Document:

WWW.EXFILE.COM, INC. -- 888-775-4789 -- NETWORK 1 SECURITY SOLUTIONS, INC. -- EXHIBIT 10.1 TO FORM 8-K

    Exhibit
10.1

     

    Settlement
Agreement

     

    This
Settlement Agreement (“Settlement Agreement”) is made and entered effective as
of the 22nd day of
May, 2009 (the “Effective Date”) by and between Network-1 Security Solutions,
Inc. (“Network-1”) and NETGEAR, Inc. (“NETGEAR”).

     

    In this
Settlement Agreement Network-1 and NETGEAR are sometimes referred to,
respectively, as “the Party” or, collectively, as “the Parties.

     

    Background

     

    (a)           Network-1
and NETGEAR are currently engaged in a dispute and are litigants in a civil
action pending in the United States District Court for the Eastern District of
Texas entitled Network-1
Security Solutions, Inc. v. Cisco Systems, Inc., et. al, Case No. 6-08
CV-030 (“the Pending Litigation”);

     

    (b)           The
Parties to this Settlement Agreement recognize the uncertainty of outcome of
disputed, complex litigation such as the Pending Litigation as well as the
extended period of time that it could take to resolve matters through
litigation, and independently concluded that their respective interests would be
best served by compromising and thereby terminating and concluding the Pending
Litigation and all disputes between them;

     

    Now, therefore, the Parties to
this Settlement Agreement mutually agree and contract with each other, for good
and reciprocal consideration given and received, as follows:

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    1.  
Notice of
Dismissal.

     

    Within
five business days of the timely payment made pursuant to Section 4.1 of the
Nonexclusive Patent License Agreement in the form attached to this Settlement
Agreement as Exhibit B (“License Agreement”), Network-1 will file a Notice of
Dismissal with Prejudice of NETGEAR with the United States District Court for
the Eastern District of Texas in the form attached to this Settlement Agreement
as Exhibit A.

    

    2.  
Releases.

     

    (a)           Effective
upon the timely payment made pursuant to Section 4.1 of the License Agreement,
Network-1 hereby releases and discharges (i) NETGEAR, (ii) NETGEAR’s
Subsidiaries (as defined in the License Agreement), (iii) (but only insofar as
they were or are acting in their capacities as such) its attorneys, employees,
stockholders, directors, officers, and agents, and (iv), NETGEAR’s customers and
distributors, but only to the extent that they are using or distributing
NETGEAR’s Licensed Products (as defined in the License Agreement), from any and
all manner of action or actions, cause or causes of action, in law or in equity,
known or unknown, from the beginning of time to the date of this Settlement
Agreement, which arises out of the Pending Litigation, PROVIDED, however, that
this release and discharge shall not apply to the obligations, rights, and
privileges created by this Settlement Agreement.

     

    (b)           Effective
upon the execution of this Agreement, NETGEAR hereby releases and discharges (i)
Network-1, and (ii) (but only insofar as they were or are acting in their
capacities as such) its attorneys, employees, shareholders, directors, officers,
and agents from any and all manner of action or actions, cause or causes of
action, in law or 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    in
equity, known or unknown, from the beginning of time to the date of this
Settlement Agreement, which arises out of the Pending Litigation, PROVIDED,
however, that this release and discharge shall not apply to the obligations,
rights, and privileges created by this Settlement Agreement.

    

    3.  
License
Agreement.

     

    Upon the
execution of this Settlement Agreement, Network-1 and NETGEAR will execute a
Nonexclusive Patent License Agreement in the form attached to this Settlement
Agreement as Exhibit B.

    

    4.  
Miscellaneous.

     

    (a)           This
Settlement Agreement shall be governed by and construed in accordance with the
laws of the State of New York.

     

    (b)           Any
action, suit, or proceeding brought by a party to this Settlement Agreement
shall be brought only in New York courts in New York County or in California
Courts in Santa Clara County, at complainant’s option.  Network-1 and
NETGEAR hereby irrevocably submit to the exclusive jurisdiction of the United
States District Court for the Southern District of New York or any court of the
State of New York located in the County of New York, and to the United
States District Court for the Northern District of California or any court of
the State of California located in County of Santa Clara, in respect of any
action, suit or proceeding brought by Network-1 or NETGEAR to enforce this
Settlement Agreement (and waive any objection based on forum non convenience or
any other objection to venue); provided, however, that such 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    consent
to jurisdiction is solely for the purpose referred to in this Section and shall
not be deemed to be a general submission to the jurisdiction of said courts or
in the State of New York or California other than for such purpose and shall not
apply with respect to, or be deemed to indicate the intent of any party to this
Settlement Agreement with respect to, any action brought by or against any
person(s) each of whom is not a party to this Settlement Agreement.

     

    (c)           The
invalidity or unenforceability of any provision of this Settlement Agreement
shall not affect the validity or enforceability of any other
provision.

     

    (d)           Network-1
and NETGEAR have had all desired counsel, legal and otherwise, in entering into
this Settlement Agreement, and do so in accordance with their own free acts and
deeds.

     

    (e)           Any
and all notices, consents, or demands permitted or required to be made or given
under this Settlement Agreement shall be in writing, signed by the individual
giving such notice, consent, or demand and shall be delivered personally, sent
by facsimile, or sent by registered or certified mail, return receipt requested,
to the other party at its address set forth below:

     

     

    
      	
               
      

            	
              To
      Licensor:

            	
              Network-1
      Security Solutions, Inc.

              
                445
      Park Avenue, Suite 1018

                
                  New
      York, NY 10022

                  
                    Attention:  Corey
      M. Horowitz, Chairman and CEO

                    
                      Telephone:  (212)
      829-5770

                      
                        Facsimile:  (212)
      829-5771

                      

                    

                  

                

              

            

    

    
       

      
        	
                 
      

              	
                With
      a copy to:

              	
                

                  Baker
      Hostetler LLP

                  45
      Rockefeller Plaza

                  New
      York, NY 10111

                  Attention:  Victor
      Siber

                

              

      

       

    

    
      
        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

        
          	
                   
      

                	
                   

                	
                  

                    

                      Telephone:  (212)
      589-4696

                      Facsimile:  (212)
      589-4201

                    

                  

                

        

        
          
             

            
              	
                       
      

                    	
                      To
      Licensee:

                    	
                      

                        

                          

                            NETGEAR
      Inc.

                            350
      East Plumeria Drive

                            San
      Jose, California 95134-1911

                            Attention:  Andrew
      Kim, V.P. of Legal & Corporate 

                            Development
      and Company Secretary

                            Telephone:
      (408) 907-8000

                            Facsimile:
      (408) 907-8097

                          

                        

                      

                    

            

            
              
                 

                
                  	
                           
      

                        	
                          With
      a copy to:

                        	
                          

                            

                              

                                

                                  Wilson
      Sonsini Goodrich & Rosati

                                  650
      Page Mill Road

                                  Palo
      Alto, CA  94304

                                  Attention:  Jamie
      DiBoise

                                  Telephone:
      (650) 493-9300

                                  Facsimile:
      (650)
493-6811

                                

                              

                            

                          

                        

                

                 

              

            

          

        

      

    

    (f)           Unless
otherwise set forth in this Settlement Agreement or as provided in the attached
Exhibits, the provisions of this Settlement Agreement including all Exhibits
shall be binding on, and inure to the benefit of, the respective successors and
assigns or partial assigns of the Parties, and, in any event, shall continue to
be binding on the Parties.

     

    (g)           Each
Party warrants and represents that it has not assigned, transferred,
hypothecated, or purported to assign, transfer, or hypothecate to any person or
entity not a party hereto, the whole or any part or portion of its claims or
rights which constitute matters released or discharged pursuant to this
Settlement Agreement.

     

    (h)           This
Settlement Agreement may be executed in separate counterparts, each of which
shall be considered an original but all of which shall constitute one
agreement.

     

    (i)           This
Settlement Agreement and the corresponding Exhibits, including the dismissal
(Exhibit A) and Nonexclusive Patent License Agreement (Exhibit B) constitute

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    the
entire agreement between the parties with respect to the subject matter of this
Agreement and supersede any prior or contemporaneous negotiations,
understandings, agreements, commitments, or representations by or between the
Parties, written or oral, with respect to the subject matter of this Settlement
Agreement.

     

    (j)           Each
party acknowledges that it has cooperated fully in the drafting and preparation
of this Settlement Agreement (including all Exhibits), and that no rule of
construction may be used to construe this Settlement Agreement against any party
by virtue of that party’s role in the drafting of this Settlement
Agreement.

     

    (k)           No
amendment of any provision of this Settlement Agreement shall be valid unless
the same shall be in writing and signed by each of the Parties.

     

    (l)           This
Settlement Agreement is not confidential.

    

    IN WITNESS WHEREOF, each of
the Parties has caused two original copies of this Settlement Agreement to be
executed on its behalf by its duly authorized officer.

     

    
       

      
        	
                Network-1
      Security Solutions, Inc.

                 

                
                  By:  /s/ Corey M. Horowitz

                  

                    
      

                  Duly
      Authorized

                   

                  Title:   Chairman & CEO

                  

                    
      

                   

                  Date:   May 27, 2009

                  

                    
      

                

              	
                NETGEAR,
      Inc.

                 

                By:  /s/ Andrew
      Kim

                

                  
      

                Duly Authorized

                 

                Title:   VP,
      Legal & Corp. Div.

                

                  
      

                 

                Date:   May 26, 2009

                

                  
      

              

      

      
 

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

      
        Exhibit
B

      

       

    

    NONEXCLUSIVE
PATENT LICENSE AGREEMENT

     

    THIS
agreement (“Agreement”) made and entered into and effective as of April 1, 2009,
is by and between Network-1 Security Solutions, Inc., a Delaware corporation
(the “Licensor”), and
NETGEAR, Inc., a Delaware corporation, (the “Licensee”).

     

    WHEREAS,
Licensor is the beneficial owner of United States Patent No. 6,218,930 (the
“‘930
Patent”);

     

    WHEREAS,
on June 18, 2008, Licensor commenced an industry-wide “Special Licensing
Program” for the ‘930 Patent to vendors of Power over Ethernet
equipment.  The Special Licensing Program was of limited duration and
was being implemented on an industry-wide basis to offer discounted running
royalty rates and exceptions to Licensor’s standard current licensing terms and
conditions relating to the ‘930 Patent to PoE vendors who are “early adopters”
and enter into license agreements without delay and to avoid litigation and
higher royalties;

     

    WHEREAS,
Licensor agreed to offer, for a limited time, the terms of the Special Licensing
Program to defendants, including Licensee, in the litigation Network-1 Security Solutions, Inc.
v. Cisco, Inc. et. al, Case No. 6:08-cv-00030, pending in the United
States District Court for the Eastern District of Texas, Tyler
Division;

     

    WHEREAS,
Licensee and its Subsidiaries desire to obtain a royalty-bearing, non-exclusive,
license under the ‘930 Patent, and Licensor is willing to grant Licensee and its
Subsidiaries such license subject to the terms and conditions of this
Agreement;

     

    NOW,
THEREFORE, in consideration of the promises and covenants in this agreement, the
parties agree as follows:

     

    
      	
              1  

            	
              Definitions.

            

    

     

    
      	
              
              

            	
              1.1  

            	
              “Adverse Ruling”
      means a holding, by a final judgment of a court of competent jurisdiction
      (including the International Trade Commission), that (a) none of the
      claims of the Licensed Patent adjudicated by the court are valid, or (b)
      the Licensed Patent is unenforceable such that it could not be enforced
      against Licensee, or (c) the Licensor is estopped or enjoined from
      asserting the Licensed Patent against Licensee.  The term
      “Adverse Ruling” shall also encompass a final order by the U.S. Patent
      & Trademark Office that at least claims 1, 2, 6, and 9 of the Licensed
      Patent are invalid.

            

    

     

    
      	
              
              

            	
              1.2  

            	
              “Effective Date”
      of this Agreement shall mean the date first written
  above.

            

    

     

    
      	
              
              

            	
              1.3  

            	
              “Expiration
      Date” means the date on which the Licensed Patent shall
      expire.

            

    

     

    
      	
              
              

            	
              1.4  

            	
              “Have Made”
      means the right to purchase a Licensed Product from a third party (e.g., suppliers and
      vendors) and/or have a third party make a Licensed Product in whole or in
      part for the use by and/or sale or transfer by Licensee or its
      Subsidiaries, where the third party operates under the license grant to
      Licensee and its Subsidiaries for providing Licensed Products to Licensee
      and/or a Subsidiary of Licensee and for no other
  purpose.

            

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
      	
              
              

            	
              1.5  

            	
              “Licensed
      Patent” means the ‘930 Patent and any continuations,
      continuations-in-part, re-issues, re-examinations, and divisionals of the
      ‘930 Patent, and all patents and applications claiming priority from the
      ‘930 Patent, or from which priority is
claimed.

            

    

     

    
      	
              
              

            	
              1.6  

            	
              “Licensed PSE”
      refers to a PSE product made, used, offered for sale, or sold within the
      United States or imported into the United States prior to the Expiration
      Date.  As used in this Agreement, “Licensed PSE” shall not
      encompass any apparatus, device, equipment or product that exclusively
      uses Spare Pairs to transmit operating
power.

            

    

     

    
      	
              
              

            	
              1.7  

            	
              “Licensed PD”
      refers to a PD product made, used, offered for sale, or sold within the
      United States or imported into the United States prior to the Expiration
      Date.  As used in this Agreement, “Licensed PD” shall not
      encompass any apparatus, device, equipment or product that exclusively
      uses Spare Pairs to receive operating
power.

            

    

     

    
      	
              
              

            	
              1.8  

            	
              “Licensed
      Product” means any Licensed PSE product or any Licensed PD
      product.  A list of current Licensed Products as of the
      Effective Date includes the products set forth in Exhibit
    1.

            

    

     

    
      	
              
              

            	
              1.9  

            	
              “Power over
      Ethernet” or “PoE” means the
      technology used to deliver electrical power over Ethernet network cabling
      for the purpose of supplying operating power to devices connected to an
      Ethernet network.

            

    

     

    
      	
              
              

            	
              1.10  

            	
              “Powered Device”
      or “PD”
      means any apparatus, device, equipment, or product that receives or is
      capable of receiving (but not sending) power from PSEs in a PoE
      system.

            

    

     

    
      	
              
              

            	
              1.11  

            	
              “Power Sourcing
      Equipment” or “PSE” means any
      fixed configuration (i.e., stand alone and
      non-expandable) product that supplies power to PDs in a PoE system,
      including, but not limited to, products complying with IEEE Standards
      802.3af and 802.3at.

            

    

     

    
      	
              
              

            	
              1.12  

            	
              “Sales Price” in
      any quarter, means, with respect to any Licensed Product sold by Licensee
      (or any of its Subsidiaries) on an arms-length basis to a party that is
      not a Subsidiary of Licensee, the “Average Sales Price” (which is
      calculated as the total sum of the “Extended Prices” actually invoiced
      during a quarter, substantially in the form of the representative invoice
      attached to this Agreement as Exhibit 3, for such product divided by the
      number of units of such product sold during such
  quarter).

            

    

     

    
      	
              
              

            	
              1.13  

            	
              “Spare Pairs”
      means the set of wires in a twisted pair cable not used for transporting
      data in an Ethernet network
segment.

            

    

     

    
      	
              
              

            	
              1.14  

            	
              “Subsidiary”
      means as to Licensee (Licensor has no Subsidiaries) an entity of which
      shares of stock having voting power to elect a majority of the Board of
      Directors or other managers of such entity are at the time owned, or the
      management of which is otherwise controlled, directly or indirectly
      through one or more intermediaries, or both, by the
    Licensee.

            

    

     

    
      	
              
              

            	
              1.15  

            	
              “Third Party Licensed
      Products” means any PD or PSE product of a third party that is
      made, used, offered for sale, or sold within the United States or imported
      into the United States that is licensed by Licensor and covered under a
      license between Licensor and the third
party.

            

    

     

    
      	
              2  

            	
              License
      Grant.

            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    
      	
              
              

            	
              2.1  

            	
              Upon
      the timely payment of the initial licensing fee set forth in Section 4.1,
      Licensor grants to the Licensee and its Subsidiaries a personal,
      non-exclusive, non-transferable, royalty bearing license under the
      Licensed Patent (i) to make, use, lease, sell, offer for sale, import,
      design, Have Made, and otherwise transfer Licensed Products, including the
      right to procure or produce components for Licensed Products, (ii) to
      practice any method or process involved in the manufacture of Licensed
      Products, and (iii) to practice any method or process involved in the use
      or other integration into a system or network of Licensed
      Products.  To the extent that any Licensed Product is sold or
      otherwise transferred by Licensee or its Subsidiaries to distributors,
      resellers, channel partners, retailers, customers, and other “arm’s
      length” customers and/or end users, and any other third parties involved
      in distributing, selling, or using Licensee’s Licensed Products, the
      license granted under this Section shall encompass such parties for such
      Licensed Products, but only to the extent that the Licensed Products
      distributed, sold, or used are licensed under this Agreement and subject
      to the royalty payment under Section 4.2 below.  To the extent
      that a third party is operating under the Have Made rights granted under
      this Section, the license granted under this Section shall encompass said
      third party, but only as to such third party’s sales of Licensed Products
      to Licensee or any Subsidiaries and other licensed conduct for Licensee
      and its Subsidiaries contemplated in this Section, and not for sales to
      other parties.

            

    

     

    
      	
              
              

            	
              2.2  

            	
              If
      the Licensee, its Subsidiaries, or its or their successors initiate any
      action to challenge, directly or indirectly through their acting officers,
      directors, employees, representatives, or agents acting at Licensee’s
      direction, the infringement or validity of the Licensed Patent, or assist
      or cooperate in any action, related to the non-infringement or invalidity
      of the Licensed Patent or any declaratory judgment action under the Patent
      Act of the United States, title 35, United States Code, the Declaratory
      Judgment Act, title 28, United States Code, or otherwise (unless the
      Licensee is required to do so pursuant to any applicable law, regulation,
      judicial or administrative order or decree, or request by other regulatory
      organization having authority pursuant to the law; provided, however, that in such
      case the Licensee gives Licensor or its Subsidiaries reasonable advance
      notice that it is required to do so (so as to afford Licensor a reasonable
      opportunity to appear, object, and obtain appropriate relief regarding
      such requirement)) the Licensee shall pay a royalty rate of five percent
      (5%) of the Sales Price of Licensed Products (in lieu of the royalties
      owed under Section 4.2) with respect to all royalties payable after the
      date Licensee (or its Subsidiaries or successors) initiate any such
      action.  This Section shall not apply if Licensee, its
      Subsidiaries, or their successors initiate such action in response to any
      litigation, assertion, or claim for infringement of the Licensed Patent
      brought by Licensor (or any other party who owns rights to the Licensed
      Patent) against Licensee, a Subsidiary of Licensee, or another party with
      respect products licensed under this
Agreement.

            

    

     

    
      	
              
              

            	
              2.3  

            	
              Licensee
      acknowledges that except for the licenses granted in section 2.1 above, no
      further licenses are granted.

            

    

     

    
      	
              
              

            	
              2.4  

            	
              All
      rights not expressly granted by Licensor are expressly
      reserved.  Nothing in this Agreement shall be construed as a
      right to use or sell Licensed Products in a manner which conveys or
      purports to convey whether explicitly, by principles of implied license,
      or otherwise, any rights to any third party user or purchaser of Licensed
      Product, under the Licensed Patent, to combine the Licensed Products with
      any other product (not licensed under Section 2.1) where the right applies
      specifically to the combination of the Licensed Product and other product
      and not to the Licensed Product
itself.

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    
      	
              
              

            	
              2.5  

            	
              Licensee
      acknowledges that, this Agreement grants no rights to combine Licensed PSE
      products with PD products not licensed by Licensor or to combine Licensed
      PD products with PSE products not licensed by
  Licensor.

            

    

     

    
      	
              3  

            	
              Third Party Patents
      and Limitations on
Liability.

            

    

     

    
      	
              
              

            	
              3.1  

            	
              Licensor
      hereby represents and warrants that:  (a) it has the authority
      to enter into this Agreement and grant the license under Section 2.1; (b)
      this Agreement is valid and binding and enforceable in accordance with its
      terms except as such enforceability may be limited by applicable
      bankruptcy, insolvency, bankruptcy reorganization, or similar laws
      affecting creditors rights generally; (c) it has all right, title and
      interest in and to the Licensed Patent; (d) there are no patents or patent
      applications or foreign counterparts related to the Licensed Patent, nor
      does Licensor own any patent or patent application claiming or disclosing
      any PoE technology except the Licensed Patent; and (e) Licensor has no
      Subsidiaries.  Licensor makes no warranty or representation that
      practicing the technology covered by the license granted to Licensee under
      Section 2.1 will not infringe any patent or patents of any country which
      is or are owned by any party or parties other than
      Licensor.  The obligations of Licensee to Licensor shall be in
      no way affected and no obligation of any character of Licensor to Licensee
      shall be created by the fact that practicing the technology covered by the
      license granted in Section 2.1 infringes the patent rights of
      others.

            

    

     

    
      	
              
              

            	
              3.2  

            	
              Except
      as expressly set forth above in Section 3.1, Licensor makes no warranty,
      whether express or implied, including warranties of merchantability or of
      fitness for a particular purpose.  Under no circumstances shall
      Licensor be liable for incidental, consequential, or other damages from
      alleged negligence, breach or warranty, strict liability, tort, contract,
      or any other legal theory arising out of the use or handling of the
      Licensed Product.

            

    

     

    
      	
              4  

            	
              Consideration, Royalty
      Payments, and Royalty
Reporting.

            

    

     

    
      	
              
              

            	
              4.1  

            	
              In
      connection with the Special Licensing Program, Licensor has agreed to
      offer Licensee an “early adopter” reduced royalty rate and to reduce its
      license initiation fees, which are based on Licensee’s past sales of PSEs
      and PDs, to three hundred fifty thousand dollars ($350,000) which shall be
      paid within five business days of the Effective
  Date.

            

    

     

    
      	
              
              

            	
              4.2  

            	
              In
      further consideration of the license granted in this Agreement, Licensee
      agrees to pay Licensor for each Licensed Product sold by Licensee to a
      third party a royalty of one point seven percent (1.7%) of the Sales
      Price  for each Licensed PSE and a royalty of two percent (2%)
      of the Sales Price for each Licensed PD (“Royalty Rate”).  If
      Licensor grants a license to any other licensee with a lower applicable
      Royalty Rate, (where such applicable Royalty Rate is either (i) contained
      in a royalty bearing license, or (ii) underlying the calculation of the
      amount of a paid up license), Licensee shall be entitled to obtain the
      benefit of such lower applicable Royalty Rate upon the effective date of
      such other license, provided however, that Licensee, is able to and agrees
      to assume all of the material financial and non-financial terms and
      conditions of the license agreement executed between such other licensee
      and Licensor (other than terms relating exclusively to payment for past
      infringement).  Licensor agrees to keep books and records,
      including other license agreements, adequate to accurately determine the
      material terms and conditions of any other licenses of the Licensed
      Patent.  Licensor shall retain such books and records for at
      least three (3) years after the delivery of any royalty
      reports.  Licensee shall have the right, no more than twice per
      calendar year, to have an independent
certified

            

    

    
       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      
        	
                
                

              	
                 

              	
                public
      accountant inspect all relevant books and records of Licensor on thirty
      (30) days’ prior written notice and during regular business hours to
      inspect any relevant agreements.  Such independent certified
      public accountant shall be selected by the auditing party and shall be
      reasonably acceptable to the other party.  The auditor shall
      enter into an appropriate nondisclosure agreement with the audited party
      and any necessary third parties, and shall disclose no more information
      than is reasonably necessary to complete the audit.  Should (a)
      a lower applicable Royalty Rate be discovered as the result of an audit,
      and (b) the Licensee enters an amended license agreement in which it
      assumes all of the material financial and non-financial terms and
      conditions of the license agreement executed between the other licensee
      and Licensor as set forth above, Licensor (i) shall credit the difference
      to Licensee, or (ii) Licensee shall set off the difference against future
      royalty payments together with interest at the compounded annual Prime
      Rate as reflected in The
      Wall Street Journal, between the royalties that were actually paid
      by Licensor and the royalties that would have been paid by the Licensor
      had the Licensor agreed to the terms of the license agreement executed
      between the other licensee and Licensor as of the effective date of the
      other license agreement  Licensor shall also reimburse Licensee
      for the reasonable cost of the
audit.

              

      

       

    

    
      	
              
              

            	
              4.3  

            	
              Only
      one royalty will be paid for the sale of any given Licensed Product
      subject to royalty in this Agreement.  Royalties for sales of
      Licensed Products shall be net of returns, including without limitation
      returns for warranty defects and stock rotation, but only to the extent
      (i) Licensee credits or refunds the customer returning Licensed Products
      an amount equal to or less than the amount originally invoiced for the
      Licensed Products, and (ii) the Licensed Products were initially sold
      after the Effective Date.  Licensee will not owe any royalty
      payment for Third Party Licensed Products sold by Licensee or under
      Licensee’s brand.  For the avoidance of doubt, for royalty
      calculation purposes, any resale of a returned product shall be treated as
      a new sale to the extent the resale brings to Licensee or to a Licensee
      Subsidiary an additional selling price not already accounted for by
      Licensee and its Subsidiaries through the initial sale of that
      product.

            

    

     

    
      	
              
              

            	
              4.4  

            	
              Licensee
      shall make all payments to Licensor in performance of any obligation of
      Licensee defined in this Agreement in United States Dollars by bank wire
      to the following account:

            

    

     

    Network-1
Security Solutions, Inc.

    Bank of
America (formerly Fleet)

    60
Hempstead Ave

    West
Hempstead, New York 11552

    Swift
code BOFAUS3N

    ABA #
021000322

    A/C #
9492142646

    

    Licensor
may, in its discretion, provide Licensee with written notice of alternative
methods of payment.  The amounts paid in consideration for this
non-exclusive license is not intended to reflect either a reasonable royalty or
an established royalty and is entered into in recognition of Licensee being the
first defendant in the litigation entitled Network-1 Security Solutions, Inc.
v. Cisco Systems, Inc., et. al, Case No. 6-08 CV-030 (currently pending
in the Eastern District of Texas) to enter into a license.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    
      	
              
              

            	
              4.5  

            	
              Licensee
      shall make running royalty payments within thirty (30) days after the end
      of each calendar quarter (“Royalty Period”) during which any Licensed
      Product subject to royalty in this Agreement was
      sold.  Royalties shall be calculated in the currency in which
      sales are made and, in the case of sales made in currency other than
      United States Dollars, the equivalent amount of the United States Dollars
      for any royalties payable hereunder will be determined on the basis of the
      rate of exchange quoted by The Wall Street Journal
      as of the due date of the royalty payment (in the event that The Wall Street Journal
      quotes more than one rate of exchange that day, Licensee shall select any
      one of those rates).  Royalties shall be submitted with a
      royalty report (“Royalty Report”), in the form of Exhibit 2,
      showing all Licensed Products sold by Licensee in the immediately
      preceding Licensee fiscal quarter.  The Royalty Report shall be
      certified by the Licensee setting forth the amount and calculation of the
      royalties for the reported period regardless of whether or not any payment
      is due.  The Royalty Report will include all Licensed Products
      sold by Licensee during the reporting fiscal quarter, including Licensed
      Products that are not on Exhibit 1 but were subsequently sold by
      Licensee.

            

    

     

    
      	
              
              

            	
              4.6  

            	
              Licensee
      assumes responsibility for any payment due but not made by any
      Subsidiary.

            

    

     

    
      	
              
              

            	
              4.7  

            	
              Irrespective
      of any ruling of a court, administrative body, or arbitral tribunal, no
      royalties paid by Licensee shall be subject to refund except for
      overpayments made in error and identified by Licensee within six (6)
      months of actual or constructive notice of such erroneous payment,
      whichever is later.  Any refund that Licensee may be entitled to
      pursuant to this Agreement shall be taken as a credit in a subsequent
      Royalty Report; provided, however that if no further royalties are due
      under this Agreement, Licensee shall receive a refund instead of a
      credit.  Such refunds shall be made to Licensee within thirty
      (30) days of notice.

            

    

     

    
      	
              
              

            	
              4.8  

            	
              No
      further royalties shall be due under Section 4.2 in the event of an
      Adverse Ruling.  Licensor shall provide Licensee with written
      notice of an Adverse Ruling as soon as reasonably
      practicable.  In the event that the Adverse Ruling is
      overturned, including by way of a ruling of the United States Court of
      Appeals for the Federal Circuit, or other higher court of competent
      jurisdiction, the obligations to pay royalties will be reinstated and the
      royalties that were not paid during the period before the Adverse Ruling
      was overturned shall be paid by Licensee with interest at the Prime Rate
      as reflected in The Wall
      Street Journal as of the date the Adverse Ruling is
      overturned.

            

    

     

    
      	
              
              

            	
              4.9  

            	
              In
      the event a third party’s PoE products (e.g., PSEs or PDs) are
      found not to infringe the Licensed Patent by a court of competent
      jurisdiction (including the International Trade Commission)
      (“Non-Infringement Finding”), Licensee may provide notice to Licensor that
      such finding could result in terminating Licensee’s obligation to pay
      royalties under the Agreement, and Licensee may provide notice to Licensor
      that it intends to cease making royalty payments for Licensed Products of
      comparable physical structure, with respect to the claims of the Licensed
      Patent, to the PoE products found not to infringe the Licensed
      Patent.  A Non-Infringement Finding arises if, for example, a
      court finds that a third party’s PoE product (i) fails to meet the
      limitations of all asserted claims not subject to an Adverse Ruling, (ii)
      is covered by an implied license, (iii) is subject to patent exhaustion,
      and/or (iv) is subject to legal estoppel.  Licensor shall
      provide Licensee with written notice of such Non-Infringement Finding as
      soon as reasonably practicable.  If the parties disagree with
      the effect the ruling has on Licensee’s obligation to pay royalties under
      this Agreement, the parties may submit the issue of whether the
      Non-Infringement Finding would be applicable to the Licensee’s Licensed
      Products to a mutually agreed upon

            

    

    
       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      
        	
                
                

              	
                 

              	
                mediator
      with expertise in patent law for mediation followed, if necessary, by
      binding arbitration before an arbitration panel pursuant to the rules of
      the American Arbitration Association.  In the event that the
      arbitration panel makes an award that the Non-Infringement Finding applies
      to Licensee or the Licensed Products (“Arbitration Award”), then Licensee
      may cease making further royalty payments for sales of the Licensed
      Product, provided, however, in the event that (a) the Non-Infringement
      Finding is overturned by the United States Court of Appeals for the
      Federal Circuit or other higher court of competent jurisdiction, or (b)
      the Arbitration Award is overturned by a court of competent jurisdiction,
      the obligations to pay royalties will be reinstated from the date of the
      earlier of (a) or (b) above, with interest at the Prime Rate as reflected
      in The Wall Street Journal as of the date of the earlier of (a) or (b),
      and this Agreement will remain in full force and effect irrespective of
      any prior arbitration ruling to the contrary.  Licensor will
      provide Licensee with written notice of (a) above within thirty (30) days
      of its issuance.  All decisions and rulings of the mediator or
      arbitration panel shall be held in confidence by Licensor and Licensee and
      shall never be used as evidence in any other legal or administrative
      proceeding.

              

      

       

    

    
      	
              
              

            	
              4.10  

            	
              Payments
      when provided for in this Agreement shall, when overdue, bear interest
      compounded monthly (prorated for periods of time less than one month) at
      an annualized rate of five percent (5%) over the prime rate quoted by
      The Wall Street
      Journal, on the date that the payment is due, for each month during
      the delinquency.  If the amount of such charge exceeds the
      maximum permitted by law, such charge shall be reduced to such
      maximum.

            

    

     

    
      	
              
              

            	
              4.11  

            	
              Licensee
      shall keep books and records adequate to accurately determine the payments
      due under this Agreement.  Licensee shall retain such books and
      records for at least three (3) years after the delivery of the Royalty
      Report to which they relate.  Licensor shall have the right, no
      more than twice per calendar year, to have an independent certified public
      accountant inspect all relevant books and records of the other party on
      thirty (30) days’ prior written notice and during regular business hours
      to verify the reports and payments required to be made pursuant to this
      Agreement.  Such independent certified public accountant shall
      be selected by the auditing party and shall be reasonably acceptable to
      the other party.  The auditor shall enter into an appropriate
      nondisclosure agreement with the audited party and any necessary third
      parties, and shall disclose no more information than is reasonably
      necessary to complete the audit.  Should an underpayment in
      excess of five percent (5%) be discovered, Licensee shall reimburse
      Licensor for the cost of the audit.  In any event, Licensee
      shall promptly pay any underpayment together with interest at the
      compounded annual Prime Rate as reflected in The Wall Street Journal
      on the last day of each month during the period of the
      delinquency.

            

    

     

    
      	
              5  

            	
              Term and
      Termination.

            

    

     

    
      	
              
              

            	
              5.1  

            	
              This
      Agreement will commence on the Effective Date and will remain in force and
      effect until the Expiration Date, unless earlier terminated or in the
      event all claims of the Licensed Patent are found to be invalid, or the
      Licensed Patent is held unenforceable against Licensee, or if the Licensor
      is estopped or enjoined from asserting the Licensed Patent against
      Licensee by a final non-appealable order of a court of competent
      jurisdiction.  Other than as provided for in Section 5.2, the
      parties to this Agreement may terminate this Agreement only by mutual
      written agreement.

            

    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    
      	
              
              

            	
              5.2  

            	
              In
      the event a party to this Agreement breaches any provision of this
      Agreement and fails to cure such breach within forty-five (45) days of
      receipt of written notice of such breach, the other party to this
      Agreement may, in its sole discretion, terminate the Agreement upon
      written notice to the other party.

            

    

     

    
      	
              
              

            	
              5.3  

            	
              If
      Licensee fails to make royalty payments required by this Agreement and
      fails to remedy such breach in accordance with Section 5.2, all remedial
      payments for outstanding payments shall be calculated at a royalty rate of
      five percent (5%) instead of the Royalty Rate set forth in Section
      4.2.  The Royalty Rate set forth in Section 4.2 will continue to
      apply after Licensee makes the remedial
  payments.

            

    

     

    
      	
              
              

            	
              5.4  

            	
              Termination
      of this Agreement by mutual written agreement of the parties to this
      Agreement shall not, unless otherwise agreed by the parties, have the
      effect of terminating, revoking, or withdrawing rights and obligations set
      forth in this Agreement with respect to matters after the Effective Date
      and up through and including the effective date of the
      termination.  Notwithstanding the foregoing, the termination of
      this Agreement for any reason shall not terminate the license granted in
      this Agreement for any Licensed Product sold or in the process of being
      manufactured prior to the termination date so long as the applicable
      royalty due with respect to such product has been paid by
      Licensee.

            

    

     

    
      	
              6  

            	
              Miscellaneous.

            

    

     

    
      	
              
              

            	
              6.1  

            	
              If
      any provision of this Agreement is held to be illegal, invalid, or
      unenforceable under any present or future law, and if the rights or
      obligations of any party to this Agreement  will not be
      materially and adversely affected thereby, (i) such provision will be
      fully severable, (ii) this Agreement will be construed and enforced
      as if such illegal, invalid, or unenforceable provision had never been
      part of this Agreement, and (iii) the remaining provisions of this
      Agreement will remain in full force and effect and will not be affected by
      the illegal, invalid, or unenforceable provision or by its severance from
      this Agreement.

            

    

     

    
      	
              
              

            	
              6.2

            	
              This
      Agreement may not be assigned by either party without the express prior
      written consent of the other party, except in connection with a merger,
      acquisition, reorganization, or sale of all or substantially all of such
      party’s assets or equity (“Transaction”).  The license set forth
      in Section 2.1, however, shall continue to cover and apply only to
      Licensed Products (which are marketed, sold, and distributed under
      licenses granted in this Agreement) in existence as of the effective date
      of the transaction, and any subsequent updates, upgrades, enhancements,
      improvements to such products.  This Agreement is binding upon
      and inures to the benefit of the parties hereto, and their permitted
      assigns.  If the Licensee enters into any Transaction with
      another entity, the other entity involved in the Transaction will not,
      under any circumstances, be released for any of its past infringement of
      the Licensed Patent as a result of the Transaction, whether or not the
      surviving entity is licensed under Section 2.1 of this Agreement after the
      date of the transaction.

            

    

     

    
      	
              
              

            	
              6.3  

            	
              If
      Licensor sells, transfers or exclusively licenses the Licensed Patent, or
      grants any interest in the Licensed Patent (other than a non-exclusive
      license) Licensor will provide notice of this license granted to Licensee
      and will ensure the Licensed Patent remains subject to this
      Agreement.

            

    

     

    
      	
              
              

            	
              6.4  

            	
              Except
      as specifically provided in Section 2.1, nothing expressed or implied in
      this Agreement is intended or shall be construed to confer upon or give to
      any party, other than

            

    

    
       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      
        	
                
                

              	
                 

              	
                the
      parties to this Agreement and their respective successors and permitted
      assigns, any rights or remedies under or by reason of this
      Agreement.

              

      

       

    

    
      	
              
              

            	
              6.5  

            	
              This
      Agreement may be executed in separate counterparts, each of which shall be
      considered an original but all of which will constitute one
      agreement.

            

    

     

    
      	
              
              

            	
              6.6  

            	
              This
      Agreement is not confidential.  Each party understands that
      following the Effective Date, the other party may be required to file a
      Form 8-K with the SEC that will include this Agreement as an
      exhibit.  Each party further understands that the other party
      may be required to publicly disclose information pertaining to this
      Agreement.

            

    

     

    
 

     

     

    
 

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    IN
WITNESS WHEREOF, each of the parties has caused two original copies of this
Agreement to be executed on its behalf by its duly authorized officer as of the
Effective Date.

     

    
      
        	 	

                NETWORK-1
      SECURITY SOLUTIONS, INC.

              	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Corey
      M. Horowitz	 
	 	 	Corey
      M. Horowitz	 
	 	 	Chairman
      and Chief Executive Officer	 
	 	 	 	 

      

    
       

      
        
          	 	

                  NETGEAR,
      Inc.

                	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/ Andrew
      Kim	 
	 	 	Andrew
      Kim	 
	 	 	VP,
      Legal; Corp. Div.	 
	 	 	 	 

        

        
 

      

    

    
      
        
        

      

      
         

        
          

        

      

      
        
        

      

    

    EXHIBIT
1

     

    

     

    LICENSED
PRODUCTS (AS OF THE EFFECTIVE DATE) INCLUDE, BUT ARE NOT NECESSARILY LIMITED
TO:

     

    
      	
              ·

            	
              ProSafe
      L3 Managed Stackable Switches (including FSM 7328PS-100NAS, FSM 7352PSNA,
      FSM 7326PNA)

            

    

     

    
      	
              ·

            	
              ProSafe
      Smart Switches (including GS 724TP-100NAS, GS 748TP-100NAS, FS
      728TP-100NAS, FS 752TPSNA, FS 726T
PNA)

            

    

     

    
      	
              ·

            	
              ProSafe
      Unmanaged Desktop Switches (including FS116PNA,
  FS108PNA)

            

    

     

    
      	
              ·

            	
              ProSafe
      Smart Wireless Controller (including
WFS709TP)

            

    

     

    
      	
              ·

            	
              ProSafe
      Light Wireless Access Point (including WGL
  102-100NAS)

            

    

     

    
      	
              ·

            	
              ProSafe
      Dual Band Light Wireless Access Point (including WAGL
  102)

            

    

     

    
      	
              ·

            	
              ProSafe
      Wireless Access Point (including WG
302NA)

            

    

     

    
      	
              ·

            	
              ProSafe
      802.11n Dual Band Wireless Access Point (including
      WNDAP330-100NAS)

            

    

     

    

 

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
2

     

    ROYALTY
REPORT

     

    The
undersigned official of Licensee is providing the following information to
Network-1 pursuant to the License Agreement dated May __, 2009 entered into
between Network-1 and Licensee.  All capitalized terms used in this
Report have the definitions ascribed to them in the Agreement.  This
Report reflects the Royalties payable by Licensee for the quarterly period
ending _______________.

     

    

    
      
        
          
            
              
                
                  
                    
                      	
                              Licensed
      Product Model No., Name & Description

                            	
                              Units
      Sold

                            	
                              Returns

                            	
                              Calculation
      Of Royalties

                            
	
                               

                               

                               

                               

                               
      

                            	 
      	 
      	
                              Sales
      Price

                               

                            	
                              Royalty
      %

                            	
                              Amount
      of Royalty

                            
	
                               
      

                               

                               

                               

                               

                               

                               

                               

                               

                            	 
      	 
      

                    

                  

                

              

            

          

        

      

    

    

    
      
        	 
      	 
      	 
      	 
      	
                Due
      & Payable

              	
                Total
      Royalties

                $________________

              

      

    

    

    The
undersigned hereby certifies the foregoing an accurate and complete record of
all royalties due and payable by Licensee for the period
___________.

     

    Signature:                                                                           Date:

    
      

    

    
       

      
        

      
Name:

    
      

    

    Title:

    
      

    

    

 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
3

     

    REPRESENTATIVE
INVOICEchxd_s8-ex4x1.htm

    Exhibit 4.1

     

    CHINA
XD PLASTICS COMPANY LIMITED

     

    2009 STOCK OPTION/STOCK
ISSUANCE PLAN

     

    ARTICLE
ONE

     

    GENERAL
PROVISIONS

     

    
      	 
      	
              I.

            	
              PURPOSE
      OF THE PLAN

            

    

     

    This Plan
is intended to promote the interests of China XD Plastics Company Limited (the “Corporation”), by
providing eligible persons employed by or serving the Corporation or any
Subsidiary or Parent with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to continue in such employ or service.

     

    Capitalized
terms herein shall have the meanings assigned to such terms in the attached
Appendix.

     

    
      	 
      	
              II.

            	
              STRUCTURE
      OF THE PLAN

            

    

     

    A. The
Plan shall be divided into two separate equity programs:

     

    (1) the
Option Grant Program under which eligible persons may, at the discretion of the
Plan Administrator, be granted options to purchase shares of Common Stock,
and

     

    (2) the
Stock Issuance Program under which eligible persons may, at the discretion of
the Plan Administrator, be issued shares of Common Stock directly, either
through the immediate purchase of such shares or as a bonus for services
rendered the Corporation (or any Parent or Subsidiary).

     

    B. The
provisions of Articles One and Four shall apply to both equity programs under
the Plan and shall accordingly govern the interests of all persons under the
Plan.

     

    
      	 
      	
              III.

            	
              ADMINISTRATION
      OF THE PLAN

            

    

     

    A. The
Board shall administer the Plan. However, any or all administrative functions
otherwise exercisable by the Board may be delegated to the Committee. Members of
the Committee shall serve for such period of time as the Board may determine and
shall be subject to removal by the Board at any time. The Board may also at any
time terminate the functions of the Committee and reassume all powers and
authority previously delegated to the Committee.

     

    B. The
Plan Administrator shall have full power and authority (subject to the
provisions of the Plan) to establish such rules and procedures as it may deem
appropriate for proper administration of the Plan and to make such
determinations under, and issue such interpretations of, the Plan and any
outstanding options or stock issued under the Plan as it may deem necessary or
advisable. Decisions of the Plan Administrator shall be final and binding on all
parties who have an interest in the Plan or any option grant or stock issued
under the Plan.

     

    C. The
Plan Administrator shall have full authority to determine, (1) with respect to
the grants made under the Option Grant Program, which eligible persons are to
receive such grants, the time or times when those grants are to be made, the
number of shares to be covered by each such grant, the status of the granted
option as either an Incentive Option or a Non-Statutory Option, the time or
times when each option is to become exercisable, the vesting schedule (if any)
applicable to the option shares and the maximum term for which the option is to
remain outstanding, and (2) with respect to stock issuances made under the Stock
Issuance Program, which eligible persons are to receive such issuances, the time
or times when those issuances are to be made, the number of shares to be issued
to each Participant, the vesting schedule (if any) applicable to the issued
shares and the consideration to be paid by the Participant for such shares. Each
option grant or stock issuance approved by the Plan Administrator shall be
evidenced by the appropriate documentation.

     

    1

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    IV.        ELIGIBILITY

     

    A. The
persons eligible to participate in the Plan are as follows:

     

    (1)
employees;

     

    (2)
members of the Board and the members of the board of directors of any Parent or
Subsidiary; and

     

    (3)
independent contractors who provide services to the Corporation (or any Parent
or Subsidiary).

     

    
      	 
      	
              V.

            	
              STOCK
      SUBJECT TO THE PLAN

            
	 
      	 
      	 
      

    

     

    A. The
shares issuable under the Plan shall be shares of authorized but unissued or
reacquired shares of Common Stock. The maximum number of shares of Common Stock
that may be issued and outstanding or subject to options outstanding under the
Plan shall not exceed 7,800,000 shares.

     

    B. Shares
of Common Stock subject to outstanding options shall be available for subsequent
issuance under the Plan to the extent (1) the options expire or terminate for
any reason prior to exercise in full or (2) the options are cancelled in
accordance with the cancellation-regrant provisions of Article Two. Unvested
Shares issued under the Plan and subsequently repurchased by the Corporation, at
a price per share not greater than the option exercise or direct issue price
paid per share, pursuant to the Corporation’s repurchase rights under the Plan
shall be added back to the number of shares of Common Stock reserved for
issuance under the Plan and shall accordingly be available for reissuance
through one or more subsequent option grants or direct stock issuances under the
Plan.

     

    C. Should
any change be made to the Common Stock by reason of any stock split, stock
dividend, reverse stock split, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation’s receipt of consideration, appropriate adjustments
shall be made to (1) the maximum number and/or class of securities issuable
under the Plan and (2) the number and/or class of securities and the exercise
price per share in effect under each outstanding option in order to prevent the
dilution or enlargement of benefits thereunder. The adjustments determined by
the Plan Administrator shall be final and binding. In no event shall any such
adjustments be made in connection with the conversion of one or more outstanding
shares of the Corporation’s preferred stock into shares of Common
Stock.

     

    D. The
grant of options or the issuance of shares of Common Stock under the Plan shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

     

    ARTICLE
TWO

     

    OPTION GRANT
PROGRAM

     

    
      	 
      	
              I.

            	
              OPTION
      TERMS

            

    

     

    A. Exercise
Price.

     

    (1) The
Plan Administrator shall fix the exercise price per share. However, (a) if the
option is granted to a 10% Stockholder, the exercise price per share must not be
less than 110% of the Fair Market Value per share of Common Stock on the date
the option is granted, (b) if a Non-Statutory Option is granted to an Optionee
who is not a 10% Stockholder, the exercise price per share must not be less than
85% of the Fair Market Value per share of Common Stock on the date the option is
granted and (c) if an Incentive Option is granted to an Optionee who is not a
10% Stockholder, the exercise price per share shall not be less than 100% of the
Fair Market Value per share of Common Stock on the date the option is
granted.

     

    

    (2) The
exercise price shall become immediately due upon exercise of the option and
shall, subject to the provisions of Section I of Article Four and the documents
evidencing the option, be payable in cash or check made payable to the
Corporation. Should the Common Stock be registered under Section 12 of the 1934
Act at the time the option is exercised, then the exercise price (and any
applicable withholding taxes) may also be paid as follows:

     

    2

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (a) in
shares of Common Stock held for the requisite period, if any, necessary to avoid
a charge to the Corporation’s earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date, or

     

    (b) to
the extent the option is exercised for Vested Shares, through a special sale and
remittance procedure pursuant to which the Optionee shall concurrently provide
irrevocable instructions (i) to a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the Corporation,
out of the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares plus all
applicable income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (ii) to the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm in
order to complete the sale.

     

    Except to
the extent such sale and remittance procedure is utilized, payment of the
exercise price for the purchased shares must be made on the Exercise
Date.

     

    B. Exercise
and Term of Options. Each option shall be exercisable at such time or
times, during such period and for such number of shares as shall be determined
by the Plan Administrator and set forth in the documents evidencing the option
grant. However, no option shall have a term in excess of ten years measured from
the option grant date.

     

    C. Effect of
Termination of Service.

     

    (1) The
following provisions shall govern the exercise of any options granted to the
Optionee that remain outstanding at the time the Optionee’s Service
ceases:

     

    (a)
Should the Optionee cease to remain in Service for any reason other than death,
Disability or Misconduct, then each option shall be exercisable for the number
of shares subject to the option that were Vested Shares at the time the
Optionee’s Service ceased and shall remain exercisable until the close of
business on the earlier
of (i) the three month anniversary of the date Optionee’s Service ceased or (ii)
the expiration date of the option.

     

    (b)
Should the Optionee cease to remain in Service by reason of death or Disability,
then each option shall be exercisable for the number of shares subject to the
option which were Vested Shares at the time of the Optionee’s Service ceased and
shall remain exercisable until the close of business on the earlier of (i) the twelve
month anniversary of the date Optionee’s Service ceased or (ii) expiration date
of the option.

     

    (c) No
additional vesting will occur after the date the Optionee’s Service ceases, and
the option shall immediately terminate with respect to the Unvested Shares. Upon
the expiration of any post-Service exercise period or (if earlier) upon the
expiration date of the term of the option, the option shall terminate with
respect to the Vested Shares.

     

    (d)
Should the Optionee’s Service be terminated for Misconduct or should the
Optionee otherwise engage in Misconduct, then each outstanding option granted to
the Optionee shall terminate immediately with respect to all
shares.

     

    (2)
Understanding that there may be adverse tax and accounting consequences to doing
so, the Plan Administrator shall have the discretion, exercisable either at the
time an option is granted or at any time while the option remains outstanding,
to:

     

    (a)
extend the period of time for which the option is to remain exercisable
following the Optionee’s cessation of Service for such period of time as the
Plan Administrator shall deem appropriate, but in no event beyond the expiration
of the option, and/or

     

    3

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)
permit the option to be exercised, during the applicable post-Service exercise
period, not only with respect to the number of Vested Shares for which such
option is exercisable at the time of the Optionee’s cessation of Service but
also with respect to one or more additional installments in which the Optionee
would have vested under the option had the Optionee continued in
Service.

     

    D. Stockholder
Rights. The holder of an option shall have no stockholder rights with
respect to the shares subject to the option until such person shall have
exercised the option, paid the exercise price and become the recordholder of the
purchased shares.

     

    E. Unvested
Shares. The Plan Administrator shall have the discretion to grant options
that are exercisable for Unvested Shares. Should the Optionee’s Service cease
while the shares issued upon the early exercise of the Optionee’s option are
still unvested, the Corporation shall have the right to repurchase, any or all
of those Unvested Shares at the lower of (1) the exercise
price paid per share, or (2) the Fair Market Value per share on the date the
Optionee’s Service ceased. Once the Corporation exercises its repurchase right,
the Optionee shall have no further stockholder rights with respect to those
shares. The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting
schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.
Any such repurchase must be made in accordance with applicable corporate law.
The Plan Administrator may not impose a vesting schedule upon any option grant
or the shares of Common Stock subject to that option which is more restrictive
than 20% per year vesting, with the initial vesting to occur not later than one
year after the option is granted. However, such limitation shall not apply to
options granted to individuals who are officers, independent consultants or
directors of the Corporation.

     

    F. Limited
Transferability of Options. An Incentive Option shall be exercisable only
by the Optionee during his or her lifetime and shall not be assignable or
transferable other than by will or by the laws of inheritance following the
Optionee’s death. A Non-Statutory Option may be assigned in whole or in part
during the Optionee’s lifetime to one or more members of the Optionee’s family
(as defined in Rule 701 promulgated by the Securities and Exchange Commission)
or to a trust established exclusively for one or more such family members or to
the Optionee’s former spouse, to the extent such assignment is in connection
with the Optionee’s estate plan or pursuant to a domestic relations order. The
terms applicable to the assigned portion shall be the same as those in effect
for the option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Plan Administrator may deem
appropriate.

     

    
      	 
      	
              II.

            	
              INCENTIVE
      OPTIONS

            

    

     

    The terms
specified below shall be applicable to all Incentive Options. Except as modified
by the provisions of this Section II, all the provisions of Articles One, Two
and Four shall be applicable to Incentive Options. Options that are specifically
designated as Non-Statutory Options shall not be subject to the terms of this
Section II.

     

    A. Eligibility.
Incentive Options may only be granted to Employees.

     

    B. Dollar
Limitation. The aggregate Fair Market Value of the shares of Common Stock
(determined as of the respective date or dates of grant) for which one or more
options granted to any Employee under the Plan (or any other option plan of the
Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one calendar year shall not exceed
$100,000.

     

    C. Term of
Option Granted to a 10% Stockholder. If any Employee to whom an Incentive
Option is granted is a 10% Stockholder, then the option term shall not exceed
five years measured from the date the option is granted.

     

    
      	 
      	
              III.

            	
              CHANGE
      IN CONTROL

            

    

     

    A. The
shares subject to each option outstanding under the Plan at the time of a Change
in Control shall automatically become Vested Shares, and each such option shall,
immediately prior to the effective date of the Change in Control, become
exercisable for all of the shares of Common Stock at the time subject to that
option. However, the shares subject to an outstanding option shall not become Vested Shares on
an accelerated basis if and to the extent: (1) such option is assumed by the
successor corporation (or parent thereof) or otherwise continued in full force
and effect pursuant to the terms of the Change in Control transaction or (2)
such option is to be replaced with a cash incentive program of the Corporation
or any successor corporation which preserves the spread existing on the Unvested
Shares at the time of the Change in Control and provides for subsequent payout
of that spread no later than the time the Optionee would vest in those Unvested
Shares or (3) the acceleration of such option is subject to other limitations
imposed by the Plan Administrator.

     

     

    4

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    B. All
outstanding repurchase rights under the Option Grant Program shall also
terminate automatically, and the shares of Common Stock subject to those
terminated rights shall immediately become Vested Shares, in the event of any
Change in Control, except to the extent: (1) those repurchase rights are
assigned to the successor corporation (or parent thereof) or otherwise continued
in effect pursuant to the terms of the Change in Control transaction, (2) the
property (including cash payments) issued with respect to Unvested Shares is to
be held in escrow and released in accordance with the vesting schedule in effect
for the Unvested Shares pursuant to the Change in Control transaction or (3)
such accelerated vesting is precluded by other limitations imposed by the Plan
Administrator.

     

    C.
Immediately following the consummation of the Change in Control, all outstanding
options shall terminate, except to the extent assumed by the successor
corporation (or parent thereof) or otherwise continued in effect pursuant to the
terms of the Change in Control transaction.

     

    D. Each
option that is assumed in connection with a Change in Control or otherwise
continued in effect shall be appropriately adjusted, immediately after such
Change in Control, to apply to the number and class of securities which would
have been issuable to the Optionee in consummation of such Change in Control,
had the option been exercised immediately prior to such Change in Control.
Appropriate adjustments shall also be made to (1) the number and class of
securities available for issuance under the Plan following the consummation of
such Change in Control and (2) the exercise price payable per share under each
outstanding option, provided the aggregate
exercise price payable for such securities shall remain the same. To the extent
the holders of the Common Stock receive cash consideration for their Common
Stock in consummation of the Change in Control, the successor corporation may,
in connection with the assumption of the outstanding options under this Plan,
substitute one or more shares of its own common stock with a fair market value
equivalent to the cash consideration paid per share of Common Stock in such
Change in Control.

     

    E. The
Plan Administrator shall have the discretion, exercisable either at the time the
option is granted or at any time while the option remains outstanding, to
structure one or more options so that the option shall become immediately
exercisable and some or all of the shares subject to those options shall
automatically become Vested Shares (and some or all of the repurchase rights of
the Corporation with respect to the Unvested Shares subject to those options
shall immediately terminate) upon the occurrence of a Change in Control or
another specified event, or the Optionee’s Involuntary Termination within a
designated period following a specified event.

     

    F. In
addition, the Plan Administrator may provide that one or more of the
Corporation’s outstanding repurchase rights with respect to some or all of the
shares held by the Optionee at the time of a Change in Control or other
specified event, or the Optionee’s Involuntary Termination following a specified
event, shall immediately terminate on an accelerated basis, and the shares
subject to those terminated rights shall become Vested Shares at that
time.

     

    G. The
portion of any Incentive Option accelerated in connection with a Change in
Control shall remain exercisable as an Incentive Option only to the extent the
applicable $100,000 limitation set forth in Section II.C. of Article Two is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a Non-Statutory Option under the
federal tax laws.

     

    
      	 
      	
              IV.

            	
              CANCELLATION
      AND REGRANT OF OPTIONS

            

    

     

    The Plan
Administrator shall have the authority to effect, at any time and from time to
time, with the consent of the affected option holders, the cancellation of any
or all outstanding options under the Plan and to grant in substitution therefor
new options covering the same or different number of shares of Common
Stock.

     

     

    5

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
THREE

     

    STOCK ISSUANCE
PROGRAM

     

    
      	 
      	
              I.

            	
              STOCK
      ISSUANCE TERMS

            

    

     

    A. Purchase
Price.

     

    (1) The
Plan Administrator shall fix the purchase price per share. However, if shares
are issued under the Stock Issuance Program to a 10% Stockholder, then the
purchase price per share shall not be less than 100% of the Fair Market Value
per share of Common Stock on the date of issuance or (b) if shares are issued
under the Stock Issuance Program to a Participant who is not a 10% Stockholder,
then the purchase price per share shall not be less than 85% of the Fair Market
Value per share of Common Stock on the date of issuance.

     

    (2)
Shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

     

    (a) cash
or check made payable to the Corporation,

     

    (b) past
services rendered to the Corporation (or any Parent or Subsidiary),
or

     

    (c) a
promissory note to the extent permitted by Section I of Article
Four.

     

    B. Vesting
Provisions.

     

    (1)
Shares of Common Stock issued under the Stock Issuance Program may, in the
discretion of the Plan Administrator, be Vested Shares or may vest in one or
more installments over the Participant’s period of Service or upon attainment of
specified performance objectives. However, the Plan Administrator may not impose
a vesting schedule upon any shares of Common Stock issued under the Stock
Issuance Program which is more restrictive than 20% per year vesting, with the
initial vesting to occur no later than one year after the shares are issued.
Such limitation shall not apply to shares issued to individuals who are
officers, independent consultants or directors of the Corporation.

     

     (2)
Any new, substituted or additional securities or other property (including money
paid other than as a regular cash dividend) which the Participant may have the
right to receive with respect to the Participant’s Unvested Shares by reason of
any stock dividend, stock split, reverse stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation’s receipt of
consideration shall be issued subject to (a) the same vesting requirements
applicable to the Participant’s Unvested Shares treated as if acquired on the
same date as the Unvested Shares and (b) such escrow arrangements as the Plan
Administrator shall deem appropriate.

     

    (3) The
Participant shall have full stockholder rights with respect to any shares of
Common Stock issued to the Participant under the Stock Issuance Program, whether
or not the Participant’s interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any regular
cash dividends paid on such shares.

     

    (4)
Should the Participant cease to remain in Service while holding one or more
Unvested Shares issued under the Stock Issuance Program or should the
performance objectives not be attained with respect to one or more such Unvested
Shares, then the Corporation shall have the right to repurchase the Unvested
Shares at the lower of
(a) the purchase price paid per share or (b) the Fair Market Value per share on
the date Participant’s Service ceased or the performance objective was not
attained. The terms upon which such repurchase right shall be exercisable shall
be established by the Plan Administrator and set forth in the document
evidencing such repurchase right. Any repurchase must be made in compliance with
the relevant provisions of New York law.

     

    (5) The
Plan Administrator may in its discretion waive the surrender and cancellation of
one or more Unvested Shares (or other assets attributable thereto) which would
otherwise occur upon the non-completion of the vesting schedule applicable to
those shares. Such waiver shall result in the immediate vesting of the
Participant’s interest in the shares of Common Stock as to which the waiver
applies. Such waiver may be effected at any time, whether before or after the
Participant’s Service ceases or he or she attains the applicable performance
objectives.

     

     

    6

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 
      	
              II.

            	
              CHANGE
      IN CONTROL

            

    

     

    A. Upon
the occurrence of a Change in Control, all outstanding repurchase rights under
the Stock Issuance Program shall terminate automatically, and the shares of
Common Stock subject to those terminated rights shall immediately become Vested
Shares, except to the extent: (1) those repurchase rights are assigned to the
successor corporation (or parent thereof) or otherwise continued in effect
pursuant to the terms of the Change in Control transaction, (2) the property
(including cash payments) issued with respect to the Unvested Shares is held in
escrow and released in accordance with the vesting schedule in effect for the
Unvested Shares pursuant to the terms of the Change in Control transaction, or
(3) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator.

     

    B. The
Plan Administrator shall have the discretionary authority, exercisable either at
the time the Unvested Shares are issued or any time while the Corporation’s
repurchase rights with respect to those shares remain outstanding, to provide
that those rights shall automatically terminate in whole or in part on an
accelerated basis, and some or all of the shares of Common Stock subject to
those terminated rights shall immediately become Vested Shares, in the event of
a Change of Control or other event or the Participant’s Service is terminated by
reason of an Involuntary Termination within a designated period following a
Change in Control or any other specified event.

     

    ARTICLE
FOUR

     

    MISCELLANEOUS

     

    
      	 
      	
              I.

            	
              FINANCING

            

    

     

    The Plan
Administrator may permit any Optionee or Participant to pay the option exercise
price under the Option Grant Program or the purchase price for shares issued
under the Stock Issuance Program by delivering a full-recourse, interest bearing
promissory note secured by the purchased shares. The Plan Administrator, after
considering the potential adverse tax and accounting consequences, shall set the
remaining terms of the note. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (A) the aggregate option exercise
price or purchase price payable for the purchased shares (less the par value of
those shares) plus (B) any applicable income and employment tax liability
incurred by the Optionee or the Participant in connection with the option
exercise or share purchase.

     

    
      	 
      	
              II.

            	
              FIRST
      REFUSAL RIGHTS

            

    

     

    The
Corporation shall have the right of first refusal with respect to any proposed
disposition by the Optionee or Participant (or any successor in interest) of any
shares of Common Stock issued under the Plan. Such right of first refusal shall
be exercisable and lapse in accordance with the terms established by the Plan
Administrator and set forth in the document evidencing such right.

     

    
      	 
      	
              III.

            	
              SHARE
      ESCROW/LEGENDS

            

    

     

    Unvested
Shares may, in the Plan Administrator’s discretion, be held in escrow by the
Corporation until the Unvested Shares vest or may be issued directly to the
Participant or Optionee with restrictive legends on the certificates evidencing
the fact that the Participant or Optionee does not have a vested right to
them.

     

    
      	 
      	
              IV.

            	
              EFFECTIVE
      DATE AND TERM OF PLAN

            

    

     

    A. The
Plan shall become effective when adopted by the Board, but no option granted
under the Plan may be exercised, and no shares shall be issued under the Plan,
until the Corporation’s stockholders approve the Plan. If such stockholder
approval is not obtained within twelve months after the date of the Board’s
adoption of the Plan, then all options previously granted under the Plan shall
terminate, and no further options shall be granted and no shares shall be issued
under the Plan. Subject to such limitation, the Plan Administrator may grant
options and issue shares under the Plan at any time after the effective date of
the Plan and before the date fixed herein for termination of the
Plan.

     

     

    7

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    B. The
Plan shall terminate upon the earlier of (1) the expiration
of the ten year period measured from the date the Plan is adopted by the Board
or (2) termination by the Board. All options and unvested stock issuances
outstanding at the time of the termination of the Plan shall continue in effect
in accordance with the provisions of the documents evidencing those options or
issuances.

     

    
      	 
      	
              V.

            	
              AMENDMENT
      OR TERMINATION OF THE PLAN

            

    

     

    A. The
Board shall have complete and exclusive power and authority to amend or
terminate the Plan or any awards made thereunder in any or all respects.
However, no such amendment or termination shall adversely affect the rights and
obligations with respect to options or unvested stock issuances at the time
outstanding under the Plan unless the Optionee or the Participant consents to
such amendment or termination. In addition, certain amendments may require
stockholder approval pursuant to applicable laws and regulations.

     

    B.
Although there may be adverse accounting consequences to doing so, options may
be granted under the Option Grant Program and shares may be issued under the
Stock Issuance Program which are in each instance in excess of the number of
shares of Common Stock then available for issuance under the Plan, provided any
excess shares actually issued under those programs shall be held in escrow until
there is obtained stockholder approval of an amendment sufficiently increasing
the number of shares of Common Stock available for issuance under the Plan. If
such stockholder approval is not obtained within twelve months after the date
the first such excess grants or issuances are made, then (1) any unexercised
options granted on the basis of such excess shares shall terminate and (2) the
Corporation shall promptly refund to the Optionees and the Participants the
exercise or purchase price paid for any excess shares issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled.

     

    
      	 
      	
              VI.

            	
              USE
      OF PROCEEDS

            

    

     

    Any cash
proceeds received by the Corporation from the sale of shares of Common Stock
under the Plan shall be used for any corporate purpose.

     

    
      	 
      	
              VII.

            	
              WITHHOLDING

            

    

     

    The
Corporation’s obligation to deliver shares of Common Stock upon the exercise of
any options granted under the Plan or upon the issuance or vesting of any shares
issued under the Plan shall be subject to the satisfaction of all applicable
income and employment tax withholding requirements.

     

    
      	 
      	
              VIII. 

            	
              REGULATORY
      APPROVALS

            

    

     

    The
implementation of the Plan, the granting of any options under the Plan and the
issuance of any shares of Common Stock (A) upon the exercise of any option or
(B) under the Stock Issuance Program shall be subject to the Corporation’s
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options granted under it and the shares
of Common Stock issued pursuant to it.

     

    
      	 
      	
              IX.

            	
              NO
      EMPLOYMENT OR SERVICE RIGHTS

            

    

     

    Nothing
in the Plan shall confer upon the Optionee or the Participant any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee or the
Participant, which rights are hereby expressly reserved by each, to terminate
such person’s Service at any time for any reason, with or without
cause.

     

    
      	 
      	
              X.

            	
              FINANCIAL
      REPORTS

            

    

     

    The
Corporation shall deliver a balance sheet and an income statement at least
annually to each individual holding an outstanding option granted or shares
issued under the Plan, unless such individual is a key Employee whose duties in
connection with the Corporation (or any Parent or Subsidiary) assure such
individual access to equivalent information.

     

     

    8

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 
      	
              XI.

            	
              SHARE
      RESERVE

            

    

     

    The
maximum number of shares of Common Stock that may be issued over the term of the
Plan together with the total number of shares of Common Stock provided for under
any stock bonus or similar plan of the Corporation shall not exceed 30’% of the
then outstanding shares (on an as if converted basis) of the Corporation unless
a percentage higher than 30% is approved by at least two-thirds of the
outstanding shares of the Corporation entitled to vote on such
matter.

     

    APPENDIX

     

    The
following definitions shall be in effect under the Plan:

     

    A. Board
shall mean the Corporation’s Board of Directors.

     

    B. Change in
Control shall mean a change in ownership or control of the Corporation
effected through any of the following transactions:

     

    (i) a
stockholder-approved merger, consolidation or other reorganization in which
securities representing more than 50% of the total combined voting power of the
Corporation’s outstanding securities are beneficially owned, directly or
indirectly, by a person or persons different from the person or persons who
beneficially owned those securities immediately prior to such
transaction;

     

    (ii) a
stockholder-approved sale, transfer or other disposition of all or substantially
all of the Corporation’s assets; or

     

    (iii) the
acquisition, directly or indirectly, by any person or related group of persons
(other than the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation), of beneficial
ownership (within the meaning of Rule 13-d3 of the 1934 Act) of securities
possessing more than 50% of the total combined voting power of the Corporation’s
outstanding securities from a person or persons other than the
Corporation.

     

    In no
event shall any public offering of the Corporation’s securities be deemed to
constitute a Change in Control. In no event shall a merger of the Corporation’s
Parent with the Corporation constitute a Change in Control.

     

    C. Code
shall mean the Internal Revenue Code of 1986, as amended.

     

    D. Committee
shall mean a committee of one or more Board members appointed by the Board to
exercise one or more administrative functions under the Plan.

     

    E. Common
Stock shall mean the Corporation’s common stock.

     

    F. Corporation
shall mean China XD Plastics Company Limited, a Nevada corporation, or the
successor to all or substantially all of the assets or the voting stock of China
XD Plastics Company Limited which has assumed the Plan.

     

    G. Disability
shall mean the inability of the Optionee or the Participant to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that is expected to result in death or has lasted or can be
expected to last for a continuous period of twelve months or more.

     

    H. Employee
shall mean an individual who is in the employ of the Corporation (or any Parent
or Subsidiary), subject to the control and direction of the employer entity as
to both the work to be performed and the manner and method of
performance.

     

    I. Exercise
Date shall mean the date on which the option has been exercised in
accordance with the applicable option documentation.

     

    J. Fair
Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:

     

    (i) If
the Common Stock is at the time listed on the Nasdaq Stock Market, then the Fair
Market Value shall be the closing selling price per share of Common Stock on the
date in question, as such price is reported by the National Association of
Securities Dealers on the Nasdaq Stock Market and published in The Wall Street Journal. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

     

     

    9

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (ii) If
the Common Stock is at the time listed on any stock exchange, then the Fair
Market Value shall be the closing selling price per share of Common Stock on the
date in question on the stock exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is officially quoted
in the composite tape of transactions on such exchange and published in The Wall Street Journal. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

     

    (iii) If
the Common Stock is at the time neither listed on any stock exchange or the
Nasdaq Stock Market, then the Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan Administrator
shall deem appropriate but shall be determined without regard to any restriction
other than a restriction which, by its term will never lapse.

     

    K. Incentive
Option shall mean an option that satisfies the requirements of Code
Section 422.

     

    L. Involuntary
Termination shall mean the termination of the Service of any individual
which occurs by reason of:

     

    (i) such
individual’s involuntary dismissal or discharge by the Corporation (or any
Parent or Subsidiary) for reasons other than Misconduct, or

     

    (ii) such
individual’s voluntary resignation following (A) a change in his or her position
with the Corporation (or any Parent or Subsidiary) which materially reduces his
or her duties and responsibilities, (B) a reduction in his or her base salary by
more than 15%, unless the base salaries of all similarly situated individuals
are reduced by the Corporation or any Parent or Subsidiary employing the
individual, or (C) a relocation of such individual’s place of employment by more
than fifty miles, provided and
only if such change, reduction or relocation is effected without the
individual’s written consent.

     

    M. Misconduct
shall mean the commission of any act of fraud, embezzlement or dishonesty by the
Optionee or Participant, any unauthorized use or disclosure by such person of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by such person adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner; provided, however, that if the term or
concept has been defined in an employment agreement between the Corporation and
the Optionee or Participant, then Misconduct shall have the definition set forth
in such employment agreement. The foregoing definition shall not in any way
preclude or restrict the right of the Corporation (or any Parent or Subsidiary)
to discharge or dismiss any Optionee, Participant or other person in the Service
of the Corporation (or any Parent or Subsidiary) for any other acts or
omissions, but such other acts or omissions shall not be deemed, for purposes of
the Plan, to constitute grounds for termination for Misconduct.

     

    N. 1934
Act shall mean the Securities Exchange Act of 1934, as
amended.

     

    O. Non-Statutory
Option shall mean an option that does not satisfy the requirements of
Code Section 422.

     

    P. Option
Grant Program shall mean the option grant program in effect under the
Plan.

     

    Q. Optionee
shall mean any person to whom an option is granted under the Plan.

     

    R. Parent
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation, provided each corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such
chain.

     

    S. Participant
shall mean any person who is issued shares of Common Stock under the Stock
Issuance Program.

     

    T. Plan
shall mean the China XD Plastics Company Limited 2009 Stock Option/Stock
Issuance Plan, as set forth in this document.

     

     

    10

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    U. Plan
Administrator shall mean either the Board or the Committee acting in its
capacity as administrator of the Plan.

     

    V. Service
shall mean the provision of services to the Corporation (or any Parent or
Subsidiary) by a person in the capacity of an Employee, a member of the board of
directors or an independent contractor, except to the extent otherwise
specifically provided in the documents evidencing the option grant.

     

    W. Stock
Issuance Agreement shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.

     

    X. Stock
Issuance Program shall mean the stock issuance program in effect under
the Plan.

     

    Y. Subsidiary
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation, provided each corporation (other
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such
chain.

     

    Z. 10%
Stockholder shall mean the owner of stock (after taking into account the
constructive ownership rules of Section 424(d) of the Code) possessing more than
10% of the total combined voting power of all classes of stock of the
Corporation (or any Parent or Subsidiary).

     

    AA. Unvested
Shares shall mean shares of Common Stock have not vested in accordance
with the vesting schedule applicable to those shares or any special vesting
acceleration provisions and which are subject to the Corporation’s repurchase
right.

     

    BB. Vested
Shares shall mean shares of Common Stock which have vested in accordance
with the vesting schedule applicable to those shares or any special vesting
acceleration provisions and which are no longer subject to the Corporation’s
repurchase right.

     

     

     

     

    11

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    CHINA
XD PLASTICS COMPANY LIMITED

     

    NOTICE OF GRANT OF STOCK
OPTION

     

    Notice is
hereby given of the following option grant (the “Option”) to purchase shares of
the Common Stock of the Corporation:

     

    Optionee:
«Optionee»

     

    Grant Date: «Grant
Date»

     

    Vesting
Commencement Date: «Vesting Date»

     

    Exercise Price:
$«Exercise Price» per share

     

    Number of Option
Shares: «Number of Shares» shares of Common Stock

     

    Expiration Date:
«Expiration Date»

     

    
      	 
      	 
      	 
      	 
      	 
      
	
              Type of Option:

            	 
      	 
      o	 
      	
              Incentive
      Stock Option

            
	 
      	 
      	 
      
	 
      	 
      	 
      o	 
      	
              Non-Statutory
      Option

            

    

     

    Date Exercisable:
Immediately Exercisable

     

    Vesting Schedule:
«Vesting Schedule»

     

    Optionee
understands and agrees that the Option is granted subject to and in accordance
with the terms of the China XD Plastics Company Limited 2009 Stock Option/Stock
Issuance Plan (the “Plan”). Optionee further agrees to be bound by the terms of
the Plan and the terms of the Option as set forth in the Stock Option Agreement
attached hereto as Exhibit A. Optionee
understands that any Option Shares purchased under the Option will be subject to
the terms set forth in the Stock Purchase Agreement attached hereto as Exhibit B. Optionee
hereby acknowledges receipt of a copy of the Plan in the form attached hereto as
Exhibit C and a
copy of the Questions and Answers About Stock Option Grants in the form attached
hereto as Exhibit
D.

    

    Repurchase Rights.
Optionee hereby agrees that the Option Shares acquired upon the exercise of the
Option may be subject to certain repurchase rights and rights of first refusal
exercisable by the Corporation and its assigns. The terms of such rights are
specified in the attached Stock Purchase Agreement.

     

    Representation.
Optionee represents that this Option and the Option Shares are being acquired
for Optionee’s own account, and not with a view to or for sale in connection
with any distribution.

     

    Prior Agreements.
This Notice and the Stock Option Agreement, and the Stock Purchase Agreement
when executed will, constitute the entire agreement and understanding of the
Corporation and Optionee with respect to the terms of the Option and supersede
all prior and contemporaneous written or verbal agreements and understandings
between Optionee and the Corporation relating to such subject matter. Any and
all prior agreements, understandings or representations relating to the Option
are terminated and cancelled in their entirety and are of no further force or
effect.

     

    At Will Service
Arrangement. Nothing in this Notice or in the attached Stock Option
Agreement, Stock Purchase Agreement or Plan shall confer upon Optionee any right
to continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee’s Service at any time
for any reason, with or without cause.

     

    Definitions. All
capitalized terms in this Notice shall have the meaning assigned to them in this
Notice or in the attached Stock Option Agreement.

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    Dated: «Dated»

     

    
      
        
          
            
              	 
      	 
      	 
      
	
                                                                                        
      CHINA XD PLASTICS COMPANY LIMITED

                    
	 
      	 
      
	
                       

                    	 
      By:	 
      
	 
      	 
      	
                      Jie
      Han

                    
	 
      	 
      	
                      Chief
      Executive Officer

                    
	 
      
	
                                                                                        
      OPTIONEE

                    
	 
      	 
      
	
                       

                    	 
      

                      Signature:

                    	 
      
	 
      	 
      	
                      «Optionee»

                    
	 
      	 
      
	
                       

                    	 
      

                      Address:

                    	 
      
	 
      	 
      
	 
      	 
      	 
      

            

          

        

      

    

     

    Attachments:

     

    Exhibit A – Stock
Option Agreement (with Addendum)

    Exhibit B – Stock
Purchase Agreement (with Addendum)

    Exhibit C – 2009
Stock Option/Stock Issuance Plan

    Exhibit D – Questions
and Answers About Stock Option Grants

     

     

     

     

     

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
A

    

    CHINA
XD PLASTICS COMPANY LIMITED

     

    STOCK OPTION
AGREEMENT

    (Incentive
Stock Option)

     

    A. The
Board has adopted the Plan for the purpose of retaining the services of selected
Employees, members of the Board or the board of directors of any Parent or
Subsidiary and independent contractors in the service of the Corporation (or any
Parent or Subsidiary).

     

    B.
Optionee is to render valuable services to the Corporation (or a Parent or
Subsidiary), and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the Corporation’s grant
of an option to Optionee.

     

    C. All
capitalized terms in this Agreement shall have the meaning assigned to them in
the attached Appendix.

     

    NOW, THEREFORE, it is hereby
agreed as follows:

     

    1. Grant of
Option. The Corporation hereby grants to Optionee, as of the Grant Date,
an option to purchase the number of Option Shares specified in the Grant Notice.
The Option Shares shall be purchasable from time to time during the option term
specified in Paragraph 2 at the Exercise Price.

     

    2. Option
Term. This option shall expire on the Expiration Date, unless sooner
terminated in accordance with this Agreement.

     

    3. Limited
Transferability.

     

    (a) This
option shall be neither transferable nor assignable by Optionee other than by
will or the laws of inheritance following Optionee’s death and may be exercised,
during Optionee’s lifetime, only by Optionee.

     

    (b)
Notwithstanding the foregoing, if this option is designated a Non-Statutory
Option in the Grant Notice, then this option may be assigned in whole or in part
during Optionee’s lifetime to one or more members of Optionee’s family (as
defined in Rule 701 promulgated by the Securities and Exchange Commission) or to
a trust established for the benefit of one or more such family members or to
Optionee’s former spouse, to the extent such assignment is in connection with
the Optionee’s estate plan or pursuant to a domestic relations order. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment.

     

    4. Dates of
Exercise. This option shall become exercisable for the Option Shares as
specified in the Grant Notice. If the option is exercisable in installments,
then as the option becomes exercisable for such installments, those installments
shall accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option under
this Agreement.

    

    5. Cessation
of Service. The option term specified in Paragraph 2 shall terminate (and
this option shall cease to be outstanding) prior to the Expiration Date should
any of the following provisions become applicable:

     

    (a)
Should Optionee cease to remain in Service for any reason (other than death,
Disability or Misconduct), then this option shall be exercisable for the number
of Option Shares which were Vested Shares at the time of Optionee’s cessation of
Service and shall remain exercisable until the earlier of (i) the close of
business on the three month anniversary of the date Optionee’s Service ceases or
(ii) the Expiration Date.

     

    (b)
Should Optionee cease to remain in Service by reason of death or Disability,
then this option shall be exercisable for the number of Option Shares which were
Vested Shares at the time of Optionee’s cessation of Service and shall remain
exercisable until the earlier of (i) the close of
business on the twelve month anniversary of the date Optionee’s Service ceases
or (ii) the Expiration Date.

     

     

    1

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c) No
additional vesting will occur after the date the Optionee’s Service ceases, and
this option shall immediately terminate with respect to the Unvested Shares.
Upon the expiration of any post-Service exercise period or (if earlier) upon the
Expiration Date, this option shall terminate with respect to the Vested
Shares.

     

    (d)
Should Optionee’s Service be terminated for Misconduct or should Optionee
otherwise engage in Misconduct while this option is outstanding, then this
option shall terminate immediately with respect to all Option
Shares.

     

    6. Accelerated
Vesting.

     

    (a)
Immediately prior to the effective date of the Change in Control, the Unvested
Shares subject to this option shall automatically become Vested Shares, and this
option shall become exercisable for all of the Option Shares. However, the
Unvested Shares shall not vest on such an
accelerated basis if and to the extent: (i) this option will be assumed by the
successor corporation (or parent thereof) or otherwise continued in effect
pursuant to the terms of the Change in Control transaction or (ii) this option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the Unvested Shares at the time of the
Change in Control (the excess of the Fair Market Value of those Unvested Shares
over the Exercise Price payable for such shares) and provides for subsequent
payout of that spread no later than the time Optionee would otherwise vest in
the Option Shares as set forth in the Grant Notice.

     

    (b)
Immediately following the Change in Control, this option shall terminate and
cease to be outstanding, except to the extent assumed by the successor
corporation (or parent thereof) or otherwise continued in effect pursuant to the
terms of the Change in Control transaction.

     

    (c) If
this option is assumed in connection with a Change in Control or otherwise
continued in effect, then this option shall be appropriately adjusted, upon such
Change in Control, to apply to the number and class of securities which would
have been issuable to Optionee in consummation of such Change in Control had the
option been exercised immediately prior to such Change in Control, and
appropriate adjustments shall also be made to the Exercise Price, provided the aggregate
Exercise Price shall remain the same. To the extent that the holders of Common
Stock receive cash consideration for their Common Stock in consummation of the
Change in Control, the successor corporation (or its parent) may, in connection
with the assumption of this option, substitute one or more shares of its own
common stock with a fair market value equivalent to the cash consideration paid
per share of Common Stock in such Change in Control.

     

    (d) This
Agreement shall not in any way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.

     

    7. Adjustment
in Option Shares. Should any change be made to the Common Stock by reason
of any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation’s receipt of consideration, appropriate
adjustments shall be made to (a) the total number and/or class of securities
subject to this option and (b) the Exercise Price in order to reflect such
change and thereby preclude a dilution or enlargement of benefits
hereunder.

     

    8. Stockholder
Rights. The holder of this option shall not have any stockholder rights
with respect to the Option Shares until such person shall have exercised the
option, paid the Exercise Price and become the record holder of the purchased
Option Shares.

     

    9. Manner of
Exercising Option.

     

    (a) In
order to exercise this option with respect to all or any part of the Option
Shares for which this option is at the time exercisable, Optionee (or any other
person or persons permitted to exercise the option) must take the following
actions:

     

     

    2

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (i)
Execute and deliver to the Corporation a Stock Purchase Agreement for the Option
Shares for which the option is exercised;

     

    (ii) Pay
the aggregate Exercise Price for the purchased shares in one or more of the
following forms:

     

    (A) cash
or check made payable to the Corporation; or

     

    (B) a
promissory note payable to the Corporation, but only to the extent authorized by
the Plan Administrator in accordance with Paragraph 14. Should the Common Stock
be registered under Section 12 of the 1934 Act at the time the option is
exercised, then the Exercise Price may also be paid as follows:

     

    (C) in
shares of Common Stock (1) held by Optionee (or any other person or persons
exercising the option) for the requisite period necessary to avoid a charge to
the Corporation’s earnings for financial reporting purposes and (2) valued at
Fair Market Value on the Exercise Date; or

     

    (D) to
the extent the option is exercised for Vested Shares, through a special sale and
remittance procedure pursuant to which Optionee (or any other person or persons
exercising the option) shall concurrently provide irrevocable instructions (1)
to a Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all applicable income and
employment taxes required to be withheld by the Corporation by reason of such
exercise and (2) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the
sale;

     

    Except to
the extent the sale and remittance procedure is utilized in connection with the
option exercise, payment of the Exercise Price must accompany the Stock Purchase
Agreement delivered to the Corporation in connection with the option
exercise.

     

    (iii)
Furnish to the Corporation appropriate documentation that the person or persons
exercising the option (if other than Optionee) have the right to exercise this
option;

     

    (iv)
Execute and deliver to the Corporation such written representations as may be
requested by the Corporation in order for it to comply with the applicable
requirements of applicable securities laws; and

     

    (v) Make
appropriate arrangements with the Corporation (or Parent or Subsidiary employing
or retaining Optionee) for the satisfaction of all applicable income and
employment tax withholding requirements applicable to the option
exercise.

     

    (b) As
soon as practical after the Exercise Date, the Corporation shall issue to or on
behalf of Optionee (or any other person or persons exercising this option) a
certificate for the purchased Option Shares, with the appropriate legends
affixed thereto.

     

    (c) In no
event may this option be exercised for any fractional shares.

     

    10. REPURCHASE
RIGHTS. ALL OPTION
SHARES ACQUIRED UPON THE EXERCISE OF THIS OPTION SHALL BE SUBJECT TO CERTAIN
RIGHTS OF THE CORPORATION AND ITS ASSIGNS TO REPURCHASE THOSE SHARES IN
ACCORDANCE WITH THE TERMS SPECIFIED IN THE STOCK PURCHASE
AGREEMENT.

     

    11. Compliance
with Laws and Regulations.

     

    (a) The
exercise of this option and the issuance of the Option Shares upon such exercise
shall be subject to compliance by the Corporation and Optionee with all
applicable requirements of law relating thereto and with all applicable
regulations of any applicable stock exchange or quotation system on which the
Common Stock may be traded at the time of such exercise and
issuance.

     

     

    3

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b) The
inability of the Corporation to obtain approval from any regulatory body having
authority deemed by the Corporation to be necessary to the lawful issuance and
sale of any Common Stock pursuant to this option shall relieve the Corporation
of any liability with respect to the non-issuance or sale of the Common Stock as
to which such approval shall not have been obtained.

     

    12. Successors
and Assigns. Except to the extent otherwise provided in Paragraphs 3 and
6, the provisions of this Agreement shall inure to the benefit of, and be
binding upon, the Corporation and its successors and assigns and Optionee,
Optionee’s permitted assigns and the legal representatives, heirs and legatees
of Optionee’s estate, whether or not any such person shall have become a party
to this Agreement or has agreed in writing to join herein and be bound by the
terms hereof.

     

    13. Notices.
Any notice required to be given or delivered to the Corporation under the terms
of this Agreement shall be in writing and addressed to the Corporation at its
principal corporate offices. Any notice required to be given or delivered to
Optionee shall be in writing and addressed to Optionee at the address indicated
below Optionee’s signature line on the Grant Notice. All notices shall be deemed
effective upon personal delivery or on the third day following deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be
notified.

     

    14. Financing.
The Plan Administrator may, in its absolute discretion and without any
obligation to do so, permit Optionee to pay the Exercise Price for the purchased
Option Shares (to the extent such Exercise Price is in excess of the par value
of those shares) by delivering a full-recourse, interest-bearing promissory note
secured by those Option Shares. The payment schedule and other terms of any such
promissory note shall be established by the Plan Administrator in its sole
discretion. However, any promissory note delivered by a consultant or
independent contractor must be secured by collateral in addition to the
purchased shares of Common Stock.

     

    15. Construction.
This Agreement and the option evidenced hereby are made and granted pursuant to
the Plan, which is incorporated herein by reference. In the event of a conflict
between the terms and conditions of the Plan and the terms and conditions of
this Agreement, the terms and conditions of this Agreement shall prevail. All
decisions of the Plan Administrator with respect to any question or issue
arising under the Plan or this Agreement shall be conclusive and binding on all
persons having an interest in this option.

     

    16. Governing
Law. The interpretation, performance and enforcement of this Agreement
shall be governed by the laws of the State of New York without giving effect to
that State’s choice of law or conflict-of-laws rules.

     

    17. Stockholder
Approval. If the Option Shares covered by this Agreement exceed, as of
the Grant Date, the number of shares of Common Stock which may be issued under
the Plan as last approved by the stockholders, then this option shall be void
with respect to such excess shares, unless stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock issuable under the
Plan is obtained in accordance with the provisions of the Plan. The inability of
the Corporation to obtain stockholder approval shall relieve the Corporation of
any liability with respect to the non-issuance or sale of the Common Stock as to
which such approval shall not have been obtained.

     

    18. At Will
Employment. Nothing in this Agreement or in the Plan shall confer upon
Optionee any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining Optionee) or of Optionee,
which rights are hereby expressly reserved by each, to terminate Optionee’s
Service at any time for any reason, with or without cause.

     

    19. Additional
Terms Applicable to an Incentive Option. In the event this option is
designated an Incentive Option in the Grant Notice, the following terms and
conditions shall also apply to the grant:

     

    (a) This
option shall cease to qualify for favorable tax treatment as an Incentive Option
if (and to the extent) this option is exercised for one or more Option Shares:
(i) more than three months after the date Optionee ceases to be an Employee for
any reason other than death or Disability or (ii) more than twelve months after
the date Optionee ceases to be an Employee by reason of Disability.

     

     

    4

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) This
option shall not become exercisable in the calendar year in which granted if
(and to the extent) the aggregate Fair Market Value (determined at the Grant
Date) of the Common Stock for which this option would otherwise first become
exercisable in such calendar year would, when added to the aggregate value
(determined as of the respective date or dates of grant) of the Common Stock and
any other securities for which one or more other Incentive Options granted to
Optionee prior to the Grant Date (whether under the Plan or any other option
plan of the Corporation or any Parent or Subsidiary) first become exercisable
during the same calendar year, exceed $100,000 in the aggregate. To the extent
the exercisability of this option is deferred by reason of the foregoing
limitation, the deferred portion shall become exercisable in the first calendar
year or years thereafter in which the $100,000 limitation of this Paragraph
19(b) would not be contravened, but such deferral shall in all events end
immediately prior to the effective date of a Change in Control in which this
option is not to be assumed or otherwise continued in effect, whereupon the
option shall become immediately exercisable as a Non-Statutory Option for the
deferred portion of the Option Shares.

     

    (c)
Should Optionee hold, in addition to this option, one or more other options to
purchase Common Stock which become exercisable for the first time in the same
calendar year as this option, then the foregoing limitations on the
exercisability of such options as Incentive Options shall be applied to the
option granted second.

     

     

    APPENDIX

     

    The
following definitions shall be in effect under the Agreement:

     

    A. Agreement
shall mean this Stock Option Agreement.

     

    B. Board
shall mean the Corporation’s Board of Directors.

     

    C. Change in
Control shall mean a change in ownership or control of the Corporation
effected through any of the following transactions:

     

    (i) a
stockholder-approved merger, consolidation or other reorganization in which
securities representing more than 50% of the total combined voting power of the
Corporation’s outstanding securities are beneficially owned, directly or
indirectly, by a person or persons different from the person or persons who
beneficially owned those securities immediately prior to such
transaction;

     

    (ii) a
stockholder-approved sale, transfer or other disposition of all or substantially
all of the Corporation’s assets; or

     

    (iii) the
acquisition, directly or indirectly, by any person or related group of persons
(other than the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation), of beneficial
ownership (within the meaning of Rule 13-d3 of the 1934 Act) of securities
possessing more than 50% of the total combined voting power of the Corporation’s
outstanding securities from persons other than the Corporation.

     

    In no
event shall any public offering of the Corporation’s securities be deemed to
constitute a Change in Control. In no event shall a merger of the Corporation’s
Parent with the Corporation constitute a Change in Control.

     

    D. Code
shall mean the Internal Revenue Code of 1986, as amended.

     

    E. Common
Stock shall mean the common stock of the Corporation.

     

    F. Corporation
shall mean China XD Plastics Company Limited, a Nevada corporation, or any
successor corporation to all or substantially all of the assets or the voting
stock of China XD Plastics Company Limited that has assumed this
option.

     

     

     

    5

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    G. Disability
shall mean the inability of Optionee to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
that is expected to result in death or has lasted or can be expected to last for
a continuous period of twelve months or more.

     

    H. Employee
shall mean an individual who is in the employ of the Corporation (or any Parent
or Subsidiary), subject to the control and direction of the employer entity as
to both the work to be performed and the manner and method of
performance.

     

    I. Exercise
Date shall mean the date on which the option shall have been exercised in
accordance with this Agreement.

     

    J. Exercise
Price shall mean the exercise price payable per Option Share as specified
in the Grant Notice.

     

    K. Expiration
Date shall mean the close of business on the date on which the option
expires as specified in the Grant Notice.

     

    L. Fair
Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:

     

    (i) If
the Common Stock is at the time listed on the Nasdaq Stock Market, then the Fair
Market Value shall be the closing selling price per share of Common Stock on the
date in question, as the price is reported by the National Association of
Securities Dealers on the Nasdaq Stock Market and published in The Wall Street Journal. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

     

    (ii) If
the Common Stock is at the time listed on any stock exchange, then the Fair
Market Value shall be the closing selling price per share of Common Stock on the
date in question on the stock exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is officially quoted
in the composite tape of transactions on such exchange and published in The Wall Street Journal. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

     

    (iii) If
the Common Stock is at the time neither listed on any stock exchange or the
Nasdaq Stock Market, then the Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan Administrator
shall deem appropriate.

     

    M. Grant
Date shall mean the date of grant of the option as specified in the Grant
Notice.

     

    N. Grant
Notice shall mean the Notice of Grant of Stock Option accompanying this
Agreement, pursuant to which Optionee has been informed of the basic terms of
the option evidenced hereby.

     

    O. Incentive
Option shall mean an option that satisfies the requirements of Code
Section 422.

     

    P. Misconduct
shall mean the commission of any act of fraud, embezzlement or dishonesty by
Optionee, any unauthorized use or disclosure by Optionee of confidential
information or trade secrets of the Corporation (or any Parent or Subsidiary),
or any other intentional misconduct by Optionee adversely affecting the business
or affairs of the Corporation (or any Parent or Subsidiary) in a material
manner; provided, however, that if the term or
concept has been defined in an employment agreement between the Corporation and
Optionee, then Misconduct shall have the definition set forth in such employment
agreement. The foregoing definition shall not in any way preclude or restrict
the right of the Corporation (or any Parent or Subsidiary) to discharge or
dismiss any Optionee or other person in the Service of the Corporation (or any
Parent or Subsidiary) for any other acts or omissions, but such other acts or
omissions shall not be deemed, for purposes of the Plan or this Agreement, to
constitute grounds for termination for Misconduct.

     

    Q. 1934
Act shall mean the Securities Exchange Act of 1934, as
amended.

     

    R. Non-Statutory
Option shall mean an option that is not intended to satisfy the
requirements of Code Section 422.

     

    S. Option
Shares shall mean the shares of Common Stock subject to the
option.

     

     

    6

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    T. Optionee
shall mean the person to whom the option is granted as specified in the Grant
Notice.

     

    U. Parent
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation, provided each corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such
chain.

     

    V. Plan
shall mean the China XD Plastics Company Limited 2009 Stock Option/Stock
Issuance Plan.

     

    W. Plan
Administrator shall mean either the Board or a committee of the Board
acting in its capacity as administrator of the Plan.

     

    X. Purchase
Agreement shall mean the stock purchase agreement in substantially the
form of Exhibit B to the Grant Notice.

     

    Y. Service
shall mean the Optionee’s performance of services for the Corporation (or any
Parent or Subsidiary) in the capacity of an Employee, a member of the board of
directors or an independent contractor.

     

    Z. Stock
Purchase Agreement shall mean the stock purchase agreement in
substantially the form of Exhibit B to the Grant Notice.

     

    AA. Subsidiary
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation, provided each corporation (other
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such
chain.

     

    BB. Unvested
Shares shall mean the Option Shares which have not vested in accordance
with the Vesting Schedule applicable to those shares or any special vesting
acceleration provisions and which are subject to the Corporation’s right to
repurchase those shares upon termination of Service.

     

    CC. Vested
Shares shall mean the Option Shares which have vested in accordance with
the Vesting Schedule applicable to those shares or any special vesting
acceleration provisions and which are no longer subject to the Corporation’s
right to repurchase those shares upon termination of Service.

     

    DD. Vesting
Schedule shall mean the vesting schedule specified in the Grant
Notice.

     

     

    7

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

     

    

    CHINA
XD PLASTICS COMPANY LIMITED

     

    STOCK OPTION  STATUTORY
AGREEMENT

    (Non-Qualified
Stock Option)

     

    A. The
Board has adopted the Plan for the purpose of retaining the services of selected
Employees, members of the Board or the board of directors of any Parent or
Subsidiary and independent contractors in the service of the Corporation (or any
Parent or Subsidiary).

     

    B.
Optionee is to render valuable services to the Corporation (or a Parent or
Subsidiary), and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the Corporation’s grant
of an option to Optionee.

     

    C. All
capitalized terms in this Agreement shall have the meaning assigned to them in
the attached Appendix.

     

    NOW, THEREFORE, it is hereby
agreed as follows:

     

    1. Grant of
Option. The Corporation hereby grants to Optionee, as of the Grant Date,
an option to purchase the number of Option Shares specified in the Grant Notice.
The Option Shares shall be purchasable from time to time during the option term
specified in Paragraph 2 at the Exercise Price.

     

    2. Option
Term. This option shall expire on the Expiration Date, unless sooner
terminated in accordance with this Agreement.

     

    3. Limited
Transferability.

     

    (a) This
option shall be neither transferable nor assignable by Optionee other than by
will or the laws of inheritance following Optionee’s death and may be exercised,
during Optionee’s lifetime, only by Optionee.

     

    (b)
Notwithstanding the foregoing, if this option is designated a Non-Statutory
Option in the Grant Notice, then this option may be assigned in whole or in part
during Optionee’s lifetime to one or more members of Optionee’s family (as
defined in Rule 701 promulgated by the Securities and Exchange Commission) or to
a trust established for the benefit of one or more such family members or to
Optionee’s former spouse, to the extent such assignment is in connection with
the Optionee’s estate plan or pursuant to a domestic relations order. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment.

     

    4. Dates of
Exercise. This option shall become exercisable for the Option Shares as
specified in the Grant Notice. If the option is exercisable in installments,
then as the option becomes exercisable for such installments, those installments
shall accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option under
this Agreement.

    

    5. Cessation
of Service. The option term specified in Paragraph 2 shall terminate (and
this option shall cease to be outstanding) prior to the Expiration Date should
any of the following provisions become applicable:

     

    (a)
Should Optionee cease to remain in Service for any reason (other than death,
Disability or Misconduct), then this option shall be exercisable for the number
of Option Shares which were Vested Shares at the time of Optionee’s cessation of
Service and shall remain exercisable until the earlier of (i) the close of
business on the three month anniversary of the date Optionee’s Service ceases or
(ii) the Expiration Date.

     

    (b)
Should Optionee cease to remain in Service by reason of death or Disability,
then this option shall be exercisable for the number of Option Shares which were
Vested Shares at the time of Optionee’s cessation of Service and shall remain
exercisable until the earlier of (i) the close of
business on the twelve month anniversary of the date Optionee’s Service ceases
or (ii) the Expiration Date.

     

     

    1

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c) No
additional vesting will occur after the date the Optionee’s Service ceases, and
this option shall immediately terminate with respect to the Unvested Shares.
Upon the expiration of any post-Service exercise period or (if earlier) upon the
Expiration Date, this option shall terminate with respect to the Vested
Shares.

     

    (d)
Should Optionee’s Service be terminated for Misconduct or should Optionee
otherwise engage in Misconduct while this option is outstanding, then this
option shall terminate immediately with respect to all Option
Shares.

     

    6. Accelerated
Vesting.

     

    (a)
Immediately prior to the effective date of the Change in Control, the Unvested
Shares subject to this option shall automatically become Vested Shares, and this
option shall become exercisable for all of the Option Shares. However, the
Unvested Shares shall not vest on such an
accelerated basis if and to the extent: (i) this option will be assumed by the
successor corporation (or parent thereof) or otherwise continued in effect
pursuant to the terms of the Change in Control transaction or (ii) this option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the Unvested Shares at the time of the
Change in Control (the excess of the Fair Market Value of those Unvested Shares
over the Exercise Price payable for such shares) and provides for subsequent
payout of that spread no later than the time Optionee would otherwise vest in
the Option Shares as set forth in the Grant Notice.

     

    (b)
Immediately following the Change in Control, this option shall terminate and
cease to be outstanding, except to the extent assumed by the successor
corporation (or parent thereof) or otherwise continued in effect pursuant to the
terms of the Change in Control transaction.

     

    (c) If
this option is assumed in connection with a Change in Control or otherwise
continued in effect, then this option shall be appropriately adjusted, upon such
Change in Control, to apply to the number and class of securities which would
have been issuable to Optionee in consummation of such Change in Control had the
option been exercised immediately prior to such Change in Control, and
appropriate adjustments shall also be made to the Exercise Price, provided the aggregate
Exercise Price shall remain the same. To the extent that the holders of Common
Stock receive cash consideration for their Common Stock in consummation of the
Change in Control, the successor corporation (or its parent) may, in connection
with the assumption of this option, substitute one or more shares of its own
common stock with a fair market value equivalent to the cash consideration paid
per share of Common Stock in such Change in Control.

     

    (d) This
Agreement shall not in any way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.

     

    7. Adjustment
in Option Shares. Should any change be made to the Common Stock by reason
of any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation’s receipt of consideration, appropriate
adjustments shall be made to (a) the total number and/or class of securities
subject to this option and (b) the Exercise Price in order to reflect such
change and thereby preclude a dilution or enlargement of benefits
hereunder.

     

    8. Stockholder
Rights. The holder of this option shall not have any stockholder rights
with respect to the Option Shares until such person shall have exercised the
option, paid the Exercise Price and become the record holder of the purchased
Option Shares.

     

    9. Manner of
Exercising Option.

     

    (a) In
order to exercise this option with respect to all or any part of the Option
Shares for which this option is at the time exercisable, Optionee (or any other
person or persons permitted to exercise the option) must take the following
actions:

     

     

    2

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (i)
Execute and deliver to the Corporation a Stock Purchase Agreement for the Option
Shares for which the option is exercised;

     

    (ii) Pay
the aggregate Exercise Price for the purchased shares in one or more of the
following forms:

     

    (A) cash
or check made payable to the Corporation; or

     

    (B) a
promissory note payable to the Corporation, but only to the extent authorized by
the Plan Administrator in accordance with Paragraph 14. Should the Common Stock
be registered under Section 12 of the 1934 Act at the time the option is
exercised, then the Exercise Price may also be paid as follows:

     

    (C) in
shares of Common Stock (1) held by Optionee (or any other person or persons
exercising the option) for the requisite period necessary to avoid a charge to
the Corporation’s earnings for financial reporting purposes and (2) valued at
Fair Market Value on the Exercise Date; or

     

    (D) to
the extent the option is exercised for Vested Shares, through a special sale and
remittance procedure pursuant to which Optionee (or any other person or persons
exercising the option) shall concurrently provide irrevocable instructions (1)
to a Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all applicable income and
employment taxes required to be withheld by the Corporation by reason of such
exercise and (2) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the
sale;

     

    Except to
the extent the sale and remittance procedure is utilized in connection with the
option exercise, payment of the Exercise Price must accompany the Stock Purchase
Agreement delivered to the Corporation in connection with the option
exercise.

     

    (iii)
Furnish to the Corporation appropriate documentation that the person or persons
exercising the option (if other than Optionee) have the right to exercise this
option;

     

    (iv)
Execute and deliver to the Corporation such written representations as may be
requested by the Corporation in order for it to comply with the applicable
requirements of applicable securities laws; and

     

    (v) Make
appropriate arrangements with the Corporation (or Parent or Subsidiary employing
or retaining Optionee) for the satisfaction of all applicable income and
employment tax withholding requirements applicable to the option
exercise.

     

    (b) As
soon as practical after the Exercise Date, the Corporation shall issue to or on
behalf of Optionee (or any other person or persons exercising this option) a
certificate for the purchased Option Shares, with the appropriate legends
affixed thereto.

     

    (c) In no
event may this option be exercised for any fractional shares.

     

    10. REPURCHASE
RIGHTS. ALL OPTION
SHARES ACQUIRED UPON THE EXERCISE OF THIS OPTION SHALL BE SUBJECT TO CERTAIN
RIGHTS OF THE CORPORATION AND ITS ASSIGNS TO REPURCHASE THOSE SHARES IN
ACCORDANCE WITH THE TERMS SPECIFIED IN THE STOCK PURCHASE
AGREEMENT.

     

    11. Compliance
with Laws and Regulations.

     

    (a) The
exercise of this option and the issuance of the Option Shares upon such exercise
shall be subject to compliance by the Corporation and Optionee with all
applicable requirements of law relating thereto and with all applicable
regulations of any applicable stock exchange or quotation system on which the
Common Stock may be traded at the time of such exercise and
issuance.

     

     

     

    3

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b) The
inability of the Corporation to obtain approval from any regulatory body having
authority deemed by the Corporation to be necessary to the lawful issuance and
sale of any Common Stock pursuant to this option shall relieve the Corporation
of any liability with respect to the non-issuance or sale of the Common Stock as
to which such approval shall not have been obtained.

     

    12. Successors
and Assigns. Except to the extent otherwise provided in Paragraphs 3 and
6, the provisions of this Agreement shall inure to the benefit of, and be
binding upon, the Corporation and its successors and assigns and Optionee,
Optionee’s permitted assigns and the legal representatives, heirs and legatees
of Optionee’s estate, whether or not any such person shall have become a party
to this Agreement or has agreed in writing to join herein and be bound by the
terms hereof.

     

    13. Notices.
Any notice required to be given or delivered to the Corporation under the terms
of this Agreement shall be in writing and addressed to the Corporation at its
principal corporate offices. Any notice required to be given or delivered to
Optionee shall be in writing and addressed to Optionee at the address indicated
below Optionee’s signature line on the Grant Notice. All notices shall be deemed
effective upon personal delivery or on the third day following deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be
notified.

     

    14. Financing.
The Plan Administrator may, in its absolute discretion and without any
obligation to do so, permit Optionee to pay the Exercise Price for the purchased
Option Shares (to the extent such Exercise Price is in excess of the par value
of those shares) by delivering a full-recourse, interest-bearing promissory note
secured by those Option Shares. The payment schedule and other terms of any such
promissory note shall be established by the Plan Administrator in its sole
discretion. However, any promissory note delivered by a consultant must be
secured by collateral in addition to the purchased shares of Common
Stock.

     

    15. Construction.
This Agreement and the option evidenced hereby are made and granted pursuant to
the Plan, which is incorporated herein by reference. In the event of a conflict
between the terms and conditions of the Plan and the terms and conditions of
this Agreement, the terms and conditions of this Agreement shall prevail. All
decisions of the Plan Administrator with respect to any question or issue
arising under the Plan or this Agreement shall be conclusive and binding on all
persons having an interest in this option.

     

    16. Governing
Law. The interpretation, performance and enforcement of this Agreement
shall be governed by the laws of the State of New York without giving effect to
that State’s choice of law or conflict-of-laws rules.

     

    17. Stockholder
Approval. If the Option Shares covered by this Agreement exceed, as of
the Grant Date, the number of shares of Common Stock which may be issued under
the Plan as last approved by the stockholders, then this option shall be void
with respect to such excess shares, unless stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock issuable under the
Plan is obtained in accordance with the provisions of the Plan. The inability of
the Corporation to obtain stockholder approval shall relieve the Corporation of
any liability with respect to the non-issuance or sale of the Common Stock as to
which such approval shall not have been obtained.

     

    18. At Will
Employment. Nothing in this Agreement or in the Plan shall confer upon
Optionee any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining Optionee) or of Optionee,
which rights are hereby expressly reserved by each, to terminate Optionee’s
Service at any time for any reason, with or without cause.

     

    19. Additional
Terms Applicable to an Incentive Option. In the event this option is
designated an Incentive Option in the Grant Notice, the following terms and
conditions shall also apply to the grant:

     

    (a) This
option shall cease to qualify for favorable tax treatment as an Incentive Option
if (and to the extent) this option is exercised for one or more Option Shares:
(i) more than three months after the date Optionee ceases to be an Employee for
any reason other than death or Disability or (ii) more than twelve months after
the date Optionee ceases to be an Employee by reason of Disability.

     

     

    4

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) This
option shall not become exercisable in the calendar year in which granted if
(and to the extent) the aggregate Fair Market Value (determined at the Grant
Date) of the Common Stock for which this option would otherwise first become
exercisable in such calendar year would, when added to the aggregate value
(determined as of the respective date or dates of grant) of the Common Stock and
any other securities for which one or more other Incentive Options granted to
Optionee prior to the Grant Date (whether under the Plan or any other option
plan of the Corporation or any Parent or Subsidiary) first become exercisable
during the same calendar year, exceed $100,000 in the aggregate. To the extent
the exercisability of this option is deferred by reason of the foregoing
limitation, the deferred portion shall become exercisable in the first calendar
year or years thereafter in which the $100,000 limitation of this Paragraph
19(b) would not be contravened, but such deferral shall in all events end
immediately prior to the effective date of a Change in Control in which this
option is not to be assumed or otherwise continued in effect, whereupon the
option shall become immediately exercisable as a Non-Statutory Option for the
deferred portion of the Option Shares.

     

    (c)
Should Optionee hold, in addition to this option, one or more other options to
purchase Common Stock which become exercisable for the first time in the same
calendar year as this option, then the foregoing limitations on the
exercisability of such options as Incentive Options shall be applied to the
option granted second.

     

     

    APPENDIX

     

    The
following definitions shall be in effect under the Agreement:

     

    A. Agreement
shall mean this Stock Option Agreement.

     

    B. Board
shall mean the Corporation’s Board of Directors.

     

    C. Change in
Control shall mean a change in ownership or control of the Corporation
effected through any of the following transactions:

     

    (i) a
stockholder-approved merger, consolidation or other reorganization in which
securities representing more than 50% of the total combined voting power of the
Corporation’s outstanding securities are beneficially owned, directly or
indirectly, by a person or persons different from the person or persons who
beneficially owned those securities immediately prior to such
transaction;

     

    (ii) a
stockholder-approved sale, transfer or other disposition of all or substantially
all of the Corporation’s assets; or

     

    (iii) the
acquisition, directly or indirectly, by any person or related group of persons
(other than the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation), of beneficial
ownership (within the meaning of Rule 13-d3 of the 1934 Act) of securities
possessing more than 50% of the total combined voting power of the Corporation’s
outstanding securities from persons other than the Corporation.

     

    In no
event shall any public offering of the Corporation’s securities be deemed to
constitute a Change in Control. In no event shall a merger of the Corporation’s
Parent with the Corporation constitute a Change in Control.

     

    D. Code
shall mean the Internal Revenue Code of 1986, as amended.

     

    E. Common
Stock shall mean the common stock of the Corporation.

     

    F. Corporation
shall mean China XD Plastics Company Limited, a Nevada corporation, or any
successor corporation to all or substantially all of the assets or the voting
stock of China XD Plastics Company Limited that has assumed this
option.

     

     

    5

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    G. Disability
shall mean the inability of Optionee to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
that is expected to result in death or has lasted or can be expected to last for
a continuous period of twelve months or more.

     

    H. Employee
shall mean an individual who is in the employ of the Corporation (or any Parent
or Subsidiary), subject to the control and direction of the employer entity as
to both the work to be performed and the manner and method of
performance.

     

    I. Exercise
Date shall mean the date on which the option shall have been exercised in
accordance with this Agreement.

     

    J. Exercise
Price shall mean the exercise price payable per Option Share as specified
in the Grant Notice.

     

    K. Expiration
Date shall mean the close of business on the date on which the option
expires as specified in the Grant Notice.

     

    L. Fair
Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:

     

    (i) If
the Common Stock is at the time listed on the Nasdaq Stock Market, then the Fair
Market Value shall be the closing selling price per share of Common Stock on the
date in question, as the price is reported by the National Association of
Securities Dealers on the Nasdaq Stock Market and published in The Wall Street Journal. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

     

    (ii) If
the Common Stock is at the time listed on any stock exchange, then the Fair
Market Value shall be the closing selling price per share of Common Stock on the
date in question on the stock exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is officially quoted
in the composite tape of transactions on such exchange and published in The Wall Street Journal. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

     

    (iii) If
the Common Stock is at the time neither listed on any stock exchange or the
Nasdaq Stock Market, then the Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan Administrator
shall deem appropriate.

     

    M. Grant
Date shall mean the date of grant of the option as specified in the Grant
Notice.

     

    N. Grant
Notice shall mean the Notice of Grant of Stock Option accompanying this
Agreement, pursuant to which Optionee has been informed of the basic terms of
the option evidenced hereby.

     

    O. Incentive
Option shall mean an option that satisfies the requirements of Code
Section 422.

     

    P. Misconduct
shall mean the commission of any act of fraud, embezzlement or dishonesty by
Optionee, any unauthorized use or disclosure by Optionee of confidential
information or trade secrets of the Corporation (or any Parent or Subsidiary),
or any other intentional misconduct by Optionee adversely affecting the business
or affairs of the Corporation (or any Parent or Subsidiary) in a material
manner; provided, however, that if the term or
concept has been defined in an employment agreement between the Corporation and
Optionee, then Misconduct shall have the definition set forth in such employment
agreement. The foregoing definition shall not in any way preclude or restrict
the right of the Corporation (or any Parent or Subsidiary) to discharge or
dismiss any Optionee or other person in the Service of the Corporation (or any
Parent or Subsidiary) for any other acts or omissions, but such other acts or
omissions shall not be deemed, for purposes of the Plan or this Agreement, to
constitute grounds for termination for Misconduct.

     

    Q. 1934
Act shall mean the Securities Exchange Act of 1934, as
amended.

     

    R. Non-Statutory
Option shall mean an option that is not intended to satisfy the
requirements of Code Section 422.

     

    S. Option
Shares shall mean the shares of Common Stock subject to the
option.

     

     

    6

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    T. Optionee
shall mean the person to whom the option is granted as specified in the Grant
Notice.

     

    U. Parent
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation, provided each corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such
chain.

     

    V. Plan
shall mean the China XD Plastics Company Limited 2009 Stock Option/Stock
Issuance Plan.

     

    W. Plan
Administrator shall mean either the Board or a committee of the Board
acting in its capacity as administrator of the Plan.

     

    X. Purchase
Agreement shall mean the stock purchase agreement in substantially the
form of Exhibit B to the Grant Notice.

     

    Y. Service
shall mean the Optionee’s performance of services for the Corporation (or any
Parent or Subsidiary) in the capacity of an Employee, a member of the board of
directors or an independent contractor.

     

    Z. Stock
Purchase Agreement shall mean the stock purchase agreement in
substantially the form of Exhibit B to the Grant Notice.

     

    AA. Subsidiary
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation, provided each corporation (other
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such
chain.

     

    BB. Unvested
Shares shall mean the Option Shares which have not vested in accordance
with the Vesting Schedule applicable to those shares or any special vesting
acceleration provisions and which are subject to the Corporation’s right to
repurchase those shares upon termination of Service.

     

    CC. Vested
Shares shall mean the Option Shares which have vested in accordance with
the Vesting Schedule applicable to those shares or any special vesting
acceleration provisions and which are no longer subject to the Corporation’s
right to repurchase those shares upon termination of Service.

     

    DD. Vesting
Schedule shall mean the vesting schedule specified in the Grant
Notice.

     

     

     

    7

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
B

     

    CHINA
XD PLASTICS COMPANY LIMITED

     

    STOCK PURCHASE
AGREEMENT

     

    AGREEMENT made as of this
        
day of                                     ,
                
by and between the Corporation, and                                         
    , Optionee under the Plan.

     

    All
capitalized terms in this Agreement shall have the meaning assigned to them in
this Agreement or in the attached Appendix.

     

    
      
        	 
      	
                A.

              	
                EXERCISE OF
      OPTION

              

      

    

     

    1. Exercise.
Optionee hereby purchases                         
shares of Common Stock (the “Purchased Shares”) at the exercise price of $                    
per share (the “Exercise Price”) pursuant to the exercise of that certain option
(the “Option”) granted to Optionee pursuant to the Plan.

     

    2. Payment.
Concurrently with the delivery of this Agreement to the Corporation, Optionee
shall pay the aggregate Exercise Price for all of the Purchased Shares in
accordance with the provisions of the Option Agreement and shall deliver
whatever additional documents may be required by the Option Agreement as a
condition for exercise, together with a duly-executed blank Assignment Separate
from Certificate (in the form attached hereto as Exhibit I) with respect to the
Purchased Shares.

     

    3. Stockholder
Rights. Until such time as the Corporation exercises the Repurchase Right
or the First Refusal Right, Optionee (or any successor in interest) shall have
all stockholder rights (including voting, dividend and liquidation rights) with
respect to the Purchased Shares, subject, however, to the transfer restrictions
imposed by this Agreement.

     

    
      
        	 
      	
                B.

              	
                SECURITIES LAW
      COMPLIANCE

              

      

    

     

    1. Restricted
Securities. The Purchased Shares have not been registered under the 1933
Act and are being issued to Optionee in reliance upon the exemption from such
registration provided by Section 4(2) of the 1933 Act or SEC Rule 504, 505, 506
or 701. Optionee hereby confirms that Optionee has been informed that the
Purchased Shares are restricted securities under the 1933 Act and may not be
resold or transferred unless the Purchased Shares are first registered under the
Federal securities laws or unless an exemption from such registration is
available. Accordingly, Optionee hereby acknowledges that Optionee is acquiring
the Purchased Shares for investment purposes only and not with a view to resale
and is prepared to hold the Purchased Shares for an indefinite period and that
Optionee is aware that SEC Rule 144 issued under the 1933 Act which exempts
certain resales of unrestricted securities is not presently available to exempt
the resale of the Purchased Shares from the registration requirements of the
1933 Act.

    

    2. Restrictions
on Disposition of Purchased Shares.

     

    (a)
Optionee shall make no disposition of the Purchased Shares (other than a
Permitted Transfer) unless and until there is compliance with all of the
following requirements:

     

    (i)
Optionee shall have provided the Corporation with a written summary of the terms
and conditions of the proposed disposition.

     

    (ii)
Optionee shall have complied with all requirements of this Agreement applicable
to the disposition of the Purchased Shares.

     

    (iii)
Optionee shall have provided the Corporation with written assurances, in form
and substance satisfactory to the Corporation, that (A) the proposed disposition
does not require registration of the Purchased Shares under the 1933 Act or (B)
all appropriate action necessary for compliance with the registration
requirements of the 1933 Act or any exemption from registration available under
the 1933 Act (including Rule 144) has been taken.

     

     

    1

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) The
Corporation shall not
be required (i) to transfer on its books any Purchased Shares which have been
sold or transferred in violation of the provisions of this Agreement or (ii) to
treat as the owner of the Purchased Shares, or otherwise to accord voting,
dividend or liquidation rights to, any transferee to whom the Purchased Shares
have been transferred in contravention of this Agreement.

     

    3. Restrictive
Legends. The stock certificates representing the Purchased Shares shall
be endorsed with one or more of the following restrictive legends:

     

    “The
shares represented by this certificate have not been registered under the
Securities Act of 1933. The shares may not be sold or offered for sale in the
absence of (a) an effective registration statement for the shares under such
Act, (b) a “no action” letter of the Securities and Exchange Commission with
respect to such sale or offer or (c) satisfactory assurances to the Corporation
that registration under such Act is not required with respect to such sale or
offer.”

     

    “The
shares represented by this certificate are subject to certain repurchase rights
and rights of first refusal granted to the Corporation and accordingly may not
be sold, assigned, transferred, encumbered, or in any manner disposed of except
in conformity with the terms of a written agreement between the Corporation and
the registered holder of the shares (or the predecessor in interest to the
shares). A copy of such agreement is maintained at the Corporation’s principal
corporate offices.”

     

    
      
        	 
      	
                C.

              	
                TRANSFER
      RESTRICTIONS

              

      

    

     

    1. Restriction
on Transfer. Except for any Permitted Transfer, (a) Optionee shall not
transfer, assign, encumber or otherwise dispose of any of the Unvested Shares
and (b) Optionee shall not transfer, assign, encumber or otherwise dispose of
any of the Vested Shares in contravention of the First Refusal Right, the Market
Stand-Off or the transfer restrictions set forth in Article B.

     

    2. Transferee
Obligations. Each person (other than the Corporation) to whom the
Purchased Shares are transferred by means of a Permitted Transfer must, as a
condition precedent to the validity of such transfer, acknowledge in writing to
the Corporation that such person is bound by the provisions of this Agreement
and that the transferred shares are subject to (a) the Repurchase Right, (b) the
First Refusal Right, (c) the Market Stand-Off and (d) the transfer restrictions
set forth in Article B, to the same extent such shares would be so subject if
retained by Optionee.

     

    3. Market
Stand-Off.

     

    (a) In
connection with the Corporation’s initial public offering and any underwritten
public offering by the Corporation of its equity securities pursuant to an
effective registration statement filed under the 1933 Act within two years after
the effective date of the Corporation’s initial public offering, Owner shall not
sell, make any short sale of, hedge with, loan, hypothecate, pledge, grant any
option for the purchase of, or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions with respect to,
any Vested Shares without the prior written consent of the Corporation or its
underwriters (the “Market Stand-Off”). The Market Stand-Off shall be in effect
for such period of time from and after the effective date of the final
prospectus for the offering as may be requested by the Corporation or such
underwriters; provided,
however, that such period shall not exceed one hundred eighty
days.

     

    (b) Owner
shall be subject to the Market Stand-Off provided and only if the
officers and directors of the Corporation are also subject to similar
restrictions.

     

    (c) Any
new, substituted or additional securities that are by reason of any
Recapitalization or Reorganization distributed with respect to Vested Shares
shall be immediately subject to the Market Stand-Off.

     

    (d) In
order to enforce the Market Stand-Off, the Corporation may impose stop-transfer
instructions with respect to Vested Shares until the end of the applicable
stand-off period.

     

     

    2

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      
        	 
      	
                D.

              	
                REPURCHASE
      RIGHT

              

      

    

     

    1. Grant.
The Corporation shall have the right (the “Repurchase Right”) to repurchase at
the Repurchase Price, any or all of the Purchased Shares which are Unvested
shares at the time Optionee’s Service ceases.

     

    2. Exercise
of the Repurchase Right. The Repurchase Right shall be exercisable by
written notice delivered to each Owner of the Unvested Shares at any time during
the sixty day period following the date Optionee ceases for any reason to remain
in Service or (if later) during the sixty day period following the execution
date of this Agreement. The notice shall indicate the number of Unvested Shares
to be repurchased, the Repurchase Price to be paid, and the date on which the
repurchase is to be effected, such date to be not more than thirty days after
the date of such notice. The certificates representing the Unvested Shares to be
repurchased shall be delivered to the Corporation on the closing date specified
for the repurchase. Concurrently with the receipt of such stock certificates,
the Corporation shall pay to Owner, in cash or cash equivalents (including the
cancellation of any purchase-money indebtedness), an amount equal to the
aggregate Repurchase Price for the Unvested Shares which are to be repurchased
from Owner.

     

    3. Termination
of the Repurchase Right. The Repurchase Right shall terminate with
respect to any Unvested Shares for which it is not timely exercised under
Paragraph D.2. In addition, the Repurchase Right shall terminate and cease to be
exercisable as and when the Purchased Shares become Vested Shares. All Vested
Shares shall, however, be subject to (a) the First Refusal Right, (b) the Market
Stand Off and (c) the transfer restrictions set forth in Article B.

     

    4. Aggregate
Vesting Limitation. If the Option is exercised in more than one increment
so that Optionee is a party to other Stock Purchase Agreements (the “Prior
Purchase Agreements”) which are executed prior to the date of this Agreement,
then the total number of Purchased Shares as to which Optionee shall be deemed
to have a fully-vested interest under this Agreement and all Prior Purchase
Agreements shall not exceed in the aggregate the number of Purchased Shares in
which Optionee would otherwise at the time be vested, in accordance with the
Vesting Schedule, had all the Purchased Shares (including those acquired under
the Prior Purchase Agreements) been acquired exclusively under this
Agreement.

     

    5. Recapitalization.
Any new, substituted or additional securities or other property (including cash
paid other than as a regular cash dividend) which is by reason of any
Recapitalization distributed with respect to the Unvested Shares shall be
immediately subject to the Repurchase Right and any escrow requirements
hereunder. Appropriate adjustments to reflect such distribution shall be made to
the number and/or class of Unvested Shares subject to this Agreement. In
addition, for purposes of determining the Repurchase Price, appropriate
adjustments shall be made to the Exercise Price in order to reflect the effect
of any such Recapitalization upon the Corporation’s capital structure; provided, however, that the
aggregate Exercise Price shall remain the same.

     

    6. Change in
Control.

     

    (a) The
Repurchase Right shall automatically terminate in its entirety, and all Unvested
Shares shall become Vested Shares, upon the consummation of a Change in Control,
except to the extent (i) the Repurchase Right is to be assigned to the successor
entity (or its parent) or is to be otherwise continued in effect pursuant to the
terms of the Change in Control transaction or (ii) the property (including cash
payments) issued with respect to Unvested Shares is to be held in escrow and
released in accordance with the Vesting Schedule in effect for the Unvested
Shares pursuant to the terms of the Change in Control transaction.

     

    (b) To
the extent the Repurchase Right remains in effect following a Change in Control,
such right shall apply to any new securities or other property (including any
cash payments) received in exchange for the Unvested Shares in consummation of
the Change in Control. For purposes of determining the Repurchase Price,
appropriate adjustments shall be made to the Exercise Price to reflect the
effect (if any) of the Change in Control upon the Corporation’s capital
structure; provided,
however, that the aggregate Exercise Price shall remain the same. The new
securities or other property (including any cash payments) issued or distributed
with respect to the Unvested Shares in consummation of the Change in Control
shall be immediately deposited in escrow with the Corporation (or the successor
entity) and shall not be released from escrow until Optionee vests in such
securities or other property in accordance with the Vesting
Schedule.

     

    3

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
        	 
      	
                E.

              	
                RIGHT OF FIRST
      REFUSAL

              

      

    

     

    1. Grant.
The Corporation shall have the right of first refusal (the “First Refusal
Right”) exercisable in connection with any proposed transfer of Vested Shares.
For purposes of this Article E, the term “transfer” shall include any sale,
assignment, pledge, encumbrance or other disposition of Vested Shares intended
to be made by Owner, but shall not include any Permitted Transfer.

     

    2. Notice of
Intended Disposition. In the event any Owner of Vested Shares desires to
accept a bona fide third-party offer for the transfer of any or all of such
shares (Vested Shares subject to such offer to be hereinafter referred to as the
“Target Shares”), Owner shall promptly (a) deliver to the Corporation written
notice (the “Disposition Notice”) of the terms of the offer, including the
purchase price and the identity of the third-party offeror, and (b) provide
satisfactory proof that the disposition of the Target Shares to such third-party
offeror would not be in contravention of the provisions set forth in Articles B
and C.

     

    3. Exercise
of the First Refusal Right. The Corporation shall have the right to
repurchase any or all of the Target Shares subject to the Disposition Notice
upon the same terms as those specified therein or upon such other terms (not
materially different from those specified in the Disposition Notice) to which
Owner consents. Such right shall be exercisable by delivery of written notice
(the “Exercise Notice”) to Owner prior to the twenty-fifth day following the
Corporation’s receipt of the Disposition Notice. If such right is exercised with
respect to all the Target Shares, then the Corporation shall effect the
repurchase of such shares, including payment of the purchase price, not more
than five business days after delivery of the Exercise Notice; and at such time
the certificates representing the Target Shares shall be delivered to the
Corporation.

     

    Should
the purchase price specified in the Disposition Notice be payable in property
other than cash or evidences of indebtedness, the Corporation shall have the
right to pay the purchase price in the form of cash equal in amount to the value
of such property. If Owner and the Corporation cannot agree on such cash value
within ten days after the Corporation’s receipt of the Disposition Notice, the
valuation shall be made by an appraiser of recognized standing selected by Owner
and the Corporation or, if they cannot agree on an appraiser within twenty days
after the Corporation’s receipt of the Disposition Notice, each shall select an
appraiser of recognized standing and the two appraisers shall designate a third
appraiser of recognized standing, whose appraisal shall be determinative of such
value. Owner and the Corporation shall share the cost of such appraisal equally.
The closing shall then be held on the later of (i) the fifth
business day following delivery of the Exercise Notice or (ii) the fifth
business day after such valuation shall have been made.

     

    4. Non-Exercise
of the First Refusal Right. In the event the Exercise Notice is not given
to Owner prior to the expiration of the twenty-five day exercise period, Owner
shall have a period of thirty days thereafter in which to sell or otherwise
dispose of the Target Shares to the third-party offeror identified in the
Disposition Notice upon terms (including the purchase price) no more favorable
to such third-party offeror than those specified in the Disposition Notice;
provided, however, that
any such sale or disposition must not be effected in contravention of the
provisions of Articles B and C. The third-party offeror shall acquire the Target
Shares subject to the First Refusal Right and the provisions and restrictions of
Article B and Paragraph C.3, and any subsequent disposition of the acquired
shares must be effected in compliance with the terms and conditions of such
First Refusal Right and the provisions and restrictions of Article B and
Paragraph C.3. In the event Owner does not effect such sale or disposition of
the Target Shares within the specified thirty day period, the First Refusal
Right shall continue to be applicable to any subsequent disposition of the
Target Shares by Owner until such right lapses.

     

    5. Partial
Exercise of the First Refusal Right. In the event the Corporation makes a
timely exercise of the First Refusal Right with respect to a portion, but not
all, of the Target Shares specified in the Disposition Notice, Owner shall have
the option, exercisable by written notice to the Corporation delivered within
five business days after Owner’s receipt of the Exercise Notice, to effect the
sale of the Target Shares pursuant to either of the following
alternatives:

     

    (a) sale
or other disposition of some or all the Target Shares to the third-party offeror
identified in the Disposition Notice, but in full compliance with the
requirements of Paragraph E.4, as if the Corporation did not exercise the First
Refusal Right; or

     

    (b) sale
to the Corporation of the portion of the Target Shares which the Corporation has
elected to purchase, such sale to be effected in substantial conformity with the
provisions of Paragraph E.3. The First Refusal Right shall continue to be
applicable to any subsequent disposition of the remaining Target Shares until
such right lapses.

     

    4

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Owner’s
failure to deliver timely notification to the Corporation shall be deemed to be
an election by Owner to sell the Target Shares pursuant to alternative (a)
above.

     

    6. Recapitalization/Reorganization.

     

    (a) Any
new, substituted or additional securities or other property that is by reason of
any Recapitalization distributed with respect to Vested Shares shall be
immediately subject to the First Refusal Right.

     

    (b) In
the event of a Reorganization, the First Refusal Right shall remain in full
force and effect and shall apply to the new capital stock or other property
received in exchange for Vested Shares in consummation of the Reorganization and
shall apply to the remaining Unvested Shares as and when they become Vested
Shares.

     

    7. Lapse.
The First Refusal Right shall lapse upon the earlier to occur of (a) a
firm commitment underwritten public offering, pursuant to an effective
registration statement under the 1933 Act, covering the offer and sale of the
Common Stock in the aggregate amount of at least $20,000,000 or (b) the
acquisition of the Corporation by an entity that is traded on a stock exchange
or the Nasdaq Stock Market. However, the Market Stand-Off shall continue to
remain in full force and effect following the lapse of the First Refusal Right,
in the case of a transaction described in (a) above.

     

    
      
        	 
      	
                F.

              	
                SPECIAL TAX
      ELECTION

              

      

    

     

    The
acquisition of the Purchased Shares may result in adverse tax consequences that
may be avoided or mitigated by filing an election under Code Section 83(b). Such
election must be filed with the Internal Revenue Service within thirty days
after the date of this Agreement. A description of the tax consequences
applicable to the acquisition of the Purchased Shares and the form for making
the Code Section 83(b) election are set forth in Exhibit II. Optionee should consult with his or
her tax advisor to determine the tax consequences of acquiring the Purchased
Shares and the advantages and disadvantages of filing the Code Section 83(b)
election. Optionee acknowledges that it is Optionee’s sole responsibility, and
not the Corporation’s responsibility, to file a timely election under Code
Section 83(b), even if Optionee requests the Corporation or its representatives
to make this filing on his or her behalf.

     

    
      
        	 
      	
                G.

              	
                GENERAL
      PROVISIONS

              

      

    

     

    1. Assignment.
The Corporation may assign the Repurchase Right and/or the First Refusal Right
to any person or entity selected by the Plan Administrator, including (without
limitation) one or more stockholders of the Corporation.

     

    2. At Will
Employment. Nothing in this Agreement or in the Plan shall confer upon
Optionee any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining Optionee) or of Optionee,
which rights are hereby expressly reserved by each, to terminate Optionee’s
Service at any time for any reason, with or without cause.

     

    3. Notices.
Any notice required to be given under this Agreement shall be in writing and
shall be deemed effective upon personal delivery or on the third day following
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party’s signature line on this Agreement or at such other address as such
party may designate by ten days advance written notice under this paragraph to
all other parties to this Agreement.

     

    4. No
Waiver. The failure of the Corporation in any instance to exercise the
Repurchase Right or the First Refusal Right shall not constitute a waiver of any
other repurchase rights and/or rights of first refusal that may subsequently
arise under the provisions of this Agreement or any other agreement between the
Corporation and Optionee. No waiver of any breach or condition of this Agreement
shall be deemed to be a waiver of any other or subsequent breach or condition,
whether of like or different nature.

     

    5

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    5. Cancellation
of Shares. If the Corporation shall make available, at the time and place
and in the amount and form provided in this Agreement, the consideration for the
Purchased Shares to be repurchased in accordance with the provisions of this
Agreement, then from and after such time, the person from whom such shares are
to be repurchased shall no longer have any rights as a holder of such shares
(other than the right to receive payment of such consideration in accordance
with this Agreement). Such shares shall be deemed purchased in accordance with
the applicable provisions hereof, and the Corporation shall be deemed the owner
and holder of such shares, whether or not the certificates therefor have been
delivered as required by this Agreement.

     

    6. Governing
Law. The interpretation, performance and enforcement of this Agreement
shall be governed by the laws of the State of NewYork without giving effect to
that State’s choice of law or conflict-of-laws rules.

     

    7. Optionee
Undertaking. Optionee hereby agrees to take whatever additional action
and execute whatever additional documents the Corporation may deem necessary or
advisable in order to carry out or effect one or more of the obligations or
restrictions imposed on either Optionee or the Purchased Shares pursuant to the
provisions of this Agreement.

     

    8. Construction.
The Plan is incorporated herein by reference. In the event of a conflict between
the terms of the Plan and the terms of this Agreement, the terms of this
Agreement shall prevail. All decisions of the Plan Administrator with respect to
any question or issue arising under the Plan or this Agreement shall be
conclusive and binding on all persons having an interest in this
option.

     

    9. Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed to
be an original, but all of which together shall constitute one and the same
instrument.

     

    10. Successors
and Assigns. The provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and upon
Optionee, Optionee’s permitted assigns and the legal representatives, heirs and
legatees of Optionee’s estate, whether or not any such person shall have become
a party to this Agreement and have agreed in writing to join herein and be bound
by the terms hereof.

     

    IN WITNESS WHEREOF, the
parties have executed this Agreement on the day and year first indicated
above.

     

    
      
        
          
            
              
                
                  
                    
                      	 
      	 
      	 
      
	
                                                                                                                           
      CHINA XD PLASTICS COMPANY LIMITED

                            
	 
      	 
      
	
                               

                            	 
      By:	 
      
	 
      	 
      
	
                               

                            	 
      Name:	 
      
	 
      	 
      
	
                               

                            	 
      Title:	 
      
	 
      	 
      
	
                               

                            	 
      

                              Address:

                            	 
      
	 
      	 
      
	 
      	 
      	 
      
	 
      
	
                                                                                                                         
       OPTIONEE

                            
	 
      	 
      
	
                               

                            	 
      

                              Signature:

                            	 
      
	 
      	 
      
	
                               

                            	 
      

                              Printed Name:

                            	 
      
	 
      	 
      
	
                               

                            	 
      

                              Address:

                            	 
      
	 
      	 
      
	 
      	 
      	 
      

                    

                  

                

              

            

          

        

      

    

     

     

     

    6

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    SPOUSAL
ACKNOWLEDGMENT

     

    The
undersigned spouse of Optionee has read and hereby approves the foregoing Stock
Purchase Agreement. In consideration of the Corporation’s granting Optionee the
right to acquire the Purchased Shares in accordance with the terms of such
Agreement, the undersigned hereby agrees to be irrevocably bound by all the
terms of such Agreement, including (without limitation) the right of the
Corporation (or its assigns) to purchase any Purchased Shares in which Optionee
is not vested at the time of his or her cessation of Service.

     

    
      
        
          
            
              	 
      	 
      	 
      
	 
      
	 
      
	
                                                                                
      OPTIONEE’S SPOUSE

                    
	 
      	 
      
	
                       

                    	 
      

                      Address:

                    	 
      
	 
      	 
      
	 
      	 
      	 
      

            

          

        

      

    

    

     

     

     

     

     

    7

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
I

     

    ASSIGNMENT
SEPARATE FROM CERTIFICATE

     

    FOR VALUE RECEIVED                                     
hereby sell(s), assign(s) and transfer(s) unto China XD Plastics Company Limited
or its successors or assigns (the “Corporation”),                             
(            )
shares of the Common Stock of the Corporation standing in his or her name on the
books of the Corporation represented by Certificate No.                     
herewith and do(es) hereby irrevocably constitute and appoint                                         
as Attorney to transfer the said stock on the books of the Corporation with full
power of substitution in the premises.

     

    Dated:

     

    
      
        	 
      	 
      	 
      
	
                 

              	 
      

                Signature

              	 
      

      

    

     

    Instruction: Please do not
fill in any blanks other than the signature line. Please sign exactly as you
would like your name to appear on the issued stock certificate. The purpose of
this assignment is to enable the Corporation to exercise the Repurchase Right
without requiring additional signatures on the part of Optionee.

     

     

     

     

     

     

     

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
II

     

    FEDERAL
INCOME TAX CONSEQUENCES AND

    SECTION 83(b) TAX
ELECTION1

     

    I. Federal
Income Tax Consequences and Section 83(b) Election For Exercise of Non-Statutory
Option. If the Purchased Shares are acquired pursuant to the exercise of
a Non-Statutory Option as specified in the Grant Notice, then under Code Section
83, the excess of the Fair Market Value of the Purchased Shares on the date any
forfeiture restrictions applicable to such shares lapse over the Exercise Price
paid for those shares will be reportable as ordinary income on the lapse date.
For this purpose, the term “forfeiture restrictions” includes the right of the
Corporation to repurchase the Purchased Shares pursuant to the Repurchase Right.
However, Optionee may elect under Code Section 83(b) to be taxed at the time the
Purchased Shares are acquired, rather than when and as such Purchased Shares
cease to be subject to such forfeiture restrictions. Such election must be filed
with the Internal Revenue Service within thirty days after the date of the
Agreement. Even if the Fair Market Value of the Purchased Shares on the date of
the Agreement equals the Exercise Price paid (and thus no tax is payable), the
election must be made to avoid potentially adverse tax consequences in the
future. The form for making this election is attached as part of this exhibit.
Failure to make this filing
within the applicable thirty day period may result in the recognition of
ordinary income by Optionee as the forfeiture restrictions
lapse.

     

    II. Federal
Income Tax Consequences and Conditional Section 83(b) Election For Exercise of
Incentive Option. If the Purchased Shares are acquired pursuant to the
exercise of an Incentive Option, as specified in the Grant Notice, then the
following tax principles shall be applicable to the Purchased
Shares:

     

    (i) For
regular tax purposes, no taxable income will be recognized at the time the
Option is exercised.  

    (ii) The
excess of (a) the Fair Market Value of the Purchased Shares on the date the
Option is exercised or (if later) on the date any forfeiture restrictions
applicable to the Purchased Shares lapse over (b) the Exercise Price paid for
the Purchased Shares will be includible in Optionee’s taxable income for
alternative minimum tax purposes.  

    (iii) If
Optionee makes a disqualifying disposition of the Purchased Shares, then, in
most cases, Optionee will recognize ordinary income in the year of such
disposition equal in amount to the excess of (a) the Fair Market Value of the
Purchased Shares on the date the Option is exercised or (if later) on the date
any forfeiture restrictions applicable to the Purchased Shares lapse over (b)
the Exercise Price paid for the Purchased Shares. Any additional gain recognized
upon the disqualifying disposition will be either short-term or long-term
capital gain depending upon the period for which the Purchased Shares are held
prior to the disposition.  

    (iv) For
purposes of the foregoing, the term “forfeiture restrictions” will include the
right of the Corporation to repurchase the Purchased Shares pursuant to the
Repurchase Right. The term “disqualifying disposition” means any sale or other
disposition1 of the
Purchased Shares within either two years after the date the option was granted
to Optionee or within one year after the exercise date of the Option.  

    (v) In
the absence of final Treasury Regulations relating to Incentive Options, it is
not certain whether Optionee may, in connection with the exercise of the Option
for any Purchased Shares at the time subject to forfeiture restrictions, file a
protective election under Code Section 83(b) which would limit Optionee’s
ordinary income upon a disqualifying disposition to the excess of the Fair
Market Value of the Purchased Shares on the date the Option is exercised over
the Exercise Price paid for the Purchased Shares. Accordingly, such election if
properly filed will only be allowed to the extent the final Treasury Regulations
permit such a protective election.  

    (vi) The
Code Section 83(b) election will be effective in limiting Optionee’s alternative
minimum taxable income to the excess of the Fair Market Value of the Purchased
Shares at the time the Option is exercised over the Exercise Price paid for
those shares.

     

    Page 2 of
the attached form for making the election should be filed with any election made
in connection with the exercise of an Incentive Option.

     

      
        

      

    

    
      	
              1

            	
              Generally,
      a disposition of shares purchased under an Incentive Option includes any
      transfer of legal title, including a transfer by sale, exchange or gift,
      but does not include a transfer to Optionee’s spouse, a transfer into
      joint ownership with right of survivorship if Optionee remains one of the
      joint owners, a pledge, a transfer by bequest or inheritance or certain
      tax-free exchanges permitted under the
Code.

            

    

     

    1

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    SECTION
83(b) ELECTION

     

    This
statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treasury Regulation Section 1.83-2.

     

    
      	
              (1)

            	
              The
      taxpayer who performed the services
is:

            

    

     

    Name:

    Address:

    Taxpayer
Ident. No.:

     

    
      
        	
                (2)

              	
                The
      property with respect to which the election is being made is                          shares of the common stock of China XD Plastics Company
      Limited

              

      

    

     

    
      
        	
                (3)

              	
                The
      property was issued on                         ,
                  .

              

      

    

     

    
      
        	
                (4)

              	
                The
      taxable year in which the election is being made is the calendar year
                  .

              

      

    

     

    
      
        	
                (5)

              	
                The
      property is subject to a repurchase right pursuant to which the issuer has
      the right to acquire the property, at the lower of the original purchase
      price per share or the fair market value per share, if for any reason
      taxpayer’s service with the issuer terminates. The issuer’s repurchase
      right will lapse in a series of annual and monthly installments over a
      four year period ending on                     ,
                  .

              

      

    

     

    
      
        	
                (6)

              	
                The
      fair market value at the time of transfer (determined without regard to
      any restriction other than a restriction which by its terms will never
      lapse) is $                    
      per share.

              

      

    

     

    
      
        	
                (7)

              	
                The
      amount paid for such property is $                    
      per share.

              

      

    

     

    
      	
              (8)

            	
              A
      copy of this statement was furnished to China XD Plastics Company Limited
      for whom taxpayer rendered the services underlying the transfer of
      property.

            

    

     

    
      
        	
                (9)

              	
                This
      statement is executed on                                         ,
                  .

              

      

    

     

    
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
              Spouse
      (if any)

            	 
      	 
      	 
      	
              Taxpayer

            

    

     

    This
election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her federal income tax returns and must be made within
thirty days after the execution date of the Stock Purchase Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Optionee must retain two copies of the completed form for filing with his or her
federal and state tax returns for the current tax year and an additional copy
for his or her records.

     

    2

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    The
property described in the above Section 83(b) election is comprised of shares of
common stock acquired pursuant to the exercise of an incentive stock option
under Section 422 of the Internal Revenue Code (the “Code”). Accordingly, it is
the intent of the Taxpayer to utilize this election to achieve the following tax
results:

     

    1. One
purpose of this election is to have the alternative minimum taxable income
attributable to the purchased shares measured by the amount by which the fair
market value of such shares at the time of their transfer to the Taxpayer
exceeds the purchase price paid for the shares. In the absence of this election,
such alternative minimum taxable income would be measured by the spread between
the fair market value of the purchased shares and the purchase price which
exists on the various lapse dates in effect for the forfeiture restrictions
applicable to such shares.

     

    2.
Section 421(a)(1) of the Code expressly excludes from income any excess of the
fair market value of the purchased shares over the amount paid for such shares.
Accordingly, this election is also intended to be effective in the event there
is a “disqualifying disposition” of the shares, within the meaning of Section
421(b) of the Code, which would otherwise render the provisions of Section 83(a)
of the Code applicable at that time. Consequently, the Taxpayer hereby elects to
have the amount of disqualifying disposition income measured by the excess of
the fair market value of the purchased shares on the date of transfer to the
Taxpayer over the amount paid for such shares. Since Section 421(a) presently
applies to the shares which are the subject of this Section 83(b) election, no
taxable income is actually recognized for regular tax purposes at this time, and
no income taxes are payable, by the Taxpayer as a result of this election. The
foregoing election is to be effective to the full extent permitted under the
Code.

     

    This
page 2 is to be attached to any Section 83(b) election filed in connection with
the exercise of an INCENTIVE STOCK OPTION under the federal tax
laws.

     

     

     

     

     

     

    3

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    APPENDIX

     

    The
following definitions shall be in effect under the Agreement:

     

    A. Agreement
shall mean this Stock Purchase Agreement.

     

    B. Board
shall mean the Corporation’s Board of Directors.

     

    C. Change in
Control shall mean a change in ownership or control of the Corporation
effected through any of the following transactions:

     

    (i) a
stockholder-approved merger, consolidation or other reorganization in which
securities representing more than 50% of the total combined voting power of the
Corporation’s outstanding securities are beneficially owned, directly or
indirectly, by a person or persons different from the person or persons who
beneficially owned those securities immediately prior to such
transaction;

     

    (ii) a
stockholder-approved sale, transfer or other disposition of all or substantially
all of the Corporation’s assets; or

     

    (iii) the
acquisition, directly or indirectly, by any person or related group of persons
(other than the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation), of beneficial
ownership (within the meaning of Rule 13-d3 of the 1934 Act) of securities
possessing more than 50% of the total combined voting power of the Corporation’s
outstanding securities from a person or persons other than the
Corporation.

     

    In no
event shall any public offering of the Corporation’s securities be deemed to
constitute a Change in Control. In no event shall a merger of the Corporation’s
Parent with the Corporation constitute a Change in Control.

     

    D. Code
shall mean the Internal Revenue Code of 1986, as amended.

     

    E. Common
Stock shall mean the common stock of the Corporation.

     

    F. Corporation
shall mean China XD Plastics Company Limited, a Nevada corporation, or any
successor corporation to the voting stock or all or substantially all of the
assets of China XD Plastics Company Limited which has assumed some or all of the
rights of China XD Plastics Company Limited under this Agreement.

     

    G. Disposition
Notice shall have the meaning assigned to such term in Paragraph
E.2.

     

    H. Exercise
Price shall have the meaning assigned to such term in Paragraph
A.1.

     

    I. Fair
Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:

     

    (i) If
the Common Stock is at the time listed on the Nasdaq Stock Market, then the Fair
Market Value shall be the closing selling price per share of Common Stock on the
date in question, as such price is reported by the National Association of
Securities Dealers on the Nasdaq Stock Market and published in The Wall Street Journal. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

     

    (ii) If
the Common Stock is at the time listed on any stock exchange, then the Fair
Market Value shall be the closing selling price per share of Common Stock on the
date in question on the stock exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is officially quoted
in the composite tape of transactions on such exchange and published in The Wall Street Journal. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

     

    1

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (iii) If
the Common Stock is at the time neither listed on any stock exchange or the
Nasdaq Stock Market, then the Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan Administrator
shall deem appropriate.

     

    J. First
Refusal Right shall mean the right granted to the Corporation in
accordance with Article E.

     

    K. Grant
Notice shall mean the Notice of Grant of Stock Option pursuant to which
Optionee has been informed of the basic terms of the Option.

     

    L. Incentive
Option shall mean an option that satisfies the requirements of Code
Section 422.

     

    M. Market
Stand-Off shall mean the market stand-off restriction specified in
Paragraph C.3.

     

    N. 1933
Act shall mean the Securities Act of 1933, as amended.

     

    O. 1934
Act shall mean the Securities Exchange Act of 1934, as
amended.

     

    P. Non-Statutory
Option shall mean an option that is not intended to satisfy the
requirements of Code Section 422.

     

    Q. Option
shall have the meaning assigned to such term in Paragraph A.1.

     

    R. Option
Agreement shall mean all agreements and other documents evidencing the
Option.

     

    S. Option
Shares shall mean the shares of Common Stock subject to the
option.

     

    T. Optionee
shall mean the person to whom the Option is granted under the Plan.

     

    U. Owner
shall mean Optionee and all subsequent holders of the Purchased Shares who
derive their chain of ownership through a Permitted Transfer from
Optionee.

     

    V. Parent
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation, provided each corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such
chain.

     

    W. Permitted
Transfer shall mean (i) a transfer of the Purchased Shares to one or more
members of Optionee’s family (as defined in Rule 701 promulgated by the SEC) or
to a trust established for the benefit of one or more family members or to
Optionee’s former spouse pursuant to a domestic relations order, (ii) a transfer
of title to the Purchased Shares effected pursuant to Optionee’s will or the
laws of inheritance following Optionee’s death or (iii) a transfer to the
Corporation in pledge as security for any purchase-money indebtedness incurred
by Optionee in connection with the acquisition of the Purchased
Shares.

     

    X. Plan
shall mean the China XD Plastics Company Limited 2009 Stock Option/Stock
Issuance Plan.

     

    Y. Plan
Administrator shall mean either the Board or a committee of the Board
acting in its capacity as administrator of the Plan.

     

    Z. Prior
Purchase Agreement shall have the meaning assigned to such term in
Paragraph D.4.

     

    AA. Purchased
Shares shall have the meaning assigned to such term in Paragraph
A.1.

     

    BB. Recapitalization
shall mean any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the Corporation’s
outstanding Common Stock as a class without the Corporation’s receipt of
consideration.

     

    CC. Reorganization
shall mean any of the following transactions:

     

    (i) a
merger or consolidation in which the Corporation is not the surviving
entity;

     

    (ii) a
sale, transfer or other disposition of all or substantially all of the
Corporation’s assets;

     

    (iii) a
reverse merger in which the Corporation is the surviving entity but in which the
Corporation’s outstanding voting securities are transferred in whole or in part
to a person or persons different from the persons holding those securities
immediately prior to the merger; or

     

     

    2

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (iv) any
transaction effected primarily to change the state in which the Corporation is
incorporated or to create a holding company structure.

     

    DD. Repurchase
Price shall mean the lower of (i) the Exercise
Price per share or (ii) the Fair Market Value per share of Common Stock on the
date Optionee’s Service ceases.

     

    EE. Repurchase
Right shall mean the right granted to the Corporation in accordance with
Article D.

     

    FF. SEC
shall mean the Securities and Exchange Commission.

     

    GG. Service
shall mean Optionee’s performance of services for the Corporation (or any Parent
or Subsidiary) in the capacity of an employee, subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance, a member of the board of directors or an
independent contractor.

     

    HH. Subsidiary
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation, provided each corporation (other
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such
chain.

     

    II. Target
Shares shall have the meaning assigned to such term in Paragraph
E.2.

     

    JJ. Unvested
Shares shall mean the Option Shares which have not vested in accordance
with the Vesting Schedule applicable to those shares or any special vesting
acceleration provisions and which are subject to the Repurchase
Right.

     

    KK. Vested
Shares shall mean the Option Shares which have vested in accordance with
the Vesting Schedule applicable to those shares or any special vesting
acceleration provisions and which are no longer subject to the Repurchase
Right.

     

    LL. Vesting
Schedule shall mean the vesting schedule specified in the Grant
Notice.

     

     

     

     

    3

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    EXHIBIT
D

    
       

      PROSPECTUS

       

      CHINA
XD PLASTICS COMPANY LIMITED

       

      2009
STOCK OPTION/STOCK ISSUANCE PLAN

       

      

       

      This
prospectus relates to shares of common stock of China XD Plastics Company
Limited offered to our employees, directors and consultants pursuant to our 2009
Stock Option/Stock Issuance Plan, referred to in this prospectus as the
Plan.  The terms and conditions of the Plan, including the prices of
the shares of our common stock, are governed by the provisions of the Plan and
the agreements issued under the Plan.  China XD Plastics Company
Limited is referred to in this prospectus as “we,” “us,” or “our.”

       

      

       

      THIS
DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING

      SECURITIES
THAT HAVE BEEN REGISTERED UNDER

      THE SECURITIES ACT OF 1933, AS
AMENDED.

       

      

       

      Our
executive offices are located at No. 9 Qinling Road, Yingbin Road, Yingbin Road
Centralized Industrial Park, Harbin Development Zone, Helongjiang, China and our
telephone number at that location is 86-451-84346600.

       

      

       

      

       

      

       

      

       

      

       

      

       

      The date of this prospectus
is May 29, 2009.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      This
prospectus contains information concerning us and the Plan, but does not contain
all the information set forth in the Form S-8 registration statement for
the Plan which we filed with the Securities and Exchange Commission, referred to
as the Commission, under the Securities Act of 1933, as amended, referred to as
the Securities Act.  The Form S-8 registration statement, including
the exhibits to the registration statement, may be inspected at the Commission's
office in Washington, D.C.  In addition, the Commission maintains a
website that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission.  The address of the Commission's website is
http:\\www.sec.gov.

       

      Upon your
written or oral request, we will provide to you without charge:

       

      
        	
                ·  

              	
                a
      copy of any and all of the information that has been or may be
      incorporated by reference in this prospectus, other than exhibits to such
      documents, and

              

      

       

      
        	
                ·  

              	
                a
      copy of any other documents required to be delivered to participants in
      the Plan pursuant to Rule 428(b) under the Securities Act, including
      our most recent annual report to stockholders, proxy statement and other
      communications distributed to our stockholders
  generally.

              

      

       

      Requests
for copies of such documents and requests for additional information about the
Plan should be directed to Corporate Secretary, 11 Broadway, Suite 1004, New
York, NY  10004.  Our telephone number at that location
is (212)
747-1118.

       

      Except
for the Corporate Secretary, no person has been authorized to give any
information or make any representations, other than those contained in this
prospectus, in connection with the Plan, and, if given or made, such information
or representations must not be relied upon as having been authorized by
us.  This prospectus does not constitute an offering in any state in
which such offering may not lawfully be made.

       

       

      
        2

           

        

        
           

          
            

          

        

        
           

        

      

      QUESTIONS
AND ANSWERS ABOUT THE

       

      CHINA
XD PLASTICS COMPANY LIMITED

       

      2009
STOCK OPTION/STOCK ISSUANCE PLAN

       

      What
is the Plan?

       

      The Plan
was adopted by our board of directors in May, 2009 and will be approved by
stockholders within 12 months of the date of adoption.  The Plan
allows us to provide equity incentives to employees, directors, and consultants
who provide services to us and any of our subsidiaries or designated affiliates
by providing such individuals with an opportunity to acquire shares of our
common stock.

       

      The Plan
is not a qualified deferred compensation plan under 401(a) of the Code nor is it
subject to the provisions of the Employee Retirement Income Security Act of
1974.  The Plan will expire by its own terms in 2019, unless
terminated sooner by the Board.

       

      What
Should I Know About This Prospectus?

       

      This
prospectus describes the main features of the Plan.  However, this
prospectus does not contain all of the terms and conditions of the official Plan
document.  Accordingly, if there is any difference between the terms
and conditions of the Plan as described in this prospectus and the provisions of
the Plan document, the Plan document will govern.

       

      What
are the Purposes of the Plan?

       

      The
purposes of the Plan are to:

       

      
        	
                ·  

              	
                attract
      and retain the best available personnel for positions of substantial
      responsibility,

              

      

       

      
        	
                ·  

              	
                to
      provide additional incentive to our employees, directors and consultants,
      and

              

      

       

      
        	
                ·  

              	
                to
      promote the success of our
business.

              

      

       

      How
Many Shares of Stock are Reserved for Issuance Under the Plan?

       

      We have reserved 7,800,000 shares of
our common stock for issuance under the Plan.  The shares may be
authorized, but unissued, or reacquired shares of our common stock.

       

      Who
Administers the Plan?

       

      The Plan
is administered by our Board or a committee appointed by our board of
directors.  Members of our board of directors are elected for one-year
terms but can be removed from office before the expiration of such term with
cause upon a sufficient vote of the stockholders.

       

      The
administrator of the Plan has final authority to interpret any provision of the
Plan or any grant made under the Plan.

      
        3

           

        

        
           

          
            

          

        

        
           

        

      

       

      Who
is Eligible to Participate in the Plan?

       

      Our
employees, directors and consultants, or employees, directors and consultants of
any of our parent or subsidiary companies, are eligible to receive nonstatutory
stock options and rights to purchase stock.  Only our employees or
employees of our parent or subsidiary companies are eligible to receive
incentive stock options.

       

      Who
Selects the Employees, Directors and Consultants Who Receive
Grants?

       

      The
administrator of the Plan selects the employees, directors and consultants who
receive awards granted under the Plan.

       

      What
Types of Grants are Permitted Under the Plan?

       

      The Plan
permits us to grant incentive stock options, nonstatutory stock options and
stock purchase rights.  These awards are described
below.  The “Tax Information” section summarizes the tax treatment of
each of these awards.

       

      What
is a Stock Option?

       

      An option
is a right to buy stock in the future at a predetermined
price.  Incentive stock options are options that qualify for preferred
tax treatment under Section 422 of the Code.  Nonstatutory stock
options are options that do not qualify as incentive stock options.

       

      Subject
to the provisions of the Plan, the administrator of the Plan determines the term
of your option, the number of shares subject to your option, and the time your
option may be exercised.  However, the term of an incentive stock
option may not exceed ten years (and in some cases five (5) years) from the date
of grant.  The administrator of the Plan also determines the exercise
price of your option.  However, the exercise price of an incentive
stock option and a nonstatutory stock option intended to qualify under 162(m) of
the Code may not be less than the fair market value of our common stock on the
date of grant.  Under certain circumstances, the exercise price of an
incentive stock option may not be less than 110% of the fair market value on the
date of grant.

       

      If your
service relationship terminates for any reason, your option may be exercised to
the extent it was exercisable on the date of such termination for a period of
time determined by the administrator of the Plan at the time the option is
granted.  In the case of a termination for disability or death, the
period for exercise following termination generally will be twelve (12)
months.  In all other cases, the period for exercise of an option
following termination generally will be three (3) months.  In no event
may you exercise your option after the expiration of the original term of your
option.

       

       

      4

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      The
administrator of the Plan determines how you may pay the exercise price of your
option. The Plan specifically states that the following are acceptable forms of
consideration:

       

      
        	
                ·  

              	
                cash,

              

      

       

      
        	
                ·  

              	
                check,

              

      

       

      
        	
                ·  

              	
                promissory
      note,

              

      

       

      
        	
                ·  

              	
                certain
      other shares of our common stock,

              

      

       

      
        	
                ·  

              	
                “cashless
      exercise,”

              

      

       

      
        	
                ·  

              	
                a
      reduction in the amount of any liability we owe
  you,

              

      

       

      
        	
                ·  

              	
                any
      other form of consideration permitted by applicable law,
  or

              

      

       

      
        	
                ·  

              	
                any
      combination of the above.

              

      

       

      Subject
to the Plan administrator's discretion, if you incur tax liability upon the
exercise of your option, you may satisfy your withholding obligation by electing
to have us retain a sufficient number of shares to cover the withholding
obligation.

       

      What
Is a Stock Purchase Right?

       

      A stock
purchase right is a right to buy shares of our common stock.  The
administrator of the Plan determines the terms and conditions under which shares
of our common stock may be purchased pursuant to a stock purchase
right.  If you are granted a stock purchase right, we will generally
retain the right to repurchase the shares of common stock at their original
purchase price if your employment, director or consulting relationship is
terminated.  The administrator determines the schedule as to which a
repurchase right will lapse each year.

       

      What
Terms Apply to All Awards?

       

      Non-transferability of Options and
Stock Purchase Rights.  You generally may not transfer an award
granted to you under the Plan, other than by will or the laws of descent and
distribution, and generally only you may exercise an award granted to you during
your lifetime.

       

      Adjustment on Changes in
Capitalization.  If any change, such as a stock split, reverse
stock split, stock dividend, combination or reclassification is made in our
capitalization which results in an increase or decrease in the number of issued
shares of our common stock without our receipt of consideration, certain
adjustments will be made, including adjustments in the price of your option or
right to purchase stock, and in the number of shares subject to your option and
stock purchase right.

       

      Effect of our Dissolution or
Liquidation.  In the event of our proposed dissolution or
liquidation, the administrator of the Plan will notify you as soon as
practicable prior to such proposed action.  The administrator may
provide in its discretion for you to have the right to exercise your option
until ten (10) days prior to such transaction as to all stock subject to your
option, including shares to which your option would not otherwise be
exercisable.  To the extent you do not exercise your option, it will
terminate immediately prior to the consummation of the proposed
action.  In addition, the administrator may provide that any
repurchase option we have will lapse as to all of your unvested
shares.

       

       

      5

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Effect of our
Acquisition.  In the event of our merger with or into another
corporation, or the sale of substantially all of our assets, your outstanding
option or stock purchase right may be assumed or substituted for by the
successor corporation (or a parent or subsidiary of such successor
corporation).  If the successor corporation refuses to assume or
substitute for your outstanding option or stock purchase right, your option or
right will fully vest and become exercisable as to all shares subject to such
option or right, including shares which would not otherwise be vested or
exercisable.  If your option or stock purchase right becomes fully
vested and exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the administrator will notify you that your option or
right will terminate fifteen (15) days from such notice.

       

      Amendment and Termination.
Our board of directors may amend, alter, suspend or discontinue the Plan at any
time, but such amendment, alteration, suspension or discontinuation may not
adversely affect your outstanding option, stock purchase right or stock issuance
without your consent. In addition, we may need to obtain stockholder approval
for certain amendments to the Plan.

       

      Additional
Considerations for our “Affiliates”.

       

      Certain
of our officers and directors are considered our “affiliates”, as that term is
defined in Rule 144(a) under the Securities Act.  Affiliates may
resell shares of our common stock subject to the restrictions of Rule 144 or
pursuant to an effective registration statement.  Rule 144 requires
that resales by affiliates satisfy the following conditions:

       

      
        	
                ·  

              	
                the
      resale must be made through a broker in an unsolicited “broker's
      transaction” or in a direct transaction with a “market maker,” as those
      terms are defined under the Securities Exchange Act of 1934, as
      amended;

              

      

       

      
        	
                ·  

              	
                certain
      information about us must be publicly
available;

              

      

       

      
        	
                ·  

              	
                the
      amount of our common stock sold in any three-month period must not exceed
      the greater of:

              

      

       

      
        	
                ·  

              	
                one
      percent of the shares of our common stock outstanding as shown by our most
      recent published report or statement,
or

              

      

       

      
        	
                ·  

              	
                the
      average weekly reported volume of trading in our common stock on the
      Nasdaq National Market during the four calendar weeks preceding such sale;
      and,

              

      

       

      
        	
                ·  

              	
                if
      applicable, a Form 144 must be timely filed with the Securities and
      Exchange Commission.

              

      

       

      If the
resale is by an affiliate pursuant to a registration statement, it may not be
made in reliance on the registration statement on Form S-8 filed in connection
with the issuance of the shares described in this prospectus.

       

       

      6

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      TAX
AND ERISA INFORMATION

       

      The
following discussion is intended only as a summary of the general United States
income tax laws in effect as of May __, 2009 that apply to Awards granted under
the Plan and the sale of any Shares acquired through the
Awards.  However, the federal, state, and local tax consequences to
any particular taxpayer will depend upon your individual
circumstances.  Also, if you are not a United States taxpayer, the
taxing jurisdiction, or jurisdictions which apply to you will determine the tax
effect of your participation in the Plan.  Accordingly, the Company strongly advises you to seek the
advice of a qualified
tax advisor regarding
your participation in the Plan.

       

      What
are the tax effects of nonstatutory stock options and stock appreciation
rights?

       

      If you
are granted a nonstatutory stock option or a stock appreciation right (with an
exercise price at least equal to the fair market value of our common stock on
the date of grant, as required by the Plan), you are not required to recognize
income at the time of grant.  However, when you exercise the
nonstatutory stock option or stock appreciation right, you will recognize
ordinary income to the extent the value of the Shares on the date of exercise
(and any cash) you receive exceeds the exercise price you pay.  If you
exercise a nonstatutory stock option and pay the exercise price in Shares, or in
a combination of Shares and cash, you will have ordinary income upon exercise to
the extent that the value (on the date of exercise) of the Shares you purchase
is greater than the value of the Shares you surrender, less the amount of any
cash paid upon exercise.

       

      As a
result of Section 409A of the Code and the regulations and guidance promulgated
thereunder by the United States Department of Treasury or Internal Revenue
Service (“Section 409A”), however, nonstatutory stock options and stock
appreciation rights granted with an exercise price below the fair market value
of the underlying stock on the date of grant must have fixed exercise dates or
meet another exception permitted by Section 409A to avoid early income
recognition in the year of vesting and an additional twenty percent (20%) tax,
plus penalty and interest charges.  Certain states, have laws similar
to Section 409A and as a result, discount options may result in additional state
income, penalty and interest taxes.  If you are an employee, the
Company will be required to withhold from, and report to you and the federal
government on Form W-2, any such income.  We strongly encourage you to
consult your tax, financial, or other advisor regarding the tax treatment of
such Awards.

       

      Any gain
or loss you recognize upon the sale or exchange of Shares that you acquire
generally will be treated as capital gain or loss and will be long-term or
short-term depending on whether you held the Shares for more than one (1)
year.  The holding period for the Shares will begin just after the
time you recognize income (though it could potentially begin sooner if you are
taxed on the date of vesting with respect to discounted stock appreciation
rights and nonstatutory stock options, as described above).  The
amount of such gain or loss will be the difference between:

       

      
        	
                ·  

              	
                the
      amount you realize upon the sale or exchange of the Shares,
      and

              

      

       

      
        	
                ·  

              	
                the
      value of the Shares at the time you recognize ordinary
    income.

              

      

       

      What
are the tax effects of incentive stock options?

       

      Incentive
stock options are options that are intended to qualify for the special tax
treatment available under Section 422 of the Code.  You will
generally not recognize income as a result of the grant or exercise of incentive
stock options.  However, you will recognize gain at the time of sale
or other disposition of the Shares acquired upon exercise of your incentive
stock option.  Any gain generally will be taxed at long term capital
gain rates if you sell Shares that you purchased through the exercise of an
incentive stock option:

       

      
        	
                ·  

              	
                more
      than two (2) years after the date of grant of the incentive stock option,
      and

              

      

       

      
        	
                ·  

              	
                more
      than one (1) year after the date of exercise of the incentive stock
      option.

              

      

       

       

       

      7

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      However,
if you sell Shares purchased through the exercise of an incentive stock option
within either the two (2) year or one (1) year holding periods described above,
generally any gain up to the excess of the fair market value of the Shares on
the date of exercise over the exercise price will be treated as ordinary
income.  Any additional gain generally will be taxable at long-term or
short-term capital gain rates, depending on whether you have held the Shares for
more than one (1) year.

       

      If you
dispose of Shares that you purchased through the exercise of an incentive stock
option without meeting both of the above holding periods in a transaction in
which you would not recognize a loss (for example, a gift), the
excess of the value of the Shares on the exercise date over the exercise price
will be treated as ordinary income.

       

      Any loss
that you recognize upon disposition of Shares purchased through the exercise of
an incentive stock option, whether before or after expiration of the two (2)
year and one (1) year holding periods above, will be treated as a capital
loss.  That loss will be long-term or short-term depending on whether
you have held the Shares for more than one (1) year.

       

      What
about incentive stock options and the alternative minimum tax?

       

      If you
are subject to the alternative minimum tax, the rules that apply to incentive
stock options described above do not apply.  Instead, alternative
minimum taxable income generally is computed under the rules that apply to
nonstatutory stock options.  Accordingly, if you hold incentive stock
options and are subject to the alternative minimum tax, you should be sure to
consult your tax adviser before exercising any incentive stock
options.

       

      What
are the tax effects of restricted stock?

       

      Unless
you make an election under Section 83(b) of the Code, you will not
recognize taxable income at the time you receive an Award of restricted stock
under the Plan.  Instead, you will have ordinary income when (and if)
the Shares vest and no longer can be forfeited.  If you make a
Section 83(b) election within thirty (30) days of the grant of restricted
stock, you will recognize ordinary income at the time you receive the restricted
stock, without regard to the vesting provisions.  However, if you
later forfeit any unvested Shares, you will not be allowed a tax deduction with
respect to the forfeiture.  In all cases, the amount of ordinary
income that you recognize will equal the fair market value of the Shares at the
time you recognize income, less the amount (if any) you paid for the
Shares.

       

       

      8

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Any gain
or loss you recognize upon the sale or exchange of Shares that you acquire
through a grant of restricted stock generally will be treated as capital gain or
loss and will be long-term or short-term depending upon the holding period of
the Shares.

       

      What
are the tax effects of Awards for the Company?

       

      The
Company generally will receive a deduction for federal income tax purposes in
connection with an Award equal to the ordinary income the Participant realizes,
subject to Section 162(m) of the Code, which limits a public company’s tax
deduction for compensation paid to certain of its executives to $1,000,000 per
executive, except for certain types of compensation, including qualified
“performance-based” compensation.  

       

      Is
the Plan subject to ERISA?

       

      The Plan
is not subject to any of the provisions of the Employee Retirement Income
Security Act of 1974 (“ERISA”).

       

       

       

       

       

       

       

      
        
          
            9

          

           

        

        
           

          
            

          

        

        
           

        

      

       

      ADDITIONAL
CONSIDERATIONS APPLICABLE TO SECTION 16 INSIDERS

       

      If you
are a Section 16 Insider, you are advised to consult with our general
counsel and with your own personal advisor regarding reporting and liability
under Section 16 with respect to your transactions under the
Plan.

       

      INFORMATION
INCORPORATED BY REFERENCE

       

      The
following documents and information we previously filed with the Securities and
Exchange Commission are incorporated into this prospectus by
reference:

       

      1.      The
Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31,
2008, filed with the Commission on March 23, 2009.

      

      2.      The
Registrant’s Quarterly Report on Form 10-Q for the 3 month period ended March
31, 2009, filed with the Commission on May 13, 2005.

      

      3.  The
Registrants Current Reports on Form 8-K as filed with the SEC on December 31,
2008, February 5, 2009, February 27, 2009 and May 1, 2009.

       

      4.      The
Registrant’s Current Reports on Form 8-K/A filed on January 30, 2009;
and

      

      5.      The
description of the Company’s common stock, $0.0001 per value (the "Common
Stock"), set forth under the caption "Description of  Securities" in
the Company’s Current Report on Form 8-K filed December 31, 2008.

       

      All
documents we have filed pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Exchange Act of 1934, as amended, after the date of this prospectus and prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, will be deemed to be incorporated by reference in this prospectus and to
be part of this prospectus from the date of filing such documents.

       

       

       

       

       

      
        
          
            10

          

           

        

        
           

          
            

          

        

        
           

        

      

    

    CHINA
XD PLASTICS COMPANY LIMITED

     

    STOCK ISSUANCE
AGREEMENT

     

    AGREEMENT made as of this
        
day of                                 ,
            
by and between the Corporation, and                                 ,
Participant in the Plan.

     

    All
capitalized terms in this Agreement shall have the meaning assigned to them in
this Agreement or in the attached Appendix.

     

    
      
        	 
      	
                A.

              	
                PURCHASE OF
      SHARES

              

      

    

     

    1. Purchase.
Participant hereby purchases                                 
shares of Common Stock (the “Purchased Shares”) pursuant to the provisions of
the Stock Issuance Program of the Plan at the purchase price of $            
per share (the “Purchase Price”).

     

    2. Payment.
Concurrently with the delivery of this Agreement to the Corporation, Participant
shall pay the aggregate Purchase Price for all of the Purchased Shares in cash
or such other consideration allowable under the Plan and approved by the Plan
Administrator and shall deliver whatever additional documents may be required by
the Plan Administrator together with a duly-executed blank Assignment Separate
from Certificate (in the form attached hereto as Exhibit I) with respect to the
Purchased Shares.

     

    3. Stockholder
Rights. Until such time as the Corporation exercises the Repurchase Right
or the First Refusal Right, Participant (or any successor in interest) shall
have all stockholder rights (including voting, dividend and liquidation rights)
with respect to the Purchased Shares, subject, however, to the transfer
restrictions imposed by this Agreement.

     

    
      
        	 
      	
                B.

              	
                SECURITIES LAW
      COMPLIANCE

              

      

    

     

    1. Restricted
Securities. The Purchased Shares have not been registered under the 1933
Act and are being issued to Participant in reliance upon the exemption from such
registration provided by Section 4(2) of the 1933 Act or SEC Rule 504, 505, 506
or 701. Participant hereby confirms that Participant has been informed that the
Purchased Shares are restricted securities under the 1933 Act and may not be
resold or transferred unless the Purchased Shares are first registered under the
Federal securities laws or unless an exemption from such registration is
available. Accordingly, Participant hereby acknowledges that Participant is
acquiring the Purchased Shares for investment purposes only and not with a view
to resale and is prepared to hold the Purchased Shares for an indefinite period
and that Participant is aware that SEC Rule 144 issued under the 1933 Act which
exempts certain resales of unrestricted securities is not presently available to
exempt the resale of the Purchased Shares from the registration requirements of
the 1933 Act.

    

    2. Restrictions
on Disposition of Purchased Shares.

     

    (a)
Participant shall make no disposition of the Purchased Shares (other than a
Permitted Transfer) unless and until there is compliance with all of the
following requirements:

     

    (i)
Participant shall have provided the Corporation with a written summary of the
terms and conditions of the proposed disposition.

     

    (ii)
Participant shall have complied with all requirements of this Agreement
applicable to the disposition of the Purchased Shares.

     

    (iii)
Participant shall have provided the Corporation with written assurances, in form
and substance satisfactory to the Corporation, that (a) the proposed disposition
does not require registration of the Purchased Shares under the 1933 Act or (b)
all appropriate action necessary for compliance with the registration
requirements of the 1933 Act or any exemption from registration available under
the 1933 Act (including Rule 144) has been taken.

     

    (b) The
Corporation shall not
be required (i) to transfer on its books any Purchased Shares which have been
sold or transferred in violation of the provisions of this Agreement or (ii) to treat as the owner
of the Purchased Shares, or otherwise to accord voting, dividend or liquidation
rights to, any transferee to whom the Purchased Shares have been transferred in
contravention of this Agreement.

     

    1

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3. Restrictive
Legends. The stock certificates representing the Purchased Shares shall
be endorsed with one or more of the following restrictive legends:

     

    “The
shares represented by this certificate have not been registered under the
Securities Act of 1933. The shares may not be sold or offered for sale in the
absence of (a) an effective registration statement for the shares under such
Act, (b) a “no action” letter of the Securities and Exchange Commission with
respect to such sale or offer or (c) satisfactory assurances to the Corporation
that registration under such Act is not required with respect to such sale or
offer.”

     

    “The
shares represented by this certificate are subject to certain repurchase rights
and rights of first refusal granted to the Corporation and accordingly may not
be sold, assigned, transferred, encumbered, or in any manner disposed of except
in conformity with the terms of a written agreement dated                     ,
            ,
between the Corporation and the registered holder of the shares (or the
predecessor in interest to the shares). A copy of such agreement is maintained
at the Corporation’s principal corporate offices.”

     

    
      
        	 
      	
                C.

              	
                TRANSFER
      RESTRICTIONS

              

      

    

     

    1. Restriction
on Transfer. Except for any Permitted Transfer, (a) Participant shall not
transfer, assign, encumber or otherwise dispose of any of the Unvested Shares
and (b) Participant shall not transfer, assign, encumber or otherwise dispose of
any of the Vested Shares in contravention of the First Refusal Right, the Market
Stand-Off or the transfer restrictions set forth in Article B.

     

    2. Transferee
Obligations. Each person (other than the Corporation) to whom the
Purchased Shares are transferred by means of a Permitted Transfer must, as a
condition precedent to the validity of such transfer, acknowledge in writing to
the Corporation that such person is bound by the provisions of this Agreement
and that the transferred shares are subject to (a) the Repurchase Right, (b) the
First Refusal Right, (c) the Market Stand-Off and (d) the transfer restrictions
set forth in Article B, to the same extent such shares would be so subject if
retained by Participant.

     

    3. Market
Stand-Off.

     

    (a) In
connection with the Corporation’s initial public offering and any underwritten
public offering by the Corporation of its equity securities pursuant to an
effective registration statement filed under the 1933 Act within two years after
the effective date of the Corporation’s initial public offering, Owner shall not
sell, make any short sale of, hedge with, loan, hypothecate, pledge, grant any
option for the purchase of, or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions with respect to,
any Vested Shares without the prior written consent of the Corporation or its
underwriters (the “Market Stand-Off”). The Market Stand-Off shall be in effect
for such period of time from and after the effective date of the final
prospectus for the offering as may be requested by the Corporation or such
underwriters; provided,
however, that such period shall not exceed one hundred eighty
days.

     

    (b) Owner
shall be subject to the Market Stand-Off provided and only if the
officers and directors of the Corporation are also subject to similar
restrictions.

     

    (c) Any
new, substituted or additional securities that are by reason of any
Recapitalization or Reorganization distributed with respect to Vested Shares
shall be immediately subject to the Market Stand-Off.

     

    (d) In
order to enforce the Market Stand-Off, the Corporation may impose stop-transfer
instructions with respect to Vested Shares until the end of the applicable
stand-off period.

     

    
      
        	 
      	
                D.

              	
                REPURCHASE
      RIGHT

              

      

    

     

    1. Grant.
The Corporation shall have the right (the “Repurchase Right”) to repurchase, at
the Repurchase Price, any or all of the Purchased Shares which are Unvested
Shares at the time of his or her cessation of Service.

     

    2

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2. Exercise
of the Repurchase Right. The Repurchase Right shall be exercisable by
written notice delivered to each Owner of the Unvested Shares at any time during
the sixty-day period following the date Participant ceases for any reason to
remain in Service. The notice shall indicate the number of Unvested Shares to be
repurchased, the Repurchase Price to be paid per share, and the date on which
the repurchase is to be effected, such date to be not more than thirty days
after the date of such notice. The certificates representing the Unvested Shares
to be repurchased shall be delivered to the Corporation on the closing date
specified for the repurchase. Concurrently with the receipt of such stock
certificates, the Corporation shall pay to Owner, in cash or cash equivalents
(including the cancellation of any purchase-money indebtedness), an amount equal
to the aggregate Repurchase Price for the Unvested Shares which are to be
repurchased from Owner.

     

    3. Termination
of the Repurchase Right. The Repurchase Right shall terminate with
respect to any Unvested Shares for which it is not timely exercised under
Paragraph D.2. In addition, the Repurchase Right shall terminate and cease to be
exercisable with respect to any and all Purchased Shares in which Participant
vests in accordance with the following Vesting Schedule:

     

    (a)
Participant shall vest in 25% of the Purchased Shares, and the Repurchase Right
shall concurrently lapse with respect to those Purchased Shares, upon
Participant’s completion of one year of Service measured from                                 ,
            .

     

    (b)
Participant shall vest in the remaining 75% of the Purchased Shares, and the
Repurchase Right shall concurrently lapse with respect to those Purchased
Shares, in a series of thirty-six successive equal monthly installments upon
Participant’s completion of each additional month of Service over the
thirty-six-month period measured from the date on which the first 25% of the
Purchased Shares vests hereunder.

     

    All
Vested Shares shall, however, be subject to (i) the First Refusal Right, (ii)
the Market Stand-Off and (iii) the transfer restrictions set forth in Article
B.

     

    4. Recapitalization.
Any new, substituted or additional securities or other property (including cash
paid other than as a regular cash dividend) which is by reason of any
Recapitalization distributed with respect to the Unvested Shares shall be
immediately subject to the Repurchase Right and any escrow requirements
hereunder. Appropriate adjustments to reflect such distribution shall be made to
the number and/or class of Unvested Shares subject to this Agreement. In
addition, for purposes of determining the Repurchase Price, appropriate
adjustments shall be made to the Purchase Price in order to reflect the effect
of any such Recapitalization upon the Corporation’s capital structure; provided, however, that the
aggregate Purchase Price shall remain the same.

     

    5. Change in
Control.

     

    (a) The
Repurchase Right shall automatically terminate in its entirety, and all Unvested
Shares shall become Vested Shares, upon the consummation of a Change in Control,
except to the extent (i) the Repurchase Right is to be assigned to the successor
entity (or its parent) or is to be otherwise continued in effect pursuant to the
terms of the Change in Control transaction or (ii) the property (including cash
payments) issued with respect to Unvested Shares is to be held in escrow and
released in accordance with the Vesting Schedule in effect for the Unvested
Shares pursuant to the terms of the Change in Control transaction.

     

    (b) To
the extent the Repurchase Right remains in effect following a Change in Control,
such right shall apply to any new securities or other property (including any
cash payments) received in exchange for the Unvested Shares in consummation of
the Change in Control. For purposes of determining the Repurchase Price,
appropriate adjustments shall be made to the Purchase Price to reflect the
effect (if any) of the Change in Control upon the Corporation’s capital
structure; provided,
however, that the aggregate Purchase Price shall remain the same. The new
securities or other property (including any cash payments) issued or distributed
with respect to the Unvested Shares in consummation of the Change in Control
shall be immediately deposited in escrow with the Corporation (or the successor
entity) and shall not be released from escrow until Participant vests in such
securities or other property in accordance with the Vesting
Schedule.

     

    
      
        	 
      	
                E.

              	
                RIGHT OF FIRST
      REFUSAL

              

      

    

     

    1. Grant.
The Corporation shall have the right of first refusal (the “First Refusal
Right”) exercisable in connection with any proposed transfer of Vested Shares.
For purposes of this Article E, the term “transfer” shall include any sale,
assignment, pledge, encumbrance or other disposition of Vested Shares intended
to be made by Owner, but shall not include any Permitted Transfer.

     

    3

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2. Notice of
Intended Disposition. In the event any Owner of Vested Shares desires to
accept a bona fide third-party offer for the transfer of any or all of such
shares (Vested Shares subject to such offer to be hereinafter referred to as the
“Target Shares”), Owner shall promptly (a) deliver to the Corporation written
notice (the “Disposition Notice”) of the terms of the offer, including the
purchase price and the identity of the third-party offeror, and (b) provide
satisfactory proof that the disposition of the Target Shares to such third-party
offeror would not be in contravention of the provisions set forth in Articles B
and C.

     

    3. Exercise
of the First Refusal Right.

     

    (a) The
Corporation shall have the right to repurchase any or all of the Target Shares
subject to the Disposition Notice upon the same terms as those specified therein
or upon such other terms (not materially different from those specified in the
Disposition Notice) to which Owner consents. Such right shall be exercisable by
delivery of written notice (the “Exercise Notice”) to Owner prior to the
twenty-fifth day following the Corporation’s receipt of the Disposition Notice.
If such right is exercised with respect to all the Target Shares, then the
Corporation shall effect the repurchase of such shares, including payment of the
aggregate purchase price, not more than five business days after delivery of the
Exercise Notice; and at such time the certificates representing the Target
Shares shall be delivered to the Corporation.

     

    (b)
Should the purchase price specified in the Disposition Notice be payable in
property other than cash or evidences of indebtedness, the Corporation shall
have the right to pay the purchase price in the form of cash equal in amount to
the value of such property. If Owner and the Corporation cannot agree on such
cash value within ten days after the Corporation’s receipt of the Disposition
Notice, the valuation shall be made by an appraiser of recognized standing
selected by Owner and the Corporation or, if they cannot agree on an appraiser
within twenty days after the Corporation’s receipt of the Disposition Notice,
each shall select an appraiser of recognized standing and the two appraisers
shall designate a third appraiser of recognized standing, whose appraisal shall
be determinative of such value. Owner and the Corporation shall share the cost
of such appraisal equally. The closing shall then be held on the later of (i) the fifth
business day following delivery of the Exercise Notice or (ii) the fifth
business day after such valuation shall have been made.

     

    4. Non-Exercise
of the First Refusal Right. In the event the Exercise Notice is not given
to Owner prior to the expiration of the twenty-five-day exercise period, Owner
shall have a period of thirty days thereafter in which to sell or otherwise
dispose of the Target Shares to the third-party offeror identified in the
Disposition Notice upon terms (including the purchase price) no more favorable
to such third-party offeror than those specified in the Disposition Notice;
provided, however, that
any such sale or disposition must not be effected in contravention of the
provisions of Articles B and C. The third-party offeror shall acquire the Target
Shares subject to the First Refusal Right and the provisions and restrictions of
Article B and Paragraph C.3, and any subsequent disposition of the acquired
shares must be effected in compliance with the terms and conditions of such
First Refusal Right and the provisions and restrictions of Article B and
Paragraph C.3. In the event Owner does not effect such sale or disposition of
the Target Shares within the specified thirty-day period, the First Refusal
Right shall continue to be applicable to any subsequent disposition of the
Target Shares by Owner until such right lapses.

     

    5. Partial
Exercise of the First Refusal Right. In the event the Corporation makes a
timely exercise of the First Refusal Right with respect to a portion, but not
all, of the Target Shares specified in the Disposition Notice, Owner shall have
the option, exercisable by written notice to the Corporation delivered within
five business days after Owner’s receipt of the Exercise Notice, to effect the
sale of the Target Shares pursuant to either of the following
alternatives:

     

    (a) sale
or other disposition of some or all the Target Shares to the third-party offeror
identified in the Disposition Notice, but in full compliance with the
requirements of Paragraph E.4, as if the Corporation did not exercise the First
Refusal Right; or

     

    (b) sale
to the Corporation of the portion of the Target Shares which the Corporation has
elected to purchase, such sale to be effected in substantial conformity with the
provisions of Paragraph E.3. The First Refusal Right shall continue to be
applicable to any subsequent disposition of the remaining Target Shares until
such right lapses.

     

    4

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Owner’s
failure to deliver timely notification to the Corporation shall be deemed to be
an election by Owner to sell the Target Shares pursuant to alternative (a)
above.

     

    6. Recapitalization/Reorganization.

     

    (a) Any
new, substituted or additional securities or other property that is by reason of
any Recapitalization distributed with respect to Vested Shares shall be
immediately subject to the First Refusal Right.

     

    (b) In
the event of a Reorganization, the First Refusal Right shall remain in full
force and effect and shall apply to the new capital stock or other property
received in exchange for Vested Shares in consummation of the Reorganization and
shall apply to the remaining Unvested Shares as and when they become Vested
Shares.

     

    7. Lapse.
The First Refusal Right shall lapse upon the earlier to occur of (a) a
firm commitment underwritten public offering, pursuant to an effective
registration statement under the 1933 Act, covering the offer and sale of the
Common Stock in the aggregate amount of at least $20,000,000 or (b) the
acquisition of the Corporation by an entity that is traded on a stock exchange
or the Nasdaq Stock Market. However, the Market Stand-Off shall continue to
remain in full force and effect following the lapse of the First Refusal Right,
in the case of a transaction described in (a) above.

     

    
      
        	 
      	
                F.

              	
                SPECIAL TAX
      ELECTION

              

      

    

     

    Under
Code Section 83, the excess of the Fair Market Value of the Purchased Shares on
the date any forfeiture restrictions applicable to such shares lapse over the
Purchase Price paid for those shares will be reportable as ordinary income on
the lapse date. For this purpose, the term “forfeiture restrictions” includes
the right of the Corporation to repurchase the Purchased Shares pursuant to the
Repurchase Right. Participant may elect under Code Section 83(b) to be taxed at
the time the Purchased Shares are acquired, rather than when and as such
Purchased Shares cease to be subject to such forfeiture restrictions. Such
election must be filed with the Internal Revenue Service within thirty days
after the date of this Agreement. Participant
should consult with his or her tax advisor to determine the tax consequences of
acquiring the Purchased Shares and the advantages and disadvantages of filing
the Code Section 83(b) election. Even if the Fair Market Value of the
Purchased Shares on the date of this Agreement equals the Purchase Price paid
(and thus no tax is payable), the election must be made to avoid potentially
adverse tax consequences in the future. The form for
making this election is attached as Exhibit II hereto. Participant understands
that failure to make this filing within the applicable thirty-day period will
result in the recognition of ordinary income as the forfeiture restrictions
lapse. Participant acknowledges that it is Participant’s sole responsibility,
and not the Corporation’s responsibility, to file a timely election under Code
Section 83(b), even if Participant requests the Corporation or its
representatives to make this filing on his or her behalf.

     

    
      
        	 
      	
                G.

              	
                GENERAL
      PROVISIONS

              

      

    

     

    1. Assignment.
The Corporation may assign the Repurchase Right and/or the First Refusal Right
to any person or entity selected by the Plan Administrator, including (without
limitation) one or more stockholders of the Corporation.

     

    2. At Will
Employment. Nothing in this Agreement or in the Plan shall confer upon
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining Participant) or of
Participant, which rights are hereby expressly reserved by each, to terminate
Participant’s Service at any time for any reason, with or without
cause.

     

    3. Notices.
Any notice required to be given under this Agreement shall be in writing and
shall be deemed effective upon personal delivery or on the third day following
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party’s signature line on this Agreement or at such other address as such
party may designate by ten days advance written notice under this paragraph to
all other parties to this Agreement.

     

    5

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4. No
Waiver. The failure of the Corporation in any instance to exercise the
Repurchase Right or the First Refusal Right shall not constitute a waiver of any
other repurchase rights and/or rights of first refusal that may subsequently
arise under the provisions of this Agreement or any other agreement between the
Corporation and Participant. No waiver of any breach or condition of this
Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.

     

    5. Cancellation
of Shares. If the Corporation shall make available, at the time and place
and in the amount and form provided in this Agreement, the consideration for the
Purchased Shares to be repurchased in accordance with the provisions of this
Agreement, then from and after such time, the person from whom such shares are
to be repurchased shall no longer have any rights as a holder of such shares
(other than the right to receive payment of such consideration in accordance
with this Agreement). Such shares shall be deemed purchased in accordance with
the applicable provisions hereof, and the Corporation shall be deemed the owner
and holder of such shares, whether or not the certificates therefor have been
delivered as required by this Agreement.

     

    6. Governing
Law. The interpretation, performance and enforcement of this Agreement
shall be governed by the laws of the State of New York without giving effect to
that State’s choice of law or conflict-of-laws rules.

     

    7. Participant
Undertaking. Participant hereby agrees to take whatever additional action
and execute whatever additional documents the Corporation may deem necessary or
advisable in order to carry out or effect one or more of the obligations or
restrictions imposed on either Participant or the Purchased Shares pursuant to
the provisions of this Agreement.

     

    8. Construction.
The Plan is incorporated herein by reference. In the event of a conflict between
the terms of the Plan and the terms of this Agreement, the terms of this
Agreement shall prevail. All decisions of the Plan Administrator with respect to
any question or issue arising under the Plan or this Agreement shall be
conclusive and binding on all persons having an interest in the Purchased
Shares.

     

    9. Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed to
be an original, but all of which together shall constitute one and the same
instrument.

     

    10. Successors
and Assigns. The provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and upon
Participant, Participant’s permitted assigns and the legal representatives,
heirs and legatees of Participant’s estate, whether or not any such person shall
have become a party to this Agreement and have agreed in writing to join herein
and be bound by the terms hereof.

     

    IN WITNESS WHEREOF, the
parties have executed this Agreement on the day and year first indicated
above.

     

    
      
        
          
            
              
                
                  
                    
                      
                        	 
      	 
      	 
      
	
                                                                                                                          
      CHINA XD PLASTICS COMPANY LIMITED

                              
	 
      	 
      
	
                                 

                              	 
      By:	 
      
	 
      	 
      
	
                                 

                              	 
      Name:	 
      
	 
      	 
      
	
                                 

                              	Title:	 
      
	 
      	 
      
	
                                 

                              	 Address	 
      
	 
      	 
      
	 
      	 
      	 
      
	 
      
	
                                                                                                                            PARTICIPANT

                              
	 
      	 
      
	
                                 

                              	Signature:	 
      
	 
      	 
      
	
                                 

                              	Printed
      Name:	 
      
	 
      	 
      
	
                                 

                              	Address:	 
      
	 
      	 
      
	 
      	 
      	 
      

                      

                    

                  

                

              

            

          

        

      

    

     

     

     

    6

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SPOUSAL
ACKNOWLEDGMENT

     

    The
undersigned spouse of Participant has read and hereby approves the foregoing
Stock Issuance Agreement. In consideration of the Corporation’s granting
Participant the right to acquire the Purchased Shares in accordance with the
terms of such Agreement, the undersigned hereby agrees to be irrevocably bound
by all the terms of such Agreement, including (without limitation) the right of
the Corporation (or its assigns) to purchase any Purchased Shares in which
Participant is not vested at the time of his or her cessation of
Service.

     

    
      
        
          
            
              
                
                  	 
      	 
      	 
      
	                                                  
        PARTICIPANT'S SPOUSE
	 
      
	
                           

                        
	 
      	 Address:
	
                           

                        	
                           

                           

                        	 
      
	 
      
	 
      

                

              

            

          

        

      

    

     

     

     

     

     

     

     

     

    7

    
 

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
I

     

    ASSIGNMENT
SEPARATE FROM CERTIFICATE

     

    FOR VALUE RECEIVED                                 
hereby sell(s), assign(s) and transfer(s) unto China XD Plastics Company Limited
or its successors or assigns (the “Corporation”),                                 
(            )
shares of the Common Stock of the Corporation standing in his or her name on the
books of the Corporation represented by Certificate No.                                 
herewith and do(es) hereby irrevocably constitute and appoint                                 
as Attorney to transfer the said stock on the books of the Corporation with full
power of substitution in the premises.

     

    Dated:

     

    
      
        	 
      	 
      	 
      
	 
      	 
      
	
                 

              	 
      Signature    	 
      

      

    

     

    Instruction: Please do not
fill in any blanks other than the signature line. Please sign exactly as you
would like your name to appear on the issued stock certificate. The purpose of
this assignment is to enable the Corporation to exercise the Repurchase Right
without requiring additional signatures on the part of Participant.

     

     

     

     

     

     

     

     

     

    1

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
II

     

    SECTION
83(b) TAX ELECTION

     

    This
statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treasury Regulation Section 1.83-2.

     

    
      	
              (1)

            	
              The
      taxpayer who performed the services
is:

            

    

     

    Name:

    Address:

    Taxpayer
Ident. No.:

     

    
      	
              (2)

            	
              The
      property with respect to which the election is being made is
      ______________ shares of the common stock of China XD Plastics Company
      Limited

            

    

     

    
      
        	
                (3)

              	
                The
      property was issued on                                 ,
                  .

              

      

    

     

    
      
        	
                (4)

              	
                The
      taxable year in which the election is being made is the calendar year
                  .

              

      

    

     

    
      
        	
                (5)

              	
                The
      property is subject to a repurchase right pursuant to which the issuer has
      the right to acquire the property, at the lower of the original purchase
      price per share or the fair market value per share, if for any reason
      taxpayer’s service with the issuer terminates. The issuer’s repurchase
      right will lapse in a series of annual and monthly installments over a
      four-year period ending on                                 ,
                  .

              

      

    

     

    
      
        	
                (6)

              	
                The
      fair market value at the time of transfer (determined without regard to
      any restriction other than a restriction which by its terms will never
      lapse) is $             per share.

              

      

    

     

    
      
        	
                (7)

              	
                The
      amount paid for such property is $            
      per share.

              

      

    

     

    
      	
              (8)

            	
              A
      copy of this statement was furnished to China XD Plastics Company Limited
      for whom taxpayer rendered the services underlying the transfer of
      property.

            

    

     

    
      
        	
                (9)

              	
                This
      statement is executed on                                 ,
                  .

              

      

    

     

    
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
              Spouse
      (if any)

            	 
      	 
      	 
      	
              Taxpayer

            

    

     

    This
election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her federal income tax returns and must be made within
thirty days after the execution date of the Stock Issuance Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Participant must retain two copies of the completed form for filing with his or
her federal and state tax returns for the current tax year and an additional
copy for his or her records.

     

     

    1

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

     

    EXHIBIT
III

     

    2009
STOCK OPTION/STOCK ISSUANCE PLAN

     

    APPENDIX

     

    The
following definitions shall be in effect under the Agreement:

     

    A. Agreement
shall mean this Stock Issuance Agreement.

     

    B. Board
shall mean the Corporation’s Board of Directors.

     

    C. Change in
Control shall mean a change in ownership or control of the Corporation
effected through any of the following transactions:

     

    (i) a
stockholder-approved merger, consolidation or other reorganization in which
securities representing more than 50% of the total combined voting power of the
Corporation’s outstanding securities are beneficially owned, directly or
indirectly, by a person or persons different from the person or persons who
beneficially owned those securities immediately prior to such
transaction;

     

    (ii) a
stockholder-approved sale, transfer or other disposition of all or substantially
all of the Corporation’s assets; or

     

    (iii) the
acquisition, directly or indirectly, by any person or related group of persons
(other than the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation), of beneficial
ownership (within the meaning of Rule 13-d3 of the 1934 Act) of securities
possessing more than 50% of the total combined voting power of the Corporation’s
outstanding securities from a person or persons other than the
Corporation.

     

    In no
event shall any public offering of the Corporation’s securities be deemed to
constitute a Change in Control. In no event shall a merger of the Corporation’s
Parent with the Corporation constitute a Change in Control.

     

    D. Code
shall mean the Internal Revenue Code of 1986, as amended.

     

    E. Common
Stock shall mean the common stock of the Corporation.

     

    F. Corporation
shall mean China XD Plastics Company Limited, a Nevada corporation, or any
successor to the voting stock or all or substantially all of the assets of China
XD Plastics Company Limited which has assumed some or all of the rights of China
XD Plastics Company Limited under this Agreement.

     

    G. Disposition
Notice shall have the meaning assigned to such term in Paragraph
E.2.

     

    H. Exercise
Notice shall have the meaning assigned to such term in Paragraph
E.3.

     

    I. Fair
Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:

     

    (i) If
the Common Stock is at the time listed on the Nasdaq Stock Market, then the Fair
Market Value shall be the closing selling price per share of Common Stock on the
date in question, as such price is reported by the National Association of
Securities Dealers on the Nasdaq Stock Market and published in The Wall Street Journal. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

     

     (ii)
If the Common Stock is at the time listed on any stock exchange, then the Fair
Market Value shall be the closing selling price per share of Common Stock on the
date in question on the stock exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is officially quoted
in the composite tape of transactions on such exchange and published in The Wall Street Journal. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

     

    1

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (iii) If
the Common Stock is at the time neither listed on any stock exchange or the
Nasdaq Stock Market, then the Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan Administrator
shall deem appropriate.

     

    J. First
Refusal Right shall mean the right granted to the Corporation in
accordance with Article E.

     

    K. Market
Stand-Off shall mean the market stand-off restriction specified in
Paragraph C.4.

     

    L. 1933
Act shall mean the Securities Act of 1933, as amended.

     

    M. Owner
shall mean Participant and all subsequent holders of the Purchased Shares who
derive their chain of ownership through a Permitted Transfer from
Participant.

     

    N. Parent
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation, provided each corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such
chain.

     

    O. Participant
shall mean the person identified in the introductory paragraph of this Agreement
to whom shares are issued under the Stock Issuance Program.

     

    P. Permitted
Transfer shall mean (i) a transfer of the Purchased Shares to one or more
members of Participant’s family (as defined in Rule 701 promulgated by the SEC)
or to a trust established for the benefit of one or more family members or to
Participant’s former spouse pursuant to a domestic relations order, (ii) a
transfer of title to the Purchased Shares effected pursuant to Participant’s
will or the laws of inheritance following Participant’s death or (iii) a
transfer to the Corporation in pledge as security for any purchase-money
indebtedness incurred by Participant in connection with the acquisition of the
Purchased Shares.

     

    Q. Plan
shall mean the China XD Plastics Company Limited 2009 Stock Option/Stock
Issuance Plan attached hereto as Exhibit III.

     

    R. Plan
Administrator shall mean either the Board or a committee of the Board
acting in its capacity as administrator of the Plan.

     

    S. Purchase
Price shall have the meaning assigned to such term in Paragraph
A.1.

     

    T. Purchased
Shares shall have the meaning assigned to such term in Paragraph
A.1.

     

    U. Recapitalization
shall mean any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the Corporation’s
outstanding Common Stock as a class without the Corporation’s receipt of
consideration.

     

    V. Reorganization
shall mean any of the following transactions:

     

    (i) a
merger or consolidation in which the Corporation is not the surviving
entity;

     

    (ii) a
sale, transfer or other disposition of all or substantially all of the
Corporation’s assets;

     

    (iii) a
reverse merger in which the Corporation is the surviving entity but in which the
Corporation’s outstanding voting securities are transferred in whole or in part
to a person or persons different from the persons holding those securities
immediately prior to the merger; or

     

    (iv) any
transaction effected primarily to change the state in which the Corporation is
incorporated or to create a holding company structure.

     

    W. Repurchase
Price shall mean the lower of (i) the Purchase
Price per share or (ii) the Fair Market Value per share of Common Stock on the
date Participant’s Service ceases.

     

    X. Repurchase
Right shall mean the right granted to the Corporation in accordance with
Article D.

     

    Y. SEC
shall mean the Securities and Exchange Commission.

     

    2

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Z. Service
shall mean the Participant’s performance of services for the Corporation (or any
Parent or Subsidiary) in the capacity of an employee, subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance, a member of the board of directors or an
independent contractor.

     

    AA. Stock
Issuance Program shall mean the Stock Issuance Program under the
Plan.

     

    BB. Subsidiary
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation, provided each corporation (other
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such
chain.

     

    CC. Target
Shares shall have the meaning assigned to such term in Paragraph
E.2.

     

    DD. Unvested
Shares shall mean the Purchased Shares which have not vested in
accordance with the Vesting Schedule applicable to those shares or any special
vesting acceleration provisions and which are subject to the Repurchase
Right.

     

    EE. Vested
Shares shall mean the Purchased Shares which have vested in accordance
with the Vesting Schedule applicable to those shares or any special vesting
acceleration provisions and which are no longer subject to the Repurchase
Right.

     

    FF. Vesting
Schedule shall mean the vesting schedule specified in Paragraph
D.3.

     

     

     

     

     

    3

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00159-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00159-of-00352.parquet"}]]