China Education Alliance, Inc.
China
Education Alliance, Inc.
80
Xxxx Xxxx Road
Kun
Lun Shopping Mall
Harbin
150090
The
People’s Republic of China
May
8,
2007
Xx.
Xxxxxx Xxxxxxx
VIA
FAX TO: 0.000.000.0000
SBI
Advisors LLC
000
Xxxxxxx Xxxxxx Xxxxx, #0000
Xxxxxxx
Xxxxx, XX 00000
|
Re:
|
Secured
Promissory Notes of
|
|
China
Education Alliance, Inc.
|
|
dated
September 29, 2006
|
Dear
Xx.
Xxxxxxx:
This
letter sets forth our mutual agreement regarding the payment outstanding secured
promissory notes dated September 29, 2006 (the “Notes”) issued by China
Education Alliance, Inc. (the “Company”) for which SBI Advisors, LLC acted as
collateral agent for the lenders (in such capacity, the “Collateral Agent”), in
the initial aggregate principal amount of $1,530,000, of which the aggregate
principal amount of $1,330,000 is outstanding. The Company has sent a separate
wire in the amount of $150,633 to SBI Advisors LLC on April 30, 2007. Upon
the
receipt of the wire, SBI Advisors LLC shall immediately return this amount
(or
such lesser amount as SBI shall have actually received). SBI Advisors LLC also
agrees to pledge 500,000 of its presently outstanding warrants as security
for
its repayment obligations pursuant to this paragraph.
Pursuant
to that certain payoff letter dated the date hereof between the Company and
the
Collateral Agent, it is contemplated that the Notes will be repaid in full
on
May 8, 2007, together with interest accrued and unpaid thereon, with interest
accruing at the rate of 12% per annum for the period from March 30, 2007 through
the date that the Notes are paid. In addition, it is hereby agreed that
following receipt by the Collateral Agent of the amounts set forth in the
previous sentence, the presently outstanding warrants to purchase a total of
1,530,000 shares of common stock of the Company shall be modified so that the
warrants will terminate on September 29, 2010 at an exercise price of US$.50
per
share. The warrants shall provide the Company the right to call the warrants
for
$.01 per share after September 29, 2008 if the average closing sales price
of
the common stock of the Company exceeds $1.38 (U.S.) per share during any 30
day
period. It is also agreed that there will be no piggy-back rights regarding
the
warrants in connection with the SEC Registration Statement to be filed by the
Company in connection with the Common Stock issuable in connection with the
Company’s proposed financing with Xxxxxx Partners, L.P. and that the warrant
holders will not exercise any demand registration rights until September 29,
2008; provided, however, the holders of the warrants shall not exercise any
demand registration rights if (a) all of the underlying shares issuable upon
exercise of such warrants may be sold pursuant to Rule 144(k) or any subsequent
successor rule or (b) such warrants have not been called for
redemption.
The
Collateral Agent hereby represents and warrants to the Company that it has
been
authorized by all of the holders of the Notes to enter into this Agreement
on
behalf of such holders. In addition, each of the Company and SBI Advisors,
LLC
represents that this Agreement constitutes the valid, binding and enforceable
obligation of such party, enforceable in accordance with its terms.
Set
forth
on the enclosed payoff letter is the amount due the Noteholders, assuming
payment is made by 5:30 PM, New York time, on May 8, 2007 and the wire transfer
instructions for the Noteholders.
Very
truly yours,
CHINA
EDUCATION ALLIANCE, INC.
By:
_/s/
Xinqun Yu_________________________________
Xin
Xxx
Xx
Chief
Executive Officer and President
Agreed
to
and approved
this
8th
day of
May, 2007
SBI
Advisors, LLC
By: /s/
Xxxxxx
Xxxxxxx
Name: Xxxxxx
Xxxxxxx
Title:
SBI
Advisors, LLC
000
Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000
China
Education Alliance, Inc.
80
Xxxx
Xxxx Road
Kun
Lun
Shopping Mall
Harbin,
P.R. China 150090
Attention:
Xx. Xxxxxx Xx
|
RE:
|
$1,530,000
Bridge Loan Financing
|
Dear
Xx.
Xx:
Pursuant
to that certain Intercreditor and Agency Agreement dated as of September 29,
2006 (as amended through the date hereof, the “Intercreditor
Agreement”),
SBI
Advisors, LLC was appointed as collateral agent (in such capacity, the
“Collateral
Agent”)
in
connection with those certain Secured Promissory Notes issued by China Education
Alliance, Inc., a North Carolina corporation (the “Borrower”),
in
favor of various investors as more particularly described in the Intercreditor
Agreement (collectively, the “Investors”).
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings given such terms in the Intercreditor
Agreement.
The
total
amount necessary to pay in full as of this date all outstanding Loans and other
obligations of the Borrower to the
Investors
under
the Notes other than any
and
all indemnity obligations under any of the Transaction Agreements (as such
term
is defined in the Notes) that are not yet due and payable and which by their
terms survive the termination of such Transaction Agreement (collectively,
the
“Contingent
Indemnity Obligations”), is
as
follows:
|
(i)
|
Aggregate
outstanding principal balance of the Loans as of this date
|
$1,330,000
|
|
(ii)
|
Accrued
but unpaid interest on the Loans as of the estimated May 8, 2007
payoff
date
|
$25,969
|
|
(iii)
|
Legal
Fees
|
$8,609.49
|
|
(iv)
|
Total
pay-off amount as of this date of the Loans and the other obligations
(other than the Contingent Indemnity Obligations) (sum of (i) -
(iii))
|
$1,364,578.49
|
Payment
of the sum specified in item (iv) above (the “Pay-Off
Amount”)
shall
be made to SBI
Advisors, LLC by
way of
a federal wire transfer of immediately available funds by no later than
5:30
p.m.
(New York time) on the date hereof, directed
as follows:
Bank
Name: Bank
of
America
City
& State: Xxx
Xxxx,
XX 00000
ABA
Routing No.: 00000000
Swift
Address: XXXXXX0X
Credit
Account No.: 11010-42499
Account
Name: SBI
Advisors, LLC
|
CHINA
EDUCATION ALLIANCE, INC.
|
May
8, 2007 Page 2
|
Upon
receipt by the Collateral Agent of the Pay-Off Amount in immediately available
funds in accordance with the preceding paragraph, (i) the Notes shall terminate
and be of no further force or effect other than those provisions therein that
specifically survive termination, (ii) all Liens (as such term is defined in
the
Notes) on any real or personal property assets of the Borrower and the
Guarantors granted in favor of the Collateral Agent will be automatically
terminated and released, (iii)
the
Collateral Agent will
execute and deliver to the Borrower and each applicable Guarantor such lien
release documents as the Borrower may reasonably request in order to evidence
or
otherwise give public notice of such collateral terminations and releases
(provided, however, that any and all such termination statements and other
lien
release documents must be prepared and recorded at the Borrower’s expense), (iv)
the
Collateral Agent will
deliver (at the Borrower’s expense) any certificated securities then in its
possession evidencing or constituting any of the Collateral into the possession
of the Borrower, and (v) the Borrower is authorized to file UCC-3 termination
statements (without signature of the Collateral Agent) for each of the UCC
financing statements relating to the Liens securing the Secured Obligations
(as
such term is defined in the Notes). The Borrower agrees to pay the Collateral
Agent for
all
out-of-pocket costs and expenses incurred by the Collateral Agent (including,
without limitation, attorneys’ fees) in
connection with the matters referred to in the previous sentence, and
acknowledges that the Collateral Agent’s execution
of and/or delivery of any documents releasing any security interest or claim
in
any property of the Borrower as set forth herein is made without recourse,
representation, warranty or other assurance of any kind by the Collateral
Agent as
to
rights in any collateral security for amounts owing under the Notes, the
condition or value of any Collateral, or any other matter.
Notwithstanding
anything to the contrary contained herein or in any of such releases or other
documents, the obligations and liabilities of the Borrower and the Guarantors
to
the Collateral Agent and the Investors under
or
in respect of the Notes insofar as such obligations and liabilities survive
termination shall continue in full force and effect in accordance with their
terms.
In
addition, the Borrower hereby releases the Collateral Agent, the
Investors and
their
respective affiliates and subsidiaries and their respective officers, directors,
employees, shareholders, agents and representatives as well as their respective
successors and assigns from any and all claims, obligations, rights, causes
of
action, and liabilities, of whatever kind or nature, whether known or unknown,
whether foreseen or unforeseen, arising on or before the date hereof, which
the
Borrower ever had, now has or hereafter can, shall or may have for, upon or
by
reason of any matter, cause or thing whatsoever, which are based upon, arise
under or are related to the Notes or any other Transaction
Agreement.
This
letter agreement shall be governed by the internal laws of the State of
California. No party may assign its rights, duties or obligations under this
letter agreement without the prior written consent of the other parties. This
letter agreement may be executed in any number of separate counterparts, each
of
which shall, collectively and separately, constitute one agreement. This letter
shall not become effective unless and until one or more counterparts hereof
are
duly executed by the Borrower in the space indicated below and telecopied to
the
attention of Xxxxx Xxxxxx of Xxxxxxxxxx & Xxxxx LLP, counsel for the
Collateral Agent, at (000) 000-0000.
Very
truly yours,
SBI
ADVISORS, LLC ,
as
Collateral Agent
By: /s/
Xxxxxx
Xxxxxxx
Name:
Xxxxxx Xxxxxxx
Title:
Accepted
and agreed as of
May
___,
2007:
CHINA
EDUCATION ALLIANCE, INC.
By:/s/
Xxxxxx
Xx
Name:Xxxxxx
Xx
Title:
