INVESTMENT MANAGEMENT TRUST AGREEMENT
Exhibit 10.5
This Agreement is made as of , 2005 by and between JK Acquisition Corp. (the
“Company”) and Continental Stock Transfer & Trust Company (“Trustee”).
WHEREAS, the Company’s Registration Statement on Form S-1, No. 333-125211 (“Registration
Statement”), for its initial public offering of securities (“IPO”) has been declared
effective as of the date hereof by the Securities and Exchange Commission (“Effective
Date”); and
WHEREAS, Xxxxxx, Xxxxx Xxxxx, Incorporated (“FBW”) is acting as the sole underwriter
in the IPO; and
WHEREAS, as described in the Company’s Registration Statement, and in accordance with the
Company’s Amended and Restated Certificate of Incorporation, as
amended, $55,050,000 of the gross
proceeds of the IPO ($63,690,000 if the underwriters over-allotment option is exercised in full)
will be delivered to the Trustee to be deposited and held in a trust account for the benefit of the
Company, FBW and the holders of the Company’s common stock, par value $.0001 per share, issued in
the IPO as hereinafter provided and in the event the Units are registered in Colorado, pursuant to
Section 11-51-302(6) of the Colorado Revised Statutes. A copy of the Colorado Statute is attached
hereto and made a part hereof (the amount to be delivered to the Trustee will be referred to herein
as the “Property”; the stockholders for whose benefit the Trustee shall hold the Property
will be referred to as the “Public Stockholders,” and the Public Stockholders, FBW and the
Company will be referred to together as the “Beneficiaries”); and
WHEREAS,
a portion of the Property consists of $1,500,000 (or $1,680,000 if the underwriters’
over-allotment option is exercised in full) attributable to the underwriters’ discount and
non-accountable expenses allowance which FBW, on behalf of the underwriters, has agreed to deposit
in the Trust Account (defined below); and
WHEREAS, the Company and the Trustee desire to enter into this Agreement to set forth the
terms and conditions pursuant to which the Trustee shall hold the Property; and
IT IS AGREED:
1. Agreements and Covenants of Trustee. The Trustee hereby agrees and covenants to:
(a) Hold the Property in trust for the Beneficiaries in accordance with the terms of this
Agreement, including the terms of Section 11-51-302(6) of the Colorado Statute, in a segregated
trust account (“Trust Account”) established by the Trustee at a branch of Amegy Bank
selected by the Trustee;
(b) Manage, supervise and administer the Trust Account subject to the terms and conditions set
forth herein;
(c) In a timely manner, upon the instruction of the Company, to invest and reinvest the
Property in any “Government Security.” As used herein, Government Security means any
Treasury Xxxx issued by the United States, having a maturity of one hundred and eighty days or
less;
(d) Collect and receive, when due, all principal and income arising from the Property, which
shall become part of the “Property,” as such term is used herein;
(e) Notify the Company and FBW of all communications received by it with respect to any
Property requiring action by the Company;
(f) Supply any necessary information or documents as may be requested by the Company in
connection with the Company’s preparation of the tax returns for the Trust Account;
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(g) Participate in any plan or proceeding for protecting or enforcing any right or interest
arising from the Property if, as and when instructed by the Company to do so;
(h) Render to the Company and to FBW, and to such other person as the Company may instruct,
monthly written statements of the activities of and amounts in the Trust Account reflecting all
receipts and disbursements of the Trust Account;
(i) As of the date of the consummation of a business combination (“Business
Combination”), commence liquidation of the Trust Account upon receipt of the Officers’
Certificate signed by the Chief Executive Officer and Chief Financial Officer of the Company and in
accordance with the terms of a letter (“Termination Letter”), in a form substantially
similar to that attached hereto as Exhibit A, signed on behalf of the Company by its
President or Chairman of the Board and Secretary or Assistant Secretary. The Trustee shall
complete the liquidation of the Trust Account and distribute the Property in the Trust Account to
the Beneficiaries as directed in the Termination Letter and the other documents referred to
therein. The Trustee understands and agrees that disbursements from the Trust Account shall be
made only pursuant to a duly executed Termination Letter, together with the other documents
referenced herein, including, without limitation, an independently certified oath and report of
inspector of election in respect of the shareholder vote for a Business Combination. In all cases,
the Trustee shall provide FBW with a copy of any Termination Letters, Officers’ Certificates and/or
any other correspondence that it receives with respect to any proposed withdrawal from the Trust
Account promptly after it receives same; and
(j) As of the date 18 months from the date of this Agreement (the “LOI Termination
Date”) (or 24 months from the date hereof (“Second Termination Date”) provided the
Trustee receives a bona fide, executed letter of intent or engagement letter (the “Letter of
Intent”) for a Business Combination), commence liquidation of the Trust Account in accordance
with the terms of a Termination Letter, in a form substantially similar to that attached hereto as
Exhibit B, signed on behalf of the Company by its President or Chairman of the Board and Secretary
or Assistant Secretary. The Trustee, upon consultation with the Company and FBW, shall file a
press release immediately to notify the Public Stockholders of such event and take such other
actions as it may deem necessary to inform the Beneficiaries. In addition, the Trustee shall
deliver the Property against satisfactory evidence of delivery of the stock certificates by the
Public Stockholders to the Company through the Depository Trust Company, its Deposit Withdraw Agent
Commission (DWAC) system or otherwise. Notwithstanding the foregoing, if the Trustee receives an
executed Letter of Intent prior to the LOI Termination Date accompanied by an Officers’ Certificate
as described in Paragraph 2(e) hereof, then the Trustee shall forego or suspend any liquidation of
the Trust Account until the earlier of a Business Combination or 24 months from the date hereof.
2. Agreements and Covenants of the Company:
(a) The Company hereby agrees and covenants to provide all instructions to the Trustee
hereunder in writing, signed by the Company’s Chief Executive Officer, President or Chairman of the
Board. In addition, except with respect to its duties under paragraph 1(i) above, the Trustee
shall be entitled to rely on, and shall be protected in relying on, any verbal or telephonic advice
or instruction which it in good faith believes to be given by any one of the persons authorized
above to give written instructions, provided that the Company shall promptly confirm such
instructions in writing;
(b) The Company hereby agrees and covenants to hold the Trustee harmless and indemnify the
Trustee from and against, any and all expenses, including reasonable counsel fees and
disbursements, or loss suffered by the Trustee in connection with any action, suit or other
proceeding brought against the Trustee involving any claim, or in connection with any claim or
demand which in any way arises out of or relates to this Agreement, the services of the Trustee
hereunder, or the Property or any income earned from investment of the Property, except for
expenses and losses resulting from the Trustee’s gross negligence or willful misconduct. Promptly
after the receipt by the Trustee of notice of demand or claim or the commencement of any action,
suit or proceeding, pursuant to which the Trustee intends to seek indemnification under this
paragraph, it shall notify the Company in writing of such claim (hereinafter referred to as the
“Indemnified Claim”). The Trustee shall have the right to conduct and manage the defense
against such Indemnified Claim, provided, that the Trustee shall obtain the consent of the Company
with respect to the selection of counsel, which consent shall not be unreasonably withheld. The
Company may participate in such action with its own counsel; and
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(c) The Company hereby agrees and covenants to pay the Trustee an initial acceptance fee of
[___] and an annual fee of [___] (it being expressly understood that the Property shall not be
used to pay such fee). The Company shall pay the Trustee the initial acceptance fee and first
year’s fee at the consummation of the IPO and thereafter on the anniversary of the Effective Date.
The Trustee shall refund to the Company the fee (on a pro rata basis) with respect to any period
after the liquidation of the Trust Fund. The Company shall not be responsible for any other fees
or charges of the Trustee except as may be provided in paragraph 2(b) hereof (it being expressly
understood that the Property shall not be used to make any payments to the Trustee under such
paragraph).
(d) In the event that the Company consummates a Business Combination and the Trust Account is
liquidated in accordance with Section 1(i) hereof, the Trustee or another independent party
designated by FBW shall act as the inspector of election to certify the results of the shareholder
vote.
(e) The
Officers’ Certificate referenced in Section 1(i) and
(j) hereof shall require the Chief Executive Officer and Chief
Financial Officer of the Company to each certify either of the following: (1) prior to the LOI Termination
Date, the Company has entered into a bona fide Letter of Intent with a target business; (2) prior
to the LOI Termination Date, the Company has entered into a Business Combination with a target
business, the terms of which are consistent with the requirements set forth in the Registration
Statement; or (3) prior to the Second Termination Date, the Company has entered into a Business
Combination with a target business, the terms of which are consistent with the requirements set
forth in the Registration Statement.
3. Limitations of Liability. The Trustee shall have no responsibility or liability to:
(a) Take any action with respect to the Property, other than as directed in paragraph 1 hereof
and the Trustee shall have no liability to any party except for liability arising out of its own
gross negligence or willful misconduct;
(b) Institute any proceeding for the collection of any principal and income arising from, or
institute, appear in or defend any proceeding of any kind with respect to, any of the Property
unless and until it shall have received instructions from the Company given as provided herein to
do so and the Company shall have advanced or guaranteed to it funds sufficient to pay any expenses
incident thereto;
(c) Change the investment of any Property, other than in compliance with paragraph 1(c);
(d) Refund any depreciation in principal of any Property;
(e) Assume that the authority of any person designated by the Company to give instructions
hereunder shall not be continuing unless provided otherwise in such designation, or unless the
Company shall have delivered a written revocation of such authority to the Trustee;
(f) The other parties hereto or to anyone else for any action taken or omitted by it, or any
action suffered by it to be taken or omitted, in good faith and in the exercise of its own best
judgment, except for its gross negligence or willful misconduct. The Trustee may rely conclusively
and shall be protected in acting upon any order, notice, demand, certificate, opinion or advice of
counsel (including counsel chosen by the Trustee), statement, instrument, report or other paper or
document (not only as to its due execution and the validity and effectiveness of its provisions,
but also as to the truth and acceptability of any information therein contained) which is believed
by the Trustee, in good faith, to be genuine and to be signed or presented by the proper person or
persons. The Trustee need not investigate any fact or matter stated in the document. The Trustee
shall not be bound by any notice or demand, or any waiver, modification, termination or rescission
of this agreement or any of the terms hereof, unless evidenced by a written instrument delivered to
the Trustee signed by the proper party or parties and, if the duties or rights of the Trustee are
affected, unless it shall give its prior written consent thereto;
(g) Verify the correctness of the information set forth in the Registration Statement or to
confirm or assure that any acquisition made by the Company or any other action taken by it is as
contemplated by the Registration Statement, unless an officer of the Trustee has actual knowledge
thereof, written notice of such event is sent to the Trustee or as otherwise required under Section
1(i) and (j) hereof; and
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(h) Pay any taxes on behalf of the Trust Account (it being expressly understood that the
Property shall not be used to pay any such taxes and that such taxes, if any, shall be paid by the
Company from funds not held in the Trust Account).
4. Certain Rights of Trustee.
(a) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate
or opinion of counsel or both. The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on such Officers’ Certificate or opinion of counsel. The Trustee
may consult with counsel and the advice of such counsel or any opinion of counsel shall be full and
complete authorization and protection from liability in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(b) The Trustee may act through its attorneys and agents and shall not be responsible for the
misconduct or negligence of any agent appointed with due care.
(c) The Trustee shall not be liable for any action it takes or omits to take in good faith
that it believes to be authorized or within the rights or powers conferred upon it by this
Agreement.
(e) The Trustee shall not be responsible for and makes no representation as to the validity or
adequacy of this Agreement; it shall not be accountable for the Company’s use of the proceeds from
the Trust Account. Notwithstanding the effective date of this Agreement or anything to the contrary
contained in this Agreement, the Trustee shall have no liability or responsibility for any act or
event relating to this Agreement or the transactions related thereto which occurs prior to the date
of this Agreement, and shall have no contractual obligations or fiduciary duties to the
Beneficiaries until the date of this Agreement.
5. Termination. This Agreement shall terminate as follows:
(a) If the Trustee gives written notice to the Company that it desires to resign under this
Agreement, the Company shall use its reasonable efforts to locate a successor trustee. At such
time that the Company notifies the Trustee that a successor trustee has been appointed by the
Company and has agreed to become subject to the terms of this Agreement, the Trustee shall transfer
the management of the Trust Account to the successor trustee, including but not limited to the
transfer of copies of the reports and statements relating to the Trust Account, whereupon this
Agreement shall terminate; provided, however, that, in the event that the Company does not locate a
successor trustee within ninety days of receipt of the resignation notice from the Trustee, the
Trustee may submit an application to have the Property deposited with the United States District
Court for the Southern District of New York and upon such deposit, the Trustee shall be immune from
any liability whatsoever;
(b) At such time that the Trustee has completed the liquidation of the Trust Account in
accordance with the provisions of paragraph 1(i) hereof, and distributed the Property in accordance
with the provisions of the Termination Letter, this Agreement shall terminate except with respect
to Paragraph 2(b); or
(c) On such date after , 2007, when the Trustee deposits the Property with the
United States District Court for the Southern District of New York in the event that, prior to such
date, the Trustee has not received a Termination Letter from the Company pursuant to Paragraphs
1(i) or (j) hereof.
6. Miscellaneous.
(a) The Company and the Trustee each acknowledge that the Trustee will follow the security
procedures set forth below with respect to funds transferred from the Trust Account. Upon receipt
of written instructions, the Trustee will confirm such instructions with an Authorized Individual
at an Authorized Telephone Number listed on the attached Exhibit C. The Company and the
Trustee will each restrict access to confidential information relating to such security procedures
to authorized persons. Each party must notify the other party immediately if it has reason to
believe unauthorized persons may have obtained access to such information, or of any change in its
authorized personnel. In executing funds transfers, the Trustee will rely upon account numbers or
other identifying numbers of a beneficiary, beneficiary’s bank or intermediary bank, rather than
names. The Trustee
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shall not be liable for any loss, liability or expense resulting from any error in an account
number or other identifying number, provided it has accurately transmitted the numbers provided.
(b) This Agreement shall be governed by and construed and enforced in accordance with the laws
of the State of New York, without giving effect to conflict of laws. It may be executed in several
counterparts, each one of which shall constitute an original, and together shall constitute but one
instrument.
(c) This Agreement contains the entire agreement and understanding of the parties hereto with
respect to the subject matter hereof. This Agreement or any provision hereof may only be changed,
amended or modified by a writing signed by each of the parties hereto; provided, however, that no
such change, amendment or modification may be made without the prior written consent of FBW. As to
any claim, cross-claim or counterclaim in any way relating to this Agreement, each party waives the
right to trial by jury.
(d) The parties hereto consent to the jurisdiction and venue of any state or federal court
located in the City of New York for purposes of resolving any disputes hereunder.
(e) Any notice, consent or request to be given in connection with any of the terms or
provisions of this Agreement shall be in writing and shall be sent by express mail or similar
private courier service, by certified mail (return receipt requested), by hand delivery or by
facsimile transmission:
| if to the Trustee, to: | ||
| Continental Stock Transfer & Trust Company | ||
| 00 Xxxxxxx Xxxxx | ||
| Xxx Xxxx, Xxx Xxxx 00000 | ||
| Attn: Xxxxx Xxxxxxxx | ||
| Fax No.: (000) 000-0000 | ||
| if to the Company, to: | ||
| JK Acquisition Corp. | ||
| 0000 Xxx Xxxxxx, Xxxxx 0000 | ||
| Xxxxxxx, Xxxxx 00000 | ||
| Attn: Xxxxx X. Xxxxxx — Chief Executive Officer | ||
| Fax No.: (000) 000-0000 | ||
| in either case with a copy to: | ||
| Xxxxxx, Xxxxx Xxxxx, Incorporated | ||
| 000 Xxxxx Xxxxxx | ||
| Xxxxxxxxx, Xxxxxxxx 00000 | ||
| Facsimile: (000) 000-0000 | ||
| Attn: Xxxxxxx X. Xxxxx | ||
(f) This Agreement may not be assigned by the Trustee without the prior consent of the Company
and FBW.
(g) Each of the Trustee and the Company hereby represents that it has the full right and power
and has been duly authorized to enter into this Agreement and to perform its respective obligations
as contemplated hereunder.
(h) The Trustee acknowledges and agrees that it shall not make any claims or proceed against
the Trust Account, including by way of set-off, and shall not be entitled to any funds in the Trust
Account under any circumstance.
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IN WITNESS WHEREOF, the parties have duly executed this Investment Management Trust Agreement
as of the date first written above.
| CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Trustee |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| JK ACQUISITION CORP. |
||||
| By: | ||||
| Name: | Xxxxx X. Xxxxxx | |||
| Title: | Chief Executive Officer | |||
EXHIBIT A
[LETTERHEAD OF COMPANY]
[LETTERHEAD OF COMPANY]
[Insert Date]
Continental Stock Transfer & Trust Company
00 Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: [ ]
00 Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: [ ]
Re: Trust Account No. [ ] — Termination Letter
Gentlemen:
Pursuant to paragraph 1(i) of the Investment Management Trust Agreement between JK Acquisition
Corp. (“Company”) and Continental Stock Transfer & Trust Company (“Trustee”), dated
as of , 2005 (“Trust Agreement”), this is to advise you that the Company has
entered into an agreement (“Business Agreement”) with (“Target Business”)
to consummate a business combination with Target Business (“Business Combination”) on or
about [Insert Date]. The Company shall notify you at least 48 hours in advance of the actual date
of the consummation of the Business Combination (“Consummation Date”) and shall provide you
with an Officer’s Certificate in accordance with Paragraphs 1(i)
and 2(e) of the Trust Agreement.
In accordance with the terms of the Trust Agreement, we hereby authorize you to commence
liquidation of the Trust Account to the effect that, on the Consummation Date, all of the funds
held in the Trust Account will be immediately available for transfer to the account or accounts
that the Company shall direct in writing on the Consummation Date.
On the Consummation Date (i) counsel for the Company shall deliver to you written notification
that (a) the Business Combination has been consummated, and (b) the provisions of Section
11-51-302(6) and Rule 51-3.4 of the CRS have been met, to the extent applicable and; (ii) the
Company shall deliver the oath and report of inspector of election certified by an independent
inspector which may be the Trustee or as otherwise appointed by FBW (collectively, the “Report”);
and (iii) the Company and FBW shall deliver to you written instructions with respect to the
transfer of the funds held in the Trust Account (“Instruction Letter”) along with
satisfactory evidence of delivery of the stock certificates from the Public Stockholders through
the Depository Trust Company, its Deposit Withdraw Agent Commission (DWAC) system or otherwise (the
“Stock Certificates”). You are hereby directed and authorized to transfer the funds held in
the Trust Account immediately upon your receipt of the counsel’s letter, the Report, evidence of
delivery of the Stock Certificates, the Officers’ Certificates and the Instruction Letter, in
accordance with the terms of the Instruction Letter. In the event that certain deposits held in the
Trust Account may not be liquidated by the Consummation Date without penalty, you will notify the
Company and FBW of the same and the Company and FBW shall issue joint written instructions
directing you as to whether such funds should remain in the Trust Account and distributed after the
Consummation Date to the Company and/or FBW. Upon the distribution of all the funds in the Trust
Account pursuant to the terms hereof, the Trust Agreement shall be terminated.
In the event that the Business Combination is not consummated on the Consummation Date
described in the notice thereof and we have not notified you on or before the original Consummation
Date of a new Consummation Date, then the funds held in the Trust Account shall be reinvested as
provided in the Trust Agreement on the business day immediately following the Consummation Date as
set forth in the notice.
| Very truly yours, JK ACQUISITION CORP. |
||||
| By: | ||||
| Xxxxx X. Xxxxxx, Chief Executive | ||||
| Officer and Secretary | ||||
| By: | ||||
| Xxxxx X. Xxxxxxxxxxx, President | ||||
EXHIBIT B
[LETTERHEAD OF COMPANY]
[LETTERHEAD OF COMPANY]
[Insert Date]
Continental Stock Transfer & Trust Company
00 Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: [ ]
00 Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: [ ]
Re: Trust Account No. [ ] — Termination Letter
Gentlemen:
Pursuant
to paragraph 1(j) of the Investment Management Trust Agreement between JK Acquisition
Corp. (“Company”) and Continental Stock Transfer & Trust Company (“Trustee”), dated
as of , 2005 (“Trust Agreement”), this is to advise you that the Board of
Directors of the Company has voted to dissolve and liquidate the Company. Attached hereto is a
copy of the minutes of the meeting of the Board of Directors of the Company relating thereto,
certified by the Secretary of the Company as true and correct and in full force and effect. All
terms not defined herein shall have the meanings ascribed to them in the Trust Agreement.
In accordance with the terms of the Trust Agreement, we hereby (a) certify to you that the
provisions of Section 11-51-302(6) and Rule 51-3.4 of the Colorado Statute have been met and (b)
acknowledge and agree that you have full authority to commence liquidation of the Trust Account
immediately on the LOI Termination Date (unless certain conditions have been satisfied in
accordance with the terms of the Trust Agreement) or Second Termination Date, whichever is
applicable. You will notify the Company, FBW and Amegy Bank (“Designated Paying Agent”) in
writing as to when all of the funds in the Trust Account will be available for immediate transfer
(“Transfer Date”).
The Designated Paying Agent shall thereafter notify you as to the account or accounts of the
Designated Paying Agent that the funds in the Trust Account should be transferred to on the
Transfer Date so that the Designated Paying Agent may commence distribution of such funds in
accordance with the Company’s instructions; provided, however, that satisfactory evidence of
delivery of the stock certificates from the Public Stockholders through the Depository Trust
Company, its Deposit Withdraw Agent Commission (DWAC) system or otherwise. You shall have no
obligation to oversee the Designated Paying Agent’s distribution of the funds. Upon the payment to
the Designated Paying Agent of all the funds in the Trust Account, the Trust Agreement shall be
terminated.
| Very truly yours, JK ACQUISITION CORP. |
||||
| By: | ||||
| Xxxxx X. Xxxxxx, Chief Executive | ||||
| Officer and Secretary | ||||
| By: | ||||
| Xxxxx X. Xxxxxxxxxxx, President | ||||
EXHIBIT C
AUTHORIZED INDIVIDUAL(S)
AUTHORIZED FOR TELEPHONE CALL BACK TELEPHONE NUMBER(S)
AUTHORIZED INDIVIDUAL(S)
AUTHORIZED FOR TELEPHONE CALL BACK TELEPHONE NUMBER(S)
| COMPANY: | ||
| JK Acquisition Corp. | ||
| 0000 Xxx Xxxxxx, Xxxxx 0000 | ||
| Xxxxxxx, Xxxxx 00000 | ||
| Attn: Xxxxx X. Xxxxxx and Xxxxx X. Xxxxxxxxxxx | ||
| (000) 000-0000 | ||
| FBW: | ||
| Xxxxxx, Xxxxx Xxxxx, Incorporated | ||
| 000 Xxxxx Xxxxxx | ||
| Xxxxxxxxx, Xxxxxxxx 00000 | ||
| Attn: Xxxxxxx X. Xxxxx | ||
| (000) 000-0000 | ||
| TRUSTEE: | ||
| Continental Stock Transfer & Trust Company | ||
| 00 Xxxxxxx Xxxxx | ||
| Xxx Xxxx, Xxx Xxxx 00000 | ||
| Attn: Xxxxx Xxxxxxxx | ||
| (000) 000-0000 | ||
