Does Raydan Mars's "Mana Chain" still work if the first person hit is KO'ed?

As I'm not familiar with the character (or even what set he's from. Mage Knight?) or the power, quoting said power could help in determining an answer.

Yep. Even though they no longer occupy their square, you'd still base it off the square they formerly occupied.

MANA CHAIN
Raydan Marz can use Penetrating/Psychic Blast. Each time Raydan Marz hits with a ranged combat attack and the attack roll is doubles, he may be given a ranged combat action as a free action counting range and line of fire from a square occupied by the hit target.