EX-10.3



 





INVESTMENT MANAGEMENT TRUST AGREEMENT




          This Agreement is made as of August 15, 2005 by and between Stone Arcade Acquisition
Corporation (the “Company”) and Continental Stock Transfer & Trust Company (“Trustee”).




          WHEREAS, the Company’s Registration Statement on Form S-1, No. 333- 124601 (“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, $110,854,000 of the net proceeds of
the IPO ($127,954,000 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;




          (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;




          (i) Upon written instructions from the Company, deliver to the Company, on a quarterly
basis, from the Property in the Trust Account, an amount equal to the taxes payable by
the Company, if any, relating to interest earned on the Property; and




          (j) Commence liquidation of the Trust Account promptly 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 affirmed by
its entire Board of Directors, 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; provided, however, that in
the event that a Termination Letter has not been received by February 19, 2007 (or the
date that is the six month anniversary of such date, in the event that a letter of
intent, agreement in principle or definitive agreement has been executed prior to such
date in connection with a Business Combination (as defined in the Termination Letter
attached hereto as Exhibit A) that has not been consummated by August 19, 2007), the
Trust Account shall be liquidated in accordance with the procedures set forth in the
Termination Letter attached as Exhibit B to the stockholders of record on the record
date; provided, further, that the record date shall be within ten (10)
days of February 19, 2007 (or the date that is the six month anniversary of such date,
in the event that a letter of intent, agreement in principle or definitive agreement
has been executed prior to such date in connection with a Business Combination that has
not been consummated by August 19, 2007), or as soon thereafter as is practicable.




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(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 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




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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;




          (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) Provide to the Trustee any letter of intent, agreement in principle or definitive agreement
that is executed prior to February 19, 2007 in connection with a Business Combination;
and




          (e) In connection with any vote of the Company’s stockholders regarding a Business
Combination, provide to the Trustee an affidavit or certificate of a firm regularly
engaged in the business of soliciting proxies and tabulating stockholder votes (which
firm may be the Trustee) verifying the vote of the Company’s stockholders regarding
such Business Combination.




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





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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 proper
person or persons. The Trustee shall not be bound by any notice or demand, or any
waiver, modification, termination or rescission of this agreement or any of the terms
hereof, unless evidenced by a written instrument delivered to the Trustee signed by the
proper party or parties and, if the duties or rights of the Trustee are affected,
unless it shall give its prior written consent thereto; and




          (g) Verify the correctness of the information set forth in the Registration Statement or to
confirm or assure that any acquisition made by the Company or any other action taken by
it is as contemplated by the Registration Statement.




          (h) Subject to the requirements of Section 1(i) of the Trust Agreement, pay any taxes on behalf
of the Trust Account to any governmental entity or taxing authority.




4. Termination. This Agreement shall terminate as follows:




          (a) If the Trustee gives written notice to the Company that it desires to resign under
this Agreement, the Company shall use its reasonable efforts to locate a successor
trustee. At such time that the Company notifies the Trustee that a successor trustee
has been appointed by the Company and has agreed to become subject to the terms of this
Agreement, the Trustee shall transfer the management of the Trust Account to the
successor trustee, including but not limited to the transfer of copies of the reports
and statements relating to the Trust Account, whereupon this Agreement shall terminate;
provided, however, that, in the event that the Company does not locate a successor
trustee within ninety days of receipt of the resignation notice from the Trustee, the
Trustee may submit an application to have the Property deposited with the United States
District Court for the Southern District of New York and upon such deposit, the Trustee
shall be immune from any liability whatsoever that arises due to any actions or
omissions to act by any party after such deposit; or




          (b) At such time that the Trustee has completed the liquidation of the Trust Account
in accordance with the provisions of paragraph 1(j) hereof, and distributed the
Property in accordance with the provisions of the Termination Letter, this Agreement
shall terminate except with respect to Paragraph 2(b).




5. Miscellaneous.




          (a) The Company and the Trustee each acknowledge that the Trustee will follow the
security procedures set forth below with respect to funds transferred from the Trust
Account. Upon receipt of written instructions, the Trustee will confirm such
instructions with an Authorized Individual at an Authorized Telephone Number listed on
the attached Exhibit C. The




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Company and the Trustee will each restrict access to
confidential information relating to such security procedures to authorized persons.
Each party must notify the other party immediately if it has reason to believe
unauthorized persons may have obtained access to such information, or of any change in
its authorized personnel. In executing funds transfers, the Trustee will rely upon
account numbers or other identifying numbers of a beneficiary, beneficiary’s bank or
intermediary bank, rather than names. The Trustee shall not be liable for any loss,
liability or expense resulting from any error in an account number or other identifying
number, provided it has accurately transmitted the numbers provided.




          (b) This Agreement shall be governed by and construed and enforced in accordance with
the laws of the State of New York, without giving effect to conflict of laws. It may
be executed in several counterparts, each one of which shall constitute an original,
and together shall constitute but one instrument.




          (c) This Agreement contains the entire agreement and understanding of the parties hereto
with respect to the subject matter hereof. This Agreement or any provision hereof may
only be changed, amended or modified by a writing signed by each of the parties hereto;
provided, however, that no such change, amendment or modification may be made without
the prior written consent of Morgan Joseph. As to any claim, cross-claim or
counterclaim in any way relating to this Agreement, each party waives the right to
trial by jury.




          (d) The parties hereto consent to the jurisdiction and venue of any state or federal
court located in the City of New York for purposes of resolving any disputes hereunder.




          (e) Any notice, consent or request to be given in connection with any of the terms or
provisions of this Agreement shall be in writing and shall be sent by express mail or
similar private courier service, by certified mail (return receipt requested), by hand
delivery or by facsimile transmission:




          if to the Trustee, to:



Continental Stock Transfer

& Trust Company

17 Battery Place

New York, New York 10004

Attn: Steven G. Nelson, Chairman

Fax No.: (212) 509-5150



          if to the Company, to:



Stone Arcade Acquisition Corp.

c/o Stone-Kaplan Investments, LLC

One Northfield Plaza, Suite 480

Northfield, IL 60093

Attn: Roger W. Stone, Chief Executive Officer

         Fax No.: (847) 441-8267



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          in either case with a copy to:



Morgan Joseph & Co. Inc.

600 Fifth Avenue, 19th Floor

New York, New York 10020

Attn: Michael Powell

Fax No.: (212) 218-3719


and


Greenberg Traurig, LLP

MetLife Building

200 Park Avenue

New York, New York 10166

Attn: Alan I. Annex, Esq.

Fax No.: (212) 801-6400



          (f) This Agreement may not be assigned by the Trustee without the prior written consent of
the Company and Morgan Joseph.




          (g) Each of the Trustee and the Company hereby represents that it has the full right and
power and has been duly authorized to enter into this Agreement and to perform its
respective obligations as contemplated hereunder. The Trustee acknowledges and agrees
that it
shall not make any claims or proceed against the Trust Account, including by way of
set-off, and shall not be entitled to any funds in the Trust Account under any
circumstance.




          IN WITNESS WHEREOF, the parties have duly executed this Investment Management Trust Agreement
as of the date first written above.




	 	 	 	 	 
	 	CONTINENTAL STOCK TRANSFER & TRUST
 COMPANY, as
Trustee

 	 
	 	By:  	/s/
Steven G. Nelson	 
	 	 	Name:         	Steven G. Nelson 	 
	 	 	Title:         	Chairman 	 
	 
	 	

STONE ARCADE ACQUISITION CORP.

 	 
	 	By:  	/s/
Roger W. Stone	 
	 	 	Name:  	Roger W. Stone 	 
	 	 	Title:  	Chief Executive Officer 	 
	 




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EXHIBIT A




[Letterhead of Company]



[Insert date]




Continental Stock Transfer

  & Trust Company

17 Battery Place

New York, New York 10004

Attn: Steven G. Nelson



Re:          Trust Account No. [                    ] Termination Letter




Gentlemen:



          Pursuant to paragraph 1(j) of the Investment Management Trust Agreement between Stone Arcade
Acquisition Corp. (“Company”) and Continental Stock Transfer & Trust Company (“Trustee”), dated as
of                     , 2005 (“Trust Agreement”), this is to advise you that the Company has entered into an
agreement (“Business Agreement”) with                                          (“Target Business”) to consummate a
business combination with Target Business (“Business Combination”) on or about [insert date]. The
Company shall notify you at least 48 hours in advance of the actual date of the consummation of the
Business Combination (“Consummation Date”).




          Pursuant to Section 2(e) of the Trust Agreement, we are providing you with [an affidavit] [a
certificate] of                     , which verifies the vote of the Company’s stockholders in
connection with the Business Combination. In accordance with the terms of the Trust Agreement, we
hereby authorize you to commence liquidation of the Trust Account to the effect that, on the
Consummation Date, all of funds held in the Trust Account will be immediately available for
transfer to the account or accounts that the Company shall direct on the Consummation Date.




          On the Consummation Date (i) counsel for the Company shall deliver to you written notification
that (a) the Business Combination has been consummated and (b) the provisions of Section
11-51-302(6) and Rule 51-3.4 of the Colorado Statute have been met, and (ii) the Company shall
deliver to you written instructions with respect to the transfer of the funds held in the Trust
Account (“Instruction Letter”). You are hereby directed and authorized to transfer the funds held
in the Trust Account immediately upon your receipt of the counsel’s letter and the Instruction
Letter, in accordance with the terms of the Instruction Letter. In the event that certain deposits
held in the Trust Account may not be liquidated by the Consummation Date without penalty, you will
notify the Company of the same and the Company shall direct you as to whether such funds should
remain in the Trust Account and distributed after the Consummation Date to the Company. Upon the
distribution of all the funds in the Trust Account pursuant to the terms hereof, the Trust
Agreement shall be terminated.




          In the event that the Business Combination is not consummated on the Consummation Date
described in the notice thereof and we have not notified you on or before the original Consummation
Date of a new Consummation Date, then the funds held in the Trust




 









 







Account shall be reinvested as provided in the Trust Agreement on the business day immediately
following the Consummation Date as set forth in the notice.




	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 	 	STONE ARCADE ACQUISITION CORP.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Roger W. Stone, Chief Executive Officer
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Matthew Kaplan, President and Secretary
	 
	 	 	 	 
	 

	 	 	 	AFFIRMED:
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Roger W. Stone, Director
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Matthew Kaplan, Director
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	John M. Chapman, Director
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Jonathan R. Furer, Director
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Muhit U. Rahman, Director






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EXHIBIT B




[Letterhead of Company]



[Insert date]




Continental Stock Transfer

  & Trust Company

17 Battery Place

New York, New York 10004

Attn: Steven G. Nelson



Re:          Trust Account No. [                    ] Termination Letter




Gentlemen:



          Pursuant to paragraph 1(j) of the Investment Management Trust Agreement between Stone Arcade
Acquisition Corporation (“Company”) and Continental Stock Transfer & Trust Company dated as of
                                        , 2005 (“Trust Agreement”), this is to advise you that the Board of Directors of the
Company has voted to dissolve and liquidate the Company. Attached hereto is a copy of the minutes
of the meeting of the Board of Directors of the Company relating thereto, certified by the
Secretary of the Company as true and correct and in full force and effect.




          In accordance with the terms of the Trust Agreement, we hereby (a) certify to you that the
provisions of Section 11-51-302(6) and Rule 51-3.4 of the Colorado Statute have been met and (b)
authorize you, to commence liquidation of the Trust Account. In connection with this liquidation,
you are hereby authorized to establish a record date for the purposes of determining the
stockholders of record entitled to receive their per share portion of the Trust Account. The
record date shall be within ten (10) days of the liquidation date, or as soon thereafter as is
practicable. You will notify the Company in writing as to when all of the funds in the Trust
Account will be available for immediate transfer (“Transfer Date”) in accordance with the terms of
the Trust Agreement and the Amended and Restated Certificate of Incorporation of the Company. You
shall commence distribution of such funds in accordance with the terms of the Trust Agreement and
the Amended and Restated Certificate of Incorporation of the Company and you shall oversee the
distribution of the funds. Upon the payment of all the funds in the Trust Account, the Trust
Agreement shall be terminated.




	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 	 	STONE ARCADE ACQUISITION CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Roger W. Stone, Chief Executive Officer
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Matthew Kaplan, President and Secretary






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	 	 	 	AFFIRMED:
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Roger W. Stone, Director
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Matthew Kaplan, Director
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	John M. Chapman, Director
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Jonathan R. Furer, Director
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Muhit U. Rahman, Director






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EXHIBIT C




	 	 	 	 	 
	AUTHORIZED INDIVIDUAL(S)	 	 	 	AUTHORIZED
	FOR TELEPHONE CALL BACK	 	 	 	TELEPHONE NUMBER(S)
	 
	Company:
	 	 	 	 
	 
	 	 	 	 
	Stone Arcade Acquisition Corporation
	 	 	 	 
	c/o Stone-Kaplan Investments, LLC
	 	 	 	 
	One Northfield Plaza, Suite 480
	 	 	 	 
	Northfield, IL 60093
	 	 	 	 
	Attn: Roger W. Stone, Chairman and CEO

	 	 	 	(847) 441-0929
	 
	 	 	 	 
	Trustee:
	 	 	 	 
	 
	 	 	 	 
	Continental Stock Transfer & Trust Company
	 	 	 	 
	17 Battery Place
	 	 	 	 
	New York, New York 10004
	 	 	 	 
	Attn: Steven G. Nelson

	 	 	 	(212) 845-3200







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