exv10w1






Exhibit 10.1



 




DUOYUAN GLOBAL WATER INC.




2008 OMNIBUS INCENTIVE PLAN



 





 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	1.	 	PURPOSE	 	1
	2.	 	DEFINITIONS	 	1
	3.	 	ADMINISTRATION OF THE PLAN	 	5
	 
	 	3.1.	 	Board	 	5
	 
	 	3.2.	 	Committee	 	6
	 
	 	3.3.	 	Jurisdictions	 	6
	 
	 	3.4.	 	Terms of Awards	 	6
	 
	 	3.5.	 	No Repricing	 	7
	 
	 	3.6.	 	Deferral Arrangement	 	8
	 
	 	3.7.	 	No Liability	 	8
	 
	 	3.8.	 	Share Issuance/Book-Entry	 	8
	4.	 	STOCK SUBJECT TO THE PLAN	 	8
	 
	 	4.1.	 	Number of Shares Available for Awards and Conversion into ADSs	 	8
	 
	 	4.2.	 	Adjustments in Authorized Shares	 	8
	 
	 	4.3.	 	Share Usage	 	9
	5.	 	EFFECTIVE DATE, DURATION AND AMENDMENTS	 	9
	 
	 	5.1.	 	Effective Date	 	9
	 
	 	5.2.	 	Term	 	9
	 
	 	5.3.	 	Amendment and Termination of the Plan	 	9
	6.	 	AWARD ELIGIBILITY AND LIMITATIONS	 	9
	 
	 	6.1.	 	Service Providers and Other Persons	 	9
	 
	 	6.2.	 	Adjustments in Authorized Shares	 	10
	7.	 	AWARD AGREEMENT	 	10
	8.	 	TERMS AND CONDITIONS OF OPTIONS	 	10
	 
	 	8.1.	 	Option Price	 	10
	 
	 	8.2.	 	Vesting	 	10
	 
	 	8.3.	 	Term	 	10
	 
	 	8.4.	 	Termination of Service	 	11
	 
	 	8.5.	 	Limitations on Exercise of Option	 	11
	 
	 	8.6.	 	Method of Exercise	 	11
	 
	 	8.7.	 	Rights of Holders of Options	 	11
	 
	 	8.8.	 	Delivery of Stock Certificates	 	12
	 
	 	8.9.	 	Transferability of Options	 	12
	 
	 	8.10.	 	Family Transfers	 	12
	 
	 	8.11.	 	Limitations on Incentive Stock Options	 	12
	 
	 	8.12.	 	Notice of Disqualifying Disposition	 	13
	9.	 	TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS	 	13
	 
	 	9.1.	 	Right to Payment and Grant Price	 	13
	 
	 	9.2.	 	Other Terms	 	13
	 
	 	9.3.	 	Term	 	13
	 
	 	9.4.	 	Transferability of SARS	 	13






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	 	 	 	 	 	 	Page
	 
	 	9.5.	 	Family Transfers	 	14
	10.	 	TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS	 	14
	 
	 	10.1.	 	Grant of Restricted Stock or Stock Units	 	14
	 
	 	10.2.	 	Restrictions	 	14
	 
	 	10.3.	 	Restricted Stock Certificates	 	14
	 
	 	10.4.	 	Rights of Holders of Restricted Stock	 	15
	 
	 	10.5.	 	Rights of Holders of Stock Units	 	15
	 
	 		 	10.5.1.     Voting and Dividend Rights	 	15
	 
	 		 	10.5.2.     Creditor’s Rights	 	15
	 
	 	10.6.	 	Termination of Service	 	15
	 
	 	10.7.	 	Purchase of Restricted Stock and Shares Subject to Stock Units	 	15
	 
	 	10.8.	 	Delivery of Stock	 	16
	11.	 	TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS	 	16
	12.	 	TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS	 	16
	 
	 	12.1.	 	Dividend Equivalent Rights	 	16
	 
	 	12.2.	 	Termination of Service	 	17
	13.	 	PAYMENT	 	17
	14.	 	PARACHUTE LIMITATIONS	 	17
	15.	 	REQUIREMENTS OF LAW	 	18
	 
	 	15.1.	 	General	 	18
	 
	 	15.2.	 	Rule 16b-3	 	19
	16.	 	EFFECT OF CHANGES IN CAPITALIZATION	 	19
	 
	 	16.1.	 	Changes in Stock	 	19
	 
	 	16.2.	 	Reorganization in Which the Company Is the Surviving Entity Which
does not Constitute a Corporate Transaction	 	20
	 
	 	16.3.	 	Corporate Transaction in which Awards are not Assumed	 	20
	 
	 	16.4.	 	Corporation Transaction in which Awards are Assumed	 	21
	 
	 	16.5.	 	Adjustments	 	21
	 
	 	16.6.	 	No Limitations on Company	 	22
	17.	 	GENERAL PROVISIONS	 	22
	 
	 	17.1.	 	Disclaimer of Rights	 	22
	 
	 	17.2.	 	Nonexclusivity of the Plan	 	22
	 
	 	17.3.	 	Withholding Taxes	 	22
	 
	 	17.4.	 	Captions	 	23
	 
	 	17.5.	 	Other Provisions	 	23
	 
	 	17.6.	 	Number and Gender	 	23
	 
	 	17.7.	 	Severability	 	23
	 
	 	17.8.	 	Governing Law	 	23
	 
	 	17.9.	 	Code Section 409A	 	24






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DUOYUAN GLOBAL WATER INC.




2008 OMNIBUS INCENTIVE PLAN




     Duoyuan Global Water Inc., a British Virgin Islands company (the “Company”), sets
forth herein the terms of its 2008 Omnibus Incentive Plan (the “Plan”), as follows:




			
	1.	 	PURPOSE





     The Plan is intended to enhance the Company’s and its Affiliates’ (as defined herein) ability
to attract and retain highly qualified officers, directors, key employees, and other persons, and
to motivate such persons to serve the Company and its Affiliates and to expend maximum effort to
improve the business results and earnings of the Company, by providing to such persons an
opportunity to acquire or increase a direct proprietary interest in the operations and future
success of the Company. To this end, the Plan provides for the grant of stock options, stock
appreciation rights, restricted stock, stock units (including deferred stock units), unrestricted
stock, dividend equivalent rights, and cash bonus awards. Stock options granted under the Plan may
be non-qualified stock options or incentive stock options, as provided herein, except that stock
options granted to outside directors and any consultants or advisers providing services to the
Company or an Affiliate shall in all cases be non-qualified stock options.




			
	2.	 	DEFINITIONS





     For purposes of interpreting the Plan and related documents (including Award Agreements), the
following definitions shall apply:



     2.1 “Affiliate” means, with respect to the Company, any company or other trade or business
that controls, is controlled by or is under common control with the Company within the meaning of
Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary.
For purposes of granting stock options or stock appreciation rights, an entity may not be
considered an Affiliate unless the Company holds a “controlling interest” in such entity, where the
term “controlling interest” has the same meaning as provided in Treasury Regulation
1.414(c)-2(b)(2)(i), provided that the language “at least 50 percent” is used instead of “at least
80 percent” and, provided further, that where granting of stock options or stock appreciation
rights is based upon a legitimate business criteria, the language “at least 20 percent” is used
instead of “at least 80 percent” each place it appears in Treasury Regulation 1.414(c)-2(b)(2)(i).



     2.2 “American Depositary Receipts” or “ADRs” means a physical certificate evidencing ownership
in American Depositary Shares, issued by the Depositary and listed on an established national or
regional stock exchange, is admitted to quotation on The Nasdaq Stock Market, Inc., or is publicly
traded on an established securities market in the United States.



     2.3 “American Depositary Shares” or “ADSs” means an equity right representing one or more
shares of Stock of the Company, or a fraction of a share of



 









 







Stock of the Company, held on deposit
by the Custodian, which carries the corporate
and economic rights of the Stock of the Company, subject to the terms specified on the
American Depositary Receipt.



     2.4 “Applicable Laws” means the legal requirements relating to the Plan and the Awards under
applicable provisions of the corporate, securities, tax and other laws, rules, regulations and
government orders, and the rules of any applicable stock exchange or national market system, of any
jurisdiction applicable to Awards granted to residents therein.



     2.5 “Award” means a grant of an Option, Stock Appreciation Right, Restricted Stock,
Unrestricted Stock, Stock Unit or Dividend Equivalent Right under the Plan.



     2.6 “Award Agreement” means the agreement between the Company and a Grantee that evidences and
sets out the terms and conditions of an Award.



     2.7 “Benefit Arrangement” shall have the meaning set forth in Section 14 hereof.



     2.8 “Board” means the Board of Directors of the Company.



     2.9 “Cause” means, as determined by the Board and unless otherwise provided in an applicable
agreement with the Company or an Affiliate, (i) gross negligence or willful misconduct in
connection with the performance of duties; (ii) conviction of a criminal offense (other than minor
traffic offenses); or (iii) material breach of any term of any employment, consulting or other
services, confidentiality, intellectual property or non-competition agreements, if any, between the
Service Provider and the Company or an Affiliate.



     2.10 “Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended.



     2.11 “Committee” means a committee of, and designated from time to time by resolution of, the
Board, which shall be constituted as provided in Section 3.2.



     2.12 “Company” means Duoyuan Global Water Inc.



     2.13 “Corporate Transaction” means (i) the dissolution or liquidation of the Company or a
merger, consolidation, or reorganization of the Company with one or more other entities in which
the Company is not the surviving entity, (ii) a sale of substantially all of the assets of the
Company to another person or entity, or (iii) any transaction (including without limitation a
merger or reorganization in which the Company is the surviving entity) which results in any person
or entity (other than Mr. Wenhua Guo or Duryuan Investments Limited) owning 50% or more of the combined voting power of all
classes of stock of the Company.



     2.14 “Custodian” means Deutsche Bank Trust Company Americas or such other bank appointed by the Company to hold
any ADSs on deposit upon or after a public offering of the Stock.



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     2.15 “Depositary” means Deutsche Bank Trust Company Americas or such other U.S. bank appointed by the Company to
issue any ADRs upon or after a public offering of the Stock.



     2.16 “Disability” means the Grantee is unable to perform each of the essential duties of such
Grantee’s position by reason of a medically determinable
physical or mental impairment which is potentially permanent in character or which can be
expected to last for a continuous period of not less than 12 months; provided, however, that, with
respect to rules regarding expiration of an Incentive Stock Option following termination of the
Grantee’s Service, Disability shall mean the Grantee is unable to engage in any substantial gainful
activity by reason of a medically determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to last for a continuous period of not
less than 12 months.



     2.17 “Dividend Equivalent Right” means a right, granted to a Grantee under Section 12 hereof,
to receive cash, Stock, other Awards or other property equal in value to dividends paid with
respect to a specified number of shares of Stock, or other periodic payments.



     2.18
“Effective Date” September 19, 2008, the date the Plan was approved by the Board.



     2.19 “Exchange Act” means the Securities Exchange Act of 1934, as now in effect or as
hereafter amended.



     2.20 “Fair Market Value” means the value of a share of Stock, determined as follows: if on
the Grant Date or other determination date the Stock is listed on an established national or
regional stock exchange, or is publicly traded on an established securities market, the Fair Market
Value of a share of Stock shall be the closing price of the Stock on such exchange or in such
market (if there is more than one such exchange or market the Board shall determine the appropriate
exchange or market) on the Grant Date or such other determination date (or if there is no such
reported closing price, the Fair Market Value shall be the mean between the highest bid and lowest
asked prices or between the high and low sale prices on such trading day) or, if no sale of Stock
is reported for such trading day, on the next preceding day on which any sale shall have been
reported. If the Stock is not listed on such an exchange or traded on such a market, Fair Market
Value shall be the value of the Stock as determined by the Board by the reasonable application of a
reasonable valuation method, in a manner consistent with Section 409A of the Code (“Code Section
409A”).



     2.21 “Family Member” means a person who is a spouse, former spouse, child, stepchild,
grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law, including adoptive
relationships, of the Grantee, any person sharing the Grantee’s household (other than a tenant or
employee), a trust in which any one or more of these persons have more than fifty percent of the
beneficial interest, a foundation in which any one or more of these persons (or the Grantee)
control the management of assets,



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and any other entity in which one or more of these persons (or
the Grantee) own more than fifty percent of the voting interests.



     2.22 “Grant Date” means, as determined by the Board, the latest to occur of (i) the date as of
which the Board approves an Award, (ii) the date on which the recipient of an Award first becomes
eligible to receive an Award under Section 6 hereof, or (iii) such other date as may be specified
by the Board.



     2.23 “Grantee” means a person who receives or holds an Award under the Plan.



     2.24 “Incentive Stock Option” means an “incentive stock option” within the meaning of Section
422 of the Code, or the corresponding provision of any subsequently enacted tax statute, as amended
from time to time.



     2.25 “IPO” means the initial sale to the general public of the Shares pursuant to a
registration statement filed with and declared effective by the U.S. Securities and Exchange
Commission.



     2.26 “Non-qualified Stock Option” means an Option that is not an Incentive Stock Option.



     2.27 “Option” means an option to purchase one or more shares of Stock pursuant to the Plan.



     2.28 “Option Price” means the exercise price for each share of Stock subject to an Option.



     2.29 “Other Agreement” shall have the meaning set forth in Section 14 hereof.



     2.30 “Plan” means this Duoyuan Global Water Inc. 2008 Omnibus Incentive Plan.



     2.31 “Purchase Price” means the purchase price for each share of Stock pursuant to a grant of
Restricted Stock, Stock Units or Unrestricted Stock.



     2.32 “Reporting Person” means a person who is required to file reports under Section 16(a) of
the Exchange Act.



     2.33 “Restricted Stock” means shares of Stock, awarded to a Grantee pursuant to Section 10
hereof.



     2.34 “SAR Exercise Price” means the per share exercise price of a SAR granted to a Grantee
under Section 9 hereof.



     2.35 “Securities Act” means the Securities Act of 1933, as now in effect or as hereafter
amended.



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     2.36 “Service” means service as a Service Provider to the Company or an Affiliate. Unless
otherwise stated in the applicable Award Agreement, a Grantee’s change in position or duties shall
not result in interrupted or terminated Service, so long as such Grantee continues to be a Service
Provider to the Company or an Affiliate. Subject to the preceding sentence, whether a termination
of Service shall have occurred for purposes of the Plan shall be determined by the Board, which
determination shall be final, binding and conclusive.



     2.37 “Service Provider” means an employee, officer or director of the Company or an Affiliate,
or a consultant or adviser (who is a natural person) currently providing services to the Company or
an Affiliate.



     2.38 “Stock” means the ordinary shares, par value $0.0001 per share, of the Company. Upon an
IPO, at the Board’s sole discretion, “Stock” may also mean the ADSs issued by the Company in
satisfaction of awards of Stock granted under the Plan.



     2.39 “Stock Appreciation Right” or “SAR” means a right granted to a Grantee under Section 9
hereof.



     2.40 “Stock Unit” means a bookkeeping entry representing the equivalent of one share of Stock
awarded to a Grantee pursuant to Section 10 hereof.



     2.41 “Subsidiary” means any “subsidiary corporation” of the Company within the meaning of
Section 424(f) of the Code.



     2.42 “Substitute Awards” means Awards granted upon assumption of, or in substitution for,
outstanding awards previously granted by a company or other entity acquired by the Company or any
Affiliate or with which the Company or any Affiliate combines.



     2.43 “Ten Percent Stockholder” means an individual who owns more than ten percent (10%) of the
total combined voting power of all classes of outstanding stock of the Company, its parent or any
of its Subsidiaries. In determining stock ownership, the attribution rules of Section 424(d) of
the Code shall be applied.



     2.44 “Unrestricted Stock” means an Award pursuant to Section 11 hereof.



     2.45 “U.S. Grantee” means any Grantee who is or becomes a taxpayer in the United States.




			
	3.	 	ADMINISTRATION OF THE PLAN






	 	3.1.	 	Board





     The Board shall have such powers and authorities related to the administration of the Plan as
are consistent with the Company’s certificate of incorporation and by-laws and applicable law. The
Board shall have full power and authority to take all actions and to make all determinations
required or provided for under the Plan, any Award or any Award Agreement, and shall have full
power and authority to take all such other actions and make all such other determinations not
inconsistent with the specific terms



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and provisions of the Plan that the Board deems to be
necessary or appropriate to the administration of the Plan, any Award or any Award Agreement. All
such actions and determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting or by unanimous consent of the Board executed in writing in
accordance with the Company’s certificate of incorporation and by-laws and applicable law. The
interpretation and construction by the Board of any provision of the Plan, any Award or any Award
Agreement shall be final, binding and conclusive.




	 	3.2.	 	Committee





     The Board from time to time may delegate to the Committee such powers and authorities related
to the administration and implementation of the Plan, as set forth in Section 3.1 above and other
applicable provisions, as the Board shall determine, consistent with the certificate of
incorporation and by-laws of the Company and applicable law.



     In the event that the Plan, any Award or any Award Agreement entered into hereunder provides
for any action to be taken by or determination to be made by the
Board, such action may be taken or such determination may be made by the Committee if the power and
authority to do so has been delegated to the Committee by the Board as provided for in this
Section. Unless otherwise expressly determined by the Board, any such action or determination by
the Committee shall be final, binding and conclusive. To the extent permitted by law, the
Committee may delegate its authority under the Plan to a member of the Board.




	 	3.3.	 	Jurisdictions





     In order to assure the viability of Awards granted to Grantees employed in various
jurisdictions, the Committee may provide for such special terms as it may consider necessary or
appropriate to accommodate differences in local law, tax policy, or custom applicable in the
jurisdiction in which the Participant resides or is employed. Moreover, the Committee may approve
such supplements to, or amendments, restatements, or alternative versions of, the Plan as it may
consider necessary or appropriate for such purposes without thereby affecting the terms of the Plan
as in effect for any other purpose; provided, however, that no such supplements, amendments,
restatements, or alternative versions shall increase the share limitations contained in Section 4.1
of the Plan. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and
no Awards shall be granted, that would violate any Applicable Laws.




	 	3.4.	 	Terms of Awards





     Subject to the other terms and conditions of the Plan, the Board shall have full and final
authority to:



     (i) designate Grantees,



     (ii) determine the type or types of Awards to be made to a Grantee,



     (iii) determine the number of shares of Stock to be subject to an Award,



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     (iv) establish the terms and conditions of each Award (including, but not limited to, the
exercise price of any Option, the nature and duration of any restriction or condition (or provision
for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award or the
shares of Stock subject thereto, the treatment of an Award in the event of a change of control, and
any terms or conditions that may be necessary to qualify Options as Incentive Stock Options),



     (v) prescribe the form of each Award Agreement evidencing an Award, and



     (vi) amend, modify, or supplement the terms of any outstanding Award. Such authority
specifically includes the authority, in order to effectuate the purposes of the Plan but without
amending the Plan, to make or modify Awards to U.S. Grantees and eligible individuals who are
foreign nationals or are individuals who are employed outside the United States to recognize
differences in local law, tax policy, or custom. Notwithstanding the foregoing, no amendment,
modification or supplement of any Award shall, without the consent of the Grantee, impair the
Grantee’s rights under such Award.



     The Company may retain the right in an Award Agreement to cause a forfeiture of the gain
realized by a Grantee on account of actions taken by the Grantee in violation or breach of or in
conflict with any employment agreement, non-competition agreement, any agreement prohibiting
solicitation of employees or
clients of the Company or any Affiliate thereof or any confidentiality obligation with respect
to the Company or any Affiliate thereof or otherwise in competition with the Company or any
Affiliate thereof, to the extent specified in such Award Agreement applicable to the Grantee. In
addition, the Company may annul an Award if the Grantee is an employee of the Company or an
Affiliate thereof and is terminated for Cause as defined in the applicable Award Agreement or the
Plan, as applicable.



     Furthermore, if the Company is required to prepare an accounting restatement due to the
material noncompliance of the Company, as a result of misconduct, with any financial reporting
requirement under the securities laws, the individuals subject to automatic forfeiture under
Section 304 of the Sarbanes-Oxley Act of 2002 and any Grantee who knowingly engaged in the
misconduct, was grossly negligent in engaging in the misconduct, knowingly failed to prevent the
misconduct or was grossly negligent in failing to prevent the misconduct, shall reimburse the
Company the amount of any payment in settlement of an Award earned or accrued during the twelve
(12) month period following the first public issuance or filing with the United States Securities
and Exchange Commission (whichever first occurred) of the financial document that contained such
material noncompliance.




	 	3.5.	 	No Repricing





     Notwithstanding anything in this Plan to the contrary, no amendment or modification may be
made to an outstanding Option or SAR, including, without limitation, by replacement of Options or
SARs with cash or other award type, that would be treated as a repricing under the rules of the
stock exchange on which the Stock is listed, in each case, without the approval of the stockholders
of the Company, provided, that, appropriate adjustments may be made to outstanding Options and SARs



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pursuant to Section 16 or Section 5.3 and may be made to make changes to achieve compliance with
applicable law, including Code Section 409A.




	 	3.6.	 	Deferral Arrangement





     The Board may permit or require the deferral of any award payment into a deferred compensation
arrangement, subject to such rules and procedures as it may establish, which may include provisions
for the payment or crediting of interest or dividend equivalents, including converting such credits
into deferred Stock equivalents. Any such deferrals shall be made in a manner that complies with
Code Section 409A.




	 	3.7.	 	No Liability





     No member of the Board or the Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any Award or Award Agreement.




	 	3.8.	 	Share Issuance/Book-Entry





     Notwithstanding any provision of this Plan to the contrary, the issuance of the Stock under
the Plan may be evidenced in such a manner as the Board, in its discretion, deems appropriate,
including, without limitation, book-entry registration or issuance of one or more Stock
certificates.




			
	4.	 	STOCK SUBJECT TO THE PLAN






	 	4.1.	 	Number of Shares Available for Awards and Conversion into ADSs





     Subject to adjustment as provided in Section 16 hereof, the number of shares of Stock
available for issuance under the Plan shall be seven hundred one thousand seven hundred fifty-four (701,754), all of which may be granted
as Incentive Stock Options. Stock issued or to be issued under the Plan shall be authorized but
unissued shares; or, to the extent permitted by applicable law, issued shares that have been
reacquired by the Company.



     If following an IPO a Grantee elects to convert Stock received pursuant to Awards under
the plan into ADSs, the Grantee will be solely responsible for following the procedures and
requirements set forth by the Depositary and for any applicable costs of such conversion. In no
event shall the Company have any duty or obligation to assist in the conversion of such Stock.




	 	4.2.	 	Adjustments in Authorized Shares





     The Board shall have the right to substitute or assume Awards in connection with mergers,
reorganizations, separations, or other transactions to which Section 424(a) of the Code applies.
The number of shares of Stock reserved pursuant to Section 4 shall be increased by the
corresponding number of Awards assumed and, in the case of a substitution, by the net increase in
the number of shares of Stock subject to Awards before and after the substitution.




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	 	4.3.	 	Share Usage





     Shares covered by an Award shall be counted as used as of the Grant Date. Any shares of Stock
that are subject to Awards shall be counted against the limit set forth in Section 4.1 as one (1)
share for every one (1) share subject to an Award. If any shares covered by an Award granted under
the Plan are not purchased or are forfeited or expire, or if an Award otherwise terminates without
delivery of any Stock subject thereto or is settled in cash in lieu of shares, then the number of
shares of Stock counted against the aggregate number of shares available under the Plan with
respect to such Award shall, to the extent of any such forfeiture, termination or expiration, again
be available for making Awards under the Plan in the same amount as such shares were counted
against the limit set forth in Section 4.1. The number of shares of Stock available for issuance
under the Plan shall not be increased by (i) any shares of Stock tendered or withheld or Award
surrendered in connection with the purchase of shares of Stock upon exercise of an Option as
described in Section 13, or (ii) any shares of Stock deducted or delivered from an Award payment in
connection with the Company’s tax withholding obligations as described in Section 17.3.




			
	5.	 	EFFECTIVE DATE, DURATION AND AMENDMENTS






	 	5.1.	 	Effective Date





     The Plan shall be effective as of the Effective Date, subject to approval of the Plan by the
Company’s stockholders within one year of the Effective Date. Upon approval of the Plan by the
stockholders of the Company as set forth above, all Awards made under the Plan on or after the
Effective Date shall be fully effective as if the stockholders of the Company had approved the Plan
on the Effective Date. If the stockholders fail to approve the Plan within one year of the
Effective Date, any Awards made hereunder shall be null and void and of no effect.




	 	5.2.	 	Term





     The Plan shall terminate automatically ten (10) years after the Effective Date and may be
terminated on any earlier date as provided in Section 5.3.




	 	5.3.	 	Amendment and Termination of the Plan





     The Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to
any shares of Stock as to which Awards have not been made. An amendment shall be contingent on
approval of the Company’s stockholders to the extent stated by the Board, required by applicable
law or required by applicable stock exchange listing requirements. No amendment, suspension, or
termination of the Plan shall, without the consent of the Grantee, impair rights or obligations
under any Award theretofore awarded under the Plan.




			
	6.	 	AWARD ELIGIBILITY AND LIMITATIONS






	 	6.1.	 	Service Providers and Other Persons




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     Subject to this Section 6, Awards may be made under the Plan to: (i) any Service Provider to
the Company or of any Affiliate, including any Service Provider who is an officer or director of the Company, or of any Affiliate, as the Board shall determine and designate from
time to time and (ii) any other individual whose participation in the Plan is determined to be in
the best interests of the Company by the Board.




	 	6.2.	 	Adjustments in Authorized Shares





     An eligible person may receive more than one Award, subject to such restrictions as are
provided herein. The Board shall have the right to substitute or assume Awards in connection with
mergers, reorganizations, separations, or other transactions to which Section 424(a) of the Code
applies. The number of Shares reserved pursuant to Section 4 shall be increased by the
corresponding number of Substitute Awards.




			
	7.	 	AWARD AGREEMENT





     Each Award granted pursuant to the Plan shall be evidenced by an Award Agreement, in such form
or forms as the Board shall from time to time determine. Award Agreements granted from time to
time or at the same time need not contain similar provisions but shall be consistent with the terms
of the Plan. Each Award Agreement evidencing an Award of Options shall specify whether such
Options are intended to be Non-qualified Stock Options or Incentive Stock Options, and in the
absence of such specification such options shall be deemed Non-qualified Stock Options.




			
	8.	 	TERMS AND CONDITIONS OF OPTIONS






	 	8.1.	 	Option Price





     The Option Price of each Option shall be fixed by the Board and stated in the Award Agreement
evidencing such Option. Except in the case of Substitute Awards, the Option Price of each Option
shall be at least the Fair Market Value on the Grant Date of a share of Stock; provided,
however, that in the event that a Grantee is a Ten Percent Stockholder, the Option Price of
an Option granted to such Grantee that is intended to be an Incentive Stock Option shall be not
less than 110 percent of the Fair Market Value of a share of Stock on the Grant Date. In no case
shall the Option Price of any Option be less than the par value of a share of Stock.




	 	8.2.	 	Vesting





     Subject to Sections 8.3 and 16.3 hereof, each Option granted under the Plan shall become
exercisable at such times and under such conditions as shall be determined by the Board and stated
in the Award Agreement. For purposes of this Section 8.2, fractional numbers of shares of Stock
subject to an Option shall be rounded down to the next nearest whole number.




	 	8.3.	 	Term





     Each Option granted under the Plan shall terminate, and all rights to purchase shares of Stock
thereunder shall cease, upon the expiration of ten years from the date such Option is granted, or
under such circumstances and on such date prior thereto as



- 10 -









 







is set forth in the Plan or as may be
fixed by the Board and stated in the Award Agreement relating to such Option; provided, however, that in the event that the Grantee is a Ten Percent
Stockholder, an Option granted to such Grantee that is intended to be an Incentive Stock Option
shall not be exercisable after the expiration of five years from its Grant Date. If on the day
preceding the date on which a Grantee’s Options would otherwise terminate, the Fair Market Value of
shares of Stock underlying a Grantee’s Options is greater than the Option Price of such Options,
the Company shall, prior to the termination of such Options and without any action being taken on
the part of the Grantee, consider such Options to have been exercised by the Grantee. The Company
shall deduct from the shares of Stock deliverable to the Grantee upon such exercise the number of
shares of Stock necessary to satisfy payment of the Option Price and all withholding
obligations.




	 	8.4.	 	Termination of Service





     Each Award Agreement shall set forth the extent to which the Grantee shall have the right to
exercise the Option following termination of the Grantee’s Service. Such provisions shall be
determined in the sole discretion of the Board, need not be uniform among all Options issued
pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service.




	 	8.5.	 	Limitations on Exercise of Option





     Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in
whole or in part, prior to the date the Plan is approved by the stockholders of the Company as
provided herein or after the occurrence of an event referred to in Section 16 hereof which results
in termination of the Option.




	 	8.6.	 	Method of Exercise





     Subject to the terms of Section 13 and Section 17.3, an Option that is exercisable may be
exercised by the Grantee’s delivery to the Company of notice of exercise on any business day, at
the Company’s principal office, on the form specified by the Company. Such notice shall specify
the number of shares of Stock with respect to which the Option is being exercised and shall be
accompanied by payment in full of the Option Price of the shares for which the Option is being
exercised plus the amount (if any) of federal and/or other taxes which the Company may, in its
judgment, be required to withhold with respect to an Award.




	 	8.7.	 	Rights of Holders of Options





     Unless otherwise stated in the applicable Award Agreement, an individual holding or exercising
an Option shall have none of the rights of a stockholder (for example, the right to receive cash or
dividend payments or distributions attributable to the subject shares of Stock or to direct the
voting of the subject shares of Stock ) until the shares of Stock covered thereby are fully paid
and issued to him. Except as provided in Section 16 hereof, no adjustment shall be made for
dividends, distributions or other





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rights for which the record date is prior to the date of such
issuance. The Grantee’s rights with respect to the shares of Stock issued after exercising the Option shall be governed by the deposit agreement among the
Company, the Depositary and the shareholders.




	 	8.8.	 	Delivery of Stock Certificates





     Promptly after the exercise of an Option by a Grantee and the payment in full of the Option
Price, such Grantee shall be entitled to the issuance of a stock certificate or certificates
evidencing his or her ownership of the shares of Stock subject to the Option.




	 	8.9.	 	Transferability of Options





     Except as provided in Section 8.10, during the lifetime of a Grantee, only the Grantee (or, in
the event of legal incapacity or incompetency, the Grantee’s guardian or legal representative) may
exercise an Option. Except as provided in Section 8.10, no Option shall be assignable or
transferable by the Grantee to whom it is granted, other than by will or the laws of descent and
distribution.




	 	8.10.	 	Family Transfers





     If authorized in the applicable Award Agreement, a Grantee may transfer, not for value, all or
part of an Option which is not an Incentive Stock Option to any Family Member. For the purpose of
this Section 8.10, a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer
under a domestic relations order in settlement of marital property rights; or (iii) unless
applicable law does not permit such transfers, a transfer to an entity in which more than fifty
percent of the voting interests are owned by Family Members (or the Grantee) in exchange for an
interest in that entity. Following a transfer under this Section 8.10, any such Option shall
continue to be subject to the same terms and conditions as were applicable immediately prior to
transfer, and shares of Stock acquired pursuant to the Option shall be subject to the same
restrictions on transfer of shares as would have applied to the Grantee. Subsequent transfers of
transferred Options are prohibited except to Family Members of the original Grantee in accordance
with this Section 8.10 or by will or the laws of descent and distribution. The events of
termination of Service of Section 8.4 hereof shall continue to be applied with respect to the
original Grantee, following which the Option shall be exercisable by the transferee only to the
extent, and for the periods specified, in Section 8.4.




	 	8.11.	 	Limitations on Incentive Stock Options





     An Option shall constitute an Incentive Stock Option only (i) if the Grantee of such Option is
an employee of the Company or any Subsidiary of the Company; (ii) to the extent specifically
provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market
Value (determined at the time the Option is granted) of the shares of Stock with respect to which
all Incentive Stock Options held by such Grantee become exercisable for the first time during any
calendar year (under the Plan and all other plans of the Grantee’s employer and its Affiliates)
does not exceed $100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.



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	 	8.12.	 	Notice of Disqualifying Disposition





     If any Grantee shall make any disposition of shares of Stock issued pursuant to the exercise
of an Incentive Stock Option under the circumstances described in Code Section 421(b) (relating to
certain disqualifying dispositions), such Grantee shall notify the Company of such disposition
within ten (10) days thereof.




			
	9.	 	TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS






	 	9.1.	 	Right to Payment and Grant Price





     A SAR shall confer on the Grantee to whom it is granted a right to receive, upon exercise
thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise over
(B) the grant price of the SAR as determined by the Board. The Award Agreement for a SAR shall
specify the grant price of the SAR, which shall be at least the Fair Market Value of a share of
Stock on the date of grant. SARs may be granted in conjunction with all or part of an Option
granted under the Plan or at any subsequent time during the term of such Option, in conjunction
with all or part of any other Award or without regard to any Option or other Award; provided that a
SAR that is granted subsequent to the Grant Date of a related Option must have a SAR Price that is
no less than the Fair Market Value of one share of Stock on the SAR Grant Date.




	 	9.2.	 	Other Terms





     The Board shall determine at the date of grant or thereafter, the time or times at which and
the circumstances under which a SAR may be exercised in whole or in part (including based on future
service requirements), the time or times at which SARs shall cease to be or become exercisable
following termination of Service or upon other conditions, the method of exercise, method of
settlement, form of consideration payable in settlement, method by or forms in which Stock will be
delivered or deemed to be delivered to Grantees, whether or not a SAR shall be in tandem or in
combination with any other Award, and any other terms and conditions of any SAR.




	 	9.3.	 	Term





     Each SAR granted under the Plan shall terminate, and all rights thereunder shall cease, upon
the expiration of ten years from the date such SAR is granted, or under such circumstances and on
such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in
the Award Agreement relating to such SAR.




	 	9.4.	 	Transferability of SARS





     Except as provided in Section 9.5, during the lifetime of a Grantee, only the Grantee (or, in
the event of legal incapacity or incompetency, the Grantee’s guardian or legal representative) may
exercise a SAR. Except as provided in Section 9.5, no SAR shall be assignable or transferable by
the Grantee to whom it is granted, other than by will or the laws of descent and distribution.



- 13 -









 






	 	9.5.	 	Family Transfers





     If authorized in the applicable Award Agreement, a Grantee may transfer, not for value, all or
part of a SAR to any Family Member. For the purpose of this Section 9.5, a “not for value”
transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic relations order in
settlement of marital property rights; or (iii) unless applicable law does not permit such
transfers, a transfer to an entity in which more than fifty percent of the voting interests are
owned by Family Members (or the Grantee) in exchange for an interest in that entity. Following a
transfer under this Section 9.5, any such SAR shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, and shares of Stock acquired pursuant
to a SAR shall be subject to the same restrictions on transfer or shares as would have applied to
the Grantee. Subsequent transfers of transferred SARs are prohibited except to Family Members of
the original Grantee in accordance with this Section 9.5 or by will or the laws of descent and
distribution.




			
	10.	 	TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS






	 	10.1.	 	Grant of Restricted Stock or Stock Units





     Awards of Restricted Stock or Stock Units may be made for no consideration (other than par
value of the shares which is deemed paid by Services already rendered).




	 	10.2.	 	Restrictions





     At the time a grant of Restricted Stock or Stock Units is made, the Board may, in its sole
discretion, establish a period of time (a “restricted period”) applicable to such
Restricted Stock or Stock Units. Each Award of Restricted Stock or Stock Units may be subject to a
different restricted period. The Board may in its sole discretion, at the time a grant of
Restricted Stock or Stock Units is made, prescribe restrictions in addition to or other than the
expiration of the restricted period, which may be applicable to all or any portion of the
Restricted Stock or Stock Units. Neither Restricted Stock nor Stock Units may be sold,
transferred, assigned, pledged or otherwise encumbered or disposed of during the restricted period
or prior to the satisfaction of any other restrictions prescribed by the Board with respect to such
Restricted Stock or Stock Units.




	 	10.3.	 	Restricted Stock Certificates





     The Company shall issue, in the name of each Grantee to whom Restricted Stock has been
granted, stock certificates representing the total number of shares of Restricted Stock granted to
the Grantee, as soon as reasonably practicable after the Grant Date. The Board may provide in an
Award Agreement that either (i) the Secretary of the Company shall hold such certificates for the
Grantee’s benefit until such time as the Restricted Stock is forfeited to the Company or the
restrictions lapse, or (ii) such certificates shall be delivered to the Grantee, provided,
however, that such certificates shall bear a legend or legends that comply with the
applicable securities laws and regulations and makes appropriate reference to the restrictions
imposed under the Plan and the Award Agreement.



- 14 -









 






	 	10.4.	 	Rights of Holders of Restricted Stock





     Unless the Board otherwise provides in an Award Agreement, holders of Restricted Stock shall
have the right to vote such Stock and the right to receive any dividends declared or paid with
respect to such Stock. The Board may provide that any dividends paid on Restricted Stock must be
reinvested in shares of Stock, which may or may not be subject to the same vesting conditions and
restrictions applicable to such Restricted Stock. All distributions, if any, received by a Grantee
with respect to Restricted Stock as a result of any stock split, stock dividend, combination of
shares, or other similar transaction shall be subject to the restrictions applicable to the
original Grant.




	 	10.5.	 	Rights of Holders of Stock Units






	 	10.5.1.	 	Voting and Dividend Rights





     Holders of Stock Units shall have no rights as stockholders of the Company. The Board may
provide in an Award Agreement evidencing a grant of Stock Units that the holder of such Stock Units
shall be entitled to receive, upon the Company’s payment of a cash dividend on its outstanding
Stock, a cash payment for each Stock Unit held equal to the per-share dividend paid on the Stock.
Such Award Agreement may also provide that such cash payment will be deemed reinvested in
additional Stock Units at a price per unit equal to the Fair Market Value of a share of Stock on
the date that such dividend is paid.




	 	10.5.2.	 	Creditor’s Rights





     A holder of Stock Units shall have no rights other than those of a general creditor of the
Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to the
terms and conditions of the applicable Award Agreement.




	 	10.6.	 	Termination of Service





     Unless the Board otherwise provides in an Award Agreement or in writing after the Award
Agreement is issued, upon the termination of a Grantee’s Service, any Restricted Stock or Stock
Units held by such Grantee that have not vested, or with respect to which all applicable
restrictions and conditions have not lapsed, shall immediately be deemed forfeited. Upon
forfeiture of Restricted Stock or Stock Units, the Grantee shall have no further rights with
respect to such Award, including but not limited to any right to vote Restricted Stock or any right
to receive dividends with respect to shares of Restricted Stock or Stock Units.




	 	10.7.	 	Purchase of Restricted Stock and Shares Subject to Stock Units





     The Grantee shall be required, to the extent required by applicable law, to purchase the
Restricted Stock or Shares subject to vested Stock Units from the Company at a Purchase Price equal
to the greater of (i) the aggregate par value of the shares of Stock represented by such Restricted
Stock or Stock Units (ii) the Purchase Price, if any, specified in the Award Agreement relating to
such Restricted Stock or Stock Units. The Purchase Price shall be payable in a form described in
Section 13



- 15 -









 







or, in the discretion of the Board, in consideration for past or future Services
rendered to the Company or an Affiliate.




	 	10.8.	 	Delivery of Stock





     Upon the expiration or termination of any restricted period and the satisfaction of any other
conditions prescribed by the Board, the restrictions applicable to shares of Restricted Stock or
Stock Units settled in Stock shall lapse, and, unless otherwise provided in the Award Agreement, a
stock certificate for such shares shall be delivered, free of all such restrictions, to the Grantee
or the Grantee’s beneficiary or estate, as the case may be. Neither the Grantee, nor the Grantee’s
beneficiary or estate, shall have any further rights with regard to a Stock Unit once the share of
Stock represented by the Stock Unit has been delivered.




			
	11.	 	TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS





     The Board may, in its sole discretion, grant (or sell at par value or such other higher
purchase price determined by the Board) an Unrestricted Stock Award to any Grantee pursuant to
which such Grantee may receive shares of Stock free of any restrictions (“Unrestricted
Stock”) under the Plan. Unrestricted Stock Awards may be granted or sold as described in the
preceding sentence in respect of past services and other valid consideration, or in lieu of, or in
addition to, any cash compensation due to such Grantee.




			
	12.	 	TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS






	 	12.1.	 	Dividend Equivalent Rights





     A Dividend Equivalent Right is an Award entitling the recipient to receive credits based on
cash distributions that would have been paid on the shares of Stock specified in the Dividend
Equivalent Right (or other award to which it relates) if such shares had been issued to and held by
the recipient. A Dividend Equivalent Right may be granted hereunder to any Grantee. The terms and
conditions of Dividend Equivalent Rights shall be specified in the grant. Dividend equivalents
credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be
reinvested in additional shares of Stock, which may thereafter accrue additional equivalents. Any
such reinvestment shall be at Fair Market Value on the date of reinvestment. Dividend Equivalent
Rights may be settled in cash or Stock or a combination thereof, in a single installment or
installments, all determined in the sole discretion of the Board. A Dividend Equivalent Right
granted as a component of another Award may provide that such Dividend Equivalent Right shall be
settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other award,
and that such Dividend Equivalent Right shall expire or be forfeited or annulled under the same
conditions as such other award. A Dividend Equivalent Right granted as a component of another
Award may also contain terms and conditions different from such other award.




- 16 -











 






	 	12.2.	 	Termination of Service





     Except as may otherwise be provided by the Board either in the Award Agreement or in writing
after the Award Agreement is issued, a Grantee’s rights in all Dividend Equivalent Rights or
interest equivalents shall automatically terminate upon the Grantee’s termination of Service for
any reason.




			
	13.	 	PAYMENT





     The Committee shall determine the methods by which the Option Price, SAR Exercise Price or
Purchase Price for an Award may be paid, the form of payment, including, without limitation (i)
cash or check denominated in U.S. Dollars, (ii) to the extent permissible under the Applicable
Laws, cash or check in Chinese Renminbi, (iii) cash or check denominated in any other local
currency as approved by the Committee, (iv) shares of Stock held for such period of time as may be
required by the Committee in order to avoid adverse financial accounting consequences and having a
Fair Market Value on the date of delivery equal to the aggregate Option Price or SAR Exercise Price
of the Option or SAR, respectively, or exercised portion thereof, or Purchase Price for Restricted
Stock, (v) after an IPO the delivery of a notice that the Grantee has placed a market order with a
broker with respect to shares of Stock then issuable upon exercise of the Option, and that the
broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company
in satisfaction of the Option Price, provided that payment of such proceeds is then made to the
Company upon settlement of such sale; notwithstanding anything in the Plan to the contrary, such
method shall be the only method a Grantee who is a resident for tax purposes in the People’s
Republic of China may exercise an Option, (vi) other property acceptable to the Committee with a
Fair Market Value equal to the Option Price, SAR Exercise Price or Purchase Price, (vii) cashless
exercise; or (viii) any combination of the foregoing. Notwithstanding any other provision of the
Plan to the contrary, no Grantee who is a member of the Board or an “executive officer” of the
Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the
Option Price, SAR Exercise Price or Purchase Price in any method that would violate Section 13(k)
of the Exchange Act.



     A Grantee may be required to provide evidence that any currency used to pay the Option Price,
SAR Exercise Price or Purchase Price of an Award were acquired and taken out of the jurisdiction in
which the Grantee resides in accordance with Applicable Laws, including foreign exchange control
laws and regulations. In the event the Option Price, SAR Exercise Price or Purchase Price for an
Award is paid in Chinese Renminbi or other foreign currency, as permitted by the Committee, the
amount payable will be determined by conversion from U.S. dollars at the official rate promulgated
by the People’s Bank of China for Chinese Renminbi, or for jurisdictions other than the People’s
Republic of China, the exchange rate as selected by the Committee on the date of exercise or
purchase.




			
	14.	 	PARACHUTE LIMITATIONS





     Notwithstanding any other provision of this Plan or of any other agreement, contract, or
understanding heretofore or hereafter entered into by a U.S. Grantee with the Company or any
Affiliate, except an agreement, contract, or understanding that expressly addresses Section 280G or
Section 4999 of the Code (an “Other Agreement”),



- 17 -









 







and notwithstanding any formal or informal
plan or other arrangement for the direct or indirect provision of compensation to the U.S. Grantee
(including groups or classes of U.S. Grantees or beneficiaries of which the U.S. Grantee is a member), whether or not such compensation is deferred,
is in cash, or is in the form of a benefit to or for the U.S. Grantee (a “Benefit
Arrangement”), if the U.S. Grantee is a “disqualified individual,” as defined in Section
280G(c) of the Code, any Option, Restricted Stock, or Stock Unit held by that U.S. Grantee and any
right to receive any payment or other benefit under this Plan shall not become exercisable or
vested (i) to the extent that such right to exercise, vesting, payment, or benefit, taking into
account all other rights, payments, or benefits to or for the U.S. Grantee under this Plan, all
Other Agreements, and all Benefit Arrangements, would cause any payment or benefit to the U.S.
Grantee under this Plan to be considered a “parachute payment” within the meaning of Section
280G(b)(2) of the Code as then in effect (a “Parachute Payment”) and (ii) if, as a
result of receiving a Parachute Payment, the aggregate after-tax amounts received by the U.S.
Grantee from the Company under this Plan, all Other Agreements, and all Benefit Arrangements would
be less than the maximum after-tax amount that could be received by the U.S. Grantee without
causing any such payment or benefit to be considered a Parachute Payment. In the event that the
receipt of any such right to exercise, vesting, payment, or benefit under this Plan, in conjunction
with all other rights, payments, or benefits to or for the U.S. Grantee under any Other Agreement
or any Benefit Arrangement would cause the U.S. Grantee to be considered to have received a
Parachute Payment under this Plan that would have the effect of decreasing the after-tax amount
received by the U.S. Grantee as described in clause (ii) of the preceding sentence, then the U.S.
Grantee shall have the right, in the U.S. Grantee’s sole discretion, to designate those rights,
payments, or benefits under this Plan, any Other Agreements, and any Benefit Arrangements that
should be reduced or eliminated so as to avoid having the payment or benefit to the U.S. Grantee
under this Plan be deemed to be a Parachute Payment; provided, however, that in order to comply
with Code Section 409A, the reduction or elimination will be performed in the order in which each
dollar of value subject to an Award reduces the Parachute Payment to the greatest extent.




			
	15.	 	REQUIREMENTS OF LAW






	 	15.1.	 	General





     The Company shall not be required to sell or issue any shares of Stock under any Award if the
sale or issuance of such shares would constitute a violation by the Grantee, any other individual
exercising an Option, or the Company of any provision of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or regulations. If at
any time the Company shall determine, in its discretion, that the listing, registration or
qualification of any shares subject to an Award upon any securities exchange or under any
governmental regulatory body is necessary or desirable as a condition of, or in connection with,
the issuance or purchase of shares hereunder, no shares of Stock may be issued or sold to the
Grantee or any other individual exercising an Option pursuant to such Award unless such listing,
registration, qualification, consent or approval shall have been effected or obtained free of any
conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the
date of termination of the Award. Without limiting the generality of the foregoing, in connection
with the Securities Act, upon the exercise of any Option or any



- 18 -









 







SAR that may be settled in shares
of Stock or the delivery of any shares of Stock underlying an Award, unless a registration
statement under such Act is in effect with respect to the shares of Stock covered by such Award,
the Company shall not be required to sell or issue such shares unless the Board has received
evidence satisfactory to it that the Grantee or any other individual exercising an Option may
acquire such shares pursuant to an exemption from registration under the Securities Act. Any determination in this
connection by the Board shall be final, binding, and conclusive. The Company may, but shall in no
event be obligated to, register any securities covered hereby pursuant to the Securities Act. The
Company shall not be obligated to take any affirmative action in order to cause the exercise of an
Option or a SAR or the issuance of shares of Stock pursuant to the Plan to comply with any law or
regulation of any governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option (or SAR that may be settled in shares of Stock) shall not be exercisable
until the shares of Stock covered by such Option (or SAR) are registered or are exempt from
registration, the exercise of such Option (or SAR) under circumstances in which the laws of such
jurisdiction apply shall be deemed conditioned upon the effectiveness of such registration or the
availability of such an exemption.




	 	15.2.	 	Rule 16b-3





     During any time when the Company has a class of equity security registered under Section 12 of
the Exchange Act, it is the intent of the Company that Awards pursuant to the Plan and the exercise
of Options and SARs granted hereunder will qualify for the exemption provided by Rule 16b-3 under
the Exchange Act. To the extent that any provision of the Plan or action by the Board does not
comply with the requirements of Rule 16b-3, it shall be deemed inoperative to the extent permitted
by law and deemed advisable by the Board, and shall not affect the validity of the Plan. In the
event that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to modify this
Plan in any respect necessary to satisfy the requirements of, or to take advantage of any features
of, the revised exemption or its replacement.




			
	16.	 	EFFECT OF CHANGES IN CAPITALIZATION






	 	16.1.	 	Changes in Stock





     If the number of outstanding shares of Stock is increased or decreased or the shares of Stock
are changed into or exchanged for a different number or kind of shares or other securities of the
Company on account of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend or other distribution payable in capital
stock, or other increase or decrease in such shares effected without receipt of consideration by
the Company occurring after the Effective Date, the number and kinds of shares for which grants of
Options and other Awards may be made under the Plan, shall be adjusted proportionately and
accordingly by the Company. In addition, the number and kind of shares for which Awards are
outstanding shall be adjusted proportionately and accordingly so that the proportionate interest of
the Grantee immediately following such event shall, to the extent practicable, be the same as
immediately before such event. Any such adjustment in outstanding Options or SARs shall not change
the aggregate Option Price or SAR Exercise Price payable with respect to shares that are subject to
the unexercised portion of an outstanding Option or SAR, as applicable, but shall include a
corresponding



- 19 -









 







proportionate adjustment in the Option Price or SAR Exercise Price per share. The
conversion of any convertible securities of the Company shall not be treated as an increase in
shares effected without receipt of consideration. Notwithstanding the foregoing, in the event of
any distribution to the Company’s stockholders of securities of any other entity or other assets
(including an extraordinary dividend but excluding a non-extraordinary dividend of the Company)
without receipt of consideration by the Company, the Company shall, in such manner as the Company
deems appropriate, adjust (i) the number and kind of shares subject to outstanding Awards and/or (ii) the exercise price of outstanding Options and Stock Appreciation
Rights to reflect such distribution.




	 	16.2.	 	Reorganization in Which the Company Is the Surviving Entity Which does not
Constitute a Corporate Transaction





     Subject to Section 16.3 hereof, if the Company shall be the surviving entity in any
reorganization, merger, or consolidation of the Company with one or more other entities which does
not constitute a Corporate Transaction, any Option or SAR theretofore granted pursuant to the Plan
shall pertain to and apply to the securities to which a holder of the number of shares of Stock
subject to such Option or SAR would have been entitled immediately following such reorganization,
merger, or consolidation, with a corresponding proportionate adjustment of the Option Price or SAR
Exercise Price per share so that the aggregate Option Price or SAR Exercise Price thereafter shall
be the same as the aggregate Option Price or SAR Exercise Price of the shares remaining subject to
the Option or SAR immediately prior to such reorganization, merger, or consolidation. Subject to
any contrary language in an Award Agreement evidencing an Award, any restrictions applicable to
such Award shall apply as well to any replacement shares received by the Grantee as a result of the
reorganization, merger or consolidation. In the event of a transaction described in this Section
16.2, Stock Units shall be adjusted so as to apply to the securities that a holder of the number of
shares of Stock subject to the Stock Units would have been entitled to receive immediately
following such transaction.




	 	16.3.	 	Corporate Transaction in which Awards are not Assumed





     Upon the occurrence of a Corporate Transaction in which outstanding Options, SARs, Stock Units
and Restricted Stock are not being assumed or continued:



     (i) all outstanding shares of Restricted Stock shall be deemed to have vested, and all Stock
Units shall be deemed to have vested and the shares of Stock subject thereto shall be delivered,
immediately prior to the occurrence of such Corporate Transaction, and



     (ii) either of the following two actions shall be taken:



          (A) fifteen days prior to the scheduled consummation of a Corporate Transaction, all Options
and SARs outstanding hereunder shall become immediately exercisable and shall remain exercisable
for a period of fifteen days, or



          (B) the Board may elect, in its sole discretion, to cancel any outstanding Awards of Options,
Restricted Stock, Stock Units, and/or SARs and pay or



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deliver, or cause to be paid or delivered, to
the holder thereof an amount in cash or securities having a value (as determined by the Board
acting in good faith), in the case of Restricted Stock or Stock Units, equal to the formula or
fixed price per share paid to holders of shares of Stock and, in the case of Options or SARs, equal
to the product of the number of shares of Stock subject to the Option or SAR (the “Award
Shares”) multiplied by the amount, if any, by which (I) the formula or fixed price per share
paid to holders of shares of Stock pursuant to such transaction exceeds (II) the Option Price or
SAR Exercise Price applicable to such Award Shares.



          With respect to the Company’s establishment of an exercise window, (i) any exercise of an
Option or SAR during such fifteen-day period shall be conditioned upon the consummation of the
event and shall be effective only immediately before the consummation of the event, and (ii) upon
consummation of any Corporate Transaction, the Plan and all outstanding but unexercised Options and SARs shall terminate. The Board shall send notice of an
event that will result in such a termination to all individuals who hold Options and SARs not later
than the time at which the Company gives notice thereof to its stockholders.




	 	16.4.	 	Corporation Transaction in which Awards are Assumed





     The Plan, Options, SARs, Stock Units and Restricted Stock theretofore granted shall continue
in the manner and under the terms so provided in the event of any Corporate Transaction to the
extent that provision is made in writing in connection with such Corporate Transaction for the
assumption or continuation of the Options, SARs, Stock Units and Restricted Stock theretofore
granted, or for the substitution for such Options, SARs, Stock Units and Restricted Stock for new
common stock options and stock appreciation rights and new common stock units and restricted stock
relating to the stock of a successor entity, or a parent or subsidiary thereof, with appropriate
adjustments as to the number of shares (disregarding any consideration that is not common stock)
and option and stock appreciation right exercise prices. In
the event a Grantee’s Award is assumed, continued or substituted upon the consummation of any
Corporate Transaction and his employment is terminated without Cause within one year following the
consummation of such Corporate Transaction, the Grantee’s Award will be fully vested and may be
exercised in full, to the extent applicable, beginning on the date of such termination and for the
one-year period immediately following such termination or for such longer period as the Committee
shall determine.




	 	16.5.	 	Adjustments





     Adjustments under this Section 16 related to shares of Stock or securities of the Company
shall be made by the Board, whose determination in that respect shall be final, binding and
conclusive. No fractional shares or other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case
by rounding downward to the nearest whole share. The Board shall determine the effect of a
Corporate Transaction upon Awards other than Options, SARs, Stock Units and Restricted Stock, and
such effect shall be set forth in the appropriate Award Agreement. The Board may provide in the
Award Agreements at the time of grant, or any time thereafter with the consent of the Grantee,



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for
different provisions to apply to an Award in place of those described in Sections 16.1, 16.2, 16.3
and 16.4. This Section 16.5 does not limit the Company’s ability to provide for alternative
treatment of Awards outstanding under the Plan in the event of change of control events that are
not Corporate Transactions.




	 	16.6.	 	No Limitations on Company





     The making of Awards pursuant to the Plan shall not affect or limit in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations, or changes of its
capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or
transfer all or any part of its business or assets.




			
	17.	 	GENERAL PROVISIONS






	 	17.1.	 	Disclaimer of Rights





     No provision in the Plan or in any Award or Award Agreement shall be construed to confer upon
any individual the right to remain in the employ or service of the Company or any Affiliate, or to
interfere in any way with any contractual or other right or authority of the Company either to
increase or decrease the compensation or other payments to any individual at any time, or to terminate any employment or other relationship between any individual
and the Company. In addition, notwithstanding anything contained in the Plan to the contrary,
unless otherwise stated in the applicable Award Agreement, no Award granted under the Plan shall be
affected by any change of duties or position of the Grantee, so long as such Grantee continues to
be a director, officer, consultant or employee of the Company or an Affiliate. The obligation of
the Company to pay any benefits pursuant to this Plan shall be interpreted as a contractual
obligation to pay only those amounts described herein, in the manner and under the conditions
prescribed herein. The Plan shall in no way be interpreted to require the Company to transfer any
amounts to a third party trustee or otherwise hold any amounts in trust or escrow for payment to
any Grantee or beneficiary under the terms of the Plan.




	 	17.2.	 	Nonexclusivity of the Plan





     Neither the adoption of the Plan nor the submission of the Plan to the stockholders of the
Company for approval shall be construed as creating any limitations upon the right and authority of
the Board to adopt such other incentive compensation arrangements (which arrangements may be
applicable either generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options otherwise than under the Plan.




	 	17.3.	 	Withholding Taxes





     No shares of Stock shall be delivered under the Plan to any Grantee until such Grantee has
made arrangements acceptable to the Committee for the satisfaction of any income and employment tax
withholding obligations under Applicable Laws. The Company or any Affiliate shall have the
authority and the right to deduct or withhold, or require a Grantee to remit to the Company, an
amount sufficient to satisfy federal, state,



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local or foreign taxes (including the Grantee’s
payroll tax obligations) required or permitted by law to be withheld with respect to any taxable
event concerning a Grantee arising as a result of this Plan. The Committee may in its discretion
and in satisfaction of the foregoing requirement allow a Grantee to elect to have the Company
withhold shares of Stock otherwise issuable under an Award or allow the return of shares of Stock
having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other
provision of the Plan, the number of shares which may be withheld with respect to the issuance,
vesting, exercise or payment of any Award (or which may be repurchased from the Grantee of such
Award after such shares of Stock were acquired by the Grantee from the Company) in order to satisfy
the Grantee’s federal, state, local and foreign income and payroll tax liabilities with respect to
the issuance, vesting, exercise or payment of the Award shall, unless specifically approved by the
Committee, be limited to the number of shares of Stock which have a Fair Market Value on the date
of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum
statutory withholding rates for federal, state, local and foreign income tax and payroll tax
purposes that are applicable to such supplemental taxable income.




	 	17.4.	 	Captions





     The use of captions in this Plan or any Award Agreement is for the convenience of reference
only and shall not affect the meaning of any provision of the Plan or such Award Agreement.







	 	17.5.	 	Other Provisions





     Each Award granted under the Plan may contain such other terms and conditions not inconsistent
with the Plan as may be determined by the Board, in its sole discretion.




	 	17.6.	 	Number and Gender





     With respect to words used in this Plan, the singular form shall include the plural form, the
masculine gender shall include the feminine gender, etc., as the context requires.




	 	17.7.	 	Severability





     If any provision of the Plan or any Award Agreement shall be determined to be illegal or
unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof
shall be severable and enforceable in accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.




	 	17.8.	 	Governing Law





     The validity and construction of this Plan and the instruments evidencing the Awards hereunder
shall be governed by the laws of the British Virgin Islands, other than any conflicts or choice of
law rule or principle that might otherwise refer construction or interpretation of this Plan and
the instruments evidencing the Awards granted hereunder to the substantive laws of any other
jurisdiction.



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	 	17.9.	 	Code Section 409A





     The Board intends to comply with Code Section 409A, or an exemption to Code Section 409A, with
regard to Awards hereunder that constitute nonqualified deferred compensation within the meaning of
Code Section 409A. To the extent that the Board determines that a Grantee would be subject to the
additional 20% tax imposed on certain nonqualified deferred compensation plans pursuant to Code
Section 409A as a result of any provision of any Award granted under this Plan, such provision
shall be deemed amended to the minimum extent necessary to avoid application of such additional
tax. The nature of any such amendment shall be determined by the Board.



* * *




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     To
record adoption of the Plan by the Board as of September 19, 2008, and approval of the Plan by
the stockholders on September 29, 2008, the Company has caused its authorized officer to execute
the Plan.



DUOYUAN GLOBAL WATER INC.





	 	 	 
	 	By:	/s/ Wenhua Guo
	 	Title:	Chief Executive Officer






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