Document:

Unassociated Document

 

Form of Director and Officer Letter

 

___, 2011

Arcade China Acquisition Corp.

62 LaSalle Road, Suite 304

West Hartford, Connecticut 06107

Morgan Joseph TriArtisan LLC

600 Fifth Avenue

19th Floor

New York, New York 10022

 

Re:           Initial Public IPO

 

Gentlemen:

 

This letter (“Letter Agreement”) is being delivered to you in accordance with the Underwriting Agreement (the “Underwriting Agreement”) entered into by and between Arcade China Acquisition Corp., a Delaware corporation (the “Company”) and Morgan Joseph TriArtisan LLC (“MJ”), as representative of the several underwriters (the “Underwriters”), relating to an underwritten initial public IPO (the “IPO”), of 4,000,000 of the Company’s units (the “Units”), each comprised of one share of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), and one warrant exercisable for one share of the Common Stock (each, a “Warrant”).  The Units sold in the IPO shall be quoted and traded on the Over-the-Counter Bulletin Board pursuant to a registration statement on Form S-1 and prospectus (the “Prospectus”) filed by the Company with the Securities and Exchange Commission (the “Commission”).  Certain capitalized terms used herein are defined in paragraph 10hereof.

 

In order to induce the Company and the Underwriters to enter into the Underwriting Agreement and to proceed with the IPO, the Company has entered into those certain letter agreements, each dated as of ___ __, 2011, with Kravis Capital Limited and Arcade China Investment Partners, LLC.

 

Therefore, in order to induce the Company and the Underwriters to enter into the Underwriting Agreement and to proceed with the IPO and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the undersigned hereby agrees with the Company as follows:

 

1.     The undersigned agrees that if the Company seeks stockholder approval of a proposed Business Combination, then in connection with such proposed Business Combination, he shall vote any shares acquired by it in the IPO or the secondary public market in favor of such proposed Business Combination.

 

2.     a.           In order to minimize potential conflicts of interest that may arise from multiple corporate affiliations, the undersigned agrees that until the earliest of the Company’s initial Business Combination, 21 months after the closing of the Offering or such time as the undersigned ceases to be a director or officer of the Company, he shall present to the Company for its consideration, prior to presentation to any other entity, any suitable opportunity to acquire an operating business with an enterprise value of $40 million or more, subject to any fiduciary or contractual obligations he has as of the date hereof.

 

  

  

  

 

b.           The undersigned hereby agrees and acknowledges that (i) each of the Underwriters and the Company would be irreparably injured in the event of a breach by the undersigned of his obligations under paragraph 2(a) herein, (ii) monetary damages may not be an adequate remedy for such breach and (iii) the non-breaching party shall be entitled to injunctive relief, in addition to any other remedy that such party may have in law or in equity, in the event of such breach.

 

3.     The undersigned hereby agrees that: 

 

        a.       in the event that the Company fails to consummate a Business Combination (as defined in the Underwriting Agreement) within the Combination Period, the undersigned shall take all reasonable steps to cause the Company to (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible, redeem 100% of the shares of the Common Stock sold in the IPO (the “IPO Shares”) for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account (including any remaining interest), less taxes payable, which redemption will completely extinguish the rights of the holders of IPO Shares (including the right to receive further liquidation distributions, if any), subject to applicable law, and subject to the requirement that any refund of income taxes that were paid from the Trust Account which is received after the redemption of the IPO Shares be distributed to the former holders of record of such IPO Shares as of the date of redemption, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate the balance of the Company’s net assets to the remaining stockholders, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and other requirements of applicable law;

 

b.      it will take all reasonable action within its power, in the event the Company conducts the redemption of the IPO Shares pursuant to a tender offer, to cause the Company or its affiliates or any dealer-manager or its affiliates, or any advisors to the Company or any dealer-manager, (i) not to purchase or arrange to purchase shares outside the tender offer while such tender offer is open or (ii) enter into any agreement, understanding or arrangement with any other person in connection with their purchase or arrangement to purchase shares outside the tender offer, when such tender offer is open; and

 

c.      in the event the Company seeks to amend the Warrants (as defined the Warrant Agreement between the Company and Continental Stock Transfer and Trust Company, as Warrant Agent) in a manner that requires the written consent of the registered holders of 65% of the then outstanding Warrants under the Warrant Agreement, the undersigned will not vote any Warrants owned or controlled by the undersigned in favor of such amendment unless the registered holders of 65% of the IPO Warrants (as defined in the Warrant Agreement) vote in favor of such amendment.

  

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4.     The undersigned hereby waives, with respect to any IPO Shares acquired by it, the right to seek appraisal rights with respect to such shares and any redemption rights it may have in connection with the consummation of a Business Combination, including, without limitation, any such rights available in the context of a stockholder vote to approve such Business Combination or in the context of a tender offer made by the Company to purchase shares of the Common Stock (although the undersigned shall be entitled to redemption and liquidation rights with respect to any IPO Shares it holds if the Company fails to consummate a Business Combination within the Combination Period).

   

5.     Except as disclosed in the Prospectus, neither the undersigned nor any affiliate of the undersigned shall receive any finder’s fee, reimbursement, consulting fee, monies in respect of any repayment of a loan or other compensation prior to, or in connection with any services rendered in order to effectuate the consummation of the Company’s initial Business Combination (regardless of the type of transaction that it is), other than the following:

 

a.      repayment of a loan in the principal amount of $50,000 made to the Company by the undersigned pursuant to a promissory note dated March 1, 2011;

 

b.      payment of an aggregate of $7,500 per month to Arcade China Investment Partners, LLC and Kravis Capital Limited for office space, secretarial and administrative services, pursuant to a Letter Agreement for Administrative Services dated ______, 2011;

 

c.      reimbursement for any out-of-pocket expenses related to finding, identifying, investigating and completing an initial Business Combination, so long as no proceeds of the IPO held in the Trust Account may be applied to the payment of such expenses prior to the consummation of a Business Combination; and

 

d.      repayment of loans, if any, and on such terms as to be determined by the Company from time to time, to finance transaction costs in connection with an intended initial Business Combination, provided, that, if the Company does not consummate an initial Business Combination, a portion of the working capital held outside the Trust Account may be used by the Company to repay such loaned amounts so long as no proceeds from the Trust Account are used for such repayment.

 

6.     The undersigned has full right and power, without violating any agreement to which it is bound (including, without limitation, any non-competition or non-solicitation agreement with any employer or former employer), to enter into this Letter Agreement and to serve as an officer and director of the Company.

 

7.     The undersigned agrees to be a member of the board of directors and an officer of the Company until the earlier of the completion by the Company of its initial Business Combination and the liquidation of the Company. The undersigned’s biographical information furnished to the Company and MJ is true and accurate in all respects and does not omit any material information with respect to the undersigned’s background. The undersigned’s questionnaire furnished to the Company and MJ is true and accurate in all respects. The undersigned represents and warrants that:

 

a.      he is not subject to, or a respondent in, any legal action for, any injunction, cease-and-desist order or order or stipulation to desist or refrain from any act or practice relating to the offering of securities in any jurisdiction;

  

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b.      he has never been convicted of, or pleaded guilty to, any crime (i) involving fraud, (ii) relating to any financial transaction or handling of funds of another person, or (iii) pertaining to any dealings in any securities and he is not currently a defendant in any such criminal proceeding; and

 

c.      he has never been suspended or expelled from membership in any securities or commodities exchange or association or had a securities or commodities license or registration denied, suspended or revoked.

 

8.     The undersigned acknowledges and agrees that the Company will not consummate any Business Combination that involves a company which is affiliated with the undersigned unless the Company obtains an opinion from an independent investment banking firm which is a member of FINRA that the Business Combination is fair to the Company’s unaffiliated stockholders from a financial point of view.

 

9.     The undersigned acknowledges that he has no right, title, interest or claim of any kind in or to any monies held in the Trust Account or any other asset of the Company as a result of any liquidation of the Company with respect to the Initial Shares. The undersigned hereby further waives, with respect to any shares of the Common Stock beneficially held by him, the right to seek appraisal rights with respect to such shares and any redemption rights it may have in connection with the consummation of a Business Combination, including, without limitation, any such rights available in the context of a stockholder vote to approve such Business Combination or in the context of a tender offer made by the Company to purchase shares of the Common Stock (although the undersigned shall be entitled to redemption and liquidation rights with respect to any shares of the Common Stock (other than the Initial Shares) he holds if the Company fails to consummate a Business Combination within 21 months from the date of the closing of the Offering).

 

10.   As used herein, (i) “Business Combination” shall mean a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination, involving the Company and one or more businesses or assets in the People’s Republic of China, or control of such businesses or assets through contractual arrangements; (ii) “Public Stockholders” shall mean the holders of securities issued in the IPO; (iii) “Combination Period” shall mean the period ending 21 months from the consummation of the IPO; and (iv) “Trust Account” shall mean the trust fund into which a portion of the net proceeds of the IPO and the sale of the Private Placement Warrants shall be deposited.

 

11.   This Letter Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersede all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof or the transactions contemplated hereby.  This Letter Agreement may not be changed, amended, modified or waived (other than to correct a typographical error) as to any particular provision, except by a written instrument executed by all parties hereto.

 

  

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12.   No party hereto may assign either this Letter Agreement or any of its rights, interests, or obligations hereunder without the prior written consent of the other party.  Any purported assignment in violation of this paragraph shall be void and ineffectual and shall not operate to transfer or assign any interest or title to the purported assignee.  This Letter Agreement shall be binding on the undersigned and each of its successors, heirs, personal representatives and assigns.

 

13.   This Letter 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.  The parties hereto (i) agree that any action, proceeding, claim or dispute arising out of, or relating in any way to, this Letter Agreement shall be brought and enforced in the courts of the State of New York for the Southern District of New York, and irrevocably submit to such jurisdiction and venue, which jurisdiction and venue shall be exclusive and (ii) waive any objection to such exclusive jurisdiction and venue or that such courts represent an inconvenient forum.

 

14.   Any notice, consent or request to be given in connection with any of the terms or provisions of this Letter 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 facsimile transmission.

 

15.   In the event of the liquidation of the Trust Account, the undersigned agrees to indemnify and hold harmless the Company against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, whether pending or threatened, or any claim whatsoever) to which the Company may become subject as a result of any claim by (i) any third party for services rendered or products sold to the Company or (ii) a prospective target business with which the Company has discussed entering or has entered into an acquisition agreement (a “Target ”); provided, however, that such indemnification of the Company by the undersigned shall apply only (i) to the extent necessary to ensure that such claims by a third party for services rendered or products sold to the Company or a Target do not reduce the amount of funds in the Trust Account to below $10.00 per IPO Share (or approximately $9.97 per IPO Share if the Underwriters’ over-allotment option, as described in the Prospectus, is exercised in full, or such pro rata amount in between $10.00 and $9.97 per IPO Share that corresponds to the portion of the over-allotment option that is exercised), and (ii) only if such third party or Target has not executed an agreement waiving claims against and all rights to seek access to the Trust Account (substantially in the form attached to the Underwriting Agreement) whether or not such agreement is enforceable.  In the event that any such executed waiver is deemed to be unenforceable against such third party, the undersigned shall not be responsible for any liability as a result of any such third party claims.  Notwithstanding any of the foregoing, such indemnification of the Company by the undersigned shall not apply as to any claims under the Company’s obligation to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended.  The undersigned shall have the right to defend against any such claim with counsel of its choice reasonably satisfactory to the Company if, within 15 days following written receipt of notice of the claim to the undersigned, the undersigned notifies the Company in writing that it shall undertake such defense.

 

16.  The undersigned agrees that he will not propose any amendment to the Company's amended and restated certificate of incorporation that would affect the substance or timing of the Company's obligation to redeem 100% of the IPO Shares if the Company does not complete a Business Combination with 21 months from the closing of the IPO, unless the Company provides its Public Stockholders with the opportunity to redeem their IPO Shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest but net of franchise and income taxes payable, divided by the number of then outstanding IPO Shares.

[Remainder of page intentionally left blank]

 

  

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IN WITNESS WHEREOF, each of the undersigned have caused this Agreement to be executed as of the date first written above.

	
COMPANY:

	  
	
ARCADE CHINA ACQUISITION CORP.

	  
	
By:  

	
   

	  	
Name:

	  
	  	
Title:

	  
	  	
Address:  

	
62 LaSalle Road, Suite 304

	  	  	
West Hartford, CT

	  	  	
Fax: (860) 236-6325

	  
	
OFFICER/DIRECTOR

	  
	
   

	
John Chapman

	  
	
   

	
Jonathan Furer

 

  

6Unassociated Document

 

INVESTMENT MANAGEMENT TRUST AGREEMENT

 

This agreement (“Agreement”) is made as of ___________, 2011 by and between Arcade China Acquisition Corp., a Delaware corporation with offices located at 62 LaSalle Road, Suite 304, West Hartford, Connecticut 06107 (the “Company”), and Continental Stock Transfer & Trust Company, a New York corporation with offices at 17 Battery Place, New York, New York 10004 (the “Trustee”).

 

WHEREAS, the Company’s registration statement, as amended, on Form S-1, No. 333-_______ (the “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 (capitalized terms used herein and not otherwise defined shall have the meanings set forth for such terms in the Registration Statement, whether or not capitalized therein); and

 

WHEREAS, Morgan Joseph Triartisan LLC (“Morgan Joseph”) is acting as the representative of the underwriters in the IPO pursuant to an underwriting agreement (the “Underwriting Agreement”); and

 

WHEREAS, simultaneously with the IPO, Arcade China Investment Partners, LLC, Kravis Capital Limited and the underwriters (including Morgan Joseph) will be purchasing an aggregate of 2,666,667 warrants (the “Private Placement Warrants”) from the Company for an aggregate purchase price of $2,000,000; and

 

WHEREAS, as described in the Registration Statement, and in accordance with the Company’s Amended and Restated Certificate of Incorporation, $40,000,000 of the gross proceeds of the IPO and sale of the Private Placement Warrants ($45,850,000 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 $0.0001 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 aggregate amount to be delivered to the Trustee, including any amounts constituting a tax refund of the Company’s income tax payments, 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, pursuant to the Underwriting Agreement, a portion of the Property equal to (A) a deferred fee of 0.5% of the gross proceeds of the IPO (the “Deferred Fee”) payable to the underwriters (including Morgan Joseph), and (B) a contingent fee equal to 2.5% of the aggregate amount of the Property (excluding the Deferred Fee) will be released to the Company and/or to the target of the Company’s Business Combination upon consummation of the Company’s initial Business Combination payable to Morgan Joseph and such other firms, if any, who are instrumental in advising the Company in connection with the consummation of the Business Combination (the “Contingent Fee”), in each case, solely upon the consummation of the Company’s Business Combination and pursuant to the terms of the Underwriting Agreement;

 

  

  

  

WHEREAS, pursuant to the Underwriting Agreement any tax refund received by the Company on its income tax payments will become a portion of the Property; 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;

 

NOW 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, including the terms of Section 11-51-302(6) of the Colorado Statute, in a segregated trust account (the “Trust Account”) established by the Trustee at JPMorgan Chase N.A. and at a brokerage institution selected by the Company that is satisfactory to 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 selected by the Company that holds itself out as a money market fund meeting the conditions of paragraphs (c)(2), (c)(3), (c)(4) and (c)(5) of Rule 2a-7 promulgated under the Investment Company Act of 1940 which invest only in direct United States government treasury obligations, as determined by the Company; except however, that any portion of the Property constituting a tax refund of the Company’s income tax payments shall not be invested as otherwise set forth in this paragraph 1(c); in this regard, it is understood that the Trust Account will earn no interest while account funds are uninvested awaiting Company instructions hereunder.

 

(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 Morgan Joseph 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 tax 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, so long as the Company shall have advanced funds sufficient to pay the Trustee’s expenses incident thereto;

 

(h)           Render to the Company, 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;

 

  

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(i)           Commence liquidation of the Trust Account only after and promptly after receipt of, and only in accordance with, the terms of a letter (the “Termination Letter”), in a form substantially similar to that attached hereto as either Exhibit A, Exhibit B or Exhibit C hereto, signed on behalf of the Company by its Chief Executive Officer, Executive Chairman or Chief Financial Officer 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; provided, however, that in the event that a Termination Letter has not been received by the Trustee by the date which is the 21 month anniversary of the closing date of the IPO (the “Closing Date”) (the “Expiration Date”), the Trust Account shall be liquidated in accordance with the procedures set forth in the Termination Letter attached as Exhibit B hereto and the Property distributed to the Public Stockholders of record on the Expiration Date.  In the event the Trustee receives a Termination Letter in a form substantially similar to Exhibit B hereto, or if the Trustee begins to liquidate the Property because it has received no such Termination Letter by the Expiration Date, following the liquidation of the Property, the Trustee shall keep the Trust Account open until the earlier to occur of (i) twelve (12) months following the date the Property has been distributed to the Public Stockholders; (ii) the Trustee’s receipt of a Termination Letter in a form substantially similar to Exhibit C hereto; or (iii) a notice from the Company’s independent auditors stating that the Company will not be receiving any tax refund on its income tax payments.  The provisions of this paragraph 1(i) may not be modified, amended or deleted under any circumstances; and

 

(j)           Make distributions of the income from the Trust Account in accordance with the provisions of Section 2 of this Agreement.

 

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 D, the Trustee shall distribute to the Company from the Trust Account the amount necessary to cover any tax obligation owed by the Company and, to the extent there is not sufficient cash in the Trust Account to pay such tax obligation, liquidate such assets held in the Trust Account as shall be designated by the Company in writing to make such distribution.  The written request of the Company referenced above shall constitute presumptive evidence that the Company is entitled to said funds, and the Trustee has no responsibility to look beyond said request.

 

(b)           Upon written request from the Company, which shall be given in a form substantially similar to that attached hereto as Exhibit C, the Trustee shall distribute to the Company’s Public Stockholders amounts previously deposited by the Company into the Trust Account that the Company has represented to be tax refund(s) of the Company’s income tax payments.

 

(c)           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 E, the Trustee shall distribute to the Company from the Trust Account interest earned on the Trust Account, net of taxes payable, up to a maximum of $500,000.

 

  

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(d)           The limited distributions referred to in paragraphs 2(a), 2(b) and 2(c) above shall be made only from income collected on the Property, and in no event shall the payments authorized by paragraph 2(a), 2(b) and 2(c) cause the amount in the Trust Account to fall below the amount initially deposited into the Trust Account.  Except as provided in paragraph 2(a), 2(b) and 2(c) above, no other distributions from the Trust Account shall be permitted except in accordance with paragraph 1(i) hereof; and

 

(e)           In all cases, the Company shall promptly provide Morgan Joseph 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 Executive Chairman, Chief Executive Officer or Chief Financial Officer, and other officers as specified in paragraph 1(i).  In addition, except with respect to its duties under paragraphs 1(i), 2(a), 2(b) and 2(c) 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 and with reasonable care 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)           Subject to the provisions of paragraph 5 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 action taken by the trustee hereunder or 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;

 

  

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(c)           Pay the Trustee the fees set forth on Schedule A hereto, including an initial acceptance fee, an annual fee and a transaction processing fee for each disbursement made pursuant to paragraphs 2(a) and 2(b), 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 and further agreed that any fees owed to the Trustee shall be deducted by the Trustee from the disbursements made to the Company pursuant to paragraphs 1(i) solely in connection with the consummation of a Business Combination and 2(c).  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 Closing Date.  The Trustee shall refund to the Company the annual fee (on a pro rata basis) with respect to any period after the liquidation of the Trust Account.  The Company shall not be responsible for any other fees or charges of the Trustee except as set forth in this Section 3(c) and as may be provided in Section 3(b) hereof;

    

(d)           In connection with the vote, if any, 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 verifying the vote of the Company’s stockholders regarding such Business Combination;

 

(e)           In connection with the Trustee acting as Paying/Disbursing Agent pursuant to Exhibit B, Exhibit C or Exhibit D, not give the Trustee disbursement instructions which would be prohibited under this Agreement;

 

(f)           Provide Morgan Joseph with a copy of any Termination Letter(s) and/or any other correspondence that the Company sends to the Trustee with respect to any proposed withdrawal from the Trust Account promptly after it issues the same;

 

(g)           Promptly after the Deferred Fee and Contingent Fee shall become determinable on a final basis, provide the Trustee notice in writing (with a copy to Morgan Joseph) of the total amount of the Deferred Fee and Contingent Fee; and

 

(h)           In the event the Company is entitled to receive a tax refund on its income tax payments, and promptly after the amount of such refund is determined on a final basis, provide the Trustee with notice in writing (with a copy to Morgan Joseph) of the amount of such income tax refund.

 

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, fraud 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 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;

 

  

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(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, fraud 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, which counsel may be company counsel, 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 and with reasonable care, 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)           File local, state and/or Federal tax returns or information returns with any taxing authority with respect to 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 or report any taxes on behalf of the Trust Account other than pursuant to paragraph 2(a).

 

(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.

 

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

 

5.           Trust Account Waiver.  The Trustee has no right of set-off or any right, title, interest or claim of any kind (a “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 in the future.  In the event the Trustee has any Claim against the Company under this Agreement, including, without limitation, under paragraph 3(b), the Trustee will pursue such Claim solely against the Company and not against the Property or any monies in the Trust Account.

 

  

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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.  Except for any liability arising out of the Trustee’s gross negligence, fraud or willful misconduct, the Trustee shall not be liable for any loss, liability or expense resulting from any error in the information or transmission of the wire.

 

(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.

   

  

7

  

   

(c)           This Agreement contains the entire agreement and understanding of the parties hereto with respect to the subject matter hereof.  Except for paragraph 1(i) (which may not be amended under any circumstances), this Agreement or any provision hereof may only be changed, amended or modified (other than to correct a typographical error) by a writing signed by each of the parties hereto.  Furthermore, this Agreement or any provision hereof may only be changed, amended or modified pursuant to this paragraph 7(c) hereof with the Consent of the Public Stockholders; provided, however, that no such change, amendment or modification may be made to paragraph 1(i) hereof (which may not be amended under any circumstances), it being the specific intention of the parties hereto that each Public Stockholder is, and shall be, a third party beneficiary of this paragraph 7(c) with the same right and power to enforce this Section 6(c) as the other parties hereto.  For purposes of this paragraph 7(c), the “Consent of the Public Stockholders” means receipt by the Trustee of a certificate from the inspector of elections of the stockholder meeting certifying that either (a) the Public Stockholders of record as of a record date established in accordance with Section 213(a) of the Delaware General Corporation Law, as amended, who hold sixty-five percent (65%) or more of all then outstanding shares of the Common Stock, have voted in favor of such change, amendment or modification, or (b) the Public Stockholders of record as of the record date who hold sixty-five percent (65%) or more of all then outstanding shares of the Common Stock, have delivered to such entity a signed writing approving such change, amendment or modification.  Except for any liability arising out of the Trustee’s gross negligence, fraud or willful misconduct, the Trustee may rely conclusively on the certification from the inspector or elections referenced above and shall be relieved of all liability to any party for executing the proposes amendment in reliance thereon.

(d)           The parties hereto consent to the personal 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

17 Battery Place

New York, New York 10004

Attn:  Steven G. Nelson, Chairman, and

Frank A. DiPaolo, CFO

Fax No.: (212) 509-5150

if to the Company, to:

Arcade China Acquisition Corp.

62 LaSalle Road, Suite 304

West Hartford, Connecticut 06107

Attn:  John Chapman, Chief Financial Officer

Fax No.: (860) 236-6325

in either case with a copy to:

Morgan Joseph TriArtisan LLC

600 Fifth Avenue, 19th Floor

New York, New York 10020

Attn:  Tina Pappas, Managing Director

Fax No.:  (212) 218-3760

 

  

8

  

 

(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.  In the event that the Trustee has a claim against the Company under this Agreement, the Trustee will pursue such claim solely against the Company and not against the Property held in the Trust Account.

 

(h)           For so long as the Property is held in the Trust Account, Morgan Joseph, on behalf of the other underwriters in the IPO, shall be third party beneficiaries, on behalf of itself and such other underwriters, with respect this Agreement and shall be entitled to enforce the terms of this Agreement to the same extent as if it were party to this Agreement.

 

[Signature page follows]

 

  

9

  

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:

	  	  	  
	
ARCADE CHINA ACQUISITION CORP.

	  	  	  
	  	
By:  

	

       

	  	  	
Name:

	  	  	
Title:

 

  

10

  

SCHEDULE A

	
Fee Item

	  	
Time and method of payment

	  	
Amount

	  	  	  	  	  
	
Initial acceptance fee

	  	
Initial closing of IPO by wire transfer

	  	
$1,000

	  	  	  	  	  
	
Annual fee

	  	
First year, initial closing of IPO by wire transfer; thereafter on the anniversary of the closing date of the IPO by wire transfer or check

	  	
$5,000

	  	  	  	  	  
	
Transaction processing fee for disbursements to Company under paragraphs 2(a) or 2(b)

	  	
Deduction by Trustee from accumulated income following disbursement made to Company under paragraph 2

	  	
$250

	  	  	  	  	  
	
Paying agent services for distributions made to shareholders pursuant to paragraphs 1(i) and 2(c)

	
  

	
Liquidation of trust pursuant to 1(i) and distribution of tax refunds, as directed by the Company pursuant to letter instruction in the form of Exhibit F

	
  

	
Usual and customary service fees from time to time applicable to Paying Agent services.

 

  

11

  

EXHIBIT A

 

[Letterhead of Company]

 

[Insert date]

Continental Stock Transfer

& Trust Company

17 Battery Place

New York, New York 10004

Attn:  Steven Nelson and Frank Di Paolo

 

Re:           Trust Account No.     -           Termination Letter

 

Gentlemen:

 

Pursuant to paragraph 1(i) of the Investment Management Trust Agreement between Arcade China Acquisition Corp. (“Company”) and Continental Stock Transfer & Trust Company (“Trustee”), dated as of _________, 2011 (“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 liquidate the Trust Account investments on________________ , and to transfer the proceeds to the above referenced checking account at JPMorgan Chase N.A. 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 checking account awaiting distribution, Trust Account will not earn any interest or dividends.

 

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)]1 joint written instructions signed by the Company and Morgan Joseph with respect to the transfer of the funds held in the Trust Account, including the Deferred Fee and Contingent Fee (“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 be 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.

 

a.        _______________________

1 Include only if there is a stockholder vote.

 

  

12

  

 

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 as soon thereafter as possible.

	  	
Very truly yours,

	  	  
	  	
ARCADE CHINA ACQUISITION CORP.

	  	  	  	  
	  	  	
By:  

	

     

	  	  	  	
Name:

	  	  	  	
Title:

	  	  	  	  
	  	  	
By:

	

     

	  	  	  	
Name:

	  	  	  	
Title:

 

cc: Morgan Joseph TriArtisan LLC

  

  

13

  

  

EXHIBIT B

 

[Letterhead of Company]

 

[Insert date]

Continental Stock Transfer

  & Trust Company

17 Battery Place

New York, New York 10004

Attn:  Steven Nelson and Frank Di Paolo

 

Re:           Trust Account No.    -       Termination Letter

 

Gentlemen:

 

Pursuant to paragraph 1(i) of the Investment Management Trust Agreement between Arcade China Acquisition Corp. (“Company”) and Continental Stock Transfer & Trust Company (“Trustee”), dated as of ________, 2011 (“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 Certificate of Incorporation, as described in the Company’s prospectus relating to its IPO.

 

In accordance with the terms of the Trust Agreement, we hereby authorize you to liquidate all the Trust Account investments on ______________2011 and to transfer the total proceeds to the Trust Checking Account at JPMorgan Chase N.A. to await distribution to the stockholders.  The Company has selected ____________ 20 ___as the record date for the purpose of determining the stockholders entitled to receive their share of the liquidation proceeds.  You agree to be the Paying Agent of record and in your separate capacity as Paying Agent and to distribute said funds directly to the Company’s stockholders (other than with respect to the initial, or insider shares) in accordance with the terms of the Trust Agreement, the Certificate of Incorporation of the Company, and your standard fees.  Upon the distribution of all the funds in the Trust Account, your obligations under the Trust Agreement shall be terminated, provided, however, that in the event the Company receives a refund of taxes paid on its income tax obligation, the Trustee agrees to immediately distribute the proceeds of such refund on a pro-rata basis to each stockholder receiving a distribution hereunder.

	  	  	
Very truly yours,

	  	  	  	  
	  	
ARCADE CHINA ACQUISITION CORP.

	  	  	
By:  

	

     

	  	  	  	
Name:

	  	  	  	
Title:

	  	  	  	  
	  	  	
By:

	

     

	  	  	  	
Name:

	  	  	  	
Title:

 

cc: Morgan Joseph TriArtisan LLC

 

  

14

  

EXHIBIT C

 

[Letterhead of Company]

 

[Insert date]

Continental Stock Transfer

  & Trust Company

17 Battery Place

New York, New York 10004

Attn:  Steven Nelson and Frank Di Paolo

 

Re:           Trust Account No.    -       Termination Letter

 

Gentlemen:

 

Pursuant to paragraph 1(i) of the Investment Management Trust Agreement between Arcade China Acquisition Corp. (“Company”) and Continental Stock Transfer & Trust Company (“Trustee”), dated as of ________, 2011 (“Trust Agreement”), this is to advise you that the Company will be receiving a refund of a portion of the taxes it paid to satisfy its income tax obligation.

 

In accordance with the terms of the Trust Agreement, we hereby authorize you to deposit the proceeds of such tax refund in the Trust Account, and to transfer the total proceeds to the Trust Checking Account at JPMorgan Chase N.A. for immediate distribution to the Company’s stockholders (the “Former Stockholders”) of record as of the date on which the Company redeemed the shares of common stock sold in its initial public offering.  You agree to be the Paying Agent of record and in your separate capacity as Paying Agent and to distribute said funds directly to the Former Stockholders (other than with respect to the initial, or insider shares) in accordance with the terms of the Trust Agreement, Certificate of Incorporation of the Company, and your standard fees.  Upon the distribution of all the funds in the Trust Account, your obligations under the Trust Agreement shall be terminated.

	  	
Very truly yours,

	  	  
	  	
ARCADE CHINA ACQUISITION CORP.

	  	  	  
	  	
By:   

	

     

	  	  	
Name:

	  	  	
Title

	  	  	  
	  	
By:

	

     

	  	  	
Name:

	  	  	
Title:

 

cc: Morgan Joseph TriArtisan LLC

 

  

15

  

EXHIBIT D

 

[Letterhead of Company]

 

[Insert date]

Continental Stock Transfer

  & Trust Company

17 Battery Place, 8th Floor

New York, New York 10004

Attn:  Steven Nelson Cynthia Jordan

 

Re:           Trust Account No.

 

Gentlemen:

 

Pursuant to paragraph 2(a) of the Investment Management Trust Agreement between Arcade China Acquisition Corp. (“Company”) and Continental Stock Transfer & Trust Company (“Trustee”), dated as of ___________, 2011 (“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 the tax obligations as set forth on the attached tax return or tax statement.  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]

	  	
ARCADE CHINA ACQUISITION CORP.

	  	  	  	  
	  	  	
By:  

	

       

	  	  	  	
Name:

	  	  	  	
Title:

	  	  	  	  
	  	  	
By:

	

       

	  	  	  	
Name:

	  	  	  	
Title:

 

cc: Morgan Joseph TriArtisan LLC

 

  

16

  

EXHIBIT E

 

[Letterhead of Company]

 

[Insert date]

Continental Stock Transfer

  & Trust Company

17 Battery Place, 8th Floor

New York, New York 10004

Attn:  Steven Nelson Cynthia Jordan

 

Re:           Trust Account No.

 

Gentlemen:

 

Pursuant to paragraph 2(c) of the Investment Management Trust Agreement between Arcade China Acquisition Corp. (“Company”) and Continental Stock Transfer & Trust Company (“Trustee”), dated as of ___________, 2011 (“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 to be used to fund the Company’s working capital requirements, which amount will bring the total amount requested to date by the Company pursuant to such paragraph 2(c) of the Trust Agreement to $_______ of the maximum permissible amount of $500,000.  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]

	  	
ARCADE CHINA ACQUISITION CORP.

	  	  	  	  
	  	  	
By:

	

       

	  	  	  	
Name:

	  	  	  	
Title:

	  	  	  	  
	  	  	
By:  

	

       

	  	  	  	
Name:

	  	  	  	
Title:

 

cc: Morgan Joseph TriArtisan LLC

 

  

17

  

 

EXHIBIT F

	
AUTHORIZED INDIVIDUAL(S)

	  	
AUTHORIZED

	
FOR TELEPHONE CALL BACK

	  	
TELEPHONE NUMBER(S)

	  	  	  
	
Company:

	  	  
	  	  	  
	
Arcade China Acquisition Corp.

	  	  
	
62 LaSalle Road, Suite 302

	  	  
	
West Hartford, Connecticut  06107

	  	  
	
Attn:  John Chapman, Chief Financial Officer

	  	
(860) ____________

	  	  	  
	
Trustee:

	  	  
	  	  	  
	
Continental Stock Transfer

	  	  
	
& Trust Company

	  	  
	
17 Battery Place

	  	  
	
New York, New York 10004

	  	  
	
Attn:  Frank Di Paolo, CFO

	
  

	
(212) 845-3270

  

18

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