INVESTMENT MANAGEMENT TRUST AGREEMENT
This
Agreement is made as of _____________, 2007 by and between China Discovery
Acquisition Corp. (the “Company”) and Continental Stock Transfer & Trust
Company (“Trustee”).
WHEREAS,
the Company’s registration statement on Form S-1, No. 333-140516
(“Registration Statement”), for its initial public offering of securities
(“IPO”) has been declared effective as of the date hereof (“Effective Date”) by
the Securities and Exchange Commission (capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Registration
Statement); 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
Memorandum and Articles of Association, $29,075,000.40 of the gross proceeds
of
the IPO and sale of the Insider Units and Insider Warrants (as defined in the
Registration Statement) ($33,372,500.40 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;
(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 United States “government securities” within the meaning of Section
2(a)(16) of the Investment Company Act of 1940 having a maturity of 180 days
or
less,
and/or
in any open ended investment company registered under the Investment Company
Act
of 1940 that holds itself out as a money market fund selected by the Company
meeting the conditions of paragraphs (c)(2), (c)(3) and (c)(4) of Rule 2a-7
promulgated under the Investment Company Act of 1940, as determined by the
Company;
(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 its returns;
(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 and 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 hereto, signed on behalf of the Company by its President or
Chairman of the Board and Secretary or Assistant Secretary and affirmed by
counsel for the Company, 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 the Trustee by
the
24-month anniversary of the effective date of the Registration Statement (“Last
Date”), the Trust Account shall be liquidated in accordance with the procedures
set forth in the Termination Letter attached as Exhibit B hereto and distributed
to the stockholders of record on the Last Date. In all cases, the Trustee shall
provide EBC 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. The provisions of this Section
1(i) may not be modified, amended or deleted under any
circumstances.
(j) Upon
written request from the Company, which may be given from time to time at
any
time in a form substantially similar to that attached hereto as Exhibit C,
the
Trustee shall distribute to the Company the amount requested by the Company
to
cover
expenses related to investigating and selecting a target business, income
and
other taxes and other working capital requirements; provided, however, that
(i)
such distribution shall be only from income collected on the Property and
(ii)
the aggregate amount of all such distributions shall not exceed $1,050,000.
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
Chairman of the Board or President. In addition, except with respect to its
duties under paragraphs 1(i) and 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;
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(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 unless such settlement includes a full release
of
the Company with respect to such Indemnified Claim. 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 for a Business Combination that is executed on or prior to the First
Date; 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/or 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;
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(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;
(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 any court in the State of New
York or 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; or
4
(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).
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 D. 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.
(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 original or facsimile
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. Except for Section 1(i) (which may
not be amended under any circumstances), 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:
5
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:
0000
Xxxx
Xxxxxxxx Xxxx, Xxxxx X
Xxxx
Xxxx, Xxxxxxxxxx 00000
Attn: Chief
Executive Officer
Fax
No.:
(___)
___-____
in
either
case with a copy to:
EarlyBirdCapital,
Inc.
000
Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxx,
Xxx Xxxx 00000
Attn: Xxxxx
X.
Xxxxxxxx
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:
By:
____________________________
Name:
Title:
|
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 China
Discovery Acquisition Corp. (“Company”) and Continental Stock Transfer &
Trust Company (“Trustee”), dated as of __________, 2007 (“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 (a) [an affidavit] [a
certificate] of __________________, which verifies the vote of the Company’s
stockholders in connection with the Business Combination and (b) 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.
8
|
Very
truly yours,
By:________________________________
Li
Xxx Xxx, Chairman of the Board
By:________________________________
Wing
Yip, 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 China
Discovery Acquisition Corp. (“Company”) and Continental Stock Transfer &
Trust Company (“Trustee”), dated as of ___________, 2007 (“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
Memorandum and Articles of Association, as described 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 as promptly as practicable to stockholders of record on the Last
Date (as defined in the Trust Agreement). 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 Memorandum and Articles of Association of the Company. You shall
commence distribution of such funds in accordance with the terms of the Trust
Agreement and the Memorandum and Articles of Association of the Company and
you
shall oversee the distribution of the funds. Upon the distribution of all the
funds in the Trust Account, your obligations under the Trust Agreement shall
be
terminated.
|
Very
truly yours,
By:________________________________
Li
Xxx Xxx, Chairman of the Board
By:________________________________
Wing
Yip, Secretary
|
cc:
EarlyBirdCapital, Inc.
10
EXHIBIT
C
[Letterhead
of Company]
[Insert
date]
Continental
Stock Transfer
&
Trust Company
00
Xxxxxxx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Re:
Trust
Account No. 530-
Gentlemen:
Pursuant
to paragraph 1(j) of the Investment Management Trust Agreement between China
Discovery Acquisition Corp. (“Company”) and Continental Stock Transfer &
Trust Company (“Trustee”), dated as of ___________, 2007 (“Trust Agreement”),
this
is
to advise you that the Company hereby requests that you deliver to the Company
$_______ of the income earned on the Property as of the date hereof. The
Company
needs such funds to cover its expenses relating to investigating and selecting
a
target business and other working capital requirements. In accordance with
the
terms of the Trust Agreement, you are hereby directed and authorized to transfer
(via wire transfer) such funds promptly upon your receipt of this letter
to the
Company’s operating account at:
[WIRE
INSTRUCTION INFORMATION]
Very
truly yours,
By:________________________________
Li
Xxx
Xxx, Chairman of the Board
By:________________________________
Wing
Yip,
Secretary
cc:
EarlyBirdCapital, Inc.
11
EXHIBIT
D
|
AUTHORIZED
INDIVIDUAL(S)
|
AUTHORIZED
|
|
FOR
TELEPHONE CALL BACK
|
TELEPHONE
NUMBER(S)
|
Company:
|
0000
Xxxx Xxxxxxxx Xxxx, Xxxxx X
|
|
|
Xxxx
Xxxx, Xxxxxxxxxx 00000
|
|
|
Attn:
Chief Executive Officer
|
(___)
___-____
|
Trustee:
|
Continental
Stock Transfer
|
|
|
&
Trust Company
|
|
|
00
Xxxxxxx Xxxxx
|
|
|
Xxx
Xxxx, Xxx Xxxx 00000
|
|
|
Attn:
Xxxxxx X. Xxxxxx, Chairman
|
(000)
000-0000
|
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