CHINA LINEN TEXTILE INDUSTRY, LTD. Lock-Up Agreement November 3, 2010
November
3, 2010
Chengdong
Street
Lanxi
County
Xxxxxxxxxxxx
Xxxxxxxx 000000, Xxxxx
Dear
Sirs:
This Lock-Up Agreement is being
delivered to you in connection with the Securities Purchase Agreement (the
“Purchase Agreement”),
dated as of November 3, 2010 by and among China Linen Textile Industry, Ltd.
(the “Company”) and the
investors party thereto (the “Buyers”), with respect to the
issuance of senior, unsecured convertible notes (the “Notes”) which will be
convertible into shares of the Company’s ordinary shares, par value $0.002 per
share (the “Ordinary
Shares”). Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the Purchase
Agreement. As used herein, “Undersigned’s Shares” means:
(i) all Ordinary Shares owned directly or indirectly by the undersigned
(including holding as a custodian) or with respect to which the undersigned has
beneficial ownership within the rules and regulations of the Securities and
Exchange Commission and (ii) all options to purchase Ordinary Shares owned
directly by the undersigned (including holding as a custodian) or with respect
to which the undersigned has beneficial ownership within the rules and
regulations of the Securities and Exchange Commission.
In order to induce the Buyers to enter
into the Purchase Agreement, the undersigned agrees that, commencing on the date
hereof and ending on the one year anniversary of the Closing Date (the “Lock-Up Period”), the
undersigned will not (i) sell, offer to sell, contract or agree to sell,
hypothecate, pledge, grant any option to purchase, make any short sale or
otherwise dispose of or agree to dispose of, directly or indirectly, any of the
Undersigned’s Shares, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the meaning of Section
16 of the Securities and Exchange Act of 1934, as amended and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder
with respect to any of the Undersigned Shares (collectively, a “Disposition”), or (ii) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of any of the Undersigned’s
Shares, whether any such transaction is to be settled by delivery of such
securities, in case or otherwise (collectively, the actions contemplated in
clauses (i) and (ii) above, “Restricted
Actions”). The foregoing sentence shall not apply to the
exercise of options or the conversion of a security outstanding as of the date
hereof; provided, however, that the undersigned agrees that the foregoing
sentence shall apply to any securities issued by the Company to the undersigned
upon such an exercise or conversion.
The foregoing restriction is expressly
agreed to preclude the undersigned or any affiliate of the undersigned from
engaging in any hedging or other transaction which is designed to or which
reasonably could be expected to lead to or result in a sale or disposition or
deemed sale or disposition of the Undersigned’s Shares or the economics of the
Undersigned’s Shares even if the Undersigned’s Shares would be disposed of by
someone other than the undersigned. Such prohibited hedging or other
transactions would include, without limitation, any short sale or any purchase,
sale or grant of any right (including, without limitation, any put or call
option) with respect to any of the Undersigned’s Shares or with respect to any
security that includes, relates to, or derives any significant part of its value
from the Undersigned’s Shares.
Notwithstanding the foregoing, the
undersigned may transfer the Undersigned’s Shares (i) as a bona fide gift or gifts,
provided that the donee or donees thereof agree to be bound in writing by the
restrictions set forth herein or (ii) to any trust for the direct or indirect
benefit of the undersigned or the immediate family of the undersigned, provided
that the trustee of the trust agrees to be bound in writing by the restrictions
set forth herein, and provided further that any such transfer shall not involve
a disposition for value. For purposes of this Lock-Up Agreement,
“immediate family” shall mean any relationship by blood, marriage or adoption,
not more remote than first cousin. The undersigned now has, and,
except as contemplated by clauses (i) and (ii) above and the SEC Documents (as
defined in the Purchase Agreement), for the duration of this
Lock-Up Agreement will have, good and marketable title to the Undersigned’s
Shares, free and clear of all liens, encumbrances, and claims
whatsoever. The undersigned also agrees and consents to the entry of
stop transfer instructions with the Company’s transfer agent and registrar
against the transfer of the Undersigned's Shares except in compliance with the
foregoing restrictions.
The undersigned understands and agrees
that this Lock-Up Agreement is irrevocable and shall be binding upon the
undersigned’s heirs, legal representatives, successors, and
assigns.
This Lock-Up Agreement may be executed
in two counterparts, each of which shall be deemed an original but both of which
shall be considered one and the same instrument.
This Lock-Up Agreement will be governed
by and construed in accordance with the laws of the State of New York, without
giving effect to any choice of law or conflicting provision or rule (whether of
the State of New York, or any other jurisdiction) that would cause the laws of
any jurisdiction other than the State of New York to be applied. In
furtherance of the foregoing, the internal laws of the State of New York will
control the interpretation and construction of this Lock-Up Agreement, even if
under such jurisdiction’s choice of law or conflict of law analysis, the
substantive law of some other jurisdiction would ordinarily apply.
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Very
truly yours,
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Exact
Name of Shareholder
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Authorized
Signature
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Title
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