INVESTMENT MANAGEMENT TRUST AGREEMENT

 

 

Ex 10.7

 

 

                      INVESTMENT MANAGEMENT TRUST AGREEMENT

 

                This Agreement is made as of _____________,  2005 by and between

Coconut Palm 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")  and

EarlyBirdCapital,  Inc.  ("EBC")  are  acting  as  the  representatives  of  the

underwriters in the IPO; and

 

                WHEREAS,  as described  in the  Registration  Statement,  and in

accordance with the Company's  Certificate of Incorporation,  $54,250,000 of the

gross proceeds of the IPO ($62,620,000 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,  par  value  $.0001  per  share,  issued in the IPO as

hereinafter  provided  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 the

Colorado  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 Citibank,  N.A. 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;

 

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                (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;

 

                (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 Morgan  Joseph and EBC, 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  Trustee  may not agree to settle any

Indemnified Claim without the

 

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prior written consent of the Company. 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 go