INVESTMENT MANAGEMENT TRUST AGREEMENT
Exhibit
10.2
This
Agreement is made as of [___], 2006 by and between Middle Kingdom Alliance
Corporation (the “Company”) and Continental Stock Transfer & Trust Company
(“Trustee”).
WHEREAS,
the Company’s Registration Statement on Form S-1, No. 333-133475 (“Registration
Statement”), for its initial public offering of securities (“IPO”) has been
declared effective as of the date hereof by the Securities and Exchange
Commission (“Effective Date”); and
WHEREAS,
Newbridge Securities Corp. and I-Bankers Securities, Inc. (collectively, the
“Representatives”) are acting as the representatives of the underwriters in the
IPO; and
WHEREAS,
as described in the Company’s Registration Statement, and in accordance with the
Company’s Amended and Restated Certificate of Incorporation, $24,240,000 of the
gross proceeds of the IPO ($27,876,000 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 Class B common stock, par value $.001 per share (“Class B Stock”)
and common stock, $0.001 par value (“Common Stock”) (except as otherwise
provided herein) and in the event the units to be issued in the IPO are
registered in Colorado, pursuant to Section 11-51-302(6) of the Colorado Revised
Statutes (the amount to be delivered to the Trustee will be referred to herein
as the “Property”; the stockholders for whose benefit the Trustee shall hold the
Property will be referred to as the “Stockholders,” and the Stockholders and the
Company will be referred to together as the “Beneficiaries”); and
WHEREAS,
pursuant to the Underwriting Agreement, dated as of [____], 2006, between the
Company and the Representatives, a portion of the Property equal to $508,800
($585,120 if the underwriters’ over-allotment option is exercised in full) is
attributable to deferred underwriting compensation that will become payable
by
the Company to the underwriters upon the consummation of a Business Combination
(as defined in the Registration Statement) (the “Deferred Discount”);
and
WHEREAS,
the Company and the Trustee desire to enter into this Agreement to set forth
the
terms and conditions pursuant to which the Trustee shall hold the Property;
IT
IS
AGREED:
1. Agreements
and Covenants of Trustee. The Trustee hereby agrees and covenants
to:
(a) Hold
the
Property in trust for the Beneficiaries in accordance with the terms of this
Agreement, including the terms of Section 11-51-302(6) of the Colorado Statute,
in a segregated trust account (“Trust Account”) established by the Trustee at a
branch of [____] Bank and utilizing the services of a broker dealer selected
by
the Trustee;
(b) Manage,
supervise and administer the Trust Account subject to the terms and conditions
set forth herein;
(c) In
a
timely manner, upon the instruction of the Company, invest and reinvest the
Property in any Government Security. As used herein, “Government Security” means
any Treasury Xxxx issued by the United States, maturing in not more than one
hundred and eighty days;
(d) Collect
and receive, when due, all principal and income arising from the Property,
which
shall become part of the “Property,” as such term is used herein;
(e) Notify
the Company and the Representatives of all communications received by it with
respect to any Property requiring action by the Company;
(f) Supply
any necessary information or documents as may be requested by the Company in
connection with the Company’s preparation of the tax returns for the Company;
(g) Participate
in any plan or proceeding for protecting or enforcing any right or interest
arising from the Property if, as and when instructed by the Company to do
so;
(h) Render
to
the Company and to the Representatives, and to such other person as the Company
may instruct, monthly written statements of the activities of and amounts in
the
Trust Account reflecting all receipts and disbursements of the Trust Account;
and
(i) Commence
liquidation of the Trust Account only after receipt of and only in accordance
with the terms of a letter (“Termination Letter”), in a form substantially
similar to that attached hereto as either Exhibit
A
or
Exhibit
B,
signed
on behalf of the Company by its Chief Executive Officer, Chief Financial Officer
or 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 [18 months from the Effective
Date] (or the date that is the six month anniversary of such date, in the event
that a letter of intent, agreement in principle or definitive agreement has
been
executed prior to such date in connection with a Business Combination (as
defined in the Termination Letter attached hereto as Exhibit
A)
that
has not been consummated by [18 months from the Effective Date]), the Trust
Account shall be liquidated in accordance with the procedures set forth in
the
Termination Letter attached as Exhibit
B
to the
stockholders of record on the record date as established by the Company. In
all
cases, the Trustee shall provide the Representatives with a copy of any
Termination Letter and/or any other correspondence that it receives with respect
to any proposed withdrawal from the Trust Account promptly after it receives
the
same.
(j) The
distribution, if any, of the Deferred Discount to the underwriters upon the
liquidation of the Trust Account as provided herein shall be made from the
Trust
Account through the Trustee (and not through the Company) in accordance with
a
written instruction of the Representatives.
2. Limited
Distributions of Income on Property.
(a) If
there
is any federal, state or local income tax obligation relating to the income
of
the Company (including Property of the Trust Account), then, at the written
instruction of the Company, the Trustee shall disburse to the Company by wire
transfer, out of the Property in the Trust Account, the amount indicated by
the
Company as required to pay income taxes; and
(b) The
Trustee shall distribute to the Company on a monthly basis an amount equal
to
one-half of the income collected on the Property [prior to the payment of any
amounts set forth in Section 2(a)] through the last day of the immediately
preceding month; provided that the total amount of income that may be
distributed pursuant to this Section 2(b) is $1,000,000 and provided further
that to the extent that the aggregate sum of the distributions exceeds $700,000,
the Company shall provide the Trustee with an authorization letter from Wachovia
prior to the Trustee making any further distribution to the Company. The first
such distribution shall be for the period ending on [_____], 2006.
(c) Except
as
provided in Sections 2(a) and 2(b) above, no other distributions from the Trust
Account shall be permitted except in accordance with Section 1(i) and (j)
hereof.
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 Chief
Executive Officer, Chief Financial Officer or Secretary. In addition, except
with respect to its duties under paragraph 1(i) above, the Trustee shall be
entitled to rely on, and shall be protected in relying on, any verbal or
telephonic advice or instruction which it in good faith believes to be given
by
any one of the persons authorized above to give written instructions, provided
that the Company shall promptly confirm such instructions in
writing;
-2-
(b) Hold
the
Trustee harmless and indemnify the Trustee from and against, any and all
expenses, including reasonable counsel fees and disbursements, or loss suffered
by the Trustee in connection with any action, suit or other proceeding brought
against the Trustee involving any claim, or in connection with any claim or
demand which in any way arises out of or relates to this Agreement, the services
of the Trustee hereunder, or the Property or any income earned from investment
of the Property, except for expenses and losses resulting from the Trustee’s
gross negligence or willful misconduct. Promptly after the receipt by the
Trustee of notice of demand or claim or the commencement of any action, suit
or
proceeding, pursuant to which the Trustee intends to seek indemnification under
this paragraph, it shall notify the Company in writing of such claim
(hereinafter referred to as the “Indemnified Claim”). The Trustee shall have the
right to conduct and manage the defense against such Indemnified Claim,
provided, that the Trustee shall obtain the consent of the Company with respect
to the selection of counsel, which consent shall not be unreasonably withheld.
The Company may participate in such action with its own counsel;
and
(c) Pay
the
Trustee an initial acceptance fee of $[1,000] and an annual fee of $[3,000]
(it
being expressly understood that the Property shall not be used to pay such
fee).
In addition, the Company shall pay the Trustee a transaction processing fee
of
$[____] for each disbursement made pursuant to section 2(a) and 2(b). It is
agreed that said fees shall be deducted from the disbursements made to the
Company pursuant to section 2(b). The Company shall pay the Trustee the initial
acceptance fee and first year’s fee at the consummation of the IPO and
thereafter on the anniversary of the Effective Date. The Trustee shall refund
to
the Company the fee (on a pro rata basis) with respect to any period after
the
liquidation of the Trust Fund. The Trustee 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. 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 paragraph 3(b) hereof (it being expressly understood that the
Property shall not be used to make any payments to the Trustee under such
paragraph).
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 paragraph 1
hereof and the Trustee shall have no liability to any party except for liability
arising out of its own gross negligence or willful misconduct;
(b) Institute
any proceeding for the collection of any principal and income arising from,
or
institute, appear in or defend any proceeding of any kind with respect to,
any
of the Property unless and until it shall have received instructions from the
Company given as provided herein to do so and the Company shall have advanced
or
guaranteed to it funds sufficient to pay any expenses incident thereto;
(c) Change
the investment of any Property, other than in compliance with
paragraph 1(c);
(d) Refund
any depreciation in principal of any Property;
(e) Assume
that the authority of any person designated by the Company to give instructions
hereunder shall not be continuing unless provided otherwise in such designation,
or unless the Company shall have delivered a written revocation of such
authority to the Trustee;
(f) The
other
parties hereto or to anyone else for any action taken or omitted by it, or
any
action suffered by it to be taken or omitted, in good faith and in the exercise
of its own best judgment, except for its gross negligence or willful misconduct.
The Trustee may rely conclusively and shall be protected in acting upon any
order, notice, demand, certificate, opinion or advice of counsel (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;
-3-
(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) Except
as
set forth in Section 2(a), pay any taxes on behalf of the Trust
Account.
(i) Verify
calculations, qualify or otherwise approve Company requests for distributions
pursuant to paragraph 2(a) and 2(b).
5. 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. 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 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).
6. 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. Upon receipt of written instructions, the Trustee will confirm
such instructions with an Authorized Individual at an Authorized Telephone
Number listed on the attached Exhibit
D.
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
account numbers or other identifying numbers of a beneficiary, beneficiary’s
bank or intermediary bank, rather than names. The Trustee shall not be liable
for any loss, liability or expense resulting from any error in an account number
or other identifying number, provided it has accurately transmitted the numbers
provided.
(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 conflict of laws. It
may
be executed in several 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. This Agreement or any provision
hereof may only be changed, amended or modified by a writing signed by each
of
the parties hereto. As to any claim, cross-claim or counterclaim in any way
relating to this Agreement, each party waives the right to trial by jury.
(d) The
parties hereto consent to the jurisdiction and venue of any state or federal
court located in the City of New York 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:
-4-
if
to the
Trustee, to:
Continental
Stock Transfer & Trust Company
00
Xxxxxxx Xxxxx, 0xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx
Attn:
Xxxxxx X. Xxxxxx, Chairman
Fax
No.: (000)
000-0000
if
to the
Company, to:
Attention:
Xxxx X. Xxxxxx
Chief
Financial Officer
000
Xxxxx
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
Fax
No.:
(000) 000-0000
with
a
copy to:
Attention:
Xxxxx X. Xxxxxxxx, Esq.
Secretary
& General Counsel
000
Xxxxx
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
Fax
No.:
(000) 000-0000
in
either
case 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
Fax:(000)
000-0000
(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.
[Signature
page to follow]
-5-
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: Xxxxxx
Xxxxxx
Title:
President
|
||
| MIDDLE KINGDOM ALLIANCE CORPORATION | ||
| |
|
|
| By: | ||
|
Name: [_______]
Title: [_______]
|
||
EXHIBIT
A
[LETTERHEAD
OF COMPANY]
[INSERT
DATE]
____________________________
____________________________
____________________________
Attn: __________________________
Re: Trust
Account No. [___________]
Termination
Letter
Gentlemen:
Pursuant
to the Investment Management Trust Agreement between Middle Kingdom Alliance
Corporation (“Company”) and Continental Stock Transfer & Trust Company
(“Trustee”), dated as of _____________, 2006 (“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 24 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
commence liquidation of the Trust Account to the effect that, on the
Consummation Date, all of the 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.
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 written instructions 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, including, but not limited to (a) funds to be delivered
to
any Stockholder that has properly exercised their conversion rights (as
described in the Registration Statement), and (b) pursuant to the terms of
the
Underwriting Agreement, dated as of _____, 2006, between the Company and the
Representatives, the portion of the Property attributable to the Deferred
Discount (as defined in the Trust Agreement), 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.
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 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, | ||
| |
|
|
| Middle Kingdom Alliance Corporation | ||
| By: | ||
|
_______, Chief Executive Officer |
||
EXHIBIT
B
[LETTERHEAD
OF COMPANY]
[INSERT
DATE]
_______________________
_______________________
_______________________
Attn:
_____________________
Re:
Trust
Account No. [_________] Termination Letter
Gentlemen:
Pursuant
to paragraph 1(i) of the Investment Management Trust Agreement between Middle
Kingdom Alliance Corporation (“Company”) and Continental Stock Transfer &
Trust Company (“Trustee”), dated as of _____, 2006 (“Trust Agreement”), this is
to advise you that the Board of Directors of the Company and the stockholders
of
the Company have voted to dissolve and liquidate the Company. Attached hereto
is
a copy of the minutes of the meeting of the Board of Directors and the
stockholders of the Company relating thereto, certified by the Secretary of
the
Company as true and correct and in full force and effect.
In
accordance with the terms of the Trust Agreement, we hereby (a) certify to
you
that the provisions of Section 11-51-302(6) and Rule 51-3.4 of the Colorado
Statute have been met and (b) authorize you, to commence liquidation of the
Trust Account. You will notify the Company and [_____] Bank (“Designated Paying
Agent”) in writing as to when all of the funds in the Trust Account will be
available for immediate transfer (“Transfer Date”). The Designated Paying Agent
shall thereafter notify you as to the account or accounts of the Designated
Paying Agent that the funds in the Trust Account should be transferred to on
the
Transfer Date so that the Designated Paying Agent may commence distribution
of
such funds in accordance with the Company’s instructions. You shall have no
obligation to oversee the Designated Paying Agent’s distribution of the funds.
Upon the payment to the Designated Paying Agent of all the funds in the Trust
Account, the Trust Agreement shall be terminated.
|
Very
truly yours,
|
||
| Middle Kingdom Alliance Corporation | ||
| |
|
|
| By: | ||
|
______, Chief Executive Officer |
||
EXHIBIT
C
[LETTERHEAD
OF COMPANY]
[Insert
Date]
Continental
Stock Transfer & Trust Company
00
Xxxxxxx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
[
]
Re:
Trust
Account No.
[ ]
— Distribution of Income on Property
Gentlemen:
Pursuant
to paragraph 2(b) of the Investment Management Trust Agreement between Middle
Kingdom Alliance Corporation (“Company”) and Continental Stock Transfer &
Trust Company (“Trustee”), dated as of ______, 2006 (“Trust Agreement”), we are
requesting for our working capital purposes that you deliver to us fifty percent
(50%) of the income earned on the Property from ___________ to ___________
prior
to any deductions made pursuant to Section 2(a) of the Trust Agreement. In
accordance with the terms of the Trust Agreement, you are hereby directed and
authorized to transfer said amount immediately upon your receipt of this letter
to the Company’s operating account at:
|
Bank:
|
[_______________]
|
|
ABA
#:
|
[_______________]
|
|
Account
Name:
|
.
|
|
Account
Number:
|
[_______________]
|
|
Reference:
|
Distribution
of Income Earned on Trust Property
|
Very
truly yours,
By:_______________________________________
By:
_______________________________________
EXHIBIT
D
AUTHORIZED
INDIVIDUAL(S)
AUTHORIZED
FOR TELEPHONE CALL BACK
| COMPANY: |
Middle
Kingdom Alliance Corporation
Attention:
Xxxxxxx. J Xxxxxxxxx III
Chief
Executive Officer
000
Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
Tel
No.: (000) 000-0000
|
|
| or | ||
|
Attention:
Xxxx X. Xxxxxx
Chief
Financial Officer
000
Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
Tel
No.: (000) 000-0000)
|
||
| TRUSTEE: |
Continental
Stock Transfer & Trust Company
00
Xxxxxxx Xxxxx, 0xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attn:
Xxxxxx X. Xxxxxx, Chairman
Telephone:
(000) 000-0000
Fax:
(000) 000-0000
|
