Document:

Unassociated Document

 

SECURITIES ESCROW AGREEMENT

 

SECURITIES ESCROW AGREEMENT, dated as of ________, 2011 (the “Agreement”) by and among Arcade China Acquisition Corp., a Delaware corporation (the “Company”), Arcade China Investment Partners, LLC and Kravis Capital Limited (collectively, the “Initial Stockholders”), the undersigned parties listed as the Underwriter Warrantholders on the signature pages hereto (the “Underwriter Warrantholders”), and Continental Stock Transfer & Trust Company, a New York corporation (the “Escrow Agent ”).

 

WHEREAS, the Company has entered into an Underwriting Agreement, dated _______, 2011 (“Underwriting Agreement”) with Morgan Joseph TriArtisan LLC (“MJ” or the “Representative”), acting as representative of the several underwriters (collectively, the “Underwriters”), pursuant to which, among other matters, the Underwriters have agreed to purchase in a public offering (the “IPO”) 4,000,000 units, excluding the underwriters’ over-allotment option (“Units”) of the Company’ securities.  Each Unit consists of one share of the Company’s common stock, par value $.0001 per share (the “Common Stock”), and one warrant (“Warrant”), each Warrant to purchase one share of Common Stock, all as more fully described in the Company’s definitive Prospectus, dated ________, 2011 (the “Prospectus”) comprising part of the Company’s Registration Statement on Form S-1 (File No. 333-172953) under the Securities Act of 1933, as amended, declared effective on _______, 2011 (the “Effective Date”);

 

WHEREAS, the Initial Stockholders have 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 their shares of Common Stock, as set forth opposite its name on Exhibit A attached hereto, in aggregate 1,150,000 shares (150,000 of which are subject to forfeiture to the extent the over-allotment option is not exercised in full) (the “Escrow Shares”), in escrow as hereinafter provided;

 

WHEREAS, the Company has entered into a Warrant Subscription Agreement, dated _____, 2011 (the “Subscription Agreement”), with the Initial Stockholders and the Underwriter Warrantholders (collectively, the “Initial Warrantholders”), pursuant to which the Initial Warrantholders have agreed to purchase 2,666,667 warrants (the “Private Warrants”) in a private placement transaction to occur simultaneously with the closing of the IPO (the “Closing Date”);

 

WHEREAS, the Initial Warrantholders have agreed as a condition of the sale of the Private Warrants to deposit all of their respective Private Warrants (together with the Escrow Shares, the “Escrow Securities”), as set forth opposite their respective names on Exhibit A attached hereto, with the Escrow Agent as hereinafter provided; and

 

WHEREAS, the Company, the Initial Stockholders and Initial Warrantholders 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, the Initial Stockholders and Initial Warrantholders 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 Closing Date, the Initial Stockholders and Initial Warrantholders shall deliver to the Escrow Agent certificates representing their respective Escrow Securities, in proper transfer order with Medallion guaranteed stock powers, to be held and disbursed subject to the terms and conditions of this Agreement.  The Initial Stockholders and Initial Warrantholders acknowledge and agree that the certificates representing the Escrow Securities will bear a legend to reflect the deposit of such Escrow Securities under this Agreement.

 

3.           Disbursement of the Escrow Securities.  The Escrow Agent shall hold each of the Escrow Shares and the Private Warrants until the termination of their respective Escrow Period (as defined below).  In the case of the Escrow Shares, the “Escrow Period” shall be the period beginning on the date the certificates representing the Escrow Shares are deposited with the Escrow Agent and ending on the date that is one year following the consummation of the initial Business Combination or earlier if, subsequent to the Business Combination the Company consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of the Company stockholders having the right to exchange their shares of Common Stock for cash, securities or other property; provided however, that the Escrow Shares will be released from escrow (1) with respect to 50% of such shares, if the closing price of the Company’s common stock equals or exceeds $12.00 for any 20 trading days within a 30-trading day period subsequent to the Business Combination, and (2) with respect to 50% of such shares, if the closing price of the Company’s common stock equals or exceeds $15.00 for any 20 trading days within a 30-trading day period subsequent to the Business Combination. The term “Business Combination” shall mean the Company’s acquisition, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination, one or more operating businesses or assets or control of such operating business or businesses or assets through contractual arrangements.  In the case of the Private Warrants, the “Escrow Period” shall be the period beginning on the date the certificates representing the Private Warrants are deposited with the Escrow Agent and ending 30 days following the date of the consummation of the initial Business Combination.  On the termination date of the applicable Escrow Period, the Escrow Agent shall, upon written instructions from the Company, disburse the Escrow Securities to the Initial Stockholders; provided, however, that if the Escrow Agent is notified by the Company pursuant to Section 6.6 hereof that up to 150,000 of the Escrow Shares have been forfeited, then the Escrow Agent shall promptly destroy the certificates representing such Escrow Shares (or portion thereof, as applicable).  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 Holder in Escrow Securities.

 

4.1           Voting Rights as a Stockholder.  Subject to the terms of the Insider Letters described in Section 4.4 hereof and except as herein provided, the Initial Stockholders shall retain all of their rights as stockholders of the Company during the Escrow Period, including, without limitation, the right to vote the Escrow Shares.

 

  

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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 Stockholders, but all dividends payable in stock 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) upon the dissolution and liquidation of holder and the distribution of assets to its members; (ii) by gift to an immediate family member of an Initial Stockholder’s or the Initial Warrantholders’ members or to a trust, the beneficiary of which is an immediate family member of such Initial Stockholders’ or Initial Warrantholders’ members, (iii) by virtue of the laws of descent and distribution upon death of any member of an Initial Stockholder or an Initial Warrantholder, (iv) pursuant to a qualified domestic relations order, (v) in the event of the Company’s liquidation prior to completion of its initial Business Combination or (vi) in the event of the Company’s consummation of a liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property subsequent to the Company’s consummation of an initial Business Combination; 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 Stockholder that is transferring the Escrow Shares.  Even if transferred in accordance with this Section 4.3, the Escrow Securities will remain subject to this Agreement and may be released from escrow only in accordance with Section 3 hereof.  During the Escrow Period, the Initial Stockholders 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 Stockholders has executed a letter agreement with the Representative and the Company, dated as of the Effective Date, a form of which is filed as an exhibit to the Registration Statement (each an “Insider Letter”), respecting the rights and obligations of such Initial Stockholder in certain events, including, but not limited to, certain voting obligations in respect of the Escrow Shares.

 

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, 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 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.

 

  

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5.2           Indemnification.  The Escrow Agent shall be indemnified and held harmless by the Company from and against any expenses, including reasonable counsel fees and disbursements, or loss suffered by the Escrow Agent in connection with any action taken by it hereunder, 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 B 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 Stockholder 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 and approved by the Representative, which approval will not be unreasonably withheld, conditioned or delayed, 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.

 

  

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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 without reference to principles of conflicts of law.  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, and irrevocably submits to such personal 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           Entire Agreement.  This Agreement and the Insider Letters contain 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 be charged.  In connection with any proposed amendment, the Escrow Agent may request an opinion of issuer’s counsel as to the validity of the proposed amendment as a condition to its execution of said amendment.

 

6.3           Headings.  The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation thereof.

 

6.4           Binding Effect.  This Agreement shall be binding upon and inure to the benefit of the respective parties hereto and their legal representative, successors and assigns.

 

6.5           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 by private national courier service, or, if mailed, four business days after the date of mailing, as follows:

	
  

	
if to the Escrow Agent, to:

	
  

	
Continental Stock Transfer & Trust Company

	
  

	
17 Battery Place

	
  

	
New York, NY 10004

	
  

	
Attn:  [        ]

	
  

	
Fax No.:  [           ]

 

  

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if to the Company, to:

	
  

	
Arcade China Acquisition Corp.

	
  

	
62 LaSalle Road, Suite 304

	
  

	
West Hartford, Connecticut

	
  

	
Attn:  John Chapman

	
  

	
Fax No.:  (860)

 

	
  

	
and a copy, which shall not constitute notice, to:

	
  

	
Loeb & Loeb LLP

	
  

	
345 Park Avenue, 18th Floor

	
  

	
New York, New York 10154

	
  

	
Attn:  Fran Stoller

	
  

	
Fax No.:  (212) 214-0706

 

	
  

	
if to any Initial Stockholder or Initial Warrantholders, to the address set forth in Exhibit A hereto.

 

	
  

	
if the to the representative of the underwriters, to:

	
  

	
Morgan Joseph TriArtisan LLC

	
  

	
600 Fifth Avenue, 19th Floor

	
  

	
New York, NY 10020

	
  

	
Attn:  Tina Pappas

	
  

	
Fax No.:  (212) 218-3760

 

	
  

	
with a copy, to:

	
  

	
McDermott Will & Emery LLP

	
  

	
340 Madison Avenue

	
  

	
New York, New York 10173

	
  

	
Attn:  Joel L.  Rubinstein

	
  

	
Fax No.:  (212) 547-5444

 

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.

 

6.6           Liquidation of Company; Forfeiture.  The Company shall give the Escrow Agent prompt written notification of (i) the liquidation of the Trust Account (as defined in Section 6.7) or (ii) forfeiture of up to 150,000 Escrow Shares held by the Initial Stockholders to the extent the underwriters over-allotment option is not exercised in full, as further described in the Registration Statement.

 

  

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6.7           Trust Account Waiver.  Notwithstanding anything herein to the contrary, the Escrow Agent hereby waives any and all right, title, interest or claim of any kind (“Claim”), now and in the future, in or to any distribution of the trust account (the “Trust Account”) in which the proceeds of the IPO and the proceeds of the sale of the Private Warrants will be deposited and held for the benefit of the holders of the securities purchased in the IPO, as described in greater detail in the Prospectus, and hereby agrees not to seek recourse, reimbursement, payment or satisfaction for any Claim against the Trust Account for any reason whatsoever.

 

6.8           Third Party Beneficiaries.  The Initial Stockholders hereby acknowledge that the Underwriters, including, without limitation, the Representative, are third party beneficiaries of this Agreement and this Agreement cannot be modified or changed without the prior written consent of the Representative.

 

6.9           Counterparts.  This Agreement may be executed in several counterparts each one of which shall constitute an original and may be delivered by facsimile transmission and together shall constitute one instrument.

 

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IN WITNESS WHEREOF, the Company has caused the execution of this Agreement as of the date first above written.

	  	
ARCADE CHINA ACQUISITION CORP.

	  	  
	  	
By:

	  
	  	  	
Name:

	  	  	
Title:

	  	  	  
	  	
CONTINENTAL STOCK TRANSFER & TRUST

COMPANY

	  	  
	  	
By:

	  
	  	  	
Name:

	  	  	
Title:

	  	  
	  	
ARCADE CHINA INVESTMENT PARTNERS,

LLC

	  	  
	  	
By:

	  
	  	  	
Name:

	  	  	
Title:

	  	  
	  	
KRAVIS CAPITAL LIMITED

	  	  
	  	
By:

	  
	  	  	
Name:

	  	  	
Title:

	  	  
	  	
UNDERWRITER WARRANTHOLDERS:

	  	  
	  	
MORGAN JOSEPH TRIARTISAN LLC

	  	  
	  	
By:

	  
	  	  	
Name:

	  	  	
Title:

 

  

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EXHIBIT A

Arcade China Investment Partners, LLC

62 LaSalle Road, Suite 304

West Hartford, CT  06107

Attn: John Chapman

Facsimile Number:

EIN:  ________

Number of Shares:  575,000 (up to 75,000) of which are subject to forfeiture in the event the underwriters over-allotment option is not exercised in full)

Number of Warrants:  1,200,000

Kravis Capital Limited

Number of Shares:  575,000 (up to 75,000) of which are subject to forfeiture in the event the underwriters over-allotment option is not exercised in full)

Number of Warrants:  1,200,000

Morgan Joseph TriArtisan LLC

600 Fifth Avenue, 19th Floor

New York, NY 10020

Attn:  Tina Pappas

Fax No.:  (212) 218-3760

Number of Warrants:  [________]

 

  

A-1

  

 

EXHIBIT B

 

Escrow Agent Fees

 

$______ annually for acting agent escrow fee.

 

First year agent fee to be paid at closing.

  

B-1Unassociated Document

 

WARRANT SUBSCRIPTION AGREEMENT

 

WARRANT SUBSCRIPTION AGREEMENT (this “Agreement”) is made as of this __ th day of               , 2011 by and among Arcade China Acquisition Corp., a Delaware corporation (the “Company”), having its principal place of business at 62 LaSalle Road, Suite 304, West Hartford, CT 06107 and each of the persons and entities whose names are set forth on the signature pages hereto under “Subscribers” (the “Subscribers” and each, a “Subscriber”).

 

WHEREAS, the Company desires to sell on a private placement basis (the “Offering”) an aggregate of 3,200,000 warrants (the “Warrants”) of the Company for a purchase price of $0.75 per Warrant. Each Warrant is exercisable to purchase one share of Common Stock at an exercise price of $11.50 per share during the period commencing on the later of: (i) one year from the date of the prospectus relating to the Company’s IPO (as defined below) and (ii) 30 days following the consummation of a Business Combination (as defined in Section 5 below) and, subject to Section 10 below, expiring on the fifth anniversary of the consummation of a Business Combination;

 

WHEREAS, Subscribers wish to purchase the Warrants and the Company wishes to accept such subscriptions.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Subscribers hereby agree as follows

 

1.           Agreement to Subscribe

 

1.1.        Purchase and Issuance of the Warrants. Upon the terms and subject to the conditions of this Agreement, the Subscribers hereby agree to purchase from the Company, and the Company hereby agrees to sell to the Subscribers, on the Closing Date (as hereinafter defined), the Warrants for an aggregate purchase price of $2,400,000 (the “Purchase Price”) in such amounts as are indicated next to each Subscriber’s name on Exhibit A attached hereto.

 

1.2.        Delivery of the Purchase Price. Upon execution of this Agreement, the Subscribers are hereby bound to fulfill their obligations hereunder and hereby irrevocably commit to deliver into a trust account at a financial institution to be chosen by the Company, maintained by Continental Stock Transfer & Trust Company, acting as Trustee, on the date of Closing (as hereinafter defined), the Purchase Price in immediately available funds by certified bank check, wire transfer or such other form of payment as shall be acceptable to the Trustee, in its sole and absolute discretion, at the Closing.

 

1.3.        Closing. The closing (the “Closing”) of the Offering, shall take place at the offices of the Company, on or prior to the closing date of the Company’s initial public offering (“IPO”) of 4,000,000 units of Common Stock and Warrants (the “Closing Date”).

 

1.4.        Warrant Agreement. Each Warrant shall have the terms set forth in the Warrant Agreement to be entered into by the Company and a warrant agent, in connection with the IPO (the “Warrant Agreement”).

 

  

  

  

 

2.           Representations and Warranties of the Subscribers

 

Each Subscriber represents and warrants to the Company solely as to such Subscriber that:

 

2.1.        No Government Recommendation or Approval. Subscriber understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Company or the Offering of the Warrants or the shares of common stock of the Company underlying the Warrants (the “Warrant Shares” and, collectively with the Warrants, the “Securities”) or the fairness or suitability of the investment in the Securities by the Subscribers nor have such authorities passed upon or endorsed the merits of the Offering.

 

2.2.        Regulation D Offering. Subscriber represents that it is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”) and acknowledges the sale contemplated hereby is being made in reliance on a private placement exemption to “Accredited Investors” within the meaning of Section 501(a) of Regulation D under the Securities Act or similar exemptions under state law.

 

2.3.        Intent. Subscriber is acquiring the Warrants and, upon exercise of the Warrants, the Warrant Shares, solely for investment purposes, for its own account and not for the account or benefit of any U.S. Person, and not with a view towards the distribution thereof and Subscriber has no present arrangement to sell the Securities to or through any person or entity. Subscriber shall not engage in hedging transactions with regard to the Warrants and the underlying securities unless in compliance with the Securities Act.

 

2.4.        Restrictions on Transfer. Subscriber acknowledges and understands the Warrants are being offered in a transaction not involving a public offering in the United States within the meaning of the Securities Act. The Securities have not been registered under the Securities Act or any state securities law, and, if in the future Subscriber decides to offer, resell, pledge or otherwise transfer the Securities, such Securities may be offered, resold, pledged or otherwise transferred only (A) pursuant to an effective registration statement filed under the Securities Act or (B) pursuant to an exemption from the registration requirements of the Securities Act, and in each case in accordance with any applicable securities laws of any state or any other jurisdiction. Subscriber agrees that if any transfer of its Securities or any interest therein is proposed to be made, as a condition precedent to any such transfer, Subscriber may be required to deliver to the Company an opinion of counsel satisfactory to the Company. Absent registration or an available exemption from registration, Subscriber agrees it will not resell the Securities. Subscriber further acknowledges that the Securities Exchange Commission (“SEC”) has taken the position that promoters or affiliates of a blank check company and their transferees, both before and after a Business Combination, are deemed to be “underwriters” under the Securities Act when reselling the securities of a blank check company. Based on that position, Rule 144 adopted pursuant to the Securities Act would not be available for resale transactions of the Securities despite technical compliance with the requirements of such Rule, and the Securities can be resold only through a registered offering or in reliance upon another exemption from the registration requirements of the Securities Act.

 

  

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2.5.        Sophisticated Investor.

 

(i)          Subscriber is sophisticated in financial matters and is able to evaluate the risks and benefits of the investment in the Warrants.

 

(ii)         Subscriber is aware that an investment in the Warrants is highly speculative and subject to substantial risks because, among other things, none of the Securities have been registered under the Securities Act and therefore cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available. Subscriber is able to bear the economic risk of its investment in the Securities for an indefinite period of time.

 

2.6.        Independent Investigation. Subscriber, in making the decision to purchase the Warrants, has relied upon an independent investigation of the Company and has not relied upon any information or representations made by any third parties or upon any oral or written representations or assurances from the Company, its officers, directors or employees or any other representatives or agents of the Company, other than as set forth in this Agreement. Subscriber is familiar with the business, operations and financial condition of the Company and has had an opportunity to ask questions of, and receive answers from the Company’s officers and directors concerning the Company and the terms and conditions of the offering of the Warrants and has had full access to such other information concerning the Company as Subscriber has requested. Subscriber confirms that all documents that it has requested have been made available and that Subscriber has been supplied with all of the additional information concerning this investment which it has requested.

 

2.7.        Organization and Authority. Each Subscriber possesses all requisite power and authority necessary to carry out the transactions contemplated by this Agreement.

 

2.8.        Authority. This Agreement has been validly authorized, executed and delivered by Subscriber and is a valid and binding agreement enforceable in accordance with its terms, subject to the general principles of equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally.

 

2.9.        No Conflicts. The execution, delivery and performance of this Agreement and the consummation by the Subscriber of the transactions contemplated hereby do not violate, conflict with or constitute a default under (i) if the Subscriber is a corporation, limited liability company, partnership or other legal entity, such Subscriber’s origination documents, (ii) any agreement, indenture or instrument to which the Subscriber is a party or (iii) any law, statute, rule or regulation to which Subscriber is subject, or any agreement, order, judgment or decree to which Subscriber is subject.

 

2.10.      No Legal Advice from Company. Subscriber acknowledges it has had the opportunity to review this Agreement and the transactions contemplated by this Agreement and the other agreements entered into between the parties hereto with Subscriber’s own legal counsel and investment and tax advisors. Except for any statements or representations of the Company made in this Agreement and the other agreements entered into between the parties hereto, Subscriber is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction.

 

  

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2.11.      Reliance on Representations and Warranties. Subscriber understands the Warrants are being offered and sold to it in reliance on specific exemptions from the registration requirements under the Securities Act, and analogous provisions in the laws and regulations of various states, and that the Company is relying upon the truth and accuracy of, and such Subscriber’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of Subscriber set forth in this Agreement in order to determine the applicability of such provisions.

 

2.12.      No Advertisements. Subscriber is not subscribing for the Warrants as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio, or presented at any seminar or meeting.

 

2.13.      Legend. Subscriber acknowledges and agrees the certificates evidencing the Warrants and the Warrant Shares shall bear a restrictive legend (the “Legend”), in form and substance as set forth in Section 4 hereof, prohibiting the offer, sale, pledge or transfer of the securities, except (i) pursuant to an effective registration statement covering these securities under the Securities Act or (ii) pursuant to an exemption from the registration requirements under the Securities Act and such laws which, in the opinion of counsel for this Company, is available.

 

3.           Representations and Warranties of the Company

 

The Company represents and warrants to the Subscribers that:

 

3.1.        Valid Issuance of Capital Stock. The total number of shares of all classes of capital stock which the Company has authority to issue is 100,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock. As of the date hereof, the Company has 1,150,000 shares of Common Stock issued and outstanding (of which 150,000 shares are subject to forfeiture as described in the registration statement related to the Company’s IPO) and no shares of Preferred Stock issued and outstanding. All of the issued shares of capital stock of the Company have been duly authorized, validly issued, and are fully paid and non-assessable.

 

3.2.        Title to Warrants. Upon issuance in accordance with, and payment pursuant to, the terms hereof and the Warrant Agreement, as the case may be, each of the Warrants and the Warrant Shares will be duly and validly issued, fully paid and non-assessable. Upon issuance in accordance with, and payment pursuant to, the terms hereof and the Warrant Agreement, as the case may be, Subscriber will have or receive good title to the Warrants, free and clear of all liens, claims and encumbrances of any kind, other than (i) transfer restrictions hereunder and under the other agreements contemplated hereby and (ii) transfer restrictions under federal and state securities laws.

 

  

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3.3.        Organization and Qualification. The Company is a corporation duly incorporated and existing in good standing under the laws of the state of Delaware and has the requisite corporate power to own its properties and assets and to carry on its business as now being conducted.

 

3.4.        Authorization; Enforcement. (i) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and to issue the Warrants and upon exercise thereof, the Warrant Shares in accordance with the terms hereof, (ii) the execution, delivery and performance of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Company or its Board of Directors or stockholders is required, and (iii) this Agreement constitutes valid and binding obligations of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization, or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by equitable principles of general application and except as enforcement of rights to indemnity and contribution may be limited by federal and state securities laws or principles of public policy.

 

3.5.        No Conflicts. The execution, delivery and performance of this Agreement and the consummation by the Company of the transactions contemplated hereby do not (i) result in a violation of the Company’s Certificate of Incorporation or Bylaws, (ii) conflict with, or constitute a default under any agreement, indenture or instrument to which the Company is a party or (iii) any law statute, rule or regulation to which the Company is subject or any agreement, order, judgment or decree to which the Company is subject. Other than any SEC or state securities filings which may be required to be made by the Company subsequent to the Closing, and any registration statement which may be filed pursuant thereto, the Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency or self-regulatory entity in order for it to perform any of its obligations under this Agreement or issue the Warrants or the Warrant Shares issuable upon exercise thereof in accordance with the terms hereof.

 

4.           Legends

 

4.1.        Legend. The Company will issue the Warrants, and when issued, the Warrant Shares, purchased by each Subscriber in its respective name. The Securities will bear the following Legend and appropriate “stop transfer” instructions:

 

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL FOR THIS CORPORATION, IS AVAILABLE.”

 

  

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN A SECURITIES ESCROW AGREEMENT (THE “AGREEMENT”) AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED DURING THE TERM OF THE ESCROW PERIOD (AS DEFINED IN THE AGREEMENT).”

 

4.2.        Subscribers’ Compliance. Nothing in this Section 4 shall affect in any way each Subscriber’s obligations and agreements to comply with all applicable securities laws upon resale of the Securities.

 

4.3.        Company’s Refusal to Register Transfer of the Securities. The Company shall refuse to register any transfer of the Securities, if in the sole judgment of the Company such purported transfer would not be made (i) pursuant to an effective registration statement filed under the Securities Act, or (ii) pursuant to an available exemption from the registration requirements of the Securities Act.

 

4.4.        Registration Rights. Subscribers will be entitled to certain registration rights which will be governed by a registration rights agreement (“Registration Rights Agreement”) to be entered into with the Company on or prior to the consummation of the IPO.

 

5.           Escrow. Upon consummation of the IPO, the holders of the Warrants shall enter into a securities escrow agreement (the “Escrow Agreement”) with Continental Stock Transfer & Trust Company, whereby the Warrants shall be held in escrow until 30 days following consummation of a Business Combination (as defined therein) subject to certain restrictions as set forth in the Escrow Agreement.

 

6.           Securities Laws Restrictions. In addition to the restrictions contained in the Escrow Agreement, each Subscriber agrees not to sell, transfer, pledge, hypothecate or otherwise dispose of all or any part of the Securities unless, prior thereto (a) a registration statement on the appropriate form under the Securities Act and applicable state securities laws with respect to the Securities proposed to be transferred shall then be effective or (b) the Company shall have received an opinion from counsel reasonably satisfactory to the Company, that such registration is not required because such transaction complies with the Securities Act and the rules promulgated by the SEC thereunder and with all applicable state securities laws.

 

7.           Waiver of Liquidation Distributions. In connection with the Securities purchased pursuant to this Agreement, and with respect to any Common Stock purchased by any Subscriber prior to the private placement, such Subscriber hereby waives any and all right, title, interest or claim of any kind in or to any distributions of the trust account, whether in connection with (i) the exercise of redemption rights if the Company consummates a Business Combination or (ii) upon the Company’s redemption of shares of Common Stock sold in the Company’s IPO upon the Company’s failure to timely complete a Business Combination. For purposes of clarity, in the event Subscriber purchases shares of Common Stock in the IPO or in the aftermarket, any additional shares so purchased shall be eligible to receive the redemption value of such shares of Common Stock upon the same terms offered to all other purchasers of Common Stock in the IPO. In no event will a Subscriber have the right to exercise any Warrants prior to the later of: (i) one year from the date of the prospectus relating to the Company’s IPO and (ii) 30 days following the consummation of a Business Combination.

 

  

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8.           Forfeiture of Warrants.

 

8.1.        Failure to Consummate Business Combination. The Warrants shall be forfeited to the Company upon the dissolution of the Company in the event that the Company does not consummate a Business Combination within 21 months from the consummation of the IPO.

 

8.2.        Termination of Rights as Holder; Escrow. If the Warrants are forfeited in accordance with this Section 8, then after such time the Subscribers (or successor in interest), shall no longer have any rights as a holder of such Warrants, and the Company shall take such action as is appropriate to cancel such Warrants. To effectuate the foregoing, all certificates representing the Warrants shall be held in escrow as provided in Section 5 hereof. In addition, each Subscriber hereby irrevocably grants the Company a limited power of attorney for the purpose of effectuating the foregoing and agrees to take any and all measures reasonably requested by the Company necessary to effect the foregoing.

 

9.           Rescission Right Waiver and Indemnification.

 

9.1.        Each Subscriber understands and acknowledges an exemption from the registration requirements of the Securities Act requires there be no general solicitation of purchasers of the Warrants. In this regard, if the IPO were deemed to be a general solicitation with respect to the Warrants, the offer and sale of such Warrants may not be exempt from registration and, if not, each Subscriber may have a right to rescind its purchase of the Warrants. In order to facilitate the completion of the Offering and in order to protect the Company, its stockholders and the trust account from claims that may adversely affect the Company or the interests of its stockholders, each Subscriber hereby agrees to waive, to the maximum extent permitted by applicable law, any claims, right to sue or rights in law or arbitration, as the case may be, to seek rescission of its purchase of the Warrants. Each Subscriber acknowledges and agrees this waiver is being made in order to induce the Company to sell the Warrants to such Subscriber. Each Subscriber agrees the foregoing waiver of rescission rights shall apply to any and all known or unknown actions, causes of action, suits, claims or proceedings (collectively, “Claims”) and related losses, costs, penalties, fees, liabilities and damages, whether compensatory, consequential or exemplary, and expenses in connection therewith, including reasonable attorneys’ and expert witness fees and disbursements and all other expenses reasonably incurred in investigating, preparing or defending against any Claims, whether pending or threatened, in connection with any present or future actual or asserted right to rescind the purchase of the Warrants hereunder or relating to the purchase of the Warrants and the transactions contemplated hereby.

 

9.2.        Each Subscriber agrees not to seek recourse against the trust account for any reason whatsoever in connection with its purchase of the Warrants or any Claim that may arise now or in the future.

 

  

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9.3.        Each Subscriber agrees that to the extent any waiver of rights under this Section 9 is ineffective as a matter of law, each Subscriber has offered such waiver for the benefit of the Company as an equitable right that shall survive any statutory disqualification or bar that applies to a legal right. Each Subscriber acknowledges the receipt and sufficiency of consideration received from the Company hereunder in this regard.

 

10.         Terms of the Warrant. The Warrants are substantially identical to the warrants included in the units offered in the IPO as set forth in the Warrant Agreement to be entered into with Continental Stock Transfer and Trust Company on or prior to the closing of the IPO, except: (i) they will be placed in escrow and not released before, except in limited circumstances, 30 days following the consummation of a Business Combination, (ii) they are being purchased pursuant to an exemption from the registration requirements of the Securities Act and will become freely tradable only after they are registered pursuant to the Registration Rights Agreement to be signed on or before the date of the prospectus relating to the Company’s IPO, and (iii) if held by the original holders or their permitted assigns, (a) they will be non-redeemable, (b) they will be exercisable on a “cashless” basis and (c) with respect to the Warrants being purchased by the underwriters of the IPO, they will expire five years from the effective date of the registration statement for the units sold in the IPO.

 

11.         Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware for agreements made and to be wholly performed within such state. The parties hereto hereby waive any right to a jury trial in connection with any litigation pursuant to this Agreement and the transactions contemplated hereby.

 

12.         Assignment; Entire Agreement; Amendment.

 

12.1.      Assignment. Neither this Agreement nor any rights hereunder may be assigned by any party to any other person other than by a Subscriber to a person agreeing to be bound by the terms hereof.

 

12.2.      Entire Agreement. This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter thereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them.

 

12.3.      Amendment. Except as expressly provided in this Agreement, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought.

 

12.4.      Binding upon Successors. This Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors and permitted assigns.

 

  

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13.         Notices; Indemnity

 

13.1.      Notices. Unless otherwise provided herein, any notice or other communication to a party hereunder shall be sufficiently given if in writing and personally delivered or sent by facsimile or other electronic transmission with copy sent in another manner herein provided or sent by courier (which for all purposes of this Agreement shall include Federal Express or other recognized overnight courier) or mailed to said party by certified mail, return receipt requested, at its address provided for herein or such other address as either may designate for itself in such notice to the other. Communications shall be deemed to have been received when delivered personally, on the scheduled arrival date when sent by next day or 2nd-day courier service, or if sent by facsimile upon receipt of confirmation of transmittal or, if sent by mail, then three days after deposit in the mail. If given by electronic transmission, such notice shall be deemed to be delivered (a) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (b) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (1) such posting and (2) the giving of such separate notice; and (c) if by any other form of electronic transmission, when directed to the stockholder.

 

13.2.      Indemnification. Each of the Subscribers and the Company agree to indemnify each other against any loss, cost or damages (including reasonable attorney’s fees and expenses) incurred as a result of such party’s breach of any representation, warranty, covenant or agreement in this Agreement.

 

14.         Counterparts. This Agreement may be executed in one or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

15.         Survival; Severability

 

15.1.      Survival. The representations, warranties, covenants and agreements of the parties hereto shall survive the Closing.

 

15.2.      Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party.

 

16.         Headings. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

[remainder of page intentionally left blank]

 

  

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This subscription is accepted by the Company on the __ day of                      , 2011.

	  	
ARCADE CHINA ACQUISITION CORP.

	  	  
	  	
By:

	  
	  	  	
Name:

	  	  	
Title:

	  	  
	  	
SUBSCRIBERS:

	  	  
	  	
ARCADE CHINA INVESTMENT PARTNERS,

LLC

	  	  
	  	
By:

	  
	  	  	
Name:

	  	  	
Title:

	  	  
	  	
KRAVIS CAPITAL LIMITED

	  	  
	  	
By:

	  
	  	  	
Name:

	  	  	
Title:

	  	  
	  	
MORGAN JOSEPH TRIARTISAN LLC

	  	  
	  	
By:

	  
	  	  	
Name:

	  	  	
Title:

 

Signature Page to Warrant Subscription Agreement

 

  

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Exhibit A

 

List of Subscribers

  

11

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