EXHIBIT 10.5 INVESTMENT MANAGEMENT TRUST AGREEMENT

 

                                                                    EXHIBIT 10.5

 

 

 

                      INVESTMENT MANAGEMENT TRUST AGREEMENT

 

      This Agreement is made as of ___________, 2005 by and between Santa Monica

Media Corporation (the "Company") and Continental Stock Transfer & Trust Company

("Trustee").

 

      WHEREAS, the Company's  Registration Statement on Form S-1, No. 333-______

("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,  The Shemano Group,  Inc. ("The Shemano  Group") is acting as the

representative of the underwriters in the IPO; and

 

      WHEREAS,  as described in the  Company's  Registration  Statement,  and in

accordance with the Company's  Certificate of  Incorporation,  $[ ] of the gross

proceeds of the IPO ($[ ] 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 holders of the  Company's  common

stock, par value $.001 per share,  issued in the IPO (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  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;

 

      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 in a segregated trust account ("Trust Account")

established  by the Trustee at a branch of Royal Bank of Canada  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 Bill 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 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 The  Shemano  Group,  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; and

 

            (i) Commence  liquidation of the Trust Account only after receipt of

and only in accordance with the terms of a letter ("Termination  Letter"),  in a

form  substantially  similar  to that  attached  hereto as  either  Exhibit A or

Exhibit B, signed on behalf of the Company by its  President  or Chairman of the

Board and Secretary or Assistant Secretary,  and 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.

 

      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. 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) 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

 

            (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 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).

 

      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;

 

 

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            (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