INVESTMENT MANAGEMENT TRUST
AGREEMENT
This Agreement is made as of _________, 2006 by
and between Argyle Security Acquisition Corporation (the
“Company”) and American Stock Transfer & Trust
Company (“Trustee”).
WHEREAS, the Company’s Registration
Statement on Form S-1, No. 333-126569 (“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 Company has agreed to issue
securities in a private placement that will occur immediately prior
to the IPO (the "Placement"); and
WHEREAS, Rodman & Renshaw, LLC
(“Rodman”) is acting as the underwriter in the IPO and
as placement agent for the Placement and
WHEREAS, as described in the Company’s
Registration Statement, and in accordance with the Company’s
Certificate of Incorporation, $___________ of the proceeds of the
IPO and the Placement ($___________ if the underwriter’s
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, the Company and
Rodman will be referred to together as the
“Beneficiaries”); and
WHEREAS, a portion of the Property consists of
$___________ (or $___________ if the underwriters’
over-allotment option is exercised in full) attributable to the
underwriters’ discount and $45,000 attributable to the
placement fee which Rodman, on behalf of the underwriters, has
agreed to deposit in the Trust Account (defined below);
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 JP Morgan 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 180 days or less or in money market funds
meeting certain conditions under 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 and Rodman 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 Rodman to
do so;
(h) Render to the Company and to Rodman, 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) As of the date of the consummation of a business
combination (“Business Combination”), commence
liquidation of the Trust Account upon receipt of the
Officers’ Certificate signed by the Co-Chief Executive
Officers or its Chairman of the Board and Vice Chairman in
accordance with the terms of a letter (“Termination
Letter”), in a form substantially similar to that attached
hereto as Exhibit A , signed on behalf of the Company by its
Co-Chief Executive Officers or its Chairman of the Board and Vice
Chairman, 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.
The Trustee understands and agrees that disbursements from the
Trust Account shall be made only pursuant to a duly executed
Termination Letter, together with the other documents referenced
herein, including, without limitation, an independently certified
oath and report of inspector of election in respect of the
shareholder vote in favor of the Business Combination. In all
cases, the Trustee shall provide Rodman with a copy of any
Termination Letters, Officers’ Certificates and/or any other
correspondence that it receives with respect to any proposed
withdrawal from the Trust Account promptly after it receives same;
and
(j) As of the date 18 months from the date of this
Agreement (the “LOI Termination Date”) (or 24 months
from the date hereof in the event the Company has executed the
Letter of Intent (defined below) prior to the LOI Termination Date
but failed to consummate a Business Combination (“Second
Termination Date”), commence liquidation of the Trust
Account. The Trustee, upon consultation with the Company and
Rodman, shall deliver a notice to Public Stockholders of record as
of the LOI Termination Date or Second Termination Date, whichever
the case may be, by U.S. mail or via the Depository Trust Company
(“DTC”), within five days of the LOI Termination Date
or Second Termination Date, to notify the Public Stockholders of
such event and take such other actions as it may deem necessary to
inform the Beneficiaries. The Trustee shall deliver to each Public
Stockholder its ratable share of the Property against satisfactory
evidence of delivery of the stock certificates by the Public
Stockholders to the Company through DTC, its Deposit Withdraw Agent
Commission (DWAC) system or as otherwise presented to the Trustee.
Notwithstanding the foregoing, if the Trustee receives a bona fide,
executed letter of intent or engagement letter (the “Letter
of Intent”) for a Business Combination prior to the LOI
Termination Date accompanied by an Officers’ Certificate as
described in Section 2(e) hereof, then the Trustee shall forego or
suspend any liquidation of the Trust Account until the earlier of a
Business Combination or the Second Termination Date.
2.
Limited Distributions of Income
on Property .
(a) Upon receipt by the Trustee of an
Officer’s Certificate signed by either of the Co-Chief
Executive Officers of the Company certifying as true, accurate and
complete a copy of any tax return required to be filed on behalf of
the Trust Account in respect of income earned on the Property held
therein, the Trustee shall deliver to the Company for submission to
the appropriate taxing authority a check made payable to the order
of such taxing authority in the amount required to pay such taxes;
provided, however, that in no event shall the aggregate amount of
all checks issued to taxing authorities pursuant to this Section
2(a) exceed the income in respect of which such taxes are due and
owing.
(b) Upon one or more written requests from the
Company, the Trustee shall distribute to the Company interest
earned on the Trust Account, up to a maximum of $600,000 in the
aggregate. The distributions requested by the Company may be for
any amount, provided that (i) in the aggregate, all distributions
under this Section 2(b) may not exceed $600,000, and (ii) that such
distributions may only be made if and to the extent that interest
has been earned on the amount initially deposited into the Trust
Account.
(c) Except as provided in Sections 2(a) and 2(b)
above, no other distributions from the Trust Account shall be
permitted except in accordance with Sections 1(i) and 1(j)
hereof.
3.
Agreements and Covenants of the
Company . The Company
hereby agrees and covenants to:
(a) Provide all instructions to the Trustee
hereunder in writing, signed by at least one of the Company’s
Co-Chief Executive Officers or its Chairman of the Board and Vice
Chairman. In addition, except with respect to its duties under
paragraph 1(i) and 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 and/or Rodman shall
promptly confirm such instructions in writing; and;
(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).
(d) In the event that the Company consummates a
Business Combination and the Trust Account is liquidated in
accordance with Section 1(i) hereof, the Trustee or another
independent party designated by Rodman shall act as the inspector
of election to certify the results of the shareholder vote;
and
(e) The Officers’ Certificate referenced in
Sections 1(i) and 1(j) hereof shall require at least one of the
Company’s Co-Chief Executive Officers or its Chairman of the
Board and Vice Chairman to each certify the following (wherever
applicable): (1) prior to the LOI Termination Date, the Company has
entered into a bona fide Letter of Intent with a target business;
and/or (2) prior to the LOI Termination Date, the Company has
entered into a Business Combination with a target business, the
terms of which are consistent with the requirements set forth in
the R
