SECURITIES ESCROW AGREEMENT


 


SECURITIES ESCROW AGREEMENT,
dated as of November 7, 2011 (“Agreement”) by and among Selway Capital Acquisition Corporation, a Delaware corporation
(“Company”), Selway Capital Holdings, LLC (the “Initial Shareholder”) and American Stock Transfer &
Trust Company, LLC, as escrow agent (the “Escrow Agent”).


 


WHEREAS, the Company
has entered into an Underwriting Agreement, dated November 7, 2011 (“Underwriting Agreement”) with Aegis Capital Corp.
(“Aegis”), as representative of the underwriters named therein (collectively, the “Underwriters”)
in connection with a public offering (the “Public Offering”) by the Company of Units (as hereafter defined), pursuant
to which, among other matters, the Underwriters have agreed to purchase up to 2,000,000 units (“Units”) of the
Company, each consisting of one Series A Share of the Company, par value $0.0001 per share (the “Series A Shares”),
and one Warrant (a “Warrant”). Each Warrant evidences the right of the holder thereof to purchase one share of common
stock for $7.50, subject to adjustment, as described in the Warrant Agreement dated as of November 7, 2011 by and between the Company
and American Stock Transfer & Trust Company as Warrant Agent; and


 


WHEREAS, pursuant to
the Placement Warrant Purchase Agreement, dated as of November 7, 2011, among the Company and the Initial Shareholder, the Company
has issued 2,333,333 warrants (the “Private Placement Warrants”) to purchase shares of common stock in a private
placement that will occur immediately prior to the IPO (the “Private Placement”); and


 


WHEREAS, the Initial
Shareholder has agreed, as a condition of the Underwriters’ obligation to purchase the Units pursuant to the Underwriting
Agreement and to offer them to the public, to deposit all of the Series C Shares of common stock (the “Insider Shares”)
owned by the Initial Shareholder prior to the consummation of the Public Offering and the Private Placement and all of the Private
Placement Warrants (collectively “Escrow Securities”; provided, however, that if Aegis
does not exercise the over-allotment option in full, the Escrow Securities will equal such lesser amount as remains after the cancellation
of shares held in escrow pursuant to Section 3.1), in escrow as hereinafter provided; and


 


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


 


NOW, THEREFORE, IT
IS AGREED:


 


1.           Appointment
of Escrow Agent.  The Company and the Initial Shareholder 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.  Prior to the date of the consummation of the Private Placement and the Public Offering, the
Initial Shareholder shall deliver to the Escrow Agent certificates representing his or her respective Escrow Securities to be held
and disbursed subject to the terms and conditions of this Agreement.  The Initial Shareholder acknowledges and agrees
that the certificates representing its Escrow Securities will be legended to reflect the deposit of such Escrow Securities under
this Agreement.


 



    	 



    	 



    

 


3.           Disbursement
of the Escrow Securities.


 


3.1        The
Escrow Securities.  The Escrow Agent shall hold (1) the Escrow Securities listed under “Warrant Escrow”
on Schedule A until it receives a certificate signed by the Chief Executive Officer or Chief Financial Officer of the Company stating
that the Company’s initial Acquisition Transaction (as hereinafter defined) has occurred (the “Warrant Escrow Period”),
(2) the Escrow Securities listed under “First Share Escrow” on Schedule A until it receives a certificate signed by
the Chief Executive Officer or Chief Financial Officer of the Company stating that 12 months have elapsed from the closing of the
initial Acquisition Transaction (the “First Share Escrow Period”) and (3) the Escrow Securities listed under “Second
Share Escrow” on Schedule A until it receives a certificate signed by the Chief Executive Officer or Chief Financial Officer
of the Company stating that 24 months have elapsed from the closing of the initial Acquisition Transaction (the “Second Share
Escrow Period”; the Warrant Escrow Period, First Share Escrow Period and Second Share Escrow Period, each, an “Escrow
Period”).  Notwithstanding the foregoing, each Escrow Period shall be extended, as applicable, if the Company has
completed an Acquisition Transaction without liquidating the trust account established at the time of the Public Offering, until
such trust account has been liquidated as described in the prospectus relating to the Public Offering.  Following the termination
of an Escrow Period, the Escrow Agent shall, upon written instructions from each of the Initial Shareholder and/or its Permitted
Transferees (as defined in Section 4.3 below), disburse the applicable Escrow Securities to the Initial Shareholder and/or
such Permitted Transferees; provided, however, that if, after the Company consummates an Acquisition Transaction
, it (or the surviving entity) subsequently consummates a liquidation, merger, share exchange or if there is a tender offer for
the Company’s securities, or other similar transaction which results in all of the shareholders of such entity
having the right to exchange their Insider Shares or Warrants for cash, securities or other property, then the Escrow Agent
will, upon receipt of a certificate, executed by the Chief Executive Officer or Chief Financial Officer of the Company, in form
reasonably acceptable to the Escrow Agent, stating that such transaction is then being consummated, release the Escrow Securities
to the Initial Shareholder or its Permitted Transferees immediately prior to the consummation of such transaction so that they
can similarly participate; provided further, that if the Escrow Agent is notified by the Company pursuant to Section
6.7 hereof that the Company is being liquidated at any time during the applicable Escrow Period, then the Escrow Agent shall promptly
destroy the certificates representing the Escrow Securities; and provided further, that if the Escrow Agent is notified
by the Company that Aegis did not exercise its over-allotment option (as further described in the Registration Statement) or exercised
it in part, an amount such that the remaining Insider Shares included in the Escrow Securities shall not exceed 20% of the outstanding
common stock post-Public Offering (but in no event more than 75,000 Insider Shares) shall be forfeited by the Initial Shareholder
and any Permitted Transferee and cancelled by the Company and the Escrow Agent shall promptly destroy the certificates representing
such Insider Shares. For purposes of this Agreement, an “Acquisition Transaction” shall mean an acquisition of one
or more operating businesses by a merger, stock exchange, asset acquisition, stock purchase or other similar
acquisition transaction, or control and pursuant to which holders of Units sold in the Public Offering have been granted redemption
rights with respect to such Units.


 



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3.2        Company
Covenants.  The Company hereby covenants and agrees to (i) cause its officers to act in good faith regarding the
release of the Escrow Securities pursuant to Section 3.1, and (ii) to promptly release the Escrow Securities after the end of each
Escrow Period, as applicable.


 


3.3        Duties.  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 the Initial Shareholder 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 Shareholder and each of its affiliates and designees shall retain all of their rights as shareholders
of the Company during the applicable 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 applicable Escrow Period, all dividends
payable in cash with respect to the Escrow Securities shall be paid to the Initial Shareholder or its Permitted Transferees, but
all dividends payable in shares 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 applicable Escrow Period, no sale, transfer, assignment or other disposition may be
made of any or all of the Escrow Securities except (i) by gift to an affiliate or (or a member of the immediate family of the Initial
Shareholder’s officers or directors) or to a trust or other entity, the beneficiary of which is the Initial Shareholder
or one of its officers, directors (or member of their respective immediate families), (ii) by virtue of the laws of descent and
distribution upon death of any Initial Shareholder, or (iii) pursuant to a qualified domestic relations order (such transferees,
the “Permitted Transferees”); 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 and its affiliates and designees transferring the Escrow Securities.  During
the applicable Escrow Period, no Initial Shareholder or Permitted Transferee shall pledge or grant a security interest in his,
her or its Escrow Securities or grant a security interest in his, her or its rights under this Agreement.


 


4.4        Insider
Letters.  Each of the Initial Shareholder and its affiliates and designees has executed a letter agreement with Aegis
and the Company, dated as indicated on Schedule A hereto (“Insider Letter”), and which is filed as an exhibit
to the Company’s Registration Statement on Form S-1, Registration No. 333-172714 with respect to the Units to be
issued in the Public Offering (the “Registration Statement”), respecting the rights and obligations of such Initial
Shareholder and its affiliates and designees in certain events, including but not limited to the liquidation of the Company.


 



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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.


 


5.3        Compensation.  The
Escrow Agent shall be entitled to reasonable compensation from the Company for all services rendered by it hereunder, as set forth
on Exhibit A hereto.  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 Shareholder 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.


 



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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 and approved
by Aegis and the Initial Shareholder or its Permitted Transferees, 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 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 Company and a majority of the Initial Shareholder or its Permitted Transferees, 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, without giving effect to any choice-of-law provisions thereof that would compel the application
of the substantive laws of any other jurisdiction.  Each of the parties hereby agrees that any action, proceeding or
claim against it arising out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State
of New York or the United States District Court for the Southern District of New York (each, a “New York court”), and
irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.  Each of the parties hereby waives any
objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.


 


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


 


6.3        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 Escrow Agent and holders of 65%
or more of the Escrow Securities, and with the consent of the holders of 90% of the Series A Shares sold in the Public Offering
(the “IPO Shares”), it being the specific intention of the parties hereto that each holder of an IPO Share is and shall
be a third-party beneficiary of this Section 6.3 with the same right and power to enforce this Section 6.3 as any of the parties
hereto.  For purposes of this Section 6.3, the “consent of the holders of 90% of the IPO Shares” shall mean
receipt by the Escrow Agent of a certificate from an entity certifying that (i) such entity regularly engages in the business of
serving as inspector of elections for companies whose securities are publicly traded, and (ii) either (a) the holders of record
of 90% of the IPO Shares of record as of a record date established in accordance with the applicable provisions of the Delaware
General Corporation Law (the “DGCL”), have voted in favor of such amendment or modification or (b) the holders of record
of 90% of the IPO Shares of record as of a record date established in accordance with the applicable provisions of the DGCL have
delivered to such entity a signed writing approving such amendment or modification.


 



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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
by private national courier service, or be mailed, certified or registered mail, return receipt requested, postage prepaid, and
shall be deemed given when so delivered personally or, if sent by private national courier service, on the next business day after
delivery to the courier, or, if mailed, two business days after the date of mailing, as follows:


 


If to the Company,
to:


 


Selway Capital Acquisition Corporation

74 Grand Avenue

2 nd Floor

Englewood, NJ 07631

Attn: Yaron Eitan, Chief Executive Officer


 


If to the Initial Shareholder
or its Permitted Transferees, to:


 


c/o Selway Capital Acquisition Corporation

74 Grand Avenue

2 nd Floor

Englewood, NJ 07631

Attn: Selway Capital Holdings, LLC


 


and if to the Escrow
Agent, to:


 


American Stock Transfer & Trust Company, LLC

59 Maiden Lane

New York, New York  10038

Attn:    Compliance Department


 



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A copy of any notice
sent hereunder shall be sent to (but which shall not constitute notice):


 


Loeb & Loeb LLP

345 Park Avenue

New York, New York 10154

Attn:    Mitchell S. Nussbaum, Esq.


 


and:


 


Aegis Capital Corp.

810 Seventh Avenue, 11th Floor

New York, NY 10019

Attn: General Counsel

Fax No.: 212-813-1010


 


and:


 


Z.A.G./S&W LLP

1290 Avenue of the Americas

29 th Floor

New York, New York 10104

Attn: Oded Har – Even

Fax  : (212) 660-3001


 


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 an  Acquisition Transaction within the time period(s) specified
in the Registration Statement.


 


- Signature page of the Company immediately
follows –


 



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


 


	 	SELWAY CAPITAL ACQUISITION CORPORATION
	 	 
	 	By:	/s/ Yaron Eitan
	 	Name:	Yaron Eitan
	 	Title:	Chief Executive Officer
	 	 
	 	Initial Shareholder:
	 	 
	 	SELWAY CAPITAL HOLDINGS LLC
	 	 
	 	By:	/s/ Yaron Eitan
	 	Name:	Yaron Eitan
	 	Title:	Board Manager


 


- Signature page of Escrow Agent immediately
follows –


 


Securities Escrow Agreement


 



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


 


	 	AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC,  as Escrow Agent
	 	 
	 	By:	/s/ Felix Orihuela
	 	Name:	Felix Orihuela
	 	Title:	Vice President


 


Securities Escrow Agreement


 



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SCHEDULE A


 


	Warrant Escrow	 	 	 	 	 	 
	Name of Initial Shareholder
 and Affiliates/Designees	 	Number of
 Warrants	 	 	Warrant
 Certificate
 Number	 
	Selway Capital Holdings LLC	 	 	2,333,333	 	 	 	PW-1	 
	Total	 	 	2,333,333	 	 	 	 	 


 


	First Share Escrow	 	 	 	 	 	 	 	 
	Name of Initial Shareholder
 and Affiliates/Designees	 	Number of
 Shares	 	 	Stock
 Certificate
 Number	 
	Selway Capital Holdings LLC	 	 	287,500	(1)	 	C-11	 
	Total	 	 	287,500	 	 	 	 	 


 


	Second Share Escrow	 	 	 	 	 	 
	Name of Initial Shareholder
 and Affiliates/Designees	 	Number of
 Shares	 	 	Stock
 Certificate
 Number	 
	Selway Capital Holdings LLC	 	 	287,500	(2)	 	 	C-12	 
	Total	 	 	287,500	 	 	 	 	 


 


(1) Up to 37,500 shares subject to forfeiture pursuant to Section
3.1 of this Agreement.


 


(2) Up to 37,500 shares subject to forfeiture pursuant to Section
3.1 of this Agreement.


 



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EXHIBIT A


 


Escrow Agent Fees


	Description	 	Amount ($)
	 	 	 
	Fee for acting as Escrow Agent	 	3,000


 



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