INVESTMENT MANAGEMENT TRUST AGREEMENT
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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 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;
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(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
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(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, deman
