INVESTMENT MANAGEMENT TRUST AGREEMENT

 

                      INVESTMENT MANAGEMENT TRUST AGREEMENT

 

      This Agreement is made as of , 2005 by and between Key Hospitality

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

Company ("Trustee").

 

      WHEREAS, the Company's Registration Statement on Form S-1, File 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, Maxim Group LLC ("Maxim") 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, $87,000,000 of the

gross proceeds of the IPO ($100,050,000 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 $.001 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.

 

      NOW, THEREFORE, in consideration of the mutual agreements herein

contained, the parties hereto agree as follows:

 

      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 with respect to Public Stockholders in Colorado, 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;

 

            (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 Maxim, 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, 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. In all cases, the Trustee shall provide Maxim with a copy of any

Termination Letters and/or any other correspondence that it receives with

respect to any proposed withdrawal from the Trust Account promptly after it

receives same.

 

      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).

 

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      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 (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

Trustee, in good faith, to be genuine and to be signed or presented by the