Document:

Exhibit 4.5

 

SHAREHOLDERS AGREEMENT

 

FEBRUARY 2010

 

MODERN CYBER INTERNATIONAL LIMITED

 

GAEATEC INTERNATIONAL LIMITED

 

VIOLET GOLD
INTERNATIONAL LIMITED

 

HOVEREX  INTERNATIONAL LIMITED

 

RICH SONIC INTERNATIONAL LIMITED

 

ROLL WHEEL INTERNATIONAL LIMITED

 

and

 

NEWMAN
INVESTMENTS LIMITED

 

and

 

LENTUO INTERNATIONAL INC.

 

 

CONTENTS

 

	
  Clause

  	
   

  	
   

  	
   

  	
  Page

  
	
  1.

  	
   

  	
  Certain Definitions

  	
   

  	
  1

  
	
  2.

  	
   

  	
  Business

  	
   

  	
  4

  
	
  3.

  	
   

  	
  Election of Directors;
  Management

  	
   

  	
  5

  
	
  4.

  	
   

  	
  Right of First Offer

  	
   

  	
  7

  
	
  5.

  	
   

  	
  Right of First Refusal;
  Co-Sale Right

  	
   

  	
  8

  
	
  6.

  	
   

  	
  Meetings of Shareholders

  	
   

  	
  10

  
	
  7.

  	
   

  	
  Covenants

  	
   

  	
  10

  
	
  8.

  	
   

  	
  Miscellaneous

  	
   

  	
  13

  
	
  9.

  	
   

  	
  Confidentiality and
  Announcements

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A ADHERENCE DEED

  	
   

  	
   

  

 

 

LENTUO INTERNATIONAL INC.

 

SHAREHOLDERS’ AGREEMENT

 

THIS SHAREHOLDERS’ AGREEMENT (the “Agreement”)  is made as of February, 2010, by and among:-

 

(1)          MODERN CYBER INTERNATIONAL
LIMITE, a limited liability company incorporated under the laws of
the British Virgin Islands (“Modern Cyber”);

 

(2)                             GAEATEC
INTERNATIONAL LIMITED, a
limited liability company incorporated under the laws of the British Virgin
Islands (“Gaeatec”);

 

(3)                                 VIOLET GOLD INTERNATIONAL LIMITED, a limited liability company incorporated under the
laws of the British Virgin Islands (“Violet Gold”);

 

(4)                                 HOVEREX  INTERNATIONAL LIMITED, a limited liability company incorporated under the laws of the British
Virgin Islands (“Hoverex”);

 

(5)                                 RICH SONIC
INTERNATIONAL LIMITED, a
limited liability company incorporated under the laws of the British Virgin
Islands (“Rich Sonic”);  and

 

(6)                                 ROLL WHEEL
INTERNATIONAL LIMITED, a
limited liability company incorporated under the laws of the British Virgin
Islands (“Roll Wheel”);

 

(collectively, the “Existing Shareholders”, and each an “Existing Shareholder”),

 

(7)                                 NEWMAN INVESTMENTS LIMITED, a limited liability company incorporated under the
laws of Samoa (the “Investor”); and

 

(8)                                 LENTUO INTERNATIONAL INC., a limited liability company incorporated under the
laws of the Cayman Islands (the “Company”)

 

(the foregoing
parties, collectively the “Parties”, and each a “Party”).

 

RECITALS

 

A.            The Company and the Investor entered into a Subscription
Agreement dated as of February, 2010 (the “Subscription Agreement”) pursuant to which
the Investor shall subscribe for certain Shares of the Company.

 

B.            The Parties desire to enter into this Agreement to
regulate the management of the Company.

 

THE PARTIES AGREE AS
FOLLOWS:

 

1.             Certain Definitions.  As
used in this Agreement, the following terms have the following respective
meanings:

 

“Adherence
Deed”  means an
adherence deed in the form attached hereto as Exhibit A.

 

“Affiliate”  means, in respect of a Person, any other Person that,
directly or indirectly, through one or more intermediaries, Controls, is
Controlled by, or is under common Control with, such Person, and (a) in
the case of a natural Person, shall include, without limitation, such Person’s
spouse, parents, children, siblings, mother-in-law and father-in-law and
brothers 

 

1

 

and sisters-in-law, (b) in the case of the
Investor, shall include any Person who holds Shares as a nominee for the
Investor, (b) for the purpose of Section 9.3(e) only, in respect
of the Investor, shall also include (i) any shareholder of the Investor, (ii) any
entity or individual which has a direct and indirect interest in the Investor
(including, if applicable, any general partner or limited partner) or any fund  manager thereof; (iii) any Person that directly or
indirectly Controls, is Controlled by, under common Control with, or is managed
by the Investor or its fund manager, (iv) the relatives of any individual
referred to in (ii) above, and (v) any trust Controlled by or held
for the benefit of such individuals.

 

“Agreement”  has the meaning set forth in the preamble to this
Agreement.

 

“Annual
Plans” means annual plans in relation to the
operations of the Group to be approved by the Board.

 

“Board”  means the Company’s board of directors as constituted from
time to time.

 

“Business
Day”  means any day,
excluding Saturdays and Sundays, on which banks in Hong Kong and the People’s
Republic of China are open for business during their normal business hours.

 

“Commission”  means the United States Securities and Exchange Commission,
as constituted from time to time, or any successor agency charged with administering
the Securities Act and/or the Exchange Act.

 

“Control”  with
respect to any third Person shall have the meaning ascribed to it in Rule 405
under the U.S. Securities Act of 1933, as amended, and shall be deemed to exist
in favour of any Person (a) when such Person holds at least twenty percent
(20%) of the outstanding voting securities of such third Person and no other
Persons owns a greater number of outstanding voting securities of such third
Person or (b) over other members of such Person’s immediate family.  Immediate family members include, without
limitation, a Person’s spouse, parents, children, siblings, mother-in-law and
father-in-law and brothers and sisters-in-law. 
The terms “Controlling”  and “Controlled”
have meanings correlative to the foregoing.

 

“Co-Sale
Right”  has the
meaning set forth in Section 5.2 of this Agreement.

 

“Co-Sale
Ratio”  with respect
to the Investor, means the ratio of (a) the number of Ordinary Share owned
by the Investor on the date of the Transfer Notice to (b) the total number
of Ordinary Share owned by the Transferring Shareholder and the Investor on the
date of the Transfer Notice.

 

“Group” or “Group Companies”
means the PRC Holding Company, the PRC Operating Companies, the Company and its
respective Subsidiaries from time to time, and “Group Company” means any one of them.

 

“Investor” means the
Investor, and its respective assignees, transferees or successors.

 

“Investor Consent”
means, at the time of its determination, the prior written consent of the
Investor.

 

“Issuance Notice” has the meaning set forth in
Section 4.2 of this Agreement.

 

“Liens”  means
any mortgage, pledge, lien, charge, assignment, hypothecation, or other
agreement or arrangement which has the same or a similar effect to the granting
of security

 

2

 

“New Securities” means
any share capital of the Company (including reissued shares), whether
authorized or not, and any rights, options, or warrants to purchase or
subscribe share capital of the Company, any notes, debentures or shares and
securities of any type whatsoever that are ultimately, or may become,
convertible into capital stock of the Company issued by the Company.

 

“Ordinary
Shares”  means the
ordinary shares, par value US$1.00 per share of the Company.

 

“Person”  means any individual, sole proprietorship, partnership,
firm, joint venture, estate, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, entity or governmental
authority or other entity of any kind or nature.

 

“PRC”  means the People’s Republic of China, excluding the Hong
Kong Special Administrative Region, Macau Special Administrative Region and the
Islands of Taiwan.

 

“PRC
Holding Company”
means Beijing Lentuo Electron
Mechanical Group Co., Ltd. , a limited liability company incorporated under the
laws of the PRC.

 

“PRC
Operating Companies” means (1), a limited liability company incorporated under the
laws of the PRC, (2), a limited liability company incorporated under the
laws of the PRC, (3), a limited liability company incorporated under the
laws of the PRC, (4), a limited liability company incorporated under the
laws of the PRC, (5), a limited liability company incorporated under the
laws of the PRC, (6), a limited liability company incorporated under the
laws of the PRC, and (7), a limited liability company incorporated under the
laws of the PRC; each a “PRC
Operating Company”.

 

“Pro
Rata Ratio”  with respect
to any Shareholder, means the ratio of: (a) the total number of Ordinary
Share held by such Shareholder to (b) the total number of Ordinary Share
held by all Shareholders.

 

“Pro
Rata Share”  with respect
to any Shareholder, means the ratio of: (a) the total number of Ordinary
Share held by such Shareholder immediately before the proposed allotment and
issue of New Securities to (b) the total number of Ordinary Share held by
all Shareholders of the Company immediately before the proposed allotment and
issue of New Securities.

 

“Qualified
IPO”  means the
closing of the Company’s first firm commitment, underwritten public offering of
Shares approved unanimously by the Board in connection with which Shares (or
the shares of a company of which the Company is a wholly owned subsidiary
established for the purpose of listing (the “Listco”))
is listed and becomes publicly traded on an internationally recognized
securities exchange acceptable to the Investor or the NASDAQ National Market or
the issue or transfer of shares in a company whose shares are listed on an
internationally recognized stock exchange acceptable to the Investor or on
NASDAQ National Market for which shares approval for listing and trading has
been duly obtained and which shares are issued or transferred in consideration
of the acquisition of the Shares of the Company or the shares of the Listco,
provided, however, that: (X) such
transaction or listing shall have a valuation of the Listco of not less than
US$300 million 

 

3

 

(calculated by multiplying the offering price
per share with the total number of Shares issued by the Company or the Listco
immediately after the listing); (Y) such
number of shares offered shall not be lower than the minimum public float
requirement prescribed in the listing rules of the securities exchange
where listing is sought; and (Z) the
shares held by the Investor shall not be subject to any lock-up other than (i) regulatory
lock-up as may be required by the securities exchange where listing is sought;
and (ii) shortest lock-up period proposed by the underwriters solely for
the purpose of marketing the offering of the Shares.

 

“Related
Party”  shall mean,
with respect to any Person, (a) any Affiliate of such Person, (b) each
Person that serves as a director, officer, partner, executor, or trustee of such
Person (or in any other similar capacity), (c) any Person with respect to
which such Person serves as a general partner or trustee (or in any other
similar capacity), (d) any Person that has direct or indirect beneficial
ownership of voting securities or other voting interests representing at least
ten percent (10%) of the outstanding voting power or equity securities or other
equity interests representing at least ten percent (10%) of the outstanding
equity interests (a “Material Interest”)  in such Person, and (e) any Person in which such
Person holds a Material Interest.

 

“Related
Transaction” means the transactions between any of the Group
Companies and its Related Parties.

 

“Reserved
Matters”  means the
matters specified in Section 7.1, which shall not be consummated without
Investor Consent.

 

“Right
of First Offer”  has the
meaning set forth in Section 4.1 of this Agreement.

 

“Right
of First Refusal has the meaning set forth in Section 5.1
of this Agreement.

 

“Securities
Act”  means the
United States Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder, all as from time to time
in effect.

 

“Senior
Manager”  means, with
respect to any Group Company, the chief executive officer of such company and
any member of management reporting directly to the board of directors or chief
executive officer of such company.

 

“Share”  means any Ordinary Share.

 

“Shareholders”  means the holders of Shares, and “Shareholder”  means any one of them.

 

“Stock”  has the meaning set forth in Section 5.1 of this
Agreement.

 

“Subsidiary”  means, with respect to any Person that is not an
individual, any corporation, partnership, or other entity, Controlled by such
Person.

 

“Transfer
Notice”  has the
meaning set forth in Section 5.1 of this Agreement.

 

“Transferring
Shareholders”  has the
meaning set forth in Section 5.1 of this Agreement.

 

2.             Business.

 

The business of the Group Companies shall be
sale, maintenance and repair, rent of automobiles, brokerage of second-hand
automobiles and any other business activities relating to automobiles.

 

4

 

3.             Election of Directors; Management.

 

3.1          Board Composition.  The number of persons comprising
the Board shall be nine (9).  The
Investor shall be entitled to nominate, and to remove from office and replace
one (1) non-executive director of the Company and PRC Holding Company (the
“Investor Representative”).  The Investor Representative shall have the
right to appoint alternate or proxy to attend any meeting of the Board and to
vote on matters before the Board on behalf of the Investor by which he was
nominated.  The Investor shall procure
the Investor Representative to resign from its office of the non-executive
director of the Company and PRC Holding Company if its shareholding in the
Company is less than 5% of the total issued and outstanding share capital of
the Company

 

3.2          Meetings of the Board;
Quorum.  The Board shall meet
at least once every three (3) calendar months.  A quorum for any meeting of the Board shall
consist of four (4) Directors present in person or by telephone or video
conference. If, within one hour from the time of the meeting specified in the
notice given pursuant to Section 3.3, such a quorum is not present, the
meeting shall be adjourned to the same day in the following week at the same
time and place and, if at such adjourned meeting, such a quorum is still not
present, those Directors present (including the Investor Representative) shall
be deemed a quorum and may, subject to Section 7, transact the business
for which the adjourned meeting was originally convened.

 

3.3          At least three (3) Business Days’ written notice shall
be given to each Director of any meeting of the Board unless all the Directors
approve a shorter notice period.  Any
notice shall include an agenda identifying in reasonable detail the matters to
be discussed at the meeting together with copies of any relevant papers to be
discussed at the meeting.  If any matter
is not identified in reasonable detail in the agenda, the Board shall not
decide upon it, unless all Directors agree in writing.  No amendments or additions shall be made to
such agenda following such delivery without the unanimous consent of all the
Directors.  Minutes of each meeting of
the Board shall be sent to each Director within thirty (30) days of the
conclusion of such meeting.

 

3.4          The chairman of the Board (“Chairman”)  shall be appointed by the Board and shall have a term of
office determined by the Board.  The
Chairman shall preside, or in his absence, the Board may by a simple majority
vote to elect one of the Directors to preside temporarily, as chairman of all
meetings of the Board and of the meetings of the Shareholders, but shall not
have a casting vote in the event of an equality of votes.

 

3.5          Matters arising at any meeting of the Board shall be
decided by a simple majority of votes, provided that any action or resolution
of the Directors to approve, effect or otherwise consummate any of the
following matters on behalf of the Company shall require the affirmative vote
of a simple majority of the Board, including the affirmative vote of the
Investor Representative:

 

(a)           Make any distribution of profits to the Shareholders by
way of interim or final dividend, capitalization of reserves or otherwise.

 

(b)           Settle or alter the terms of any profit sharing scheme or
any employee share option or share participation scheme.

 

(c)           Amend the accounting policies previously adopted, change
the fiscal or financial year of the Company.

 

(d)           Appoint or change the auditors of any Group Company.

 

(e)           Change the number of persons comprising the Board.

 

5

 

(f)            Increase or reduce the power of the Board.

 

(g)           Acquire any investment or incur any commitment, or acquire
any share capital or other securities of any body corporate, or establish any
brands not within the Annual Plans, and the relevant amount of each single
transaction or a series of related transactions exceeds 5% of the audited
consolidated total assets of the Company as at the end of the latest financial
year.

 

(h)           Borrow any money or obtain any financial facilities from
any external third parties not within the Annual Plans, and exceeding the sum
of RMB10,000,000 for any single borrowings or a total aggregate amount of
RMB50,000,000 in respect of all such borrowings obtained in any financial year.

 

(i)            Provide any guarantee or undertaking in favour of a third
party or any other act which may result in contingent liabilities of the
Company not within the Annual Plans, and exceeding the sum of RMB10,000,000 for
any single transaction or a total aggregate amount of RMB30,000,000 in respect
of all such transactions in any financial year.

 

(j)            Create, allow to arise or issue any debenture
constituting a pledge, lien or charge (whether by way of fixed or floating
change, mortgage encumbrance or other security) security interest, guarantee,
claim, restriction, equity or encumbrances of any nature whatsoever on any of
the property, undertaking, assets or rights of any Group Company.

 

(k)           Approve or make adjustments or modifications to terms of
transactions involving the interest of any director or shareholder of any Group
Company, including but not limited to the making of any loans or advances,
whether directly or indirectly, or the provision of any guarantee, indemnity or
security for or in connection with any indebtedness of liabilities of any
director or shareholder of any Group Company.

 

(l)            Increase, reduce or cancel the authorized or issued share
capital of any Group Company or issue, allot, purchase or redeem any shares or
securities convertible into or carrying a right of subscription in respect of
shares or any share warrants or grant or issue any options rights or warrants
or which may require the issue of shares in the future or do any act which has
the effect of diluting or reducing the effective shareholding of the Investor
in the Company or their effective interest in any Group Company.

 

(m)          Sell, transfer, license, charge, encumber or otherwise
dispose of any trademarks, patents or other intellectual property owned by any
Group Company. For the avoidance of any doubt, the existing authorised use of
an intellectual property shall be valid until its expiry.

 

(n)           Make any alteration or amendment to the Memorandum of
Association or Articles of Association of the Company, or the constitutional
documents of any other Group Company.

 

(o)           Dispose of or dilute the Company’s direct or indirect
interest in any of its Subsidiaries not within the Annual Plans, and the
relevant amount of each individual transaction or a series of related
transactions exceeds 5% of the audited consolidated total assets of the Company
as at the end of the latest financial year.

 

(p)           Cease to conduct or carry on the business of any Group
Company as now conducted or change any part of its business activities.

 

(q)           Sell or dispose of the whole or a material part of the
undertaking, goodwill or assets of any Group Company.

 

6

 

(r)            Pass any resolution for the winding up or dissolution of
any Group Company or undertake any merger, reconstruction or liquidation
exercise concerning any Group Company or apply for the appointment of a
receiver, manager or judicial manager or like officer in respect of any Group
Company.

 

(s)            Approve any transfer of shares or interests in any Group
Company.

 

(t)            Commence, institute, defend or maintain any litigation,
legal proceedings, arbitration, mediation or any other dispute resolution
procedures which are material to the Group.

 

(u)           Enter into any abnormal or unusual contract or contract
outside the ordinary course of business of the Company which are material to
the Group.

 

(v)           Incur of any capital expenditure by the Company not within
the Annual Plans, exceeding the sum of RMB10,000,000 for any single transaction
or a total aggregate amount of RMB30,000,000 in respect of any financial year.

 

(w)          Matters in relation to initial public offering of any
interests of the Company, including but not limited to time, price, listing
place, except for the Qualified IPO.

 

(x)           Initial public offering of any securities of the Company
(except for the Qualified IPO), including but not limited to shares, bonds
and/or convertible bonds.

 

(y)           Conduct Related Transaction otherwise than those in the
Annual Plans exceeding the sum of RMB10,000,000 for any single Related
Transaction or a total aggregate amount of RMB30,000,000 in respect of all
Related Transaction within consecutive 12 months.

 

3.6          Written Resolution.  A resolution signed in writing by
all the Directors (which resolution may consist of several counterparts) shall
be as valid and effective as if passed at a duly convened meeting of the Board.

 

4.             Right of First Offer.

 

4.1          Right of First Offer and
Right of Oversubscription With Respect to New Securities.  Subject to the provisions of
Sections 4.2 and 4.3, the Company grants to each of the Shareholders the right
(the “Right of First Offer”)  to subscribe its Pro Rata Share of New Securities which the
Company may, from time to time, propose to allot and issue and the right of
oversubscription if any Shareholder elects not to subscribe its Pro Rata Share
of such New Securities (the “Oversubscription Right”).  The Company shall
offer to the Shareholders for subscription their Pro Rata Share of the New
Securities on the same terms and at the same price at which the Company
proposes to allot and issue the New Securities. 
The New Securities which have not been accepted for subscription by any
of the Shareholders who fail to exercise their rights of first offer or fail to
complete the subscription of their Pro Rata Shares shall first be offered to
the Shareholders who have exercised their Oversubscription Rights within the
Issuance Notice Period pro rata to the number of additional New Securities
which such Shareholders have agreed to take up above their Pro Rata Shares
provided that no Shareholder shall be obliged to subscribe more New Securities
above its Pro Rata Share than such additional New Securities it indicates its
agreement to take up under this Section 4.1.  Thereafter the Company shall have the right
to sell all remaining New Securities pursuant to Section 4.3 of this
Agreement.

 

4.2          Issuance Notice.  In the event the Company proposes
to issue New Securities, it shall give each of the Shareholders a written
notice (the “Issuance Notice”)  of its intention, describing the type of New Securities,
the price, the terms upon which the Company proposes 

 

7

 

to issue the same, and an offer for
subscription the number of shares which that each of the Shareholders is
entitled to subscribe pursuant to Section 4.1 of this Agreement, and a
statement that each of the Shareholders shall have twenty (20) days from the
date of receipt of the Issuance Notice to accept the offer for subscription
under Issuance Notice (the “Issuance Notice Period”).  Within the Issuance
Notice Period, each of the Shareholders may elect to subscribe its Pro Rata
Share of the New Securities and to exercise its Oversubscription Right for the
price and upon the terms specified in the issuance Notice by: (a) giving
written notice to the Company within the Issuance Notice Period, (b) forwarding
payment for its Pro Rata Share of New Securities to the Company if immediate
payment is required by the terms of the Issuance Notice, and (c) if the
Oversubscription Right is exercised, the amount of additional New Securities it
agrees to subscribe above its Pro Rata Share.

 

4.3          Subscription of New
Securities.  In the event any
of the Shareholders fails to exercise its right of first offer within the
Issuance Notice Period and subject to the other Shareholders’ Oversubscription
Rights, the Company shall have ninety (90) days thereafter to enter into an
agreement (pursuant to which the subscription of New Securities covered by the
Issuance Notice shall be closed, if at all, within sixty (60) days after the
date of that agreement) to allot and issue the New Securities in respect of
which the rights of the Shareholders were not exercised, at a price and upon
general terms no more favourable to the subscriber of the New Securities than
specified in the Issuance Notice.  In the
event the Company has not entered into an agreement with regards to the New Securities
within this ninety (90) day period (or allotted and issued New Securities in
accordance with the foregoing within sixty (60) days from the date of the
agreement), the Company shall not thereafter allot or issue any New Securities
without first offering the New Securities to each of the Shareholders in the
manner provided above.

 

4.4          Validity. The
Right of First Offer under this Section 4 shall expire upon the Qualified
IPO.

 

5.             Right of First Refusal; Co-Sale Right.

 

5.1          Right of First Refusal.

 

(a)           Subject to the provisions of this Section 5.1 of this
Agreement, if any Existing Shareholder (the “Transferring
Shareholder”) proposes to sell or otherwise transfer any
Ordinary Shares or other voting securities of the Company now owned or
subsequently acquired by the Transferring Shareholder (the “Stock”)  or
any interest therein to any person or entity then the Investor shall have a
right of first refusal (the “Right of First Refusal”)  to purchase the Stock proposed to be sold or otherwise
transferred.

 

(b)           The Transferring Shareholder shall give a written notice
(the “Transfer Notice”)  to the Investor describing fully the proposed transfer,
including the number of Shares proposed to be transferred, the proposed
transfer price, the name and address of the proposed transferee.  The Transfer Notice shall be signed by the
Transferring Shareholder, accompanied by a written certification by such
Transferring Shareholder that the proposed transferee is a bona fide purchaser
and the Transfer Notice constitutes a binding commitment of the Transferring Shareholder
and the proposed transferee, with or without conditions, for the transfer of
that Stock subject to the Right of First Refusal of the Investor.

 

(c)           The Investor shall then have the right to purchase its Pro
Rata Ratio of the Stock subject to the Transfer Notice at a price per share
equal to the proposed per share transfer price, by delivery of a notice of
exercise of its Right of First Refusal within five (5) days after the date
the Transfer Notice is delivered to the Remaining Shareholders.

 

8

 

5.2          Co-Sale Right.  If the Transferring Shareholder is
the Existing Shareholder, then the Investor who does not exercise its Right of
First Refusal pursuant to Section 5.1 above shall have the right,
exercisable upon written notice to the Transferring Shareholder within five (5) days
after the date the Transfer Notice is delivered to the Investor, to participate
in the sale of Stock on substantially the same terms and conditions as the
Transferring Shareholder to the extent of the Investor’s Co-Sale Ratio with
respect to its Stock (the “Co-Sale Right”).  Notice of exercise of a Co-Sale Right shall
indicate the number of shares the Investor wishes to sell under its Co-Sale
Right.  The Investor may elect to sell
all or some of the shares then held by it up to the Investor’s Co-Sale Ratio
with respect to its Stock.  To the extent
the Investor exercises its Co-Sale Right in accordance with the terms and
conditions set forth in this Section 5.2, the Transferring Shareholder (i) may
only sell its shares if the proposed transferee completes the purchase of the
shares which the Investor seeks to sell pursuant to the exercise of its Co-Sale
Right, and (ii) shall, at the request of the Investor, reduce the number
of shares to be sold by the number of shares that the Investor wishes to sell
under its Co-Sale Right.

 

(a)           Delivery of
Certificates.  The Investor
shall effect its participation in the sale by promptly delivering to the
Transferring Shareholder for transfer to the prospective purchaser one or more
certificates, properly endorsed for transfer, which represent the type and
number of shares which the Investor elects to sell.  The Investor shall be required to give any
representations and warranties to the purchaser other than a representation and
warranty that such Stock is sold by the Investor as beneficial owner free from
Liens other than those under this Agreement, the Memorandum of Association and
the Articles of Association of the Company.

 

(b)           Sales Proceeds.  The stock certificate or
certificates that the Investor delivers to the Transferring Shareholder
pursuant to Section 5.2(a) shall be transferred to the prospective
purchaser in consummation of the sale of the Stock pursuant to substantially
the same terms and conditions as specified in the Transfer Notice, and the
Transferring Shareholder shall upon receiving the same from the prospective
purchaser concurrently remit to the Investor that portion of the sale proceeds
to which the Investor is entitled by reason of its participation in the sale.  To the extent that any prospective purchaser
or purchasers prohibits assignment or otherwise refuses to purchase shares or
other securities from the Investor, the Transferring Shareholder shall not sell
to the prospective purchaser or purchasers any Stock unless and until,
simultaneously with the sale, the Transferring Shareholder purchases those
shares or other securities from the Investor.

 

5.3          Sale by Transferring
Shareholder.  If and to the
extent that the Investor does not exercise its Right of First Refusal or its
Co-Sale Right in aggregate with respect to the sale of all the Stock subject to
the Transfer Notice within the relevant prescribed period, the Transferring
Shareholder may, not later than 90 days following delivery to the Company and
the Investor of the Transfer Notice, conclude a bona fide transfer of all of
the Stock covered by the Transfer Notice on terms and conditions not more
favourable to the transferee or transferor than those described in the Transfer
Notice.  Any proposed transfer on terms
and conditions more favourable than those described in the Transfer Notice, as
well as any subsequent proposed transfer of any Stock by the Transferring
Shareholder, shall again be subject to the Right of First Refusal and Co-Sale
Right of the Investor and shall require compliance by the Transferring
Shareholder with the procedures described in this Section 5.

 

5.4          No Adverse Effect.  The Investor’s exercise or
non-exercise of the Right of First Refusal or the Co-Sale Right shall not
adversely affect their rights to participate in subsequent transfers of Stock
by the Transferring Shareholder subject to the provisions of this Section 5.

 

9

 

6.             Meetings of Shareholders

 

6.1          Meetings of the Shareholders shall be held at least once
every twelve (12) calendar months and, subject to Section 7, any matter
arising at any meeting of the Shareholders shall be decided by votes of not
less than a majority of all the issued and outstanding Ordinary Shares of the
Company voting in favour of such matter and the quorum necessary for the
transaction of business at a meeting of the Shareholders shall be at least four
(4) Shareholders, each present in person or by proxy together holding not
less than sixty percent (60%) of all the issued and outstanding Ordinary Shares
of the Company.

 

6.2          If, within one (1) hour from the time of the meeting
specified in the notice given pursuant to Section 6.3, the quorum
specified in Section 7.1 is still not present, the meeting shall stand
adjourned to the same day in the following week at the same time and place and,
if at such adjourned meeting, such a quorum is still not present those
Shareholders present, provided that there are at least two (2) Shareholders
present in person or by proxy shall be deemed a quorum and may, subject to Section 7,
transact the business for which the adjourned meeting was originally
convened.  The Parties acknowledge that
the quorum provisions in this Section 6.2 may be modified or amended in
connection with subsequent equity financings of the Company to the extent
agreed with the Investor in such subsequent financings and the Shareholders.

 

6.3          At least ten (10) days written notice of any meeting
of the Shareholders shall be given to each member of the Company by the Board
unless all Shareholders approve a shorter notice period.  Any notice shall include an agenda
identifying in reasonable detail the matters to be discussed at the meeting
together with copies of any relevant papers to be discussed at the
meeting.  If any matter is not identified
in reasonable detail, the Shareholders shall not decide upon it, unless all
Shareholders agree in writing.

 

6.4          Any member of the Company may participate in any meeting of
the Shareholders by telephone, video conferencing or other means by which all
participants may speak and hear each other, and any Member so participating
shall be deemed to be present in person at such meeting.

 

6.5          A resolution in writing (in one or more counterparts)
signed by all Shareholders for the time being entitled to receive notice of and
to attend and vote at meetings of the Shareholders shall be as valid and
effective as if the same had been passed at a meeting of the Shareholders duly
convened and held.

 

7.             Covenants

 

7.1          Matters requiring Investor
Consent.  In addition to any
other rights provided by law and the provisions of the Articles of Association
or Memorandum of Association of the Company, the Company shall not, and shall
procure that the Group Companies shall not, and the Existing Shareholders shall
procure that the Existing Shareholders and the Group Companies shall not,
without first obtaining the consent of the Investor, effect or otherwise
consummate any of the following:

 

(a)           Make any distribution of profits to the Shareholders by
way of interim or final dividend, capitalization of reserves or otherwise.

 

(b)           Settle or alter the terms of any profit sharing scheme or
any employee share option or share participation scheme.

 

(c)           Amend the accounting policies previously adopted, change
the fiscal or financial year of the Company.

 

(d)           Appoint or change the auditors of any Group Company.

 

10

 

(e)           Change the number of persons comprising the Board.

 

(f)            Increase or reduce the power of the Board.

 

(g)           Acquire any investment or incur any commitment, or acquire
any share capital or other securities of any body corporate, or establish any
brands not within the Annual Plans, and the relevant amount of each single
transaction or a series of related transactions exceeds 5% of the audited
consolidated total assets of the Company as at the end of the latest financial
year.

 

(h)           Borrow any money or obtain any financial facilities from
any external third parties not within the Annual Plans, and exceeding the sum
of RMB10,000,000 for any single borrowings or a total aggregate amount of
RMB50,000,000 in respect of all such borrowings obtained in any financial year.

 

(i)            Provide any guarantee or undertaking in favour of a third
party or any other act which may result in contingent liabilities of the
Company not within the Annual Plans, and exceeding the sum of RMB10,000,000 for
any single transaction or a total aggregate amount of RMB30,000,000 in respect
of all such transactions in any financial year.

 

(j)            Create, allow to arise or issue any debenture
constituting a pledge, lien or charge (whether by way of fixed or floating
change, mortgage encumbrance or other security) security interest, guarantee,
claim, restriction, equity or encumbrances of any nature whatsoever on any of
the property, undertaking, assets or rights of any Group Company.

 

(k)           Approve or make adjustments or modifications to terms of
transactions involving the interest of any director or shareholder of any Group
Company, including but not limited to the making of any loans or advances,
whether directly or indirectly, or the provision of any guarantee, indemnity or
security for or in connection with any indebtedness of liabilities of any
director or shareholder of any Group Company.

 

(l)            Increase, reduce or cancel the authorized or issued share
capital of any Group Company or issue, allot, purchase or redeem any shares or
securities convertible into or carrying a right of subscription in respect of
shares or any share warrants or grant or issue any options rights or warrants
or which may require the issue of shares in the future or do any act which has
the effect of diluting or reducing the effective shareholding of the Investor
in the Company or their effective interest in any Group Company.

 

(m)          Sell, transfer, license, charge, encumber or otherwise
dispose of any trademarks, patents or other intellectual property owned by any
Group Company. For the avoidance of any doubt, the existing authorised use of
an intellectual property shall be valid until its expiry.

 

(n)           Make any alteration or amendment to the Memorandum of
Association or Articles of Association of the Company, or the constitutional
documents of any other Group Company.

 

(o)           Dispose of or dilute the Company’s direct or indirect
interest in any of its Subsidiaries not within the Annual Plans, and the
relevant amount of each individual transaction or a series of related
transactions exceeds 5% of the audited consolidated total assets of the Company
as at the end of the latest financial year.

 

(p)           Cease to conduct or carry on the business of any Group
Company as now conducted or change any part of its business activities.

 

11

 

(q)           Sell or dispose of the whole or a material part of the
undertaking, goodwill or assets of any Group Company.

 

(r)            Pass any resolution for the winding up or dissolution of
any Group Company or undertake any merger, reconstruction or liquidation
exercise concerning any Group Company or apply for the appointment of a
receiver, manager or judicial manager or like officer in respect of any Group
Company.

 

(s)            Approve any transfer of shares or interests in any Group
Company.

 

(t)            Commence, institute, defend or maintain any litigation,
legal proceedings, arbitration, mediation or any other dispute resolution
procedures which are material to the Group.

 

(u)           Enter into any abnormal or unusual contract or contract
outside the ordinary course of business of the Company which are material to
the Group.

 

(v)           Incur of any capital expenditure by the Company not within
the Annual Plans, exceeding the sum of RMB10,000,000 for any single transaction
or a total aggregate amount of RMB30,000,000 in respect of any financial year.

 

(w)          Matters in relation to initial public offering of any
interests of the Company, including but not limited to time, price, listing
place, except for the Qualified IPO.

 

(x)           Initial public offering of any securities of the Company
(except for the Qualified IPO), including but not limited to shares, bonds
and/or convertible bonds.

 

(y)           Conduct Related Transaction otherwise than those in the
Annual Plans exceeding the sum of RMB10,000,000 for any single Related
Transaction or a total aggregate amount of RMB30,000,000 in respect of all
Related Transaction within consecutive 12 months.

 

7.2          Protection of Reserved
Matters; Each of the Company and the Shareholders jointly and
severally undertakes to the Investor that it shall exercise all its rights and
powers in relation to the Company and the Group Companies so as to procure
that, subject to applicable law, no resolutions to approve, authorize and
ratify any of the Reserved Matters.

 

7.3          Control of Directly Owned
Subsidiaries.  The Company
will exercise or refrain from exercising any voting rights or other powers of
Control which it may have in or over any of its directly owned subsidiaries
(each a “Directly Owned Subsidiary”)  so as to ensure that none of the actions set out in Section 7.1
will be taken by any such Directly Owned Subsidiary without the same prior
approval as required under Section 7.1, insofar as it is not inconsistent
with or contrary to the laws and regulations of the jurisdiction in which such
Directly Owned Subsidiary is organized. 
For this purpose, references in Section 7.1 to the Company shall be
construed as references to such Directly Owned Subsidiary.

 

7.4          Control of Indirectly
Owned Subsidiaries.  The
Company will cause each of its Directly Owned Subsidiaries to exercise or
refrain from exercising any voting rights or other powers of Control (whether direct
or indirect) which it may have in or over any company which is a subsidiary of
any Directly Owned Subsidiary (each an “Indirectly Owned
Subsidiary”)  so as to
ensure that none of the actions set out in Section 7.1 will be taken by
such Indirectly Owned Subsidiary without the same prior approval as required
under Section 7.1, insofar as it is not inconsistent with or contrary to
the laws and regulations of the jurisdiction in which such Indirectly Owned
Subsidiary is organized.  For this
purpose, references in Section 7.1 to the Company shall be construed as
references to such Indirectly Owned Subsidiary.

 

12

 

7.5          Obtaining a Qualified
IPO.  The Company and the
Existing Shareholders undertake to use their best efforts to cause a Qualified
IPO on or prior to 31 December 2010.

 

7.6          Non-Competition. Each
Existing Shareholder undertakes to other Shareholders that the Company is and
will continue to be its sole operating entity carrying out the current business activities of the Company.

 

7.7          Change of Control. Subject to the Investor Consent, the Existing Shareholders shall remain
their control over the Company.

 

8.             Miscellaneous.

 

8.1          Governing Law.  This Agreement shall be governed
by, and construed in accordance with, the laws of the Hong Kong Special
Administrative Region, excluding those laws that direct the application of the
laws of another jurisdiction.

 

8.2          Dispute Resolution.

 

(a)           Any dispute, controversy or claim arising out of or
relating to this Agreement, or the interpretation, breach, termination or
validity hereof, shall be resolved through consultation.  Such consultation shall begin immediately
after one party hereto has delivered to the other parry hereto a written
request for such consultation.  If within
30 days following the date on which such notice is given the dispute cannot he
resolved, the dispute shall be submitted to arbitration upon the request of
either party with notice to the other.

 

(b)           The arbitration shall be conducted in Hong Kong under the
auspices of the Hong Kong International Arbitration Centre (the “Centre”).  There shall be three
arbitrators.  Each opposing party to a
dispute shall be entitled to appoint one arbitrator, and the third arbitrator
shall be jointly appointed by the disputing parties or, failing which the
Centre shall appoint the third arbitrator.

 

(c)           The arbitration proceedings shall be conducted in
English.  The arbitration tribunal shall
apply the UNCITRAL Arbitration Rules as administered by the Centre at the
time of the arbitration.

 

(d)           The arbitrators shall decide any dispute submitted by the
parties to the arbitration strictly in accordance with the substantive laws of
Hong Kong and shall not apply any other substantive law.

 

(e)           Each party shall cooperate with the other in making full
disclosure of and providing complete access to all information and documents
requested by the other in connection with such arbitration proceedings, subject
only to any confidentiality obligations binding on such party.

 

(f)            The award of the arbitration tribunal shall be final and
binding upon the disputing parties, and the prevailing party may apply to a
court of competent jurisdiction for enforcement of such award.

 

(g)           Either party shall be entitled to seek preliminary injunctive
relief from any court of competent jurisdiction pending the constitution of the
arbitral tribunal.

 

8.3          Counterparts and Facsimile
Execution.  This Agreement may
be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.  Any counterpart or other
signature delivered by 

 

13

 

facsimile shall be deemed for all purposes as
being a good and valid execution and delivery of this Agreement by that party.

 

8.4          Notices.  Except as may be otherwise
provided herein, all notices, requests, waivers and other communications made
pursuant to this Agreement shall be in writing and shall be conclusively deemed
to have been duly given (a) when hand delivered to the other party; (b) when
printed confirmation sheet verifying successful transmission of the facsimile
is generated by the sender’s machine, when sent by facsimile at the number set
forth below (or hereafter amended by subsequent notice to the parties hereto); (c)
five (5) Business Days after deposit in the mail as certified mail,
receipt requested, postage prepaid and addressed to the other party as set
forth below; or (d) three (3) Business Days after deposit with an overnight
delivery service, postage prepaid, addressed to the parties as set forth below,
provided that the sending party receives a confirmation of delivery from the
delivery service provider.

 

	
  To:

  	
  MODERN CYBER INTERNATIONAL LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tel. No.:

  
	
   

  	
   

  
	
   

  	
  Fax No.:

  
	
   

  	
   

  
	
   

  	
  Attention:

  
	
   

  	
   

  
	
  To:

  	
  GAEATEC INTERNATIONAL LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tel. No.:

  
	
   

  	
   

  
	
   

  	
  Fax No.:

  
	
   

  	
   

  
	
   

  	
  Attention:

  
	
   

  	
   

  
	
  To:

  	
  VIOLET GOLD
  INTERNATIONAL LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tel. No.:

  
	
   

  	
   

  
	
   

  	
  Fax No.:

  
	
   

  	
   

  
	
   

  	
  Attention:

  
	
   

  	
   

  
	
  To:

  	
  HOVEREX INTERNATIONAL LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tel. No.:

  
	
   

  	
   

  
	
   

  	
  Fax No.:

  
	
   

  	
   

  
	
   

  	
  Attention:

  

 

14

 

	
  To:

  	
  RICH SONIC INTERNATIONAL LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tel. No.:

  
	
   

  	
   

  
	
   

  	
  Fax No.:

  
	
   

  	
   

  
	
   

  	
  Attention:

  
	
   

  	
   

  
	
  To:

  	
  ROLL WHEEL INTERNATIONAL LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tel. No.:

  
	
   

  	
   

  
	
   

  	
  Fax No.:

  
	
   

  	
   

  
	
   

  	
  Attention:

  
	
   

  	
   

  
	
  To:

  	
  NEWMAN INVESTMENTS
  LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tel. No.:

  
	
   

  	
   

  
	
   

  	
  Fax No.:

  
	
   

  	
   

  
	
   

  	
  Attention:

  
	
   

  	
   

  
	
  To:

  	
  LENTUO INTERNATIONAL INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tel. No.:

  
	
   

  	
   

  
	
   

  	
  Fax No.:

  
	
   

  	
   

  
	
   

  	
  Attention:

  

 

Each person making a communication hereunder by
facsimile shall promptly confirm by telephone to the person to whom such
communication was addressed each communication made by it by facsimile pursuant
hereto but the absence of such confirmation shall not affect the validity of
any such communication.  A party may
change or supplement the addresses given above, or designate additional
addresses, for purposes of this Section 8.4 by giving the other parties
written notice of the new address in the manner set forth above.

 

8.5          Severability.  In case any provision of this
Agreement shall be invalid, illegal, or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.

 

8.6          Entire Agreement;
Successors and Assigns.  Except
as specifically referenced in this Agreement, this Agreement, together with the
Exhibit to this Agreement, constitute the entire contract among the
Parties with respect to the subject matter of this Agreement.  Any prior or contemporaneous agreement,
discussion, understanding, or correspondence among the parties (including any
prior representations or warranties given by the Parties) regarding the subject
matter of this Agreement is superseded by this Agreement.  Subject to the exceptions specifically set
forth in this Agreement, the terms and conditions of this Agreement shall inure

 

15

 

to the benefit of and be binding upon the
respective executors, administrators, heirs, successors, and assigns of the
Parties to this Agreement.

 

8.7          Conflict with Charter
Documents.  In the event of
any conflict or inconsistency between the provisions of this Agreement and the
provisions of the Company’s Articles or Memorandum of Association or other
constitutional documents, the parties shall, notwithstanding the conflict or
inconsistency, act so as to effect the intent of this Agreement to the greatest
extent possible under the circumstances and shall promptly amend the
conflicting constitutional documents to conform to this Agreement to the
greatest extent possible.

 

8.8          Termination.  The provisions of this Agreement,
save for Sections 1, 2, 8 and 9 and other provisions that by their express
terms survive termination, shall cease to have effect immediately upon a
Qualified IPO and no parties shall have any rights or obligations under these
provisions (save as excepted above) save for any obligations arising in
connection prior to the Qualified IPO.

 

8.9          Liquidation Preference. Immediately prior to the Qualified IPO,
the Investor shall be entitled to receive in preference to the existing
Shareholders an amount of up to US$18,000,000 together with all declared but
unpaid dividends in the event of liquidation.

 

9.             Confidentiality and Announcements.

 

9.1          Disclosure of Terms.  No Party shall, without the prior
written approval of the Investor, make any announcement concerning or otherwise
disclose or divulge any information concerning any Investor’s involvement with
or interest in any Group Company including (without limitation) the subject
matter and the terms and conditions set forth in this Agreement and the
Subscription Agreement, and negotiations relating thereto, which shall be
confidential information (collectively, “Confidential Information”);  provided, however, that the
Investor and the Company may disclose or make announcements with respect to the
amount of funds raised by the Company, and the identity of the Investor.

 

9.2          Confidentiality
Period.  Each Party (other
than the Investor) shall at all times after the date of this Agreement keep
confidential, and not directly or indirectly reveal, disclose or use for any
purpose, any Confidential Information, howsoever received or obtained.

 

9.3          Permitted
Disclosures.  The prohibitions
set out in Sections 9.1 and 9.2 do not apply to:

 

(a)           information which was in the public domain or otherwise
known to a Party (the “Disclosing Party”)  before it was provided to the Disclosing Party by another
Party, or entered the public domain otherwise than as a result of (a) a
breach by the Disclosing Party of this Section 9, or (b) a breach of
a confidentiality obligation by the another person, where such breach was known
to the Disclosing Party;

 

(b)           disclosure of Confidential Information which is legally
compelled by any law, the order of any court, the requirements of a stock
exchange or to obtain tax or other clearances or consents from any relevant
authority that is applicable to the Disclosing Party, and provided that the
Disclosing Party shall promptly provide the other Parties with written notice
of that fact, in accordance with Section 8.4, so that such other Parties
may seek a protective order, confidential treatment or other appropriate
remedy.  In such event, the Disclosing
Party shall furnish only that portion of the Confidential Information which is
legally required and shall exercise reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded such Confidential
Information to the extent requested by the other Parties hereto;

 

16

 

(c)           information disclosed by the Investor to its advisers,
consultants, auditors, directors, officers, employees, stockholders, investors
or insurers;

 

(d)           information disclosed by the Investor to a bona fide
potential purchaser of or investor in the shares in the capital stock of the
Company; or

 

(e)           information disclosed by the Investor Representative to
the Investor that appointed him, or its Affiliates.

 

9.4          Existing Shareholders’
Obligations.  The Existing
Shareholders shall cause the observance of this Section 9 by each Group
Company, shall allow access to Confidential Information only to directors,
officers and employees of the Group Companies whose duties require them to
possess such Confidential Information, and shall take all reasonable steps to
minimize the risk of disclosure of Confidential Information.

 

9.5          Other Information.  The provisions of this Section 9
shall be in addition to, and not in substitution for, the provisions of any
separate nondisclosure agreement executed by any of the Parties hereto with
respect to the transactions contemplated hereby.

 

[Remainder of this page intentionally
left blank]

 

17

 

IN WITNESS WHEREOF,
the parties to this Agreement have executed this Shareholders’ Agreement as of
the day and year first above written.

 

	
   

  	
  MODERN CYBER INTERNATIONAL
  LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hetong Guo

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
				

 

[SHAREHOLDERS’ AGREEMENT
SIGNATURE PAGE]

 

 

	
   

  	
  GAEATEC
  INTERNATIONAL LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jing Yang

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
				

 

[SHAREHOLDERS’ AGREEMENT
SIGNATURE PAGE]

 

 

	
   

  	
  VIOLET
  GOLD INTERNATIONAL LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Miusi Yang

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
				

 

[SHAREHOLDERS’ AGREEMENT
SIGNATURE PAGE]

 

 

	
   

  	
  HOVEREX
  INTERNATIONAL LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Xiaoli Geng

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
				

 

[SHAREHOLDERS’ AGREEMENT
SIGNATURE PAGE]

 

 

	
   

  	
  RICH
  SONIC INTERNATIONAL LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Chuanxin Sun

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
				

 

[SHAREHOLDERS’ AGREEMENT
SIGNATURE PAGE]

 

 

	
   

  	
  ROLL
  WHEEL INTERNATIONAL LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Xueyuan Han

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
				

 

[SHAREHOLDERS’ AGREEMENT
SIGNATURE PAGE]

 

 

	
   

  	
  NEWMAN INVESTMENTS LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Weimin Yin

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
				

 

[SHAREHOLDERS’ AGREEMENT
SIGNATURE PAGE]

 

 

	
   

  	
  LENTUO
  INTERNATIONAL INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hetong Guo

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
				

 

[SHAREHOLDERS’ AGREEMENT
SIGNATURE PAGE]

 

 

EXHIBIT A

 

ADHERENCE
DEED

 

ADHERENCE DEED

 

THIS ADHERENCE DEED is made
the                                        
day of
                                                         by
[       ], a company incorporated in
[     ] with registered number
[     ] whose registered office is at
[       ] (“New
Shareholder”)

 

RECITALS

 

A.            On [    ], 2010, the shareholders of LENTUO
INTERNATIONAL INC. (the “Company”)  entered into a shareholders’ agreement (the “Shareholders’ Agreement”), to which
the substantial form of this Adherence Deed forms A.

 

B.            The New Shareholder is the intended transferee of
[   ] [Ordinary Shares] of par value [US$1.00] each (“Transferred Shares”)  in the capital of the Company from [...] (“Transferor”)  and
in accordance with Section 5 of the Shareholders’ Agreement is executing
this Deed.

 

THIS DEED WITNESSES as follows:

 

1.             Interpretation.  Capitalized
terms not otherwise defined in this Deed shall have the meanings given to then
in the Shareholders’ Agreement.

 

2.             Covenant; Enforceability.  The
New Shareholder hereby ratifies and accedes to the terms of, agrees to be bound
by, and assumes all rights and obligations under the terms and conditions of,
the Shareholders’ Agreement, as if the New Shareholder had been an original
party to the Shareholders’ Agreement in the same capacity as the Transferor; provided,
however, that the New Shareholder shall not have the benefit of any rights
of the Transferor under the Shareholders’ Agreement which are expressed to be
non-transferable by the terms thereof. 
The existing Shareholders shall be entitled to enforce the Shareholders’
Agreement against the New Shareholder.

 

3.             Governing Law.  This
Adherence Deed shall be governed by and construed in all respects in accordance
with the laws of Hong Kong.

 

IN WITNESS WHEREOF this Adherence Deed has been
executed [as a deed] by the New Shareholder on the date set forth above.

 

	
  [NEW SHAREHOLDER]

  	
  )

  
	
  in the presence of:

  	
  )

  

 

 

SUPPLEMENTARY AGREEMENT

 

TO

 

SHAREHOLDERS’ AGREEMENT

 

THIS
SUPPLEMENTARY AGREEMENT TO SHAREHOLDERS’ AGREEMENT (this “Agreement”)  is made as of October 28, 2010, by
and among:

 

(1)                                  LENTUO INTERNATIONAL INC., a limited liability company incorporated under the
laws of the Cayman Islands (the “Company”);

 

(2)                                  GAEATEC INTERNATIONAL LIMITED, a limited liability company incorporated under the
laws of the British Virgin Islands (“Gaeatec”);

 

(3)                                  MODERN CYBER INTERNATIONAL LIMITED, a limited liability company incorporated under the
laws of the British Virgin Islands (“Modern
Cyber”);

 

(4)                                  VIOLET GOLD INTERNATIONAL LIMITED, a limited liability company incorporated under the
laws of the British Virgin Islands (“Violet
Gold”);

 

(5)                                  HOVEREX  INTERNATIONAL
LIMITED, a limited liability company incorporated under the laws of
the British Virgin Islands (“Hoverex”);

 

(6)                                  RICH SONIC INTERNATIONAL LIMITED, a limited liability company incorporated under the
laws of the British Virgin Islands (“Rich
Sonic”);

 

(7)                                  ROLL WHEEL INTERNATIONAL LIMITED, a limited liability company incorporated under the
laws of the British Virgin Islands (“Roll
Wheel”); and

 

(8)                                  NEWMAN INVESTMENTS LIMITED, a limited liability company incorporated under the
laws of Samoa (the “Investor”),

 

(the foregoing parties, collectively the “Parties”, and  each
a “Party”).

 

RECITALS

 

A.            The
Company, Gaeatec, Modern Cyber, Violet Gold, Hoverex, Rich Sonic, Roll Wheel,
and the Investor entered into a Shareholders’ Agreement dated as of
February 2010 (the “Shareholders’
Agreement”), which specifies the regulation over the Company by
the Shareholders and the rights and obligations of each Shareholder following
the consummation of the Investor’s investment in the Company; and

 

B.            Having
agreed to amend relevant provisions in the Shareholders’ Agreement and having
reached agreement on such amendments, the Parties desire to enter into a
written agreement to confirm such amendments.

 

1

 

NOW,
THEREFORE, in consideration of the foregoing premises, the Parties agree as
follows:

 

1.                                       The Parties agree that the definition of “Qualified
IPO” in Article 1. Certain Definitions
in the Shareholders’ Agreement shall be amended to the effect that the listing
of the Listco on a foreign stock exchange resulting in the Listco having a
market capitalization of not less than US$300 million shall be removed from the
conditions for the determination of the Qualified IPO; and

 

2.                                       The Parties
agree that this Agreement shall take effect as of the date of execution and
shall constitute an integral part of the Shareholders’ Agreement upon
execution.  This Agreement shall be
binding upon the Parties unless terminated in writing by the Parties.

 

[Remainder of this
page intentionally left blank]

 

2

 

[Signature
Page]

 

IN
WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their
respective representatives as of the date first above written.

 

 

	
   

  	
  LENTUO
  INTERNATIONAL INC.  

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Hetong Guo

  
	
   

  	
   

  	
   

  
	
   

  	
  GAEATEC
  INTERNATIONAL LIMITED  

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Jing Yang

  
	
   

  	
   

  	
   

  
	
   

  	
  MODERN
  CYBER INTERNATIONAL LIMITED  

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Hetong Guo

  
	
   

  	
   

  	
   

  
	
   

  	
  HOVEREX
  INTERNATIONAL LIMITED  

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Xiaoli Geng

  
	
   

  	
   

  	
   

  
	
   

  	
  VIOLET
  GOLD INTERNATIONAL LIMITED  

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Miusi Yang

  
	
   

  	
   

  	
   

  
	
   

  	
  RICH
  SONIC INTERNATIONAL LIMITED  

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Chuanxin Sun

  
	
   

  	
   

  	
   

  
	
   

  	
  ROLL
  WHEEL INTERNATIONAL LIMITED 

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Xueyuan Han

  
	
   

  	
   

  	
   

  
	
   

  	
  NEWMAN
  INVESTMENTS LIMITED 

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  Weimin
  Yin

  

 

3Exhibit 10.1

 

LENTUO INTERNATIONAL INC.

FORM 2010 SHARE INCENTIVE PLAN

 

1.             Purposes of the Plan.  The purposes of this Plan are:

 

·                  to attract and
retain the best available personnel for positions of substantial
responsibility;

 

·                  to provide
additional incentive to Employees, Directors and Consultants; and

 

·                  to promote the
success of the Company’s business.

 

The
Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options,
Restricted Shares, Share Appreciation Rights, Restricted Share Units,
Performance Units, Performance Shares and Other Share-Based Awards.

 

2.             Definitions.  As used herein, the following definitions
will apply:

 

(a)   “Administrator” means the Board or any
of its Committees as will be administering the Plan, in accordance with Section 4
of the Plan.

 

(b)   “Applicable Laws” means any applicable
legal requirements relating to the administration of and the issuance of
securities under equity securities-based compensation plans, including, without
limitation, the requirements of the laws of the Cayman Islands, Hong Kong, the
People’s Republic of China, U.S. federal and state securities laws, the Code
and the requirements of any stock exchange or quotation system upon which the
Ordinary Shares may be listed or quoted and the applicable laws of any other
country or jurisdiction where Awards are granted under the Plan.  For all purposes of this Plan, references to
statutes and regulations shall be deemed to include any successor statutes or
regulations, where necessary as determined by the Administrator in its sole
discretion.

 

(c)   “Award” means, individually or
collectively, a grant under the Plan of Incentive Stock Options, Nonstatutory
Stock Options, SARs, Restricted Share, Restricted Share Units, Performance
Units, Performance Shares or Other Share-Based Awards.

 

(d)   “Award Agreement” means the written or
electronic agreement setting forth the terms and provisions applicable to each
Award granted under the Plan.  The Award
Agreement is subject to the terms and conditions of the Plan.

 

(e)   “Awarded Shares” means the Ordinary
Shares subject to an Award.

 

(f)    “Board” means the Board of Directors of
the Company.

 

(g)   “Change in Control” means the
occurrence of any of the following events:

 

 

(i)            Any “person” (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3
of the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power represented
by the Company’s then outstanding voting securities;

 

(ii)           The consummation of the sale or disposition by the Company of all or
substantially all of the Company’s assets;

 

(iii)          A change in the composition of the Board occurring within a two-year
period at any time after a Qualified Public Offering, as a result of which
fewer than a majority of the directors are Incumbent Directors.  “Incumbent Directors” means directors
who either (A) are Directors as of the first Qualified Public Offering, or
(B) are elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Incumbent Directors at the time
of such election or nomination (but will not include an individual whose
election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Company);

 

(iv)          The consummation of a merger, amalgamation or consolidation of the
Company with any other corporation or business entity, other than a merger or
consolidation which 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 or its parent) at least fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such
surviving entity or its parent outstanding immediately after such merger or
consolidation; or

 

(v)           The sanction by a court of a scheme of arrangement under the Cayman
Islands Companies Act.

 

Anything
in the foregoing to the contrary notwithstanding, a transaction shall not
constitute a Change in Control if its sole purpose is to change the legal
jurisdiction of the Company’s incorporation or to create a holding company that
will be owned in substantially the same proportions by the persons who held the
Company’s securities immediately before such transaction.  In addition, a sale by the Company of its
securities in a transaction, the primary purpose of which is to raise capital
for the Company’s operations and business activities including, without
limitation, a Qualified Public Offering, shall not constitute a Change in
Control.

 

(h)   “Code” means the U.S. Internal Revenue
Code of 1986, as amended.  Any reference
to a section of the Code herein will be a reference to any successor or amended
section of the Code.

 

(i)    “Committee” means the compensation
committee of the Board or such other committee of Directors or other
individuals satisfying Applicable Laws appointed by the Board in accordance
with Section 4 of the Plan.

 

(j)    “Company” means Lentuo International
Inc., a company incorporated in the Cayman Islands, having its registered
office at Marquee Place, Suite 300, 430 West Bay Road, 

 

2

 

P.O. Box
3502, Grand Cayman KYI-1208, Cayman Islands, British West Indies, or any
successor thereto.

 

(k)   “Consultant” means any person,
including an advisor, engaged by the Company, a Subsidiary or a Parent to
render services to such entity.

 

(l)    “Director” means a member of the Board.

 

(m)  “Disability” means total and permanent
disability as defined in Section 22(e)(3) of the Code, provided that
in the case of Awards other than Incentive Stock Options, the Administrator in
its discretion may determine whether a permanent and total disability exists in
accordance with uniform and non-discriminatory standards adopted by the
Administrator from time to time.

 

(n)   “Dividend Equivalent” means a credit,
made at the discretion of the Administrator, to the account of a Participant in
an amount equal to the value of dividends paid on one Ordinary Share for each
Share represented by an Award held by such Participant.

 

(o)   “Employee” means any person, including
Directors, employed by the Company or any Parent or Subsidiary of the
Company.  Neither service as a Director
nor payment of a director’s fee by the Company or any Parent or Subsidiary of
the Company will be sufficient to constitute “employment” by the Company.

 

(p)   “Exchange Act” means the U.S.
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

 

(q)   “Exchange Program” means a program
under which (i) outstanding Awards are surrendered or canceled in exchange
for Awards of the same type (which may have lower exercise prices and different
terms), Awards of a different type, and/or cash, and/or (ii) the exercise
price of an outstanding Award is reduced. 
The terms and conditions of any Exchange Program will be determined by
the Administrator in its sole discretion.

 

(r)    “Fair Market Value” means, as of any
date, the value of Shares determined as follows:

 

(i)            If the Ordinary Shares are listed on any established stock exchange or a
national market system, including, without limitation, the Nasdaq Global Market
or the Nasdaq Capital Market, its Fair Market Value will be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or system for the day of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;

 

(ii)           If the Ordinary Shares are regularly quoted by a recognized securities
dealer but selling prices are not reported, the Fair Market Value of an
Ordinary Share will be the mean between the high bid and low asked prices for
the Ordinary Shares for the day of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable; or

 

3

 

(iii)          In the absence of an established market for the Ordinary Shares, the Fair
Market Value will be determined in good faith by the Administrator; provided
that with respect to Options granted to a U.S. Participant, Fair Market Value
shall be determined pursuant to a valuation of the Company by an independent
appraisal that meets the requirements of Section 401(a)(28)(C) of the
Code or another methodology for determining fair market value that complies
with Section 409A of the Code.

 

The
Administrator also may adopt a different methodology for determining Fair
Market Value with respect to one or more Awards if a different methodology is
necessary or advisable to secure any intended favorable tax, legal or other
treatment for the particular Award(s) (for example, and without
limitation, the Administrator may provide that Fair Market Value for purposes
of one or more Awards will be based on an average of closing prices (or the
average of high and low daily trading prices) for a specified period preceding
the relevant date).

 

Any
determination as to Fair Market Value made pursuant to this Plan shall be made
without regard to any restriction other than a restriction which, by its terms,
will never lapse, and shall be final, conclusive and binding on all persons
with respect to Awards granted under this Plan.

 

(s)    “Fiscal Year” means the fiscal year of
the Company.

 

(t)    “Hong Kong” means the Hong Kong Special
Administrative Region of the People’s Republic of China.

 

(u)   “Incentive Stock Option” means an
Option intended to qualify as an incentive stock option within the meaning of
Section 422 of the Code, as designated in the applicable Award Agreement.

 

(v)   “Nonstatutory Stock Option” means an
Option that by its terms does not qualify or is not intended to qualify as an
Incentive Stock Option.

 

(w)  “Option” means an option to purchase
and acquire Shares granted pursuant to the Plan.

 

(x)   “Ordinary Share” means an Ordinary
Share of the Company, par value US$0.00001 per share, or the number or fraction
of American Depositary Shares representing such ordinary share.

 

(y)   “Other Share-Based Awards” means any
other awards not specifically described in the Plan that are valued in whole or
in part by reference to, or are otherwise based on, Ordinary Shares and are
created by the Administrator pursuant to Section 11 of the Plan.

 

(z)   “Outside Director” means a Director who
is not an Employee.

 

(aa)         “Parent” means a “parent corporation”
with respect to the Company, whether now or hereafter existing, as defined in
Section 424(e) of the Code.

 

4

 

(bb)         “Participant” means the holder of an
outstanding Award granted under the Plan.

 

(cc)         “Performance Period” means the time
period during which the performance objectives relating to a grant of
Performance Shares or Performance Units must be met.

 

(dd)         “Performance Share” means an Award
granted to a Service Provider pursuant to Section 10 of the Plan.

 

(ee)         “Performance Unit” means an Award
granted to a Service Provider pursuant to Section 10 of the Plan.

 

(ff)          “Period of Restriction” means the
period during which the transfer of Restricted Shares are subject to
restrictions and, therefore, subject to vesting.  Such restrictions may be based on the passage
of time, the achievement of target levels of performance, or the occurrence of
other events as determined by the Administrator.

 

(gg)         “Plan” means this 2010 Share Incentive
Plan.

 

(hh)         “Qualified Public Offering” means the
closing of an underwritten public offering of not less than 15% of the Ordinary
Shares (i) pursuant to an effective registration statement under the
Securities Act or (ii) on the basis of an approved prospectus and/or
pursuant to a valid registration, qualification or filing under Applicable Law
of another jurisdiction, in each case of the Shares or other equity securities
of the Company; provided, however, that a Qualified Public
Offering shall not include a registration relating solely to employee benefit
plans or to a Rule 145 transaction under the Securities Act or to similar
registrations under Applicable Law of another jurisdiction.

 

(ii)   “Restricted Share” means Shares issued
pursuant to a Restricted Share award granted pursuant Section 7 of the
Plan or issued pursuant to the early exercise of an Option.

 

(jj)           “Restricted Share Unit” means a right
to receive Shares in the settlement of an Award granted pursuant to Section 8
of the Plan.

 

(kk)         “Securities Act” means the U.S.
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

 

(ll)           “Service Provider” means an Employee,
Director or Consultant.

 

(mm)      “Share” means an Ordinary Share or the
cash equivalent thereof, in each case as adjusted in accordance with Section 15
of the Plan.

 

(nn)         “Share Appreciation Right” or “SAR”
means an Award granted pursuant to Section 9 of the Plan.

 

(oo)         “Subsidiary” means a “subsidiary
corporation” with respect to the Company, whether now or hereafter existing, as
defined in Section 424(f) of the Code.

 

5

 

(pp)         “U.S. Participant” means a Participant
who is or becomes a U.S. taxpayer, or who is otherwise physically resident in
the United States.

 

3.             Shares Subject to the Plan.

 

(a)   Shares Subject to the Plan. 
Subject to the provisions of Section 15 of the Plan, the maximum aggregate
number of Shares that may be issued under the Plan is 4,500,000; plus an annual
increase on the first day of each Fiscal Year, commencing with the first Fiscal
Year after a Qualifying Public Offering, equal to the lesser of (i) 1.0%
of the outstanding Shares on the first day of the Fiscal Year; or
(ii) such lesser amount of Shares as determined by the Board.  The Shares may be authorized, but unissued or
reacquired Ordinary Shares.  Shares shall
not be deemed to have been issued pursuant to the Plan with respect to any
portion of an Award that is settled in cash. 
Upon payment in Shares pursuant to the exercise of an Award, the number
of Shares available for issuance under the Plan shall be reduced only by the number
of Shares actually issued in such payment. 
If a Participant pays the exercise price of an Award through the tender
of Ordinary Shares, if Ordinary Shares are tendered or Shares withheld to
satisfy any Company withholding obligations, the number of Ordinary Shares so
tendered or Shares withheld shall again be available for issuance pursuant to
future Awards under the Plan.

 

(b)   Lapsed Awards.  If any
outstanding Award expires or is terminated or canceled without having been
exercised or settled in full, the Shares allocable to the terminated portion of
such Award shall again be available for grant under the Plan.

 

(c)   Share Reserve.  The
Company, during the term of the Plan, shall at all times reserve and keep
available such number of Ordinary Shares as will be sufficient to satisfy the
requirements of the Plan.

 

(d)   Application to American Depositary Shares (“ADSs”).  For
purposes of calculating the number of Shares issued under this Plan (and for
purposes of calculating any other Share limit set forth herein), the issuance
of an ADS shall be deemed to equal one Share, provided, however,
that if the number of Shares represented by an ADS is other than on a
one-to-one basis, the number of Shares issued under this Plan (and any other
Share limit set forth herein) shall be adjusted to reflect such issuance of
ADSs.

 

4.             Administration of the Plan.

 

(a)   Procedure.

 

(i)            Multiple Administrative Bodies.  Different Committees with respect to
different groups of Service Providers may administer the Plan.

 

(ii)           Other Administration.  Other than as provided above, the Plan will
be administered by (A) the Board or (B) a Committee, which committee
will be constituted by the Board to satisfy Applicable Laws.

 

(iii)          Delegation of Authority for Day-to-Day Administration.  Except to the extent prohibited
by Applicable Law, the Administrator may delegate to one or more 

 

6

 

individuals the day-to-day
administration of the Plan and any of the functions assigned to it in this
Plan.  Such delegation may be revoked at
any time.

 

(b)   Powers of the Administrator. 
Subject to the provisions of the Plan, and in the case of a Committee,
subject to the specific duties delegated by the Board to such Committee, the
Administrator will have the authority, in its discretion:

 

(i)            to determine Fair Market Value;

 

(ii)           to select the Service Providers to whom Awards may be granted hereunder;

 

(iii)          to determine the number of Shares to be covered by each Award granted
hereunder;

 

(iv)          to approve forms of agreement for use under the Plan;

 

(v)           to determine the terms and conditions, not inconsistent with the terms of
the Plan, of any Award granted hereunder. 
Such terms and conditions include, but are not limited to, the exercise
or purchase price, the time or times when Awards may be granted, exercised or
settled (which may be based on performance criteria), any vesting acceleration
or waiver of forfeiture, cancellation or repurchase restrictions, and any
restriction or limitation regarding any Award or the Shares relating thereto,
based in each case on such factors as the Administrator, in its sole
discretion, will determine;

 

(vi)          to reduce the exercise or purchase price of any Award;

 

(vii)         to
institute an Exchange Program;

 

(viii)        to
construe and interpret the terms of the Plan and Awards granted pursuant to the
Plan;

 

(ix)          to prescribe, amend and rescind rules and regulations relating to
the Plan, including rules and regulations relating to sub-plans
established for the purpose of satisfying Applicable Laws, including, without
limitation, the Exchange Act and the Securities Act, and/or qualifying for
preferred tax treatment under Applicable Laws, including, without limitation,
the Code;

 

(x)           to modify or amend each Award (subject to Section 18(c) of the
Plan), including (A) the discretionary authority to extend the
post-termination exercisability period of Awards longer than is otherwise
provided for in the Plan and (B) accelerate the satisfaction of any
vesting or exercisability criteria or waiver of forfeiture, cancellation or
repurchase restrictions;

 

(xi)          to allow Participants to satisfy withholding tax obligations by electing
to have the Company withhold from the Shares to be issued upon exercise or
vesting of an Award that number of Shares having a Fair Market Value equal to
the minimum amount required to be withheld. 
The Fair Market Value of any Shares to be withheld will be determined

 

7

 

on the date that the
amount of tax to be withheld will be determined by the Administrator in its
discretion, which determination shall be final, binding and conclusive on all
Participants and any other holders of Awards. 
All elections by a Participant to have Shares withheld for this purpose
will be made in such form and under such conditions as the Administrator may
deem necessary or advisable;

 

(xii)          to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Award previously granted by the
Administrator,

 

(xiii)         to
allow a Participant to defer the receipt of the delivery or payment of Shares
that would otherwise be due to such Participant under an Award;

 

(xiv)        to
determine whether Awards will be settled in Ordinary Shares, cash or in any
combination thereof;

 

(xv)         to
determine whether Awards will be adjusted for Dividend Equivalents;

 

(xvi)        to
establish a program whereby Service Providers designated by the Administrator
can reduce compensation otherwise payable in cash in exchange for Awards under
the Plan;

 

(xvii)       to
impose such restrictions, conditions or limitations as it determines
appropriate as to the timing and manner of any resales by a Participant or
other subsequent transfers by the Participant of any Ordinary Shares issued as
a result of or under an Award, including without limitation, (A) restrictions
under an insider trading policy and (B) restrictions as to the use of a
specified brokerage firm for such resales or other transfers; and

 

(xviii)      to
make all other determinations deemed necessary or advisable for administering
the Plan.

 

(c)   Effect of Administrator’s Decision.  The
Administrator’s decisions, determinations and interpretations will be final,
binding and conclusive on all Participants and any other holders of Awards.

 

5.             Eligibility; Rights as a Service Provider.  Nonstatutory Stock Options, Restricted Stock,
Stock Appreciation Rights, Performance Units, Performance Shares, Restricted
Stock Units and Other Stock Based Awards may be granted to Service
Providers.  Incentive Stock Options may
be granted only to Employees. 
Participants will consist of those Service Providers and Employees as
the Administrator in its sole discretion determines and whom the Administrator
may designate from time to time to receive awards.  Neither the Plan nor any Award shall confer
upon a Participant any right with respect to continuing his or her relationship
as a Service Provider, nor shall they interfere in any way with the right of
the Participant or the right of the Company or its Parent or Subsidiaries to
terminate such relationship at any time, with or without cause.

 

8

 

6.             Options.

 

(a)   Term of Option.  The term
of each Option will be stated in the Award Agreement.  In the case of an Incentive Stock Option, the
term will be ten (10) years from the date of grant or such shorter term as
may be provided in the Award Agreement. 
Moreover, in the case of an Incentive Stock Option granted to a
Participant who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option will be five (5) years from the date of
grant or such shorter term as may be provided in the Award Agreement.

 

(b)   Option Exercise Price and Consideration.

 

(i)            Exercise Price.  The per Share exercise price for the Shares
to be issued pursuant to exercise of an
Option will be determined by the Administrator, subject to the following:

 

(1) In
the case of an Incentive Stock Option

 

(A) granted to
an Employee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price will be no less than 110% of the Fair Market Value per
Share on the date of grant.

 

(B) granted to
any Employee other than an Employee described in paragraph (A) immediately
above, the per Share exercise price will be no less than 100% of the Fair
Market Value per Share on the date of grant.

 

(2) In
the case of a Nonstatutory Stock Option, the per Share exercise price will be
determined by the Administrator.  In the
case of a Nonstatutory Stock Option intended to qualify as “performance-based
compensation” within the meaning of Section 162 (m) of the Code, the
per Share exercise price will be no less than 100% of the Fair Market Value per
Share on the date of grant.

 

(3) Notwithstanding
the foregoing, Incentive Stock Options may be granted with a per Share
exercise price of less than 100% of the Fair Market Value per Share on the date
of grant pursuant to a transaction described in, and in a manner consistent
with, Section 424(a) of the Code.

 

(ii)           Waiting Period and Exercise Dates.  At the time an Option is granted, the
Administrator will fix the period within which the Option may be exercised and
will determine any conditions that must be satisfied before the Option may be
exercised, including, without limitation, the achievement of performance
objectives.  The Administrator, in its
sole discretion, may accelerate the satisfaction of such conditions at any
time.

 

(iii)          Form of Consideration.  The Administrator will determine the
acceptable form of consideration for exercising an Option, including the method
of payment.  Such consideration, to the
extent permitted by Applicable Laws, may consist entirely of:

 

(1)           cash;

 

9

 

(2)           check;

 

(3)           promissory note;

 

(4)           Shares which meet the conditions established by the Administrator to
avoid adverse accounting consequences (as determined by the Administrator);

 

(5)           consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan;

 

(6)           a reduction in the amount of any Company liability to the Participant,
including any liability attributable to the Participant’s participation in any
Company-sponsored deferred compensation program or arrangement;

 

(7)           any combination of the foregoing methods of payment; or

 

(8)           such other consideration and method of payment for the issuance of Shares
to the extent permitted by Applicable Laws.

 

(c)   Incentive Stock Option $100,000 Rule.  Each
Option will be designated in the Award Agreement as either an Incentive Stock
Option or a Nonstatutory Stock Option. 
However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by the Participant during any
calendar year (under all plans of the Company and any Parent or Subsidiary)
exceeds $100,000, such Options will be treated as Nonstatutory Stock
Options.  For purposes of this
Section 7(c), Incentive Stock Options will be taken into account in
the order in which they were granted. 
The Fair Market Value of the Shares will be determined as of the time
the Option with respect to such Shares is granted.

 

(d)   Exercise of Option.

 

(i)            Procedure for Exercise; Rights as a Shareholder.  Any Option granted hereunder
will be exercisable according to the terms of the Plan and at such times and
under such conditions as determined by the Administrator and set forth in the
Award Agreement.  An Option may not be
exercised for a fraction of a Share.

 

An
Option will be deemed exercised when the Company receives: (x) written or
electronic notice of exercise (in accordance with the Award Agreement) from the
person entitled to exercise the Option, and (y) full payment for the
Shares with respect to which the Option is exercised (including provision for
any applicable tax withholding).  Full
payment may consist of any consideration and method of payment authorized by
the Administrator and permitted by the Award Agreement, the Plan and Applicable
Laws.  Shares issued upon exercise of an
Option will be issued in the name of the Participant or, if requested by the
Participant, in the name of the Participant and his or her spouse.  Until the Shares are issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder will exist with respect to the Awarded Shares,
notwithstanding the exercise of the Option. 
The Company will issue (or cause to be issued) such Shares promptly
after the Option is exercised.  No
adjustment will be

 

10

 

made
for a dividend or other right for which the record date is prior to the date
the Shares are issued, except as provided in Section 15 of the Plan or the
applicable Award Agreement.

 

Exercising
an Option in any manner will decrease the number of Shares thereafter available
for sale under the Option, by the number of Shares as to which the Option is
exercised.

 

(ii)           Termination of Relationship as a Service Provider - Generally.  If a Participant ceases to be a
Service Provider, other than upon the Participant’s death or Disability, the
Participant may exercise his or her Option within such period of time as is
specified in the Award Agreement to the extent that the Option is vested on the
date of termination (but in no event later than the expiration of the term of
such Option as set forth in the Award Agreement).  In the absence of a specified time in the
Award Agreement, the Option will remain exercisable for sixty (60) days
following the Participant’s termination. 
Unless otherwise provided by the Administrator, if on the date of
termination the Participant is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option will revert to the
Plan.  If after termination the
Participant does not exercise his or her Option as to all of the vested Shares
within the time specified by the Administrator, the Option will terminate, and
the remaining Shares covered by such Option will revert to the Plan.

 

(iii)          Disability of Participant.  If a Participant ceases to be a Service Provider
as a result of the Participant’s Disability, the Participant may exercise his
or her Option within such period of time as is specified in the Award Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Award
Agreement).  In the absence of a
specified time in the Award Agreement, the Option will remain exercisable for
twelve (12) months following the Participant’s termination.  Unless otherwise provided by the
Administrator, if on the date of termination the Participant is not vested as
to his or her entire Option, the Shares covered by the unvested portion of the
Option will revert to the Plan.  If after
termination the Participant does not exercise his or her Option as to all of
the vested Shares within the time specified by the Administrator, the Option
will terminate, and the remaining Shares covered by such Option will revert to
the Plan.

 

(iv)          Death of Participant.  If a Participant dies while a Service
Provider, the Option may be exercised following the Participant’s death within
such period of time as is specified in the Award Agreement to the extent that
the Option is vested on the date of death (but in no event may the Option be
exercised later than the expiration of the term of such Option as set forth in
the Award Agreement), by the Participant’s designated beneficiary, provided
such beneficiary has been designated prior to the Participant’s death in a form
acceptable to the Administrator. If no such beneficiary has been designated by
the Participant, then such Option may be exercised by the personal
representative of the Participant’s estate or by the persons to whom the Option
is transferred pursuant to the Participant’s will or in accordance with the
laws of descent and distribution.  In the
absence of a specified time in the Award Agreement, the Option will remain
exercisable for twelve (12) months following the Participant’s death.  Unless otherwise provided by the
Administrator, if at the time of death the Participant is not vested as to his
or her entire Option, the Shares covered by the unvested portion of the Option
will immediately revert to the Plan.  If
the Option is not exercised as to all of the vested Shares within 

 

11

 

the time specified by the
Administrator, the Option will terminate, and the remaining Shares covered by
such Option will revert to the Plan.

 

7.             Restricted Shares.

 

(a)   Grant of Restricted Shares. 
Subject to the terms and provisions of the Plan, the Administrator, at
any time and from time to time, may grant Restricted Shares to Service
Providers in such amounts as the Administrator, in its sole discretion, will
determine.

 

(b)   Restricted Share Agreement.  Each
grant of Restricted Shares will be evidenced by an Award Agreement that will
specify the Period of Restriction, the number of Shares granted, and such other
terms and conditions as the Administrator, in its sole discretion, will
determine.  Unless the Administrator
determines otherwise, Restricted Shares will be held by the Company as escrow
agent until the restrictions on such Shares have lapsed.

 

(c)   Transferability.  Except as
provided in this Section 7 or Section 15, Restricted Shares may not
be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated
until the end of the applicable Period of Restriction.

 

(d)   Other Restrictions.  The
Administrator, in its sole discretion, may impose such other restrictions on
Restricted Shares as it may deem advisable or appropriate.

 

(e)   Removal of Restrictions. 
Except as otherwise provided in this Section 7, Restricted Shares
covered by each Restricted Share grant made under the Plan will be released
from escrow as soon as practicable after the last day of the Period of
Restriction.  The Administrator, in its
discretion, may accelerate the time at which any restrictions will lapse or be
removed.

 

(f)    Voting Rights.  During the
Period of Restriction, Participants holding Restricted Shares granted hereunder
may exercise full voting rights with respect to those Shares, unless the
Administrator determines otherwise.

 

(g)   Dividends and Other Distributions. 
During the Period of Restriction, Participants’ Restricted Shares will
be entitled to receive all dividends and other distributions paid with respect
to such Shares unless otherwise provided in the Award Agreement.  If any such dividends or distributions are
paid in Shares, the Shares will be subject to the same restrictions on
transferability and forfeitability as the Restricted Shares with respect to
which they were paid.

 

(h)   Return of Restricted Shares to Company.  On
the date set forth in the Award Agreement, the Restricted Shares for which
restrictions have not lapsed will revert to the Company and again will become
available for grant under the Plan.

 

8.             Restricted Share Units.

 

(a)   Grant of Restricted Share Units. 
Subject to the terms and provisions of the Plan, the Administrator, at
any time and from time to time, may grant Restricted Share Units to Service
Providers in such amounts as the Administrator, in its sole discretion, will
determine.

 

12

 

(b)   Number of Shares.  Each
Award Agreement will specify the number of Awarded Shares and will provide for
the adjustment of such number in accordance with Section 15 of the Plan.

 

(c)   Settlement of Restricted Share Units.

 

(i)            Procedure; Rights as a Shareholder.  Any Restricted Share Unit granted hereunder
will be settled according to the terms of the Plan and at such times and under
such conditions as determined by the Administrator and set forth in the Award
Agreement.  Until the Restricted Share
Units are settled and the Awarded Shares are delivered (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company), no right to vote, if applicable, or receive dividends or
any other rights as a shareholder or depositary receipt holder will exist with
respect to the Awarded Shares.  No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Shares are delivered, except as provided in Section 15
of the Plan or the applicable Award Agreement.

 

(ii)           Restrictions on Transfer of Shares.  Awarded Shares delivered upon settlement of
Restricted Units may be subject to such special forfeiture conditions, rights
of repurchase or redemption, rights of first refusal, and other transfer
restrictions as the Administrator may determine.  The restrictions described in the preceding
sentence shall be referenced in the applicable Award Agreement and shall apply
in addition to any restrictions that may apply to holders of Ordinary Shares
generally under the articles of association of the Company.

 

(d)   Cessation of Services.  Each
Award Agreement will specify the consequence of a Participant’s ceasing to be a
Service Provider prior to the settlement of a grant of Restricted Share Units.

 

9.             Share Appreciation Rights.

 

(a)   Grant of SARs.  Subject to
the terms and conditions of the Plan, a SAR may be granted to Service Providers
at any time and from time to time as will be determined by the Administrator,
in its sole discretion.

 

(b)   Number of Shares.  The
Administrator will have complete discretion to determine the number of SARs granted
to any Service Provider.

 

(c)   Exercise Price and Other Terms.  The
Administrator, subject to the provisions of the Plan, will have complete
discretion to determine the terms and conditions of SARs granted under the
Plan.

 

(d)   Exercise of SARs.  SARs
will be exercisable on such terms and conditions as the Administrator, in its
sole discretion, will determine.  The
Administrator, in its sole discretion, may accelerate exercisability at any
time.

 

13

 

(e)   SAR Agreement.  Each SAR
grant will be evidenced by an Award Agreement that will specify the exercise
price, the term of the SAR, the conditions of exercise, and such other terms
and conditions as the Administrator, in its sole discretion, will determine.

 

(f)    Expiration of SARs.  An
SAR granted under the Plan will expire upon the date determined by the
Administrator, in its sole discretion, and set forth in the Award
Agreement.  Notwithstanding the foregoing,
the rules of Sections 6(d)(ii), 6(d)(iii) and 6(d)(iv) also will
apply to SARs.

 

(g)   Payment of SAR Amount.  Upon
exercise of an SAR, a Participant will be entitled to receive payment from the
Company in an amount determined by multiplying:

 

(i)            the difference between the Fair Market Value of a Share on the date of
exercise over the exercise price; times

 

(ii)           the number of Shares with respect to which the SAR is exercised.

 

At
the discretion of the Administrator, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, or in some combination thereof.

 

10.           Performance Units and Performance Shares.

 

(a)   Grant of Performance Units/Shares. 
Subject to the terms and conditions of the Plan, Performance Units and
Performance Shares may be granted to Service Providers at any time and from
time to time, as will be determined by the Administrator, in its sole
discretion.  The Administrator will have
complete discretion in determining the number of Performance Units and
Performance Shares granted to each Participant.

 

(b)   Value of Performance Units/Shares.  Each
Performance Unit will have an initial value that is established by the
Administrator on or before the date of grant. 
Each Performance Share will have an initial value equal to the Fair
Market Value of a Share on the date of grant.

 

(c)   Performance Objectives and Other Terms.  The
Administrator will set performance objectives in its discretion which,
depending on the extent to which they are met, will determine the number or
value of Performance Units/Shares that will be paid out to the Participant.  Each Award of Performance Units/Shares will
be evidenced by an Award Agreement that will specify the Performance Period,
and such other terms and conditions as the Administrator, in its sole
discretion, will determine.  The
Administrator may set performance objectives based upon the achievement of
Company-wide, divisional, or individual goals (including solely continued
service), or any other basis determined by the Administrator in its discretion.

 

(d)   Earning of Performance Units/Shares.  After
the applicable Performance Period has ended, the holder of Performance
Units/Shares will be entitled to receive a payout of the number of Performance
Units/Shares earned by the Participant over the Performance Period, to be
determined as a function of the extent to which the corresponding performance
objectives 

 

14

 

have
been achieved.  After the grant of a
Performance Unit/Share, the Administrator, in its sole discretion, may reduce
or waive any performance objectives for such Performance Unit/Share.

 

(e)   Form and Timing of Payment of Performance
Units/Shares.  Payment of earned Performance Units/Shares
will be made after the expiration of the applicable Performance Period at the
time determined by the Administrator. 
The Administrator, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash, in Shares (which have an aggregate Fair
Market Value equal to the value of the earned Performance Units/Shares at the
close of the applicable Performance Period) or in a combination of cash and
Shares.

 

(f)    Cancellation of Performance Units/Shares.  On
the date set forth in the Award Agreement, all unearned or unvested Performance
Units/Shares will be forfeited to the Company, and again will be available for
grant under the Plan.

 

11.           Other Share-Based Awards.  Other Share-Based Awards may be granted
either alone, in addition to, or in tandem with, other Awards granted under the
Plan and/or cash awards made outside of the Plan.  The Administrator shall have authority to
determine the Service Providers to whom and the time or times at which Other
Share-Based Awards shall be made, the amount of such Other Share-Based Awards,
and all other conditions of the Other Share-Based Awards including any dividend
and/or voting rights.

 

12.           Leaves of Absence.  Unless the Administrator provides otherwise,
vesting of Awards granted hereunder will be suspended during any unpaid leave
of absence and will resume on the date the Participant returns to work on a
regular schedule as determined by the Company; provided, however,
that no vesting credit will be awarded for the time vesting has been suspended
during such leave of absence.  A Service
Provider will not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company or any Parent or Subsidiary of the Company.  For purposes of Incentive Stock Options, no
leave of absence may exceed ninety (90) days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract.  If reemployment upon expiration of a leave of
absence approved by the Company is not so guaranteed, then three months
following the 91st day of such leave any Incentive Stock Option held by the
Participant will cease to be treated as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option.

 

13.           Restrictions on Transfer of Securities.  Shares issued upon grant, exercise or
settlement of an Award may be subject to such special forfeiture conditions,
rights of repurchase or redemption, rights of first refusal, and other transfer
restrictions as the Administrator may determine.  The restrictions described in the preceding
sentence shall be referenced in the applicable Award Agreement and shall apply
in addition to any restrictions that may apply to holders of Ordinary Shares
under the articles of association of the Company.

 

14.           Non-Transferability of Awards.  Unless determined otherwise by the Administrator,
an Award may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Participant, only
by the Participant.  If the Administrator

 

15

 

makes an Award
transferable, such Award will contain such additional terms and conditions as
the Administrator deems appropriate.

 

15.           Adjustments; Dissolution or Liquidation; Change in Control.

 

(a)   Adjustments.  In the
event that any dividend or other distribution (whether in the form of cash,
Shares, other securities, or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company, or other change in the corporate structure of the Company affecting
the Ordinary Shares occurs such that an adjustment is determined by the
Administrator (in its sole discretion) to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Administrator shall, in such manner as
it may deem equitable, adjust the number and class of Shares which may be
delivered under the Plan, the number, class and price of Shares subject to
outstanding awards, and the numerical limits in Section 3.  The adjustment contemplated in this Section 15(a) shall
be made by the Board or, if delegated by the Board to the Committee, by the
Committee, whose determination shall be final, binding and conclusive on all
parties.  Except as expressly provided
herein, no issuance by the Company of equity securities of the Company of any
class, or securities convertible into equity securities of the Company of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number, type, or price of Shares subject to an Award.  Notwithstanding the preceding, the number of
Shares subject to any Award always shall be a whole number.

 

(b)   Dissolution or Liquidation.  In
the event of the proposed dissolution or liquidation of the Company, the
Administrator will notify each Participant as soon as practicable prior to the
effective date of such proposed transaction. 
The Administrator in its discretion may provide for a Participant to
have the right to exercise his or her Award, to the extent applicable, until
ten (10) days prior to such transaction as to all of the Awarded Shares covered
thereby, including Shares as to which the Award would not otherwise be
exercisable.  In addition, the
Administrator may provide that any Company repurchase option, cancellation or
forfeiture rights applicable to any Award shall lapse 100%, and that any Award
vesting shall accelerate 100%, provided the proposed dissolution or liquidation
takes place at the time and in the manner contemplated.  To the extent it has not been previously
exercised or vested, an Award will terminate immediately prior to the
consummation of such proposed action.

 

(c)   Change in Control.

 

(i)            Share Options and SARs.  In the event of a Change in Control, each
outstanding Award shall be assumed or an equivalent Award substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation or
other business entity.  Unless determined
otherwise by the Administrator, in the event that the successor corporation
refuses to assume or substitute for the Award, the Participant shall fully vest
in and have the right to exercise the Award as to all of the Awarded Shares,
including Shares as to which it would not otherwise be vested or
exercisable.  If an Award is not assumed
or substituted in the event of a Change in Control, the Administrator shall
notify the Participant in writing or electronically that the Award shall be
exercisable, to the extent vested, for a period of up to thirty (30) days from
the date of such notice, and the Award shall terminate upon the expiration of
such period.  For 

 

16

 

the purposes of this
paragraph, the Award shall be considered assumed if, following the Change in
Control, the Award confers the right to purchase or receive, for each Awarded
Share subject to the Award immediately prior to the Change in Control, the
consideration (whether stock, cash, or other securities or property) received
in the Change in Control by holders of Ordinary Shares for each Ordinary Share
held on the effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Ordinary Shares); provided, however,
that if such consideration received in the Change in Control is not solely
shares of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Award, for each share of Awarded Shares
subject to the Award, to be solely shares of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Ordinary Shares in the Change in Control.

 

(ii)           Restricted Shares, Performance Shares, Performance Units, Restricted
Share Units and Other Share-Based Awards.  In the event of a Change in Control, each
outstanding Award of Restricted Shares, Performance Shares, Performance Units,
Other Share-Based Awards and Restricted Share Unit shall be assumed or an
equivalent award substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. 
Unless determined otherwise by the Administrator, in the event that the
successor corporation refuses to assume or substitute for the Award, the Participant
shall fully vest in the Award including as to Shares/Units that would not
otherwise be vested, all applicable restrictions will lapse, and all
performance objectives and other vesting criteria will be deemed achieved at
targeted levels.  For the purposes of
this paragraph, an Award of Restricted Shares, Performance Shares, Performance
Units, Other Share-Based Awards and Restricted Share Units shall be considered
assumed if, following the Change in Control, the award confers the right to
purchase or receive, for each Share subject to the Award immediately prior to
the Change in Control (and if a Restricted Share Unit or Performance Unit, for
each Share as determined based on the then current value of the unit), the
consideration (whether stock, cash, or other securities or property) received in
the Change in Control by holders of Ordinary Share for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Ordinary Shares); provided, however, that if such
consideration received in the Change in Control is not solely common stock of
the successor corporation or its Parent, the Administrator may, with the
consent of the successor corporation, provide that the consideration to be
received for each Share (and if a Restricted Share Unit or Performance Unit,
for each Share as determined based on the then current value of the unit) be
solely common stock of the successor corporation or its Parent equal in fair
market value to the per share consideration received by holders of Ordinary
Share in the Change in Control. 
Notwithstanding anything herein to the contrary, an Award that vests, is
earned, or is paid-out upon the satisfaction of one or more performance goals
will not be considered assumed if the Company or its successor modifies any of
the performance goals without the Participant’s consent; provided, however,
a modification to the performance goals only to reflect the successor
corporation’s post-Change in Control corporate structure will not be deemed to
invalidate an otherwise valid Award assumption.

 

(d)   Reservation of Rights. 
Except as provided in this Section 15 and in the applicable Award
Agreement, a Participant shall have no rights by reason of (i) any subdivision
or consolidation of Ordinary Shares or other securities of any class,
(ii) the payment of any 

 

17

 

dividend,
or (iii) any other increase or decrease in the number of Ordinary Shares
or other securities of any class.  Any
issuance by the Company of equity securities of any class, or securities
convertible into equity securities of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
exercise price of Awarded Shares.  The
grant of an Award 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, to merge or consolidate or to dissolve, liquidate,
sell, or transfer all or any part of its business or assets.

 

16.           Date of Grant.  The date of grant of an Award will be, for
all purposes, the date on which the Administrator makes the determination
granting such Award, or such other later date as is determined by the
Administrator.  For purposes of this
Plan, the determination of grant of an Award made by the Administrator shall
not occur unless and until all required Board and shareholder approval has been
obtained and the key terms of the Award, including any vesting period, the
exercise price and the number of Awarded Shares subject to an Award, have been
determined.  Notice of the determination
will be provided to each Participant as soon as practicable, but in no event
more than five (5) working days, after the date of such grant.

 

17.           Term of Plan.  The Plan will become effective upon its
adoption by the Board.  It will continue
in effect for a term of ten (10) years unless terminated earlier under Section 18
of the Plan.

 

18.           Amendment and Termination of the Plan.

 

(a)   Amendment and Termination.  The
Board may at any time amend, alter, suspend or terminate the Plan.

 

(b)   Shareholder Approval.  The
Company will obtain shareholder approval of any Plan amendment to the extent
necessary and desirable to comply with Applicable Laws.

 

(c)   Effect of Amendment or Termination.  No
amendment, alteration, suspension, or termination of the Plan will materially
impair the rights of any Participant, unless mutually agreed otherwise between
the Participant and the Administrator, which agreement must be in writing and
signed by the Participant and the Company. 
Termination of the Plan will not affect the Administrator’s ability to
exercise the powers granted to it hereunder with respect to Awards granted
under the Plan prior to the date of such termination.

 

19.           Conditions Upon Issuance of Shares.

 

(a)   Legal Compliance. 
Notwithstanding any other provision of the Plan or any agreement entered
into by the Company pursuant to the Plan, Shares will not be issued pursuant to
the exercise of an Award unless the exercise of such Award and the issuance and
delivery of such Shares will comply with Applicable Laws, including, without
limitation, the Securities Act, the Exchange Act, U.S. state securities laws
and regulations, and the regulations of any stock exchange or other securities
market on which the Company’s securities may then be traded, and will be
further subject to the approval of counsel for the Company with respect to such
compliance.

 

18

 

(b)   Investment Representations.  As a
condition to the exercise or receipt of an Award, the Company may require the
person exercising or receiving such Award to represent and warrant at the time
of any such exercise or receipt that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.

 

20.           Severability.  Notwithstanding any contrary provision of the
Plan or an Award to the contrary, if any one or more of the provisions (or any
part thereof) of this Plan or the Awards shall be held invalid, illegal, or
unenforceable in any respect, such provision shall be modified so as to make it
valid, legal, and enforceable, and the validity, legality, and enforceability
of the remaining provisions (or any part thereof) of the Plan or Award, as
applicable, shall not in any way be affected or impaired thereby.

 

21.           Inability to Obtain Authority.  The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, will relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite
authority will not have been obtained.

 

22.           Sections 409A and 457A.  Notwithstanding other provisions of the Plan
or any Award Agreement, no Award may 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 or Section 457A
of the Code upon a Participant.  In the
event that it is reasonably determined by the Board or, if delegated by the
Board to the Administrator, by the Administrator 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, including as a result
of the fact that the Participant is a “specified employee” 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 will use
commercially reasonable efforts to implement the provisions of this Section 22
in good faith; provided that neither the Company, nor the Administrator
nor any of the Company’s employees, directors or representatives will have any
liability to Participants with respect to this Section 22.

 

23.           Choice of Law.  The Plan will be governed by and construed in
accordance with the laws of Hong Kong.

 

19

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