STOCK ESCROW AGREEMENT
STOCK
ESCROW AGREEMENT, dated as of
,
2005 (“Agreement”), by and among Key Hospitality Acquisition Corporation, a
Delaware corporation (“Company”), and the undersigned parties listed under
Initial Stockholders on the signature page hereto (collectively, the “Initial
Stockholders”) and Continental Stock Transfer & Trust Company, a New York
corporation (“Escrow Agent”).
WHEREAS,
the Company has entered into an Underwriting Agreement, dated
,
2005 (“Underwriting
Agreement”), with Maxim Group LLC (“Maxim”) acting as representative of the
several underwriters (collectively with Maxim, the “Underwriters”), pursuant to
which, among other matters, the Underwriters have agreed to purchase 10,000,000
units (“Units”) of the Company. Each Unit consists of one share of the
Company’s common stock, par value $.001 per share (“Common Stock”), and one
Warrant, with each Warrant granting the holder thereof the right to purchase
one
share of Common Stock, all as more fully described in the Company’s final
Prospectus, dated
,
2005
(“Prospectus”) comprising part of the Company’s Registration Statement on Form
S-1 (File No. 333-125009) under the Securities Act of 1933,
as amended
(“Registration Statement”), declared effective on
,
2005 (“Effective Date”).
WHEREAS,
the Initial Stockholders have agreed as a condition of the sale of the Units
to
deposit their shares of Common Stock, as set forth opposite their respective
names in Exhibit A attached hereto (collectively “Escrow Shares”), in escrow as
hereinafter provided.
WHEREAS,
the Company and the Initial Stockholders desire that the Escrow Agent accept
the
Escrow Shares, in escrow, to be held and disbursed as hereinafter
provided.
NOW,
THEREFORE, in consideration of the mutual agreements herein contained, the
parties hereto agree as follows:
1.
Appointment of Escrow Agent.
The Company and the Initial Stockholders hereby appoint the Escrow Agent
to act
in accordance with and subject to the terms of this Agreement, and the Escrow
Agent hereby accepts such appointment and agrees to act in accordance with
and
subject to such terms.
2.
Deposit of Escrow Shares.
On or before the Effective Date, each of the Initial Stockholders shall deliver
to the Escrow Agent certificates representing his respective Escrow Shares,
to
be held and disbursed subject to the terms and conditions of this
Agreement. Each Initial Stockholder acknowledges that the certificate
representing his Escrow Shares is legended to reflect the deposit of such
Escrow
Shares under this Agreement.
3.
Disbursement of the Escrow Shares.
The Escrow Agent shall hold the Escrow Shares until the third anniversary
of the
Effective Date (“Escrow Period”), on which date it shall, upon written
instructions from each Initial Stockholder, disburse each of the Initial
Stockholder’s Escrow Shares to such Initial Stockholder; provided, however, that
if the Escrow Agent is notified by the Company pursuant to Section 6.7
hereof that the Company is being liquidated at any time during the Escrow
Period, then the Escrow Agent shall promptly destroy the certificates
representing the Escrow Shares; provided further, however, that if, after
the
Company consummates a Business Combination (as such term is defined in the
Registration Statement), it (or the surviving entity) subsequently consummates
a
liquidation, merger, stock exchange or other similar transaction which results
in all of the stockholders of such entity having the right to exchange their
shares of Common Stock for cash, securities or other property, then the Escrow
Agent will, upon receipt of a certificate, executed by the Chief Executive
Officer or Chief Financial Officer of the Company, in form reasonably acceptable
to the Escrow Agent, that such transaction is then being consummated, release
the Escrow Shares to the Initial Stockholders upon consummation of the
transaction so that they can similarly participate. The Escrow Agent
shall
have no further duties hereunder after the disbursement or destruction of
the
Escrow Shares in accordance with this Section 3.
4.
Rights of Initial Stockholders in Escrow Shares.
4.1
Voting Rights as a Stockholder.
Subject to the terms of the Insider Letter described in Section 4.4
hereof
and except as herein provided, the Initial Stockholders shall retain all
of
their rights as stockholders of the Company during the Escrow Period, including,
without limitation, the right to vote such shares.
4.2
Dividends and Other Distributions in Respect of the Escrow
Shares.
During the Escrow Period, all dividends payable in cash with respect to the
Escrow Shares shall be paid to the Initial Stockholders, but all dividends
payable in stock or other non-cash property (“Non-Cash Dividends”) shall be
delivered to the Escrow Agent to hold in accordance with the terms hereof.
As used herein, the term “Escrow Shares” shall be deemed to include the Non-Cash
Dividends distributed thereon, if any.
4.3
Restrictions on Transfer.
During the Escrow Period, no sale, transfer or other disposition may be made
of
any or all of the Escrow Shares except (i) by gift to a member of Initial
Stockholder’s immediate family or to a trust, the beneficiary of which is an
Initial Stockholder or a member of an Initial Stockholder’s immediate family,
(ii) by virtue of the laws of descent and distribution upon death of any
Initial
Stockholder, or (iii) pursuant to a qualified domestic relations order;
provided,
however,
that
such permissive transfers may be implemented only upon the respective
transferee’s written agreement to be bound by the terms and conditions of this
Agreement and of the Insider Letter signed by the Initial Stockholder
transferring the Escrow Shares. During the Escrow Period, the Initial
Stockholders shall not pledge or grant a security interest in the Escrow
Shares
or grant a security interest in their rights under this Agreement.
4.4
Insider Letters.
Each of the Initial Stockholders has executed a letter agreement with Maxim
and
the Company, dated as indicated on Exhibit A hereto, and which is
filed as
an exhibit to the Registration Statement (“Insider Letter”), respecting the
rights and obligations of such Initial Stockholder in certain events, including
but not limited to the liquidation of the Company.
5.
Concerning the Escrow Agent.
5.1
Good
Faith Reliance.
The Escrow Agent shall not be liable for any action taken or omitted by it
in
good faith and in the exercise of its own best judgment, and 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
Escrow Agent), 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 Escrow Agent to be genuine and
to be
signed or presented by the proper person or persons. The Escrow Agent
shall not be bound by any notice or demand, or any waiver, modification,
termination or rescission of this Agreement unless evidenced by a writing
delivered to the Escrow Agent signed by the proper party or parties and,
if the
duties or rights of the Escrow Agent are affected, unless it shall have given
its prior written consent thereto.
5.2
Indemnification.
The Escrow Agent shall be indemnified and held harmless by the Company from
and
against any expenses, including counsel fees and disbursements, or loss suffered
by the Escrow Agent in connection with any action, suit or other proceeding
involving any claim which in any way, directly or indirectly, arises out
of or
relates to this Agreement, the services of the Escrow Agent hereunder, or
the
Escrow Shares held by it hereunder, other than expenses or losses arising
from
the gross negligence or willful misconduct of the Escrow Agent. Promptly
after the receipt by the Escrow Agent of notice of any demand or claim or
the
commencement of any action, suit or proceeding, the Escrow Agent shall notify
the other parties hereto in writing. In the event of the receipt
of such
notice, the Escrow Agent, in its sole discretion, may commence an action
in the
nature of interpleader in an appropriate court to determine ownership or
disposition of the Escrow Shares or it may deposit the Escrow Shares with
the
clerk of any appropriate court or it may retain the Escrow Shares pending
receipt of a final, non-appealable order of a court having jurisdiction over
all
of the parties hereto directing to whom and under what circumstances the
Escrow
Shares are to be disbursed and delivered. The provisions of this
Section 5.2 shall survive in the event the Escrow Agent resigns or
is
discharged pursuant to Sections 5.5 or 5.6 below.
5.3
Compensation.
The Escrow Agent shall be entitled to the compensation from the Company set
forth on Exhibit
B
attached
hereto for all services rendered by the Escrow Agent hereunder. The
Escrow
Agent shall also be entitled to reimbursement from the Company for all
documented expenses paid or incurred by it in the administration of its duties
hereunder including, but not limited to, all counsel, advisors’ and agents’ fees
and disbursements and all taxes or other governmental charges.
5.4
Further Assurances.
From time to time on and after the date hereof, the Company and the Initial
Stockholders shall deliver or cause to be delivered to the Escrow Agent such
further documents and instruments and shall do or cause to be done such further
acts as the Escrow Agent shall reasonably request to carry out more effectively
the provisions and purposes of this Agreement, to evidence compliance herewith
or to assure itself that it is protected in acting hereunder.
5.5
Resignation.
The Escrow Agent may resign at any time and be discharged from its duties
as
escrow agent hereunder by its giving the other parties hereto written notice
and
such resignation shall become effective as hereinafter provided.
Such
resignation shall become effective only at such time that the Escrow Agent
shall
turn over to a successor escrow agent appointed by the Company, the Escrow
Shares held hereunder. If no new escrow agent is so appointed within
the
60 day period following the giving of such notice of resignation, the Escrow
Agent may submit an application to have the Escrow Shares deposited with
the
United States District Court for the Southern District of New York and upon
such
deposit, the Escrow Agent shall be immune from any liability
whatsoever.
5.6
Discharge of Escrow Agent.
The Escrow Agent shall resign and be discharged from its duties as escrow
agent
hereunder if so requested in writing at any time by the Company and a majority
of the Initial Stockholders, jointly, provided, however, that such resignation
shall become effective only upon acceptance of appointment by a successor
escrow
agent as provided in Section 5.5.
5.7
Liability.
Notwithstanding anything herein to the contrary, the Escrow Agent shall not
be
relieved from liability hereunder for its own gross negligence or its own
willful misconduct.
6.
Miscellaneous.
6.1
Governing Law.
This Agreement shall for all purposes be deemed to be made under and shall
be
construed in accordance with the laws of the State of New York, with regard
to
the conflicts of laws principals thereof.
6.2
Third
Party Beneficiaries.
Each of the Initial Stockholders, the Company and the Escrow Agent hereby
specifically acknowledges and agrees that the Underwriters are third party
beneficiaries of this Agreement and this Agreement may not be modified or
changed without the prior written consent of Maxim.
6.3
Entire Agreement.
This Agreement contains the entire agreement of the parties hereto with respect
to the subject matter hereof and, except as expressly provided herein, may
not
be changed or modified except by an instrument in writing signed by the party
to
be charged.
6.4
Headings.
The headings contained in this Agreement are for reference purposes only
and
shall not affect in any way the meaning or interpretation thereof.
6.5
Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the respective
parties hereto and their legal representatives, successors and
assigns.
6.6
Notices.
Any notice or other communication required or which may be given hereunder
shall
be in writing and either be delivered personally, by facsimile transmission
(followed by regular mail delivery) or be mailed, certified or registered
mail,
or by private national courier service, return receipt requested, postage
prepaid, and shall be deemed given when so delivered personally or by facsimile
or, if mailed, two days after the date of mailing, as follows:
If
to the
Company, to:
0000
Xxxxxxxx, Xxxxx 000
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Chairman
Fax
No:
______________________
If
to a
Stockholder, to the address and fax number set forth on Exhibit A.
and
if to
the Escrow Agent, to:
Continental
Stock Transfer & Trust Company
00
Xxxxxxx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Chairman
Fax
No:
______________________
A
copy of
any notice sent hereunder shall be sent to:
Xxxxx
Xxxxx Xxxx Xxxxxx Xxxxxxx and Xxxxx, PC
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Xxxxxxx X. Xxxx, Esq.
Fax
No:
(000) 000-0000
and:
Maxim
Group LLC
000
Xxxxxxxxx Xxx.
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Xxxxxxxx X. Xxxxxx
Fax
No:
(000) 000-0000
and:
Ellenoff
Xxxxxxxx & Schole LLP
000
Xxxxxxxxx Xxx.
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Xxxxxxx X. Xxxxxxxx, Esq.
Fax
No:
(000) 000-0000
The
parties may change the persons and addresses to which the notices or other
communications are to be sent by giving written notice to any such change
in the
manner provided herein for giving notice.
6.7 Liquidation
of Company.
The
Company shall give the Escrow Agent written notification of the liquidation
and
dissolution of the Company in the event that the Company fails to consummate
a
Business combination within the time period(s) specified in the
Prospectus.
6.8
Counterparts.
This
Agreement 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.
[signature
page follows]
WITNESS
the execution of this Agreement as of the date first above written.
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By:
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[Name],
[Title]
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INITIAL
STOCKHOLDERS:
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Xxxxxxx
and Xxxx Xxxx Xxxxxxxx
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Xxx
Xxxxxxxx
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Xxxxx
Xxxxxxxx
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Trust
F/B/O Alexander & Xxxx Xxxxxxxx DTD 9/2/93
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Name:
Title:
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Xxxx
Xxxxxxxx
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Xxxx
X. Xxxxxx
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W.
Xxxxxx Xxxxxxxxxx
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Xxxxxxx
X. Xxxxxx
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Xxxxxx
Xxxxxxx
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Xxxxxx
and Xxxxxx Xxxxxxx
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Xxxxxxx
Xxxxxxxxxx
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CONTINENTAL
STOCK TRANSFER
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& TRUST COMPANY
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By:
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Name:
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Title:
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EXHIBIT
A
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Name
and Address of
Initial
Stockholder
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Number
of
Shares
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Stock
Certificate
Number
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Date
of
Insider
Letter
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Xxxxxxx
and Xxxx Xxxx Xxxxxxxx
[add
in address and fax]
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943,750
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Xxx
Xxxxxxxx
[add
in address and fax]
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362,500
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Xxxxx
Xxxxxxxx
[add
in address and fax]
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250,000
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Trust
F/B/O Alexander & Xxxx Xxxxxxxx DTD 9/2/93
[add
in address and fax]
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133,333
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Xxxx
Xxxxxxxx
[add
in address and fax]
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52,083
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Xxxx
X. Xxxxxx
[add
in address and fax]
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150,000
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W.
Xxxxxx Xxxxxxxxxx
[add
in address and fax]
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208,333
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Xxxxxxx
X. Xxxxxx
[add
in address and fax]
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125,000
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Xxxxxx
and Xxxxxx Xxxxxxx
[add
in address and fax]
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125,000
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Xxxxxx
Xxxxxxx
[add
in address and fax]
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66,666
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Xxxxxxx
Xxxxxxxxxx
[add
in address and fax]
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83,333
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EXHIBIT
B
Escrow
Agent Fees
[to
be
provided]
