ESCROW SHARES ESCROW AGREEMENT

ESCROW SHARES ESCROW AGREEMENT

          THIS ESCROW SHARES ESCROW AGREEMENT (the “Agreement”) is made and entered into as of November 23, 2005 (the “Effective Date”) by and among HIGHGATE HOUSE FUNDS, LTD. (“Highgate”), XINHUA CHINA LTD, a corporation organized and existing under the laws of the State of Nevada (the “Company”), and GOTTBETTER & PARTNERS, LLP, as escrow agent (“Escrow Agent”). 

RECITALS:

          WHEREAS, the Company and Highgate have entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”), dated as of the date hereof, pursuant to which the Company proposes to sell secured convertible debentures (the “Convertible Debentures”) which shall be convertible into the Company’s Common Stock, par value $.00001 per share (the “Common Stock”) and in connection therewith the Company has agreed to issue certain of its warrants (the “Warrants”; and, together with the Convertible Debentures, the “Securities”);

          WHEREAS, the Securities Purchase Agreement provides that Highgate shall deposit the Escrow Shares (as defined in the Securities Purchase Agreement) in a segregated escrow account to be held by Escrow Agent in order to effectuate the conversions of the Convertible Debentures and the exercise of the Warrant; 

          WHEREAS, The Escrow Agent is willing to act as escrow agent pursuant to the terms of this Agreement with respect to the Escrow Shares; and

          NOW, THEREFORE, in consideration of the mutual covenants, agreements, warranties, and representations herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

TERMS AND CONDITIONS

          1.       Procedure for Escrow.  The procedures of the escrow shall be governed by the provisions of Exhibit F of the Securities Purchase Agreement and the Convertible Debentures, all of which are incorporated herein by reference as if set forth fully herein.

          2.       Terms of Escrow.  The terms of the escrow shall be governed by the Purchase Agreement and the Convertible Debenture, all of which are incorporated herein by reference as if set forth fully herein.  The Escrow Shares may be released from escrow once an Event of Default under the Convertible Debentures occurs.

          3.       No Rights Prior to Release from Escrow.  The Company, Highgate and the Escrow Agent acknowledge that until the Escrow Shares represented by the share certificates delivered to the Escrow Agent have been released from escrow by the Escrow Agent to Highgate in accordance with the Securities Purchase Agreement and related transaction documents, the Escrow Shares shall have no voting rights, dividend rights, or other corporate rights, as the Company has not received full consideration for the Escrow Shares.  However, upon Highgate’s conversion of the Convertible Debentures upon an Event of Default under the Convertible Debentuers, the Escrow Shares released from escrow to Highgate shall be considered fully-paid and non-assessable shares of common stock of the Company.

          4.       Concerning the Escrow Agent.

                    4.1.            The Escrow Agent undertakes to perform only such duties as are expressly set forth herein and no implied duties or obligations shall be read into this Agreement against the Escrow Agent.

                    4.2.            The Escrow Agent may act in reliance upon any writing or instrument or signature which it, in good faith, believes to be genuine, may assume the validity and accuracy of any statement or assertion contained in such a writing or instrument, and may assume that any person purporting to give any writing, notice, advice or instructions in connection with the provisions hereof has been duly authorized to do so.  The Escrow Agent shall not be liable in any manner for the sufficiency or correctness as to form, manner, and execution, or validity of any instrument deposited in this escrow, nor as to the identity, authority, or right of any person executing the same; and its duties hereunder shall be limited to the safekeeping of such certificates, monies, instruments, or other document received by it as such escrow holder, and for the disposition of the same in accordance with the written instruments accepted by it in the escrow.

                    4.3.            Highgate and the Company hereby agree, to defend and indemnify the Escrow Agent and hold it harmless from any and all claims, liabilities, losses, actions, suits, or proceedings at law or in equity, or any other expenses, fees, or charges of any character or nature which it may incur or with which it may be threatened by reason of its acting as Escrow Agent under this Agreement; and in connection therewith, to indemnify the Escrow Agent against any and all expenses, including attorneys’ fees and costs of defending any action, suit, or proceeding or resisting any claim (and any costs incurred by the Escrow Agent pursuant to Sections 6.4 or 6.5 hereof).  The Escrow Agent shall be vested with a lien on all property deposited hereunder,

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