Document:

Exhibit 10.2

 

ZUOAN FASHION LIMITED

 

2010 EQUITY INCENTIVE PLAN

 

1.               Purpose of the Plan

 

The purpose of the Plan is to aid the Company and its Affiliates in recruiting and retaining key employees, directors or consultants of outstanding ability and to motivate such employees, directors or consultants to exert their best efforts on behalf of the Company and its Affiliates by providing incentives through the granting of Awards.  The Company expects that it will benefit from the added interest which such key employees, directors or consultants will have in the welfare of the Company as a result of their proprietary interest in the Company’s success.

 

2.               Definitions

 

The following capitalized terms used in the Plan have the respective meanings set forth in this Section:

 

(a)                                  Act:  The U.S. Securities Exchange Act of 1934, as amended, or any successor thereto.

 

(b)                                 Affiliate:  With respect to the Company, any entity directly or indirectly controlling, controlled by, or under common control with, the Company.

 

(c)                                  Applicable Laws: All laws, statutes, regulations, ordinances, rules or governmental requirements that are applicable to this Plan or any Award granted pursuant to this Plan, including but not limited to applicable laws of the People’s Republic of China, the United States and the Cayman Islands,  and the rules and requirements of any applicable national securities exchange.

 

(d)                                 Award:  An Option, Award of Restricted Stock, Restricted Stock Units, Share Appreciation Rights or Other Stock-Based Awards granted pursuant to the Plan.

 

(e)                                  Beneficial Owner:  A “beneficial owner”, as such term is defined in Rule 13d-3 under the Act (or any successor rule thereto).

 

(f)                                    Board:  The board of directors of the Company.

 

(g)                                 Cause:  With respect to a Participant, the meaning defined in any employment agreement between the Participant and the Company then in effect or, if no such employment agreement is then in effect, “Cause” shall mean (i) the employee’s willful and continued failure substantially to perform his or her duties to the Company (other than as a result of total or partial incapacity due to physical or mental illness), (ii) dishonesty in the performance of the employee’s duties to the Company, (iii) the employee’s indictment for a felony under the laws of the jurisdiction in which the participant is employed (or, if there is no such concept as 

 

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“indictment” in the applicable jurisdiction, such analogous procedural event following the employee’s arrest and prior to any conviction) or (iv) any other act or omission on the part of the employee which is materially injurious to the financial condition or business reputation of the Company or any of its Affiliates.

 

(h)                                 Change in Control:  The occurrence of any of the following events:

 

(i) an individual, corporation, partnership, group, associate or other entity or “person”, as such term is defined in Section 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), other than the Company, Mr. James Hong, Ms. Siu Fong Or, Fame Brilliant Group Limited or any employee benefit plan(s) sponsored by the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 30% or more of the combined voting power of the Company’s outstanding securities ordinarily having the right to vote at elections of directors;

 

(ii) individuals who constitute the Board of Directors of the Company on the effective date of this Plan (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof; provided that any Approved Director, as hereinafter defined, shall be, for purposes of this subsection (ii), considered as though such person were a member of the Incumbent Board. An “Approved Director”, for purposes of this subsection (ii), shall mean any person becoming a director subsequent to the effective date of this Plan whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee of the Company for director), but shall not include any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, associate or other entity or “person” other than the Board; or

 

(iii) the consummation of a plan or agreement providing (A) for a merger or consolidation of the Company other than with a wholly-owned subsidiary and other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (B) for a sale, exchange or other disposition of all or substantially all of the assets of the Company; or

 

(iv) in addition to the events described in subsections (i), (ii) and (iii), it shall be a “Change in Control” for purposes hereof for any Participant principally employed in the business of a Designated Business Unit, as hereinafter defined, if an event 

 

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described in subsections (i), (ii) or  (iii) shall occur, except that for purposes of this subsection (iv), references in such subsections to the “Company” shall be deemed to refer to the Designated Business Unit in the business of which the Participant is principally employed.  A Change in Control described in this subsection (iv) shall apply only to a Participant employed principally by the affected Designated Business Unit.  For purposes of this subsection (iv), “Designated Business Unit” shall mean specified subsidiaries and any other business unit identified as a Designated Business Unit by the Committee from time to time.

 

(i)                                     Code:  The U.S. Internal Revenue Code of 1986, as amended, or any successor thereto.

 

(j)                                     Committee:  The compensation committee of the Board (or a subcommittee thereof as provided under Section 5), or such other committee of the Board (including, without limitation, the full Board) to which the Board has delegated power to act under or pursuant to the provisions of the Plan. For the avoidance of doubt, the Board shall at all times be authorized to act as the Committee under or pursuant to any provisions of the Plan.

 

(k)                                  Company:  Zuoan Fashion Limited, a company incorporated under the laws of the Cayman Islands.

 

(l)                                     Consultant:  Any individual, including an advisor, who is engaged by the Company or an Affiliate to render services and is compensated for such services, and any director of the Company or an Affiliate whether or not compensated for such services.

 

(m)                               Disability:  The term “Disability” shall have the meaning given to such term in any employment agreement between the Company or any of its Affiliates and the applicable Participant, or if no such employment agreement exists or if “Disability” is not defined therein, then Disability shall have the meaning ascribed to such term under Section 409A(a)(2)(C)(i) of the Code for all purposes, except to the extent necessary for qualification of Options as ISOs, then Disability shall mean the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code.  Without limiting the foregoing and except as otherwise provided in a Participant’s employment agreement, the existence of a Disability shall be determined by the Committee in good faith in accordance with Applicable Law.

 

(n)                                 Effective Date:  The date the Board approves the Plan, or such other date as is designated by the Board.

 

(o)                                 Employment:  The term “Employment” as used herein shall be deemed to refer to (i) a Participant’s employment if the Participant is an employee of the Company or any of its Affiliates, (ii) a Participant’s services as a consultant, if the Participant is consultant to the Company or its Affiliates and (iii) a Participant’s services as an 

 

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non-employee director of the Board or the board of directors (or equivalent governing body) of any Affiliate of the Company.

 

(p)                                 Fair Market Value:  The term “Fair Market Value” with respect to the American Depositary Shares (the “ADSs”) representing the Shares of the Company, shall mean, as of any date, the value of an ADS determined as follows: (i) the closing per ADS price on such date as quoted on the New York Stock Exchange (the “NYSE”) (or such market in which such prices are regularly quoted), or, if no sale of ADSs shall have been quoted on the NYSE (or such other market) on such date, then the immediately preceding date on which sales of the ADSs have been so reported or quoted shall be used, and (ii) if there should not be a public market for the ADSs on such date, then Fair Market Value shall be determined in good faith by the Board of Directors of the Company (or a committee thereof) in a manner consistent with its past practices.  The “Fair Market Value” of a Share shall at all times be the Fair Market Value of an ADS divided by the number of Shares presented by one ADS.   Notwithstanding anything to the contrary herein, the “Fair Market Value” of the Shares shall at all times be determined in a manner intended to be consistent with Section 409A of the Code (and the regulations and guidance promulgated thereunder), as may be amended from time to time, and the same method shall be used by the Company for determining all applicable income tax consequences resulting from the exercise of an Option.

 

(q)                                 ISO:  An Option that is also an incentive stock option granted pursuant to Section 7(d) of the Plan.

 

(r)                                    Officer: The term “Officer” shall mean a person who is an officer of the Company within the meaning of Section 16 of the Act.

 

(s)                                  Option:  A stock option granted pursuant to Section 7 of the Plan.

 

(t)                                    Option Price:  The purchase price per Share of an Option, as determined pursuant to Section 7(a) of the Plan.

 

(u)                                 Other Stock-Based Award:  An award defined in and granted pursuant to Section 10 of the Plan.

 

(v)                                 Participant:  An employee, director or consultant who is selected by the Committee to participate in the Plan.

 

(w)                               Person:  A “person”, as such term is used for purposes of Section 13(d) or 14(d) of the Act (or any successor section thereto).

 

(x)                                   Plan:  This Zuoan Fashion Limited 2010 Equity Incentive Plan.

 

(y)                                 Restricted Stock:  shall mean any Share granted under Section 8 hereof.

 

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(z)                                   Restricted Stock Unit:  shall mean a contractual right granted under Section 8 hereof that is denominated in Shares, each of which represents a right to receive the value of a Share (or a percentage of such value, which percentage may be higher than 100%) upon the terms and conditions set forth in this Plan and the applicable Award Agreement.

 

(aa)                            Shares:  Ordinary shares of the Company, par value US$0.00025 per share.

 

(bb)                          Share Limit: the total number of Shares which may be issued under the Plan.

 

(cc)                            Share Appreciation Right:  A stock appreciation right granted pursuant to Section 9 of the Plan.

 

(dd)                          Subsidiary:  A corporation or other entity of which a majority of the outstanding voting shares or voting power is beneficially owned directly or indirectly by the Company.

 

(ee)                            Substitute Awards:  shall mean Awards granted in assumption of, or in substitution for, outstanding awards previously granted by, or held by the employees of, a company or other entity or business acquired (directly or indirectly) by the Company or with which the Company combines.

 

3.               Shares Subject to the Plan

 

(a)                                  Subject to adjustment as provided in Section 11 below, the maximum aggregate number of Shares that may be issued pursuant to all Awards shall not exceed 3%, on a fully diluted basis, of the issued and outstanding Shares of the Company immediately after the completion of the initial public offering and listing of the Shares on the New York Stock Exchange.

 

(b)                                 If, after the effective date of this Plan, any Shares covered by an Award, or to which such an Award relates, are forfeited, cancelled or if such an Award otherwise terminates without the delivery of Shares or of other consideration, then the Shares covered by such Award, or to which such Award relates, to the extent of any such forfeiture or termination, shall again be, or shall become, available for issuance under this Plan.

 

(c)                                  In the event that any Option or other Award granted hereunder (other than a Substitute Award) is exercised through the delivery of Shares, or in the event that withholding tax liabilities arising from such Option or Award are satisfied by the withholding of Shares by the Company, the number of Shares available for Awards under this Plan shall be increased by the number of Shares so surrendered or withheld.

 

(d)                                 Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares.

 

(e)                                  Shares underlying Substitute Awards shall not reduce the number of Shares remaining available for issuance under this Plan.

 

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4.               Eligibility.

 

(a)                                  Employees, members of the Board and Consultants are eligible to participate in this Plan.  An Employee, member of the Board or Consultant who has been granted an Award may, if he or she is otherwise eligible, be granted additional Awards.

 

(b)                                 An individual who has agreed to accept employment by, or to provide services to, the Company or an Affiliate shall be deemed to be eligible for Awards hereunder as of the date of such agreement.

 

5.               Administration

 

The Plan shall be administered by the Committee, which may delegate its duties and powers in whole or in part to any subcommittee thereof consisting solely of at least two individuals who are intended to qualify as “Non-Employee Directors” within the meaning of Rule 16b-3 under the Act (or any successor rule thereto) and an “independent director” as defined in NYSE Rule 303A.02 (or any successor rule thereto).  The Committee may, in its discretion, grant Substitute Awards.  The Committee is authorized to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make any other determinations that it deems necessary or desirable for the administration of the Plan.  The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent the Committee deems necessary or desirable.  Any decision of the Committee in the interpretation and administration of the Plan, as described herein, shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned (including, but not limited to, Participants and their beneficiaries or successors). The Committee shall have the full power and authority to establish the terms and conditions of any Award consistent with the provisions of the Plan and to waive any such terms and conditions at any time (including, without limitation, accelerating or waiving any vesting conditions).

 

In addition, the Board, in its sole discretion, may delegate to a one or more Officers the authority to do one or both of the following: (A) to the extent permitted under Applicable Law, designate employees who are not Officers to be recipients of Awards, and (B) determine the number of Shares subject to such Awards granted to such employees; provided, however, that the Board resolutions regarding such delegation shall specify the total number of Shares that may be subject to the Awards granted by such Officer and that such Officer may not grant an Award to himself or herself.   Notwithstanding anything to the contrary herein, the Board may not delegate to an Officer the authority to determine the Fair Market Value of Shares subject to an Award.

 

6.               Limitations

 

No Award may be granted under the Plan after the day preceding the tenth anniversary of the Effective Date, but Awards theretofore granted may extend beyond that date.

 

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7.               Terms and Conditions of Options

 

Options granted under the Plan shall be, as determined by the Committee, either non-qualified stock options or ISOs for U.S. federal income tax purposes, as evidenced by the related Award agreements, and shall be subject to the foregoing and the following terms and conditions and to such other terms and conditions, not inconsistent therewith, as the Committee shall determine:

 

(a)                                  Option Price.  The Option Price per Share shall be determined by the Committee, but shall not be less than, (i) with respect to Options granted to individuals subject to taxation in the United States, 100% of the Fair Market Value of a Share, and (ii) with respect to all other Options, 85% of the Fair Market Value of a Share, in each case, on the date an Option is granted (other than Options granted in substitution of previously granted awards, as described in Section 5 hereof).

 

(b)                                 Exercisability.  Options granted under the Plan shall be exercisable at such time and upon such terms and conditions as may be determined by the Committee, but in no event shall an Option be exercisable more than ten years after the date it is granted.

 

(c)                                  Exercise of Options. Except as otherwise provided in the Plan or in an Award agreement, an Option may be exercised for all, or, from time to time, any portion of the Shares for which it is then exercisable. For purposes of this Section 7, the exercise date of an Option shall be the later of the date a notice of exercise is received by the Company and, if applicable, the date payment is received by the Company pursuant to clauses (i), (ii), (iii) or (iv) in the following sentence.  The purchase price for the Shares as to which an Option is exercised shall be paid to the Company in full at the time of exercise at the election of the Participant  (i) in cash or its equivalent (e.g., by check), (ii) to the extent permitted by the Committee, in Shares having a Fair Market Value equal to the aggregate Option Price for the Shares being purchased and satisfying such other requirements as may be imposed by the Committee, (iii) partly in cash and, to the extent permitted by the Committee and subject to the other requirements and conditions set forth above in (ii), partly in Shares, or (iv) if there is a public market for the Shares at such time, through the delivery of irrevocable instructions to a broker to sell Shares obtained upon the exercise of the Option and to deliver promptly to the Company an amount out of the proceeds of such sale equal to the aggregate Option Price for the Shares being purchased.  No Participant shall have any rights to dividends or other rights of a stockholder with respect to Shares subject to an Option until the Participant has given written notice of exercise of the Option, paid in full for such Shares and, if applicable, has satisfied any other conditions imposed by the Committee pursuant to the Plan.

 

(d)                                 ISOs.  The Committee may grant Options under the Plan that are intended to be ISOs.  Such ISOs shall comply with the requirements of Section 422 of the Code (or any successor section thereto).  No ISO may be granted to any Participant who at the time of such grant, owns more than ten percent of the total combined voting power of all classes of stock of the Company or of any Subsidiary, unless (i) the Option Price for such ISO is at least 110% of the Fair Market Value of a Share on 

 

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the date the ISO is granted and (ii) the date on which such ISO terminates, if not previously exercised, is a date not later than the day preceding the fifth anniversary of the date on which the ISO is granted.  Any Participant who disposes of Shares acquired upon the exercise of an ISO either (i) within two years after the date of grant of such ISO or (ii) within one year after the transfer of such Shares to the Participant, shall notify the Company of such disposition and of the amount realized upon such disposition.  All Options granted under the Plan are intended to be nonqualified stock options, unless the applicable Award agreement expressly states that the Option is intended to be an ISO.  If an Option is intended to be an ISO, and if for any reason such Option (or portion thereof) shall not qualify as an ISO, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as a nonqualified stock option granted under the Plan; provided that such Option (or portion thereof) otherwise complies with the Plan’s requirements relating to nonqualified stock options.  In no event shall any member of the Board, the Committee, the Company or any of its Affiliates (or their respective employees, officers or directors) have any liability to any Participant (or any other Person) due to the failure of an Option to qualify for any reason as an ISO.

 

(e)                                  Attestation.  Wherever in this Plan or any agreement evidencing an Award a Participant is permitted to pay the exercise price of an Option or taxes relating to the exercise of an Option by delivering Shares, the Participant may, subject to procedures satisfactory to the Committee, satisfy such delivery requirement by presenting proof of beneficial ownership of such Shares, in which case the Company shall treat the Option as exercised without further payment and shall withhold such number of Shares from the Shares acquired by the exercise of the Option.

 

8.                                       Terms and Conditions of Restricted Stock and Restricted Stock Units.

 

(a)                                  The Committee is hereby authorized to grant Awards of Restricted Stock and of Restricted Stock Units to Participants.

 

(b)                                 Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may impose (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right or property in respect of a Share of Restricted Stock), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate.

 

(c)                                  Any share of Restricted Stock granted under this Plan may be evidenced in such manner as the Committee may deem appropriate including, without limitation, book-entry registration or issuance of a stock certificate or certificates.  In the event any stock certificate is issued in respect of shares of Restricted Stock granted under this Plan, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock.

 

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9.               Terms
and Conditions of Share Appreciation Rights

 

(a)                                  Grants.  The
Committee also may grant (i) a Share Appreciation Right independent of an
Option or (ii) a Share Appreciation Right in connection with an Option, or
a portion thereof.  A Share Appreciation
Right granted pursuant to clause (ii) of the preceding sentence
(A) may be granted at the time the related Option is granted or at any
time prior to the exercise or cancellation of the related Option,
(B) shall cover the same number of Shares covered by an Option (or such
lesser number of Shares as the Committee may determine) and (C) shall be
subject to the same terms and conditions as such Option except for such
additional limitations as are contemplated by this Section 9 (or such
additional limitations as may be included in an Award agreement).

 

(b)                                 Terms.  The
exercise price per Share of a Share Appreciation Right shall be an amount
determined by the Committee but in no event shall such amount be less than the
greater of (i) the Fair Market Value of a Share on the date the Share
Appreciation Right is granted or, in the case of a Share Appreciation Right
granted in conjunction with an Option, or a portion thereof, the Option Price
of the related Option and (ii) the minimum amount permitted by Applicable
Laws.  Each Share Appreciation Right
granted independent of an Option shall entitle a Participant upon exercise to
an amount, payable as provided below, equal to (i) the excess of
(A) the Fair Market Value on the exercise date of one Share over
(B) the exercise price per Share, times (ii) the number of Shares
covered by the Share Appreciation Right. 
Each Share Appreciation Right granted in conjunction with an Option, or
a portion thereof, shall entitle a Participant to surrender to the Company the
unexercised Option, or any portion thereof, and to receive from the Company in
exchange therefore an amount, payable as provided below, equal to (i) the
excess of (A) the Fair Market Value on the exercise date of one Share over
(B) the Option Price per Share, times (ii) the number of Shares
covered by the Option, or portion thereof, which is surrendered.  The date a notice of exercise is received by
the Company shall be the exercise date. 
Payment shall be made in Shares or in cash, or partly in Shares and partly
in cash (any such Shares valued at such Fair Market Value), all as shall be
determined by the Committee.  Share
Appreciation Rights may be exercised from time to time upon actual receipt by
the Company of written notice of exercise stating the number of Shares with
respect to which the Share Appreciation Right is being exercised.  No fractional Shares will be issued in
payment for Share Appreciation Rights, but instead cash will be paid for a
fraction or, if the Committee should so determine, the number of Shares will be
rounded downward to the next whole Share.

 

(c)                                  Limitations.  The
Committee may impose, in its discretion, such conditions upon the
exercisability or transferability of Share Appreciation Rights as it may deem
fit.

 

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10.         Other Stock-Based Awards

 

The
Committee, in its sole discretion, may grant or sell Awards of Shares, Awards
of restricted Shares and Awards that are valued in whole or in part by
reference to, or are otherwise based on the Fair Market Value of, Shares (each,
an “Other Stock-Based Award”).  Such
Other Stock-Based Awards shall be in such form, and dependent on such
conditions, as the Committee shall determine, including, without limitation,
the right to receive, or vest with respect to, one or more Shares (or the
equivalent cash value of such Shares) upon the completion of a specified period
of service, the occurrence of an event and/or the attainment of performance
objectives.  Other Stock-Based Awards may
be granted alone or in addition to any other Awards granted under the
Plan.  Subject to the provisions of the
Plan, the Committee shall determine to whom and when Other Stock-Based Awards
will be made, the number of Shares to be awarded under (or otherwise related
to) such Other Stock-Based Awards; whether such Other Stock-Based Awards shall
be settled in cash, Shares or a combination of cash and Shares; and all other
terms and conditions of such Awards (including, without limitation, the vesting
provisions thereof and provisions ensuring that all Shares so awarded and
issued shall be fully paid and non-assessable).

 

11.         Adjustments Upon Certain Events

 

Notwithstanding
any other provisions in the Plan to the contrary, the following provisions
shall apply to all Awards granted under the Plan:

 

(a)                                  Generally.  In the
event of any change in the outstanding Shares after the Effective Date by
reason of any Share dividend or split, reorganization, recapitalization,
merger, consolidation, spin-off, combination or transaction or exchange of
Shares or other corporate exchange, or any cash dividend or distribution to
shareholders of Shares (other than ordinary cash dividends) or any transaction
similar to the foregoing, the Committee shall, in its sole discretion in good
faith and without liability to any person shall make such substitution or
adjustment, if any, as it deems to be equitable (subject to Section 19),
as to (i) the number or kind of Shares or other securities issued or
reserved for issuance pursuant to the Plan or pursuant to outstanding Awards, (ii) the
Option Price or exercise price of any Option or Share Appreciation Right and/or
(iii) any other affected terms of such Awards; provided, that, for
the avoidance of doubt, in the case of the occurrence of any of event that constitutes
an “equity restructuring” (within the meaning of the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 123
(revised 2004)), the Committee shall make an equitable adjustment to
outstanding Awards to reflect such event.

 

(b)                                 Change in Control. In the event of a Change in Control after
the Effective Date, the Committee may (subject to Section 19), but shall
not be obligated to, (i) accelerate, vest or cause the restrictions to
lapse with respect to all or any portion of an Award, (ii) cancel any
Award for fair value (as determined by the Committee in its sole discretion in
good faith) which, in the case of Options and Share Appreciation Rights, may
equal the excess, if any, of value of the consideration to be paid in the
Change in Control transaction, directly or indirectly, to holders of the same
number of Shares subject to such Options or Share Appreciation Rights (or, if
no consideration is paid in any such transaction, the Fair Market Value of the
Shares 

 

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subject
to such Options or Share Appreciation Rights) over the aggregate Option Price
of such Options or exercise price of such Share Appreciation Rights, (iii) subject
to any limitations or reductions as may be necessary to comply with Sections
424 or 409A of the Code and, in each case, the applicable regulations
thereunder, provide for the issuance of substitute Awards that will preserve
the rights under, and the otherwise applicable terms of, any affected Awards
previously granted hereunder as determined by the Committee in its sole
discretion in good faith, or (iv) provide that for a period of at least 15
days prior to the Change in Control, such Options shall be exercisable as to
all Shares subject thereto (whether or not vested) and that upon the occurrence
of the Change in Control, such Options shall terminate and be of no further
force and effect.

 

12.         No Right to Employment or Awards

 

The
granting of an Award under the Plan shall impose no obligation on the Company
or any Affiliate to continue the Employment of a Participant and shall not
lessen or affect the Company’s or any Affiliate’s right to terminate the
Employment of such Participant.  No
Participant or other Person shall have any claim to be granted any Award, and
there is no obligation for uniformity of treatment of Participants, or holders
or beneficiaries of Awards.  The terms
and conditions of Awards and the Committee’s determinations and interpretations
with respect thereto need not be the same with respect to each Participant
(whether or not such Participants are similarly situated).

 

13.         Successors and Assigns

 

The
Plan shall be binding on all successors and assigns of the Company and each
Participant, including without limitation, the estate of each such Participant
and the executor, administrator or trustee of any such estate, and any receiver
or trustee in bankruptcy or representative of the creditors of any such
Participant.

 

14.         Nontransferability of Awards

 

Unless expressly permitted by the Committee in an
award Agreement or otherwise in writing, 
and, in each case, to the extent permitted by Applicable Law, an Award
shall not be transferable or assignable by the applicable Participant other
than by will or by the laws of descent and distribution.  An Award exercisable after the death of a
Participant may be exercised by the legatees, personal representatives or
distributees of the Participant.

 

15.         Amendments or Termination

 

The
Board may amend, alter or discontinue the Plan, but no amendment, alteration or
discontinuation shall be made, (a) without the approval of the
shareholders of the Company, if such action would (except as is provided in
Section 11 of the Plan) increase the total number of Shares reserved for
the purposes of the Plan or change the maximum number of Shares for which
Awards may be granted to any Participant, in
each case only to the extent such approval is required by the principal
national securities exchange on which the Shares are listed or admitted to
trading,  

 

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or
(b) without the consent of a Participant, if such action would diminish
any of the rights of the Participant under any Award theretofore granted to
such Participant under the Plan; provided,
however, that the Committee may amend the Plan in such manner as it
deems necessary to permit the granting of Awards meeting the requirements of
any Applicable Laws.

 

Without
limiting the generality of the foregoing, to the extent applicable,
notwithstanding anything herein to the contrary, this Plan and Awards issued
hereunder shall be interpreted in accordance with Section 409A of the Code
and Department of Treasury regulations and other interpretative guidance issued
thereunder, including without limitation any such regulations or other guidance
that may be issued after the Effective Date. 
Notwithstanding any provision of the Plan to the contrary, in the event
that the Committee determines that any amounts payable hereunder will be
taxable to a Participant under Section 409A of the Code and related
Department of Treasury guidance prior to payment to such Participant of such
amount, the Company may (a) adopt such amendments to the Plan and Awards
and appropriate policies and procedures, including amendments and policies with
retroactive effect, that the Committee determines necessary or appropriate to
preserve the intended tax treatment of the benefits provided by the Plan and
Awards hereunder and/or (b) take such other actions as the Committee
determines necessary or appropriate to comply with the requirements of Section 409A
of the Code.

 

16.         Multiple Jurisdictions

 

In
order to assure the viability of Awards granted to Participants employed in
various jurisdictions, the Committee may, in its sole discretion, 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, 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 limitation contained in Section 3
hereof.  Notwithstanding the foregoing,
the Committee may not take any actions hereunder, and no Awards shall be
granted that would violate any Applicable Laws.

 

17.         Distribution of Shares

 

The
obligation of the Company to make payments in Shares pursuant to an Award shall
be subject to all Applicable Laws and to any such approvals by government
agencies as may be required. 
Additionally, in the discretion of the Committee, American depositary
shares, or ADSs, may be distributed in lieu of Shares in settlement of any
Award, provided that the ADSs shall be of equal value to the Shares that would
have otherwise been distributed.  If the
number of Shares represented by an ADS is other than on a one-to-one basis, the
limitations contained in Section 3 shall be adjusted to reflect the
distribution of ADSs in lieu of Shares.

 

18.         Taxes

 

No
Shares shall be delivered under the Plan to any Participant until such
Participant has made arrangements acceptable to the Committee for the
satisfaction of any income and 

 

12

 

employment
tax withholding obligations under any Applicable Laws, in particular, the tax
laws, rules, regulations and government orders of the People’s Republic of
China or the U.S. federal, state or other local tax laws, as applicable.  The Company and each of its Subsidiaries
shall have the authority and the right to deduct or withhold, or require a
Participant to remit to the Company, an amount sufficient to satisfy federal,
state, local and foreign taxes (including the Participant’s payroll tax
obligations, if any) required to be withheld under any Applicable Laws with
respect to any Award issued to the Participant hereunder.  The Committee may in its discretion and in
satisfaction of the foregoing requirement allow a Participant to elect to have
the Company withhold Shares otherwise issuable under an Award (or allow the
return of Shares) 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 Participant of such Award after such Shares were acquired
by the Participant from the Company) in order to satisfy the Participant’s
federal, state, local and other 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
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 other income tax any payroll
tax purposes that are applicable to such taxable income.

 

19.         Section 409A

 

Notwithstanding
other provisions of this Plan or any Award agreements hereunder, no Award shall
be granted, deferred, accelerated, extended, paid out or modified under this
Plan in a manner that would result in the imposition of an additional tax under
Section 409A of the Code upon a Participant.  In the event that it is reasonably determined
by the Committee that, as a result of Section 409A of the Code, payments
in respect of any Award under the Plan may not be made at the time contemplated
by the terms of the Plan or the relevant Award agreement, as the case may be,
without causing the Participant holding such Award to be subject to taxation
under Section 409A of the Code, the Company will make such payment on the
first day that would not result in the Participant incurring any tax liability
under Section 409A of the Code.  The Company shall use commercially reasonable
efforts to implement the provisions of this Section 19 in good faith; provided
that neither the Company, the Committee nor any of the Company’s employees,
directors or representatives shall have any liability to any Participant with
respect to this Section 19.

 

20.         Choice of Law

 

The
Plan shall be governed by and construed in accordance with the laws of the
Cayman Islands.

 

21.         Effectiveness of the Plan

 

The
Plan shall be effective as of the Effective Date and shall terminate on the day
prior to the tenth anniversary of the Effective Date, subject to earlier
termination by the Board pursuant to Section 15 hereof.

 

13Exhibit 10.3

 

FORM OF INDEMNIFICATION AGREEMENT

 

ZUOAN FASHION LIMITED

 

This Indemnification Agreement (this “Agreement”), made and entered into as of the          day of             , 20        , by and between Zuoan Fashion Limited, an exempted company incorporated under the laws of the Cayman Islands (the “Company”), and                    (“Indemnitee”).

 

W I T N E S S E T H:

 

WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors or officers unless they are provided with adequate protection through insurance or adequate indemnification against risks of claims and actions against them arising out of their service to and activities on behalf of the corporation.

 

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities.

 

WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons.

 

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future.

 

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified.

 

WHEREAS, this Agreement is a supplement to and in furtherance of the Amended and Restated Memorandum and Articles of Association (the “Memorandum and Articles”) of the Company and any resolutions adopted pursuant thereto and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

 

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WHEREAS, Indemnitee does not regard the protection available under the Memorandum and Articles and insurance of the Company as adequate in the present circumstances, and may not be willing to serve as an officer or director of the Company without adequate protection, and the Company desires Indemnitee to serve in such capacity.  Indemnitee is willing to serve, continue to serve and take on additional service for or on behalf of the Company on the condition that he be so indemnified.

 

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

 

ARTICLE 1

CERTAIN DEFINITIONS

 

(a) As used in this Agreement:

 

“Change of Control” means any one of the following circumstances occurring after the date hereof: (i) there shall have occurred an event required to be reported with respect to the Company in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item or any similar schedule or form) under the Exchange Act, regardless of whether the Company is then subject to such reporting requirement; (ii) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) shall have become, without prior approval of the Company’s Board by approval of at least two-thirds of the Continuing Directors, the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding voting securities (provided that, for purposes of this clause (ii), the term “person” shall exclude (x) the Company, (y) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (z) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company); (iii) there occurs a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 51% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity; (iv) all or substantially all the assets of the Company are sold or disposed of in a transaction or series of related transactions; (v) the approval by the stockholders of the Company of a complete liquidation of the Company; or (vi) the Continuing Directors cease for any reason to constitute at least a majority of the members of the Board.

 

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“Continuing Director” means (i) each director on the Board on the date hereof or (ii) any new director whose election or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors on the date hereof or whose election or nomination was so approved.

 

“Corporate Status” means the status of a person who is or was a director, officer, trustee, general partner, managing member, fiduciary, board of directors’ committee member, employee or agent of the Company or of any other Enterprise.

 

“Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

 

“Enterprise” means the Company and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, board of directors’ committee member, employee or agent.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Expenses” means all direct and indirect costs (including attorneys’ fees, retainers, court costs, transcripts, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses) reasonably incurred in connection with (i) prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding or (ii) establishing or enforcing a right to indemnification under this Agreement, the Memorandum and Articles, applicable law or otherwise. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding, including the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent.  For the avoidance of doubt, Expenses, however, shall not include any Liabilities.

 

“Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporate law and neither currently is, nor in the five years previous to its selection or appointment has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement or of other indemnitees under similar indemnification agreements) or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.

 

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Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

 

“Liabilities” means any losses or liabilities, including any judgments, fines, ERISA excise taxes and penalties, penalties and amounts paid in settlement, arising out of or in connection with any Proceeding (including all interest, assessments and other charges paid or payable in connection with or in respect of any such judgments, fines, ERISA excise taxes and penalties, penalties or amounts paid in settlement).

 

“Proceeding” means any threatened, pending or completed action, derivative action, suit, claim, counterclaim, cross claim, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether civil (including intentional and unintentional tort claims), criminal, administrative or investigative, including any appeal therefrom, and whether instituted by or on behalf of the Company or any other party, or any inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit or other proceeding hereinabove listed in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of any Corporate Status of Indemnitee, or by reason of any action taken (or failure to act) by him or her or of any action (or failure to act) on his or her part while serving in any Corporate Status.

 

(b)        For the purposes of this Agreement:

 

References to “Company” shall include, in addition to the resulting or surviving corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that if Indemnitee is or was a director, officer, employee, or agent of such constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise, then Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

 

Reference to “other enterprise” shall include employee benefit plans; references to “fines” shall include any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries;

 

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and a person who acted in good faith and in a manner he reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

 

Reference to “including” shall mean “including, without limitation,” regardless of whether the words “without limitation” actually appear, references to the words “herein,” “hereof” and “hereunder” and other words of similar import shall refer to this Agreement as a whole and not to any particular paragraph, subparagraph, section, subsection or other subdivision.

 

ARTICLE 2

SERVICES BY INDEMNITEE

 

Section 2.01.  Services By Indemnitee.  Indemnitee hereby agrees to serve as [a director of the Company, for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders his or her resignation or is removed] [an officer of the Company until such time as Indemnitee’s employment is terminated for any reason].

 

ARTICLE 3

INDEMNIFICATION

 

Section 3.01.  General. (a) The Company hereby agrees to and shall indemnify Indemnitee and hold Indemnitee harmless from and against any and all Expenses and Liabilities, in either case, actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf by reason of Indemnitee’s Corporate Status, to the fullest extent permitted by applicable law.  The Company’s indemnification obligations set forth in this Section 3.01 shall apply (i) in respect of Indemnitee’s past, present and future service in any Corporate Status and (ii) regardless of whether Indemnitee is serving in any Corporate Status at the time any such Expense or Liability is incurred.

 

For purposes of this Agreement, the meaning of the phrase “to the fullest extent permitted by applicable law” shall include, but not be limited to:

 

(i)    to the fullest extent permitted by any provision of the Companies Law (2010 Revision) of the Cayman Islands (the “Companies Law”), or the corresponding provision of any successor statute, and

 

(ii)   to the fullest extent authorized or permitted by any amendments to or replacements of the Companies Law adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.

 

5

 

(b) Witness Expenses.  Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his or her Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on his or her behalf in connection therewith.

 

(c) Expenses as a Party Where Wholly or Partly Successful.  Notwithstanding any other provisions of this Agreement, to the fullest extent permitted by applicable law, to the extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or her in connection therewith.  If Indemnitee is not wholly successful in such Proceeding, but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall, to the fullest extent permitted by applicable law, indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on his or her behalf in connection with each successfully resolved claim, issue or matter.  For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

Section 3.02. Exclusions.  Notwithstanding any provision of this Agreement and unless Indemnitee ultimately is successful on the merits with respect to any such claim, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:

 

(a)        for (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law, regardless of whether the securities are subject to the requirements of such provision; or (ii) any reimbursement of the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act); or

 

(b)        except as otherwise provided in Sections 6.01(e), prior to a Change of Control, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part

 

6

 

of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

 

ARTICLE 4

ADVANCEMENT OF EXPENSES; DEFENSE OF CLAIMS

 

Section 4.01.  Advances. Notwithstanding any provision of this Agreement to the contrary, the Company shall advance any Expenses actually and reasonably incurred by Indemnitee in connection with any Proceeding within twenty (20) days after the receipt by the Company of each statement requesting such advance from time to time, whether prior to or after final disposition of any Proceeding.  Advances shall be unsecured and interest free.  Advances shall be made without regard to Indemnitee’s ability to repay such amounts and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement.  Advances shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed.

 

Section 4.02.  Repayment of Advances or Other Expenses.  Indemnitee agrees that Indemnitee shall reimburse the Company for all Expenses advanced by the Company pursuant to Section 4.01, in the event and only to the extent that it shall be determined by final judgment or other final adjudication under the provisions of any applicable law (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee is not entitled to be indemnified by the Company for such Expenses.

 

Section 4.03.  Defense of Claims.  The Company will be entitled to participate in the Proceeding at its own expense.  Upon the delivery of written notice by the Company to Indemnitee, the Company shall be entitled to assume the defense of any Proceeding with counsel consented to by Indemnitee (such consent not to be unreasonably withheld), except for such Proceeding brought by the Company or as to which the Indemnitee has reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee.  After delivery of such notice, consent to such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees or expenses of counsel subsequently incurred by Indemnitee with respect to such Proceeding; provided that (i) Indemnitee shall have the right to employ separate counsel in respect of any Proceeding at Indemnitee’s expense and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized in writing by the Company or (B) Indemnitee shall have reasonably concluded upon the advice of counsel that there is a conflict of interest between the Company and Indemnitee in the conduct of the defense of 

 

7

 

such Proceeding, then in each such case the fees and expenses of Indemnitee’s counsel shall be at the Company’s expense. The Company shall not settle any action, claim or Proceeding (in whole or in part) which would impose any Expense, judgment, fine, penalty or limitation on Indemnitee without Indemnitee’s prior written consent, such consent not to be unreasonably withheld. Indemnitee shall not settle any action, claim or Proceeding (in whole or in part) which may impose any Expense, judgment, fine, penalty or limitation on the Company without the Company’s prior written consent, such consent not to be unreasonably withheld.

 

ARTICLE 5

PROCEDURES FOR NOTIFICATION OF AND DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION

 

Section 5.01.  Notification; Request For Indemnification.  (a) As soon as reasonably practicable after receipt by Indemnitee of written notice that he is a party to or a participant (as a witness or otherwise) in any Proceeding or of any other matter in respect of which Indemnitee intends to seek indemnification or advancement of Expenses hereunder, Indemnitee shall provide to the Company written notice thereof, including the nature of and the facts underlying the Proceeding. The omission by Indemnitee to so notify the Company will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise.

 

(b)        To obtain indemnification under this Agreement, Indemnitee shall deliver to the Company a written request for indemnification, including therewith such information as is reasonably available to Indemnitee and reasonably necessary to determine Indemnitee’s entitlement to indemnification hereunder.  Such request(s) may be delivered from time to time and at such time(s) as Indemnitee deems appropriate in his or her sole discretion. Indemnitee’s entitlement to indemnification shall be determined according to Section 5.02 of this Agreement and applicable law.

 

Section 5.02.  Determination of Entitlement.  (a) Where there has been a written request by Indemnitee for indemnification pursuant to Section 5.01(b), then as soon as is reasonably practicable (but in any event not later than 60 days) after final disposition of the relevant Proceeding, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case: (i) if a Change of Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (ii) if a Change of Control shall have occurred, by Independent Counsel in a written opinion to the Board, a copy of

 

8

 

which shall be delivered to Indemnitee.  If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination.  Indemnitee shall reasonably cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys’ fees and disbursements) actually and reasonably incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification).

 

(b)        If entitlement to indemnification is to be determined by Independent Counsel pursuant to Section 5.02(a)(ii), such Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected.  If entitlement to indemnification is to be determined by Independent Counsel pursuant to Section 5.02(a)(i)(C) (or if Indemnitee requests that such selection be made by the Board), such Independent Counsel shall be selected by the Company in which case the Company shall give written notice to Indemnitee advising him or her of the identity of the Independent Counsel so selected.  In either event, Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been received, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 1 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion.  Absent a proper and timely objection, the person so selected shall act as Independent Counsel.  If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court of competent jurisdiction has determined that such objection is without merit.  If, within 20 days after the later of submission by Indemnitee of a written request for indemnification pursuant to Section 5.01(b) hereof and the final disposition of the Proceeding, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 5.02(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 6.01(a) of this Agreement, the Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

 

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(c)        The Company agrees to pay the reasonable fees and expenses of any Independent Counsel serving under this Agreement.

 

Section 5.03.  Presumptions and Burdens of Proof; Effect of Certain Proceedings.  (a) In making any determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 5.01(b) of this Agreement, and the Company shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.  Neither the failure of any person, persons or entity to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by any person, persons or entity that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

 

(b)        If the person, persons or entity empowered or selected under Section 5.02 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within the sixty (60) day period referred to in Section 5.02(a), the requisite determination of entitlement to indemnification shall, to the fullest extent not prohibited by law, be deemed to have been made and Indemnitee shall be entitled to such indemnification , absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto.

 

(c)        The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful.

 

(d)        For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is in good faith reliance on the records or books of account of any Enterprise, including financial 

 

10

 

statements, or on information supplied to Indemnitee by the officers of such Enterprise in the course of their duties, or on the advice of legal counsel for such Enterprise or on information or records given or reports made to such Enterprise by an independent certified public accountant or by an appraiser or other expert selected by such Enterprise.  The provisions of this Section 5.03(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed or found to have met the applicable standard of conduct set forth in this Agreement.

 

(e)        The knowledge and/or actions, or failure to act, of any other director, trustee, partner, managing member, fiduciary, officer, agent or employee of any Enterprise shall not be imputed to Indemnitee for purposes of determining any right to indemnification under this Agreement.

 

ARTICLE 6

REMEDIES OF INDEMNITEE

 

Section 6.01. Adjudication or Arbitration.  (a) In the event of any dispute between Indemnitee and the Company hereunder as to entitlement to indemnification or advancement of Expenses (including where (i) a determination is made pursuant to Section 5.02 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 4.01 of this Agreement, (iii) payment of indemnification pursuant to Section 3.01 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, (iv) no determination as to entitlement to indemnification is timely made pursuant to Section 5.02 of this Agreement and no payment of indemnification is made within ten (10) days after entitlement is deemed to have been determined pursuant to Section 5.03(b)) or (v) a contribution payment is not made in a timely manner pursuant to Section 8.04 of this Agreement, then Indemnitee shall be entitled to an adjudication by a court of his or her entitlement to such indemnification, contribution or advancement. Alternatively, in such case, Indemnitee, at his or her option, may seek an award in arbitration to be conducted by the China International Economic and Trade Arbitration Commission or the Hong Kong International Arbitration Centre.  The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

 

(b)        In the event that a determination shall have been made pursuant to Section 5.02(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 6.01 shall be conducted in all respects as a de novo trial, or arbitration, on the merits, and Indemnitee shall not be prejudiced by reason of that adverse determination.  In any judicial proceeding or arbitration commenced pursuant to this Section 6.01 the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be, and the Company may not refer to or introduce into evidence any 

 

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determination pursuant to Section 5.02(a) of this Agreement adverse to Indemnitee for any purpose.  If Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 6.01, Indemnitee shall not be required to reimburse the Company for any advances pursuant to Section 4.02 until a final determination is made with respect to Indemnitee’s entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed).

 

(c)        If a determination shall have been made pursuant to Section 5.02(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 6.01, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

 

(d)        The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 6.01 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.

 

(e)           The Company shall indemnify Indemnitee to the fullest extent permitted by law against all Expenses and, if requested by Indemnitee, shall (within ten (10) days after the Company’s receipt of such written request) advance such Expenses to Indemnitee, which are reasonably incurred by Indemnitee in connection with any judicial proceeding or arbitration brought by Indemnitee for (i) indemnification or advances of Expenses by the Company (or otherwise for the enforcement, interpretation or defense of his or her rights) under this Agreement or any other agreement, including any other indemnification, contribution or advancement agreement, or any provision of the Company’s Memorandum and Articles of Association now or hereafter in effect or (ii) recovery or advances under any directors’ and officers’ liability insurance policy maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, contribution, advancement or insurance recovery, as the case may be.

 

ARTICLE 7

DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE

 

Section 7.01.  D&O Liability Insurance.  To the extent that the Company maintains a policy or policies of insurance (“D&O Liability Insurance”) providing liability insurance for directors and officers of the Company in their capacities as such (and for any capacity in which any director or officer of the Company serves any other Enterprise at the request of the Company), in respect of acts or omissions occurring while serving in such capacity, Indemnitee shall be 

 

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covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any other director or officer under such policy or policies.

 

Section 7.02.  Evidence of Coverage.  Upon request by Indemnitee, the Company shall provide copies of all policies of D&O Liability Insurance obtained and maintained in accordance with Section 7.01 of this Agreement.  The Company shall promptly notify Indemnitee of any changes in such insurance coverage.

 

ARTICLE 8

MISCELLANEOUS

 

Section 8.01.  Nonexclusivity of Rights.  The rights of indemnification, contribution and advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled to under applicable law, the Company’s Memorandum and Articles, any agreement, a vote of stockholders or a resolution of directors, or otherwise.  No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

 

Section 8.02.  Insurance and Subrogation.  (a) If, at the time the Company receives notice of a claim hereunder, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies.  The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.  The failure or refusal of any such insurer to pay any such amount shall not affect or impair the obligations of the Company under this Agreement.

 

(b)        In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

 

(c)        The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which advancement is provided) hereunder if and to the extent that Indemnitee has actually received such payment under any insurance policy or other indemnity provision.

 

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Section 8.03 The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, fiduciary, board of directors’ committee member, employee or agent of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such Enterprise.

 

Section 8.04.  Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving rise to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

 

Section 8.05.  Amendment. This Agreement may not be modified or amended except by a written instrument executed by or on behalf of each of the parties hereto.  No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit, restrict or reduce any right of Indemnitee under this Agreement in respect of any act or omission, or any event occurring, prior to such amendment, alteration or repeal.  To the extent that a change in applicable law, whether by statute or judicial decision, permits greater indemnification, contribution or advancement of Expenses than would be afforded currently under the Company’s Memorandum and Articles and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.

 

Section 8.06.  Waivers. The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) by the party entitled to enforce such term only by a writing signed by the party against which such waiver is to be asserted. Unless otherwise expressly provided herein, no delay on the part of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party hereto of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.

 

Section 8.07.  Entire Agreement.  This Agreement and the documents referred to herein constitute the entire agreement between the parties hereto with respect to the matters covered hereby, and any other prior or contemporaneous

 

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oral or written understandings or agreements with respect to the matters covered hereby are superseded by this Agreement, provided that this Agreement is a supplement to and in furtherance of the Memorandum and Articles and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

 

Section 8.08.  Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever:  (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

 

Section 8.09.  Notices. All notices, requests, demands and other communications under this Agreement shall be in writing (which may be by facsimile transmission).  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a business day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding business day in the place of receipt.  The address for notice to a party is as shown on the signature page of this Agreement, or such other address as any party shall have given by written notice to the other party as provided above.

 

Section 8.10.  Binding Effect.  (a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director or officer of the Company.

 

(b)        This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and executors, administrators, personal and legal representatives.  The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all, or a substantial part of the business or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to 

 

15

 

perform this Agreement in the manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

(c)        The indemnification, contribution and advancement of Expenses provided by, or granted pursuant to this Agreement shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors, administrators, legatees and assigns of such a person.

 

Section 8.11.  Governing Law.  This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without regard to its conflict of laws rules.

 

Section 8.12.  Consent To Jurisdiction.  Except with respect to any arbitration commenced by Indemnitee pursuant to Section 6.01(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in any state or United States federal court located in the Borough of Manhattan, the City of New York, New York (each a “New York Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the New York Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue of any such action or proceeding in the New York Court, and (iv) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the New York Court has been brought in an improper or inconvenient forum.

 

Section 8.13.  Headings. The Article and Section headings in this Agreement are for convenience of reference only, and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof.

 

Section 8.14.  Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement.  Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

 

Section 8.15.  Use of Certain Terms.  As used in this Agreement, the words “herein,” “hereof,” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular paragraph, subparagraph, section, subsection, or other subdivision. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

 

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be effective as of the date first above written.

 

 

	
 
  	
ZUOAN FASHION LIMITED
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
By:
  	
 
  
	
 
  	
 
  	
Name:
  
	
 
  	
 
  	
Title:
  
	
 
  	
 
  	
 
  
	
 
  	
Address:
  
	
 
  	
Facsimile:
  
	
 
  	
Attention:
  
	
 
  	
 
  
	
 
  	
With a copy to:
  
	
 
  	
 
  
	
 
  	
Address:
  
	
 
  	
Facsimile:
  
	
 
  	
Attention:
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
INDEMNITEE
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
Address:
  
	
 
  	
Facsimile:
  
	
 
  	
 
  
	
 
  	
With a copy to:
  
	
 
  	
 
  
	
 
  	
Address:
  
	
 
  	
Facsimile:
  
	
 
  	
Attention:
  

 

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