Exhibit 10.3

SECURITIES ESCROW AGREEMENT

SECURITIES ESCROW AGREEMENT, dated as of December 19, 2006 (“Agreement”), by and
among MIDDLE KINGDOM ALLIANCE CORPORATION, a corporation organized under the
laws of Delaware (“Company”), HIGH CAPITAL FUNDING LLC, DAVID A. RAPAPORT, FRED
A. BRASCH, BERNARD JEROME TANENBAUM III FAMILY TRUST, GEDEON INTERNATIONAL
LIMITED, MTP HOLDINGS LTD., SUPREME OCEAN DEVELOPMENT LIMITED, ALLAN LAM, and
ANTHONY NG (collectively “Initial Shareholders”) and Continental Stock
Transfer & Trust Company (“Escrow Agent”).

WHEREAS, the Company has entered into an Underwriting Agreement, dated
December 13, 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 198,000 Series A Units and 3,300,000 Series
B Units (the “Units”) of the Company. Each Series A Unit consists of one share
of common stock, $0.001 par value (“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 Class B common stock, $0.001 par value
(“Class B 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 December 13, 2006 (“Prospectus”) comprising
part of the Company’s Registration Statements on Forms S-1 (File Nos. 333-133475
and 333-139325) under the Securities Act of 1933, (together, the “Registration
Statement”), which was declared effective on December 13, 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

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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 Representatives 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

 

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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.

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

333 Sandy Springs Circle

Suite 223

Atlanta, GA 30328

Attn: David A. Rapaport, Esq.

Tel: (404) 257-9150

Fax: (404) 257-9125

 

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with a copy to:

Cozen O’Connor

The Army & Navy Club Building

1627 I Street, NW, Suite 1100

Washington, DC 20006

Attn: Ralph V. De Martino

Tel: (202) 912-4800

Fax:(866) 741-8182

If to a Stockholder, to his address set forth in Exhibit A.

and if to the Escrow Agent, to:

Continental Stock Transfer & Trust Company

17 Battery Place, 8th Floor

New York, New York 10004

Attn: Steven G. Nelson, 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.

 

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

 

MIDDLE KINGDOM ALLIANCE CORP. By:  

/s/ Bernard J. Tanenbaum III

  Bernard J. Tanenbaum III, CEO INITIAL SHAREHOLDERS  

/s/ David A. Rapaport

  High Capital Funding LLC By:   David A. Rapaport  

/s/ David A. Rapaport

  David A. Rapaport  

/s/ Fred A. Brasch

  Fred A. Brasch  

/s/ Bernard Jerome Tanenbaum III

  Bernard Jerome Tanenbaum III Family Trust By:   Bernard J. Tanenbaum III  

/s/ [Illegible]

  Gedeon International Limited   By:  

/s/ Allan Shu Cheuk Lam

  Supreme Ocean Development Limited   By: Allan Shu Cheuk Lam  

/s/ Alex Chun Yao

  MTP Holdings Ltd. By:    

/s/ Allan Shu Cheuk Lam

  Allan Shu Cheuk Lam  

/s/ Anthony Ng

  Anthony Ng

CONTINENTAL STOCK TRANSFER

& TRUST COMPANY

By:  

/s/ Steven Nelson

  Steven Nelson, Chairman

 

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EXHIBIT A

 

Name and Address of Initial Shareholders

  

Initial Common

Stock
(Stock Certificate

Number)

  Class A Units   

Common Stock

underlying Units
(Stock Certificate

Number)

  Class A
Warrants
(Warrant
Numbers)

High Capital Funding LLC

333 Sandy Springs Circle Ste 230

Atlanta, GA 30328

   290,625
(#            )   51,652    51,652
(#            )   258,260
(#            )

David A. Rapaport

333 Sandy Springs Circle Ste 230

Atlanta, GA 30328

   18,750
(#            )   2,015    2,015
(#            )   10,075
(#            )

Fred A. Brasch

333 Sandy Springs Circle Ste 230

Atlanta, GA 30328

   9,375
(#            )   783    783
(#            )   3,915
(#            )

Bernard Jerome Tanenbaum III Family Trust

333 Sandy Springs Circle Ste 223

Atlanta, GA 30328

   121,875
(#            )   10,174    10,174
(#            )   50,870
(#            )

Gedeon International Limited

c/o Stonehage SA

Puits Godet 12

P.O. Box 126

2005 Neuchatel Switzerland

Attention: Michael Marks

   121,875
(#            )   10,174    10,174
(#            )   50,870
(#            )

Supreme Ocean Development Limited

c/o ATC Trustees (BVI) Limited

2nd Floor, Abbott Building

P.O. Box 933

Road Town

Tortola British Virgin Islands

Attention: Allan Shu Cheuk Lam

   37,500
(#            )   3,130    3,130
(#            )   15,650
(#            )

MTP Holdings Ltd.

Room 804, Hong Kong Plaza 283 Huaihai Zhong Road

Shanghai 200021, P.R. China

   75,000
(#            )   6,261    6,261
(#            )   31,305
(#            )

Allan Shu Cheuk Lam

82-9133 Bayview Avenue

Richmond Hill

Ontario L4B 4V6 Canada

   37,500
(#            )   3,131    3,131
(#            )   15,655
(#            )

Anthony Ng

Cathay Forest Products Corp.

5650 Yonge St., Ste. 1500

Toronto, Ontario

Canada M2M 4G3

   37,500
(#            )   3,130    3,130
(#            )   15,650
(#            )

 

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