Document:

Exhibit 10.1

Exhibit 10.1

THIS AGREEMENT is made the 26th day of July, Two Thousand and Ten

BETWEEN

	1.	 	CHU WAI WA VIVIAN (Holder of Hong Kong Identity Card No. [_______] of 20th Floor, Block
44, Baguio Villa, 550 Victoria Road, Hong Kong (hereinafter called “Vivian Chu”) of the first
part;

	2.	 	OFFICEWAY TECHNOLOGY LIMITED, a company incorporated in the British Virgin Islands under the
International Business Companies Act on 8th December 1999 with Company Number 356202
(hereinafter called “Officeway”) of the second part;
(AND Vivian Chu and Officeway are hereinafter collectively called the “Vendors” and as far as the
context shall permit the term “Vendors” shall mean any or all of them); and

	3.	 	ZHU Guangming (holder of the People’s Republic of China passport No. [_______] of Room
1110A, No. 5 Building, 3161 Binghe Road, Shenzhen, China (hereinafter called “Purchaser”) of
the third part.

WHEREAS :-

	(1)	 	CHINAWE ASSET MANAGEMENT LIMITED whose registered office is situate at Room 8, 12th Floor,
Block A, Fuk Keung Industrial Building, 66-68 Tong Mi Road, Kowloon, Hong Kong (hereinafter
called the “Company”) is a private company limited by shares incorporated in Hong Kong under
the provisions of the Companies Ordinance by registration No. 611817 and has an authorised
share capital of HK$2,075,800 divided into 2,075,800 ordinary shares of HK$1.00 each and have
been issued and are fully paid up. The present shareholders and their shareholding are more
particularly described in the Schedule I hereto.

	(2)	 	Vivian Chu, Wai Man Ying Ken and Wai Man Keung are the present directors of the Company.

	(3)	 	The Vendors are desirous of selling and the Purchaser is desirous of purchasing all the
Vendors’ shareholding in the Company for the consideration and upon and subject to the terms
and conditions hereinafter contained.

	 
	 	 	NOW IT IS HEREBY AGREED as follows:-

	1.	 	INTERPRETATION

	1.01	 	The Schedules form part of this agreement and shall have the same force and effect as if
expressly set out in the body of this agreement and any reference to this agreement shall
include the Schedules.

 

 

 

	1.02	 	In this agreement the following expressions shall have the following respective meanings:-

	 	 	 
	          “Balance Sheet Date”

	 	31st December, 2008
	 	 	 
	          “Board of Directors”

	 	the board of directors for the time
being of the Company or the directors present at a meeting of directors at which a quorum
is present, including any duly constituted committee of the board of directors;
	 	 	 
	          “Companies Ordinance”

	 	the Companies Ordinance (Cap.32, as
amended, of the laws of Hong Kong);
	 	 	 
	          “Completion”

	 	completion of the sale and purchase as provided in Clause 6;
	 	 	 
	          “Completion Accounts”

	 	draft management accounts of the
Company prepared by the Company before Completion in accordance with generally accepted
accountancy principles and practice in Hong Kong Special Administrative Region from
31st December, 2008 up to the Completion Date;
	 	 	 
	          “Completion Date”

	 	the 26th July, 2010 or such other date as may be
agreed amongst all the parties hereto in writing;
	 	 	 
	          “Conditions”

	 	the conditions set out in Clause 4;
	 	 	 
	          “Financial Report”

	 	the report including a balance sheet showing the
financial status of the Company as at Balance Sheet Date prepared by Mazars CPA Limited
	 	 	 
	          “HK$”

	 	Hong Kong dollars, the lawful currency of Hong Kong Special
Administrative Region;
	 	 	 
	          “Shares”

	 	ordinary share(s) of HK$1.00 each in the capital of the Company
more particularly described in Schedule II;
	 	 	 
	          “US$”

	 	United States dollars, the lawful currency of the United States of
America.

	1.03	 	Unless the context otherwise requires, in this agreement:-

	 	(a)	 	words and expressions defined in the Companies Ordinance shall have the same respective
meanings;

	 	(b)	 	references to Clauses, Recitals or Schedules are references to the Clauses of or Recitals
or Schedules to this agreement, each reference to a sub-clause is a reference to the relevant
sub-clause of the clause in which the reference appears and each reference to a paragraph is a
reference to the relevant paragraph of the sub-clause in which the reference appears; and

	 	(c)	 	words importing one gender shall include every gender, words importing the singular shall
include the plural and vice versa and reference to persons shall include bodies corporate and
unincorporate.

	1.04	 	Headings in this agreement are for convenience only and shall not affect the construction of
this agreement.

 

 

 

	2.	 	SALE OF SHARES

	2.01	 	Subject to the terms of this agreement, each of the Vendors shall as beneficial owner sell
and the Purchaser shall purchase free from all liens, charges and incumbrances and together
with all rights now or hereinafter attaching thereto their respective shareholding in the
Company, which are set out opposite to each of the Vendors’ names in Schedule II hereto.

	2.02	 	Each of the Vendors and the Purchaser shall waive any pre-emption rights if they may have in
relation to any of the Shares under the Articles of Association of the Company or otherwise.

	3.	 	PURCHASE CONSIDERATION

	3.01	 	Subject to the terms and conditions of this agreement, the price payable for the Shares is
US$1.00 and the proportion thereof payable to each of the Vendors is the same as the
proportion of shares sold by each of the Vendors.

	3.02	 	Subject as provided in this agreement, the price for the purchase of the Shares shall be paid
or satisfied on completion.

	4.	 	CONDITIONS

	4.01	 	Completion of the sale and purchase of the Shares shall be conditional on all the Vendors
shall sell and transfer the Shares to the Purchaser or his nominee(s) on Completion in
accordance with the terms of this agreement.

	4.02	 	The Purchaser shall have the option to waive the conditions in Clause 4.01.

	4.03	 	If the Condition specified in Clause 4.01 has not been or is not fulfilled and the condition
is not waived by the Purchaser, this agreement shall automatically terminate with immediate
effect but without prejudice to the demand rights proceedings and claims of the Purchaser
including but not by way of limitation specific performance against any of the Vendors who are
in default or breach of the terms of this agreement.

	5.	 	PRE-COMPLETION UNDERTAKINGS

	5.01	 	The Vendors undertake that they shall procure that before the Completion Date, except with
the prior written consent of the Purchaser or otherwise as contemplated under this agreement,
the Company shall:-

	 	(a)	 	not issue, or agree to issue, any share or loan capital or grant, or agree to
grant, any option over or right to acquire or to subscribe for any share or loan
capital;

	 	(b)	 	not enter into any transaction, agreement or contract, trade or carry on
business, acquire or dispose of any interest in any asset or create or undertake any
capital commitment or expenditure or actual or contingent liability whatsoever;

 

 

 

	 	(c)	 	not create or permit to arise any mortgage, charge (fixed or floating), lien,
pledge, other form of security or encumbrance or equity of whatsoever nature, whether
similar to the foregoing or not, nor in respect of any part of its undertaking,
property or assets other than liens arising by operation of law in amounts which are
not material;

	 	(d)	 	not borrow any money;

	 	(e)	 	continue to comply with and duly perform and discharge its duties and
obligations (including payment obligations) under all agreements and contracts entered
into by it and discharge all liabilities in relation thereto which accrue due for the
period prior to Completion;

	 	(f)	 	not amend its Memorandum and/or Articles of Association;

	 	(g)	 	not hire any employee, enter into any service agreements with directors or
officers;

	 	(h)	 	not establish any pension, retirement scheme, share option scheme, profit
sharing or bonus scheme or any other benefit scheme;

	 	(i)	 	not carry on any business other than its existing business;

	 	(j)	 	not enter into any partnership or joint venture arrangement;

	 	(k)	 	not establish or open or close any branch of office; and

	 	(l)	 	not dispose of the ownership, possession, custody or control of any corporate
or other books or records which are required to be delivered to the Purchaser under
this agreement or are required under any law; regulation or rule to be kept by the
Company.

	5.02	 	Immediately after the signing of this agreement, the Purchaser and any persons authorized by
him (including without limitation any prospective financing party and the employees, officers
and professional advisers of the Purchaser or any prospective financing party) shall by prior
appointment be given reasonable access to the books, minutes, records, documents, title deeds
and such other information of the Company and upon the prior written consent of the Vendors
(such consent not to be unreasonably withheld) permitted to take copies thereof before
Completion.

	6.	 	COMPLETION

	6.01	 	Completion of the sale and purchase of the Shares shall take place at or before 3:00 p.m. on Completion Date.

 

 

 

	6.02	 	On Completion the Vendors shall deliver or cause to be delivered to the Purchaser:-

	 	(a)	 	duly executed transfers and sold notes in respect of the Shares in favour of
the Purchaser or his nominee(s) accompanied by the relevant share certificates for the
Shares;

	 	(b)	 	written resolutions of the Board of Directors of the Company approving the
registration of the transfer of the Shares to the Purchaser upon presentation of the
executed and duly stamped transfer;

	 	(c)	 	the Common Seal, Certificate of Incorporation, Business Registration
Certificate, company chop and minutes book, all financial and accounting books, all tax
return and assessments, all contracts, documents, copies of the Memorandum and Articles
of Association of the Company and papers of the Company, which are in the possession or
control of the Vendors or any of them;

	 	(d)	 	written resignations of all the directors of the Company except the Purchaser
with effect from the Completion Date with acknowledgments signed by each of them to the
effect that he has no claim against the Company for compensation for loss of office or
otherwise; and

	 	(e)	 	such other reasonable documents as may be required by the Purchaser to vest the
legal and beneficial ownership of the Shares in the Purchaser or his nominees.

	7.	 	WARRANTIES AND COVENANTS

	7.01	 	Save and except those matters that have been disclosed to the Purchaser in writing
hereinbefore or those matters authorized by the Purchaser, the Vendors and each of them hereby
represent warrant and undertake to the Purchaser as follows :-

	 	(a)	 	That at the date hereof the authorised and issued share capital of the Company
is as recited above; that no loan capital has been issued by the Company and remains
outstanding; that no share or loan capital of the Company is under option; and that
before Completion of the sale and purchase of the Shares no share or loan capital will
be created or issued and no options will be granted by the Company which could result
in the issue of any share or loan capital save and except those expressly provided
herein;

	 	(b)	 	That the Financial Report of the Company as at Balance Sheet Date a copy of
which has been supplied to the Purchaser gives a true and accurate statement of the
financial position of the Company as at the date thereof; that save as mentioned herein
there have been no material alterations or variations in the financial position of the
Company since the Balance Sheet Date;

	 	(c)	 	That save as has been disclosed to the Purchaser in writing or save in the
ordinary course of business or save as mentioned herein since the Balance Sheet Date
the Company has not disposed of any of its assets otherwise than in the ordinary course
of business and pending Completion will not do so;

 

 

 

	 	(d)	 	That since the Balance Sheet Date the business of the Company has been carried
on in the ordinary and usual course and save as has prior hereto been disclosed to the
Purchaser in writing no contracts other than normal contracts necessitated by
day-to-day business have been entered into by the Company and that pending Completion
the said business will be so carried on and that without the written consent of the
Purchaser no unusual or abnormal contracts will be entered into;

	 	(e)	 	That the Company has not knowingly done or omitted to do any act or thing in
contravention or breach of any of the provisions of the Companies Ordinance or any
regulations or any laws made thereunder and that the Company will not pending
Completion do any act or thing in contravention or breach of any laws or regulations;

	 	(f)	 	That all the returns particulars resolutions and other documents required to be
filed with or delivered on behalf of the Company to the Registrar of Companies pursuant
to the provisions of the Companies Ordinance have been correctly and properly made up
and filed or delivered;

	 	(g)	 	That at the date hereof there is not outstanding any insurance service or other
business contract between the Company and any other person which cannot be determined
upon not more than one month’s notice without payment of compensation or damages and
that pending completion no such contract will be entered into by the Company;

	 	(h)	 	That at the date hereof the Company is not in the course of acquiring and has
not acquired and pending Completion will not acquire or agree to acquire any assets on
hire purchase credit sale of deferred payment terms except as disclosed in the
Financial Report or otherwise to the Purchaser in writing;

	 	(i)	 	That since the Balance Sheet Date the Company has not save as has been
disclosed to the Purchaser in writing incurred any commitments for capital expenditure
such as would fall to be disclosed in its accounts to be made up at the end of its
current financial year;

	 	(j)	 	That at the date hereof the Company has not given any guarantees which are
outstanding that it is not under any liability to give any guarantees and that pending
Completion no guarantee will be given by the Company;

	 	(k)	 	That at the date hereof there are no mortgages charges or other incumbrances on
or over the whole or any part of the assets of the Company and that pending Completion
no such mortgages charges or other incumbrances will be created given or granted except
as disclosed in the Financial Report or otherwise to the Purchaser in writing;

	 	(l)	 	No dividend bonus or other distribution has been declared paid or made on any
share in the capital of the Company and that pending Completion no such dividend bonus
or distribution will be so declared paid or made;

	 	(m)	 	That save for normal debt collection the Company is not engaged in any
litigation or arbitration and that the directors are not aware of any facts likely to
give rise to any litigation or arbitration;

 

 

 

	 	(n)	 	That there are no existing service agreements or contracts between the Company
and any of its officers and employees which are not determinable without compensation
by one month’s notice or less and that pending Completion the Company will not enter
into any service agreement or contract which is not so determinable;

	 	(o)	 	That the persons who are the directors of the Company have not been paid and
pending Completion will not be paid or become entitled to any remuneration save as
disclosed in the Financial Report or otherwise to the Purchaser in writing;

	 	(p)	 	That the Company is not under any legal liability to pay pensions
superannuation allowances or the like to any of its past or present directors officers
or employees or their dependants and that there are no pension schemes or arrangements
for payment of pensions or death benefits or similar arrangements in operation in
relation to the Company;

	 	(q)	 	That the returns if any made by the Company for taxation purposes are correct
and on a proper basis and are not the subject matter of any dispute with or claim by
the appropriate revenue authorities and that the directors are not aware of any dispute
or claim and that full provision has been made in the Financial Report for all taxation
which has been or may be assessed in respect of or calculated by reference to profits
income or gains of the Company earned or accrued up to and including the Balance Sheet
Date;

	 	(r)	 	That the Company has not made or given or agreed to make or give and pending
Completion will not make or give any such loan or advance;

	 	(s)	 	No order has been made or petition presented or resolution passed for the
winding up of the Company and no receiver or manager has been appointed over all or any
part of its assets or undertakings;

	 	(t)	 	No distress, execution or other process has been levied in respect of the
assets of the Company and to the best of the knowledge and belief of the Vendors, there
is no unfulfilled or unsatisfied judgment or court order outstanding against the
Vendors or the Company;

	 	(u)	 	The Company has not entered into any transaction which is unenforceable by
reason of the transaction being voidable at the instance of any other party or ultra
vires, void or illegal;

	 	(v)	 	That the Company has disclosed to the Purchaser all material facts known to
them relating to the business and finances of the Company; and

	 	(w)	 	That the facts, representations and statements in the Recitals and Schedules
hereof are true and correct.

	7.02	 	Each of the Vendors hereby represent warrant and undertake to the Purchaser in respect of
their respective parts of the Shares as follows :-

	 	(a)	 	He shall obtain all necessary authorizations, approvals or consents required for the sale
by him pursuant to the terms of this agreement on or prior to the Completion Date; and

	 	(b)	 	There is no option, right to acquire, mortgage, charge, pledge, lien or other form of
security or encumbrance on, over or affecting his respective part of the Shares or any part
thereof and there is no agreement or commitment to give or create any of the foregoing and no
claim has been made by any person to be entitled to any of the foregoing which has not been
waived in its entirety or satisfied in full.

 

 

 

	7.03	 	All representations warrants and undertakings contained in the foregoing provisions shall be
deemed to be repeated immediately before Completion by the Vendors.

	8	 	INDEMNITIES

	8.01	 	The Vendors hereby covenant with the Purchaser that they will at all times indemnify the
Purchaser from and against any depletion of the assets of the Company by reason of:-

	 	(a)	 	Any claim for inheritance tax payable by the Company upon or by reason of the
death of any person or persons living or dead who may have been members of the Company
by virtue of the provisions of any amendment or statutory re-enactment thereof; and

	 	(b)	 	Any costs incurred by the Company in contesting or settling any such claim
assessment recovery or counteraction (whether threatened or made) as is mentioned in
this Clause.

	9.	 	ENTIRE AGREEMENT

	9.01	 	This agreement constitutes and sets forth the entire agreement and understanding between the
parties hereto relating to the transactions and arrangements contemplated under this agreement
and supersedes all and any previous agreements or arrangements between the parties hereto or
any of them relating to the Company or to any other matter referred to in this agreement and
all or any such previous agreements or arrangements shall cease and determine with effect from
the date hereof but without prejudice to the obligations or liabilities incurred before the
date hereof.

	10	 	COSTS AND EXPENSES

	10.01	 	All legal costs and other fees, costs and expenses incurred in connection with the
negotiation, preparation, execution and performance of this agreement and all documentation
incidental or relating to Completion and all stamp duty (including penalty, if any) payable in
connection with the sale and purchase of the Shares shall be borne by the Vendors (between
them in proportion to the shares sold by them respectively) and the Purchaser equally.

	11	 	NOTICES

	11.01	 	Any notice or other communication to be given, made or served pursuant to or for any purpose
of this agreement shall sent or delivered to the address of the person concerned set out in
this agreement or to such other address as may be notified by such person to the other parties
hereto.

 

 

 

	11.02	 	Any notice or other communication to be given, made or served pursuant to or for any purpose
of this agreement shall be in writing and may be delivered personally or sent by letter
(postage prepaid and by airmail if to another country) telex or facsimile transmission and
shall be deemed given, made or served, if delivered personally, when left at the relevant
address or, if sent by letter, two working days (or seven working days if by airmail) after
being put in the post or if sent by telex or facsimile transmission, on the next working day
in the place to which it is sent and in proving service of any notice it shall be sufficient
to prove that the notice was properly directed or addressed and delivered or sent. Any period
of notice required to be given pursuant to this agreement shall commence on the date when any
notice served as aforesaid is hereby deemed given, made or served.

	12	 	SURVIVAL OF OBLIGATIONS AFTER COMPLETION

	12.01	 	All covenants warranties representations indemnities and other obligations of whatsoever
kind given made or undertaken by the Vendors under this agreement shall (except for any
obligations fully performed on Completion) continue in full force and effect notwithstanding
the Completion.

	13	 	JOINT AND SEVERAL LIABILITY

	13.01	 	The obligation and liability of the Vendors under this agreement shall be joint and several
unless the context of provisions requires otherwise.

	14	 	TIME OF THE ESSENCE

	14.01	 	Time shall be of the essence of this agreement.

	14.02	 	No time or indulgence given by any party to the other or others shall be deemed or in any
way be construed as a waiver of any of its rights or remedies hereunder.

	15	 	GOVERNING LAW

	15.01	 	This agreement shall be governed by and construed in accordance with the laws of Hong Kong
Special Administrative Region and each party submits to the non-exclusive jurisdiction of the
courts of Hong Kong Special Administrative Region as regards any claim or matter arising under
this agreement.

	16	 	COUNTERPARTS

	16.01	 	This agreement may be entered into by the parties hereto in any number of counterparts, each
of which when so executed and delivered shall be an original, but all the counterparts shall
together constitute one and the same instrument.

 

 

 

	17	 	SUCCESSION

	17.01	 	This agreement shall be binding on and for the benefit of the assign and successor of the
parties hereto.

In witness whereof the parties hereof set their hands hereunto the day and year first above
written.

 

 

 

SCHEDULE I

	 	 	 	 	 
	Shareholders names	 	Number of shares held	 
	CHU WAI WA VIVIAN
	 	 	1	 
	OFFICEWAY TECHNOLOGY LIMITED
	 	 	2,075,799	 

 

 

 

SCHEDULE II

	 	 	 	 	 
	Vendors names	 	Number of shares sold	 
	CHU WAI WA VIVIAN
	 	 	1	 
	OFFICEWAY TECHNOLOGY LIMITED
	 	 	2,075,799	 
	Total :
	 	 	2,075,800	 

 

 

 

	 	 	 	 	 	 	 
	SIGNED by CHU WAI WA VIVIAN

	 	)	 	 	 
	 

	 	)	 	 	/s/ Vivian Chu
	 

	 	 	 	 	 	 
	in the presence of:-

	 	)	 	 	 
	 
	 	 	 	 	 	 
	SIGNED by

	 	)	 	 	 
	 

	 	)	 	 	/s/ Alan Wai
	 

	 	 	 	 	 	 
	 

	 	)	 	 	 
	on behalf of OFFICEWAY TECHNOLOGY)
	 	 	 	 	 	 
	 

	 	)	 	 	 
	LIMITED

	 	)	 	 	 
	 

	 	)	 	 	 
	in the presence of :-

	 	)	 	 	 
	 
	 	 	 	 	 	 
	SIGNED by ZHU Guangming

	 	)	 	 	 
	 

	 	)	 	 	/s/ ZHU Guangming
	 

	 	 	 	 	 	 
	in the presence of :-

	 	)	 	 	 

 

 

 

Dated the 26th day of July, 2010

CHU WAI WA VIVIAN

OFFICEWAY TECHNOLOGY) LIMITED

AND

ZHU Guangming

***********************************************

SALE AND PURCHASE OF SHARES AGREEMENT

relating to

CHINAWE ASSET MANAGEMENT LIMITED

***********************************************

Chris h.m. Yuen & Co.

SOLICITORS & NOTARIES

AGENT FOR TRADEMARKS & PATENTS

Unit 2816, 28th floor, China Merchants Tower, Shun Tak Centre,

168-200 Connaught Road Central, Hong Kong

Tel : (852) 2521 0691

Fax : (852) 2845 5748

Ref : CY/7746/10exv4w1

Exhibit 4.1

2008 STOCK COMPENSATION PLAN

of

LJ INTERNATIONAL INC.

(a British Virgin Islands international business company)

 

TABLE OF CONTENTS

* * *

2008 STOCK COMPENSATION PLAN

of

LJ INTERNATIONAL INC.

	 	 	 	 	 	 	 	 	 

	SECTION	 	SUBJECT
	 	PAGE

	 	1.	 	 	Purpose of Plan 
	 	 	1	 
	 	 	 	 	 
	 	 	 	 
	 	2.	 	 	Stock Subject to the Plan 
	 	 	2	 
	 	 	 	 	 
	 	 	 	 
	 	3.	 	 	Administration of the Plan 
	 	 	2	 
	 	 	 	 	(a) General 
	 	 	2	 
	 	 	 	 	(b) Changes in Law Applicable 
	 	 	5	 
	 	 	 	 	 
	 	 	 	 
	 	4.	 	 	Type of Awards Under the Plan 
	 	 	5	 
	 	 	 	 	 
	 	 	 	 
	 	5.	 	 	Persons to Whom Options Shall Be Granted 
	 	 	5	 
	 	 	 	 	(a) Nonqualified Options 
	 	 	5	 
	 	 	 	 	(b) Incentive Options 
	 	 	5	 
	 	 	 	 	 
	 	 	 	 
	 	6.	 	 	Factors to Be Considered in Granting Options 
	 	 	6	 
	 	 	 	 	 
	 	 	 	 
	 	7.	 	 	Time of Granting Options 
	 	 	6	 
	 	 	 	 	 
	 	 	 	 
	 	8.	 	 	Terms and Conditions of Options 
	 	 	6	 
	 	 	 	 	(a) Number of Shares 
	 	 	6	 
	 	 	 	 	(b) Type of Option 
	 	 	7	 
	 	 	 	 	(c) Option Period 
	 	 	7	 
	 	 	 	 	(1) General 
	 	 	7	 
	 	 	 	 	(2) Termination of Employment 
	 	 	7	 
	 	 	 	 	(3) Cessation of Service as Director
or Advisor 
	 	 	7	 
	 	 	 	 	(4) Disability 
	 	 	8	 
	 	 	 	 	(5) Death 
	 	 	8	 

(i)

 

	 	 	 	 	 	 	 	 	 

	 	 	 
	 	PAGE

	 	 	 	 	(6) Acceleration and Exercise Upon
Change of Control 
	 	 	9	 
	 	 	 	 	(d) Option Prices 
	 	 	11	 
	 	 	 	 	(1) Nonqualified Options 
	 	 	11	 
	 	 	 	 	(2) Incentive Options 
	 	 	11	 
	 	 	 	 	(3) Determination of Fair Market
Value 
	 	 	12	 
	 	 	 	 	(e) Exercise of Options 
	 	 	12	 
	 	 	 	 	(f) Nontransferability of Options 
	 	 	13	 
	 	 	 	 	(g) Limitations on 10% Shareholders 
	 	 	14	 
	 	 	 	 	(h) Compliance with Securities Laws 
	 	 	14	 
	 	 	 	 	(i) Additional Provisions 
	 	 	15	 
	 	 	 	 	 
	 	 	 	 
	 	9.	 	 	Medium and Time of Payment 
	 	 	16	 
	 	 	 	 	 
	 	 	 	 
	 	10.	 	 	Rights as a Shareholder 
	 	 	17	 
	 	 	 	 	 
	 	 	 	 
	 	11.	 	 	Optionee’s Agreement to Serve 
	 	 	17	 
	 	 	 	 	 
	 	 	 	 
	 	12.	 	 	Adjustments on Changes in Capitalization 
	 	 	18	 
	 	 	 	 	(a) Changes in Capitalization 
	 	 	18	 
	 	 	 	 	(b) Reorganization, Dissolution or
Liquidation 
	 	 	18	 
	 	 	 	 	(c)Change in Par Value 
	 	 	19	 
	 	 	 	 	(d)Notice of Adjustments 
	 	 	19	 
	 	 	 	 	(e)Effect Upon Holder of Option 
	 	 	19	 
	 	 	 	 	(f)Right of Company to Make Adjustments 
	 	 	21	 
	 	 	 	 	 
	 	 	 	 
	 	13.	 	 	Investment Purpose 
	 	 	21	 
	 	 	 	 	 
	 	 	 	 
	 	14.	 	 	No Obligation to Exercise Option 
	 	 	22	 
	 	 	 	 	 
	 	 	 	 
	 	15.	 	 	Modification, Extension, and Renewal
of Options
	 	 	22	 
	 	 	 	 	 
	 	 	 	 
	 	16.	 	 	Effective Date of the Plan 
	 	 	22	 
	 	 	 	 	 
	 	 	 	 
	 	17.	 	 	Termination of the Plan 
	 	 	22	 
	 	 	 	 	 
	 	 	 	 
	 	18.	 	 	Amendment of the Plan 
	 	 	23	 
	 	 	 	 	 
	 	 	 	 
	 	19.	 	 	Withholding 
	 	 	23	 
	 	 	 	 	 
	 	 	 	 

(ii)

 

	 	 	 	 	 	 	 	 	 

	 	 	 
	 	PAGE

	 	20.	 	 	Indemnification of Committee 
	 	 	24	 
	 	 	 	 	 
	 	 	 	 
	 	21.	 	 	Application of Funds 
	 	 	24	 
	 	 	 	 	 
	 	 	 	 
	 	22.	 	 	Governing Law 
	 	 	24	 

(iii)

 

2008 STOCK COMPENSATION PLAN

OF

LJ INTERNATIONAL INC.

     1. Purpose of Plan. This 2008 Stock Compensation Plan (“Plan”) is intended to
encourage ownership of the common stock of LJ INTERNATIONAL INC., a British Virgin Islands
international business company, (“Company”) by certain officers, directors, employees and advisors
of the Company or any Subsidiary or Subsidiaries of the Company (as hereinafter defined) in order
to provide additional incentive for such persons to promote the success and the business of the
Company or its Subsidiaries and to encourage them to remain in the employ of the Company or its
Subsidiaries by providing such persons an opportunity to benefit from any appreciation of the
common stock of the Company through the issuance of stock options to such persons in accordance
with the terms of the Plan. It is further intended that options granted pursuant to this Plan
shall constitute either incentive stock options (“Incentive Options”) within the meaning of Section
422 (formerly Section 422A) of the Internal Revenue Code of 1986, as amended (“Code”), or options
which do not constitute Incentive Options (“Nonqualified Options”) as determined by the Committee
(as hereinafter defined) at the time of issuance of such options. Incentive Options and
Nonqualified Options are herein sometimes referred to collectively as “Options.” As used herein,
the term Subsidiary or Subsidiaries shall mean any corporation (other than the employer
corporation) in an unbroken chain of corporations beginning with the employer corporation if, at
the time of granting of the Option, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing fifty

Page 1

 

percent (50%) or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

     2. Stock Subject to the Plan. Subject to adjustment as provided in Section 12 hereof,
there will be reserved for the use upon the exercise of Options to be granted from time to time
under the Plan, an aggregate of four million (4,000,000) shares of the common stock, $.01 par
value, of the Company (“Common Stock”), which shares in whole or in part shall be authorized, but
unissued, shares of the Common Stock or issued shares of Common Stock which shall have been
reacquired by the Company as determined from time to time by the Board of Directors of the Company
(“Board of Directors”). To determine the number of shares of Common Stock available at any time
for the granting of Options under the Plan, there shall be deducted from the total number of
reserved shares of Common Stock, the number of shares of Common Stock in respect of which Options
have been granted pursuant to the Plan which remain outstanding or which have been exercised. If
and to the extent that any Option to purchase reserved shares shall not be exercised by the
optionee for any reason or if such Option to purchase shall terminate as provided herein, such
shares which have not been so purchased hereunder shall again become available for the purposes of
the Plan unless the Plan shall have been terminated, but such unpurchased shares shall not be
deemed to increase the aggregate number of shares specified above to be reserved for purposes of
the Plan (subject to adjustment as provided in Section 12 hereof).

     3. Administration of the Plan.

          (a) General. The Plan shall be administered by the full Board of Directors or by a
Compensation Committee (“Committee”) appointed by the Board of Directors, which

Page 2

 

Committee shall consist solely of not less than two (2) non-employee Directors. All references in
this Plan to the Committee shall be deemed to refer instead to the full Board of Directors at any
time there is not a committee qualified to act hereunder. The Board of Directors may from time to
time appoint members of the Committee in substitution for or in addition to members previously
appointed and may fill vacancies, however caused, in the Committee. If the Board of Directors does
not designate a Chairman of the Committee, the Committee shall select one of its members as its
Chairman. The Committee shall hold its meetings at such times and places at it shall deem
advisable. A majority of its members shall constitute a quorum. Any action of the Committee shall
be taken by a majority vote of its members at a meeting at which a quorum is present.
Notwithstanding the preceding, any action of the Committee may be taken without a meeting by a
written consent signed by all of the members, and any action so taken shall be deemed fully as
effective as if it had been taken by a vote of the members present in person at the meeting duly
called and held. The Committee may appoint a Secretary, shall keep minutes of its meetings, and
shall make such rules and regulations for the conduct of its business at it shall deem advisable.

     The Committee shall have the sole authority and power, subject to the express provisions and
limitations of the Plan, to construe the Plan and option agreements granted hereunder, and to
adopt, prescribe, amend, and rescind rules and regulations relating to the Plan, and to make all
determinations necessary or advisable for administering the Plan, including, but not limited to,
(i) who shall be granted Options under the Plan, (ii) the term of each Option, (iii) the number of
shares covered by such Option, (iv) whether the Option shall constitute an Incentive Option or a
Nonqualified Option, (v) the exercise price for the purchase of the shares of the Common Stock

Page 3

 

covered by the Option, (vi) the period during which the Option may be exercised, (vii) whether the
right to purchase the number of shares covered by the Option shall be fully vested on issuance of
the Option so that such shares may be purchased in full at one time or whether the right to
purchase such shares shall become vested over a period of time so that such shares may only be
purchased in installments, and (viii) the time or times at which Options shall be granted. The
Committee’s determinations under the Plan, including the above enumerated determinations, need not
be uniform and may be made by it selectively among the persons who receive, or are eligible to
receive, Options under the Plan, whether or not such persons are similarly situated.

     The interpretation by the Committee of any provision of the Plan or of any option agreement
entered into hereunder with respect to any Incentive Option shall be in accordance with Section 422
of the Code and the regulations issued thereunder, as such section or regulations may be amended
from time to time, in order that the rights granted hereunder and under said option agreements
shall constitute “Incentive Stock Options” within the meaning of such section. The interpretation
and construction by the Committee of any provision of the Plan or of any Option granted hereunder
shall be final and conclusive, unless otherwise determined by the Board of Directors. No member of
the Board of Directors or the Committee shall be liable for any action or determination made in
good faith with respect to the Plan or any Option granted under it. Upon issuing an Option under
the Plan, the Committee shall report to the Board of Directors the name of the person granted the
Option, whether the Option is an Incentive Option or a Nonqualified Option, the number of shares of
Common Stock covered by the Option, and the terms and conditions of such Option.

Page 4

 

          (b) Changes in Law Applicable. If the laws relating to Incentive Options or
Nonqualified Options are changed, altered or amended during the term of the Plan, the Board of
Directors shall have full authority and power to alter or amend the Plan with respect to Incentive
Options or Nonqualified Options, respectively, to conform to such changes in the law, unless the
changes require shareholder approval.

	 	4.	 	Type of Awards Under the Plan. Awards under the Plan shall be in the
form of Options.

	 	5.	 	Persons to Whom Options Shall Be Granted.

          (a) Nonqualified Options. Nonqualified Options shall be granted only to officers,
directors, employees and advisors of the Company or a Subsidiary who, in the judgment of the
Committee, are responsible for or contribute to the management or success of the Company or a
Subsidiary and who, at the time of the granting of the Nonqualified Options, are either officers,
directors, employees or advisors of the Company or a Subsidiary.

          (b) Incentive Options. Incentive Options shall be granted only to employees of the
Company or a Subsidiary who, in the judgment of the Committee, are responsible for or contribute to
the management or success of the Company or a Subsidiary and who, at the time of the granting of
the Incentive Option are an employee of either the Company or a Subsidiary pursuant to an effective
employment agreement. Subject to the provisions of Section 8(g) hereof, no individual shall be
granted an Incentive Option who, immediately before such Incentive Option was granted, would own
more than ten percent (10%) of the total combined voting power or value of all classes of stock of
the Company (“10% Shareholder”).

Page 5

 

     6. Factors to Be Considered in Granting Options. In making any determination as to
persons to whom Options shall be granted and as to the number of shares to be covered by such
Options, the Committee shall take into account the duties and responsibilities of the respective
officers, directors, employees, or advisors, their current and potential contributions to the
success of the Company or a Subsidiary, and such other factors as the Committee shall deem relevant
in connection with accomplishing the purpose of the Plan.

     7. Time of Granting Options. Neither anything contained in the Plan or in any
resolution adopted or to be adopted by the Board of Directors or the Shareholders of the Company or
a Subsidiary nor any action taken by the Committee shall constitute the granting of any Option.
The granting of an Option shall be effected only when a written Option Agreement acceptable in form
and substance to the Committee, subject to the terms and conditions hereof including those set
forth in Section 8 hereof, shall have been duly executed and delivered by or on behalf of the
Company and the person to whom such Option shall be granted. No person shall have any rights under
the Plan until such time, if any, as a written Option Agreement shall have been duly executed and
delivered as set forth in this Section 7.

     8. Terms and Conditions of Options. All Options granted pursuant to this Plan must be
granted within ten (10) years from the date the Plan is adopted by the Board of Directors of the
Company. Each Option Agreement governing an Option granted hereunder shall be subject to at least
the following terms and conditions, and shall contain such other terms and conditions, not
inconsistent therewith, that the Committee shall deem appropriate:

          (a) Number of Shares. Each Option shall state the number of shares of Common Stock
which it represents.

Page 6

 

          (b) Type of Option. Each Option shall state whether it is intended to be an Incentive
Option or a Nonqualified Option.

          (c) Option Period.

               (1) General. Each Option shall state the date upon which it is granted. Each Option
shall be exercisable in whole or in part during such period as is provided under the terms of the
Option subject to any vesting period set forth in the Option, but in no event shall an Option be
exercisable either in whole or in part after the expiration of ten (10) years from the date of
grant; provided, however, if an Incentive Option is granted to a 10% Shareholder, such Incentive
Option shall not be exercisable more than five (5) years from the date of grant thereof.

               (2) Termination of Employment. Except as otherwise provided in case of Disability (as
hereinafter defined), death or Change of Control (as hereinafter defined), no Option shall be
exercisable after an optionee who is an employee of the Company or a Subsidiary ceases to be
employed by the Company or a Subsidiary as an employee; provided, however, that the Committee shall
have the right in its sole discretion, but not the obligation, to extend the exercise period
following the date of termination of such optionee’s employment; provided further, however, that no
Option shall be exercisable after the expiration of ten (10) years from the date it is granted and
provided further, no Incentive Option granted to a 10% Shareholder shall be exercisable after the
expiration of five (5) years from the date it is granted.

               (3) Cessation of Service as Director or Advisor. Except as otherwise provided in case
of Disability, death or Change of Control, no Option shall be exercisable after an optionee who was
a director or advisor of the Company or a Subsidiary ceases to be a director or advisor of the
Company or a Subsidiary; provided, however, that the Committee shall have the

Page 7

 

right in its sole discretion, but not the obligation, to extend the exercise period following
the date such optionee ceases to be a director or advisor of the Company or a Subsidiary; provided
further, however, that no Option shall be exercisable after the expiration of ten (10) years from
the date it is granted.

               (4) Disability. If an optionee’s employment is terminated by reason of the permanent
and total Disability of such optionee or if an optionee who is a director or advisor of the Company
or a Subsidiary ceases to serve as a director or advisor by reason of the permanent and total
Disability of such optionee, the Committee shall have the right in its sole discretion, but not the
obligation, to extend the exercise period following the date of termination of the optionee’s
employment or the date such optionee ceases to be a director or advisor of the Company or a
Subsidiary, as the case may be, subject to the condition that no Option shall be exercisable after
the expiration of ten (10) years from the date it is granted and subject to the further condition
that no Incentive Option granted to a 10% Shareholder shall be exercisable after the expiration of
five (5) years from the date it is granted. For purposes of this Plan, the term “Disability” shall
mean the inability of the optionee to fulfill such optionee’s obligations to the Company or a
Subsidiary by reason of any 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 twelve (12)
months as determined by a physician acceptable to the Committee in its sole discretion.

               (5) Death. If an optionee dies while in the employ of the Company or a Subsidiary, or
while serving as a director or advisor of the Company or a Subsidiary, and shall not have fully
exercised Options granted pursuant to the Plan, such Options may be exercised in

Page 8

 

whole or in part at any time within one (1) year after the optionee’s death, by the executors or
administrators of the optionee’s estate or by any person or persons who shall have acquired the
Options directly from the optionee by bequest or inheritance, but only to the extent that the
optionee was entitled to exercise such Option at the date of such optionee’s death, subject to the
condition that no Option shall be exercisable after the expiration of ten (10) years from the date
it is granted and subject to the further condition that no Incentive Option granted to a 10%
Shareholder shall be exercisable after the expiration of five (5) years from the date it is
granted.

               (6) Acceleration and Exercise Upon Change of Control. Notwithstanding the preceding
provisions of this Section 8(c), if any Option granted under the Plan provides for either (a) an
incremental vesting period whereby such Option may only be exercised in installments as such
incremental vesting period is satisfied or (b) a delayed vesting period whereby such Option may
only be exercised after the lapse of a specified period of time, such as after the expiration of
one (1) year, such vesting period shall be accelerated upon the occurrence of a Change of Control
(as hereinafter defined) of the Company, or a threatened Change of Control of the Company as
determined by the Committee, so that such Option shall thereupon become exercisable immediately in
part or its entirety by the holder thereof, as such holder shall elect. For the purposes of this
Plan, a “Change of Control” shall be deemed to have occurred if:

                    (i) Any “person”, including a “group” as determined in accordance with Section 13(d)(3) of the
Securities Exchange Act of 1934 (“Exchange Act”) and the Rules and Regulations promulgated
thereunder, is or becomes, through one or a series of related transactions or through one or more
intermediaries, the beneficial owner, directly or

Page 9

 

indirectly, of securities of the Company representing 25% or more of the combined voting power of
the Company’s then outstanding securities, other than a person who is such a beneficial owner on
the effective date of the Plan and any affiliate of such person;

                    (ii) As a result of, or in connection with, any tender offer or exchange offer, merger or
other business combination, sale of assets or contested election, or any combination of the
foregoing transactions (“Transaction”), the persons who were Directors of the Company before the
Transaction shall cease to constitute a majority of the Board of Directors of the Company or any
successor to the Company;

                    (iii) Following the effective date of the Plan, the Company is merged or consolidated with
another corporation and as a result of such merger or consolidation less than 40% of the
outstanding voting securities of the surviving or resulting corporation shall then be owned in the
aggregate by the former stockholders of the Company, other than (x) any party to such merger or
consolidation, or (y) any affiliates of any such party;

                    (iv) A tender offer or exchange offer is made and consummated for the ownership of securities
of the Company representing 25% or more of the combined voting power of the Company’s then
outstanding voting securities; or

                    (v) The Company transfers more than 50% of its assets, or the last of a series of transfers
results in the transfer of more than 50% of the assets of the Company, to another corporation that
is not a wholly-owned corporation of the Company. For purposes of this subsection 8(c)(6)(v), the
determination of what constitutes more than 50% of the assets of the Company shall be determined
based on the sum of the values attributed to (i) the Company’s

Page 10

 

real property as determined by an independent appraisal thereof, and (ii) the net book value of all
other assets of the Company, each taken as of the date of the Transaction involved.

     In addition, upon a Change of Control, any Options previously granted under the Plan to the
extent not already exercised may be exercised in whole or in part either immediately or at any time
during the term of the Option as such holder shall elect.

          (d) Option Prices.

               (1) Nonqualified Options. The purchase price or prices of the shares of the Common
Stock which shall be offered to any person under the Plan and covered by a Nonqualified Option
shall be the price determined by the Committee at the time of granting of the Nonqualified Option,
which price may be less than, equal to or greater than one hundred percent (100%) of the fair
market value of the Common Stock at the time of granting the Nonqualified Option.

               (2) Incentive Options. The purchase price or prices of the shares of the Common Stock
which shall be offered to any person under the Plan and covered by an Incentive Option shall be the
price determined by the Committee at the time of granting of the Incentive Option, which price may
be less than, equal to or greater than one hundred percent (100%) of the fair market value of the
Common Stock at the time of granting the Incentive Option; provided, however, if an Incentive
Option is granted to a 10% Shareholder, the purchase price of the shares of the Common Stock of the
Company covered by such Incentive Option may not be less than one hundred ten percent (110%) of the
fair market value of such shares on the day the Incentive Option is granted.

Page 11

 

               (3) Determination of Fair Market Value. During such time as the Common Stock of the
Company is not listed upon an established stock exchange, the fair market value per share shall be
deemed to be the closing bid price of the Common Stock on The Nasdaq Stock Market, Inc. (“Nasdaq”)
on the day the Option is granted, as reported by Nasdaq, if the Common Stock is so quoted, and if
not so quoted, the average of the “bid” and “ask” prices of the Common Stock on the Electronic
Bulletin Board on the day the Option is granted, as reported by the National Association of
Securities Dealers, Inc. If the Common Stock is listed upon an established stock exchange or
exchanges, such fair market value shall be deemed to be the closing price of the Common Stock on
such stock exchange or exchanges on the day the Option is granted or, if no sale of the Common
Stock of the Company shall have been made on an established stock exchange on such day, on the next
preceding day on which there was a sale of such stock. If there is no market price for the Common
Stock, then the Board of Directors and the Committee may, after taking all relevant facts into
consideration, determine the fair market value of the Common Stock.

          (e) Exercise of Options. To the extent that a holder of an Option has a current right
to exercise, the Option may be exercised from time to time by written notice to the Company at its
principal place of business. Such notice shall state the election to exercise the Option, the
number of whole shares in respect of which it is being exercised, shall be signed by the person or
persons so exercising the Option, and shall contain any investment representation required by
Section 8(i) hereof. Such notice shall be accompanied by payment of the full purchase price of
such shares and by the Option Agreement evidencing the Option. In addition, if the Option shall be
exercised, pursuant to Section 8(c)(4) or Section 8(c)(5) hereof, by any

Page 12

 

person or persons other than the optionee, such notice shall also be accompanied by
appropriate proof of the right of such person or persons to exercise the Option. The Company shall
deliver a certificate or certificates representing such shares as soon as practicable after the
aforesaid notice and payment of such shares shall be received. The certificate or certificates for
the shares as to which the Option shall have been so exercised shall be registered in the name of
the person or persons so exercising the Option. In the event the Option shall not be exercised in
full, the Secretary of the Company shall endorse or cause to be endorsed on the Option Agreement
the number of shares which has been exercised thereunder and the number of shares that remains
exercisable under the Option and return such Option Agreement to the holder thereof.

          (f) Nontransferability of Options. An Option granted pursuant to the Plan shall be
exercisable only by the optionee or the optionee’s court appointed guardian as set forth in Section
8(c)(4) hereof during the optionee’s lifetime and shall not be assignable or transferable by the
optionee otherwise than by Will, the laws of descent and distribution, or as permitted by the rules
and regulations of the Securities and Exchange Commission. An Option granted pursuant to the Plan
shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise
other than by Will, the laws of descent and distribution, or as permitted by the rules and
regulations of the Securities and Exchange Commission) and shall not be subject to execution,
attachment, or similar process. Any attempted transfer, assignment, pledge, hypothecation, or
other disposition of any Option or of any rights granted thereunder contrary to the foregoing
provisions of this Section 8(f), or the levy of any attachment or similar process upon an Option or
such rights, shall be null and void.

Page 13

 

          (g) Limitations on 10% Shareholders. No Incentive Option may be granted under the
Plan to any 10% Shareholder unless (i) such Incentive Option is granted at an option price not less
than one hundred ten percent (110%) of the fair market value of the shares on the day the Incentive
Option is granted and (ii) such Incentive Option expires on a date not later than five (5) years
from the date the Incentive Option is granted.

          (h) Compliance with Securities Laws. The Plan and the grant and exercise of the
rights to purchase shares hereunder, and the Company’s obligations to sell and deliver shares upon
the exercise of rights to purchase shares, shall be subject to all applicable federal, foreign and
state laws, rules and regulations, and to such approvals by any regulatory or governmental agency
as may, in the opinion of counsel for the Company, be required, and shall also be subject to all
applicable rules and regulations of any stock exchange upon which the Common Stock of the Company
may then be listed. At the time of exercise of any Option, the Company may require the optionee to
execute any documents or take any action which may then be necessary to comply with the Securities
Act of 1933, as amended (“Securities Act”), and the rules and regulations promulgated thereunder,
or any other applicable federal or state laws regulating the sale and issuance of securities, and
the Company may, if it deems necessary, include provisions in the stock option agreements to assure
such compliance. The Company may, from time to time, change its requirements with respect to
enforcing compliance with federal and state securities laws, including the request for and
enforcement of letters of investment intent, such requirements to be determined by the Company in
its judgment as necessary to assure compliance with said laws. Such changes may be made with
respect to any particular Option or stock issued upon exercise thereof. Without limiting the
generality of the foregoing, if the

Page 14

 

Common Stock issuable upon exercise of an Option granted under the Plan is not registered
under the Securities Act, the Company at the time of exercise may require that the registered owner
execute and deliver an investment representation agreement to the Company in form acceptable to the
Company and its counsel, and the Company may place a legend on the certificate evidencing such
Common Stock restricting the transfer thereof, which legend shall be substantially as follows:

THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW BUT HAVE BEEN ACQUIRED FOR THE
PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT BE OFFERED, SOLD
OR TRANSFERRED UNTIL EITHER (i) A REGISTRATION STATEMENT UNDER SUCH
SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE
BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) THE COMPANY SHALL HAVE
RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY AND ITS
COUNSEL THAT REGISTRATION UNDER SUCH SECURITIES ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH
SUCH PROPOSED OFFER, SALE OR TRANSFER.

          (i) Additional Provisions. The Option Agreement authorized under the Plan shall
contain such other provisions as the Committee shall deem advisable, including, without limitation,
restrictions upon the exercise of the Option. Any such Option Agreement with respect to an
Incentive Option shall contain such limitations and restrictions upon the exercise of the Incentive
Option as shall be necessary in order that the Option will be an “Incentive Stock Option” as
defined in Section 422 of the Code.

Page 15

 

     9. Medium and Time of Payment. The purchase price of the shares of the Common Stock
as to which the Option shall be exercised shall be paid in full either (i) in cash at the time of
exercise of the Option, (ii) by tendering to the Company shares of the Company’s Common Stock
having a fair market value (as of the date of receipt of such shares by the Company) equal to the
purchase price for the number of shares of Common Stock purchased, or (iii) partly in cash and
partly in shares of the Company’s Common Stock valued at fair market value as of the date of
receipt of such shares by the Company. Cash payment for the shares of the Common Stock purchased
upon exercise of the Option shall be in the form of either a cashier’s check, certified check or
money order. Personal checks may be submitted, but will not be considered as payment for the
shares of the Common Stock purchased and no certificate for such shares will be issued until the
personal check clears in normal banking channels. If a personal check is not paid upon presentment
by the Company, then the attempted exercise of the Option will be null and void. In the event the
optionee tenders shares of the Company’s Common Stock in full or partial payment for the shares
being purchased pursuant to the Option, the shares of Common Stock so tendered shall be accompanied
by fully executed stock powers endorsed in favor of the Company with the signature on such stock
power being guaranteed. If an optionee tenders shares, such optionee assumes sole and full
responsibility for the tax consequences, if any, to such optionee arising therefrom, including the
possible application of Code Section 424(c), or its successor Code section, which negates any
nonrecognition of income rule with respect to such transferred shares, if such transferred shares
have not been held for the minimum statutory holding period to receive preferential tax treatment.

Page 16

 

     10. Rights as a Shareholder. The holder of an Option shall have no rights as a
shareholder with respect to the shares covered by the Option until the due exercise of the Option
and the date of issuance of one or more stock certificates to such holder for such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 12 hereof.

     11. Optionee’s Agreement to Serve. Each employee receiving an Option shall, as one of
the terms of the Option Agreement, agree that such employee will remain in the employ of the
Company or Subsidiary for a period of at least one (1) year from the date on which the Option shall
be granted to such employee, and that such employee will, during such employment, devote such
employee’s time, energy, and skill to the service of the Company or a Subsidiary as may be required
by the management thereof, subject to vacations, sick leaves, and military absences. Such
employment, subject to the provisions of any written contract between the Company or a Subsidiary
and such employee, shall be at the pleasure of the Board of Directors of the Company or a
Subsidiary, and at such compensation as the Company or a Subsidiary shall reasonably determine.
Any termination of such employee’s employment during the period which the employee has agreed
pursuant to the foregoing provisions of this Section 11 to remain in employment that is either for
cause or voluntary on the part of the employee shall be deemed a violation by the employee of such
employee’s agreement. In the event of such violation, any Option or Options held by such employee,
to the extent not theretofore exercised, shall forthwith terminate, unless otherwise determined by
the Committee. Notwithstanding the preceding, neither the action of the Company in establishing
the Plan nor any action taken by the Company,

Page 17

 

a Subsidiary or the Committee under the provisions hereof shall be construed as granting the
optionee the right to be retained in the employ of the Company or a Subsidiary, or to limit or
restrict the right of the Company or a Subsidiary, as applicable, to terminate the employment of
any employee of the Company or a Subsidiary, with or without cause.

     12. Adjustments on Changes in Capitalization.

          (a) Changes in Capitalization. The number of shares of Common Stock covered by the
Plan, the number of shares of Common Stock covered by each outstanding Option and the exercise
price per share thereof specified in each such Option shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock of the Company resulting from a
subdivision or consolidation of shares or the payment of a stock dividend (but only on the Common
Stock) or any other increase or decrease in the number of shares effected without receipt of
consideration by the Company after the date the Option is granted, so that upon exercise of the
Option, the optionee shall receive the same number of shares the optionee would have received had
the optionee been the holder of all shares subject to such optionee’s outstanding Option
immediately before the effective date of such change in the number of issued shares of the Common
Stock of the Company.

          (b) Reorganization, Dissolution or Liquidation. A dissolution or liquidation of the
Company or a merger or consolidation in which the Company is not the surviving corporation shall
cause each outstanding Option to terminate as of a date to be fixed by the Committee (which date
shall be as of or prior to the effective date of any such dissolution or liquidation or merger or
consolidation); provided, that not less than thirty (30) days written notice of the date so fixed
as such termination date shall be given to each optionee, and each

Page 18

 

optionee shall, in such event, have the right, during the said period of thirty (30) days
preceding such termination date, to exercise such optionee’s Option in whole or in part in the
manner herein set forth.

          (c) Change in Par Value. In the event of a change in the Common Stock of the Company
as presently constituted, which change is limited to a change of all of its authorized shares with
par value into the same number of shares with a different par value or without par value, the
shares resulting from any change shall be deemed to be the Common Stock within the meaning of the
Plan.

          (d) Notice of Adjustments. To the extent that the adjustments set forth in the
foregoing paragraphs of this Section 12 relate to stock or securities of the Company, such
adjustments, if any, shall be made by the Committee, whose determination in that respect shall be
final, binding and conclusive, provided that each Incentive Option granted pursuant to this Plan
shall not be adjusted in a manner that causes the Incentive Option to fail to continue to qualify
as an “Incentive Stock Option” within the meaning of Section 422 of the Code. The Company shall
give timely notice of any adjustments made to each holder of an Option under this Plan and such
adjustments shall be effective and binding on the optionee.

          (e) Effect Upon Holder of Option. Except as hereinbefore expressly provided in this
Section 12, the holder of an Option shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class by reason of any dissolution,
liquidation, merger, reorganization, or consolidation, or spin-off of assets or stock of another
corporation. Any issue by the Company of shares of stock of any class, or securities convertible

Page 19

 

into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject to the Option.
Without limiting the generality of the foregoing, no adjustment shall be made with respect to the
number or price of shares subject to any Option granted hereunder upon the occurrence of any of the
following events:

               (1) The grant or exercise of any other options which may be granted or exercised under any
qualified or nonqualified stock option plan or under any other employee benefit plan of the
Company, whether or not such options were outstanding on the date of grant of the Option or
thereafter granted;

               (2) The sale of any shares of Common Stock in the Company’s initial or any subsequent public
offering, including, without limitation, shares sold upon the exercise of any overallotment option
granted to the underwriter in connection with such offering;

               (3) The issuance, sale or exercise of any warrants to purchase shares of Common Stock, whether
or not such warrants were outstanding on the date of grant of the Option or thereafter issued;

               (4) The issuance or sale of rights, promissory notes or other securities convertible into
shares of Common Stock in accordance with the terms of such securities (“Convertible Securities”),
whether or not such Convertible Securities were outstanding on the date of grant of the Option or
were thereafter issued or sold;

               (5) The issuance or sale of Common Stock upon conversion or exchange of any Convertible
Securities, whether or not any adjustment in the purchase price was made or required to be made
upon the issuance or sale of such Convertible Securities and

Page 20

 

whether or not such Convertible Securities were outstanding on the date of grant of the Option
or were thereafter issued or sold; or

               (6) Upon any amendment to or change in the terms of any rights or warrants to subscribe for or
purchase, or options for the purchase of, Common Stock or Convertible Securities or in the terms of
any Convertible Securities, including, but not limited to, any extension of any expiration date of
any such right, warrant or option, any change in any exercise or purchase price provided for in any
such right, warrant or option, any extension of any date through which any Convertible Securities
are convertible into or exchangeable for Common Stock or any change in the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock.

          (f) Right of Company to Make Adjustments. The grant of an Option pursuant to the Plan
shall not affect 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 or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or
assets.

     13. Investment Purpose. Each Option under the Plan shall be granted on the condition
that the purchase of the shares of stock thereunder shall be for investment purposes, and not with
a view to resale or distribution; provided, however, that in the event the shares of stock subject
to such Option are registered under the Securities Act or in the event a resale of such shares of
stock without such registration would otherwise be permissible, such condition shall be inoperative
if in the opinion of counsel for the Company such condition is not required under the Securities
Act or any other applicable law, regulation, or rule of any governmental agency.

Page 21

 

     14. No Obligation to Exercise Option. The granting of an Option shall impose no
obligation upon the optionee to exercise such Option.

     15. Modification, Extension and Renewal of Options. Subject to the terms and
conditions and within the limitations of the Plan, the Committee and the Board of Directors may
modify, extend or renew outstanding Options granted under the Plan, or accept the surrender of
outstanding Options (to the extent not theretofore exercised). With the approval of the Board of
Directors, the Company may modify any outstanding Options so as to specify a lower price or accept
the surrender of outstanding Options and authorize the granting of new Options in substitution
therefor specifying a lower price. Notwithstanding the foregoing, however, no modification of an
Option shall, without the consent of the optionee, alter or impair any rights or obligations under
any Option theretofore granted under the Plan.

     16. Effective Date of the Plan. The Plan shall become effective on the date of
execution hereof, which date is the date the Board of Directors approved and adopted the Plan
(“Effective Date”); provided, however, if the Shareholders of the Company shall not have approved
the Plan by the requisite vote of the Shareholders within twelve (12) months after the Effective
Date, then the Plan shall terminate and all Options theretofore granted under the Plan shall
terminate and be null and void.

     17. Termination of the Plan. This Plan shall terminate as of the expiration of ten
(10) years from the Effective Date. Options may be granted under this Plan at any time and from
time to time prior to its termination. Any Option outstanding under the Plan at the time of its
termination shall remain in effect until the Option shall have been exercised or shall have
expired.

Page 22

 

     18. Amendment of the Plan. The Plan may be terminated at any time by the Board of
Directors of the Company. The Board of Directors may at any time and from time to time without
obtaining the approval of the Shareholders of the Company or a Subsidiary, modify or amend the Plan
(including such form of Option Agreement as hereinabove mentioned) in such respects as it shall
deem advisable in order that the Incentive Options granted under the Plan shall be “Incentive Stock
Options” as defined in Section 422 of the Code or to conform to any change in the law, or in any
other respect which shall not change: (a) the maximum number of shares for which Options may be
granted under the Plan, except as provided in Section 12 hereof; or (b) the periods during which
Options may be granted or exercised; or (c) the provisions relating to the determination of persons
to whom Options shall be granted and the number of shares to be covered by such Options; or (d) the
provisions relating to adjustments to be made upon changes in capitalization. The termination or
any modification or amendment of the Plan shall not, without the consent of the person to whom any
Option shall theretofore have been granted, affect that person’s rights under an Option theretofore
granted to such person. With the consent of the person to whom such Option was granted, an
outstanding Option may be modified or amended by the Committee in such manner as it may deem
appropriate and consistent with the requirements and purpose of this Plan applicable to the grant
of a new Option on the date of modification or amendment.

     19. Withholding. Whenever an optionee shall recognize compensation income as a result
of the exercise of any Option granted under the Plan, the optionee shall remit in cash to the
Company or Subsidiary the minimum amount of federal income and employment tax withholding, if any,
which the Company or Subsidiary is required to remit to the United States

Page 23

 

Internal Revenue Service in accordance with the then current provisions of the Code. The full
amount of such withholding shall be paid by the optionee simultaneously with the award or exercise
of an Option, as applicable.

     20. Indemnification of Committee. In addition to such other rights of indemnification
as they may have as Directors or as members of the Committee, the members of the Committee shall be
indemnified by the Company against the reasonable expenses, including attorneys’ fees actually and
necessarily incurred in connection with the defense of any action, suit or proceedings, or in
connection with any appeal therein, to which they or any of them may be a party by reason of any
action taken or failure to act under or in connection with the Plan or any Option granted
thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such Committee member is liable for gross
negligence or wilful misconduct in the performance of his duties; provided that within sixty (60)
days after institution of any such action, suit or proceeding a Committee member shall in writing
offer the Company the opportunity, at its own expense, to pursue and defend the same.

     21. Application of Funds. The proceeds received by the Company from the sale of
Common Stock pursuant to Options granted hereunder will be used for general corporate purposes.

     22. Governing Law. This Plan shall be governed by and construed in accordance with
the laws of the jurisdiction of incorporation of the Company.

Page 24

 

     EXECUTED effective this 8th day of August, 2008.

	 	 	 	 	 
	 	LJ INTERNATIONAL INC.

 	 
	 	By:  	/S/ YU CHUAN YIH
 	 
	 	 	YU CHUAN YIH, 	 
	 	 	Chairman 	 
	 

ATTEST:

	 	 	 

	/S/ RINGO HON TAK NG
 

RINGO HON TAK NG

	 	 
	CFO
	 	 

Page 25

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