Exhibit 10.1
FORBEARANCE AND
SETTLEMENT AGREEMENT
THIS
FORBEARANCE AND SETTLEMENT AGREEMENT (the “ Agreement
”) is made and entered into effective as of December 29,
2006, between XINHUA CHINA LTD., a Nevada corporation (the “
Company ”), CORNELL CAPITAL PARTNERS, L.P. (“
Cornell ”), and HIGHGATE HOUSE FUNDS, LTD. (“
Highgate ”). Cornell and Highgate are
collectively referred to herein as the “ Buyers.
” All terms not otherwise defined herein shall have the
meaning ascribed to them in the Securities Purchase Agreement (as
defined below).
WHEREAS, in connection with the Securities Purchase
Agreement among the Company and the Buyers entered into on November
23, 2005, as amended on March 23, 2006 (“ Securities
Purchase Agreement ”) the Company has issued to the
Buyers the following convertible debentures (the “
Convertible Debentures ”), which, as of December 29,
2006, have outstanding principal and accrued and unpaid interest
stated in table below:
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Buyers Name :
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Issuance Date of
Debenture :
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Outstanding
Principal :
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Outstanding
Interest :
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Highgate
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November 23, 2005
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$1,250,000
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$27,465.75
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Cornell
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March 23, 2006
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$2,000,000
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$30,794.52
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WHEREAS , in connection with the Securities Purchase
Agreement, on November 23, 2005, as amended on March 23, 2006 the
Company and the Buyers also entered in (a) an Investor Registration
Rights Agreement (the “ Registration Rights Agreement
”), (b) a Security Agreement (the “ Security
Agreement ”), and (c) along with Pacific Stock Transfer,
Irrevocable Transfer Agent Instructions (the “ Transfer
Agent Instructions ”). The Convertible Debentures,
the Securities Purchase Agreement, the Registration Rights
Agreement, Security Agreement, the Transfer Agent Instructions, and
all other agreements entered into between the Company and Buyers in
connection therewith are collectively referred to herein as the
“ Transaction Documents ”.
WHEREAS , the Company has an opportunity to sell its Beijing
Boheng Investments subsidiary (the “ Subsidiary
”) for a purchase price which will be paid to the Company
periodically over the course of approximately two years and which
sale of the Subsidiary requires the consent of Cornell and
Highgate.
WHEREAS, the Company wishes to use the proceeds from the
sale of the Subsidiary as received to repay principal and accrued
and unpaid interest due to the Buyers under the Convertible
Debentures under the terms and conditions as set forth herein.
WHEREAS , in connection with the Securities Purchase
Agreement, on November 23, 2005, the Company issued to Highagte a
warrant (the “ Warrant ”) to purchase 1,035,000
shares of the Company’s common stock (the “ Warrant
Shares ”).
WHEREAS , the Company acknowledges that it has failed to
obtain effectiveness of the Registration Statement within 120 days
after filing thereof (the Registration Statement was filed on March
28, 2006), which requires the Company to pay to the holders of the
Convertible Debentures as liquidated damages and not as a penalty,
a cash amount equal to two percent (2%) per month of the
outstanding principal amount of the Convertible Debentures
outstanding starting within three (3) business days from the end of
the month in which the Scheduled Effective Deadline occurred.
NOW, THEREFORE, in consideration of the mutual promises,
conditions and covenants contained herein and other good and
valuable consideration, receipt of which is hereby acknowledged,
the parties hereto agree as follows:
1. The Company hereby
acknowledges, confirms and agrees:
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a.
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That amounts owed, together with interest
accrued and accruing thereon (collectively, the “
Obligations ”) now or hereafter payable by the Company
to the Buyers under the Convertible Debentures and the Transaction
Documents are unconditionally owing by the Company to the Buyers,
without offset, setoff, defense or counterclaim of any kind, nature
or description whatsoever.
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b.
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That: (1) each of the Transaction
Documents to which it is a party has been duly executed and
delivered to the Buyers by the Company, and each is in full force
and effect as of the date hereof, (2) the agreements and
obligations of the Company contained in such documents and in this
Agreement constitute the legal, valid and binding obligations of
the Company, enforceable against it in accordance with their
respective terms, and the Company has no valid defense to the
enforcement of such obligations, (3) the Buyers are and shall
be entitled to the rights, remedies and benefits provided for in
the Transaction Documents and applicable law, without offset,
setoff, defense or counterclaim of any kind, nature or descriptions
whatsoever, and (4) it has no claims, actions, cause of action,
suits, judgments, and demands whatsoever, in law, admiralty or
equity, against the Buyers or their affiliates.
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c.
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That the Buyers have and shall continue to
have valid, enforceable and perfected first-priority liens upon and
security interests in the Pledged Property (as defined in the
Transaction Documents) heretofore granted pursuant to the Security
Agreement, or otherwise granted to or held by the Buyer.
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d.
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That as of November 28, 2006, the Company owes
to the Buyers liquidated damages pursuant to Section 2(c) of the
Registration Rights Agreement in an amount equal to $260,000 plus
an additional $65,000 for each month thereafter (collectively, the
“ Accrued Liquidated Damages ”) for failure to
have the registration statement timely declared effective by the
SEC.
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2. In reliance upon the
representations, warranties and covenants of the Company contained
in this Agreement, and subject to the terms and conditions set
forth herein, the Buyers hereby
waive on a one-time basis only the Accrued Liquidated Damages
(subject to Section 5 below) and further agree to forbear from
exercising its rights and remedies under the Transaction Documents
or applicable law in respect of or arising out of the
Company’s failure to timely pay the Accrued Liquidated
Damages, subject to the conditions, amendments and modifications
contained herein for the period (the “ Forbearance
Period ”) commencing on the date he
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