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EXHIBIT 10.3
INVESTMENT MANAGEMENT TRUST AGREEMENT
This Agreement is made as of _________, 2005 by and between
Stone
Arcade Acquisition Corp. (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, Morgan Joseph & Co. Inc. ("Morgan Joseph") 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 Amended
and Restated Certificate of
Incorporation, $164,150,000 of the net
proceeds of the IPO ($189,260,000 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 holders of the Company's
Common Stock issued in the IPO 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
which 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 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, 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
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 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;
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(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 Morgan Joseph 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 and/or Morgan
Joseph to do so;
(h) Render to
the Company and to Morgan Joseph, 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 Chief Executive Officer or
Chairman of the Board and 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 Chief Executive
Officer 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
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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;
(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
