Exhibit 10.12
INVESTMENT MANAGEMENT TRUST AGREEMENT
This INVESTMENT MANAGEMENT TRUST AGREEMENT (this "Agreement") is made as
of October _____, 2005 by and between Key Hospitality Acquisition Corporation
(the "Company") and Continental Stock Transfer & Trust Company ("Trustee").
WHEREAS, the Company's Registration Statement on Form S-1, File No.
333-125009, as amended (the "Registration Statement" and the final prospectus
contained therein, the "Prospectus"), 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, Maxim Group LLC ("Maxim") is acting as the representative of the
underwriters in the IPO; and
WHEREAS, as described in the Registration Statement, and in accordance
with the Company's Certificate of Incorporation, $43,495,000 of the gross
proceeds of the IPO ($50,260,000 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 and the public holders (the
"Public Stockholders") of the Company's common stock, par value $.001 per share
(the "Common Stock"), issued in the IPO and, in the event the Company's units
(which are comprised of one share of Common Stock and one Common Stock purchase
warrant) 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 Public Stockholders and the Company will be
referred to together as the "Beneficiaries"; 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.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
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 with respect to Public Stockholders in Colorado, in a
segregated trust account ("Trust Account") established by the Trustee at a
branch of JPMorgan Chase NY 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 United States "government securities" within
the meaning of Section 2(a)(16) of the Investment Company Act of 1940 having a
maturity of 180 days or less, or in any open ended investment company registered
under the Investment Company Act of 1940 that holds itself out as a money market
fund meeting the conditions of paragraphs (c)(2), (c)(3) and (c)(4) of Rule 2a-7
promulgated under the Investment Company Act of 1940;
(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 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;
(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 Maxim, 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) If there is any income tax obligation relating to the income of
the Property in the Trust Account, then, at the written instruction of the
Company, the Trustee shall issue a check directly to the taxing authorities
designated by the Company, out of the Property in the Trust Account, the amount
indicated by the Company as owing to each such taxing authority; and
(j) Commence and effect liquidation of the Trust Account in
accordance with the following procedures:
(i) The Trustee shall liquidate and distribute the proceeds of
the Trust to the Public Stockholders immediately after receipt of, and only in
accordance with the terms of a letter (the "Termination Letter"), in a form
substantially similar to that attached hereto as either Exhibit A or Exhibit B,
as the case may be;
(ii) Any Termination Letter delivered pursuant to this
Agreement shall be executed on behalf of the Company by its Chief Executive
Officer or President and shall be affirmed by the signature the Company's entire
Board of Directors;
(iii) The Trustee shall complete the liquidation of the Trust
Account and distribute the Property in the Trust Account only as directed in the
Termination Letter and the other documents referred to therein;
(iv) Notwithstanding the provisions of Sections 1(j)(i) and
(iii) hereof, the Trust Account shall be immediately liquidated and distributed
to the Public Stockholders of record on the Record Date or the Extended Record
Date (each as defined below), as the case may be, in accordance with the terms
and provisions set forth in the Termination Letter attached as Exhibit B in the
event that a Termination Letter has not been received by the Trustee by either:
(A) June ___, 2007 (the "Record Date"), or a more practicable date, determined
by the Trustee in its sole and absolute discretion, which is no more than ten
(10) days before or after the Record Date or (B) the date that is the six month
anniversary of the Record Date or such other, more practicable date, as
determined by the Trustee in accordance with subsection (A) above (such date,
the "Extended Record Date"), in the event that a letter of intent, agreement in
principle or definitive agreement has been executed prior to the Deadline Date
in connection with a Business Combination (as defined in the Prospectus) that
has not been consummated by the Record Date.
(v) All distributions of Property made to the Public
Stockholders upon the liquidation of the Trust as provided for herein shall be
made from the Trust Account through the Trustee (and not through the Company) as
follows: (A) through the Trustee, as transfer agent for the Company, to the
Public Stockholders who hold shares of Common Stock "of record" as of the Record
Date or the Extended Record Date, as the case may be, or (B) through the
Depository Trust Company, to the Public Stockholders who hold shares of Common
Stock in "street name" as of the Record Date or the Extended Record Date, as the
case may be.
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2. Agreements and Covenants of the Company. The Company hereby agrees and
covenants to:
(a) Give all instructions to the Trustee hereunder in writing,
signed by the Company's President or Chairman of the Board and affirmed in
writing by the Company's Board of Directors. In addition, except with respect to
its duties under Section 1(j) 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) 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 Section, 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;
(c) Pay the Trustee an initial acceptance fee of $1,000 and an
annual fee of $3,000 (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 Section 2(b)
hereof (it being expressly understood that the Property shall not be used to
make any payments to the Trustee under such Section);
(d) Provide to the Trustee (and, at such time, certify in writing to
the Trustee as to the veracity and completeness of) any letter of intent,
agreement in principle or definitive agreement that is executed prior to the
Record Date in connection with a Business Combination; and
(e) In connection with any vote of the Company's stockholders
regarding a Business Combination, provide to the Trustee an affidavit or
certificate of a firm regularly engaged in the business of soliciting proxies
and tabulating stockholder votes (which firm may be the Trustee) verifying the
vote of the Company's stockholders regarding such Business Combination.
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 Section 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;
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(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 Section 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 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; and
(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. 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, during which time the Trustee shall
continue to act in accordance with this Agreement. 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, but shall not be obligated to, 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;
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(b) At such time that the Trustee has completed the liquidation of
the Trust Account in accordance with the provisions of Section 1(j) hereof, and
distributed the Property in accordance with the provisions of the Termination
Letter, this Agreement shall terminate except with respect to Section 2(b); or
(c) On such date after the Record Date (or, as the case may be, the
Extended Record Date) 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 Section 1(j) hereof.
5. 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 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
may be delivered by facsimile transmission and each 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
Maxim, who, along with the other underwriters of the IPO, the parties
specifically agree, are and shall be a third-party beneficiary for purposes of
this Agreement. 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 State and County of New York for purposes
of resolving any disputes hereunder. The parties hereto irrevocably submit to
such jurisdiction, which jurisdiction shall be exclusive. The parties hereto
hereby waive any objection to such exclusive jurisdiction and that such courts
represent an inconvenient forum.
(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: Xxxxxx X. Xxxxxx
Fax No.: (000) 000-0000
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If to the Company, to:
Key Hospitality Acquisition Corporation
0 Xxxxxx Xxxx Xxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx
Fax No.: (000) 000-0000
in either case with a copy to:
Maxim Group LLC
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxxx
Fax No.: (000) 000-0000
(f) This Agreement may not be assigned by the Trustee without the
prior consent of the Company.
(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.
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.
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:
KEY HOSPITALITY ACQUISITION CORPORATION
By:
-------------------------------------------
Name:
Title:
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EXHIBIT A
Key Hospitality Acquisition Corporation
0 Xxxxxx Xxxx Xxxx
Xxxxxxxx, Xxx Xxxxxx 00000
[Insert date]
Continental Stock Transfer & Trust Company
00 Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
Re: Trust Account No. Termination Letter
Gentlemen:
Pursuant to Section 1(j) of the Investment Management Trust Agreement
between Key Hospitality Acquisition Corporation (the "Company") and Continental
Stock Transfer & Trust Company ("Trustee"), dated as of October ____, 2005 (the
"Trust Agreement"), this is to advise you that the Company has entered into an
agreement (the "Business Agreement") with ________________________ (the "Target
Business") to consummate a business combination with the Target Business (a
"Business Combination") on or about [insert date]. The Company shall notify you
at least two business days in advance of the actual date of the consummation of
the Business Combination (the "Consummation Date").
Pursuant to paragraph 2(e) of the Trust Agreement, we are providing you
with [an affidavit] [a certificate] of ____________, which verifies the vote of
the Company's stockholders in connection with the Business Combination. 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 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 Colorado
Statute have been met, and (ii) the Company shall deliver to you written
instructions with respect to the transfer of the funds held in the Trust Account
("Instruction Letter"). You are hereby directed and authorized to transfer the
funds held in the Trust Account immediately upon your receipt of the counsel's
letter 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 of the same and the Company shall direct you as to whether such
funds should remain in the Trust Account and be distributed after the
Consummation Date to the Company. Upon the distribution of all the funds in the
Trust Account pursuant to the terms hereof, the Trust Agreement shall be
terminated and the Trust Account closed.
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.
A-1
Very truly yours,
KEY HOSPITALITY ACQUISITION CORPORATION
By:
--------------------------------------
By:
--------------------------------------
A-2
EXHIBIT B
Key Hospitality Acquisition Corporation
0 Xxxxxx Xxxx Xxxx
Xxxxxxxx, Xxx Xxxxxx 00000
[Insert date]
Continental Stock Transfer & Trust Company
00 Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
Re: Trust Account No. Termination Letter
Gentlemen:
Pursuant to the Investment Management Trust Agreement between Key
Hospitality Acquisition Corporation (the "Company") and Continental Stock
Transfer & Trust Company (the "Trustee"), dated as of October ___, 2005 (the
"Trust Agreement"), this is to advise you that the Board of Directors of the
Company has voted to dissolve and liquidate the Trust Account (as defined in the
Trust Agreement). 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.
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) authorize you, to commence
liquidation of the Trust Account. In connection with this liquidation, you are
hereby authorized, in your discretion, to establish a record date for the
purposes of determining the stockholders of record entitled to receive their per
share portion of the Trust Account. The record date shall be within ten (10)
days of the date of this letter. You will notify the Company in writing as to
when all of the funds in the Trust Account will be available for immediate
transfer ("Transfer Date") in accordance with the terms of the Trust Agreement
and the Amended and Restated Certificate of Incorporation of the Company. You
shall commence distribution of such funds in accordance with the terms of the
Trust Agreement and the Amended and Restated Certificate of Incorporation of the
Company and you shall oversee the distribution of the funds. Upon the payment of
all the funds in the Trust Account, the Trust Agreement shall be terminated.
Very truly yours,
KEY HOSPITALITY ACQUISITION CORPORATION
By:
---------------------------------------
By:
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EXHIBIT C
AUTHORIZED INDIVIDUAL(S) AUTHORIZED
FOR TELEPHONE CALL BACK TELEPHONE NUMBER(S)
------------------------------------------ ------------------------------------
Company:
Key Hospitality Acquisition Corporation
0 Xxxxxx Xxxx Xxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx (000) 000-0000
Trustee:
Continental Stock Transfer
& Trust Company
00 Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx, Chairman [Telephone]
C-1
