INVESTMENT MANAGEMENT TRUST AGREEMENT
-------------------------------------
This Agreement is made as of _____________, 2005 by and between Chardan
China Acquisition Corp. III (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, EarlyBirdCapital, Inc. ("EBC") is acting as the representative of
the underwriters in the IPO; and
WHEREAS, as described in the Registration Statement, and in accordance
with the Company's Certificate of Incorporation, $20,640,000 of the gross
proceeds of the IPO ($23,736,000 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 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 Xxxx 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;
(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 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
prior written consent of the Company. The Company may participate in such action
with its own counsel; and
2
(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 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;
3
(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; and
(h) Pay any taxes on behalf of the Trust Account (it being expressly
understood that the Property shall not be used to pay any such taxes and that
such taxes, if any, shall be paid by the Company from funds not held in the
Trust Account).
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;
(b) At such time that the Trustee has completed the liquidation of the
Trust Account in accordance with the provisions of paragraph 1(i) 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); or
(c) On such date after _____________, 2007 when the Trustee deposits the
Property with the United States District Court for the Southern District of New
York in the event that, prior to such date, the Trustee has not received a
Termination Letter from the Company pursuant to paragraph 1(i).
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 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.
4
(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
conflicts of law principles that would result in the application of the
substantive laws of another jurisdiction. 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 EBC. 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, Borough of Manhattan, 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
00 Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
Fax No.: (000) 000-0000
if to the Company, to:
Chardan China Acquisition Corp. III
000 Xxxxxxxx
Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Jiangnan Xxxxx, Chairman
Fax No.: (000) 000-0000
5
in either case with a copy to:
EarlyBirdCapital, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Chairman
Fax No.: (000) 000-0000
(f) This Agreement may not be assigned by the Trustee without the prior
consent of the Company.
(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.
(h) Each of the Company and the Trustee hereby acknowledge that EBC is a
third party beneficiary of this Agreement.
6
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: ____________________________
Name:
Title:
CHARDAN CHINA ACQUISITION CORP. III
By: ____________________________
Name: Jiangnan Xxxxx
Title: Chairman
7
EXHIBIT A
[LETTERHEAD OF COMPANY]
[INSERT DATE]
Continental Stock Transfer
& Trust Company
00 Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxx
Re: Trust Account No. 530-_____________________Termination Letter
Gentlemen:
Pursuant to paragraph 1(i) of the Investment Management Trust Agreement
between Chardan China Acquisition Corp. III ("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").
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.
8
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,
CHARDAN CHINA ACQUISITION CORP. III
By:________________________________
Jiangnan Xxxxx, Chairman
By:________________________________
Xxxxx Xxxxxxx, Secretary
cc: EarlyBirdCapital, Inc.
9
EXHIBIT B
[LETTERHEAD OF COMPANY]
[INSERT DATE]
Continental Stock Transfer
& Trust Company
00 Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn:
Re: Trust Account No. 530-__________________Termination Letter
Gentlemen:
Pursuant to paragraph 1(i) of the Investment Management Trust Agreement
between Chardan China Acquisition Corp. III ("Company") and Continental Stock
Transfer & Trust Company ("Trustee"), dated as of ___________, 2005 ("Trust
Agreement"), this is to advise you that the Company has been unable to effect a
Business Combination with a Target Company within the time frame specified in
the Company's prospectus relating to its IPO.
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. You will notify the Company and JPMorgan Chase NY Bank
("Designated Paying Agent") in writing as to when all of the funds in the Trust
Account will be available for immediate transfer ("Transfer Date"). The
Designated Paying Agent shall thereafter notify you as to the account or
accounts of the Designated Paying Agent that the funds in the Trust Account
should be transferred to on the Transfer Date so that the Designated Paying
Agent may commence distribution of such funds in accordance with the Company's
instructions. You shall have no obligation to oversee the Designated Paying
Agent's distribution of the funds. Upon the payment to the Designated Paying
Agent of all the funds in the Trust Account, the Trust Agreement shall be
terminated.
Very truly yours,
CHARDAN CHINA ACQUISITION CORP. III
By:________________________________
Jiangnan Xxxxx, Chairman
By:________________________________
Xxxxx Xxxxxxx, Secretary
cc: EarlyBirdCapital, Inc.
10
EXHIBIT C
AUTHORIZED INDIVIDUAL(S) AUTHORIZED
FOR TELEPHONE CALL BACK TELEPHONE NUMBER(S)
----------------------- -------------------
COMPANY:
Chardan China Acquisition Corp. III
000 Xxxxxxxx
Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Jiangnan Xxxxx, Chairman (000) 000-0000
TRUSTEE:
Continental Stock Transfer
& Trust Company
00 Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx, Chairman (000) 000-0000
11
