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EXHIBIT 10.69
CUSTODY AGREEMENT
CUSTODY AGREEMENT, effective as of the 3rd day of August, 1999, by and
among certain of the shareholders listed on Exhibit A to this Custody Agreement
(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 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 with a medallion guarantee. Promptly after the Effective
Date, the Custodian shall deliver a receipt therefor and, if requested by a
Shareholder, a new certificate representing each Shareholder's shares of Common
Stock represented by the certificates delivered but which are not subject to
this Custody Agreement.
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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 approved
in writing and 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
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. The Company will
notify the Custodian of the occurrence of the events listed in this section.
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SECTION 6. RELEASE AND DELIVERY OF CUSTODIAL SHARES.
a. In the event the Custodian receives written notice 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 share of the Custodial Shares as are listed on Exhibit A. 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 notice 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 share of the Custodial
Shares as are listed on Exhibit A. 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 notice 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 $20.00, the
Custodian shall immediately return to each Shareholder his or her share of the
Custodial Shares as are listed on Exhibit A. 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 notice 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 share of the Custodial
Shares as are listed on Exhibit A. 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 notice 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 share of the Custodial
Shares as are listed on Exhibit A. 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 notice 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 share
of the Custodial Shares as are listed on Exhibit A. 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
share of the Custodial Shares as are listed on Exhibit A 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, except as is
set forth in Section 6.f of this Custody Agreement.
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 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
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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.
00000 Xxxx Xxxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: Corporate Trust Department
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 Xxxxx X. Xxxxx
0000 Xxxxxx Xxxx 0000 Xxxxxxxxxxxxxx Xxxxx
Xxxx, Xxxx 00000 Xxxxxxxx, Xxxxxxx 00000
R. Xxxxxx Xxxxxxx Xxxxxx X. Xxxxx
0000 Xxxxxxxxxxxxxx Xxxxx 0000 Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000 Xxxx, Xxxx 00000
Xxxx X. Xxx Xxxxxxx X. Xxx
0000 Xxxxxxxxxxxxxx Xxxxx 00000 Xxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000 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.
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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.
SECTION 15. DISPUTES. In the event of any disputes between the parties
hereto as to the facts of default, the validity of the instructions contained
herein or any other fact or matter relating to this Agreement, the Escrow Agent
is instructed (i) that it shall be under no obligation to act, except under
process or order of court, or until it has been adequately indemnified to its
full and complete satisfaction, and shall sustain no liability for its failure
to act pending such process or court order or indemnification; and (ii) that it
may, in its sole and absolute discretion, deposit the property described herein
or so much thereof as remains in its hands with the then Clerk, or acting Clerk,
of the District Court of the City and County of Denver, State of Colorado, and
interplead the parties thereto, and upon so depositing such property and filing
its compliant in interpleader it shall be relieved of all liability under the
terms hereof as to the property so deposited and shall be entitled to recover in
such interpleader action, from the other parties thereto, its reasonable
attorney fees and related costs and expenses incurred in commencing such action
and furthermore, the parties hereto for themselves, their successors and assigns
do hereby submit themselves to the jurisdiction of said court and do hereby
appoint the then Clerk, or acting Clerk, of said court as their Agent for the
Service of all process in connection with such proceedings. The institution of
any such interpleader action shall not impair the rights of the Escrow Agent as
provided under the terms of this Agreement.
SECTION 15. OPTIONS. In the event that any of the Shareholders
exercises any options that are deposited pursuant to this Custody Agreement, no
certificates evidencing the Common Stock underlying such options will be issued
by Custodian unless and until the Custodian receives written notification from
such Shareholder that the shares of Common Stock issuable upon such exercise are
not Custodial Shares.
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., AS CUSTODIAN
By:
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Title:
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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:
----------------------------------
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
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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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