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INVESTMENT MANAGEMENT TRUST AGREEMENT
This Agreement is made as of ________ ____, 2004 by and
between Chardan China
Acquisition Corp. (the "Company") and American 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 Company's Registration
Statement,
and in accordance with the
Company's Certificate of Incorporation, $15,300,000
of the gross proceeds of the
IPO ($17,595,000 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 (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 in a segregated trust account
("Trust Account") established
by the Trustee at a branch of _________________
[INSERT 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 of all communications received by it
with respect to
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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, 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 Company may participate in such action
with its own counsel;
and
(c) Pay the
Trustee an initial acceptance fee of $1,000 and
an annual fee of
2
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$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
(includin
