 that will permit video gaming
machine payouts to continue in South Carolina, the Custodian shall
return to each Shareholder his or her pro rata share of the Custodial
Shares. The Custodian shall return the Custodial Shares only to the
person named as the holder of record in Exhibit A to this Custody
Agreement, as modified by any transfers made pursuant to Section 3
above.
b. In the event that on or prior to a date that is twelve
months from the Effective Date the Custodian receives written advice
from the Representative and the Company confirming that the Governor of
California has entered into a gaming compact with at least 10 Native
American tribes located in California, the Custodian shall return to
each Shareholder his or her pro rata share of the Custodial Shares. The
Custodian shall return the Custodial Shares only to the person named as
the holder of record in Exhibit A to this Custody Agreement, as
modified by any transfers made pursuant to Section 3 above.
c. In the event that on or prior to a date that is twelve
months from the Effective Date the Custodian receives written advice
from the Representative and the Company confirming that the Company has
successfully completed a subsequent underwritten public offering of the
Company's Common Stock in a gross amount of at least $30 million or a
price per share of at least $20, the Custodian shall immediately after
the closing of any such public offering return to each Shareholder his
or her pro rata share of the Custodial Shares. The Custodian shall
return the Custodial Shares only to the person named as the holder of
record in Exhibit A to this Custody Agreement, as modified by any
transfers made pursuant to Section 3 above. In the event that the date
is more than twelve months from the Effective Date, the Representative,
in its discretion, may return to each Shareholder his or her pro rata
share of the Custodial Shares.
d. In the event the Custodian receives written advice from the
Representative and the Company confirming the Company had net income
after tax of at least $17 million for the year ended June 30, 2000, the
Custodian shall return to each Shareholder a certificate for his or her
pro rata share of the Custodial Shares. The Custodian shall return each
certificate only to the person named as the holder of record in Exhibit
A hereto, as modified by any transfers made pursuant to Section 3
above.
e. In the event the Custodian receives written advice from the
Representative and the Company confirming the Company had net income
after tax of at least $32 million for the year ended June 30, 2001, the
Custodian shall return to each Shareholder a certificate for his or her
pro rata share of the Custodial Shares. The Custodian shall return each
certificate only to the person named as the holder of record in Exhibit
A hereto, as modified by any transfers made pursuant to Section 3
above.
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f. In the event the Custodian receives written advice from the
Representative and the Company confirming that the Company has been
merged or consolidated with another company which is the survivor to
the transaction, or that the Company has sold all or substantially all
of its assets and the relevant transaction was approved by the holders
of a majority of the Company's outstanding voting securities exclusive
of any such securities held by any party to this Agreement, the
Custodian shall immediately prior to the closing of any such
transaction return to each Shareholder a certificate for his or her pro
rata share of the Custodial Shares. The Custodian shall return each
certificate only to the person named as the holder of record in Exhibit
A hereto, as modified by any transfers made pursuant to Section 3
above.
g. In the event none of the criteria for release specified in
subparagraphs (a), (b), (c), (d), (e) or (f) above is reached by the
Company, the Custodial Shares shall remain in the Custody Account until
a date that is seven years from the Effective Date. Upon termination of
the Custody Period pursuant to the provisions of this Section 6(g), the
Custodian shall, as promptly as possible, return to each Shareholder a
certificate for his or her pro rata share of the Custodial Shares
remaining in the Custody Account by means of registered mail, return
receipt requested. The Custodian shall return each certificate only to
the person named as the holder of record in Exhibit A hereto, as
modified by any transfers made pursuant to Section 3 above.
h. At such time as the Custodian shall have returned all
Custodial Shares as provided in this Section, the Custodian shall be
discharged completely and released from any and all further liabilities
and responsibilities under this Custody Agreement.
i. The determination of the criteria described above shall be
solely the responsibility of the Company and the Representative, and
the Custodian shall have no liability or responsibility therefor.
SECTION 7. VOTING RIGHTS. During the Custody Period, the Shareholder,
or any transferee receiving all or a portion of the Custody Shares pursuant to
Section 3 of this Custody Agreement, shall have the right to vote the Custodial
Shares (to the extent the Custodial Shares have voting rights) in the Custodial
Account at any and all shareholder meetings without restriction.
SECTION 8. LIMITATION OF LIABILITY OF CUSTODIAN. In acting pursuant to
this Custody Agreement, the Custodian shall be protected fully in every
reasonable exercise of its discretion and shall have no obligation hereunder to
either the Shareholders or to any other party except as expressly set forth
herein. In performing any of its duties hereunder, the Custodian shall not incur
any liability to any person for any damages, losses or expenses, except for
willful default or negligence and it shall, accordingly, not incur any such
liability with respect to (1) any action taken or omitted in good faith upon
advice of its counsel, counsel for the Company or counsel for the Representative
given with respect to any question relating to the duties and responsibilities
of the Custodian under this Agreement, and (2) any action taken or omitted in
reliance upon any
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instrument, including written notices provided for herein, not only to its due
execution and validity and effectiveness of its provisions, but also to the
truth and accuracy of any information contained therein, which the Custodian
shall in good faith believe to be genuine, to have been signed and presented by
a proper person or persons and to be in compliance with the provisions of this
Agreement.
SECTION 9. INDEMNIFICATION. The Company, the Representative and the
Shareholders shall indemnify and hold harmless the Custodian against any and all
losses, claims, damages, liabilities and expenses, including reasonable costs of
investigation and counsel fees and disbursements, which may be imposed upon the
Custodian or incurred by the Custodian in connection with its acceptance of
appointment as Custodian or the performance of its duties hereunder, including
any litigation arising from this Custody Agreement or involving the subject
matter of this Custody Agreement.
SECTION 10. PAYMENT OF FEES. The Company shall be responsible for all
reasonable fees and expenses of the Custodian incurred by it in the course of
performing under this Custody Agreement.
SECTION 11. CHANGE OF CUSTODIAN. In the event the Custodian notifies
the Company and the Representative that its acceptance of the duties of
Custodian has been terminated by the Custodian, or in the event the Custodian
files for protection under the United States Bankruptcy Code or is liquidated or
ceases operations for any reason, the Company and the Representative shall have
the right to jointly designate a replacement Custodian who shall succeed to the
rights and duties of the Custodian hereunder. Any such replacement Custodian
shall be a trust or stock transfer company experienced in stock transfer, escrow
and related matters and shall have a minimum net worth of $5 million. Upon
appointment of such successor Custodian, the Custodian shall be discharged from
all duties and responsibilities hereunder.
SECTION 12. NOTICES. All notices, demands or requests required or
authorized hereunder shall be deemed given sufficiently if in writing and sent
by registered mail or certified mail, return receipt requested and postage
prepaid and by facsimile or cable:
In the case of the Representative to:
Xxxxxxxxx Securities, Inc.
The Chancery
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. X'Xxxxxx, President
With a copy to (which shall not constitute notice):
Xxxxxx X. Xxxxxx, Esq.
Berliner Xxxxxx Xxxxxx & Xxxxxxxx, P.C.
One Norwest Center, Suite 4700
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000-0000
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In the case of the Custodian to:
American Securities Transfer & Trust, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000-0000
In the case of the Company to:
Leisure Time Casinos & Resorts, Inc.
0000 Xxxxxxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
With a copy to (which shall not constitute notice):
Xxxxxx X. Xxxxx, Esq.
Xxxxx XxXxxxxxxx, P.C.
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
In the case of the Shareholders to:
Xxxx X. Xxxxxxx
0000 Xxxxxx Xxxx
Xxxx, Xxxx 00000
Xxxxx X. Xxxxx
0000 Xxxxxxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
R. Xxxxxx Xxxxxxx
0000 Xxxxxxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Xxxxxx X. Xxxxx
0000 Xxxxxx Xxxx
Xxxx, Xxxx 00000
Xxxx X. Xxx
0000 Xxxxxxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
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Xxxxxxx X. Xxx
00000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, Xxxx 00000
Xxxxxx X. Xxxxxxx
0000 Xxxxxxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
SECTION 13. COUNTERPARTS. This Custody Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Custody Agreement. Facsimile signatures shall
be accepted as original signatures for all purposes.
SECTION 14. GOVERNING LAW. The validity, interpretation and
construction of this Custody Agreement and of each part hereof shall be governed
by the laws of the State of Colorado.
IN WITNESS WHEREOF, the Shareholders, the Company, the Representative
and the Custodian have executed this Custody Agreement to be effective as of the
day and year first above written.
AMERICAN SECURITIES TRANSFER & TRUST, INC.
By:
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Title:
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LEISURE TIME CASINOS & RESORTS, INC.
By:
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Title:
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XXXXXXXXX SECURITIES, INC.
By:
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Title:
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THE SHAREHOLDERS:
By:
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Xxxx X. Xxxxxxx
By:
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Xxxxx X. Xxxxx
By:
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R. Xxxxxx Xxxxxxx
By:
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Xxxxxx X. Xxxxx
By:
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Xxxx X. Xxx
By:
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Xxxxxxx X. Xxx
By:
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Xxxxxx X. Xxxxxxx
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EXHIBIT A
TO CUSTODY AGREEMENT
TOTAL SHARES UNDERLYING
NAME TOTAL SHARES OPTIONS
---- ------------ -----------------------
Xxxx X. Xxxxxxx 348,000
Xxxxx X. Xxxxx 61,150
R. Xxxxxx Xxxxxxx 13,500
Xxxxxx X. Xxxxx 38,100
Xxxx X. Xxx 1,650
Xxxxxxx X. Xxx 35,400
Xxxxxx X. Xxxxxxx 2,200
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