SECURITIES ESCROW AGREEMENT
SECURITIES
ESCROW AGREEMENT, dated as of ,
2006
(“Agreement”), by and among MIDDLE KINGDOM ALLIANCE CORPORATION, a corporation
organized under the laws of Delaware (“Company”), HIGH CAPITAL FUNDING LLC,
XXXXX X. XXXXXXXX, XXXX X. XXXXXX, XXXXXXX XXXXXX XXXXXXXXX III FAMILY TRUST,
XXXXXX INTERNATIONAL LIMITED, MTP HOLDINGS LTD., XXXXX XXX, and XXXXXXX XX
(collectively “Initial Shareholders”) and Continental Stock Transfer &
Trust Company (“Escrow Agent”).
WHEREAS,
the Company has entered into an Underwriting Agreement, dated ,
2006
(“Underwriting Agreement”), with I-Bankers Securities, Inc. (“I-Bankers”),
Newbridge Securities Corp. and Westminster Securities Corp. (the
“Representatives”) acting as representative of the several underwriters
(collectively, the “Underwriters”), pursuant to which, among other matters, the
Underwriters have agreed to purchase 180,000 Series A Units and 3,000,000
Series
B Units (the “Units”) of the Company. Each Series A Unit consists of one share
of Class B common stock, $0.001 par value (“Class B Common Stock”), and five
Class A warrants (the “Class A Warrants”), each to purchase one share of Common
Stock. Each Series B Unit consists of one share of common stock, $0.001
par
value (“Common Stock”), and one Class B warrant (the “Class B Warrants”), each
to purchase one share of Common Stock, all as more fully described in the
Company’s final Prospectus, dated ,
2006
(“Prospectus”) comprising part of the Company’s Registration Statement on Form
S-1 (File No. 333-133475) under the Securities Act of 1933, (together,
the
“Registration Statement”), which was declared effective on ,
2006
(“Effective Date”).
WHEREAS,
the Initial Shareholders have agreed as a condition of the sale of the Units
to
deposit their securities of the Company, consisting of Class A Units (which
includes Common Stock and Class A Warrants) and certain additional shares of
Common Stock (such shares of Common Stock, excluding the Common Stock included
in the Class A Units, the “Initial Common Stock”), as set forth opposite their
respective names in Exhibit
A
attached
hereto (collectively “Escrow Securities”), in escrow as hereinafter provided.
WHEREAS,
the Company and the Initial Shareholders desire that the Escrow Agent accept
the
Escrow Securities, in escrow, to be held and disbursed as hereinafter provided.
IT
IS
AGREED:
1. Appointment
of Escrow Agent. The Company and the Initial Shareholders 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 Securities. On or before the Effective Date, each of the Initial
Shareholders shall deliver to the Escrow Agent certificates representing
his
respective Escrow Securities, to be held and disbursed subject to the terms
and
conditions of this Agreement; provided however, that I-Bankers,
on behalf of the Representatives, may release any Initial Shareholder from
this
escrow obligation if I-Bankers, on behalf of the Representatives, determines,
in
its sole discretion, that the circumstances reasonably warrant such release.
Each Initial Shareholder acknowledges that the certificate representing his
Escrow Securities is legended to reflect the deposit of such Escrow Securities
under this Agreement.
3. Disbursement
of the Escrow Securities. The Escrow Agent shall: (i) hold the Initial Common
Stock until the third anniversary of the Effective Date, and (ii) hold the
Class
A Units (including the Common Stock and Class A Warrants underlying the Class
A
Units) until the earlier of (a) the completion of a Business Combination
(as
defined in the Prospectus) or (b) liquidation of the Trust Account (as defined
in the Investment Management Trust Agreement between the Escrow Agent and
the
Company) (“Escrow Period”), on which date it shall, upon written instructions
from each Initial Shareholder, disburse each of the Initial Shareholder’s Escrow
Securities to such Initial Shareholder; provided, however, that if, after
the
Company consummates a Business Combination, it (or the surviving entity)
subsequently consummates a liquidation, stock exchange or other similar
transaction which results in all of the stockholders of such entity having
the
right to exchange their securities for cash, securities or other property,
then
the Escrow Agent will, upon receipt of a certificate, executed by the Chief
Executive Officer or Chairman of the Board of the Company
and
countersigned by I-Bankers, acting on behalf of the Representatives, in form
reasonably acceptable to the Escrow Agent, that such transaction is then
being
consummated, release the Escrow Securities to the Initial Shareholders upon
consummation of the transaction so that they can similarly participate; provided
further that the time period set forth above may be waived by I-Bankers,
acting
on behalf of the Representatives. The Escrow Agent shall have no further
duties
hereunder after the disbursement or destruction of the Escrow Securities
in
accordance with this Section 3.
4. Rights
of
Initial Shareholders in Escrow Securities.
4.1 Voting
Rights as a Shareholder.
Subject
to the terms of the Insider Letter described in Section 4.4 hereof and
except as herein provided, the Initial Shareholders 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 Securities. During the
Escrow Period, all dividends payable in cash with respect to the Escrow
Securities shall be paid to the Initial Shareholders, but all dividends payable
in securities 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 Securities” shall be deemed to include the
Non-Cash Dividends distributed thereon, if any.
4.3 Restrictions
on Transfer. During the Escrow Period, no sale, transfer or other
disposition may be made of any or all of the Escrow Securities except
(i) by gift to a member of Initial Shareholder’s immediate family or to a
trust, the beneficiary of which is an Initial Shareholder or a member of an
Initial Shareholder’s immediate family, (ii) by virtue of the laws of
descent and distribution upon death of any Initial Shareholder,
(iii) pursuant to a qualified domestic relations order, or
(iv) pursuant to a transfer of record ownership whereby there is no change
in beneficial ownership; provided, however, that such permissive 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
signed by the Initial Shareholder transferring the Escrow Securities. During
the
Escrow Period, the Initial Shareholders shall not pledge or grant a security
interest in the Escrow Securities or grant a security interest in their rights
under this Agreement.
4.4 Insider
Letters. Each of the Initial Shareholders has executed a letter agreement
with the Representative and the Company, which is filed as an exhibit to the
Registration Statement (“Insider Letter”), respecting the rights and obligations
of such Initial Shareholder in certain events, including but not limited to
the
liquidation of the Company.
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 Securities 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 Securities or it may deposit the Escrow Securities with the clerk
of
any appropriate court or it may retain the Escrow Securities 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
Securities 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.
2
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 Shareholders 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 Securities
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 Securities 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.
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.
6.2 Third
Party Beneficiaries. Each of the Initial Shareholders hereby acknowledges
that the Underwriters are third party beneficiaries of this Agreement.
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:
Middle
Kingdom Alliance Corporation
000
Xxxxx
Xxxxxxx Xxxxxx
Xxxxx
000
Xxxxxxx,
XX 00000
Attn:
Xxxxx X. Xxxxxxxx, Esq.
Tel:
(000) 000-0000
Fax:
(000) 000-0000
3
with
a
copy to:
Cozen
X’Xxxxxx
The
Army
& Navy Club Building
0000
X
Xxxxxx, XX, Xxxxx 0000
Xxxxxxxxxx,
XX 00000
Attn:
Xxxxx X. Xx Xxxxxxx
Tel:
(000) 000-0000
Fax:(000)
000-0000
If
to a
Stockholder, to his address set forth in Exhibit
A.
and
if to
the Escrow Agent, to:
Continental
Stock Transfer & Trust Company
00
Xxxxxxx Xxxxx, 0xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Xxxxxx X. Xxxxxx, Chairman
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.
6.7 Liquidation
of 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(s) specified in the
Prospectus.
6.8 Amendment.
This Agreement contains the entire agreement and understanding of the parties
hereto with respect to the subject matter hereof. 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 I-Bankers acting on behalf of the
Representatives. As to any claim, cross-claim or counterclaim in any way
relating to this Agreement, each party waives the right to trial by jury.
6.9 Assignment.
This Agreement may not be assigned by the Escrow Agent without the prior consent
of the Company.
4
WITNESS
the execution of this Agreement as of the date first above written.
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By:
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Xxxxxxx
X. Xxxxxxxxx III, CEO
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INITIAL
SHAREHOLDERS
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High
Capital Funding LLC
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Xxxxx X. Xxxxxxxx |
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Xxxx X. Xxxxxx |
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Xxxxxxx
Xxxxxx Xxxxxxxxx III Family Trust
By:
Xxxxxxx X. Xxxxxxxxx III
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Xxxxxx
International Limited
By:
Xxxxxxx Xxxxx
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Supreme
Ocean Development Limited
By:
Xxxxx Xxx Xxxxx Xxx
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MTP
Holdings Ltd.
By:
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Xxxxx Xxx Xxxxx Xxx |
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Xxxxxxx
Xx
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CONTINENTAL
STOCK TRANSFER
&
TRUST
COMPANY
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By:
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Xxxxxx
Xxxxxx,
Chairman
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5
EXHIBIT
A
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Name
and Address of Initial
Shareholders
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Initial
Common Stock (Stock Certificate Number)
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Class
A Units
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Common
Stock underlying Units
(Stock Certificate Number)
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Class
A Warrants (Warrant Numbers)
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High
Capital Funding LLC
000
Xxxxx Xxxxxxx Xxxxxx
Xxx
000
Xxxxxxx,
XX 00000
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290,625
(#_______)
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51,652
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51,652
(#_______)
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258,260
(#_______)
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Xxxxx
X. Xxxxxxxx
000
Xxxxx Xxxxxxx Xxxxxx
Xxx
000
Xxxxxxx,
XX 00000
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18,750
(#_______)
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2,015
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2,015
(#_______)
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10,075
(#_______)
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Xxxx
X. Xxxxxx
000
Xxxxx Xxxxxxx Xxxxxx
Xxx
000
Xxxxxxx,
XX 00000
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9,375
(#_______)
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783
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783
(#_______)
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3,915
(#_______)
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Xxxxxxx
Xxxxxx Xxxxxxxxx III Family Trust
000
Xxxxx Xxxxxxx Xxxxxx
Xxx
000
Xxxxxxx,
XX 00000
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121,875
(#_______)
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10,174
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10,174
(#_______)
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50,870
(#_______)
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Xxxxxx
International Limited
c/o
Stonehage SA
Puits
Godet 12
X.X.
Xxx 000
0000
Xxxxxxxxx
Xxxxxxxxxxx
Attention:
Xxxxxxx Xxxxx
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121,875
(#_______)
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10,174
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10,174
(#_______)
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50,870
(#_______)
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Supreme
Ocean Development Limited
x/x
XXX Xxxxxxxx (XXX) Xxxxxxx
0xx
Xxxxx, Xxxxxx Building
P.O.
Box 933
Road
Town
Tortola
British
Virgin Islands
Attention:
Xxxxx Xxx Xxxxx Xxx
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37,500
(#_______)
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3,130
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3,130
(#_______)
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15,650
(#_______)
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XXX
Xxxxxxxx Xxx.
Xxxx
000, Xxxx Xxxx Xxxxx 283 Huaihai Zhong Road
Shanghai
200021, P.R. China
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75,000
(#_______)
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6,261
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6,261
(#_______)
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31,305
(#_______)
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Xxxxx
Xxx Xxxxx Xxx
00-0000
Xxxxxxx Xxxxxx
Xxxxxxxx
Xxxx
Xxxxxxx
X0X 0X0
Xxxxxx
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37,500
(#_______)
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3,131
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3,131
(#_______)
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15,655
(#_______)
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Xxxxxxx
Xx
Cathay
Forest Products Corp.
0000
Xxxxx Xx., Xxx. 0000
Xxxxxxx,
Xxxxxxx
Xxxxxx
X0X 0X0
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37,500
(#_______)
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3,130
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3,130
(#_______)
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15,650
(#_______)
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6
