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 12,000,000 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-______) 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:
Key Hospitality Acquisition Corporation
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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
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Attn: Chairman
Fax No: ______________________
A copy of any notice sent hereunder shall be sent to:
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Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
and:
Maxim Group LLC
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Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
and:
Ellenoff ▇▇▇▇▇▇▇▇ & Schole LLP
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Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
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.
KEY HOSPITALITY ACQUISITION CORPORATION
By:
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[Name], [Title]
INITIAL STOCKHOLDERS:
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Trust F/B/O Alexander & ▇▇▇▇ ▇▇▇▇▇▇▇▇ DTD 9/2/93
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Name:
Title:
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CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
By:
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Name:
Title:
EXHIBIT A
Name and Address of Number Stock Date of
Initial Stockholder of Shares Certificate Number Insider Letter
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[add in address and fax] 1,197,500
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[add in address and fax] 500,000
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[add in address and fax] 300,000
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Trust F/B/O Alexander & ▇▇▇▇ ▇▇▇▇▇▇▇▇ DTD 9/2/93
[add in address and fax] 160,000
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[add in address and fax] 62,500
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▇▇▇▇ ▇. ▇▇▇▇▇▇
[add in address and fax] 150,000
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W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
[add in address and fax] 150,000
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
[add in address and fax] 150,000
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▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
[add in address and fax] 150,000
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[add in address and fax] 80,000
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[add in address and fax] 100,000
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EXHIBIT B
Escrow Agent Fees
[to be provided]
