U.S. Securities & Exchange Commission
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U.S. Securities and Exchange Commission

October 12, 2005

Kenneth R. Koch
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Chrysler Center
666 Third Avenue
New York, NY 10017

Re: Key Hospitality Acquisition Corporation
File No.: TP 05-106

Dear Mr. Koch:

In your letter dated October 12, 2005, as supplemented by conversations with the staff of the Division of Market Regulation (Division), you request on behalf of Key Hospitality Acquisition Corporation (Company) that the Division will not recommend to the Securities and Exchange Commission (Commission) enforcement action in connection with the bid represented by the Warrant Purchase Agreement (WPA) during the restricted period. We have attached a copy of your letter to avoid reciting the facts that it presents. Unless otherwise noted, each defined term in this letter has the same meaning as defined in your letter.


As a consequence of the unit offering, the Company is engaged in a distribution of units subject to Rules 101 and 102 of Regulation M.1 The WPA among the existing stockholders, officers and directors of the Company, and Maxim Group LLC, accompanied by the disclosed agreement in the registration statement to conduct a warrant repurchase program subsequent to the offering, constitutes a bid during the restricted period for purposes of Regulation M.

In your letter, you make the following representations, among others:

  • The warrant purchase terms are fully disclosed in the prospectus, including the duration of the purchase period, the maximum price to be paid per warrant, and the total dollar amount committed to the purchase program;
  • The WPA will be filed as an exhibit to the registration statement;
  • The warrant purchases will be made pursuant to pre-established agreements in accordance with the guidelines in Rule 10b5-1 under the Securities Exchange Act of 1934 (Exchange Act) by a broker-dealer who is registered under Section 15 of the Exchange Act;
  • None of the warrants purchased pursuant to the WPA will be sold or transferred until the completion of a business combination; and
  • All warrant purchases by management and affiliates of the Company will be reported to the Commission and publicly disclosed pursuant to Form 4, Statement of Changes of Beneficial Ownership of Securities. In the event that the purchases of warrants by the lead underwriter trigger a requirement to file Form 3, Initial Statement of Beneficial Ownership of Securities, the warrant purchases will be reported to the Commission and publicly disclosed pursuant to Form 3.

Accordingly, on the basis of your representations and the facts presented, and without necessarily concurring in your analysis, the Division will not recommend to the Commission enforcement action under Rules 101 and 102 Regulation M, subject to the following conditions:

  1. Other than the bid represented by the WPA during the restricted period, no warrant bids or purchases pursuant to the WPA will occur until 60 calendar days following the end of the restricted period for the unit distribution;
  2. The Company and Maxim Group LLC shall provide to the Division promptly upon request, a daily time-sequenced schedule of all warrant purchases made pursuant to the WPA, on a transaction-by-transaction basis, including: (i) size, broker (if any), time of execution, price of purchase; and (ii) the exchange, quotation system, or other facility through which the warrant purchase occurred;
  3. Upon request of the Division, the Company and Maxim Group LLC shall transmit the information as specified in paragraph 2 above to the Division at its headquarters in Washington, DC within 30 days of its request; and
  4. Representatives of the Company and Maxim Group LLC shall be made available (in person at the offices of the Division in Washington, DC or by telephone) to respond to inquiries by the Division regarding their purchase(s).

This position concerns enforcement action only and does not represent a legal conclusion with respect to the applicability of statutory or regulatory provisions of the federal securities laws. Moreover, this position is based on the facts you have presented and the representations you have made, and any different facts or conditions may require a different response. In addition, this position is subject to modification or revocation if at any time the Commission or the Division determines that such action is necessary or appropriate in furtherance of the purposes of the Exchange Act.

In addition, your attention is directed to the anti-fraud and anti-manipulation provisions of the Exchange Act, particularly Sections 9(a) and 10(b), and Rule 10b-5 thereunder. Responsibility for compliance with these and any other applicable provisions of the federal securities laws must rest with the Company and Maxim Group LLC. This Division expresses no view with respect to any other questions that the proposed transactions may raise, including, but not limited to, the adequacy of the disclosure concerning, and the applicability of any federal or state laws to, the proposed transactions.


James A. Brigagliano
Assistant Director

1 17 CFR 242.101, 242.102.

Incoming Letter:

The Incoming Letter is in Acrobat format.



Modified: 10/17/2005