Document:

Exhibit 10.3

 

 

INVESTMENT MANAGEMENT TRUST AGREEMENT

 

This Agreement is made as
of [●], 2021 by and between Monterey Bio Acquisition Corporation (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 (“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, Chardan Capital Markets
LLC (“Chardan”) is acting as the underwriter in the IPO; and

 

WHEREAS, as described in the
Registration Statement, and in accordance with the Company’s Amended and Restated Certificate of Incorporation, $101,000,000 ($116,150,000
if the 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 (“Common Stock”), issued
in the IPO as hereinafter provided (the proceeds 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, if a Business Combination is not consummated within 12 months
from the date of the closing of the IPO, the Company’s insiders or their affiliates may, but are not obligated to, extend the period
of time to consummate a Business Combination up to three times by an additional three months each time (for a total of up to 21 months
to complete a Business Combination); provided that, pursuant to the Company’s Amended and Restated Certificate of Incorporation,
the only way to extend the time available for the Company to consummate its initial Business Combination is for the Company’s insiders
or their affiliates or designees, upon five days’ advance notice prior to each applicable deadline, to deposit into the Trust Account
$1,000,000, or $1,150,000 if the over-allotment option is exercised in full ($0.10 per unit in either case, or an aggregate of $3,000,000,
or $3,450,000 if the over-allotment option is exercised in full, if the time to consummate a Business Combination is extended to a full
21 months), on or prior to the date of the applicable deadline; 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.

 

THEREFORE, 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 JPMorgan Chase Bank, N.A. in the United States, maintained by Trustee, (or at another U.S. chartered commercial bank with consolidated assets
of $100 billion or more) and at a brokerage institution selected by the
Trustee that is reasonably satisfactory to the Company;

 

(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, invest and reinvest the Property (i) in United States government treasury bills, notes or bonds having
a maturity of 185 days or less and/or (ii) in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment
Company Act of 1940, as amended, and that invest solely in U.S. treasuries, as determined by the Company, it being understood that the
Trust Account will earn no interest while the account funds are uninvested awaiting the Company’s instructions hereunder; while the account funds are invested or uninvested, the
Trustee may earn bank credits and other consideration;

  

(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) Promptly notify the Company
and Chardan 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 (or its authorized agents) in connection with the Company’s preparation of the tax
returns relating to assets held in the Trust Account or in connection with the preparation or completion of the audit of the Company’s
financial statements by the Company’s auditors;

 

(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;

 

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(h) Render to the Company 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 (x) receipt of, and only in accordance with, the terms of a letter from the
Company (“Termination Letter”), in a form substantially similar to that attached hereto as either Exhibit A or Exhibit
B, as applicable, signed on behalf of the Company by its President, Chief Executive Officer, Chief Financial Officer, Chairman of
the Board, Secretary or other authorized officer of the Company and, in the case of a Termination Letter in a form substantially
similar to that attached hereto as Exhibit A, and complete the liquidation of the Trust Account and distribute the Property in the
Trust Account, including interest not previously released to the Company to pay its taxes, if any (less up to $100,000 of interest
to pay dissolution expenses), only as directed in the Termination Letter and the other documents referred to therein, or (y) upon
the date which is (1) 12 months (or up to 21 months, as applicable) after the closing of the IPO and (2) such later date as may be
approved by the Company’s stockholders in accordance with the Company’s Amended and Restated Certificate of
Incorporation if a Termination Letter has not been received by the Trustee prior to such date, in which case the Trust Account shall
be liquidated in accordance with the procedures set forth in the Termination Letter attached as Exhibit B and the Property in the
Trust Account, including interest not previously released to the Company to pay its taxes, if any (less up to $100,000 of interest
to pay dissolution expenses) shall be distributed to the Public Stockholders of record as of such date; and 

 

(j) Upon
written request from the Company, which may be given from time to time in a form substantially similar to that attached hereto as Exhibit D
(“Stockholder Redemption Withdrawal Instruction”), the Trustee shall distribute to the
remitting brokers on behalf of Public Stockholders redeeming shares of Common Stock the amount required to pay for redeemed shares of
Common Stock from Public Stockholders in connection with a stockholder vote to approve an amendment to the Company’s Amended and
Restated Certificate of Incorporation to affect the substance or timing of the Company’s obligation to redeem all shares of Common
Stock included in the Units sold in the IPO if the Company does not complete a Business Combination within the time period set forth
in the Company’s Amended and Restated Certificate of Incorporation. The written request of the Company referenced above shall constitute
presumptive evidence that the Company is entitled to distribute said funds, and the Trustee shall have no responsibility to look beyond
said request.

 

2. Limited
Distributions of Income from Trust Account.

 

(a) Upon written request from
the Company, which may be given from time to time in a form substantially similar to that attached hereto as Exhibit C (a “Tax Payment
Withdrawal Instruction”), the Trustee shall distribute to the Company the amount of interest income earned on the Trust Account
requested by the Company to cover any income or other tax obligation owed by the Company.

 

(b) The limited distributions
referred to in Section 2(a) above shall be made only from income collected on the Property. Except as provided in Section 2(a) above,
no other distributions from the Trust Account shall be permitted except in accordance with Sections 1(i) and (j) hereof.

 

(c) The Company shall provide
Chardan with a copy of any Termination Letters and/or any other correspondence that it issues to the Trustee with respect to any proposed
withdrawal from the Trust Account promptly after such issuance.

 

3. 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, Chief Executive Officer, Chief Financial Officer, Chairman
of the Board, Secretary or other authorized officer of Company. In addition, except with respect to its duties under paragraphs 1(i),
1(j) and 2(a) 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) Subject to the
provisions of Sections 5 and 7(g) of this Agreement, 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 claim,
potential claim, 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, which consent shall not be unreasonably withheld. The Company
may participate in such action with its own counsel;

 

(c) Pay the Trustee an initial
acceptance fee, an annual fee and a transaction processing fee for each disbursement made pursuant to Section 2(a) as set forth on Schedule
A hereto, which fees shall be subject to modification by the parties from time to time. It is expressly understood that the Property shall
not be used to pay such fees except for disbursements made to the Company pursuant to Sections 1(i) and (j) solely in connection with
the consummation of a Business Combination. 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. Except as set forth in this Section 3(c) and Section
3(b) hereof, the Company shall not be responsible for any other fees or charges of the Trustee;

 

(d) 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 shareholder votes verifying the vote of the Company’s stockholders
regarding such Business Combination; and

 

(e) In the event that the Company
directs the Trustee to commence liquidation of the Trust Account pursuant to Section 1(i), the Company agrees that it will not direct
the Trustee to make any payments that are not specifically authorized by this Agreement.

 

4. 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 paragraphs 1 and 2 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;

 

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(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;

 

(h) File local, state and/or
federal tax returns or information returns with any taxing authority on behalf of the Trust Account and payee statements with the Company
documenting the taxes, if any, payable by the Company or the Trust Account, relating to the income earned on the Property;

 

(i) 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 or released to it under Section 2(a) hereof);

 

(j) Imply obligations, perform
duties, inquire or otherwise be subject to the provisions of any agreement or document other than this agreement and that which is expressly
set forth herein; and

 

(k) Verify calculations, qualify
or otherwise approve Company requests for distributions pursuant to Sections 1(i), 1(j) or 2(a) above.

 

5. Trust Account
Waiver. The Trustee has no right of set-off or any right, title, interest or claim of any kind (“Claim”) to, or to
any monies in, the Trust Account, and hereby irrevocably waives any Claim to, or to any monies in, the Trust Account that it may
have now or in the future. In the event the Trustee has any Claim against the Company under this Agreement, including, without
limitation, under Section 3(b) or Section 3(c) hereof, the Trustee shall pursue such Claim solely against the Company and its assets
outside the Trust Account and not against the Property or any monies in the Trust Account.

 

6. 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 during which time the Trustee shall act in accordance with this Agreement. 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

 

(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 3(b).

 

7. 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. 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 all information
supplied to it by the Company, including account names, account numbers and all other identifying information relating to a beneficiary,
beneficiary’s bank or intermediary bank. The Trustee shall not be liable for any loss, liability or expense resulting from any
error in the information or transmission of the wire.

 

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(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 Sections 1(i) and 1(j)
(which may only be amended with the approval of the holders of a majority of the outstanding shares of Common Stock sold in the IPO),
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 Chardan. As to any claim, cross-claim
or counterclaim in any way relating to this Agreement, each party waives the right to trial by jury. The Trustee may require from Company
counsel an opinion as to the propriety of any proposed amendment.

 

(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, facsimile transmission or by electronic
mail:

 

if to the Trustee, to:

 

Continental Stock Transfer & Trust Company

1 State Street, 30th Floor

New York, New York 10004

Attn: Francis Wolf and Celeste Gonzalez

Email: fwolf@continentalstock.com; cgonzalez@continentalstock.com

 

if to the Company, to:

 

Monterey Bio Acquisition Corporation

17 State Street

21st Floor

New York, NY 10004

Attn: Sanjeev Satyal, Chief Executive Officer

Email: sanjeev@montereybio.com

 

in either case with a copy (which copy shall not constitute
notice) to:

 

Chardan Capital Markets LLC

17 State Street, 21st Floor

New York, NY 10004

Attn: Jonas Grossman

Email: jgrossman@chardan.com

 

and

 

Greenberg
Traurig, LLP

1750 Tysons
Boulevard, Suite 1000

McLean,
VA 22102

Attn: Jason
T. Simon, Esq.

Email: simonj@gtlaw.com

 

and

 

Reed Smith LLP

599 Lexington Avenue

New York, NY 10022

Attn: Ari Edelman, Edward P. Bromley III

Email: aedelman@reedsmith.com;
ebromley@reedsmith.com

 

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(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.

 

(h) Each of the Company and
the Trustee hereby acknowledge that Chardan is a third party beneficiary of this Agreement.

 

[Signature Page Follows]

 

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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: Francis E. Wolf, Jr.
	 	Title: Vice President
	 
	 	MONTEREY BIO ACQUISITION CORPORATION
	 
	 	By:	 
	 	Name: Sanjeev Satyal
	 	Title: Chief Executive Officer

 

[Signature Page to Investment Management Trust
Agreement]

 

    

     

    

 

SCHEDULE A

 

	Fee Item	Time and method of payment	Amount
	Initial acceptance fee	Initial closing of IPO by wire transfer	$3,500.00
	Annual fee	First year, initial closing of IPO by wire transfer; thereafter on the anniversary of the effective date of the IPO by wire transfer or check	$10,000.00
	Transaction processing fee for disbursements to Company under Section 2	Deduction by Trustee from accumulated income following disbursement made to Company under Section 2	$250.00
	Paying Agent services as required pursuant to sections 1(i) and 1(j)	Billed to Company upon delivery of service pursuant to sections 1(i) and (j)	Market Rate

 

    

     

    

 

EXHIBIT A

[Letterhead of Company]

 

[Insert date]

 

Continental Stock Transfer & Trust Company

1 State Street, 30th Floor

New York, N.Y. 10004

Attn: Francis Wolf and Celeste Gonzalez

 

Re:        Trust
Account - Termination Letter

 

Gentlemen:

 

Pursuant to paragraph 1(i)
of the Investment Management Trust Agreement between Monterey Bio Acquisition Corporation (“Company”) and Continental Stock
Transfer & Trust Company (“Trustee”), dated as of [______________], 2021 (“Trust Agreement”), this is to advise
you that the Company has entered into an 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 72 hours in advance of the actual date of the consummation of the Business Combination (“Consummation Date”).
Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Trust Agreement.

 

In accordance with the terms
of the Trust Agreement, we hereby authorize you to liquidate the Trust Account investments and to transfer the proceeds
to the above-referenced account at [●] 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. It is acknowledged
and agreed that while the funds are on deposit in the trust operating account at JPMorgan Chase Bank, N.A. awaiting distribution, the
Company will not earn any interest or dividends.

 

On the Consummation Date (i)
counsel for the Company shall deliver to you written notification that the Business Combination has been consummated and (ii) the Company
shall deliver to you (a) a certificate of the Chief Executive Officer, which verifies the vote of the Company’s stockholders
in connection with the Business Combination if a vote is held and (b) joint written instructions from the Company and Chardan Capital
Markets LLC 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 upon receipt by the Trustee of written instructions from
the Company, 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,
	 
	 	MONTEREY BIO ACQUISITION CORPORATION
	 
	 	By:	
	 	Name:
	 	Title:

 

cc: Chardan Capital Markets LLC

 

    

     

    

 

EXHIBIT B

 

[Letterhead of Company]

 

[Insert date]

 

Continental Stock Transfer & Trust Company

1 State Street, 30th Floor

New York, N.Y. 10004

Attn: Francis Wolf and Celeste Gonzalez

 

Re:        Trust
Account - Termination Letter

 

Gentlemen:

 

Pursuant to paragraph 1(i)
of the Investment Management Trust Agreement between Monterey Bio Acquisition Corporation (“Company”) and Continental Stock
Transfer & Trust Company (“Trustee”), dated as of [______________], 2021 (“Trust Agreement”), this is to advise
you that the Company has been unable to effect a Business Combination with a Target Business within the time frame specified in the Company’s
Amended and Restated Certificate of Incorporation, as described in the Company’s prospectus relating to its IPO. Capitalized terms
used herein and not otherwise defined shall have the meanings set forth in the Trust Agreement.

 

In accordance with the
terms of the Trust Agreement, we hereby authorize you to liquidate all the Trust Account investments and to transfer the total
proceeds to the trust operating account at J.P. Morgan Chase Bank, N.A. to await distribution to the Public Stockholders. The
Company has selected [____________, 20__]1 as the
effective date for the purpose of determining when the Public Stockholders will be entitled to receive their share of the
liquidation proceeds. It is acknowledged that no interest will be earned by the Company on the liquidation proceeds while on deposit
in the trust operating account at J.P. Morgan Chase Bank, N.A. You agree to be the Paying Agent of record and
in your separate capacity as Paying Agent, to distribute said funds directly to the Public Stockholders in accordance with the terms
of the Trust Agreement and the Amended and Restated Certificate of Incorporation of the Company. Upon the distribution of all the
funds in the Trust Account, your obligations under the Trust Agreement shall be terminated.

 

	 	Very truly yours,
	 	 
	 	MONTEREY BIO ACQUISITION CORPORATION
	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

cc: Chardan Capital Markets LLC

 

 

 

1 12 months from the closing of the IPO or at a later date,
if extended.

 

    

     

    

 

EXHIBIT C

 

[Letterhead of Company]

 

[Insert date]

 

Continental Stock Transfer & Trust Company

1 State Street, 30th Floor

New York, N.Y. 10004

Attn: Francis Wolf and Celeste Gonzalez

 

Re:        Trust
Account - Tax Payment Withdrawal Instruction

 

Gentlemen:

 

Pursuant to paragraph 2(a)
of the Investment Management Trust Agreement between Monterey Bio Acquisition Corporation (“Company”) and Continental Stock
Transfer & Trust Company (“Trustee”), dated as of [______________], 2021 (“Trust Agreement”), the Company
hereby requests that you deliver to the Company [$_______] of the interest income earned on the Property as of the date hereof. The Company
needs such funds to pay for its tax obligations. 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]

 

	 	MONTEREY BIO ACQUISITION CORPORATION
	 	 
	 	By:	 
	 	 	Name: 
	 	 	Title:

 

cc: Chardan Capital Markets LLC

 

    

     

    

 

EXHIBIT D

 

[Letterhead of Company]

 

[Insert date]

 

Continental Stock Transfer & Trust Company

1 State Street, 30th Floor

New York, New York 10004

Attn:  Francis Wolf and Celeste Gonzalez

 

Re:       Trust
Account - Stockholder Redemption Withdrawal Instruction

 

Dear Mr. Wolf and Ms. Gonzalez:

 

Pursuant to Section 1(j) of the Investment
Management Trust Agreement between Monterey Bio Acquisition Corporation (the “Company”) and Continental Stock Transfer &
Trust Company (the “Trustee”), dated as of _________, 2021 (the “Trust Agreement”), the Company hereby requests
that you deliver to the redeeming Public Stockholders of the Company $[_____] of the principal and interest income earned on the Property
as of the date hereof to a segregated account held by you on behalf of the Beneficiaries for distribution to the Public Stockholders who
have requested redemption of their shares of Common Stock.  Capitalized terms used but not defined herein shall have the meanings
set forth in the Trust Agreement.

 

The Company needs such funds to pay its Public
Stockholders who have properly elected to have their shares of Common Stock redeemed by the Company in connection with a stockholder vote
to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation to affect the substance or timing of
the Company’s obligation to redeem all shares of Common Stock included in the Units sold in the IPO if the Company does not complete
a Business Combination within the time period set forth in the Company’s Amended and Restated Certificate of Incorporation.  As
such, you are hereby directed and authorized to transfer (via wire transfer) such funds promptly upon your receipt of this letter into
a segregated account held by you on behalf of the Beneficiaries.

 

[WIRE INSTRUCTION INFORMATION]

 

	 	MONTEREY BIO ACQUISITION CORPORATION
	 	 
	 	By:	 
	 	 	Name: 
	 	 	Title:

 

cc: Chardan Capital Markets LLCExhibit 10.4

 

STOCK ESCROW AGREEMENT

 

This STOCK ESCROW AGREEMENT,
dated as of [●], 2021 (“Agreement”), by and among MONTEREY BIO ACQUISITION CORPORATION, a Delaware corporation
(“Company”), the initial stockholders listed on the signature pages hereto (collectively, the “Initial Stockholders”),
and CONTINENTAL STOCK TRANSFER & TRUST COMPANY, a New York limited purpose trust company (“Escrow Agent”).

 

WHEREAS, the Company has entered
into an Underwriting Agreement, dated as of [●], 2021 (“Underwriting Agreement”), with Chardan Capital Markets,
LLC (“Chardan”) acting as representative of the several underwriters (collectively, the “Underwriters”),
pursuant to which, among other matters, the Underwriters have agreed to purchase 10,000,000 units (“Units”) of the
Company, plus an additional 1,500,000 Units if the Underwriters exercise their over-allotment option in full. Each Unit consists of one
share of common stock of the Company, par value $0.0001 per share (the “Common Stock”), and one warrant, with each
warrant entitling the holder thereof to purchase one share of  Common Stock at an exercise price of $11.50 per share, all
as more fully described in the Company’s prospectus, dated [●], 2021 (“Prospectus”), comprising part of
the Company’s Registration Statement on Form S-1 (File No. 333-[__]) under the Securities Act of 1933, as amended (“Registration
Statement”), declared effective on [●], 2021 (“Effective Date”).

 

WHEREAS, the Initial Stockholders
have agreed as a condition of the sale of the Units to deposit their Insider Shares (as defined in the Prospectus), as set forth opposite
their respective names on Exhibit A attached hereto (collectively “Escrow Shares”), in escrow as hereinafter
provided.

 

WHEREAS, the Company and the
Initial Stockholders desire that the Escrow Agent accept the Escrow Shares, in escrow, to be held and disbursed as hereinafter provided.

 

IT IS AGREED:

 

1. Appointment of
Escrow Agent. The Company and the Initial Stockholders hereby appoint the Escrow Agent to act in accordance with and subject to the
terms of this Agreement, and the Escrow Agent hereby accepts such appointment and agrees to act in accordance with and subject to such
terms.

 

2. Deposit of Escrow
Shares. On or prior to the date hereof, each of the Initial Stockholders delivered to the Escrow Agent certificates representing such
Initial Stockholder’s respective Escrow Shares, together with applicable share powers, to be held and disbursed subject to the terms
and conditions of this Agreement. Each of the Initial Stockholders acknowledges that the certificate representing such Initial Stockholder’s
Escrow Shares is legended to reflect the deposit of such Escrow Shares under this Agreement.

 

3. Disbursement of
the Escrow Shares.

 

3.1 The Escrow Agent shall
hold the Escrow Shares during the period (the “Escrow Period”) commencing on the date hereof and (i) for 50% of
the Escrow Shares, ending on the earlier of (x) six months after the date of the consummation of the Company’s initial
business combination (as described in the Registration Statement, hereinafter a “Business Combination”) and (y) the date
on which the closing price of the Common Stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends,
reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing after the Company’s
initial Business Combination and (ii) for the remaining 50% of the Escrow Shares, ending six months after the date of the
consummation of an initial Business Combination. The Company shall promptly provide notice of the consummation of a Business
Combination to the Escrow Agent. Upon completion of the Escrow Period, the Escrow Agent shall disburse such amount of each Initial
Stockholder’s Escrow Shares (and any applicable share power) to such Initial Stockholder; provided, however, that if the
Escrow Agent is notified by the Company pursuant to Section 6.7 hereof that the Company is being liquidated at any time during the
Escrow Period, then the Escrow Agent shall promptly destroy the certificates representing the Escrow Shares; provided further,
however, that if, within six months after the Company consummates an initial Business Combination, the Company (or the surviving
entity) subsequently consummates a liquidation, merger, stock exchange or other similar transaction which results in all of the
stockholders of such entity having the right to exchange their shares of Common Stock for cash, securities or other property, then
the Escrow Agent will, upon receipt of a notice executed by the Chairman of the Board, Chief Executive Officer or other authorized
officer of the Company, in form reasonably acceptable to the Escrow Agent, certifying that such transaction is then being
consummated or such conditions have been achieved, as applicable, release the Escrow Shares to the Initial Stockholders. The Escrow
Agent shall have no further duties hereunder after the disbursement or destruction of the Escrow Shares in accordance with this
Section 3.1.

 

    1

     

    

 

3.2 Notwithstanding Section
3.1, if the Underwriters do not exercise their over-allotment option to purchase an additional 1,500,000 Units of the Company in full
within 45 days of the date of the Prospectus (as described in the Underwriting Agreement), NorthStar Bio Ventures, LLC and Chardan Monterey
Investments LLC (together, the “Co-Sponsors”) agree that the Escrow Agent shall return to the Company for cancellation, at
no cost, the number of Escrow Shares held by the Co-Sponsors listed on Exhibit B determined by multiplying (a) 281,250
in the case of NorthStar Bio Ventures, LLC and 93,750 in the case of Chardan Monterey Investments, LLC, by (b) a fraction, (i) the numerator
of which is 1,500,000 minus the number of shares of Common Stock purchased by the Underwriters upon the exercise of their over-allotment
option, and (ii) the denominator of which is 1,500,000. The Company shall promptly provide notice to the Escrow Agent of the expiration
or termination of the Underwriters’ over-allotment option and the number of Units, if any, purchased by the Underwriters in connection
with their exercise thereof.

 

4. Rights of Initial
Stockholders in Escrow Shares.

 

4.1 Voting Rights as
a Stockholder. Subject to the terms of the Insider Letters described in Section 4.4 hereof and except as herein provided, the Initial
Stockholders shall retain all of their rights as stockholders of the Company during the Escrow Period, including, without limitation,
the right to vote such shares.

 

4.2 Dividends and Other
Distributions in Respect of the Escrow Shares. During the Escrow Period, all dividends payable in cash with respect to the Escrow
Shares shall be paid to the Initial Stockholders, but all dividends payable in stock or other non-cash property (“Non-Cash Dividends”)
shall be delivered to the Escrow Agent to hold in accordance with the terms hereof. As used herein, the term “Escrow Shares”
shall be deemed to include the Non-Cash Dividends distributed thereon, if any.

 

4.3 Restrictions on
Transfer. During the Escrow Period, the only permitted transfers of the Escrow Shares will be to (1) any person (including their affiliates
and stockholders) participating in the private placement of the private warrants, officers, directors, stockholders, employees and members
of NorthStar Bio Ventures, LLC and Chardan Monterey Investments LLC and their respective affiliates, (2) to the Company’s pre-IPO
stockholders or their respective affiliates, or to the Company’s offices, directors, advisors and employees (3) if the Initial Stockholder
is an entity, as a distribution to its, partners, stockholders or members upon its liquidation, (4) by bona fide gift to a member of the
Initial Stockholder’s immediate family or to a trust, the beneficiary of which is the Initial Stockholder or a member of the Initial
Stockholder’s immediate family for estate planning purposes, (5) by virtue of the laws of descent and distribution upon death of
the Initial Stockholder, (6) pursuant to a qualified domestic relations order, (7) by certain pledges to secure obligations incurred in
connection with purchases of the Company’s securities, (8) by private sales at prices no greater than the price at which the Insider
Shares were originally purchased or (9) for the cancellation of up to 375,000 shares of Common Stock subject to forfeiture to the extent
that the Underwriters’ over-allotment is not exercised in full or in part or in connection with the consummation of our initial
Business Combination, in each case (except for clause 9 or with our prior consent) on the condition that such transfers may be implemented
only upon the respective transferee’s written agreement to be bound by the terms and conditions of this Agreement and of the Insider
Letter (as defined below) signed by the Initial Stockholder transferring the Escrow Shares.

 

4.4 Insider Letters.
Each of the Initial Stockholders has executed a letter agreement with Chardan and the Company, the form of which is filed as an exhibit
to the Registration Statement (“Insider Letter”), respecting the rights and obligations of such Initial Stockholder
in certain events, including but not limited to the liquidation of the Company.

 

    2

     

    

 

5. Concerning the
Escrow Agent.

 

5.1 Good Faith
Reliance. The Escrow Agent shall not be liable for any action taken or omitted by it in good faith and in the exercise of its
own best judgment, and 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 Escrow Agent), 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 Escrow Agent to be genuine and to be signed or presented by the proper
person or persons. The Escrow Agent shall not be bound by any notice or demand, or any waiver, modification, termination or
rescission of this Agreement unless evidenced by a writing delivered to the Escrow Agent signed by the proper party or parties and,
if the duties or rights of the Escrow Agent are affected, unless it shall have given its prior written consent thereto.

 

5.2 Indemnification.
The Escrow Agent shall be indemnified and held harmless by the Company from and against any expenses, including counsel fees and disbursements,
or loss suffered by the Escrow Agent in connection with any action, suit or other proceeding involving any claim which in any way, directly
or indirectly, arises out of or relates to this Agreement, the services of the Escrow Agent hereunder, or the Escrow Shares held by it
hereunder, other than expenses or losses arising from the gross negligence or willful misconduct of the Escrow Agent. Promptly after the
receipt by the Escrow Agent of notice of any demand or claim or the commencement of any action, suit or proceeding, the Escrow Agent shall
notify the other parties hereto in writing. In the event of the receipt of such notice, the Escrow Agent, in its sole discretion, may
commence an action in the nature of interpleader in an appropriate court to determine ownership or disposition of the Escrow Shares or
it may deposit the Escrow Shares with the clerk of any appropriate court or it may retain the Escrow Shares pending receipt of a final,
non-appealable order of a court having jurisdiction over all of the parties hereto directing to whom and under what circumstances the
Escrow Shares are to be disbursed and delivered. The provisions of this Section 5.2 shall survive in the event the Escrow Agent resigns
or is discharged pursuant to Sections 5.5 or 5.6 below.

 

5.3 Compensation.
The Escrow Agent shall be entitled to reasonable compensation from the Company for all services rendered by it hereunder. The Escrow Agent
shall also be entitled to reimbursement from the Company for all expenses paid or incurred by it in the administration of its duties hereunder
including, but not limited to, all counsel, advisors’ and agents’ fees and disbursements and all taxes or other governmental
charges.

 

5.4 Further Assurances.
From time to time on and after the date hereof, the Company and the Initial Stockholders shall deliver or cause to be delivered to the
Escrow Agent such further documents and instruments and shall do or cause to be done such further acts as the Escrow Agent shall reasonably
request to carry out more effectively the provisions and purposes of this Agreement, to evidence compliance herewith or to assure itself
that it is protected in acting hereunder.

 

5.5 Resignation.
The Escrow Agent may resign at any time and be discharged from its duties as escrow agent hereunder by its giving the other parties hereto
written notice and such resignation shall become effective as hereinafter provided. Such resignation shall become effective at such time
that the Escrow Agent shall turn over to a successor escrow agent appointed by the Company, the Escrow Shares held hereunder. If no new
escrow agent is so appointed within the 60 day period following the giving of such notice of resignation, the Escrow Agent may deposit
the Escrow Shares with any court it reasonably deems appropriate.

 

5.6 Discharge of Escrow
Agent. The Escrow Agent shall resign and be discharged from its duties as escrow agent hereunder if so requested in writing at any
time by the other parties hereto, jointly, provided, however, that such resignation shall become effective only upon acceptance of appointment
by a successor escrow agent as provided in Section 5.5.

 

5.7 Liability. Notwithstanding
anything herein to the contrary, the Escrow Agent shall not be relieved from liability hereunder for its own gross negligence or its own
willful misconduct.

 

5.8 Waiver. The
Escrow Agent hereby waives any right of set-off or any other right, title, interest or claim of any kind (“Claim”)
in, or to any distribution of, the Trust Account (as defined in that certain Investment Management Trust Agreement, dated as of the date
hereof, by and between the Company and the Escrow Agent as trustee thereunder) and hereby agrees not to seek recourse, reimbursement,
payment or satisfaction for any Claim against the Trust Account for any reason whatsoever.

 

    3

     

    

 

6. Miscellaneous.

 

6.1 Governing Law.
This Agreement shall for all purposes be deemed to be made under and shall be construed 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.

 

6.2 Third Party Beneficiaries.
Each of the Initial Stockholders hereby acknowledges that Chardan is a third party beneficiary of this Agreement and this Agreement may
not be modified or changed without the prior written consent of Chardan.

 

6.3 Entire Agreement.
This Agreement contains the entire agreement of the parties hereto with respect to the subject matter hereof and, except as expressly
provided herein, may not be changed or modified except by an instrument in writing signed by the party to the charged.

 

6.4 Headings. The
headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation thereof.

 

6.5 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the respective parties hereto and their legal representatives, successors
and assigns.

 

6.6 Notices. Any
notice or other communication required or which may be given hereunder shall be in writing and either be delivered personally or be mailed,
certified or registered mail, or by private national courier service, return receipt requested, postage prepaid, and shall be deemed given
when so delivered personally or, if mailed, two days after the date of mailing, as follows:

 

	If to the Company, to:	Monterey Bio Acquisition Corporation
	 	17 State Street
	 	21st Floor
	 	New York, NY 10004
	 	Attn: Chief Executive Officer
	 	Email: sanjeev@montereybio.com

 

	If to a Stockholder, to his address set forth in Exhibit
    A.
	 
	and if to the Escrow Agent, to:	Continental Stock Transfer & Trust Company
	 	1 State Street, 30th Floor
	 	New York, New York 10004
	 	Attn: [●]
	 	Email: [●]

 

	A copy (which copy shall not constitute notice) sent hereunder shall be sent to:
	 
	 	Chardan Capital Markets LLC
	 	17 State Street, 21st Floor
	 	New York, NY 10004
	 	Attn: Jonas Grossman
	 	Email: jgrossman@chardan.com

 

	and:	Greenberg
    Traurig, LLP
	 	1750 Tysons Boulevard,
    Suite 1000
	 	McLean, Virginia 22102
	 	Attn: Jason Simon
	 	Email:
    simonj@gtlaw.com

 

The parties may change the
persons and addresses to which the notices or other communications are to be sent by giving written notice to any such change in the manner
provided herein for giving notice.

 

    4

     

    

 

6.7 Liquidation of the
Company. The Company shall give the Escrow Agent written notification of the liquidation and dissolution of the Company in the event
that the Company fails to consummate a Business Combination within the time period specified in the Prospectus.

 

[Signature Page Follows]

 

    5

     

    

 

WITNESS the execution of this
Agreement as of the date first above written.

 

	 	COMPANY:
	 	 
	 	MONTEREY BIO ACQUISITION CORPORATION
	 	 
	 	By:	 
	 	 	Name: Sanjeev Satyal
	 	 	Title:   Chief Executive Officer
	 	 	 
	 	CONTINENTAL STOCK TRANSFER & TRUST COMPANY
	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:
	 	 	 
	 	INITIAL STOCKHOLDERS:
	 	 
	 	NORTHSTAR BIO VENTURES, LLC
	 	 
	 	By:	 
	 	 	Name: 
	 	 	Title:   
	 	 	 
	 	CHARDAN MONTEREY INVESTMENTS LLC
	 	 	 
	 	By:	 
	 	 	Name: 
	 	 	Title:   

 

	 	 
	 	Sanjeev Satyal
	 	 
	 	 
	 	William McKeever
	 	 
	 	 
	 	 Jonas Grossman
	 	 
	 	 
	 	 Frances K. Heller
	 	 
	 	 
	 	 James R. Neal
	 	 
	 	 
	 	Sandip I. Patel, Esq. 
	 	 
	 	 

 

[Signature Page to Escrow Agreement]

 

     

     

    

 

EXHIBIT A

 

Initial Stockholders

 

	Name of Initial Stockholder	 	Number
 of Shares	 
	NorthStar Bio Ventures, LLC	 	 	1,912,500
	 
	Chardan Monterey Investments LLC	 	 	637,500
	 
	Sanjeev Satyal	 	 	150,000	 
	William McKeever	 	 	35,000	 
	Jonas Grossman	 	 	35,000	 
	Frances K. Heller	 	 	35,000	 
	James R. Neal	 	 	35,000	 
	Sandip I. Patel, Esq	 	 	35,000	 

 

     

     

    

 

EXHIBIT B

 

Escrow Shares

 

NorthStar Bio Ventures, LLC – 1,912,500

 

Chardan Monterey Investments LLC – 637,500

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