Unassociated Document


    
           EXECUTION
VERSION



     

    REGISTRATION
RIGHTS AGREEMENT

     

    REGISTRATION RIGHTS AGREEMENT
(this “Agreement”),
dated as of November 3, 2010, by and among China Linen Textile Industry, Ltd.,
with headquarters located at Chengdong Street, Lanxi County, Heilongjiang
Province 151500, China (the “Company”), and the investors
listed on the Schedule of Buyers attached hereto (each, a “Buyer” and collectively, the
“Buyers”).

     

    WHEREAS:

     

    A.           In
connection with the Securities Purchase Agreement by and among the parties
hereto of even date herewith (the “Securities Purchase
Agreement”), the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, to issue and sell to each Buyer
senior, unsecured convertible notes of the Company (the “Notes”), which will, among
other things, be convertible into the Company’s ordinary shares, par value
$0.002 per share (the “Ordinary
Shares”) (as converted, collectively, the “Conversion
Shares”).

     

    B.           In
accordance with the terms of the Securities Purchase Agreement, the Company has
agreed to provide certain registration rights under the Securities Act of 1933,
as amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the “1933 Act”), and applicable
state securities laws.

     

    NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and each of the Buyers hereby agree as
follows:

     

    1.           Definitions.

     

    Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:

     

    (a)           “Additional Effective Date”
means the date the Additional Registration Statement is declared effective by
the SEC.

     

    (b)           “Additional Effectiveness
Deadline” means (i) in the event that the Additional Registration
Statement is not subject to a full review by the SEC, the date which is one
hundred thirty five (135) calendar days after the earlier of the Additional
Filing Date and the Additional Filing Deadline or (ii) in the event that the
Additional Registration Statement is subject to a full review by the SEC, one
hundred sixty five (165) calendar days after the after the earlier of the
Additional Filing Date and the Additional Filing Deadline.

     

    (c)           “Additional Filing Date” means
the date on which the Additional Registration Statement is filed with the
SEC.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (d)           “Additional Filing Deadline”
means if Cutback Shares are required to be included in any Additional
Registration Statement, the later of (i) the date sixty (60) days after the date
substantially all of the Registrable Securities registered under the immediately
preceding Registration Statement are sold and (ii) the date six (6) months from
the Initial Effective Date or the most recent Additional Effective Date, as
applicable.

     

    (e)           “Additional Registrable
Securities” means, (i) any Cutback Shares not previously included on a
Registration Statement and (ii) any capital stock of the Company issued or
issuable with respect to the Notes, the Conversion Shares, or the Cutback
Shares, as applicable, as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, without regard to any
limitations on conversion and/or redemption of the Notes.

     

    (f)           “Additional Registration
Statement” means a registration statement or registration statements of
the Company filed under the 1933 Act covering any Additional Registrable
Securities.

     

    (g)           “Additional Required Registration
Amount” means (I) any Cutback Shares not previously included on a
Registration Statement, all subject to adjustment as provided in Section 2(f) or
(II) such other amount as may be required by the staff of the SEC pursuant to
Rule 415, without regard to any limitations on conversion and/or redemption of
the Notes.

     

    (h)           “Business Day” means any day
other than Saturday, Sunday or any other day on which commercial banks in the
City of New York are authorized or required by law to remain
closed.

     

    (i)           “Closing Date” shall have the
meaning set forth in the Securities Purchase Agreement.

     

    (j)           “Cutback Shares” means any of
the Initial Required Registration Amount or the Additional Required Registration
Amount (without regard to clause (II) in the definition thereof) of Registrable
Securities not included in all Registration Statements previously declared
effective hereunder as a result of a limitation on the maximum number of
Ordinary Shares of the Company permitted to be registered by the staff of the
SEC pursuant to Rule 415.  For the purpose of determining the Cutback
Shares, in order to determine any applicable Required Registration Amount, the
Conversion Shares shall be excluded on a pro rata basis until all of the
Conversion Shares have been excluded.

     

    (k)           “Effective Date” means the
Initial Effective Date and the Additional Effective Date, as
applicable.

     

    (l)           “Effectiveness Deadline” means
the Initial Effectiveness Deadline and the Additional Effectiveness Deadline, as
applicable.

     

    (m)           “Filing Date” means the date on
which the Initial Registration Statement and the Additional Registration
Statement, as applicable, is filed with the SEC.

     

    
      
        
        

      

      
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    (n)           “Filing Deadline” means the
Initial Filing Deadline and the Additional Filing Deadline, as
applicable.

     

    (o)           “Initial Effective Date” means
the date that the Initial Registration Statement has been declared effective by
the SEC.

     

    (p)           “Initial Effectiveness
Deadline” means the date which is (i) in the event that the Initial
Registration Statement is not subject to a full review by the SEC, ninety (90)
calendar days after the Closing Date or (ii) in the event that the Initial
Registration Statement is subject to a full review by the SEC, one hundred
ninety-five (195) calendar days after the Closing Date.

     

    (q)           “Initial Filing Deadline” means
the date which is sixty (60) calendar days after the Closing Date.

     

    (r)           “Initial Registrable
Securities” means (i) the Conversion Shares issued or issuable upon
conversion and/or redemption of the Notes, and (ii) any capital stock of the
Company issued or issuable with respect to the Notes or the Conversion Shares as
a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise, without regard to any limitations on conversion
and/or redemption of the Notes.

     

    (s)           “Initial Registration
Statement” means a registration statement or registration statements of
the Company filed under the 1933 Act covering the Initial Registrable
Securities.

     

    (t)           “Initial Required Registration
Amount” means 130% of the sum of (i) the number of Conversion Shares
issued and issuable pursuant to the Notes as of the Trading Day immediately
preceding the applicable date of determination and all subject to adjustment as
provided in Section 2(f), without regard to any limitations on conversion and/or
redemption of the Notes.

     

    (u)           “Investor” means a Buyer or any
transferee or assignee thereof to whom a Buyer assigns its rights under this
Agreement and who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 and any transferee or assignee thereof to whom a
transferee or assignee assigns its rights under this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with Section
9.

     

    (v)           “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof.

     

    (w)           “register,” “registered,” and “registration” refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415, and the declaration or ordering of effectiveness of such Registration
Statement(s) by the SEC.

     

    (x)           “Registrable Securities” means
the Initial Registrable Securities and the Additional Registrable
Securities.

     

    
      
        
        

      

      
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    (y)           “Registration Statement” means
the Initial Registration Statement and the Additional Registration Statement, as
applicable.

     

    (z)           “Required Holders” means the
holders of at least a majority of the Registrable Securities.

     

    (aa)           “Required Registration Amount”
means either the Initial Required Registration Amount or the Additional Required
Registration Amount, as applicable.

     

    (bb)           “Rule 415” means Rule 415
promulgated under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis.

     

    (cc)           “SEC” means the United States
Securities and Exchange Commission.

     

    (dd)           “Trading Day” means any day on
which the Ordinary Shares are traded on the Principal Market, or, if the
Principal Market (as defined in the Securities Purchase Agreement) is not the
principal trading market for the Ordinary Shares, then on the principal
securities exchange or securities market on which the Ordinary Shares are then
traded; provided that “Trading Day” shall not include any day on which the
Ordinary Shares are scheduled to trade on such exchange or market for less than
4.5 hours or any day that the Ordinary Shares are suspended from trading during
the final hour of trading on such exchange or market (or if such exchange or
market does not designate in advance the closing time of trading on such
exchange or market, then during the hour ending at 4:00:00 p.m., New York
time).

     

    2.           Registration.

     

    (a)           Initial Mandatory
Registration.  The Company shall prepare, and, as soon as
practicable but in no event later than the Initial Filing Deadline, file with
the SEC the Initial Registration Statement on Form F-3 covering the resale of
all of the Initial Registrable Securities.  In the event that Form F-3
is unavailable for such a registration, the Company shall use such other form as
is available for such a registration on another appropriate form reasonably
acceptable to the Required Holders, subject to the provisions of Section
2(e).  The Initial Registration Statement prepared pursuant hereto
shall register for resale at least the number of Ordinary Shares equal to the
Initial Required Registration Amount determined as of the date the Initial
Registration Statement is initially filed with the SEC, subject to adjustment as
provided in Section 2(f).  The Initial Registration Statement shall
contain (except if otherwise directed by the Required Holders) the “Plan of Distribution”
and “Selling
Shareholders” sections in substantially the form attached hereto as Exhibit B. The
Company shall use its best efforts to have the Initial Registration Statement
declared effective by the SEC as soon as practicable, but in no event later than
the Initial Effectiveness Deadline.  By 9:30 a.m. New York time on the
Business Day following the Initial Effective Date, the Company shall file with
the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to
be used in connection with sales pursuant to such Initial Registration
Statement.

     

    
      
        
        

      

      
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    (b)           Additional Mandatory
Registrations.  The Company shall prepare, and, as soon as
practicable but in no event later than the Additional Filing Deadline, file with
the SEC an Additional Registration Statement on Form F-3 covering the resale of
all of the Additional Registrable Securities not previously registered on an
Additional Registration Statement hereunder.  To the extent the staff
of the SEC does not permit the Additional Required Registration Amount to be
registered on an Additional Registration Statement, the Company shall file
Additional Registration Statements successively trying to register on each such
Additional Registration Statement the maximum number of remaining Additional
Registrable Securities until the Additional Required Registration Amount has
been registered with the SEC.  In the event that Form F-3 is
unavailable for such a registration, the Company shall use such other form as is
available for such a registration on another appropriate form reasonably
acceptable to the Required Holders, subject to the provisions of Section
2(e).  Each Additional Registration Statement prepared pursuant hereto
shall register for resale at least that number of Ordinary Shares equal to the
Additional Required Registration Amount determined as of the date such
Additional Registration Statement is initially filed with the SEC, subject
to adjustment as provided in Section 2(f).  Each Additional
Registration Statement shall contain (except if otherwise directed by the
Required Holders) the “Plan of Distribution”
and “Selling
Shareholders” sections in substantially the form attached hereto as Exhibit
B.  The Company shall use its best efforts to have each
Additional Registration Statement declared effective by the SEC as soon as
practicable, but in no event later than the Additional Effectiveness
Deadline.  By 9:30 a.m. New York time on the Business Day following
the Additional Effective Date, the Company shall file with the SEC in accordance
with Rule 424 under the 1933 Act the final prospectus to be used in connection
with sales pursuant to such Additional Registration Statement.

     

    (c)           Allocation of Registrable
Securities.  The initial number of Registrable Securities
included in any Registration Statement and any increase or decrease in the
number of Registrable Securities included therein shall be allocated pro rata
among the Investors based on the number of Registrable Securities held by each
Investor at the time the Registration Statement covering such initial number of
Registrable Securities or increase or decrease thereof is declared effective by
the SEC.  In the event that an Investor sells or otherwise transfers
any of such Investor’s Registrable Securities, each transferee shall be
allocated a pro rata portion of the then remaining number of Registrable
Securities included in such Registration Statement for such
transferor.  Any Ordinary Shares included in a Registration Statement
and which remain allocated to any Person which ceases to hold any Registrable
Securities covered by such Registration Statement shall be allocated to the
remaining Investors, pro rata based on the number of Registrable Securities then
held by such Investors which are covered by such Registration
Statement.  In no event shall the Company include any securities other
than Registrable Securities on any Registration Statement without the prior
written consent of the Required Holders.

     

    (d)           Legal
Counsel.  Subject to Section 5 hereof, the Required Holders
shall have the right to select one legal counsel to review and oversee any
registration pursuant to this Section 2 (“Legal Counsel”), which shall
be Reed Smith LLP or such other counsel as thereafter designated by the Required
Holders.  The Company and Legal Counsel shall reasonably cooperate
with each other in performing the Company’s obligations under this
Agreement.

     

    (e)           Ineligibility for Form
F-3.  In the event that Form F-3 is not available for the
registration of the resale of Registrable Securities hereunder, the Company
shall (i) register the resale of the Registrable Securities on another
appropriate form reasonably acceptable to the Required Holders and (ii)
undertake to register the Registrable Securities on Form F-3 as soon as such
form is available, provided that the Company shall maintain the effectiveness of
the Registration Statement then in effect until such time as a Registration
Statement on Form F-3 covering the Registrable Securities has been declared
effective by the SEC.

     

    
      
        
        

      

      
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    (f)           Sufficient Number of Shares
Registered.  In the event the number of shares available under
a Registration Statement filed pursuant to Section 2(a) or Section 2(b) is
insufficient to cover all of the Registrable Securities required to be covered
by such Registration Statement or an Investor’s allocated portion of the
Registrable Securities pursuant to Section 2(c), the Company shall amend the
applicable Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover at least
the Required Registration Amount as of the Trading Day immediately preceding the
date of the filing of such amendment or new Registration Statement, in each
case, as soon as practicable, but in any event not later than fifteen (15) days
after the necessity therefor arises.  The Company shall use its best
efforts to cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof.  For
purposes of the foregoing provision, the number of shares available under a
Registration Statement shall be deemed “insufficient to cover all of the
Registrable Securities” if at any time the number of Ordinary Shares available
for resale under the Registration Statement is less than the product determined
by multiplying (i) the Required Registration Amount as of such time by (ii)
0.90.  The calculation set forth in the foregoing sentence shall be
made without regard to any limitations on the conversion and/or redemption of
the Notes and such calculation shall assume that the Notes are then convertible
in full into Ordinary Shares at the then prevailing Conversion Rate (as defined
in the Notes) are then exercisable in full into Ordinary Shares.

     

    (g)           Effect of Failure to File
and Obtain and Maintain Effectiveness of Registration
Statement.  If (i) a Registration Statement covering all of the
Registrable Securities required to be covered thereby and required to be filed
by the Company pursuant to this Agreement is (A) not filed with the SEC on or
before the applicable Filing Deadline (a “Filing Failure”) or (B) not
declared effective by the SEC on or before the applicable Effectiveness
Deadline, (an “Effectiveness
Failure”) or
(ii) on any day after the applicable Effective Date sales of all of the
Registrable Securities required to be included on such Registration Statement
cannot be made (other than during an Allowable Grace Period (as defined in
Section 3(r)) pursuant to such Registration Statement or otherwise (including,
without limitation, because of the suspension of trading or any other limitation
imposed by an Eligible Market (as defined below), a failure to keep such
Registration Statement effective, a failure to disclose such information as is
necessary for sales to be made pursuant to such Registration Statement, a
failure to register a sufficient number of Ordinary Shares or a failure to
maintain the listing of the Ordinary Shares) (a “Maintenance Failure”) then, as
partial relief for the damages to any holder by reason of any such delay in or
reduction of its ability to sell the underlying Ordinary Shares (which remedy
shall not be exclusive of any other remedies available at law or in equity,
including, without limitation, specific performance), the Company shall pay to
each holder of Registrable Securities relating to such Registration Statement an
amount in cash equal to one percent (1.0%) of the aggregate Purchase Price (as
such term is defined in the Securities Purchase Agreement) of the Registrable
Securities held by such Investor on each of the following dates: (i) the day of
a Filing Failure; (ii) the day of an Effectiveness Failure; (iii) the initial
day of a Maintenance Failure; (iv) on the thirtieth day after the date of a
Filing Failure and every thirtieth day thereafter (pro rated for periods
totaling less than thirty days) until such Filing Failure is cured; (v) on the
thirtieth day after the date of an Effectiveness Failure and every thirtieth day
thereafter (pro rated for periods totaling less than thirty days) until such
Effectiveness Failure is cured; and (vi) on the thirtieth day after the date of
a Maintenance Failure and every thirtieth day thereafter (pro rated for periods
totaling less than thirty days) until such Maintenance Failure is cured;
provided, however, that for the purposes of this Section 2(g), no Filing
Failure, Effectiveness Failure or Maintenance Failure shall exist solely as a
result of the failure to register Cutback Shares on the Registration Statement
as a direct result of a specific comment from the SEC on the Registration
Statement disallowing the characterization of the sale of the Cutback Shares as
a secondary offering pursuant to Rule 415 if (A) the Company otherwise satisfies
its obligations under this Agreement and includes the maximum number of
Registrable Securities on the Registration Statement that may be included in
accordance with the SEC’s comment; and (B) at all times until any Registrable
Securities excluded from the Registration Statement are registered, there is
current public information, as defined in Rule 144(c), regarding the
Company.  The payments to which a holder shall be entitled pursuant to
this Section 2(g) are referred to herein as “Registration Delay
Payments.”  Registration Delay Payments shall be paid on the
earlier of (I) the dates set forth above and (II) the third Business Day after
the event or failure giving rise to the Registration Delay Payments is
cured.  In the event the Company fails to make Registration Delay
Payments in a timely manner, such Registration Delay Payments shall bear
interest at the rate of one and one-half percent (1.5%) per month (prorated for
partial months) until paid in full.

     

    
      
        
        

      

      
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    3.           Related
Obligations.

     

    At such
time as the Company is obligated to file a Registration Statement with the SEC
pursuant to Section 2(a), 2(b), 2(e), 2(f) or 2(g), the Company will use its
best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and, pursuant
thereto, the Company shall have the following obligations:

     

    (a)           The
Company shall promptly prepare and file with the SEC a Registration Statement
with respect to the Registrable Securities and use its best efforts to cause
such Registration Statement relating to the Registrable Securities to become
effective as soon as practicable after such filing (but in no event later than
the Effectiveness Deadline).  The Company shall keep each Registration
Statement effective pursuant to Rule 415 at all times until the earlier of (i)
the date which is one year after the conversion of all the Notes, or (ii) the
date which is two years from the Closing Date (the “Registration
Period”).  The Company shall ensure that each Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein, or necessary to
make the statements therein (in the case of prospectuses, in the light of the
circumstances in which they were made) not misleading.  The term
“best efforts” shall
mean, among other things, that the Company shall submit to the SEC, within two
(2) Business Days after the later of the date that (i) the Company learns that
no review of a particular Registration Statement will be made by the staff of
the SEC or that the staff has no further comments on a particular Registration
Statement, as the case may be, and (ii) the approval of Legal Counsel pursuant
to Section 3(c) (which approval is immediately sought), a request for
acceleration of effectiveness of such Registration Statement to a time and date
not later than two (2) Business Days after the submission of such
request.  The Company shall respond in writing to comments made by the
SEC in respect of a Registration Statement as soon as practicable, but in no
event later than fifteen (15) days after the receipt of comments by or notice
from the SEC that an amendment is required in order for a Registration Statement
to be declared effective.

     

    
      
        
        

      

      
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    (b)           The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep such Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by such Registration Statement until the earlier of (i) such
time as all of such Registrable Securities shall have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in such Registration Statement, and (ii) the end of the
Registration Period.  In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of the Company filing a
report on Form 20-F or any analogous report under the Securities Exchange Act of
1934, as amended (the “1934
Act”), the Company shall have incorporated such report by reference into
such Registration Statement, if applicable, or shall file such amendments or
supplements with the SEC on the same day on which the 1934 Act report is filed
which created the requirement for the Company to amend or supplement such
Registration Statement.

     

    (c)           The
Company shall (A) permit Legal Counsel to review and comment upon (i) a
Registration Statement at least five (5) Business Days prior to its filing with
the SEC and (ii) all amendments and supplements to all Registration Statements
(except for Annual Reports on Form 20-F, Current Reports on Form 6-K, and any
similar or successor reports) within a reasonable number of days prior to their
filing with the SEC, and (B) not file any Registration Statement or amendment or
supplement thereto in a form to which Legal Counsel reasonably
objects.  The Company shall not submit a request for acceleration of
the effectiveness of a Registration Statement or any amendment or supplement
thereto without the prior approval of Legal Counsel, which consent shall not be
unreasonably withheld.  The Company shall furnish to Legal Counsel,
without charge, (i) copies of any correspondence from the SEC or the staff of
the SEC to the Company or its representatives relating to any Registration
Statement, (ii) promptly after the same is prepared and filed with the SEC, one
copy of any Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, if requested by an Investor, and all exhibits and (iii) upon the
effectiveness of any Registration Statement, one copy of the prospectus included
in such Registration Statement and all amendments and supplements
thereto.  The Company shall reasonably cooperate with Legal Counsel in
performing the Company’s obligations pursuant to this Section 3.

     

    (d)           The
Company shall furnish to each Investor whose Registrable Securities are included
in any Registration Statement, without charge,  (i) promptly after the
same is prepared and filed with the SEC, at least one copy of such Registration
Statement and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference, if requested by an
Investor, all exhibits and each preliminary prospectus, (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the prospectus
included in such Registration Statement and all amendments and supplements
thereto (or such other number of copies as such Investor may reasonably request)
and (iii) such other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to time in order
to facilitate the disposition of the Registrable Securities owned by such
Investor.

     

    
      
        
        

      

      
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    (e)           The
Company shall use its best efforts to (i) register and qualify, unless an
exemption from registration and qualification applies, the resale by Investors
of the Registrable Securities covered by a Registration Statement under such
other securities or “blue sky” laws of all applicable jurisdictions in the
United States, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(e), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such
jurisdiction.  The Company shall promptly notify Legal Counsel and
each Investor who holds Registrable Securities of the receipt by the Company of
any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities
or “blue sky” laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any proceeding for such
purpose.

     

    (f)           The
Company shall notify Legal Counsel and each Investor in writing of the happening
of any event, as promptly as practicable after becoming aware of such event, as
a result of which the prospectus included in a Registration Statement, as then
in effect, includes an untrue statement of a material fact or omission to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (provided that in no event shall such notice contain any
material, nonpublic information), and, subject to Section 3(r), promptly prepare
a supplement or amendment to such Registration Statement to correct such untrue
statement or omission, and deliver ten (10) copies of such supplement or
amendment to Legal Counsel and each Investor (or such other number of copies as
Legal Counsel or such Investor may reasonably request).  The Company
shall also promptly notify Legal Counsel and each Investor in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to Legal
Counsel and each Investor by (i) facsimile or electronic mail and (ii) by
overnight courier on the same day of such effectiveness), (ii) of any request by
the SEC for amendments or supplements to a Registration Statement or related
prospectus or related information, and (iii) of the Company’s reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate.  By 9:30 a.m. New York City time on the date following
the date any post-effective amendment has become effective, the Company shall
file with the SEC in accordance with Rule 424 under the 1933 Act the final
prospectus to be used in connection with sales pursuant to such Registration
Statement.

     

    
      
        
        

      

      
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    (g)           The
Company shall use its best efforts to prevent the issuance of any stop order or
other suspension of effectiveness of a Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible moment and to
notify Legal Counsel and each Investor who holds Registrable Securities being
sold of the issuance of such order and the resolution thereof or its receipt of
actual notice of the initiation or threat of any proceeding for such
purpose.

     

    (h)           If
any Investor is required under applicable securities laws to be described in the
Registration Statement as an underwriter or an Investor believes that it could
reasonably be deemed to be an underwriter of Registrable Securities, at the
reasonable request of such Investor, the Company shall furnish to such Investor,
on the date of the effectiveness of the Registration Statement and thereafter
from time to time on such dates as an Investor may reasonably request (i) a
letter, dated such date, from the Company’s independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the Investors, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the Investors.

     

    (i)           If
any Investor is required under applicable securities laws to be described in the
Registration Statement as an underwriter or an Investor believes that it could
reasonably be deemed to be an underwriter of Registrable Securities, the Company
shall make available for inspection by (i) such Investor, (ii) Legal Counsel and
(iii) one firm of accountants or other agents retained by the Investors
(collectively, the “Inspectors”), all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the “Records”), as shall be
reasonably deemed necessary by each Inspector, and cause the Company’s officers,
directors and employees to supply all information which any Inspector may
reasonably request; provided, however, that each Inspector shall agree to hold
in strict confidence and shall not make any disclosure (except to an Investor)
or use of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the 1933 Act, (b) the release of such Records is ordered pursuant
to a final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
Agreement.  Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential.  Nothing herein (or in any other confidentiality
agreement between the Company and any Investor) shall be deemed to limit the
Investors’ ability to sell Registrable Securities in a manner which is otherwise
consistent with applicable laws and regulations.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (j)           The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor provided to the Company unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement.  The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt written notice to such Investor and allow such Investor, at the
Investor’s expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.

     

    (k)           The
Company shall use its best efforts either to (i) cause all of the Registrable
Securities covered by a Registration Statement to be listed on (A) each
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange or (B) the OTC
Bulletin Board, or (ii) secure the inclusion for quotation of all of the
Registrable Securities on The NASDAQ Global Market or (iii) if, despite the
Company’s best efforts, the Company is unsuccessful in satisfying the preceding
clauses (i) or (ii), to secure the inclusion for quotation on, The New York
Stock Exchange, The NASDAQ Global Select Market, The NASDAQ Capital Market or
the NYSE Amex (the “Eligible
Markets” and, each, individually, an “Eligible Market”) for such
Registrable Securities and, without limiting the generality of the foregoing, to
use its best efforts to arrange for at least two market makers to register with
the Financial Industry Regulatory Authority, Inc. as such with respect to such
Registrable Securities.  The Company shall pay all fees and expenses
in connection with satisfying its obligation under this Section
3(k).

     

    (l)           The
Company shall cooperate with the Investors who hold Registrable Securities being
offered and, to the extent applicable, facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the Investors may reasonably request and registered in such names as the
Investors may request.

     

    (m)           If
requested by an Investor, the Company shall as soon as practicable (i)
incorporate in a prospectus supplement or post-effective amendment such
information as an Investor reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being offered or sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such offering;
(ii) make all required filings of such prospectus supplement or post-effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) supplement or make
amendments to any Registration Statement if reasonably requested by an Investor
holding any Registrable Securities.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (n)           The
Company shall use its best efforts to cause the Registrable Securities covered
by a Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to consummate the
disposition of such Registrable Securities.

     

    (o)           The
Company shall make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with, and in the
manner provided by, the provisions of Rule 158 under the 1933 Act) covering a
twelve-month period beginning not later than the first day of the Company’s
fiscal quarter next following the applicable Effective Date of a Registration
Statement.

     

    (p)           The
Company shall otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC in connection with any registration
hereunder.

     

    (q)           Within
two (2) Business Days after a Registration Statement which covers Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel for the Company to deliver, to the transfer agent for such
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit
A.

     

    (r)           Notwithstanding
anything to the contrary herein, at any time after the Effective Date, the
Company may delay the disclosure of material, non-public information concerning
the Company the disclosure of which at the time is not, in the good faith
opinion of the Board of Directors of the Company and its counsel, in the best
interest of the Company and, in the opinion of counsel to the Company, otherwise
required (a “Grace
Period”); provided, that the Company shall promptly (i) notify the
Investors in writing of the existence of material, non-public information giving
rise to a Grace Period (provided that in each notice the Company will not
disclose the content of such material, non-public information to the Investors)
and the date on which the Grace Period will begin, and (ii) notify the Investors
in writing of the date on which the Grace Period ends; and, provided further,
that no Grace Period shall exceed twenty (20) consecutive days and during any
three hundred sixty five (365) day period such Grace Periods shall not exceed an
aggregate of forty-five (45) days and the first day of any Grace Period must be
at least five (5) Trading Days after the last day of any prior Grace Period
(each, an “Allowable Grace
Period”).  For purposes of determining the length of a Grace
Period above, the Grace Period shall begin on and include the date the Investors
receive the notice referred to in clause (i) and shall end on and include the
later of the date the Investors receive the notice referred to in clause (ii)
and the date referred to in such notice.  The provisions of Section
3(g) hereof shall not be applicable during the period of any Allowable Grace
Period.  Upon expiration of the Grace Period, the Company shall again
be bound by the first sentence of Section 3(f) with respect to the information
giving rise thereto unless such material, non-public information is no longer
applicable.  Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended Ordinary Shares to a
transferee of an Investor in accordance with the terms of the Securities
Purchase Agreement in connection with any sale of Registrable Securities with
respect to which an Investor has entered into a contract for sale, prior to the
Investor’s receipt of the notice of a Grace Period and for which the Investor
has not yet settled.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (s)           Neither
the Company nor any Subsidiary or affiliate thereof shall identify any Buyer as
an underwriter in any public disclosure or filing with the SEC, the Principal
Market (as defined in the Securities Purchase Agreement) or any Eligible Market
and any Buyer being deemed an underwriter by the SEC shall not relieve the
Company of any obligations it has under this Agreement or any other Transaction
Document (as defined in the Securities Purchase Agreement); provided, however, that the
foregoing shall not prohibit the Company from including the disclosure found in
the “Plan of Distribution” section attached hereto as Exhibit B in the
Registration Statement.

     

    (t)           The
Company shall not file any other registration statements until, or grant
registration rights to any Person that can be exercised prior to the time that,
all Registrable Securities are registered pursuant to a Registration Statement
that is declared effective by the SEC, provided that this Section 3(t) shall not
prohibit the Company from filing amendments (pre-effective and post-effective)
to registration statements filed prior to the date of this Agreement; provided
that no such amendment shall increase the number of securities registered on a
registration statement. Neither the Company nor
any of its Subsidiaries has entered, as of the date hereof, nor shall the
Company or any of its Subsidiaries, on or after the date of this Agreement,
enter into any agreement with respect to its securities, that would have the
effect of impairing the rights granted to the Buyers in this Agreement or
otherwise conflicts with the provisions hereof.

     

    4.           Obligations of the
Investors.

     

    (a)           At
least five (5) Business Days prior to the first anticipated Filing Date of a
Registration Statement, the Company shall notify each Investor in writing of the
information the Company requires from each such Investor if such Investor elects
to have any of such Investor’s Registrable Securities included in such
Registration Statement.  It shall be a condition precedent to the
obligations of the Company to complete any registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect and maintain the effectiveness of the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.

     

    (b)           Each
Investor, by such Investor’s acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of any Registration Statement hereunder, unless
such Investor has notified the Company in writing of such Investor’s election to
exclude all of such Investor’s Registrable Securities from such Registration
Statement.

     

    (c)           Each
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(g) or the first
sentence of 3(f), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Investor’s receipt of copies of the
supplemented or amended prospectus as contemplated by Section 3(g) or the first
sentence of 3(f) or receipt of notice that no supplement or amendment is
required.  Notwithstanding anything to the contrary, the Company shall
cause its transfer agent to deliver unlegended Ordinary Shares to a transferee
of an Investor in accordance with the terms of the Securities Purchase Agreement
in connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the Investor’s receipt of
a notice from the Company of the happening of any event of the kind described in
Section 3(g) or the first sentence of 3(f) and for which the Investor has not
yet settled.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (d)           Each
Investor covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act as applicable to it or an exemption therefrom in
connection with sales of Registrable Securities pursuant to the Registration
Statement.

     

    5.           Expenses of
Registration.

     

    All
reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company shall be paid by the Company.  The Company
shall also reimburse the Investors for the fees and disbursements of Legal
Counsel in connection with registration, filing or qualification pursuant to
Sections 2 and 3 of this Agreement which amount shall be limited to $15,000 for
each such registration, filing or qualification.

     

    6.           Indemnification.

     

    In the
event any Registrable Securities are included in a Registration Statement under
this Agreement:

     

    (a)           To
the fullest extent permitted by law, the Company will, and hereby does,
indemnify, hold harmless and defend each Investor, the directors, officers,
partners, members, employees, agents, representatives of, and each Person, if
any, who controls any Investor within the meaning of the 1933 Act or the 1934
Act (each, an “Indemnified
Person”), against any losses, claims, damages, liabilities, judgments,
fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in
settlement or expenses, joint or several (collectively, “Claims”), incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto (“Indemnified Damages”), to
which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon:  (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other “blue sky” laws of any jurisdiction
in which Registrable Securities are offered, or the omission or alleged omission
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, (iii) any violation or alleged violation by the Company of
the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement or
(iv) any violation of this Agreement (the matters in the foregoing clauses (i)
through (iv) being, collectively, “Violations”).  Subject
to Section 6(c), the Company shall reimburse the Indemnified Persons, promptly
as such expenses are incurred and are due and payable, for any legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim.  Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section
6(a):  (i) shall not apply to a Claim by an Indemnified Person arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by such Indemnified Person
for such Indemnified Person expressly for use in connection with the preparation
of the Registration Statement or any such amendment thereof or supplement
thereto, if such prospectus was timely made available by the Company pursuant to
Section 3(d); and (ii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld or
delayed.  Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (b)           In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement and each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against
any Claim or Indemnified Damages to which any of them may become subject, under
the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified
Damages arise out of or are based upon any Violation, in each case to the
extent, and only to the extent, that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and, subject
to Section 6(c), such Investor shall reimburse the Indemnified Party for any
legal or other expenses reasonably incurred by an Indemnified Party in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) and the agreement
with respect to contribution contained in Section 7 shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld or delayed; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the net proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such Registration
Statement.  Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (c)           Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section 6
of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses of not
more than one counsel for all such Indemnified Person or Indemnified Party to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the Indemnified Person or Indemnified Party, as applicable, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding.  In the
case of an Indemnified Person, legal counsel referred to in the immediately
preceding sentence shall be selected by the Investors holding at least a
majority in interest of the Registrable Securities included in the Registration
Statement to which the Claim relates.  The Indemnified Party or
Indemnified Person shall cooperate reasonably with the indemnifying party in
connection with any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or Claim.  The indemnifying party shall keep
the Indemnified Party or Indemnified Person fully apprised at all times as to
the status of the defense or any settlement negotiations with respect
thereto.  No indemnifying party shall be liable for any settlement of
any action, claim or proceeding effected without its prior written consent,
provided, however, that the indemnifying party shall not unreasonably withhold,
delay or condition its consent.  No indemnifying party shall, without
the prior written consent of the Indemnified Party or Indemnified Person,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such Claim or litigation and such
settlement shall not include any admission as to fault on the part of the
Indemnified Party.  Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been
made.  The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such
action.

     

    (d)           The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Damages are incurred.

     

    (e)           The
indemnity agreements contained herein shall be in addition to (i) any cause of
action or similar right of the Indemnified Party or Indemnified Person against
the indemnifying party or others, and (ii) any liabilities the indemnifying
party may be subject to pursuant to the law.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    7.           Contribution.

     

    To the
extent any indemnification by an indemnifying party is prohibited or limited by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however, that:  (i) no
Person involved in the sale of Registrable Securities which Person is guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) in connection with such sale shall be entitled to contribution from any
Person involved in such sale of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the amount of net proceeds received by
such seller from the sale of such Registrable Securities pursuant to such
Registration Statement.

     

    8.           Reports Under the 1934
Act.

     

    With a
view to making available to the Investors the benefits of Rule 144 promulgated
under the 1933 Act or any other similar rule or regulation of the SEC that may
at any time permit the Investors to sell securities of the Company to the public
without registration (“Rule
144”), the Company agrees to:

     

    (a)           make
and keep public information available, as those terms are understood and defined
in Rule 144;

     

    (b)           file
with the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains
subject to such requirements and the filing of such reports and other documents
is required for the applicable provisions of Rule 144.  It being
acknowledged and agreed that the filing and posting of such reports on the SEC’s
EDGAR system shall satisfy this obligation; and

     

    (c)           furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company, if true, that it has
complied with the reporting requirements of Rule 144, the 1933 Act and the 1934
Act, (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested to permit the Investors to sell
such securities pursuant to Rule 144 without registration.

     

    9.           Assignment of Registration
Rights.

     

    The
rights under this Agreement shall be automatically assignable by the Investors
to any transferee of all or any portion of such Investor’s Registrable
Securities if:  (i) the Investor agrees in writing with the transferee
or assignee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment; (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned; (iii) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act or applicable state securities laws; (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein; and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    10.           Amendment of Registration
Rights.

     

    Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Required
Holders.  Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.  No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the Registrable Securities.  No consideration shall
be offered or paid to any Person to amend or consent to a waiver or modification
of any provision of this Agreement unless the same consideration also is offered
to all of the parties to this Agreement.

     

    11.           Miscellaneous.

     

    (a)           A
Person is deemed to be a holder of Registrable Securities whenever such Person
owns or is deemed to own of record such Registrable Securities.  If
the Company receives conflicting instructions, notices or elections from two or
more Persons with respect to the same Registrable Securities, the Company shall
act upon the basis of instructions, notice or election received from such record
owner of such Registrable Securities.

     

    (b)           Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered:  (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile or electronic mail (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) two Business Days after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same.  The addresses, facsimile
numbers and electronic mail addresses for such communications shall
be:

     

    If to the
Company:

     

    
      China
Linen Textile Industry, Ltd.

      Chengdong
Street

      Lanxi
County, Heilongjiang Province 151500, China

    

    Telephone: +86
(455) 563-5885

    Facsimile:   +86
(451) 8230-9971

    E-mail:        gaoren@chinalinen.cc

    Attention: Gao
Ren, Chief Executive Officer

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    


     

    With a
copy (for informational purposes only) to:

    


    Loeb
& Loeb LLP

    345 Park
Avenue

    New York,
NY 10154

    Telephone: (212)
407-4159

    Facsimile:   (212)
504-3013

    E-mail:        mnussbaum@loeb.com

    Attention: Mitchell
Nussbaum, Esq.

    


    If to the
Transfer Agent:

    


    Island
Stock Transfer

    100
Second Avenue South, Suite 705S

    Saint
Petersburg, FL 33701

    Telephone: (727)
289-0010 Ext. 266

    Facsimile:   (727)
483-5436

    E-mail:        oksana@islandstocktransfer.com

    Attention: Oksana
Savchenko

     

    If to
Legal Counsel:

    


    Reed
Smith LLP

    599
Lexington Avenue

    New York,
New York  10022

    Telephone: (212)
521-5400

    Facsimile:   (212)
521-5450

    E-mail:        ladillon@reedsmith.com

    Attention: Lee
Ann Dillon, Esq.

     

    If to a
Buyer, to its address, facsimile number and electronic mail address set forth on
the Schedule of Buyers attached hereto, with copies to such Buyer’s
representatives as set forth on the Schedule of Buyers, or to such other address
and/or facsimile number and/or electronic mail address and/or to the attention
of such other Person as the recipient party has specified by written notice
given to each other party five (5) days prior to the effectiveness of such
change.  Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine or computer
containing the time, date, recipient facsimile number or electronic mail address
and an image of the first page of such transmission or (C) provided by a courier
or overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or electronic mail or receipt from a nationally recognized
overnight delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.

     

    (c)           Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as a
waiver thereof.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    (d)           All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of
New York.  Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper.  Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof.  Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

     

    (e)           If
any provision of this Agreement is prohibited by law or otherwise determined to
be invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Agreement so long as this Agreement
as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties.  The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable provision(s).

     

    (f)           This
Agreement, the other Transaction Documents (as defined in the Securities
Purchase Agreement) and the instruments referenced herein and therein constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof.  There are no restrictions, promises, warranties
or undertakings, other than those set forth or referred to herein and
therein.  This Agreement, the other Transaction Documents and the
instruments referenced herein and therein supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.

     

    (g)           Subject
to the requirements of Section 9, this Agreement shall inure to the benefit of
and be binding upon the permitted successors and assigns of each of the parties
hereto.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    (h)           The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

     

    (i)           This
Agreement may be executed in identical counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same
agreement.  This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile or electronic mail transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.

     

    (j)           Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.

     

    (k)           All
consents and other determinations required to be made by the Investors pursuant
to this Agreement shall be made, unless otherwise specified in this Agreement,
by the Required Holders, determined as if all of the outstanding Notes then held
by the Investors have been converted for Registrable Securities without regard
to any limitations on conversion of the Notes.

     

    (l)           The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent and no rules of strict construction will
be applied against any party.

     

    (m)           This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.

     

    (n)           The
obligations of each Investor hereunder are several and not joint with the
obligations of any other Investor, and no provision of this Agreement is
intended to confer any obligations on any Investor vis-à-vis any other
Investor.  Nothing contained herein, and no action taken by any
Investor pursuant hereto, shall be deemed to constitute the Investors as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Investors are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated
herein.

     

    * * * * *
*

     

    [Signature
Page Follows]

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    IN WITNESS WHEREOF, each Buyer
and the Company have caused their respective signature page to this Registration
Rights Agreement to be duly executed as of the date first written
above.

     

    
      
        	 	
                COMPANY:

              	 
	 	
              	 
	 	
                China
      Linen Textile Industry, LTD.

              	 
	 	 	 	 
	
                 

              	
                By:
      

              	 	 
	 	 	Name: 	 
	 	 	Title: 	 


      

    

     

    
      
        
        

      

      
        
          [Signature
Page to Registration Rights Agreement]

        

        
          

        

      

      
        
        

      

    

     

    


     

     

    IN WITNESS WHEREOF, each Buyer
and the Company have caused their respective signature page to this Registration
Rights Agreement to be duly executed as of the date first written
above.

     

    
      
        	 	
                BUYERS:

              	 
	 	
              	 
	 	[_____]	 
	 	 	 	 
	
                 

              	
                By:
      

              	 	 
	 	 	
                [_____]

              	 


      

    

     

    
      
        
        

      

      
        
          [Signature
Page to Registration Rights Agreement]

        

        
          

        

      

      
        
        

      

       

    

    SCHEDULE
OF BUYERS

     

    
      	
               

              Buyer

            	 	
              Buyer
      Address, Facsimile 
Number and E-mail
      Address

            	 	
              Buyer's
      Representative's Address,

              Facsimile Number and E-mail
      Address

            	 
	
              CNH
      DIVERSIFIED 
OPPORTUNITIES MASTER 
ACCOUNT, L.P.

            	 	[Contact Information Redacted]   	 	
              Reed
      Smith LLP

              599
      Lexington Avenue

              New
      York, New York  10022

              Attention:  Lee
      Ann Dillon, Esq.

              E-mail:
      ladillon@reedsmith.com

              Facsimile:
      (212) 521-5400

              Telephone:  (212)
      521-5450

            	 
	
              AQR
      DELTA SAPPHIRE 
FUND, L.P.

            	 	[Contact Information Redacted]	 	
              Reed
      Smith LLP

              599
      Lexington Avenue

              New
      York, New York  10022

              Attention:  Lee
      Ann Dillon, Esq.

              E-mail:
      ladillon@reedsmith.com

              Facsimile:
      (212) 521-5400

              Telephone:  (212)
      521-5450

            	 
	
              AQR
      FUNDS - AQR 
DIVERSIFIED ARBITRAGE 
FUND

            	 	[Contact Information Redacted]	 	
              Reed
      Smith LLP

              599
      Lexington Avenue

              New
      York, New York  10022

              Attention:  Lee
      Ann Dillon, Esq.

              E-mail:
      ladillon@reedsmith.com

              Facsimile:
      (212) 521-5400

              Telephone:  (212)
      521-5450

            	 
	
              AQR
      OPPORTUNISTIC 
PREMIUM OFFSHORE 
FUND, L.P.

               

            	 	
              [Contact Information
      Redacted]

            	 	
              Reed
      Smith LLP

              599
      Lexington Avenue

              New
      York, New York  10022

              Attention:  Lee
      Ann Dillon, Esq.

              E-mail:
      ladillon@reedsmith.com

              Facsimile:
      (212) 521-5400

              Telephone:  (212)
      521-5450

            	 
	
              ADVANCED
      SERIES TRUST – AST 
ACADEMIC SERVICES 
PORTFOLIO

               

            	 	
              [Contact Information
      Redacted]

            	 	
              Reed
      Smith LLP

              599
      Lexington Avenue

              New
      York, New York  10022

              Attention:  Lee
      Ann Dillon, Esq.

              E-mail:
      ladillon@reedsmith.com

              Facsimile:
      (212) 521-5400

              Telephone:  (212)
      521-5450

            	 
	
              AQR
      DELTA MASTER 
ACCOUNT, L.P.

               

            	 	
              [Contact Information
      Redacted]

            	 	
              Reed
      Smith LLP

              599
      Lexington Avenue

              New
      York, New York  10022

              Attention:  Lee
      Ann Dillon, Esq.

              E-mail:
      ladillon@reedsmith.com

              Facsimile:
      (212) 521-5400

              Telephone:  (212)
      521-5450

               

            	 
	
              AQR
      ABSOLUTE RETURN 
MASTER ACCOUNT, L.P.

               

            	 	
              [Contact Information
      Redacted]

            	 	
              Reed
      Smith LLP

              599
      Lexington Avenue

              New
      York, New York  10022

              Attention:  Lee
      Ann Dillon, Esq.

              E-mail:
      ladillon@reedsmith.com

              Facsimile:
      (212) 521-5400

              Telephone:  (212)
      521-5450

            	 


    

     

    
      
        
        

      

      
        
          [Signature
Page to Registration Rights Agreement]

        

        
          

        

      

      
        
        

      

    

     

    
      	
               

              Buyer

            	 	
              Buyer
      Address, Facsimile 
Number and E-mail
      Address

            	 	
              Buyer's
      Representative's Address,

              Facsimile Number and E-mail
      Address

            	 


    

    
      	
              PERISCOPE
      PARTNERS LP

            	 	
              [Contact Information
      Redacted]

            	 	 
      	 
	
              STINSON
      MANAGEMENT 
COMPANY

            	 	
              [Contact Information
      Redacted]

            	 	 
      	 
	
              NEXTVIEW
      CAPITAL, LP

            	 	
              [Contact Information
      Redacted]

            	 	 
      	 
	
              WEI
      LI

            	 	
              [Contact Information
      Redacted]

            	 	 
      	 
	
              CRANSHIRE
      CAPITAL LP

            	 	
              [Contact Information
      Redacted]

            	 	 
      	 
	
              GIBRALT
      US, INC.

            	 	
              [Contact Information
      Redacted]

            	 	 
      	 
	
              IROQUOIS
      MASTER FUND LTD.

            	 	
              [Contact Information
      Redacted]

            	 	 
      	 
	
              PACIFIC
      CAPITAL 
MANAGEMENT LLC

            	 	
              [Contact Information
      Redacted]

            	 	 
      	 


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               

              Buyer

            	 	
              Buyer
      Address, Facsimile 
Number and E-mail
      Address

            	 	
              Buyer's
      Representative's Address,

              Facsimile Number and E-mail
      Address

            	 


    

    
      	
              WARBERG
      OPPORTUNISTIC 
TRADING FUND LP

            	 	
              [Contact Information
      Redacted]

            	 	 
      	 
	
              RL
      CAPITAL PARTNERS, LP

            	 	
              [Contact Information
      Redacted]

            	 	 
      	 
	
              RONALD
      LAZAR

            	 	
              [Contact Information
      Redacted]

            	 	 
      	 
	
              ANTHONY
      POLAK

            	 	
              [Contact Information
      Redacted]

            	 	 
      	 
	
              ANTHONY
      POLAK “S”

            	 	
              [Contact Information
      Redacted]

            	 	 
      	 
	
              JAMIE
      POLAK

            	 	
              [Contact Information
      Redacted]

            	 	 
      	 
	
              DOMACO
      VENTURE CAPITAL 
FUND

            	 	
              [Contact Information
      Redacted]

            	 	 
      	 
	
              MAPLE
      DAY LIMITED

            	 	
              [Contact Information
      Redacted]

            	 	 
      	 


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    EXHIBIT
A

     

    FORM
OF NOTICE OF EFFECTIVENESS

    OF
REGISTRATION STATEMENT

    


    [                                           ]

    [                                           ]

    [                                           ]

    


    Attention:  [                  ]

     

    Re:           China Linen
Textile Industry, Ltd.

     

    Ladies
and Gentlemen:

     

    [We
are][I am] counsel to China Linen Textile Industry, Ltd., a Cayman Islands
limited company (the “Company”), and have
represented the Company in connection with that certain Securities Purchase
Agreement, dated as of November 3, 2010 (the “Securities Purchase Agreement”), entered
into by and among the Company and the buyers named therein (collectively, the
“Holders”) pursuant to
which the Company issued to the Holders senior, unsecured convertible
notes (the “Notes”)
convertible into shares of the Company’s ordinary shares, par value $0.002 per
share (the “Ordinary
Shares”).  Pursuant to the Securities Purchase Agreement, the
Company also has entered into a Registration Rights Agreement with the Holders
(the “Registration Rights
Agreement”) pursuant to which the Company agreed, among other things, to
register the resale of the Registrable Securities (as defined in the
Registration Rights Agreement), including the Ordinary Shares issuable upon
conversion of the Notes under the Securities Act of 1933, as amended (the “1933 Act”).  In
connection with the Company’s obligations under the Registration Rights
Agreement, on ____________ ___, 201_, the Company filed a Registration Statement
on Form F-3 (File No. 333-_____________) (the “Registration Statement”) with
the Securities and Exchange Commission (the “SEC”) relating to the resale
of the Registrable Securities which names each of the Holders as a selling
shareholder thereunder.

     

    In
connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF
EFFECTIVENESS] and we
have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
any stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC and
the Registrable Securities are available for resale under the 1933 Act pursuant
to the Registration Statement.

     

    This
letter shall serve as our standing instruction to you that the Ordinary Shares
are freely transferable by the Holders pursuant to the Registration
Statement.  You need not require further letters from us to effect any
future legend-free issuance or reissuance of Ordinary Shares to the Holders in
connection with a resale of such Ordinary Shares, as contemplated by the Plan of
Distribution set forth in the Registration Statement and the Company’s
Irrevocable Transfer Agent Instructions dated November 3,
2010.

    
    

     

    
      	 	
              Very
      truly yours,

            
	 	
               

            
	 	
              [ISSUER’S COUNSEL]

            


    

     

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

     

    
      	 	
              By:
      _____________________

            
	 	 
	
              CC:           [LIST NAMES OF
      HOLDERS]

            	 


    

     

    
      
        
        

      

      
        A-2

        
          

        

      

      
        
        

      

       

    

    EXHIBIT
B

    SELLING
SHAREHOLDERS

     

    The
ordinary shares being offered by the selling shareholders are those issuable to
the selling shareholders upon conversion of the convertible
notes.  For additional information regarding the issuance of those
convertible notes, see “Private Placement of Convertible Notes”
above.  We are registering the ordinary shares in order to permit the
selling shareholders to offer the shares for resale from time to
time.  Except for the ownership of the convertible notes issued
pursuant to the Securities Purchase Agreement, the selling shareholders have not
had any material relationship with us within the past three years.

     

    The table
below lists the selling shareholders and other information regarding the
beneficial ownership of the ordinary shares by each of the selling
shareholders.  The second column lists the number of ordinary shares
beneficially owned by each selling shareholder, based on its ownership of the
convertible notes, as of ________, 2010, assuming conversion of all convertible
notes held by the selling shareholders on that date, without regard to any
limitations on conversions.

     

    The third
column lists the ordinary shares being offered by this prospectus by the selling
shareholders.

     

    In
accordance with the terms of a registration rights agreement with the selling
shareholders, this prospectus generally covers the resale of at least 130% of
the sum of number of ordinary shares issuable upon conversion and/or of the
convertible notes as of the Trading Day immediately preceding the date the
registration statement is initially filed with the SEC.  Because the
conversion price of the convertible notes may be adjusted, the number of shares
that will actually be issued may be more or less than the number of shares being
offered by this prospectus.  The fourth column assumes the sale of all
of the shares offered by the selling shareholders pursuant to this
prospectus.

     

    Under the
terms of the convertible notes, a selling shareholder may not convert the
convertible notes to the extent such conversion would cause such selling
shareholder, together with its affiliates, to beneficially own a number of
ordinary shares which would exceed 4.99% of our then outstanding ordinary shares
following such conversion, excluding for purposes of such determination ordinary
shares issuable upon conversion of the convertible notes which have not been
converted.  The number of shares in the second column does not reflect
this limitation.  The selling shareholders may sell all, some or none
of their shares in this offering.  See “Plan of
Distribution.”

     

    
      
        
        

      

      
        Annex
I-1

        
          

        

      

      
        
        

      

    

     

    


     

    
      	
               

               

              Name of Selling Shareholder

            	 	
              Number of Ordinary Shares 
Owned Prior to
      Offering

            	 	 	
              Maximum Number of 
Ordinary Shares to be Sold
      
Pursuant to this Prospectus

            	 	 	
              Number of Ordinary 
Shares Owned After
      
Offering

            	 
	
              CNH
      Diversified Opportunities Master Account, L.P.

            	 	 	
            	 	 	 	 	 	 	 	
            	 
	
              AQR
      DELTA Sapphire Fund, L.P.

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              AQR
      Funds – AQR Diversified Arbitrage Fund

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              AQR
      Opportunistic Premium Offshore Fund, L.P.

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              Advanced
      Series Trust – AST Academic Services Portfolio

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              AQR
      DELTA Master Account, L.P.

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              AQR
      Absolute Return Master Account, L.P.

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              Periscope
      Partners LP

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              Stinson
      Management Company

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              Nextview
      Capital, LP

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              Wei
      Li

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              Cranshire
      Capital LP

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              Gibralt
      US, Inc.

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              Iroquois
      Master Fund Ltd.

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              Pacific
      Capital Management LLC

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              Warberg
      Opportunistic Trading Fund LP

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              RL
      Capital Partners, LP

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              Ronald
      Lazar

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              Anthony
      Polak

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              Anthony
      Polak “S”

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              Jamie
      Polak

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              Domaco
      Venture Capital Fund

            	 	 	 	 	 	 	 	 	 	 	 	 
	
              Maple
      Day Limited

            	 	 	 	 	 	 	 	 	 	 	 	 


    

     

    
      
        
        

      

      
        Annex
I-2

        
          

        

      

      
        
        

      

    

     

    PLAN
OF DISTRIBUTION

     

    We are
registering the ordinary shares issuable upon conversion of the convertible
notes to permit the resale of these ordinary shares by the holders of the
convertible notes from time to time after the date of this
prospectus.  We will not receive any of the proceeds from the sale by
the selling shareholders of the ordinary shares.  We will bear all
fees and expenses incident to our obligation to register the ordinary
shares.

     

    The
selling shareholders may sell all or a portion of the ordinary shares
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents.  If the
ordinary shares are sold through underwriters or broker-dealers, the selling
shareholders will be responsible for underwriting discounts or commissions or
agent’s commissions.  The ordinary shares may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated
prices.  These sales may be effected in transactions, which may
involve crosses or block transactions,

     

    
      	
               
      

            	
              ·

            	
              on
      any national securities exchange or quotation service on which the
      securities may be listed or quoted at the time of
  sale;

            


    

     

    
      	
               
      

            	
              ·

            	
              in
      the over-the-counter market;

            


    

     

    
      	
               
      

            	
              ·

            	
              in
      transactions otherwise than on these exchanges or systems or in the
      over-the-counter market;

            


    

     

    
      	
               
      

            	
              ·

            	
              ordinary
      brokerage transactions and transactions in which the broker-dealer
      solicits purchasers;

            


    

     

    
      	
               
      

            	
              ·

            	
              block
      trades in which the broker-dealer will attempt to sell the shares as agent
      but may position and resell a portion of the block as principal to
      facilitate the transaction;

            


    

     

    
      	
               
      

            	
              ·

            	
              purchases
      by a broker-dealer as principal and resale by the broker-dealer for its
      account;

            


    

     

    
      	
               
      

            	
              ·

            	
              an
      exchange distribution in accordance with the rules of the applicable
      exchange;

            


    

     

    
      	
               
      

            	
              ·

            	
              privately
      negotiated transactions;

            


    

     

    
      	
               
      

            	
              ·

            	
              sales
      pursuant to Rule 144;

            


    

     

    
      	
               
      

            	
              ·

            	
              broker-dealers
      may agree with the selling shareholders to sell a specified number of such
      shares at a stipulated price per
share;

            


    

     

    
      	
               
      

            	
              ·

            	
              a
      combination of any such methods of sale;
and

            


    

     

    
      	
               
      

            	
              ·

            	
              any
      other method permitted pursuant to applicable
  law.

            


    

     

    
      
        
        

      

      
        Annex
I-3

        
          

        

      

      
        
        

      

    

     

    If the
selling shareholders effect such transactions by selling ordinary shares to or
through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling shareholders or commissions from
purchasers of the ordinary shares for whom they may act as agent or to whom they
may sell as principal (which discounts, concessions or commissions as to
particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved).  In connection with
sales of the ordinary shares or otherwise, the selling shareholders may enter
into hedging transactions with broker-dealers, which may in turn engage in short
sales of the ordinary shares in the course of hedging in positions they
assume.  The selling shareholders may also sell ordinary shares short
and deliver ordinary shares covered by this prospectus to close out short
positions and to return borrowed shares in connection with such short
sales.  The selling shareholders may also loan or pledge ordinary
shares to broker-dealers that in turn may sell such shares.

     

    The
selling shareholders may pledge or grant a security interest in some or all of
the convertible notes or ordinary shares owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the ordinary shares from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933, as amended, amending, if
necessary, the list of selling shareholders to include the pledgee, transferee
or other successors in interest as selling shareholders under this
prospectus.  The selling shareholders also may transfer and donate the
ordinary shares in other circumstances in which case the transferees, donees,
pledgees or other successors in interest will be the selling beneficial owners
for purposes of this prospectus.

     

    The
selling shareholders and any broker-dealer participating in the distribution of
the ordinary shares may be deemed to be “underwriters” within the meaning of the
Securities Act, and any commission paid, or any discounts or concessions allowed
to, any such broker-dealer may be deemed to be underwriting commissions or
discounts under the Securities Act.  At the time a particular offering
of the ordinary shares is made, a prospectus supplement, if required, will be
distributed which will set forth the aggregate amount of ordinary shares being
offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling shareholders and any discounts,
commissions or concessions allowed or reallowed or paid to
broker-dealers.

     

    Under the
securities laws of some states, the ordinary shares may be sold in such states
only through registered or licensed brokers or dealers.  In addition,
in some states the ordinary shares may not be sold unless such shares have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with.

     

    There can
be no assurance that any selling shareholder will sell any or all of the
ordinary shares registered pursuant to the registration statement, of which this
prospectus forms a part.

     

    The
selling shareholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the ordinary shares by the selling shareholders
and any other participating person.  Regulation M may also restrict
the ability of any person engaged in the distribution of the ordinary shares to
engage in market-making activities with respect to the ordinary
shares.  All of the foregoing may affect the marketability of the
ordinary shares and the ability of any person or entity to engage in
market-making activities with respect to the ordinary shares.

     

    
      
        
        

      

      
        Annex
I-4

        
          

        

      

      
        
        

      

    

     

    We will
pay all expenses of the registration of the ordinary shares pursuant to the
registration rights agreement, estimated to be $[     ]
in total, including, without limitation, Securities and Exchange Commission
filing fees and expenses of compliance with state securities or “blue sky” laws;
provided, however, that a selling shareholder will pay all underwriting
discounts and selling commissions, if any.  We will indemnify the
selling shareholders against liabilities, including some liabilities under the
Securities Act, in accordance with the registration rights agreements, or the
selling shareholders will be entitled to contribution.  We may be
indemnified by the selling shareholders against civil liabilities, including
liabilities under the Securities Act, that may arise from any written
information furnished to us by the selling shareholder specifically for use in
this prospectus, in accordance with the related registration rights agreement,
or we may be entitled to contribution.

     

    Once sold
under the registration statement, of which this prospectus forms a part, the
ordinary shares will be freely tradable in the hands of persons other than our
affiliates.

     

    
      
        
        

      

      
        Annex
I-5