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FORM F-1
ZTO Express (Cayman) Inc. - ZTO
Filed: September 30, 2016 (period: )
Registration statement for certain foreign private issuers
The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user
assumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot be
limited or excluded by applicable law. Past financial performance is no guarantee of future results.
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TABLE OF CONTENTS
ZTO EXPRESS (CAYMAN) INC. INDEX TO FINANCIAL STATEMENTS
Table of Contents
As filed with the Securities and Exchange Commission on September 30, 2016
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ZTO Express (Cayman) Inc.

(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant's name into English)
Cayman Islands
(State or other jurisdiction of
incorporation or organization)
4210
(Primary Standard Industrial
Classification Code Number)
Not Applicable
(I.R.S. Employer
Identification Number)
Building One, No. 1685 Huazhi Road, Qingpu District

Shanghai, 201708
People's Republic of China
+86 21 5980-4508
(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)
Law Debenture Corporate Services
4th Floor, 400 Madison Avenue
New York, New York 10017
(212) 750-6474
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Z. Julie Gao, Esq.
Haiping Li, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
c/o 42/F, Edinburgh Tower, The Landmark
15 Queen's Road Central
Hong Kong
+852 3740-4700
David Zhang, Esq.

Benjamin Su, Esq.
Steve Lin, Esq.
Kirkland & Ellis International LLP
c/o 26/F, Gloucester Tower, The Landmark
15 Queen's Road Central
Hong Kong
+852 3761-3300
Approximate date of commencement of proposed sale to the public:

as soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
Source: ZTO Express (Cayman) Inc., F-1, September 30, 2016
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
CALCULATION OF REGISTRATION FEE
Title of each class of securities

to be registered
Class A Ordinary Shares, par value $0.0001 per share(1)
Proposed maximum
aggregate offering
price(2)(3)
Amount of
registration fee
$1,500,000,000
$151,050
(1)
American depositary shares issuable upon deposit of Class A ordinary shares registered hereby will be registered under a separate registration statement on Form F-6 (Registration No. 333Each American depositary share represents
Class A ordinary shares.
).
(2)
Includes Class A ordinary shares that are issuable upon the exercise of the underwriters' over-allotment option. Also includes Class A ordinary shares initially offered and sold outside the United States
that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are
first bona fide offered to the public. These Class A ordinary shares are not being registered for the purpose of sales outside the United States.
(3)
Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(o) under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers
to buy these securities in any state where the offer or sale is not permitted.
PROSPECTUS (Subject to Completion)

Issued
, 2016.
American Depositary Shares

Representing
Class A Ordinary Shares
ZTO Express (Cayman) Inc. is offering

American depositary shares, or ADSs. This is our initial public offering and no public market currently
exists for our ADSs or ordinary shares. Each ADS represents
of our Class A ordinary shares, par value $0.0001 per share. It is currently
estimated that the initial public offering price per ADS will be between $
and $
.
We intend to apply and have our ADSs listed on the New York Stock Exchange under the symbol "ZTO."
We are an "emerging growth company" under applicable U.S. federal securities laws and are eligible for reduced public company reporting requirements.
Investing in our ADSs involves risks. See "Risk Factors" beginning on page 15.
PRICE $
PER ADS
Price to Public
Per ADS
Total
(1)
$
$
Underwriting
Discounts and
Commissions(1)
$
$
Proceeds to Us
$
$
See "Underwriting" for additional disclosure regarding underwriting compensation payable by us.
We have granted the underwriters the right to purchase up to an additional
ADSs to cover over-allotments.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Subject to the approval of our existing shareholders, immediately prior to the completion of this offering, our outstanding share capital will consist of
Class A ordinary shares and Class B ordinary shares. Mr. Meisong Lai, our founder, chairman of the board of directors and chief executive officer, will
beneficially own all of our issued Class B ordinary shares. These Class B ordinary shares will constitute approximately
% of our total issued and
outstanding share capital immediately after the completion of this offering and
% of the aggregate voting power of our total issued and outstanding
share capital immediately after the completion of this offering, assuming the underwriters do not exercise their over-allotment option. Holders of Class A
ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. Each Class A ordinary share is entitled to one
vote, and each Class B ordinary share is entitled to ten votes and is convertible into one Class A ordinary share at any time by the holder thereof. Class A
ordinary shares are not convertible into Class B ordinary shares under any circumstances.
The underwriters expect to deliver the ADSs to purchasers on
, 2016.
MORGAN STANLEY
CHINA RENAISSANCE
GOLDMAN SACHS (ASIA) L.L.C.

CITIGROUP
CREDIT SUISSE
J.P. MORGAN
(in alphabetical order)

, 2016.
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TABLE OF CONTENTS
Prospectus Summary
The Offering
Summary Consolidated Financial Data
Risk Factors
Special Note Regarding Forward-Looking Statements
Use of Proceeds
Dividend Policy
Capitalization
Dilution
Exchange Rate Information
Enforceability of Civil Liabilities
Corporate History and Structure
Selected Consolidated Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Industry
Business
Regulation
Management
Principal Shareholders
Related Party Transactions
Description of Share Capital
Description of American Depositary Shares
Shares Eligible for Future Sales
Taxation
Underwriting
Expenses Related to this Offering
Legal Matters
Experts
Where You Can Find Additional Information
Index to Consolidated Financial Statements
1
8
11
15
55
56
57
58
60
62
63
65
70
73
103
110
128
140
148
151
154
164
177
179
186
196
197
198
199
F-1
You should rely only on the information contained in this prospectus or in any related free-writing prospectus. We have not authorized anyone to
provide you with information different from that contained in this prospectus or in any related free writing prospectus. We are offering to sell, and seeking
offers to buy the ADSs, only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date
of this prospectus, regardless of the time of delivery of this prospectus or any sale of the ADSs.
We have not taken any action to permit a public offering of the ADSs outside the United States or to permit the possession or distribution of this
prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and
observe any restrictions relating to the offering of the ADSs and the distribution of the prospectus outside the United States.
Until
, 2016 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade ADSs, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
i
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial
statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the
risks of investing in our ADSs discussed under "Risk Factors," before deciding whether to invest in our ADSs. This prospectus contains information
from an industry report commissioned by us and prepared by iResearch Consulting Group, or iResearch, an independent research firm, to provide
information regarding our industry and our market position in China. We refer to this report as the iResearch Report.
Our Mission
Our mission is to bring happiness to more people through our services. We strive to provide timely and reliable express delivery services to
consumers, create jobs for employees and delivery personnel in the ZTO network, promote entrepreneurship among our business partners, and
ultimately help ordinary people accomplish their goals.
Our Business
We are a leading express delivery company in China and one of the largest express delivery companies globally, in terms of total parcel volume in
2015, according to the iResearch Report. We have demonstrated the fastest growth rate among the top five Chinese express delivery companies as of
December 31, 2015, with our annual parcel volume growing at a compounded annual growth rate, or CAGR, of 80.3% between 2011 and 2015, during
which we recorded consecutive annual increases in market share. See "BusinessBusiness Overview" for more information on our annual parcel
volume in each year between 2011 and 2015. We have achieved superior profitability along with our rapid growth. Our operating margin, which is the
ratio of our income from operations to revenues, in 2015 was 25.1%, which was one of the highest among the major publicly listed logistics companies
globally.
We provide express delivery service through our nationwide network as well as other value-added logistics services. We have developed one of
the most extensive and reliable delivery networks in China covering over 96% of China's cities and counties as of June 30, 2016. China's rapidly
expanding e-commerce market, which reached US$609 billion in terms of total retail GMV in 2015 according to the iResearch Report, has created
strong demand for our services. We are both a key enabler and a direct beneficiary of China's fast-growing e-commerce market. We have established
ourselves as one of the largest express delivery service providers for millions of online merchants and consumers transacting on leading Chinese ecommerce platforms, such as Alibaba and JD.com. Globally, we provide delivery services in key overseas markets through our business partners, while
we are expanding our coverage in international express delivery through collaborations with international industry players.
We operate a highly scalable network partner model, which we believe is best suited to support the significant growth of e-commerce in China. We
leverage our network partners to provide pickup and last-mile delivery services, while we control the mission-critical line-haul transportation and
sorting network within the express delivery service value chain. The network partner model is developed to reach and serve the Chinese e-commerce
industry's fragmented and geographically dispersed merchant and consumer base and seasonal demand. It allows us to achieve strong operating
leverage through minimizing fixed costs and capital requirements, consequently driving higher return on invested capital and equity.
We have established a distinctive "shared success" system, which enables us to align the interests of our network partners, management and
employees with ours through a reward and risk sharing mechanism. This shared success system incentivizes our network partners to maximize their
growth and profitability and strengthens their loyalty to our ZTO brand and business. The general managers of our key regions collectively hold a
significant equity stake in our company, and we believe this initiative incentivizes our key stakeholders and further ensures the stability of our
network. In addition, our innovative, entrepreneurial approach has led to a number of industry firsts. We were first in the industry to introduce a
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fee sharing mechanism in which the pickup and delivery outlets share the delivery service fees of each delivery order. We also foster an effective and
transparent system that enables our network partners to exit our network by transferring their business to buyers approved by us and benefit from any
value appreciation of their business through such transfers. We facilitate those transfers by providing information and guidance on valuation of the
transferred business with participation by both sides.
Operational efficiency and cost management are critical to the success of an express delivery business. We have achieved strong operational
efficiency through centralized control and management of 74 sorting hubs and a fleet of over 3,300 trucks, route planning and optimization, as well as
our proprietary waybill tracking system and transportation management system. Our operational efficiency and economies of scale have resulted in our
cost leadership with unit cost per parcel.
We strive to maintain high quality service and customer satisfaction. We have established proven systems and procedures which have been critical
in achieving service standardization and control over the quality of services rendered by us and our network partners. We constantly monitor a series of
key service quality indicators such as delivery delay rate, complaint rate and damaged parcel rate and have improved each of these measures over the
past three years. Our superior service quality is reflected by rankings published by authoritative institutions. For example, we ranked top three in the
express deliveries user satisfaction survey for 2015 conducted by the State Post Bureau of China.
We have achieved significant growth and profitability. Our total parcel volume increased from 279 million in 2011 to 2,946 million in 2015 and
from 1,185 million in the six months ended June 30, 2015 to 1,913 million in the same period in 2016. Our total parcel volume in July and
August 2016 was 697.9 million. Our revenues increased from RMB3.9 billion in 2014 to RMB6.1 billion (US$915.8 million) in 2015 and from
RMB2.5 billion in the six months ended June 30, 2015 to RMB4.2 billion (US$638.8 million) in the same period in 2016. We generated operating
profit of RMB600.3 million and RMB1.5 billion (US$230.1 million) and our operating profit margin was 15.4% and 25.1% in 2014 and 2015,
respectively. We generated operating profit of RMB579.9 million and RMB1.1 billion (US$159.0 million) and our operating profit margin was 23.3%
and 24.9% in the six months ended June 30, 2015 and 2016, respectively.
Our Industry
China is the world's largest express delivery market, with total parcel volume of 20.7 billion in 2015, approximately 1.5 times the total parcel
volume of the United States, according to the iResearch Report. The logistics industry in China is at an earlier stage of development compared to the
United States, and the majority of players focus on one particular logistics sub-segment, such as express delivery, or a limited number of logistics
service categories.
The express delivery market is in turn driven by China's fast growing e-commerce market. China's total retail e-commerce GMV, which represented
12.6% of the total retail consumption in 2015, has reached US$609 billion in 2015 and is expected to increase to US$1,465 billion in 2020,
representing a CAGR of 19%, according to the iResearch Report. In addition, "micro-merchants" who promote and sell their merchandise on social
networking and other mobile platforms have also become an emerging key growth driver of the express delivery industry in China.
According to the iResearch Report, China's express delivery service providers generally fall into the following two major categories:
"Network partner" model. A majority of China's private domestic express delivery service providers operate under the "network
partner" model. The top four domestic express delivery companies that operate under this model, namely ZTO Express, STO Express,
YTO Express and Yunda Express, are commonly referred to as the "Tongda Operators". Market shares of these four companies in 2015 in
terms of parcel volume were 14.3%, 12.4%, 14.7% and 10.5%, respectively, according to the iResearch Report. These players typically
operate a logistics network by focusing on the build-out
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and operations of the core sorting hubs and line-haul transportation assets while relying on network partners to carry out pickup and
last-mile deliveries. As a result of these unique characteristics, the Tongda Operators have the ability to rapidly scale up and expand
their networks to meet the demands from the fast-growing e-commerce industry while limiting their capital expenditures.
"Direct" model. EMS (a subsidiary of China Post) and SF Express are examples of Chinese express delivery operators that have adopted
t h e "direct" model. Market shares of EMS and SF Express in 2015 in terms of parcel volume were 6.2% and 8.2%, respectively,
according to the iResearch Report.
We believe the network partner model is best suited to support the enormous growth of the e-commerce industry in China. This model enables the
express delivery companies to serve a fragmented merchant and consumer base and seasonal demand of the e-commerce industry. See "Industry
China Express Delivery Landscape."
In addition to robust economic and e-commerce growth, the growth of China's express delivery companies benefited from continuous government
support through adoption of favorable policies in recent years, and these policies will continue to stimulate infrastructure development in rural areas
and increase penetration of express delivery services. The express delivery industry is also witnessing certain new growth opportunities in cross-border
e-commerce market as well as adjacent logistics markets including less-than-truckload business.
Competitive Strengths
We believe that the following competitive strengths contribute to our success and differentiate us from our competitors:
leading and fastest growing express delivery company in China;
highly scalable network partner model enabling China's e-commerce growth;
distinctive shared success system strengthening brand loyalty and maximizing performance;
strong operational capabilities and cost leadership;
superior service quality; and
experienced and entrepreneurial management team and strong corporate culture.
Our Strategies
We intend to pursue the following strategies to further grow our business:
strengthen our leading market position in China;
enhance our technology platform and infrastructure;
expand our presence in the cross-border e-commerce market;
broaden our service offerings and expand our customer base; and
pursue strategic alliances and select acquisition opportunities.
Our Challenges
Our ability to realize our mission and execute our strategies is subject to risks and uncertainties, including those relating to our ability to:
expand and diversify our customer base and service offerings;
operate through, and efficiently manage, our network partners and their employees and personnel;
manage our growth and expansion effectively;
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cope with intense competition;
enhance our brand image and protect our corporate reputation; and
control our capital expenditures and costs and expenses associated with our operations.
Please see "Risk Factors" and other information included in this prospectus for a discussion of these and other risks and uncertainties that we face.
Corporate History and Structure
We commenced our express delivery service business through Shanghai Zhongtongji Express Service Co., Ltd., or Shanghai Zhongtongji, in
Shanghai, China in January 2009. Prior to 2014, we operated express delivery services in Shanghai, Anhui Province, Jiangsu Province and Zhejiang
Province through Shanghai Zhongtongji, which authorized and cooperated with third-party business partners to operate ZTO-branded express delivery
services elsewhere in China.
During 2014 and 2015, we acquired the express delivery business and assets of selected network partners in exchange for cash and/or our ordinary
shares in order to optimize our nationwide network.
In April 2015, ZTO Express (Cayman) Inc. was incorporated under the laws of the Cayman Islands as our offshore holding company to facilitate
financing and offshore listing. ZTO Express (Cayman) Inc. established ZTO Express Limited in British Virgin Islands as its wholly-owned subsidiary in
April 2015. ZTO Express Limited subsequently established ZTO Express (Hong Kong) Limited as its wholly-owned subsidiary in May 2015.
In July 2015, ZTO Express (Hong Kong) Limited established a wholly-owned PRC subsidiary, Shanghai Zhongtongji Network
Technology Co., Ltd., or Shanghai Zhongtongji Network. Due to the PRC legal restrictions on foreign ownership in companies that provide mail
delivery services in China, we carry out our express delivery business through ZTO Express, a domestic PRC company, equity interests in which are
held by PRC citizens and companies established in China. Shanghai Zhongtongji Network entered into a series of contractual arrangements, including
a n exclusive call option agreement, an equity interest pledge agreement, a voting rights proxy agreement, irrevocable powers of attorney and an
exclusive consulting and services agreement, with ZTO Express and its shareholders, and obtained spousal consent letters by the spouses of six key
shareholders of ZTO Express. These shareholders are Messrs. Meisong Lai, Jianfa Lai, Jilei Wang, Xiangliang Hu, Shunchang Zhang and Xuebing
Shang, collectively holding 73.8% of equity interest in ZTO Express.
As a result of these contractual arrangements, we have effective control over, and are the primary beneficiary of, ZTO Express. ZTO Express is
therefore our consolidated variable interest entity, or consolidated VIE, which generally refers to an entity in which we do not have any equity interests
but whose financial results are consolidated into our consolidated financial statements in accordance with U.S. GAAP because we have effective
financial control over, and are the primary beneficiary of, that entity. We treat ZTO Express and its subsidiaries as our consolidated affiliated entities
under U.S. GAAP and have consolidated their financial results in our consolidated financial statements in accordance with U.S. GAAP. However, those
contractual arrangements may not be as effective in providing operational control as direct ownership. See "Risk FactorsRisks Related to Our
Corporate Structure" and "Risk FactorsRisks Related to Doing Business in China".
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The following diagram illustrates our corporate structure, including our principal subsidiaries, the VIE, and the VIE's principal subsidiaries, as of
the date of this prospectus:
(1)
Messrs. Meisong Lai, Jianfa Lai, Jilei Wang, Xiangliang Hu, Shunchang Zhang, Jianying Teng, Xuebin Shang, Baixi Lan and Jianchang Lai are beneficial owners of the shares of ZTO Express
(Cayman) Inc. and hold 34.35%, 12.00%, 10.00%, 7.05%, 6.00%, 5.02%, 4.40%, 1.40% and 1.06% equity interests in ZTO Express, respectively. Among them, Messrs. Meisong Lai, Jianfa
Lai, Jilei Wang, Xiangliang Hu and Baixi Lan are also directors of our company. Beijing Sequoia Xinyuan Equity Investment Center (L.P.) and Tianjin Sequoia Juye Equity Investment
Centre (L.P.) hold 4.00% and 2.00% of the equity interest in ZTO Express, respectively. The remaining 12.72% equity interest in ZTO Express are held by 32 other shareholders who are also
beneficial owners of the shares of ZTO Express (Cayman) Inc. None of these 32 shareholders holds more than 3.00% equity interest in ZTO Express.
Implication of Being an Emerging Growth Company

As a company with less than US$1.0 billion in revenue for our last fiscal year, we qualify as an "emerging growth company" pursuant to the
Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and
other
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requirements compared to those that are otherwise applicable generally to public companies. These provisions include exemption from the auditor
attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company's internal control over
financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial
accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. However,
we have elected to "opt out" of this provision and, as a result, we will comply with new or revised accounting standards as required when they are
adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.
We will remain an emerging growth company until the earliest of (a) the last day of the fiscal year during which we have total annual gross
revenues of at least US$1.0 billion; (b) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (c) the date on
which we have, during the preceding three-year period, issued more than US$1.0 billion in non-convertible debt; or (d) the date on which we are
deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market
value of our ADSs that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal
quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.
Corporate Information
Our principal executive offices are located at Building One, No. 1685 Huazhi Road, Qingpu District, Shanghai, 201708, People's Republic of
China. Our telephone number at this address is +86 21 5980-4508. Our registered office in the Cayman Islands is located at the offices of Maples
Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our main website is www.zto.com.
The information contained on our website is not a part of this prospectus. Our agent for service of process in the United States is Law Debenture
Corporate Services Inc., located at 4th Floor, 400 Madison Avenue, New York, New York 10017.
Conventions that Apply to this Prospectus
Unless otherwise indicated or the context otherwise requires, references in this prospectus to:
"ADSs" are to our American depositary shares, each of which represents
"ADRs" are to the American depositary receipts that evidence our ADSs;
"BVI" are to the British Virgin Islands;
"China" or the "PRC" are to the People's Republic of China, excluding, for the purposes of this prospectus only, Hong Kong, Macau
and Taiwan;
"delivery service fees" are to service fees directly charged by our network partners from parcel senders in connection with express
delivery services rendered. This amount typically includes, among other things, the network transit fees we charge the network partners
and the last-mile delivery fees that are payable by the pickup outlet to the delivery outlet directly;
"Class A ordinary shares" are to our Class A ordinary shares, par value US$0.0001 per share;
"Class B ordinary shares" are to our Class B ordinary shares, par value US$0.0001 per share;
"GMV" are to the total value of all orders for products and services placed, regardless of whether the products and services are actually
sold, delivered or returned;
Class A ordinary shares;
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our "network partners" are to business partners that own and operate pickup and delivery outlets in our network and operate express
delivery services under our "Zhongtong" or "ZTO" brand;
"network transit fees" are to fees payable by our network partners to us in connection with the services we provide to them, which mainly
include parcel sorting and parcel line-haul transportation;
"ordinary shares" are to our ordinary shares, par value US$0.0001 per share, and upon and after the completion of this offering, are to our
Class A and Class B ordinary shares, par value US$0.0001 per share;
our "parcel volume" in any given period are to the number of parcels collected by our network partners using our waybills in that period;
"RMB" or "Renminbi" are to the legal currency of China;
"top five Chinese express delivery companies" are to ZTO Express, YTO Express, STO Express, Yunda Express and SF Express, which
are the five largest express delivery companies in China in terms of market share of parcel volume in 2015, according to the iResearch
Report;
"unit cost per parcel" are to the sum of cost of revenues and total operating expenses of the applicable period divided by our total parcel
volume during the same period;
"US$," "U.S. dollars," "$," or "dollars" are to the legal currency of the United States;
"ZTO Express" are to ZTO Express Co. Ltd. or, depending on the context, ZTO Express Co. Ltd. and its subsidiaries; and
"ZTO," "we," "us," "our company" or "our" are to ZTO Express (Cayman) Inc., its subsidiaries and its consolidated affiliated entities.
Depending on the context, references to "we" and "our" may also include the network partners within our network.
Unless the context indicates otherwise, all information in this prospectus assumes no exercise by the underwriters of their over-allotment option.
Our reporting currency is the Renminbi. This prospectus also contains translations of certain foreign currency amounts into U.S. dollars for the
convenience of the reader. Unless otherwise stated, all translations of Renminbi into U.S. dollars were made at RMB6.6459 to US$1.00, the noon
buying rate on June 30, 2016 set forth in the H.10 statistical release of the U.S. Federal Reserve Board. We make no representation that the Renminbi or
U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any
particular rate or at all. On September 23, 2016, the noon buying rate for Renminbi was RMB6.6690 to US$1.00.
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THE OFFERING
Offering price
We currently estimate that the initial public offering price will be between
US$
and US$
per ADS.
ADSs offered by us
ADSs (or
option in full).
ADSs if the underwriters exercise their over-allotment
ADSs outstanding immediately after

this offering
ADSs (or
option in full)
ADSs if the underwriters exercise their over-allotment
Ordinary shares outstanding

immediately after this offering
ordinary shares, comprised of

Class A ordinary shares
and
Class B ordinary shares (or
ordinary shares if the
underwriters exercise their over-allotment option in full, comprised
of
Class A ordinary shares and
Class B ordinary shares).
The ADSs
Each ADS represents

share.
Class A ordinary shares, par value US$0.0001 per
The depositary will hold Class A ordinary shares underlying your ADSs. You
will have rights as provided in the deposit agreement among us, the
depositary and holders and beneficial owners of ADSs from time to time.
[We do not expect to pay dividends in the foreseeable future. If, however, we
declare dividends on our ordinary shares, the depositary will pay you the
cash dividends and other distributions it receives on our ordinary shares after
deducting its fees and expenses in accordance with the terms set forth in the
deposit agreement.]
You may turn in your ADSs to the depositary in exchange for Class A
ordinary shares. The depositary will charge you fees for any exchange.
We may amend or terminate the deposit agreement without your consent. If
you continue to hold your ADSs after an amendment to the deposit
agreement, you agree to be bound by the deposit agreement as amended.
To better understand the terms of the ADSs, you should carefully read the
"Description of American Depositary Shares" section of this prospectus. You
should also read the deposit agreement, which is filed as an exhibit to the
registration statement that includes this prospectus.
Table of Contents
Ordinary shares
Our ordinary shares will be divided into Class A ordinary shares and Class B
ordinary shares immediately prior to the completion of this offering. Holders
of Class A ordinary shares and Class B ordinary shares will have the same
rights except for voting and conversion rights. In respect of matters requiring
a shareholder vote, each Class A ordinary share will be entitled to one vote,
and each Class B ordinary share will be entitled to ten votes. Each Class B
ordinary share is convertible into one Class A ordinary share at any time by
the holder thereof. Class A ordinary shares are not convertible into Class B
ordinary shares under any circumstances. Upon any sale of Class B ordinary
shares by a holder thereof to any person or entity which is not an affiliate of
such holder, such Class B ordinary shares shall be automatically and
immediately converted into the same number of Class A ordinary shares. In
addition, if at any time, Mr. Meisong Lai and his affiliates collectively own
less than 10% of the outstanding share capital of our company, each issued
and outstanding Class B ordinary share will be automatically and
immediately converted into one Class A ordinary share, and we will not issue
any Class B ordinary shares thereafter. For a description of Class A ordinary
shares and Class B ordinary shares, see "Description of Share Capital."
Over-allotment Option
We have granted to the underwriters an option, exercisable within 30 days

from the date of this prospectus, to purchase up to an aggregate
of
additional ADSs.
Use of proceeds
We expect that we will receive net proceeds of approximately

US$
million from this offering, assuming an initial public offering
price of US$
per ADS, which is the midpoint of the estimated range of
the initial public offering price, after deducting underwriting discounts and
commissions and estimated offering expenses payable by us.
We intend to use the net proceeds from this offering for land acquisition,
facilities construction and equipment purchase to expand our sorting
capacity, purchase of additional trucks to strengthen our line-haul
transportation and general corporate purposes, including the investment in
our information technology system and potential strategic transactions. See
"Use of Proceeds" for more information.
Lock-up
[We, our directors, executive officers and all of our existing shareholders
have agreed with the underwriters not to sell, transfer or dispose of any ADSs,
ordinary shares or similar securities for a period of 180 days after the date of
this prospectus. See "Shares Eligible for Future Sales" and "Underwriting."]
Directed Share Program
At our request, the underwriters have reserved for sale, at the initial public
offering price, up to an aggregate of
ADSs offered in this offering to
some of our directors, officers, employees, business associates and related
persons through a directed share program.
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Listing
We intend to apply to have the ADSs listed on the New York Stock
Exchange under the symbol "ZTO." Our ADSs and shares will not be listed
on any other stock exchange or traded on any automated quotation system.
Depositary
10
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SUMMARY CONSOLIDATED FINANCIAL DATA

The following summary consolidated comprehensive income data for the years ended December 31, 2014 and 2015, summary consolidated
balance sheet data as of December 31, 2014 and 2015 and summary consolidated cash flow data for the years ended December 31, 2014 and 2015 have
been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated comprehensive
income data for the six months ended June 30, 2015 and 2016 and the summary consolidated balance sheet data as of June 30, 2016 and summary
consolidated cash flow data for the six months ended June 30, 2015 and 2016 are derived from our unaudited condensed consolidated financial
statements included elsewhere in this prospectus. We have prepared the unaudited condensed consolidated financial statements on the same basis as
our audited consolidated financial statements. This unaudited condensed financial statements include all adjustments, consisting only of normal and
recurring adjustments, that we consider necessary for a fair representation of our financial position and operating results for the periods presented. Our
consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of
America, or U.S. GAAP. Our historical results are not necessarily indicative of results expected for future periods. You should read this Summary
Consolidated Financial Data section together with our consolidated financial statements and the related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.
2014
RMB
Summary Consolidated
Comprehensive
Income Data:
Revenues
Cost of revenues
Gross profit
Operating income (expenses):
Selling, general and
administrative
Other operating income, net
Total operating expenses
Income from operations
Other income (expenses):
Interest income
Interest expense
Gain on deemed disposal of
equity method
investments
Income before income tax, and
share of profit (loss) in equity
method investments
Income tax expense
Income before share of profit
(loss) in equity method
investments
Share of profit (loss) in equity
method investments
Net Income
Net loss attributable to
noncontrolling interests
Net income attributable to ZTO
Express (Cayman) Inc.
Change in redemption value of
convertible redeemable
preferred shares
Net income attributable to
ordinary shareholders
Years Ended December 31,

Six Months Ended June 30,
2015
2015
2016
RMB
US$
RMB
RMB
US$
(in thousands, except for share and per share data)
3,903,572
(2,770,530)
1,133,042
6,086,455
(3,998,737)
2,087,718
915,821
(601,685)
314,136
2,486,060
(1,671,279)
814,781
4,245,177
(2,815,910)
1,429,267
638,766
(423,706)
215,060
(534,537)
1,796
(532,741)
600,301
(591,738)
33,249
(558,489)
1,529,229
(89,038)
5,003
(84,035)
230,101
(249,183)
14,293
(234,890)
579,891
(380,728)
8,023
(372,705)
1,056,562
(57,287)
1,207
(56,080)
158,980
3,408
(798)
15,091
(16,392)
2,271
(2,466)
3,170
(8,436)
20,811
(8,386)
3,131
(1,262)
224,148
33,727
9,551
1,437
602,911
(202,486)
1,752,076
(419,999)
263,633
(63,197)
574,625
(163,462)
1,078,538
(293,972)
162,286
(44,233)
400,425
1,332,077
200,436
411,163
784,566
118,053
5,578
406,003
(459)
1,331,618
(69)
200,367
4,257
415,420
(19,950)
764,616
(3,002)
115,051
423
137
20
586
1,978
298
406,426
1,331,755
200,387
416,006
766,594
115,349
(79,723)
(11,996)
686,871
103,353
406,426
(28,775)
1,302,980
(4,330)
196,057
416,006
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2015
2015
2016
RMB
US$
RMB
RMB
2014
RMB
Net earnings per share

attributable to
ordinary
shareholders
Basic
Diluted
Weighted average
shares used in
calculating net
earnings per
ordinary share
Basic
Diluted
US$
0.68
0.68
2.15
2.15
0.32
0.32
0.70
0.70
1.07
1.07
0.16
0.16
597,882,740
597,882,740
599,373,273
599,373,273
599,373,273
599,373,273
594,205,525
594,205,525
613,901,657
613,901,657
613,901,657
613,901,657
25,829
3,886
416,006
712,700
107,239
Other comprehensive
(loss) income, net of
tax of nil:
Foreign currency
translation
adjustment
Comprehensive
income attributable
to ordinary
shareholders
406,426
(13,749)
(2,069)
1,289,231
193,988
As of December 31,
2015
RMB
2014
RMB
Summary Consolidated Balance Sheet Data:

Current assets:
Cash and cash equivalents
Prepayments and other current assets
Non-current assets:
Property and equipment, net
Goodwill
Total assets
Liabilities, mezzanine equity and equity
Current liabilities:
Short-term bank borrowing
Other current liabilities
Total liabilities
Total liabilities, mezzanine equity and equity
2014
RMB
Summary Consolidated Cash Flow

Data:
Net cash provided by operating
activities
Net cash used in investing activities
Net cash provided by financing
activities
Effect of exchange rate changes on
cash and cash equivalents
Net increase/(decrease) in cash and
cash equivalents
Cash and cash equivalents at
beginning of period
Cash and cash equivalents at end
of period
As of June 30,
2016
RMB
US$
US$
(in thousands)
163,359
126,800
2,452,359
211,724
369,003
31,858
2,058,231
313,706
309,699
47,203
925,868
2,379,182
4,974,125
1,752,586
4,091,219
10,582,223
263,709
615,600
1,592,293
2,660,307
4,157,111
11,713,514
400,293
625,515
1,762,517
250,000
539,257
1,578,422
4,974,125
300,000
1,264,914
2,736,002
10,582,223
45,141
190,330
411,683
1,592,293
406,943
1,283,292
2,739,582
11,713,514
61,232
193,095
412,221
1,762,517

2015
RMB
1,071,751
(1,116,299)

2015
2016
US$
RMB
RMB
US$
(in thousands)
1,867,538
(1,449,746)
281,006
(218,141)
422,934
(236,722)
596,914
(1,108,727)
89,817
(166,829)
171,064
1,869,331
281,276
29,530
98,000
14,746
1,877
282
19,685
2,962
126,516
2,289,000
344,423
215,742
(394,128)
(59,304)
36,843
163,359
24,580
163,359
2,452,359
369,003
163,359
2,452,359
369,003
379,101
2,058,231
309,699
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Non-GAAP Measures
We use adjusted EBITDA and adjusted net income, each a non-GAAP financial measure, in evaluating our operating results and for financial and
operational decision-making purposes.
We believe that adjusted EBITDA and adjusted net income help identify underlying trends in our business that could otherwise be distorted by the
effect of the expenses and gains that we include in income from operations and net income. We believe that adjusted EBITDA and adjusted net income
provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects and allow for
greater visibility with respect to key metrics used by our management in its financial and operational decision-making.
Adjusted EBITDA and adjusted net income should not be considered in isolation or construed as an alternative to net income or any other measure
of performance or as an indicator of our operating performance. Investors are encouraged to review the historical non-GAAP financial measures to the
most directly comparable GAAP measures. Adjusted EBITDA and adjusted net income presented here may not be comparable to similarly titled
measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative
measures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.
Adjusted EBITDA represents net income (which excludes depreciation, amortization, interest expenses and income tax expenses) before (i) sharebased compensation expense; and (ii) gain on deemed disposal of equity method investments.
Adjusted net income represents net income before (i) share-based compensation expense; and (ii) gain on deemed disposal of equity method
investments.
The table below sets forth a reconciliation of our net income to adjusted EBITDA for the periods indicated:
2014
2015
2015
2016
RMB
RMB
US$
RMB
RMB
US$
(in thousands)
Net income
Add:
Depreciation
Amortization
Interest expenses
Income tax expenses
EBITDA
Add:
Share-based compensation expense
Less:
Gain on deemed disposal of equity method
investments
Adjusted EBITDA
406,003
1,331,618
200,367
415,420
764,616
115,051
56,037
7,977
798
202,486
673,301
145,276
12,780
16,392
419,999
1,926,065
21,859
1,923
2,466
63,197
289,812
68,646
5,598
8,436
163,462
661,562
113,461
10,037
8,386
293,972
1,190,472
17,072
1,511
1,262
44,233
179,129
116,800
17,575
61,063
122,000
18,357
(224,148)
1,818,717
(33,727)
273,660
722,625
(9,551)
1,302,921
(1,437)
196,049
673,301
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The table below sets forth a reconciliation of our net income to adjusted net income for the periods indicated:
2014
2015
2015
2016
RMB
RMB
US$
RMB
RMB
US$
(in thousands)
Net income
Add:
Less:
investments
Adjusted net income
406,003
1,331,618
200,367
415,420
764,616
115,051
116,800
17,575
61,063
122,000
18,357
(224,148)
1,224,270
(33,727)
184,215
476,483
(9,551)
877,065
(1,437)
131,971
406,003
14
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RISK FACTORS
An investment in our ADSs involves significant risks. You should consider carefully all of the information in this prospectus, including the risks and
uncertainties described below, before making an investment in our ADSs. Any of the following risks could have a material and adverse effect on our
business, financial condition and results of operations. In any such case, the market price of our ADSs could decline, and you may lose all or part of your
investment.
Risks Related to Our Business
Our business and growth are highly dependent on the development of the e-commerce industry in China.
We generate a significant portion of our parcel volume by serving end customers that conduct business on the various e-commerce platforms in China,
and our end customers rely on our services to fulfill orders placed by consumers on such platforms. Our business and growth are highly dependent on the
viability and prospects of the e-commerce industry in China.
Any uncertainties relating to the growth, profitability and regulatory regime of the e-commerce industry in China could have a significant impact on us.
The development of the e-commerce industry in China is affected by a number of factors, most of which are beyond our control. These factors include:
the growth of broadband and mobile Internet penetration and usage in China;
the consumption power and disposable income of e-commerce consumers in China, as well as changes in demographics and consumer tastes
and preferences;
the availability, reliability and security of e-commerce platforms;
the selection, price and popularity of products offered on e-commerce platforms;
the emergence of alternative channels or business models that better suit the needs of consumers in China;
the development of fulfillment, payment and other ancillary services associated with e-commerce; and
changes in laws and regulations, as well as government policies that govern the e-commerce industry in China.
The e-commerce industry is highly sensitive to changes of macroeconomic conditions, and e-commerce spending tends to decline during recessionary
periods. Many factors beyond our control, including inflation and deflation, fluctuation of currency exchange rate, volatility of stock and property markets,
interest rates, tax rates and other government policies and changes in unemployment rates can adversely affect consumer confidence and spending behavior
on e-commerce platforms, which could in turn materially and adversely affect our growth and profitability. In addition, unfavorable changes in domestic and
international politics, including military conflicts, political turmoil and social instability, may also adversely affect consumer confidence and spending,
which could in turn negatively impact our growth and profitability.
We have experienced, and may continue to experience, significant reliance on the Alibaba ecosystem.
Our business is significantly reliant on the Alibaba ecosystem. Parcel volume generated from Alibaba's e-commerce platforms accounted for
approximately 80%, 77% and 75% of the total parcel volume processed in our network in 2014, 2015 and the six months ended June 30, 2016, respectively.
Although we plan to expand and diversify our customer base, we still expect to be reliant on the Alibaba ecosystem for the foreseeable future.
Although Alibaba is not our direct customer, it can significantly influence how transactions take place on its e-commerce platforms, including how
purchase orders are fulfilled by indicating the preferred express delivery companies for each order. In order to maintain and foster our cooperation with
Alibaba,
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we may have to accommodate the demands and requirements from various players in the Alibaba ecosystem, such as the adoption of digital waybills initiated
by China Smart Logistics, or Cainiao, a central logistics information system and solutions provider affiliated with Alibaba. Such demands and requirements
may increase the cost of our business, weaken our connection with our end customers, or even be disruptive to our existing business model.
In addition, Alibaba has invested, and may invest in the future, in our competitors and, as a result, may encourage merchants on its platforms to choose
their investees' services over ours. Alibaba may also build in-house delivery network to serve its e-commerce platforms in the future. If either or both of these
activities take place, our business may be harmed, and our results of operations may be materially and adversely affected.
We face risks associated with our network partners and their employees and personnel.
As of June 30, 2016, we had 3,541 direct network partners and approximately 4,200 indirect network partners under our ZTO brand. We rely on these
network partners to directly interact with and serve end customers, but the interest of a network partner may not be entirely aligned with ours or with that of
other network partners. We enter into cooperation agreements with our direct network partners, many of which sub-contract part of their business to their
cooperation partners, which we refer to as our indirect network partners. We gain certain level of control over direct network partners through our cooperation
agreements, which provide for incentives and periodic evaluation. The sub-contracting of indirect network partners is subject to our consent. However, our
control over the network partners may not be as effective as if we had directly owned these network partners, which could potentially make it difficult for us
to manage our network partners. Particularly, as we do not enter into agreements with our indirect network partners, we are unable to exert a significant degree
of influence over them.
Our network partners and their employees carry out a significant amount of direct interactions with our end customers, and their performance directly
affects our brand image. However, we do not directly supervise their services provided to end customers. Although we have established and distributed
service standards across our network and provide training to the employees and personnel of our network partners from time to time, we may not be able to
successfully monitor, maintain and improve the service provided by our network partners and their employees. In the event of any unsatisfactory performance
by our network partners and/or their employees, we may experience service disruptions and our reputation may be materially and adversely affected.
Furthermore, our network partners may fail to implement sufficient control over the pickup and delivery personnel who work at the outlets in connection with
their conduct, such as proper collection and handling of parcels and delivery service fees, adherence to customer privacy standards and timely delivery of
parcels. As a result, we or our network partners may suffer financial losses, incur liabilities and suffer reputational damages in the event of theft or late
delivery of parcels, embezzlement of delivery service fees or mishandling of customer privacy.
Suspension or termination of a network partner's services in a particular geographic area may cause interruption to or failure in our services in the
corresponding geographic area. A network partner may suspend or terminate its services voluntarily or involuntarily due to various reasons, including
disagreement or dispute with us, failure to make a profit, failure to maintain requisite approvals, licenses or permits or to comply with other governmental
regulations, and events beyond our or its control, such as inclement weather, natural disasters, transportation interruptions or labor unrest or shortage. Due to
the intense competition in China's express delivery industry, our existing network partners may also choose to discontinue their cooperation with us and
work with our competitors instead. We may not be able to promptly replace our network partners or find alternative ways to provide services in a timely,
reliable and cost-effective manner, or at all. As a result of any service disruptions associated with our network partners, our customer satisfaction, reputation,
operations and financial performance may be materially and adversely affected.
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We face intense competition which could adversely affect our results of operations and market share.
We operate in a highly competitive and fragmented industry. We compete primarily with leading domestic express delivery companies including SF
Express, STO Express, YTO Express, Yunda Express as well as EMS. We compete with them based on a number of factors, including business model,
operational capabilities, cost control and service quality. In particular, we have historically experienced declines in the delivery service market prices and
may face downward pricing pressure again. If we and our network partners cannot effectively control our costs to remain competitive, our market share and
revenue may decline. Additionally, if we have to subsidize our network partners to increase our network partners' competitiveness, our gross margin
may decline.
In addition, major e-commerce platforms, such as Alibaba and JD.com, may choose to build or further develop in-house delivery capabilities to serve
their logistics needs and compete with us, which may significantly affect our market share and total parcel volume. Furthermore, as we diversify service
offerings and further expand our customer base, we may face competition from existing or new players in those new sectors. In particular, we or our network
partners may face competition from existing or new last-mile delivery service providers which may expand their service offerings to express delivery or adopt
a business model disruptive to our business and compete with our network partners for hiring of delivery personnel. Similarly, existing players in an adjacent
or sub-market may choose to leverage their existing infrastructure and expand their services to serve our customers. If these players succeed in doing so, our
business could be encroached by their entrance and adversely affected.
Certain of our current and potential competitors, as well as international logistics operators with presence in China, may have significantly greater
resources, longer operating histories, larger customer bases and greater brand recognition than us. They may be acquired by, receive investment from or enter
into strategic relationships with, established and well-financed companies or investors which would help enhance their competitiveness. In view of this, some
of our competitors may adopt more aggressive pricing policies or devote greater resources to marketing and promotional campaigns than us. We may not be
able to compete successfully against current or future competitors, and competitive pressures may have a material and adverse effect on our business,
financial condition and results of operations.
Any service disruption experienced by our sorting hubs or the outlets operated by our network partners may adversely affect our business operations.
Our daily operations heavily rely on the orderly performance of our sorting hubs and the outlets operated by our network partners. Any service disruption
of the sorting hubs or the outlets due to failure in their automated facilities, under-capacity during peak parcel volume periods, force majeure events, thirdparty sabotage, dispute with us or any third party, employee delinquency or strike, governmental inspection of properties or governmental orders that
mandate any service halt or temporary or permanent shutdown would adversely impact our business operations. In case of any service disruption by sorting
hubs or outlets, parcel sorting or parcel pickup and delivery at the applicable sorting hubs or outlets may be delayed, suspended or stopped. Parcels will need
to be redirected to other nearby sorting hubs or outlets, and such rerouting of parcels will likely increase risks of delay and errors in delivery. At the same
time, increased parcel sorting or pickup and delivery pressure on nearby sorting hubs or outlets may negatively impact their performance and spread adverse
effects further across our network. Any of the foregoing events may result in significant operational interruptions and slowdowns, customer complaints and
reputational damage.
Our technology system is critical to our business operations and growth prospects.
The satisfactory performance, reliability and availability of our technology system is critical to our ability to provide high-quality customer services. We
rely on our centralized technology system, which consists of our Zhongtian system, our transportation system, as well as our Ping'an settlement system to
efficiently operate our network. This integrated system supports the smooth performance of certain key
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functions of our business, such as order tracking, fleet dispatching and management, fee settlement and route planning. In addition, the maintenance and
processing of various operating and financial data is essential to the day-to-day operation of our business and formulation of our development strategies.
Therefore, our business operations and growth prospects depend, in part, on our ability to maintain and make timely and cost-effective enhancements and
upgrades to our technology system and to introduce innovative additions which can meet changing operational needs. While continuing to invest in
information technology and equipment to enhance operational efficiency and reliability is one of our growth strategies, our historical spending on
technology has been low compared to certain major global logistics companies. Such level of expenditure may not be sufficient to fully support our business
operation and expansion needs. Failure to do so could cause economic losses and put us at a disadvantage to our competitors. We can provide no assurance
that we will be able to keep up with technological improvements or that the technology developed by others will not render our services less competitive
or attractive.
Any interruptions caused by telecommunications failures, computer viruses, hacking or other attempts to harm our systems that result in the
unavailability or slowdown of our centralized system could quickly impact the workflow in a large portion of, if not the entire, network. We can provide no
assurance that our current security mechanisms will be sufficient to protect our technology systems from any third-party intrusions, viruses or hacker attacks,
information or data theft or other similar activities. Any such occurrences could disrupt our services, damage our reputation and harm our results
of operations.
Overall tightening of the labor market or any possible labor unrest may affect our business as we operate in a labor-intensive industry.
Our business is labor-intensive and requires a substantial number of personnel. Any failure to retain stable and dedicated labor by us and our network
partners may lead to disruption to or delay in our services provided to end customers. We and our network partners often need to hire additional or temporary
workers to handle the significant increase in parcel volume following special promotional events or during peak seasons of e-commerce. Although we have
not experienced any labor shortage to date, we have observed an overall tightening and increasingly competitive labor market. We have experienced, and
expect to continue to experience, increases in labor costs due to increases in salary, social benefits and employee headcount. We and our network partners
compete with other companies in our industry and other labor-intensive industries for labor, and we may not be able to offer competitive salaries and benefits
compared to them.
We and our network partners were subject to labor disputes initiated by our or our network partners' employees and personnel from time to time, although
none of them, individually or in the aggregate, had a material adverse impact on us. We expect to continue to be subject to various legal or administrative
proceedings related to labor dispute in the ordinary course of our business, due to the magnitude of labor force involved in our network. Any labor unrest
directed against us or our network partners could directly or indirectly prevent or hinder our normal operating activities, and, if not resolved in a timely
manner, lead to delays in fulfilling our customer orders and decreases in our revenue. Historically, we have experienced an incident where an employee strike
of one of our network partners caused a prolonged service suspension in a southern city of China, and we cannot assure you that similar incidents would not
happen in the future. We and our network partners are not able to predict or control any labor unrest, especially those involving labor not directly employed
by us. Further, labor unrest may affect general labor market conditions or result in changes to labor laws, which in turn could materially and adversely affect
our business, financial condition and results of operations.
We face risks associated with the parcels handled through our network.
We handle a large volume of parcels across our network, and face challenges with respect to the protection and examination of these parcels. Parcels in
our network may be stolen, damaged or lost for various reasons, and we and/or our network partners may be perceived or found liable for such incidents. In
addition, we may fail to screen parcels and detect unsafe or prohibited/restricted items. There had been
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certain historical incidents where our network partners were found to have failed to strictly implement parcel screening procedures and allowed controlled
items to be mailed through our network. As a result, the operation of such network partner was suspended by the post authorities in charge. Unsafe items, such
as flammables and explosives, toxic or corrosive items and radioactive materials, may damage other parcels in our network, injure recipients and harm the
personnel and assets of us and/or our network partners. Furthermore, if we fail to prevent prohibited or restricted items from entering into our network and if
we participate in the transport and delivery of such items, we may be subject to administrative or even criminal penalties, and if any personal injury or
property damage is concurrently caused, we may be further liable for civil compensation.
The delivery of parcels also involves inherent risks. We constantly have a large number of vehicles and personnel in transportation, and are therefore
subject to risks associated with transportation safety, and the insurance maintained by us may not fully cover the damages caused by transportation related
injuries or loss. From time to time, our vehicles and personnel may be involved in transportation accidents, and the parcels carried by them may be lost or
damaged. In addition, frictions or disputes may occasionally arise from the direct interactions between our pickup and delivery personnel with parcel senders
and recipients. Personal injuries or property damages may arise if such incidents escalate.
Any of the foregoing could disrupt our services, cause us to incur substantial expenses and divert the time and attention of our management. We and our
network partners may face claims and incur significant liabilities if found liable or partially liable for any of injuries, damages or losses. Claims against us
may exceed the amount of our insurance coverage, or may not be covered by insurance at all. Governmental authorities may also impose significant fines on
us or require us to adopt costly preventive measures. Furthermore, if our services are perceived to be insecure or unsafe by our end customers, e-commerce
platforms and consumers, our business volume may be significantly reduced, and our business, financial condition and results of operations may be
materially and adversely affected.
Our past growth rates may not be indicative of our future growth, and if we are unable to manage our growth or execute our strategies effectively, our
business and prospects may be materially and adversely affected.
Our business has grown substantially in recent years, but our past growth rates may not be indicative of our future growth. Our revenue growth in recent
years was partly attributable to the business that we acquired. We plan to further expand our network in response to increasing customer/consumer needs, but
we may not succeed in doing so. Even if we are able to expand our network as planned, we may not be able to continue to integrate and optimize a larger
network. In addition, as customer/consumer needs at both national and regional levels are continuously changing, we may not be able to successfully
anticipate and respond to such changes. For example, we may experience shortages in our delivery capacity if our expansion fails to accurately and timely
match the increases in customer/consumer needs. Furthermore, our anticipated future growth will likely place significant demand on our management and
operations. Our success in managing our growth will depend, to a significant degree, on the ability of our executive officers and other members of senior
management to carry out our strategies effectively, our ability to balance the interests between us and our network partners as well as among our network
partners, and our ability to adapt, improve and develop our financial and management information systems, controls and procedures. In addition, we will
likely have to successfully recruit, train and manage more employees and improve and expand our sales and marketing capabilities. If we are not able to
manage our growth or execute our strategies effectively due to any of the foregoing reasons, our expansion may not be successful and our business and
prospects may be materially and adversely affected.
Our long-term growth and competiveness are highly dependent on our ability to control costs.
In order to maintain competitive pricing and enhance our profit margins, we must continually control our costs. Effective cost-control measures have a
direct impact on our financial condition and results of operations. We have adopted various such measures, and will continue to add new ones as necessary
and appropriate. For example, transportation costs can be reduced through the choice of vehicles, and labor
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costs can be reduced through automation. However, the measures we have adopted or will adopt in the future may not be as effective as expected in
improving our financial condition and results of operations. In order to sustain our long-term growth and competitiveness, we do not intend to adopt
aggressive pricing policies to compete with our competitors. There have historically been declines in the delivery services fees charged by our network
partners to parcel senders partially due to market competition. If we are not able to effectively control our cost and adjust the level of network transit fees
based on operating costs and market conditions, our profitability and cash flow may be adversely affected.
We outsource part of our line-haul transportation capacity to our related party and use their services.
We outsource part of our line-haul transportation needs to Tonglu Tongze Logistics Ltd., or Tonglu Tongze, which is a transportation operator that
works exclusively for us. Tonglu Tongze has a fleet of over 1,200 trucks as of June 30, 2016. In 2014, 2015 and the six months ended June 30, 2016, we
incurred RMB643.6 million, RMB703.1 million (US$105.8 million) and RMB418.0 million (US$62.9 million), respectively, of transportation service fees to
Tonglu Tongze and its subsidiaries and had RMB55.8 million, RMB84.6 million (US$12.7 million) and RMB27.9 million (US$4.2 million) of accounts
payable due as of December 31, 2014, 2015 and June 30, 2016, respectively. Certain of our employees and certain employees of Tonglu Tongze beneficially
owned 76.6% and 5.0% equity interest in Tonglu Tongze as of June 30, 2016, respectively. Therefore, we treat Tonglu Tongze as our related party and we
expect to continue to rely on its services. In light of the materiality of Tonglu Tongze's continued service to us, we may face a number of risks and
uncertainties associated with our transactions with them. There is no assurance that (i) their service will continue to be available to us on an exclusive basis or
at all, (ii) their service quality will not materially deteriorate, (iii) they will not unilaterally increase their service pricing, (iv) the quality of their service will
be sustained, (v) there will not be any wrongdoing or misconduct by their employees or by it which would materially adversely affect their service, or (vi) we
can continue to maintain good relations with Tonglu Tongze with respect to future transportation services. Any deterioration to their services or relations
with us may adversely affect our overall business and results of operations.
We face challenges in diversifying our service offerings and expanding our customer base.
We intend to further diversify our service offerings and expand our customer base to add to our revenue sources in the future. New services or new types
of customers may involve risks and challenges we do not currently face. Such new initiatives may require us to devote significant financial and managerial
resources and may not perform as well as expected. We may not be able to successfully address customer demand and preferences and our existing network
and facilities may not be adaptable to the new services or customers. For example, different service offerings will likely impose different equipment
specifications and service standards. We may also be inexperienced with the operating models and cost structures associated with a new type of customer. In
addition, we may not be able to assure adequate service quality and receive complaints or incur costly liability claims, which would harm our overall
reputation and financial performance. We may also selectively invest in emerging business opportunities in adjacent logistics market, such as less-thantruckload shipping, or leverage our existing network and infrastructure to directly engage in these businesses. We may not be able to achieve profitability or
recoup our investments with respect to any new services or new types of customers in time or at all.
Damages to brand image and corporate reputation could materially and adversely impact our business.
We believe our brand image and corporate reputation will play an increasingly important role in enhancing our competitiveness and maintaining
business growth. Many factors, some of which are beyond our control, may negatively impact our brand image and corporate reputation if not properly
managed. These factors include our ability to provide superior services to our end customers, successfully conduct marketing and promotional activities,
manage relationship with and among network partners, and manage complaints and events of negative publicity, maintain positive perception of our
company, our peers and the express delivery industry in general. Any actual or perceived deterioration of our service quality, which
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i s based on an array of factors including customer satisfaction, rate of complaint or rate of accident, could subject us to damages such as loss of important
customers. Any negative publicity against us or our peers could cause damages to our corporate reputation and changes to the government policies and
regulatory environment. If we are unable to promote our brand image and protect our corporate reputation, we may not be able to maintain and grow our
customer base, and our business and growth prospects may be adversely affected.
Failure to comply with PRC laws and regulations by us or our network partners may materially and adversely impact our business, financial
condition and results of operations.
Our business is subject to governmental supervision and regulation by the relevant PRC governmental authorities, including but not limited to the State
Post Bureau and the Ministry of Transportation. Together, these governmental authorities promulgate and enforce regulations that cover many aspects of our
day-to-day operations, and we may fail to fully comply with these regulations. See also "PRC Regulation". For example, the PRC Postal Law indicates that
express delivery companies cannot engage in "posting and mail delivery business exclusively operated by postal enterprises." However, PRC law does not
provide a definition for "posting and mail delivery business exclusively operated by postal enterprises". If the authorities define such term in the future and if
the parcels that we deliver fall into the defined category, we may be considered in violation of such regulation. Certain of our network partners carry out their
express delivery services while they are still in the process of obtaining Courier Service Operation Permits, and we may be subject to fines or order of
rectification as a result.
In addition, our network partners have full discretion over their daily operations and make localized decisions with respect to their facilities, vehicles
and hiring and pricing strategies. Their operations are regulated by various PRC laws and regulations, including local administrative rulings, orders and
policies that are pertinent to their localized express delivery business. For example, local regulations may specify the models or types of vehicles to be used
in parcel pickup and delivery services or require the network partners to implement heightened parcel safety screening procedures, which could materially
drive up the operating costs and delivery efficiency of the pickup and delivery outlets.
New laws and regulations may be enforced from time to time and substantial uncertainties exist regarding the interpretation and implementation of
current and any future PRC laws and regulations applicable to our businesses. If the PRC government promulgates new laws and regulations that require
additional approvals or licenses or imposes additional restrictions on our daily operations, it has the authority, among other things, to levy fines, confiscate
income, revoke business licenses, and require us to discontinue our relevant business or impose restrictions on the affected portion of our business. Any of
these actions by the PRC government may have a material and adverse effect on our results of operations. If our network partners are found to be in violation
of any applicable law or regulation then in effect, such network partners may be subject to similar penalties or administrative orders and may not be able to
continue to deliver satisfactory services or at all. As a result, we may suffer reputational damages due to negative publicity or compromised service quality.
Any lack of requisite approvals, licenses or permits applicable to the business operation of us or our network partners may have a material and
adverse impact on our business, financial condition and results of operations.
We and our network partners are required to hold a number of licenses and permits in connection with our business operation, including, but not limited
to, the Courier Service Operation Permit and Road Transportation Operation Permit.
Under PRC laws, an enterprise that operates and provides express delivery services must obtain a Courier Service Operation Permit listing out all the
regions it and its branches are allowed to operate in. Such enterprise needs to make a filing with the relevant postal authority to update its Courier Service
Operation Permit to include any additional regions it plans to expand into. All of our consolidated affiliated entities engaging in the express delivery
services have obtained the Courier Service Operation
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Permits, which has covered the majority part of China. However, some of our consolidated affiliated entities have not timely made the filing with the relevant
postal authority to update its Courier Service Operation Permit with respect to certain regions they currently operate in. Failure to make such filing may
subject us to a correction order or fines. In addition, an enterprise engaging in road freight transportation is required to obtain a Road Transportation
Operation Permit from the relevant county-level road transportation administrative bureau, while a foreign-invested enterprise (including its subsidiaries)
engaging in road freight transportation must obtain the approval from the provincial-level road transportation administrative bureau. Similarly, our network
partners also need to obtain necessary licenses and permits to operate express delivery and transportation business. We can provide no assurance that all of
our network partners have obtained all of the licenses and permits necessary for their business. Failure to obtain such licenses and permits may result in
suspension of operation, fines or other penalties by government authorities. In addition, companies that apply for the Courier Service Operation Permit are
subject to certain service capability requirements, including sufficiency of express delivery personnel. Certain of our consolidated affiliated entities applied
for and obtained their Courier Service Operation Permits by applying the express delivery personnel of our network partners as our own. If any of our
consolidated affiliated entities are found to have failed to meet the service capability requirements at the time of applying for or during the validity of such
permit, such entities may be subject to a fine ranging from RMB10,000 to RMB30,000 and their Courier Service Operation Permits may be revoked.
After obtaining the Courier Service Operation Permit, an enterprise is further required to maintain its express delivery service operations during the
validity of such permit. Where the permit-holder does not operate any express delivery services for a period of time over six months without due grounds after
obtaining the Courier Service Operation Permit, or suspends its business for more than six months without authorization, the postal administrative
departments may cancel the Courier Service Operation Permit of such holder. As of June 30, 2016, 10 of our consolidated affiliated entities have not been in
operation of express delivery service for more than six months. As a result, their Courier Service Operation Permits may be cancelled by the relevant
regulatory authorities, although we are currently not aware of any such cancellation or notice of cancellation. If we become subject to such penalty, our
business, results of operations, financial condition and prospects could be adversely affected.
According to the Administrative Provisions for Foreign Investment in the Road Transportation Industry, as amended and supplemented, we may be
required to obtain prior approval with respect to the acquisition by Shanghai Zhongtongji Network of certain of its subsidiaries engaging in transportation
services. See "RegulationRegulations Relating to Foreign InvestmentForeign Investment in Road Transportation Businesses". Shanghai Zhongtongji
Network acquired these entities without obtaining any prior approval from the relevant governmental authorities. There is currently no regulation prescribing
penalties with respect to the lack of such prior approval, and we have not received any notice of warning or been subject to penalties or other disciplinary
action from the relevant governmental authorities. However, we cannot assure you that the relevant governmental authorities would not require us to obtain
the approvals, or take any other actions retrospectively in the future. If the relevant governmental authorities require us to obtain the approvals, we cannot
assure you that we will be able to do so in a timely manner or at all. Additionally, we may not be able to renew Road Transportation Operation Permit of the
relevant subsidiaries due to the lack of such prior approval.
New laws and regulations may be enforced from time to time to require additional licenses and permits other than those we currently have. As a result,
substantial uncertainties exist regarding the interpretation and implementation of current and any future PRC laws and regulations applicable to our
businesses. If the PRC government considers that we or our network partners were operating without the proper approvals, licenses or permits or promulgates
new laws and regulations that require additional approvals or licenses or imposes additional restrictions on the operation of any part of our business, it has
the authority, among other things, to levy fines, confiscate our income, revoke our business licenses, and require us to discontinue our relevant business or
impose restrictions on the affected portion of our business. Any of these actions by the PRC government may have a material and adverse effect on our results
of operations.
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Any deficiencies in China's telecommunication and Internet infrastructure could impair the functioning of our technology system and the operation
of our business.
Our business depends on the performance and reliability of the telecommunication and Internet infrastructure in China. The availability and reliability of
our website, mobile application, customer service hotline and technology system depends on telecommunications carriers and other third-party providers for
communications and storage capacity, including bandwidth and server storage, among other things. If we are unable to enter into and renew agreements with
these providers on acceptable terms, or if any of our existing agreements with such providers are terminated as a result of our breach or otherwise, our ability
to provide our services to our customers could be adversely affected. We have experienced service interruptions in the past due to service interruptions at the
underlying external telecommunications service providers, such as the Internet data centers and broadband carriers. Frequent service interruptions could
frustrate customers and discourage them from using our services, which could cause us to lose customers and harm our operating results.
We may not be able to maintain our corporate culture, which has been a key to our success.
Since our inception, our corporate culture has been defined by our mission, vision and values, and we believe that our culture has been critical to our
success. In particular, our corporate culture has helped us serve our customers, attract, retain and motivate employees and network partners, and create value
for our shareholders. We face a number of challenges that may affect our ability to maintain our corporate culture, including:
failure to identify and promote people to leadership positions in our organization who share our culture, values and mission;
the increasing number and geographic diversity of our network partners;
competitive pressures to move in directions that may divert us from our mission and values;
the continued challenges of an ever-changing business environment;
the potential pressure from the public markets to focus on short-term results instead of long-term value creation; and
the increasing need to develop expertise in new areas of business that affect us.
If we are not able to maintain our corporate culture or if our culture fails to deliver the long-term results we expect to achieve, our business, financial
condition, results of operations and prospects may be materially and adversely affected.
Our business and results of operations may be materially and adversely affected if we are unable to provide high quality service to network partners
and our end customers.
The success of our business largely depends on our ability to maintain and further enhance our service quality. We provide the network partnersour
direct customerswith access to our line-haul transportation and sorting network. Together with our network partners, we provide complete door-to-door
express delivery services to our end customers, which consists mainly of e-commerce merchants, and other express delivery service users. If we or our network
partners are unable to provide express delivery services in a timely, reliable, safe and secure manner, our reputation and customer loyalty could be negatively
affected. If our customer service personnel fail to satisfy individual customer needs and respond effectively to customer complaints, we may lose potential or
existing end customers and experience a decrease in customer orders, which could have a material adverse effect on our business, financial condition and
results of operations.
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Customer demand is difficult to forecast accurately, and as a result we may be unable to make planning and spending decisions to match customer
demand.
We make planning and spending decisions, including capacity expansion, procurement commitments, personnel needs and other resource requirements
based on our estimates of customer demand. The parcel volume we generate from end customers can vary significantly and unexpectedly, reducing our
ability to accurately estimate future customer demand. In particular, we may potentially experience capacity and resource shortages in fulfilling customer
orders during peak season of e-commerce consumption or following special promotional campaigns on any e-commerce platforms. Failure to meet customer
demand in a timely fashion or at all adversely affect our financial condition and results of operations.
Our business depends on the continuing efforts of our management. If we lose their services, our business may be severely disrupted.
Our business operations depend on the continuing efforts of our management, particularly the executive officers named in this prospectus. If one or more
of our management were unable or unwilling to continue their employment with us, we may not be able to replace them in a timely manner, or at all. We may
incur additional expenses to recruit and retain qualified replacements. Our business may be severely disrupted and our financial condition and results of
operations may be materially and adversely affected. In addition, our management may join a competitor or form a competing company. We can provide no
assurance that we will be able to successfully enforce our contractual rights included in the employment agreements we have entered into with our
management team, in particular in China, where almost all of these individuals reside. As a result, our business may be negatively affected due to the loss of
one or more members of our management.
If we are unable to attract, train and retain qualified personnel, our business may be materially and adversely affected.
We intend to hire and retain additional qualified employees to support our business operations and planned expansion. Our future success depends, to a
significant extent, on our ability to attract, train and retain qualified personnel, particularly management and operational personnel with expertise in the
express delivery industry, the e-commerce industry or other areas we expand into. Our experienced mid-level managers are instrumental in executing our
business plans, implementing our business strategies and supporting our business operations and growth, and we cannot assure you that we will be able to
attract or retain these qualified personnel.
We have made, and may need to continue to make, substantial capital expenditures, and will face risks that are inherent to such investment.
In order to carry out our strategies and expansion plan, we made significant capital expenditures on acquisition of land use rights, construction of
facilities and upgrading of delivery infrastructure in connection with the consolidation and organic growth of our business. We paid an aggregate of
approximately RMB790.1 million, RMB1.5 billion (US$225.7 million) and RMB866.6 million (US$130.4 million) in 2014, 2015 and the six months ended
June 30, 2016, respectively, for the acquisition of land use rights, fleet procurement, building of sorting facilities and purchase of equipment and other fixed
assets. To facilitate our future expansion, including the entry into new sectors such as less-than-truckload business, we may need to continue to make
substantial capital expenditures.
Significant capital expenditures are associated with certain inherent risks. We may not have the resources to fund such investment. Even if we have
sufficient funding, assets that best suit our needs may not be available at reasonable prices or at all. For example, land resources may be scarce in an area that
best fits our network expansion plan due to local zoning plan or other regulatory controls. In addition, we are likely to incur capital expenditures earlier than
all of the anticipated benefits, and the return on these investments may be lower, or may be realized more slowly, than we expected. In addition, the carrying
value of the related assets may be subject to impairment, which may adversely affect our financial
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conditions and operating results. Furthermore, our continued investment in land, construction and delivery infrastructure may put us at a competitive
disadvantage against competitors who spend less on these assets but focus more on improving other aspects of their business that are less capital heavy.
Our results of operations are subject to seasonal fluctuations.
We experience seasonality in our business, mainly reflecting the seasonality patterns associated with e-commerce in China. For example, our customers
generally experience less purchase orders during national holidays in China, particularly during the Chinese New Year holiday season in the first quarter of
each year. Furthermore, when e-commerce platforms hold special promotional campaigns, for example, on November 11 and December 12 each year, we
typically observe peaks of parcel volume following these campaigns. Our financial condition and results of operations for future periods may continue to
fluctuate. As a result, our results of operations and the trading price of our ADSs may fluctuate from time to time due to seasonality.
Fluctuations in the price or availability of fuel may adversely affect our results of operations.
The availability and price of fuel are subject to political, economic, and market factors that are outside of our control. Despite the recent decline in fuel
prices, there is a risk that fuel prices could rise significantly in future periods. In the event of significant fuel prices rise, our transportation expenses may rise
and our gross profits may decrease if we are unable to adopt any effective cost control-measures or pass on the incremental costs to our customers in the form
of service surcharges.
We may not be able to obtain additional capital when desired, on favorable terms or at all.
We anticipate that the net proceeds we receive from this offering, together with our current cash, cash provided by operating activities and funds
available through our bank loans and credit facilities, will be sufficient to meet our current and anticipated needs for general corporate purposes for at least
the next 12 months. However, we need to make continued investments in equipment, land, facilities and technological systems to remain competitive. Due to
the unpredictable nature of the capital markets and our industry, we cannot assure you that we will be able to raise additional capital on terms favorable to us,
or at all, if and when required, especially if we experience disappointing operating results. If adequate capital is not available to us as required, our ability to
fund our operations, take advantage of unanticipated opportunities, develop or enhance our infrastructure or respond to competitive pressures could be
significantly limited. If we cannot raise required capital when needed, we may be unable to meet the demands of existing and prospective customers, which
would adversely affect our business, financial condition and results of operations. If we do raise additional funds through the issuance of equity or
convertible debt securities, the ownership interests of our shareholders could be significantly diluted. These newly issued securities may have rights,
preferences or privileges senior to those of existing shareholders.
Our business and results of operations may be adversely affected if we are unable to integrate the businesses and assets we have acquired.
We have consolidated the businesses of certain of our network partners through asset purchase and/or equity purchase in the past three years, and we may
continue to do so in the future. We may not be able to successfully integrate the business and assets we have acquired. We may not be able to provide timely
and effective training to former employees of the acquired network partners after they become our employees. As a result, our business and results of
operations may be adversely affected.
A severe or prolonged downturn in the PRC or global economy could materially and adversely affect our business and our financial condition.
The global macroeconomic environment is facing challenges, including the escalation of the European sovereign debt crisis since 2011, the end of
quantitative easing by the U.S. Federal Reserve and the
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economic slowdown in the Eurozone in 2014. The PRC economy has slowed down since 2012 and such slowdown may continue. There is considerable
uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the
world's leading economies, including the United States and China. There have been concerns over unrest and terrorist threats in the Middle East, Europe and
Africa, which have resulted in volatility in oil and other markets, and over the conflicts involving Ukraine and Syria. There have also been concerns on the
relationship among China and other Asian countries, which may result in or intensify potential conflicts in relation to territorial disputes. Economic
conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or
perceived overall economic growth rate in China. Moreover, the United Nations population projections (2015) project a slowdown in increase in Chinese
population from 2015 to 2030 and a decrease in its population thereafter with the percentage of population over 60 predicted to more than double from 2015
to 2050. In the absence of substantial increase in per capita productivity, this projected change in Chinese demographics can result in decrease in overall
productivity and growth rates of the Chinese economy. Any severe or prolonged slowdown in the global or PRC economy may materially and adversely
affect our business, results of operations and financial condition. In addition, continued turbulence in the international markets may adversely affect our
ability to access capital markets to meet liquidity needs.
We have limited insurance coverage which could expose us to significant costs and business disruption.
We maintain various insurance policies to safeguard against risks and unexpected events. We have purchased compulsory motor vehicle liability
insurance and commercial insurance such as automobile third-party liability insurance, vehicle loss insurance and driver/passenger liability insurance. We
also provide social security insurance including pension insurance, unemployment insurance, work-related injury insurance and medical insurance for our
employees. We are not legally required to maintain insurance for parcel shipment. We do not maintain business interruption insurance or general third-party
liability insurance, nor do we maintain key-man life insurance. We cannot assure you that our insurance coverage is sufficient to prevent us from any loss or
that we will be able to successfully claim our losses under our current insurance policies on a timely basis, or at all. If we incur any loss that is not covered by
our insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial condition and results of operations could
be materially and adversely affected.
We rely on certain key operating metrics to evaluate the performance of our business, and real or perceived inaccuracies in such metrics may harm
our reputation and negatively affect our business.
We rely on certain key operating metrics, such as parcel volume and unit cost per parcel, to evaluate the performance of our business. Our operating
metrics may differ from estimates published by third parties or from similarly titled metrics used by our competitors due to differences in methodology and
assumptions. We calculate these operating metrics using internal company data that has not been independently verified. For example, our parcel volume
data is derived based on the number of parcels collected by our network partners using our waybills. If we discover material inaccuracies in the operating
metrics we use, or if they are perceived to be inaccurate, our reputation may be harmed and our evaluation methods and results may be impaired, which could
negatively affect our business. If investors make investment decisions based on operating metrics we disclose that are inaccurate, we may also face potential
lawsuits or disputes.
Failure to protect confidential information of our end customers or consumers could damage our reputation and substantially harm our business and
We have access to a large amount of confidential information in our day-to-day operations. Each waybill contains the names, addresses, phone numbers
and other contact information of the sender and recipient of a parcel. The content of the parcel may also constitute or reveal confidential information. The
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proper use and protection of confidential information is essential to maintaining customer trust and confidence in us.
Our technology system also processes and stores a significant amount of confidential information and data for the proper functioning of our network.
Security breaches and hackings to our system might result in a compromise to the technology that we use to protect confidential information. We may not be
able to prevent third parties, especially hackers or other individuals or entities engaging in similar activities, from illegally obtaining the confidential
information. Such individuals or entities may further engage in various other illegal activities using such information. On the other hand, as each parcel
moves through our network from pickup to delivery, a large number of personnel handle the parcel and have access to the relevant confidential information.
Some of them may misappropriate the confidential information, although we have adopted security policies and measures. Most of the delivery and pickup
personnel are not our employees, which makes it more difficult for us to implement sufficient and effective control over them.
Practices regarding the collection, use, storage, transmission and security of personal information have recently come under increased public scrutiny. In
the future, the PRC government may adopt new laws and regulations applying to the solicitation, collection, processing or use of personal or consumer
information. Compliance with such new laws and regulations could affect how we collect, store and process the information and require significant capital
and other resources.
Any failure or perceived failure by us to prevent information security breaches or to comply with privacy policies or privacy-related legal obligations
could cause our customers to lose trust in us. Any perception that the privacy of information is unsafe or vulnerable when using our services, could damage
our reputation and substantially harm our business.
We may fail to successfully make necessary or desirable strategic alliance, acquisition or investment, and we may not be able to achieve the benefits
we expect from the alliances, acquisition or investments we make.
We may pursue selected strategic alliances and potential strategic acquisitions that are complementary to our business and operations, including
opportunities that can help us further expand our service offerings and improve our technology system.
Strategic alliances with third parties could subject us to a number of risks, including risks associated with sharing proprietary information, nonperformance or default by counterparties, and increased expenses in establishing these new alliances, any of which may materially and adversely affect our
business. We may have limited ability to control or monitor the actions of our strategic partners. To the extent a strategic partner suffers any negative
publicity as a result of its business operations, our reputation may be negatively affected by virtue of our association with such party.
To consolidate and optimize our delivery capacity in key geographic areas within China, in 2014 and 2015, we acquired substantially all of the assets
from eight and 16 delivery companies, respectively. We acquired 60% equity interest in a network partner in January 2014, which was accounted for as
equity method investment. In January 2016, we acquired the remaining minority equity interest in this network partner. We have recorded goodwill as a
result of these acquisitions. If these companies do not subsequently generate the anticipated financial performance or if any goodwill impairment test
triggering event occurs, we may need to revalue or write down the value of goodwill and other intangible assets in connection with such acquisitions, which
would harm our results of operations. No impairment charge was recognized for the years ended December 31, 2014, 2015 and for the six months ended
June 30, 2016.
In addition, we may consider entering into strategic acquisition of other companies, businesses, assets or technologies that are complementary to our
business and operations as part of our growth strategy. Strategic acquisitions and subsequent integrations of newly acquired businesses would require
significant managerial and financial resources and could result in a diversion of resources from our existing business, which in turn could have an adverse
effect on our growth and business operations. Acquired businesses or assets may not generate expected financial results and may incur losses. The cost and
duration of
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integrating newly acquired businesses could also materially exceed our expectations. Any such negative developments could have a material adverse effect
on our business, financial condition and results of operations.
Our business is subject to the risks associated with international expansion initiatives.
Our current operations are almost exclusively in China, but we also offer express deliveries in other key overseas markets. We intend to continue to
explore and enter into other international expansion initiatives in the future. These initiatives involve countries we have limited experience with, and subject
us to various risks, including changes in economic and political conditions in those countries, changes in compliance with international laws and
regulations, changes in tariffs, trade restrictions, trade agreements and taxations, and difficulties in managing or overseeing operations outside China. The
occurrence or consequences of any of these risks may restrict our ability to operate in the affected country and/or decrease our profitability of our operations
in that country. We will also be exposed to increased risk of loss from foreign currency fluctuation and exchange controls as well as longer accounts
receivable payment cycles. We also may not alter our business practices in time to avoid or reduce adverse effects from any of the foregoing risks.
We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.
We regard our trademarks, domain names, trade secrets, proprietary technologies and other intellectual property as critical to our business. We rely on a
combination of intellectual property laws and contractual arrangements to protect our proprietary rights. It is often difficult to register, maintain and enforce
intellectual property rights in China. Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be applied
consistently due to the lack of clear guidance on statutory interpretation. Confidentiality agreements and license agreements may be breached by
counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our
intellectual property rights or to enforce our contractual rights in China. Policing any unauthorized use of our intellectual property is difficult and costly and
the steps we have taken may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our
intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no
assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently
discovered by, our competitors. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business,
financial condition and results of operations.
Our business and reputation may be harmed by unethical or anticompetitive business conducts within or in connection with our network.
There have been and may continue to be unethical or anticompetitive conducts within or in connection with our network, such as those with respect to
the procurement of resources and the pricing of delivery service charges. Although we have adopted protocols and disciplinary measures governing business
conduct of our employees and our customers, there can be no assurance that such measures are sufficient to prevent and deter them or their personnel from
acting unethically. Such conduct may include mishandling of funds or unlawful kick-backs during our raw material or equipment procurements. We are also
aware of certain e-commerce merchants initiating unsubstantiated brushing orders, such as parcels with valueless content, to themselves or their designated
parties with the intent to generate inflated consumer shopping records and consumer reviews and create perceived popularity among online consumers. These
brushing orders do not directly impact our revenues as our network partners generally are able to collect service charges from these merchants, who pay for
the delivery of the scalping parcels. Although we implement parcel screening procedures throughout our network, it is extremely difficult for
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us and our network partners to distinguish the scalping orders from the ones that are with a genuine purpose. We may be subject to heightened compliance
costs or even loss of business due to reduced e-commerce business volume if the PRC government cracks down on these unethical practices. We also have
little control over third parties involved in unethical or anticompetitive business conducts targeted at or in connection with our network. For example, we
cannot assure you that we will not be subject to third-party sabotage or allegations that are targeted at or relevant to us or our network partners. We may incur
substantial monetary losses and suffer reputational damage due to these conducts. We may even incur significant liabilities and penalties arising from
unethical conducts. We may also be required to allocate significant resources and incur material expenses to prevent unethical or anticompetitive conducts.
Our senior management has limited experience managing a public company, and regulatory compliance may divert their attention from the day-today management of our business.
Our senior management has limited experience managing a publicly traded company and limited experience complying with the increasingly complex
laws pertaining to public companies. Obligations associated with being a public company will require substantial attention from our senior management and
partially divert their attention away from the day-to-day management of our business, which could adversely impact our operations.
If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately report our results of operations, meet our
reporting obligations or prevent fraud.
Prior to this offering, we were a private company with limited accounting personnel and other resources with which to address our internal controls and
procedures. Our management has not completed an assessment of the effectiveness of our internal control over financial reporting and our independent
registered public accounting firm has not conducted an audit of our internal control over financial reporting. In the course of auditing our consolidated
financial statements for the year ended December 31, 2015, we and our independent registered public accounting firm identified one material weakness and
one significant deficiency in our internal control over financial reporting as well as other control deficiencies as of December 31, 2015, in accordance with
the standards established by the Public Company Accounting Oversight Board of the United States.
The material weakness identified relates to the lack of accounting personnel with appropriate knowledge of U.S. GAAP and SEC financial reporting
requirements and the lack of accounting policies and procedures over financial reporting in accordance with U.S. GAAP. The significant deficiency identified
relates to the lack of formal risk assessment process and internal control framework. We have implemented and are continuing to implement a number of
measures to address the material weakness and the deficiencies that have been identified. For details, see "Management's Discussion and Analysis of
Financial Condition and Results of OperationsInternal Control Over Financial Reporting." However, we cannot assure you that we will be able to continue
implementing these measures in the future, or that we will not identify additional material weaknesses or significant deficiencies in the future.
Upon the completion of this offering, we will become a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of
the Sarbanes-Oxley Act of 2002, or Section 404, will require that we include a report of management on our internal control over financial reporting in our
annual report on Form 20-F beginning with our annual report for the fiscal year ending December 31, 2017. In addition, once we cease to be an "emerging
growth company" as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of
our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even
if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after
conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are
documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company,
our reporting obligations
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may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely
complete our evaluation testing and any required remediation.
During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other
weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over
financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we
have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control
environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause
investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and
lead to a decline in the trading price of our ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud
or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal
sanctions.
The title defects with respect to or encumbrances on certain land and buildings may cause interruptions to our business operations.
We have not obtained land use rights with respect to three land parcels currently used by us, including approximately 33,333 square meters of the land
we currently use for our headquarters in Shanghai, and we have not obtained ownership with respect to 49 buildings currently used by us, including
33 buildings used as sorting facilities and 16 buildings used for general and administrative purposes. We are in the process of applying for the registration of
the land use right and property ownership. We expect to complete the registration of the land use rights of two parcels of land and ownership of 44 of those
buildings by December 2017. We are currently unable to estimate the length of time required to register the land use rights of the remaining one land parcel
and the ownership of the five buildings thereon, which are used as part of our corporate headquarters in Shanghai due to the lack of clarity in the local
authority's relevant policies. We have, however, obtained the land use right of an adjacent land parcel and have started to construct new buildings thereon,
which can, upon their completion, replace those five office buildings when necessary. We have not received any adverse decisions from relevant government
authorities relating to those 49 buildings as of the date of this prospectus. However, until we obtain use or ownership rights to such land and buildings, we
could be compelled to return the land to relevant government authority while the buildings located on such land could be confiscated or demolished. In
addition, a fine up to RMB30 per square meter may be imposed on us. Moreover, certain land use rights and the buildings we own in Shanghai and Suzhou
have been mortgaged to banks as collateral for our outstanding loans. In the event that the mortgage holder forecloses on the mortgage and transfers the
property to a third party, we may be forced to relocate these facilities. This could disrupt our operations and result in additional costs, which could adversely
affect our business, financial condition and results of operations.
Our use of certain leased properties could be challenged by third parties or governmental authorities, which may cause interruptions to our business
operations.
As of the date of this prospectus, approximately 69% of the lessors of our leased sorting hubs and offices have not provided us with their property
ownership certificates or any other documentation proving their right to lease those properties to us. If our lessors are not the owners of the properties and
they have not obtained consents from the owners or their lessors or permits from the relevant governmental authorities, our leases could be invalidated. If this
occurs, we may have to renegotiate the leases with the owners or other parties who have the right to lease the properties, and the terms of the new leases may
be less favorable to us. To our knowledge, some of the lessors of the leased delivery and pickup outlets have not provided our network partners with their
property ownership certificates or other documentation
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proving their right to lease those properties. If our network partners were to find replacement premises for their outlets due to any lease deficiencies, the daily
operations of such outlets may be negatively affected. In addition, a substantial portion of our leasehold interests in leased properties have not been
registered with the relevant PRC governmental authorities as required by relevant PRC laws. The failure to register leasehold interests may expose us to
potential fines.
Furthermore, some of our leased properties do not have title certificates, which means the owner or lessor of such property may not have the full right to
lease such property to us. For example, certain properties we lease in Beijing for our sorting hub and office does not have a title certificate due to lack of
approval obtained during its construction and the owner of such property had received notice from government authorities indicating that the construction
was illegal. Although relevant authorities have not mandated the owner to dismantle the property, our use of the leased property may be affected in the future.
In the event that our use of properties is successfully challenged, we may be subject to fines and forced to relocate from the affected operations. In addition,
we may become involved in disputes with the property owners or third parties who otherwise have rights to or interests in our leased properties. We are
currently using our best efforts to find an alternative location in Beijing, including purchasing a new piece of land, to mitigate the risk arising from such title
deficiency. However, we can provide no assurance that we will be able to find suitable replacement sites on terms acceptable to us on a timely basis, or at all,
or that we will not be subject to material liability resulting from third parties' challenges on our use of such properties. As a result, our business, financial
condition and results of operations may be materially and adversely affected.
Failure to renew our current leases or locate desirable alternatives for our facilities could materially and adversely affect our business.
We lease properties for our offices and sorting hubs. Some of our network partners lease properties for their pickup and delivery outlets. We and our
network partners may not be able to successfully extend or renew such leases upon expiration of the current term on commercially reasonable terms or at all,
and may therefore be forced to relocate the affected operations. This could disrupt our operations and result in significant relocation expenses, which could
adversely affect our business, financial condition and results of operations. In addition, we compete with other businesses for premises at certain locations or
of desirable sizes. As a result, even though we could extend or renew our leases, rental payments may significantly increase as a result of the high demand for
the leased properties. In addition, we may not be able to locate desirable alternative sites for our facilities as our business continues to grow and failure in
relocating our affected operations could adversely affect our business and operations.
Our failure to comply with regulations on commercial franchising may result in penalties to us.
Pursuant to the Regulations on Commercial Franchising promulgated by the State Council in February 2007 and Provisions on Administration of the
Record Filing of Commercial Franchises issued by Ministry of Commerce in December 2011, collectively the Regulations and Provisions on Commercial
Franchising, commercial franchising refers to the business activities where an enterprise that possesses the registered trademarks, enterprise logos, patents,
proprietary technology or any other business resources allows such business resources to be used by another business operator through contract and the
franchisee follows the uniform business model to conduct business operation and pay franchising fees according to the contract. We and our network partners
are therefore subject to regulations on commercial franchising. Under the relevant regulations, we are required to file our cooperation arrangements with
network partners with the Ministry of Commerce or its local counterparts, but we have not made such filings. As of the date of this prospectus, we have not
received any order from any governmental authorities to make such filing. If relevant authorities determine that we have failed to report franchising activities
in accordance with the regulations, we may be subject to fines ranging from RMB10,000 to RMB50,000 and if we fail to comply within the rectification
period determined by the competent governmental authority, we
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may be subject to an additional fine ranging from RMB50,000 to RMB100,000 and the relevant authority may issue a public reprimand.
Economic sanctions and anti-corruption laws imposed by the United States and other jurisdictions may expose us to potential compliance risks.
Sanctions laws prohibit business in or with certain countries or governments, and with certain persons or entities that have been sanctioned by the
United States or other governments and international or regional organizations, such as the United Nations Security Council. Although our primary market is
China, we intend to expand our international business, which may increase our exposure to international sanctions. For example, we have limited control
over the activities of our international business partners and investees, which may provide delivery services into jurisdictions that are subject to sanctions. In
addition, we intend to begin providing delivery services between the United States and China through our U.S. affiliate. Any U.S. affiliate and any
U.S. person employees will be subject to all U.S. economic sanctions requirements. We currently do not maintain internal controls for compliance with
applicable economic sanctions, and we cannot ensure that we do not inadvertently do business with sanctioned parties or provide delivery services for
products for higher-risk or prohibited end-uses. We also cannot predict with certainty the interpretation or implementation of any sanction laws or policies.
While we do not believe that we are in violation of any applicable sanctions or that any of our activities are currently sanctionable under applicable laws,
some of our activities or the activities of our affiliates could be exposed to penalties under these laws. Any alleged violations of sanctions could adversely
affect our reputation, business, results of operations and financial condition. Also, we may be subject to Foreign Corrupt Practices Act and Chinese and other
anti-corruption laws. Our activities in China create the risk of unauthorized payments or offers of payments by employees, consultants, agents or other
business partners of our company and its affiliates. We may also be held liable under successor liability for violations committed by companies in which we
invest or that we acquire.
We face risks related to severe weather conditions and other natural disasters, health epidemics and other outbreaks, which could significantly
disrupt our operations.
Our business could be adversely affected by severe weather conditions and natural disasters or the outbreak of avian influenza, severe acute respiratory
syndrome, the influenza A (H1N1), H7N9 or another epidemic. Any of such occurrences could cause severe disruption to our daily operations, and may even
require a temporary closure of our facilities. Such closures may disrupt our business operations and adversely affect our results of operations. Our operation
could also be disrupted if our suppliers, customers or business partners were affected by such natural disasters or health epidemics.
Risks Related to Our Corporate Structure
If the PRC government finds that the agreements that establish the structure for operating certain of our operations in China do not comply with PRC
regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject
to severe penalties or be forced to relinquish our interests in those operations.
Under current PRC laws and regulations, foreign enterprises or individuals may not invest in or operate domestic mail delivery services. According to the
Guidance Catalogue of Industries for Foreign Investment (most recently revised in 2015), foreign investment is prohibited in the establishment of any postal
enterprise and in domestic mail delivery services. Postal enterprises refer to the China Post Group and its wholly-owned enterprises or controlled enterprises
providing postal services, as well as other services including but not limited to mail delivery, postal remittances, savings and issuance of stamps and
production and sale of philatelic products.
We are a Cayman Islands company and our PRC subsidiaries are considered foreign-invested enterprises. Accordingly, none of our PRC subsidiaries is
eligible to operate domestic mail delivery services in China. It is also practically and economically not possible to separate the delivery of mail from the
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delivery of non-mail items in our day-to-day services. To ensure strict compliance with the PRC laws and regulations, we conduct such business activities
through ZTO Express, our consolidated affiliated entity, and its subsidiaries. Shanghai Zhongtongji Network, our wholly-owned subsidiary in China, has
entered into a series of contractual arrangements with ZTO Express and its 43 shareholders, which enable us to (1) exercise effective control over ZTO
Express, (2) receive substantially all of the economic benefits of ZTO Express, and (3) have an exclusive option to purchase all or part of the equity interests
and assets in ZTO Express when and to the extent permitted by PRC law. Because of these contractual arrangements, we have control over and are the primary
beneficiary of ZTO Express and hence consolidate its financial results as our variable interest entity under U.S. GAAP.
If the PRC government finds that our contractual arrangements do not comply with its restrictions on foreign investment in domestic express delivery
services of mail, or if the PRC government otherwise finds that we, ZTO Express, or any of its subsidiaries are in violation of PRC laws or regulations or lack
the necessary permits or licenses to operate our business, the relevant PRC regulatory authorities, would have broad discretion in dealing with such
violations or failures, including, without limitation:
revoking the business licenses and/or operating licenses of such entities;
discontinuing or placing restrictions or onerous conditions on our operation through any transactions between our PRC subsidiaries and
consolidated affiliated entities;
imposing fines, confiscating the income from our PRC subsidiaries or consolidated affiliated entities, or imposing other requirements with
which such entities may not be able to comply;
requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with our variable interest
entity and deregistering the equity pledges of our variable interest entity, which in turn would affect our ability to consolidate, derive
economic interests from, or exert effective control over our variable interest entity; or
restricting or prohibiting our use of the proceeds of this offering to finance our business and operations in China.
Any of these actions could cause significant disruption to our business operations and severely damage our reputation, which would in turn materially
and adversely affect our business, financial condition and results of operations. If any of these occurrences results in our inability to direct the activities of
our variable interest entity that most significantly impact its economic performance, and/or our failure to receive the economic benefits from our variable
interest entity, we may not be able to consolidate the entity in our consolidated financial statements in accordance with U.S. GAAP.
We rely on contractual arrangements with our variable interest entity and its shareholders for a substantial portion of our business operations, which
may not be as effective as direct ownership in providing operational control.
We have relied and expect to continue to rely on contractual arrangements with ZTO Express and its shareholders to operate domestic express delivery
services, including delivery of mail. For a description of these contractual arrangements, see "Corporate History and Structure." These contractual
arrangements may not be as effective as direct ownership in providing us with control over our variable interest entity. For example, our variable interest
entity and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct its operations in an acceptable
manner or taking other actions that are detrimental to our interests.
If we had direct ownership of ZTO Express, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of ZTO
Express, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under
the current contractual arrangements, we rely on the performance by our variable interest entity and its shareholders of their obligations under the contracts to
exercise control over our variable interest entity. The shareholders of our consolidated variable interest entity may not act in the best interests of our
company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate certain portion of
our business through the contractual arrangements with our variable interest entity. If any dispute relating to these contracts remains unresolved, we will have
to enforce our rights under these contracts through the operations of PRC law and arbitration, litigation and other legal proceedings and therefore will be
subject to uncertainties in the PRC legal system. Therefore, our contractual arrangements with our variable interest entity may not be as effective in ensuring
our control over the relevant portion of our business operations as direct ownership would be.
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Any failure by our variable interest entity or its shareholders to perform their obligations under our contractual arrangements with them would have
a material and adverse effect on our business.
If our variable interest entity or its shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur
substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC law, including
seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective under PRC law. For example, if the
shareholders of ZTO Express refuse to transfer their equity interest in ZTO Express to us or our designee if we exercise the purchase option pursuant to these
contractual arrangements, or if they otherwise act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual
obligations. Due to the significant number of shareholders in ZTO Express, we may not be able to obtain consent and cooperation from all the shareholders in
further actions with respect to ZTO Express, such as the transferring the shareholders' respective equity interests in ZTO Express to our designee. In addition,
if any third parties claim any interest in such shareholders' equity interests in ZTO Express, our ability to exercise shareholders' rights or foreclose the share
pledge according to the contractual arrangements may be impaired. For example, even though we have obtained spousal consents from spouses of our six key
shareholders of ZTO Express, who collectively hold 73.8% of the equity interests in ZTO Express, we have not required spousal consents to be entered into
by the rest of the shareholders of our variable interest entity. With respect to those shareholders, we cannot assure you that our WFOE will be able to exercise
or enforce its rights in full under our contractual arrangements in the event of a dispute between the shareholder and his or her spouse. If these or other
disputes between the shareholders of our variable interest entity and third parties were to impair our control over ZTO Express, our ability to consolidate the
financial results of our variable interest entity would be affected, which would in turn result in material adverse effect on our business, operations and
financial condition. All the agreements under our contractual arrangements are governed by PRC law and provide for the resolution of disputes through
arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with
PRC legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in
the PRC legal system could limit our ability to enforce these contractual arrangements. Meanwhile, there are very few precedents and little formal guidance
as to how contractual arrangements in the context of a variable interest entity should be interpreted or enforced under PRC law. There remain significant
uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC law, rulings by arbitrators are
final, parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the arbitration awards within a prescribed time limit, the
prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional
expenses and delay. In the event we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of
enforcing these contractual arrangements, we may not be able to exert effective control over our variable interest entity, and our ability to conduct our
business may be negatively affected.
The shareholders of our variable interest entity may have potential conflicts of interest with us, which may materially and adversely affect our
business and financial condition.
The shareholders of ZTO Express may have potential conflicts of interest with us. These shareholders may breach, or cause our variable interest entity to
breach, or refuse to renew, the existing contractual arrangements we have with them and our variable interest entity, which would have a material and adverse
effect on our ability to effectively control our variable interest entity and receive economic benefits from it. For example, the shareholders may be able to
cause our agreements with ZTO Express to be performed in a manner adverse to us by, among other things, failing to remit payments due under the
contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best
interests of our company or such conflicts will be resolved in our
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favor. Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company. If we cannot resolve
any conflict of interest or dispute between us and these shareholders, we would have to rely on legal proceedings, which could result in disruption of our
business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.
Contractual arrangements in relation to our variable interest entity may be subject to scrutiny by the PRC tax authorities and they may determine that
we or our PRC variable interest entity owe additional taxes, which could negatively affect our financial condition and the value of your investment.
Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax
authorities within ten years after the taxable year when the transactions are conducted. We could face material and adverse tax consequences if the PRC tax
authorities determine that the VIE contractual arrangements were not entered into on an arm's length basis in such a way as to result in an impermissible
reduction in taxes under applicable PRC laws, rules and regulations, and adjust income of ZTO Express in the form of a transfer pricing adjustment. A transfer
pricing adjustment could, among other things, result in a reduction of expense deductions recorded by ZTO Express for PRC tax purposes, which could in
turn increase its tax liabilities without reducing our PRC subsidiaries' tax expenses. In addition, the PRC tax authorities may impose late payment fees and
other penalties on ZTO Express for the adjusted but unpaid taxes according to the applicable regulations. Our financial position could be materially and
adversely affected if our variable interest entity's tax liabilities increase or if it is required to pay late payment fees and other penalties.
We may lose the ability to use and benefit from assets held by our consolidated affiliated entities that are material to the operation of certain portion
of our business if the entity goes bankrupt or becomes subject to a dissolution or liquidation proceeding.
As part of our contractual arrangements with ZTO Express, our consolidated affiliated entities hold certain assets that are material to the operation of
certain portion of our business, including sorting hub premises and sorting equipment. If ZTO Express goes bankrupt and all or part of their assets become
subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely
affect our business, financial condition and results of operations. Under the contractual arrangements, ZTO Express may not, in any manner, sell, transfer,
mortgage or dispose of their assets or legal or beneficial interests in the business without our prior consent. If ZTO Express undergoes a voluntary or
involuntary liquidation proceeding, the independent third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to
operate our business, which could materially and adversely affect our business, financial condition and results of operations.
Risks Related to Doing Business in China
Changes in China's economic, political or social conditions or government policies could have a material adverse effect on our business
and operations.
Substantially all of our assets and operations are located in China. Accordingly, our business, financial condition, results of operations and prospects
may be influenced to a significant degree by political, economic and social conditions in China generally. The Chinese economy differs from the economies
of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign
exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for
economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a
substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role
in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control
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over China's economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and
providing preferential treatment to particular industries or companies.
While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various
sectors of the economy, and the rate of growth has been slowing since 2012. Any adverse changes in economic conditions in China, in the policies of the
Chinese government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such
developments could adversely affect our business and operating results, lead to reduction in demand for our services and adversely affect our competitive
position. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these
measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may
be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has
implemented certain measures, including interest rate adjustment, to control the pace of economic growth. These measures may cause decreased economic
activity in China, which may adversely affect our business and operating results.
Uncertainties with respect to the PRC legal system could adversely affect us.
The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system
may be cited for reference but have limited precedential value.
In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall
effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investments in China.
However, China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of
economic activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC administrative
and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate
the outcome of administrative and court proceedings and the level of legal protection we enjoy. These uncertainties may affect our judgment on the
relevance of legal requirements and our ability to enforce our contractual rights or tort claims. In addition, the regulatory uncertainties may be exploited
through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from us.
Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all
and may have retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. In
addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management
attention.
We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have,
and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct
our business.
We are a Cayman Islands holding company and we rely principally on dividends and other distributions on equity from our PRC subsidiaries for our
cash requirements, including for services of any debt we may incur. Our subsidiaries' ability to distribute dividends is based upon their distributable earnings.
Current PRC regulations permit our PRC subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any,
determined in accordance with PRC accounting standards and regulations. In addition, each of our variable interest entity is required to set aside at least
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1 0 % of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. These reserves are not
distributable as cash dividends. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their
ability to pay dividends or make other payments to us. Any limitation on the ability of our PRC subsidiaries to distribute dividends or other payments to
their respective shareholders could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our
businesses, pay dividends or otherwise fund and conduct our business.
PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion
may delay or prevent us from using the proceeds of this offering to make loans to or make additional capital contributions to our PRC subsidiaries, which
could materially and adversely affect our liquidity and our ability to fund and expand our business.
Any funds we transfer to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration
with relevant governmental authorities in China. According to the relevant PRC regulations on FIEs in China, capital contributions to our PRC subsidiaries
are subject to the approval of the MOFCOM or its local branches and registration with other governmental authorities in China. In addition, (a) any foreign
loan procured by our PRC subsidiaries is required to be registered with the State Administration of Foreign Exchange, or SAFE, or its local branches, and
(b) each of our PRC subsidiaries may not procure loans which exceed the difference between its registered capital and its total investment amount as
approved by the MOFCOM or its local branches. Any medium or long term loan to be provided by us to our variable interest entity must be approved by the
NDRC and the SAFE or its local branches. We may not obtain these government approvals or complete such registrations on a timely basis, if at all, with
respect to future capital contributions or foreign loans by us to our PRC subsidiaries. If we fail to receive such approvals or complete such registration, our
ability to use the proceeds of this offering and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and
our ability to fund and expand our business.
In 2008, the SAFE promulgated the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and
Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142. SAFE Circular 142 regulates the conversion by FIEs of foreign
currency into Renminbi by restricting the usage of converted Renminbi. SAFE Circular 142 provides that any Renminbi capital converted from registered
capitals in foreign currency of FIEs may only be used for purposes within the business scopes approved by PRC governmental authority and such Renminbi
capital may not be used for equity investments within China unless otherwise permitted by the PRC law. In addition, the SAFE strengthened its oversight of
the flow and use of the Renminbi capital converted from registered capital in foreign currency of FIEs. The use of such Renminbi capital may not be changed
without SAFE approval, and such Renminbi capital may not in any case be used to repay Renminbi loans if the proceeds of such loans have not been
utilized. As a result, we are required to apply Renminbi funds converted from the net proceeds we received from this offering within the business scopes of
our PRC subsidiaries. On April 8, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange
Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19. SAFE Circular 19 took effect as of June 1, 2015 and superseded SAFE Circular 142
on the same date. SAFE Circular 19 launched a nationwide reform of the administration of the settlement of the foreign exchange capitals of FIEs and allows
FIEs to settle their foreign exchange capital at their discretion, but continues to prohibit FIEs from using the Renminbi fund converted from their foreign
exchange capitals for expenditure beyond their business scopes. SAFE Circular 19 may significantly limit our ability to transfer to and use in China the net
proceeds from this offering, which may adversely affect our business, financial condition and results of operations.
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PRC regulation of loans by offshore holding companies to PRC entities and governmental control of currency conversion may limit our ability to
fund the operations of our consolidated variable interest entity.
Due to the restrictions imposed on loans in foreign currencies extended to any PRC domestic companies, we are not likely to have our Cayman Islands
holding company or other offshore entities to use the proceeds from this offering to extend loans to our variable interest entity, a PRC domestic company.
Meanwhile, we are not likely to finance the activities of our variable interest entity by means of capital contributions due to regulatory restrictions relating to
foreign investment in PRC domestic enterprises engaged in domestic express delivery services of mail. In addition, due to the restrictions on a foreigninvested enterprise's use of Renminbi converted from foreign-currency registered capital under PRC regulations, including but not limited to SAFE
Circular 19, as described under the foregoing risk factor, our PRC subsidiaries may be unable to use the Renminbi converted from their registered capital to
provide loans to our variable interest entity. We currently do not plan to use the proceeds from this offering to fund the operations of ZTO Express, our
variable interest entity. Additionally, our PRC subsidiaries are not prohibited under PRC laws and regulations from using their capital generated from their
operating activities to provide entrusted loans through financial institutions to our variable interest entity. We will assess the working capital requirements of
our variable interest entity on an ongoing basis and, if needed, may have our PRC subsidiaries to use their capital from operating activities to provide
financial support to our variable interest entity.
Fluctuations in exchange rates could have a material and adverse effect on our results of operations and the value of your investment.
The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and
economic conditions in China and by China's foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging
the value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between
July 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. Since
June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or
U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.
Significant revaluation of the Renminbi may have a material and adverse effect on your investment. For example, to the extent that we need to convert
U.S. dollars we receive from this offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect
on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making
payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a
negative effect on the U.S. dollar amount available to us.
Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging
transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the
availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency
exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency.
Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.
The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out
of China. We receive substantially all of our revenues
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in Renminbi. Under our current corporate structure, our Cayman Islands holding company primarily relies on dividend payments from our PRC subsidiaries
to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including
profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval
of the SAFE by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash
generated from the operations of our PRC subsidiaries in China may be used to pay dividends to our company. However, approval from or registration with
appropriate governmental authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses
such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of
our PRC subsidiaries and variable interest entity to pay off their respective debt in a currency other than Renminbi owed to entities outside China, or to make
other capital expenditure payments outside China in a currency other than Renminbi. The PRC government may at its discretion restrict access to foreign
currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to
satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.
Certain PRC regulations may make it more difficult for us to pursue growth through acquisitions.
Among other things, the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, established
additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such
regulation requires, among other things, that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor acquires
control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions on Thresholds for Prior
Notification of Concentrations of Undertakings, issued by the State Council in 2008, were triggered. Moreover, the Anti-Monopoly Law promulgated by the
Standing Committee of the NPC which became effective in 2008 requires that transactions which are deemed concentrations and involve parties with
specified turnover thresholds must be cleared by the MOFCOM before they can be completed. In addition, PRC national security review rules which became
effective in September 2011 require acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are crucial
to national security be subject to security review before consummation of any such acquisition. We may pursue potential strategic acquisitions that are
complementary to our business and operations. Complying with the requirements of these regulations to complete such transactions could be timeconsuming, and any required approval processes, including obtaining approval or clearance from the MOFCOM, may delay or inhibit our ability to complete
such transactions, which could affect our ability to expand our business or maintain our market share.
PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial
owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries' ability to
increase their registered capital or distribute profits to us, or may otherwise adversely affect us.
In July 2014, SAFE has promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents' Offshore Investment
and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37, to replace the Notice on Relevant Issues Concerning
Foreign Exchange Administration for Domestic Residents' Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or SAFE
Circular 75, which ceased to be effective upon the promulgation of SAFE Circular 37. SAFE Circular 37 requires PRC residents (including PRC individuals
and PRC corporate entities) to register with local branches of SAFE in connection with their direct or
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indirect offshore investment activities. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore
acquisitions that we make in the future.
Under SAFE Circular 37, PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments in
offshore special purpose vehicles, or SPVs, will be required to register such investments with the SAFE or its local branches. In addition, any PRC resident
who is a direct or indirect shareholder of an SPV, is required to update its filed registration with the local branch of SAFE with respect to that SPV, to reflect
any material change. Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders to update their registration with the
local branch of SAFE. If any PRC shareholder of such SPV fails to make the required registration or to update the previously filed registration, the subsidiary
of such SPV in China may be prohibited from distributing its profits or the proceeds from any capital reduction, share transfer or liquidation to the SPV, and
the SPV may also be prohibited from making additional capital contribution into its subsidiary in China. On February 28, 2015, the SAFE promulgated a
Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, which became effective on
June 1, 2015. Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct investment and outbound overseas direct
investment, including those required under the SAFE Circular 37, will be filed with qualified banks instead of the SAFE. The qualified banks will directly
examine the applications and accept registrations under the supervision of the SAFE.
All of our shareholders that we are aware of being subject to the SAFE regulations have completed all necessary registrations with the local SAFE branch
or qualified banks as required by SAFE Circular 37 in March 2015. We cannot assure you, however, that all of these individuals may continue to make
required filings or updates on a timely manner, or at all. We can provide no assurance that we are or will in the future continue to be informed of identities of
all PRC residents holding direct or indirect interest in our company. Any failure or inability by such individuals to comply with the SAFE regulations may
subject us to fines or legal sanctions, such as restrictions on our cross-border investment activities or our PRC subsidiaries' ability to distribute dividends to,
or obtain foreign exchange-denominated loans from, our company or prevent us from making distributions or paying dividends. As a result, our business
operations and our ability to make distributions to you could be materially and adversely affected.
Furthermore, as these foreign exchange regulations are still relatively new and their interpretation and implementation has been constantly evolving, it is
unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by
the relevant governmental authorities. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange
activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of
operations. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be,
will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may
restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.
Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans of overseas, publicly-listed
company may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
Pursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies may submit
applications to SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose companies. In the meantime, our
directors, executive officers and other employees who are PRC citizens or who are non-PRC residents residing in the PRC for a continuous period of not less
than one year, subject to limited exceptions, and who have been granted incentive share awards by us, may follow the Notices on Issues Concerning the
Foreign Exchange
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Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-Listed Company, promulgated by the SAFE in 2012.
Pursuant to the 2012 SAFE notices, PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate
in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic
qualified agent, which could be the PRC subsidiaries of such overseas listed company, and complete certain other procedures. In addition, an overseas
entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and
interests. We and our executive officers and other employees who are PRC citizens or who reside in the PRC for a continuous period of not less than one year
and who have been granted options will be subject to these regulations when our company becomes an overseas listed company upon the completion of this
offering. Failure to complete the SAFE registrations may subject them to fines of up to RMB300,000 for entities and up to RMB50,000 for individuals, and
legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries and limit our PRC subsidiaries' ability to distribute
dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers
and employees under PRC law. See "PRC RegulationRegulations Relating to Employee Stock Incentive Plan."
The State Administration of Taxation, or SAT, has issued certain circulars concerning employee share options and restricted shares. Under these circulars,
our employees working in China who exercise share options or are granted restricted shares will be subject to PRC individual income tax. Our PRC
subsidiaries have obligations to file documents related to employee share options or restricted shares with relevant tax authorities and to withhold individual
income taxes of those employees who exercise their share options. If our employees fail to pay or we fail to withhold their income taxes according to relevant
laws and regulations, we may face sanctions imposed by the tax authorities or other PRC governmental authorities. See "PRC RegulationRegulations
Relating to Employee Stock Incentive Plan."
If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavourable tax consequences to us
and our non-PRC shareholders or ADS holders.
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with "de facto management body"
within the PRC is considered a "resident enterprise" and will be subject to the enterprise income tax on its global income at the rate of 25%. The
implementation rules define the term "de facto management body" as the body that exercises full and substantial control and overall management over the
business, productions, personnel, accounts and properties of an enterprise. In 2009, the SAT, issued a circular, known as SAT Circular 82, which provides
certain specific criteria for determining whether the "de facto management body" of a PRC-controlled enterprise that is incorporated offshore is located in
China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC
individuals or foreigners, the criteria set forth in the circular may reflect the SAT's general position on how the "de facto management body" text should be
applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, an offshore incorporated enterprise controlled by a
PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its "de facto management body" in China and will be
subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day
operational management is in the PRC; (ii) decisions relating to the enterprise's financial and human resource matters are made or are subject to approval by
organizations or personnel in the PRC; (iii) the enterprise's primary assets, accounting books and records, company seals, and board and shareholder
resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.
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We believe that ZTO Express (Cayman) Inc. is not a PRC resident enterprise for PRC tax purposes. See "PRC RegulationRegulations Relating to Tax
Enterprise Income Tax." However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain
with respect to the interpretation of the term "de facto management body." If the PRC tax authorities determine that ZTO Express (Cayman) Inc. is a PRC
resident enterprise for enterprise income tax purposes, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that
are non-resident enterprises, including the holders of our ADSs. In addition, non-resident enterprise shareholders (including our ADS holders) may be subject
to PRC tax on gains realized on the sale or other disposition of ADSs or ordinary shares, if such income is treated as sourced from within the PRC.
Furthermore, if we are deemed a PRC resident enterprise, dividends payable to our non-PRC individual shareholders (including our ADS holders) and any
gain realized on the transfer of ADSs or ordinary shares by such shareholders may be subject to PRC tax at a rate of 20% unless a reduced rate is available
under an applicable tax treaty. It is unclear whether non-PRC shareholders of ZTO Express (Cayman) Inc. would be able to claim the benefits of any tax
treaties between their country of tax residence and the PRC in the event that ZTO Express (Cayman) Inc. is treated as a PRC resident enterprise.
Value-added tax, or VAT, is imposed to replace the business tax, which could result in unfavourable tax consequences to us.
The Ministry of Finance and the SAT promulgated the Circular on the Inclusion of the Railway Transportation Industry and Postal Service Industry in
the Pilot Collection of Value-added Tax to Replace Business Tax, or Circular 106. Pursuant to Circular 106, starting from January 1, 2014, a VAT rate of 6%
applies to revenue derived from the provision of express delivery services, and a VAT rate of 11% applies to revenue derived from provision of transportation
services, which is higher than the previously applicable 5% and 3% business tax rate. In 2016, the Ministry of Finance and the SAT promulgated the Circular
on Comprehensively Promoting the Pilot Program of the Collection of Value-added Tax to Replace Business Tax, or Circular 36. Circular 36 took effect as of
May 1, 2016 and superseded Circular 106 on the same date. Circular 36 expanded the application of VAT in replacement business tax to enterprises
engaging in the building industry, the real estate industry, the financial industry and the life service industry on a nationwide basis. According to Circular 36,
the VAT rates applicable to revenue derived from the provision of express delivery services and revenue derived from provision of transportation services
remain the same (6% and 11% respectively) as those under Circular 106. Although a taxpayer is allowed to offset the qualified input VAT paid on taxable
purchases against the output VAT chargeable on the revenue from services provided, our effective tax rate could be higher. The replacement of the business
tax with a VAT on our services could result in unfavorable tax consequences to us. See "PRC RegulationPRC Value-Added Tax".
We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT
Circular 698, issued by the SAT in 2009 with retroactive effect from January 1, 2008, where a non-resident enterprise transfers the equity interests of a PRC
resident enterprise indirectly by disposition of the equity interests of an overseas holding company, or an Indirect Transfer, and such overseas holding
company is located in a tax jurisdiction that: (a) has an effective tax rate less than 12.5% or (b) does not tax foreign income of its residents, the non-resident
enterprise, being the transferor, shall report to the competent tax authority of the PRC resident enterprise this Indirect Transfer.
On February 3, 2015, the SAT issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax
Resident Enterprises, or SAT Public Notice 7. SAT
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Public Notice 7 supersedes the rules with respect to the Indirect Transfer under SAT Circular 698, but does not touch upon the other provisions of SAT
Circular 698, which remain in force. SAT Public Notice 7 has introduced a new tax regime that is significantly different from the previous one under SAT
Circular 698. SAT Public Notice 7 extends its tax jurisdiction to not only Indirect Transfers set forth under SAT Circular 698 but also transactions involving
transfer of other taxable assets through offshore transfer of a foreign intermediate holding company. In addition, SAT Public Notice 7 provides clearer criteria
than SAT Circular 698 for assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase
and sale of equity through a public securities market. SAT Public Notice 7 also brings challenges to both foreign transferor and transferee (or other person
who is obligated to pay for the transfer) of taxable assets. Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity
interests of an overseas holding company, which is an Indirect Transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that
directly owns the taxable assets, may report such Indirect Transfer to the relevant tax authority. Using a "substance over form" principle, the PRC tax
authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of
reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the
transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of
equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to
withhold the taxes and the transferor fails to pay the taxes.
We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as
offshore restructuring, sale of the shares in our offshore subsidiaries or investments. Our company may be subject to filing obligations or taxed if our
company is transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transactions, under SAT
Circular 698 and SAT Public Notice 7. For transfer of shares in our company by investors that are non-PRC resident enterprises, our PRC subsidiaries may be
requested to assist in the filing under SAT Circular 698 and SAT Public Notice 7. As a result, we may be required to expend valuable resources to comply
with SAT Circular 698 and SAT Public Notice 7 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or
t o establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results
of operations.
We may be required to register our operating offices outside of our residence addresses as branch offices under PRC law.
Under PRC law, a company setting up premises for business operations outside its residence address must register them as branch offices with the local
industry and commerce bureau at the place where the premises are located and obtain business licenses for them as branch offices. We operate 68 sorting hubs
across China as of June 30, 2016. We registered branch offices in all of the 68 cities where we have sorting hubs as of the date of this prospectus. However, we
may expand our delivery network in the future to additional locations in China, and we may not be able to register branch offices in a timely manner due to
complex procedural requirements and relocation of branch offices from time to time. If the PRC regulatory authorities determine that we are in violation of
the relevant laws and regulations, we may be subject to penalties, including fines, confiscation of income and suspension of operation. If we become subject
to these penalties, our business, results of operations, financial condition and prospects could be adversely affected.
Our failure to fully comply with PRC labor-related laws may expose us to potential penalties.
Companies operating in China are required to participate in various government sponsored employee benefit plans, including certain social insurance,
housing funds and other welfare-oriented payment
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obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our employees up to a
maximum amount specified by the local government from time to time at locations where we operate our businesses. The requirement of employee benefit
plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations.
We did not pay, or were not able to pay, certain past social security and housing fund contributions in strict compliance with the relevant PRC regulations for
and on behalf of our employees due to differences in local regulations and inconsistent implementation or interpretation by local authorities in the PRC and
varying levels of acceptance of the housing fund system by our employees. Although we have recorded accruals for estimated underpaid amounts in our
financial statements, we may be subject to fines and penalties for our failure to make payments in accordance with the applicable PRC laws and regulations.
We may be required to make up the contributions for these plans as well as to pay late fees and fines. We have not made any accruals for the interest on
underpayments and penalties that may be imposed by the relevant PRC government authorities in the financial statements. If we are subject to late fees or
fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected.
In December 2012, the Labor Contract Law was amended to impose more stringent requirements on the use of employees of temp agencies, who are
known in China as "dispatched workers". For example, the number of dispatched workers may not exceed a certain percentage of the total number of
employees and the dispatched workers can only engage in temporary, auxiliary or substitute work. According to the Interim Provisions on Labor Dispatch
promulgated on March 1, 2014, the number of dispatched workers hired by an employer may not exceed 10% of the total number of its employees. As of
June 30, 2016, the number of dispatched workers in two of the subsidiaries of our variable interest entity and one of the subsidiaries of Shanghai Zhongtongji
Network exceeded 10% of the total number of their employees. While we expect to formulate and implement a plan and reduce the percentage of dispatched
workers to below 10%, we cannot assure you that we will be able to find replacement for dispatched workers on a timely basis or without incurring increasing
labor and administrative costs. In addition, since the application and interpretation of the amended PRC Labor Contract Law and the Interim Provisions on
Labor Dispatch are limited and uncertain, we cannot assure you the type of work that our dispatched workers perform will be deemed as temporary, auxiliary
or substitute work under the PRC Labor Contract Law. If we fail to reduce and keep the number of our dispatched workers to below 10% or if we are found to
be in violation of any other requirements under the amended Labor Contract Law or the Interim Provisions on Labor Dispatch, we may be ordered by the
labor authority to rectify the non-compliance by entering into written employment contracts with the dispatched workers. If we fail to comply within the time
period specified by the labor authority, we may be subject to a penalty ranging from RMB5,000 to RMB10,000 per dispatched worker.
The audit report included in this prospectus is prepared by an auditor who is not inspected by the Public Company Accounting Oversight Board and,
as such, you are deprived of the benefits of such inspection
Our independent registered public accounting firm that issues the audit reports included in this annual report, as an auditor of companies that are traded
publicly in the United States and a firm registered with the Public Company Accounting Oversight Board, or the PCAOB, is required by the laws of the
United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards. Because
our auditors are located in China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities,
our auditors are not currently inspected by the PCAOB.
Inspections of other firms that the PCAOB has conducted outside of China have identified deficiencies in those firms' audit procedures and quality
control procedures, which may be addressed as part of the inspection process to improve future audit quality. This lack of PCAOB inspections in China
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prevents the PCAOB from regularly evaluating our auditors' audits and its quality control procedures. As a result, investors may be deprived of the benefits of
PCAOB inspections.
The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditors' audit
procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections. Investors may lose confidence in
our reported financial information and procedures and the quality of our financial statements.
Proceedings instituted by the SEC against five PRC-based accounting firms, including our independent registered public accounting firm, could
result in financial statements being determined to not be in compliance with the requirements of the Exchange Act.
Starting in 2011 the Chinese affiliates of the "big four" accounting firms, including our independent registered public accounting firm, were affected by a
conflict between U.S. and Chinese law. Specifically, for certain U.S.-listed companies operating and audited in mainland China, the SEC and the PCAOB
sought to obtain from the Chinese firms access to their audit work papers and related documents. The firms were, however, advised and directed that under
Chinese law, they could not respond directly to the U.S. regulators on those requests, and that requests by foreign regulators for access to such papers in
China had to be channeled through the CSRC.
In late 2012, this impasse led the SEC to commence administrative proceedings under Rule 102(e) of its Rules of Practice and also under the SarbanesOxley Act of 2002 against the Chinese accounting firms, including our independent registered public accounting firm. A first instance trial of the
proceedings in July 2013 in the SEC's internal administrative court resulted in an adverse judgment against the firms. The administrative law judge proposed
penalties on the firms including a temporary suspension of their right to practice before the SEC, although that proposed penalty did not take effect pending
review by the Commissioners of the SEC. On February 6, 2015, before a review by the Commissioner had taken place, the firms reached a settlement with the
SEC. Under the settlement, the SEC accepts that future requests by the SEC for the production of documents will normally be made to the CSRC. The firms
will receive matching Section 106 requests, and are required to abide by a detailed set of procedures with respect to such requests, which in substance require
them to facilitate production via the CSRC. If they fail to meet specified criteria, the SEC retains authority to impose a variety of additional remedial
measures on the firms depending on the nature of the failure. Remedies for any future noncompliance could include, as appropriate, an automatic six-month
bar on a single firm's performance of certain audit work, commencement of a new proceeding against a firm, or in extreme cases the resumption of the current
proceeding against all four firms.
In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, listed companies in the United States with major
PRC operations may find it difficult or impossible to retain auditors in respect of their operations in the PRC, which could result in financial statements being
determined to not be in compliance with the requirements of the Exchange Act, including possible delisting. Moreover, any negative news about any such
future proceedings against these audit firms may cause investor uncertainty regarding China-based, U.S.-listed companies and the market price of our
common stock may be adversely affected.
If our independent registered public accounting firm was denied, even temporarily, the ability to practice before the SEC and we were unable to timely
find another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined not to
be in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to the delisting of our ADSs from the New York
Stock Exchange or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the
United States.
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Risks Related to Our ADSs and This Offering
An active trading market for our ordinary shares or our ADSs may not develop and the trading price for our ADSs may fluctuate significantly.
We expect to list our ADSs on the New York Stock Exchange. We have no current intention to seek a listing for our ordinary shares on any stock
exchange. Prior to the completion of this offering, there has been no public market for our ADSs or our ordinary shares, and we cannot assure you that a liquid
public market for our ADSs will develop. If an active public market for our ADSs does not develop following the completion of this offering, the market price
and liquidity of our ADSs may be materially and adversely affected. The initial public offering price for our ADSs will be determined by negotiation between
us and the underwriters based upon several factors, and we can provide no assurance that the trading price of our ADSs after this offering will not decline
below the initial public offering price. As a result, investors in our securities may experience a significant decrease in the value of their ADSs.
The trading price of our ADSs is likely to be volatile, which could result in substantial losses to investors.
The trading price of our ADSs is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad
market and industry factors, including the performance and fluctuation of the market prices of other companies with business operations located mainly in
China that have listed their securities in the United States. In addition to market and industry factors, the price and trading volume for our ADSs may be
highly volatile for factors specific to our own operations, including the following:
variations in our revenues, earnings and cash flow;
announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors;
announcements of new offerings, solutions and expansions by us or our competitors;
changes in financial estimates by securities analysts;
detrimental adverse publicity about us, our services or our industry;
additions or departures of key personnel;
release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and
potential litigation or regulatory investigations.
Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade.
In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in
the market price of their securities. If we were involved in a class action suit, it could divert a significant amount of our management's attention and other
resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any
such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is
successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and
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Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from
pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
Immediately prior to the completion of this offering and subject to the approval of our existing shareholders, we expect to create a dual-class share
structure such that our ordinary shares will consist of Class A ordinary shares and Class B ordinary shares. In respect of matters requiring the votes of
shareholders, holders of Class A ordinary shares will be entitled to one vote per share, while holders of Class B ordinary shares will be entitled to ten votes per
share based on our proposed dual-class share structure. We will sell Class A ordinary shares represented by our ADSs in this offering. Each Class B ordinary
share is convertible into one Class A ordinary share at any time by the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary
shares under any circumstances. Upon any transfer of Class B ordinary shares by a holder thereof to any person or entity which is not an affiliate of such
holder, such Class B ordinary shares shall be automatically and immediately converted into the equal number of Class A ordinary shares.
Immediately prior to the completion of this offering and subject to the approval of our existing shareholders, 206,100,000 ordinary shares held by Zto
Lms Holding Limited, a British Virgin Islands company wholly owned by Mr. Meisong Lai, will be redesignated as Class B ordinary shares. Mr. Meisong Lai,
who beneficially owns 32.6% of the aggregate voting power of our company as of the date of this prospectus, will beneficially own approximately
% of
the aggregate voting power of our company immediately after the completion of this offering due to the disparate voting powers associated with our dualclass share structure, assuming the underwriters do not exercise their over-allotment option. See "Principal Shareholders." As a result of the dual-class share
structure and the concentration of ownership, Mr. Meisong Lai will have considerable influence over matters such as decisions regarding mergers,
consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. He may take actions that are
not in the best interest of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our company,
which could have the effect of depriving our other shareholders of the opportunity to receive a premium for their shares as part of a sale of our company and
may reduce the price of our ADSs. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing
any potential merger, takeover or other change of control transactions that holders of Class A ordinary shares and ADSs may view as beneficial.
Certain existing shareholders have substantial influence over our company and their interests may not be aligned with the interests of our other
shareholders.
As of the date of this prospectus, our directors and executive officers collectively own an aggregate of 58.9% of our outstanding share capital on a fullyconverted basis. Upon the completion of this offering, they will collectively own an aggregate of
% of our outstanding ordinary shares,
representing
% of the total voting power of our outstanding ordinary shares immediately after the completion of this offering, assuming the
underwriters do not exercise their over-allotment option. As a result, they have substantial influence over our business, including significant corporate
actions such as mergers, consolidations, sales of all or substantially all of our assets, election of directors and other significant corporate actions.
They may take actions that are not in the best interest of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a
change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our
company and may reduce the price of the ADSs. These actions may be taken even if they are opposed by our other shareholders, including those who
purchase ADSs in this offering. In addition, the significant concentration of share ownership may adversely affect the trading price of the ADSs due to
investors'
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perception that conflicts of interest may exist or arise. For more information regarding our principal shareholders and their affiliated entities, see "Principal
Shareholders."
We have granted, and may continue to grant, share incentives, which may result in increased share based compensation expenses.
We adopted the 2016 Share Incentive Plan in June 2016 for the purpose of granting share based compensation awards to employees, directors and
consultants to incentivize their performance and align their interests with ours. As approved by our board of directors, the 2016 Share Incentive Plan was
amended and restated in August 2016. We account for compensation costs for all share options using a fair-value based method and recognize expenses in
our consolidated statements of comprehensive income in accordance with U.S. GAAP. Under the 2016 Share Incentive Plan (as amended and restated), or the
2016 Plan, we are authorized to grant options, restricted shares and other types of awards the administrator of the 2016 Plan decides. Under the 2016 Plan, the
maximum aggregate number of shares which may be issued pursuant to all awards under the 2016 Plan is initially 3,000,000, plus an annual increase on the
first day of each of our fiscal year during the term of the 2016 Plan commencing with the fiscal year beginning January 1, 2017, by an amount equal to the
least of (i) 0.5% of the total number of shares issued and outstanding on the last day of the immediately preceding fiscal year; (ii) 3,000,000 shares; or
(iii) such number of shares as may be determined by our board of directors. As of the date of this prospectus, options to purchase 300,000 ordinary shares have
been granted and outstanding, excluding awards that were forfeited or cancelled after the relevant grant dates. In June 2016, we also established an employee
share holding platform to allow our employees in the PRC to receive share incentives. We issued 16,000,000 ordinary shares to the holding vehicle of this
platform to establish a reserve pool for future grants of share incentives. As of the date of this prospectus, we have awarded certain rights associated with
4,558,164 ordinary shares through this platform as share incentives. We account for shared-based compensation for these share incentive awards using a fair
value based method and recognize expenses in our consolidated statements of comprehensive income in accordance with U.S. GAAP. We will incur
additional share based compensation expenses in the future as we continue to grant share incentives using the ordinary shares reserved for this platform. We
believe the granting of share-based compensation is of significant importance to our ability to attract and retain key personnel and employees, and we will
continue to grant share based compensation to employees in the future. As a result, our expenses associated with share-based compensation may increase,
which may have an adverse effect on our results of operations.
If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding
our ADSs, the market price for our ADSs and trading volume could decline.
The trading market for our ADSs will be influenced by research or reports that industry or securities analysts publish about our business. If one or more
analysts who cover us downgrade our ADSs, the market price for our ADSs would likely decline. If one or more of these analysts cease to cover us or fail to
regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for our ADSs
to decline.
The sale or availability for sale of substantial amounts of our ADSs could adversely affect their market price.
Sales of substantial amounts of our ADSs in the public market after the completion of this offering, or the perception that these sales could occur, could
adversely affect the market price of our ADSs and could materially impair our ability to raise capital through equity offerings in the future. The ADSs sold in
this offering will be freely tradable without restriction or further registration under the Securities Act, and shares held by our existing shareholders may also
be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701 under the Securities Act and the applicable lock-up agreements.
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There will be
ADSs (equivalent to
Class A ordinary shares) outstanding immediately after this offering, or
ADSs (equivalent to
Class A ordinary shares) if the underwriters exercise their over-allotment option in full. In connection with this offering, we, our directors and officers and our
existing shareholders have agreed not to sell any ordinary shares or ADSs for 180 days after the date of this prospectus without the prior written consent of the
underwriters, subject to certain exceptions. However, the underwriters may release these securities from these restrictions at any time, subject to applicable
regulations of the Financial Industry Regulatory Authority, Inc. We cannot predict what effect, if any, market sales of securities held by our significant
shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our ADSs. See "Underwriting" and
"Shares Eligible for Future Sale" for a more detailed description of the restrictions on selling our securities after this offering.
Because we do not expect to pay dividends in the foreseeable future after this offering, you must rely on price appreciation of our ADSs for return on
your investment.
We currently intend to retain most, if not all, of our available funds and any future earnings after this offering to fund the development and growth of our
business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our ADSs as a
source for any future dividend income.
Our board of directors has complete discretion as to whether to distribute dividends. Even if our board of directors decides to declare and pay dividends,
the timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus,
the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by
our board of directors. Accordingly, the return on your investment in our ADSs will likely depend entirely upon any future price appreciation of our ADSs.
There is no guarantee that our ADSs will appreciate in value after this offering or even maintain the price at which you purchased the ADSs. You may not
realize a return on your investment in our ADSs and you may even lose your entire investment in our ADSs.
We have not determined a specific use for a portion of the net proceeds from this offering and we may use these proceeds in ways with which you may
not agree.
We have not determined a specific use for a portion of the net proceeds of this offering, and our management will have considerable discretion in
deciding how to apply these proceeds. You will not have the opportunity to assess whether the proceeds are being used appropriately before you make your
investment decision. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. We cannot assure you
that the net proceeds will be used in a manner that would improve our results of operations or increase our ADS price, nor that these net proceeds will be
placed only in investments that generate income or appreciate in value.
The approval of the China Securities Regulatory Commission may be required in connection with this offering under PRC law.
The M&A Rules, which were adopted in 2006 by six PRC regulatory agencies, including the CSRC, purport to require offshore special purpose vehicles
that are controlled by PRC companies or individuals and that have been formed for the purpose of seeking a public listing on an overseas stock exchange
through acquisitions of PRC domestic companies or assets to obtain CSRC approval prior to publicly listing their securities on an overseas stock exchange.
The interpretation and application of the regulations remain unclear, and this offering may ultimately require approval from the CSRC. If CSRC approval is
required, it is uncertain whether it would be possible for us to obtain the approval and any failure to obtain or delay in obtaining CSRC approval for this
offering would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.
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Our PRC counsel, Zhong Lun Law Firm, has advised us that, based on its understanding of the current PRC laws and regulations, we will not be required
to submit an application to the CSRC for the approval of the listing and trading of our ADSs on
because (i) our wholly foreign-owned PRC subsidiaries
were established by foreign direct investment, rather than through a merger or acquisition of equity interest or assets of a PRC domestic company owned by
PRC companies or individuals as defined under the M&A Rules that are the beneficial owners of the Company, and (ii) no provision in the M&A Rules
clearly classifies contractual arrangements as a type of transaction subject to the M&A Rules.
However, as a principle under PRC Securities Law, which was adopted in 2014 by the Standing Committee of the National People's Congress, any direct
or indirect issuance of securities abroad by domestic companies, or listing and trading of securities abroad by such companies, is subject to approval by
CSRC. We cannot assure you that relevant PRC government agencies, including the CSRC, would reach the same conclusion as our PRC counsel, and hence
we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies. These regulatory agencies may impose fines and
penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the
repatriation of the proceeds from this offering into China or take other actions that could have a material adverse effect on our business, financial condition,
results of operations and prospects, as well as the trading price of the ADSs. The CSRC or other PRC regulatory agencies also may take actions requiring us,
or making it advisable for us, to halt this offering before settlement and delivery of the ADSs offered hereby. Consequently, if you engage in market trading
or other activities in anticipation of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur. In addition, if the
CSRC or other regulatory agencies later promulgate new rules or explanations requiring that we obtain their approvals for this offering, we may be unable to
obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity
regarding such approval requirement could have a material adverse effect on the trading price of the ADSs.
Our memorandum and articles of association contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our
Class A ordinary shares and ADSs.
We will adopt amended and restated memorandum and articles of association that will become effective immediately prior to the completion of this
offering. Our new memorandum and articles of association contain provisions to limit the ability of others to acquire control of our company or cause us to
engage in change-of-control transactions. For example, such provisions include a dual-class share structure that gives greater voting power to the Class B
ordinary shares beneficially owned by our founder. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares
at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar
transaction. Our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix their
designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including
dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights
associated with our ordinary shares, in the form of ADS or otherwise. Preferred shares could be issued quickly with terms calculated to delay or prevent a
change in control of our company or make removal of management more difficult. If our board of directors decides to issue preferred shares, the price of our
ADSs may fall and the voting and other rights of the holders of our ordinary shares and ADSs may be materially and adversely affected.
You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are
incorporated under Cayman Islands law.
We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of
association, the Companies Law (2016 Revision)
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o f the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority
shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman
Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the
common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our
shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial
precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States.
Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition,
Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.
Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or to obtain
copies of lists of shareholders of these companies. Our directors have discretion under our articles of association to determine whether or not, and under what
conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it
more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders
in connection with a proxy contest.
Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies
incorporated in other jurisdictions such as the United States. Currently, we [plan to rely on home country practice in lieu of
, and] do not plan to rely
on home country practice with respect to any [other] corporate governance matter. To the extent we choose to follow home country practice with respect to
corporate governance matters, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to
U.S. domestic issuers.
As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management,
members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States. For a
discussion of significant differences between the provisions of the Companies Law of the Cayman Islands and the laws applicable to companies incorporated
in the United States and their shareholders, see "Description of Share CapitalDifferences in Corporate Law."
Certain judgments obtained against us by our shareholders may not be enforceable.
We are a Cayman Islands company and substantially all of our assets are located outside of the United States. Substantially all of our current operations
are conducted in China. In addition, all of our current directors and officers are nationals and residents of countries other than the United States. Substantially
all of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or
against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or
otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a
judgment against our assets or the assets of our directors and officers. For more information regarding the relevant laws of the Cayman Islands and China, see
"Enforceability of Civil Liabilities."
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The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to vote your
Class A ordinary shares.
As a holder of our ADSs, you will only be able to exercise the voting rights with respect to the underlying Class A ordinary shares in accordance with the
provisions of the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions to the depositary. If we ask for your
instructions, then upon receipt of your voting instructions, the depositary will try to vote the underlying Class A ordinary shares in accordance with these
instructions. If we do not instruct the depositary to ask for your instructions, the depositary may still vote in accordance with instructions you give, but it is
not required to do so. You will not be able to directly exercise your right to vote with respect to the underlying shares unless you withdraw the shares. When a
general meeting is convened, you may not receive sufficient advance notice to withdraw the shares underlying your ADSs to allow you to vote with respect
to any specific matter. If we ask for your instructions, the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to
you. We have agreed to give the depositary at least
days' prior notice of shareholder meetings. Nevertheless, we cannot assure you that you will receive
the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for
failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right
to vote and you may have no legal remedy if the shares underlying your ADSs are not voted as you requested.
You may experience dilution of your holdings due to inability to participate in rights offerings.
We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will
not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from
registration under the Securities Act with respect to all holders of ADSs, or are registered under the provisions of the Securities Act. The depositary may, but is
not required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We may be unable to establish an exemption from
registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to
endeavor to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may
experience dilution of their holdings as a result.
You may be subject to limitations on transfer of your ADSs.
Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems
expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in
connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books
for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver,
transfer or register transfers of our ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary
thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit
agreement, or for any other reason.
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable
to United States domestic public companies.
Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the
United States that are applicable to U.S. domestic issuers, including: (i) the rules under the Exchange Act requiring the filing of quarterly reports on Form 10Q or current reports on Form 8-K with the SEC; (ii) the sections of the Exchange Act regulating
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the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; (iii) the sections of the Exchange Act
requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period
of time; and (iv) the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results
on a quarterly basis through press releases, distributed pursuant to the rules and regulations of
. Press releases relating to financial results and material
events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and
less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or
information, which would be made available to you, were you investing in a U.S. domestic issuer.
We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.
We are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable to
other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we are an emerging growth company until the earliest of (a) the last day of the
fiscal year during which we have total annual gross revenues of at least US$1.0 billion; (b) the last day of our fiscal year following the fifth anniversary of the
completion of this offering; (c) the date on which we have, during the preceding three-year period, issued more than US$1.0 billion in non-convertible debt;
or (d) the date on which we are deemed to be a "large accelerated filer" under the Exchange Act, which would occur if the market value of our ADSs that are
held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter.
We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an "emerging growth company."
Upon completion of this offering, we will become a public company and expect to incur significant legal, accounting and other expenses that we did not
incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and
, impose various
requirements on the corporate governance practices of public companies. As a company with less than US$1.0 billion in revenues for our last fiscal year, we
qualify as an "emerging growth company" pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and
other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement
under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of the emerging growth company's internal control over financial
reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies. However, we
have elected to "opt out" of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for
public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.
We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming
and costly. After we are no longer an "emerging growth company," we expect to incur significant expenses and devote substantial management effort toward
ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. For example, as
a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal controls and
disclosure controls and procedures. We also expect that operating as a public company will make it more
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difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or
incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with our public company
reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are
currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty
the amount of additional costs we may incur or the timing of such costs.
There can be no assurance that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable
year, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ADSs or ordinary shares.
A non-U.S. corporation will be a passive foreign investment company, or PFIC, for any taxable year if either (1) at least 75% of its gross income for such
year consists of certain types of "passive" income; or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets)
during such year is attributable to assets that produce passive income or are held for the production of passive income (the "asset test"). Based on our current
and expected income and assets (taking into account the expected cash proceeds and our anticipated market capitalization following this offering), we do not
presently expect to be a PFIC for the current taxable year or the foreseeable future. However, no assurance can be given in this regard because the
determination of whether we are or will become a PFIC is a fact-intensive inquiry made on an annual basis that depends, in part, upon the composition of our
income and assets. Fluctuations in the market price of our ADSs may cause us to become a PFIC for the current or subsequent taxable years because the value
of our assets for the purpose of the asset test may be determined by reference to the market price of our ADSs. The composition of our income and assets may
also be affected by how, and how quickly, we use our liquid assets and the cash raised in this offering.
If we were to be or become a PFIC for any taxable year during which a U.S. Holder (as defined in "TaxationUnited States Federal Income Tax
Considerations") holds our ADSs or ordinary shares, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. See "Taxation
United States Federal Income Tax ConsiderationsPassive Foreign Investment Company Rules."
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that reflect our current expectations and views of future events. The forward looking statements are
contained principally in the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business." Known and unknown risks, uncertainties and other factors, including those listed under "Risk Factors," may cause our
actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.
You can identify some of these forward-looking statements by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend,"
"plan," "believe," "is/are likely to," "potential," "continue" or other similar expressions. We have based these forward-looking statements largely on our
current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and
financial needs. These forward-looking statements include statements relating to:
our goals and strategies;
our future business development, financial conditions and results of operations;
the expected growth of the express delivery industry in China;
our expectations regarding demand for and market acceptance of our services;
our expectations regarding our relationships with network partners, direct and end customers, suppliers and our other stakeholders;
competition in our industry; and
relevant government policies and regulations relating to our industry.
These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking
statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations.
Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in "Prospectus Summary
Our Challenges," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," "Regulation" and
other sections in this prospectus. You should read thoroughly this prospectus and the documents that we refer to with the understanding that our actual future
results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.
This prospectus contains certain data and information that we obtained from various government and private publications. Statistical data in these
publications also include projections based on a number of assumptions. The online shopping industry may not grow at the rate projected by market data, or
at all. Failure of this market to grow at the projected rate may have a material and adverse effect on our business and the market price of our ADSs. In addition,
the rapidly changing nature of the e-commerce industry results in significant uncertainties for any projections or estimates relating to the growth prospects or
future condition of our market. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results
may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.
The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this
prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read
this prospectus and the documents that we refer to in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part,
completely and with the understanding that our actual future results may be materially different from what we expect.
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USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of approximately US$
, or approximately US$
if the underwriters exercise their
over-allotment option in full, after deducting underwriting discounts and the estimated offering expenses payable by us. These estimates are based upon an
assumed initial public offering price of US$
per ADS, the mid-point of the price range shown on the front cover page of this prospectus. A US$1.00
increase (decrease) in the assumed initial public offering price of US$
per ADS would increase (decrease) the net proceeds to us from this offering by
US$
, assuming the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated
underwriting discounts and commissions and estimated expenses payable by us.
The primary purposes of this offering are to create a public market for our shares for the benefit of all shareholders, retain talented employees by
providing them with equity incentives, and obtain additional capital. We plan to use the net proceeds of this offering as follows:
US$
for land acquisition, facilities construction and equipment purchase to expand our sorting capacity;
US$
for the purchase of additional trucks to strengthen our line-haul transportation capabilities; and
US$
for general corporate purposes, including the investment in our information technology system and potential strategic transactions.
The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this
offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or
business conditions change, we may use the proceeds of this offering differently than as described in this prospectus. See "Risk FactorsRisks Related to Our
ADSs and This OfferingWe have not determined a specific use for a portion of the net proceeds from this offering and we may use these proceeds in ways
with which you may not agree."
Pending any use described above, we plan to invest the net proceeds in short-term, interest-bearing, debt instruments or demand deposits.
In using the proceeds of this offering, we are permitted under PRC laws and regulations as an offshore holding company to provide funding to our PRC
subsidiaries only through loans or capital contributions and to our variable interest entity only through loans. Subject to satisfaction of applicable
government registration and approval requirements, we may extend inter-company loans to our PRC subsidiaries or make additional capital contributions to
our PRC subsidiaries to fund their capital expenditures or working capital. We cannot assure you that we will be able to obtain these government
registrations or approvals on a timely basis, if at all. See "Risk FactorsRisks Related to Our Corporate StructurePRC regulation of loans to and direct
investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds
of this offering to make loans to or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity
and our ability to fund and expand our business."
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DIVIDEND POLICY
Our board of directors has complete discretion on whether to distribute dividends, subject to certain restrictions under Cayman Islands law. Even if our
board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and
surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.
We do not have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future after this offering. We currently intend to
retain most, if not all, of our available funds and any future earnings to operate and expand our business.
We are a holding company incorporated in the Cayman Islands. We may rely on dividends from our subsidiaries in China for our cash requirements,
including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us. See
"RegulationRegulations on Dividend Distribution."
If we pay any dividends, we will pay our ADS holders to the same extent as holders of our ordinary shares, subject to the terms of the deposit agreement,
including the fees and expenses payable thereunder. See "Description of American Depositary Shares." Cash dividends on our ordinary shares, if any, will be
paid in U.S. dollars.
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CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2016:
on an actual basis;
on a pro forma basis to reflect (i) the redesignation of 206,100,000 ordinary shares held by Zto Lms Holding Limited into Class B ordinary
shares on a one-for-one basis immediately prior to the completion of this offering, (ii) the redesignation of all of the remaining ordinary shares
into Class A ordinary shares on a one-for-one basis immediately prior to the completion of this offering, and (iii) the automatic conversion and
the redesignation of all of our issued and outstanding preferred shares on a one-for-one basis into Class A ordinary shares immediately upon
the completion of this offering; and
on a pro forma as adjusted basis to reflect (i) the redesignation of 206,100,000 ordinary shares held by Zto Lms Holding Limited into Class B
ordinary shares on a one-for-one basis immediately prior to the completion of this offering, (ii) the redesignation of all of the remaining
ordinary shares into Class A ordinary shares on a one-for-one basis immediately prior to the completion of this offering, (iii) the automatic
conversion and the redesignation of all of our issued and outstanding preferred shares into Class A ordinary shares on a one-for-one basis
immediately upon the completion of this offering, and (iv) the sale of
Class A ordinary shares in the form of ADSs by us in this offering
at an assumed initial public offering price of
US$ per ADS, the mid-point of the estimated range of the initial public offering price
shown on the front cover of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses
payable by us, assuming the underwriters do not exercise the over-allotment option.
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You should read this table together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the
information under "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Actual
RMB
Mezzanine equity:
Series A convertible redeemable preferred
shares (US$0.0001 par value;
30,079,918 shares authorized, issued and
outstanding (1) on an actual basis, and none
outstanding on a pro forma or a pro forma
as adjusted basis)
Shareholders' equity:
Ordinary shares (US$0.0001 par value,
10,000,000,000 shares authorized):
Ordinary Shares629,226,522 shares issued
and 618,384,686 shares outstanding (2) on
an actual basis
Class A ordinary shares453,206,440 shares
issued and 442,364,604 shares
outstanding (2) on a pro forma basis and
shares issued and
outstanding (2) on a
pro forma as adjusted basis
Class B ordinary shares206,100,000 shares
issued and outstanding on a pro forma basis
and on a pro forma as adjusted basis
Additional paid-in capital (3)
Retained earnings
Accumulated other comprehensive income
ZTO Express (Cayman) Inc. shareholders'
equity (3)
Noncontrolling interests
Total mezzanine equity and shareholders'
equity (3)
As of June 30, 2016

Pro Forma
Pro Forma As Adjusted
US$
RMB
US$
RMB
US$
2,056,578
309,450
402
60
288
43
4,618,575
2,276,291
12,080
694,951
342,511
1,818
134
6,675,133
2,276,291
12,080
20
1,004,398
342,511
1,818
6,907,348
10,006
1,039,340
1,506
8,963,926
10,006
1,348,790
1,506
8,973,932
1,350,296
8,973,932
1,350,296
(1)
In August and December 2015, we issued an aggregate of 30,079,918 series A preferred shares at a per share price of US$9.97 to a
group of unrelated third-party investors for a total consideration of US$300 million.
(2)
We issued 16,000,000 ordinary shares to Zto Es Holding Limited for purpose of establishing our employee share holding platform in
June 2016. As of the date of this prospectus, rights associated with 4,558,164 of those shares have been granted to certain of our
employees as share incentives and rights associated with 600,000 of those shares have been granted to a network partner in Suzhou as
part of the acquisition consideration for the remaining 40% equity interest in that network partner. Zto Es Holding Limited has waived
all shareholder rights attached to the remaining 10,841,836 ordinary shares. Those 10,841,836 ordinary shares are excluded from the
number of our outstanding ordinary shares in our capitalization table. See "ManagementCompensation of Directors and Officers
Employee Share Holding Platform."
(3)
A US$1.00 increase (decrease) in the assumed initial public offering price of US$
per share, the midpoint of the range set forth
on the cover page of this prospectus, would increase (decrease) each of additional paid-in capital, total ZTO shareholders' equity, total
equity and total capitalization by US$
.
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DILUTION
If you invest in our ADSs, your interest will be diluted to the extent of the difference between the initial public offering price per ADS and our net
tangible book value per ADS after this offering. Dilution results from the fact that the initial public offering price per ordinary share is substantially in excess
of the book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares.
Our net tangible book value as of June 30, 2016 was approximately US$
, or US$
per ordinary share as of that date and US$
per ADS.
Net tangible book value represents the amount of our total consolidated tangible assets, less the amount of our total consolidated liabilities. Dilution is
determined by subtracting net tangible book value per ordinary share, after giving effect to the additional proceeds we will receive from this offering, from
the assumed initial public offering price of US$
per ordinary share, which is the midpoint of the estimated initial public offering price range set forth on
the cover page of this prospectus adjusted to reflect the ADS-to-ordinary share ratio, and after deducting underwriting discounts and commissions and
estimated offering expenses payable by us. Because the Class A ordinary shares and Class B ordinary shares have the same dividend and other rights, except
for voting and conversion rights, the dilution is presented based on all issued and outstanding ordinary shares, including Class A ordinary shares and Class B
ordinary shares.
Without taking into account any other changes in net tangible book value after June 30, 2016, other than to give effect to our sale of the ADSs offered in
this offering at the assumed initial public offering price of US$
per ADS, the midpoint of the estimated range of the initial public offering price, after
deduction of the underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value
as of June 30, 2016 would have been US$
, or US$
per ordinary share and US$
per ADS. This represents an immediate increase in net
tangible book value of US$
per ADS to the existing shareholders and an immediate dilution in net tangible book
value of US$
per ADS to investors purchasing ADSs in this offering. The following table illustrates such dilution:
Per Ordinary Share
Assumed initial public offering price

Net tangible book value as of June 30, 2016
Pro forma net tangible book value after giving effect to the
conversion of our preferred shares
Pro forma as adjusted net tangible book value after giving
effect to the conversion of our preferred shares and this
offering
Amount of dilution in net tangible book value to new investors
in this offering
Per ADS
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
A US$1.00 increase (decrease) in the assumed public offering price of US$

per ADS would increase (decrease) our pro forma as adjusted net
tangible book value after giving effect to this offering by US$
, the pro forma as adjusted net tangible book value per ordinary share and per ADS after
giving effect to this offering by US$
per ADS and the dilution in pro forma as adjusted net tangible book value per
ordinary share and per ADS to new investors in this offering by US$
per ADS, assuming no change to the number of
ADSs offered by us as set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and other offering
expenses.
The following table summarizes, on a pro forma as adjusted basis as of June 30, 2016, the differences between existing shareholders and the new
investors with respect to the number of ordinary shares (in the form of ADSs or shares) purchased from us, the total consideration paid and the average price
per
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ordinary share and per ADS paid before deducting the underwriting discounts and commissions and estimated offering expenses. The total number of
ordinary shares does not include ordinary shares underlying the ADSs issuable upon the exercise of the over-allotment option granted to the underwriters.
Ordinary Shares
Purchased
Number
Existing shareholders
New investors
Total
Total Consideration
Percent
Amount
US$
US$
US$
Percent
%US$
%US$
100.0%
Average
Price Per
Ordinary
Share
Average
Price Per
ADS
US$
US$
The pro forma as adjusted information discussed above is illustrative only. Our net tangible book value following the completion of this offering is
subject to adjustment based on the actual initial public offering price of our ADSs and other terms of this offering determined at pricing.
The discussion and tables above assume no exercise of any outstanding share options outstanding as of the date of this prospectus. As of the date of this
prospectus, there are
ordinary shares issuable upon exercise of outstanding share options at a weighted average exercise price of US$
per
share, and there are
ordinary shares available for future issuance upon the exercise of future grants under our 2016 Plan. To the extent that any of
these options are exercised, there will be further dilution to new investors.
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EXCHANGE RATE INFORMATION
Our reporting currency is the Renminbi because our business is mainly conducted in China and all of our revenues are denominated in Renminbi. This
prospectus contains translations of Renminbi amounts into U.S. dollars at specific rates solely for the convenience of the reader. The conversion of Renminbi
into U.S. dollars in this prospectus is based on the rate certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all
translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this prospectus were made at a rate of RMB6.6459 to US$1.00, the noon
buying rate on June 30, 2016 set forth in the H.10 statistical release of the U.S. Federal Reserve Board. We make no representation that any Renminbi or
U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or
at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign
exchange and through restrictions on foreign trade. On September 23, 2016, the rate was RMB6.6690 to US$1.00.
The following table sets forth information concerning exchange rates between the Renminbi and the U.S. dollar for the periods indicated. These rates are
provided solely for your convenience and are not necessarily the exchange rates that we used in this prospectus or will use in the preparation of our periodic
reports or any other information to be provided to you.
Certified Exchange Rate
Period
End
Period
2011
2012
2013
2014
2015
2016
March
April
May
June
July
August
September (through September 23)
Average(1)
Low
(RMB per US$1.00)
High
6.2939
6.2301
6.0537
6.2046
6.4778
6.4475
6.2990
6.1478
6.1620
6.2827
6.6364
6.3879
6.2438
6.2591
6.4896
6.2939
6.2221
6.0537
6.0402
6.1870
6.4480
6.4738
6.5798
6.6459
6.6371
6.6776
6.6690
6.5027
6.4754
6.5259
6.5892
6.6783
6.6466
6.6700
6.5500
6.5004
6.5798
6.6481
6.7013
6.6778
6.6788
6.4480
6.4571
6.4738
6.5590
6.6371
6.6239
6.6600
Source: Federal Reserve Statistical Release

(1)
Annual averages were calculated by using the average of the exchange rates on the last day of each month during the relevant year. Monthly averages are calculated by using the
average of the daily rates during the relevant month.
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ENFORCEABILITY OF CIVIL LIABILITIES
We are incorporated in the Cayman Islands to take advantage of certain benefits associated with being a Cayman Islands exempted company, such as:
political and economic stability;
an effective judicial system;
a favorable tax system;
the absence of exchange control or currency restrictions; and
the availability of professional and support services.
However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include:
the Cayman Islands has a less developed body of securities laws as compared to the United States and provides significantly less protection to
investors; and
Cayman Islands companies may not have standing to sue before the federal courts of the United States.
Our constituent documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States,
between us, our officers, directors and shareholders, be arbitrated.
Substantially all of our operations are conducted in China, and substantially all of our assets are located in China. A majority of our directors and
executive officers are nationals or residents of jurisdictions other than the United States and most of their assets are located outside the United States. As a
result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments
obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in
the United States.
We have appointed
securities laws of the United States.
, located at
as our agent upon whom process may be served in any action brought against us under the
We have been informed by Maples and Calder that the United States and the Cayman Islands do not have a treaty providing for reciprocal recognition
and enforcement of judgments of U.S. courts in civil and commercial matters and that a final judgment for the payment of money rendered by any federal or
state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would not be automatically
enforceable in the Cayman Islands. We have also been advised by Maples and Calder that a final and conclusive judgment obtained in U.S. federal or state
courts under which a sum of money is payable as compensatory damages (i.e., not being a sum claimed by a net revenue authority for taxes or other charges of
a similar nature by a governmental authority, or in respect of a fine or penalty or multiple or punitive damages) may be the subject of an action on a debt in
the Supreme Court of the Cayman Islands under the common law doctrine of obligation. This type of action should be successful upon proof that the sum of
money is due and payable, without having to prove the facts supporting the underlying judgment, as long as:
the court that gave the judgment was competent to hear the action in accordance with private international law principles as applied by the
courts in the Cayman Islands; and
the judgment was not contrary to public policy in the Cayman Islands, was not obtained by fraud or in proceedings contrary to the natural
justice of the Cayman Islands, and was not based on an error in Cayman Islands law.
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A Cayman Islands court may impose civil liability on us or our directors or officers in a suit brought in the Supreme Court of the Cayman Islands against
us or these persons with respect to a violation of U.S. federal securities laws, provided that the facts surrounding any violation constitute or give rise to a
cause of action under Cayman Islands law.
Zhong Lun Law Firm, our counsel as to PRC law, has advised us that there is uncertainty as to whether the courts of China would:
recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability
provisions of the securities laws of the United States or any state in the United States; or
entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of
the United States or any state in the United States.
Zhong Lun Law Firm has further advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures
Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties
between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. The PRC does not have any treaties or other
form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In
addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they
decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and
on what basis a PRC court would enforce a judgment rendered by a court in the United States or in the Cayman Islands. Under the PRC Civil Procedures Law,
foreign shareholders may originate actions based on PRC law against a company in the PRC for disputes relating to contracts or other property interests, the
PRC court may accept a course of action based on the laws or the parties' express mutual agreement in contracts choosing PRC courts for dispute resolution if
(a) the contract is signed and/or performed within the PRC, (b) the subject of the action is located within the PRC, (c) the company (as defendant) has seizable
properties within the PRC, (d) the company has a representative organization within the PRC, or (e) other circumstances prescribed under the PRC law. The
action may be initiated by a shareholder through filing a complaint with the PRC court. The PRC court will determine whether to accept the complaint in
accordance with the PRC Civil Procedures Law. The shareholder may participate in the action by itself or entrust any other person or PRC legal counsel to
participate on behalf of such shareholder. Foreign citizens and companies will have the same rights as PRC citizens and companies in an action unless the
home jurisdiction of such foreign citizens or companies restricts the rights of PRC citizens and companies.
In addition, it will be difficult for U.S. shareholders to originate actions against us in the PRC in accordance with PRC laws because we are incorporated
under the laws of the Cayman Islands and it will be difficult for U.S. shareholders, by virtue only of holding our ADSs or Class A ordinary shares, to establish
a connection to the PRC for a PRC court to have jurisdiction as required under the PRC Civil Procedures Law.
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CORPORATE HISTORY AND STRUCTURE
We commenced our express delivery service business through Shanghai Zhongtongji Express Service Co., Ltd., or Shanghai Zhongtongji, in Shanghai,
China in January 2009. Prior to 2014, we operated express delivery services in Shanghai, Anhui Province, Jiangsu Province and Zhejiang Province through
Shanghai Zhongtongji, which authorized and cooperated with third-party business partners to operate ZTO-branded express delivery services elsewhere
in China.
In January 2013, the shareholders who separately owned Shanghai Zhongtongji and 15 network partners located in the cities and provinces mentioned
above, established ZTO Express, as the holding company to hold the businesses of Shanghai Zhongtongji and the 15 network partners.
In January 2014, ZTO Express acquired businesses and assets of Shanghai Zhongtongji and eight network partners that were wholly-owned by some of
the shareholders who formed ZTO Express.
In October 2015, ZTO Express and its wholly-owned subsidiaries acquired express delivery businesses from 16 network partners and their respective
shareholders in exchange for equity interest in ZTO Express (Cayman) Inc. and cash.
In April 2015, ZTO Express (Cayman) Inc. was incorporated under the laws of the Cayman Islands as our offshore holding company to facilitate
financing and offshore listing. Upon its incorporation, ZTO Express (Cayman) Inc. issued 600,000,000 ordinary shares to the BVI holding vehicles of the
then shareholders of ZTO Express, in proportion to these shareholders' then respective share percentage in ZTO Express. ZTO Express (Cayman) Inc.
established ZTO Express Limited in British Virgin Islands as its wholly-owned subsidiary in April 2015. ZTO Express Limited subsequently established ZTO
Express (Hong Kong) Limited as its wholly-owned subsidiary in May 2015.
In July 2015, ZTO Express (Hong Kong) Limited established a wholly-owned PRC subsidiary, Shanghai Zhongtongji Network Technology Co., Ltd., or
Shanghai Zhongtongji Network. Due to the PRC legal restrictions on foreign ownership in companies that provide mail delivery services in China, we carry
out our express delivery business through ZTO Express, a domestic PRC company, equity interests in which are held by PRC citizens and companies
established in China. Shanghai Zhongtongji Network entered into a series of contractual arrangements, including an exclusive call option agreement, an
equity pledge agreement, a voting rights proxy agreement, as described in more detail below, irrevocable powers of attorney and an exclusive consulting and
services agreement, with ZTO Express and its shareholders, and obtained spousal consent letters by the spouses of six key shareholders of ZTO Express.
These shareholders are Messrs. Meisong Lai, Jianfa Lai, Jilei Wang, Xiangliang Hu, Shunchang Zhang and Xuebing Shang, collectively holding 73.8% of
equity interest in ZTO Express.
These contractual arrangements allow us to:
exercise effective control over ZTO Express via control over the voting rights of the shareholders of ZTO Express;
receive substantially all of the economic benefits of ZTO Express; and
have an exclusive option to purchase all or part of the equity interests and assets in ZTO Express when and to the extent permitted by
PRC law.
As a result of these contractual arrangements, we have effective control over, and are regarded as the primary beneficiary of, ZTO Express. ZTO Express is
therefore our consolidated variable interest entity, or consolidated VIE, which generally refers to an entity in which we do not have any equity interests but
whose financial results are consolidated into our consolidated financial statements in accordance with U.S. GAAP because we have effective financial control
over, and are the primary beneficiary of, that entity. We treat ZTO Express and its subsidiaries as our consolidated affiliated entities under U.S. GAAP and
have consolidated their financial results in our consolidated financial statements in accordance with
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U.S. GAAP. However, those contractual arrangements may not be as effective in providing operational control as direct ownership. See "Risk FactorsRisks
Related to Our Corporate Structure" and "Risk FactorsRisks Related to Doing Business in China."
The following diagram illustrates our corporate structure, including our principal subsidiaries, the VIE, and the VIE's principal subsidiaries, as of the date
of this prospectus:
(1)
Messrs. Meisong Lai, Jianfa Lai, Jilei Wang, Xiangliang Hu, Shunchang Zhang, Jianying Teng, Xuebin Shang, Baixi Lan and Jianchang Lai are beneficial owners of the shares of ZTO Express
(Cayman) Inc. and hold 34.35%, 12.00%, 10.00%, 7.05%, 6.00%, 5.02%, 4.40%, 1.40% and 1.06% equity interests in ZTO Express, respectively. Among them, Messrs. Meisong Lai, Jianfa Lai,
Jilei Wang, Xiangliang Hu and Baixi Lan are also directors of our company. Beijing Sequoia Xinyuan Equity Investment Centre (L.P.) and Tianjin Sequoia Juye Equity Investment Centre (L.P.) hold
4.00% and 2.00% of the equity interest in ZTO Express, respectively. The remaining 12.72% equity interest in ZTO Express are held by 32 other shareholders who are also beneficial owners of the
shares of ZTO Express (Cayman) Inc. None of these 32 shareholders hold more than 3.00% of the equity interest in ZTO Express.
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The following is a summary of the currently effective contractual arrangements by and among Shanghai Zhongtongji Network, our wholly-owned
subsidiary, ZTO Express, our consolidated affiliated entity, and the shareholders of ZTO Express.
Agreements that provide us effective control over ZTO Express
Voting Rights Proxy Agreement. On August 18, 2015, ZTO Express and the shareholders of ZTO Express entered into a voting rights proxy agreement
with Shanghai Zhongtongji Network. Pursuant to the voting rights proxy agreement, each of the shareholders of ZTO Express irrevocably appointed Meisong
Lai, Shanghai Zhongtongji Network's designated person, as their attorney-in-fact to exercise all shareholder rights, including, but not limited to: (i) calling
for and attending shareholders meetings as the proxy of the shareholders; (ii) exercising voting rights and all other shareholder's rights provided under PRC
laws and the articles of association of ZTO Express, including but not limited to, selling, transferring, pledging or disposing all or a portion of the shares held
by such shareholder or the assets of ZTO Express; (iii) voting on all matters submitted to shareholders meetings, including but not limited to, the election of
directors and senior management officers; and (iv) exercising other voting rights granted to the shareholders by the articles of association of ZTO Express, as
may be amended from time to time. Shanghai Zhongtongji Network and Meisong Lai both have the right to execute documents in connection with and
perform other obligations under the equity pledge agreement and exclusive call option agreement. Any conduct of Shanghai Zhongtongji Network or
Meisong Lai in connection with ZTO Express will be deemed as conduct of the shareholders of ZTO Express. Any documents executed by Shanghai
Zhongtongji Network or Meisong Lai in connection with ZTO Express will be deemed to be executed by the shareholders of ZTO Express. Each of the
shareholders of ZTO Express agreed to acknowledge, accept and approve such conduct of or execution by Shanghai Zhongtongji Network and Meisong Lai.
The voting rights proxy agreement will remain in force for an unlimited term, unless all the parties to the agreement mutually agree to terminate the
agreement in writing. The authorization and appointment above is premised on Shanghai Zhongtongji Network's designated person being a PRC citizen and
Shanghai Zhongtongji Network's consent of such authorization and appointment. If and only if Shanghai Zhongtongji Network sends a written notice to the
shareholders of ZTO Express to replace its designated person, the shareholders of ZTO Express shall promptly appoint the replaced designated person as their
new attorney-in-fact under their power of attorney. Otherwise, the authorization and appointment by the shareholders of ZTO Express's shall not be revoked.
Equity Pledge Agreement. On August 18, 2015, Shanghai Zhongtongji Network, ZTO Express and the shareholders of ZTO Express entered into an
equity pledge agreement. Pursuant to the equity pledge agreement, each of the shareholders of ZTO Express pledged all of their equity interests in ZTO
Express to guarantee their and ZTO Express's performance of their obligations under the contractual arrangements, including the exclusive consulting and
services agreement, its related agreements and the equity pledge agreement. If ZTO Express or its shareholders breach their contractual obligations under
these agreements, Shanghai Zhongtongji Network, as pledgee, will have the right to dispose of the pledged equity interests in ZTO Express and priority in
receiving the proceeds from such disposal. The shareholders of ZTO Express also agreed that, during the term of the equity pledge agreements, they will not
dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests. During the term of the equity pledge agreements,
Shanghai Zhongtongji Network has the right to receive all of the dividends and profits distributed on the pledged equity interests. The equity pledges
became effective in September 2015, which is when the pledge of equity interests contemplated in the equity pledge agreement were registered with the
relevant administration for industry and commerce in accordance with the PRC Property Rights Law, and will remain effective until ZTO Express and its
shareholders completed all their obligations under the contractual arrangements or discharge all their obligations under the contractual arrangements.
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Exclusive Call Option Agreement. On August 18, 2015, Shanghai Zhongtongji Network, ZTO Express and the shareholders of ZTO Express entered
into an exclusive call option agreement. Pursuant to the exclusive call option agreement, each of the shareholders of ZTO Express irrevocably granted
Shanghai Zhongtongji Network an exclusive option to purchase, or have its designated entity or person to purchase, at its discretion, to the extent permitted
under PRC law, all or part of the shareholders' equity interests in ZTO Express. The purchase price shall be the lower of (i) the amount that the shareholders
contributed to ZTO Express as registered capital for the equity interests to be purchased, or (ii) the lowest price permitted by applicable PRC law. In addition,
ZTO Express granted Shanghai Zhongtongji Network an exclusive option to purchase, or have its designated entity or person, to purchase, at its discretion, to
the extent permitted under PRC law, all or part of ZTO Express's assets at the lowest price permitted by applicable PRC law. Without the prior written consent
of Shanghai Zhongtongji Network, the shareholders of ZTO Express may not increase or decrease the registered capital, dispose of its material assets,
terminate any material contract or enter into any contract that is in conflict with its material contracts, appoint or remove any management members,
distribute dividends to the shareholders, amend its articles of association or provide any loans to any third parties, and shall guarantee the continuance of
ZTO Express. The exclusive call option agreement will remain effective until all equity interests in ZTO Express held by its shareholders and all assets of
ZTO Express are transferred or assigned to Shanghai Zhongtongji Network or its designated representatives.
Irrevocable Powers of Attorney. Pursuant to the powers of attorney dated August 18, 2015, the shareholders of ZTO Express each irrevocably
appointed Shanghai Zhongtongji Network's designated person, Meisong Lai, as the attorney-in-fact to exercise all of such shareholder's voting and related
rights with respect to such shareholder's equity interests in ZTO Express, including but not limited to: (i) calling for and attending shareholders meetings as
the proxy of the shareholders; (ii) exercising voting rights and all other shareholder's rights provided under PRC laws and the articles of association of ZTO
Express, including but not limited to, selling, transferring, pledging or disposing all or a portion of the shares held by such shareholder or the assets of ZTO
Express; (iii) voting on all matters submitted to shareholders meetings, including but not limited to, the election of directors and senior management officers;
and (iv) exercising other voting rights granted to the shareholders by the articles of association of ZTO Express, as may be amended from time to time.
Shanghai Zhongtongji Network and Meisong Lai both have the right to execute documents in connection with and perform other obligations under the
equity pledge agreement and exclusive purchase option agreement. Any conduct of Shanghai Zhongtongji Network or Meisong Lai in connection with ZTO
Express will be deemed as conduct of the shareholders of ZTO Express. Any documents executed by Shanghai Zhongtongji Network or Meisong Lai in
connection with ZTO Express will be deemed to be executed by the shareholders of ZTO Express. Each of the shareholders of ZTO Express agreed to
acknowledge, accept and approve such conduct of or execution by Shanghai Zhongtongji Network and Meisong Lai. Each power of attorney will remain in
force until the voting rights proxy agreement expires or is terminated.
Spousal Consents. Each of the spouses of six key shareholders of ZTO Express, namely Meisong Lai, Jianfa Lai, Jilei Wang, Xiangliang Hu, Shunchang
Zhang and Xuebing Shang, signed a spousal consent letter. These six key shareholders collectively hold 73.8% equity interest in ZTO Express. Under the
spousal consent letters, each signing spouse unconditionally and irrevocably agreed that the spouse is aware of the abovementioned exclusive call option
agreement, voting right proxy agreement, irrevocable powers of attorney, equity pledge agreement and the exclusive consulting and services agreement, and
has read and understood the contractual arrangements. Each signing spouse committed not to impose any adverse assertions upon the validity and existence
of such contractual arrangement based on the existence or termination of the marital relationship with the relevant VIE shareholder, or exert any impediment
or adverse influence over the relevant VIE shareholder's performance of any contractual arrangement.
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Agreement that allows us to receive economic benefits from ZTO Express
Exclusive Consulting and Services Agreement. Under the exclusive consulting and services agreement between Shanghai Zhongtongji Network and
ZTO Express, dated August 18, 2015, Shanghai Zhongtongji Network has the exclusive right to provide ZTO Express with the technical support and
consulting services required by ZTO Express's business. Shanghai Zhongtongji Network owns the exclusive intellectual property rights created as a result of
the performance of this agreement. ZTO Express agrees to pay Shanghai Zhongtongji Network an annual service fee, at an amount that is agreed by Shanghai
Zhongtongji Network and ZTO Express after the end of each calendar year. This agreement will remain effective for an unlimited term, unless Shanghai
Zhongtongji Network and ZTO Express mutually agree to terminate the agreement in writing, or the agreement is required to be terminated by applicable
PRC law. ZTO Express is not permitted to unilaterally terminate the agreement in any event unless required by applicable law.
In the opinion of Zhong Lun Law Firm, our PRC legal counsel:
the ownership structures of ZTO Express and Shanghai Zhongtongji Network, both currently and immediately after giving effect to this
offering, will not result in any violation of PRC laws or regulations currently in effect; and
the contractual arrangements among Shanghai Zhongtongji Network, ZTO Express and its shareholders governed by PRC law both currently
and immediately after giving effect to this offering are valid, binding and enforceable, and will not result in any violation of PRC laws or
regulations currently in effect.
However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules.
Accordingly, the PRC regulatory authorities may in the future take a view that is contrary to or otherwise different from the above opinion of our PRC legal
counsel. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would
provide. If the PRC government finds that the agreements that establish the structure for operating our express delivery business do not comply with PRC
government restrictions on foreign investment in our businesses, we could be subject to severe penalties including being prohibited from continuing
operations. See "Risk FactorsRisks Related to Our Corporate StructureIf the PRC government finds that the agreements that establish the structure for
operating certain of our operations in China do not comply with PRC regulations relating to the relevant industries, or if these regulations or the
interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations"
and "Risk FactorsRisks Related to Doing Business in ChinaUncertainties with respect to the PRC legal system could adversely affect us."
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SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated comprehensive income data for the years ended December 31, 2014 and 2015, selected consolidated balance sheet
data as of December 31, 2014 and 2015 and selected consolidated cash flow data for the years ended December 31, 2014 and 2015 have been derived from
o u r audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated comprehensive income data for the six
months ended June 30, 2015 and 2016 and the selected consolidated balance sheet data as of June 30, 2016 and cash flow data for the six months ended
June 30, 2015 and 2016 are derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. We have
prepared the unaudited condensed consolidated financial statements on the same basis as our audited consolidated financial statements. The unaudited
condensed financial statements include all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair
representation of our financial position and operating results for the periods presented. Our consolidated financial statements are prepared and presented in
accordance with U.S. GAAP. Our historical results do not necessarily indicate results expected for any future periods. You should read this Selected
Consolidated Financial Data section together with our consolidated financial statements and the related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this prospectus.
2014
RMB
Selected Consolidated
Comprehensive Income Data:
Revenues
Cost of revenues
Gross profit
Selling, general and administrative
Interest income
Interest expense
Gain on deemed disposal of equity
method investments
Income before income tax, and share
of profit (loss) in equity method
investments
Income tax expense
Income before share of profit (loss) in
equity method investments
method investments
Net income
Net loss attributable to
convertible redeemable preferred
shares
Net income attributable to ordinary
shareholders

2015
2015
2016
RMB
US$
RMB
RMB
US$
3,903,572
(2,770,530)
1,133,042
6,086,455
(3,998,737)
2,087,718
915,821
(601,685)
314,136
2,486,060
(1,671,279)
814,781
4,245,177
(2,815,910)
1,429,267
638,766
(423,706)
215,060
(534,537)
1,796
(532,741)
600,301
(591,738)
33,249
(558,489)
1,529,229
(89,038)
5,003
(84,035)
230,101
(249,183)
14,293
(234,890)
579,891
(380,728)
8,023
(372,705)
1,056,562
(57,287)
1,207
(56,080)
158,980
3,408
(798)
15,091
(16,392)
2,271
(2,466)
3,170
(8,436)
20,811
(8,386)
3,131
(1,262)
224,148
33,727
9,551
1,437
602,911
(202,486)
1,752,076
(419,999)
263,633
(63,197)
574,625
(163,462)
1,078,538
(293,972)
162,286
(44,233)
400,425
1,332,077
200,436
411,163
784,566
118,053
5,578
406,003
(459)
1,331,618
(69)
200,367
4,257
415,420
(19,950)
764,616
(3,002)
115,051
423
137
20
586
1,978
298
406,426
1,331,755
200,387
416,006
766,594
115,349
(79,723)
(11,996)
686,871
103,353
406,426
(28,775)
1,302,980
(4,330)
196,057
416,006
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2014
RMB
Net earnings per share

attributable to ordinary
shareholders
Basic
Diluted
Weighted average shares
used in calculating net
earnings per ordinary
share
Basic
Diluted
Other comprehensive (loss)
income, net of tax of nil:
Foreign currency translation
adjustment
Comprehensive income
attributable to ordinary
shareholders

2015
2015
2016
RMB
US$
RMB
RMB
US$
0.68
0.68
2.15
2.15
0.32
0.32
0.70
0.70
1.07
1.07
0.16
0.16
597,882,740
597,882,740
599,373,273
599,373,273
599,373,273
599,373,273
594,205,525
594,205,525
613,901,657
613,901,657
613,901,657
613,901,657
25,829
3,886
416,006
712,700
107,239
406,003
(13,749)
(2,069)
1,289,231
193,988
As of December 31,
2015
RMB
2014
RMB
Selected Consolidated Balance Sheet Data:

Current assets:
Non-current assets:
Goodwill
Total assets
Liabilities, mezzanine equity and equity
Total liabilities
Total liabilities, mezzanine equity and equity
US$
(in thousands)
As of June 30,
2016
RMB
US$
163,359
126,800
2,452,359
211,724
369,003
31,858
2,058,231
313,706
309,699
47,203
925,868
2,379,182
4,974,125
1,752,586
4,091,219
10,582,223
263,709
615,600
1,592,293
2,660,307
4,157,111
11,713,514
400,293
625,515
1,762,517
250,000
536,577
1,578,422
4,974,125
300,000
1,264,914
2,736,002
10,582,223
45,141
190,330
411,683
1,592,293
406,943
1,283,292
2,739,582
11,713,514
61,232
193,095
412,221
1,762,517
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2014
RMB
Selected Consolidated Cash Flow Data:

Net cash provided by operating activities
Net cash provided by financing activities
Effect of exchange rate changes on cash
and cash equivalents
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning
of period
Cash and cash equivalents at end of
period

2015
RMB
1,071,751
(1,116,299)
171,064
1,867,538
(1,449,746)
1,869,331
2015
US$
RMB
(in thousands)
281,006
(218,141)
281,276

2016
RMB
US$
422,934
(236,722)
29,530
596,914
(1,108,727)
98,000
89,817
(166,829)
14,746
1,877
282
19,685
2,962
126,516
2,289,000
344,423
215,742
(394,128)
(59,304)
36,843
163,359
24,580
163,359
2,452,359
369,003
163,359
2,452,359
369,003
379,101
2,058,231
309,699
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the section entitled
"Selected Consolidated Financial and Operating Data" and our consolidated financial statements and the related notes included elsewhere in this
prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events
could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk
Factors" and elsewhere in this prospectus.
Overview
We are a leading express delivery company in China and one of the largest express delivery companies globally in terms of total parcel volume in 2015,
according to the iResearch Report. We have demonstrated the fastest growth rate among the top five Chinese express delivery companies as of December 31,
2015, with our annual parcel volume growing at a CAGR of 80.3% from 279 million in 2011 to 2,946 million in 2015, during which we recorded consecutive
annual increases in market share. See "BusinessBusiness Overview" for more information on our annual parcel volume in each year between 2011 and
2015. We have achieved superior profitability along with our rapid growth. Our operating margin in 2015 was 25.1%, which was one of the highest among
the major publicly listed logistics companies globally.
Through our network and together with our network partners, we provide domestic and international express delivery services supplemented by other
value-added services. We mainly provide express deliveries in China of parcels weighing under 50 kilograms with expected delivery time ranging from 24 to
72 hours.
We operate the core sorting and line-haul transportation network services and our network partners operate the outlets responsible for parcel pickup and
last-mile delivery. We charge our network partners network transit fees in connection with the services we provide to them, which mainly include parcel
sorting and line-haul transportation.
We have achieved significant growth and profitability. Our revenues increased from RMB3.9 billion in 2014 to RMB6.1 billion (US$915.8 million) in
2015 and from RMB2.5 billion in the six months ended June 30, 2015 to RMB4.2 billion (US$638.8 million) in the six months ended June 30, 2016. We
generated operating profit of RMB600.3 million and RMB1.5 billion (US$230.1 million) and our operating profit margin was 15.4% and 25.1% in 2014 and
2015, respectively. We generated operating profit of RMB579.9 million and RMB1.1 billion (US$159.0 million) and our operating profit margin was 23.3%
and 24.9% in the six months ended June 30, 2015 and 2016, respectively. Based on the preliminary financial information currently available to us, our
operating profit margin in the two months ended August 31, 2016 increased from that in the first half of 2016 primarily due to a decrease in our share-based
compensation expenses in these two months, our economies of scale and our continued efforts to effectively control costs. Our preliminary financial
information for the two months ended August 31, 2016 was prepared on a basis substantially consistent with that of the interim and annual financial
statements included in this prospectus, but has not been audited or reviewed and may not be indicative of our results for the quarter ended September 30,
2016 or future periods.
General Factors Affecting Our Results of Operations
Demand from China's e-commerce industry for express delivery services
We have benefited from the rapid growth of China's e-commerce industry and its demand for more express delivery services, and our business and growth
depend on and contribute to the viability and prospects of the e-commerce industry in China. We anticipate that the demand for express delivery services will
continue to grow. According to the iResearch Report, annual express delivery parcel volume is expected to grow to 60 billion by 2020, representing a CAGR
of 23.7% from 2015 to 2020.
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Market conditions and our market position
The market conditions, competitive landscape and our market position in the express delivery industry will affect the pricing of our services and in turn,
our revenue and operating income.
Operating leverage of our network partner model
Our business model is highly scalable and flexible. It enables us to expand our business operation efficiently by leveraging the resources and operating
capabilities of our network partners with minimum capital requirements and operating expenditures. In addition, we can dynamically adjust our network
capacity to cope with peak demand and respond to seasonal demand. For instance, we have the ability to allocate sorting capacity among adjacent sorting
hubs and our network partners have flexibility to add temporary workers. The scalability of our business model has helped us expand geographic coverage
and capture incremental growth in parcel volume, as well as improve operating margin.
Our continued investment in infrastructure, technology and people
We invest in our sorting hubs and line-haul fleets, as well as technology infrastructure and people, particularly talent in overall management, business
operation and information technology. We expect our continued investments to further improve our parcel handling capacity, increase market penetration,
and enhance customer services and operational efficiency.
Our ability to broaden service offerings and diversify customer base
Our results of operations are also affected by our ability to invest in new service offerings and expand and further penetrate our customer base. We expect
our new investments will include exploring new service offerings to capture existing and new market growth opportunities, including cross-border ecommerce, less-than-truckload logistics and backhaul trucking logistics of agricultural products. We also plan to expand our customer base across different
segments and industries.
Key Line Items and Specific Factors Affecting Our Results of Operations
Revenues
The following table sets forth the principal components of our revenues for the periods indicated:
2014
RMB
Express delivery
services
Sale of accessories
Total revenues

2015
%
RMB
US$
2015
%
RMB
(in thousands)

2016
%
RMB
US$
3,778,514
96.8 5,913,289 889,765
97.2 2,432,664
97.9 4,083,407 614,425
96.2
125,058
3.2
173,166
26,056
2.8
53,396
2.1
161,770
24,341
3.8
3,903,572 100.0 6,086,455 915,821 100.0 2,486,060 100.0 4,245,177 638,766 100.0
We derive substantially all of our revenues from express delivery services that we provide to our network partners, which mainly include parcel sorting
and line-haul transportation. We charge our network partners network transit fee for each parcel that is processed through our network. Such fees represented
94.1%, 94.9%, 95.9% and 93.5% of our total express delivery services revenues in 2014, 2015 and the six months ended June 30, 2015 and 2016,
respectively. In addition, we also directly provide express delivery services to certain enterprise customers, including vertical e-commerce and traditional
merchants, in connection with the delivery of their products to end consumers. Revenues from our direct express delivery services accounted for 5.9%, 5.1%,
4.1% and 6.5% of our total express delivery services revenues in 2014, 2015 and the six months ended June 30, 2015 and 2016, respectively. We also
generate revenues from the sale of ancillary materials, such as portable barcode readers, thermal paper and ZTO-branded packing materials and uniforms, to
our network partners.
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Our revenues are primarily driven by our parcel volume and the network transit fee we charge our network partners for each parcel going through our
network.
In general, our parcel volume is affected by the various factors driving the growth of China's e-commerce industry, as we generate the majority of our
parcel volume by serving end customers that carry out business on the various e-commerce platforms in China. Our parcel volume is also affected by our
ability to scale our network to meet increases in demand and the ability of our network partners and us to provide high-quality services to our end customers
at a competitive price. Our annual parcel volume increased from 279 million in 2011 to 2,946 million in 2015 and from 1,185 million in the six months
ended June 30, 2015 to 1,913 million in the same period in 2016.
We determine the level of pricing of our network transit fee based on the operating costs of our business while also considering other factors including
market conditions and competitions as well as our service quality. The network transit fees we charge our network partners are primarily measured by (i) a
fixed amount for a waybill attached to each parcel and (ii) a variable amount per parcel for sorting and line-haul transportation based on the parcel weight
and route. The delivery service fees we charge the enterprise customers are also based on parcel weight and route.
Our network partners generally charge each parcel sender a delivery services fee directly. They have full discretion over the pricing of their services after
taking into consideration certain cost factors including the network transit fees we charge them and other factors including market conditions and
competitions as well as their service quality. There has historically been decline in the delivery services fees charged by our network partners to parcel
senders partially due to decreasing unit operational costs and market competition. We have been able to adjust the level of network transit fee based on
market conditions and operating costs.
We recognize revenues from express delivery services provided to our network partners when a parcel is delivered from our sorting hub to the delivery
outlet. Revenues from express delivery services performed for our enterprise customers are recognized when the parcel has been delivered to the end
recipient. Our revenues do not include the last-mile delivery fee, as the pickup outlet is obligated to pay this fee to the delivery outlet directly.
Cost of Revenues
In addition to the level of network transit fee we charge our network partners, our profitability also depends on our ability to control our costs as we
expand. Our cost of revenues mainly consists of (i) line-haul transportation cost, (ii) sorting hub cost, (iii) cost of accessories sold, and (iv) other costs. The
following table sets forth the components of our cost of revenues, in absolute amounts and as percentages of our revenues for the periods indicated:
2014
RMB

2015
% of
revenues
RMB
US$
Line-haul
transportation
cost
1,627,767
Sorting hub
cost
675,711
Cost of
accessories
sold
100,152
Other costs
366,900
Total cost of
revenues
2,770,530

2016
% of
% of
revenues
RMB
revenues
RMB
US$
(in thousands, except percentages)
2015
% of
revenues
41.7 2,317,636 348,732
38.1
977,426
39.3 1,604,216 241,384
37.8
17.3 1,179,894 177,537
19.4
477,644
19.2
20.9
2.2
6.0
40,798
175,411
1.6
7.1
2.6
9.4
133,222
367,985
20,046
55,370
71.0 3,998,737 601,685
65.7 1,671,279
885,363 133,219
118,540
207,791
17,837
31,266
2.8
4.9
67.2 2,815,910 423,706
66.4
Line-haul transportation cost primarily includes (i) payment for services by outsourced fleets, (ii) truck fuel costs and tolls incurred by our self-owned
fleet, (iii) employee compensation and other benefits for drivers of our self-owned fleet, (iv) air transportation cost and (v) depreciation and
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maintenance of our self-owned fleet. Total line-haul transportation cost as a percentage of our revenues decreased from 41.7% in 2014 to 38.1% in 2015 and
from 39.3% in the six months ended June 30, 2015 to 37.8% in the same period in 2016. The decrease in line-haul transportation cost as a percentage of
revenues was mainly due to (i) decreases in fuel price, (ii) increased purchase and use of cost-efficient high capacity trucks, and (iii) increased truck
utilization through optimized route planning and increased back-haul transportation.
Sorting hub cost includes (i) labor costs, (ii) land lease costs, (iii) depreciation of property and equipment and amortization of land use rights and
(iv) other operating costs. Total sorting hub cost accounted for 17.3%, 19.4%, 19.2% and 20.9% of our revenues in 2014, 2015 and the six months ended
June 30, 2015 and 2016, respectively. The increase in sorting hub cost as a percentage of revenues was mainly due to increased labor costs arising from
headcount addition and wage increase. Increases in land lease for sorting hubs and depreciation expenses of property and equipment also contributed to
such increase.
Cost of accessories sold, which mainly includes cost of accessories that we sell to our network partners, such as (i) portable bar code readers, (ii) thermal
paper for digital waybill printing, and (iii) ZTO-branded packing materials and uniforms, accounted for 2.6%, 2.2%, 1.6% and 2.8% of our revenues in 2014,
2015 and the six months ended June 30, 2015 and 2016, respectively. Cost of accessories sold as a percentage of our revenues from sale of accessories was
reduced from 80.1% in 2014 to 76.9% in 2015 and from 76.4% in the six months ended June 30, 2015 to 73.3% in the same period in 2016, mainly due to
the increase in sale of thermal paper as a result of the increased use of digital waybills.
Other costs, which mainly include (i) paper waybill material cost, (ii) information technology related cost, (iii) overhead cost to serve enterprise
customers, and (iv) business tax surcharges, accounted for 9.4%, 6.0%, 7.1% and 4.9% of our revenues in 2014, 2015 and the six months ended June 30, 2015
and 2016, respectively. The decrease in other costs as a percentage of revenues was mainly due to the reduced use of paper waybills, which are replaced by
digital ones.
In order to maintain competitive pricing and enhance our profit margins, we must continually control our costs and improve our operating efficiency. We
have adopted various cost-control measures. For example, fuel cost can be reduced through the use of more fuel-efficient vehicles, and unit transportation
cost can be reduced by adding cost efficient, high capacity line-haul trucks to our self-owned fleet, and labor costs can be contained through the deployment
of more automated equipment at our sorting hubs.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses, which consist primarily of (i) salaries and other benefits for management and employees,
(ii) depreciation and rental costs for office facilities, (iii) advertising and marketing costs, and (iv) legal, finance, and other corporate overhead costs,
accounted for 13.6%, 9.7%, 10.1% and 9.0% of our revenues in 2014, 2015 and the six months ended June 30, 2015 and 2016, respectively. Our selling,
general and administrative expenses also included (i) a payment of RMB212.5 million in 2014 to compensate certain shareholders for their undertaking to
cease their pre-existing business, which accounted for 5.4% of our revenues in 2014, and (ii) share-based compensation expenses of nil, RMB116.8 million,
RMB61.1 million and RMB122.0 million in 2014, 2015, the six months ended June 30, 2015 and 2016, which accounted for nil, 1.9%, 2.5% and 2.9% of
our revenues in the same periods. The increase in the absolute amount of our selling, general and administrative expenses was mainly due to our business
acquisitions and organic business growth. We expect that our selling, general and administrative expenses will continue to increase as we hire additional
personnel and incur additional costs in connection with the expansion of our business operations, enhancement of management capabilities, grant of share
incentives, and our becoming a listed company. Our selling, general and administrative expenses as a percentage of our revenues decreased from 2014 to
2015 and from the six months ended June 30, 2015 to the same period in 2016, mainly due to the effect of the economies of scale.
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Results of Operations
The following table sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amounts and as percentages
of our total revenues. This information should be read together with our consolidated financial statements and related notes included elsewhere in this
prospectus. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.
2015
2015
2016
%
RMB
US$
%
RMB
%
RMB
US$
(in thousands, except percentages)
3,903,572
100.0
6,086,455
915,821
100.0
2,486,060
100.0
4,245,177
638,766
(2,770,530) (71.0) (3,998,737) (601,685) (65.7) (1,671,279) (67.2) (2,815,910) (423,706)
1,133,042
29.0
2,087,718
314,136
34.3
814,781
32.8
1,429,267
215,060
2014
RMB
Revenues
Cost of revenues
Gross profit
Operating income (expenses)(1)
Other income (expenses)
Interest income
Interest expense
method investments
Income before income tax, and share of
profit (loss) in equity method
investments
Income tax expense
Share of profit (loss) in equity method
investments
Net Income
Net loss attributable to noncontrolling
interests
Net income attributable to ZTO Express
(Cayman) Inc.
(1)
%
100.0
(66.3)
33.7
(534,537)
1,796
(532,741)
600,301
(13.6)
0.0
(13.6)
15.4
(591,738)
33,249
(558,489)
1,529,229
(89,038)
5,003
(84,035)
230,101
(9.7)
0.5
(9.2)
25.1
(249,183)
14,293
(234,890)
579,891
(10.1)
0.6
(9.5)
23.3
(380,728)
8,023
(372,705)
1,056,562
(57,287)
1,207
(56,080)
158,980
(9.0)
0.2
(8.8)
24.9
3,408
(798)
0.1
(0.0)
15,091
(16,392)
2,271
(2,466)
0.2
(0.3)
3,170
(8,436)
0.1
(0.3)
20,811
(8,386)
3,131
(1,262)
0.5
(0.2)
224,148
33,727
3.8
9,551
1,437
0.2
602,911
(202,486)
15.5
(5.2)
1,752,076
(419,999)
263,633
(63,197)
28.8
(6.9)
574,625
(163,462)
23.1
(6.6)
1,078,538
(293,972)
162,286
(44,233)
25.4
(6.9)
400,425
10.3
1,332,077
200,436
21.9
411,163
16.5
784,566
118,053
18.5
5,578
406,003
0.1
10.4
(459)
1,331,618
(69)
200,367
0.0
21.9
4,257
415,420
0.2
16.7
(19,950)
764,616
(3,002)
115,051
(0.5)
18.0
423
0.0
137
20
0.0
586
0.0
1,978
298
0.0
406,426
10.4
1,331,755
200,387
21.9
416,006
16.7
766,594
115,349
18.0
Our operating income (expenses) in 2015, the six months ended June 30, 2015 and the six months ended June 30, 2016 includes RMB116.8 million (US$17.6 million),
RMB61.1 million and RMB122.0 million (US$18.4 million), respectively of share-based compensation expenses, accounting for 1.9%, 2.5% and 2.9% of our total revenues in the
same periods, respectively.
Non-GAAP Measures
We use adjusted EBITDA and adjusted net income, both non-GAAP financial measures, in the evaluation of our operating results and in our financial
and operational decision-making.
We believe that adjusted EBITDA and adjusted net income help identify underlying trends in our business that could otherwise be distorted by the effect
of the expenses and gains that we include in income from operations and net income. We believe that adjusted EBITDA and adjusted net income provide
useful information about our operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility
with respect to key metrics used by our management in its financial and operational decision-making.
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Adjusted EBITDA and adjusted net income should not be considered in isolation or construed as an alternative to net income or any other measure of
performance or as an indicator of our operating performance. Investors are encouraged to review the historical non-GAAP financial measures to the most
directly comparable GAAP measures. Adjusted EBITDA and adjusted net income presented here may not be comparable to similarly titled measures
presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our
data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.
Adjusted EBITDA represents income from operations (which excludes depreciation, amortization, interest expenses and income tax expenses) before
(i) share-based compensation expenses; and (ii) gain on deemed disposal of equity method investments.
Adjusted net income represents net income before (i) share-based compensation expenses; and (ii) gain on deemed disposal of equity method
investments.
The table below sets forth a reconciliation of our net income to adjusted EBITDA for the periods indicated:
2014
2015
2015
2016
RMB
RMB
US$
RMB
RMB
US$
(in thousands)
Net income
Add:
Depreciation
Amortization
Interest expenses
Income tax expenses
EBITDA
Add:
Less:
investments
Adjusted EBITDA
406,003
1,331,618
200,367
415,420
764,616
115,051
56,037
7,977
798
202,486
673,301
145,276
12,780
16,392
419,999
1,926,065
21,859
1,923
2,466
63,197
289,812
68,646
5,598
8,436
163,462
661,562
113,461
10,037
8,386
293,972
1,190,472
17,072
1,511
1,262
44,233
179,129
116,800
17,575
61,063
122,000
18,357
(224,148)
1,818,717
(33,727)
273,660
722,625
(9,551)
1,302,921
(1,437)
196,049
673,301
The table below sets forth a reconciliation of our net income to adjusted net income for the periods indicated:
2014
2015
2015
2016
RMB
RMB
US$
RMB
RMB
US$
(in thousands)
Net income
Add:
Less:
investments
Adjusted net income
406,003
1,331,618
200,367
415,420
764,616
115,051
116,800
17,575
61,063
122,000
18,357
(224,148)
1,224,270
(33,727)
184,215
476,483
(9,551)
877,065
(1,437)
131,971
406,003
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Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
Revenues
Our revenues increased by 70.8% from RMB2.5 billion in the six months ended June 30, 2015 to RMB4.2 billion (US$638.8 million) in the same period
in 2016. The increase was mainly driven by growth in parcel volume from 1,185 million in the six months ended June 30, 2015 to 1,913 million in the same
period in 2016. We completed our acquisition of the express delivery business from 16 network partners on October 31, 2015 and from another network
partner on January 1, 2016. Those acquired businesses in the aggregate contributed RMB828.0 million (US$124.6 million), or 19.5%, of our revenues in the
six months ended June 30, 2016.
Cost of Revenues
Our total cost of revenues increased by 68.5% from RMB1.7 billion in the six months ended June 30, 2015 to RMB2.8 billion (US$423.7 million) in the
same period in 2016. This increase primarily resulted from increases in our line-haul transportation cost by RMB626.8 million (US$94.3 million), sorting hub
operating cost by RMB407.7 million (US$61.3 million) and cost of accessories by RMB77.7 million (US$11.7 million), partially offset by a decrease in
waybill material cost by RMB20.9 million (US$3.1 million) as our end customers reduced the use of paper waybills, which are replaced by digital ones. An
aggregate of RMB678.7 million (US$102.1 million) of our cost of revenues in the six months ended June 30, 2016 was attributable to the businesses we
acquired on October 31, 2015 and January 1, 2016.
Line-haul transportation cost. Our line-haul transportation cost increased by 64.1% from RMB977.4 million in the six months ended June 30, 2015 to
RMB1.6 billion (US$0.2 billion) in the same period in 2016. The increase was in line with the increase in our parcel volume and was mainly attributable to
increased costs of RMB208.1 million (US$31.3 million) in outsourced transportation service, and increased costs of RMB329.0 million (US$49.5 million)
incurred by our self-owned fleet, which includes truck fuel, tolls, drivers' compensation, and depreciation and maintenance expenses. Air transportation cost
also contributed RMB45.2 million (US$6.8 million) to the increase.
Sorting hub cost. Our sorting hub cost increased by 85.4% from RMB477.6 million in the six months ended June 30, 2015 to RMB885.4 million
(US$133.2 million) in the same period in 2016 mainly due to increased labor cost of RMB380.0 million arising from headcount addition primarily as a result
of business acquisitions and wage increase. Daily operation cost and utilities also contributed RMB20.0 million (US$3.0 million) to the increase.
Cost of accessories sold. Our cost of accessories sold increased significantly from RMB40.8 million in the six months ended June 30, 2015 to
RMB118.6 million (US$17.8 million) in the same period in 2016. The increase was in line with the growth in our revenue from the sale of accessories. We
sold more portable barcode readers and packing materials as our operations expanded and sold more thermal paper as our end customers used more digital
waybills.
Other costs. Other costs increased by 18.5% from RMB175.4 million in the six months ended June 30, 2015 to RMB207.8 million (US$31.3 million)
in the same period in 2016. This was mainly due to the increase in delivery cost related to express delivery services to certain enterprise customers by
RMB19.4 million (US$2.9 million) and the increase in certain materials costs.
Gross Profit
Our gross profit increased by 75.4% from RMB814.8 million in the six months ended June 30, 2015 to RMB1.4 billion (US$215.1 million) in the same
period in 2016. The businesses we acquired on October 31, 2015 and January 1, 2016 in the aggregate contributed RMB149.4 million (US$22.5 million) of
our gross profit in the six months ended June 30, 2016. Our gross profit margin increased from 32.8% in the six
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months ended June 30, 2015 to 33.7% in the same period in 2016, mainly attributable to our economies of scale and our continued efforts to effectively
control our line-haul transportation costs through effective route planning, the purchase and use of more cost efficient, high capacity line-haul trucks,
improved truck utilization through increased back-haul transportation as well as increased usage of digital waybills.
Operating Expenses
Our total operating expenses increased by 58.7% from RMB234.9 million in the six months ended June 30, 2015 to RMB372.7 million
(US$56.1 million) in the same period in 2016.
Selling, general and administrative expenses. Our selling, general and administrative expenses increased by 52.8% from RMB249.2 million in the six
months ended June 30, 2015 to RMB380.7 million (US$57.3 million) in the same period in 2016. Selling, general and administrative expenses in the six
months ended June 30, 2016 included RMB122.0 million (US$ 18.4 million) of share-based compensation expenses, as compared to RMB61.1 million in the
same period in 2015. Increase in our selling, general and administrative expenses was also due to increases in general and administrative employee
compensation by RMB13.5 million (US$2.0 million), depreciation and amortization by RMB13.5 million (US$2.0 million) and professional service fees by
RMB11.0 million (US$1.7 million).
Other operating income, net. We had a net other operating income of RMB8.0 million (US$1.2 million) in the six months ended June 30, 2016,
compared to RMB14.3 million in the same period in 2015. The decrease was mainly due to the decrease in government subsidies.
Other Income and Expenses
Interest income. Our interest income increased from RMB3.2 million in the six months ended June 30, 2015 to RMB20.8 million (US$3.1 million) in
the same period in 2016, primarily due to the increase in our bank deposits from cash generated from our business operations, as well as the proceeds from our
series A financing.
Interest expense. Our interest expense was RMB8.4 million and RMB8.4 million (US$1.3 million) in the six months ended June 30, 2015 and the same
period in 2016, respectively.
Gain on deemed disposal of equity method investments.
Our gain on deemed disposal of equity method investments was RMB9.6 million
(US$1.4 million) in the six months ended June 30, 2016, compared to nil in the same period in 2015. In January 2016, we acquired the remaining equity
interest in a network partner in Suzhou. In connection with the acquisition, our existing equity interest in that network partner was re-measured to an
aggregate fair value of RMB91.1 million (US$13.7 million), with the excess over the carrying amount of our investments in this company being recognized
as a gain on deemed disposal of equity method investments amounting to RMB9.6 million (US$1.4 million).
Income Tax Expense
Our income tax expense was RMB294.0 million (US$44.2 million) in the six months ended June 30, 2016, representing an increase of 79.8% as
compared to RMB163.5 million in the same period in 2015 due to the increase in our taxable income. Our effective tax rate in the six months ended June 30,
2016 decreased to 27.3% compared with 28.5% in the same period in 2015 mainly due to increase in non-taxable income recorded in the six months ended
June 30, 2016 and partially offset by the increase in non-deductible share based compensation expenses.
Net Income
As a result of the foregoing, our net income increased from RMB415.4 million in the six months ended June 30, 2015 to RMB764.6 billion
(US$115.1 million) in the same period in 2016. Our net margin increased from 16.7% in the six months ended June 30, 2015 to 18.0% in the same period in
2016, mainly attributing to the effect of the economies of scale and further improvements in our operating efficiency.
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Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
Revenues
Our revenues increased by 55.9% from RMB3.9 billion in 2014 to RMB6.1 billion (US$915.8 million) in 2015. The increase was mainly driven by
growth in parcel volume from 1,816 million in 2014 to 2,946 million in 2015 as a result of growth in China's e-commerce market and an increase in our
market share. The businesses we acquired on October 31, 2015 contributed RMB291.7 million (US$43.9 million), or 4.8%, of our revenues in 2015.
Cost of Revenues
Our total cost of revenues increased by 44.3% from RMB2.8 billion in 2014 to RMB4.0 billion (US$601.7 million) in 2015. This increase primarily
resulted from increases in our line-haul transportation cost by RMB689.9 million, sorting hub operating cost by RMB504.2 million and other cost, partially
offset by a decrease in waybill material cost by RMB49.9 million as our end customers reduced the use of paper waybills, which are replaced by digital ones.
RMB230.0 million (US$34.6 million) of our cost of revenues in 2015 was attributable to the businesses we acquired on October 31, 2015.
Line-haul transportation cost.
Our line-haul transportation cost increased by 42.4% from RMB1.6 billion in 2014 to RMB2.3 billion
(US$348.7 million) in 2015. The increase was mainly driven by the increase in our parcel volume and primarily attributable to increased costs of
RMB268.1 million in outsourced transportation service, and increased costs of RMB363.9 million incurred by our self-owned fleet, which includes truck
fuel, tolls, drivers' compensation, and depreciation and maintenance expenses.
Sorting hub cost. Our sorting hub cost increased by 74.6% from RMB675.7 million in 2014 to RMB1.2 billion (US$177.5 million) in 2015 mainly due
to increased labor cost of RMB398.3 million arising from headcount addition and wage increase. Rental expenses of sorting hubs and depreciation expenses
of property and equipment also contributed to the increase with an aggregate amount of RMB92.3 million.
Cost of accessories sold. Our cost of accessories sold increased by 32.9% from RMB100.2 million in 2014 to RMB133.2 million (US$20.0 million) in
2015 in line with our revenue growth.
Other costs. Other costs remained stable from RMB366.9 million in 2014 to RMB368.0 million (US$55.4 million) in 2015 in spite of our revenue
growth. This is mainly due to increased usage of digital waybills which replaces paper waybills and reduces waybill material costs.
Gross Profit
Our gross profit increased by 84.3% from RMB1.1 billion in 2014 to RMB2.1 billion (US$314.1 million) in 2015. Our organic growth contributed
RMB893.0 million to the increase in our gross profit while the businesses we acquired on October 31, 2015, in the aggregate, contributed RMB61.7 million
(US$9.3 million) to the increase in our gross profit in 2015. Our gross profit margin increased from 29.0% in 2014 to 34.3% in 2015, as our revenue growth
outpaced the increase in cost of revenue. The increase in our gross profit margin was also attributable to our efforts to effectively control our line-haul
transportation costs through effective route planning and the purchase and use of more cost efficient, high capacity line-haul trucks, improved truck
utilization through increased back-haul transportation as well as increased usage of digital waybills.
Operating Expenses
Our total operating expenses increased by 4.8% from RMB532.7 million in 2014 to RMB558.5 million (US$84.0 million) in 2015.
Selling, general and administrative expenses. Our selling, general and administrative expenses increased by 10.7% from RMB534.5 million in 2014 to
RMB591.7 million (US$89.0 million) in 2015. Our selling, general and administrative expenses in 2014 included a payment of RMB212.5 million to certain
shareholders to compensate them for their undertaking to cease their pre-existing business in competition
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with ours. Selling, general and administrative expenses in 2015 included RMB116.8 million (US$17.6 million) in share-based compensation expenses, as
compared to nil in 2014. Excluding the effect of these two factors, our selling, general and administrative expense increased by 47.5% from
RMB322.0 million in 2014 to RMB474.9 million (US$71.5 million) in 2015, primarily due to increases in general and administrative employee
compensation by RMB97.4 million, depreciation and amortization by RMB11.5 million and professional service fees by RMB9.5 million.
Other operating income, net. We had a net other operating income of RMB33.2 million (US$5.0 million) in 2015, compared to RMB1.8 million in
2014. The increase was mainly due to the increase in government subsidies.
Other Income and Expenses
Interest income. Our interest income increased from RMB3.4 million in 2014 to RMB15.1 million (US$2.3 million) in 2015, primarily due to increased
interest income from bank deposits.
Interest expense. Our interest expense increased from RMB0.8 million in 2014 to RMB16.4 million (US$2.5 million) in 2015, primarily due to interest
payments for RMB300 million of bank loans with a bank starting from December 2014.
Gain on deemed disposal of equity method investments. We acquired the operating assets of nine network partners in which we already had existing
equity interest in October 2015. In connection with the acquisition, our existing equity interest in those network partners was re-measured to an aggregate fair
value of RMB431.0 million (US$64.9 million), with the excess over the carrying amount of our investments in these companies being recognized as gain on
deemed disposal of equity method investments amounting to RMB224.1 million (US$33.7 million).
Income Tax Expense
Our income tax expense was RMB420.0 million (US$63.2 million) in 2015, representing an increase of 107.4% as compared to RMB202.5 million in
2014 due to the increase in our taxable income. Our income tax expense included RMB5.2 million of income tax expense attributable to the business we
acquired on October 31, 2015. Our effective tax rate in 2015 decreased to 24.0% compared with 33.6% in 2014. Of the 9.6% decrease in effective tax rate,
approximately 6.7% was due to a decrease in non-deductible expenses and approximately 3.2% was due to an increase in non-taxable income in 2015.
Net Income
As a result of the foregoing, our net income increased significantly from RMB406.0 million in 2014 to RMB1.3 billion (US$200.4 million) in 2015. The
businesses we acquired in 2015 contributed RMB20.1 million (US$3.0 million), or 1.5%, to our net income in 2015. Our net margin increased from 10.4% in
2014 to 21.9% in 2015. The increase in our net margin from 2014 to 2015 was partly attributable to a payment of RMB212.5 million in 2014 to certain
shareholders to compensate them for their undertaking to cease their pre-existing competitive business.
Selected Quarterly Results of Operations
The following table sets forth our historical consolidated selected quarterly results of operations and parcel volume for the periods indicated. You should
read the following table in conjunction with our audited consolidated financial statements and related notes included elsewhere in this prospectus. We have
prepared the consolidated quarterly financial information on the same basis as our annual audited consolidated financial statements. The consolidated
quarterly financial information includes all
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adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair representation of our operating results for the quarters
presented.
March 31,
2015
Revenues
Cost of revenues
Gross profit
Other operating income (expense),
net
Interest income
Interest expense
method investments
Income before income tax, and share
of profit (loss) in equity method
investments
Income tax expense
method investments
Net Income
Net (income) loss attributable to
Parcel volume (in millions)
For the Three Months Ended

September 30,
December 31,
March 31,
2015
2015
2016
(in RMB thousands except for parcel volume)
June 30,
2015
June 30,
2016
1,128,295
(779,863)
348,432
1,357,765
(891,416)
466,349
1,412,422
(972,723)
439,699
2,187,973
(1,354,735)
833,238
1,958,548
(1,357,100)
601,448
2,286,629
(1,458,810)
827,819
(115,678)
(133,505)
(156,171)
(186,384)
(162,631)
(218,097)
3,100
(112,578)
235,854
11,193
(122,312)
344,037
20,245
(135,926)
303,773
(1,289)
(187,673)
645,565
15,640
(146,991)
454,457
(7,617)
(225,714)
602,105
1,131
(4,142)
2,039
(4,294)
2,299
(4,293)
9,622
(3,663)
9,057
(3,644)
11,754
(4,742)
224,148
9,551
232,843
(65,836)
341,782
(97,626)
301,779
(90,323)
875,672
(166,214)
469,421
(122,018)
609,117
(171,954)
167,007
244,156
211,456
709,458
347,403
437,163
(2,234)
164,773
6,491
250,647
1,691
213,147
(6,407)
703,051
(8,589)
338,814
(11,361)
425,802
161
425
197
(646)
(39)
164,934
498
251,072
687
213,344
732
702,405
1,029
338,775
828
2,017
427,819
1,085
We experience seasonality in our business, mainly reflecting seasonal fluctuations of the e-commerce industry in China. For example, we generally
experience fewer delivery orders during national holidays in China, particularly during the Chinese New Year holiday season in the first quarter of each year,
when the e-commerce industry experiences lower transaction volume. Furthermore, e-commerce platforms in China hold special promotional campaigns on
November 11 and December 12 of each year that tend to boost
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sales in the fourth quarter relative to other quarters. The seasonal trends that we have experienced in the past may not apply to, or be indicative of, our future
operating results.
Liquidity and Capital Resources
The following table sets forth the movements of our cash and cash equivalents for the periods presented:
2014
RMB

Effect of exchange rate
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at the
beginning of period
Cash and cash equivalents at the end of
period

2015
RMB
1,071,751
(1,116,299)
171,064
2015
US$
RMB
(in thousands)

2016
RMB
US$
1,867,538
(1,449,746)
1,869,331
1,877
281,006
(218,141)
281,276
282
422,934
(236,722)
29,530
596,914
(1,108,727)
98,000
19,685
89,817
(166,829)
14,746
2,962
126,516
2,289,000
344,423
215,742
(394,128)
(59,304)
36,843
163,359
24,580
163,359
2,452,359
369,003
163,359
2,452,359
369,003
379,101
2,058,231
309,699
Our principal sources of liquidity have been proceeds from cash flows from operating activities and financing activities. As of December 31, 2014, 2015
and June 30, 2016, our cash and cash equivalents were RMB163.4 million, RMB2.5 billion (US$369.0 million) and RMB2.1 billion (US$309.7 million),
respectively. Our cash and cash equivalents primarily consist of cash on hand and highly liquid investments, which are unrestricted as to withdrawal or use
and have maturities of three months or less when purchased. Approximately 58% of our cash and cash equivalent as of June 30, 2016 were held in China.
Approximately 48% of our cash and cash equivalents were held by our consolidated affiliated entities and denominated in Renminbi.
As of June 30, 2016, we had short-term borrowings of RMB406.9 million (US$61.2 million). The borrowings were collateralized by our fixed assets.
We believe that our existing cash and cash equivalents and anticipated cash flow from operations are sufficient to fund our operating activities, capital
expenditures and other obligations for at least the next 12 months. However, we may decide to enhance our liquidity position or increase our cash reserve for
future expansions and acquisitions through additional financing activities. The issuance and sale of additional equity would result in further dilution to our
existing shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that may restrict
our operations and ability to make distributions. However, financing may not be available in amounts or on terms acceptable to us, if at all.
Although we consolidate the results of our consolidated affiliated entities, we only have access to the assets or earnings of our consolidated affiliated
entities through our contractual arrangements with our VIE. See "Corporate History and Structure." For restrictions and limitations on liquidity and capital
resources as a result of our corporate structure, see "Management's Discussion and Analysis of Financial Condition and Results of OperationsHolding
Company Structure." In addition, we would need to accrue and pay withholding taxes if we were to distribute funds from our subsidiaries and consolidated
affiliated entities in China to our offshore subsidiaries. We do not intend to repatriate such funds in the foreseeable
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future, as we plan to use existing cash balances in China for general corporate purposes and reinvestment to support our business growth.
In utilizing the proceeds we expect to receive from this offering and the other cash that we hold offshore, we may make additional capital contributions
to our PRC subsidiaries, establish new PRC operating entities, make loans to our PRC operating entities, or acquire offshore entities with business operations
in China in offshore transactions. Most of these uses are subject to PRC regulations and approvals.
Operating Activities
Net cash provided by operating activities in the six months ended June 30, 2016 was RMB596.9 million (US$89.8 million), which was mainly
attributable to the following factors: (i) our express delivery services and sales of accessories generated net cash inflow RMB4.0 billion (US$605.6 million),
while the aggregate cash outflow for transportation cost, sorting hubs operation cost, cost of accessories sold and other costs was RMB1.9 billion
(US$287.9 million); (ii) we paid RMB0.9 billion (US$135.6 million) as labor related costs, including salaries, social insurances and other benefits; (iii) we
paid income tax of RMB389.4 million (US$58.6 million); and (iv) we paid RMB145.0 million (US$21.8 million) as other administrative costs.
Net cash provided by operating activities in 2015 was RMB1.9 billion (US$281.0 million), which was mainly attributable to the following factors:
(i) our express delivery services and sale of accessories generated net cash inflow RMB6.4 billion (US$1.0 billion), while the aggregate cash outflow for
transportation cost, sorting hubs operation cost, cost of accessories sold and other costs was RMB2.8 billion (US$430.7 million); (ii) we paid RMB1.0 billion
(US$143.3 million) as labor related costs, including salaries, social insurances and other benefits; (iii) we paid income tax of RMB331.2 million
(US$49.8 million); and (iv) we paid RMB354.4 million (US$53.3 million) as other administrative costs.
Net cash provided by operating activities in 2014 was RMB1.1 billion, which was mainly attributable to the following factors: (i) our express delivery
services and sale of accessories generated net cash inflow of RMB4.1 billion, while the aggregate cash outflow for transportation cost, sorting hubs operation
cost, cost of accessories sold and other costs was RMB2.0 billion; (ii) we paid RMB566.7 million as labor related costs, including the salaries, social
insurances and other benefits; (iii) we paid RMB212.5 million to certain shareholders to compensate them for their cessation of business; and (iv) we paid
RMB152.8 million as other general and administrative costs.
Investing Activities
Net cash used in investing activities in the six months ended June 30, 2016 was RMB1.1 billion (US$166.8 million), primarily due to purchase of
property and equipment of RMB504.5 million (US$75.9 million), including the purchase of sorting hub facilities, office furnishing and furnitures, trucks and
sorting equipment and the purchase of land use rights for our new sorting hubs in an amount of RMB362.0 million (US$54.5 million).
Net cash used in investing activities in 2015 was RMB1.4 billion (US$218.1 million), primarily due to purchase of property and equipment of
RMB1.0 billion (US$159.8 million), including the purchase of sorting hub facilities, office properties, trucks and sorting equipment, purchase of land use
rights for our new sorting hubs in an amount of RMB413.6 million (US$62.2 million) and the increase in equity method investments of RMB193.8 million
(US$29.2 million), partially offset by repayment of an amount from a related party of RMB228.5 million (US$34.4 million).
Net cash used in investing activities in 2014 was RMB1.1 billion, primarily due to purchase of property and equipment of RMB618.6 million, including
the purchase of sorting hub facilities, office properties, trucks and sorting equipment, payment of an amount of RMB228.5 million and the purchase of land
use rights for our new sorting hubs in an amount of RMB171.5 million.
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Financing Activities
Net cash provided by financing activities in the six months ended June 30, 2016 was RMB98.0 million (US$14.7 million), primarily generated from
RMB100.0 million (US$15.0 million) of proceeds from short-term borrowings, partially offset by repayment of short-term borrowings in an amount of
RMB2.0 million (US$0.3 million).
Net cash provided by financing activities in 2015 was RMB1.9 billion (US$281.3 million), primarily generated from RMB1.9 billion
(US$291.1 million) of proceeds from issuing preferred shares, partially offset by payment of dividends in an amount of RMB115 million (US$17.3 million).
Net cash provided by financing activities in 2014 was RMB171.1 million, primarily generated from capital injection in an amount RMB500 million and
RMB250 million of net proceeds from short-term borrowing partially offset by payment of deemed distribution in an amount of RMB64 million, and
repayment of interest-free loan to a related party in an amount of RMB341 million and RMB184 million payment for repurchasing ordinary shares.
Capital Expenditures
In connection with the expansion of our network and upgrade of our equipment and facilities, we paid an aggregate of approximately
RMB790.1 million, RMB1.5 billion (US$225.7 million) and RMB866.6 million (US$130.4 million) in 2014, 2015 and the six months ended June 30, 2016,
respectively, for the acquisition of land use rights, fleet procurement, building of sorting facilities and purchase of equipment and other fixed assets. We
intend to fund our future capital expenditures with our existing cash balance, proceeds from this offering and other financing alternatives. We will continue
to make capital expenditures to support the growth of our business.
Contractual Obligations
The following table sets forth our contractual obligations as of December 31, 2015:
Payment Due by Period
Less than
1 year
1 - 3 years
Total
RMB
US$
3 - 5 years
RMB
More than
5 years
(in thousands)
Operating lease commitments
881,764
132,678
122,643
171,240
122,433
465,448
We lease office space, sorting hubs and other facilities under non-cancellable operating lease agreements that expire at various dates through
December 2032. During 2014, 2015 and the six months ended June 30, 2016, we incurred RMB65.9 million, RMB105.2 million (US$16.2 million) and
RMB62.3 million (US$9.4 million) of such expenses, respectively.
We also have certain capital commitments that are primarily related to commitments on construction of office buildings, sorting hubs and other facilities.
Total capital commitments contracted but not yet reflected in the consolidated financial statements amounted to RMB1.0 billion (US$153.8 million) as of
June 30, 2016. All of these capital commitments will be fulfilled in the following years according to the construction progress.
Off-Balance Sheet Commitments and Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any unconsolidated third parties. In
addition, we have not entered into any derivative contracts that are indexed to our shares and classified as shareholders' equity, or that are not reflected in our
consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves
as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing,
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liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.
Business Combination
To consolidate and optimize our delivery capacity in key geographic areas within China, in 2014 and 2015, we acquired substantially all of the assets
from eight and 16 network partners, respectively. The assets acquired constituted substantially all of the operating assets of such network partners, including
sorting hubs, vehicles and miscellaneous fixture, the book value of which approximates fair value. We acquired 60% equity interest in a network partner in
January 2014, which was accounted for as equity method investment. In January 2016, we acquired the remaining minority equity interest in this network
partner. We accounted for such acquisitions as business combinations.
Total consideration for the 2014 acquisitions consisted of cash of RMB64.5 million and 202,800,000 ordinary shares of ZTO Express at a determined per
share fair value of RMB11.73. Total consideration for the 2015 acquisitions consisted of cash of RMB57.7 million and 26,386,657 ordinary shares of ZTO
Express at a determined per share fair value of RMB48.64. Total consideration for the 2016 acquisition consisted of cash of RMB30.7 million and 600,000
ordinary shares of our company at a determined per share fair value of RMB50.11. The excess of the total cash and share-based consideration over the fair
value of the assets acquired was recorded as goodwill which is not tax deductible.
According to the provisions of ASC 805, the identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquiree must be
recognized and measured at fair value as of the acquisition date. We engaged a third party valuation firm to assist us with the valuation of ordinary shares as
well as property, plant and equipment and intangible assets. The discounted cash flow method was used to determine the fair value of equity interests, and the
value of ordinary shares was derived using an option-pricing model.
We recognized goodwill as a result of these acquisitions. The most significant intangible assets are customer service capability and presence in
geographic locations or markets, which are not separately recognized from goodwill, neither of which were qualified as amortizable intangible assets.
Taxation
We generate the majority of our operating income from our PRC operations. Income tax liability is calculated based on a separate return basis as if we
had filed separate tax returns for all the periods presented.
The Cayman Islands and the British Virgin Islands
Under the current laws of the Cayman Islands and the British Virgin Islands, we are not subject to tax on our income or capital gains. In addition, the
Cayman Islands and the British Virgin Islands do not impose withholding tax on dividend payments.
Hong Kong
Under the current Hong Kong Inland Revenue Ordinance, our Hong Kong subsidiary is subject to 16.5% Hong Kong profit tax on its income tax on their
taxable income generated from operations in Hong Kong. Under the Hong Kong tax laws, we are exempted from the Hong Kong income tax on our foreignderived income. In addition, payments of dividends from our Hong Kong subsidiary to us are not subject to any Hong Kong withholding tax.
PRC
Under the PRC Enterprise Income Tax Law, or EIT Law, our PRC subsidiaries and consolidated affiliated entities are subject to enterprise income tax at a
statutory rate of 25%. In accordance with the EIT Law, dividends, which arise from profits of foreign invested enterprises, or FIEs, earned after January 1,
2008, are subject to a 10% withholding income tax. In addition, under tax treaty between the
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PRC and Hong Kong, if the foreign investor is incorporated in Hong Kong and qualifies as the beneficial owner, the applicable withholding tax rate is
reduced to 5%, if the investor holds at least 25% in the FIE, or 10%, if the investor holds less than 25% in the FIE. Under Circular 36, our PRC subsidiaries
and consolidated affiliated entities are subject to value added tax, or VAT, at a rate of 6% to 17% on proceeds received from customers, and are entitled to a
refund for VAT already paid or borne on the goods purchased by it and utilized in the production of goods or provisions of services that have generated the
gross sales proceeds.
Critical Accounting Policies
We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions that
affect our reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of each fiscal period and our reported
amounts of revenue and expenses during each fiscal period. We continually evaluate these judgments and estimates based on our own historical experience,
knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and assumptions
that we believe to be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the
use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting
policies require a higher degree of judgment than others in their application.
The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported
results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. We believe the following
accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
We recognize revenue when persuasive evidence of an arrangement exists, service has been performed, the fee is fixed or determinable and collectability
is reasonably assured while we serve as the franchisor in the ZTO network, we have not collected any franchisee fees from our network partners. We consider
the pickup outlets operated by our network partners to be our customers in our revenue arrangements. The principle source of our revenue consisted of
network transit fees derived from sorting and line haul transportation services provided to the pickup outlets operated by our network partners. The network
transit fees we charge the pickup outlets consist of (i) a fixed amount for a waybill attached to each parcel and (ii) a variable amount per parcel for sorting and
long-haul transportation based on the parcel weight and route. Revenue is recognized when the parcels are delivered from our sorting hubs to the delivery
outlets operated by our network partners, assuming all other revenue recognition criteria have been met. A small portion of our delivery services are
performed for our enterprise customers, and is recognized when parcels are delivered to recipients.
Consolidation of Variable Interest Entities
Our consolidated financial statements include the financial statements of our holding company, our subsidiaries, and our variable interest entity. All
intercompany transactions and balances have been eliminated on consolidation.
We evaluate the need to consolidate certain variable interest entities by determining if we are their primary beneficiary. In determining whether we are
the primary beneficiary, we consider if we (1) have authority to direct the activities that most significantly affect the economic performance of the variable
interest entity, and (2) the obligation to absorb losses of the variable interest entity that could potentially be significant to the variable interest entity or the
right to receive benefits from the variable interest entity that could potentially be significant to the variable interest entity. We consolidate the variable
interest entity if we are deemed its primary beneficiary.
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Applicable PRC laws and regulations currently limit foreign ownership of companies that provide domestic mail delivery services in PRC. We are
deemed a foreign legal person under PRC laws and accordingly subsidiaries owned by us are ineligible to engage in provisions of domestic mail delivery
services. Therefore, we conduct our operations through our VIE, ZTO Express. To provide the effective control over ZTO Express and receive substantially all
of the economic benefits of ZTO Express, Shanghai Zhongtongji Network, our wholly-owned subsidiary, entered into a series of contractual arrangements
with ZTO Express and its shareholders. These contractual agreements include a shareholders' voting rights proxy agreement, an exclusive call option
agreement, an equity pledge agreement, irrevocable powers of attorney, an exclusive consulting and services agreement and spousal consent letters. As a
result of these contractual arrangements, the shareholders of ZTO Express irrevocably granted Shanghai Zhongtongji Network the power to exercise all
voting rights to which they were entitled. In addition, Shanghai Zhongtongji Network has the option to acquire all of the equity interests in ZTO Express, to
the extent permitted by the then-effective PRC laws and regulations, for nominal consideration. Finally, Shanghai Zhongtongji Network is entitled to receive
service fees for certain services to be provided to ZTO Express. We conclude that ZTO Express is our variable interest entity, of which we are the primary
beneficiary. As such, we consolidated the financial results of ZTO Express in our consolidated financial statements.
Tonglu Tongze, together with its subsidiaries, was formed in 2013 and majority owned by our employees. We have participated significantly in the
design of Tonglu Tongze during its formation and we have the ability to determine which of our employees can become shareholders of Tonglu Tongze.
Historically, our employees served as management of Tonglu Tongze without any compensation paid by Tonglu Tongze. In 2015 we extended a loan to
Tonglu Tongze amounting to RMB15 million which was repaid in 2016. We have determined that Tonglu Tongze is a variable interest entity as its equity
investors do not have the power, through voting rights or similar rights, to direct the activities of Tonglu Tongze that most significantly impact the entity's
economic performance and we held variable interests in Tonglu Tongze in the form of a waiver in management fees and loan receivable. After considering the
terms, characteristics, size of the economic interests and our involvement in Tonglu Tongze, we have concluded that we are not the primary beneficiary of
Tonglu Tongze as we do not have an exposure to the economics of Tonglu Tongze that is more than insignificant.
Income Taxes
Current income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense items which are not
assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. We follow the asset and liability
method of accounting for income taxes.
In accordance with the provisions of ASC 740, we recognize in our financial statements the benefit of a tax position if the tax position is "more likely
than not" to prevail based on the facts and technical merits of the position. Tax positions that meet the "more likely than not" recognition threshold are
measured at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. We estimate our liability for
unrecognized tax benefits which are periodically assessed and may be affected by changing interpretations of laws, rulings by tax authorities, changes and/or
developments with respect to tax audits, and expiration of the statute of limitations. The ultimate outcome for a particular tax position may not be determined
with certainty prior to the conclusion of a tax audit and, in some cases, appeal or litigation process.
Under this method, deferred tax assets and liabilities are determined based on the temporary differences between the financial statements carrying
amounts and tax bases of assets and liabilities by applying enacted statutory tax rates that will be in effect in the period in which the temporary differences
are expected to reverse. We consider positive and negative evidence when determining whether some portion or all of our deferred tax assets will not be
realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability,
the duration of statutory carry-forward periods, our historical results of operations, and our
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tax planning strategies. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which
those temporary differences become deductible. Based upon the level of our historical taxable income and projections for future taxable income over the
periods in which the deferred tax assets are deductible, we believe it is more likely than not that we will realize the deferred tax assets resulted from the tax
loss carried forward in the future periods.
The actual benefits that are ultimately realized may differ from our estimates. As each audit is concluded, adjustments, if any, are recorded in our
financial statements in the period in which the audit is concluded. Additionally, in future periods, changes in facts, circumstances and new information may
require us to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates
are recognized in the period in which the changes occur. As of December 31, 2014 and 2015 and June 30, 2016, we did not have any significant
unrecognized uncertain tax positions.
Fair Value of Our Ordinary Shares
Prior to our initial public offering, we were a private company with no quoted market prices for our ordinary shares. We therefore needed to make
estimates of the fair value of our ordinary shares at various dates for the following purposes:
determining the fair value of our ordinary shares issued for business acquisitions at the date when control of the business acquired
was obtained;
determining the fair value of our ordinary shares at the date of the grant of share-based compensation award to our employees as one of the
inputs into determining the grant date fair value of the award.
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The following table sets forth the fair value of our ordinary shares estimated at different times prior to our initial public offering with the assistance from
an independent valuation firm:
Date
Equity Value
(RMB thousands)
Fair Value
per Share
(RMB)
DLOM
Discount
Rate
Type of
Valuation
Purpose of
Valuation
January 1, 2014
7,038,549
11.73
19%
18%
Retrospective
November 6,
2014
February 6,
2015
March 31, 2015
10,000,000
16.67
14%
17%
Retrospective
Fair value of ordinary shares issued

as the consideration of
acquisitions;
Repurchase of ordinary shares;
13,992,175
23.18
12%
16%
Retrospective
Issuance of Share Unit Awards;
13,992,175
23.18
12%
16%
Retrospective
June 30, 2015
20,433,038
34.07
11%
16%
Retrospective
September 30,
2015
October 31,
2015
December 31,
2015
March 31, 2016
30,703,596
48.40
11%
15%
Retrospective
30,855,845
48.64
11%
15%Contemporaneous
32,767,260
50.11
11%
15%Contemporaneous
39,749,047
61.02
10%
14%Contemporaneous
June 20, 2016
44,112,144
67.37
9%
13.5%Contemporaneous
June 28, 2016
44,112,144
67.37
9%
13.5%Contemporaneous
Subsequent measurement of Share

Unit Awards;
Unit Awards;
Unit Awards;
Issuance of ordinary shares as the
consideration of acquisitions;
Unit Awards;
Unit Awards;
Fair value of options granted in
connection with share based
compensation;
Fair value of ordinary shares issued
in connection with share based
compensation;
Our share unit awards were all converted into interest of our employee share holding platform on June 28, 2016, and the fair value of the underlying
ordinary shares on other dates of valuation is calculated on a fully diluted basis as if the share unit awards were converted.
Equity value refers to the indicative value of all equity interests in us, including the value of our issued and outstanding ordinary shares, non-contingent
ordinary shares relating to the 2015 acquisitions and series A convertible redeemable preferred shares. We adopted the income approach, in particular, the
discounted cash flow method, to analyze the indicative value of all equity interests in us.
The determination of the fair value of our ordinary shares requires complex and subjective judgments to be made regarding our projected financial and
operating results, our unique business risks, the liquidity of our shares and our operating history and prospects at the time of valuation.
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The major assumptions used in calculating the fair value of ordinary shares include:
Discount rates. The discount rates listed out in the table above were based on the weighted average cost of capital, which was determined based
on a consideration of the factors including risk-free rate, comparative industry risk, equity risk premium, company size and non-systemic risk factors.
Comparable companies. In deriving the weighted average cost of capital used as the discount rates under the income approach, seven publicly
traded companies were selected for reference as our guideline companies. The guideline companies were selected based on the following criteria:
(i) they operate in the air freight and logistics industry and (ii) their shares are publicly traded in developed capital markets, including the
United States, the United Kingdom, Europe and Japan.
Discount for lack of marketability, or DLOM. DLOM was quantified by the Black-Scholes option pricing model. Under this option-pricing
method, the cost of the put option, which can hedge the price change before the privately held shares can be sold, was considered as a basis to
determine the DLOM. This option pricing method is one of the methods commonly used in estimating DLOM as it can take into consideration factors
like timing of a liquidity event (such as an IPO) and estimated volatility of our shares. The farther the valuation date is from an expected liquidity
event, the higher the put option value and thus the higher the implied DLOM. The lower DLOM is used for the valuation, the higher is the determined
fair value of the ordinary shares.
The income approach involves applying appropriate discount rates to estimated cash flows that are based on earnings forecasts. Our revenues and
earnings growth rates, as well as major milestones that we have achieved, contributed to the increase in the fair value of our ordinary shares. However, these
fair values are inherently uncertain and highly subjective. The assumptions used in deriving the fair values are consistent with our business plan. These
assumptions include: no material changes in the existing political, legal and economic conditions in China; our ability to retain competent management, key
personnel and staff to support our ongoing operations; and no material deviation in market conditions from economic forecasts. These assumptions are
inherently uncertain.
The option-pricing method was used to allocate enterprise value to preferred and ordinary shares, taking into account the guidance prescribed by the
AICPA Audit and Accounting Practice Aid, "Valuation of Privately-Held Company Equity Securities Issued as Compensation." The method treats common
stock and preferred stock as call options on the enterprise's value, with exercise prices based on the liquidation preference of the preferred stock.
The option-pricing method involves making estimates of the anticipated timing of a potential liquidity event, such as a sale of our company or an initial
public offering, and estimates of the volatility of our equity securities. The anticipated timing is based on the plans of our board of directors and
management. Estimating the volatility of the share price of a privately held company is complex because there is no readily available market for the shares.
We estimate the volatility of our shares to range from 24.3% to 32.7% based on the historical volatilities of comparable publicly traded companies engaged
in similar lines of business. Had we used different estimates of volatility, the allocations between preferred and ordinary shares would have been different.
The fair value of our ordinary shares increased from RMB11.73 as of January 1, 2014 to RMB16.67 as of November 6, 2014. DLOM decreased from 19%
to 14% during the same period, primarily due to our expectations for the timing of our initial public offering. Meanwhile, the increase in fair value of our
ordinary shares was attributable to organic growth of our business.
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The fair value of our ordinary shares increased from RMB16.67 as of November 6, 2014 to RMB23.18 as of February 6, 2015 and March 31, 2015. The
increase in fair value of our ordinary shares was mainly generated from the significant increase in demand for parcel delivery due to the growth in e-commerce
industry in China. We incorporated the higher expectation of parcel volume in the cash flow forecast and lowered the discount rate from 17.0% as of
November 6, 2014 to 16.0% as of February 6, 2015 and March 31, 2015 to reflect the reduction in perceived uncertainties associated with our business plan.
The fair value of our ordinary shares increased from RMB23.18 as of March 31, 2015 to RMB34.07 as of June 30, 2015. The increase in fair value of our
ordinary shares was attributable to organic growth of our business.
The fair value of our ordinary shares increased from RMB34.07 as of June 30, 2015 to RMB48.40 as of September 30, 2015 and RMB48.64 as of
October 31, 2015. The increase in fair value of our ordinary shares was primarily triggered by the fact that on August 18, 2015, we completed the first closing
of Series A preferred shares financing from institutional investors and entered into a series of agreements to acquire franchisees within mainland China. We
believe the transactions will integrate resources in different regions and further extend our presence in the connection with China e-commerce market.
Regarding of the transactions, we adjusted our financial forecast to reflect the expected economic benefits and synergies generated from the transactions. We
also lowered the discount rate from 16.0% as of June 30, 2015 to 15.0% as of September 30, 2015 and October 31, 2015, due to the increase size of our
business and the reduction in perceived uncertainties associated with our business plan.
The fair value of our ordinary shares increased slightly from RMB48.64 as of October 31, 2015 to RMB50.11 as of December 31, 2015. The increase in
fair value of our ordinary shares was attributable to the second closing of preferred sharesSeries A financing from institutional investors.
The fair value of our ordinary shares increased continuously from RMB50.11 as of December 31, 2015 to RMB67.37 as of June 30, 2016. The increase in
fair value of our ordinary shares was mainly attributable to organic growth of our business. Due to the increase in the size of our business and the
commencement of our preparation for this offering in April 2016, we lowered the discount rate from 15% as of December 31, 2015 to 14% as of March 31,
2016 and 13.5% as of June 20, 2016 and June 28, 2016.
Fair Value of Share Unit Awards
In February 2015, we granted a total of 584,000 redeemable and contingently convertible share units to certain key employees. These awards are
classified as liabilities and measured at fair value at the date of the grant and subsequently re-measured at fair value at the end of each reporting period
through settlement. Changes in the fair value of the liabilities incurred for these awards are recognized as share based compensation expense. On June 28,
2016, we converted those redeemable and contingently convertible share units into 17,520,000 shares of limited partner interests in the limited partnerships
that are shareholders of Zto Es Holding Limited, the holding vehicle of our onshore employee share holding platform. Holders of those shares of limited
partner interests are entitled to indirect economic interest in 3,504,000 ordinary shares of the company. The fair value of the limited partner interests at the
modification date was based on the fair value of the underlying ordinary shares.
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The following table sets forth information regarding the redeemable share unit with conversion option contingent on IPO granted to eligible employees:
Number of Share
Unit Awards
Grant or Re-measure dates
February 6, 2015
March 31, 2015
June 30, 2015
September 30, 2015
October 31, 2015
December 31, 2015
March 31, 2016
Conversion
Ratio
584,000
584,000
584,000
584,000
584,000
584,000
584,000
Fair Value
per Share Unit
Fair Value of the

Share Unit Awards
(RMB)
(RMB thousands)
1:6
1:6
1:6
1:6
1:6
1:6
1:6
147.10
146.47
204.56
290.42
290.42
300.00
366.15
85,906
85,536
119,463
169,604
169,605
175,200
213,834
Our share based compensation expense is measured based on the fair value of the share unit awards as calculated under the binomial option pricing
model. Management is responsible for determining the fair value of share unit awards granted to employees.
The key assumptions used to determine the fair value of the share unit awards at the grant date and the re-measure dates were as follows. Changes in these
assumptions could significantly affect the fair value of share unit awards and hence the amount of compensation expenses we recognize in our consolidated
financial statements.
Assumptions used in the binomial model are presented below:
February 6,
2015
March 31,
2015
June 30,
2015
September 30,
2015
October 31,
2015
December 31,
2015
March 31,
2016
Expected volatility(1)
Risk-free interest rate (per annum)(2)
25.1%
1.50%
24.3%
1.38%
25.3%
1.35%
27.5%
1.30%
28.3%
1.30%
29.0%
1.51%
32.0%
1.39%
Risky interest rate (per annum)(3)

Expected dividend yield(4)
6.00%
5.75%
5.25%
5.00%
4.75%
4.75%
4.35%
Expected term (in years)(5)

Fair value of underlying ordinary shares(6)
1.9
23.18
1.8
23.18
1.5
34.07
1.3
48.40
1.2
48.64
1.0
50.11
0.8
61.02
(1)
We estimate expected volatility based on the annualized standard deviation of the daily return embedded in historical share prices of comparable companies with a time horizon
close to the expected expiry of the term.
(2)
We estimate risk-free interest rate based on the yield to maturity of relevant government bonds with a maturity similar to the expected expiry of the term.
(3)
We estimate risky interest rate based on the Renminbi-denominated borrowing cost of the company with the term corresponding to the expected time interval.
(4)
We do not anticipate any dividend payments on our ordinary shares in the foreseeable future.
(5)
Expected term is the time interval between grant date or re-measure date and expected date of initial public offering.
(6)
The fair value of underlying ordinary share is derived from the previous section.
The assumptions used in fair value recognition represent our best estimates, but these estimates involve inherent uncertainties and the application of our
judgment. If factors change or different assumptions are used, the fair value could be materially different for any period. Moreover, the estimates of fair value
are not intended to predict actual future events or the value that ultimately will be realized by grantees who receive share-based awards, and subsequent
events are not indicative of the reasonableness of the original estimates of fair value made by us for accounting purposes.
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Fair Value of Options
We adopted the 2016 Plan in order to provide appropriate incentives to the relevant directors, executive officers and other employees of the company
and its affiliates, pursuant to which the maximum number of shares of the company available for issuance pursuant to all awards under the 2016 Plan shall be
3,000,000 ordinary shares, subject to an annual increase beginning from the fiscal year beginning January 1, 2017. On June 20, 2016, we granted options to
purchase 300,000 ordinary shares to certain executive officers of our company at an exercise price of US$9.97 per share under the 2016 Plan. The options
expire in 10 years from the date of grant and vest ratably at each grant date anniversary over a requisite service period of five years.
Our share based compensation expense is measured based on the fair value of options as calculated under the binomial option pricing model.
Management is responsible for determining the fair value of options granted to employees.
The key assumptions used to determine the fair value of options at the grant date as follows. Changes in these assumptions could significantly affect the
fair value of options and hence the amount of compensation expenses we recognize in our consolidated financial statements.
June 20, 2016
Risk-free interest rate(1)

Contract life(2)
Expected volatility range(3)
Expected dividend yield (4)
Exercise multiple(5)
Fair value of underlying ordinary shares on the date of option grants (RMB)(6)
2.54%
9.7
31.25%
3.14%
2.8x
67.37
(1)
We estimate risk-free interest rate based on the yield to maturity of relevant government bonds with a maturity similar to the expected
expiry of the term.
(2)
Contract life is the time interval between grant date and date of expiring.
(3)
We estimate expected volatility based on the annualized standard deviation of the daily return embedded in historical share prices of
comparable companies with a time horizon close to the contract life.
(4)
The dividend yield is estimated with reference to the average dividend yield of the comparable companies.
(5)
The exercise multiple is adopted based on the academic studies, as we are currently a private company and there is not adequate
historical exercise behavior for reference.
(6)
The fair value of underlying ordinary share is derived from the previous section.
The assumptions used in fair value recognition represent our best estimates, but these estimates involve inherent uncertainties and the application of our
judgment. If factors change or different assumptions are used, the fair value could be materially different for any period. Moreover, the estimates of fair value
are not intended to predict actual future events or the value that ultimately will be realized by grantees who receive share-based awards, and subsequent
events are not indicative of the reasonableness of the original estimates of fair value made by us for accounting purposes.
Fair Value Determination Related to the Accounting for Business Combinations
We completed several acquisitions of businesses from our network partners located in certain provinces on January 1, 2014, October 31, 2015 and
January 1, 2016 by cash and by issuance of ordinary shares. According to ASC 805, Business Combination, the identifiable assets acquired, liabilities
assumed
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and any non-controlling interest in the acquiree are required to be recognized and measured at fair value as of the acquisition date. ASC 805 also requires that
the fair value of the consideration transferred, including any equity securities, to be determined on the acquisition date. We engaged a third party valuation
firm to assist us with the valuation of consideration in ordinary shares, property, plant and equipment and intangible assets acquired.
Income approach (in particular, discounted cash flow method) was used in the determinations of fair value of the equity interest and then the value of
ordinary share was derived through an option-pricing model. Replacement cost approach was used to perform the valuation of property, plant and equipment
acquired.
An intangible assets is identified if it meets either the separability criterion or the contractual-legal criteria in accordance with ASC 805, Business
Combination. The intangible assets acquired in these acquisitions were assembled workforce, customer service capability and presence in geographic
locations/market within PRC, which did not meet the separation criteria or the contractual-legal criteria and therefore are not identifiable and not recognized
apart from goodwill.
We believe that the estimated fair value assigned to the assets acquired is based on reasonable assumptions and estimates that market participants would
use. However, such assumptions are inherently uncertain and actual results could differ from those estimates.
Share-based compensation
We follow ASC 718 "Stock Compensation," and under the fair value recognition provisions of ASC 718, we recognize share-based compensation net of
an estimated forfeiture rate and therefore only recognize compensation cost for those shares expected to vest over the service period of the award.
Under ASC 718, we applied the Binominal model in determining the fair value of options granted, which has been discussed in fair value of option
above. The assumptions used in calculating the fair value of stock options represent our best estimates, but these estimates involve inherent uncertainties and
the application of management judgment. As a result, if factors change and we use different assumptions, our share-based compensation expense could be
materially different in the future.
In June 2016, we established an employee share holding platform, or the Share Holding Platform, to allow our employees in the PRC to receive share
incentives. We accounted for such share incentives as equity awards and measured them at fair value at the date of the grant in accordance with ASC 718. As
these awards vested immediately at the date of grant, we recorded share-based compensation at the date of the grant based on a determined per share fair value
of our ordinary shares. We engaged a third party valuation firm to assist us with the valuation of the share incentive.
On June 28, 2016, we converted 584,000 outstanding redeemable and contingently convertible share units into 17,520,000 shares of limited partner
interests in the limited partnerships that are shareholders of Zto Es Holding Limited, the holding vehicle of our Share Holding Platform. Upon conversion, the
cash redemption right and contingent conversion right were terminated. According to ASC 718, this conversion was accounted for as a modification. We
calculate incremental compensation cost of this modification as the excess of the fair value of the modified awards over the fair value of the redeemable and
contingently convertible share units as of the last reporting date. We recognize incremental compensation cost in the period the modification occurs as no
vesting condition associated with those share incentive.
Impairment Assessment on Long-Lived Assets and Goodwill
We evaluate the recoverability of long-lived assets with determinable useful lives whenever events or changes in circumstances indicate that an
intangible asset's carrying amount may not be recoverable. We measure the carrying amount of long-lived asset against the estimated undiscounted future
cash flows associated with it. Impairment exists when the sum of the expected future net cash flows is less than the
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carrying value of the asset being evaluated. Impairment loss is calculated as the amount by which the carrying value of the asset exceeds its fair value. Fair
value is estimated based on various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment
requires us to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual
results may differ from assumed and estimated amounts. No impairment charge was recognized for the years ended December 31, 2014 and 2015.
Goodwill is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible net assets of business acquired.
Several factors give rise to goodwill in our acquisitions, such as the expected benefit from synergies of the combination and the existing workforce of the
acquired business. Goodwill is reviewed at least annually for impairment. In our evaluation of goodwill impairment, we first perform a qualitative assessment
to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment is not conclusive,
we proceed to a two-step process to test goodwill for impairment, including comparing the fair value the reporting unit to its carrying value (including
attributable goodwill). Fair value for our reporting units is determined using an income or market approach incorporating market participant considerations
and management's assumptions on revenue growth rates, operating margins, discount rates and expected capital expenditures. Fair value determinations may
include both internal and third-party valuations. Unless circumstances otherwise dictate, we perform our annual impairment testing in the fourth quarter. No
impairment charge was recognized for the years ended December 31, 2014, 2015 and for the six months ended June 30, 2016.
Depreciation and Amortization
The costs of property and equipment and intangible assets are charged ratably as depreciation and amortization expenses, respectively, over the
estimated useful lives of the respective assets using the straight-line method. We periodically review changes in technology and industry conditions, asset
retirement activity and residual values to determine adjustments to estimated remaining useful lives and depreciation and amortization rates. Actual
economic lives may differ from estimated useful lives. Periodic reviews could result in a change in estimated useful lives and therefore depreciation and
amortization expenses in future periods.
Internal Control over Financial Reporting
Prior to this offering, we have been a private company with limited accounting personnel and other resources with which to address our internal control
and procedures over financial reporting. In the course of auditing our consolidated financial statements for the year ended December 31, 2015, we and our
independent registered public accounting firm identified one material weakness and one significant deficiency in our internal control over financial
reporting as well as other control deficiencies as of December 31, 2015. As defined in the standards established by the U.S. Public Company Accounting
Oversight Board, a "material weakness" is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of our company's annual or interim financial statements will not be prevented or detected on a
timely basis.
The material weakness identified relates to the lack of accounting personnel with appropriate knowledge of U.S. GAAP and SEC financial reporting
requirements and the lack of accounting policies and procedures over financial reporting in accordance with U.S. GAAP. The significant deficiency identified
relates to the lack of formal risk assessment process and internal control framework. Neither we nor our independent registered public accounting firm
undertook a comprehensive assessment of our internal control under the Sarbanes-Oxley Act for purposes of identifying and reporting any weakness in our
internal control over financial reporting. We and they are required to do so only after we become a public company. Had we performed a formal assessment of
our internal control over financial reporting or
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had our independent registered public accounting firm performed an audit of our internal control over financial reporting, additional control deficiencies
may have been identified.
To remedy our identified material weakness subsequent to December 31, 2015, we have adopted a few measures to improve our internal control over
financial reporting, including, among others: (i) hiring our new chief financial officer with extensive finance, accounting, and SEC reporting experience at
U.S.-listed public companies based in China, (ii) hiring additional qualified accounting and reporting personnel with appropriate knowledge and experience
of U.S. GAAP and SEC reporting requirements as well as allocating more staff resources from other accounting teams to our U.S. GAAP reporting team,
(iii) organizing regular, appropriate trainings for our accounting staff, especially trainings related to U.S. GAAP and SEC reporting requirements,
(iv) planning to continuously improve our monthly closing process and develop a comprehensive U.S. GAAP accounting manual as well as related financial
reporting and disclosure procedures and monitor compliance, (v) planning to hire an internal audit director and establish our internal audit function after the
public offering to design and set up an enhanced internal control framework and procedures, (vi) improving the development, maintenance, and integration
of various internal operational and financial systems to ensure the accuracy and timeliness of financial reporting, and (vii) planning to engage an external
consulting firm to assist us in assessing Sarbanes-Oxley compliance readiness and improve overall internal controls.
However, we cannot assure you that we will remediate our material weakness in a timely manner. See "Risk FactorsRisks Related to Our BusinessIf
we fail to implement and maintain an effective system of internal controls, we may be unable to accurately report our results of operations, meet our reporting
obligations or prevent fraud."
As a company with less than US$1.0 billion in revenue for our last fiscal year, we qualify as an emerging growth company pursuant to the JOBS Act. An
emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public
companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, in the
assessment of the emerging growth company's internal control over financial reporting. The JOBS Act also provides that an emerging growth company does
not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such
new or revised accounting standards. However, we have elected to "opt out" of this provision and, as a result, we will comply with new or revised accounting
standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act
is irrevocable.
Holding Company Structure
ZTO Express (Cayman) Inc. is a holding company with no material operations of its own. We conduct our operations primarily through our whollyowned subsidiaries and consolidated affiliated entities in China. As a result, our ability to pay dividends depends upon dividends paid by our wholly-owned
subsidiaries. If our wholly-owned subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their
debt may restrict their ability to pay dividends to us. In addition, our wholly-owned subsidiaries are permitted to pay dividends to us only out of their
retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of our wholly-owned PRC
subsidiaries and consolidated affiliated entities is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until
such reserve reaches 50% of its registered capital. Although the statutory reserves can be used, among other ways, to increase the registered capital and
eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event
of liquidation. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by the SAFE.
We currently plan to reinvest all earnings from our PRC subsidiaries to their business developments and do not plan to request dividend distributions
from them.
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Inflation
To date, inflation in China has not materially impacted our results of operations. According to the National Bureau of Statistics of China, the year-overyear percent changes in the consumer price index for December 2013, 2014 and 2015 were increases of 2.5%, 1.5% and 1.6%, respectively. Although we have
not been materially affected by inflation in the past, we can provide no assurance that we will not be affected by higher rates of inflation in China in
the future.
Market Risks
Foreign Exchange Risk
Our revenues, expenses and assets and liabilities are mainly denominated in Renminbi. Renminbi is not freely convertible into foreign currencies for
capital account transactions. The value of the Renminbi against the U.S. dollar and other currencies is affected by changes in China's political and economic
conditions and by China's foreign exchange policies, among other things. In July 2005, the PRC government changed its decades-old policy of pegging the
value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between
July 2008 and June 2010, this appreciation subsided and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. Since
June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or
U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.
To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. To the extent that we
need to convert U.S. dollars we received from this offering into RMB for our operations or capital expenditures, appreciation of the RMB against the
U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. Conversely, if we decide to convert our RMB into
U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar
against the RMB would have a negative effect on the U.S. dollar amount available to us.
We estimate that we will receive net proceeds of approximately US$
million from this offering if the underwriters do not exercise their overallotment option, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us, based on the initial offering
price of US$
per ADS. Assuming that we convert the full amount of the net proceeds from this offering into Renminbi, a 10% appreciation of the
U.S. dollar against Renminbi, from a rate of Renminbi
to US$1.00 to a rate of Renminbi
to US$1.00, will result in an increase of
Renminbi
million in our net proceeds from this offering. Conversely, a 10% depreciation of the U.S. dollar against the Renminbi, from a rate of
Renminbi
to US$1.00 to a rate of Renminbi
to US$1.00, will result in a decrease of Renminbi
million in our net proceeds from
this offering.
Interest Rate Risk
Our exposure to interest rate risk primarily relates to the interest income generated by excess cash, which is mostly held in interest-bearing bank deposits.
Interest-earning instruments carry a degree of interest rate risk. We have not been exposed to material risks due to changes in interest rates, and we have not
used any derivative financial instruments to manage our interest risk exposure. However, our future interest income may fall short of expectations due to
changes in market interest rates.
Commodity Price Risk
Our exposure to commodity price risk primarily relates to the fuel price in connection with our line-haul transportation. The price and availability of fuel
are subject to fluctuations due to changes in the
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level of global oil production, seasonality, weather, global politics and other factors. Historically, we have not experienced significant pricing pressure in
connection with fuel price fluctuation. Despite the recent decline in fuel prices, there is a risk that fuel prices could rise in future periods. In the event of
significant fuel price rise, our transportation expenses may rise and our gross profits may decrease if we are unable to adopt any effective cost controlmeasures or pass on the incremental costs to our customers in the form of service surcharges.
Recent Accounting Pronouncements
In May 2014, Financial Accounting Standards Board (or "FASB") issued Accounting Standards Updates (or "ASU") 2014-09, Revenue from Contracts
with Customers (Topic 606), to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and
International Financial Reporting Standards ("IFRS"). An entity has the option to apply the provisions of ASU 2014-09 either retrospectively to each prior
reporting period presented or retrospectively with the cumulative effect of initially applying this standard recognized at the date of initial application. ASU
2014-09 is effective for fiscal years and interim periods within those years beginning after December 15, 2016, and early adoption is not permitted. In August,
2015, the FASB updated this standard to ASU 2015-14, the amendments in this Update defer the effective date of Update 2014-09, that the Update should be
applied to annual reporting periods beginning after December 15, 2017 and earlier application is permitted only as of annual reporting periods beginning
after December 15, 2016, including interim reporting periods within that reporting period. We are in the process of assessing the potential financial impact
the adoption will have to us.
In February 2015, FASB issued ASU 2015-02, Consolidation (Topic 810)Amendments to the Consolidation Analysis. ASU 2015-02 modifies existing
consolidation guidance related to (i) limited partnerships and similar legal entities, (ii) the evaluation of variable interests for fees paid to decision makers or
service providers, (iii) the effect of fee arrangements and related parties on the primary beneficiary determination, and (iv) certain investment funds. These
changes are expected to limit the number of consolidation models and place more emphasis on risk of loss when determining a controlling financial interest.
ASU 2015-02 is effective for fiscal years and interim periods within those years beginning December 15, 2015. Early adoption is permitted. We have early
adopted this guidance during the year ended December 31, 2015. When performing the consolidation analysis on Tonglu Tongze, we concluded that we do
not have a controlling financial interest in Tonglu Tongze and, therefore, do not consolidate Tonglu Tongze. The early adoption of ASU 2015-02 had no
impact on our consolidation analysis of ZTO Express.
In July 2015, FASB issued ASU 2015-11 as part of its simplification initiative. The ASU changes the way of measurement on inventory, which currently
requires an entity to measure inventory at the lower of cost or market. The amendments in this Update require an entity to measure inventory within the scope
of this Update at the lower of cost and net realizable value. We do not expect a material impact on our consolidated financial statement upon adoption of this
ASU.
In September 2015, FASB issued ASU 2015-16 related to the accounting for measurement period adjustments recognized in a business combination.
Under the previous standard, when adjustments were made to amounts previously reported as part of a business combination during the measurement period,
entities were required to revise comparative information for prior periods. Under the new standard, entities must recognize these adjustments in the reporting
period in which the amounts are determined rather than retrospectively. We adopted the new standard during the year ended December 31, 2015, which did
not have a significant impact on our financial statements.
In November 2015, FASB issued ASU 2015-17 Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The amendments in this
Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this
Update
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apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying
component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. For public business entities, the
amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within
those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The amendments in this
Update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. We chose to early adopt the
new standard and applied retrospectively to all periods presented. We have adopted this guidance during the year ended December 31, 2015 retroactively.
The adoption of this guidance did not have a material effect on our financial condition, results of operations and cash flow.
In January 2016, FASB issued ASU 2016-01, to improve the recognition and measurement of financial instruments. The new guidance requires equity
investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair
value with changes in fair value recognized in net income and separate presentation of financial assets and financial liabilities by measurement category and
form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. The guidance also
eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities
and the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be
disclosed for financial instruments measured at amortized cost on the balance sheet. The new guidance is effective for public companies for fiscal years
beginning after December 15, 2017, including interim periods within those fiscal years. The new guidance permits early adoption of the own credit provision.
We are in the process of assessing the impact of this ASU on our consolidated financial statements.
In February 2016, FASB issued ASU 2016-02 related to Leases. Under the new guidance, lessees will be required to recognize all leases (with the
exception of short-term leases) at the commencement date including a lease liability, which is a lessee's obligation to make lease payments arising from a
lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset
for the lease term. Lessees (for capital and operating leases) and must apply a modified retrospective transition approach for leases existing at, or entered into
after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any
transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach.
Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within
those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted. We are in the process of evaluating the impact of the
standard on our consolidated financial statements.
In March 2016, FASB issued ASU 2016-07, which eliminates the requirement to retroactively adopt the equity method of accounting. The amendments
require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held
interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The amendments in this
ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be
applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity
method. Earlier application is permitted. We are in the process of evaluating the impact of this ASU on our consolidated financial statements.
In March, 2016, FASB issued ASU 2016-09 related to stock compensation to facilitate improvements to Employee Share-Based Payment Accounting,
which is intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their
employees. Several aspects of the accounting for share-based payment award transactions are simplified,
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including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; (c) accruals of compensation costs based on the forfeitures
(d) classification on the statement of cash flows. For public companies, the amendments are effective for annual periods beginning after December 15, 2016,
and interim periods within those annual periods. Early adoption is permitted. We have elected to early adopt this standard on a retrospective basis as we
elected to account for forfeitures when they occur to reduce the complexity in the accounting of share based compensation. The adoption of this guidance
did not have a material effect on our financial condition, results of operations and cashflow for the year ended December 31, 2015.
In May 2016, FASB issued ASU 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.
The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update affect only the narrow
aspects of Topic 606. The areas improved include: (1) Assessing the Collectability Criterion in Paragraph 606-10-25-1(e) and Accounting for Contracts That
Do Not Meet the Criteria for Step 1; (2) Presentation of Sales Taxes and Other Similar Taxes Collected from Customers; (3) Noncash Consideration;
(4) Contract Modifications at Transition; (5) Completed Contracts at Transition; and (6) Technical Correction. The effective date and transition requirements
for the amendments in this Update are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by Update
2014-09). We are in the process of assessing the impact of this ASU on our consolidated financial statements.
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INDUSTRY
Overview of Logistics Industry
Benefiting from its economic growth in the past decade, China has become the world's largest logistics market. In 2015, the total spending on logistics in
China reached US$1.7 trillion, 60.4% and 17.4% larger than that of Europe and the United States, respectively, according to the iResearch Report.
In mature logistics markets such as the United States and Europe, there are integrated operators, such as FedEx and DHL, that cover the full spectrum of
logistics services. In China, the logistics industry is at an earlier stage of development compared to the United States. Many players in this industry focus on
one particular logistics sub-segment, such as express delivery, or a limited number of logistics service categories.
The diagram below illustrates the general landscape of the contemporary logistics industry and major sub-segments.
Contemporary Logistics Industry and Sub-Segments
Sub-Segments
Features
Express
Delivery
Timely and door-to-door delivery with minimum warehousing requirements
Contract
Logistics
Contract logistics typically includes a variety of supply chain services such as supply chain design and
management, distribution, warehousing, packaging, labeling and transportation
Parcels are typically subject to weight and size limitations
Suppliers of these services are commonly called third-party logistics operators, or 3PL
Warehousing
Storage-related services for goods and materials
Ground
Transportation of unit loads or bulk goods by road or rail through a network of vehicles
Transportation
Includes less-than-truckload, or LTL, full-truckload, or FTL, and rail transportation services
Freight
Forwarding
Typically, an asset-light business model where forwarders buy capacity from carriers (airlines, trucking
companies, ocean carriers) and offer this capacity to their customers to meet their transportation
requirements
Integrated
Logistics
Services
Providers of nearly all logistics services in a global scale
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China Express Delivery Landscape
China is the world's largest express delivery market, with total parcel volume of 20.7 billion in 2015, approximately 1.5 times the total parcel volume of
the United States, according to the iResearch Report. The market volume is expected to grow at a CAGR of 23.7% from 2015 to 2020, according to the
iResearch Report.
Source: iResearch, State Post Bureau of China
In mature markets such as the United States, Japan and Europe, the express delivery industry is typically consolidated among a few market leaders with
the top two players in the United States representing approximately 80% of market share in terms of parcel volume in 2015, according to the iResearch
Report. China's express delivery market, in contrast, remains fragmented with the top five Chinese express delivery companies, namely ZTO Express, YTO
Express, STO Express, Yunda Express and SF Express, representing approximately 60.1% of the total market share in terms of parcel volume in 2015,
according to the iResearch Report. Among these companies, only ZTO Express gained market share in consecutive years from 2011 to 2015. The following
diagram demonstrates the shift in market share among China's express delivery companies from 2011 to 2015 in terms of parcel volume.
Market Share Evolvement of China's Express Delivery Market
(Parcel Volume)
Source: iResearch, State Post Bureau of China and publicly available information of YTO, STO and SF
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According to the iResearch Report, China's express delivery service providers generally fall into the following two major categories:
"Network partner" model. The majority of China's private domestic express delivery service providers operate under the "network partner"
model. The top four domestic express delivery companies that operate under model, namely ZTO Express, STO Express, YTO Express and
Yunda Express, are commonly referred to as the "Tongda Operators". The Tongda Operators together accounted for approximately 51.9% of
the total express delivery market share in China, measured by total parcel volume in 2015 according to the iResearch Report. These players
typically operate a logistics network by focusing on the build-out and operations of the core sorting hubs and line-haul transportation assets
while relying on network partners to carry out pickup and last-mile deliveries. As a result of these unique characteristics, the Tongda Operators
have the ability to rapidly scale up and expand their networks to meet the demands from the fast-growing e-commerce industry while limiting
their capital expenditures.
"Direct" model: EMS (a subsidiary of China Post) and SF Express are examples of Chinese express delivery operators that have adopted the
"direct" model. This business model is characterized by direct ownership of the entire delivery network including pick-up and last-mile
delivery outlets. Their services focus more on delivery of business documents whereas Tongda Operators focus more on deliveries of parcels to
individuals. In addition, international express delivery operators such as UPS, FedEx and DHL adopt the direct model or partner with domestic
operators for their logistics business in China.
Emergence of Express Delivery Industry in China's E-Commerce Boom

The express delivery industry is driven by China's fast growing e-commerce market. In the U.S. express delivery market, e-commerce parcels represented
approximately 50% of the total parcel volume in 2015, whereas China's express delivery market had 70% of parcel volume from e-commerce in 2015,
according to the iResearch Report.
China's total retail e-commerce GMV reached US$609 billion in 2015, accounting for 12.6% of total retail consumption in 2015 and is expected to
increase to US$1,465 billion in 2020, representing a CAGR of 19.2%, according to the iResearch Report. The following factors have historically contributed
to and are expected to continue to fuel the growth of China's e-commerce industry:
Rising middle class and millennials. The emerging middle class in China plays an important role in driving e-commerce growth. The middle
class population in China was 109 million in 2015 and is expected to increase significantly by another 830 million from 2015 to 2030,
according to the iResearch Report. In addition, millennials, the generation that is customarily understood to be born after 2000 and constitutes
over 17% of the population in China, have a greater tendency to shop online according to the iResearch Report. As they gradually become a
primary shopping force in China, e-commerce is expected to receive a powerful demographic boost.
Growing domestic consumption purchasing power of Chinese consumers. The rising disposable income level of Chinese consumers has been
a major force behind the increasing contribution of consumption to the overall economy. China's disposal income per capita has increased
from US$2,260 in 2011 to US$3,533 in 2015, according to the iResearch Report.
Fragmented retail market and underdeveloped infrastructure. The traditional "brick and mortar" retail market in China is fragmented and the
retail infrastructure is under-developed, making e-commerce an attractive alternative for consumers. For instance, the aggregate market share of
the top 20 retailers in China was 3.9% in 2015, compared with 23.9% in the United States, according to the iResearch Report. Additionally,
the number of shopping centers per million people in China is only 11% of that in the United States in 2015, according to the iResearch
Report.
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Growing Internet and mobile penetration. China's Internet penetration rate has grown from 38% in 2011 to 50% in 2015, and over 90% of
Internet users also access the Internet through mobile devices, according to CNNIC. Increased mobile Internet penetration drives additional ecommerce volume, which generates further growth in express delivery market.
Social network platforms in China, such as Weixin (WeChat), are another avenue to conduct e-commerce activities due to the low entry barrier, minimal
transaction costs and large user base. Merchants on these social networking and other mobile platforms promote and sell their products to friends,
acquaintances and other individuals in their social networks. In addition, merchants also use mobile platforms to promote and sell products. These merchants
are generally referred to as "micro-merchants". Micro-merchants are geographically dispersed across China and form a highly fragmented marketplace. They
rely on express delivery companies to fulfill their orders. The emergence of "micro-merchants" has become a key growth driver of the express delivery
industry in China. According to Internet Society of China, the market size of micro-merchant transactions in terms of GMV reached RMB182 billion in 2015
and is expected to grow to RMB361 billion in 2016.
The express delivery industry also played an instrumental role in enabling e-commerce robust growth. Growing side-by-side with the e-commerce
industry, express delivery companies have built extensive logistics infrastructure to meet the strong and varied demands and service needs of e-commerce
players. This logistics infrastructure includes both external third-party and in-house infrastructure:
Third-party logistics. In 2015, orders on Alibaba's platform accounted for over 78% of the total online shopping market, according to the
iResearch Report. Consumers and merchants on the Alibaba marketplace are both highly fragmented and scattered in dispersed locations
across regions. Orders on Alibaba's e-commerce platform are fulfilled by third-party express delivery companies that ship and deliver parcels
from merchants to consumers. In addition, China Smart Logistics, or Cainiao, provides a logistics information system that connects Alibaba's
marketplace merchants with express delivery companies to enhance delivery efficiency. Cainiao is an open logistics data platform with
investments from Alibaba, a number of express delivery companies, including ZTO Express and other Tongda Operators, and other investors.
Cainiao itself does not provide express delivery services to the merchants operating on Alibaba's platforms. Instead, Cainiao collaborates with
selected express delivery companies, including the Tongda Operators, to provide order fulfilment service to the merchants. Merchants on
Alibaba's platforms select express delivery companies at their discretion, considering multiple factors, such as service quality, pricing and
existing relationships. If they choose to use digital waybills, the merchants can only choose from express delivery companies that have
established system communication protocols with Cainiao. Merchants generate service orders in their order management systems, which are
connected to Cainiao, and post their orders on Cainiao. Cainiao assigns a digital waybill number that it receives from the selected express
delivery company to the merchant's order and forwards the delivery information to the selected express delivery company. The merchant's
order management system generates the digital waybill that is affixed to the parcel. The delivery status of the parcel can then be tracked by the
express delivery company, the merchant and the consumer as the parcel is transferred through the delivery network.
In-house logistics. JD.com and Vipshop are examples of e-commerce players in China who have opted to build out in-house logistics systems.
However, they also rely on third-party express delivery companies when their in-house logistics cannot meet customer demand. In addition,
players like JD.com also derive a large part of their business from their online marketplace and use third-party logistics providers for
fulfillment and delivery. There has been an increasing trend of these players outsourcing logistics services, including parcel deliveries to meet
their increasing business needs even though they have built in-house logistics infrastructure.
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According to the iResearch Report, the express delivery market in China in terms of parcel volume is expected to grow at a CAGR of 23.7% from 2015 to
2020, compared to a CAGR for the e-commerce market of 19.2% during the same period, in terms of GMV.
Unique Needs of the Express Delivery Market
Express delivery service operators must address certain key needs of China's unique e-commerce market:
Geographically dispersed e-commerce merchants and consumers. Orders generated from e-commerce market are often characterized by their
high frequency, low value and small and irregular sizes. These features are even more apparent in the micro-merchant base of some social
network platforms and mobile marketplaces. These distinctive aspects create challenges for the traditional express delivery operators to cater
to the needs of both the senders and recipients in this market. For instance, there were over 10 million annual active sellers on Alibaba's ecommerce platform fulfilling orders from over 400 million active buyers as of December 31, 2015, according to the iResearch Report.
Cost consciousness, timeliness and service quality. Merchants and consumers consistently expect faster, and more reliable and convenient
delivery services at lower cost. Those providers who offer better service with shorter delivery times and lower costs are more likely to become
the preferred service providers.
Infrastructure and penetration in rural areas. According to the iResearch Report, rural online shopping accounted for approximately 9% of
the total e-commerce market share as of 2015. Penetration into rural markets has become a key strategy for e-commerce platforms, which
requires strong support in fulfillment capabilities with last-mile logistics facilities. Relatively low order density, imbalanced traffic and less
developed infrastructure in rural areas favor express delivery operators that have nationwide coverage, cost advantage and network flexibility.
Seasonality and peak season demand. China's express delivery market is seasonal and requires express delivery operators to plan and prepare
for the peak season demand in advance.
Compatibility of Network Partner Model with E-commerce

We believe the network partner model is best suited to support the enormous growth of the e-commerce industry in China. The model enables express
delivery companies to serve a fragmented merchant and consumer base and the seasonal demand of the e-commerce industry through the following
advantages:
Network Scalability. The network partner model enables express delivery companies to quickly penetrate into wide geographic areas at
relatively low costs by partnering with local network partners to provide pickup and last-mile delivery services. This helps serve the
fragmented merchant and customer base on e-commerce and social network platforms and mobile marketplaces. The direct model is less
adaptable to increasing e-commerce demand due to the time required to establish outlets in the new areas, which requires considerable capital
outlays.
Cost Efficiency. Network partners in the network partner model have the latitude to make local hires under their own payroll, adapt to local
supply and demand conditions and make tailored expansion plans. The Tongda Operators, through this model, are able to retain centralized
control over sorting and line-haul transportation network while efficiently expanding their pickup and delivery networks at relatively low
cost, which helps them achieve higher margins and productivity. The asset-heavy nature of the "direct" model implies higher fixed costs
related to network infrastructure and labor costs.
Network Flexibility. The network partner model enables express delivery companies to dynamically adjust their capacity to meet the peak
demand and avoid delivery delays caused by capacity
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constraints of sorting hubs and delivery outlets. This can address the peaks in demand for express delivery, particularly during the Singles'
Day. Operators under the "direct" model generally face challenges in adjusting their capacity, since it takes time to invest and build the
additional capacity to cope with seasonal peaks.
With these advantages, the Tongda Operators are capable of quickly scaling up and expanding their networks while effectively control the level of
capital expenditure incurred. Their services are attractive to e-commerce merchants, who rely on the express delivery companies to fulfill customer orders.
Favorable Government Policies
In addition to robust economic and e-commerce growth, the development of China's express delivery companies benefits from continuous government
support through favorable policies. Over the past several years, the PRC government introduced a series of favorable policies and reforms aimed at supporting
the development of the logistics sector in China, particularly the express delivery industry. These policies are generally related to network infrastructure,
taxation, technology and other areas.
Key Government Policies Since 2015
Year
Policy
Implication
2015
13th Five-Year (2016 - 2020) Plan
Policies, plans and standards specifically designed to improve the

distribution and service network in rural areas, to encourage the
development of rural e-commerce, and to promote agricultural
products
2015
Opinions on Development of
Express Delivery Industry
("Opinions")
Promotion of the integration and efficiency of the Internet and

logistics industries to foster e-commerce development and promote
industry innovations
Policy highlights:
Encourages industry consolidation and public offerings of shares
Express delivery network to reach 100% coverage of rural China
by 2020
Market Trends and Opportunities

The express delivery industry is expected to benefit from the following market trends and opportunities:
Market consolidation. The top five players in the Chinese express delivery market only accounted for approximately 60.1% of the market
share, compared with 80.1% market share held by the top two players in the United States in 2015 in terms of total parcel volume, according to
the iResearch Report. Given the large potential of economies of scale, China's express delivery market is expected to further consolidate as it
becomes more mature. The express delivery operators with network scalability, flexibility, low cost, high quality service and the best-suited
business model are more likely to gain further market share.
Increase in penetration and expansion of service. In 2015, the number of express parcels delivered in China was approximately 15 units per
capita, only around one-third that of the United States, according to the iResearch Report. As penetration rate increases, express delivery
companies can increase the density of outlets to capture the market opportunity. In addition, more value-added logistics services may increase
average delivery service fee per parcel in China, which is currently
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much lower than that of the United States (i.e., US$2.2 versus US$6.4) according to the iResearch Report.
Technological advancement. Major technology investments can be seen in wider use of sensing and tracking technology, such as (i) radio
frequency identification (RFID) for parcel identification and tracking; (ii) in-vehicle information systems used to monitor vehicle performance
and fuel consumption; (iii) vehicle tracking systems such as GPS and GIS and (iv) on-road integrated optimization systems used in optimizing
route planning. Emerging technologies such as big data analytics, which is supported by the increasing development and adoption of digital
waybills, cloud computing and Internet of Things (IoT) also demonstrate new opportunities for the transformation and upgrade of the logistics
industry to further improve operational efficiency and profitability.
Rural area infrastructure development. According to China State Post Bureau, for the six months ended June 30, 2016, more than 81% of
express delivery parcel volume are generated from Eastern China, the more developed region of the country, while Western China accounts for
only 7%. In order to resolve the imbalance in parcel volume, the Chinese government issued several favorable policies to promote express
delivery services in Western China and the underdeveloped rural areas, creating significant growth opportunities for the express delivery
industry. Between 2011 and 2015, parcel volume of Western and central areas in China increased from 740.0 million to 3.7 billion, growing at
a CAGR of 49.6%, and is expected to continue to grow significantly in future periods, according to the iResearch Report.
Emerging logistics opportunities. Given the synergistic nature of the logistics sub-segments, express delivery companies can leverage their
existing platforms and infrastructure to expand service offerings into adjacent areas of the industry, including less-than-truckload, cross-border
e-commerce, specialty logistics (such as cold chain), online-to-offline, supply chain management, and supply chain financing, with potential
to become fully integrated service providers.
The cross-border e-commerce GMV reached RMB5 trillion in 2015 and is expected to grow at a CAGR of 18.2% from 2015 to 2020,
according to the iResearch Report. Express delivery companies are expected to benefit from the enormous market opportunity of crossborder e-commerce growth.
The less-than-truckload services market in China is highly fragmented, with the top four operators in this sector in aggregate
accounting for only approximately 5% of the total market size in terms of volume in 2014, according to the iResearch Report. The lessthan-truckload services market size increased from RMB500 billion to RMB800 billion from 2013 to 2015, representing a CAGR of
26.5%, and is expected to reach RMB1,609 billion in 2020, representing a CAGR of 15.0% from 2015 to 2020, according to the
iResearch Report.
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BUSINESS
Our Mission
Our mission is to bring happiness to more people through our services. Through our distinctive network partner model, we are constantly creating value
for numerous merchants, consumers, business partners, employees and investors. We strive to provide timely and reliable express delivery services to
consumers, create jobs for employees and delivery personnel in the ZTO network, promote entrepreneurship among our business partners, and ultimately help
ordinary people accomplish their goals. We are proud to be an essential part of the e-commerce infrastructure in China and will continue to fuel its growth in
the years to come. We focus on long-term, sustainable growth together with our stakeholders and aspire to become a leading player in the global express
delivery industry.
Our Values
Our values are fundamental to the way we operate and achieve future growth. Our core values are:
Shared success: We strive to become the "partner of choice," aligning our interest with that of all key stakeholders in our business network. We believe
we win when our stakeholders win.
Trust and accountability: We promote mutual trust among our network partners, employees and us. We expect them to uphold the high standards of
integrity and fulfil their commitments.
Innovation and entrepreneurship: We champion innovative business practices and technologies that improve the way we operate and serve our
customers. We foster the entrepreneurial spirit among our network partners and employees to reinforce our competitive advantages.
Business Overview
We are a leading express delivery company in China and one of the largest express delivery companies globally, in terms of total parcel volume in 2015,
according to the iResearch Report. We have demonstrated the fastest growth rate among the top five Chinese express delivery companies as of December 31,
2015, with our annual parcel volume growing at a CAGR of 80.3% between 2011 and 2015, during which we recorded consecutive annual increases in
market share. We have achieved superior profitability along with our rapid growth. Our operating margin in 2015 was 25.1%, which was one of the highest
among the major publicly listed logistics companies globally.
The chart below sets forth our annual parcel volume in the periods presented.
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We provide express delivery service through our nationwide network as well as other value-added logistics services. We have developed one of the most
extensive and reliable delivery networks in China covering over 96% of China's cities and counties as of June 30, 2016. China's rapidly expanding ecommerce market, which reached US$609 billion in terms of total retail GMV in 2015 according to the iResearch Report, has created strong demand for our
services. We are both a key enabler and a direct beneficiary of China's fast-growing e-commerce market. We have established ourselves as one of the largest
express delivery service providers for millions of online merchants and consumers transacting on leading Chinese e-commerce platforms, such as Alibaba and
JD.com. Globally, we provide delivery services in key overseas markets through our business partners, while we are expanding our coverage in international
express delivery business and enhancing collaborations with international industry players.
We operate a highly scalable network partner model, which we believe is best suited to support the enormous growth of e-commerce in China. We
leverage our network partners to provide pickup and last-mile delivery services, while we control the mission-critical line-haul transportation and sorting
network within the express delivery service value chain. The network partner model is developed to reach and serve the Chinese e-commerce industry's
fragmented and geographically dispersed merchant and consumer base and seasonal demand. It allows us to achieve strong operating leverage through
minimizing fixed costs and capital requirements, consequently driving higher return on invested capital and equity.
We have established a distinctive "shared success" system, which enables us to align the interests of our network partners, management and employees
with ours through a reward and risk sharing mechanism. This shared success system incentivizes our network partners to maximize their growth and
profitability and strengthens their loyalty to our ZTO brand and business. The general managers of our key regions collectively hold a significant equity
stake in our company, and we believe this initiative incentivizes our key stakeholders and further ensures the stability of our network. In addition, our
innovative, entrepreneurial approach has led to a number of industry firsts. We were first in the industry to introduce a fee sharing mechanism in which the
pickup and delivery outlets share the delivery service fees of each delivery order. We also foster an effective and transparent system that enables our network
partners to exit our network by transferring their business to buyers approved by us and benefit from any value appreciation of their business through such
transfers. We facilitate those transfers by providing information and guidance on valuation of the transferred business with participation by both parties.
Operational efficiency and cost management are critical to the success of an express delivery business. We have achieved strong operational efficiency
through centralized control and management of 74 sorting hubs and a fleet of over 3,300 trucks, route planning and optimization, as well as our proprietary
waybill tracking system and transportation management system.
We strive to maintain high quality service and customer satisfaction. We have established proven systems and procedures which have been critical in
achieving service standardization and control over the quality of services rendered by us and our network partners. We constantly monitor a series of key
service quality indicators such as delivery delay rate, complaint rate and damaged parcel rate and have improved each of these measures over the past three
years. Our superior service quality is reflected by rankings published by authoritative institutions. For example, we ranked top three in the 2015 express
deliveries user satisfaction survey and the 2015 express delivery companies punctuality survey, both conducted by the State Post Bureau of China.
We have achieved significant growth and profitability. Our total parcel volume increased from 279 million in 2011 to 2,946 million in 2015. Our parcel
volume in the six months ended June 30, 2016 was 1,913 million, which represents a 58.3% increase from 1,185 million in the same period in 2015. Our total
parcel volume in July and August 2016 was 697.9 million. Our revenues increased from RMB3.9 billion in 2014 to RMB6.1 billion (US$915.8 million) in
2015. We generated operating profit of RMB600.3 million and RMB1.5 billion (US$230.1 million) in 2014 and 2015, respectively. Our operating profit
margin was 15.4% and 25.1% in 2014 and 2015, respectively. Our revenues increased from RMB2.5 billion in the six months ended June 30, 2015 to
RMB4.2 billion (US$638.8 million) in the same period in 2016. We generated operating profit of RMB 579.9 million and RMB1.1 billion
(US$159.0 million) in the six months
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ended June 30, 2015 and 2016, respectively. Our operating profit margin was 23.3% and 24.9% in the six months ended June 30, 2015 and 2016,
respectively.
Our Strengths
We believe that the following competitive strengths contribute to our success and differentiate us from our competitors:
Leading and fastest growing express delivery company in China
We are a leading express delivery company in China and one of the largest express delivery companies globally, in terms of total parcel volume in 2015,
according to the iResearch Report. Our parcel volume in the first quarter of 2016 was 827.7 million, which accounted for approximately 14.4% of the total
express delivery parcel volume in China during that period as reported by the iResearch Report. We have established ourselves as one of the key express
delivery service providers for millions of online merchants and consumers transacting on leading Chinese e-commerce players, such as Alibaba and JD.com.
We have achieved tremendous scale and growth since our inception while maintaining our profitability. Our annual parcel volume grew at a CAGR of
80.3% from 2011 to 2015, making us the fastest growing company among the top five Chinese express delivery companies over the past five years, according
to the iResearch Report. See "BusinessBusiness Overview" for more information on our annual parcel volume in each year between 2011 and 2015. As a
result, we have continually gained market share in terms of parcel volume over the past five years, increasing from 7.6% in 2011 to 14.3% in 2015.
Furthermore, we have achieved profitability and had operating profit of RMB600.3 million and RMB1.5 billion (US$230.1 million) and operating profit
margin of 15.4% and 25.1% in 2014 and 2015, respectively. We generated operating profit of RMB579.9 million and RMB1.1 billion (US$159.0 million)
and our operating profit margin was 23.3% and 24.9% in the six months ended June 30, 2015 and 2016, respectively. We believe our market leading position
and scale lead to increase in our operating leverage and profitability.
Highly scalable network partner model enabling China's e-commerce growth
We believe our highly scalable network partner model is best suited to support the enormous growth of e-commerce in China, which is the largest
globally in terms of parcel volume, according to the iResearch Report. China's total retail e-commerce GMV reached US$609 billion in 2015 and we are an
essential part of the infrastructure that enabled its growth. Our model is well-suited to serve a fragmented and geographically dispersed merchant and
consumer base and cope with the seasonal demand of the e-commerce industry. We are able to expand our nationwide network quickly and provide ecommerce merchants with greater geographic reach at low cost.
Our network partner model is designed to be flexible and scalable. We own and operate most of the mission-critical line-haul transportation and sorting
network while our independent network partners operate our ZTO-branded outlets, which provide pickup and last-mile delivery services. Under our network
partner model, we leverage the resources and operating capabilities of our network partners to efficiently expand our network with less capital outlay and
lower labor costs. As of June 30, 2016, our core line-haul transportation and sorting network of 68 sorting hubs operated by us supported over 23,000 outlets
owned by our network partners. Our extensive network in China covered over 96% of its cities and counties as of June 30, 2016, with a total parcel volume of
2,946 million in 2015 and 1,913 million in the six months ended June 30, 2016.
The scalability of our network enables e-commerce merchants to leverage our broad geographic coverage and reach a diversified base of consumers at
low cost and within a short delivery time. As a result, e-commerce consumers are offered a time and cost efficient shopping experience. We can dynamically
adjust our network capacity to cope with peak demand and respond to seasonality swings in demand. We also have the ability to allocate sorting capacities
among adjacent sorting hubs and our network partners have greater flexibility in adding temporary workers. For example, in the week following the 2015
Singles'
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Day, the retail sales day in China which takes place annually on November 11, our highest daily parcel pickup volume was over 29 million, which was more
than three times our average daily parcel pickup volume in 2015. We did not experience any significant delivery delays during that period.
Distinctive shared success system strengthening brand loyalty and maximizing performance
We also attribute our success to the thorough implementation of our deeply rooted management philosophy of "shared success" in all aspects of our
business. Our shared success system aligns the interests of our network partners with ours, fully incentivizes our network partners to maximize their growth
and profitability and strengthens their loyalty to our ZTO brand and business. Our general managers of key regions collectively hold a significant equity
stake in our company, and we believe this initiative fully incentivizes and aligns the interests of our key stakeholders and further ensures the stability of
our network.
We are also the first express delivery company in China to introduce and consistently execute many industry-defining innovative approaches to
incentivize key stakeholders. For example, we were first in the industry to have introduced a sharing mechanism of delivery services fees. As our pickup and
delivery outlets in different regions may experience significantly imbalanced service demand volume due to the high fragmentation of the e-commerce
merchant and consumer base in China, there may be a significant outlet revenue disparity because the delivery service fee is typically charged by the pickup
outlet. To reduce revenue disparity and improve the stability of our network, we require the pickup outlet to pay part of the last-mile delivery fees to the
delivery outlet. Over the years, we have continued to refine this mechanism and have now built a database of tiered and outlet-specific fee sharing rates. This
incentivizes our network partners with generally lower pickup volume and higher last-mile delivery volume to continue working with us, resulting in a wellbalanced network.
In addition, we foster an effective and transparent system, which enables our network partners to transfer their business and benefit from any value
appreciation of their business. This helps to maximize the return on our network partners' investments and encourages them to improve the fundamentals of
the outlets, such as higher local market share, higher customer satisfaction rates and profitability.
We believe our shared success system fosters healthy and sustainable growth of our business.
Strong operational capabilities and cost leadership
Our scale and operational efficiencies have enabled us to achieve leading cost advantages in the industry. Our headquarters oversees and centrally
administers the various functions of our core networks and coordinates our land acquisition, facility planning, equipment and fleet procurement, route
optimization and technology investment to jointly achieve greater efficiency.
We believe one of our key strengths is our ability to acquire sizable parcels of land in strategic locations with convenient access to major highways for
the construction of our sorting hubs. We connect our sorting hubs with over 1,800 well-planned line-haul routes. Our centralized route planning reduces the
number of times each parcel is handled by our sorting hubs, improves our truck utilization, and lowers our transportation costs. When planning the routes, we
prioritize the efficiency of the entire network over the interest of individual network partners. For each parcel on the road, we deliver it to the sorting hub
closest to its destination irrespective of whether the sorting hub and the destination are located in regions covered by different network partners. This largely
reduces transportation time and lowers our transportation cost.
Our fleet consists of more than 2,100 self-owned trucks, over 680 of which are high capacity 15-17 meter long models, as of June 30, 2016. Our use of
new 15-17 meter long trucks, which have nearly twice the loading capacity of 9.6 meter long trucks with minimal incremental costs, contributes to lower unit
line-haul transportation cost. The centralized planning and design of our sorting hubs with extra capacity provides sufficient parking and operation space for
15-17 meter trucks. We deploy suitable models of trucks to cope with different transportation conditions so that we can reduce our transportation cost.
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We operate a large percentage of our sorting hubs, and they benefit from our investments in equipment and technologies that enhance productivity. For
example, we partner with a renowned research institution in China to develop critical parts of our automated sorting equipment to ensure they are customized
to meet our unique operational requirements at lower costs compared to the imported equipment. We also equip an increasing number of our sorting hubs
with extendable belt conveyor. Such initiatives substantially improved our parcel loading, unloading and sorting efficiency.
To further enhance our operational efficiency, we have also invested in our IT systems, such as our proprietary waybill tracking system, transportation
management system, and network payment settlement system, to support the smooth operation of our network. Our waybill tracking system allows us to track
each parcel processed through our network and monitor the real-time movement of each on-duty truck using GPS technology.
Our cost leadership will continue to benefit from our economies of scale. After our initial investments in sorting hub construction and equipment
purchase as well as self-owned fleet, our network is now able to handle additional parcels at minimum marginal operating cost. Our scale of operation also
helps to drive down our procurement cost through our centralized procurement of fleet, equipment and consumables for ourselves and our network partners.
We achieved outstanding operating margins of 15.4% and 25.1% in 2014 and 2015, respectively, while our annual parcel volume increased from
1,816 million to 2,946 million in the same periods. Our operating margin was 23.3% and 24.9% in the six months ended June 30, 2015 and 2016,
respectively. Our parcel volume increased from 1,185 million in the six months ended June 30, 2015 to 1,913 million in the same period in 2016.
Superior service quality
Together with our network partners, we strive to provide superior services consistently to our end customers. We have successfully established and
streamlined policies and processes to achieve standardization and control over service quality throughout our network. We keep on monitoring a series of
key service quality indicators such as parcel delay rate, complaint rate and damaged parcel rate and have further reduced each of these rates over the years.
We also provide regular systematic training to our network partners, who interact with our end customers directly. We periodically review their performance
with customer satisfaction as a key performance indicator and provide rewards and impose penalties depending on the review results.
In addition, our call center is localized with branch offices in over 18 provinces in China with mostly local hires to leverage their local knowledge. All
branches can be reached via a unified number and use the same system and database. Our system automatically forwards incoming calls to the local branch
near the caller's location. Our approximately 780 call center representatives adhere to a nationwide customer service standard and their local knowledge
contributes to enhanced customer service effectiveness.
Our service quality is industry-leading, according to third-party reports. We are ranked in the top three of major Chinese express delivery services
companies in terms of overall customer satisfaction in 2014 and 2015, according to the China Express Delivery Services Customer Satisfaction Rate Report
of Horizon Consulting Group. We ranked top three in the 2015 express deliveries user satisfaction survey and the 2015 express delivery companies
punctuality survey, both conducted by the State Post Bureau of China. According to statistics released by the State Post Bureau of China, we are one of the
three major express delivery companies that have the lowest complaint rates in each of the first three months of 2016. We believe more and more e-commerce
merchants and consumers will choose our services due to our superior service quality.
Experienced and entrepreneurial management team and strong corporate culture
We have an experienced and entrepreneurial management team with a proven track record. Majority of our senior management having been with us since
our inception. Our management has introduced and refined many key industry innovations, such as the introduction of the sharing mechanism of delivery
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service fees, the formation of our self-owned fleet, and the creation of the system facilitating transfer of business by our network partners. Our founder,
chairman of the board and chief executive officer, Mr. Meisong Lai, is recognized as a leading figure in China's express delivery industry. Under the
leadership of our management team, we have become a leading player in the express delivery industry in China within a short operating history.
Our unique corporate culture embodied in our mission, vision and values drives the livelihood of a healthy working environment with productivity and
aligns the interests of our network partners and employees with ours.
Our Strategies
We aspire to become a leading player in the global express delivery industry and we intend to pursue the following strategies to further grow our
business:
Strengthen our leading market position in China
We plan to further enhance our operational capabilities and expand our capacity in the express delivery business. We expect to add or expand sorting
hubs in strategic locations to boost future growth, and to enhance the efficiency of existing hubs with design optimization and higher automation levels to
meet increasing capacity demands. We expect to expand and upgrade our line-haul fleet to increase the portion of larger trucks with greater carrying capacity
to reduce unit transportation costs. Furthermore, we plan to continue enhancing our domestic network density and penetration in inland cities and remote
rural areas, targeting to increase township-level coverage from approximately 65% currently to more than 80% by 2020. We may also seek to increase our
market share through market consolidation.
Enhance our technology platform and infrastructure
We intend to continue to invest in information technology and equipment to enhance operational efficiency and reliability, improve customer
experience and reduce costs. Our initiatives include wider use of digital waybills, further optimization in route planning based on data mining and analysis
and greater sorting automation. We will also upgrade and improve the integration of our existing operation and financial systems. As a long-term initiative,
we plan to continue to cooperate with renowned research institutions to develop more tailor-made equipment and technology systems to further improve
efficiency.
Expand our presence in the cross-border e-commerce market
We expect to expand our presence in the cross-border e-commerce market. The cross-border e-commerce GMV in China reached RMB5 trillion in 2015,
and is expected to grow at a CAGR of 18.2% from 2015 to 2020, according to the iResearch Report. We plan to leverage our extensive domestic delivery
network and capabilities and seek alliances with global logistics and postal service providers to strengthen our presence in the cross-border e-commerce
markets.
Broaden our service offerings and expand our customer base
We may selectively invest in new service offerings to capture existing and new market growth opportunities, including less-than-truckload logistics and
backhaul trucking logistics. We also plan to further penetrate and expand our customer base across different industries, such as manufacturing
and agriculture.
Pursue strategic alliances and select acquisition opportunities
We aim to selectively form additional strategic alliances with overseas logistics companies and other partners that bring synergies with our business. We
also plan to selectively pursue acquisitions of companies that are complementary to our business and operations.
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Service Offerings by Us and Our Network Partners
Through our network and together with our network partners, we provide domestic and international express delivery services supplemented by other
value-added services. We mainly provide express deliveries in China of parcels weighing under 50 kilograms with expected delivery time ranging from 24 to
72 hours.
The following chart sets out the services provided by us and our network partners.
Express delivery service process

The following diagram illustrates the process for the completion of a typical domestic delivery order.
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Step 1: Parcel Pickup. Our pickup outlet arranges for a courier to collect the parcel from the sender once they receive a delivery order. Unless the
sender chooses pay-at-arrival service, our pickup outlet collects the delivery service fee from the sender at the time of pickup. The pickup outlet collects and
sends the parcels to our sorting hub covering its region once or twice per day depending on parcel volume. Typically, parcels that are picked up before 6 p.m.
will be shipped to the sorting hub on the same day. Through each waybill, we assign a unique tracking number and corresponding barcode to each parcel.
The waybills, coupled with our automated systems, allow us to track the status of each individual parcel throughout the entire pickup, sorting and delivery
process.
Step 2: Parcel Sorting and Line-Haul Transportation. Upon receipt of parcels shipped from various pickup outlets within its coverage area, the sorting
hub sorts, further packs and dispatches the parcels to the destination sorting hub. We provide line-haul transportation services between sorting hubs.
Barcodes on each waybill attached to the parcels are scanned as they go through each sorting and transportation gateway so that we can keep track of the
service progress.
Step 3: Parcel Delivery. Our destination sorting hub unloads and sorts the parcels, which are then delivered to the recipients by our delivery outlets.
Once the recipient signs on the waybill to confirm receipt, a full service cycle is completed and the settlement of delivery service fee promptly ensues on our
network payment settlement system.
Express delivery service pricing
The network transit fees we charge our network partners for the express delivery services we provide to them primarily consist of (i) a fixed amount for a
waybill attached to each parcel and (ii) a variable amount per parcel for sorting and line-haul transportation based on the parcel weight and route. We
determine our pricing based on the operating costs of our business, while also considering other factors including market conditions and competitions as well
as our service quality. Our service pricing may also be affected by market conditions and competition faced by our network partners. There has historically
been declines in delivery service fees charged by our network partners, partially due to market competition. Based on the market conditions and our cost
base, we may evaluate and adjust our service pricing from time to time.
Senders are generally required to pay delivery service fees to our pickup outlets and our network partners have full discretion over the pricing of their
services. Our network partners determine their pricing mainly based on their total cost of operations, which mainly includes the network transit fees we
charge, the last-mile delivery fees paid to the delivery network partners, as well as the outlet operating costs. They also consider other factors including
market conditions and competitions as well as their service quality. We do not set any explicit limitations on pricing and allow pricing latitude to our
network partners so that they can effectively respond to the competitive dynamics in their local markets with tailor-made pricing based on the business
volume and long-term prospect of each sender. We believe this model helps to leverage our network partners' entrepreneurship and their insights into the
local market. We believe this pricing method strengthens the stability of our network.
Our Network and Infrastructure
Our network consists of our directly operated core sorting hubs and line-haul transportation network and network partner-operated outlets across China.
Sorting hubs
Our sorting hubs are connected by the line-haul transportation network that we operate. They collect parcels from outlets within their respective
coverage area, sort them according to their destinations and dispatch them to the destination sorting hub. As of June 30, 2016, we operate 68 sorting hubs and
our business partners operate six sorting hubs. These sorting hubs did not experience any significant service interruption even during the peak season of the
year. The remaining six sorting hubs are located in remote areas in China
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and we work closely with their independent third-party owners to effectively operate those hubs. The following map shows our nationwide sorting network as
of June 30, 2016. In addition to the sorting hubs, our network partners also operate two sorting facilities in Inner Mongolia and Tibet, respectively.
Our centralized planning team coordinates the development of new hubs and the expansion of existing ones in aspects including site selection, facility
layout design and equipment purchase. We consider adding new sorting hubs to our network if they can optimize our route or increase our capacity in the
surrounding area. We select sites with convenient access to major highways to improve efficiency and reduce cost. We design new hubs with their expected
growth in mind and build in extra capacity for volume growth in the foreseeable future. We equip our hubs with sorting and loading equipment that best fits
our needs. For example, we commissioned a renowned Chinese research institution to design and develop microchips and other critical parts of sorting
equipment tailored to support our operations. This tailor-made equipment has lower procurement and maintenance costs and higher operational efficiency
compared with non-customized products available on the market.
We believe that our sorting hubs are among the most efficient in the industry. Our waybill tracking system monitors the status of parcel movement and
enables us to identify hubs with the need for additional investment or resource allocation to increase sorting speed.
When planning routes, we prioritize the efficiency of the entire network over the interest of any individual network partner. We dispatch each parcel to
the sorting hub closest to its destination even if the sorting hub and the destination are located in different administrative regions. This greatly reduces
transportation time and lowers our transportation cost. Our seamless route planning and management benefit from our experience accumulated through years
of optimization and the support of our information technology infrastructure, which enables dynamic tracking and monitoring of parcel movement.
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Eighteen of the sorting hubs operated by us are located on the premises we own and 50 on leased premises. We plan to acquire more land for our sorting
hubs to invest for long-term and more stable operations on land that we own. In connection with our enterprise customer services, from time to time we
provide temporary warehousing services to our key account customers to store their products close to their target demographics.
Line-haul transportation network
We connect our sorting hubs with over 1,800 well-planned line-haul routes. We utilize a self-owned fleet, a fleet majority owned by our employees and
contracted vehicles to form our line-haul transportation network responsible for the long-distance, high-capacity transportation of parcels. We control the
route planning and vehicle dispatch of our entire line-haul transportation system. Leveraging our centralized transportation management system, we plan our
routes to achieve lower transportation cost and transit times.
Our fleet consists of more than 2,100 self-owned trucks, approximately 680 of which are high capacity 15-17 meter long models as of June 30, 2016. Our
use of new models of 15-17 meter long trucks, which have nearly twice the loading capacity of 9.6 meter long trucks commonly used in the industry with
minimal marginal cost, contributes to lower unit line-haul transportation cost. The centralized planning and design of our sorting hubs with extra parking
space allows us to lower transportation cost of parcels. We invest in this fleet with our own funds and are therefore able to adjust the ratio of different vehicle
models swiftly to react to changes in operational needs.
We outsource part of our line-haul transportation to Tonglu Tongze, a transportation operator that works exclusively for us. Tonglu Tongze has a fleet of
approximately 1,200 trucks (mostly 9.6 meter long trucks) as of June 30, 2016. Certain of our employees, employees of Tonglu Tongze and other
shareholders beneficially own 76.6%, 5.0% and 18.4% of Tonglu Tongze as of June 30, 2016, respectively. Through written proxies, all shareholders of
Tonglu Tongze have appointed three of our mid-level managers as nominee shareholders who do not hold equity interests in Tonglu Tongze, to exercise all
of their shareholder rights (except dividend rights). Daily operations of Tonglu Tongze are managed by its own employees. Tonglu Tongze purchases
vehicles with its own funds, and they implement their fleet's truck dispatching plans according to our network needs. The price we pay to Tonglu Tongze is
based on our market insights on cost factors, including (i) toll cost based on route, (ii) fuel cost based on route, type of truck used and fuel price, and
(iii) other costs such as drivers' compensation, depreciation and maintenance cost. We use the same criteria and standards for pricing when we contract
independent third-party transportation companies. We typically use the Tonglu Tongze fleet for round-trip transportation.
We also contract other independent third-party transportation companies for additional capacity. In most of those cases, we use their services for single
trip transportation when we foresee a low return trip truckload. We carefully review the operating history, fleet condition and other criteria of the candidates
to select only reliable providers.
Pickup and delivery outlets
Our outlets are all operated by our network partners and not owned by us. The network partners primarily provide the pickup and last-mile delivery
services through the outlets managed by them, although certain larger outlets also have regional sorting and dispatching capabilities. Each outlet has its own
designated geographical scope of operation and can generally only take orders generated within that area. As of June 30, 2016, our network had over
23,000 outlets nationwide. Our outlets cover 96% of China's cities and counties as of June 30, 2016. We closely monitor the performance of our outlets and
provide incentives to our network partners to maximize performance.
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Our Network Partner Model
Our network partners own and operate the business of the pickup and delivery outlets under our brand and form an important part of our network system.
The diagram below illustrates our network partner model.
As of June 30, 2016, we had 3,541 direct network partners who have entered into cooperation agreements with us. These agreements generally have a
term of one or three years and the direct network partner may elect to renew the agreement upon expiration if it remains in our network. Our network partners
pay us recurring network transit fees for the express delivery services we provide to them. We have the right to impose monetary penalties on our direct
network partners for failure to adhere to the cooperation terms. A direct network partner is also required to place a deposit with us as guarantee for its
performance. We authorize our direct network partners to carry out express delivery business under our "Zhongtong" or "ZTO" brand and mandate the unified
application of our logos on outlets, personnel uniforms, transportation vehicles and packaging materials.
Through our agreements with them, we authorize our direct network partners to exclusively operate ZTO-branded express delivery business within a
designated area, the size of which ranges from a township to a province. Depending on the size of, and the business volume in, their respective authorized
areas, many of our direct network partners subcontract a portion of their business to third parties under our consent. We do not directly enter into cooperation
agreements with those third parties and refer to them as our indirect network partners. Indirect network partners are also authorized to operate ZTO-branded
express delivery business.
Our Zhongtian and Ping'an systems provide the technology infrastructure for the management of our network partners. Our Zhongtian system tracks each
delivery order and calculates the network transit fees
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payable to us, and the last-mile delivery fees payable to our direct network partners and, where applicable, our indirect network partners. Our Ping'an system
is synchronized regularly and retrieve the fee balances from our Zhongtian system. With this information, the Ping'an system manages the settlement of
amounts from our direct network partners to us for parcel transit in our network. All of our direct network partners have an account on the Ping'an system and
we require them to make a deposit into their respective account both for efficient settlement and as guarantee for the performance of their obligations. After
each synchronization, the Ping'an system automatically transfers funds from the accounts of our network partners to ours as settlement. The Ping'an system
also handles payment settlements among our direct network partners.
All of our direct network partners and most of our indirect network partners work with us exclusively. A small number of our indirect network partners
also operate their outlets for other express delivery companies. This is typically limited to situations where an outlet is located in a remote or isolated area or
newly-entered market. Such exception to our exclusivity requirement in those situations helps to increase the outlet's business volume to support its business.
We control the qualification of new network partners and provide extensive ongoing training to our network partners. We also periodically review the
performance of our network partners with indicators including parcel volume, local market share, service quality and parcel safety/security. We consider the
conditions and forecast of the local market to set guidance for those indicators. We set guidance and review the performance of our network partners, as well
as certain pickup and delivery outlets with large parcel volume. For all other regions, we set guidance and review our direct network partners at the provincial
level. We reward those who significantly outperform the targets with fee discount. We believe those measures ultimately also provide incentives to our
indirect network partners.
If a direct network partner continuously fails to meet our performance targets, we can unilaterally terminate our cooperation with it, which historically
has only occurred in isolated cases. In those cases, we introduce qualified buyers vetted by us or, in the cases where the exiting direct network partner has
already identified a buyer itself, we review the buyer's credentials and decide whether to accept it as a new direct network partner. This process also applies to
voluntary departure by direct network partners.
We offer our network partners latitude in their pricing and operation. The network partners have full discretion over their daily operations and make
localized decisions with respect to facilities, vehicles and recruitment to meet their capacity and service needs. We believe this model incentivizes our
network partners to be entrepreneurial and innovative and provides them with the flexibility to compete effectively in their local market.
We strive to promote balanced development among all our network partners. For example, we first adopted and continue to refine the sharing mechanism
of delivery service fees to help balance the disparity in business volume and composition between network partners due to China's geographical imbalance in
economic development. In addition, we foster an effective and transparent system, which enables our network partners to exit our network by transfering their
business to buyers approved by us and benefit from any value appreciation of their business through such transfers. We facilitate those transfers by providing
information and guidance on valuation of the transferred business with participation by both sides. This helps maximize the return on our network partners'
investments and encourages them to improve the fundamentals of their outlets, such as higher local market share, higher customer satisfaction rates and
profitability. Furthermore, we have also established partnerships with a few domestic banks to recommend qualified network partners in need of financing.
Although we do not provide guarantees for the network partners, we believe the arrangement allows them to find and diversify capital sources needed to
support their business and growth.
With this highly scalable model, we are able to leverage the resources of network partners to achieve rapid expansion and deep penetration of our
network without significant resources outlay by ourselves.
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Our Customers
The following chart illustrates our direct and end customers.
Our direct customers are our direct network partners, who, along with our indirect partners, own and operate pickup and delivery outlets. We provide
them with access to our core line-haul transportation and sorting network, which form the infrastructure of their and our indirect partners' express delivery
services. In addition, we also directly serve some enterprise customers, including vertical e-commerce and traditional merchants, in connection with the
delivery of their products to consumers.
Together with our network partners, we mainly serve e-commerce merchants and other express service users as our end customers. A significant portion of
our end customers are merchants on China's e-commerce platforms. We have established ourselves as one of the largest express delivery service providers for
millions of online merchants and consumers transacting on the leading Chinese e-commerce platforms, such as Alibaba and JD.com.
Customer Service
We believe our superior customer service enhances our customer loyalty and brand image. Our network partners directly interact with our end customers,
and we provide ongoing training and conduct regular performance reviews to ensure that they provide quality customer services.
We also operate a call center system providing real-time assistance by our representatives during business hours, seven days a week. Our automated
system continues to respond to inquiries outside of business hours and forwards complicated inquiries to our call center representatives for further handling.
Our call center is localized with branch offices in over 18 provinces in China with mostly local hires to leverage their local knowledge. All branches can be
reached via a unified number and use the same call
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system and database. Our call system automatically forwards incoming calls to the local branch near the caller's location. Our approximately 780 call center
representatives adhere to the same customer service standards nationwide and their local knowledge contributes to enhanced customer service effectiveness.
We provide regular trainings to our representatives and review the callers' level of satisfaction with their service. At the end of each call, we ask the caller to
grade the quality of our customer service and a designated call-back team follows up on all incidences of dissatisfaction. For each complaint, we strive to
provide a response within seven days.
Information Technology and Intellectual Property
We have built our technology system with third-party software and systems and have refined and tailored them to suit our operational needs. We design
and utilize our technology systems to enhance the efficiency and scalability of our network. They play an important role in the success of our business. The
principal components of our technology system include:
Zhongtian SystemThe Zhongtian system is the technology backbone for our express delivery management with the following main functions:
Parcel sorting, transportation and tracking management. Our parcels are sorted and dispatched based on routing logic through the Zhongtian
system. Our Zhongtian system provides the technology backbone and our scanners identify and extract the parcels' addresses. The parcels are
then manually or automatically sorted into different baggage by the area of delivery for shipment. With this system, we can track each parcel
processed through our network based on a unique waybill barcode assigned to each parcel. As the parcel moves through each gateway, its
barcode is scanned and its route and other delivery information are input into the Zhongtian system. We also monitor the capacity of our
sorting hubs on our Zhongtian system and monitor the real-time movement of each on-duty truck with GPS and GIS technology that is
synchronized with the Zhongtian system.
Settlement payment calculation. The Zhongtian System tracks each delivery order and, according to pre-set formulae, calculates the network
transit fees payable to us, and last-mile delivery fees payable to our direct network partners and, where applicable, our indirect network
partners.
Platform integration. Our Zhongtian system is connected to the order systems of major e-commerce platforms and vertical e-commerce websites
in China. Merchants can therefore seamlessly send delivery orders to our outlets via our Zhongtian system.
Mobile application. The Zhongtian system also supports our mobile application so that our pickup and delivery personnel are able to handle
functions such as digital waybill printing, order pickup, parcel tracking, receipt signing on mobile devices.
Customer service support. Our call center staff have access to the Zhongtian system's database to provide better and more effective customer
service. The automated customer service functions on our website and WeChat public account allow end customers to track parcels and search
outlet location with the data support from Zhongtian system.
Management of sale of accessories. Our network partners make online purchases of accessories from us utilizing the accessories management
module of Zhongtian system. The network partners log on to our system to place orders for waybills, packing materials, portable barcode
scanners and other accessories. We then send out the accessories to the network partners once we have checked the orders received.
Data analytics and decision support. The Zhongtian system collects and provides operational data such as parcel volume, hub utilization and
parcel delivery speed, which is valuable information to analyze and enhance our and our network partners' performance. It provides a
dashboard available
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to our core management team with various data and analytical tools. By utilizing the dashboard, our management can monitor and evaluate
our business real-time with data support.
Ping'an Settlement SystemThe Ping'an system is synchronized regularly and obtains the fee balances from our Zhongtian system. With this
information, the Ping'an system manages the settlement of amounts from our direct network partners to us for parcel transit on our network. All our direct
network partners have an account on the Ping'an system and we require them to make a deposit into their account both for efficient settlement and as
guarantee for the performance of their other obligations. After each synchronization, the Ping'an system automatically transfers funds from the accounts of our
network partners to ours as settlement. The Ping'an system is also capable of handling payment settlements among our direct network partners. For example,
upon the completion of a delivery order, the system automatically transfers the applicable amount of last-mile delivery fee from the pickup outlet's account
on the system to that of the delivery outlet.
We have leased a high grade data center in Zhejiang province to support our core operational systems such as Zhongtian, transportation management
system and Ping'an. Our server center in Shanghai mainly provides the network infrastructure for our managerial, data backup and other non-core functions.
We have adopted security policies and measures, including encryption technology, to protect our software, proprietary data and customer information. Our
system is configured with multiple layers of security to prevent our software and databases from unauthorized access and we implement security protocols for
communication among applications. We utilize a system of firewalls to prevent unauthorized access to our internal systems. Exchange of critical data on our
website and public and private interfaces use the Secure Sockets Layer networking protocol, a standard security technology for establishing encrypted
network communications. We back up our databases, including customer data, regularly with both on-site and off-site storage. Encryption is used to secure
sensitive information when it is in transit or being stored.
We regard our trademarks, copyrights, patents, domain names, know-how, proprietary technologies, and similar intellectual property as critical to our
success. As of June 30, 2016, we owned nine computer software copyrights in China for various aspects of our operations and maintained seven trademark
registrations inside China. As of June 30, 2016, we had registered six domain names, including www.zto.cn, among others.
Competition
The express delivery industry in China is fragmented and we compete primarily with leading domestic express delivery companies including YTO
Express, STO Express, Yunda Express, SF Express and EMS. We also face competition from emerging players in our industry or existing players in an
adjacent market who choose to leverage their existing infrastructure and expand their services into express delivery. As a leading and the fastest growing
express delivery company in China, we believe that our innovative shared success system, superior operational capabilities and cost leadership as well as our
quality service provide us with a competitive advantage. Entry into the express delivery industry requires significant initial investment in network
construction and partner attraction. However, certain more established e-commerce companies may establish or further improve their proprietary delivery
infrastructure and compete with us. Furthermore, as we look to offer more products and expand our customer base, we may face competition from players in
those new sectors. We believe that our core strengths provide us with competitive advantages over existing and potential competitors.
Security and Safety
We have established parcel security screening protocols to inspect parcels before we accept them for sorting and delivery. We have listed the prohibited
items for on-land transportation and by air transportation into three classes, such as flammables and explosives, gunpowder, gasoline, opium and poultry. All
senders are required to provide identity information. We require that our pickup team visually
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inspect all items sent by end customers who we do not have long term relationship with and perform random inspection on items sent by repeat end
customers. We also have other measures such as X-ray screening of parcels for safety hazards or prohibited items. The penalty on the responsible personnel for
picking up or delivering these prohibited items ranges from RMB500 to RMB100,000 per parcel and they can be required to pay damages that are caused by
delivering these prohibited items ranging from RMB10,000 to RMB500,000 per incident. Our safety screening system will continue to evolve to meet the
changing needs.
Workplace safety and transportation safety are important to our business. We have implemented protocols for safety of ground transportation for our fleet
and operations of our sorting hubs to ensure transportation and sorting hubs and to minimize accidents. We provide periodic training to our employees to
recognize hazards, mitigate risk and avoid injury of themselves and others at work.
Procurement
We have adopted centralized procurement for the selection, bidding and purchase of land use rights, sorting equipment, vehicles and consumables such
as waybills, barcode scanners and uniforms. We hold bidding processes where possible to select products with best value. We generally provide better
payment terms than industry norm to promote long-term stable relationship with reliable suppliers. We work with manufacturers and research institutions to
design and adjust equipment that best fit our needs. For example, we commissioned a renowned Chinese research institution to design and develop
microchips and other critical parts of sorting equipment tailored to support our operations. Compared with ready-made products available on the market,
tailor-made equipment has lower procurement and maintenance costs but higher operational efficiency.
We also leverage the scale of our network and assist our network partners to negotiate better procurement terms with their suppliers.
Branding and Marketing
We strive to enhance our brand awareness through higher service quality and other marketing initiatives. We were recognized as one of China's
outstanding logistics companies in 2015 at the 13 th Annual Conference of Chinese Logistics Entrepreneurs. We were also recognized by the Post Bureau of
Shanghai as having made outstanding contributions to the development of the express delivery industry in 2015 and was named by China Central Television
as an influential and outstanding enterprise in China in 2013.
We employ a variety of programs and marketing activities to promote our brand and our services. We regularly attend trade expositions, such as the
China Beijing International Fair for Trade in Services, and speak at industry forums. We also operate a news feeds channel and leverage various mobile social
network applications, such as WeChat, to distribute business updates and corporate news. Our offline marketing activities include traditional media such as
billboard and public relations activities. In addition, we require the network partners to apply our logos on personnel uniforms, transportation vehicles and
packaging materials in a consistent and unified manner in order to further enhance our brand recognition during interactions with our end customers.
We train and guide our network partners to market their products to our end customers and maintain customer relationships. Our designated team
maintains enterprise customers relationships directly through regular dialogue. In general, we and our network partners strive to continuously improve our
service qualities to elevate our brand and attract and retain more customers.
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Employees
As of December 31, 2014 and 2015, we had a total of 11,605 and 26,119 employees, respectively. Almost all our employees are located in China. The
following table sets forth the breakdown of our own employees as of December 31, 2015 by function:
Number of
Employees
Functional Area
Sorting
Transportation
Management and Administration
Customer Service
Operation Support
Sales and Marketing
Technology and Engineering
Total
16,626
3,173
2,917
1,860
761
474
308
26,119
% of
Total
63.7
12.1
11.2
7.1
2.9
1.8
1.2
100.0
In addition to our own employees, our workforce also includes 1,373 and 8,139 dispatched and contractor workers, respectively, as of December 31,
2015. Our network partners hire their own employees according to their operational needs.
We believe we offer our employees competitive compensation packages and a merit-based work environment that encourages initiative, and as a result,
we have generally been able to attract and retain qualified personnel and maintain a stable core management team.
As required by PRC regulations, we participate in various government statutory employee benefit plans, including social insurance funds, namely a
pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan,
and a housing provident fund. We are required under PRC law to make contributions to employee benefit plans at specified percentages of the salaries,
bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. We have not made
adequate employee benefit payments. We may be required to make up the contributions for these plans as well as to pay late fees and fines but have made
adequate provisions. See "Risk FactorsRisks Related to Doing Business in ChinaOur failure to fully comply with PRC labor-related laws may expose us
to potential penalties."
We enter into standard labor agreements with our employees and, in addition, enter into confidentiality and non-compete agreements with our key
employees. The non-compete restricted period typically expires two years after the termination of employment, and we agree to compensate the employee
with a certain percentage of his or her pre-departure salary during the restricted period.
We believe that we maintain a good working relationship with our employees, and we have not experienced any major labor disputes.
Facilities and Property
As of June 30, 2016, we owned office buildings in China with an aggregate gross floor area of approximately 54,400 square meters, including
approximately 13,700 square meters for our headquarters in Shanghai, and leased an office building in Beijing with an aggregate gross floor area of
approximately 6,000 square meters. The lease in Beijing will expire in 2032.
In addition, as of June 30, 2016, 18 of the sorting hubs operated by us have obtained the land use rights from the state with respect to an aggregate gross
land area of approximately 692,000 square meters,
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and the remaining 50 of the sorting hubs operated by us leased an aggregate gross land area of approximately 758,800 square meters. The terms of such leases
range from one to 15 years.
The areas of self-owned properties and leased premises are based on figures specified in the relevant land use right certificates or lease agreements, where
available, or our operational records. We lease properties from third parties on an as is basis.
We plan to acquire or establish new sorting hubs and expand existing ones. As of June 30, 2016, we have acquired or are in the process of acquiring land
use rights in 40 locations with an aggregate land area of approximately 2.2 million square meters to build new sorting hubs. We believe that we will be able
to obtain adequate facilities through acquisition or lease to accommodate our future expansion plans.
Insurance
We maintain various insurance policies to safeguard against risks and unexpected events. We have purchased compulsory motor vehicle liability
insurance and commercial insurance such as automobile third-party liability insurance, vehicle loss insurance and driver/passenger liability insurance. We
also provide social security insurance including pension insurance, unemployment insurance, work-related injury insurance and medical insurance to
our employees.
We are in the process of purchasing property insurance to cover our fixed assets. We do not purchase insurance for items delivered by us. Instead, our end
customers may pay extra fees to purchase our priority handling services for valuable items and we will compensate those customers based on the value
declared in the case of item loss or damage attributable to us. We do not maintain business interruption insurance nor do we maintain product liability
insurance or key-man insurance. Our management will evaluate the adequacy of our insurance coverage from time to time and purchase additional insurance
policies as needed.
Legal proceedings
We are currently not a party to any material legal or administrative proceedings. We may from time to time be subject to various legal or administrative
claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, may
result in substantial cost and diversion of our resources, including our management's time and attention.
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REGULATION
This section sets forth a summary of the most significant rules and regulations that affect our business activities in China or our shareholders' rights to
receive dividends and other distributions from us.
Regulations Relating to Foreign Investment
Industry Catalogue Relating to Foreign Investment. Investment activities in China by foreign investors are principally governed by the Guidance
Catalogue of Industries for Foreign Investment, or the Catalogue, which was promulgated and is amended from time to time by the Ministry of Commerce and
the National Development and Reform Commission. The Catalogue sets forth the industries in which foreign investments are encouraged, restricted, or
prohibited. Industries that are not listed in any of the above three categories are permitted areas for foreign investments, and are generally open to foreign
investment unless specifically restricted by other PRC regulations. Establishment of wholly foreign-owned enterprises is generally allowed in encouraged
and permitted industries. Foreign investors are not allowed to invest in industries in the prohibited category.
We are mainly engaged in express delivery services, which may involve domestic express delivery services of mail. According to the latest version of the
Catalogue, which came into effect on April 10, 2015, foreign investments in domestic express delivery services of mail are prohibited. Therefore, we provide
domestic express delivery services of mail through our consolidated affiliated entities in China.
Our PRC subsidiaries also operate in certain industries which fall into the encouraged category, such as road transportation and software development.
Our subsidiaries Shanghai Zhongtongji Network is registered in accordance with PRC law and mainly engages in software development, technical services
and consultation, which are encouraged under the latest version of the Catalogue.
Under PRC law, the establishment of a wholly foreign-owned enterprise is subject to the approval of the Ministry of Commerce or its local counterparts
and the wholly foreign-owned enterprise must register with the competent industry and commerce bureau. Shanghai Zhongtongji Network has duly obtained
all material approvals required for its business operation.
Foreign Investment in Road Transportation Businesses.
According to the Administrative Provisions for Foreign Investment in the Road
Transportation Industry, promulgated in November 2014 by the Ministry of Transportation and the Ministry of Commerce, and its supplements and
implementing rules, investment in a road transportation business (including, among other things, road freight transportation, and flitting, loading, unloading
and storage of road cargo) by a foreign investor is subject to the approval of the relevant provincial counterparts of the Ministry of Transportation, and the
newly established foreign-invested enterprise must obtain a Road Transportation Operation Permit from the relevant provincial counterparts of the Ministry
of Transportation after the completion of other foreign investment registration procedures. The incorporation of any direct or indirect subsidiary of a foreigninvested enterprise that intend to engage in road transportation business is subject to the same approval procedure. Based on such regulation, acquisition by
foreign investors or PRC entities directly or indirectly owned by foreign investors of road transportation business may also be required to obtain prior
approval from the provincial counterparts of the Ministry of Transportation. See "Risk FactorsRisks Related to Our BusinessAny lack of requisite
approvals, licenses or permits applicable to the business operation of us or our network partners may have a material and adverse impact on our business,
financial condition and results of operations."
Regulations Relating to Express Delivery Services
The PRC Postal Law, which took effect in October 2009 with latest amendment in 2015, sets out the fundamental rules on the establishment and
operation of an express delivery company. Pursuant to the
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Postal Law, an enterprise that operates and provides express delivery services must run its express delivery business by obtaining an Courier Service
Operation Permit. In order to apply for a business permit for express delivery services, a company must meet all the requirements as a corporate legal person
and satisfy certain prerequisites with respect to its service capacity and management system, and its registered capital must be no less than RMB500,000 to
operate within a province, autonomous region, or municipality directly under the central government, no less than RMB1,000,000 in the case of crossprovincial operation, and no less than RMB2,000,000 to operate international express delivery services.
Filing with the postal administrative department is required where an express delivery company sets up branches. The requirements for the establishment
of a branch of express delivery company are specified in the Administrative Measures for Courier Service Market, or the Courier Market Measures, which was
announced by the Ministry of Transportation in 2013. The Courier Market Measures stipulate that where any express delivery company establishes its
branches or business departments, it must register with the local industrial and commercial administrations where such branches or business departments are
located by submitting its express delivery services operation permit and a list of its branches and, such branches or business departments must, within 20 days
after they obtain their relevant business licenses, file with the local postal administrative department. If an express delivery company fails to complete the
required registration and/or filing with the relevant governmental authority, it may be imposed a fine ranging from RMB10,000 to RMB50,000, compelled to
make corrections, and/or ordered to suspend its business operation for rectification.
Pursuant to the Courier Market Measures and the Administrative Measures on Courier Service Operation Permits, which was promulgated by the
Ministry of Transportation on 24 June 2015, any entity engaging in express delivery services must obtain a Courier Service Operation Permit from the State
Post Bureau or its local counterpart and is subject to their supervision and regulation. Entities applying for a permit to operate express delivery services in a
certain province should apply to the provincial-level postal bureau, while entities applying for a permit to operate express delivery services across multiple
provinces should apply to the State Post Bureau. If an entity operates express delivery services without obtaining a Courier Service Operation Permit in
accordance with the above measures, it may be compelled to make corrections, subject to the confiscation of its earnings generated from its unlicensed
operating express delivery services, imposed a fine ranging from RMB50,000 to RMB200,000, and/or ordered to suspend its business operation for
rectification. If a permit-holder does not operate any express delivery services for over six months without due grounds after obtaining the Courier Service
Operation Permit, or suspends its business for more than six months without authorization, the postal administrative departments have the authority to cancel
the Courier Service Operation Permit of such holder.
Enterprises engaged in express delivery services other than postal enterprises may not engage in posting and mail delivery business exclusively operated
by postal enterprises, and may not deliver any official documents of state organs. The express delivery business must be operated within the permitted scope
and valid term of the Courier Service Operation Permit. The Courier Service Operation Permit is valid for 5 years upon its issuance and comes with an annual
reporting obligation. The Circular on Implementing the Administrative Measures for the Courier Market and Strengthening the Administration of Courier
Service Operations, which was issued by the State Post Bureau in 2013, further clarifies that the postal administrative department must examine whether an
entity operates express delivery service within the permitted business scope and geographic scope of its Courier Service Operation Permit, and the
geographic examination must be carried out down to the district-level within cities. Failure to conduct express delivery services within the permitted
operation scopes would subject the express delivery company to a correction order by the postal administrative department and a fine from RMB5,000 to
RMB30,000. Moreover, in accordance with the Regulations on Annual Reporting of Operation Permission of Express Delivery Service Business issued by
the State Post Bureau in 2011, an enterprise engaged in express delivery services must complete annual reporting on its operation status for the previous year
with the postal administrative authority which issued its Courier Service Operation Permit. Where an express
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delivery service company fails to submit its annual report to the relevant postal administrative authority in a timely manner or conceals any facts or commits
fraud in its annual report, such express delivery service company may be imposed a fine ranging from RMB10,000 to RMB30,000.
In accordance with the Decision of the State Council on Issues concerning Cancelling and Adjusting a Batch of Administrative Examination and
Approval Items in February 2015, a company operating express delivery services must apply for and obtain the Courier Service Operation Permit prior to the
application of its business license, and the obtaining of Courier Service Operation Permit is subject to industrial and commercial registration with prior
examination.
In accordance with the Courier Market Measures, if any express delivery service is carried out through franchise, both the franchisees and franchisors
must obtain the Courier Service Operation Permit and any franchisee must run its franchise business within its licensed scopes; and the franchisees and
franchisors must enter into written agreements providing the rights and obligations of both parties and the liabilities of both parties in case of any violation
of the legal rights and interests of the users of express delivery services. Any franchisee or franchisor failing to obtain the Courier Service Operation Permit or
any franchisee failing to run its franchise business within its licensed scopes would be subject to a correction order by the relevant postal administrative
authority and a fine ranging from RMB5,000 to RMB30,000.
Companies engaging in express delivery service must establish and implement a system for the examination of parcels or articles received for delivery.
Pursuant to the PRC Postal Law and Measures for the Supervision and Administration of Security of the Postal Industry issued by the Ministry of
Transportation in 2011, express delivery companies must examine the postal articles that would be in the presence of customers so as to inspect whether the
postal articles are prohibited or restricted from express delivery. Express delivery companies must also examine whether the names, categories and quantity of
the postal articles have been properly written down on delivery form. Any failure to establish or implement such inspection system, or any unlawful
acceptance or delivery of prohibited or restricted parcels/articles may result in the suspension of the company's business operation for rectification until
cancellation of its Courier Service Operation Permit.
ZTO Express and 49 of its subsidiaries have obtained the Courier Service Operation Permits to operate express delivery services. See "Risk Factors
Risks Related to Our BusinessAny lack of requisite approvals, licenses or permits applicable to the business operation of us or our network partners may
have a material and adverse impact on our business, financial condition and results of operations."
Road Transportation Operation Permit
Pursuant to the Regulations on Road Transportation promulgated by the State Council in April 2004 and most recently amended in February 2016, and
the Provisions on Administration of Road Freight Transportation and Stations (Sites) issued by the Ministry of Transportation in June 2005 and most recently
amended in April 2016, the business operations of road freight transportation refer to commercial road freight transportation activities that provide public
services. The road freight transportation includes general road freight transportation, special road freight transportation, road transportation of large articles,
and road transportation of dangerous cargos. Special road freight transportation refers to freight transportation using special vehicles with containers,
refrigeration equipment, or tank containers, etc. The Provisions on Administration of Road Freight Transportation and Stations (Sites), or the Road Freight
Provisions, set forth detailed requirements with respect to vehicles and drivers.
Under the Road Freight Provisions, anyone engaging in the business of operating road freight transportation or stations (sites) must obtain a Road
Transportation Operation Permit from the local county-level road transportation administrative bureau, and each vehicle used for road freight transportation
must have a Road Transportation Certificate from the same authority. The incorporation of a subsidiary of road freight transportation operator that intends to
engage in road transportation business
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is subject to the same approval procedure. If it intends to establish a branch, it should file with the local road transportation administrative bureau where the
branch is to be established.
Although the Road Transportation Operation Permits have no limitation with respect to geographical scope, several provincial governments in China,
including Shanghai and Beijing, promulgated local rules on administration of road transportation, stipulating that permitted operators of road freight
transportation registered in other provinces should also make record-filing with the local road transportation administrative bureau where it carries out
its business.
ZTO Express and 12 of its subsidiaries have obtained Road Transportation Operation Permits to operate general road freight transportation or station
(sites). Shanghai Zhongtongji Logistics Co., Ltd. and 20 of its subsidiaries have obtained Road Transportation Operation Permits to operate general road
freight transportation or station (sites). See "Risk FactorsRisks Related to Our BusinessAny lack of requisite approvals, licenses or permits applicable to
the business operation of us or our network partners may have a material and adverse impact on our business, financial condition and results of operations."
Regulations Relating to International Freight Forwarding Business
Administrative Provisions on International Freight Forwarders promulgated in 1995 and its detailed rules regulate the business of international freight
forwarding. According to the provisions and its detailed rules, the minimum amount of registered capital must be RMB5 million for an international freight
forwarder by sea, RMB3 million for an international freight forwarder by air and RMB2 million for an international freight forwarder by land or for an entity
operating international express delivery services. Additionally, the International Freight Forwarder Approval Certificate must be obtained by company
intending to carrying out the international freight forwarding business from the Ministry of Commerce. An international freight forwarder must, when
applying for setting up its branches, increase its registered (or the excess amount over its minimum registered capital) by RMB500,000. Under the Tentative
Measures on Filing of International Freight Forwarders announced in February 2005, all international freight forwarders and their branches registered with the
state industrial and commercial administration must be filed with the Ministry of Commerce or its authorized organs.
Shanghai Dayu International Logistics Co., Ltd. is engaged in the international freight forwarding business and has filed with competent authority for
carrying out such business.
Regulations on Commercial Franchising
Pursuant to the Regulations on Commercial Franchising promulgated by the State Council in February 2007 and Provisions on Administration of the
Record Filing of Commercial Franchises issued by Ministry of Commerce in December 2011, collectively the Regulations and Provisions on Commercial
Franchising, commercial franchising refers to the business activities where an enterprise that possesses the registered trademarks, enterprise logos, patents,
proprietary technology or any other business resources allows such business resources to be used by another business operator through contract and the
franchisee follows the uniform business model to conduct business operations and pay franchising fees according to the contract. We and our network
partners are therefore subject to regulations on commercial franchising. Under the Regulations and Provisions on Commercial Franchising, within 15 days of
the first conclusion of franchising contract, the franchisor must carry out record-filing with Ministry of Commerce or its local counterparts and must report the
current status of its franchising contracts in the first quarter of each year after record-filing. Ministry of Commerce announces the names of franchisors who
have completed filing on the government website and makes prompt updates. If the franchisor fails to comply with these Regulations and Provisions on
Commercial Franchising, the Ministry of Commerce or its local counterparts have the discretion to take administrative measures against the franchisor,
including fines and public announcements. The Regulations and Provisions on Commercial Franchising also set forth
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requirements on the contents of franchising contracts. ZTO Express has signed cooperation agreements, which are deemed franchising contracts under the
Regulations and Provisions on Commercial Franchising, with 3,541 network partners as of June 30, 2016, the first of which was signed on January 1, 2014.
As of the date of this prospectus, we have not made any filings with local counterparts of Ministry of Commerce or received any governmental order to make
such filings. See "Risk FactorsRisks Related to Doing Business in ChinaOur failure to comply with regulations on commercial franchising may result in
penalties to us.".
Regulations Relating to Personal Information Security and Consumer Protection
The Administrative Provisions on the Security of Personal Information of Express Service Users, promulgated by State Post Bureau in March 2014,
provide for the protection of the personal information of users of express or express delivery services, and the supervision on the express operations of postal
enterprises and express delivery companies. In accordance with these provisions, the state postal administrative department and its local counterparts are the
supervising and administering authority responsible for the security of the personal information of users of express or express delivery services, and postal
enterprises and express delivery companies must establish and refine systems and measures for the security of such information. Specifically, express delivery
companies must enter into confidentiality agreements with its employees regarding the information of its clients or users to specify confidentiality
obligations and liabilities for violation thereof. Where express delivery companies are entrusted by operators engaging in online shopping, TV shopping,
mail-order and other businesses to provide express delivery services, such express delivery companies must enter into agreements with the said principals
agreeing upon provisions safeguarding the security of information of users of express delivery services. Courier companies operating through franchise are
further required to formulate provisions on the security of information of users of express delivery services in franchising contracts and clarify the security
responsibilities between franchisor and franchisee. A courier company and its employees causing damages to the users of express delivery services by
divulging the users' information is expected to bear compensation liabilities. If a courier company is found to unlawfully furnish the information of users of
express delivery services, the company and its employees are subject to administrative liabilities or even criminal penalties. A user of express delivery
services may further seek remedies by following the Measures on Settling the Complaints of the Postal Users issued by State Post Bureau, which took effect in
September 2014. The Postal Users Complaints Settling Center handles the complaints from users on the quality of the express delivery services under a
regime of mediation. We are subject to the above provisions or measures with regard to the security of personal information and believe that we are currently
in compliance with the law in all material aspects.
Regulations Relating to Pricing
In China, the prices of a very small number of products and services are guided or fixed by the government. According to the Pricing Law, business
operators must, as required by the government departments in charge of pricing, mark the prices explicitly and indicate the service items, charging standards
and other related particulars clearly. Business operators may not charge any fees that are not explicitly indicated. Business operators must not commit
unlawful pricing activities, such as colluding with others to manipulate the market price, using false or misleading prices to deceive consumers to transact, or
conducting price discrimination against other business operators. Failure to comply with the Pricing Law may subject business operators to administrative
sanctions such as warning, ceasing unlawful activities, compensation, confiscating illegal gains, fines. The business operators may be ordered to suspend
business for rectification, or have their business licenses revoked if the circumstances are severe. We are subject to the Pricing Law as a service provider and
believe that our pricing activities are currently in compliance with the law in all material aspects.
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Regulations Relating to Leasing
A large part of ZTO's offices, sorting hubs, pickup and delivery outlets and other facilities are leased properties. Pursuant to the Law on Administration of
Urban Real Estate which took effect in January 1995 with the latest amendment in August 2009, lessors and lessees are required to enter into a written lease
contract, containing such provisions as the term of the lease, the use of the premises, liability for rent and repair, and other rights and obligations of both
parties. Both lessor and lessee are also required to register the lease with the real estate administration department. Pursuant to implementing rules stipulated
by certain provinces or cities, such as Tianjin, if the lessor and lessee fail to go through the registration procedures, both lessor and lessee may be subject
to fines.
According to the PRC Contract Law which took effect in October 1999, the lessee may sublease the leased premises to a third party, subject to the
consent of the lessor. Where the lessee subleases the premises, the lease contract between the lessee and the lessor remains valid. The lessor is entitled to
terminate the lease contract if the lessee subleases the premises without the consent of the lessor. In addition, if the lessor transfers the premises, the lease
contract between the lessee and the lessor will still remain valid.
Pursuant to the PRC Property Law which took effect in October 2007, if a mortgagor leases the mortgaged property before the mortgage contract is
executed, the previously established leasehold interest will not be affected by the subsequent mortgage, but where a mortgagor leases the mortgaged property
after the creation and registration of the mortgage interest, the leasehold interest will be subordinated to the registered mortgage.
Regulations Relating to Land Use Right and Construction
Certain of our offices, sorting hubs and other facilities, together with the land use rights attached, are obtained or built by us or bought from third parties.
Pursuant to the PRC Land Administration Law promulgated in June 1986 with the latest amendment in August 2004 and the PRC Property Law, any entity
that needs land for the purposes of construction must obtain land use right and must register with local counterparts of Land and Resources Ministry. Land
use right is established at the time of registration. We have not obtained land use right to certain pieces of land currently used by us. See "Risk Factors
Risks Related to Doing Business in ChinaThe title defects with respect to or encumbrances on certain land and buildings may cause interruptions to our
business operations."
According to the Measures for Control and Administration of Grant and Assignment of Right to Use Urban State-owned Land promulgated by the
Ministry of Construction in December 1992, and the PRC Law on Urban and Rural Planning promulgated by the National People's Congress in October 2007
and became effective in January 2008 with the latest amendment in April 2015, the Measures for Administration of Granting Permission for Commencement
of Construction Works promulgated by the Ministry of Construction in June 2014, and the Interim Provisions on Inspection Upon Completion of Buildings
and Municipal Infrastructure promulgated by the Ministry of Construction in June 2000 with the latest amendment in October 2009, after obtaining land use
right, the owner of land use right must obtain construction land planning permit, construction works planning permit from the relevant municipal planning
authority, and a construction permit from relevant construction authority in order to commence construction. After a building is completed, an examination
of completion by the relevant governmental authorities and experts must be organized.
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Regulations Relating to Environmental Protection
Pursuant to the PRC Law on Environment Impact Assessment promulgated in 2002 and the Administrative Regulations on the Environmental Protection
of Construction Projects promulgated in 1998, each construction project is required to undergo an environmental impact assessment, and an environmental
impact assessment report must be submitted to the relevant governmental authorities for approval before the commencement of construction. In the event that
there is a material change in respect of the construction site, scale, nature, the production techniques employed or the measures adopted for preventing
pollution and preventing ecological damage of a given project, a new environmental impact assessment report must be submitted for approval. Moreover, in
accordance with the Administrative Regulations on the Environmental Protection Completion Acceptance of Construction Projects promulgated in 2001,
after the completion of a construction project, the constructing entity is required to obtain a completion acceptance on environmental protection for the
project from the competent department of environmental protection. Failure to comply with the above-mentioned regulations may subject an enterprise to
fines, suspension of the construction and other administrative liabilities and even criminal liabilities under severe circumstances.
Regulations Relating to Intellectual Property Rights
The PRC government has adopted comprehensive legislation governing intellectual property rights, including copyrights, patents, trademarks and
domain names.
Copyright. Copyright in China, including copyrighted software, is principally protected under the Copyright Law and its implementation rules. Under
the Copyright Law, the term of protection for copyrighted software is 50 years. As of June 30, 2016, we had nine software copyrights.
Patent. The Patent Law provides for patentable inventions, utility models and designs, which must meet three conditions: novelty, inventiveness and
practical applicability. The State Intellectual Property Office under the State Council is responsible for examining and approving patent applications. The
duration of a patent right is either 10 years or 20 years from the date of application, depending on the type of patent right.
Trademark. The Trademark Law and its implementation rules protect registered trademarks. The PRC Trademark Office of State Administration of
Industry and Commerce is responsible for the registration and administration of trademarks throughout China. The Trademark Law has adopted a "first-tofile" principle with respect to trademark registration. Where registration is sought for a trademark that is identical or similar to another trademark which has
already registered or given preliminary examination and approval for use in the same or similar category of commodities or services, the application for
registration of such trademark may be rejected. Trademark registration is effective for a renewable ten-year period, unless otherwise revoked. As of June 30,
2016, we had seven registered trademarks in different applicable trademark categories and had six trademark applications in China.
Domain Name. Domain names are protected under the Administrative Measures on the Internet Domain Names promulgated by the Ministry of
Industry and Information Technology. The Ministry of Industry and Information Technology is the major regulatory body responsible for the administration
of the PRC internet domain names, under supervision of which the China Internet Network Information Center is responsible for the daily administration
of.cn domain names and Chinese domain names. Domain name registration is handled through domain name service agencies established under the relevant
regulations, and applicants become domain name holders upon successful registration. We have registered zto.cn, zto.com.cn, zto.net.cn, zto.com, zto.net and
other domain names.
Regulations Relating to Employment
Pursuant to the Labor Law, promulgated by National People's Congress in January 1995, and the Labor Contract Law, promulgated by Standing
Committee of the National People's Congress in June 2007
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an d amended in December 2012, employers must execute written labor contracts with full-time employees. If an employer fails to enter into a written
employment contract with an employee within one year from the date on which the employment relationship is established, the employer must rectify the
situation by entering into a written employment contract with the employee and pay the employee twice the employee's salary for the period from the day
following the lapse of one month from the date of establishment of the employment relationship to the day prior to the execution of the written employment
contract. All employers must comply with local minimum wage standards. Violation of the Labor Law and the Labor Contract Law may result in the
imposition of fines and other administrative and criminal liability in the case of serious violation.
In December 2012, the Labor Contract Law was amended to impose more stringent requirements on the use of employees of temp agencies, who are
known in China as "dispatched workers". Dispatched workers are entitled to equal pay with fulltime employees for equal work. Employers are only allowed to
use dispatched workers for temporary, auxiliary or substitutive positions, and the number of dispatched workers may not exceed 10% of the total number of
employees. As of June 30, 2016, the number of dispatched workers in three of our PRC operating entities exceeded 10% of the total number of their
employees. See "Risk FactorsRisks Related to Doing Business in ChinaOur failure to fully comply with PRC labor-related laws may expose us to
potential penalties".
Enterprises in China are required by PRC laws and regulations to participate in certain employee benefit plans, including social insurance funds, namely
a pension plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan, and a
housing provident fund, and contribute to the plans or funds in amounts equal to certain percentages of salaries, including bonuses and allowances, of the
employees as specified by the local government from time to time at locations where they operate their businesses or where they are located. According to the
Social Insurance Law, an employer that fails to make social insurance contributions may be ordered to rectify the non-compliance and pay the required
contributions within a stipulated deadline and be subject to a late fee of up to 0.05% or 0.2% per day, as the case may be. If the employer still fails to rectify
the failure to make social insurance contributions within the stipulated deadline, it may be subject to a fine ranging from one to three times the amount
overdue. According to the Regulations on Management of Housing Fund, an enterprise that fails to make housing fund contributions may be ordered to
rectify the noncompliance and pay the required contributions within a stipulated deadline; otherwise, an application may be made to a local court for
compulsory enforcement. We have not made adequate contributions to employee benefit plans, as required by applicable PRC laws and regulations. We have
recorded accruals for the estimated underpaid amounts in our financial statements. However, we have not made any accruals for the interest on
underpayments and penalties that may be imposed by the relevant PRC government authorities in the financial statements as we believe it would be unlikely
that the relevant PRC government authorities will impose any significant interests or penalties. See "Risk FactorsRisks Related to Doing Business in China
Our failure to fully comply with PRC labor-related laws may expose us to potential penalties."
Regulations Relating to Foreign Exchange
The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, most recently amended
in August 2008. Payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can usually be
made in foreign currencies without prior approval from the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural
requirements. By contrast, approval from or registration with appropriate governmental authorities is required where Renminbi is to be converted into foreign
currency and remitted out of China to pay capital expenses such as the repayment of foreign currency-denominated loans.
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On March 30, 2015, SAFE issued the Circular of the State Administration of Foreign Exchange on Reforming the Management Approach regarding the
Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or SAFE Circular 19. Pursuant to SAFE Circular 19, the foreign exchange capital of
foreign-invested enterprises is subject to the discretional foreign exchange settlement, which means the foreign exchange capital in the capital account of
foreign-invested enterprises upon the confirmation of rights and interests of monetary contribution by the local foreign exchange bureau (or the book-entry
registration of monetary contribution by the banks) may be settled at the banks based on the actual operation needs of the enterprises. The proportion of
discretionary settlement of foreign exchange capital of foreign-invested enterprises is currently 100%. SAFE can adjust such proportion in due time based on
the circumstances of international balance of payments.
Regulations on Dividend Distribution
Wholly foreign-owned companies in China may pay dividends only out of their accumulated profits as determined in accordance with PRC accounting
standards and regulations. In addition, wholly foreign-owned companies are required to set aside at least 10% of their after-tax profits each year, if any, to
fund a statutory reserve funds, until the accumulative amount of such fund reaches 50% of its registered capital. Although the statutory reserves can be used,
among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds
are not distributable as cash dividends except in the event of liquidation. At the discretion of the wholly foreign-owned companies, they may allocate a
portion of their after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds
are not distributable as cash dividends.
Regulations on Offshore Financing
SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents' Offshore Investment and Financing
and Round-trip Investment through Special Purpose Vehicles, or SAFE Circular 37, on July 4, 2014, which replaced the former circular commonly known as
"SAFE Circular 75". SAFE Circular 37 requires PRC residents to register with local branches of SAFE in connection with their direct establishment or indirect
control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents' legally owned assets or equity interests in
domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a "special purpose vehicle". SAFE Circular 37 further requires
amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital
contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in
a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making
profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be
restricted in its ability to contribute additional capital into its PRC subsidiary. Furthermore, failure to comply with the various SAFE registration
requirements described above could result in liability under PRC law for evasion of foreign exchange controls. We have been notified that all beneficial
owners of ordinary shares who we know are PRC residents have filed SAFE Circular 37 reports.
On February 13, 2015, SAFE released Circular of the State Administration of Foreign Exchange on Further Simplifying and Improving the Direct
Investment-related Foreign Exchange Administration Policies, or SAFE Circular 13, under which local banks will examine and handle foreign exchange
registration for overseas direct investment, including the initial foreign exchange registration and amendment registration, starting from June 1, 2015.
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Regulations Relating to Employee Stock Incentive Plan of Overseas Publicly-Listed Company
Pursuant to the Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of
Overseas Publicly-Listed Company, issued by SAFE in February 2012, individuals participating in any stock incentive plan of any overseas publicly listed
company who are PRC citizens or non-PRC citizens who reside in China for a continuous period of not less than one year, subject to a few exceptions, are
required to register with SAFE through a domestic qualified agent, which could be a PRC subsidiary of such overseas listed company, and complete certain
other procedures. We and our executive officers and other employees who are PRC citizens or non-PRC citizens who reside in China for a continuous period
of not less than one year and have been granted options will be subject to these regulations upon the completion of this offering. Failure of by such
individuals to complete their SAFE registrations may subject us and them to fines and other legal sanctions. See "Risk FactorRisks Related to Doing
Business in ChinaAny failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans of overseas
publicly-listed company may subject the PRC plan participants or us to fines and other legal or administrative sanctions.".
The SAT has issued certain circulars concerning employee share options or restricted shares. Under these circulars, our employees working in China who
exercise share options or are granted restricted shares will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents
related to employee share options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees who exercise
their share options. If our employees fail to pay or we fail to withhold their income taxes according to relevant laws and regulations, we may face sanctions
imposed by the tax authorities or other PRC governmental authorities.
Regulations Relating to Tax
Dividend Withholding Tax
Pursuant to the Enterprise Income Tax Law and its implementation rules, if a non-resident enterprise has not set up an organization or establishment in
China, or has set up an organization or establishment but the income derived has no actual connection with such organization or establishment, it will be
subject to a withholding tax on its PRC-sourced income at a rate of 10%. Pursuant to the Arrangement between Mainland China and the Hong Kong Special
Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, the withholding tax rate in respect to the payment of dividends by
a PRC enterprise to a Hong Kong enterprise is reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC
enterprise. Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax
Agreements, or SAT Circular 81, a Hong Kong resident enterprise must meet the following conditions, among others, in order to enjoy the reduced
withholding tax: (i) it must directly own the required percentage of equity interests and voting rights in the PRC resident enterprise; and (ii) it must have
directly owned such percentage in the PRC resident enterprise throughout the 12 months prior to receiving the dividends. Furthermore, the Administrative
Measures for Tax Convention Treatment for Non-resident Taxpayers, which became effective in November 2015, require that non-resident enterprises
meeting conditions for enjoying the convention treatment may be entitled to the convention treatment itself/himself when filing a tax return or making a
withholding declaration through a withholding agent, subject to the subsequent administration by the tax authorities. Accordingly, ZTO Express (Hong
Kong) Limited may be able to enjoy the 5% withholding tax rate for the dividends they receive from ZTO Express, if they satisfy the conditions prescribed
under SAT Circular 81 and other relevant tax rules and regulations. However, according to SAT Circular 81, if the relevant tax authorities consider the
transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable
withholding tax in the future.
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Enterprise Income Tax
The principal regulations governing enterprise income tax in China are the Enterprise Income Tax Law, or the EIT Law, and its implementing rules,
which became effective on January 1, 2008. Under the EIT Law, enterprises are classified as resident enterprises and nonresident enterprises. PRC resident
enterprises typically pay an enterprise income tax at the rate of 25%. Uncertainties exist with respect to how the EIT Law applies to the tax residence status of
ZTO Express (Cayman) Inc. and our offshore subsidiaries.
Under the EIT Law, an enterprise established outside China with its "de facto management bodies" located within China is considered a "resident
enterprise", meaning that it is treated in a manner similar to a PRC domestic enterprise for enterprise income tax purposes. The implementing rules of the EIT
Law define de facto management body as a managing body that in practice exercises "substantial and overall management and control over the production
and operations, personnel, accounting, and properties" of the enterprise.
The SAT issued the Circular of the State Administration of Taxation on Issues Concerning the Identification of Chinese-Controlled Overseas Registered
Enterprises as Resident Enterprises in Accordance With the Actual Standards of Organizational Management, or SAT Circular 82 in 2009. According to SAT
Circular 82, a Chinese-controlled offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having a "de facto management body"
in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following criteria are met:(a) the primary location of the
day-to-day operational management is in China; (b) decisions relating to the enterprise's financial and human resource matters are made or are subject to
approval by organizations or personnel in China; (c) the enterprise's primary assets, accounting books and records, company seals, and board and
shareholders meeting minutes are located or maintained in China; and (d) 50% or more of voting board members or senior executives habitually reside in
China. In addition, the SAT issued the Bulletin of the State Administration of Taxation on Printing and Distributing the Administrative Measures for Income
Tax on Chinese-controlled Resident Enterprises Incorporated Overseas (Trial Implementation) in 2011, providing more guidance on the implementation of
SAT Circular 82. This bulletin clarifies matters including resident status determination, post determination administration and competent tax authorities. In
January 2014, the SAT issued the Bulletin of the State Administration of Taxation on Issues concerning the Determination of Resident Enterprises Based on
the Standards of Actual Management Institutions, or SAT Bulletin 9. According to SAT Bulletin 9, a Chinese-controlled offshore incorporated enterprise that
satisfies the conditions prescribed under the SAT Circular 82 for being recognized as a PRC tax resident must apply for being recognized as a PRC tax
resident to the competent tax authority at the place of registration of its main investor within the territory of China.
We do not believe that we meet all of the conditions outlined in the immediately preceding paragraph. We believe that ZTO Express (Cayman) Inc. and
our offshore subsidiaries should not be treated as a "resident enterprise" for PRC tax purposes if the criteria for "de facto management body" as set forth in
SAT Circular 82 were deemed applicable to us. However, as the tax residency status of an enterprise is subject to determination by the PRC tax authorities
and uncertainties remain with respect to the interpretation of the term "de facto management body" as applicable to our offshore entities, we may be treated as
a resident enterprise for PRC tax purposes under the EIT Law, and we may therefore be subject to PRC income tax on our global income. We are actively
monitoring the possibility of "resident enterprise" treatment for the applicable tax years and are evaluating appropriate organizational changes to avoid this
treatment, to the extent possible.
In the event that ZTO Express (Cayman) Inc. or any of our offshore subsidiaries is considered to be a PRC resident enterprise: ZTO Express (Cayman) Inc.
or our offshore subsidiaries, as the case may be, may be subject to the PRC enterprise income tax at the rate of 25% on our worldwide taxable income;
dividend income that ZTO Express (Cayman) Inc. or our offshore subsidiaries, as the case may be, received from our PRC subsidiaries may be exempt from
the PRC withholding tax; and interest paid to our overseas
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shareholders or ADS holders who are non-PRC resident enterprises as well as gains realized by such shareholders or ADS holders from the transfer of our
shares or ADSs may be regarded as PRC-sourced income and as a result be subject to PRC withholding tax at a rate of up to 10%, subject to any reduction or
exemption set forth in relevant tax treaties, and similarly, dividends paid to our overseas shareholders or ADS holders who are non-PRC resident individuals,
as well as gains realized by such shareholders or ADS holders from the transfer of our shares or ADSs, may be regarded as PRC-sourced income and as a result
be subject to PRC withholding tax at a rate of 20%, subject to any reduction or exemption set forth in relevant tax treaties. "Risk FactorRisks Related to
Doing Business in ChinaIf we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax
consequences to us and our non-PRC shareholders or ADS holders.".
SAT issued Bulletin of the State Administration of Taxation on Several Issues concerning the Enterprise Income Tax on the Indirect Transfers of
Properties by Non-Resident Enterprises, or SAT Bulletin 7, on February 3, 2015, which replaced or supplemented certain previous rules under the Circular of
the State Administration of Taxation on Strengthening the Administration of Enterprise Income Tax on Incomes from Equity Transfers of Non-Resident
Enterprises, or SAT Circular 698. Under SAT Bulletin 7, an "indirect transfer" of assets, including equity interests in a PRC resident enterprise, by non-PRC
resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial
purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be
subject to PRC enterprise income tax. According to SAT Bulletin 7, "PRC taxable assets" include assets attributed to an establishment in China, immoveable
properties in China, and equity investments in PRC resident enterprises. In respect of an indirect offshore transfer of assets of a PRC establishment, the
relevant gain is to be regarded as effectively connected with the PRC establishment and therefore included in its enterprise income tax filing, and would
consequently be subject to PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to the immoveable properties in China or to
equity investments in a PRC resident enterprise, which is not effectively connected to a PRC establishment of a non-resident enterprise, a PRC enterprise
income tax at 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements, and the party who is
obligated to make the transfer payments has the withholding obligation. There is uncertainty as to the implementation details of SAT Bulletin 7. If SAT
Bulletin 7 was determined by the tax authorities to be applicable to some of our transactions involving PRC taxable assets, our offshore subsidiaries
conducting the relevant transactions might be required to spend valuable resources to comply with SAT Bulletin 7 or to establish that the relevant
transactions should not be taxed under SAT Bulletin 7. "Risk FactorRisks Related to Doing Business in ChinaWe face uncertainty with respect to
indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.".
Where the payers fail to withhold any or sufficient tax, the non-PRC residents, as the transferors, are required to declare and pay such taxes to the tax
authorities on their own within the statutory time limit. Failure to comply with the tax payment obligations by the non-PRC residents will result in penalties,
including full payment of taxes owed, fines ranging from fifty percent to five times the amount of unpaid or underpaid tax and default interest on those taxes.
PRC Value-Added Tax
Pursuant to applicable PRC regulations promulgated by the Ministry of Finance of China and the SAT, any entity or individual conducting business in
the service industry is required to pay a valued-added tax, or VAT, at a rate of 6% with respect to revenues derived from the provision of express delivery
services or at 11% with respect to revenues derived from the provision of transportation services. A taxpayer is allowed to offset the qualified input VAT paid
on taxable purchases against the output VAT chargeable on the revenue from services provided. "Risk FactorRisks Related to Doing Business in China
Value-added tax, or VAT, is imposed to replace the business tax, which could result in unfavorable tax consequences to us.".
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MANAGEMENT
Directors and Executive Officers
The following table sets forth information regarding our directors and executive officers as of the date of this prospectus.
Directors and Executive Officers
Meisong Lai
Jianfa Lai
Jilei Wang
Xiangliang Hu
Baixi Lan
Xing Liu
Frank Zhen Wei
Charles Huang*
Jianmin (James) Guo
Jianchang Lai
Jingxi Zhu
Renqun Jin
Genyan Ni
Jianfeng Zhang
Zhiwei Zhao
*
Age
45
46
50
58
48
45
44
46
45
45
35
49
45
33
49
Position/Title
Founder, Chairman of the Board of Directors and Chief Executive Officer

Director
Director and Vice President of Infrastructure Management
Director and General Manager of Guangdong Province
Director and General Manager of Beijing Municipality
Director
Director
Director Appointee
Chief Financial Officer
Vice President of Overseas Operations
Vice President of Information Technology
Vice President of Service and Support
Vice President of Operations
Vice President of Public Relations
Vice President of Administration
Mr. Charles Huang has accepted our appointment to be a director of our company, effective upon the SEC's declaration of
effectiveness of our registration statement on Form F-1, of which this prospectus is a part.
Mr. Meisong Lai is our founder and has served as chairman of our board of directors since 2013 and chief executive officer since our inception. Mr. Lai is
the deputy chairman of the China Express Delivery Association. Mr. Lai is a prominent figure in China's express delivery industry and has been deeply
involved in the industry for over 15 years. Mr. Lai is currently attending "Lakeside University", a senior executive training program founded by Jack Ma,
founder and chairman of Alibaba Group.
Mr. Jianfa Lai has served as our director since 2013 and executive vice president in charge of our overall daily management from our inception to
August 14, 2016. Starting from August 15, 2016, Mr. Jianfa Lai serves as the executive director of ZTO Supply Chain Management Co. Ltd., an equity
investee of us which is engaged in the provision of less-than-truckload transportation services in China. Mr. Jianfa Lai is attending the executive MBA
program at Fudan University in China.
Mr. Jilei Wang has been our director since 2013 and has served as our vice president of infrastructure management since October 2012. From 2009 to
2012, Mr. Wang served as a deputy general manager of our then network partner in Beijing.
Mr. Xiangliang Hu has been our director since 2013 and has served as our general manager of Guangdong province since January 2012. Mr. Hu served as
a general manager of our then network partner in Beijing from January 2006 to December 2011.
Mr. Baixi Lan has been our director since 2013 and has served as a general manager of our operations in Beijing since 2012. Mr. Lan was our head of
line-haul operations from 2010 to 2012. Prior to 2012, Mr. Lan served a number of managerial positions in our company.
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Mr. Xing Liu has served as our director since 2013. Mr. Liu is a partner of Sequoia Capital China. Prior to joining Sequoia Capital China in 2007, Mr. Liu
had over nine years of experience in investment banking, technology and product development and consulting at Merrill Lynch, Xerox and GlobalSight.
Mr. Liu currently serves on the board of directors of various Sequoia Capital China portfolio companies, including Vipshop Holdings Limited and China
Online Education Group, each of which is a NYSE-listed company. Mr. Liu received an MBA degree from The Wharton School of the University of
Pennsylvania in 2004, a master's degree in computer engineering from Syracuse University in 1995, and a bachelor's degree in management information
systems from Fudan University in 1992.
Mr. Frank Zhen Wei has been our director since August 2015. Mr. Wei is a managing director of Warburg Pincus Asia, where he is primarily responsible
for investments in the consumer and healthcare sectors in China. Prior to this, Mr. Wei was the Marketing Director at Renren.com from 1999 to 2000. Mr. Wei
worked as an investment banking analyst of Morgan Stanley in Hong Kong from 1997 to 1999 and as a business analyst at McKinsey & Company in
Shanghai from 1995 to 1997. Mr. Wei is a non-executive director of AAG Energy Holdings Limited, CAR Inc., each a company listed on the Hong Kong
Stock Exchange, ANE Logistics Co., Ltd. and Sunnywell Group. Mr. Wei received a master's degree in business administration from Harvard Business School
in 2002 and a bachelor of degree in science from the University of Texas at Austin in 1995.
Mr. Charles Huang will serve as our director commencing from the SEC's declaration of effectiveness of our registration statement on Form F-1, of which
this prospectus is a part. Mr. Huang is the founder, chief executive officer and chairman of Netbig Education Holdings Ltd., or Netbig, a leading education
enterprise in China. Mr. Huang has served on the board of directors of Sohu.com Inc., a NASDAQ-listed company, since 2001. Prior to founding Netbig in
1999, Mr. Charles Huang served as executive director and head of Asia securitization group of Deutsche Bank, New York and Hong Kong, as well as senior
vice president of Prudential Securities Inc., New York. He holds a master of science degree in computer science from the Massachusetts Institute of
Technology in 1990 and a bachelor of science degree from the University of Science and Technology of China. Mr. Charles Huang is also a Chartered
Financial Analyst.
Mr. Jianmin (James) Guo has served as our chief financial officer since March 2016. Prior to joining us, Mr. Guo served as the chief financial officer of
Zhaopin Ltd., a NYSE-listed company, from January 2010 to February 2016. Mr. Guo has also served as finance director of Xinyuan Real Estate Co., Ltd, a
NYSE-listed company, from July 2007 to June 2008. Prior to that, Mr. Guo worked at the Toronto office of Deloitte Inc. from 2005 to 2007 as a consulting
manager of its strategy and operation division. From 1993 to 2002, Mr. Guo was an auditor, and then an audit manager and a senior audit manager in the
China office of PricewaterhouseCoopers. Mr. Guo was qualified as a certified public accountant in China, a certified internal auditor and a certified
information systems auditor. Mr. Guo received his MBA degree with distinction from Richard Ivey School of Business, University of Western Ontario,
Canada, in 2005 and his bachelor's degree from Shenzhen University in China in 1993.
Mr. Jianchang Lai has been our vice president of overseas operations since September 2016. Mr. Lai was our director from 2014 to September 2016 and
our head of network partner management since our inception to September 2016. Mr. Jianchang Lai is a brother-in-law to Mr. Meisong Lai, and a cousin to
Mr. Jianfa Lai.
Mr. Jingxi Zhu has been our head of information technology since our inception and has served as a vice president of information technology since
September 2016. From 2014 to September 2016, Mr. Zhu was also our director. Mr. Zhu received a bachelor's degree in management from Nanjing Army
Command College in China in 2014 and an associate degree from Yancheng Teachers University in China in 2003.
Mr. Renqun Jin has served as our vice president of service and support since January 2011 and was our director from 2015 to September 2016. Mr. Jin
served as vice president of TTK Express from June 2009 to December 2010, vice president of STO Express from September 2006 to May 2009. Prior to this,
Mr. Jin founded and managed Dawen Freight Agency Co., Ltd. in June 1993 and worked there until March 2004.
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Mr. Genyan Ni has served as our vice president of operations since October 2012. From September 2010 to September 2012, Mr. Ni served as the vice
general manager of STO Express in its Beijing operation. Between September 2008 and August 2010, he was the vice president of operations of Huitong
Express. Mr. Ni served as the general manager of a local express delivery company in Guangdong from January 2007 to August 2008. Prior to this, Mr. Ni was
the vice president of operations of Yunda Express from October 2000 to December 2006.
Mr. Jianfeng Zhang has served as our vice president of public relations since February 2016. Mr. Zhang served as the general manager of the news
information center of Xinhua News Agency in the Shanghai office from July 2006 to August 2010 and as the deputy director of the images center of Xinhua
News Agency from August 2010 to February 2016. Mr. Zhang also served as the assistant director of the news information center of Xinhua News Agency in
the Shanghai office from June 2012 to February 2016. Mr. Zhang received a master's degree in arts from Renmin University in China in 2012 and a bachelor's
degree in law from Shanghai International Studies University in China in 2006.
Mr. Zhiwei Zhao has served as our vice president of administration since December 2010. From November 2006 to December 2010, Mr. Zhao served as
the director of our general manager's office. Mr. Zhao was the manager of the northern region of Shanghai Jinchiqiliang Logistics Co., Ltd. from
February 2003 to January 2006.
Board of Directors
Our board of directors will consist of
directors upon the SEC's declaration of effectiveness of our registration statement on Form F-1, of which this
prospectus is a part. A director is not required to hold any shares in our company by way of qualification. A director may vote with respect to any contract,
proposed contract or arrangement in which he is materially interested provided (i) such director, if his interest in such contract or arrangement is material, has
declared the nature of his interest at the earliest meeting of the board at which it is practicable for him to do so, either specifically or by way of a general
notice and (ii) if such contract or arrangement is a transaction with a related party, such transaction has been approved by the audit committee. The directors
may exercise all the powers of the company to borrow money, mortgage its undertaking, property and uncalled capital, and issue debentures or other
securities whenever money is borrowed or as security for any obligation of the company or of any third party. None of our non-executive directors has a
service contract with us that provides for benefits upon termination of service.
Committees of the Board of Directors
We will establish three committees under the board of directors immediately upon the effectiveness of our registration statement on Form F-1, of which
this prospectus is a part: an audit committee, a compensation committee and a nominating and corporate governance committee. We have adopted a charter
for each of the three committees. Each committee's members and functions are described below.
Audit Committee. Our audit committee will consist of
,
and
.
will be the chairman of our audit committee. We have determined
that
,
and
satisfy the "independence" requirements of Section 303A of the Corporate Governance Rules of the New York Stock Exchange
and meet the independence standards under Rule 10A-3 under the Exchange Act. We have determined that
qualifies as an "audit committee financial
expert." The audit committee will oversee our accounting and financial reporting processes and the audits of the financial statements of our company. The
audit committee will be responsible for, among other things:
appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent
auditors;
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reviewing with the independent auditors any audit problems or difficulties and management's response;
discussing the annual audited financial statements with management and the independent auditors;
reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and
control major financial risk exposures;
reviewing and approving all proposed related party transactions;
meeting separately and periodically with management and the independent auditors; and
monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to
ensure proper compliance.
Compensation Committee. Our compensation committee will consist of

,
and
.
will be the chairman of our compensation
committee. We have determined that
,
and
satisfy the "independence" requirements of Section 303A of the Corporate Governance Rules of the
New York Stock Exchange. The compensation committee will assist the board in reviewing and approving the compensation structure, including all forms of
compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his
compensation is deliberated. The compensation committee will be responsible for, among other things:
reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive
officers;
reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors;
reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and
selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person's
independence from management.
Nominating and Corporate Governance Committee. Our nominating and corporate governance committee will consist of
,
and
.
will be the chairperson of our nominating and corporate governance committee.
,
and
satisfy the "independence"
requirements of Section 303A of the Corporate Governance Rules of the New York Stock Exchange. The nominating and corporate governance committee
will assist the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its
committees. The nominating and corporate governance committee will be responsible for, among other things:
selecting and recommending to the board nominees for election by the shareholders or appointment by the board;
reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge,
skills, experience and diversity;
making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the
board; and
advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our
compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on
any remedial action to be taken.
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Duties of Directors
Under Cayman Islands law, our directors have a duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to
exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our
directors must ensure compliance with our memorandum and articles of association and the class rights vested thereunder in the holders of the shares. A
shareholder may in certain circumstances have rights to damages if a duty owed by the directors is breached.
Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs. The functions and powers of our
board of directors include, among others:
convening shareholders' annual general meetings and reporting its work to shareholders at such meetings;
declaring dividends and distributions;
appointing officers and determining the term of office of the officers;
exercising the borrowing powers of our company and mortgaging the property of our company; and
approving the transfer of shares in our company, including the registration of such shares in our share register.
Terms of Directors and Officers

Our officers are elected by and serve at the discretion of the board of directors. Our directors are not subject to a term of office and hold office until such
time as they are removed from office by ordinary resolution of the shareholders or by the board. A director will be removed from office automatically if,
among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; or (ii) is found by our company to be or
becomes of unsound mind.
Employment Agreements and Indemnification Agreements
We have entered into employment agreements with each of our executive officers. Under these agreements, each of our executive officers is employed for
a specified time period. We may terminate employment for cause for certain acts of the executive officer, such as conviction or plea of guilty to a felony or
any crime involving moral turpitude, negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties. We may also terminate
an executive officer's employment without cause upon 60-day advance written notice. In such case of termination by us, we will provide severance payments
to the executive officer as agreed by us and the executive officer. The executive officer may resign at any time with a 60-day advance written notice.
Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidence and
not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any of our confidential
information or trade secrets, any confidential information or trade secrets of our clients or prospective clients, or the confidential or proprietary information of
any third party received by us and for which we have confidential obligations. The executive officers have also agreed to disclose in confidence to us all
inventions, designs and trade secrets which they conceive, develop or reduce to practice during the executive officer's employment with us and to assign all
right, title and interest in them to us, and assist us in obtaining and enforcing patents, copyrights and other legal rights for these inventions, designs and
trade secrets.
In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment
and typically for one year following the last date of
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employment. Specifically, each executive officer has agreed not to (i) approach our suppliers, clients, customers or contacts or other persons or entities
introduced to the executive officer in his or her capacity as a representative of us for the purpose of doing business with such persons or entities that will harm
our business relationships with these persons or entities; (ii) assume employment with or provide services to any of our competitors, or engage, whether as
principal, partner, licensor or otherwise, any of our competitors, without our express consent; or (iii) seek directly or indirectly, to solicit the services of, or
hire or engage, any person who is known to be employed or engaged by us; or (iv) otherwise interfere with our business or accounts.
We have also entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we agree to indemnify
our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being
a director or officer of our company.
Compensation of Directors and Executive Officers
For the year ended December 31, 2015, we paid an aggregate of approximately RMB5.1 million (US$0.8 million) in cash to our executive officers, and
we did not pay any compensation to our non-executive directors. We have not set aside or accrued any amount to provide pension, retirement or other similar
benefits to our executive officers and directors. Our PRC subsidiaries and variable interest entity are required by law to make contributions equal to certain
percentages of each employee's salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a
housing provident fund.
2016 Share Incentive Plan
In June 2016, our board of directors approved the 2016 Share Incentive Plan to attract and retain the best available personnel, provide additional
incentives to employees, directors and consultants and promote the success of our business. As approved by our board of directors, the 2016 Share Incentive
Plan was amended and restated in August 2016. Under the 2016 Share Incentive Plan (as amended and restated), or the 2016 Plan, the maximum aggregate
number of shares which may be issued pursuant to all awards under the 2016 Plan is initially 3,000,000, plus an annual increase on the first day of each of our
fiscal year during the term of the 2016 Plan commencing with the fiscal year beginning January 1, 2017, by an amount equal to the least of (i) 0.5% of the
total number of shares issued and outstanding on the last day of the immediately preceding fiscal year; (ii) 3,000,000 shares or (iii) such number of shares as
may be determined by our board of directors. As of the date of this prospectus, options to purchase 300,000 ordinary shares have been granted and
outstanding, excluding awards that were forfeited or cancelled after the relevant grant dates.
The following paragraphs describe the principal terms of the 2016 Plan.
Types of Awards. The 2016 Plan permits the awards of options, restricted shares or any other type of awards that the committee decides.
Plan Administration. Our board of directors or a committee of one or more members of the board of directors will administer the 2016 Plan. The
committee or the full board of directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to each
participant, and the terms and conditions of each award grant.
Award Agreement. Awards granted under the 2016 Plan are evidenced by an award agreement that sets forth terms, conditions and limitations for each
award, which may include the term of the award, the provisions applicable in the event of the grantee's employment or service terminates, and our authority to
unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.
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Eligibility. We may grant awards to our employees, directors and consultants of our company. However, we may grant options that are intended to
qualify as incentive share options only to our employees and employees of our parent companies and subsidiaries.
Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement.
Exercise of Options. The plan administrator determines the exercise price for each award, which is stated in the award agreement. The vested portion of
option will expire if not exercised prior to the time as the plan administrator determines at the time of its grant. However, the maximum exercisable term is ten
years from the date of a grant.
Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than by will or the laws of descent and distribution, except as
otherwise provided by the plan administrator.
Termination and amendment of the 2016 Plan. Unless terminated earlier, the 2016 Plan has a term of ten years. Our board of directors has the authority
to amend or terminate the plan. However, no such action may adversely affect in any material way any awards previously granted unless agreed by
the recipient.
The following table summarizes, as of the date of this prospectus, the options granted under our 2016 Plan to our executive officer, excluding awards that
were forfeited or cancelled after the relevant grant dates.
Ordinary Shares
Underlying Options
Awarded
Name
Jianmin (James) Guo

*
Exercise Price
(US$/Share)
Date of Grant
9.97 June 20, 2016
Date of Expiration
March 1, 2026
Less than 1% of our total outstanding shares.
As of the date of this prospectus, other employees as a group held options to purchase
from nil to US$
per share.
ordinary shares of our company, with exercise prices ranging
Employee Share Holding Platform

In June 2016, we issued 16,000,000 ordinary shares to Zto Es Holding Limited, or ZTO ES, to establish an onshore employee share holding platform to
allow our employees in China to receive share incentives. The consideration for those shares was US12.0 million.
ZTO ES is owned by four limited partnerships formed in China, each holding 25% of the outstanding shares of ZTO ES. An entity controlled by
Mr. Meisong Lai, our chairman and chief executive officer, is the general partner of each of those limited partnerships and Ms. Yufeng Lai, wife of Mr. Lai,
was the sole limited partner of each of those limited partnerships upon their formation. Concurrently with the issuance of those shares, ZTO ES executed a
deed of waiver to waive all shareholder rights attached to those shares.
Our board of directors has delegated the authority to Mr. Lai to periodically review the performance of our employees, and reward selected employees by
directing Ms. Lai to transfer limited partnership interests in those partnerships to them. Once an employee receives the partnership interest, ZTO ES may
amend its deed of waiver to reduce the amount of shares subject to the waiver by such number that is proportional to the employee's indirect ownership of
ZTO ES. Each recipient of such partnership interest is entitled to rights associated with the number of our ordinary shares held by ZTO ES that corresponds to
the recipient's proportional indirect ownership of ZTO ES to (i) receive dividends, if and when declared, on those shares and (ii) request the sale of those
shares by ZTO ES and receive the sale proceeds. ZTO ES
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remains the record holder of, and retains the voting rights with respect to, the granted shares and it does not have shareholders' rights with respect to the
remainder of the shares it holds.
The following table summarizes, as of the date of this prospectus, the number of our ordinary shares held by ZTO ES over which our directors and officers
have such rights.
Name
Meisong Lai
Jianfa Lai
Jilei Wang
Xiangliang Hu
Baixi Lan
Jianchang Lai
Jingxi Zhu
Renqun Jin
Genyan Ni
Zhiwei Zhao
Total
*
Ordinary Shares
Date of Grant
*
*
*
*
*
*
*
*
*
*
1,972,864
June 28, 2016

June 28, 2016
June 28, 2016
June 28, 2016
June 28, 2016
June 28, 2016
June 28, 2016
June 28, 2016
June 28, 2016
June 28, 2016
As of the date of this prospectus, other employees as a group were granted the same rights associated with 2,585,300 ordinary shares held by ZTO ES
through our employee share holding platform.
Certain of our employees paid subscription consideration of RMB 58.4 million in February 2015 relating to the issuance of 584,000 redeemable and
contingently convertible share units. These share units were converted to partnership interests of the employee share holding platform in June 2016, which
correspond to the rights associated with 3,504,000 ordinary shares of our company held by ZTO ES without additional subscription consideration.
We granted rights associated with 308,100 ordinary shares of our company held by ZTO ES with a subscription consideration of RMB10 million and
granted rights associated with the remaining 746,064 ordinary shares held by ZTO ES with nil subscription consideration.
We also granted such rights associated with 600,000 of the ordinary shares held by ZTO ES to a network partner in Suzhou as part of the acquisition
consideration of the remaining minority equity interest in that network partner. We do not plan to make grants to persons other than our directors, officers or
employees in the future.
The number of shares subject to the waiver of shareholder rights was reduced by 5,158,164 as a result of theses grants and the remaining 10,841,836
shares are still subject to the same waiver of shareholder rights.
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PRINCIPAL SHAREHOLDERS
Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary shares as of the date of
this prospectus by:
each of our directors and executive officers, including the appointees who will become directors upon the SEC's declaration of effectiveness of
our registration statement on Form F-1 of which this prospectus is a part;
each person known to us to own beneficially more than 5% of our ordinary shares; and
Gopher China S.O. Project Limited, which voluntarily discloses its ownership of our shares.
The calculations in the table below are based on 648,464,604 issued and outstanding ordinary shares on an as-converted basis outstanding as of the date
of this prospectus, and
Class B ordinary shares outstanding immediately after the completion of this offering,
assuming the underwriters do not exercise their over-allotment option and excluding (i) ordinary shares issuable upon the exercise of outstanding share
options and ordinary shares reserved for issuance under our 2016 Plan and (ii) 10,841,836 ordinary shares issued and reserved for the purpose of our
employee share holding platform, the holder of which has waived all shareholder rights attached to those shares.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days, including through the
exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the
percentage ownership of any other person.
Ordinary Shares
Beneficially Owned
Prior to This
Offering
Number
Directors and Executive Officers:

Meisong Lai (1)
Jianfa Lai (2)
Jilei Wang (3)
Xiangliang Hu (4)
Baixi Lan (5)
Xing Liu
Frank Zhen Wei
Charles Huang***
Jianmin (James) Guo
Jianchang Lai
Jingxi Zhu
Renqun Jin
Genyan Ni
Jianfeng Zhang
Zhiwei Zhao
All Directors and Executive Officers as a Group
211,258,164
66,375,000
54,120,000
37,982,700
7,909,400
*
*
*
*
*
382,845,306
32.6
10.2
8.3
5.9
1.2
*
*
*
*
*
59.0
206,100,000
66,000,000
54,000,000
37,860,000
39,854,218
36,000,000
10,248,228
31.8
10.2
8.3
5.8
6.1
5.6
1.6
Class A
ordinary
shares
Ordinary Shares
Beneficially Owned
After This Offering
Total ordinary
Class B
shares on an
ordinary
as-converted
shares
basis
% of
aggregate
voting
power
Principal and Certain OtherShareholders:

Zto Lms Holding Limited (6)
Zto Ljf Holding Limited (7)
Zto Wjl Holding Limited (8)
Zto Hxl Holding Limited (9)
Onyx Gem Investment Holdings Limited (10)
Max Alpha Limited & Max Beyond Limited (11)
Gopher China S.O. Project Limited (12)
*
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Table of Contents
For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the
voting power of all of our Class A and Class B ordinary shares as a single class. Each holder of Class A ordinary shares is entitled to one vote per share and each holder of our
Class B ordinary shares is entitled to ten votes per share on all matters submitted to them for a vote. Our Class A ordinary shares and Class B ordinary shares vote together as a
single class on all matters submitted to a vote of our shareholders, except as may otherwise be required by law. Our Class B ordinary shares are convertible at any time by the
holder thereof into Class A ordinary shares on a one-for-one basis.
**
Except for Messrs. Xing Liu and Frank Zhen Wei, the business address of our directors and executive officers is c/o No. 1685 Huazhi Road, Qingpu District, Shanghai, 201708,
People's Republic of China.
***
Mr. Charles Huang has accepted our appointment to be a director of our company, effective upon the SEC's declaration of effectiveness of our registration statement on Form F-1,
of which this prospectus is a part.
(1)
Represents (i) 206,100,000 ordinary shares directly held by Zto Lms Holding Limited, a British Virgin Islands company wholly owned by Mr. Meisong Lai and (ii) 5,158,164
ordinary shares held by ZTO ES for purpose of our employee share holding platform. We granted rights to receive dividends on, and to receive sale proceeds of, those 5,158,164
shares held by ZTO ES to certain of our employees. ZTO ES remains the record holder of those shares and retains the voting rights with respect to those shares. Mr. Meisong Lai
is the sole shareholder and the sole director of Zto Lms Holding Limited. Mr. Meisong Lai is the sole director of Zto Es Holding Limited. All of the ordinary shares held by Zto
Lms Holding Limited will be redesignated as Class B ordinary shares immediately prior to the completion of this offering. All of our ordinary shares held by Zto Es Holding
Limited will be redesignated as Class A ordinary shares immediately prior to the completion of this offering.
(2)
Represents (i) 66,000,000 ordinary shares directly held by Zto Ljf Holding Limited, a British Virgin Islands company wholly owned by Mr. Jianfa Lai, and (ii) 375,000 ordinary
shares held by ZTO ES. Mr. Jiafa Lai is the sole shareholder and the sole director of Zto Ljf Holding Limited. Mr. Lai has the power to direct the sale of those 375,000 ordinary
shares held by ZTO ES. All of these shares will be redesignated as Class A ordinary shares immediately prior to the completion of this offering.
(3)
Represents (i) 54,000,000 ordinary shares directly held by Zto Wjl Holding Limited, a British Virgin Islands company wholly owned by Mr. Jilei Wang, and (ii) 120,000 ordinary
shares held by ZTO ES. Mr. Jilei Wang is the sole shareholder and the sole director of Zto Wjl Holding Limited. Mr. Wang has the power to direct the sale of those 120,000
ordinary shares held by ZTO ES. All of these shares will be redesignated as Class A ordinary shares immediately prior to the completion of this offering.
(4)
Represents (i) 37,860,000 ordinary shares directly held by Zto Hxl Holding Limited, a British Virgin Islands company wholly owned by Mr. Xiangliang Hu, and (ii) 122,700
ordinary shares held by ZTO ES. Mr. Xiangliang Hu is the sole shareholder and the sole director of Zto Hxl Holding Limited. Mr. Hu has the power to direct the sale of those
122,700 ordinary shares held by ZTO ES. All of these shares will be redesignated as Class A ordinary shares immediately prior to the completion of this offering.
(5)
Represents (i) 7,800,000 ordinary shares directly held by Zto Lbx Holding Limited, a British Virgin Islands company wholly owned by Mr. Baixi Lan, and (ii) 109,400 ordinary
shares held by ZTO ES. Mr. Baixi Lan is the sole shareholder and the sole director of Zto Lbx Holding Limited. Mr. Lan has the power to direct the sale of those 109,400 ordinary
shares held by ZTO ES. All of these shares will be redesignated as Class A ordinary shares immediately prior to the completion of this offering.
(6)
Represents 206,100,000 ordinary shares directly held by Zto Lms Holding Limited, a British Virgin Islands company wholly owned by Mr. Meisong Lai. All of these shares will
be redesignated as Class B ordinary shares immediately prior to the completion of this offering. The registered address of Zto Lms Holding Limited is Sertus Chambers,
P.O. Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands.
(7)
Represents 66,000,000 ordinary shares directly held by Zto Ljf Holding Limited, a British Virgin Islands company wholly owned by Mr. Jianfa Lai. The registered address of Zto
Ljf Holding Limited is Sertus Chambers, P.O. Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands. All of these shares will be redesignated as Class A
ordinary shares immediately prior to the completion of this offering.
(8)
Represents 54,000,000 ordinary shares directly held by Zto Wjl Holding Limited, a British Virgin Islands company wholly owned by Mr. Jilei Wang. The registered address of
Zto Wjl Holding Limited is Sertus Chambers, P.O. Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands. All of these shares will be redesignated as Class A
(9)
Represents 37,860,000 ordinary shares directly held by Zto Hxl Holding Limited, a British Virgin Islands company wholly owned by Mr. Xiangliang Hu. The registered address of
Zto Hxl Holding Limited is Sertus Chambers, P.O. Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands. All of these shares will be redesignated as Class A
(10)
Represents 22,307,600 ordinary shares and 17,546,618 series A preferred shares directly held by Onyx Gem Investment Holdings Limited. 71.4% of all the issued and outstanding
shares of Onyx Gem Investment Holdings Limited are owned by Onyx Gem Group Limited, a company incorporated under the laws of the British Virgin Islands, and the
remaining 28.6% of the shares are owned by Zebra Co-Invest LP, a Cayman Islands exempted limited partnership. The 22,307,600 ordinary shares held by Onyx Gen Investment
Holdings Limited will be redesignated as Class A ordinary shares immediately prior to the
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completion of this offering and the 17,546,618 series A preferred shares held by Onyx Gen Investment Holdings Limited will be automatically converted into and redesignated as
Class A ordinary shares immediately upon the completion of this offering.
Onyx Gem Group Limited is 77.61% owned by Warburg Pincus Private Equity XI, L.P., a Delaware limited partnership, 14.35% owned by Warburg Pincus Private Equity XIB, L.P., a Delaware limited partnership, 0.33% owned by Warburg Pincus Private Equity XI-C, L.P., a Cayman Islands exempted limited partnership, 2.71% owned by WP XI
Partners, L.P., a Delaware limited partnership, and 5.00% owned by Warburg Pincus XI Partners, L.P., a Delaware limited partnership, (collectively, "WP XI"). Warburg
Pincus LLC, a New York limited liability company ("WP LLC"), is manager of WP XI.
Warburg Pincus XI, L.P., a Delaware limited partnership ("WP XI GP"), is the general partner of each of WP XI, WP XI-B, Warburg Pincus XI Partners, and WP XI Partners.
WP Global LLC, a Delaware limited liability company ("WP Global"), is the general partner of WP XI GP. Warburg Pincus Partners II, L.P., a Delaware limited partnership
("WPP II"), is the managing member of WP Global. Warburg Pincus Partners GP LLC, a Delaware limited liability company ("WPP GP"), is the general partner of WPP II.
Warburg Pincus & Co., a New York general partnership, is the managing member of WPP GP. Warburg Pincus (Cayman) XI, L.P., a Cayman Islands exempted limited
partnership ("WP XI Cayman GP"), is the general partner of WP XI-C. Warburg Pincus XI-C, LLC, a Delaware limited liability company ("WP XI-C LLC"), and Warburg Pincus
(Bermuda) XI, Ltd., a Bermuda exempted company ("WP XI Bermuda"), are the general partners of WP XI Cayman GP. Warburg Pincus Partners II (Cayman), L.P., a Cayman
Islands exempted limited partnership ("WPP II Cayman"), is the managing member of WP XI-C LLC and the sole shareholder of WP XI Bermuda. Warburg Pincus (Bermuda)
Private Equity GP Ltd., a Bermuda exempted company, is the general partner of WPP II Cayman.
Cayman Zebra Holdings GP Ltd., a Cayman Islands company, is the general partner of Zebra Co-Invest LP. Cayman Zebra Holdings GP Ltd. is a wholly-owned subsidiary of
WP XI.
The address of the Warbury Pincus entities is 450 Lexington Avenue, New York, New York 10017. Charles R. Kaye and Joseph P. Landy are Managing General Partners of
Warburg Pincus & Co. and Managing Members and Co-Chief Executive Officers of WP LLC and may be deemed to control the Warburg Pincus entities. Messrs. Kaye and Landy
disclaim beneficial ownership of all shares held by the Warburg Pincus entities. The registered address of Onyx Gem Investment Holdings Limited is P.O. Box 3340, Road Town,
Tortola, British Virgin Islands.
(11)
Represents (i) 24,000,000 ordinary shares directly held by Max Alpha Limited, a company incorporated in the Cayman Islands and (ii) 12,000,000 ordinary shares directly held by
Max Beyond Limited, a company incorporated in the Cayman Islands. All of these shares will be redesignated as Class A ordinary shares immediately prior to the completion of
this offering. Max Alpha Limited is wholly owned by Shanghai Zheyuan Investment Centre (L.P.). Max Beyond Limited is wholly owned by Shanghai Huanye Investment Centre
(L.P.). Shanghai Zheyuan Investment Centre (L.P.) is an investment entity incorporated by Sequoia Capital Equity Investment Management (Tianjin) Limited and Beijing Sequoia
Xinyuan Equity Investment Centre (L.P.). Shanghai Huanye Investment Centre (L.P.) is an investment entity incorporated by Sequoia Capital Equity Investment Management
(Tianjin) Limited and Tianjin Sequoia Juye Equity Investment Centre (L.P.). The general partner of Beijing Sequoia Xinyuan Equity Investment Centre (L.P.) is Shanghai Zheyou
Investment Centre (L.P.) whose general partner is Sequoia Capital Equity Investment Management (Tianjin) Limited. The general partner of Tianjin Sequoia Juye Equity
Investment Centre (L.P.) is Shanghai Zhexuan Investment Centre (L.P.) whose general partner is also Sequoia Capital Equity Investment Management (Tianjin) Limited. Therefore,
Sequoia Capital Equity Investment Management (Tianjin) Limited is concurrently the ultimate general partner of Beijing Sequoia Xinyuan Equity Investment Centre (L.P.) and
Tianjin Sequoia Juye Equity Investment Centre (L.P.). Sequoia Capital Equity Investment Management (Tianjin) Limited is wholly owned by Zhou Kui, Ji Yue and Zhang
Lianqing, who disclaim beneficial ownership of their shares held by Sequoia Funds, except to the extent of their pecuniary interest therein. The registered address of Max Alpha
Limited and Max Beyond Limited is Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands.
(12)
Represents 5,736,240 ordinary shares and 4,511,988 series A preferred shares directly held by Gopher China S.O. Project Limited. The 5,736,240 ordinary shares held by Gopher
China S.O. Project Limited will be re-designated as Class A ordinary shares immediately prior to the completion of this offering and the 4,511,988 series A preferred shares held
by Gopher China S.O. Project Limited will be automatically converted into and re-designated as Class A ordinary shares immediately upon the completion of this offering.
Gopher China S.O. Project Limited is majority owned by Gopher Harvest Fund L.P. and Gopher China Special Opportunity Fund II L.P. (together, the "Gopher Investment
Funds"). Each of the Gopher Investment Funds is an exempted limited partnership formed and registered in the Cayman Islands. The general partners of each of the Gopher
Investment Funds are Gopher Capital GP Ltd. and SC China Holdings II, Ltd., which is an entity related to Sequoia Capital China. Gopher Capital GP Ltd. has the ultimate
voting power to conduct the business of the Gopher Investment Funds and investment power with respect to the assets held by the Gopher Investment Funds, and SC China
Holdings II, Ltd.'s role is providing investment advisory advice to the Gopher Investment Funds. Gopher Capital GP Ltd. is a wholly owned subsidiary of Noah Holdings
Limited, a Cayman Islands company listed on the NYSE. The controlling voting power of Noah Holdings Limited vests with Wang Jingbo and Yin Zhe, who disclaim beneficial
ownership of shares held by Gopher China S.O. Project Limited, except to the extent of their pecuniary interest therein. The registered address of Gopher China S.O. Project
Limited is Akara Bldg., 24 De Castro Street, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands.
As of the date of this prospectus, none of our ordinary shares or series A preferred shares are held by record holder in the United States.
We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
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RELATED PARTY TRANSACTIONS
Contractual Arrangements with our Variable Interest Entity and its Shareholders
See "Corporate History and Structure."
Private Placements
See "Description of Share CapitalHistory of Securities Issuances."
Shareholders Agreement
See "Description of Share CapitalHistory of Securities Issuances."
Employment Agreements and Indemnification Agreements
See "ManagementEmployment Agreements and Indemnification Agreements."
Share Incentive Plan
See "Management2016 Share Incentive Plan."
See "ManagementCompensation of Directors and OfficersEmployee Share Holding Platform."
Other Transactions with Related Parties
In 2014, we paid RMB213 million to certain of our shareholders to compensate them for their cessation of business.
As part of our restructuring in 2013, ZTO Express agreed to pay a cash consideration of RMB222 million for the acquisition of the operating assets and
equity investments held by Shanghai Zhongtongji. In 2014, ZTO Express paid approximately RMB158 million of deposits and other expenses on behalf of
Shanghai Zhongtongji. As agreed to by the parties, ZTO Express paid Shanghai Zhongtongji RMB64 million to net settle the difference between the two
amounts in 2014.
In 2014, ZTO Express paid off an interest-free loan in the amount of RMB341 million to Shanghai Zhongtongji, which was incurred to fund the
registered capital injections for the establishment of our subsidiaries.
We generate delivery revenues from certain related parties. We also incur accounts payable to certain related parties for transportation and deposits, as
well as prepaid transportation fees to related parties.
Quanzhou Zhongtong Express Ltd., or Quanzhou ZTO, is our equity investee. We derived RMB68.3 million, RMB49.0 million
(US$7.4 million) and nil of revenue from Quanzhou ZTO in 2014, 2015 and the six months ended June 30, 2016, respectively. As of
December 31, 2014, 2015 and June 30, 2016, we had nil, RMB5.6 million (US$0.8 million) and nil, respectively, due to Quanzhou ZTO.
Suzhou Zhongtong Express Ltd., or Suzhou ZTO, had been our equity investee until we acquired all of the remaining equity interest in it in
January 2016. We derived RMB10.6 million, RMB14.9 million (US$2.2 million) and nil of revenue from Suzhou ZTO in 2014, 2015 and the
six months ended June 30, 2016, respectively. As of December 31, 2014, 2015 and June 30, 2016, we had RMB28.0 million,
RMB10.9 million (US$1.6 million) and nil, respectively, due to Suzhou ZTO.
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Shenyang Changsheng Zhongtong Express Ltd., or Shenyang ZTO, had been our equity investee until it was acquired by us in October 2015.
We derived RMB10.6 million and RMB14.3 million (US$2.2 million) of revenue from Shenyang ZTO in 2014 and 2015, respectively.
Nanchang Zhongtong Express Ltd., or Nanchang ZTO, had been our equity investee until it was acquired by us in October 2015. We derived
RMB12.7 million and RMB13.6 million (US$2.0 million) of revenue from Nanchang ZTO in 2014 and 2015, respectively.
Tianjin Qianqiu Zhongtong Express Service Co., Ltd., or Tianjin ZTO, had been our equity investee until it was acquired by us in
October 2015. We derived RMB10.2 million and RMB10.6 million (US$1.6 million) of revenue from Tianjin ZTO in 2014 and 2015,
respectively.
Shaanxi Zhongtong Express Ltd., or Shaanxi ZTO, had been our equity investee until it was acquired by us in October 2015. We derived
RMB10.1 million and RMB10.3 million (US$1.5 million) of revenue from Shaanxi ZTO in 2014 and 2015, respectively.
Shanxi Zhongtong Daying Logistics Ltd., or Shanxi ZTO, had been our equity investee until it was acquired by us in October 2015. We
derived RMB6.0 million and RMB7.1 million (US$1.1 million) of revenue from Shanxi ZTO in 2014 and 2015, respectively. As of
December 31, 2014 and 2015, respectively, we had nil and RMB2.1 million (US$0.3 million) due to Shanxi ZTO, and RMB1.2 million and
RMB2.3 million (US$0.3 million), respectively, due from Shanxi ZTO.
Jilin Zhongtong Daying Logistics Ltd., or Jilin ZTO, had been our equity investee until it was acquired by us in October 2015. We derived
RMB4.9 million and RMB5.9 million (US$0.9 million) of revenue from Jilin ZTO in 2014 and 2015, respectively.
Heilongjiang Ruston Express Ltd., or Ruston, is our equity investee. We derived RMB0.4 million, RMB0.7 million (US$0.1 million) and nil
of revenue from Ruston in 2014, 2015 and the six months ended June 30, 2016, respectively.
Fengwang Investments Ltd., or Fengwang, is our equity investee. We derived RMB1.6 million, RMB0.8 million (US$0.1 million) and nil of
revenue from Fengwang in 2014, 2015 and the six months ended June 30, 2016, respectively.
Zhejiang Zhongtong Express Services Company Ltd., or Zhejiang ZTO, had been controlled by certain of our shareholders until October 31,
2014. In 2014, we derived RMB64.7 million of revenue from Zhejiang ZTO.
Wuhan Chengxin Zhongtong Express Ltd., or Wuhan ZTO, is controlled by certain of our shareholders. As of December 31, 2014, 2015 and
June 30, 2016, we had RMB5.6 million, nil and nil, respectively, due to Wuhan ZTO, and nil, RMB0.2 million (US$26,332.0) and nil,
respectively, due from Wuhan ZTO.
Guangzhou Xin Zhongtong Express Ltd., or Guangzhou ZTO, is controlled by certain of our shareholders. As of December 31, 2014, 2015 and
June 30, 2016, respectively, we had RMB1.5 million, nil and nil due to Guangzhou ZTO.
Shanghai Kuaibao Network Technology Ltd., or Shanghai Kuaibao, is our equity investee. As of December 31, 2014, 2015 and June 30, 2016,
we had nil, RMB2.7 million (US$0.4 million) and RMB5.4 million (US$0.8 million), respectively, due from Shanghai Kuaibao.
Ms. Lai Yufeng is the spouse of our chairman. As of December 31, 2014, 2015 and June 30, 2016, Ms. Lai Yufeng was holding RMB228.5 million,
RMB58.4 million (US$8.8 million) and nil, respectively, in cash and cash equivalent on our behalf. The balance of RMB58.4 million (US$9.0 million) as of
December 31, 2015 has been transferred to Zto Es Holding Limited in June 2016 in connection with the establishment of our employee share holding
platform and has been remitted back to our company.
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As of June 30, 2016, certain of our employees and certain employees of Tonglu Tongze beneficially own 76.6% and 5.0% equity interest in Tonglu
Tongze, respectively. Through written proxies, all shareholders of Tonglu Tongze have appointed three of our mid-level managers as nominee shareholders,
who do not hold equity interests in Tonglu Tongze, to exercise all their shareholder rights except dividend rights. Daily operations of Tonglu Tongze are
managed by its employees. We treat it as our related party. We incurred RMB643.6 million, RMB703.1 million (US$105.8 million) and RMB418.0 million
(US$62.9 million) of transportation service fees to Tonglu Tongze and its subsidiaries in 2014, 2015 and the six months ended June 30, 2016, respectively.
As of December 31, 2014, 2015 and June 30, 2016, respectively, we had RMB55.8 million, RMB84.6 (US$12.8 million) and RMB27.9 million
(US$4.2 million), respectively, of accounts payable due to Tonglu Tongze and its subsidiaries for transportation service. We also had prepaid transportation
service fees of RMB7.2 million (US$1.1 million) to Tonglu Tongze's subsidiaries as of December 31, 2015. As of December 31, 2015, we had outstanding
interest bearing loan in an amount of RMB15.0 million (US$2.3 million) to Tonglu Tongze. The loan and accrued interest was fully repaid in June 2016.
Shanghai Mingyu Barcode Technology Ltd., or Shanghai Mingyu, is controlled by our chairman's brother. We incurred RMB80.9 million,
RMB80.4 million (US$12.1 million) and RMB44.4 million (US$6.7 million) for purchases of supplies to Shanghai Mingyu in 2014, 2015 and the six months
ended June 30, 2016, respectively. As of December 31, 2014, 2015 and June 30, 2016, respectively, we had RMB10.0 million, nil and RMB7.8 million
(US$1.2 million), respectively, due to Shanghai Mingyu.
In August 2016, we entered into an agreement with ZTO Supply Chain Management Co., Ltd., or ZTO LTL, and Mr. Jianfa Lai, a director and principal
shareholder of our company, to invest RMB54.0 million in cash in exchange of 18% equity interest in ZTO LTL. ZTO LTL is engaged in the provision of
less-than-truckload transportation services in China. The principal shareholders of ZTO LTL are also principal shareholders of our company.
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DESCRIPTION OF SHARE CAPITAL
We are a Cayman Islands company and our affairs are governed by our memorandum and articles of association and the Companies Law (2016 Revision)
of the Cayman Islands, which we refer to as the Companies Law below.
As of the date of this prospectus, our company is authorized to issue up to a maximum of 10,000,000,000 shares, which consist of
9,969,920,082 ordinary shares with a par value of $0.0001 each and 30,079,918 series A preferred shares with a par value of $0.0001 each. As of the date of
this prospectus, 629,226,522 ordinary shares and 30,079,918 series A preferred shares are issued and outstanding. All of our issued and outstanding ordinary
and preferred shares are fully paid. Subject to the approval of our existing shareholders, immediately prior to the completion of this offering, all ordinary
shares held by Zto Lms Holding Limited will be redesignated as Class B ordinary shares and all remaining ordinary shares, including ordinary shares issuable
upon the automatic conversion of our preferred shares, will be redesignated as Class A ordinary shares. Immediately upon the completion of this offering,
there will be
Class B ordinary shares outstanding, including a total of 30,079,918 Class A ordinary shares
resulting from the automatic conversion of all of our outstanding preferred shares, assuming the underwriters do not exercise the over-allotment option.
Our Post-Offering Memorandum and Articles
We expect to adopt, subject to the approval of our existing shareholders, an amended and restated memorandum and articles of association, which will
become effective and replace our current amended and restated memorandum and articles of association in its entirety immediately prior to the completion of
this offering. The following are summaries of material provisions of the post-offering amended and restated memorandum and articles of association that we
expect to adopt and of the Companies Act, insofar as they relate to the material terms of our ordinary shares.
Objects of Our Company. Under our post-offering amended and restated memorandum and articles of association, the objects of our company are
unrestricted and we have the full power and authority to carry out any object not prohibited by the law of the Cayman Islands.
Ordinary Shares. Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of our Class A ordinary shares and
Class B ordinary shares will have the same rights except for voting and conversion rights. Our ordinary shares are issued in registered form. Our shareholders
who are nonresidents of the Cayman Islands may freely hold and vote their shares.
Conversion. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof. Class A ordinary shares are
not convertible into Class B ordinary shares under any circumstances. Upon any sale of Class B ordinary shares by a holder thereof to any person or entity
that is not an Affiliate (as defined in our post-offering amended and restated articles of association) of such holder, such Class B ordinary shares will be
automatically and immediately converted into an equal number of Class A ordinary shares. In addition, if at any time, Mr. Meisong Lai and his affiliates
collectively own less than 10% of the outstanding share capital of our company, each issued and outstanding Class B ordinary share will be automatically
and immediately converted into one Class A ordinary share, and we will not issue any Class B ordinary shares thereafter.
Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. Our post-offering amended
and restated articles of association provide that dividends may be declared and paid out of our profits, realized or unrealized, or from any reserve set aside
from profits which our board of directors determine is no longer needed. Dividends may also be declared and paid out of share premium account or any other
fund or account which can be authorized for this purpose in accordance with the Companies Law.
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Voting Rights. On a show of hands each shareholder is entitled to one vote or, on a poll, each shareholder is entitled to one vote for each Class A
ordinary share and ten votes for each Class B ordinary share, voting together as a single class, on all matters that require a shareholder's vote. Voting at any
shareholders' meeting is by show of hands unless a poll is demanded. A poll may be demanded by the chairman of such meeting or any one or more
shareholders who together hold not less than 10% of the votes attaching to the total ordinary shares present in person or by proxy.
A quorum required for a meeting of shareholders consists of one or more shareholders present and holding not less than one-third of the votes of the
outstanding voting shares in our company. Shareholders may be present in person or by proxy or, if the shareholder is a legal entity, by its duly authorized
representative. Shareholders' meetings may be convened by our board of directors on its own initiative or upon a request to the directors by shareholders
holding no less than one-third of our voting share capital. Advance notice of at least seven days is required for the convening of our annual general
shareholders' meeting and any other general shareholders' meeting.
An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the
ordinary shares cast at a meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast attaching to the
outstanding ordinary shares at a meeting. A special resolution will be required for important matters such as a change of name or making changes to our postoffering amended and restated memorandum and articles of association. Holders of the ordinary shares may, among other things, divide or combine their
shares by ordinary resolution.
Transfer of Ordinary Shares. Subject to the restrictions set out below and the provisions above in respect of the transfer of Class B ordinary shares, any
of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved
by our board of directors.
Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have
a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:
the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence
as our board of directors may reasonably require to show the right of the transferor to make the transfer;
the instrument of transfer is in respect of only one class of ordinary shares;
the instrument of transfer is properly stamped, if required; and
in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four.
a fee of such maximum sum as the New York Stock Exchange may determine to be payable or such lesser sum as our directors may from time to
time require is paid to us in respect thereof.
If our directors refuse to register a transfer they shall, within three months after the date on which the instrument of transfer was lodged, send to each of
the transferor and the transferee notice of such refusal.
The registration of transfers may, after compliance with any notice required of the New York Stock Exchange, be suspended and the register closed at
such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be
suspended nor the register closed for more than 30 days in any year as our board may determine.
Liquidation. On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of shares), assets available for
distribution among the holders of ordinary shares shall be distributed among the holders of our ordinary shares on a pro rata basis. If our assets available for
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distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders proportionately.
Calls on Shares and Forfeiture of Shares. Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their
shares in a notice served to such shareholders at least 14 days prior to the specified time and place of payment. The shares that have been called upon and
remain unpaid are subject to forfeiture.
Redemption of Shares. The Companies Law and our post-offering amended and restated articles of association permit us to purchase, redeem or
otherwise acquire our own shares. In accordance with our post-offering amended and restated articles of association and provided the necessary shareholders
or board approval have been obtained, we may issue shares on terms that are subject to redemption, at our option or at the option of the holders of these
shares, on such terms and in such manner, including out of capital, as may be determined by our board of directors.
Variations of Rights of Shares. The rights attached to any class or series of shares (unless otherwise provided by the terms of issue of the shares of that
class or series), whether or not our company is being wound-up, may be varied with the consent in writing of all the holders of the issued shares of that class
or series or with the sanction of a resolution passed by a majority of the votes cast at a separate meeting of the holders of the shares of the class or series. The
rights conferred upon the holders of the shares of any class issued shall not, unless otherwise expressly provided by the terms of issue of the shares of that
class, be deemed to be varied by the creation or issue of further shares ranking pari passu with such existing class of shares.
Issuance of Additional Shares.
Our post-offering amended and restated memorandum of association authorizes our board of directors to issue
additional ordinary shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.
Our post-offering amended and restated memorandum of association also authorizes our board of directors to establish from time to time one or more
series of preference shares and to determine, with respect to any series of preference shares, the terms and rights of that series, including:
the designation of the series;
the number of shares of the series;
the dividend rights, dividend rates, conversion rights, voting rights; and
the rights and terms of redemption and liquidation preferences.
Our board of directors may issue preference shares without action by our shareholders to the extent authorized but unissued. Issuance of these shares may
dilute the voting power of holders of ordinary shares.
Inspection of Books and Records. Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of
our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See "Where You Can
Find Additional Information."
Anti-Takeover Provisions. Some provisions of our post-offering memorandum and articles of association may discourage, delay or prevent a change of
control of our company or management that shareholders may consider favorable, including provisions that:
authorize our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and
restrictions of such preference shares without any further vote or action by our shareholders; and
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limit the ability of shareholders to requisition and convene general meetings of shareholders.
However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our post-offering memorandum and
articles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company.
Exempted Company. We are an exempted company with limited liability under the Companies Law. The Companies Law distinguishes between
ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the
Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary
company except that an exempted company:
does not have to file an annual return of its shareholders with the Registrar of Companies;
is not required to open its register of members for inspection;
does not have to hold an annual general meeting;
may issue negotiable or bearer shares or shares with no par value;
may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first
instance);
may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
may register as a limited duration company; and
may register as a segregated portfolio company.
"Limited liability" means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company.
Differences in Corporate Law
The Companies Act is modeled after that of England but does not follow recent English statutory enactments and differs from laws applicable to
U.S. corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Act applicable
to us and the laws applicable to companies incorporated in the United States and their shareholders.
Mergers and Similar Arrangements. A merger of two or more constituent companies under Cayman Islands law requires a plan of merger or
consolidation to be approved by the directors of each constituent company and authorization by (a) a special resolution of the shareholders and (b) such
other authorization, if any, as may be specified in such constituent company's articles of association.
A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders of
that Cayman subsidiary if a copy of the plan of merger is given to every member of that Cayman subsidiary to be merged unless that member agrees
otherwise. For this purpose a subsidiary is a company of which at least ninety percent (90%) of the issued shares entitled to vote are owned by the
parent company.
The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a court in
the Cayman Islands.
Save in certain circumstances, a dissentient shareholder of a Cayman constituent company is entitled to payment of the fair value of his shares upon
dissenting to a merger or consolidation. The exercise of appraisal rights will preclude the exercise of any other rights save for the right to seek relief on the
grounds that the merger or consolidation is void or unlawful.
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In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved
by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent threefourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or
meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the
Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be
expected to approve the arrangement if it determines that:
the statutory provisions as to the required majority vote have been met;
the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the
minority to promote interests adverse to those of the class;
the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and
the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.
When a takeover offer is made and accepted by holders of 90.0% of the shares within four months, the offeror may, within a two-month period
commencing on the expiration of such four month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An
objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unless
there is evidence of fraud, bad faith or collusion.
If an arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would
otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially
determined value of the shares.
Shareholders' Suits. In principle, we will normally be the proper plaintiff and as a general rule a derivative action may not be brought by a minority
shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, there are exceptions to
the foregoing principle, including when:
a company acts or proposes to act illegally or ultra vires;
the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that has not been
obtained; and
those who control the company are perpetrating a "fraud on the minority."
Indemnification of Directors and Executive Officers and Limitation of Liability. Cayman Islands law does not limit the extent to which a company's
memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by
the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.
Our post-offering amended and restated memorandum and articles of association permit indemnification of officers and directors for losses, damages, costs
and expenses incurred in their capacities as such unless such losses or damages arise from dishonesty or fraud of such directors or officers. This standard of
conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation.
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In addition, we have entered into indemnification agreements with our directors and executive officers that provide such persons with additional
indemnification beyond that provided in our post-offering amended and restated memorandum and articles of association.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the
foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
Directors' Fiduciary Duties. Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its
shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care
that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders,
all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director acts in a manner he reasonably
believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing
by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or
controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis,
in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by
evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the director must prove the
procedural fairness of the transaction, and that the transaction was of fair value to the corporation.
As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore it
is considered that he owes the following duties to the companya duty to act bona fide in the best interests of the company, a duty not to make a profit
based on his position as director (unless the company permits him to do so) and a duty not to put himself in a position where the interests of the company
conflict with his personal interest or his duty to a third party. A director of a Cayman Islands company owes to the company a duty to act with skill and care.
It was previously considered that a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a
person of his knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required
skill and care and these authorities are likely to be followed in the Cayman Islands.
Shareholder Action by Written Consent. Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by
written consent by amendment to its certificate of incorporation. Cayman Islands law and our post-offering amended and restated articles of association
provide that shareholders may approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would
have been entitled to vote on such matter at a general meeting without a meeting being held.
Shareholder Proposals. Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of
shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any
other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.
Cayman Islands law does not provide shareholders any right to put proposal before a meeting or requisition a general meeting. However, these rights may
be provided in articles of association. Our post-offering amended and restated articles of association allow our shareholders holding not less than one-third of
all voting power of our share capital in issue to requisition a shareholder's meeting. Other
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than this right to requisition a shareholders' meeting, our post-offering amended and restated articles of association do not provide our shareholders other
right to put proposal before a meeting. As an exempted Cayman Islands company, we are not obliged by law to call shareholders' annual general meetings.
Cumulative Voting. Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation's
certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of
directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the
shareholder's voting power with respect to electing such director. There are no prohibitions in relation to cumulative voting under the laws of the Cayman
Islands but our post-offering amended and restated articles of association do not provide for cumulative voting. As a result, our shareholders are not afforded
any less protections or rights on this issue than shareholders of a Delaware corporation.
Removal of Directors. Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause
with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our post-offering
amended and restated articles of association, directors may be removed with or without cause, by an ordinary resolution of our shareholders.
Transactions with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable to Delaware
corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is
prohibited from engaging in certain business combinations with an "interested shareholder" for three years following the date that such person becomes an
interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target's outstanding voting
share within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all
shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an
interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested
shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target's board
of directors.
Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business
combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does
provide that such transactions must be entered into bona fide in the best interests of the company and not with the effect of constituting a fraud on the
minority shareholders.
Dissolution; Winding up. Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution
must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors
may it be approved by a simple majority of the corporation's outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of
incorporation a supermajority voting requirement in connection with dissolutions initiated by the board.
Under Cayman Islands law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolution of its members
or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its members. The court has authority to order winding up in a
number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so. Under the Companies Law and our postoffering amended and restated articles of association, our company may be dissolved, liquidated or wound up by a special resolution of our shareholders.
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Variation of Rights of Shares. Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of
a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under Cayman Islands law and our post-offering
amended and restated articles of association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class
with the written consent of the holders of a majority of the issued shares of that class or with the sanction of a special resolution passed at a general meeting of
the holders of the shares of that class.
Amendment of Governing Documents. Under the Delaware General Corporation Law, a corporation's governing documents may be amended with the
approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by Cayman Islands
law, our post-offering amended and restated memorandum and articles of association may only be amended with a special resolution of our shareholders.
Rights of Non-resident or Foreign Shareholders. There are no limitations imposed by our post-offering amended and restated memorandum and
articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions
in our post-offering amended and restated memorandum and articles of association governing the ownership threshold above which shareholder ownership
must be disclosed.
History of Securities Issuances
The following is a summary of our securities issuances in the past three years.
Ordinary Shares
We were incorporated in the Cayman Islands in April 2015. Upon our incorporation, we issued an aggregate of 600,000,000 ordinary shares to the BVI
holding vehicles of the then shareholders of ZTO Express, in proportion to such shareholders respective share percentage in ZTO Express.
Pursuant to the share purchase and subscription agreement entered into on May 21, 2015, some of our shareholders sold a total of 38,241,600 ordinary
shares for an aggregate consideration of US$300 million to Onyx Gem Investment Holdings Limited, Hillhouse ZT Holdings Limited, Standard Chartered
Private Equity (Mauritius) III Limited and Gopher China S.O. Project Limited, or collectively as series A investors. The ordinary shares were sold and
transferred in two equal batches in August 2015 and December 2015, respectively. As a result, the selling shareholders sold and transferred an aggregate of
(i) 22,307,600 ordinary shares to Onyx Gem Investment Holdings Limited; (ii) 6,373,600 ordinary shares to Hillhouse ZT Holdings Limited; (iii) 3,824,160
ordinary shares to Standard Chartered Private Equity (Mauritius) III Limited; and (iv) 5,736,240 ordinary shares to Gopher China S.O. Project Limited in two
equal batches in August 2015 and December 2015.
In June 2016, we issued 13,226,522 ordinary shares as part of the acquisition consideration associated with the 2015 acquisions.
See "ManagementCompensation of Directors and OfficersEmployee Share Holding Platform."
Preferred Shares
Pursuant to the same share purchase and subscription agreement entered into on May 21, 2015, we issued and sold a total of 30,079,918 series A
preferred shares for an aggregate consideration of US$300 million to the four series A investors. The series A preferred shares were issued in two equal batches
in August 2015 and December 2015, respectively. As a result, we issued and sold an aggregate of (i) 17,546,618 series A preferred shares to Onyx Gem
Investment Holdings Limited; (ii) 5,013,320 series A
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preferred shares to Hillhouse ZT Holdings Limited; (iii) 3,007,992 series A preferred shares to Standard Chartered Private Equity (Mauritius) III Limited; and
(iv) 4,511,988 series A preferred shares to Gopher China S.O. Project Limited. Upon the completion of a qualified initial public offering of our company,
which means a firm underwritten initial public offering of our ordinary shares and the listing of such shares for trading on the New York Stock Exchange or
other exchanges determined in accordance with the terms of our shareholders agreement, the conversion of the series A preferred shares is subject to a
guaranteed return provision. Under this provision, upon the completion of a qualified initial public offering of our company, valuation of the series A
preferred shares as determined by reference to the per-share offering price in that offering shall not be less than the lower of (i) the aggregate purchase price for
the series A preferred shares subscribed by the preferred shareholders pursuant to the share purchase and subscription agreements and held prior to the
completion of that offering plus return on such investment calculated based on 25% per annual compound rate of return, or (ii) 200% of the aggregate
purchase price for such series A preferred shares. If the valuation of all or portion of the series A preferred shares determined by referenced to the offering price
in the qualified initial public offering shall be less than the guaranteed return upon the completion of the offering (such shortfall being referred to as the
shortfall amount), we are obligated to issue warrants to such preferred shareholders or have the conversion price or conversion rate applicable to the series A
preferred shares automatically adjusted or, to the extent that none of the aforesaid IPO adjustments is permitted by the applicable laws, pay cash or share
compensation at the election of the preferred shareholders.
Option Grants
In June 2016, we granted options to purchase our ordinary shares to an executive officer.
See "Management2016 Share Incentive Plan."
Shareholders Agreement
We entered into our shareholders agreement on August 18, 2015 with our shareholders, which consist of holders of ordinary shares and series A preferred
shares.
Pursuant to this shareholders agreement, our board of directors shall consist of 11 directors. Zto Lms Holding Limited is entitled to appoint eight
directors, each of Zto Wlm Holding Limited, Max Alpha Limited and Max Beyond Limited, Onyx Gem Investment Holdings Limited is entitled to appoint
one director.
The shareholders agreement also provides for certain preferential rights, including right of first refusal, co-sale rights, preemptive rights. Except for the
registration rights, all the preferential rights, as well as the provisions governing the board of directors, will automatically terminate upon the completion of
this offering.
Registration Rights
Pursuant to our current shareholders agreement, we have granted certain registration rights to our shareholders. Set forth below is a description of the
registration rights granted under the agreement.
Demand Registration Rights. At any time after the earlier of (i) 180 days after the effective date of the registration statement for a public offering or
(ii) the expiration of the period during which the managing underwriters for such public offering shall prohibit us from effecting any other public sale or
distribution of registrable securities, holders of series A preferred shares, Max Alpha Limited and Max Beyond Limited, and Zto Wlm Holding Limited have
the right to demand that we file a registration statement covering the registration of any registrable securities of such holders. We have the right to defer filing
of a registration statement for a period of not more than 90 days after the receipt of the request of the initiating holders under certain conditions, but we
cannot exercise the deferral right more than once in any six-month period.
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We are not obligated to effect more than two demand registrations, other than demand registration to be effected pursuant to registration statement on Form F3, for which an unlimited number of demand registrations shall be permitted.
Piggyback Registration Rights. If we propose to file a registration statement for a public offering of our securities, we must offer holders of our
registrable securities an opportunity to include in the registration the number of registrable securities of the same class or series as those proposed to be
registered. If the managing underwriters of any underwritten offering determine in its view the number of registrable securities exceeds the maximum offering
size, the registrable securities shall allocate first to us, second to each of holders requesting for the inclusion of their registrable securities pursuant to the
piggyback registration, and third to any other party with such priorities among them as we shall determine.
Form F-3 Registration Rights. Holders of series A preferred shares, Max Alpha Limited and Max Beyond Limited, and Zto Wlm Holding Limited, may
request us in writing to file an unlimited number of registration statements on Form F-3. Within 90 days of receiving such request, we shall effect the
registration of the securities on Form F-3.
Expenses of Registration. We will bear all registration expenses, other than underwriting discounts and selling commissions incurred in connection
with any demand, piggyback or F-3 registration.
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DESCRIPTION OF AMERICAN DEPOSITARY SHARES
American Depositary Receipts
, as depositary will issue the ADSs which you will be entitled to receive in this offering. Each ADS will represent an ownership interest in a
designated number of shares which we will deposit with the custodian, as agent of the depositary, under the deposit agreement among ourselves, the
depositary and yourself as an ADR holder. In the future, each ADS will also represent any securities, cash or other property deposited with the depositary but
which they have not distributed directly to you. Unless certificated ADRs are specifically requested by you, all ADSs will be issued on the books of our
depositary in book-entry form and periodic statements will be mailed to you which reflect your ownership interest in such ADSs. In our description,
references to American depositary receipts or ADRs shall include the statements you will receive which reflect your ownership of ADSs.
The depositary's office is located at
You may hold ADSs either directly or indirectly through your broker or other financial institution. If you hold ADSs directly, by having an ADS
registered in your name on the books of the depositary, you are an ADR holder. This description assumes you hold your ADSs directly. If you hold the ADSs
through your broker or financial institution nominee, you must rely on the procedures of such broker or financial institution to assert the rights of an ADR
holder described in this section. You should consult with your broker or financial institution to find out what those procedures are.
As an ADR holder, we will not treat you as a shareholder of ours and you will not have any shareholder rights. Cayman Islands law governs shareholder
rights. Because the depositary or its nominee will be the shareholder of record for the shares represented by all outstanding ADSs, shareholder rights rest with
such record holder. Your rights are those of an ADR holder. Such rights derive from the terms of the deposit agreement to be entered into among us, the
depositary and all registered holders from time to time of ADSs issued under the deposit agreement. The obligations of the depositary and its agents are also
set out in the deposit agreement. Because the depositary or its nominee will actually be the registered owner of the shares, you must rely on it to exercise the
rights of a shareholder on your behalf. The deposit agreement and the ADSs are governed by New York law. Under the deposit agreement, as an ADR holder,
you agree that any legal suit, action or proceeding against or involving us or the depositary, arising out of or based upon the deposit agreement, the ADSs or
the transactions contemplated thereby, may only be instituted in a state or federal court in New York, New York, and you irrevocably waive any objection
which you may have to the laying of venue of any such proceeding and irrevocably submit to the exclusive jurisdiction of such courts in any such suit,
action or proceeding.
The following is a summary of what we believe to be the material terms of the deposit agreement. Notwithstanding this, because it is a summary, it may
not contain all the information that you may otherwise deem important. For more complete information, you should read the entire deposit agreement and the
form of ADR which contains the terms of your ADSs. You can read a copy of the deposit agreement which is filed as an exhibit to the registration statement of
which this prospectus forms a part. You may also obtain a copy of the deposit agreement at the SEC's Public Reference Room which is located at 100 F Street,
NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-732-0330. You may
also find the registration statement and the attached deposit agreement on the SEC's website at http://www.sec.gov.
Share Dividends and Other Distributions
How will I receive dividends and other distributions on the shares underlying my ADSs?
We may make various types of distributions with respect to our securities. The depositary has agreed that, to the extent practicable, it will pay to you the
cash dividends or other distributions it or the custodian receives on shares or other deposited securities, after converting any cash received into U.S. dollars
(if it
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determines such conversion may be made on a reasonable basis) and, in all cases, making any necessary deductions provided for in the deposit agreement.
The depositary may utilize a division, branch or affiliate of
to direct, manage and/or execute any public and/or private sale of securities under
the deposit agreement. Such division, branch and/or affiliate may charge the depositary a fee in connection with such sales, which fee is considered an
expense of the depositary. You will receive these distributions in proportion to the number of underlying securities that your ADSs represent.
Except as stated below, the depositary will deliver such distributions to ADR holders in proportion to their interests in the following manner:
Cash. The depositary will distribute any U.S. dollars available to it resulting from a cash dividend or other cash distribution or the net
proceeds of sales of any other distribution or portion thereof (to the extent applicable), on an averaged or other practicable basis, subject to
(i) appropriate adjustments for taxes withheld, (ii) such distribution being impermissible or impracticable with respect to certain registered
ADR holders, and (iii) deduction of the depositary's and/or its agents' expenses in (1) converting any foreign currency to U.S. dollars to the
extent that it determines that such conversion may be made on a reasonable basis, (2) transferring foreign currency or U.S. dollars to the
United States by such means as the depositary may determine to the extent that it determines that such transfer may be made on a reasonable
basis, (3) obtaining any approval or license of any governmental authority required for such conversion or transfer, which is obtainable at a
reasonable cost and within a reasonable time and (4) making any sale by public or private means in any commercially reasonable manner. If
exchange rates fluctuate during a time when the depositary cannot convert a foreign currency, you may lose some or all of the value of the
distribution.
Shares. In the case of a distribution in shares, the depositary will issue additional ADRs to evidence the number of ADSs representing such
shares. Only whole ADSs will be issued. Any shares which would result in fractional ADSs will be sold and the net proceeds will be distributed
in the same manner as cash to the ADR holders entitled thereto.
Rights to receive additional shares. In the case of a distribution of rights to subscribe for additional shares or other rights, if we timely provide
evidence satisfactory to the depositary that it may lawfully distribute such rights, the depositary will distribute warrants or other instruments in
the discretion of the depositary representing such rights. However, if we do not timely furnish such evidence, the depositary may:
(i)
sell such rights if practicable and distribute the net proceeds in the same manner as cash to the ADR holders entitled thereto; or
(ii)
i f it is not practicable to sell such rights by reason of the non-transferability of the rights, limited markets therefor, their short duration or
otherwise, do nothing and allow such rights to lapse, in which case ADR holders will receive nothing and the rights may lapse.
We have no obligation to file a registration statement under the Securities Act in order to make any rights available to ADR holders.
Other Distributions. In the case of a distribution of securities or property other than those described above, the depositary may either
(i) distribute such securities or property in any manner it deems equitable and practicable or (ii) to the extent the depositary deems distribution
of such securities or property not to be equitable and practicable, sell such securities or property and distribute any net proceeds in the same
way it distributes cash.
If the depositary determines in its discretion that any distribution described above is not practicable with respect to any specific registered ADR holder,
the depositary may choose any method of distribution that it deems practicable for such ADR holder, including the distribution of foreign currency, securities
or
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property, or it may retain such items, without paying interest on or investing them, on behalf of the ADR holder as deposited securities, in which case the
ADSs will also represent the retained items.
Any U.S. dollars will be distributed by checks drawn on a bank in the United States for whole dollars and cents. Fractional cents will be withheld without
liability and dealt with by the depositary in accordance with its then current practices.
The depositary is not responsible if it fails to determine that any distribution or action is lawful or reasonably practicable.
There can be no assurance that the depositary will be able to convert any currency at a specified exchange rate or sell any property, rights, shares or other
securities at a specified price, nor that any of such transactions can be completed within a specified time period. All purchases and sales of securities will be
handled by the Depositary in accordance with its then current policies.
Deposit, Withdrawal and Cancellation
How does the depositary issue ADSs?
The depositary will issue ADSs if you or your broker deposit shares or evidence of rights to receive shares with the custodian and pay the fees and
expenses owing to the depositary in connection with such issuance. In the case of the ADSs to be issued under this prospectus, we will arrange with the
underwriters named herein to deposit such shares.
Shares deposited in the future with the custodian must be accompanied by certain delivery documentation and shall, at the time of such deposit, be
registered in the name of
, as depositary for the benefit of holders of ADRs or in such other name as the depositary shall direct.
The custodian will hold all deposited shares (including those being deposited by or on our behalf in connection with the offering to which this
prospectus relates) for the account and to the order of the depositary. ADR holders thus have no direct ownership interest in the shares and only have such
rights as are contained in the deposit agreement. The custodian will also hold any additional securities, property and cash received on or in substitution for
the deposited shares. The deposited shares and any such additional items are referred to as "deposited securities".
Upon each deposit of shares, receipt of related delivery documentation and compliance with the other provisions of the deposit agreement, including the
payment of the fees and charges of the depositary and any taxes or other fees or charges owing, the depositary will issue an ADR or ADRs in the name or upon
the order of the person entitled thereto evidencing the number of ADSs to which such person is entitled. All of the ADSs issued will, unless specifically
requested to the contrary, be part of the depositary's direct registration system, and a registered holder will receive periodic statements from the depositary
which will show the number of ADSs registered in such holder's name. An ADR holder can request that the ADSs not be held through the depositary's direct
registration system and that a certificated ADR be issued.
How do ADR holders cancel an ADS and obtain deposited securities?
When you turn in your ADR certificate at the depositary's office, or when you provide proper instructions and documentation in the case of direct
registration ADSs, the depositary will, upon payment of certain applicable fees, charges and taxes, deliver the underlying shares to you or upon your written
order. Delivery of deposited securities in certificated form will be made at the custodian's office. At your risk, expense and request, the depositary may deliver
deposited securities at such other place as you may request.
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The depositary may only restrict the withdrawal of deposited securities in connection with:
temporary delays caused by closing our transfer books or those of the depositary or the deposit of shares in connection with voting at a
shareholders' meeting, or the payment of dividends;
the payment of fees, taxes and similar charges; or
compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of deposited securities.
This right of withdrawal may not be limited by any other provision of the deposit agreement.
Record Dates
The depositary may, after consultation with us if practicable, fix record dates (which, to the extent applicable, shall be as near as practicable to any
corresponding record dates set by us) for the determination of the registered ADR holders who will be entitled (or obligated, as the case may be):
to receive any distribution on or in respect of deposited securities,
to give instructions for the exercise of voting rights at a meeting of holders of shares,
to pay the fee assessed by the depositary for administration of the ADR program and for any expenses as provided for in the ADR, or
to receive any notice or to act in respect of other matters
all subject to the provisions of the deposit agreement.

Voting Rights
How do I vote?
If you are an ADR holder and the depositary asks you to provide it with voting instructions, you may instruct the depositary how to exercise the voting
rights for the shares which underlie your ADSs. Subject to the next sentence, as soon as practicable after receipt from us of notice of any meeting at which the
holders of shares are entitled to vote, or of our solicitation of consents or proxies from holders of shares, the depositary shall fix the ADS record date in
accordance with the provisions of the deposit agreement in respect of such meeting or solicitation of consent or proxy. The depositary shall, if we request in
writing in a timely manner (the depositary having no obligation to take any further action if our request shall not have been received by the depositary at
least 30 days prior to the date of such vote or meeting) and at our expense and provided no legal prohibitions exist, distribute to the registered ADR holders a
notice stating such information as is contained in the voting materials received by the depositary and describing how you may instruct, or, subject to the next
sentence, will be deemed to instruct, the depositary to exercise the voting rights for the shares which underlie your ADSs, including instructions for giving a
discretionary proxy to a person designated by us. To the extent we have provided the depositary with at least 40 days' notice of a proposed meeting, if voting
instructions are not timely received by the depositary from any holder, such holder shall be deemed, and in the deposit agreement the depositary is instructed
to deem such holder, to have instructed the depositary to give a discretionary proxy to a person designated by us to vote the shares represented by their ADSs
as desired, provided that no such instruction shall be deemed given and no discretionary proxy shall be given (a) if we inform the depositary in writing that
(i) we do not wish such proxy to be given, (ii) substantial opposition exists with respect to any agenda item for which the proxy would be given or (iii) the
agenda item in question, if approved, would materially or adversely affect the rights of holders of shares and (b) unless, with respect to such meeting, we have
provided the depositary with an opinion of our counsel, in form and substance satisfactory to the depositary, to the effect that (a) the granting of such
discretionary proxy does not subject the depositary to any reporting obligations in the Cayman Islands, (b) the granting of such proxy will not result in a
violation of any
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applicable law, public rule or regulation in force in the Cayman Islands, (c) the courts of the Cayman Islands will give effect to the voting arrangement and
deemed instruction as contemplated in the proxy under Cayman Islands law and (d) there is nothing under Cayman Islands law which would result in the
depositary being deemed to have exercised any discretion when voting in accordance with the terms of the proxy.
Holders are strongly encouraged to forward their voting instructions to the depositary as soon as possible. For instructions to be valid, the ADR
department of the depositary that is responsible for proxies and voting must receive them in the manner and on or before the time specified, notwithstanding
that such instructions may have been physically received by the depositary prior to such time. The depositary will not itself exercise any voting discretion.
Furthermore, neither the depositary nor its agents are responsible for any failure to carry out any voting instructions, for the manner in which any vote is cast
or for the effect of any vote. Notwithstanding anything contained in the deposit agreement or any ADR, the depositary may, to the extent not prohibited by
l aw or regulations, or by the requirements of the stock exchange on which the ADSs are listed, in lieu of distribution of the materials provided to the
depositary in connection with any meeting of, or solicitation of consents or proxies from, holders of deposited securities, distribute to the registered holders
of ADRs a notice that provides such holders with, or otherwise publicizes to such holders, instructions on how to retrieve such materials or receive such
materials upon request (i.e., by reference to a website containing the materials for retrieval or a contact for requesting copies of the materials).
We have advised the depositary that under the Cayman Islands law and our constituent documents, each as in effect as of the date of the deposit
agreement, voting at any meeting of shareholders is by show of hands unless a poll is (before or on the declaration of the results of the show of hands)
demanded. In the event that voting on any resolution or matter is conducted on a show of hands basis in accordance with our constituent documents, the
depositary will refrain from voting and the voting instructions received by the depositary from holders shall lapse. The depositary will not demand a poll or
join in demanding a poll, whether or not requested to do so by holders of ADSs.
There is no guarantee that you will receive voting materials in time to instruct the depositary to vote and it is possible that you, or persons who hold their
ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.
Reports and Other Communications
Will ADR holders be able to view our reports?
The depositary will make available for inspection by ADR holders at the offices of the depositary and the custodian the deposit agreement, the
provisions of or governing deposited securities, and any written communications from us which are both received by the custodian or its nominee as a holder
of deposited securities and made generally available to the holders of deposited securities.
Additionally, if we make any written communications generally available to holders of our shares, and we furnish copies thereof (or English translations
or summaries) to the depositary, it will distribute the same to registered ADR holders.
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Fees and Expenses
What fees and expenses will I be responsible for paying?
The depositary may charge each person to whom ADSs are issued, including, without limitation, issuances against deposits of shares, issuances in respect
of share distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared by us or issuances pursuant to a merger,
exchange of securities or any other transaction or event affecting the ADSs or deposited securities, and each person surrendering ADSs for withdrawal of
deposited securities or whose ADRs are cancelled or reduced for any other reason, US$5.00 for each 100 ADSs (or any portion thereof) issued, delivered,
reduced, cancelled or surrendered, as the case may be. The depositary may sell (by public or private sale) sufficient securities and property received in respect
of a share distribution, rights and/or other distribution prior to such deposit to pay such charge.
The following additional charges shall be incurred by the ADR holders, by any party depositing or withdrawing shares or by any party surrendering
ADSs and/or to whom ADSs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of
stock regarding the ADSs or the deposited securities or a distribution of ADSs), whichever is applicable:
a fee of US$1.50 per ADR or ADRs for transfers of certificated or direct registration ADRs;
a fee of up to $
a fee of up to $
per ADS per calendar year (or portion thereof) for services performed by the depositary in administering the ADRs (which
fee may be charged on a periodic basis during each calendar year and shall be assessed against holders of ADRs as of the record date or record
dates set by the depositary during each calendar year and shall be payable in the manner described in the next succeeding provision);
a fee for the reimbursement of such fees, charges and expenses as are incurred by the depositary and/or any of its agents (including, without
limitation, the custodian and expenses incurred on behalf of holders in connection with compliance with foreign exchange control regulations
or any law or regulation relating to foreign investment) in connection with the servicing of the shares or other deposited securities, the sale of
securities (including, without limitation, deposited securities), the delivery of deposited securities or otherwise in connection with the
depositary's or its custodian's compliance with applicable law, rule or regulation (which fees and charges shall be assessed on a proportionate
basis against holders as of the record date or dates set by the depositary and shall be payable at the sole discretion of the depositary by billing
such holders or by deducting such charge from one or more cash dividends or other cash distributions);
a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to the
US$0.05 per ADS issuance fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such
securities (treating all such securities as if they were shares) but which securities or the net cash proceeds from the sale thereof are instead
distributed by the depositary to those holders entitled thereto;
stock transfer or other taxes and other governmental charges;
cable, telex and facsimile transmission and delivery charges incurred at your request in connection with the deposit or delivery of shares,
ADRs or deposited securities;
transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or
withdrawal of deposited securities;
in connection with the conversion of foreign currency into U.S. dollars, shall deduct out of such foreign currency the fees, expenses and other
charges charged by it and/or its agent (which may be a division, branch or affiliate) so appointed in connection with such conversion; and
per ADS for any cash distribution made pursuant to the deposit agreement;
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fees of any division, branch or affiliate of the depositary utilized by the depositary to direct, manage and/or execute any public and/or private
sale of securities under the deposit agreement.
and/or its agent may act as principal for such conversion of foreign currency.
We will pay all other charges and expenses of the depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to
time between us and the depositary. The charges described above may be amended from time to time by agreement between us and the depositary.
Our depositary anticipates to reimburse us for certain expenses we incur that are related to establishment and maintenance of the ADR program upon
such terms and conditions as we and the depositary may agree from time to time. The depositary may make available to us a set amount or a portion of the
depositary fees charged in respect of the ADR program or otherwise upon such terms and conditions as we and the depositary may agree from time to time.
The depositary collects its fees for issuance and cancellation of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of
withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the
amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by
deduction from cash distributions, or by directly billing investors, or by charging the book-entry system accounts of participants acting for them. The
depositary will generally set off the amounts owing from distributions made to holders of ADSs. If, however, no distribution exists and payment owing is not
timely received by the depositary, the depositary may refuse to provide any further services to holders that have not paid those fees and expenses owing until
such fees and expenses have been paid. At the discretion of the depositary, all fees and charges owing under the deposit agreement are due in advance and/or
when declared owing by the depositary.
The fees and charges you may be required to pay may vary over time and may be changed by us and by the depositary. You will receive prior notice of
the increase in any such fees and charges.
Payment of Taxes
ADR holders must pay any tax or other governmental charge payable by the custodian or the depositary on any ADS or ADR, deposited security or
distribution. If any taxes or other governmental charges (including any penalties and/or interest) shall become payable by or on behalf of the custodian or the
depositary with respect to any ADR, any deposited securities represented by the ADSs evidenced thereby or any distribution thereon, including, without
limitation, any Chinese Enterprise Income Tax owing if the Circular Guoshuifa [2009] No. 82 issued by the Chinese State Administration of Taxation (SAT)
or any other circular, edict, order or ruling, as issued and as from time to time amended, is applied or otherwise, such tax or other governmental charge shall
be paid by the holder thereof to the depositary and by holding or having held an ADR the holder and all prior holders thereof, jointly and severally, agree to
indemnify, defend and save harmless each of the depositary and its agents in respect thereof. If an ADR holder owes any tax or other governmental charge, the
depositary may (i) deduct the amount thereof from any cash distributions, or (ii) sell deposited securities (by public or private sale) and deduct the amount
owing from the net proceeds of such sale. In either case the ADR holder remains liable for any shortfall. If any tax or governmental charge is unpaid, the
depositary may also refuse to effect any registration, registration of transfer, split-up or combination of deposited securities or withdrawal of deposited
securities until such payment is made. If any tax or governmental charge is required to be withheld on any cash distribution, the depositary may deduct the
amount required to be withheld from any cash distribution or, in the case of a non-cash distribution, sell the distributed property or securities (by public or
private sale) in such amounts and in such manner as the depositary deems necessary and practicable to pay such taxes and distribute any remaining net
proceeds or the balance of any such property after deduction of such taxes to the ADR holders entitled thereto.
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By holding an ADR or an interest therein, you will be agreeing to indemnify us, the depositary, its custodian and any of our or their respective officers,
directors, employees, agents and affiliates against, and hold each of them harmless from, any claims by any governmental authority with respect to taxes,
additions to tax, penalties or interest arising out of any refund of taxes, reduced rate of withholding at source or other tax benefit obtained.
Reclassifications, Recapitalizations and Mergers
If we take certain actions that affect the deposited securities, including (i) any change in par value, split-up, consolidation, cancellation or other
reclassification of deposited securities, (ii) any distributions of shares or other property not made to holders of ADRs or (iii) any recapitalization,
reorganization, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all of our assets, then the depositary may choose to,
and shall if reasonably requested by us:
(1)
amend the form of ADR;
(2)
distribute additional or amended ADRs;
(3)
distribute cash, securities or other property it has received in connection with such actions;
(4)
sell any securities or property received and distribute the proceeds as cash; or
(5)
none of the above.
If the depositary does not choose any of the above options, any of the cash, securities or other property it receives will constitute part of the deposited
securities and each ADS will then represent a proportionate interest in such property.
Amendment and Termination
How may the deposit agreement be amended?
We may agree with the depositary to amend the deposit agreement and the ADSs without your consent for any reason. ADR holders must be given at
least 30 days notice of any amendment that imposes or increases any fees or charges (other than stock transfer or other taxes and other governmental charges,
transfer or registration fees, SWIFT, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or otherwise prejudices any substantial
existing right of ADR holders. Such notice need not describe in detail the specific amendments effectuated thereby, but must identify to ADR holders a
means to access the text of such amendment. If an ADR holder continues to hold an ADR or ADRs after being so notified, such ADR holder is deemed to
agree to such amendment and to be bound by the deposit agreement as so amended. Notwithstanding the foregoing, if any governmental body or regulatory
body should adopt new laws, rules or regulations which would require amendment or supplement of the deposit agreement or the form of ADR to ensure
compliance therewith, we and the depositary may amend or supplement the deposit agreement and the ADR at any time in accordance with such changed
laws, rules or regulations, which amendment or supplement may take effect before a notice is given or within any other period of time as required for
compliance. No amendment, however, will impair your right to surrender your ADSs and receive the underlying securities, except in order to comply with
mandatory provisions of applicable law.
How may the deposit agreement be terminated?
The depositary may, and shall at our written direction, terminate the deposit agreement and the ADRs by mailing notice of such termination to the
registered holders of ADRs at least 30 days prior to the date fixed in such notice for such termination; provided, however, if the depositary shall have
(i) resigned as depositary under the deposit agreement, notice of such termination by the depositary shall not be provided to registered holders unless a
successor depositary shall not be operating under the deposit
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agreement within 60 days of the date of such resignation, and (ii) been removed as depositary under the deposit agreement, notice of such termination by the
depositary shall not be provided to registered holders of ADRs unless a successor depositary shall not be operating under the deposit agreement on the 120th
day after our notice of removal was first provided to the depositary. After the date so fixed for termination, (a) all direct registration ADRs shall cease to be
eligible for the direct registration system and shall be considered ADRs issued on the ADR register maintained by the depositary and (b) the depositary shall
use its reasonable efforts to ensure that the ADSs cease to be DTC eligible so that neither DTC nor any of its nominees shall thereafter be a registered holder
of ADRs. At such time as the ADSs cease to be DTC eligible and/or neither DTC nor any of its nominees is a registered holder of ADRs, the depositary shall
(a) instruct its custodian to deliver all shares to us along with a general stock power that refers to the names set forth on the ADR register maintained by the
depositary and (b) provide us with a copy of the ADR register maintained by the depositary. Upon receipt of such shares and the ADR register maintained by
the depositary, we have agreed to use our best efforts to issue to each registered holder a Share certificate representing the Shares represented by the ADSs
reflected on the ADR register maintained by the depositary in such registered holder's name and to deliver such Share certificate to the registered holder at the
address set forth on the ADR register maintained by the depositary. After providing such instruction to the custodian and delivering a copy of the ADR
register to us, the depositary and its agents will perform no further acts under the deposit agreement or the ADRs and shall cease to have any obligations
under the deposit agreement and/or the ADRs.
Limitations on Obligations and Liability to ADR holders
Limits on our obligations and the obligations of the depositary; limits on liability to ADR holders and holders of ADSs
Prior to the issue, registration, registration of transfer, split-up, combination, or cancellation of any ADRs, or the delivery of any distribution in respect
thereof, and from time to time in the case of the production of proofs as described below, we or the depositary or its custodian may require:
payment with respect thereto of (i) any stock transfer or other tax or other governmental charge, (ii) any stock transfer or registration fees in
effect for the registration of transfers of shares or other deposited securities upon any applicable register and (iii) any applicable fees and
expenses described in the deposit agreement;
the production of proof satisfactory to it of (i) the identity of any signatory and genuineness of any signature and (ii) such other information,
including without limitation, information as to citizenship, residence, exchange control approval, beneficial ownership of any securities,
compliance with applicable law, regulations, provisions of or governing deposited securities and terms of the deposit agreement and the
ADRs, as it may deem necessary or proper; and
compliance with such regulations as the depositary may establish consistent with the deposit agreement.
The issuance of ADRs, the acceptance of deposits of shares, the registration, registration of transfer, split-up or combination of ADRs or the withdrawal of
shares, may be suspended, generally or in particular instances, when the ADR register or any register for deposited securities is closed or when any such
action is deemed advisable by the depositary; provided that the ability to withdraw shares may only be limited under the following circumstances:
(i) temporary delays caused by closing transfer books of the depositary or our transfer books or the deposit of shares in connection with voting at a
shareholders' meeting, or the payment of dividends, (ii) the payment of fees, taxes, and similar charges, and (iii) compliance with any laws or governmental
regulations relating to ADRs or to the withdrawal of deposited securities.
The deposit agreement expressly limits the obligations and liability of the depositary, ourselves and our respective agents, provided, however, that no
disclaimer of liability under the Securities Act of 1933 is
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intended by any of the limitations of liabilities provisions of the deposit agreement. In the deposit agreement it provides that neither we nor the depositary
nor any such agent will be liable if:
any present or future law, rule, regulation, fiat, order or decree of the United States, the Cayman Islands, the People's Republic of China or any
other country or jurisdiction, or of any governmental or regulatory authority or securities exchange or market or automated quotation system,
the provisions of or governing any deposited securities, any present or future provision of our charter, any act of God, war, terrorism,
nationalization, expropriation, currency restrictions, work stoppage, strike, civil unrest, revolutions, rebellions, explosions, computer failure or
circumstance beyond our, the depositary's or our respective agents' direct and immediate control shall prevent or delay, or shall cause any of
them to be subject to any civil or criminal penalty in connection with, any act which the deposit agreement or the ADRs provide shall be done
or performed by us, the depositary or our respective agents (including, without limitation, voting);
it exercises or fails to exercise discretion under the deposit agreement or the ADRs including, without limitation, any failure to determine that
any distribution or action may be lawful or reasonably practicable;
it performs its obligations under the deposit agreement and ADRs without gross negligence or willful misconduct;
it takes any action or refrains from taking any action in reliance upon the advice of or information from legal counsel, accountants, any person
presenting shares for deposit, any registered holder of ADRs, or any other person believed by it to be competent to give such advice or
information; or
it relies upon any written notice, request, direction or other document believed by it to be genuine and to have been signed, presented or given
by the proper party or parties.
Neither the depositary nor its agents have any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any
deposited securities or the ADRs. We and our agents shall only be obligated to appear in, prosecute or defend any action, suit or other proceeding in respect
of any deposited securities or the ADRs, which in our opinion may involve us in expense or liability, if indemnity satisfactory to us against all expense
(including fees and disbursements of counsel) and liability is furnished as often as may be required. The depositary and its agents may fully respond to any
and all demands or requests for information maintained by or on its behalf in connection with the deposit agreement, any registered holder or holders of
ADRs, any ADRs or otherwise related to the deposit agreement or ADRs to the extent such information is requested or required by or pursuant to any lawful
authority, including without limitation laws, rules, regulations, administrative or judicial process, banking, securities or other regulators. The depositary shall
not be liable for the acts or omissions made by, or the insolvency of, any securities depository, clearing agency or settlement system. Furthermore, the
depositary shall not be responsible for, and shall incur no liability in connection with or arising from, the insolvency of any custodian that is not a branch or
affiliate of
. Notwithstanding anything to the contrary contained in the deposit agreement or any ADRs, the depositary shall not be
responsible for, and shall incur no liability in connection with or arising from, any act or omission to act on the part of the custodian except to the extent that
the custodian has (i) committed fraud or willful misconduct in the provision of custodial services to the depositary or (ii) failed to use reasonable care in the
provision of custodial services to the depositary as determined in accordance with the standards prevailing in the jurisdiction in which the custodian is
located. The depositary and the custodian(s) may use third party delivery services and providers of information regarding matters such as pricing, proxy
voting, corporate actions, class action litigation and other services in connection with the ADRs and the deposit agreement, and use local agents to provide
extraordinary services such as attendance at annual meetings of issuers of securities. Although the depositary and the custodian will use reasonable care
(and cause their agents to use reasonable care) in the selection and retention of such third party providers and local agents, they will not be responsible for
any errors or omissions made by them in providing the relevant information
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or services. The depositary shall not have any liability for the price received in connection with any sale of securities, the timing thereof or any delay in
action or omission to act nor shall it be responsible for any error or delay in action, omission to act, default or negligence on the part of the party so retained
in connection with any such sale or proposed sale.
The depositary has no obligation to inform ADR holders or other holders of an interest in any ADSs about the requirements of Cayman Islands or
People's Republic of China law, rules or regulations or any changes therein or thereto.
Additionally, none of us, the depositary or the custodian shall be liable for the failure by any ADR holder or beneficial owner therein to obtain the
benefits of credits on the basis of non-U.S. tax paid against such holder's or beneficial owner's income tax liability. Neither we nor the depositary shall incur
any liability for any tax consequences that may be incurred by ADR holders or beneficial owners therein on account of their ownership of ADRs or ADSs.
Neither the depositary nor its agents will be responsible for any failure to carry out any instructions to vote any of the deposited securities, for the manner
in which any such vote is cast or for the effect of any such vote. The depositary may rely upon instructions from us or our counsel in respect of any approval
or license required for any currency conversion, transfer or distribution. The depositary shall not incur any liability for the content of any information
submitted to it by us or on our behalf for distribution to ADR holders or for any inaccuracy of any translation thereof, for any investment risk associated with
acquiring an interest in the deposited securities, for the validity or worth of the deposited securities, for the credit-worthiness of any third party, for allowing
any rights to lapse upon the terms of the deposit agreement or for the failure or timeliness of any notice from us. The depositary shall not be liable for any acts
or omissions made by a successor depositary whether in connection with a previous act or omission of the depositary or in connection with any matter arising
wholly after the removal or resignation of the depositary. Neither the depositary nor any of its agents shall be liable to registered holders or beneficial owners
of interests in ADSs for any indirect, special, punitive or consequential damages (including, without limitation, legal fees and expenses) or lost profits, in
each case of any form incurred by any person or entity, whether or not foreseeable and regardless of the type of action in which such a claim may be brought.
In the deposit agreement each party thereto (including, for avoidance of doubt, each holder and beneficial owner and/or holder of interests in ADRs)
irrevocably waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in any suit, action or proceeding against the
depositary and/or us directly or indirectly arising out of or relating to the shares or other deposited securities, the ADSs or the ADRs, the deposit agreement or
any transaction contemplated therein, or the breach thereof (whether based on contract, tort, common law or any other theory).
The depositary and its agents may own and deal in any class of our securities and in ADSs.
Disclosure of Interest in ADSs
To the extent that the provisions of or governing any deposited securities may require disclosure of or impose limits on beneficial or other ownership of
deposited securities, other shares and other securities and may provide for blocking transfer, voting or other rights to enforce such disclosure or limits, you
agree to comply with all such disclosure requirements and ownership limitations and to comply with any reasonable instructions we may provide in respect
thereof. We reserve the right to instruct you to deliver your ADSs for cancellation and withdrawal of the deposited securities so as to permit us to deal with
you directly as a holder of shares and, by holding an ADS or an interest therein, you will be agreeing to comply with such instructions.
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Books of Depositary
The depositary or its agent will maintain a register for the registration, registration of transfer, combination and split-up of ADRs, which register shall
include the depositary's direct registration system. Registered holders of ADRs may inspect such records at the depositary's office at all reasonable times, but
solely for the purpose of communicating with other holders in the interest of the business of our company or a matter relating to the deposit agreement. Such
register may be closed at any time or from time to time, when deemed expedient by the depositary or, in the case of the issuance book portion of the ADR
register, when reasonably requested by us solely in order to enable us to comply with applicable law.
The depositary will maintain facilities for the delivery and receipt of ADRs.
Pre-release of ADSs
In its capacity as depositary, the depositary shall not lend shares or ADSs; provided, however, that the depositary may (i) issue ADSs prior to the receipt
of shares and (ii) deliver shares prior to the receipt of ADSs for withdrawal of deposited securities, including ADSs which were issued under (i) above but for
which shares may not have been received (each such transaction a "pre-release"). The depositary may receive ADSs in lieu of shares under (i) above (which
ADSs will promptly be canceled by the depositary upon receipt by the depositary) and receive shares in lieu of ADSs under (ii) above. Each such pre-release
will be subject to a written agreement whereby the person or entity (the "applicant") to whom ADSs or shares are to be delivered (a) represents that at the time
of the pre-release the applicant or its customer owns the shares or ADSs that are to be delivered by the applicant under such pre-release, (b) agrees to indicate
the depositary as owner of such shares or ADSs in its records and to hold such shares or ADSs in trust for the depositary until such shares or ADSs are
delivered to the depositary or the custodian, (c) unconditionally guarantees to deliver to the depositary or the custodian, as applicable, such shares or ADSs,
and (d) agrees to any additional restrictions or requirements that the depositary deems appropriate. Each such pre-release will be at all times fully
collateralized with cash, U.S. government securities or such other collateral as the depositary deems appropriate, terminable by the depositary on not more
than five (5) business days' notice and subject to such further indemnities and credit regulations as the depositary deems appropriate. The depositary will
normally limit the number of ADSs and shares involved in such pre-release at any one time to thirty percent (30%) of the ADSs outstanding (without giving
effect to ADSs outstanding under (i) above), provided, however, that the depositary reserves the right to change or disregard such limit from time to time as it
deems appropriate. The depositary may also set limits with respect to the number of ADSs and shares involved in pre-release with any one person on a caseby-case basis as it deems appropriate. The depositary may retain for its own account any compensation received by it in conjunction with the foregoing.
Collateral provided in connection with pre-release transactions, but not the earnings thereon, shall be held for the benefit of the ADR holders (other than
the applicant).
Appointment
In the deposit agreement, each registered holder of ADRs and each person holding an interest in ADSs, upon acceptance of any ADSs (or any interest
therein) issued in accordance with the terms and conditions of the deposit agreement will be deemed for all purposes to:
be a party to and bound by the terms of the deposit agreement and the applicable ADR or ADRs, and
appoint the depositary its attorney-in-fact, with full power to delegate, to act on its behalf and to take any and all actions contemplated in the
deposit agreement and the applicable ADR or ADRs, to adopt any and all procedures necessary to comply with applicable laws and to take
such action as the depositary in its sole discretion may deem necessary or appropriate to carry out the purposes of the deposit agreement and
the applicable ADR and ADRs, the taking of such actions to be the conclusive determinant of the necessity and appropriateness thereof.
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Governing Law and Jurisdiction
The deposit agreement and the ADRs shall be governed by and construed in accordance with the laws of the State of New York. In the deposit agreement,
we have submitted to the jurisdiction of the courts of the State of New York and appointed an agent for service of process on our behalf. Notwithstanding the
foregoing, (i) the depositary may, in its sole discretion, elect to institute any action, controversy, claim or dispute directly or indirectly based on, arising out
of or relating to the deposit agreement or the ADRs or the transactions contemplated thereby, including without limitation any question regarding its or their
existence, validity, interpretation, performance or termination, against any other party or parties to the deposit agreement (including, without limitation,
against ADR holders and owners of interests in ADSs), by having the matter referred to and finally resolved by an arbitration conducted under the terms
described below, and (ii) the depositary may in its sole discretion require that any action, controversy, claim, dispute, legal suit or proceeding brought against
the depositary by any party or parties to the deposit agreement (including, without limitation, by ADR holders and owners of interests in ADSs) shall be
referred to and finally settled by an arbitration conducted under the terms described below; provided however, to the extent there are specific federal
securities law violation aspects to any claims against us and/or the depositary brought by any registered holder of ADRs, the federal securities law violation
aspects of such claims brought by a registered holder of ADRs against us and/or the depositary may, at the option of such registered holder of ADRs, remain
in state or federal court in New York, New York and all other aspects, claims, disputes, legal suits, actions and/or proceedings brought by such ADR holders
against us and/or the depositary, including those brought along with, or in addition to, federal securities law violation claims, would be referred to arbitration
in accordance with the provisions of the deposit agreement. Any such arbitration shall be conducted in the English language either in New York, New York
in accordance with the Commercial Arbitration Rules of the American Arbitration Association or in Hong Kong following the arbitration rules of the United
Nations Commission on International Trade Law (UNCITRAL).
By holding an ADS or an interest therein, registered holders of ADRs and owners of ADSs each irrevocably agree that any legal suit, action or proceeding
against or involving us or the depositary, arising out of or based upon the deposit agreement, the ADSs or the transactions contemplated thereby, may only be
instituted in a state or federal court in New York, New York, and each irrevocably waives any objection which it may have to the laying of venue of any such
proceeding, and irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding.
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SHARES ELIGIBLE FOR FUTURE SALES
Upon completion of this offering, we will have
ADSs outstanding, representing approximately
% of our outstanding ordinary shares. All of
the ADSs sold in this offering will be freely transferable by persons other than by our "affiliates" without restriction or further registration under the Securities
Act. Sales of substantial amounts of our ADSs in the public market could adversely affect prevailing market prices of our ADSs. Prior to this offering, there
has been no public market for our ordinary shares or the ADSs. We intend to apply to list the ADSs on the
, but we cannot assure you that a regular
trading market will develop in the ADSs. We do not expect that a trading market will develop for our ordinary shares not represented by the ADSs.
Lock-up Agreements
[We have agreed, for a period of 180 days after the date of this prospectus, not to offer, sell, contract to sell, pledge, grant any option to purchase, make
any short sale, lend or otherwise dispose of, except in this offering, any of our ordinary shares or ADSs or securities that are substantially similar to our
ordinary shares or ADSs, including but not limited to any options or warrants to purchase our ordinary shares, ADSs or any securities that are convertible into
or exchangeable for, or that represent the right to receive, our ordinary shares, ADSs or any such substantially similar securities (other than upon the exercise
of an option or warrant or the conversion of a security outstanding on the date of the underwriting agreement of which the underwriters have been advised in
writing), without the prior written consent of the representatives of the underwriters.]
[Furthermore, each of our directors, executive officers and existing shareholders has also entered into a similar lock-up agreement for a period of
180 days from the date of this prospectus, subject to certain exceptions, with respect to our ordinary shares, ADSs and securities that are substantially similar
to our ordinary shares or ADSs. These restrictions also apply to any ADSs acquired by our directors and executive officers in the offering pursuant to the
directed share program. These parties collectively own all of our outstanding ordinary shares, without giving effect to this offering.]
The restrictions described in the preceding paragraphs will be automatically extended under certain circumstances. See "Underwriting."
Other than this offering, we are not aware of any plans by any significant shareholders to dispose of significant numbers of our ADSs or ordinary shares.
However, one or more existing shareholders or owners of securities convertible or exchangeable into or exercisable for our ADSs or ordinary shares may
dispose of significant numbers of our ADSs or ordinary shares in the future. We cannot predict what effect, if any, future sales of our ADSs or ordinary shares,
or the availability of ADSs or ordinary shares for future sale, will have on the trading price of our ADSs from time to time. Sales of substantial amounts of our
ADSs or ordinary shares in the public market, or the perception that these sales could occur, could adversely affect the trading price of our ADSs.
Rule 144
All of our ordinary shares that will be outstanding upon the completion of this offering, other than those Class A ordinary shares sold in this offering, are
"restricted securities" as that term is defined in Rule 144 under the Securities Act and may be sold publicly in the United States only if they are subject to an
effective registration statement under the Securities Act or pursuant to an exemption from the registration requirement such as those provided by Rule 144
and Rule 701 promulgated under the Securities Act. In general, beginning 90 days after the date of this prospectus, a person (or persons whose shares are
aggregated) who at the time of a sale is not, and has not been during the three months preceding the sale, an affiliate of ours and has beneficially owned our
restricted securities for at least six months will be entitled to sell the restricted securities without registration under the Securities Act, subject only to the
availability of current public information about us, and will be entitled to sell restricted
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securities beneficially owned for at least one year without restriction. Persons who are our affiliates and have beneficially owned our restricted securities for at
least six months may sell a number of restricted securities within any three-month period that does not exceed the greater of the following:
1% of the then outstanding ordinary shares of the same class, in the form of ADSs or otherwise, which immediately after this offering will
equal
ordinary shares, assuming the underwriters do not exercise their over-allotment option; or
the average weekly trading volume of our ordinary shares of the same class, in the form of ADSs or otherwise, during the four calendar weeks
preceding the date on which notice of the sale is filed with the SEC.
Sales by our affiliates under Rule 144 are also subject to certain requirements relating to manner of sale, notice and the availability of current public
information about us.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect, each of our employees, consultants or advisors who purchases our ordinary shares
from us in connection with a compensatory stock plan or other written agreement executed prior to the completion of this offering is eligible to resell those
ordinary shares in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period, contained in Rule 144. However,
the Rule 701 shares would remain subject to lock-up arrangements and would only become eligible for sale when the lock-up period expires.
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TAXATION
The following summary of the material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in our ADSs or ordinary shares
is based upon laws and relevant interpretations thereof in effect as of the date of this registration statement, all of which are subject to change. This summary
does not deal with all possible tax consequences relating to an investment in our ADSs or ordinary shares, such as the tax consequences under U.S. state and
local tax laws or under the tax laws of jurisdictions other than the Cayman Islands, the People's Republic of China and the United States.
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in
the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for
stamp duties which may be applicable on instruments executed in, or brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party
to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions
in the Cayman Islands.
People's Republic of China Taxation
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with "de facto management body"
within the PRC is considered a resident enterprise. The implementation rules define the term "de facto management body" as the body that exercises full and
substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the State
Administration of Taxation issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the "de facto management
body" of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled
by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the State
Administration of Taxation's general position on how the "de facto management body" text should be applied in determining the tax resident status of all
offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded
as a PRC tax resident by virtue of having its "de facto management body" in China only if all of the following conditions are met: (i) the primary location of
the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise's financial and human resource matters are made or are subject
to approval by organizations or personnel in the PRC; (iii) the enterprise's primary assets, accounting books and records, company seals, and board and
shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in
the PRC.
We believe that ZTO Express (Cayman) Inc. is not a PRC resident enterprise for PRC tax purposes. ZTO Express (Cayman) Inc. is not controlled by a
PRC enterprise or PRC enterprise group and we do not believe that ZTO Express (Cayman) Inc. meets all of the conditions above. ZTO Express (Cayman) Inc.
is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located,
and its records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside the PRC. However, the tax
resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term
"de facto management body."
If the PRC tax authorities determine that ZTO Express (Cayman) Inc. is a PRC resident enterprise for enterprise income tax purposes, we may be required
to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of our ADSs. In
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addition, non-resident enterprise shareholders (including our ADS holders) may be subject to a 10% PRC tax on gains realized on the sale or other
disposition of ADSs or ordinary shares, if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise,
dividends payable to our non-PRC individual shareholders (including our ADS holders) and any gain realized on the transfer of ADSs or ordinary shares by
such shareholders may be subject to PRC tax at a rate of 20% unless a reduced rate is available under an applicable tax treaty. It is also unclear whether nonPRC shareholders of ZTO Express (Cayman) Inc. would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in
the event that ZTO Express (Cayman) Inc. is treated as a PRC resident enterprise.
In January 2009, the State Administration of Taxation promulgated the Provisional Measures for the Administration of Withholding of Enterprise
Income Tax for Non-resident Enterprises, pursuant to which the entities that have the direct obligation to make certain payments to a non-resident enterprise
should be the relevant tax withholders for the non-resident enterprise, and such payments include: income from equity investments (including dividends and
other return on investment), interest, rents, royalties and income from assignment of property as well as other incomes subject to enterprise income tax
received by non-resident enterprises in China. Further, the measures provide that in case of an equity transfer between two non-resident enterprises which
occurs outside China, the non-resident enterprise which receives the equity transfer payment must, by itself or engage an agent to, file tax declaration with
the PRC tax authority located at place of the PRC company whose equity has been transferred, and the PRC company whose equity has been transferred
should assist the tax authorities to collect taxes from the relevant non-resident enterprise.
The State Administration of Taxation issued an SAT Circular 59 together with the Ministry of Finance in April 2009 and a SAT Circular 698 in
December 2009. By promulgating and implementing these two circulars, the PRC tax authorities have enhanced their scrutiny over the direct or indirect
transfer of equity interests in a PRC resident enterprise by a non-resident enterprise. Under SAT Circular 698, where a non-resident enterprise transfers the
equity interests of a PRC "resident enterprise" indirectly by disposition of the equity interests of an overseas holding company, and the overseas holding
company is located in a tax jurisdiction that: (1) has an effective tax rate less than 12.5% or (2) does not tax foreign income of its residents, the non-resident
enterprise, being the transferor, must report to the relevant tax authority of the PRC "resident enterprise" the indirect transfer. On February 3, 2015, the SAT
issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or SAT Public
Notice 7. SAT Public Notice 7 supersedes the rules with respect to the Indirect Transfer under SAT Circular 698, but does not touch upon the other provisions
of SAT Circular 698, which remain in force. SAT Public Notice 7 has introduced a new tax regime that is significantly different from the previous one under
SAT Circular 698. SAT Public Notice 7 extends its tax jurisdiction to not only Indirect Transfers set forth under SAT Circular 698 but also transactions
involving transfer of other taxable assets through offshore transfer of a foreign intermediate holding company. In addition, SAT Public Notice 7 provides
clearer criteria than SAT Circular 698 for assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and
the purchase and sale of equity through a public securities market. SAT Public Notice 7 also brings challenges to both foreign transferor and transferee
(or other person who is obligated to pay for the transfer) of taxable assets. Where a non-resident enterprise transfers taxable assets indirectly by disposing of
the equity interests of an overseas holding company, which is an Indirect Transfer, the non-resident enterprise as either transferor or transferee, or the PRC
entity that directly owns the taxable assets, may report such Indirect Transfer to the relevant tax authority. Using a "substance over form" principle, the PRC
tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of
reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the
transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of
equity interests in a PRC resident enterprise. Both the transferor and
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the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes. Our company
may be subject to filing obligations or taxed if our company is transferor in such transactions, and may be subject to withholding obligations if our company
is transferee in such transactions, under SAT Circular 698 and SAT Public Notice 7. For transfer of shares in our company by investors that are non-PRC
resident enterprises, our PRC subsidiaries may be requested to assist in the filing under SAT Circular 698 and SAT Public Notice 7. As a result, we may be
required to expend valuable resources to comply with SAT Circular 698 and SAT Public Notice 7 or to request the relevant transferors from whom we
purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material
adverse effect on our financial condition and results of operations.
United States Federal Income Tax Considerations
The following discussion is a summary of U.S. federal income tax considerations generally applicable to the ownership and disposition of our ADSs or
Class A ordinary shares by a U.S. Holder (as defined below) that acquires our ADSs in this offering and holds our ADSs as "capital assets" (generally, property
held for investment) under the U.S. Internal Revenue Code of 1986, as amended, or the Code. This discussion is based upon existing U.S. federal tax law,
which is subject to differing interpretations or change, possibly with retroactive effect. No ruling has been sought from the Internal Revenue Service, the IRS,
with respect to any U.S. federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary
position. This discussion, moreover, does not address the U.S. federal estate, gift, Medicare, and alternative minimum tax considerations, or any state, local
and non-U.S. tax considerations, relating to the ownership or disposition of our ADSs or Class A ordinary shares. The following summary does not address all
aspects of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances or to persons in special tax
situations such as:
banks and other financial institutions;
insurance companies;
pension plans;
cooperatives;
regulated investment companies;
real estate investment trusts;
broker-dealers;
traders in securities that elect to use a mark-to-market method of accounting;
certain former U.S. citizens or long-term residents;
tax-exempt entities (including private foundations);
persons liable for alternative minimum tax;
holders who acquire their ADSs or Class A ordinary shares pursuant to any employee share option or otherwise as compensation;
investors that will hold their ADSs or Class A ordinary shares as part of a straddle, hedge, conversion, constructive sale or other integrated
transaction for U.S. federal income tax purposes;
investors that have a functional currency other than the U.S. dollar;
persons that actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock; or
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partnerships or other entities taxable as partnerships for U.S. federal income tax purposes, or persons holding common stock through
such entities.
all of whom may be subject to tax rules that differ significantly from those discussed below.
Each U.S. Holder is urged to consult its tax advisor regarding the application of U.S. federal tax law to its particular circumstances, and the state, local,
non-U.S. and other tax considerations of the ownership and disposition of our ADSs or Class A ordinary shares.
General
For purposes of this discussion, a "U.S. Holder" is a beneficial owner of our ADSs or Class A ordinary shares that is, for U.S. federal income tax purposes:
an individual who is a citizen or resident of the United States;
a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created in, or organized under the law of the
United States or any state thereof or the District of Columbia;
an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
a trust (A) the administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have
the authority to control all substantial decisions of the trust or (B) that has otherwise validly elected to be treated as a U.S. person under
the Code.
If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of our ADSs or Class A ordinary shares,
the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding
our ADSs or Class A ordinary shares and their partners are urged to consult their tax advisors regarding an investment in our ADSs or Class A ordinary shares.
For U.S. federal income tax purposes, it is generally expected that a U.S. Holder of ADSs will be treated as the beneficial owner of the underlying shares
represented by the ADSs. The remainder of this discussion assumes that a U.S. Holder of our ADSs will be treated in this manner. Accordingly, deposits or
withdrawals of Class A ordinary shares for ADSs will generally not be subject to U.S. federal income tax.
Passive Foreign Investment Company Considerations
A non-U.S. corporation, such as our company, will be classified as a PFIC, for U.S. federal income tax purposes for any taxable year, if either (i) 75% or
more of its gross income for such year consists of certain types of "passive" income or (ii) 50% or more of the value of its assets (determined on the basis of a
quarterly average) during such year is attributable to assets that produce or are held for the production of passive income. For this purpose, cash and assets
readily convertible into cash are categorized as a passive asset and the company's goodwill and other unbooked intangibles are taken into account. Passive
income generally includes, among other things, dividends, interest, rents, royalties, and gains from the disposition of passive assets. We will be treated as
owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly,
more than 25% (by value) of the stock.
Although the law in this regard is not entirely clear, we treat our consolidated VIE as being owned by us for U.S. federal income tax purposes because we
control its management decisions and are entitled to substantially all of the economic benefits associated with this entity. As a result, we consolidate its
results of operations in our consolidated U.S. GAAP financial statements. If it were determined, however, that we
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are not the owner of the consolidated VIE for U.S. federal income tax purposes, we would likely be treated as a PFIC for the current taxable year and any
subsequent taxable year.
Assuming that we are the owner of the VIE for U.S. federal income tax purposes, and based upon our current and projected income and assets, including
the proceeds from this offering, and projections as to the value of our assets, based in part on the market value of our ADSs following this offering, we do not
expect to be a PFIC for the current taxable year or the foreseeable future. While we do not anticipate being or becoming a PFIC in the current or foreseeable
taxable years, no assurance can be given in this regard because the determination of whether we will be or become a PFIC is a factual determination made
annually that will depend, in part, upon the composition of our income and assets. Fluctuations in the market price of our ADSs may cause us to be classified
as a PFIC for the current or future taxable years because the value of our assets for purposes of the asset test, including the value of our goodwill and
unbooked intangibles, may be determined by reference to the market price of our ADSs from time to time (which may be volatile). In estimating the value of
our goodwill and other unbooked intangibles, we have taken into account the expected cash proceeds and our anticipated market capitalization following
this offering. If our market capitalization subsequently declines, we may be or become classified as a PFIC for the current taxable year or future taxable years.
Furthermore, the composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in this
offering. Under circumstances where our revenue from activities that produce passive income significantly increase relative to our revenue from activities that
produce non-passive income, or where we determine not to deploy significant amounts of cash for active purposes, our risk of becoming classified as a PFIC
may substantially increase.
If we are classified as a PFIC for any year during which a U.S. Holder holds our ADSs or ordinary shares, the PFIC rules discussed below under "Passive
Foreign Investment Company Rules" generally will apply to such U.S. Holder for such taxable year, and unless the U.S. Holder makes certain elections, will
apply in future years even if we cease to be a PFIC.
The discussion below under "Dividends" and "Sale or Other Disposition" is written on the basis that we will not be or become classified as a PFIC for
U.S. federal income tax purposes. The U.S. federal income tax rules that apply generally if we are treated as a PFIC are discussed below under "Passive Foreign
Investment Company Rules."
Dividends
Subject to the discussion below under "Passive Foreign Investment Company Rules," any cash distributions (including the amount of any PRC tax
withheld) paid on our ADSs or Class A ordinary shares out of our current or accumulated earnings and profits, as determined under U.S. federal income tax
principles, will generally be includible in the gross income of a U.S. Holder as dividend income on the day actually or constructively received by the
U.S. Holder, in the case of Class A ordinary shares, or by the depositary, in the case of ADSs. Because we do not intend to determine our earnings and profits
on the basis of U.S. federal income tax principles, any distribution we pay will generally be treated as a "dividend" for U.S. federal income tax purposes.
Dividends received on our ADSs or Class A ordinary shares will not be eligible for the dividends received deduction allowed to corporations. A noncorporate U.S. Holder will be subject to tax at the lower capital gain tax rate applicable to "qualified dividend income," provided that certain conditions are
satisfied, including that (1) our ADSs are readily tradeable on an established securities market in the United States, or, in the event that we are deemed to be a
PRC resident enterprise under the PRC tax law, we are eligible for the benefit of the United States-PRC income tax treaty, (2) we are neither a PFIC nor treated
as such with respect to a U.S. Holder (as discussed below) for the taxable year in which the dividend was paid and the preceding taxable year, and (3) certain
holding period requirements are met. We expect our ADSs (but not our ordinary share) will be readily tradeable on an established securities market in the
United States. There can be no assurance, however, that our ADSs will be considered readily tradeable on an established securities market in later years.
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In the event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law (see "TaxationPeople's Republic of China
Taxation"), a U.S. Holder may be subject to PRC withholding taxes on dividends paid on our ADSs or Class A ordinary shares. We may, however, be eligible
for the benefits of the United States-PRC income tax treaty. If we are eligible for such benefits, dividends we pay on our Class A ordinary shares, regardless of
whether such shares are represented by the ADSs, would be eligible for the reduced rates of taxation described in the preceding paragraph.
Dividends will generally be treated as income from foreign sources for U.S. foreign tax credit purposes and will generally constitute passive category
income. Depending on the U.S. Holder's individual facts and circumstances, a U.S. Holder may be eligible, subject to a number of complex limitations, to
claim a foreign tax credit in respect of any foreign withholding taxes imposed on dividends received on our ADSs or Class A ordinary shares. A U.S. Holder
who does not elect to claim a foreign tax credit for foreign tax withheld may instead claim a deduction, for U.S. federal income tax purposes, in respect of
such withholding, but only for a year in which such holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax credit
are complex and their outcome depends in large part on the U.S. Holder's individual facts and circumstances. Accordingly, U.S. Holders are urged to consult
their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.
Sale or Other Disposition
Subject to the discussion below under "Passive Foreign Investment Company Rules," a U.S. Holder will generally recognize capital gain or loss upon the
sale or other disposition of ADSs or Class A ordinary shares in an amount equal to the difference between the amount realized upon the disposition and the
holder's adjusted tax basis in such ADSs or Class A ordinary shares. Any capital gain or loss will be long-term if the ADSs or Class A ordinary shares have
been held for more than one year and will generally be U.S.-source gain or loss for U.S. foreign tax credit purposes. In the event that gain from the disposition
of the ADSs or Class A ordinary shares is subject to tax in the PRC, such gain may be treated as PRC source gain under the United States-PRC income tax
treaty. The deductibility of a capital loss may be subject to limitations. U.S. Holders are urged to consult their tax advisors regarding the tax consequences if
a foreign tax is imposed on a disposition of our ADSs or Class A ordinary shares, including the availability of the foreign tax credit under their particular
circumstances.
Passive Foreign Investment Company Rules
If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares, and unless the U.S. Holder makes
a mark-to-market election (as described below), the U.S. Holder will generally be subject to special tax rules on (i) any excess distribution that we make to the
U.S. Holder (which generally means any distribution paid during a taxable year to a U.S. Holder that is greater than 125 percent of the average annual
distributions paid in the three preceding taxable years or, if shorter, the U.S. Holder's holding period for the ADSs or Class A ordinary shares), and (ii) any
gain realized on the sale or other disposition of ADSs or Class A ordinary shares. Under the PFIC rules:
the excess distribution or gain will be allocated ratably over the U.S. Holder's holding period for the ADSs or Class A ordinary shares;
the amount allocated to the current taxable year and any taxable years in the U.S. Holder's holding period prior to the first taxable year in
which we are classified as a PFIC (each, a "pre-PFIC year"), will be taxable as ordinary income;
the amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect for individuals
or corporations, as appropriate, for that year; and
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the interest charge generally applicable to underpayments of tax will be imposed on the tax attributable to each prior taxable year, other than a
pre-PFIC year.
If we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares and any of our subsidiaries is also a PFIC,
such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these
rules. U.S. Holders are urged to consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries.
As an alternative to the foregoing rules, a U.S. Holder of "marketable stock" in a PFIC may make a mark-to-market election with respect to such stock,
provided that such stock is regularly traded. For those purposes, our ADSs, but not our ordinary shares, will be treated as marketable stock upon their listing
on the NYSE. We anticipate that our ADSs should qualify as being regularly traded, but no assurances may be given in this regard. If a U.S. Holder makes this
election, the holder will generally (i) include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market value of ADSs
held at the end of the taxable year over the adjusted tax basis of such ADSs and (ii) deduct as an ordinary loss the excess, if any, of the adjusted tax basis of
the ADSs over the fair market value of such ADSs held at the end of the taxable year, but such deduction will only be allowed to the extent of the amount
previously included in income as a result of the mark-to-market election. The U.S. Holder's adjusted tax basis in the ADSs would be adjusted to reflect any
income or loss resulting from the mark-to-market election. If a U.S. Holder makes a mark-to-market election in respect of a corporation classified as a PFIC
and such corporation ceases to be classified as a PFIC, the holder will not be required to take into account the gain or loss described above during any period
that such corporation is not classified as a PFIC. If a U.S. Holder makes a mark-to-market election, any gain such U.S. Holder recognizes upon the sale or other
disposition of our ADSs in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as ordinary loss, but such loss will only
be treated as ordinary loss to the extent of the net amount previously included in income as a result of the mark-to-market election.
Because a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to be subject to the PFIC rules
with respect to such U.S. Holder's indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal income
tax purposes.
We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections which, if available, would result in tax
treatment different from (and generally less adverse than) the general tax treatment for PFICs described above.
If a U.S. Holder owns our ADSs or Class A ordinary shares during any taxable year that we are a PFIC, the holder must generally file an annual IRS
Form 8621. You should consult your tax advisors regarding the U.S. federal income tax consequences of owning and disposing of our ADSs or Class A
ordinary shares if we are or become a PFIC.
Information Reporting
Certain U.S. Holders may be required to report information to the IRS with respect to the beneficial ownership of our ADSs or Class A ordinary shares.
These rules also impose penalties if a U.S. Holder is required to submit such information to the IRS and fails to do so.
In addition, U.S. Holders may be subject to information reporting to the IRS with respect to dividends on and proceeds from the sale or other disposition
of our ADSs or Class A ordinary shares. Each U.S. Holder is advised to consult with its tax advisor regarding the application of the U.S. information reporting
rules to their particular circumstances.
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UNDERWRITING
Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below, for
whom
,
and
are acting as representatives, have severally agreed to purchase, and we have agreed to sell to them,
severally, the number of ADSs indicated below:
Name
Number of ADSs
Morgan Stanley & Co. International plc

Goldman Sachs (Asia) L.L.C.
China Renaissance Securities (Hong Kong) Limited
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
J.P. Morgan Securities LLC
Total:
The underwriters and the representatives are collectively referred to as the "underwriters" and the "representatives," respectively. The underwriters are
offering the ADSs subject to their acceptance of the ADSs from us and subject to prior sale. The underwriting agreement provides that the obligations of the
several underwriters to pay for and accept delivery of the ADSs offered by this prospectus are subject to the approval of certain legal matters by their counsel
and to certain other conditions. The underwriters are obligated to take and pay for all of the ADSs offered by this prospectus if any such ADSs are taken.
However, the underwriters are not required to take or pay for the ADSs covered by the underwriters' over-allotment option described below.
The underwriters initially propose to offer part of the ADSs directly to the public at the offering price listed on the cover page of this prospectus and part
to certain dealers. After the initial offering of the ADSs, the offering price and other selling terms may from time to time be varied by the representatives.
We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to
additional ADSs at the
public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option
solely for the purpose of covering over-allotments, if any, made in connection with the offering of the ADSs offered by this prospectus. To the extent the
option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional ADSs as
the number listed next to the underwriter's name in the preceding table bears to the total number of ADSs listed next to the names of all underwriters in the
preceding table.
The following table shows the per ADS and total public offering price, underwriting discounts and commissions, and proceeds before expenses to us.
These amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase up to an additional
ADSs.
Total
Per
ADS
Public offering price

Underwriting discounts and commissions to be paid by us:
Proceeds, before expenses, to us
$
$
$
No
Exercise
$
$
$
Full
Exercise
$
$
$
The estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately $
reimburse the underwriters for certain out-of-pocket expenses of the underwriters payable by us, in an aggregate amount not to exceed $
. We have agreed to
.
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The underwriters have informed us that they do not intend sales to discretionary accounts to exceed 5% of the total number of ADSs offered by them.
Some of the underwriters are expected to make offers and sales both inside and outside the United States through their respective selling agents. Any
offers or sales in the United States will be conducted by broker-dealers registered with the SEC. Morgan Stanley & Co. International plc will offer ADSs in the
United States through its registered broker-dealer affiliate in the United States, Morgan Stanley & Co. LLC. Goldman Sachs (Asia) L.L.C. will offer ADSs in
the United States through its SEC-registered broker-dealer affiliate in the United States, Goldman, Sachs & Co. China Renaissance Securities (Hong Kong)
Limited will offer ADSs in the United States through its SEC-registered broker-dealer affiliate in the United States, China Renaissance Securities (US) Inc. We
intend to apply for the listing of our ADSs on the New York Stock Exchange under the trading symbol "ZTO."
[We and all directors and officers and the holders of all of our outstanding ordinary shares and share options have agreed that, without the prior written
consent of the representatives on behalf of the underwriters, we and they will not, during the period ending 180 days after the date of this prospectus
(the "restricted period"):
offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any ordinary shares, ADSs or any securities convertible into
or exercisable or exchangeable for ordinary shares or ADSs;
file any registration statement with the Securities and Exchange Commission relating to the offering of any ordinary shares, ADSs or any
securities convertible into or exercisable or exchangeable for ordinary shares or ADSs; or
enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of
ordinary shares or ADSs.
whether any such transaction described above is to be settled by delivery of ordinary shares, ADSs or such other securities, in cash or
otherwise. In addition, we and each such person agrees that, without the prior written consent of the representatives on behalf of the
underwriters, we or such other person will not, during the restricted period, make any demand for, or exercise any right with respect to, the
registration of any ordinary shares, ADSs or any security convertible into or exercisable or exchangeable for ordinary shares or ADSs.
The restrictions described in the preceding paragraph are subject to certain exceptions.]
The representatives, in their sole discretion, may release the ordinary shares, ADSs and other securities subject to the lock-up agreements described above
in whole or in part at any time.
In order to facilitate the offering of the ADSs, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the
ADSs. Specifically, the underwriters may sell more ADSs than they are obligated to purchase under the underwriting agreement, creating a short position. A
short sale is covered if the short position is no greater than the number of ADSs available for purchase by the underwriters under the over-allotment option.
The underwriters can close out a covered short sale by exercising the over-allotment option or purchasing ADSs in the open market. In determining the source
of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available
under the over-allotment option. The underwriters may also sell ADSs in excess of the over-allotment option, creating a naked short position. The
underwriters must close out any naked short position by purchasing ADSs in the open market. A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on the price of the ADSs in the open market after pricing that could adversely affect
investors who purchase in this offering. As an additional means of facilitating this offering, the underwriters may bid
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for, and purchase, ADSs in the open market to stabilize the price of the ADSs. Finally, the underwriters may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the ADSs in this offering, if the syndicate repurchases previously distributed ADSs to cover syndicate short positions
or to stabilize the price of the ADSs. These activities may raise or maintain the market price of the ADSs above independent market levels or prevent or retard
a decline in the market price of the ADSs. The underwriters are not required to engage in these activities and may end any of these activities at any time.
We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any,
participating in this offering. The representatives may agree to allocate a number of ADSs to underwriters for sale to their online brokerage account holders.
Internet distributions will be allocated by the representatives to underwriters that may make Internet distributions on the same basis as other allocations.
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading,
commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and
brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various
financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.
In addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of
investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own
account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and
securities activities may involve our securities and instruments. The underwriters and their respective affiliates may also make investment recommendations
or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they
acquire, long or short positions in such securities and instruments.
Pricing of the Offering
Prior to this offering, there has been no public market for our ordinary shares or ADSs. The initial public offering price was determined by negotiations
between us and the representatives. Among the factors considered in determining the initial public offering price were our future prospects and those of our
industry in general, our sales, earnings and certain other financial and operating information in recent periods, and the price-earnings ratios, price-sales ratios,
market prices of securities, and certain financial and operating information of companies engaged in activities similar to ours.
Directed Share Program
At our request, the underwriters have reserved
percent of the ADSs to be issued by the Company and offered by this prospectus for sale, at the
initial public offering price, to our directors, officers, employees, business associates and related persons. The number of ADSs available for sale to the
general public will be reduced to the extent these individuals purchase such reserved ADSs. Any reserved ADSs that are not so purchased will be offered by
the underwriters to the general public on the same basis as the other ADSs offered by this prospectus.
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Selling Restrictions
No action may be taken in any jurisdiction other than the United States that would permit a public offering of the ADSs or the possession, circulation or
distribution of this prospectus in any jurisdiction where action for that purpose is required. Accordingly, the ADSs may not be offered or sold, directly or
indirectly, and neither the prospectus nor any other offering material or advertisements in connection with the ADSs may be distributed or published in or
from any country or jurisdiction except under circumstances that will result in compliance with any applicable laws, rules and regulations of any such
country or jurisdiction.
Australia
This document has not been lodged with the Australian Securities & Investments Commission and is only directed to certain categories of exempt
persons. Accordingly, if you receive this document in Australia:
(a)
you confirm and warrant that you are either:

(i)
"sophisticated investor" under section 708(8)(a) or (b) of the Corporations Act 2001 (Cth) of Australia, or the Corporations Act;
(ii)
"sophisticated investor" under section 708(8)(c) or (d) of the Corporations Act and that you have provided an accountant's certificate to
the company which complies with the requirements of section 708(8)(c)(i) or (ii) of the Corporations Act and related regulations before
the offer has been made;
(iii)
person associated with the company under section 708(12) of the Corporations Act; or
(iv)
"professional investor" within the meaning of section 708(11)(a) or (b) of the Corporations Act;
and to the extent that you are unable to confirm or warrant that you are an exempt sophisticated investor, associated person or professional investor
under the Corporations Act, any offer made to you under this document is void and incapable of acceptance;
(b)
you warrant and agree that you will not offer any of the ADSs issued to you pursuant to this document for resale in Australia within 12 months
of those ADSs being issued unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the
Corporations Act.
Canada
The ADSs may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National
Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National
Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the ADSs must be made in accordance with an
exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus
(including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within
the time limit prescribed by the securities legislation of the purchaser's province or territory. The purchaser should refer to any applicable provisions of the
securities legislation of the purchaser's province or territory for particulars of these rights or consult with a legal advisor.
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Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National
Instrument 33-105 Underwriting Conflicts ("NI 33-105"), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding
underwriter conflicts of interest in connection with this offering.
Cayman Islands
This prospectus does not constitute an invitation or offer to the public in the Cayman Islands of the ADSs, whether by way of sale or subscription. The
underwriters have not offered or sold, and will not offer or sell, directly or indirectly, any ADSs in the Cayman Islands.
Dubai International Finance Center
This document relates to an Exempt Offer, as defined in the Offered Securities Rules module of the DFSA Rulebook, or the OSR, in accordance with the
Offered Securities Rules of the Dubai Financial Services Authority. This document is intended for distribution only to Persons, as defined in the OSR, of a
type specified in those rules. It must not be delivered to, or relied on by, any other Person. The Dubai Financial Services Authority has no responsibility for
reviewing or verifying any documents in connection with Exempt Offers. The Dubai Financial Services Authority has not approved this document nor taken
steps to verify the information set out in it, and has no responsibility for it. The ADSs to which this document relates may be illiquid and/or subject to
restrictions on their resale. Prospective purchasers of the ADSs offered should conduct their own due diligence on the ADSs. If you do not understand the
contents of this document you should consult an authorized financial adviser.
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State") an
offer to the public of any shares which are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State unless
the prospectus has been approved by the competent authority in such Relevant Member State or, where appropriate, approved in another Relevant Member
State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that an offer to the
public in that Relevant Member State of any shares may be made at any time under the following exemptions under the Prospectus Directive, if they have
been implemented in that Relevant Member State:
to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate
purpose is solely to invest in securities;
to any legal entity which has two or more of (i) an average of at least 250 employees during the last financial year; (ii) a total balance sheet of
more than 43,000,000 and (iii) an annual net turnover of more than 50,000,000, as shown in its last annual or consolidated accounts;
by the underwriters to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending
Directive, 150, natural or legal persons (other than "qualified investors" as defined in the Prospectus Directive) subject to obtaining the prior
consent of the representatives for any such offer; or
in any other circumstances falling within Article 3(2) of the Prospectus Directive; provided that no such offer of shares shall result in a
requirement for the publication by us or any representative of a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a
prospectus pursuant to Article 16 of the Prospectus Directive.
Any person making or intending to make any offer of shares within the EEA should only do so in circumstances in which no obligation arises for us or
any of the underwriters to produce a prospectus for
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such offer. Neither we nor the underwriters have authorized, nor do they authorize, the making of any offer of shares through any financial intermediary, other
than offers made by the underwriters which constitute the final offering of shares contemplated in this prospectus.
For the purposes of this provision, and your representation below, the expression an "offer to the public" in relation to any shares in any Relevant
Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to
enable an investor to decide to purchase any shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus
Directive in that Relevant Member State and the expression "Prospectus Directive" means Directive 2003/71/EC (including the 2010 PD Amending
Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in each Relevant Member State and the
expression "2010 PD Amending Directive" means Directive 2010/73/EU.
Each person in a Relevant Member State who receives any communication in respect of, or who acquires any shares under, the offer of shares
contemplated by this prospectus will be deemed to have represented, warranted and agreed to and with us and each underwriter that:
it is a "qualified investor" within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus
Directive; and
in the case of any shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (i) the shares
acquired by it in the offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in
any Relevant Member State other than "qualified investors" (as defined in the Prospectus Directive), or in circumstances in which the prior
consent of the representatives has been given to the offer or resale; or (ii) where shares have been acquired by it on behalf of persons in any
Relevant Member State other than qualified investors, the offer of those shares to it is not treated under the Prospectus Directive as having
been made to such persons.
In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be
directed at persons who are "qualified investors" (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to
investments falling within Article 19 (5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, or the Order, and/or
(ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order
(all such persons together being referred to as "relevant persons"). This document must not be acted on or relied on in the United Kingdom by persons who are
not relevant persons. In the United Kingdom, any investment or investment activity to which this document relates is only available to, and will be engaged
in with, relevant persons.
Hong Kong
The ADSs may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the
public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32, Laws of Hong Kong), or (ii) to "professional
investors" within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other
circumstances which do not result in the document being a "prospectus" within the meaning of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the ADSs may be issued or may be in the possession of
any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed
or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to ADSs which are or are intended to
be disposed of only to persons outside
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Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules
made thereunder.
Japan
The ADSs have not been and will not be registered under the Financial Instruments and Exchange Law of Japan, and ADSs will not be offered or sold,
directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any
corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan,
except pursuant to any exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and
any other applicable laws, regulations and ministerial guidelines of Japan.
Korea
The ADSs may not be offered, sold and delivered directly or indirectly, or offered or sold to any person for reoffering or resale, directly or indirectly, in
Korea or to any resident of Korea except pursuant to the applicable laws and regulations of Korea, including the Korea Securities and Exchange Act and the
Foreign Exchange Transaction Law and the decrees and regulations thereunder. The ADSs have not been registered with the Financial Services Commission
of Korea for public offering in Korea. Furthermore, the ADSs may not be resold to Korean residents unless the purchaser of the ADSs complies with all
applicable regulatory requirements (including but not limited to government approval requirements under the Foreign Exchange Transaction Law and its
subordinate decrees and regulations) in connection with the purchase of the ADSs.
Kuwait
Unless all necessary approvals from the Kuwait Ministry of Commerce and Industry required by Law No. 31/1990 "Regulating the Negotiation of
Securities and Establishment of Investment Funds," its Executive Regulations and the various Ministerial Orders issued pursuant thereto or in connection
therewith, have been given in relation to the marketing and sale of the ADSs, these may not be marketed, offered for sale, nor sold in the State of Kuwait.
Neither this prospectus (including any related document), nor any of the information contained therein is intended to lead to the conclusion of any contract
of whatsoever nature within Kuwait.
Malaysia
No prospectus or other offering material or document in connection with the offer and sale of the securities has been or will be registered with the
Securities Commission of Malaysia, or Commission, for the Commission's approval pursuant to the Capital Markets and Services Act 2007. Accordingly, this
prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the securities may not be
circulated or distributed, nor may the securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or
indirectly, to persons in Malaysia other than (i) a closed end fund approved by the Commission; (ii) a holder of a Capital Markets Services License; (iii) a
person who acquires the securities as principal, if the offer is on terms that the securities may only be acquired at a consideration of not less than RM250,000
(or its equivalent in foreign currencies) for each transaction; (iv) an individual whose total net personal assets or total net joint assets with his or her spouse
exceeds RM3 million (or its equivalent in foreign currencies), excluding the value of the primary residence of the individual; (v) an individual who has a
gross annual income exceeding RM300,000 (or its equivalent in foreign currencies) per annum in the preceding twelve months; (vi) an individual who,
jointly with his or her spouse, has a gross annual income of RM400,000 (or its equivalent in foreign currencies), per annum in the preceding twelve months;
(vii) a corporation with total net assets exceeding RM10 million (or its equivalent in a foreign currencies) based
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on the last audited accounts; (viii) a partnership with total net assets exceeding RM10 million (or its equivalent in foreign currencies); (ix) a bank licensee or
insurance licensee as defined in the Labuan Financial Services and Securities Act 2010; (x) an Islamic bank licensee or takaful licensee as defined in the
Labuan Financial Services and Securities Act 2010; and (xi) any other person as may be specified by the Commission; provided that, in the each of the
preceding categories (i) to (xi), the distribution of the securities is made by a holder of a Capital Markets Services License who carries on the business of
dealing in securities. The distribution in Malaysia of this prospectus is subject to Malaysian laws. This prospectus does not constitute and may not be used
for the purpose of public offering or an issue, offer for subscription or purchase, invitation to subscribe for or purchase any securities requiring the registration
of a prospectus with the Commission under the Capital Markets and Services Act 2007.
Mexico
None of the ADSs or the ordinary shares have been or will be registered with the National Securities Registry (Registro Nacional de Valores) maintained
by the Mexican National Banking and Securities Commission (Comisin Nacional Bancaria y de Valores) of Mexico and, as a result, may not be offered or
sold publicly in Mexico. The ADSs and the ordinary shares may only be sold to Mexican institutional and qualified investors, pursuant to the private
placement exemption set forth in the Mexican Securities Market Law (Ley del Mercado de Valores).
People's Republic of China
This prospectus has not been and will not be circulated or distributed in the PRC, and ADSs may not be offered or sold, and will not be offered or sold to
any person for re-offering or resale, directly or indirectly, to any resident of the PRC except pursuant to applicable laws and regulations of the PRC.
Qatar
In the State of Qatar, the offer contained herein is made on an exclusive basis to the specifically intended recipient thereof, upon that person's request and
initiative, for personal use only and shall in no way be construed as a general offer for the sale of securities to the public or an attempt to do business as a
bank, an investment company or otherwise in the State of Qatar. This prospectus and the underlying securities have not been approved or licensed by the
Qatar Central Bank or the Qatar Financial Centre Regulatory Authority or any other regulator in the State of Qatar. The information contained in this
prospectus shall only be shared with any third parties in Qatar on a need to know basis for the purpose of evaluating the contained offer. Any distribution of
this prospectus by the recipient to third parties in Qatar beyond the terms hereof is not permitted and shall be at the liability of such recipient.
Saudi Arabia
This prospectus may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Offers of Securities Regulations
issued by the Capital Market Authority. The Capital Market Authority does not make any representation as to the accuracy or completeness of this
prospectus, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this prospectus. Prospective
purchasers of the securities offered hereby should conduct their own due diligence on the accuracy of the information relating to the securities. If you do not
understand the contents of this prospectus you should consult an authorized financial adviser.
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document
or material in connection with the offer or sale, or invitation for subscription or purchase, of our ADSs may not be circulated or distributed, nor may our
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ADSs be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than
(i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or SFA, (ii) to a relevant person or any person
pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA, and in accordance with the conditions specified in
Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case
subject to compliance with conditions set forth in the SFA.
Where our ADSs are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor as
defined in Section 4A of the SFA) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals,
each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each
beneficiary of the trust is an individual who is an accredited investor; shares, debentures and units of shares and debentures of that corporation or the
beneficiaries' rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired
the ADSs under Section 275 of the SFA, except: (1) to an institutional investor (for corporations under Section 274 of the SFA) or to a relevant person defined
in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of
that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for
each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with
the conditions, specified in Section 275 of the SFA; (2) where no consideration is or will be given for the transfer; or (3) where the transfer is by operation
of law.
Switzerland
The ADSs will not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or
regulated trading facility in Switzerland. This prospectus has been prepared without regard to the disclosure standards for issuance prospectuses under art.
652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing
rules of any other stock exchange or regulated trading facility in Switzerland.
Neither this prospectus nor any other offering or marketing material relating to our company or the ADSs have been or will be filed with or approved by
any Swiss regulatory authority. In particular, this prospectus will not be filed with, and the offer of the ADSs will not be supervised by, the Swiss Financial
Market Supervisory Authority, and the offer of the ADSs has not been and will not be authorized under the Swiss Federal Act on Collective Investment
Schemes (the "CISA"). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers
of the ADSs.
Taiwan
The ADSs have not been and will not be registered or filed with, or approved by, the Financial Supervisory Commission of Taiwan pursuant to relevant
securities laws and regulations and may not be offered or sold in Taiwan through a public offering or in circumstances which constitute an offer within the
meaning of the Securities and Exchange Act of Taiwan or relevant laws and regulations that require a registration, filing or approval of the Financial
Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorized to offer or sell the ADSs in Taiwan.
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United Arab Emirates
This prospectus is not intended to constitute an offer, sale or delivery of shares or other securities under the laws of the United Arab Emirates, or the UAE.
The ADSs have not been and will not be registered under Federal Law No. 4 of 2000 Concerning the Emirates Securities and Commodities Authority and the
Emirates Security and Commodity Exchange, or with the UAE Central Bank, the Dubai Financial Market, the Abu Dhabi Securities Market or with any other
UAE exchange.
The offering, the ADSs and interests therein have not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities in
the UAE, and do not constitute a public offer of securities in the UAE in accordance with the Commercial Companies Law, Federal Law No. 8 of 1984
(as amended) or otherwise.
In relation to its use in the UAE, this prospectus is strictly private and confidential and is being distributed to a limited number of investors and must not
be provided to any person other than the original recipient, and may not be reproduced or used for any other purpose. The interests in the ADSs may not be
offered or sold directly or indirectly to the public in the UAE.
United Kingdom
Each underwriter has represented and agreed that:
(a)
i t has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or
inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 ("FSMA")
received by it in connection with the issue or sale of the ADSs in circumstances in which Section 21(1) of the FSMA does not apply to us; and
(b)
i t has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the ADSs in,
from or otherwise involving the United Kingdom.
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EXPENSES RELATED TO THIS OFFERING
Set forth below is an itemization of the total expenses, excluding underwriting discount, that we expect to incur in connection with this offering. With
the exception of the SEC registration fee, the Financial Industry Regulatory Authority, or FINRA, filing fee, and the NYSE market entry and listing fee, all
amounts are estimates.
SEC Registration Fee
FINRA Filing Fee
NYSE Market Entry and Listing Fee
Printing Expenses
Legal Fees and Expenses
Accounting Fees and Expenses
Miscellaneous
Total
$
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LEGAL MATTERS
We are being represented by Skadden, Arps, Slate, Meagher & Flom LLP with respect to certain legal matters as to United States federal securities and
New York State law. The underwriters are being represented by Kirkland & Ellis International LLP with respect to certain legal matters as to United States
federal securities and New York State law. The validity of the ordinary shares represented by the ADSs offered in this offering will be passed upon for us by
Maples and Calder. Certain legal matters as to PRC law will be passed upon for us by Zhong Lun Law Firm and for the underwriters by JunHe Law Offices.
Skadden, Arps, Slate, Meagher & Flom LLP may rely upon Maples and Calder with respect to matters governed by Cayman Islands law and Zhong Lun Law
Firm with respect to matters governed by PRC law. Kirkland & Ellis International LLP may rely upon JunHe Law Offices with respect to matters governed by
PRC law.
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EXPERTS
The consolidated financial statements as of December 31, 2014 and 2015, and for each of the two years in the period ended December 31, 2015, and the
related financial statement schedule included in this prospectus have been audited by Deloitte Touche Tohmatsu Certified Public Accountants LLP, an
independent registered public accounting firm, as stated in their report appearing herein (which report expresses an unqualified opinion on the financial
statements and includes an explanatory paragraph referring to the translation of Renminbi amounts to United States dollar amounts). Such financial
statements and financial statement schedule are included in reliance upon the report of such firm given upon their authority as experts in accounting
and auditing.
The offices of Deloitte Touche Tohmatsu Certified Public Accountants LLP are located at Bund Center, 30th Floor 222 Yan An Road East, Shanghai, the
People's Republic of China.
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed a registration statement, including relevant exhibits, with the SEC on Form F-1 under the Securities Act with respect to the underlying
ordinary shares represented by the ADSs to be sold in this offering. We have also filed a related registration statement on Form F-6 with the SEC to register
the ADSs. This prospectus, which constitutes a part of the registration statement on Form F-1, does not contain all of the information contained in the
registration statement. You should read our registration statements and their exhibits and schedules for further information with respect to us and our ADSs.
Immediately upon the effectiveness of the registration statement on Form F-1 of which this prospectus forms a part, we will become subject to periodic
reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Accordingly, we will be required to file reports,
including annual reports on Form 20-F, and other information with the SEC. All information filed with the SEC can be obtained over the internet at the SEC's
website at www.sec.gov or inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You
can request copies of documents, upon payment of a duplicating fee, by writing to the SEC.
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ZTO EXPRESS (CAYMAN) INC.

INDEX TO FINANCIAL STATEMENTS
Page
Consolidated Financials Statements for the Years Ended December 31, 2014 and 2015
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Balance Sheets as of December 31, 2014 and 2015
F-3
Consolidated Statements of Comprehensive Income for the years ended December 31, 2014 and 2015
F-4
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2014 and 2015
F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2015
F-6
Notes to Consolidated Financial Statements
F-9
Financial Statements Schedule IFinancial Information of Parent Company
F-46
Unaudited Condensed Consolidated Financials Statements for the Six Months Ended June 30, 2015 and 2016
Unaudited Condensed Consolidated Balance Sheets as of December 31, 2015 and June 30, 2016
F-50
Unaudited Condensed Consolidated Statements of Comprehensive Income for the six months ended June 30,
2015 and 2016
F-52
Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity for the six months ended
June 30, 2016
F-53
Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2016
F-54
Notes to the Unaudited Condensed Consolidated Financial Statements
F-56
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of ZTO Express (Cayman) Inc.
We have audited the accompanying consolidated balance sheets of ZTO Express (Cayman) Inc. (the "Company"), its subsidiaries, variable interest entity
and subsidiaries of variable interest entity (the "Group") as of December 31, 2014 and 2015, and the related consolidated statements of comprehensive
income, changes in shareholders' equity, and cash flows for each of the two years in the period ended December 31, 2015 and related financial statement
schedule included in Schedule I. These consolidated financial statements and financial statement schedule are the responsibility of the Group's management.
Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Group is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, such consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the
Group as of December 31, 2014 and 2015, and the results of their operations and their cash flows for each of the two years in the period ended December 31,
2015, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set
forth therein.
Our audits also comprehended the translation of Renminbi amounts into United States dollar amounts and, in our opinion, such translation has been
made in conformity with the basis stated in Note 2. Such United States dollar amounts are presented solely for the convenience of readers in the United States
of America.
/s/ Deloitte Touche Tohmatsu Certified Public Accountants LLP
Shanghai, China
June 23, 2016 (August 29, 2016 as to the convenience translation described in Note 2(f))
F-2
Table of Contents

CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except for share and per share data)
Notes
ASSETS
Current assets:
Restricted cash
Accounts receivable, net of allowance for doubtful accounts of nil and RMB536 at December 31, 2014
and 2015, respectively
Inventories
Advances to suppliers
Amounts due from related parties
Total current assets
Investments in equity investees
Land use rights, net
Goodwill
Deferred tax assets
Other non-current assets
TOTAL ASSETS
LIABILITIES, MEZZANINE EQUITY AND EQUITY
Current liabilities (including amounts of the consolidated VIE without recourse to ZTO Express
(Cayman) Inc. See Note 2(b))
Accounts payable
Advances from customers
Income tax payable
Amounts due to related parties
Acquisition consideration payable
Total current liabilities
Deferred tax liabilities
TOTAL LIABILITIES
Commitments and contingencies (Note 14)
Mezzanine equity:
Series A convertible redeemable preferred shares (US$0.0001 par value; 30,079,918 shares authorized,
issued and outstanding as of December 31, 2015)
Shareholders' equity
Ordinary shares (US$0.0001 par value; 10,000,000,000 shares authorized, 600,000,000 shares issued,
586,200,000 and 600,000,000 shares outstanding as of December 31, 2014 and 2015, respectively)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
ZTO Express (Cayman) Inc. shareholders' equity
Total Equity
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY
13
7
4
5
6
10
13
3
9
10
16
2014
RMB
As of December 31,
2015
RMB
US$
(Note 2)
163,359
2,452,359
266,403
369,003
40,085
49,164
4,950
178,671
126,800
229,670
752,614
389,557
925,868
416,283
2,379,182
87,259
23,362
4,974,125
58,494
15,720
347,680
211,724
85,740
3,438,120
377,431
1,752,586
821,131
4,091,219
81,006
20,730
10,582,223
8,802
2,365
52,315
31,858
12,901
517,329
56,792
263,709
123,555
615,600
12,189
3,119
1,592,293
250,000
152,059
220,247
218,215
100,819
50,697
539,257
1,531,294
47,128
1,578,422
300,000
294,199
298,865
301,932
103,267
87,766
1,264,914
2,650,943
85,059
2,736,002
45,141
44,268
44,970
45,431
15,538
13,206
190,330
398,884
12,799
411,683
1,976,855
297,454
390
4,281,321
1,589,420
(13,749)
5,857,382
11,984
5,869,366
10,582,223
59
644,205
239,158
(2,069)
881,353
1,803
883,156
1,592,293
390
2,966,980
401,440
3,368,810
26,893
3,395,703
4,974,125
The accompanying notes are an integral part of these consolidated financial statements
F-3
Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Notes
Revenues (including related party revenue of RMB200,171 and

RMB127,157 for the years ended December 31, 2014 and 2015,
respectively)
Cost of revenues (including related party cost of revenues of
RMB724,522 and RMB783,467 for the years ended
December 31, 2014 and 2015, respectively)
Gross profit
Operating income (expenses)
Interest income
Interest expense
Gain on deemed disposal of equity method investments
Income before income tax and share of profit (loss) in equity
method investments
Income tax expense
Income before share of profit (loss) in equity method investments
Share of profit (loss) in equity method investments
Net income
Net loss attributable to noncontrolling interests
Net income attributable to ZTO Express (Cayman) Inc.
Change in redemption value of convertible redeemable preferred
shares
Net income attributable to ordinary shareholders
Net earnings per share attributable to ordinary shareholders:
Basic
Diluted
Weighted average shares used in calculating net earnings per
ordinary share:
Basic
Diluted
Net income
Other comprehensive loss, net of tax of nil
Foreign currency translation adjustment
Less: comprehensive loss attributable to noncontrolling interests
Comprehensive income attributable to ZTO Express (Cayman)
Inc.
Change in redemption value of convertible redeemable preferred
shares
Comprehensive income attributable to ordinary shareholders
3
10
16
2014
RMB
Years ended December 31,

2015
RMB
US$
(Note 2)
3,903,572
6,086,455
915,821
(2,770,530)
1,133,042
(3,998,737)
2,087,718
(601,685)
314,136
(534,537)
1,796
(532,741)
600,301
(591,738)
33,249
(558,489)
1,529,229
(89,038)
5,003
(84,035)
230,101
3,408
(798)
15,091
(16,392)
224,148
2,271
(2,466)
33,727
602,911
(202,486)
400,425
5,578
406,003
423
406,426
1,752,076
(419,999)
1,332,077
(459)
1,331,618
137
1,331,755
263,633
(63,197)
200,436
(69)
200,367
20
200,387
406,426
(28,775)
1,302,980
(4,330)
196,057
12
0.68
0.68
2.15
2.15
0.32
0.32
597,882,740
597,882,740
406,003
599,373,273
599,373,273
1,331,618
599,373,273
599,373,273
200,367
406,003
423
(13,749)
1,317,869
137
(2,069)
198,298
20
406,426
1,318,006
198,318
406,426
(28,775)
1,289,231
(4,330)
193,988
F-4
Table of Contents
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Amounts in thousands, except for share)
ZTO Express (Cayman) Inc. Shareholders' Equity
Retained
Accumulated
Additional
earnings/
other
Ordinary shares
paid-in
(accumulated
comprehensive
capital
deficit)
loss
Number
of shares
RMB
RMB
RMB
RMB
Balance at January 1,
2014
Deemed distribution to
shareholders of
Shanghai
Zhongtongji in
connection with
2013 Restructuring
Net income (loss)
Fair value of ordinary
shares issued for
business acquisitions
Fair value of ordinary
shares issued for
acquisition of equity
investees
Repurchase of ordinary
shares (Note 15)
Additional capital
contribution from
shareholders
Capital contribution
from noncontrolling
interest shareholder
Balance at
December 31, 2014
Net income (loss)
Distribution of
dividends
Foreign currency
translation
adjustments
Ordinary shares
consideration for
business acquisitions
Acquisition of
noncontrolling
interests of the
Group's subsidiary
Change in redemption
value of convertible
redeemable preferred
shares
Balance at
December 31, 2015
600,000,000
390
319,244
(222,401)
314,648
406,426
(222,401)
406,426
2,379,182
2,379,182
2,379,182
220,955
220,955
220,955
(230,000)
(230,000)
(230,000)
500,000
500,000
500,000
9,800
9,800
586,200,000
390
2,966,980
401,440
1,331,755
3,368,810
1,331,755
13,800,000
1,314,569
(228)
(228)
(28,775)
600,000,000
390
4,281,321
(115,000)
(28,775)
1,589,420
(13,749)
(13,749)
17,516
Total Equity
RMB
(13,800,000)
(4,986)
Noncontrolling
interests
RMB
Total
RMB
(423)
26,893
(137)
332,164
(222,401)
406,003
3,395,703
1,331,618
(115,000)
(115,000)
(13,749)
(13,749)
1,314,569
5,857,382
(14,772)
11,984
1,314,569
(15,000)
(28,775)
5,869,366
F-5
Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS
2014
RMB

2015
RMB
US$
(Note 2)
Operating activities
Net Income
406,003
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization
Loss on disposal of property and equipment
Allowance for doubtful accounts
Deferred income tax
Gain on deemed disposal of equity method investments
Share of (profit) loss in equity method investments
Changes in operating assets and liabilities:
Restricted cash
Accounts receivable
Inventories
Accounts payable
Income tax payable
1,331,618
200,367
64,014
3,132
(80,309)
(5,578)
116,800
158,056
7,293
2,588
5,047
(224,148)
459
17,575
23,782
1,097
389
760
(33,727)
69
(40,656)
(4,950)
(8,959)
(100,690)
(1,161)
(23,362)
110,025
106,956
100,819
217,646
328,821
1,071,751
(266,403)
(11,918)
(10,770)
(7,095)
(52,674)
(11,179)
2,632
142,139
78,618
2,448
83,717
520,310
1,867,538
(40,084)
(1,793)
(1,621)
(1,068)
(7,926)
(1,682)
396
21,387
11,830
368
12,597
78,290
281,006
F-6
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
2014
RMB
Cash flows from investing activities

Purchases of property and equipment
Purchases of land use rights
Payment of amounts due from related parties
Repayment of amounts due from related parties
Cash paid for business acquisitions
Purchases of equity method investments
Others
Cash flows from financing activities
Proceeds from issuance of convertible redeemable preferred shares
Proceeds from capital contribution from shareholders
Proceeds from capital contribution from noncontrolling interest shareholder
Proceeds from short-term borrowing
Repayment of short-term borrowing
Payment of dividends
Repayment of amounts due to related parties
Repurchase of ordinary shares
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

2015
RMB
US$
(Note 2)
(618,571)
(171,510)
(228,509)
(13,793)
(95,400)
11,484
(1,116,299)
(1,062,302)
(413,562)
(15,000)
228,509
(20,604)
(193,803)
27,016
(1,449,746)
(159,842)
(62,228)
(2,257)
34,383
(3,100)
(29,161)
4,064
(218,141)
500,000
9,800
300,000
(50,000)
(404,736)
(184,000)
171,064
126,516
36,843
163,359
1,934,331
350,000
(300,000)
(115,000)
1,869,331
1,877
2,289,000
163,359
2,452,359
291,057
52,664
(45,141)
(17,304)
281,276
282
344,423
24,580
369,003
F-7
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
2014
2015
RMB
RMB
US$
(Note 2)
Supplemental disclosure of cash flow information

Income taxes paid
Interest expense paid
65,148
798
331,235
16,392
49,841
2,466
Supplemental disclosure on non-cash investing and financing activities:

In 2014 and 2015, the Group acquired delivery company operating assets which constituted businesses and were accounted for these acquisitions as
business combinations. Details of non-cash activities arising from these acquisitions are set out in Note 3.
In 2014, the Group acquired investments in 7 network partners that were accounted for under the equity method with consideration paid in ordinary
shares. Details of these non-cash activities are disclosed in Note 7(1) and (2).
As of December 31, 2014 and 2015, payables for purchase of property and equipment are RMB91,106 and RMB68,900, respectively.
F-8
Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2015
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
ZTO Express (Cayman) Inc. (the "Company") was incorporated under the laws of Cayman Islands on April 8, 2015. The Company, its subsidiaries, its
variable interest entity and subsidiaries of variable interest entity ("VIE") (collectively referred to as the "Group") are principally engaged in express delivery
services in the People's Republic of China ("PRC") through a nationwide network partner model.
History of the Group and Restructuring
Prior to 2013, the Group's operations were conducted through Shanghai Zhongtongji Express Service Co., Ltd. ("Shanghai Zhongtongji") located in
Shanghai, PRC. Shanghai Zhongtongji served as the franchisor of the ZTO delivery service network (the "ZTO network") which operated as a franchise. In
addition to providing delivery services in Shanghai, Anhui, Jiangsu and Zhejiang province in PRC, Shanghai Zhongtongji determined the business strategies
and coordinated the operations of our network partners.
2013 Restructuring
In 2013, in order to obtain investments from outside investors, shareholders of Shanghai Zhongtongji and 15 network partners located in various
provinces within PRC agreed to a restructuring plan. The main purpose of the restructuring is to create a holding company, which in turn holds the businesses
of Shanghai Zhongtongji and 15 network partners across the ZTO network. Shanghai Zhongtongji did not hold direct ownership in any of these network
partners and they were not under common control, however, there was significant commonality of shareholders of the network partners within the ZTO
network. The restructuring was accomplished through a series of contemplated transactions ("2013 Restructuring") summarized as follows:
1.
In January 2013, the shareholders who separately owned Shanghai Zhongtongji and 15 network partners formed ZTO Express Co., Ltd.
("ZTO Express") and entered into a non-binding commitment to transfer their respective businesses to ZTO Express in exchange of a pre-determined
equity percentage of ZTO Express. Each of the shareholders (11 in total) contributed nominal cash for their respective pro-rata share of paid-in capital
in ZTO Express and shares of ZTO Express were issued to them based on the pre-determined percentage accordingly. These shareholders owned
various equity interests in Shanghai Zhongtongji and 15 network partners.
2. In January 2014, ZTO Express executed separate agreements to acquire the operating assets of Shanghai Zhongtongji and 8 network partners
that were wholly owned by some of the shareholders that formed ZTO Express in step 1 above. The legal contracts stipulated a cash purchase price for
each acquisition based on the net book value of the fixed assets to be acquired, which approximated fair value, in addition to the equity shares of ZTO
Express issued to them in 2013 in contemplation of the acquisitions of these 8 network partners.
3. There were 7 network partners identified in the restructuring plan that had minority interest holders who held significant participating rights.
For these entities, ZTO Express initially acquired the legal and economic rights associated with the equity interests held by the majority equity
shareholders in January 2014 in exchange of equity shares of ZTO Express issued to them in January 2013. Other
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES (Continued)
t h a n Suzhou ZTO Co., Ltd., the acquisitions of minority interests of the other 6 network partners companies were completed in
October 2015(Note 7(2)).
The 2013 Restructuring was accounted for as a put-together transaction in accordance with ASC 805, Business Combination and Shanghai Zhongtongji
has been identified as the accounting acquirer of ZTO Express and the 15 network partners. Operating assets and equity investments transferred from
Shanghai Zhongtongji to ZTO Express were recognized and measured at their historical cost basis. Payment of cash consideration to Shanghai Zhongtongji
of RMB222 million for the acquisition of these assets in accordance with the asset purchase agreement signed between Shanghai Zhongtongji and ZTO
Express was recorded as deemed distribution to the shareholders of Shanghai Zhongtongji in the consolidated statements of changes in shareholders' equity.
Although there was common ownership amongst ZTO Express, Shanghai Zhongtongji, and the 15 network partners, neither ZTO Express nor Shanghai
Zhongtongji had a majority of the voting interests or a controlling financial interest in any of the 15 network partners. The 2013 Restructuring involved
acquisitions of Shanghai Zhongtongji and the 15 network partners with the initial acquisitions of Shanghai Zhongtongji and the 8 network partners on
January 1, 2014. As more than one entity was involved in the acquisition, but none of the owners of the combining entities individually or as a group retain
or receive a majority of the voting rights of the combined entities, the 2013 Restructuring is considered to be a put-together transaction accounted for as
business combination for which the acquisition method of accounting was applied, and Shanghai Zhongtongji is the accounting acquirer.
2015 Restructuring
In 2015, ZTO Express and its shareholders undertook another reorganization in order to establish the Company (the "2015 Restructuring"), which was
executed in two steps as follows:
On April 8, 2015, the Company was incorporated by the shareholders of ZTO Express, each maintaining identical ownership interests as in
ZTO Express, and
On August 18, 2015, the Company, through its wholly owned subsidiary in PRC, entered into a series of contractual arrangements, with ZTO
Express and their respective shareholders. (see Note 2(b)) below for a description of the VIE arrangements pursuant to which the Company and
its subsidiary were established as the primary beneficiary of ZTO Express.
The main purpose of the 2015 Restructuring was to establish a Cayman holding company for the existing business in preparation for an overseas initial
public offering. The reorganization was necessary to comply with the PRC law and regulations which restrict foreign ownership of companies that engage in
delivery services in China. The Group has accounted for the 2015 Restructuring akin to a reorganization of entities under common control. Accordingly, the
accompanying consolidated financial statements have been prepared by using historical cost basis and include the assets, liabilities, revenue, expenses and
cash flows that were directly attributable to ZTO Express for all periods presented. The share and per share data relating to the ordinary shares issued by the
Company during the 2015 Restructuring are presented as if the 2015 Restructuring transactions occurred at the beginning of the first period presented.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
("US GAAP").
(b) Principles of consolidation
The consolidated financial statements include the financial statements of the Company, its subsidiaries and VIE. All intercompany transactions and
balances have been eliminated on consolidation.
The Group evaluates the need to consolidate certain VIE of which the Group is the primary beneficiary. In determining whether the Group is the primary
beneficiary, the Group considers if the Group (1) has power to direct the activities that most significantly affects the economic performance of the VIE, and
(2) The obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could
potentially be significant to the VIE. If deemed the primary beneficiary, the Group consolidates the VIE.
Applicable PRC laws and regulations currently limit foreign ownership of companies that provide delivery services in PRC. The Company is deemed a
foreign legal person under PRC laws and accordingly subsidiaries owned by the Company are ineligible to engage in provisions of delivery services. As
discussed in Note 1, the Group undertook the 2015 Restructuring whereby ZTO Express and its subsidiaries became a VIE of the Group effective on
August 18, 2015. To provide the Group effective control over ZTO Express and receive substantially all of the economic benefits of ZTO Express, the
Company's wholly owned subsidiary, Shanghai Zhongtongji Network Technology Ltd. ("Shanghai Zhongtongji Network") entered into a series of
contractual arrangements, described below, with ZTO Express and its individual shareholders.
Agreements that provide the Company effective control over the VIE include:
Voting Rights Proxy Agreement & Irrevocable Powers of Attorney
Under which each shareholder of ZTO Express has executed a power of attorney to grant Shanghai Zhongtongji Network the power of attorney to act on
his or her behalf on all matters pertaining ZTO Express and to exercise all of his or her rights as a shareholder of ZTO Express, including but not limited to
convene, attend and vote at shareholders' meetings, designate and appoint directors and senior management members. The proxy agreement will remain in
effect unless Shanghai Zhongtongji Network terminates the agreement by giving a prior written notice or gives its consent to the termination by
ZTO Express.
Exclusive Call Option Agreement
Under which the shareholders of ZTO Express granted Shanghai Zhongtongji Network or its designated representative(s) an irrevocable and exclusive
option to purchase their equity interests in ZTO Express when and to the extent permitted by PRC law. Shanghai Zhongtongji Network or its designated
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
representative(s) has sole discretion as to when to exercise such options, either in part or in full. Without Shanghai Zhongtongji Network's written consent,
the shareholders of ZTO Express shall not transfer, donate, pledge, or otherwise dispose any equity interests of ZTO Express in any way. The acquisition price
for the shares or assets will be the minimum amount of consideration permitted under the PRC law at the time when the option is exercised. The agreement
can be early terminated by Shanghai Zhongtongji Network, but not by ZTO Express or its shareholders.
Equity Pledge Agreement
Under which the shareholders of ZTO Express pledged all of their equity interests in ZTO Express to Shanghai Zhongtongji Network as collateral to
secure their obligations under the above agreement. If the shareholders of ZTO Express or ZTO Express breach their respective contractual obligations,
Shanghai Zhongtongji Network, as pledgee, will be entitled to certain rights, including the right to dispose the pledged equity interests. Pursuant to the
agreement, the shareholders of ZTO Express shall not transfer, assign or otherwise create any new encumbrance on their respective equity interest in ZTO
Express without prior written consent of Shanghai Zhongtongji Network. The equity pledge right held by Shanghai Zhongtongji Network will expire when
the shareholders of ZTO Express and Shanghai Zhongtongji Network have fully performed their respective obligations under the Consulting Services
Agreement and Operating Agreement, or the shareholder is no longer a shareholder of ZTO Express or the satisfaction of all its obligations by ZTO under the
VIE contractual arrangements.
The agreements that transfer economic benefits to the Company include:
Exclusive Consulting and Services Agreement
Under which ZTO Express engages Shanghai Zhongtongji Network as its exclusive technical and operational consultant and under which Shanghai
Zhongtongji Network agrees to assist in business development and related services necessary to conduct ZTO Express's operational activities. ZTO Express
shall not seek or accept similar services from other providers without the prior written approval of Shanghai Zhongtongji Network. The agreements will be
effective as long as ZTO Express exists. Shanghai Zhongtongji Network may terminate this agreement at any time by giving a prior written notice to
ZTO Express.
Under the above agreements, the shareholders of ZTO Express irrevocably granted Shanghai Zhongtongji Network the power to exercise all voting rights
to which they were entitled. In addition, Shanghai Zhongtongji Network has the option to acquire all of the equity interests in ZTO Express, to the extent
permitted by the then-effective PRC laws and regulations, for nominal consideration. Finally, Shanghai Zhongtongji Network is entitled to receive service
fees for certain services to be provided to ZTO Express.
The Call Option Agreement and Voting Rights Proxy Agreement provide the Company with effective control over the VIE and its subsidiaries, while the
Equity Interest Pledge Agreements secure the obligations of the shareholders of ZTO Express under the relevant agreements. Because the Company, through
Shanghai Zhongtongji Network, has (i) the power to direct the activities of ZTO Express that most significantly affect the entity's economic performance and
(ii) the right to receive substantially all of
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the benefits from ZTO Express, the Company is deemed the primary beneficiary of ZTO Express. Accordingly, the Company consolidates the ZTO Express's
financial results of operations, assets and liabilities in the Company's consolidated financial statements. The aforementioned Control Documents are effective
agreements between a parent and a consolidated subsidiary, neither of which is accounted for in the consolidated financial statements or is ultimately
eliminated upon consolidation, such as the service fees provided under the Consulting Services Agreement and Operating Agreement.
The Group believes that the contractual arrangements with the VIE are in compliance with the PRC law and are legally enforceable. However, the
contractual arrangements are subject to risks and uncertainties, including:
ZTO Express and its shareholders may have or develop interests that conflict with the Group's interests, which may lead them to pursue
opportunities in violation of the aforementioned contractual arrangements.
ZTO Express and its shareholders could fail to obtain the proper operating licenses or fail to comply with other regulatory requirements. As a
result, the PRC government could impose fines, new requirements or other penalties on the VIE or the Group, mandate a change in ownership
structure or operations for the VIE or the Group, restrict the VIE or the Group's use of financing sources or otherwise restrict the VIE or the
Group's ability to conduct business.
The aforementioned contractual agreements may be unenforceable or difficult to enforce. The equity interests under the Equity Interest Pledge
Agreement have been registered by the shareholders of ZTO Express with the relevant office of the administration of industry and commerce,
however, the VIE or the Group may fail to meet other requirements. Even if the contractual agreements are enforceable, they may be difficult to
enforce given the uncertainties in the PRC legal system.
The PRC government may declare the aforementioned contractual arrangements invalid. They may modify the relevant regulations, have a
different interpretation of such regulations, or otherwise determine that the Group or the VIE have failed to comply with the legal obligations
required to effectuate such contractual arrangements.
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The following amounts and balances of ZTO Express and its subsidiaries were included in the Group's consolidated financial statements after the
elimination of intercompany balances and transactions:
As of
December 31,
2014
2015
RMB
RMB
Assets
Current assets:
Restricted cash
Accounts receivable
Inventories
Goodwill
Deferred tax assets
TOTAL ASSETS
Liabilities
Accounts payable
Income tax payable
Acquisition consideration payables
TOTAL LIABILITIES
163,359
49,164
4,950
178,671
126,800
229,670
752,614
389,557
925,868
416,283
2,379,182
87,259
23,362
4,974,125
587,039
266,403
56,262
15,720
256,955
170,824
85,740
1,438,943
249,508
1,383,357
788,717
4,091,219
81,006
15,707
8,048,457
250,000
152,059
220,247
218,215
100,819
50,697
539,257
1,531,294
47,128
1,578,422
300,000
280,774
295,865
300,864
103,267
87,766
1,184,875
2,553,411
85,059
2,638,470
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Years ended
December 31,
2014
RMB
Total revenue
Net income
Net cash generated from operating activities
Net cash provided by (used in) financing activities
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
3,903,572
406,003
1,071,751
(1,116,299)
171,064
126,516
36,843
163,359
2015
RMB
6,086,455
1,331,621
1,898,426
(1,409,746)
(65,000)
423,680
163,359
587,039
ZTO Express contributed 100% of the Group's consolidated revenues for the years ended December 31, 2014 and 2015. As of December 31, 2014 and
2015, ZTO Express accounted for an aggregate of 100% and 76%, respectively, of the consolidated total assets, and 100% and 96%, respectively, of the
consolidated total liabilities. Total assets not associated with ZTO Express consisted of cash and cash equivalents. The Group expects less percentage of
revenue generated from ZTO Express compared to the whole Group for the foreseeable future as transportation assets and the associated revenue generating
activities will be transferred to subsidiaries of the Group.
There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that require the Company or its
subsidiaries to provide financial support to ZTO Express. However, if ZTO Express were ever to need financial support, the Company or its subsidiaries may,
at its option and subject to statutory limits and restrictions, provide financial support to its VIE through loans to the shareholders of the VIE or entrustment
loans to the VIE.
The Group believes that there are no assets held in the consolidated VIE that can be used only to settle obligations of the VIE, except for registered
capital and the PRC statutory reserves. As the consolidated VIE is incorporated as a limited liability company under the PRC Company Law, creditors of the
VIE do not have recourse to the general credit of the Company for any of the liabilities of the consolidated VIE.
Relevant PRC laws and regulations restrict the VIE from transferring a portion of their net assets, equivalent to the balance of its statutory reserve and its
share capital, to the Company in the form of loans and advances or cash dividends. Please refer to Note 19 for disclosure of restricted net assets.
Nonconsolidated Variable Interest Entity
Tonglu Tongze Logistics Ltd. and its subsidiaries ("Tonglu"), established in 2013, is a transportation service company providing line-haul transportation
services to the Group. Tonglu is majority owned by the employees of the Group who are considered as related parties to the Group. The Group has
participated significantly in the design of Tonglu during its formation and have the ability to determine which of the Group's employees can become the
shareholders of Tonglu. Historically, the Group's employees have served as the key management of Tonglu, with compensation determined and paid by the
Group, and not
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Tonglu. The Group concluded that Tonglu constitutes a VIE, as the equity investors do not have the power, through voting rights or similar rights, to direct
the activities of Tonglu that most significantly impact the Tonglu's economic performance. In addition, the Group held variable interests in Tonglu in the
form of a waiver of management fees and an outstanding loan receivable as of December 31, 2015 of RMB15 million that was repaid in full in 2016. After
considering the terms, characteristics, size of the economic interests and our involvement in Tonglu, the Group concluded that it is not the primary
beneficiary of Tonglu as it does not have an exposure to the economics of Tonglu that is more than insignificant.
The amount represents the maximum exposure to loss as result of the Group's variable interests in Tonglu included in the Group's consolidated balance
sheets are set forth below.
As of
December 31,
2014
2015
RMB
RMB
Amount due from related parties

Maximum exposure to loss in nonconsolidated variable interest entity
15,000
15,000
The Group also has transactions with Tonglu for the years ended December 31, 2014 and 2015 and amounts due to Tonglu as of December 31, 2014 and
2015 for transportation service received from Tonglu, in connection with a contractual arrangement and considered by management to be on terms that are
commensurate with market. Transactions and balances relating to the transportation services are disclosed in Note 13 (a), (b) and (c).
(c) Use of estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual
results may differ from these estimates. The Group bases its estimates on historical experience and various other factors believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from
other sources. Significant accounting estimates reflected in the Group's financial statements include assessment of useful lives of long-lived assets, valuation
of ordinary shares and share-based compensation, realization of deferred tax assets, impairment assessment of long-lived assets and goodwill and assumptions
used to determine the fair value of the assets acquired through business combination. Actual results may differ materially from those estimates.
(d) Fair value
Fair value is considered to be the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at
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fair value, the Group considers the principal or most advantageous market in which it would transact and considers assumptions that market participants
would use when pricing the asset or liability.
Authoritative literature provides a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad
levels. The level in the hierarchy within which the fair value measurement in its entirety falls is based upon the lowest level of input that is significant to the
fair value measurement as follows:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or
liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient
volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally
from, or corroborated by, observable market data.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of
the fair value of the assets or liabilities. The Group has stock unit awards payable that was required to be measured at fair value on a recurring basis at the end
of each reporting period. Change in fair value and inputs in the valuations are disclosed in Note 11.
The carrying values of financial instruments, which consist of cash and cash equivalents, accounts receivable, amounts due from related parties, advances
to suppliers, prepayments and other current assets, short-term bank borrowing, accounts payable, advances from customers, amounts due to related parties and
other current liabilities are recorded at cost which approximates their fair value due to the short-term nature of these instruments.
We allocate the fair value of purchase consideration to the tangible assets acquired based on their estimated fair values. The excess of the fair value of
purchase consideration over the fair values of these identifiable assets is recorded as goodwill. Management's estimates of fair value are based upon
assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During
the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the
corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
(e) Foreign currency translation
The Group's reporting currency is Renminbi ("RMB"). The functional currency of the Company and subsidiaries incorporated outside the mainland
China are the United States dollar ("US dollar" or "US$"). The functional currency of all the other subsidiaries and the VIE is RMB.
Foreign currency denominated monetary assets and liabilities have been translated into the functional currency at the rates of exchange ruling at the
balance sheet date. Transactions in foreign currencies have been translated into the functional currency at the applicable rates of exchange prevailing on the
date transactions occurred. Transaction gains and losses are recognized in the consolidated statements of comprehensive income.
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Monetary assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the functional currencies at
the prevailing rates of exchange at the balance sheet date. Nonmonetary assets and liabilities are remeasured into the applicable functional currencies at
historical exchange rates. Transactions in currencies other than the applicable functional currencies during the year are converted into the functional
currencies at the applicable rates of exchange prevailing at the transaction dates. Transaction gains and losses are recognized in the consolidated statements
of comprehensive income.
(f) Convenience translation
Our business is primarily conducted in China and almost all of our revenues are denominated in RMB. However, periodic reports made to shareholders
will include current period amounts translated into US dollars using the then current exchange rates, for the convenience of the readers. Translations of
balances in the consolidated balance sheets, consolidated statements of comprehensive income and consolidated statements of cash flows from RMB into
US dollars as of and for the year ended December 31, 2015 are solely for the convenience of the readers and were calculated at the rate of
US$1.00=RMB6.6459, representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on June 30, 2016. No
representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on June 30, 2016, or at any
other rate.
(g) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and highly liquid investments which are unrestricted as to withdrawal or use, and which have
maturities of three months or less when purchased.
(h) Restricted cash
Restricted cash represents cash received from network partners that was immediately restricted for use until the final delivery of parcel to the recipients.
(i) Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the following estimated
useful lives:
Leasehold improvements
Furniture, office and electric equipment
Machinery and equipment
Vehicles
Buildings
Lesser of lease term or estimated useful life of 3 years

3 to 5 years
10 years
5 years
20 years
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(j) Investments in equity investees
Investments in equity investees of the Group are comprised of investments in privately-held companies. The Group uses the equity method to account for
an equity investment over which it has significant influence but does not own a majority equity interest or otherwise control. The Group records equity
method adjustments in share of profits and losses. Equity method adjustments include the Group's proportionate share of investee income or loss, adjustments
to recognize certain differences between the Group's carrying value and its equity in net assets of the investee at the date of investment, impairments, and
other adjustments required by the equity method. Dividends received are recorded as a reduction of carrying amount of the investment. Cumulative
distributions that do not exceed the Group's cumulative equity in earnings of the investee are considered as a return on investment and classified as cash
inflows from operating activities. Cumulative distributions in excess of the Group's cumulative equity in the investee's earnings are considered as a return of
investment and classified as cash inflows from investing activities. For equity investments over which the Group does not have significant influence or
control, the cost method of accounting is used. Under the cost method, the Group carries the investment at cost and recognizes income to the extent of
dividends received from the distribution of the equity investee's post-acquisition profits.
(k) Impairment of long-lived assets
The Group evaluates the recoverability of long-lived assets with determinable useful lives whenever events or changes in circumstances indicate that an
intangible asset's carrying amount may not be recoverable. The Group measures the carrying amount of long-lived asset against the estimated undiscounted
future cash flows associated with it. Impairment exists when the sum of the expected future net cash flows is less than the carrying value of the asset being
evaluated. Impairment loss is calculated as the amount by which the carrying value of the asset exceeds its fair value. Fair value is estimated based on various
valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment requires the Group to make
assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ
from assumed and estimated amounts. No impairment charge was recognized for the years ended December 31, 2014 and 2015.
(l) Goodwill
Goodwill is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible net assets of business acquired.
Several factors give rise to goodwill in our acquisitions, such as the expected benefit from synergies of the combination and the existing workforce of the
acquired businesses. Goodwill is reviewed at least annually for impairment. In our evaluation of goodwill impairment, we perform a qualitative assessment to
determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment is not conclusive, we
proceed to a two-step process to test goodwill for impairment, including comparing the fair value the reporting unit to its carrying value (including
attributable goodwill). Fair value for our reporting units is determined using an income or market approach incorporating market participant considerations
and management's assumptions on revenue growth rates, operating margins, discount rates and expected
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capital expenditures. Fair value determinations mainly include both internal and third-party valuations. Unless circumstances otherwise dictate, we perform
our annual impairment testing in the fourth quarter. No impairment charge was recognized for the years ended December 31, 2014 and 2015.
(m) Share-based compensation
The Group granted share units to eligible employees and accounts for these share unit awards in accordance with ASC 718 CompensationStock
Compensation. As these share unit awards are subject to repurchase features that are not within the control of the Group, these awards are classified as
liabilities and measured at fair value at the date of the grant and subsequently remeasured to fair value at the end of each reporting period through settlement.
Changes in the fair value of the liabilities incurred for these awards are recognized as share-based compensation.
(n) Revenue recognition
The Group recognizes revenue when persuasive evidence of an arrangement exists, service has been performed, the fee is fixed or determinable and
collectability is reasonably assured. While the Group serves as the franchisor in the ZTO network, it has not collected franchise fees from its network partners.
The Group considers its customers to be the pickup outlets operated by the Group's network partners. The Group's revenue represents network transit fees
derived from the provision of sorting and line-haul transportation services to the pickup outlets operated by the Group's network partners. The network transit
fees the Group charges its pickup outlets consist of (i) a fixed amount for a waybill attached to each parcel and (ii) a variable amount per parcel for sorting
and line-haul transportation based on the parcel weight and route. The Group recognizes revenue when the parcels are delivered from the Group's sorting
hubs to the delivery outlets in the network, assuming all other revenue recognition criteria have been met. A small percentage of the Group's delivery services
are performed for its enterprise customers; and enterprise customer revenues are recognized when the packages are delivered to the recipients.
Revenues also include sales of accessories, such as portable barcode readers and ZTO-branded packing supplies and apparels. Revenues for the sales of
accessories were RMB125,058 and RMB173,166 for the years ended December 31, 2014 and 2015, respectively.
(o) Cost of revenues
Cost of revenues consists of the following:
Transportation costs, including payments to outsourced transportation companies, as well as costs associated with the Group's own
transportation infrastructure; including, labor costs of truck drivers, depreciation of self-owned trucks, airfare cost, fuel cost, and road toll,
operating costs for the ZTO delivery IT platform,
cost of hub operations, such as operators' labor costs and depreciation and lease costs, and
cost of accessories including portable barcode readers, thermal papers and packaging materials.
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(p) Income taxes
Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
As part of the process of preparing financial statements, the Group is required to estimate its income taxes in each of the jurisdictions in which it operates.
The Group accounts for income taxes using the asset and liability method. Under this method, deferred income taxes are recognized for temporary differences
between the tax basis of assets and liabilities and their reported amounts in the financial statements. Net operating loss are carried forwards and credited by
applying enacted statutory tax rates applicable to future years when the reported amounts of the asset or liability are expected to be recovered or settled,
respectively. Deferred tax assets are reduced by a valuation allowance when, based upon the weight of available evidence, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as non-current.
The Group recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination
by the taxing authorities, based on the technical merits of the position.
(q) Comprehensive income
Comprehensive income is defined to include all changes in equity from transactions and other events and circumstances from non-owner sources. For the
years presented, the Group's comprehensive income includes net income and foreign currency translation adjustments and is presented in the consolidated
statements of comprehensive income.
(r) Operating leases as lessee
Leases, including leases of offices and sorting hubs, where substantially all the rewards and risks of ownership of assets remain with the lessor are
accounted for as operating leases. Payments made under operating leases are recognized as an expense on a straight-line basis over the lease term. The Group
had no capital leases for any of the years presented herein.
(s) Concentration credit risk
Financial instruments that potentially expose the Group to concentrations of credit risk consist primarily of cash and cash equivalents, amounts due from
related parties, accounts receivable, other receivables and advances to suppliers and prepayments and other current assets. The Group places its cash and cash
equivalents with financial institutions with high-credit ratings and quality. Accounts receivable primarily comprise amounts receivable from enterprise
customers. The Group conducts a credit evaluation of these enterprise customers. With respect to advances to product suppliers, the Group performs on-going
credit evaluations of the financial condition of its suppliers. The Group establishes an allowance for doubtful accounts based upon estimates, factors
surrounding the credit risk of specific customers and other information. The allowance amounts were immaterial for all periods presented.
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(t) Earnings per share
Basic earnings per share are computed by dividing income attributable to holders of ordinary shares by the weighted average number of ordinary shares
outstanding during the period.
The Company's convertible redeemable preferred shares are participating securities as the preferred shares participate in undistributed earnings on an asif-converted basis. Accordingly, the Company uses the two-class method whereby undistributed net income is allocated on a pro rata basis to each
participating share to the extent that each class may share in income for the period.
Diluted earnings per ordinary share reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised
or converted into ordinary shares. Ordinary share equivalents are excluded from the computation in income periods should their effects be anti-dilutive. The
Group had convertible redeemable preferred shares, which could potentially dilute basic earnings per share in the future. Diluted earnings per share are
computed using the two-class method or the as-if converted method, whichever is more dilutive.
(u) Stock split
In December 2014, the Company's shareholders approved an increase of the total authorized and issued capital shares from 100,000,000 to
600,000,000 shares with the same per share par value of RMB1.00. All share and per share data in these financial statements and footnotes has been
retrospectively adjusted to account for this stock split.
(v) Recently issued accounting standards
In May 2014, Financial Accounting Standards Board (or "FASB") issued Accounting Standards Updates (or "ASU") 2014-09, Revenue from Contracts
with Customers (Topic 606), to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and
International Financial Reporting Standards ("IFRS"). An entity has the option to apply the provisions of ASU 2014-09 either retrospectively to each prior
reporting period presented or retrospectively with the cumulative effect of initially applying this standard recognized at the date of initial application. ASU
2014-09 is effective for fiscal years and interim periods within those years beginning after December 15, 2016, and early adoption is not permitted. In August,
2015, the FASB updated this standard to ASU 2015-14, the amendments in this Update defer the effective date of Update 2014-09, that the Update should be
applied to annual reporting periods beginning after December 15, 2017 and earlier application is permitted only as of annual reporting periods beginning
after December 15, 2016, including interim reporting periods within that reporting period. The Group is still in the process of assessing the potential financial
impact the adoption will have to the Group.
In February 2015, FASB issued ASU 2015-02, Consolidation (Topic 810)Amendments to the Consolidation Analysis. ASU 2015-02 modifies existing
consolidation guidance related to (i) limited partnerships and similar legal entities, (ii) the evaluation of variable interests for fees paid to decision makers or
service providers, (iii) the effect of fee arrangements and related parties on the primary beneficiary determination, and (iv) certain investment funds. These
changes are expected to limit the
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number of consolidation models and place more emphasis on risk of loss when determining a controlling financial interest. ASU 2015-02 is effective for
fiscal years and interim periods within those years beginning after December 15, 2015. Early adoption is permitted. The Group has early-adopted this
guidance during the year ended December 31, 2015, when performing the consolidation analysis of Tonglu, which is a variable interest entity majorityowned by the Group's employees. The Group concluded it does not have a controlling financial interest in Tonglu therefore, does not consolidate Tonglu.
There is no impact in performing the consolidation analysis of ZTO Express upon early adoption of ASU 2015-02 (See Note 2(b)).
In July 2015, FASB issued ASU 2015-11 as part of its simplification initiative. The ASU changes the way of measurement on inventory, which currently
requires an entity to measure inventory at the lower of cost or market. The amendments in this Update require an entity to measure inventory within the scope
of this Update at the lower of cost and net realizable value. The Group does not expect a material impact to its consolidated financial statement upon
adoption of this ASU.
In September 2015, FASB issued ASU 2015-16 related to the accounting for measurement period adjustments recognized in a business combination.
Under the previous standard, when adjustments were made to amounts previously reported as part of a business combination during the measurement period,
entities were required to revise comparative information for prior periods. Under the new standard, entities must recognize these adjustments in the reporting
period in which the amounts are determined rather than retrospectively. The Group adopted the new standard during the year ended December 31, 2015,
which did not have a significant impact on the financial statements.
In November 2015, FASB issued ASU 2015-17 Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The amendments in this
Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this
Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a taxpaying component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. For public business entities, the
amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within
those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The amendments in this
Update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Group has adopted this
guidance during the year ended December 31, 2015, retroactively. The adoption of this guidance did not have a material effect on the Group's consolidated
financial statements.
In January 2016, FASB issued ASU 2016-01, to improve the recognition and measurement of financial instruments. The new guidance requires equity
investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair
value with changes in fair value recognized in net income and separate presentation of financial assets and financial liabilities by measurement category and
form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. The guidance also
eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities
and the requirement for public business entities to
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disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at
amortized cost on the balance sheet. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including
interim periods within those fiscal years. The Group is still in the process of assessing the impact of this ASU on our consolidated financial statements.
In February 2016, FASB issued ASU 2016-02 related to Leases. Under the new guidance, lessees will be required to recognize all leases (with the
exception of short-term leases) at the commencement date including a lease liability, which is a lessee's obligation to make lease payments arising from a
lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset
for the lease term. Lessees (for capital and operating leases) and must apply a modified retrospective transition approach for leases existing at, or entered into
after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any
transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach.
Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within
those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted. The Group is in the process of evaluating the impact of the
standard on its consolidated financial statements.
In March 2016, FASB issued ASU 2016-07, which eliminates the requirement to retroactively adopt the equity method of accounting. The amendments
require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held
interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The amendments in this
ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be
applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity
method. Earlier application is permitted. The Group is in the process of evaluating the impact of this ASU on the consolidated financial statements.
In March 2016, FASB issued ASU 2016-09 related to stock compensation to facilitate improvements to Employee Share-Based Payment Accounting,
which is intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their
employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences;
(b) classification of awards as either equity or liabilities; (c) accruals of compensation costs based on the forfeitures; (d) classification on the statement of cash
flows. For public companies, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual
periods. Early adoption is permitted. The Group has elected to early adopt this standard on a retrospective basis for the year ended December 31, 2015 as the
Group elected to account for forfeitures when they occur to reduce the complexity in the accounting of share based compensation. The adoption of this
guidance did not have a material effect on the Group's consolidated financial statements.
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3. Business Combination
In order to consolidate and optimize the Group's delivery capacity in key geographic areas within PRC, in 2014 and 2015, the Group acquired
substantially all of the operating assets of 8 and 16 network partners, respectively. The assets acquired from these entities constituted substantially all of the
operating assets of the network partners including parcel sorting hubs, vehicles and miscellaneous furniture and fixture, and assumption of their respective
assembled workforces. The Group accounted for these acquisitions as business combinations.
Total consideration for 2014 acquisitions consisted of cash of RMB64,490 and 202,800,000 ordinary shares of ZTO Express at a determined per share
fair value of RMB11.73. Total consideration for 2015 acquisitions consisted of cash of RMB57,673 and 26,336,657 ordinary shares of ZTO Express at a
determined per share fair value of RMB48.64. The Group engaged a third party valuation firm to assist them with the valuation of ordinary shares as well as
property, plant and equipment and intangible assets. The excess of the total cash and fair value of share-based consideration over the fair value of the assets
acquired was recorded as goodwill which is not tax deductible.
2014 Acquisitions of Network Partners
In January 2014, in connection with the Group's 2013 Restructuring, the Group purchased 8 network partners located in various provinces in PRC,
namely Henan, Sichuan, Hubei, Beijing, Guangdong and Hunan. The details of the considerations, fair value of fixed assets acquired and goodwill for the
network partners acquired in 2014 are as follows:
Henan
Sichuan
Hubei
Beijing
Guangdong
and Hunan (1)
Total
Consideration:
Ordinary shares
Cash
Total
70,390
953
71,343
70,390
5,170
75,560
234,399
6,804
241,203
758,100
2,044
760,144
1,245,903
49,519
1,295,422
2,379,182
64,490
2,443,672
Fair value of fixed assets acquired

Goodwill
953
70,390
5,170
70,390
6,804
234,399
2,044
758,100
49,519
1,245,903
64,490
2,379,182
(1)
There are three entities in Guangdong, namely, Shenzhen Chengxin ZTO Industrial Co., Ltd., Guangzhou Xin ZTO Express Co., Ltd.
and Dongguan Kaisheng ZTO Express Co., Ltd. The three network partners in Guangdong and one network partner in Hunan were
owned by the same group of shareholders.
2015 Acquisitions of Network Partners

In October 2015, the Group purchased 16 network partners, consisting of the following:
6 network partners identified in the 2013 Restructuring that were previously accounted for under the equity method (Note 7) for cash consideration of
RMB22,680 and 3,915,720 ordinary shares, determined to have a per share fair value of RMB48.64.
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3. Business Combination (Continued)
3 network partners in Fujian province previously accounted for under the equity method for cash consideration of RMB761 and 4,440,132 ordinary
shares, determined to have a per share fair value of RMB48.64.
7 network partners owned and operated by unrelated third parties for cash consideration of RMB34,232 and 17,980,805 ordinary shares, determined to
have a per share fair value of RMB48.64.
For the acquisitions of the 9 delivery companies which the Group had investments in these entities accounted for under the equity method, the Group's
existing equity interests in these entities were remeasured to a total aggregate fair value of RMB431,022, with the excess over the carrying amount
recognized as gain on deemed disposal of equity method investments of RMB224,148 in the consolidated statements of comprehensive income. Each of the
network partners acquired was insignificant individually and in aggregate.
The aggregated consideration, fair value of operating assets acquired and goodwill resulted for these acquisitions in 2015 are as follows:
2015
RMB
Consideration:
Ordinary shares
Cash
Total
Fair value of the Group's existing equity interests at the time of acquisition
Less: Fair value of fixed assets acquired
Goodwill
1,281,015
57,673
1,338,688
431,022
57,673
1,712,037
The fair value of the ordinary shares was determined by the Group using generally accepted valuation methodologies, including the discounted cash
flow approach, which incorporates certain assumptions including the financial results and growth trends of the Group, to derive the total equity value of
the Group.
In accordance with ASC 805, Business Combination, the Group's pre-existing interest in these entities were remeasured at fair value, with a resulting gain
in the amount of RMB224,148 recorded in earnings.
The fair value of the pre-existing interest in the equity method investment on the acquisition date is calculated by deducting the total fair value of
additional equity interest acquired in these entities from the fair value of 100% equity interest in these entities at the date of acquisition by adopting income
approach, in particular, the discounted cash flow method to analyze the indicative value of all equity interests in the acquired entities. The fair value of the
entities acquired are estimated based on significant inputs which mainly include the financial results, growth trends of the Group and discount rate.
The identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree are required to be recognized and measured at fair
value as of the acquisition date. An intangible asset is
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3. Business Combination (Continued)
identified if it meets either the separability criterion or the contractual-legal criteria in accordance with ASC 805, Business Combination. Fair value of fixed
assets acquired approximates the net book value of these assets. The intangible assets acquired in these acquisitions were assembled workforce, client service
capability and presence in geographic locations/market within PRC, which did not meet the separation criteria or the contractual-legal criteria, therefore, are
not identifiable and not recognized apart from goodwill. The goodwill was assigned to the whole group as a result of these acquisitions.
Cash consideration of RMB50,697 and RMB87,766 was not paid as of December 31, 2014 and 2015, respectively, and has been recorded in acquisition
consideration payables.
13,226,525 ordinary shares relating to the equity consideration exchanged for the 2015 acquisitions were not issued as of December 31, 2015. However,
RMB643,338 relating to these non-contingent shares has been recorded as additional paid-in capital in the consolidated statements of changes in
shareholders' equity.
The following table summarizes unaudited pro forma results of operations for the years ended December 31, 2014 and 2015 assuming that all
acquisitions occurred as of the beginning of period. The pro forma results have been prepared for comparative purpose only based on management's best
estimate and do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred as of the beginning
of period:
2014
2015
(Unaudited)
RMB
RMB
Pro forma revenue

Pro forma income from operations
Pro forma net income attributable to the Group
Pro forma net income per share
Basic
Diluted
4,762,499
637,460
434,133
6,997,299
1,599,022
1,154,382
0.72
0.72
1.86
1.86
Pro forma net income attributable to the Group for the year ended December 31, 2015 excluded the gain of RMB224,148 on the deemed disposal of
equity investments based on the assumption that the deemed disposal gain would not have resulted in this period, had the acquisitions been acquired as of
the beginning of the period. It should not be included in the pro forma net income attributable to the Group for the year ended December 31, 2014 as such
gain did not have a continuing impact.
Revenues and net income in the amount of RMB291,688 and RMB15,594, respectively, attributable to the network partners acquired in October 2015
were included in the consolidated statements of comprehensive income since the acquisition date.
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4. Property and equipment, net
Property and equipment, net consist of the following:
As of December 31,
2014
2015
RMB
RMB
Buildings
Vehicles
Construction in progress
Total
Accumulated depreciation
348,796
83,129
83,209
244,642
46,605
174,699
981,080
(55,212)
925,868
444,088
202,674
103,126
538,235
81,653
577,645
1,947,421
(194,835)
1,752,586
Depreciation expenses were RMB56,037 and RMB145,276 for the years ended December 31, 2014 and 2015, respectively.
As at December 31, 2014 and 2015, the title certificates for certain buildings of the Group with an aggregate net book value of approximately
RMB74,998 and RMB172,768, respectively, had not been obtained.
5. Land use rights, net
There is no private land ownership in China. Companies or individuals are authorized to possess and use the land only through land use rights granted
by the PRC government. Land use rights are amortized using the straight-line method over the lease term of around 50 years or less.
As of December 31,
2014
2015
RMB
RMB
Cost
Less: Accumulated amortization
430,287
(14,004)
416,283
847,915
(26,784)
821,131
Amortization expenses for land use rights were RMB7,977 and RMB12,780 for the years ended December 31, 2014 and 2015, respectively.
As at December 31, 2014 and 2015, the title certificates for certain land use right of the Group with carrying value of approximately nil and RMB3,881,
respectively, has not been obtained.
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6. Goodwill
The changes in the carrying amount of goodwill for the years ended December 31, 2014 and 2015 were as follows:
Amount
RMB
Balance at January 1, 2014

Increase in goodwill related to acquisitions
Balance at December 31, 2014
Increase in goodwill related to acquisitions
2,379,182
2,379,182
1,712,037
4,091,219
7. Investments in equity investees

The Group's investments in equity investees comprise the following:
As of December 31,
2014
2015
RMB
RMB
Investments accounted for under equity method:

Suzhou Zhongtong Express Ltd. ("Suzhou ZTO")(1)
Shenyang Changsheng ZTO Express Co., Ltd. ("Shenyang ZTO")(2)
Feng Wang Investment Co., Ltd. ("Feng Wang")(3)
Tianjin Qianqiu ZTO Express Service Co., Ltd. ("Tianjin ZTO")(2)
Shaanxi ZTO Express Co., Ltd. ("Shaanxi ZTO")(2)
Nanchang ZTO Express Service Co., Ltd. ("Jiangxi ZTO")(2)
Jilin ZTO Daying Express Service Co., Ltd. ("Jilin ZTO")(2)
Shanxi ZTO Daying Express Co., Ltd. ("Shanxi ZTO")(2)
Shenzhen Feng Chao Technology Ltd. ("Feng Chao")(4)
Others
Total investments accounted for under the equity method
Investments accounted for under cost method:
Cai Niao Smart Logistics Network Limited ("Cai Niao")(5)
Wheat Commune Group Inc. ("Wheat Commune)(6)
Others
Total investments accounted for under the cost method
Total investments in equity investees
77,028
69,452
50,198
34,372
26,994
22,887
21,770
21,539
15,317
339,557
81,538
50,237
92,468
13,385
237,628
50,000
50,000
389,557
50,000
77,923
11,880
139,803
377,431
(1) Suzhou ZTO

In connection with the 2013 Restructuring, the Group acquired 60% equity interest in Suzhou ZTO for share consideration amounting to the fair
value of ZTO Express ordinary shares issued of
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7. Investments in equity investees (Continued)
RMB21,117 (1,800,000 shares at a determined per share fair value of RMB11.73) and cash consideration of RMB50,400. The minority interest
shareholder has significant participating rights and the key decisions concerning the management and operations of Suzhou ZTO are subject to the
unanimous consent of all shareholders.
(2) Shenyang ZTO, Shaanxi ZTO, Jiangxi ZTO, Jilin ZTO, Shanxi ZTO and Tianjin ZTO
In January 2014, in connection with the 2013 Restructuring, the Group acquired from the majority shareholders of the following entities, the legal and
economic rights associated with their equity interest in these entities in exchange of ordinary shares of ZTO Express. These minority interest holders
held significant participating rights, including key decisions concerning the management and operations of these entities were subject to the
unanimous consent of all shareholders.
Due to the significant participating rights held by the minority interest shareholders, the Group does not have the ability to control these entities but
has the ability to exercise significant influence over the operations and financial policies of these entities. Therefore, the Group accounted for their
investments in these entities under the equity method of accounting. Details of these investments are as follows:
Interest
acquired
Equity investees
Shenyang ZTO
Shaanxi ZTO
Jiangxi ZTO
Jilin ZTO
Shanxi ZTO
Tianjin ZTO
62%
50%
70%
51%
51%
70%
Total fair value

of consideration
ordinary shares
65,463
31,675
24,636
21,539
21,539
34,984
In October 2015, the Group acquired the remaining economic interests in substantially all of the operating assets and acquired the workforce from
each of the above entities from their respective minority interest holders. In accordance with ASC 805, Business Combination, the Group's preexisting interest in these entities were remeasured at fair value, with a resulting gain recorded in earnings. Details of the fair value of pre-existing
interest in these entities and the resulting gain are set out in Note 3.
(3) Feng Wang
In December 2013, the Group entered into an agreement with other three top express delivery companies in China, to establish Feng Wang, which is
to invest in the upstream industries and integrate resources across the express delivery value chain. The capital contribution by the Group was
RMB50 million in cash, representing 25% of the equity interest of Feng Wang. In 2015, the Group's equity interest to Feng Wang decreased to 20%
due to the additional capital contributions from other shareholders of Feng Wang.
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7. Investments in equity investees (Continued)
(4) Feng Chao
In June 2015, the Group entered into a subscription and contribution agreement with three other express delivery companies in PRC, to establish a
new company named Feng Chao, which focuses on optimizing the delivery process, for example, by creating storage lockers for deliveries, innovating
on the "last mile" delivery of express parcels. The capital contribution by the Group was RMB100 million in cash, representing 20% of the equity
interest of Feng Chao. The Group has one board seat out of five of Feng Chao, and has significant influence on Feng Chao's significant operating
activities. Therefore, the investment is accounted for using the equity method.
(5) Cai Niao
In May 2013, the Group entered into an investment agreement with several prestigious e-Commerce firms, investment corporations and delivery
companies, to launch a new company named Cai Niao, which provides a platform that connects with a network of logistics providers through a
proprietary logistics information system and facilitates the delivery of packages across PRC. The Group invested RMB50 million in Cai Niao, and
held 1% of its equity interests.
(6) Wheat Commune
I n December 2015, the Group entered into a share purchase agreement to obtain 7.45% equity interest in Wheat Commune for US$12 million
(equivalent to RMB78 million). Wheat Commune is a leading Omni-channel platform providing comprehensive campus service in more than
100 cities across the country.
8. Short-term bank borrowing
Short-term bank borrowing consists of the following:
As of December 31,
2014
2015
RMB
RMB
250,000
250,000
300,000
300,000
On December 2, 2014, the Group entered into a short-term borrowing agreement for a loan of RMB300,000 with a commercial bank in the PRC with a
fixed interest rate of 5.60% per annum. The Group had repaid RMB20,000 and RMB30,000 on December 26 and December 29, 2014, respectively. The
remaining balance was fully repaid on November 2, 2015.
On January 5, 2015, the Group entered into a short-term borrowing agreement for a loan of RMB50,000 with a commercial bank in the PRC with a fixed
interest rate of 5.60% per annum. The loan was repaid on November 2, 2015.
On November 4, 2015, a PRC subsidiary of the Group entered into a short-term borrowing agreement for RMB300,000 with a commercial bank in the
PRC with a fixed interest rate of 4.35% per annum. The borrowing was guaranteed by a related party and another PRC subsidiary of the Group and
collateralized
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8. Short-term bank borrowing (Continued)
by certain of the Group's assets at the original cost of RMB64,942 and net book value of RMB59,030 as of December 31, 2015.
9. Other current liabilities
Other current liabilities consist of the following:
As of December 31,
2014
2015
RMB
RMB
Deposits from network partners(1)

Payables related to property and equipment
Salary and welfare payable
Share unit awards payable (Note 11)
Construction deposits
Others
Total
(1)
148,032
91,106
166,240
40,310
93,569
539,257
380,776
68,900
417,777
175,200
37,190
185,071
1,264,914
Amount primarily represents the dispatching fee deposits collected from the pickup outlets operated by our network partners,
which is refunded when the parcel is delivered to the recipients.
10. Income tax

Under the current laws of the Cayman Islands, the Company is incorporated in the Cayman Islands and not subject to tax on income or capital gain.
Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.
Under the current laws of the British Virgin Islands, the Group's subsidiary incorporated in British Virgin Island are not subject to tax.
Under the current Hong Kong Inland Revenue Ordinance, the Group's subsidiary domiciled in Hong Kong is subject to 16.5% Hong Kong profit tax on
its taxable income generated from operations in Hong Kong. Additionally, payments of dividends by the subsidiary incorporated in Hong Kong to the
Company are not subject to any Hong Kong withholding tax.
Under the Law of the People's Republic of China on Enterprise Income Tax ("EIT Law"), the Group's subsidiaries domiciled in the PRC are subject to
statutory rate of 25%.
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10. Income tax (Continued)
The current and deferred portion of income tax expenses included in the consolidated statements of comprehensive income, which were substantially
attributable to the Group's PRC subsidiaries are as follows:
Years ended
December 31,
2014
2015
RMB
RMB
Current tax expenses

Deferred tax
Total
282,795
(80,309)
202,486
414,952
5,047
419,999
Reconciliations of the differences between PRC statutory income tax rate and the Group's effective income tax rate for the years ended December 31,
2014 and 2015 are as follows:
Years ended
December 31,
2014
2015
Statutory income tax rate

R&D super deduction
Non-deductible expenses
Expired tax loss
Wavier of tax liabilities due to liquidation
Non-taxable income
Others
25.00% 25.00%
(0.35)% (0.25)%
9.12%
2.44%
0.78%
(0.87)%
(3.20)%
(0.10)% (0.02)%
33.58% 23.97%
The principal components of the Group's deferred income tax assets and liabilities as of December 31, 2014 and 2015 are as follows:
As of December 31,
2014
2015
Deferred tax assets:

Accrued expense
Unrealized gain for intragroup transaction
Net loss carryforward
Government subsidy
Provision for allowance for doubtful accounts
Depreciation for property and equipment
Total deferred tax assets
Deferred tax liabilities:
Difference in basis of land use rights
Total deferred tax liabilities
75,479
7,117
1,964
1,632
1,067
87,259
64,398
7,146
4,233
1,550
513
3,166
81,006
(47,128)
(47,128)
(85,059)
(85,059)
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The Group considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will more likely than not be
realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of
statutory carryforward periods, the Group's experience with tax attributes expiring unused and tax planning alternatives. Considering all the above factors,
the management concluded that all the deferred tax assets could be utilized before its expiry. As such, no valuation allowances are provided to the deferred
tax assets.
As of December 31, 2015, the Group had tax loss carryforward in subsidiaries of RMB16,935 which will expire from 2019 to 2020.
Uncertainties exist with respect to how the current income tax law in the PRC applies to the Group's overall operations, and more specifically, with
regard to tax residency status. The New EIT Law includes a provision specifying that legal entities organized outside of the PRC will be considered residents
for Chinese Income tax purposes if the place of effective management or control is within the PRC. The implementation rules to the New EIT Law provide
that non-resident legal entities will be considered PRC residents if substantial and overall management and control over the manufacturing and business
operations, personnel, accounting and properties, occurs within the PRC. Despite the present uncertainties resulting from the limited PRC tax guidance on
the issue, the Group does not believe that the legal entities organized outside of the PRC within the Group should be treated as residents for EIT law
purposes. If the PRC tax authorities subsequently determine that the Company and its subsidiaries registered outside the PRC should be deemed resident
enterprises, the Company and its subsidiaries registered outside the PRC will be subject to the PRC income taxes, at a statutory income tax rate of 25%. The
Group is not subject to any other uncertain tax position.
According to PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational
errors made by the taxpayer or withholding agent. The statute of limitations will be extended five years under special circumstances, which are not clearly
defined (but an underpayment of tax liability exceeding RMB0.1 million is specifically listed as a special circumstance). In the case of a related party
transaction, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. From inception to 2015, the Group is subject to
examination of the PRC tax authorities.
Aggregate undistributed earnings of the Group's PRC subsidiaries and VIE that are available for distribution was RMB337,875 and RMB1,434,218 as of
December 31, 2014 and 2015, respectively.
In accordance with the EIT Law, dividends, which arise from profits of foreign invested enterprises ("FIEs") earned after January 1, 2008, are subject to a
10% withholding income tax. In addition, under tax treaty between the PRC and Hong Kong, if the foreign investor is incorporated in Hong Kong and
qualifies as the beneficial owner, the applicable withholding tax rate is reduced to 5%, if the investor holds at least 25% in the FIE, or 10%, if the investor
holds less than 25% in the FIE. A deferred tax liability should be recognized for the undistributed profits of PRC subsidiaries unless the Company has
sufficient evidence to demonstrate that the undistributed dividends will be reinvested and the remittance of the dividends will be postponed indefinitely. The
Group plans to indefinitely reinvest undistributed profits earned from its China subsidiaries in its operations in the PRC. Therefore, no withholding income
taxes for undistributed profits of the Group's subsidiaries have been provided as of December 31, 2014 and 2015.
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Under applicable accounting principles, a deferred tax liability should be recorded for taxable temporary differences attributable to the excess of
financial reporting basis over tax basis in a domestic subsidiary. However, recognition is not required in situations where the tax law provides a means by
which the reported amount of that investment can be recovered tax-free and the enterprise expects that it will ultimately use that means. The Group
completed its feasibility analysis on a method, which the Group will ultimately execute if necessary to repatriate the undistributed earnings of the VIE
without significant tax costs. As such, the Group does not accrue deferred tax liabilities on the earnings of the VIE given that the Group will ultimately use
the means.
11. Share-based compensation
On February 6, 2015, ZTO Express granted a total of 584,000 redeemable and contingently convertible share units to certain key employees. The key
terms of these share unit grants are as follows:
Participating employees are required to pay a subscription price of RMB100 per share unit at the date of grant.
Participating employees have the right to request ZTO Express to repurchase their share units in January of each year subsequent to their
subscription of the share units. The repurchase price is determined based on the original subscription price of RMB100 per unit plus a return
based on a fixed compound annual rate of 35% for 2015, increasing by 5% in each of the following years. The annual return rate is capped
at 50%.
Upon termination of employment or retirement, participating employees have the right to request ZTO Express to repurchase their share units
based on a pro rated return determined by the number of days they held the share units during the year. If the employee does not request for a
cash redemption at the time they terminate their employment with ZTO Express, the repurchase right is terminated.
Participating employees do not have the option to convert their share units to equity of the ZTO Express. Conversion of these share units are
contingent upon a qualified initial public offering ("IPO"). All outstanding units at the time of the Group's IPO will be converted on ordinary
shares based on a conversion ratio of 1:6. The repurchase provision terminates upon conversion of these share units to ordinary share
upon IPO.
In conjunction with the 2015 Restructuring in August 2015, all outstanding share units granted and outstanding were converted to the share units of the
Company with the same terms and conditions noted above. As of December 31, 2015, none of the share units was forfeited.
These awards are classified as liabilities and measured at fair value at the date of the grant and subsequently remeasured to fair value at the end of each
reporting period. Changes in the fair value of the liabilities incurred for these awards are recognized as stock-based compensation.
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11. Share-based compensation (Continued)
The Group uses a binominal option pricing model to estimate the fair value of the share units granted. The fair value per unit was determined at the date
of grant to be RMB147.10 and at December 31, 2015 to be RMB300.00 using the following assumptions:
February 6, 2015
Expected volatility
Risk-free interest rate (per annum)
Risk-based interest rate (per annum)
Expected dividend yield
Expected term (in years)
Fair value of underlying ordinary shares
25.1%
1.50%
6.00%
1.9
23.18
December 31, 2015
29.0%
1.51%
4.75%
1.0
50.11
Total fair value of the awards at the date of grant and December 31, 2015 were RMB85,906 and RMB175,200, respectively. A total fair value adjustment
of RMB116,800 was recorded as selling, general and administrative expenses in the consolidated statements of comprehensive income for the year ended
December 31, 2015.
12. Earnings per share and dividends per share
The Group has used the two-class method of computing earnings per share as its Series A convertible redeemable preferred shares participate in
undistributed earnings on the same basis as the ordinary shares. Under this method, net income applicable to holders of ordinary shares is allocated on a prorata basis to the ordinary and preferred shares to the extent that each class may share in income for the period had it been distributed. Losses are not allocated
to the participating securities. Diluted earnings per share are computed using the more dilutive of (a) the two-class method or (b) the if-converted method.
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12. Earnings per share and dividends per share (Continued)
Basic and diluted earnings per share for each of the years presented are calculated as follows:
2014
2015
RMB
RMB
Numerator:
Less:
Change in redemption value for redeemable preferred shares
Earnings attributable to participating securities
Net income attributable to ordinary shareholders in computing basic and
diluted earnings per share
Shares (Denominator):
Weight average ordinary shares outstandingbasic and diluted
Earnings per sharebasic and diluted
406,426
1,331,755
(28,775)
(12,157)
406,426
1,290,823
597,882,740
0.68
599,373,273
2.15
13,226,525 non-contingent ordinary shares relating to the 2015 acquisitions that were not issued as of December 31, 2015 have been included in the
calculations of basic and diluted earnings per share.
Diluted earnings per share were computed using the two-class method as it is more dilutive than the if-converted method. As of December 31, 2014 and
2015, nil and 30,079,918 convertible redeemable preferred shares were excluded from computation of diluted earnings per share as their effects would have
been anti-dilutive.
Conversion of 584,000 redeemable and contingently convertible share units issued in February 2015 based on a conversion ratio of 1:6 are contingent
upon an effective qualified IPO, a condition which is not currently met. Therefore, these share units have been excluded from the denominator in the
computation of basic and diluted EPS for the year ended December 31, 2015.
Cash dividend of RMB0.19 per share were declared and paid on September 14, 2015, to shareholders of record as of December 31, 2014.
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13. Related party transactions
The table below sets forth the major related parties and their relationships with the Group:
Name of related parties
Relationship with the Group
Tonglu Tongze Logistics Ltd and its subsidiaries
Majority equity interests held by the employees of the

Group
Spouse of chairman of the Group
Controlled by brother of chairman of the Group
Group's equity investee
Entity controlled by principal shareholders of the Group
Group's equity investee until October 2015
until October 31, 2014
Lai Yufeng
Shanghai Mingyu Barcode Technology Ltd.
Fengwang Investments Ltd.
Shenzhen Fengchao Technology Ltd.
Heilongjiang Ruston Express Ltd.
Shanghai Kudan Technology Ltd.
Shanghai Kuaibao Network Technology Ltd.
Quanzhou Zhongtong Express Ltd
Wuhan Chengxin Zhongtong Express Ltd.
Guangzhou Xin Zhongtong Express Ltd.
Shanxi Zhongtong Daying Logistics Ltd.
Shenyang Changsheng Zhongtong Express Ltd.
Nanchang Zhongtong Express Ltd.
Tianjin Qianqiu Zhongtong Express Service Co. Ltd.
Shaanxi Zhongtong Express Ltd.
Jilin Zhongtong Daying Logistics Ltd.
Zhejiang Zhongtong Express Services Company Ltd.
Shanghai Zhongtongji Express Service Co., Ltd
Suzhou Zhongtong Express Ltd.
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Table of Contents
13. Related party transactions (Continued)
(a)
The Group entered into the following transactions with its related parties:
Years ended
December 31,
2014
2015
RMB
RMB
Delivery revenue derived from

Quanzhou Zhongtong Express Ltd.
Nanchang Zhongtong Express Ltd
Tianjin Qianqiu Zhongtong Express Service Co., Ltd.
Zhejiang Zhongtong Express Services Company Ltd.
Total
68,326
10,622
10,607
12,700
10,193
10,135
6,017
4,902
1,604
398
64,667
200,171
49,019
14,922
14,257
13,598
10,580
10,346
7,051
5,869
849
666
127,157
Transportation service fees paid to

Tonglu Tongze Logistics Ltd and its subsidiaries
643,618
703,072
80,904
80,395
Purchases of supplies from

In 2014, the Group paid RMB213 million to certain principal shareholders of the Group who are also the owners of Zhejiang Zhongtong Express
Services Company Ltd. to cease their delivery operations in Zhejiang province, PRC.
As part of the 2013 Restructuring and pursuant to an agreement executed between Shanghai Zhongtongji and ZTO Express, ZTO Express has agreed to
pay a cash consideration of RMB222 million for the acquisition of substantially all of the operating assets and equity investments held by Shanghai
Zhongtongji. In 2014, ZTO Express paid approximately RMB158 million of deposits and other expenses on behalf of Shanghai Zhongtongji after the
acquisition of Shanghai Zhongtongji's business. The Group has agreed with the shareholders of Shanghai Zhongtongji to net settle these two balances and a
cash payment for the net amount of RMB64 million was made in 2014.
In 2013, Shanghai Zhongtongji provided RMB341 million of interest-free loan to ZTO Express to fund the registered capital injections for the
establishment of ZTO Express's subsidiaries. ZTO Express repaid the loan in 2014.
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(b)
The Group had the following balances with its related parties:
As of December 31,
2014
2015
RMB
RMB
Amounts due to
Tonglu Tongze Logistics Ltd. and its subsidiaries
Suzhou Zhongtong Express Ltd
Guangzhou Xin Zhongtong Express Ltd.
Total
55,811
28,048
9,900
5,560
1,500
100,819
84,646
10,909
5,590
2,122
103,267
Amounts due to related parties consisted of accounts payable to related parties for transportation and deposits as of December 31, 2014 and 2015,
respectively.
(c)
As of December 31,
2014
2015
RMB
RMB
Amounts due from

Lai Yufeng (1)
Tonglu Tongze Logistics Ltd. and its subsidiaries(2)
Shanghai Kuaibao Network Technology Ltd.(3)
Shanxi Zhongtong Daying Logistics Ltd.(3)
Wuhan Chengxin Zhongtong Express Ltd.(3)
Total
228,509
1,161
229,670
58,400
22,168
2,700
2,297
175
85,740
(1)
As of December 31, 2014 and 2015, Ms. Lai Yufeng was holding RMB228,509 and RMB58,400 in cash and cash equivalent
on behalf of the Group.
(2)
As of December 31, 2015, the Group had an outstanding note receivable of RMB15,000, which bears interest of 20% per
annum from Tonglu Tongze Logistics Ltd. and its subsidiaries ("Tonglu"). The amount, plus accrued interest of
RMB1,500 was fully repaid to the Group in June 2016. The Group also prepaid transportation fee of nil and RMB7,168 to
Tonglu as of December 31, 2014 and 2015, respectively. Historically, the Group's employees have served as the key
management of Tonglu, with compensation determined and paid by the Group. Such compensation paid has not been
significant for the periods presented.
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(3)
Other amounts due from related parties consisted of prepaid transportation fee to related parties as of December 31, 2014 and
2015, respectively.
14. Commitments and contingencies

Operating Leases Commitments
The Group leases office space, sorting hubs and warehouse facilities under non-cancellable operating lease agreements that expire at various dates
through December 2032. During the two years ended December 31, 2014 and 2015, the Group incurred rental expenses amounting to RMB65,892 and
RMB105,235, respectively.
As of December 31, 2015, minimum lease payments under all non-cancellable leases are as follows:
Years ending
December 31,
RMB
2016
2017
2018
2019
2020
2021 and after
Total lease commitment
122,643
95,673
75,567
61,407
61,026
465,448
881,764
Capital Commitments
The Group's capital commitments primarily relate to commitments on construction of office building, sorting hubs and warehouse facilities. Total capital
commitments contracted but not yet reflected in the consolidated financial statements amounted to RMB1,001,031 as of December 31, 2015. All of these
capital commitments will be fulfilled in the following years based on the construction progress.
Contingencies
The Group is subject to periodic legal or administrative proceedings in the ordinary course of business. The Group does not believe that any currently
pending legal or administrative proceeding to which the Group is a party will have a material effect on its business or financial condition.
The Group has not made adequate contributions to employee benefit plans, as required by applicable PRC laws and regulations, but the Group has
recorded accruals for the estimated underpaid amounts in the consolidated financial statements. However, the Group has not made any accruals for the
interest on underpayments and penalties that may be imposed by the relevant PRC government authorities in the consolidated financial statements as the
Group believes it would be unlikely that the relevant PRC government authorities will impose any significant interests or penalties.
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15. Repurchase of ordinary share of ZTO Express
In November 2014, the Group repurchased an aggregate of 13,800,000 ordinary shares of ZTO Express from certain shareholders at RMB16.67 per share
for total cash consideration of RMB230 million, which approximated fair value. Consideration of RMB46 million was not paid as of December 31, 2015.
16. Convertible redeemable preferred shares
In 2015, the Company issued 30,079,918 shares of Series A preferred shares ("Preferred Shares") at a per-share purchase price of about US$9.97
(equivalent to RMB64.58) for a total consideration of US$300 million (equivalent to RMB1,943 million) to a group of unrelated third party investors. Given
the nature of certain key terms of the Preferred Shares as listed below, the Company has classified the Preferred Shares as mezzanine equity. The key terms of
the Preferred Shares are as follows:
Conversion
Each holder of Preferred Shares shall have the right, at such holder's sole discretion, to convert all or any portion of the Preferred Shares into ordinary
shares based on a one-for-one basis at any time. The initial conversion price is the issuance price of Preferred Shares, subject to adjustment in the event of
(1) stock splits, share combinations, share dividends and distribution, recapitalizations and similar events, and (2) issuance of new securities at a price per
share less than the conversion price in effect on the date of or immediately prior to such issuance. In that case, the conversion price shall be reduced
concurrently to the subscription price of such issuance. The Preferred Shares will be automatically converted into ordinary shares at the then applicable
conversion price upon the earlier of (1) the closing of a Qualified Initial Public Offering (QIPO), which refers to a firm underwritten initial public offering of
the Company's ordinary shares for trading on the New York Stock Exchange, NASDAQ Global Market, Main Board of the Hong Kong Stock Exchange or any
other stock exchange as approved by a majority of the Company's shareholders; or (2) the date specified by written consent or agreement of majority holders
of Preferred Shares.
Upon the closing of a QIPO, the conversion of the Preferred Share is subject to a Guarantee Return provision which is defined as below:
Upon consummation of a QIPO, valuation of Preferred Shares determined by reference to the per-share offering price in the QIPO shall not be less than the
Guaranteed Return which is the lower of (i) the aggregate purchase price for the Preferred Shares subscribed prior to the consummation of a QIPO plus return
on such investment calculated based on 25% per annual compound rate of return; or (ii) 200% of the aggregate purchase price for the Preferred Shares.
If the valuation of all or the portion of the Preferred Shares determined by reference to the offering price in the IPO shall be less than the Guaranteed
Return upon the completion of the QIPO (such shortfall, the "Shortfall Amount"), the Company is obligated issue warrants to such preferred shareholders or
have the conversion price or conversion rate applicable to the Preferred Shares automatically adjusted or cash or share compensation (at the election of
preferred shareholders) shall be payable from the Company according to the shortfall amount.
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Table of Contents
16. Convertible redeemable preferred shares (Continued)
The Group has determined that there was no beneficial conversion feature ("BCF") attributable to the Preferred Shares, as the effective conversion price
was greater than the fair value of the ordinary shares on the respective commitment date. The Group will reevaluate whether additional BCF is required to be
recorded upon the modification to the effective conversion price of the Preferred Shares, if any.
Voting Rights
The Preferred Shareholders are entitled to vote with ordinary shareholders on an as-converted basis.
Dividends
The Preferred Shareholders participate in dividends on an as-converted basis and must be paid prior to any payment on ordinary shares.
Redemption
In the event that a QIPO has not been completed by August 18, 2019 (the fourth anniversary of the first closing date), holders of the Preferred Shares may
at any time thereafter require that the Company redeem all or a portion of the Preferred Shares held by such holder at a redemption price per share equal to the
sum of (i) an amount equal to the original issuance price plus annual rate of return of 8% from the date that such holder made payment to the Company, and
(ii) all dividends accrued and unpaid with respect thereto (as adjusted for any share splits, share dividends, combinations, recapitalizations and similar
transactions). Management of the Group evaluated on the issuance date of preferred shares that the redemption is probable to occur until the occurrence of the
IPO. Therefore, the preferred shares were recorded at fair value on closing dates, and subsequently accreted to redemption value based on the terms stipulated
in the shareholder agreement. Changes in the redemption value are recorded against retained earnings.
The following is the rollforward of the carrying amounts of Preferred Share for the year ended December 31, 2015:
Balance as of January 1, 2015
Issuance of Preferred Shares
Change in redemption value
Balance as of December 31, 2015
1,948,080
28,775
1,976,855
Liquidation
In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, all assets and funds of the Company
legally available for distribution to the shareholders (after satisfaction of all creditors' claims and claims that may be preferred by law) shall be distributed to
all shareholders on parity with each other and shall be made ratably to the holders of the outstanding Preferred Shares and Ordinary Shares, on an asconverted to Ordinary Share basis determined pursuant to an Optional Conversion as of the time of such distribution.
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Table of Contents
17. Employee Benefit Plans
The Group's PRC subsidiaries are required by law to contribute a certain percentages of applicable salaries for retirement benefits, medical insurance
benefits, housing funds, unemployment and other statutory benefits for full time employees. The Group contributed RMB120,521 and RMB253,561 for the
years ended December 31, 2014 and 2015, respectively, for such benefits and has no legal obligation for the benefits beyond the contribution made. The PRC
government is responsible for the medical benefits and ultimate liability to those employees.
18. Segment Information
The Group has only one reportable segment since the Group does not distinguish revenues, costs and expenses between segments in its internal
reporting, and reports costs and expenses by nature as a whole.
The Group's chief operating decision maker, who has been identified as the Chief Executive Officer, reviews the consolidated results when making
decisions about allocating resources and assessing performance of the Group as a whole. The Group does not distinguish among markets or segments for the
purpose of internal reports.
All of the Company's revenues for the years ended December 31, 2014 and 2015 were generated from the PRC. As of December 31, 2014 and 2015, all of
the long-lived assets of the Group are located in the PRC, and no geographical segments are presented.
19. Restricted Net Assets
Pursuant to the laws applicable to the PRC's Foreign Investment Enterprises and local enterprises, the Group's entities in the PRC must make
appropriation from after-tax profit to non-distributable reserve funds as determined by the Board of Directors of the Company.
PRC laws and regulations permit payments of dividends by the Company's subsidiaries and VIE incorporated in the PRC only out of their retained
earnings, if any, as determined in accordance with PRC accounting standards and regulations. In addition, the Company's subsidiaries and VIE incorporated
in the PRC are required to annually appropriate 10% of their net income to the statutory reserve prior to payment of any dividends, unless such reserve has
reached 50% of their respective registered capital. In addition, registered share capital and capital reserve accounts are also restricted from withdrawal in the
PRC, up to the amount of net assets held in each subsidiary and VIE.
The appropriation to these reserves by the Company's PRC entities were RMB63,538 and RMB91,633 for the years ended December 31, 2014 and 2015,
respectively. The accumulated reserves as of December 31, 2014 and 2015 were RMB63,565 and RMB155,199, respectively.
As a result of these PRC laws and regulations and the requirement that distributions by PRC entities can only be paid out of distributable profits
computed in accordance with PRC GAAP, the PRC entities are restricted from transferring a portion of their net assets to the Group. Amounts restricted
include paid-in capital and the statutory reserves of the Company's PRC subsidiaries and VIE. As of December 31, 2015, the aggregate amount of capital and
statutory reserves restricted which represented the amount of net assets of the relevant subsidiaries and VIE in the Group not available for distribution was
RMB2,759,952.
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Table of Contents
20. Subsequent Events
On March 22, 2016, the Group subscribed for 30,000,000 ordinary shares of Cainiao Smart Logistics Network Limited ("Cainiao Cayman", formerly Cai
Niao, which completed its legal reorganization in January 2016), at total consideration of US$15,473 (equivalent to RMB100,000). Upon the closing of the
subscription, the Group held 120,000,000 equity shares of Cainiao Cayman in aggregate, representing 1% of Cainiao Cayman's equity interest.
In May 2016, the Group entered into the capital increase agreement with Feng Chao, to increase its investment by RMB100,000 to maintain its equity
shares in Feng Chao at 20%. Till the date of this report, the Group has not paid the contribution yet.
In June 2016, the Group granted 300,000 stock options to certain management of the Group at exercise price of US$9.97 per share. The options expire
10 years from the date of grant and vest ratably at each grant date anniversary over a requisite service period of five years.
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ADDITIONAL FINANCIAL INFORMATION OF PARENT COMPANY

FINANCIAL STATEMENTS SCHEDULE I
FINANCIAL INFORMATION OF PARENT COMPANY
CONDENSED BALANCE SHEETS
As of December 31,
2015
RMB
2014
RMB
ASSETS
Current assets:
Amounts due from a subsidiary
Investments in subsidiaries and VIE
TOTAL ASSETS
Mezzanine equity:
Series A convertible redeemable preferred shares (US$0.0001 par Value; Nil
and 30,079,918 shares authorized, issued and outstanding as of December 31,
2014 and 2015, respectively)
Shareholders' equity:
Ordinary shares (US$0.0001 par value; 10,000,000,000 shares authorized
600,000,000 issued, 586,200,000 and 600,000,000 shares outstanding as of
December 31, 2014 and 2015, respectively)
Retained earnings
Accumulated other comprehensive loss
Total shareholders' equity
TOTAL MEZZANINE AND SHAREHOLDERS' EQUITY
US$
(Note 5)
3,368,810
3,368,810
974,040
974,038
1,948,078
5,886,159
7,834,237
146,563
146,562
293,125
885,683
1,178,808
1,976,855
297,455
390
4,281,321
1,589,420
(13,749)
5,857,382
7,834,237
59
644,205
239,158
(2,069)
881,353
1,178,808
390
2,966,980
401,440
3,368,810
3,368,810
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Table of Contents
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
2014
RMB
Operating expenses:
General and administrative
Loss from operations
Equity in profit of subsidiaries and VIE
Net income
Change in redemption value of convertible redeemable preferred shares
Net income
Other comprehensive loss, net of tax of nil

2015
RMB
US$
(Note 5)
406,426
406,426
406,426
406,426
(2)
(2)
(2)
1,331,620
1,331,618
(28,775)
1,302,843
1,331,618
200,367
200,367
(4,330)
196,037
200,367
406,426
(13,749)
1,317,869
(2,069)
198,298
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Table of Contents
CONDENSED STATEMENTS OF CASH FLOWS
2014
RMB
Cash flows from operating activities:

Net income
Adjustments to reconcile net income to net cash used by operating activities
Equity in profit of subsidiaries and VIE
Net cash used in operating activities
Advances to related parties
Proceeds from the issuance of preferred shares
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year

2015
RMB
US$
(Note 5)
406,426
1,331,618
200,367
(406,426)
(1,331,620)
(2)
(200,367)
(962,166)
(962,166)
(144,776)
(144,776)
1,934,331
1,934,331
1,877
974,040
974,040
291,056
291,056
282
146,562
146,562
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Table of Contents
NOTES TO SCHEDULE I
1)
Schedule 1 has been provided pursuant to the requirements of Rule 12-04(a) and 5-04(c) of Regulation S-X, which require condensed financial
information as to the financial position, changes in financial position and results of operations of a parent company as of the same dates and for the
same periods for which audited consolidated financial statements have been presented when the restricted net assets of consolidated subsidiaries
exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. The Company does not include condensed
financial information as to the changes in equity as such financial information is the same as the consolidated statements of changes in shareholders'
equity.
2)
As disclosed in Note 1 to the consolidated financial statements, the Company was incorporated on April 8, 2015 in the Cayman Islands to be the
holding company of the Group. The Company undertook a series of transactions to redomicile its business from PRC to the Cayman Islands. The
Company has presented Schedule I as if Cayman Islands parent company has been incorporated on January 1, 2014.
3)
The condensed financial information has been prepared using the same accounting policies as set out in the consolidated financial statements except
that the equity method has been used to account for investments in its subsidiaries and VIE. For the parent company, the Company records its
investments in subsidiaries and VIE under the equity method of accounting as prescribed in ASC 323, InvestmentsEquity Method and Joint
Ventures. Such investments are presented on the Condensed Balance Sheets as "Investment in subsidiaries and VIE" and the subsidiaries and VIE's
profit or loss as "Equity in profit/loss of subsidiaries" on the Condensed Statements of Operations and Comprehensive Income. Ordinarily under the
equity, an investor in an equity method investee would cease to recognize its share of the losses of an investee once the carrying value of the
investment has been reduced to nil absent an undertaking by the investor to provide continuing support and fund losses. For the purpose of this
Schedule I, the parent company has continued to reflect its share, based on its proportionate interest, of the losses of subsidiaries and VIE regardless of
the carrying value of the investment even though the parent company is not obligated to provide continuing support or fund losses.
4)
As of December 31, 2014 and 2015, there were no material contingencies, significant provisions of long-term obligations, mandatory dividend or
redemption requirements of redeemable stocks or guarantees of the Company.
5)
Translations of balances in the additional financial information of Parent Company- Financial Statements Schedule I from RMB into US$ as of and for
the year ended December 31, 2015 are solely for the convenience of the readers and were calculated at the rate of US$1.00= RMB6.6459, representing
the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on June 30, 2016. No representation is made that the
RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on June 30, 2016, or at any other rate.
F-49
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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
As of
December 31,
2015
RMB
Notes
June 30, 2016

RMB
US$
(Note 2)
ASSETS
Current assets:
Restricted cash
Accounts receivable, net of allowance
for doubtful accounts of RMB536
and RMB846 at December 31, 2015
and June 30, 2016, respectively
Inventories
Goodwill
Deferred tax assets
TOTAL ASSETS
LIABILITIES, MEZZANINE EQUITY
AND EQUITY
Current liabilities (including amounts of
the consolidated VIE without recourse
to ZTO Express (Cayman) Inc. See
Note 2(b))
Accounts payable
Income tax payable
Acquisition consideration payable
TOTAL LIABILITIES
14
7
4
5
6
14
9
June 30, 2016

RMB
US$
Pro-forma
(Note 2)
2,452,359
266,403
2,058,231
211,549
309,699
31,832
2,058,231
211,549
309,699
31,832
58,494
15,720
347,680
211,724
85,740
3,438,120
377,431
1,752,586
821,131
4,091,219
81,006
20,730
10,582,223
117,091
19,037
523,544
313,706
73,800
3,316,958
389,197
2,660,307
1,018,425
4,157,111
121,962
49,554
11,713,514
17,619
2,864
78,777
47,203
11,105
499,099
58,562
400,293
153,241
625,515
18,351
7,456
1,762,517
117,091
19,037
523,544
313,706
73,800
3,316,958
389,197
2,660,307
1,018,425
4,157,111
121,962
49,554
11,713,514
17,619
2,864
78,777
47,203
11,105
499,099
58,562
400,293
153,241
625,515
18,351
7,456
1,762,517
300,000
294,199
298,865
301,932
103,267
87,766
1,264,914
2,650,943
85,059
2,736,002
406,943
381,793
243,345
248,497
35,700
30,660
1,283,292
2,630,230
109,352
2,739,582
61,232
57,448
36,616
37,391
5,372
4,613
193,095
395,767
16,454
412,221
406,943
381,793
243,345
248,497
35,700
30,660
1,283,292
2,630,230
109,352
2,739,582
61,232
57,448
36,616
37,391
5,372
4,613
193,095
395,767
16,454
412,221
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
F-50
Table of Contents
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
As of
Notes
December 31,
2015
RMB
June 30, 2016

RMB
US$
(Note 2)
Commitments and contingencies (Note 15)

Mezzanine equity:
Series A convertible redeemable preferred
shares (US$0.0001 par value;
30,079,918 shares authorized, issued
and outstanding as of December 31,
2015 and June 30, 2016)
Shareholders' equity
Ordinary shares (US$0.0001 par value;
10,000,000,000 shares authorized,
600,000,000 shares issued and
outstanding as of December 31, 2015;
and 629,226,522 shares issued and
618,384,686 outstanding as of June 30,
2016; and 659,306,440 shares issued
and 648,464,604 shares outstanding as
of June 30, 2016 on a pro forma basis)
Retained earnings
Accumulated other comprehensive (loss)
income
ZTO Express (Cayman) Inc. shareholders'
equity
Total Equity
TOTAL LIABILITIES, MEZZANINE
EQUITY AND EQUITY
17
June 30, 2016

RMB
US$
Pro-forma
(Note 2)
1,976,855
2,056,578
309,450
390
4,281,321
1,589,420
402
4,618,575
2,276,291
60
694,951
342,511
422
6,675,133
2,276,291
63
1,004,398
342,511
12,080
1,818
12,080
1,818
5,857,382
11,984
5,869,366
6,907,348
10,006
6,917,354
1,039,340
1,506
1,040,846
8,963,926
10,006
8,973,932
1,348,790
1,506
1,350,296
10,582,223
11,713,514
1,762,517
11,713,514
1,762,517
(13,749)
F-51
Table of Contents
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Notes
Revenues (including related party revenue of RMB62,328 and nil for the six months ended
June 30, 2015 and 2016, respectively)
Cost of revenues (including related party cost of revenues of RMB353,989 and RMB462,340 for
the six months ended June 30, 2015 and 2016, respectively)
Gross profit
Operating income (expenses)
Interest income
Interest expense
Gain on deemed disposal of an equity method investment
Income before income tax and share of profit (loss) in equity method investments
Income tax expense
Income before share of profit (loss) in equity method investments
Share of profit (loss) in equity method investments
Net income
Net loss attributable to noncontrolling interests
Net earnings per share attributable to ordinary shareholders:
Basic
Diluted
Weighted average shares used in calculating net earnings per ordinary share:
Basic
Diluted
Net income
Other comprehensive income, net of tax of nil
Less: comprehensive loss attributable to noncontrolling interests
Comprehensive income attributable to ZTO Express (Cayman) Inc.
Comprehensive income attributable to ordinary shareholders
10
17
2015
Six months ended June 30,

2016
RMB
RMB
2,486,060
4,245,177
638,766
(1,671,279)
814,781
(2,815,910)
1,429,267
(423,706)
215,060
(249,183)
14,293
(234,890)
579,891
(380,728)
8,023
(372,705)
1,056,562
(57,287)
1,207
(56,080)
158,980
3,170
(8,436)
574,625
(163,462)
411,163
4,257
415,420
586
416,006
416,006
20,811
(8,386)
9,551
1,078,538
(293,972)
784,566
(19,950)
764,616
1,978
766,594
(79,723)
686,871
3,131
(1,262)
1,437
162,286
(44,233)
118,053
(3,002)
115,051
298
115,349
(11,996)
103,353
US$
(Note 2)
13
0.70
0.70
1.07
1.07
0.16
0.16
594,205,525
594,205,525
415,420
613,901,657
613,901,657
764,616
613,901,657
613,901,657
115,051
415,420
586
416,006
416,006
25,829
790,445
1,978
792,423
(79,723)
712,700
3,886
118,937
298
119,235
(11,996)
107,239
F-52
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
(Amounts in thousands, except for share data)
Balance at January 1, 2016

Net income (loss)
Foreign currency translation
adjustments
Ordinary shares issued for business
acquisition
Conversion of redeemable and
contingently convertible share
units
Ordinary shares issued for share
based compensation
convertible redeemable preferred
shares
Balance at June 30, 2016
ZTO Express (Cayman) Inc. Shareholders' Equity

Accumulated
Additional
other
paid-in
Retained
comprehensive
Ordinary shares
capital
earnings
income (loss)
RMB
RMB
RMB
RMB
Number
of shares
600,000,000
390
4,281,321
1,589,420
(13,749)
766,594
Total
RMB
5,857,382
766,594
Noncontrolling
interests
RMB
11,984
(1,978)
Total
Equity
RMB
5,869,366
764,616
25,829
25,829
25,829
13,826,522
30,057
30,066
30,066
3,504,000
236,179
236,181
236,181
1,054,164
71,018
71,019
71,019
618,384,686
402
4,618,575
(79,723)
2,276,291
12,080
(79,723)
6,907,348
10,006
(79,723)
6,917,354
F-53
Table of Contents

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
2015
2016
RMB
RMB
US$
(Note 2)
Operating activities
Net Income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Loss on disposal of property and equipment
Allowance for doubtful accounts
Deferred income tax
Gain on deemed disposal of an equity method investment
Share of (profit) loss in equity method investments
Changes in operating assets and liabilities:
Restricted cash
Accounts receivable
Inventories
Accounts payable
Income tax payable
415,420
764,616
115,051
61,063
74,244
888
16,845
(4,257)
122,000
123,498
145
(1,742)
(42,041)
(9,551)
19,950
18,357
18,583
22
(262)
(6,326)
(1,437)
3,002
(31,077)
(8,090)
(50,763)
(18,446)
(1,690)
10,417
31,571
44,600
(9,971)
(83,333)
(24,487)
422,934
54,854
(56,856)
(3,317)
(44,943)
(89,182)
9,640
(28,824)
87,594
(55,520)
(67,567)
(53,435)
(132,405)
596,914
8,254
(8,555)
(499)
(6,762)
(13,419)
1,451
(4,337)
13,180
(8,354)
(10,167)
(8,040)
(19,925)
89,817
F-54
Table of Contents
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Purchases of property and equipment
Purchases of land use rights
Repayment of amounts due from related parties
Cash paid for business acquisitions, net of cash acquired from Suzhou ZTO
Additional capital injection for investments
Others
Proceeds from short-term borrowing
Repayment of short-term borrowing
Payment of dividends
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information
Income taxes paid
Interest expense paid
2015

2016
RMB
RMB
US$
(Note 2)
(336,955)
(46,075)
167,027
(900)
(20,000)
181
(236,722)
(504,522)
(362,036)
15,000
(84,794)
(111,426)
(60,949)
(1,108,727)
(75,915)
(54,475)
2,257
(12,759)
(16,766)
(9,171)
(166,829)
50,000
(20,470)
29,530
215,742
163,359
379,101
100,000
(2,000)
98,000
19,685
(394,128)
2,452,359
2,058,231
15,047
(301)
14,746
2,962
(59,304)
369,003
309,699
229,950
8,436
389,447
8,386
58,600
1,262
Supplemental disclosure on non-cash investing and financing activities:

In January 2016, the Group purchased the remaining 40% equity interest of Suzhou Zhongtong Express Ltd. Details of this business combination are set
out in Note 3. In conjunction with the acquisition, non-cash investing and financing activities are as follows:
RMB
Issuance of equity consideration

Cash consideration payable
Fair value of assets acquired and liabilities assumed
30,066
30,660
85,923
As of June 30, 2015 and 2016, payables for purchase of property and equipment are RMB56,374 and RMB413,616, respectively.
As of June 30, 2015 and 2016, payables for land use rights are nil and RMB21,958, respectively.
F-55
Table of Contents

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2016
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
ZTO Express (Cayman) Inc. (the "Company") was incorporated under the laws of Cayman Islands on April 8, 2015. The Company, its subsidiaries, its
variable interest entity and subsidiaries of variable interest entity ("VIE") (collectively referred to as the "Group") are principally engaged in express delivery
services in the People's Republic of China ("PRC") through a nationwide network partner model.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the
United States of America ("US GAAP") and applicable rules and regulations of the Securities and Exchange Commission, regarding financial reporting, and
include all normal and recurring adjustments that management of the Group considers necessary for a fair presentation of its financial position and operation
results. Certain information and footnote disclosures normally included in financial statements prepared in conformity with US GAAP have been condensed
or omitted pursuant to such rules and regulations. Accordingly, these statements should be read in conjunction with the Company's consolidated financial
statements as of and for the two years in the period ended December 31, 2015.
(b) Principles of consolidation
The condensed consolidated financial statements include the financial statements of the Company, its subsidiaries and VIE. All intercompany
transactions and balances have been eliminated on consolidation.
The Group evaluates the need to consolidate certain VIE of which the Group is the primary beneficiary. In determining whether the Group is the primary
beneficiary, the Group considers if the Group (1) has power to direct the activities that most significantly affects the economic performance of the VIE, and
(2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could
potentially be significant to the VIE. If deemed the primary beneficiary, the Group consolidates the VIE.
F-56
Table of Contents
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following amounts and balances of ZTO Express Co., Ltd. ("ZTO Express") and its subsidiaries were included in the Group's condensed consolidated
financial statements after the elimination of intercompany balances and transactions:
As of
December 31, 2015
RMB
Assets
Current assets:
Restricted cash
Accounts receivable, net
Inventories
Goodwill
Deferred tax assets
TOTAL ASSETS
Liabilities
Accounts payable
Income tax payable
Acquisition consideration payables
TOTAL LIABILITIES
June 30, 2016

RMB
587,039
266,403
56,262
15,720
256,955
170,824
85,740
1,438,943
249,508
1,383,357
788,717
4,091,219
81,006
15,707
8,048,457
519,551
211,549
105,751
17,149
222,111
251,977
5,400
1,333,488
153,021
1,891,175
872,856
4,157,111
91,693
41,553
8,540,897
300,000
280,774
295,865
300,864
103,267
87,766
1,184,875
2,553,411
85,059
2,638,470
406,943
335,029
243,345
1,099
35,700
30,660
879,982
1,932,758
84,115
2,016,873
F-57
Table of Contents
Six Months ended

June 30,
2015
2016
RMB
RMB
Total revenue
Net income
Net cash generated from operating activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
2,486,060
415,420
422,934
(236,722)
29,530
215,742
163,359
379,101
4,245,177
1,748,192
469,060
(634,548)
98,000
(67,488)
587,039
519,551
ZTO Express and its subsidiaries contributed 100% and 100% of the Group's consolidated revenues for the six months ended June 30, 2015 and 2016. As
of December 31, 2015 and June 30, 2016, ZTO Express accounted for an aggregate of 76% and 73%, respectively, of the consolidated total assets, and 96%
and 74%, respectively, of the consolidated total liabilities. Total assets not associated with ZTO Express consisted of cash and cash equivalents.
Beginning in January 2016, the ZTO Express and its subsidiaries (the "VIE") pay transportation fees and service fees pursuant to the Exclusive
Consulting and Services Agreements to Shanghai Zhongtongji Network (the "WFOE") based on the VIE's operating results and WFOE's operating cost of
sorting hubs and the Group's owned fleet. The WFOE is entitled to receive substantially all of the net income and transfer a majority of the economic benefits
in the form of service fees from the VIEs. The net income for ZTO Express and its subsidiaries after the deduction of the inter-company transportation fees and
service fees charges by WFOE were RMB126,406 for the six months ended June 30, 2016.
There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that require the Company or its
subsidiaries to provide financial support to the VIE. However, if the VIE was ever to need financial support, the Company or its subsidiaries may, at its option
and subject to statutory limits and restrictions, provide financial support to its VIE through loans to the shareholders of the VIE or entrustment loans to the
VIE.
The Group believes that there are no assets held in the consolidated VIE that can be used only to settle obligations of the VIE, except for registered
capital and the PRC statutory reserves. As the consolidated VIE is incorporated as a limited liability company under the PRC Company Law, creditors of the
VIE do not have recourse to the general credit of the Company for any of the liabilities of the consolidated VIE.
Relevant PRC laws and regulations restrict the VIE from transferring a portion of their net assets, equivalent to the balance of its statutory reserve and its
share capital, to the Company in the form of loans and advances or cash dividends.
F-58
Table of Contents
Nonconsolidated Variable Interest Entity
Tonglu Tongze Logistics Ltd. and its subsidiaries ("Tonglu"), established in 2013, is a transportation service company providing line-haul transportation
services to the Group. Tonglu is majority owned by the employees of the Group who are considered as related parties to the Group. The Group has concluded
that it is not the primary beneficiary of Tonglu as it does not have the obligation to absorb losses of Tonglu that could potentially be significant to Tonglu or
the right to receive benefits from Tonglu that could potentially be significant to Tonglu.
The Group held variable interests in Tonglu in the form of a waiver of management fees and an outstanding loan receivable as of December 31, 2015 of
RMB15 million that was repaid in full in 2016. As of June 30, 2016, the Group has no exposure to loss included in the Group's condensed consolidated
balance sheets as a result of the Group's variable interest in Tonglu.
The Group had transactions with Tonglu during the six months ended June 30, 2015 and 2016 and amounts due to Tonglu as of December 31, 2015 and
June 30, 2016 for transportation service received from Tonglu, in connection with a contractual arrangement and considered by management to be on terms
that are commensurate with market. Transactions and balances relating to the transportation services are disclosed in Note 14 (a), (b) and (c).
(c) Convenience translation
Our business is primarily conducted in China and almost all of our revenues are denominated in RMB. However, periodic reports made to shareholders
will include current period amounts translated into US dollars using the then current exchange rates, for the convenience of the readers. Translations of
balances in the condensed consolidated balance sheet, condensed consolidated statement of comprehensive income and condensed consolidated statement
of cash flows from RMB into US dollars as of and for the six months ended June 30, 2016 are solely for the convenience of the readers and were calculated at
the rate of US$1.00=RMB6.6459, representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on June 30,
2016. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on June 30, 2016, or
at any other rate.
(d) Revenue recognition
The Group recognizes revenue when persuasive evidence of an arrangement exists, service has been performed, the fee is fixed or determinable and
collectability is reasonably assured. While the Group serves as the franchisor in the ZTO network, it has not collected franchise fees from its network partners.
The Group considers its customers to be the pickup outlets operated by the Group's network partners. The Group's revenue represents network transit fees
derived from the provision of sorting and line-haul transportation services to the pickup outlets operated by the Group's network partners. The network transit
fees the Group charges its pickup outlets consist of (i) a fixed amount for a waybill attached to each parcel and (ii) a variable amount per parcel for sorting
and line-haul transportation based on the parcel weight and route. The Group recognizes revenue when the parcels are delivered from the Group's sorting
hubs to the delivery outlets in the network, assuming all other revenue recognition criteria have been met.
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Table of Contents
(d) Revenue recognition (Continued)
A small percentage of the Group's delivery services are performed for its enterprise customers; and enterprise customer revenues are recognized when the
packages are delivered to the recipients.
Revenues also include sales of accessories, such as portable barcode readers and ZTO-branded packing supplies and apparels. Revenues for the sales of
accessories were RMB53,396 and RMB161,770 for the six months ended June 30, 2015 and 2016, respectively.
(e) Pro forma information
The pro forma balance sheet information as of June 30, 2016 assumes the conversion of the outstanding Series A convertible redeemable preferred shares
into ordinary shares using a conversion ratio of one for one upon completion of a qualified IPO as the Group believed it is unlikely that the per-share offering
price in the qualified IPO will be less than the Guaranteed Return conversion rate as defined in Note 16 to the consolidated financial statements for the years
ended December 31, 2014 and 2015. Based on the fair value of ordinary shares as of June 30, 2016.
Pro forma net earnings per share for the year ended December 31, 2015 and the six-month period ended June 30, 2016 were not presented because the
effect of the conversion of the outstanding series A convertible redeemable preferred shares using a conversion ratio of one for one would have resulted in the
pro forma net earnings per share greater than the historical net earnings per share for the year ended December 31, 2015 and the six-month period ended
June 30, 2016. The effect of the assumed conversion would be anti-dilutive as the per share impact of the increase to net income attributable to ordinary
shareholders from adding back the change in redemption value of the preferred shares is greater than the per share decrease resulting from the conversions of
the outstanding Series A convertible redeemable preferred shares into ordinary shares.
(f) Share-based compensation
The Group grants share options and Ordinary Share Units to eligible employees, management and directors and accounts for these share-based awards in
accordance with ASC 718 CompensationStock Compensation.
Employees' share-based awards are measured at the grant date fair value of the awards and recognized as expenses a) immediately at grant date if no
vesting conditions are required; or b) using graded vesting method, net of forfeitures, over the requisite service period, which is the vesting period. When
there is a modification of the terms and conditions of an award, the Group measures the pre-modification and post-modification fair value of the share-based
awards as of the modification date and recognizes the incremental value as compensation cost over the remaining service period.
All transactions in which goods or services are received in exchange for equity instruments are accounted for based on the fair value of the consideration
received or the fair value of the equity instrument issued, whichever is more reliably measurable.
F-60
Table of Contents
(f) Share-based compensation (Continued)
The fair value of the share options and Ordinary Share Units were assessed using the income approach/discounted cash flow method, with a discount for
lack of marketability given that the shares underlying the awards were not publicly traded at the time of grant. This assessment required complex and
subjective judgments regarding the Company's projected financial and operating results, its unique business risks, the liquidity of its ordinary shares and its
operating history and prospects at the time the grants were made. In addition, the binomial option-pricing model is used to measure the value of share
options. The determination of the fair value is affected by the fair value of the ordinary shares as well as assumptions regarding a number of complex and
subjective variables, including the expected share price volatility, actual and projected employee and non-employee share option exercise behavior, risk-free
interest rates and expected dividends. The fair value of these awards was determined with the assistance from an independent valuation firm using
management's estimates and assumption.
The assumptions used in share-based compensation expense recognition represent management's best estimates, but these estimates involve inherent
uncertainties and application of management judgment. If factors change or different assumptions are used, the share-based compensation expenses could be
materially different for any period. Moreover, the estimates of fair value of the awards are not intended to predict actual future events or the value that
ultimately will be realized by grantees who receive share-based awards, and subsequent events are not indicative of the reasonableness of the original
estimates of fair value made by the Company for accounting purposes.
(g) Recently issued accounting standards
In May 2016, FASB issued ASU 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.
The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update affect only the narrow
aspects of Topic 606. The areas improved include: (1) Assessing the Collectability Criterion in Paragraph 606-10-25-1(e) and Accounting for Contracts That
Do Not Meet the Criteria for Step 1; (2) Presentation of Sales Taxes and Other Similar Taxes Collected from Customers; (3) Noncash Consideration;
(4) Contract Modifications at Transition; (5) Completed Contracts at Transition; and (6) Technical Correction. The effective date and transition requirements
for the amendments in this Update are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by Update
2014-09). The Group is in the process of assessing the impact of this ASU on its consolidated financial statements.
3. BUSINESS COMBINATION
In January 2016, the Group purchased the remaining 40% equity interest of Suzhou Zhongtong Express Ltd. ("Suzhou ZTO") that was previously
accounted for under the equity method for cash consideration of RMB30,660 and equity consideration of 600,000 ordinary shares, determined to have a per
share fair value of RMB50.11.
As a result of acquiring Suzhou ZTO, the Group's existing equity interests was remeasured to a fair value of RMB91,089, with the excess over the
carrying amount recognized as gain on deemed disposal of
F-61
Table of Contents
3. BUSINESS COMBINATION (Continued)
equity method investment of RMB9,551 in the condensed consolidated statement of comprehensive income for the six months ended June 30, 2016. The
acquisition of Suzhou ZTO was not material to the condensed consolidated financial statements for the six months ended June 30, 2016.
4. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consist of the following:
As of
December 31, 2015
RMB
Buildings
Vehicles
Construction in progress
Total
Accumulated depreciation
444,088
202,674
103,126
538,235
81,653
577,645
1,947,421
(194,835)
1,752,586
June 30, 2016

RMB
851,500
317,841
141,933
744,028
110,824
788,679
2,954,805
(294,498)
2,660,307
Depreciation expenses were RMB68,646 and RMB113,461 for the six months ended June 30, 2015 and 2016, respectively.
As of December 31, 2015 and June 30, 2016, the title certificates for certain buildings of the Group with an aggregate net book value of RMB172,768
and RMB316,775 had not yet been obtained, respectively.
5. LAND USE RIGHTS, NET
There is no private land ownership in China. Companies or individuals are authorized to possess and use the land only through land use rights granted
by the PRC government. Land use rights are amortized using the straight-line method over the lease term of around 50 years or less.
As of
December 31, 2015
RMB
Cost
Less: Accumulated amortization
847,915
(26,784)
821,131
June 30, 2016

RMB
1,055,414
(36,989)
1,018,425
Amortization expenses for land use rights were RMB5,598 and RMB10,037 for the six months ended June 30, 2015 and 2016, respectively.
F-62
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5. LAND USE RIGHTS, NET (Continued)
As of December 31, 2015 and June 30, 2016, the title certificates for certain land use rights of the Group with carrying value of RMB3,881 and
RMB9,591 has not yet been obtained, respectively.
6. GOODWILL
The changes in the carrying amount of goodwill as of December 31, 2015 and June 30, 2016 were as follows:
Amount
RMB

Addition in goodwill related to acquisition of Suzhou ZTO
Balance at June 30, 2016
4,091,219
65,892
4,157,111
7. INVESTMENTS IN EQUITY INVESTEES

The Group's investments in equity investees comprise the following:
As of
December 31, 2015
RMB
Investments accounted for under the equity method:

Suzhou Zhongtong Express Ltd. ("Suzhou ZTO")
Shenzhen Feng Chao Technology Ltd. ("Feng Chao")
Feng Wang Investment Co., Ltd. ("Feng Wang")
Others
Total investments accounted for under the equity method
Investments accounted for under the cost method:
Cai Niao Smart Logistics Network Limited ("Cai Niao")
Wheat Commune Group Inc. ("Wheat Commune)
Others
Total investments accounted for under the cost method
Total investments in equity investees
June 30, 2016

RMB
81,538
92,468
50,237
13,385
237,628
74,995
49,411
16,735
141,141
50,000
77,923
11,880
139,803
377,431
156,426
79,750
11,880
248,056
389,197
In May 2013, the Group entered into an investment agreement with several prestigious e-Commerce firms, investment corporations and delivery
companies, to launch a new company named Cai Niao, which provides a platform that connects with a network of logistics providers through a proprietary
logistics information system and facilitates the delivery of packages across PRC. The Group invested RMB50 million in Cai Niao, and held 1% of its equity
interests. In March, 2016, the Group subscribed for an additional 30,000,000 shares for consideration of RMB106 million (equivalent to and paid in
US$15,473) pursuant to the share subscription agreement dated as of March 11, 2016 during the new round of financing by Cai Niao. The additional
subscription did not change the percentage of equity interest the Group held in Cai Niao.
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8. SHORT-TERM BANK BORROWING
Short-term bank borrowing consists of the following:
As of
December 31, 2015
RMB
Domestic commercial bank
300,000
300,000
June 30, 2016

RMB
406,943
406,943
On November 4, 2015, a PRC subsidiary of the Group entered into a short-term borrowing agreement for RMB300,000 with a commercial bank in the
PRC due on November 2016, with a fixed interest rate of 4.35% per annum. The borrowing was guaranteed by a related party and another PRC subsidiary of
the Group and collateralized by certain of the Group's assets at the original cost of RMB64,942 and net book value of RMB57,487 as of June 30, 2016.
On January 1, 2016, the Group acquired Suzhou ZTO, which has an outstanding short-term borrowing amounting to RMB8,943 due on January 2017,
with a fixed interest rate of 6.4% per annum. The Group repaid RMB2,000 on January 11, 2016. The borrowing was guaranteed by the previous shareholders
of Suzhou ZTO and collateralized by the land use rights of Suzhou ZTO with a net book value of RMB11,191 as of June 30, 2016.
On February 3, 2016, a PRC subsidiary of the Group entered into a short-term borrowing agreement of RMB100,000 with a commercial bank in the PRC
at a fixed interest rate of 4.785% per annum.
9. OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
As of
December 31, 2015
RMB
Salary and welfare payable

Payables related to property and equipment
Deposits from network partners
Share unit awards payable (Note 11)
Others
Total
417,777
68,900
380,776
175,200
222,261
1,264,914
June 30, 2016

RMB
439,635
413,616
273,756
156,285
1,283,292
Deposits from network partners primarily represents the dispatching fee deposits collected from the pickup outlets operated by our network partners,
which is refunded when the parcel is delivered to the recipients.
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10. INCOME TAX
The current and deferred portion of income tax expenses included in the condensed consolidated statements of comprehensive income, which were
substantially attributable to the Group's PRC subsidiaries are as follows:
Six months ended
June 30,
2015
2016
RMB
RMB
Current tax expenses

Deferred tax
Total
146,617
16,845
163,462
336,013
(42,041)
293,972
The effective tax rate is based on expected income and statutory tax rates. For interim financial reporting, the Group estimates the annual tax rate based
on projected taxable income for the full year and records a quarterly income tax provision in accordance with the guidance on accounting for income taxes in
a period. As the year progresses, the Group refines the estimates of the year's taxable income as new information becomes available. This continual estimation
process often results in a change to the expected effective tax rate for the year. When this occurs, the Group adjusts the income tax provision during the
quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected annual tax rate.
The Group's effective tax rates were 28.45% and 27.26% for the six months ended June 30, 2015 and 2016, respectively. The change in the effective tax
rate is mainly due to non-deductible expenses.
11. SHARE-BASED COMPENSATION
In June 2016, the Group established an employee share holding platform (the "Share Holding Platform"). The purpose of the Share Holding Platform is to
allow employees of the Group in the PRC to receive equity share incentives. Zto Es Holding Limited ("ZTO ES"), a British Virgin Islands company was
established as a holding vehicle for the Group's Share Holding Platform. Four limited liability partnerships ("LLPs") were established in the PRC as the
shareholders of ZTO ES, each holding 25% equity interest in ZTO ES. At the time of establishment of these LLPs, Mr. Lai Meisong, chairman and chief
executive officer of the Group, and his wife, Ms. Lai Yufeng agreed to serve as the general partner and sole limited partner of each of the four LLPs,
respectively. ZTO ES and the LLPs have no activities other than administering the plan and does not have employees. On behalf of the Group and subject to
approval of board of director of the Company, Mr. Lai Meisong as the general partner of the LLPs, has the authority to select the eligible participants to
whom awards will be granted; and determine the number of shares covered; establish the terms, conditions and provision of such awards.
On June 28, 2016, the Company issued 16 million ordinary shares to ZTO ES. At the time of issuance, all shareholder rights associated with these
16 million ordinary shares including but not limited to voting right and dividend right were waived initially until such time when the economic interests in
the ordinary shares are granted to the employees, through transfer of interests in the LLPs. Pursuant to the terms of the partnership agreement, a recipient of
limited partnership interests is entitled to indirectly all of the
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11. SHARE-BASED COMPENSATION (Continued)
economic rights associated with the underlying ordinary shares of the Company and accordingly, at the direction of the employee, the LLPs will sell the
Company's ordinary shares held in connection with the limited partnership interest owned by the employee, and remit the proceeds to the employee. The
other shareholder's rights associated with the Company's ordinary shares held by the partnership may be exercised by the general partner of these LLPs. The
Group referred to these limited partner's partnership interests as Ordinary Share Units and five Ordinary Share Units correspond to the indirect economic
interest in one ordinary share of the Company.
Pursuant to a board of director resolution, on June 28, 2016, the following awards were approved to be granted to certain of Group's employees:
584,000 outstanding redeemable and contingently convertible share units were converted to 17,520,000 Ordinary Share Units, which
correspond to 3,504,000 Company's ordinary shares. This conversion is calculated based on the original conversion ratio of one redeemable
and contingently convertible share units to six ordinary shares. Upon conversion to the Ordinary Share Units, the cash redemption right and
contingent conversion right were terminated.
5,270,820 Ordinary Share Units corresponding to 1,054,164 Company's ordinary shares were transferred to certain employees to award them
for past performance. Of these awards, 1,540,500 Ordinary Share Units were granted to one employee with a cash subscription payment of
RMB10,000, and the remaining 3,730,320 Ordinary Share Units were granted to employees for no cash subscription.
These Ordinary Share Units awards have no vesting conditions and can be transferred in accordance with the applicable limited liability
partnership agreement.
The conversion of 584,000 redeemable and contingently convertible share units to Ordinary Share Units was accounted for as a modification in
accordance with ASC 718, CompensationStock Compensation. As a result of the modification, the cash redemption clause and contingent conversion
upon IPO clause were terminated. As the Group is not obligated to settle the Ordinary Share Units in cash, this modification changed the award's classification
from liability to equity. The fair value of the modified awards on the date of the modification was RMB236,181. Compensation cost of RMB60,981
representing the difference between the fair value of the modified awards on the date of modification and the fair value of the redeemable and contingently
convertible share units as of December 31, 2015 was recorded as shared-based compensation expenses and included in selling, general and administrative
expenses in the condensed consolidated statement of comprehensive income for the six months ended June 30, 2016. As these Ordinary Share Units have no
vesting condition, the total fair value of the modified award of RMB236,179 has been recorded as a credit to the additional paid in capital at the date of
modification.
Total fair value of redeemable and contingently convertible share units awards at the date of grant and June 30, 2015 were RMB85,906 and
RMB119,463, respectively. A total fair value adjustment of RMB61,063 was recorded as selling, general and administrative expenses in the condensed
consolidated statement of comprehensive income for the six months ended June 30, 2015.
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The Group accounted 5,270,820 Ordinary Share Units (equivalent to 1,054,164 ordinary shares) as equity awards and measured them at fair value at the
date of the grant in accordance with ASC 718. As these awards vested immediately at the date of grant, the Group recorded share-based compensation of
61,019 at the date of the grant based on a determined per share fair value of ordinary shares at RMB67.37 in the condensed consolidated statement of
comprehensive income for the six months ended June 30, 2016.
A summary of changes in the ordinary share awards relating to the Share Holding Platform granted by the Group during the six months ended June 30,
2016 is as follows:
Number of
ordinary shares under
Incentive Platform
Awarded and outstanding at January 1, 2016

Granted and vested
Vested and Outstanding at June 30, 2016
Weighted average
grant-date fair value
4,558,164
4,558,164
67.37
67.37
The fair value of Ordinary Share Units was based on the fair value of the underlying ordinary shares which was determined by using option-pricing
method to allocate enterprise value to preferred and ordinary shares on a fully diluted basis. The method treats ordinary shares and preferred shares as call
options on the enterprise's value, with exercise prices on the liquidation preference of the preferred shares.
On June 20, 2016, the Board also approved a 2016 share incentive plan (the "2016 Share Incentive Plan") in order to provide appropriate incentives to
the relevant directors, executive officers and other employees of the Company and its affiliates, pursuant to which the maximum number of shares of the
Company available for issuance pursuant to all awards under the 2016 Share Incentive Plan shall be 3,000,000 ordinary shares. On the same date, the
Company granted options to purchase 300,000 ordinary shares to certain executive of the Company at an exercise price of US$9.97 per share under the 2016
Share Incentive Plan. The options expire in 10 years from the date of grant and vest ratably at each grant date anniversary over a requisite service period of
five years.
The Group uses a binominal pricing model to estimate the fair value of the above options granted under the 2016 Share Incentive Plan. The fair value per
option was estimated at the date of grant using the following weighted-average assumptions:
June 20, 2016
Risk-free interest rate

Contract life
Expected volatility range
Expected dividend yield
Exercise multiple
Fair value of underlying ordinary shares on the date of option grants (RMB)
2.54%
9.7
31.25%
3.14%
2.8x
67.37
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The Group estimated the risk free interest rate based on the yield to maturity of U.S. treasury bonds denominated in USD and adjusted for country risk
premium of PRC at the option valuation date. The expected volatility at the date of grant date and each option valuation date was estimated based on the
annualized standard deviation of the daily return embedded in historical share prices of comparable peer companies with a time horizon close to contract life.
The Group estimated dividend yield based on the average dividend yield of comparable peer companies.
A summary of changes in the share options relating to ordinary shares granted by the Company during the six months ended June 30, 2016 is as follows:
Number of
share options
Outstanding at January 1, 2016

Granted
Outstanding at June 30, 2016
Vested and exercisable at June 30, 2016
Vested and expected to vest at June 30, 2016
300,000
300,000
300,000
Weighted
average
exercise price
66.26
66.26
66.26
Weighted average
remaining
contractual life
9.67 years
9.67 years
Aggregate
Intrinsic
Value of option
471
471
The weighted average grant date fair value of options granted during the six months ended June 30, 2016 was RMB15.89. There were no options granted
during the six months ended June 30, 2015. As of June 30, 2016, there was RMB4,767 of total unrecognized compensation expense related to unvested share
options granted. That cost is expected to be recognized over a weighted-average period of 4.75 years.
12. ORDINARY SHARES
As disclosed in Note 11, on June 28, 2016, 16 million ordinary shares of the Company were issued to ZTO ES to establish a reserve pool for future
issuance of equity share incentive to the Group's employees. All shareholder rights of these 16 million ordinary shares including but not limited to voting
rights and dividend rights are unconditionally waived until the corresponding Ordinary Share Units are transferred to the employees. While the ordinary
shares were legally issued to ZTO ES, ZTO ES does not have any of the rights associated with the ordinary shares, as such the Company accounted for these
shares as issued but not outstanding ordinary shares until the waiver is released by the Company, which occurs when Ordinary Shares Units are awarded to the
employees. 10,841,836 ordinary shares transferred to ZTO ES are considered issued but not outstanding as of June 30, 2016.
13. EARNINGS PER SHARE
The Group used the two-class method of computing earnings per share for the six months ended June 30, 2016 as its Series A convertible redeemable
preferred shares issued in August and December 2015 participate in undistributed earnings on the same basis as the ordinary shares. Under this method, net
income applicable to holders of ordinary shares is allocated on a pro-rata basis to the ordinary and preferred shares to the extent that each class may share in
income for the period had it been distributed. Losses are not allocated to the participating securities. Diluted earnings per share are computed using the more
dilutive of (a) the two-class method or (b) the if-converted method.
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13. EARNINGS PER SHARE (Continued)
Basic and diluted earnings per share for each of the years presented are calculated as follows:
2015
2016
RMB
RMB
Numerator:
Less:
Change in redemption value for redeemable preferred shares
Earnings attributable to participating securities
Net income attributable to ordinary shareholders in computing basic and
diluted earnings per share
Shares (Denominator):
Weight average ordinary shares outstandingbasic and diluted
Earnings per sharebasic and diluted
416,006
766,594
(79,723)
(32,083)
416,006
654,788
594,205,525
0.70
613,901,657
1.07
Diluted earnings per share for the six months ended June 30, 2016 were computed using the two-class method as it is more dilutive than the if-converted
method. As of June 30, 2016, 30,079,918 convertible redeemable preferred shares and 300,000 share options were excluded from computation of diluted
earnings per share as their effects would have been anti-dilutive.
10,841,836 ordinary shares transferred to ZTO ES were considered issued but not outstanding as of June 30, 2016 and therefore not included in the
calculation of basic and dilutive earnings per share.
Conversion of the redeemable and contingently convertible share units issued in February 2015 based on a conversion ratio of 1:6 are contingent upon
an effective qualified IPO, a condition which was not met as of June 30, 2015. Therefore, these share units have been excluded from the denominator in the
computation of basic and dilutive EPS for the six-month period ended June 30, 2015. On June 28, 2016, all the redeemable and contingently convertible
share units have been converted to Ordinary Shares Units. The underlying ordinary shares associated with these Ordinary Share Units were included in the
denominator in the computation of basic and diluted earnings per share for the six months ended on June 30, 2016.
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14. RELATED PARTY TRANSACTIONS
The table below sets forth the major related parties and their relationships with the Group:
Name of related parties
Relationship with the Group
Majority equity interests held by the employees of the

Group
Spouse of chairman of the Group
Controlled by brother of chairman of the Group
Group's equity investee until January 1, 2016
Entity controlled by Chairman of the Group
Lai Yufeng
Shanghai Kuaibao Network Technology Ltd.
Quanzhou Zhongtong Express Ltd
Nanchang Zhongtong Express Ltd.
Tianjin Qianqiu Zhongtong Express Service Co. Ltd.
Zto Es Holding Limited
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14. RELATED PARTY TRANSACTIONS (Continued)
(a)
The Group entered into the following transactions with its related parties:
Six months ended
June 30,
2015
2016
RMB
RMB
Delivery revenue derived from

Nanchang Zhongtong Express Ltd
Tianjin Qianqiu Zhongtong Express Service Co., Ltd.
Total
Transportation service fees paid to
Purchases of supplies from
(b)
28,606
6,596
5,875
5,513
5,183
3,557
3,438
2,825
412
323
62,328
320,022
417,957
33,967
44,383
As of
December 31,
2015
RMBK
Amounts due to
Suzhou Zhongtong Express Ltd
Total
84,646
10,909
5,590
2,122
103,267
June 30,
2016
RMB
27,944
7,756
35,700
Amounts due to related parties consisted of accounts payable to related parties for transportation, waybill material and deposits as of December 31, 2015
and June 30, 2016, respectively.
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14. RELATED PARTY TRANSACTIONS (Continued)
(c)
As of
December 31,
2015
RMBK
Amounts due from

ZTO ES(1)
Lai Yufeng (2)
Tonglu Tongze Logistics Ltd. and its subsidiaries(3)
Shanghai Kuaibao Network Technology Ltd.(4)
Shanxi Zhongtong Daying Logistics Ltd.(4)
Wuhan Chengxin Zhongtong Express Ltd.(4)
Total
58,400
22,168
2,700
2,297
175
85,740
June 30,
2016
RMB
68,400
5,400
73,800
(1)
Amount represents cash paid by employees relating to their Ordinary Share Unit awards, which ZTO ES is in the process of
remitting to the Group pending regulatory approval.
(2)
As of December 31, 2015 and June 30, 2016, Ms. Lai Yufeng was holding RMB58,400 and nil in cash and cash equivalent on
behalf of the Group.
(3)
As of December 31, 2015, the Group had an outstanding note receivable of RMB15,000, which bears interest of 20% per
annum from Tonglu Tongze Logistics Ltd. and its subsidiaries ("Tonglu"). The amount, plus accrued interest of RMB1,500
was fully repaid to the Group in June 2016. The Group also prepaid transportation fee of RMB7,168 and nil to Tonglu as of
December 31, 2015 and June 30, 2016, respectively. Historically, the Group's employees have served as the key management
of Tonglu, with compensation determined and paid by the Group. Such compensation paid has not been significant for the
periods presented.
(4)
Other amounts due from related parties consisted of prepaid transportation fee and loans to related parties as of December 31,
2015 and June 30, 2016, respectively.
15. COMMITMENTS AND CONTINGENCIES

Operating Leases Commitments
The Group leases office space, sorting hubs and warehouse facilities under non-cancellable operating lease agreements that expire at various dates
through December 2032. During the six months ended June 30, 2015 and 2016, the Group incurred rental expenses amounting to RMB39,657 and
RMB62,344, respectively.
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15. COMMITMENTS AND CONTINGENCIES (Continued)
As of June 30, 2016, minimum lease payments under all non-cancellable leases are as follows:
As of June 30,
2016
RMB
July to December, 2016

2017
2018
2019
2020
2021 and after
Total lease commitment
79,916
122,795
93,411
71,651
64,945
468,925
901,643
Capital Commitments
The Group's capital commitments primarily relate to commitments on construction of office building, sorting hubs and warehouse facilities. Total capital
commitments contracted but not yet reflected in the condensed consolidated financial statements amounted to RMB1,021,966 as of June 30, 2016. All of
these capital commitments will be fulfilled in the following years based on the construction progress.
Contingencies
The Group is subject to periodic legal or administrative proceedings in the ordinary course of business. The Group does not believe that any currently
pending legal or administrative proceeding to which the Group is a party will have a material effect on its business or financial condition.
The Group has not made adequate contributions to employee benefit plans, as required by applicable PRC laws and regulations, but the Group has
recorded accruals for the estimated underpaid amounts in the condensed consolidated financial statements. However, the Group has not made any accruals for
the interest on underpayments and penalties that may be imposed by the relevant PRC government authorities in the financial statements as the Group
believes it would be unlikely that the relevant PRC government authorities will impose any significant interests or penalties.
16. REPURCHASE OF ORDINARY SHARE OF ZTO EXPRESS
In November 2014, the Group repurchased an aggregate of 13,800,000 ordinary shares of ZTO Express from certain shareholders at RMB16.67 per share
for total cash consideration of RMB230 million, which approximated fair value. Consideration of RMB46 million was not paid as of December 31, 2015 and
June 30, 2016.
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17. CONVERTIBLE REDEEMABLE PREFERRED SHARES
The preferred shares were recorded at fair value on closing date, and subsequently accreted to redemption value based on the terms stipulated in the
shareholder agreement. Changes in the redemption value are recorded against retained earnings.
The following is the rollforward of the carrying amounts of Preferred Share for the six months ended June 30, 2016:
Balance as of January 1, 2016
Change in redemption value
Balance as of June 30, 2016
1,976,855
79,723
2,056,578
18. EMPLOYEE BENEFIT PLANS

The Group's PRC subsidiaries are required by law to contribute a certain percentages of applicable salaries for retirement benefits, medical insurance
benefits, housing funds, unemployment and other statutory benefits for full time employees. The Group contributed RMB86,564 and RMB139,603 for the
six months ended June 30, 2015 and 2016, respectively, for such benefits and has no legal obligation for the benefits beyond the contribution made. The
PRC government is responsible for the medical benefits and ultimate liability to those employees.
19. SUBSEQUENT EVENTS
On August 22, 2016, the Group has entered into an investment agreement with ZTO Supply Chain Management Co., Ltd. ("ZTO LTL") and Mr. Jianfa
Lai to invest cash of RMB 54,000 in exchange of 18% equity interest in ZTO LTL. ZTO LTL is engaged in provision of less-than-truckload transportation
services in China. The principal shareholders of ZTO LTL are also the principal shareholders of the Group.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Cayman Islands law does not limit the extent to which a company's articles of association may provide for indemnification of officers and directors,
except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against
civil fraud or the consequences of committing a crime.
The new articles of association that we expect to adopt to become effective upon the completion of this offering provide for indemnification of officers
and directors for losses, damages, costs and expenses incurred in their capacities as such only if they acted honestly and in good faith with a view to the best
interests of our company and, in the case of criminal proceedings, only if they had no reasonable cause to believe that their conduct was unlawful.
Pursuant to the indemnification agreements the form of which is filed as Exhibit 10.2 to this registration statement, we agree to indemnify our directors
and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a
director or officer.
The underwriting agreement, the form of which will be filed as Exhibit 1.1 to this registration statement, will also provide for indemnification by the
underwriters of us and our officers and directors for certain liabilities, including liabilities arising under the Securities Act, but only to the extent that such
liabilities are caused by information relating to the underwriters furnished to us in writing expressly for use in this registration statement and certain other
disclosure documents.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the
foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
ITEM 7. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, we have issued the following securities. We believe that each of the following issuances was exempt from registration under
the Securities Act in reliance on Regulation D under the Securities Act or pursuant to Section 4(2) of the Securities Act regarding transactions not
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involving a public offering or in reliance on Regulation S under the Securities Act regarding sales by an issuer in offshore transactions. No underwriters were
involved in these issuances of securities.
Purchaser
40 shareholders upon our incorporation

Max Alpha Limited
Max Beyond Limited
Onyx Gen Investment Holdings Limited
Date of Sale
or Issuance
April 8, 2015
August 18, 2015
August 18, 2015
August 18, 2015
Hillhouse ZT Holdings Limited

August 18, 2015
Standard Chartered Private Equity (Mauritius)
Limited
Gopher China S.O. Project Limited
August 18, 2015

August 18, 2015
Onyx Gen Investment Holdings Limited

December 31, 2015
December 31, 2015
Standard Chartered Private Equity (Mauritius)
Limited
19 existing shareholders
Zto Es Holding Limited
December 31, 2015

December 31, 2015
June 28, 2016
June 28, 2016
Number of Securities
600,000,000 ordinary shares

8,773,309 series A preferred
shares
shares
shares
shares
shares
shares
shares
shares
Consideration
US$
US$
US$
6,000
240
120
US$
87,500,000
US$
25,000,000
US$
15,000,000
US$
22,500,000
US$
87,500,000
US$
25,000,000
US$
15,000,000
US$
US$
US$
22,500,000
1,323
12,025,012
ITEM 8. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)
Exhibits
See Exhibit Index beginning on page II-7 of this registration statement.
The agreements included as exhibits to this registration statement contain representations and warranties by each of the parties to the applicable
agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (i) were not intended to
be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) may
have been qualified in such agreement by disclosure that was made to the other party in connection with the negotiation of the applicable agreement;
(iii) may apply contract standards of "materiality" that are different from "materiality" under the applicable securities laws; and (iv) were made only as of the
date of the applicable agreement or such other date or dates as may be specified in the agreement.
We acknowledge that, notwithstanding the inclusion of the foregoing cautionary statements, we are responsible for considering whether additional
specific disclosure of material information regarding material contractual provisions is required to make the statements in this registration statement
not misleading.
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Table of Contents
(b)
Financial Statement Schedules
Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the Consolidated Financial
Statements or the Notes thereto.
ITEM 9. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described in Item 6, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Shanghai, China, on September 30, 2016.
By: /s/ Meisong Lai
Name:
Title:
Meisong Lai
Chairman of the Board of Directors and Chief
Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints each of Meisong Lai and Jianmin (James) Guo as attorneys-in-fact with full power
of substitution for him or her in any and all capacities to do any and all acts and all things and to execute any and all instruments which said attorney and
agent may deem necessary or desirable to enable the registrant to comply with the Securities Act of 1933, as amended (the "Securities Act"), and any rules,
regulations and requirements of the Securities and Exchange Commission thereunder, in connection with the registration under the Securities Act of ordinary
shares of the registrant (the "Shares"), including, without limitation, the power and authority to sign the name of each of the undersigned in the capacities
indicated below to the Registration Statement on Form F-1 (the "Registration Statement") to be filed with the Securities and Exchange Commission with
respect to such Shares, to any and all amendments or supplements to such Registration Statement, whether such amendments or supplements are filed before
or after the effective date of such Registration Statement, to any related Registration Statement filed pursuant to Rule 462(b) under the Securities Act, and to
any and all instruments or documents filed as part of or in connection with such Registration Statement or any and all amendments thereto, whether such
amendments are filed before or after the effective date of such Registration Statement; and each of the undersigned hereby ratifies and confirms all that such
attorney and agent shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature
Title
Date
/s/ Meisong Lai
September 30, 2016
Meisong Lai
Chairman of the Board of Directors and Chief

Executive Officer (Principal Executive
Officer)
/s/ Jianfa Lai
Director
September 30, 2016
Director
September 30, 2016
Jianfa Lai
/s/ Jilei Wang
Jilei Wang
II-4
Table of Contents
Signature
/s/ Xiangliang Hu
Title
Date
Director
September 30, 2016
Director
September 30, 2016
Director
September 30, 2016
Director
September 30, 2016
Chief Financial Officer (Principal Financial

and Accounting Officer)
September 30, 2016
Xiangliang Hu
/s/ Baixi Lan
Baixi Lan
/s/ Xing Liu
Xing Liu
/s/ Frank Zhen Wei
Frank Zhen Wei
/s/ Jianmin (James) Guo
Jianmin (James) Guo
II-5
Table of Contents
SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
Pursuant to the Securities Act of 1933, the undersigned, the duly authorized representative in the United States of ZTO Express (Cayman) Inc. has signed
this registration statement or amendment thereto in New York on September 30, 2016.
Authorized U.S. Representative
By: /s/ Giselle Manon
Name:
Title:
Giselle Manon
Service of Process Officer
II-6
Table of Contents
EXHIBIT INDEX
Exhibit
Number
Description of Document
1.1*
Form of Underwriting Agreement
3.1
Amended and Restated Memorandum and Articles of Association of the Registrant, as currently in effect
3.2
Form of Second Amended and Restated Memorandum and Articles of Association of the Registrant (effective
upon the closing of this offering)
4.1*
Registrant's Specimen American Depositary Receipt (included in Exhibit 4.3)
4.2*
Registrant's Specimen Certificate for Class A Ordinary Shares
4.3*
Form of Deposit Agreement, among the Registrant, the depositary and holder of the American Depositary
Receipts
4.4
Shareholders Agreement between the Registrant and other parties thereto dated August 18, 2015
5.1
Opinion of Maples and Calder regarding the validity of the ordinary shares being registered and certain
Cayman Islands tax matters
8.1
Opinion of Maples and Calder regarding certain Cayman Islands tax matters (included in Exhibit 5.1)
8.2
Opinion of Zhong Lun Law Firm regarding certain PRC tax matters (included in Exhibit 99.2)
10.1
Amended and Restated 2016 Share Incentive Plan
10.2
Form of Indemnification Agreement between the Registrant and its directors and executive officers
10.3
Form of Employment Agreement between the Registrant and its executive officers
10.4
English translation of Exclusive Consulting and Services Agreement between Shanghai Zhongtongji Network
and ZTO Express dated August 18, 2015
10.5
English translation of Exclusive Call Option Agreement among Shanghai Zhongtongji Network, ZTO Express
and the shareholders of ZTO Express dated August 18, 2015
10.6
English translation of Equity Pledge Agreement among Shanghai Zhongtongji Network, ZTO Express and the
shareholders of ZTO Express dated August 18, 2015
10.7
English translation of Voting Rights Proxy Agreement among Shanghai Zhongtongji Network, ZTO Express
and the shareholders of ZTO Express dated August 18, 2015
10.8
English translation of Irrevocable Powers of Attorney granted by the shareholders of ZTO Express dated
August 18, 2015
10.9
English translations of Spousal Consents granted by each of Lai Yufeng, Fu Aiyun, Chen Xinyu, Shen
Linxian, Wu Yanfen and Fan Feiqun
10.10
English translation of Road Transportation Agreement between ZTO Express and Tonglu Tongze dated
December 22, 2014
10.11
English translation of form of Cooperation Agreement between ZTO Express and direct network partners of the
Registrant
II-7
Table of Contents
Exhibit
Number
Description of Document
10.12
Share Purchase and Subscription Agreement by and among the Registrant, Onyx Gem Investment Holdings
Limited, Hillhouse ZT Holdings Limited, Standard Chartered PrivateEquity (Mauritius) III Limited, Gopher
China S.O. Project Limited and other parties thereto dated May 21, 2015
10.13
Share Subscription Agreement by and between the Registrant and Zto Es Holding Limited dated June 28,
2016
21.1
Significant subsidiaries and consolidated affiliated entities of the Registrant
23.1
Consent of Deloitte Touche Tohmatsu Certified Public Accountants LLP, an independent registered public
accounting firm
23.2
Consent of Maples and Calder (included in Exhibit 5.1)
23.3
Consent of Zhong Lun Law Firm (included in Exhibit 99.2)
23.4
Consent of Charles Huang
24.1
Powers of Attorney (included on signature page)
99.1
Code of Business Conduct and Ethics of the Registrant
99.2
Opinion of Zhong Lun Law Firm regarding certain PRC law matters
99.3
Consent of iResearch Consulting Group
To be filed by amendment.
II-8
Exhibit 3.1
THE COMPANIES LAW (AS AMENDED)
COMPANY LIMITED BY SHARES
AMENDED AND RESTATED
MEMORANDUM OF ASSOCIATION
OF

AMENDED AND RESTATED MEMORANDUM OF ASSOCIATION
OF
(Adopted by special resolution of the shareholders passed on August 18, 2015)
1.
The name of the company is ZTO Express (Cayman) Inc. (the Company).
2.
The registered office of the Company will be situated at the offices of Sertus Incorporations (Cayman) Limited, Sertus Chambers, P.O. Box 2547,
Cassia Court, Camana Bay, Grand Cayman, Cayman Islands or at such other location in the Cayman Islands as the Directors may from time to time
determine.
3.
The objects for which the Company is established are unrestricted and the Company shall have full power and authority to carry out any object not
prohibited by any law as provided by Section 7(4) of the Companies Law (as amended) of the Cayman Islands (the Law).
4.
The Company shall have and be capable of exercising all the functions of a natural person of full capacity irrespective of any question of corporate
benefit as provided by Section 27(2) of the Law.
5.
The Company will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried
on outside the Cayman Islands; provided that nothing in this section shall be construed as to prevent the Company effecting and concluding
contracts in the Cayman Islands, and exercising in the Cayman Islands all of its powers necessary for the carrying on of its business outside the
Cayman Islands.
6.
The liability of the shareholders of the Company is limited to the amount, if any, unpaid on the shares respectively held by them.
7.
The capital of the Company is US$1,000,000 divided into 10,000,000,000 shares of a nominal or par value of US$0.0001 each, of which
9,969,920,082 are designated as ordinary shares of a par value of US$0.0001 each (Ordinary Shares) and 30,079,918 are designated as Series A
convertible, redeemable preferred shares of a par value of US$0.0001 each (Series A Preferred Shares), provided always that subject to the Law
and the Articles of Association the Company shall have power to redeem or purchase any of its shares and to sub-divide or consolidate the said
shares or any of them and to issue all or any part of its capital whether original, redeemed, increased or reduced with or without any preference,
priority, special privilege or other rights or subject to any postponement of rights or to any conditions or restrictions whatsoever and so that unless
the conditions of issue shall otherwise expressly provide every issue of shares whether stated to be ordinary, preference or otherwise shall be subject
to the powers on the part of the Company hereinbefore provided.
8.
The Company may exercise the power contained in Section 206 of the Law to deregister in the Cayman Islands and be registered by way of
continuation in some other jurisdiction.
TABLE OF CONTENTS
CLAUSE
PAGE
TABLE A
INTERPRETATION
PRELIMINARY
SHARES
SERIES A PREFERRED SHARES
10
CONVERSION
10
MODIFICATION OF RIGHTS
16
CERTIFICATES
16
LIEN
17
CALLS ON SHARES
17
FORFEITURE OF SHARES
18
TRANSFER OF SHARES
18
TRANSMISSION OF SHARES
22
ALTERATION OF SHARE CAPITAL
23
REDEMPTION, PURCHASE AND SURRENDER OF SHARES
23
TREASURY SHARES
25
GENERAL MEETINGS
25
NOTICE OF GENERAL MEETINGS
26
PROCEEDINGS AT GENERAL MEETINGS
26
VOTES OF SHAREHOLDERS
27
CORPORATIONS ACTING BY REPRESENTATIVES AT MEETINGS
29
DIRECTORS
29
POWERS AND DUTIES OF DIRECTORS
31
BORROWING POWERS OF DIRECTORS
32
i
DISQUALIFICATION OF DIRECTORS
32
PROCEEDINGS OF DIRECTORS
32
THE SEAL
35
DIVIDENDS
35
ACCOUNTS, AUDIT AND ANNUAL RETURN AND DECLARATION
36
CAPITALISATION OF RESERVES
36
SHARE PREMIUM ACCOUNT
37
NOTICES
38
INDEMNITY
39
NON-RECOGNITION OF TRUSTS
39
WINDING UP
40
AMENDMENT OF ARTICLES OF ASSOCIATION
41
CLOSING OF REGISTER OR FIXING RECORD DATE
41
REGISTRATION BY WAY OF CONTINUATION
41
MERGERS AND CONSOLIDATION
42
DISCLOSURE
42
ii

FIRST AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
(Adopted by special resolution of the shareholders passed on August 18, 2015)
TABLE A
The Regulations contained or incorporated in Table A in the First Schedule of the Law shall not apply to ZTO Express (Cayman) Inc. (the
Company) and the following Articles shall comprise the Articles of Association of the Company.
INTERPRETATION
1.
In these Articles the following defined terms will have the meanings ascribed to them, if not inconsistent with the subject or context:
Affiliate means, with respect to any Person, any other Person directly or indirectly Controlling, Controlled by, or under common Control with
such Person. With respect to a New Investor and Sequoia, the term Affiliate also includes (i) any shareholder of such Person, (ii) such Persons or
its shareholders general partners or limited partners, and (iii) the fund manager managing such Person or its shareholder (and general partners,
limited partners and officers thereof) and other funds managed by such fund manager (for the avoidance of doubt, excluding their respective
Portfolio Companies). With respect to any natural Person, means: (i) spouse; (ii) parents; (iii) children; (iv) siblings; (v) any other Person who is a
lineal ascendant or descendant of such Person; and (vi) any other Person who is a relative of such Person and lives in the same house with such
Person.
Anti-Bribery Procedures has the meaning ascribed to it in the Shareholders Agreement.
Articles means these articles of association of the Company, as amended or substituted from time to time.
Attorney has the meaning ascribed to it in Article 98.
Authorised Signature has the meaning ascribed to it in Article 98.
Automatic Conversion has the meaning ascribed to it in Article 15(c).
Board means the board of directors of the Company.
Board Observer has the meaning ascribed to it in Article 91A.
Branch Register means any branch Register of such category or categories of Members as the Company may from time to time determine.
1
Business Day has the meaning ascribed to it in the Shareholders Agreement.

BVI Holding Company has the meaning ascribed to it in the Shareholders Agreement.
Chairman has the meaning ascribed to it in Article 112.
Charter Documents has the meaning ascribed to it in the Shareholders Agreement.
Class or Classes means any class or classes of Shares as may from time to time be issued by the Company.
Closing has the meaning set forth in the Share Purchase Agreement
Closing Date means the date of each Closing.
Company has the meaning set forth in the preamble.
Company Securities means (i) Shares, (ii) securities convertible into or exchangeable for Shares and (iii) any employee stock incentive plan,
options, warrants or other rights to acquire Shares.
Competitor has the meaning ascribed to it in the Shareholders Agreement.
Control Documents has the meaning ascribed to it in the Share Purchase Agreement.
Co-Sale Rightholder has the meaning ascribed to it in Article 41(a).
Convertible Securities means any indebtedness, shares or other securities directly or indirectly convertible into or exchange for Ordinary Shares.
Directors means the directors of the Company for the time being, or as the case may be, the directors assembled as a board or as a committee
thereof.
Domestic Company has the meaning ascribed to it in the Shareholders Agreement.
Excluded Issuance has the meaning ascribed to it in the Shareholders Agreement.
Exempted Issuance has the meaning ascribed to it in Article 9(e).
Exercise Notice has the meaning ascribed to it in Article 9(b).
Exercising Co-Sale Rightholder has the meaning ascribed to it in Article 41(c).
Exercising Shareholder has the meaning ascribed to it in Article 40(c).
Financial Investor has the meaning ascribed to it in the Shareholders Agreement.
First Closing Date has the meaning ascribed to it in the Share Purchase Agreement.
Founder means Mr. Lai Mei Song (), a PRC citizen.
2
Founder SPV means ZTO LMS Holding Limited, a company limited by shares incorporated and existing under the laws of the British Virgin
Islands.
Group Company has the meaning ascribed to it in the Shareholders Agreement.
Gopher has the meaning ascribed to it in the Shareholders Agreement.
Guaranteed Return has the meaning ascribed to it in the Shareholders Agreement.
Hao Min has the meaning ascribed to it in the Shareholders Agreement.
Hao Min Representative has the meaning ascribed to it in the Shareholders Agreement.
Hillhouse means Hillhouse ZT Holdings Limited, and / or its Permitted Transferees, if applicable.
HK Holding Company has the meaning ascribed to it in the Shareholders Agreement.
Indemnified Person has the meaning ascribed to it in Article 138.
Internal Control Plan has the meaning ascribed to it in the Shareholders Agreement.
Investment Amount means the total purchase price paid by the New Investors under the Share Purchase Agreement.
IPO Adjustment has the meaning ascribed to it in the Shareholders Agreement.
Issuance Notice has the meaning ascribed to it in Article 9(a).
Law means the Companies Law (2013 Revision) of the Cayman Islands and any future statutory amendments or re-enactment thereof.
Material Group Company has the meaning ascribed to it in the Shareholders Agreement.
Memorandum of Association or Memorandum means the memorandum of association of the Company, as amended or substituted from time to
time.
New Investor has the meaning ascribed to it in the Shareholders Agreement.
New Investors Holding a Majority in Interest means, collectively, the New Investors holding at least a majority of the then outstanding Series A
Preferred Shares held by all New Investors.
New Shares shall mean any Shares issued (or deemed to have been issued pursuant to Article 15(e)(iv) by the Company after the Series A Issue
Date, other than any Shares issued pursuant to an Exempted Issuance.
Non-Exercising Co-Sale Rightholder has the meaning ascribed to it in Article 41(c).
Offered Securities has the meaning ascribed to it in Article 40(a).
Office means the registered office of the Company as required by the Law.
3
Officers means the officers for the time being and from time to time of the Company.
Option Period has the meaning ascribed to it in Article 40(b).
Optional Conversion has the meaning ascribed to it in Article 15(b).
Ordinary Resolution means a resolution:
(a)
passed by a simple majority of such Shareholders as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at a
general meeting of the Company and where a poll is taken regard shall be had in computing a majority to the number of votes to which
each Shareholder is entitled; or
(b)
approved in writing by at least a simple majority of all Shareholders entitled to vote at a general meeting of the Company in one or more
instruments each signed by one or more of such Shareholders and the effective date of the resolution so adopted shall be the date on which
the instrument, or the last of such instruments, if more than one, is executed.
paid up means paid up as to the par value in respect of the issue of any Shares and includes credited as paid up.
Permitted Transferee has the meaning ascribed to it in the Shareholders Agreement.
Person means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization (whether or not
having a separate legal personality) or any of them as the context so requires, other than in respect of a Director or Officer in which circumstances
Person shall mean any person or entity permitted to act as such in accordance with the laws of the Cayman Islands.
Portfolio Companies means, with respect to the New Investors and Sequoia, any company in which such Person or its Affiliates have invested as
part of their respective ordinary course of private equity investment business.
PRC has the meaning ascribed to it in the Shareholders Agreement.
Preemptive Portion means, with respect to a Preemptive Rightholder, a fraction, the numerator of which shall be the aggregate number of
Ordinary Shares held by such Preemptive Rightholder (including all Preferred Shares held by such Shareholder on an as-converted to Ordinary Share
basis) and the denominator of which shall be the total number of Ordinary Shares held by all Preemptive Rightholders (including all Preferred Shares
held by such Shareholders on an as-converted to Ordinary Share basis) then outstanding immediately prior to the issuance of the Company
Securities specified in the Issuance Notice.
Preemptive Rightholder means each Financial Investor.
Preferred IPO Adjustment has the meaning ascribed to it in the Shareholders Agreement.
Preferred Shares means Series A Preferred Shares and any other Class of preferred Shares of the Company from time to time.
Principal Business means the business as currently conducted by the Group, taken as a whole, as of the date hereof.
4
Principal Register, where the Company has established one or more Branch Registers pursuant to the Law and these Articles, means the Register
maintained by the Company pursuant to the Law and these Articles that is not designated by the Directors as a Branch Register.
Pro Rata Share has the meaning ascribed to it in Article 40(b).
Public Offering has the meaning ascribed to it in the Shareholders Agreement.
Qualified IPO has the meaning ascribed to it in the Shareholders Agreement.
Redemption Date has the meaning ascribed to it in Article 52(b).
Redemption Right has the meaning ascribed to it in Article 52(a).
Redemption Notice has the meaning ascribed to it in Article 52(a).
Register means the register of Members of the Company required to be kept pursuant to the Law and includes any Branch Register(s) established
by the Company in accordance with the Law.
Related Party has the meaning ascribed to it in the Shareholders Agreement.
Restricted Party has the meaning ascribed to it in the Shareholders Agreement.
Rightholder has the meaning ascribed to it in Article 40(a).
Sanctions has the meaning ascribed to it in the Shareholders Agreement.
SC means Standard Chartered Private Equity (Mauritius) III Limited, and / or its Permitted Transferees, if applicable.
Seal means the common seal of the Company (if adopted) including any facsimile thereof.
Second Notice has the meaning ascribed to it in Article 40(c).
Secondary Option Period has the meaning ascribed to it in Article 40(c).
Secretary means any Person appointed by the Directors to perform any of the duties of the secretary of the Company.
Sequoia has the meaning ascribed to it in the Shareholders Agreement.
Sequoia Director means the Director appointed by Sequoia.
Series A Conversion Price shall initially be the Series A Issue Price, and shall be subject to adjustment and readjustment from time to time as
hereinafter provided in these Articles.
Series A Issue Date means, with respect to a Series A Preferred Share, the original issue date.
Series A Issue Price means, with respect to a Series A Preferred Share, US$9.973432 per share.
5
Series A Preferred Shares means the Series A convertible, redeemable preferred shares of the Company, par value US$0.0001 per share.
Series A Redemption Price has the meaning ascribed to it in Article 52(a).
Share means Preferred Shares and Ordinary Shares or any other share in the capital of the Company.
Shareholder or Member means a Person who is registered as the holder of Shares in the Register and includes each subscriber to the
Memorandum of Association pending entry in the Register of such subscriber.
Shareholders Agreement means the Shareholders Agreement entered into by the Company, the Shareholders and other parties listed thereon
dated August 18, 2015.
Share Premium Account means the share premium account established in accordance with these Articles and the Law.
Share Purchase Agreement means the Share Purchase and Subscription Agreement entered into by the Company, the New Investors and other
parties listed thereon dated May 21, 2015.
signed means bearing a signature or representation of a signature affixed by mechanical means.
Special Resolution means a special resolution of the Company passed in accordance with the Law, being a resolution:
(a)
passed by a majority of not less than two-thirds of such Shareholders as, being entitled to do so, vote in person or, where proxies are
allowed, by proxy at a general meeting of the Company of which notice specifying the intention to propose the resolution as a special
resolution has been duly given and where a poll is taken regard shall be had in computing a majority to the number of votes to which each
Shareholder is entitled; or
(b)
approved in writing by all of the Shareholders entitled to vote at a general meeting of the Company in one or more instruments each signed
by one or more of the Shareholders and the effective date of the special resolution so adopted shall be the date on which the instrument or
the last of such instruments, if more than one, is executed.
Strategic Investor has the meaning ascribed to it in the Shareholders Agreement.

Target Franchisee has the meaning ascribed to it in the Share Purchase Agreement.
Transaction Documents has the meaning ascribed to it in the Share Purchase Agreement.
Transfer has the meaning ascribed to it in the Shareholders Agreement.
Transfer Lock-up Period has the meaning ascribed to it in the Shareholders Agreement.
Transfer Notice has the meaning ascribed to it in Article 40(a).
6
Transferor has the meaning ascribed to it in Article 40(a).
Unredeemed Shares has the meaning ascribed to it in Article 52(c).
WFOE has the meaning ascribed to it in the Shareholders Agreement.
WP means Onyx Gem Investment Holdings Limited and / or its Permitted Transferees, if applicable.
WP Director means the Director appointed by WP.
2.
In these Articles, save where the context requires otherwise:

(a)
words importing the singular number shall include the plural number and vice versa;
(b)
words importing the masculine gender only shall include the feminine gender and any Person as the context may require;
(c)
the word may shall be construed as permissive and the word shall shall be construed as imperative;
(d)
reference to a dollar or dollars or US$ (or $) and to a cent or cents is reference to dollars and cents of the United States of America;
(e)
reference to a statutory enactment shall include reference to any amendment or re-enactment thereof for the time being in force;
(f)
reference to any determination by the Directors shall be construed as a determination by the Directors in their sole and absolute discretion
and shall be applicable either generally or in any particular case;
(g)
reference to in writing shall be construed as written or represented by any means reproducible in writing, including any form of print,
lithograph, email, facsimile, photograph or telex or represented by any other substitute or format for storage or transmission for writing or
partly one and partly another; and
(h)
3.
in calculations of share numbers or percentages, references to fully-diluted and as-converted basis mean that the calculation is to be made
assuming that all outstanding options, warrants and other Company Securities convertible into or exercisable or exchangeable for Ordinary
Shares (whether or not by their terms then currently convertible, exercisable or exchangeable), have been so converted, exercised or
exchanged. Any share calculation shall be appropriately adjusted to take into account any share split, share consolidation, recapitalization,
bonus issue, reclassification or similar event. References to a Persons stake, interest or similar terms shall unless the context deems
otherwise refer to the aggregate amount of Company Securities held or beneficially owned by such Person in the applicable entity.
Subject to the preceding Articles, any words defined in the Law shall, if not inconsistent with the subject or context, bear the same meaning in these
Articles.
7
PRELIMINARY
4.
The business of the Company may be commenced at any time after incorporation.
5.
The Office shall be at such address in the Cayman Islands as the Directors may from time to time determine. The Company may in addition establish
and maintain such other offices and places of business and agencies in such places as the Directors may from time to time determine.
6.
The expenses incurred in the formation of the Company and in connection with the offer for subscription and issue of Shares shall be paid by the
Company. Such expenses may be amortised over such period as the Directors may determine and the amount so paid shall be charged against
income and/or capital in the accounts of the Company as the Directors shall determine.
7.
The Directors shall keep, or cause to be kept, the Register at such place or (subject to compliance with the Law and these Articles) places as the
Directors may from time to time determine. In the absence of any such determination, the Register shall be kept at the Office. The Directors may
keep, or cause to be kept, one or more Branch Registers as well as the Principal Register in accordance with the Law, provided always that a
duplicate of such Branch Register(s) shall be maintained with the Principal Register in accordance with the Law.
SHARES
8.
Subject to these Articles (including Articles 73 and 74) and applicable terms of Transaction Documents, all Shares for the time being unissued shall
be under the control of the Directors who may:
(a)
issue, allot and dispose of the same to such Persons, in such manner, on such terms and having such rights and being subject to such
restrictions as they may from time to time determine; and
(b)
grant options with respect to such Shares and issue warrants or similar instruments with respect thereto;
and, for such purposes, the Directors may reserve an appropriate number of Shares for the time being unissued.
9.
Preemptive Rights.
(a)
The Company shall give each Preemptive Rightholder notice (an Issuance Notice) of any proposed issuance by the Company of any
Company Securities at least 30 days prior to the proposed issuance date. The Issuance Notice shall specify the price at which such
Company Securities are to be issued and the other material terms of the issuance. Subject to Article 9(e) below, each Preemptive
Rightholder shall be entitled to purchase up to its Preemptive Portion of the Company Securities proposed to be issued, at the price and on
the terms specified in the Issuance Notice.
(b)
Each Preemptive Rightholder who desires to purchase any or all of its Preemptive Portion of the Company Securities specified in the
Issuance Notice shall deliver notice to the Company (each, an Exercise Notice) of its election to purchase such Company Securities
within 30 Business Days of receipt of the Issuance Notice. The Exercise Notice shall specify the number (or amount) of Company Securities
to be
8
purchased by such Preemptive Rightholder and shall constitute exercise by such Preemptive Rightholder of its rights under this Article 9
and a binding agreement of it to purchase, at the price and on the terms specified in the Issuance Notice, the number (or amount) of
Company Securities specified in the Exercise Notice. If, at the termination of such 30-Business Day period, any Preemptive Rightholder
shall not have delivered an Exercise Notice to the Company, such Preemptive Rightholder shall be deemed to have waived all of its rights
under this Article 9 with respect to the purchase of such Company Securities. Promptly following the termination of such 30-Business Day
period, the Company shall deliver to each Preemptive Rightholder a copy of all Exercise Notices it received.
10.
(c)
The Company shall have 120 days from the date of the Issuance Notice to consummate the proposed issuance of any or all of such
Company Securities that the Shareholders have not elected to purchase to a third party at the price and upon terms that are not less
favorable to the Company than those specified in the Issuance Notice; provided that, if such issuance is subject to regulatory approval, such
120-day period shall be extended until the expiration of five Business Days after all such approvals have been received, but in no event
later than 210 days from the date of the Issuance Notice. If the Company proposes to issue any such Company Securities after such 120-day
(or 210-day) period, it shall again comply with the procedures set forth in this Article 9.
(d)
At the consummation of the issuance of such Company Securities, the Company shall deliver a copy of the Register updated to reflect such
issuance and issue certificates representing the Company Securities to be purchased by each Preemptive Rightholder exercising preemptive
rights pursuant to this Article 9 registered in the name of such Preemptive Rightholder, against payment by such Shareholder of the
purchase price for such Company Securities in accordance with the terms and conditions as specified in the Issuance Notice.
(e)
Notwithstanding the foregoing, no Preemptive Rightholder shall be entitled to purchase Company Securities as contemplated by this
Article 9 in connection with issuances of Company Securities (A) to employees and officers pursuant to any employee benefit plan,
employee stock option plan or similar plan, including the Excluded Issuance, (B) in connection with any bona fide, arms-lengths direct or
indirect merger, acquisition or similar transaction as duly approved by the Shareholders or the Board pursuant to these Articles, including
the acquisition of Target Franchisees as contemplated by the Share Purchase Agreement), (C) pursuant to a Public Offering, (D) in
connection with any exercise of conversion rights by any Shareholder holding any Preferred Shares pursuant to these Articles, or (E) in
connection with any IPO Adjustment (collectively, the Exempted Issuance).
(f)
These provisions under Article 9 shall not apply to any issuance of the Company Securities made relating to or in connection with any IPO
Adjustment pursuant to the Shareholders Agreement and shall terminate upon the consummation of an initial Public Offering.
The Company may insofar as may be permitted by law, pay a commission to any Person in consideration of his subscribing or agreeing to subscribe
whether absolutely or conditionally for any Shares. Such commissions may be satisfied by the payment of cash or the lodgement of fully or partly
paid-up Shares or partly in one way and partly in the other. The Company may also pay such brokerage as may be lawful on any issue of Shares.
9
11.
The Directors may refuse to accept any application for Shares, and may accept any application in whole or in part, for any reason or for no reason.
SERIES A PREFERRED SHARES
12.
Each holder of a Series A Preferred Share shall be entitled to receive dividends at such rate, payable out of funds or assets when and as such funds or
assets become legally available therefor on parity with each other, when, as, and if declared by the Board. Such dividends shall be cumulative.
13.
All dividends and other distributions made by the Company to any Members shall be made ratably to the holders of the outstanding Series A
Preferred Shares and the Ordinary Shares, on an as-converted to Ordinary Share basis determined pursuant to an Optional Conversion as of the time
of such distribution.
14.
No dividend or distribution, whether in cash, in property, or in any other Shares, shall be declared, paid, set aside or made with respect to the
Ordinary Shares at any time unless and until (i) a similar amount, whether in cash, in property, or in any other Shares, shall be declared, paid, set
aside or made with respect to Series A Preferred Shares and (ii) all accrued but unpaid dividends on Series A Preferred Shares (if any) have been paid
in full.
CONVERSION
15.
The holders of Series A Preferred Shares shall have the rights described below with respect to the conversion of Series A Preferred Shares into
Ordinary Shares:
(a)
Conversion Ratio. Each Series A Preferred Share shall be convertible as permitted by this Article 15 into such number of paid up and
nonassessable Ordinary Shares as determined by dividing the Series A Issue Price by the theneffective Series A Conversion Price.
(b)
Optional Conversion. Subject to the Law and these Articles, any Series A Preferred Share may, at the option of the holder thereof, be
converted at any time after the date of issuance of such Shares (Optional Conversion), without the payment of any additional
consideration pursuant to this Article 15.
(c)
Automatic Conversion. Each Series A Preferred Share shall automatically be converted (Automatic Conversion), without the payment of
any additional consideration, into paid up and nonassessable Ordinary Shares upon the closing of a Qualified IPO, pursuant to this
Article 15.
(d)
Conversion Mechanism. The conversion hereunder of Series A Preferred Shares shall be effected in the following manner:
(i)
Except as provided in clauses (ii) and (iii) below, before any holder of any Series A Preferred Shares shall be entitled to convert the
same into Ordinary Shares, such holder shall surrender any certificate or certificates therefor duly endorsed (or in lieu thereof shall
deliver an affidavit of lost certificate and indemnity therefor), at the office of the Company or of any transfer agent for such share to
be converted and shall give notice to the Company at its principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for Ordinary Shares are to be issued. The Company shall, as
soon as practicable
10
thereafter, issue and deliver at such office to such holder of Series A Preferred Shares, or to the nominee or nominees of such holder,
a certificate or certificates (if applicable) for the number of Ordinary Shares to which such holder shall be entitled as aforesaid, and
such conversion shall be deemed to have been made immediately prior to the close of business on the date of such notice and such
surrender of Series A Preferred Shares to be converted, the Register shall be updated accordingly to reflect the same, and the Person
or Persons entitled to receive Ordinary Shares issuable upon such conversion shall be treated for all purposes as the record holder
or holders of such Ordinary Shares as of such date.
(ii)
Any Automatic Conversion will be conditioned upon the closing with the underwriter(s) of the sale of securities pursuant to the
relevant public offering and the Person(s) entitled to receive the Ordinary Shares issuable upon such conversion shall not be
deemed to have converted their Series A Preferred Shares until immediately prior to the closing of such sale of securities.
(iii)
Upon the occurrence of an Automatic Conversion, all holders of Series A Preferred Shares to be automatically converted will be
given at least ten (10) days prior written notice (unless such notice is waived by the New Investors Holding a Majority in Interest)
of the date fixed (which date shall in the case of a Qualified IPO be the latest practicable date immediately prior to the closing of a
Qualified IPO) and the place designated for Automatic Conversion of all such Preferred Shares pursuant to this Article 15(d). Such
notice shall be given to each record holder of such Series A Preferred Shares at such holders address appearing on the Register. On
or before the date fixed for conversion, each holder of such Preferred Shares shall surrender the applicable certificate or certificates
duly endorsed (or in lieu thereof shall deliver an affidavit of lost certificate and indemnity therefor) (if any) for all such shares to
the Company at the place designated in such notice. On the date fixed for conversion (subject to Article 15(d)(i) for the avoidance
of doubt), the Company shall promptly effect such conversion and update its Register to reflect such conversion. All certificates
evidencing such Series A Preferred Shares shall, from and after the date of conversion, be deemed to have been retired and
cancelled and Series A Preferred Shares represented thereby converted into Ordinary Shares for all purposes, notwithstanding the
failure of the holder or holders thereof to surrender such certificates on or prior to such date.
(iv)
The Company may effect the conversion of Series A Preferred Shares in any manner available under applicable law, including
redeeming or repurchasing the relevant Series A Preferred Shares and applying the proceeds thereof towards payment for the new
Ordinary Shares. For purposes of the repurchase or redemption, the Company may, subject to the Company being able to pay its
debts in the ordinary course of business, make payments out of its capital.
(v)
No fractional Ordinary Shares shall be issued upon conversion of any Series A Preferred Shares. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Company shall at the discretion of the Board either (i) pay cash equal to such
fraction multiplied by the fair market value for Series A Preferred Share as determined and approved by the Board (so long as such
approval includes the approval of the WP Director), or (ii) issue one
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whole Ordinary Share for each fractional share to which the holder would otherwise be entitled.
(e)
Adjustment of Series A Conversion Price. Subject to Article 16, the Series A Conversion Price shall be adjusted and re-adjusted from time
to time as provided below:
(i)
Adjustment for Share Splits and Combinations. If the Company shall at any time, or from time to time, effect a subdivision of the
outstanding Ordinary Shares, the Series A Conversion Price in effect immediately prior to such subdivision shall be
proportionately decreased. Conversely, if the Company shall at any time, or from time to time, combine the outstanding Ordinary
Shares into a smaller number of shares, the Series A Conversion Price in effect immediately prior to such combination shall be
proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(ii)
Adjustment for Ordinary Share Dividends and Distributions. If the Company makes (or fixes a record date for the determination of
holders of Ordinary Shares entitled to receive) a dividend or other distribution to the holders of Ordinary Shares payable as a bonus
issuance of Ordinary Shares, the Series A Conversion Price then in effect shall be decreased as of the time of such issuance (or in
the event such record date is fixed, as of the close of business on such record date) by multiplying such Series A Conversion Price
by a fraction (i) the numerator of which is the total number of Ordinary Shares issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date, and (ii) the denominator of which is the total number of
Ordinary Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date
plus the number of Ordinary Shares issuable in payment of such dividend or distribution.
(iii)
Adjustment for Other Dividends. If the Company at any time, or from time to time, makes (or fixes a record date for the
determination of holders of Ordinary Shares entitled to receive) a dividend or other distribution to the holders of Ordinary Shares
payable in securities of the Company other than Ordinary Shares or payable in any other asset or property (other than cash), then,
and in each such event, provision shall be made so that, upon conversion of any Series A Preferred Share thereafter, the holder
thereof shall receive, in addition to the number of Ordinary Shares issuable thereon, the amount of Company Securities or other
asset or property of the Company which the holder of such Series A Preferred Share would have received in connection with such
event had such Series A Preferred Shares been converted into Ordinary Shares immediately prior to such event.
(iv)
Adjustments for Dilutive Issuances.

(A)
If the Company should issue, at any time after the date of the Series A Issue Date, any New Shares for a consideration per
share less than the Series A Conversion Price in effect immediately prior to the issuance of such New Shares, the Series A
Conversion Price in effect immediately prior to each such issuance shall be reduced,
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concurrently with such issuance, to such lower issue price of such New Shares.
(B)
In the case of the issuance of New Shares for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any discounts, commissions or other expenses allowed, paid or incurred by the Company for
any underwriting or otherwise in connection with the issuance and sale thereof. In the case of the issuance of New Shares
for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair
value thereof as determined by the Board in good faith pursuant to Article 143(b), irrespective of any accounting
treatment.
(C)
In the event the Company at any time or from time to time after the Series A Issue Date shall issue any Options or
Convertible Securities (other than Exempted Issuances) or shall fix a record date for the determination of holders of any
Class of Company Securities entitled to receive any such Options or Convertible Securities, the maximum number of
Ordinary Shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a
subsequent adjustment of such number for anti-dilution adjustments) issuable upon the exercise of such Options or, in the
case of Convertible Securities the conversion or exchange of such Convertible Securities, shall be deemed to be New
Shares issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on
such record date, provided that in any such case in which New Shares are deemed to be issued:
(1)
no further adjustment in the Series A Conversion Price shall be made upon the subsequent issue of Convertible
Securities or Ordinary Shares upon the exercise of such Option or conversion or exchange for such Convertible
Securities or upon the subsequent issue of Options for Convertible Securities or Ordinary Shares;
(2)
if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any
change in the consideration per share payable to the Company, upon the exercise, conversion or exchange
thereof, the then effective Series A Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any
such change becoming effective, be recomputed to reflect such change insofar as it affects such Options or the
rights of conversion or exchange under such Convertible Securities;
(3)
no readjustment pursuant to Article 15(e)(iv)(C)(2) shall have the effect of increasing the then-effective Series A
Conversion Price to an amount which exceeds the Series A Conversion Price that would have been in effect had
no adjustments in relation to the issuance of such Options or Convertible Securities as referenced in Article 15(e)
(iv)(C)(2) been made;
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(D)
(4)
upon the expiration of any such Options or any rights of conversion or exchange under such Convertible
Securities that have not been exercised, the then effective Series A Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based
thereon shall, upon such expiration, be recomputed as if: (x) in the case of Convertible Securities or Options for
Ordinary Shares, the only New Shares issued were the Ordinary Shares, if any, actually issued upon the exercise
of such Options or the conversion or exchange of such Convertible Securities and the consideration received
therefor was the consideration actually received by the Company for the issue of such exercised Options plus the
consideration actually received by the Company upon such exercise or for the issue of all such Convertible
Securities that were actually converted or exchanged, plus the additional consideration, if any, actually received
by the Company upon such conversion or exchange, and (y) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue
of such Options, and the consideration received by the Company for the New Shares deemed to have been then
issued was the consideration actually received by the Company for the issue of such exercised Options, plus the
consideration deemed to have been received by the Company (determined pursuant to Article 143(b)) upon the
issue of the Convertible Securities with respect to which such Options were actually exercised.
(5)
If such record date shall have been fixed and such Options or Convertible Securities are not issued on the date
fixed therefor, the adjustment previously made in the Series A Conversion Price which became effective on such
record date shall be cancelled as of the close of business on such record date, and thereafter the Series A
Conversion Price shall be adjusted pursuant to this Article 15(e)(iv)(C) as of the actual date of their issuance.
Notwithstanding anything herein to the contrary, if the Company should issue, at any time after the date of the Series A
Issue Date, any New Shares to any Strategic Investor for a consideration per share less than the Series A Conversion Price
in effect immediately prior to the issuance of such New Shares, the Company and the New Investors shall discuss in good
faith on the adjustment of the Series A Conversion Price; provide that if the valuation of all Companies Securities held by
the New Investors determined based on such lower consideration per share should be less than the Investment Amount,
the Company shall adjust the Series A Conversion Price pursuant to the adjustment mechanism mutually agreed by the
Company and the New Investors Holding a Majority in Interest at that time so that the valuation of the Company
Securities held by the New Investors shall not be less than the Investment Amount in principle.
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(E)
Notwithstanding anything herein to the contrary, any adjustment of the Series A Conversion Price pursuant to this
Article 15(e)(iv) may be waived, either prospectively or retroactively and either generally or in a particular instance, by
the consent from the New Investors Holding a Majority in Interest. Any such waiver shall bind all future holders of
Series A Preferred Shares.
(v)
No Impairment. The Company will not, by amendment of these Articles, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying
out of all the provisions of this Article and in the taking of all such action as may be necessary or appropriate to protect the
conversion rights of the holders of Series A Preferred Shares against impairment.
(vi)
Certificate of Adjustment. In the case of any adjustment or readjustment of the Series A Conversion Price, the Company, at its sole
expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall deliver such certificate by notice to each registered holder of Series A
Preferred Shares, at the holders address as shown in the Register. The certificate shall set forth the facts triggering such adjustment
or readjustment and the Series A Conversion Price in effect before and after such adjustment or readjustment.
(vii)
Notice of Record Date. In the event the Company shall propose to take any action of the type or types requiring an adjustment set
forth in this Article 15(e), the Company shall give notice to the holders of Series A Preferred Shares, which notice shall specify the
record date, if any, with respect to any such action and the date on which such action is to take place. Such notice shall also set
forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action (to the extent such effect
may be known at the date of such notice) on the Series A Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable upon the occurrence of such action or deliverable upon the conversion of Series A
Preferred Shares. In the case of any action which would require the fixing of a record date, such notice shall be given at least
twenty (20) days prior to the date so fixed, and in the case of all other actions, such notice shall be given at least thirty (30) days
prior to the taking of such proposed action.
(viii)
Reservation of Shares Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its authorized
but unissued Ordinary Shares, solely for the purpose of effecting the conversion of Series A Preferred Shares, such number of its
Ordinary Shares as shall from time to time be sufficient to effect the conversion of all outstanding Series A Preferred Shares. If at
any time the number of authorized but unissued Ordinary Shares shall not be sufficient to effect the conversion of all then
outstanding Series A Preferred Shares, in addition to such other remedies as shall be available to the holders of Series A Preferred
Shares, the Company and its Members will take such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued Ordinary Shares to such number of shares as shall be sufficient for such purpose.
15
16.
(ix)
Notices. Any notice required or permitted pursuant to this Article 15 shall be given in writing and shall be given in accordance
with these Articles.
(x)
Payment of Taxes. The Company will pay all taxes (other than taxes based upon income) and other governmental charges that
may be imposed with respect to the issue or delivery of Ordinary Shares upon conversion of Series A Preferred Shares, excluding
any tax or other charge imposed in connection with any transfer involved in the issue and delivery of Ordinary Shares in a name
other than that in which such Series A Preferred Shares so converted were registered.
In the event that if any New Investor requests the Company to adjust the Series A Conversion Price in connection with an IPO Adjustment, upon
request of such New Investor, the Series A Conversion Price determined pursuant to Article 15 applicable to Series A Preferred Shares held by such
New Investor shall be further adjusted as follows:
Y= [(DC)B]A
where, Y is the new Series A Conversion Price;
A is the amount of the Guaranteed Return;
B is the offering price per Ordinary Share in the Qualified IPO;
C is the number of Ordinary Shares converted or convertible from all Series A Preferred Shares then held by such New Investor based on the
conversion price without regard to the Preferred IPO Adjustment; and
D is the conversion price of such Series A Preferred Shares as determined pursuant to these Articles without regard to the Preferred IPO
Adjustment.
17.
Whenever the capital of the Company is divided into different Classes the rights attached to any such Class may, subject to any rights or restrictions
for the time being attached to any Class, only be materially adversely varied or abrogated with the consent in writing of the holders of at least a
majority of the issued Shares of the relevant Class, or with the sanction of a resolution passed at a separate meeting of the holders of the Shares of
such Class by at least a majority of the votes cast at such a meeting. To every such separate meeting all the provisions of these Articles relating to
general meetings of the Company or to the proceedings thereat shall, mutatis mutandis, apply, except that the necessary quorum shall be one or more
Persons at least holding or representing by proxy a majority in nominal or par value amount of the issued Shares of the relevant Class (but so that if
at any adjourned meeting of such holders a quorum as above defined is not present, those Shareholders who are present shall form a quorum) and
that, subject to any rights or restrictions for the time being attached to the Shares of that Class, every Shareholder of the Class shall on a poll have
one vote for each Share of the Class held by him.
CERTIFICATES
18.
No Person shall be entitled to a certificate for any or all of his Shares, unless the Directors shall determine otherwise.
16
LIEN
19.
The Company has a first and paramount lien on every Share (whether or not fully paid) for all amounts (whether presently payable or not) payable at
a fixed time or called in respect of that Share. The Company also has a first and paramount lien on every Share (whether or not fully paid) registered
in the name of a Person indebted or under liability to the Company (whether he is the sole registered holder of a Share or one of two or more joint
holders) for all amounts owing by him or his estate to the Company (whether or not presently payable). The Directors may at any time declare a
Share to be wholly or in part exempt from the provisions of this Article 19. The Companys lien on a Share extends to any amount payable in respect
of it.
20.
The Company may sell, in such manner as the Directors in their absolute discretion think fit, any Share on which the Company has a lien, but no sale
shall be made unless an amount in respect of which the lien exists is presently payable nor until the expiration of fourteen days after a notice in
writing, demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the registered
holder for the time being of the Share, or the Persons entitled thereto by reason of his death or bankruptcy.
21.
For giving effect to any such sale the Directors may authorise some Person to transfer the Shares sold to the purchaser thereof. The purchaser shall be
registered as the holder of the Shares comprised in any such transfer and he shall not be bound to see to the application of the purchase money, nor
shall his title to the Shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.
22.
The proceeds of the sale after deduction of expenses, fees and commission incurred by the Company shall be received by the Company and applied
in payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue shall (subject to a like lien for sums
not presently payable as existed upon the Shares prior to the sale) be paid to the Person entitled to the Shares immediately prior to the sale.
CALLS ON SHARES
23.
The Directors may from time to time make calls upon the Shareholders in respect of any moneys unpaid on their Shares, and each Shareholder shall
(subject to receiving at least fourteen days notice specifying the time or times of payment) pay to the Company at the time or times so specified the
amount called on such Shares.
24.
The joint holders of a Share shall be jointly and severally liable to pay calls in respect thereof.
25.
If a sum called in respect of a Share is not paid before or on the day appointed for payment thereof, the Person from whom the sum is due shall pay
interest upon the sum at the rate of not exceeding ten percent per annum as the Directors may determine from the day appointed for the payment
thereof to the time of the actual payment, but the Directors shall be at liberty to waive payment of that interest wholly or in part.
26.
The provisions of these Articles as to the liability of joint holders and as to payment of interest shall apply in the case of non-payment of any sum
which, by the terms of issue of a Share, becomes payable at a fixed time, whether on account of the amount of the Share, or by way of premium, as if
the same had become payable by virtue of a call duly made and notified.
17
27.
If a Shareholder fails to pay any call or instalment of a call in respect of any Shares on the day appointed for payment, the Directors may, at any time
thereafter during such time as any part of such call or instalment remains unpaid, serve a notice on him requiring payment of so much of the call or
instalment as is unpaid, together with any interest which may have accrued.
28.
The notice shall name a further day (not earlier than the expiration of fourteen days from the date of the notice) on or before which the payment
required by the notice is to be made, and shall state that in the event of non-payment at or before the time appointed the Shares in respect of which
the call was made will be liable to be forfeited.
29.
If the requirements of any such notice as aforesaid are not complied with, any Share in respect of which the notice has been given may at any time
thereafter, before the payment required by notice has been made, be forfeited by a resolution of the Directors to that effect.
30.
A forfeited Share may be sold or otherwise disposed of on such terms and in such manner as the Directors think fit, and at any time before a sale or
disposition the forfeiture may be cancelled on such terms as the Directors think fit.
31.
A Person whose Shares have been forfeited shall cease to be a Shareholder in respect of the forfeited Shares, but shall, notwithstanding, remain liable
to pay to the Company all moneys which at the date of forfeiture were payable by him to the Company in respect of the Shares forfeited, but his
liability shall cease if and when the Company receives payment in full of the amount unpaid on the Shares forfeited.
32.
A statutory declaration in writing that the declarant is a Director, and that a Share has been duly forfeited on a date stated in the declaration, shall be
conclusive evidence of the facts in the declaration as against all Persons claiming to be entitled to the Share.
33.
The Company may receive the consideration, if any, given for a Share on any sale or disposition thereof pursuant to applicable provisions of these
Articles and the Transaction Documents as to forfeiture and may execute a transfer of the Share in favour of the Person to whom the Share is sold or
disposed of and that Person shall be registered as the holder of the Share, and shall not be bound to see to the application of the purchase money, if
any, nor shall his title to the Shares be affected by any irregularity or invalidity in the proceedings in reference to the disposition or sale.
34.
The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum which by the terms of issue of a Share becomes
due and payable, whether on account of the amount of the Share, or by way of premium, as if the same had been payable by virtue of a call duly
made and notified.
TRANSFER OF SHARES
35.
The instrument of transfer of any Share shall be in any usual or common form or such other form as the Directors may, in their absolute discretion,
approve and be executed by or on behalf of the transferor and if in respect of a nil or partly paid up Share, or if so required by the Directors, shall also
be executed on behalf of the transferee and shall be accompanied by the certificate (if any) of the Shares to which it relates and such other evidence
as the Directors may reasonably require to show the right of the transferor to make the transfer. The transferor
18
shall be deemed to remain a Shareholder until the name of the transferee is entered in the Register in respect of the relevant Shares.
36.
The Directors shall decline to register any Transfer of Shares that does not comply with these Articles or the Shareholders Agreement.
37.
The registration of Transfers may be suspended at such times and for such periods as the Directors may from time to time determine.
38.
All instruments of transfer that are registered shall be retained by the Company, but any instrument of transfer that the Directors decline to register
shall (except in any case of fraud) be returned to the Person depositing the same.
39.
Restrictions on Transfer.
(a)
Each Shareholder shall not Transfer any Company Securities (or solicit any offer in respect of any Transfer of any Company Securities),
except in compliance with the terms and conditions of these Articles and the Shareholders Agreement. Any attempt to Transfer any
Company Securities not in compliance with these Articles and the Shareholders Agreement shall be null and void, and the Company shall
not, and shall cause any transfer agent not to, give any effect in the Companys records and registers to such attempted Transfer.
(b)
Notwithstanding anything to the contrary in these Articles and the Shareholders Agreement, each Shareholder shall not Transfer any Shares
to a Restricted Party.
(c)
Notwithstanding anything to the contrary in these Articles and the Shareholders Agreement, no Shareholder may Transfer any Shares to a
Competitor without consent from the Founder and the New Investors Holding a Majority in Interest.
(d)
The Founder shall not Transfer any Company Securities held by him during the Transfer Lock-up Period unless otherwise approved by the
New Investors Holding a Majority in Interest and in compliance with Articles 40 and 41.
(e)
Each Financial Investor shall not Transfer any Company Securities during the Transfer Lock-up Period unless otherwise consented by the
Founder and other non-Transferring Financial Investors holding at least a majority of Ordinary Shares of all Ordinary Shares held by all
Financial Investors (in each case, including all Preferred Shares held by such Financial Investors on an as-converted to Ordinary Shares
basis), except that:
(i)
it may Transfer any of its Company Securities to a Permitted Transferee in accordance with the Shareholders Agreement;
(ii)
it may Transfer any Ordinary Shares held by it as of the date hereof; and
(iii)
from and after the first anniversary of the First Closing Date, it may only Transfer any Series A Preferred Shares held by it to the
Company (or its designee) by a one-month advance written notice at the price equal to (A) the Series A Issue Price paid by such
Transferring Shareholder for such Series A Preferred Shares to be Transferred; plus (B) such Series A Issue Price multiplied by the
compound annual rate of return at 8% for the period from the applicable Closing Date to the date of the consummation of such
Transfer
19
up to four full years; plus (C) any declared by unpaid dividends on all of such Series A Preferred Shares at the time of the
consummation of such Transfer; provided that within one month from the date of such notice from the relevant Financial Investor
to the Company, if the Company elects not to purchase all of such Series A Preferred Shares offering for Transfer at the foregoing
price or fails to respond to such Financial Investor in writing, such Financial Investor may Transfer such Series A Preferred Shares
to any Person other than the Company.
For the avoidance of doubt, after expiration of the Transfer Lock-up Period, subject to Articles 39(a), 39(b) and 39(c), each Financial
Investor may Transfer the Company Securities held by it to any third party without any restrictions.
(f)
40.
Notwithstanding anything in these Articles and the Shareholders Agreement to the contrary, (i) any Financial Investor may at any time
Transfer any or all of its Company Securities (including Ordinary Shares and Series A Preferred Shares) to one or more of its Permitted
Transferees without the consent of the Board or any other Shareholder and without compliance with Article 39(e); and (ii) the Founder SPV
may at any time Transfer any or all of its Company Securities to one or more of its Permitted Transferees without the consent of the Board or
any other Shareholder and without compliance with Articles 39(d), 40 and 42; provided that in each case, such Permitted Transferee shall
comply with the Shareholders Agreement.
Right of First Refusal

(a)
Subject to Article 39, if any Shareholder other than a Financial Investor (a Transferor) proposes to Transfer any Company Securities or
any interest therein to one or more Persons, the Transferor shall give the Company and each Financial Investor (each such Financial
Investor, a Rightholder) a written notice of the Transferors intention to make the Transfer (the Transfer Notice), which shall include
(A) a description of the Company Securities to be transferred (the Offered Securities), (B) the identity and address of the prospective
transferee and (C) the consideration and other material terms and conditions upon which the proposed Transfer is to be made. The Transfer
Notice shall certify that the Transferor has received a definitive offer from the prospective transferee and in good faith believes a binding
agreement for the Transfer is obtainable on the terms set forth in the Transfer Notice. The Transfer Notice shall also include a copy of any
written proposal, term sheet or letter of intent or other agreements relating to the proposed Transfer.
(b)
Each Rightholder shall have an option for a period of 30 Business Days following receipt of the Transfer Notice (the Option Period) to
elect to purchase all or any portion of its respective Pro Rata Share of the Offered Securities at the same price and subject to the same terms
and conditions as described in the Transfer Notice, by notifying the Transferor and the Company in writing before expiration of the Option
Period as to the number of such Offered Securities that it wishes to purchase. For purpose of this Article 40(b), the Rightholders Pro Rata
Share of such Offered Securities shall be equal to (A) the total number of such Offered Securities, multiplied by (B) a fraction, the
numerator of which shall be the aggregate number of Ordinary Shares held by such Rightholder on the date of the Transfer Notice
(including all Preferred Shares held by such Rightholder on an as-converted to Ordinary Share basis) and the denominator of which shall be
the total number of Ordinary Shares held by all Rightholders on such date (including all Preferred Shares held by such Rightholders on an
as-converted to Ordinary Share basis).
20
41.
(c)
If any Investor fails to exercise its right to purchase its full Pro Rata Share of such Offered Securities, the Company shall deliver a written
notice thereof (the Second Notice), within five days after the expiration of the Option Period, to the Transferor and to each Rightholder
that elected to purchase its entire Pro Rata Share of the Offered Securities (an Exercising Shareholder). The Exercising Shareholders
shall have a right of re-allotment, and may exercise an additional right to purchase such unpurchased Offered Securities by notifying the
Transferor and the Company in writing within 30 Business Days (the Secondary Option Period) after receipt of the Second Notice;
provided that if the Exercising Shareholders desire to purchase in aggregate more than the number of such unpurchased Offered Securities,
then such unpurchased Offered Securities will be allocated to the extent necessary among the Exercising Shareholders in accordance with
their relative Pro Rata Shares.
(d)
If any Rightholder gives the Transferor and the Company notice that it desires to purchase Offered Securities, payment for the Offered
Securities to be purchased shall be made by wire transfer in immediately available funds of the appropriate currency, against delivery of
such Offered Securities to be purchased, remotely via the exchange of documents and signatures on the 30 th day after expiration of the
Option Period or the Secondary Option Period, as applicable, or other time as agreed by the Transferor, the Company and all Exercising
Shareholders. The Company will update its register of members upon the consummation of any such Transfer.
(e)
These provisions of this Article 40 shall not apply to any Transfer relating to or in connection with any IPO Adjustment pursuant to the
Shareholders Agreement and shall terminate upon the consummation of an initial Public Offering.
Co-Sale Rights.
(a)
To the extent that the Rightholders do not exercise their right of first refusals as to any Offered Securities proposed to be sold by the
Transferor to the prospective transferee identified in the Transfer Notice, such Rightholders (each, a Co-Sale Rightholder) shall have the
right to participate in such sale, to the prospective transferee identified in the Transfer Notice on the same terms and conditions as specified
in the Transfer Notice by notifying the Transferor in writing within the Option Period.
(b)
Subject to Article 41(c), the maximum number of Company Securities that each Co-Sale Rightholder may elect to sell shall be equal to the
product of (A) the total Companies Securities owned by the Transferor (including all Preferred Shares held by the Transferor on an asconverted to Ordinary Share basis), multiplied by (B) a fraction, the numerator of which shall be the number of Ordinary Shares owned by
such Co-Sale Rightholder (including all Preferred Shares held by such Co-Sale Rightholder on an as-converted to Ordinary Share basis) and
the denominator of which shall be the total number of Ordinary Shares held by the Transferor and all participating Co-Sale Rightholders
immediately prior to the proposed Transfer (including all Preferred Shares held by such Shareholders on an as-converted to Ordinary Share
basis).
(c)
If any Co-Sale Rightholder (the Non-exercising Co-Sale Rightholder) fails to exercise its right to sell its full portion of the Company
Securities held by it as determined pursuant to Article 41(b), the Company shall deliver a written notice thereof (the Second Co-Sale
Notice), within five days after the expiration of the Option Period, to the Transferor and to each Co-Sale Rightholder that elected to sell its
full portion of the Company Securities held by it as determined pursuant to 41(b)
21
(an Exercising Co-Sale Rightholder). The Exercising Co-Sale Rightholders shall have a right of re-allotment, and may exercise an
additional right to sell the Company Securities held by it but not included in the proposed Transfer pursuant to this section by notifying
the Transferor and the Company in writing within 30 Business Days after receipt of the Second Co-Sale Notice; provided that if the
Exercising Co-Sale Rightholders desire to sell in aggregate more than the number of such portion entitled to be included by all NonExercising Co-Sale Rightholders, then such remaining portion will be allocated to the extent necessary among the Exercising Co-Sale
Rightholder on a pro rata basis.
(d)
Each Co-Sale Rightholder shall effect its participation in the sale by promptly delivering to the Transferor for Transfer to the prospective
transferee, before the applicable closing, one or more certificates, which represent the type and number of Company Securities which the
Co-Sale Rightholder elects to sell. In any such Transfer, each Co-Sale Righholder shall not be required to provide any representations,
warranties or indemnities in connection with such sale of its Company Securities (other than representations, warranties and indemnities
with respect to its title to, and ownership of, such Company Securities held and to be sold by such Co-Sale Rightholder).
(e)
The share certificate or certificates that each Co-Sale Righholder delivers to the Transferor pursuant to Article 41(b) shall be submitted to
the Company for cancellation and the Company shall, upon the consummation of the sale of the Company Securities pursuant to the terms
and conditions specified in the Co-Sale Notice, issue a new certificate to each Co-Sale Rightholder for the remaining balance. The
Transferor shall concurrently therewith remit to each Co-Sale Rightholder that portion of the sale proceeds to which the Co-Sale
Rightholder is entitled by reason of its participation in such Transfer. The Company shall update the Register upon consummation of such
Transfer.
(f)
To the extent that any prospective purchaser prohibits the participation by the Co-Sale Rightholder exercising its co-sale rights hereunder
in a proposed Transfer or otherwise refuses to purchase Company Securities from such Co-Sale Righholder, the Transferor shall not sell to
such prospective purchaser any Company Securities unless and until, simultaneously with such sale, the Transferor shall purchase from the
Co-Sale Rightholder such Company Securities that the Co-Sale Rightholder would otherwise be entitled to sell to the prospective purchase
pursuant to its co-sale rights for the same consideration and on the terms and conditions as the proposed Transfer described in the Co-Sale
Notice.
(g)
These provisions under this Article 41 shall terminate upon the consummation of an initial Public Offering.
42.
The legal personal representative of a deceased sole holder of a Share shall be the only Person recognised by the Company as having any title to the
Share. In the case of a Share registered in the name of two or more holders, the survivors or survivor, or the legal personal representatives of the
deceased holder of the Share, shall be the only Person recognised by the Company as having any title to the Share.
43.
Any Person becoming entitled to a Share in consequence of the death or bankruptcy of a Shareholder shall upon such evidence being produced as
may from time to time be required by the Directors, have the right either to be registered as a Shareholder in respect of the
22
Share or, instead of being registered himself, to make such transfer of the Share as the deceased or bankrupt Person could have made; but the
Directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the Share by
the deceased or bankrupt Person before the death or bankruptcy.
44.
A Person becoming entitled to a Share by reason of the death or bankruptcy of a Shareholder shall be entitled to the same dividends and other
advantages to which he would be entitled if he were the registered Shareholder, except that he shall not, before being registered as a Shareholder in
respect of the Share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company.
45.
Subject to applicable provisions of these Articles, if any, the Company may from time to time by Ordinary Resolution increase the share capital by
such sum, to be divided into Shares of such Classes and amount, as the resolution shall prescribe.
46.
Subject to applicable provisions of these Articles, if any, the Company may by Ordinary Resolution:
47.
(a)
consolidate and divide all or any of its share capital into Shares of a larger amount than its existing Shares;
(b)
convert all or any of its paid up Shares into stock and reconvert that stock into paid up Shares of any denomination;
(c)
subdivide its existing Shares, or any of them into Shares of a smaller amount provided that in the subdivision the proportion between the
amount paid and the amount, if any, unpaid on each reduced Share shall be the same as it was in case of the Share from which the reduced
Share is derived; and
(d)
cancel any Shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any Person and diminish
the amount of its share capital by the amount of the Shares so cancelled.
Subject to applicable provisions of these Articles, if any, the Company may by Special Resolution reduce its share capital and any capital
redemption reserve in any manner authorised by law.
48.
Subject to the Law and applicable provisions of these Articles, if any, the Company may:
(a)
issue Shares on terms that they are to be redeemed or are liable to be redeemed at the option of the Company or the Shareholder on such
terms and in such manner as the Directors may determine;
(b)
purchase its own Shares (including any redeemable Shares) on such terms and in such manner as the Directors may determine and agree with
the Shareholder;
(c)
make a payment in respect of the redemption or purchase of its own Shares in any manner authorised by the Law; and
23
(d)
accept the surrender for no consideration of any paid up Share (including any redeemable Share) on such terms and in such manner as the
Directors may determine.
49.
Any Share in respect of which notice of redemption has been given shall not be entitled to participate in the profits of the Company in respect of the
period after the date specified as the date of redemption in the notice of redemption.
50.
The redemption, purchase or surrender of any Share shall not be deemed to give rise to the redemption, purchase or surrender of any other Share.
51.
The Directors may when making payments in respect of redemption or purchase of Shares, if authorised by the terms of issue of the Shares being
redeemed or purchased or with the agreement of the holder of such Shares, make such payment either in cash or in specie.
52.
Redemption Right of Series A Preferred Shares

(a)
In the event that a Qualified IPO has not been completed by the fourth anniversary of the First Closing Date, then each New Investor shall
have the right (the Redemption Right), exercisable by written notice to the Company (the Redemption Notice), to request the
Company to redeem all Series A Preferred Shares then outstanding held by it, out of funds legally available therefor and subject to the Law,
at a redemption price (the Series A Redemption Price) per Series A Preferred Share equal to the aggregate of (X) the Series A Issue Price,
(Y) an amount representing an 8.00% annual rate of return thereon (compounded annually) for the period from the applicable Closing Date
to the date of the consummation of such redemption up to four full years and (Z) any declared but unpaid dividends thereon; provided that
if the Company fails to redeem any Series A Preferred Shares within the time period set forth in Article 52(b), such unredeemed Series A
Preferred Shares shall continue to accrue interest at a rate of 8% per annual compounded annually until such shares have been fully
redeemed.
(b)
The delivery of a valid Redemption Notice shall constitute an irrevocable exercise of the Redemption Right, and upon such receipt of the
full amount of the Series A Redemption Price, notwithstanding to the contrary herein, all other rights of such holders hereunder, including
with respect to conversion, voting or otherwise, shall automatically be extinguished. Upon receipt of such Redemption Notice, the
Company shall notify the relevant holders of the date (the Redemption Date) on which it will redeem such Shares, which date shall fall
within 60 days of receipt by the Company of such Redemption Notice. The Company shall take, or cause to be taken, any and all necessary
or desirable actions (subject to mandatory requirement under the Law and any other applicable law) to redeem all of such Series A Preferred
Shares on the Redemption Date, including but not limited to initiate a sale, fundraising, procure all profits of each other Group Company
for the time being legally available for distribution and subject to appropriate reserves for continuing ordinary course operations and
working capital under the applicable law for the respective Group Company to be paid to the Company by way of dividend or other
distribution.
(c)
These provisions under this Article 52 shall terminate upon the consummation of an initial Public Offering.
24
TREASURY SHARES
53.
Shares that the Company purchases, redeems or acquires (by way of surrender or otherwise) may, at the option of the Company, be cancelled
immediately or held as Treasury Shares in accordance with the Law. In the event that the Directors do not specify that the relevant Shares are to be
held as Treasury Shares, such Shares shall be cancelled.
54.
No dividend may be declared or paid, and no other distribution (whether in cash or otherwise) of the Companys assets (including any distribution of
assets to members on a winding up) may be declared or paid in respect of a Treasury Share.
55.
The Company shall be entered in the Register as the holder of the Treasury Shares provided that:
56.
(a)
the Company shall not be treated as a member for any purpose and shall not exercise any right in respect of the Treasury Shares, and any
purported exercise of such a right shall be void;
(b)
a Treasury Share shall not be voted, directly or indirectly, at any meeting of the Company and shall not be counted in determining the total
number of issued shares at any given time, whether for the purposes of these Articles or the Law, save that an allotment of Shares as fully
paid bonus shares in respect of a Treasury Share is permitted and Shares allotted as fully paid bonus shares in respect of a treasury share
shall be treated as Treasury Shares.
Treasury Shares may be disposed of by the Company on such terms and conditions as determined by the Directors.
GENERAL MEETINGS
57.
The Directors may, whenever they think fit, convene a general meeting of the Company.
58.
The Directors may cancel or postpone any duly convened general meeting at any time prior to such meeting, except for general meetings
requisitioned by the Shareholders in accordance with these Articles, for any reason or for no reason at any time prior to the time for holding such
meeting or, if the meeting is adjourned, the time for holding such adjourned meeting. The Directors shall give Shareholders notice in writing of any
cancellation or postponement. A postponement may be for a stated period of any length or indefinitely as the Directors may determine.
59.
General meetings shall also be convened on the requisition in writing of any Shareholder or Shareholders entitled to attend and vote at general
meetings of the Company holding at least 5% of the paid up voting share capital of the Company deposited at the Office specifying the objects of
the meeting by notice given no later than 21 days from the date of deposit of the requisition signed by the requisitionists, and if the Directors do not
convene such meeting for a date not later than 45 days after the date of such deposit, the requisitionists themselves may convene the general
meeting in the same manner, as nearly as possible, as that in which general meetings may be convened by the Directors, and all reasonable expenses
incurred by the requisitionists as a result of the failure of the Directors to convene the general meeting shall be reimbursed to them by the Company.
60.
If at any time there are no Directors, any two Shareholders (or if there is only one Shareholder then that Shareholder) entitled to vote at general
meetings of the Company may convene a
25
general meeting in the same manner as nearly as possible as that in which general meetings may be convened by the Directors.
61.
At least seven clear days notice in writing counting from the date service is deemed to take place as provided in these Articles specifying the place,
the day and the hour of the meeting and in case of special business, the general nature of that business, shall be given in the manner hereinafter
provided or in such other manner (if any) as may be prescribed by the Company by Ordinary Resolution to such Persons as are, under these Articles,
entitled to receive such notices from the Company, but with the consent of all the Shareholders entitled to receive notice of some particular meeting
and attend and vote thereat, that meeting may be convened by such shorter notice or without notice and in such manner as those Shareholders may
think fit. Notice of all general meetings shall be given in accordance with this Article 61.
62.
The accidental omission to give notice of a meeting to or the non-receipt of a notice of a meeting by any Shareholder shall not invalidate the
proceedings at any meeting.
63.
No business shall be transacted at any general meeting unless a quorum of Shareholders is present at the time when the meeting proceeds to
business. Save as otherwise provided by these Articles, one or more Shareholders holding at least a majority of the paid up Ordinary Shares and one
or more Shareholders holding at least of a majority of the paid up Series A Preferred Shares present in person or by proxy and entitled to vote at that
meeting shall form a quorum.
64.
If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of
Shareholders, shall be dissolved. In any other case it shall stand adjourned to the same day in the next week, at the same time and place, and if at the
adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting the Shareholder or Shareholders present and
entitled to vote shall form a quorum.
65.
If the Directors wish to make this facility available for a specific general meeting or all general meetings of the Company, participation in any
general meeting of the Company may be by means of a telephone or similar communication equipment by way of which all Persons participating in
such meeting can communicate with each other and such participation shall be deemed to constitute presence in person at the meeting.
66.
Any Director or Person nominated by the Directors shall preside as chairman at any general meeting, failing which the Shareholders present in
person or by proxy shall choose any Person present to be chairman of that meeting.
67.
At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands, unless a poll is (before or on the declaration
of the result of the show of hands) demanded by the chairman or one or more Shareholders present in person or by proxy entitled to vote, and unless
a poll is so demanded, a declaration by the chairman that a resolution has, on a show of hands, been carried, or carried unanimously, or by a
particular majority, or lost, and an entry to that effect in the book of the proceedings of the Company, shall be conclusive evidence of the fact,
without proof of the number or proportion of the votes recorded in favour of, or against, that resolution.
26
68.
If a poll is duly demanded it shall be taken in such manner as the chairman directs, and the result of the poll shall be deemed to be the resolution of
the meeting at which the poll was demanded.
69.
The chairman of the meeting at which the show of hands takes place or at which the poll is demanded, shall not be entitled to a second or casting
vote.
70.
General Rights. Subject to the provisions of the Memorandum and these Articles (including any Article providing for special voting rights), at all
general meetings of the Company: (a) the holder of each Ordinary Share issued and outstanding shall have one vote in respect of each Ordinary
Share held, and (b) the holder of a Series A Preferred Share shall be entitled to such number of votes as equals the whole number of Ordinary Shares
into which such holders Series A Preferred Share is convertible immediately after the close of business on the record date of the determination of the
Companys Members entitled to vote or, if no such record date is established, at the date such vote is taken or any written consent of the Companys
Members is first solicited (with such conversion determined by dividing the Series A Issue Price by the Series A Conversion Price in effect at such
time).
71.
Fractional votes shall not, however, be permitted and any fractional voting rights available on an as converted basis (after aggregating all shares into
which Series A Preferred Shares held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded
upward).
72.
To the extent that the Law or the Articles allow Series A Preferred Shares to vote separately as a class or series with respect to any matters, Series A
Preferred Shares, shall have the right to vote separately as a class or series with respect to such matters.
73.
The Company shall not, and it shall cause each other Group Company not to, take any action (including any action by the Board or any committee
thereof) with respect to any of the following matters of each Group Company without written consent from each New Investor:
(a)
any voluntary commencement of liquidation, dissolution or other similar procedure of the Company or any Material Group Company;
(b)
termination or suspension of the Principal Business; and
(c)
any amendment to, modification of or change in its Anti-Bribery Procedures or compliance process, policies and procedures covering
Sanctions.
The provisions under this Article 73 shall terminate upon the consummation of an initial Public Offering.
74.
The Company shall not, and it shall cause each other Group Company not to, take any action (including any action by the Board or any committee
thereof) with respect to any of the following matters of each Group Company (as applicable) without written consent from the New Investors Holding
a Majority in Interest:
(a)
any amendment to the Charter Documents of the Company, BVI Holding Company, HK Holding Company, the WFOE or the Domestic
Company (except that new issuance of Company Securities shall be governed by Article 74(b) below and except for amendment to the
Charter Documents of the Company for purpose of an initial
27
Public Offering); and any amendment to the Charter Documents of any other Group Company to the extent that such amendments could
reasonably be expected to adversely affect the New Investors rights or privileges hereunder or under other Transaction Documents;
(b)
the issuance price of any new issue of Company Securities (excluding (A) any issue pursuant to any employee benefit plan, employee stock
option plan or similar plan in which the total Company Securities to be reserved or issued account for not more than 3% of the then
outstanding Company Securities (calculated on a fully-diluted and as-converted basis), (B) any issue to the Strategic Investors which is not
primarily for equity financing purpose and in which the total Company Securities to be issued account for no more than 15% of the then
outstanding Company Securities (calculated on a fully-diluted and as-converted basis) and (C) any issue pursuant to an initial Public
Offering) or any redemption, repurchase, recapitalization, reclassification or combination of any Company Securities if not on a pro rata
basis with respect to all shareholders; and
(c)
entry into a transaction or a series of transactions with its Related Party that provides for payment to or from the Group Companies of
RMB200 million or more and on terms less favorable than those that could be obtained if such transaction were entered into with a third
party on the arms-length basis;
(d)
any amendment to, modification of or change in any Control Document; and
(e)
entry into a complete new line of business substantially different from the Principal Business.
The provisions under this Article 74 shall terminate upon the consummation of an initial Public Offering.
75.
Subject to any rights and restrictions for the time being attached to any Share, on a show of hands every Shareholder present in person and every
Person representing a Shareholder by proxy shall, at a general meeting of the Company, each have one vote and on a poll every Shareholder and
every Person representing a Shareholder by proxy shall have one vote for each Share of which he or the Person represented by proxy is the holder.
76.
In the case of joint holders the vote of the senior who tenders a vote whether in person or by proxy shall be accepted to the exclusion of the votes of
the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the Register.
77.
A Shareholder of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in lunacy, may vote in respect of
Shares carrying the right to vote held by him, whether on a show of hands or on a poll, by his committee, or other Person in the nature of a committee
appointed by that court, and any such committee or other Person, may vote in respect of such Shares by proxy.
78.
No Shareholder shall be entitled to vote at any general meeting of the Company unless all calls, if any, or other sums presently payable by him in
respect of Shares carrying the right to vote held by him have been paid.
79.
On a poll votes may be given either personally or by proxy.

28
80.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the
appointor is a corporation, either under Seal or under the hand of an officer or attorney duly authorised. A proxy need not be a Shareholder.
81.
An instrument appointing a proxy may be in any usual or common form or such other form as the Directors may approve.
82.
The instrument appointing a proxy shall be deposited at the Office or at such other place as is specified for that purpose in the notice convening the
meeting no later than the time for holding the meeting or, if the meeting is adjourned, the time for holding such adjourned meeting.
83.
The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll.
84.
A resolution in writing signed by all the Shareholders for the time being entitled to receive notice of and to attend and vote at general meetings of
the Company (or being corporations by their duly authorised representatives) shall be as valid and effective as if the same had been passed at a
general meeting of the Company duly convened and held.
85.
Each Shareholder shall vote all of its Company Securities or execute proxies or written consents, as the case may be, and to take all other actions
necessary, to ensure that these Articles (i) facilitate, and do not at any time conflict with, any provision of the Shareholders Agreement and (ii) permit
each Shareholder to receive the benefits to which each such Shareholder is entitled under the Shareholders Agreement.
86.
Any corporation which is a Shareholder or a Director may by resolution of its directors or other governing body authorise such Person as it thinks fit
to act as its representative at any meeting of the Company or of any meeting of holders of a Class or of the Directors or of a committee of Directors,
and the Person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could
exercise if it were an individual Shareholder or Director.
DIRECTORS
87.
Subject to applicable provisions of these Articles and the Transaction Documents, if any, the Company may by Ordinary Resolution appoint any
natural person or corporation to be a Director.
88.
Subject to applicable provisions of these Articles and the Transaction Documents, if any, a Director shall hold office until such time as he is removed
from office by Ordinary Resolution.
89.
Composition of the Board.

(a)
The Board shall consist of 11 Directors, of whom (i) eight shall be appointed by the Founder SPV, (ii) one shall be appointed by the Hao
Min Representative for so long as Hao Min holds at least 1% of the then issued and outstanding Company Securities (calculated on a fullydiluted and as-converted basis), (iii) one shall be appointed by Sequoia for so long as Sequoia and Gopher jointly hold at least 1% of the
then issued and outstanding Company Securities (calculated on a fully-diluted and as-converted basis) and (iv) one shall be appointed by
WP, for so long as it holds at least 1% of the
29
then issued and outstanding Company Securities (calculated on a fully-diluted and as-converted basis).
(b)
90.
Each Shareholder shall, if at any time it is then entitled to vote for the election of Directors to the Board, vote all of its Company Securities
or execute proxies or written consents, as the case may be, and take all other necessary action (including causing the Company to call a
special meeting of shareholders) in order to ensure that the composition of the Board is as set forth in this Article 89.
Removal of Directors.
Each Shareholder shall, if at any time it is then entitled to vote for the removal of Directors from the Board, not vote any of its Company Securities or
execute proxies or written consents, as the case may be, in favor of the removal of any Director who shall have been appointed pursuant to Article
89(a), unless the Shareholder or other Person entitled to appoint or nominate such Director pursuant to Article 89(a) shall have consented to such
removal in writing; provided that, if the Shareholder or other Person entitled to appoint any Director pursuant to Article 89(a) shall request in writing
the removal of such Director, each Shareholder shall vote all of its Company Securities or execute proxies or written consents, as the case may be,
and take all other necessary action (including causing the Company to call a special meeting of Shareholders) in order to effect such removal.
91.
Vacancies.
If, as a result of death, disability, retirement, resignation, disqualification, removal or otherwise, there shall exist or occur any vacancy on the Board:
91A.
(a)
the Shareholder or other Person entitled under Article 89(a) to appoint such Director whose death, disability, retirement, resignation or
removal resulted in such vacancy, subject to the provisions of Article 89(a), shall have the exclusive right to appoint another individual;
and
(b)
subject to Article 89(a), each Shareholder shall if it is then entitled to vote for the election of Directors to the Board, vote all of its Company
Securities, or execute proxies or written consents, as the case may be, and take all other necessary action (including causing the Company
to call a special meeting of Shareholders) in order to ensure that such replacement appointee is elected to the Board.
Board Observer
(a)
Each of Hillhouse and SC, for so long as it holds at least 0.5% of the then issued and outstanding Company Securities (calculated on a
fully-diluted and as-converted basis) shall have the right to appoint one non-voting observer (each, a Board Observer).
(b)
The appointment of a Board Observer shall become effective upon written notice from Hillhouse or SC, as applicable, to the Company of
the name and contact information of the individual so appointed. Each of Hillhouse and SC may from time to time replace its Board
Observer by notifying the Company in writing name and contact information of the new Board Observer at least two Business Days prior to
any meeting of the Board.
(c)
Except as otherwise expressly provided herein, each Board Observer shall have the same rights as a Director with respect to receipt of
information and the right to notice
30
of and to participate in all meetings of the Board; provided that each Board Observer shall execute a confidentiality undertaking
reasonably requested by the Company which shall not be more stringent than those imposed on the Shareholders in the Shareholders
Agreement. It is understood and agreed that no Board Observer shall have voting rights, nor shall Board Observers be counted towards a
quorum. The Company shall send to each such Board Observer the notice of the time and place of each meeting of the Board in the same
manner and at the same time as it shall send such notice to the Directors. The Company shall also provide to each such Board Observer
copies of all notices, reports, minutes, consents and any other materials at the time and in the manner as they are provided to the Directors.
92.
The remuneration of the Directors may be determined by the Directors or by Ordinary Resolution.
93.
There shall be no shareholding qualification for Directors.

94.
Subject to the Law, these Articles and to any resolutions passed in a general meeting, the business of the Company shall be managed by the
Directors, who may pay all expenses incurred in setting up and registering the Company and may exercise all powers of the Company. No resolution
passed by the Company in general meeting shall invalidate any prior act of the Directors that would have been valid if that resolution had not been
passed.
95.
The Directors may from time to time appoint any Person, whether or not a Director to hold such office in the Company as the Directors may think
necessary for the administration of the Company, including but not limited to, the office of president, one or more vice-presidents, treasurer, assistant
treasurer, manager or controller, and for such term and at such remuneration (whether by way of salary or commission or participation in profits or
partly in one way and partly in another), and with such powers and duties as the Directors may think fit. Any Person so appointed by the Directors
may be removed by the Directors or by the Company by Ordinary Resolution. The Directors may also appoint one or more of their number to the
office of managing director upon like terms, but any such appointment shall ipso facto terminate if any managing director ceases from any cause to
be a Director, or if the Company by Ordinary Resolution resolves that his tenure of office be terminated.
96.
The Directors may appoint any Person to be a Secretary (and if need be an assistant Secretary or assistant Secretaries) who shall hold office for such
term, at such remuneration and upon such conditions and with such powers as they think fit. Any Secretary or assistant Secretary so appointed by
the Directors may be removed by the Directors or by the Company by Ordinary Resolution.
97.
The Directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit; any committee
so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the Directors.
98.
The Directors may from time to time and at any time by power of attorney (whether under Seal or under hand) or otherwise appoint any company,
firm or Person or body of Persons, whether nominated directly or indirectly by the Directors, to be the attorney or attorneys or authorised signatory
(any such person being an Attorney or Authorised Signatory, respectively) of the Company for such purposes and with such powers, authorities
and discretion (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions
as they may think fit, and any such power of attorney or other appointment may contain such provisions for the protection and
31
convenience of Persons dealing with any such Attorney or Authorised Signatory as the Directors may think fit, and may also authorise any such
Attorney or Authorised Signatory to delegate all or any of the powers, authorities and discretion vested in him.
99.
The Directors may from time to time provide for the management of the affairs of the Company in such manner as they shall think fit and the
provisions contained in the three next following Articles shall not limit the general powers conferred by this Article 99.
100.
The Directors from time to time and at any time may establish any committees, local boards or agencies for managing any of the affairs of the
Company and may appoint any Person to be a member of such committees or local boards and may appoint any managers or agents of the Company
and may fix the remuneration of any such Person.
101.
The Directors from time to time and at any time may delegate to any such committee, local board, manager or agent any of the powers, authorities
and discretions for the time being vested in the Directors and may authorise the members for the time being of any such local board, or any of them
to fill any vacancies therein and to act notwithstanding vacancies and any such appointment or delegation may be made on such terms and subject
to such conditions as the Directors may think fit and the Directors may at any time remove any Person so appointed and may annul or vary any such
delegation, but no Person dealing in good faith and without notice of any such annulment or variation shall be affected thereby.
102.
Any such delegates as aforesaid may be authorised by the Directors to sub-delegate all or any of the powers, authorities, and discretion for the time
being vested in them.
103.
Subject to these Articles, the Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking,
property and uncalled capital or any part thereof, or to otherwise provide for a security interest to be taken in such undertaking, property or uncalled
capital, and to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation
of the Company or of any third party.
104.
The office of Director shall be vacated, if the Director:

(a)
becomes bankrupt or makes any arrangement or composition with his creditors;
(b)
dies or is found to be or becomes of unsound mind;
(c)
resigns his office by notice in writing to the Company; or
(d)
is removed from office pursuant to any provision of these Articles.

105.
Meetings of the Board.

The Board shall hold a regularly scheduled meeting at least semi-annually (or otherwise as decided by the Board from time to time). The Company
shall pay all reasonable out-of-pocket expenses incurred by each Director in connection with attending regular and special meetings
32
of the Board and any committee thereof, and any such meetings of the board of directors of any other Group Company and any committee thereof.
Any Director may at any time call a meeting of the Board upon at least forty-eight (48) hours prior notice in writing to every other Director and the
Company unless such notice is waived by all the Directors either at, before or after the meeting. Directors may participate in a meeting of the Board
or any committee thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the
meeting can hear each other and such participation in a meeting shall constitute presence in person at such meeting.
106.
Actions and Powers of the Board.

(a)
A quorum of the Board shall consist of at least a majority of the Board who shall include the WP Director and the Sequoia Director for so
long as WP and Sequoia (as the case may be) has the right to appoint a Director. If at any meeting of the Board, due to absence of the WP
Director or the Sequoia Director, a quorum is not present within one hour of the time appointed for a meeting or ceases to be present at any
time during the meeting, the meeting shall stand adjourned to the same place and time at least seven days after the original date set for such
meeting of the Board. If at the reconvened meeting after such adjournment, due to absence of the WP Director or the Sequoia Director, a
quorum is not present within one hour of the time appointed for the meeting, the meeting shall stand adjourned to the same place and time
at least seven days after the original date set for such reconvened meeting. If at the second reconvened meeting, due to the absence of the
WP Director or the Sequoia Director, a quorum is not present within one hour of the time appointed for the meeting, the presence of a
majority of the Directors shall constitute a quorum. Subject to Article 106(b), all actions of the Board shall require the affirmative vote of at
least two-thirds of the Directors present at a duly convened meeting of the Board at which a quorum is present or the written consent of all
Directors; provided that, if there is a vacancy on the Board and an individual has been nominated to fill such vacancy, the first order of
business shall be to fill such vacancy.
(b)
The Company shall not, and it shall cause each other Group Company not to, take any action (including any action by the Board or any
committee thereof) with respect to any of the following matters of each Group Company without the affirmative vote by the WP Director at
the applicable Board meeting:
(i)
subject to Article 106(b)(ii),any sale, transfer, lease, pledge or other disposition by any Group Company of any assets (tangible or
intangible), businesses, interests or properties, in a single transaction or a series of related transactions, with a value in the
aggregate in excess of RMB200 million; or any sale, transfer or other disposition by any Group Company of any Person either
gross revenue or net income of which of the preceding financial year accounts for 5% or more of the total gross revenue or net
income of the Group of the preceding financial year;
(ii)
any provision of guarantee or security for a Person that is not a Group Company or a delivery hub / franchisee transacting with the
Group Companies; or provision of loans providing for either (A) a total principal amount of RMB10 million or more to a single
Person that is not a Group Company or (B) a total principal amount of RMB30 million or more to all Persons that are not Group
Companies; and
(iii)
any appointment and removal of the independent auditor of the Company who will be responsible to audit and opine on the
consolidated financial
33
statements of the Company reflecting the financial position of the Group, or any material change in accounting principles except
as required by law.
(c)
The Board shall have all powers necessary for managing, directing and supervising the business and affairs of the Company and other
Group Company in accordance with these Articles.
107.
A Director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the Company shall declare the nature
of his interest at a meeting of the Directors. A general notice given to the Directors by any Director to the effect that he is to be regarded as interested
in any contract or other arrangement which may thereafter be made with that company or firm shall be deemed a sufficient declaration of interest in
regard to any contract so made. A Director may vote in respect of any contract or proposed contract or arrangement notwithstanding that he may be
interested therein and if he does so his vote shall be counted and he may be counted in the quorum at any meeting of the Directors at which any such
contract or proposed contract or arrangement shall come before the meeting for consideration.
108.
A Director may hold any other office or place of profit under the Company (other than the office of auditor) in conjunction with his office of Director
for such period and on such terms (as to remuneration and otherwise) as the Directors may determine and no Director or intending Director shall be
disqualified by his office from contracting with the Company either with regard to his tenure of any such other office or place of profit or as vendor,
purchaser or otherwise, nor shall any such contract or arrangement entered into by or on behalf of the Company in which any Director is in any way
interested, be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit
realised by any such contract or arrangement by reason of such Director holding that office or of the fiduciary relation thereby established. A
Director, notwithstanding his interest, may be counted in the quorum present at any meeting of the Directors whereat he or any other Director is
appointed to hold any such office or place of profit under the Company or whereat the terms of any such appointment are arranged and he may vote
on any such appointment or arrangement.
109.
Any Director may act by himself or his firm in a professional capacity for the Company, and he or his firm shall be entitled to remuneration for
professional services as if he were not a Director; provided that nothing herein contained shall authorise a Director or his firm to act as auditor to the
Company.
110.
The Directors shall cause minutes to be made in books or loose-leaf folders provided for the purpose of recording:
111.
(a)
all appointments of Officers made by the Directors;
(b)
the names of the Directors present at each meeting of the Directors and of any committee of the Directors; and
(c)
all resolutions and proceedings at all meetings of the Company, and of the Directors and of committees of Directors.
When the chairman of a meeting of the Directors signs the minutes of such meeting the same shall be deemed to have been duly held
notwithstanding that all the Directors have not actually come together or that there may have been a technical defect in the proceedings.
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112.
The chairman of the Board (the Chairman) shall be elected from time to time by a majority of the Directors then in office. For the avoidance of
doubt, the Chairman shall not be entitled to any second or casting vote or any veto right whether in the event of a deadlock or otherwise.
113.
A committee appointed by the Directors may meet and adjourn as it thinks proper, subject to any regulations imposed on it by the Directors.
114.
All acts done by any meeting of the Directors or of a committee of Directors, or by any Person acting as a Director, shall notwithstanding that it be
afterwards discovered that there was some defect in the appointment of any such Director or Person acting as aforesaid, or that they or any of them
were disqualified, be as valid as if every such Person had been duly appointed and was qualified to be a Director.
THE SEAL
115.
The Seal shall not be affixed to any instrument except by the authority of a resolution of the Directors provided always that such authority may be
given prior to or after the affixing of the Seal and if given after may be in general form confirming a number of affixings of the Seal. The Seal shall be
affixed in the presence of a Director or a Secretary (or an assistant Secretary) or in the presence of any one or more Persons as the Directors may
appoint for the purpose and every Person as aforesaid shall sign every instrument to which the Seal is so affixed in their presence.
116.
The Company may maintain a facsimile of the Seal in such countries or places as the Directors may appoint and such facsimile Seal shall not be
affixed to any instrument except by the authority of a resolution of the Directors provided always that such authority may be given prior to or after
the affixing of such facsimile Seal and if given after may be in general form confirming a number of affixings of such facsimile Seal. The facsimile
Seal shall be affixed in the presence of such Person or Persons as the Directors shall for this purpose appoint and such Person or Persons as aforesaid
shall sign every instrument to which the facsimile Seal is so affixed in their presence and such affixing of the facsimile Seal and signing as aforesaid
shall have the same meaning and effect as if the Seal had been affixed in the presence of and the instrument signed by a Director or a Secretary (or an
assistant Secretary) or in the presence of any one or more Persons as the Directors may appoint for the purpose.
117.
Notwithstanding the foregoing, a Secretary or any assistant Secretary shall have the authority to affix the Seal, or the facsimile Seal, to any
instrument for the purposes of attesting authenticity of the matter contained therein but which does not create any obligation binding on the
Company.
DIVIDENDS
118.
Subject to any rights and restrictions for the time being attached to any Shares (including pursuant to Articles 12, 13, and 14), or as otherwise
provided for in the Law and these Articles, the Directors may from time to time declare dividends (including interim dividends) and other
distributions on Shares in issue and authorise payment of the same out of the funds of the Company lawfully available therefor.
119.
Subject to any rights and restrictions for the time being attached to any Shares and Article 74, the Company by Ordinary Resolution may declare
dividends, but no dividend shall exceed the amount recommended by the Directors.
35
120.
The Directors may, before recommending or declaring any dividend, set aside out of the funds legally available for distribution such sums as they
think proper as a reserve or reserves which shall, in the absolute discretion of the Directors be applicable for meeting contingencies, or for equalising
dividends or for any other purpose to which those funds may be properly applied and pending such application may in the absolute discretion of the
Directors, either be employed in the business of the Company or be invested in such investments as the Directors may from time to time think fit.
121.
Any dividend may be paid in any manner as the Directors may determine. If paid by cheque it will be sent through the post to the registered address
of the Shareholder or Person entitled thereto, or in the case of joint holders, to any one of such joint holders at his registered address or to such
Person and such address as the Shareholder or Person entitled, or such joint holders as the case may be, may direct. Every such cheque shall be made
payable to the order of the Person to whom it is sent or to the order of such other Person as the Shareholder or Person entitled, or such joint holders as
the case may be, may direct.
122.
The Directors when paying dividends to the Shareholders in accordance with the foregoing provisions of these Articles may make such payment
either in cash or in specie.
123.
Subject to any rights and restrictions for the time being attached to any Shares, all dividends shall be declared and paid according to the amounts
paid up on the Shares, but if and for so long as nothing is paid up on any of the Shares dividends may be declared and paid according to the par
value of the Shares.
124.
If several Persons are registered as joint holders of any Share, any of them may give effectual receipts for any dividend or other moneys payable on or
in respect of the Share.
125.
The books of account relating to the Companys affairs shall be kept in such manner as may be determined from time to time by the Directors.
126.
The books of account shall be kept at the Office, or at such other place or places as the Directors think fit, and shall always be open to the inspection
of the Directors.
127.
The Directors may from time to time determine whether and to what extent and at what times and places and under what conditions or regulations
the accounts and books of the Company or any of them shall be open to the inspection of Shareholders not being Directors.
128.
The accounts relating to the Companys affairs shall only be audited if the Directors so determine, in which case the financial year end and the
accounting principles will be determined by the Directors.
129.
The Directors in each year shall prepare, or cause to be prepared, an annual return and declaration setting forth the particulars required by the Law
and deliver a copy thereof to the Registrar of Companies in the Cayman Islands.
130.
Subject to the Law and these Articles, the Directors may:

36
(a)
resolve to capitalise an amount standing to the credit of reserves (including a Share Premium Account, capital redemption reserve and profit
and loss account), whether or not available for distribution;
(b)
appropriate the sum resolved to be capitalised to the Shareholders in proportion to the nominal amount of Shares (whether or not fully
paid) held by them respectively and apply that sum on their behalf in or towards:
(i)
paying up the amounts (if any) for the time being unpaid on Shares held by them respectively, or
(ii)
paying up in full unissued Shares or debentures of a nominal amount equal to that sum,
and allot the Shares or debentures, credited as fully paid, to the Shareholders (or as they may direct) in those proportions, or partly
in one way and partly in the other, but the Share Premium Account, the capital redemption reserve and profits which are not
available for distribution may, for the purposes of this Article, only be applied in paying up unissued Shares to be allotted to
Shareholders credited as fully paid;
(c)
make any arrangements they think fit to resolve a difficulty arising in the distribution of a capitalised reserve and in particular, without
limitation, where Shares or debentures become distributable in fractions the Directors may deal with the fractions as they think fit;
(d)
authorise a Person to enter (on behalf of all the Shareholders concerned) into an agreement with the Company providing for either:
(i)
the allotment to the Shareholders respectively, credited as fully paid, of Shares or debentures to which they may be entitled on the
capitalisation, or
(ii)
the payment by the Company on behalf of the Shareholders (by the application of their respective proportions of the reserves
resolved to be capitalised) of the amounts or part of the amounts remaining unpaid on their existing Shares,
and any such agreement made under this authority being effective and binding on all those Shareholders; and
(e)
generally do all acts and things required to give effect to any of the actions contemplated by this Article 130.

131.
The Directors shall in accordance with the Law establish a Share Premium Account and shall carry to the credit of such account from time to time a
sum equal to the amount or value of the premium paid on the issue of any Share.
132.
There shall be debited to any Share Premium Account on the redemption or purchase of a Share the difference between the nominal value of such
Share and the redemption or purchase price provided always that at the discretion of the Directors such sum may be paid out of the profits of the
Company or, if permitted by the Law, out of capital.
37
NOTICES
133.
Any notice or document may be served by the Company or by the Person entitled to give notice to any Shareholder either personally, or by posting
it airmail or air courier service in a prepaid letter addressed to such Shareholder at his address as appearing in the Register, or by electronic mail to
any electronic mail address such Shareholder may have specified in writing for the purpose of such service of notices, or by facsimile should the
Directors deem it appropriate. In the case of joint holders of a Share, all notices shall be given to that one of the joint holders whose name stands first
in the Register in respect of the joint holding, and notice so given shall be sufficient notice to all the joint holders.
134.
Any Shareholder present, either personally or by proxy, at any meeting of the Company shall for all purposes be deemed to have received due notice
of such meeting and, where requisite, of the purposes for which such meeting was convened.
135.
Any notice or other document, if served by:

(a)
post, shall be deemed to have been served five clear days after the time when the letter containing the same is posted;
(b)
facsimile, shall be deemed to have been served upon production by the transmitting facsimile machine of a report confirming transmission
of the facsimile in full to the facsimile number of the recipient;
(c)
recognised courier service, shall be deemed to have been served 48 hours after the time when the letter containing the same is delivered to
the courier service; or
(d)
electronic mail, shall be deemed to have been served immediately upon the time of the transmission by electronic mail.
In proving service by post or courier service it shall be sufficient to prove that the letter containing the notice or documents was properly addressed
and duly posted or delivered to the courier service.
136.
Any notice or document delivered or sent by post to or left at the registered address of any Shareholder in accordance with the terms of these Articles
shall notwithstanding that such Shareholder be then dead or bankrupt, and whether or not the Company has notice of his death or bankruptcy, be
deemed to have been duly served in respect of any Share registered in the name of such Shareholder as sole or joint holder, unless his name shall at
the time of the service of the notice or document, have been removed from the Register as the holder of the Share, and such service shall for all
purposes be deemed a sufficient service of such notice or document on all Persons interested (whether jointly with or as claiming through or under
him) in the Share.
137.
Notice of every general meeting of the Company shall be given to:

(a)
all Shareholders holding Shares with the right to receive notice and who have supplied to the Company an address for the giving of notices
to them; and
(b)
every Person entitled to a Share in consequence of the death or bankruptcy of a Shareholder, who but for his death or bankruptcy would be
entitled to receive notice of the meeting.
38
No other Person shall be entitled to receive notices of general meetings.

INDEMNITY
138.
Every Director, Secretary, assistant Secretary, or other officer for the time being and from time to time of the Company (but not including the
Companys auditors) and the personal representatives of the same (each an Indemnified Person) shall be indemnified and secured harmless
against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained by such Indemnified Person, other than
by reason of such Indemnified Persons own dishonesty, wilful default or fraud as determined by a court of competent jurisdiction, in or about the
conduct of the Companys business or affairs (including as a result of any mistake of judgment) or in the execution or discharge of his duties,
powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurred by
such Indemnified Person in defending (whether successfully or otherwise) any civil proceedings concerning the Company or its affairs in any court
whether in the Cayman Islands or elsewhere.
139.
No Indemnified Person shall be liable:

(a)
for the acts, receipts, neglects, defaults or omissions of any other Director or officer or agent of the Company; or
(b)
for any loss on account of defect of title to any property of the Company; or
(c)
on account of the insufficiency of any security in or upon which any money of the Company shall be invested; or
(d)
for any loss incurred through any bank, broker or other similar Person; or
(e)
for any loss occasioned by any negligence, default, breach of duty, breach of trust, error of judgement or oversight on such Indemnified
Persons part; or
(f)
for any loss, damage or misfortune whatsoever which may happen in or arise from the execution or discharge of the duties, powers,
authorities, or discretions of such Indemnified Persons office or in relation thereto;
unless the same shall happen through such Indemnified Persons own dishonesty, wilful default or fraud as determined by a court of competent
jurisdiction.
140.
Subject to the proviso hereto, no Person shall be recognised by the Company as holding any Share upon any trust and the Company shall not, unless
required by law, be bound by or be compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial
interest in any Share or (except only as otherwise provided by these Articles or as the Law requires) any other right in respect of any Share except an
absolute right to the entirety thereof in each Shareholder registered in the Register, provided that, notwithstanding the foregoing, the Company shall
be entitled to recognise any such interests as shall be determined by the Directors.
39
WINDING UP
141.
If the Company shall be wound up the liquidator shall apply the assets of the Company in such manner and order as he thinks fit in satisfaction of
creditors claims.
142.
If the Company shall be wound up, the liquidator may, with the sanction of an Ordinary Resolution divide amongst the Shareholders in specie or
kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may, for such purpose
set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between
the Shareholders or different Classes. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts
for the benefit of the Shareholders as the liquidator, with the like sanction shall think fit, but so that no Shareholder shall be compelled to accept any
assets whereon there is any liability.
143.
Liquidation Rights.
(a)
In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, all assets and funds of the
Company legally available for distribution to the Members (after satisfaction of all creditors claims and claims that may be preferred by
law) shall be distributed to all Members on parity with each other and shall be made ratably to the holders of the outstanding Series A
Preferred Shares and Ordinary Shares, on an as-converted to Ordinary Share basis determined pursuant to an Optional Conversion as of the
time of such distribution.
(b)
Valuation of Properties. In the event any assets other than cash shall be distributed to the Members in connection with any liquidation,
dissolution or winding up of the Company pursuant to Article 143, the value of the assets to be distributed to the Members shall be
determined in good faith by the Board; provided that any securities not subject to investment letter or similar restrictions on free
marketability shall be valued as follows:
(i)
If traded on a securities exchange, the value shall be deemed to be the average of the securitys closing prices on such exchange
over the thirty (30) day period ending one (1) day prior to the distribution;
(ii)
If traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the thirty (30) day period
ending three (3) days prior to the distribution; and
(iii)
If there is no active public market, the value shall be the fair market value thereof as determined in good faith by the Board;
provided further that the method of valuation of securities subject to investment letter or other restrictions on free marketability shall be
adjusted to make an appropriate discount from the market value determined as above in clauses 143(b)(ii) or (iii) to reflect the fair market
value thereof as determined in good faith by the Board.
Notwithstanding the foregoing, the New Investors Holding a Majority in Interest shall have the right to challenge any determination by the
Board of value pursuant to this Article 143(b), in which case the determination of value shall be made by an independent appraiser selected
jointly by the Board and the New Investors Holding a Majority in Interest, with the cost of such appraisal to be borne by the Company.
40
(c)
Notices. In the event that the Company shall propose at any time to consummate a liquidation, dissolution or winding up of the Company,
then, in connection with each such event, subject to any necessary approval required by the Law and these Articles, the Company shall
send to the holders of Series A Preferred Shares at least thirty (30) days prior written notice of the date when the same shall take place;
provided, however, that the foregoing notice periods may be shortened or waived with the vote or written consent of the New Investors
Holding a Majority in Interest.
(d)
Enforcement. In the event the requirements of this Article 143 are not complied with, the Company shall forthwith either (i) cause the
closing of the applicable transaction to be postponed until such time as the requirements of this Article 143 have been complied with, or
(ii) cancel such transaction.
144.
Subject to the Law and the rights attaching to the various Classes, the Company may at any time and from time to time by Special Resolution alter
or amend these Articles in whole or in part.
145.
For the purpose of determining those Shareholders that are entitled to receive notice of, attend or vote at any meeting of Shareholders or any
adjournment thereof, or those Shareholders that are entitled to receive payment of any dividend, or in order to make a determination as to who is a
Shareholder for any other purpose, the Directors may provide that the Register shall be closed for transfers for a stated period which shall not exceed
in any case 40 days. If the Register shall be so closed for the purpose of determining those Shareholders that are entitled to receive notice of, attend
or vote at a meeting of Shareholders the Register shall be so closed for at least ten days immediately preceding such meeting and the record date for
such determination shall be the date of the closure of the Register.
146.
In lieu of or apart from closing the Register, the Directors may fix in advance a date as the record date for any such determination of those
Shareholders that are entitled to receive notice of, attend or vote at a meeting of the Shareholders and for the purpose of determining those
Shareholders that are entitled to receive payment of any dividend the Directors may, at or within 90 days prior to the date of declaration of such
dividend, fix a subsequent date as the record date for such determination.
147.
If the Register is not so closed and no record date is fixed for the determination of those Shareholders entitled to receive notice of, attend or vote at a
meeting of Shareholders or those Shareholders that are entitled to receive payment of a dividend, the date on which notice of the meeting is posted
or the date on which the resolution of the Directors declaring such dividend is adopted, as the case may be, shall be the record date for such
determination of Shareholders. When a determination of those Shareholders that are entitled to receive notice of, attend or vote at a meeting of
Shareholders has been made as provided in this Article, such determination shall apply to any adjournment thereof.
148.
The Company may by Special Resolution resolve to be registered by way of continuation in a jurisdiction outside the Cayman Islands or such other
jurisdiction in which it is for the time being incorporated, registered or existing. In furtherance of a resolution adopted pursuant to this Article, the
Directors may cause an application to be made to the Registrar of Companies
41
to deregister the Company in the Cayman Islands or such other jurisdiction in which it is for the time being incorporated, registered or existing and
may cause all such further steps as they consider appropriate to be taken to effect the transfer by way of continuation of the Company.
MERGERS AND CONSOLIDATION
149.
Subject to applicable provisions of these Articles and the Transaction Documents, if any, the Company may by Special Resolution resolve to merge
or consolidate the Company in accordance with the Law.
DISCLOSURE
150.
The Directors, or any authorised service providers (including the officers, the Secretary and the registered office agent of the Company), shall be
entitled to disclose to any regulatory or judicial authority, or to any stock exchange on which the Shares may from time to time be listed, any
information regarding the affairs of the Company including, without limitation, information contained in the Register and books of the Company.
42
Exhibit 3.2
THE COMPANIES LAW (2016 REVISION)
OF THE CAYMAN ISLANDS
SECOND AMENDED AND RESTATED
MEMORANDUM OF ASSOCIATION
OF
(adopted by a Special Resolution passed on
, 2016 and effective immediately prior to the completion of the initial public offering of the Companys
American Depositary Shares representing its Class A Ordinary Shares)
1.
The name of the Company is ZTO Express (Cayman) Inc.
2.
The Registered Office of the Company will be situated at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand
Cayman, KY1-1104, Cayman Islands, or at such other location within the Cayman Islands as the Directors may from time to time determine.
3.
The objects for which the Company is established are unrestricted and the Company shall have full power and authority to carry out any object not
prohibited by the Companies Law or any other law of the Cayman Islands.
4.
The Company shall have and be capable of exercising all the functions of a natural person of full capacity irrespective of any question of corporate
benefit as provided by the Companies Law.
5.
The Company will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried
on outside the Cayman Islands; provided that nothing in this section shall be construed as to prevent the Company effecting and concluding contracts
in the Cayman Islands, and exercising in the Cayman Islands all of its powers necessary for the carrying on of its business outside the Cayman Islands.
6.
The liability of each Shareholder is limited to the amount, if any, unpaid on the Shares held by such Shareholder.
7.
The authorised share capital of the Company is US$1,000,000 divided into 10,000,000,000 shares comprising of (i) 8,000,000,000 Class A Ordinary
Shares of a par value of US$0.0001 each, (ii) 1,000,000,000 Class B Ordinary Shares of a par value of US$0.0001 each and (iii) 1,000,000,000 shares of
a par value of US$0.0001 each of such class or classes (however designated) as the board of directors may determine in accordance with Article 9 of the
Articles. Subject to the Companies Law and the Articles, the Company shall have power to redeem or purchase any of its Shares and to increase or
reduce its authorised share capital and to sub-divide or consolidate the said Shares or any of them and to issue all or any part of its capital whether
original, redeemed, increased or reduced with or without any preference, priority, special privilege or other rights or subject to any postponement of
rights or to any conditions or restrictions whatsoever and so that unless the conditions of issue shall otherwise expressly provide every issue of shares
whether stated to be ordinary, preference or otherwise shall be subject to the powers on the part of the Company hereinbefore provided.
8.
The Company has the power contained in the Companies Law to deregister in the Cayman Islands and be registered by way of continuation in some
other jurisdiction.
9.
Capitalised terms that are not defined in this Memorandum of Association bear the same meanings as those given in the Articles of Association of the
Company.
THE COMPANIES LAW (2016 REVISION)

OF THE CAYMAN ISLANDS
SECOND AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
(adopted by a Special Resolution passed on
, 2016 and effective immediately prior to the completion of the initial public offering of the Companys
American Depositary Shares representing its Class A Ordinary Shares)
TABLE A
The regulations contained or incorporated in Table A in the First Schedule of the Companies Law shall not apply to the Company and the following
Articles shall comprise the Articles of Association of the Company.
INTERPRETATION
1.
In these Articles the following defined terms will have the meanings ascribed to them, if not inconsistent with the subject or context:
ADS
means an American Depositary Share representing Class A Ordinary Shares;
Affiliate
means in respect of a Person, any other Person that, directly or indirectly, through (1) one or more
intermediaries, controls, is controlled by, or is under common control with, such Person, and (i) in the case of a
natural person, shall include, without limitation, such persons spouse, parents, children, siblings, mother-inlaw, father-in-law, brothers-in-law and sisters-in-law, a trust for the benefit of any of the foregoing, and a
corporation, partnership or any other entity wholly or jointly owned by any of the foregoing, and (ii) in the
case of an entity, shall include a partnership, a corporation or any other entity or any natural person which
directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common
control with, such entity. The term control shall mean the ownership, directly or indirectly, of shares
possessing more than fifty per cent (50%) of the voting power of the corporation, partnership or other entity
(other than, in the case of a corporation, securities having such power only by reason of the happening of a
contingency), or having the power to control the management or elect a majority of members to the board of
directors or equivalent decision-making body of such corporation, partnership or other entity;
2
Articles
means these articles of association of the Company, as amended or substituted from time to time;
Board and Board of Directors and

Directors
means the directors of the Company for the time being, or as the case may be, the directors assembled as a
board or as a committee thereof;
Chairman
means the chairman of the Board of Directors;
Class or Classes
means any class or classes of Shares as may from time to time be issued by the Company;
Class A Ordinary Share
means an Ordinary Share of a par value of US$0.0001 in the capital of the Company, designated as a Class A
Ordinary Shares and having the rights provided for in these Articles;
Class B Ordinary Share
means an Ordinary Share of a par value of US$0.0001 in the capital of the Company, designated as a Class B
Ordinary Share and having the rights provided for in these Articles;
Commission
means the Securities and Exchange Commission of the United States of America or any other federal agency
for the time being administering the Securities Act;
Company
means ZTO Express (Cayman) Inc., a Cayman Islands exempted company;
Companies Law
means the Companies Law (2016 revision) of the Cayman Islands and any statutory amendment or reenactment thereof;
Companys Website
means the main corporate/investor relations website of the Company, the address or domain name of which
has been notified to Shareholders;
Designated Stock Exchange
means the stock exchange in the United States on which any Shares and ADSs are listed for trading;
Designated Stock Exchange Rules
means the relevant code, rules and regulations, as amended, from time to time, applicable as a result of the
original and continued listing of any Shares or ADSs on the Designated Stock Exchange;
electronic
has the meaning given to it in the Electronic Transactions Law and any amendment thereto or re-enactments
thereof for the time being in force and includes every other law incorporated therewith or substituted therefor;
electronic communication
means electronic posting to the Companys Website, transmission to any number, address or internet website
or other electronic delivery methods as otherwise decided and approved by not less than two-thirds of the vote
of the Board;
Electronic
means the Electronic Transactions Law (2003 Revision) of the

3
Transactions Law
Cayman Islands and any statutory amendment or re-enactment thereof;
electronic record
has the meaning given to it in the Electronic Transactions Law and any amendment thereto or re-enactments
thereof for the time being in force and includes every other law incorporated therewith or substituted therefor;
Law
means the Companies Law and every other law and regulation of the Cayman Islands for the time being in
force concerning companies and affecting the Company;
Memorandum of Association
means the memorandum of association of the Company, as amended or substituted from time to time;
Ordinary Resolution
means a resolution:
(a) passed by a simple majority of the votes cast by such Shareholders as, being entitled to do so, vote in
person or, where proxies are allowed, by proxy or, in the case of corporations, by their duly authorised
representatives, at a general meeting of the Company held in accordance with these Articles; or
(b) approved in writing by all of the Shareholders entitled to vote at a general meeting of the Company in
one or more instruments each signed by one or more of the Shareholders and the effective date of the
resolution so adopted shall be the date on which the instrument, or the last of such instruments, if more
than one, is executed;
Ordinary Share
means a Class A Ordinary Share or a Class B Ordinary Share;
paid up
means paid up as to the par value in respect of the issue of any Shares and includes credited as paid up;
Person
means any natural person, firm, company, joint venture, partnership, corporation, association or other entity
(whether or not having a separate legal personality) or any of them as the context so requires;
Register
means the register of Members of the Company maintained in accordance with the Companies Law;
Registered Office
means the registered office of the Company as required by the Companies Law;
Seal
means the common seal of the Company (if adopted) including any facsimile thereof;
Secretary
means any Person appointed by the Directors to perform any of the duties of the secretary of the Company;
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Securities Act
means the Securities Act of 1933 of the United States of America, as amended, or any similar federal statute
and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time;
Share
means a share in the capital of the Company. All references to Shares herein shall be deemed to be Shares of
any or all Classes as the context may require. For the avoidance of doubt in these Articles the expression
Share shall include a fraction of a Share;
Shareholder or Member
means a Person who is registered as the holder of one or more Shares in the Register;
Share Premium Account
means the share premium account established in accordance with these Articles and the Companies Law;
signed
means bearing a signature or representation of a signature affixed by mechanical means or an electronic

symbol or process attached to or logically associated with an electronic communication and executed or
adopted by a person with the intent to sign the electronic communication;
Special Resolution
means a special resolution of the Company passed in accordance with the Law, being a resolution:
(a) passed by not less than two-thirds of the votes cast by such Shareholders as, being entitled to do so, vote
in person or, where proxies are allowed, by proxy or, in the case of corporations, by their duly authorised
representatives, at a general meeting of the Company of which notice specifying the intention to propose
the resolution as a special resolution has been duly given; or
(b) approved in writing by all of the Shareholders entitled to vote at a general meeting of the Company in
one or more instruments each signed by one or more of the Shareholders and the effective date of the
special resolution so adopted shall be the date on which the instrument or the last of such instruments, if
more than one, is executed;
Treasury Share
means a Share held in the name of the Company as a treasury share in accordance with the Companies Law;
and
United States
means the United States of America, its territories, its possessions and all areas subject to its jurisdiction.
2.
In these Articles, save where the context requires otherwise:

(a)
words importing the singular number shall include the plural number and vice versa;
5
3.
(b)
words importing the masculine gender only shall include the feminine gender and any Person as the context may require;
(c)
the word may shall be construed as permissive and the word shall shall be construed as imperative;
(d)
reference to a dollar or dollars (or US$) and to a cent or cents is reference to dollars and cents of the United States of America;
(e)
reference to a statutory enactment shall include reference to any amendment or re-enactment thereof for the time being in force;
(f)
reference to any determination by the Directors shall be construed as a determination by the Directors in their sole and absolute discretion
and shall be applicable either generally or in any particular case;
(g)
reference to in writing shall be construed as written or represented by any means reproducible in writing, including any form of print,
lithograph, email, facsimile, photograph or telex or represented by any other substitute or format for storage or transmission for writing
including in the form of an electronic record or partly one and partly another;
(h)
any requirements as to delivery under the Articles include delivery in the form of an electronic record or an electronic communication;
(i)
any requirements as to execution or signature under the Articles, including the execution of the Articles themselves, can be satisfied in the
form of an electronic signature as defined in the Electronic Transaction Law; and
(j)
Sections 8 and 19(3) of the Electronic Transactions Law shall not apply.
Subject to the last two preceding Articles, any words defined in the Companies Law shall, if not inconsistent with the subject or context, bear the
same meaning in these Articles.
PRELIMINARY
4.
The business of the Company may be conducted as the Directors see fit.
5.
The Registered Office shall be at such address in the Cayman Islands as the Directors may from time to time determine. The Company may in
addition establish and maintain such other offices and places of business and agencies in such places as the Directors may from time to time
determine.
6.
The expenses incurred in the formation of the Company and in connection with the offer for subscription and issue of Shares shall be paid by the
Company. Such expenses may be amortised over such period as the Directors may determine and the amount so paid shall be charged against
income and/or capital in the accounts of the Company as the Directors shall determine.
6
7.
The Directors shall keep, or cause to be kept, the Register at such place as the Directors may from time to time determine and, in the absence of any
such determination, the Register shall be kept at the Registered Office.
SHARES
8.
9.
Subject to these Articles, all Shares for the time being unissued shall be under the control of the Directors who may, in their absolute discretion and
without the approval of the Members, cause the Company to:
(a)
issue, allot and dispose of Shares (including, without limitation, preferred shares) (whether in certificated form or non-certificated form) to
such Persons, in such manner, on such terms and having such rights and being subject to such restrictions as they may from time to time
determine;
(b)
grant rights over Shares or other securities to be issued in one or more classes or series as they deem necessary or appropriate and determine
the designations, powers, preferences, privileges and other rights attaching to such Shares or securities, including dividend rights, voting
rights, conversion rights, terms of redemption and liquidation preferences, any or all of which may be greater than the powers, preferences,
privileges and rights associated with the then issued and outstanding Shares, at such times and on such other terms as they think proper;
and
(c)
grant options with respect to Shares and issue warrants or similar instruments with respect thereto.
The Directors may authorise the division of Shares into any number of Classes and the different Classes shall be authorised, established and
designated (or re-designated as the case may be) and the variations in the relative rights (including, without limitation, voting, dividend and
redemption rights), restrictions, preferences, privileges and payment obligations as between the different Classes (if any) may be fixed and
determined by the Directors or by a Special Resolution. The Directors may issue Shares with such preferred or other rights, all or any of which may
be greater than the rights of Ordinary Shares, at such time and on such terms as they may think appropriate. Notwithstanding Article 17, the
Directors may issue from time to time, out of the authorised share capital of the Company (other than the authorised but unissued Ordinary Shares),
series of preferred shares in their absolute discretion and without approval of the Members; provided, however, before any preferred shares of any
such series are issued, the Directors shall by resolution of Directors determine, with respect to any series of preferred shares, the terms and rights of
that series, including:
(a)
the designation of such series, the number of preferred shares to constitute such series and the subscription price thereof if different from the
par value thereof;
(b)
whether the preferred shares of such series shall have voting rights, in addition to any voting rights provided by law, and, if so, the terms of
such voting rights, which may be general or limited;
7
(c)
the dividends, if any, payable on such series, whether any such dividends shall be cumulative, and, if so, from what dates, the conditions
and dates upon which such dividends shall be payable, and the preference or relation which such dividends shall bear to the dividends
payable on any shares of any other class or any other series of shares;
(d)
whether the preferred shares of such series shall be subject to redemption by the Company, and, if so, the times, prices and other conditions
of such redemption;
(e)
whether the preferred shares of such series shall have any rights to receive any part of the assets available for distribution amongst the
Members upon the liquidation of the Company, and, if so, the terms of such liquidation preference, and the relation which such liquidation
preference shall bear to the entitlements of the holders of shares of any other class or any other series of shares;
(f)
whether the preferred shares of such series shall be subject to the operation of a retirement or sinking fund and, if so, the extent to and
manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the preferred shares of such series for
retirement or other corporate purposes and the terms and provisions relative to the operation thereof;
(g)
whether the preferred shares of such series shall be convertible into, or exchangeable for, shares of any other class or any other series of
preferred shares or any other securities and, if so, the price or prices or the rate or rates of conversion or exchange and the method, if any, of
adjusting the same, and any other terms and conditions of conversion or exchange;
(h)
the limitations and restrictions, if any, to be effective while any preferred shares of such series are outstanding upon the payment of
dividends or the making of other distributions on, and upon the purchase, redemption or other acquisition by the Company of, the existing
shares or shares of any other class of shares or any other series of preferred shares;
(i)
the conditions or restrictions, if any, upon the creation of indebtedness of the Company or upon the issue of any additional shares,
including additional shares of such series or of any other class of shares or any other series of preferred shares; and
(j)
any other powers, preferences and relative, participating, optional and other special rights, and any qualifications, limitations and
restrictions thereof;
and, for such purposes, the Directors may reserve an appropriate number of Shares for the time being unissued. The Company shall not issue Shares
to bearer.
10.
The Company may insofar as may be permitted by law, pay a commission to any Person in consideration of his subscribing or agreeing to subscribe
whether absolutely or conditionally for any Shares. Such commissions may be satisfied by the payment of cash or the lodgement of fully or partly
paid-up Shares or partly in one way and partly
8
in the other. The Company may also pay such brokerage as may be lawful on any issue of Shares.
11.
The Directors may refuse to accept any application for Shares, and may accept any application in whole or in part, for any reason or for no reason.
CLASS A ORDINARY SHARES AND CLASS B ORDINARY SHARES
12.
Holders of Class A Ordinary Shares and Class B Ordinary Shares shall at all times vote together as one class on all resolutions submitted to a vote by
the Members. Each Class A Ordinary Share shall entitle the holder thereof to one (1) vote on all matters subject to vote at general meetings of the
Company, and each Class B ordinary share shall entitle the holder thereof to ten (10) votes on all matters subject to vote at general meetings of the
Company.
13.
Each Class B Ordinary Share is convertible into one (1) Class A Ordinary Share at any time at the option of the holder thereof. The right to convert
shall be exercisable by the holder of the Class B Ordinary Share delivering a written notice to the Company that such holder elects to convert a
specified number of Class B Ordinary Shares into Class A Ordinary Shares. In no event shall Class A Ordinary Shares be convertible into Class B
Ordinary Shares. Each Class B Ordinary Share shall automatically be re-designated into one Class A Ordinary Share without any action being
required by the holders of Class B Ordinary Shares and whether or not the certificates representing such shares are surrendered to the Company or its
transfer agent, if at any time Mr. LAI Meisong and his affiliates collectively hold less than ten percent (10%) of the issued Shares in the capital of the
Company, and no Class B Ordinary Shares shall be issued by the Company thereafter.
14.
Any conversion of Class B Ordinary Shares into Class A Ordinary Shares pursuant to these Articles shall be effected by means of the re-designation
of each relevant Class B Ordinary Share as a Class A Ordinary Share. Such conversion shall become effective forthwith upon entries being made in
the Register of Members to record the re-designation of the relevant Class B Ordinary Shares as Class A Ordinary Shares.
15.
Upon any sale, transfer, assignment or disposition of any Class B Ordinary Share by a Shareholder to any person who is not an Affiliate of such
Shareholder, or upon a change of ultimate beneficial ownership of any Class B Ordinary Share to any Person who is not an Affiliate of the registered
shareholder of such Share, such Class B Ordinary Share shall be automatically and immediately converted into one Class A Ordinary Share. For the
avoidance of doubt, (i) a sale, transfer, assignment or disposition shall be effective upon the Companys registration of such sale, transfer, assignment
or disposition in its Register of Members; and (ii) the creation of any pledge, charge, encumbrance or other third party right of whatever description
on any Class B Ordinary Shares to secure a holders contractual or legal obligations shall not be deemed as a sale, transfer, assignment or disposition
unless and until any such pledge, charge, encumbrance or other third party right is enforced and results in the third party holding legal title to the
relevant Class B Ordinary Shares, in which case all the related Class B Ordinary Shares shall be automatically converted into the same number of
Class A Ordinary Shares. For purpose of this Article 15, beneficial ownership shall have the meaning set forth in Rule 13d-3 under the United States
Securities Exchange Act of 1934, as amended.
9
16.
Save and except for voting rights and conversion rights as set out in Articles 12 to 16 (inclusive), the Class A Ordinary Shares and the Class B
Ordinary Shares shall rank pari passu with one another and shall have the same rights, preferences, privileges and restrictions.
17.
Whenever the capital of the Company is divided into different Classes the rights attached to any such Class may, subject to any rights or restrictions
for the time being attached to any Class, only be materially adversely varied with the consent in writing of the holders of two-thirds of the issued
Shares of that Class or with the sanction of a Special Resolution passed at a separate meeting of the holders of the Shares of that Class. To every such
separate meeting all the provisions of these Articles relating to general meetings of the Company or to the proceedings thereat shall, mutatis
mutandis, apply, except that the necessary quorum shall be one or more Persons holding or representing by proxy at least one-third in nominal or par
value amount of the issued Shares of the relevant Class (but so that if at any adjourned meeting of such holders a quorum as above defined is not
present, those Shareholders who are present shall form a quorum) and that, subject to any rights or restrictions for the time being attached to the
Shares of that Class, every Shareholder of the Class shall on a poll have one vote for each Share of the Class held by him. For the purposes of this
Article the Directors may treat all the Classes or any two or more Classes as forming one Class if they consider that all such Classes would be affected
in the same way by the proposals under consideration, but in any other case shall treat them as separate Classes.
18.
The rights conferred upon the holders of the Shares of any Class issued with preferred or other rights shall not, subject to any rights or restrictions for
the time being attached to the Shares of that Class, be deemed to be materially adversely varied by, inter alia, the creation, allotment or issue of
further Shares ranking pari passu with or subsequent to them or the redemption or purchase of any Shares of any Class by the Company. The rights
of the holders of Shares shall not be deemed to be materially adversely varied by the creation or issue of Shares with preferred or other rights
including, without limitation, the creation of Shares with enhanced or weighted voting rights.
CERTIFICATES
19.
Every Person whose name is entered as a Member in the Register may, without payment and upon its written request, request a certificate within two
calendar months after allotment or lodgement of transfer (or within such other period as the conditions of issue shall provide) in the form determined
by the Directors. All certificates shall specify the Share or Shares held by that Person, provided that in respect of a Share or Shares held jointly by
several persons the Company shall not be bound to issue more than one certificate, and delivery of a certificate for a Share to one of several joint
holders shall be sufficient delivery to all. All certificates for Shares shall be delivered personally or sent through the post addressed to the Member
entitled thereto at the Members registered address as appearing in the Register.
20.
Every share certificate of the Company shall bear legends required under the applicable laws, including the Securities Act.
10
21.
Any two or more certificates representing Shares of any one Class held by any Member may at the Members request be cancelled and a single new
certificate for such Shares issued in lieu on payment (if the Directors shall so require) of one dollar (US$1.00) or such smaller sum as the Directors
shall determine.
22.
If a share certificate shall be damaged or defaced or alleged to have been lost, stolen or destroyed, a new certificate representing the same Shares may
be issued to the relevant Member upon request, subject to delivery up of the old certificate or (if alleged to have been lost, stolen or destroyed)
compliance with such conditions as to evidence and indemnity and the payment of out-of-pocket expenses of the Company in connection with the
request as the Directors may think fit.
23.
In the event that Shares are held jointly by several persons, any request may be made by any one of the joint holders and if so made shall be binding
on all of the joint holders.
FRACTIONAL SHARES
24.
The Directors may issue fractions of a Share and, if so issued, a fraction of a Share shall be subject to and carry the corresponding fraction of
liabilities (whether with respect to nominal or par value, premium, contributions, calls or otherwise), limitations, preferences, privileges,
qualifications, restrictions, rights (including, without prejudice to the generality of the foregoing, voting and participation rights) and other
attributes of a whole Share. If more than one fraction of a Share of the same Class is issued to or acquired by the same Shareholder such fractions
shall be accumulated.
LIEN
25.
The Company has a first and paramount lien on every Share (whether or not fully paid) for all amounts (whether presently payable or not) payable at
a fixed time or called in respect of that Share. The Company also has a first and paramount lien on every Share registered in the name of a Person
indebted or under liability to the Company (whether he is the sole registered holder of a Share or one of two or more joint holders) for all amounts
owing by him or his estate to the Company (whether or not presently payable). The Directors may at any time declare a Share to be wholly or in part
exempt from the provisions of this Article. The Companys lien on a Share extends to any amount payable in respect of it, including but not limited
to dividends.
26.
The Company may sell, in such manner as the Directors in their absolute discretion think fit, any Share on which the Company has a lien, but no sale
shall be made unless an amount in respect of which the lien exists is presently payable nor until the expiration of fourteen calendar days after a
notice in writing, demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the
registered holder for the time being of the Share, or the Persons entitled thereto by reason of his death or bankruptcy.
27.
For giving effect to any such sale the Directors may authorise a Person to transfer the Shares sold to the purchaser thereof. The purchaser shall be
registered as the holder of the Shares comprised in any such transfer and he shall not be bound to see to the
11
application of the purchase money, nor shall his title to the Shares be affected by any irregularity or invalidity in the proceedings in reference to the
sale.
28.
The proceeds of the sale after deduction of expenses, fees and commission incurred by the Company shall be received by the Company and applied
in payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue shall (subject to a like lien for sums
not presently payable as existed upon the Shares prior to the sale) be paid to the Person entitled to the Shares immediately prior to the sale.
CALLS ON SHARES
29.
Subject to the terms of the allotment, the Directors may from time to time make calls upon the Shareholders in respect of any moneys unpaid on their
Shares, and each Shareholder shall (subject to receiving at least fourteen calendar days notice specifying the time or times of payment) pay to the
Company at the time or times so specified the amount called on such Shares. A call shall be deemed to have been made at the time when the
resolution of the Directors authorising such call was passed.
30.
The joint holders of a Share shall be jointly and severally liable to pay calls in respect thereof.
31.
If a sum called in respect of a Share is not paid before or on the day appointed for payment thereof, the Person from whom the sum is due shall pay
interest upon the sum at the rate of eight percent per annum from the day appointed for the payment thereof to the time of the actual payment, but
the Directors shall be at liberty to waive payment of that interest wholly or in part.
32.
The provisions of these Articles as to the liability of joint holders and as to payment of interest shall apply in the case of non-payment of any sum
which, by the terms of issue of a Share, becomes payable at a fixed time, whether on account of the amount of the Share, or by way of premium, as if
the same had become payable by virtue of a call duly made and notified.
33.
The Directors may make arrangements with respect to the issue of partly paid Shares for a difference between the Shareholders, or the particular
Shares, in the amount of calls to be paid and in the times of payment.
34.
The Directors may, if they think fit, receive from any Shareholder willing to advance the same all or any part of the moneys uncalled and unpaid
upon any partly paid Shares held by him, and upon all or any of the moneys so advanced may (until the same would, but for such advance, become
presently payable) pay interest at such rate (not exceeding without the sanction of an Ordinary Resolution, eight percent per annum) as may be
agreed upon between the Shareholder paying the sum in advance and the Directors. No such sum paid in advance of calls shall entitle the Member
paying such sum to any portion of a dividend declared in respect of any period prior to the date upon which such sum would, but for such payment,
become presently payable.
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35.
If a Shareholder fails to pay any call or instalment of a call in respect of partly paid Shares on the day appointed for payment, the Directors may, at
any time thereafter during such time as any part of such call or instalment remains unpaid, serve a notice on him requiring payment of so much of the
call or instalment as is unpaid, together with any interest which may have accrued.
36.
The notice shall name a further day (not earlier than the expiration of fourteen calendar days from the date of the notice) on or before which the
payment required by the notice is to be made, and shall state that in the event of non-payment at or before the time appointed, the Shares in respect
of which the call was made will be liable to be forfeited.
37.
If the requirements of any such notice as aforesaid are not complied with, any Share in respect of which the notice has been given may at any time
thereafter, before the payment required by notice has been made, be forfeited by a resolution of the Directors to that effect.
38.
A forfeited Share may be sold or otherwise disposed of on such terms and in such manner as the Directors think fit, and at any time before a sale or
disposition the forfeiture may be cancelled on such terms as the Directors think fit.
39.
A Person whose Shares have been forfeited shall cease to be a Shareholder in respect of the forfeited Shares, but shall, notwithstanding, remain liable
to pay to the Company all moneys which at the date of forfeiture were payable by him to the Company in respect of the Shares forfeited, but his
liability shall cease if and when the Company receives payment in full of the amount unpaid on the Shares forfeited.
40.
A certificate in writing under the hand of a Director of the Company that a Share has been duly forfeited on a date stated in the certificate shall be
conclusive evidence of the facts in the declaration as against all Persons claiming to be entitled to the Share.
41.
The Company may receive the consideration, if any, given for a Share on any sale or disposition thereof pursuant to the provisions of these Articles
as to forfeiture and may execute a transfer of the Share in favour of the Person to whom the Share is sold or disposed of and that Person shall be
registered as the holder of the Share and shall not be bound to see to the application of the purchase money, if any, nor shall his title to the Shares be
affected by any irregularity or invalidity in the proceedings in reference to the disposition or sale.
42.
The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum which by the terms of issue of a Share becomes
due and payable, whether on account of the amount of the Share, or by way of premium, as if the same had been payable by virtue of a call duly
made and notified.
TRANSFER OF SHARES
43.
The instrument of transfer of any Share shall be in writing and in any usual or common form or such other form as the Directors may, in their absolute
discretion, approve and be executed by or on behalf of the transferor and if in respect of a nil or
13
partly paid up Share, or if so required by the Directors, shall also be executed on behalf of the transferee and shall be accompanied by the certificate
(if any) of the Shares to which it relates and such other evidence as the Directors may reasonably require to show the right of the transferor to make
the transfer. The transferor shall be deemed to remain a Shareholder until the name of the transferee is entered in the Register in respect of the
relevant Shares.
44.
(a)
The Directors may in their absolute discretion decline to register any transfer of Shares which is not fully paid up or on which the Company
has a lien.
(b)
The Directors may also decline to register any transfer of any Share unless:
(i)
the instrument of transfer is lodged with the Company, accompanied by the certificate for the Shares to which it relates and such
other evidence as the Board may reasonably require to show the right of the transferor to make the transfer;
(ii)
the instrument of transfer is in respect of only one Class of Shares;
(iii)
the instrument of transfer is properly stamped, if required;
(iv)
in the case of a transfer to joint holders, the number of joint holders to whom the Share is to be transferred does not exceed four;
and
(v)
a fee of such maximum sum as the Designated Stock Exchange may determine to be payable, or such lesser sum as the Board of
Directors may from time to time require, is paid to the Company in respect thereof.
45.
The registration of transfers may, on ten calendar days notice being given by advertisement in such one or more newspapers, by electronic means or
by any other means in accordance with the Designated Stock Exchange Rules, be suspended and the Register closed at such times and for such
periods as the Directors may, in their absolute discretion, from time to time determine, provided always that such registration of transfer shall not be
suspended nor the Register of Members closed for more than thirty calendar days in any calendar year.
46.
All instruments of transfer that are registered shall be retained by the Company. If the Directors refuse to register a transfer of any Shares, they shall
within three calendar months after the date on which the transfer was lodged with the Company send notice of the refusal to each of the transferor
and the transferee.
47.
The legal personal representative of a deceased sole holder of a Share shall be the only Person recognised by the Company as having any title to the
Share. In the case of a Share registered in the name of two or more holders, the survivors or survivor, or the legal personal representatives of the
deceased survivor, shall be the only Person recognised by the Company as having any title to the Share.
48.
Any Person becoming entitled to a Share in consequence of the death or bankruptcy of a Shareholder shall, upon such evidence being produced as
may from time to time
14
be required by the Directors, have the right either to be registered as a Shareholder in respect of the Share or, instead of being registered himself, to
make such transfer of the Share as the deceased or bankrupt Person could have made; but the Directors shall, in either case, have the same right to
decline or suspend registration as they would have had in the case of a transfer of the Share by the deceased or bankrupt Person before the death or
bankruptcy.
49.
A Person becoming entitled to a Share by reason of the death or bankruptcy of a Shareholder shall be entitled to the same dividends and other
advantages to which he would be entitled if he were the registered Shareholder, except that he shall not, before being registered as a Shareholder in
respect of the Share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company, provided
however, that the Directors may at any time give notice requiring any such person to elect either to be registered himself or to transfer the Share, and
if the notice is not complied with within ninety calendar days, the Directors may thereafter withhold payment of all dividends, bonuses or other
monies payable in respect of the Share until the requirements of the notice have been complied with.
REGISTRATION OF EMPOWERING INSTRUMENTS
50.
The Company shall be entitled to charge a fee not exceeding one dollar (US$1.00) on the registration of every probate, letters of administration,
certificate of death or marriage, power of attorney, notice in lieu of distringas, or other instrument.
51.
The Company may from time to time by Ordinary Resolution increase the share capital by such sum, to be divided into Shares of such Classes and
amount, as the resolution shall prescribe.
52.
The Company may by Ordinary Resolution:
53.
(a)
increase its share capital by new Shares of such amount as it thinks expedient;
(b)
consolidate and divide all or any of its share capital into Shares of a larger amount than its existing Shares;
(c)
subdivide its Shares, or any of them, into Shares of an amount smaller than that fixed by the Memorandum, provided that in the subdivision
the proportion between the amount paid and the amount, if any, unpaid on each reduced Share shall be the same as it was in case of the
Share from which the reduced Share is derived; and
(d)
cancel any Shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any Person and diminish
the amount of its share capital by the amount of the Shares so cancelled.
The Company may by Special Resolution reduce its share capital and any capital redemption reserve in any manner authorised by law.
15

54.
Subject to the provisions of the Companies Law and these Articles, the Company may:
(a)
issue Shares that are to be redeemed or are liable to be redeemed at the option of the Shareholder or the Company. The redemption of Shares
shall be effected in such manner and upon such terms as may be determined, before the issue of such Shares, by either the Board or by the
Shareholders by Special Resolution;
(b)
purchase its own Shares (including any redeemable Shares) on such terms and in such manner and terms as have been approved by the
Board or by the Members by Ordinary Resolution, or are otherwise authorised by these Articles; and
(c)
make a payment in respect of the redemption or purchase of its own Shares in any manner permitted by the Companies Law, including out
of capital.
55.
The purchase of any Share shall not oblige the Company to purchase any other Share other than as may be required pursuant to applicable law and
any other contractual obligations of the Company.
56.
The holder of the Shares being purchased shall be bound to deliver up to the Company the certificate(s) (if any) thereof for cancellation and
thereupon the Company shall pay to him the purchase or redemption monies or consideration in respect thereof.
57.
The Directors may accept the surrender for no consideration of any fully paid Share.
TREASURY SHARES
58.
The Directors may, prior to the purchase, redemption or surrender of any Share, determine that such Share shall be held as a Treasury Share.
59.
The Directors may determine to cancel a Treasury Share or transfer a Treasury Share on such terms as they think proper (including, without
limitation, for nil consideration).
GENERAL MEETINGS
60.
All general meetings other than annual general meetings shall be called extraordinary general meetings.
61.
(a)
The Company may (but shall not be obliged to) in each calendar year hold a general meeting as its annual general meeting and shall specify
the meeting as such in the notices calling it. The annual general meeting shall be held at such time and place as may be determined by the
Directors.
(b)
At these meetings the report of the Directors (if any) shall be presented.
16
62.
(a)
The Chairman or a majority of the Directors may call general meetings, and they shall on a Shareholders requisition forthwith proceed to
convene an extraordinary general meeting of the Company.
(b)
A Shareholders requisition is a requisition of Members holding at the date of deposit of the requisition Shares which carry in aggregate not
less than one-third (1/3) of all votes attaching to all issued and outstanding Shares of the Company that as at the date of the deposit carry
the right to vote at general meetings of the Company.
(c)
The requisition must state the objects of the meeting and must be signed by the requisitionists and deposited at the Registered Office, and
may consist of several documents in like form each signed by one or more requisitionists.
(d)
If the Directors do not within twenty-one calendar days from the date of the deposit of the requisition duly proceed to convene a general
meeting to be held within a further twenty-one calendar days, the requisitionists, or any of them representing more than one-half of the total
voting rights of all of them, may themselves convene a general meeting, but any meeting so convened shall not be held after the expiration
of three calendar months after the expiration of the said twenty-one calendar days.
(e)
A general meeting convened as aforesaid by requisitionists shall be convened in the same manner as nearly as possible as that in which
general meetings are to be convened by Directors.
63.
64.
At least ten (10) calendar days notice shall be given for any general meeting. Every notice shall be exclusive of the day on which it is given or
deemed to be given and of the day for which it is given and shall specify the place, the day and the hour of the meeting and the general nature of the
business and shall be given in the manner hereinafter mentioned or in such other manner if any as may be prescribed by the Company, provided that
a general meeting of the Company shall, whether or not the notice specified in this Article has been given and whether or not the provisions of these
Articles regarding general meetings have been complied with, be deemed to have been duly convened if it is so agreed:
(a)
in the case of an annual general meeting, by all the Shareholders (or their proxies) entitled to attend and vote thereat; and
(b)
in the case of an extraordinary general meeting, by two-thirds (2/3 rd ) of the Shareholders having a right to attend and vote at the meeting,
present in person or by proxy or, in the case of a corporation or other non-natural person, by its duly authorised representative or proxy.
The accidental omission to give notice of a meeting to or the non-receipt of a notice of a meeting by any Shareholder shall not invalidate the
proceedings at any meeting.
17

65.
No business except for the appointment of a chairman for the meeting shall be transacted at any general meeting unless a quorum of Shareholders is
present at the time when the meeting proceeds to business. One or more holders holding Shares which carry in aggregate (or representing by proxy)
not less than one-third of all votes attaching to all Shares in issue and entitled to vote at such general meeting, present in person or by proxy or, if a
corporation or other non-natural person, by its duly authorised representative, shall be a quorum for all purposes.
66.
If within half an hour from the time appointed for the meeting a quorum is not present, the meeting shall be dissolved.
67.
If the Directors wish to make this facility available for a specific general meeting or all general meetings of the Company, participation in any
general meeting of the Company may be by means of a telephone or similar communication equipment by way of which all Persons participating in
such meeting can communicate with each other and such participation shall be deemed to constitute presence in person at the meeting.
68.
The chairman, if any, of the Directors shall preside as chairman at every general meeting of the Company.
69.
If there is no such chairman, or if at any general meeting he is not present within fifteen minutes after the time appointed for holding the meeting or
is unwilling to act as chairman, any Director or Person nominated by the Directors shall preside as chairman of that meeting, failing which the
Shareholders present in person or by proxy shall choose any Person present to be chairman of that meeting.
70.
The chairman may with the consent of any general meeting at which a quorum is present (and shall if so directed by the meeting) adjourn a meeting
from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the
meeting from which the adjournment took place. When a meeting, or adjourned meeting, is adjourned for fourteen calendar days or more, notice of
the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid it shall not be necessary to give any notice of an
adjournment or of the business to be transacted at an adjourned meeting.
71.
The Directors may cancel or postpone any duly convened general meeting at any time prior to such meeting, except for general meetings
requisitioned by the Shareholders in accordance with these Articles, for any reason or for no reason, upon notice in writing to Shareholders. A
postponement may be for a stated period of any length or indefinitely as the Directors may determine.
72.
At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands, unless a poll is (before or on the declaration
of the result of the show of hands) demanded by the chairman or any Shareholder present in person or by proxy, and unless a poll is so demanded, a
declaration by the chairman that a resolution has, on a show of hands, been carried, or carried unanimously, or by a particular majority, or lost, and
an entry to that effect in the book of the proceedings
18
of the Company, shall be conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favour of, or against,
that resolution.
73.
If a poll is duly demanded it shall be taken in such manner as the chairman directs, and the result of the poll shall be deemed to be the resolution of
the meeting at which the poll was demanded.
74.
All questions submitted to a meeting shall be decided by an Ordinary Resolution except where a greater majority is required by these Articles or by
the Law. In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes
place or at which the poll is demanded, shall be entitled to a second or casting vote.
75.
A poll demanded on the election of a chairman of the meeting or on a question of adjournment shall be taken forthwith. A poll demanded on any
other question shall be taken at such time as the chairman of the meeting directs.
76.
Subject to any rights and restrictions for the time being attached to any Share, on a show of hands every Shareholder present in person or by proxy
(or, if a corporation or other non-natural person, by its duly authorised representative or proxy) shall, at a general meeting of the Company, each
have one vote and on a poll every Shareholder present in person or by proxy (or, if a corporation or other non-natural person, by its duly authorised
representative or proxy) shall have one vote for each Class A Ordinary Share and ten votes for each Class B Ordinary Share of which he is the holder.
77.
In the case of joint holders the vote of the senior who tenders a vote whether in person or by proxy (or, if a corporation or other non-natural person,
by its duly authorised representative or proxy) shall be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority
shall be determined by the order in which the names stand in the Register.
78.
Shares carrying the right to vote that are held by a Shareholder of unsound mind, or in respect of whom an order has been made by any court having
jurisdiction in lunacy, may be voted, whether on a show of hands or on a poll, by his committee, or other Person in the nature of a committee
appointed by that court, and any such committee or other Person may vote in respect of such Shares by proxy.
79.
No Shareholder shall be entitled to vote at any general meeting of the Company unless all calls, if any, or other sums presently payable by him in
respect of Shares carrying the right to vote held by him have been paid.
80.
On a poll votes may be given either personally or by proxy.
81.
Each Shareholder, other than a recognised clearing house (or its nominee(s)) or depositary (or its nominee(s)), may only appoint one proxy on a show
of hand. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the
appointor is a corporation, either
19
under Seal or under the hand of an officer or attorney duly authorised. A proxy need not be a Shareholder.
82.
An instrument appointing a proxy may be in any usual or common form or such other form as the Directors may approve.
83.
The instrument appointing a proxy shall be deposited at the Registered Office or at such other place as is specified for that purpose in the notice
convening the meeting, or in any instrument of proxy sent out by the Company:
(a)
not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes
to vote; or
(b)
in the case of a poll taken more than 48 hours after it is demanded, be deposited as aforesaid after the poll has been demanded and not less
than 24 hours before the time appointed for the taking of the poll; or
(c)
where the poll is not taken forthwith but is taken not more than 48 hours after it was demanded be delivered at the meeting at which the poll
was demanded to the chairman or to the secretary or to any director;
provided that the Directors may in the notice convening the meeting, or in an instrument of proxy sent out by the Company, direct that the
instrument appointing a proxy may be deposited at such other time (no later than the time for holding the meeting or adjourned meeting) at the
Registered Office or at such other place as is specified for that purpose in the notice convening the meeting, or in any instrument of proxy sent out
by the Company. The Chairman may in any event at his discretion direct that an instrument of proxy shall be deemed to have been duly deposited.
An instrument of proxy that is not deposited in the manner permitted shall be invalid.
84.
The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll.
85.
A resolution in writing signed by all the Shareholders for the time being entitled to receive notice of and to attend and vote at general meetings of
the Company (or being corporations by their duly authorised representatives) shall be as valid and effective as if the same had been passed at a
general meeting of the Company duly convened and held.
86.
Any corporation which is a Shareholder or a Director may by resolution of its directors or other governing body authorise such Person as it thinks fit
to act as its representative at any meeting of the Company or of any meeting of holders of a Class or of the Directors or of a committee of Directors,
and the Person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could
exercise if it were an individual Shareholder or Director.
20
DEPOSITARY AND CLEARING HOUSES
87.
If a recognised clearing house (or its nominee(s)) or depositary (or its nominee(s)) is a Member of the Company it may, by resolution of its directors
or other governing body or by power of attorney, authorise such Person(s) as it thinks fit to act as its representative(s) at any general meeting of the
Company or of any Class of Shareholders provided that, if more than one Person is so authorised, the authorisation shall specify the number and
Class of Shares in respect of which each such Person is so authorised. A Person so authorised pursuant to this Article shall be entitled to exercise the
same powers on behalf of the recognised clearing house (or its nominee(s)) or depositary (or its nominee(s)) which he represents as that recognised
clearing house (or its nominee(s)) or depositary (or its nominee(s)) could exercise if it were an individual Member holding the number and Class of
Shares specified in such authorisation, including the right to vote individually on a show of hands.
DIRECTORS
88.
89.
(a)
Unless otherwise determined by the Company in general meeting, the number of Directors shall not be less than three (3) Directors, the
exact number of Directors to be determined from time to time by the Board of Directors.
(b)
The Board of Directors shall have a Chairman elected and appointed by a majority of the Directors then in office. The period for which the
Chairman will hold office will also be determined by a majority of all of the Directors then in office. The Chairman shall preside as
chairman at every meeting of the Board of Directors. To the extent the Chairman is not present at a meeting of the Board of Directors within
fifteen minutes after the time appointed for holding the same, the attending Directors may choose one of their number to be the chairman of
the meeting.
(c)
The Company may by Ordinary Resolution appoint any person to be a Director.
(d)
The Board may, by the affirmative vote of a simple majority of the remaining Directors present and voting at a Board meeting, appoint any
person as a Director, to fill a casual vacancy on the Board or as an addition to the existing Board.
(e)
An appointment of a Director may be on terms that the Director shall automatically retire from office (unless he has sooner vacated office) at
the next or a subsequent annual general meeting or upon any specified event or after any specified period in a written agreement between
the Company and the Director, if any; but no such term shall be implied in the absence of express provision. Each Director whose term of
office expires shall be eligible for re-election at a meeting of the Shareholders or re-appointment by the Board.
A Director may be removed from office by Ordinary Resolution of the Company, notwithstanding anything in these Articles or in any agreement
between the Company and such Director (but without prejudice to any claim for damages under such agreement). A vacancy on the Board created by
the removal of a Director under the
21
previous sentence may be filled by Ordinary Resolution or by the affirmative vote of a simple majority of the remaining Directors present and voting
at a Board meeting. The notice of any meeting at which a resolution to remove a Director shall be proposed or voted upon must contain a statement
of the intention to remove that Director and such notice must be served on that Director not less than ten (10) calendar days before the meeting. Such
Director is entitled to attend the meeting and be heard on the motion for his removal.
90.
The Board may, from time to time, and except as required by applicable law or Designated Stock Exchange Rules, adopt, institute, amend, modify or
revoke the corporate governance policies or initiatives of the Company and determine on various corporate governance related matters of the
Company as the Board shall determine by resolution of Directors from time to time.
91.
A Director shall not be required to hold any Shares in the Company by way of qualification. A Director who is not a Member of the Company shall
nevertheless be entitled to attend and speak at general meetings.
92.
The remuneration of the Directors may be determined by the Directors or by Ordinary Resolution.
93.
The Directors shall be entitled to be paid their travelling, hotel and other expenses properly incurred by them in going to, attending and returning
from meetings of the Directors, or any committee of the Directors, or general meetings of the Company, or otherwise in connection with the business
of the Company, or to receive such fixed allowance in respect thereof as may be determined by the Directors from time to time, or a combination
partly of one such method and partly the other.
ALTERNATE DIRECTOR OR PROXY
94.
Any Director may in writing appoint another Person to be his alternate and, save to the extent provided otherwise in the form of appointment, such
alternate shall have authority to sign written resolutions on behalf of the appointing Director, but shall not be required to sign such written
resolutions where they have been signed by the appointing director, and to act in such Directors place at any meeting of the Directors at which the
appointing Director is unable to be present. Every such alternate shall be entitled to attend and vote at meetings of the Directors as a Director when
the Director appointing him is not personally present and where he is a Director to have a separate vote on behalf of the Director he is representing in
addition to his own vote. A Director may at any time in writing revoke the appointment of an alternate appointed by him. Such alternate shall be
deemed for all purposes to be a Director of the Company and shall not be deemed to be the agent of the Director appointing him. The remuneration
of such alternate shall be payable out of the remuneration of the Director appointing him and the proportion thereof shall be agreed between them.
95.
Any Director may appoint any Person, whether or not a Director, to be the proxy of that Director to attend and vote on his behalf, in accordance with
instructions given by that Director, or in the absence of such instructions at the discretion of the proxy, at a meeting or meetings of the Directors
which that Director is unable to attend personally. The instrument appointing the proxy shall be in writing under the hand of the appointing Director
and shall be in any usual or common form or such other form
22
as the Directors may approve, and must be lodged with the chairman of the meeting of the Directors at which such proxy is to be used, or first used,
prior to the commencement of the meeting.
96.
Subject to the Companies Law, these Articles and to any resolutions passed in a general meeting, the business of the Company shall be managed by
the Directors, who may pay all expenses incurred in setting up and registering the Company and may exercise all powers of the Company. No
resolution passed by the Company in general meeting shall invalidate any prior act of the Directors that would have been valid if that resolution had
not been passed.
97.
Subject to these Articles, the Directors may from time to time appoint any natural person or corporation, whether or not a Director to hold such office
in the Company as the Directors may think necessary for the administration of the Company, including but not limited to, chief executive officer,
one or more other executive officers, president, one or more vice-presidents, treasurer, assistant treasurer, manager or controller, and for such term and
at such remuneration (whether by way of salary or commission or participation in profits or partly in one way and partly in another), and with such
powers and duties as the Directors may think fit. Any natural person or corporation so appointed by the Directors may be removed by the Directors.
The Directors may also appoint one or more of their number to the office of managing director upon like terms, but any such appointment shall ipso
facto terminate if any managing director ceases for any cause to be a Director, or if the Company by Ordinary Resolution resolves that his tenure of
office be terminated.
98.
The Directors may appoint any natural person or corporation to be a Secretary (and if need be an assistant Secretary or assistant Secretaries) who
shall hold office for such term, at such remuneration and upon such conditions and with such powers as they think fit. Any Secretary or assistant
Secretary so appointed by the Directors may be removed by the Directors or by the Company by Ordinary Resolution.
99.
The Directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit; any committee
so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the Directors.
100.
The Directors may from time to time and at any time by power of attorney (whether under Seal or under hand) or otherwise appoint any company,
firm or Person or body of Persons, whether nominated directly or indirectly by the Directors, to be the attorney or attorneys or authorised signatory
(any such person being an Attorney or Authorised Signatory, respectively) of the Company for such purposes and with such powers, authorities
and discretion (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions
as they may think fit, and any such power of attorney or other appointment may contain such provisions for the protection and convenience of
Persons dealing with any such Attorney or Authorised Signatory as the Directors may think fit, and may also authorise any such Attorney or
Authorised Signatory to delegate all or any of the powers, authorities and discretion vested in him.
23
101.
The Directors may from time to time provide for the management of the affairs of the Company in such manner as they shall think fit and the
provisions contained in the three next following Articles shall not limit the general powers conferred by this Article.
102.
The Directors from time to time and at any time may establish any committees, local boards or agencies for managing any of the affairs of the
Company and may appoint any natural person or corporation to be a member of such committees or local boards and may appoint any managers or
agents of the Company and may fix the remuneration of any such natural person or corporation.
103.
The Directors from time to time and at any time may delegate to any such committee, local board, manager or agent any of the powers, authorities
and discretions for the time being vested in the Directors and may authorise the members for the time being of any such local board, or any of them
to fill any vacancies therein and to act notwithstanding vacancies and any such appointment or delegation may be made on such terms and subject
to such conditions as the Directors may think fit and the Directors may at any time remove any natural person or corporation so appointed and may
annul or vary any such delegation, but no Person dealing in good faith and without notice of any such annulment or variation shall be affected
thereby.
104.
Any such delegates as aforesaid may be authorised by the Directors to sub-delegate all or any of the powers, authorities, and discretion for the time
being vested in them.
105.
The Directors may from time to time at their discretion exercise all the powers of the Company to raise or borrow money and to mortgage or charge
its undertaking, property and assets (present and future) and uncalled capital or any part thereof, to issue debentures, debenture stock, bonds and
other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.
THE SEAL
106.
The Seal shall not be affixed to any instrument except by the authority of a resolution of the Directors provided always that such authority may be
given prior to or after the affixing of the Seal and if given after may be in general form confirming a number of affixings of the Seal. The Seal shall be
affixed in the presence of a Director or a Secretary (or an assistant Secretary) or in the presence of any one or more Persons as the Directors may
appoint for the purpose and every Person as aforesaid shall sign every instrument to which the Seal is so affixed in their presence.
107.
The Company may maintain a facsimile of the Seal in such countries or places as the Directors may appoint and such facsimile Seal shall not be
affixed to any instrument except by the authority of a resolution of the Directors provided always that such authority may be given prior to or after
the affixing of such facsimile Seal and if given after may be in general form confirming a number of affixings of such facsimile Seal. The facsimile
Seal shall be affixed in the presence of such Person or Persons as the Directors shall for this purpose appoint and such Person or Persons as aforesaid
shall sign every instrument to which the facsimile Seal is so affixed in their presence and
24
such affixing of the facsimile Seal and signing as aforesaid shall have the same meaning and effect as if the Seal had been affixed in the presence of
and the instrument signed by a Director or a Secretary (or an assistant Secretary) or in the presence of any one or more Persons as the Directors may
appoint for the purpose.
108.
Notwithstanding the foregoing, a Secretary or any assistant Secretary shall have the authority to affix the Seal, or the facsimile Seal, to any
instrument for the purposes of attesting authenticity of the matter contained therein but which does not create any obligation binding on the
Company.
109.
The office of Director shall be vacated, if the Director:

(a)
becomes bankrupt or makes any arrangement or composition with his creditors;
(b)
dies or is found to be or becomes of unsound mind;
(c)
resigns his office by notice in writing to the Company;
(d)
without special leave of absence from the Board, is absent from meetings of the Board for three consecutive meetings and the Board
resolves that his office be vacated; or
(e)
is removed from office pursuant to any other provision of these Articles.

110.
The Directors may meet together (either within or without the Cayman Islands) for the despatch of business, adjourn, and otherwise regulate their
meetings and proceedings as they think fit. Questions arising at any meeting shall be decided by a majority of votes. At any meeting of the Directors,
each Director present in person or represented by his proxy or alternate shall be entitled to one vote. In case of an equality of votes the Chairman
shall have a second or casting vote. A Director may, and a Secretary or assistant Secretary on the requisition of a Director shall, at any time summon a
meeting of the Directors.
111.
A Director may participate in any meeting of the Directors, or of any committee appointed by the Directors of which such Director is a member, by
means of telephone or similar communication equipment by way of which all Persons participating in such meeting can communicate with each
other and such participation shall be deemed to constitute presence in person at the meeting.
112.
The quorum necessary for the transaction of the business of the Board may be fixed by the Directors, and unless so fixed, the quorum shall be a
majority of Directors then in office. A Director represented by proxy or by an alternate Director at any meeting shall be deemed to be present for the
purposes of determining whether or not a quorum is present.
113.
A Director who is in any way, whether directly or indirectly, interested in a contract or transaction or proposed contract or transaction with the
Company shall declare the
25
nature of his interest at a meeting of the Directors. A general notice given to the Directors by any Director to the effect that he is a member of any
specified company or firm and is to be regarded as interested in any contract or transaction which may thereafter be made with that company or firm
shall be deemed a sufficient declaration of interest in regard to any contract so made or transaction so consummated. Subject to the Designated Stock
Exchange Rules and disqualification by the chairman of the relevant Board meeting, a Director may vote in respect of any contract or transaction or
proposed contract or transaction notwithstanding that he may be interested therein and if he does so his vote shall be counted and he may be
counted in the quorum at any meeting of the Directors at which any such contract or transaction or proposed contract or transaction shall come
before the meeting for consideration.
114.
A Director may hold any other office or place of profit under the Company (other than the office of auditor) in conjunction with his office of Director
for such period and on such terms (as to remuneration and otherwise) as the Directors may determine and no Director or intending Director shall be
disqualified by his office from contracting with the Company either with regard to his tenure of any such other office or place of profit or as vendor,
purchaser or otherwise, nor shall any such contract or arrangement entered into by or on behalf of the Company in which any Director is in any way
interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit
realised by any such contract or arrangement by reason of such Director holding that office or of the fiduciary relation thereby established. A
Director, notwithstanding his interest, may be counted in the quorum present at any meeting of the Directors whereat he or any other Director is
appointed to hold any such office or place of profit under the Company or whereat the terms of any such appointment are arranged and he may vote
on any such appointment or arrangement.
115.
Any Director may act by himself or through his firm in a professional capacity for the Company, and he or his firm shall be entitled to remuneration
for professional services as if he were not a Director; provided that nothing herein contained shall authorise a Director or his firm to act as auditor to
the Company.
116.
The Directors shall cause minutes to be made for the purpose of recording:
(a)
all appointments of officers made by the Directors;
(b)
the names of the Directors present at each meeting of the Directors and of any committee of the Directors; and
(c)
all resolutions and proceedings at all meetings of the Company, and of the Directors and of committees of Directors.
117.
When the Chairman of a meeting of the Directors signs the minutes of such meeting the same shall be deemed to have been duly held
notwithstanding that all the Directors have not actually come together or that there may have been a technical defect in the proceedings.
118.
A resolution in writing signed by all the Directors or all the members of a committee of Directors entitled to receive notice of a meeting of Directors
or committee of Directors, as the case may be (an alternate Director, subject as provided otherwise in
26
the terms of appointment of the alternate Director, being entitled to sign such a resolution on behalf of his appointer), shall be as valid and effectual
as if it had been passed at a duly called and constituted meeting of Directors or committee of Directors, as the case may be. When signed a resolution
may consist of several documents each signed by one or more of the Directors or his duly appointed alternate.
119.
The continuing Directors may act notwithstanding any vacancy in their body but if and for so long as their number is reduced below the number
fixed by or pursuant to these Articles as the necessary quorum of Directors, the continuing Directors may act for the purpose of increasing the
number, or of summoning a general meeting of the Company, but for no other purpose.
120.
Subject to any regulations imposed on it by the Directors, a committee appointed by the Directors may elect a chairman of its meetings. If no such
chairman is elected, or if at any meeting the chairman is not present within fifteen minutes after the time appointed for holding the meeting, the
committee members present may choose one of their number to be chairman of the meeting.
121.
A committee appointed by the Directors may meet and adjourn as it thinks proper. Subject to any regulations imposed on it by the Directors,
questions arising at any meeting shall be determined by a majority of votes of the committee members present and in case of an equality of votes the
chairman shall have a second or casting vote.
122.
All acts done by any meeting of the Directors or of a committee of Directors, or by any Person acting as a Director, shall notwithstanding that it be
afterwards discovered that there was some defect in the appointment of any such Director or Person acting as aforesaid, or that they or any of them
were disqualified, be as valid as if every such Person had been duly appointed and was qualified to be a Director.
PRESUMPTION OF ASSENT
123.
A Director of the Company who is present at a meeting of the Board of Directors at which an action on any Company matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written
dissent from such action with the person acting as the chairman or secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered post to such person immediately after the adjournment of the meeting. Such right to dissent shall not apply to a Director who
voted in favour of such action.
DIVIDENDS
124.
Subject to any rights and restrictions for the time being attached to any Shares, the Directors may from time to time declare dividends (including
interim dividends) and other distributions on Shares in issue and authorise payment of the same out of the funds of the Company lawfully available
therefor.
125.
Subject to any rights and restrictions for the time being attached to any Shares, the Company by Ordinary Resolution may declare dividends, but no
dividend shall exceed the amount recommended by the Directors.
27
126.
The Directors may, before recommending or declaring any dividend, set aside out of the funds legally available for distribution such sums as they
think proper as a reserve or reserves which shall, in the absolute discretion of the Directors, be applicable for meeting contingencies or for equalising
dividends or for any other purpose to which those funds may be properly applied, and pending such application may in the absolute discretion of
the Directors, either be employed in the business of the Company or be invested in such investments (other than Shares of the Company) as the
Directors may from time to time think fit.
127.
Any dividend payable in cash to the holder of Shares may be paid in any manner determined by the Directors. If paid by cheque it will be sent by
mail addressed to the holder at his address in the Register, or addressed to such person and at such addresses as the holder may direct. Every such
cheque or warrant shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders,
to the order of the holder whose name stands first on the Register in respect of such Shares, and shall be sent at his or their risk and payment of the
cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company.
128.
The Directors may determine that a dividend shall be paid wholly or partly by the distribution of specific assets (which may consist of the shares or
securities of any other company) and may settle all questions concerning such distribution. Without limiting the generality of the foregoing, the
Directors may fix the value of such specific assets, may determine that cash payment shall be made to some Shareholders in lieu of specific assets
and may vest any such specific assets in trustees on such terms as the Directors think fit.
129.
Subject to any rights and restrictions for the time being attached to any Shares, all dividends shall be declared and paid according to the amounts
paid up on the Shares, but if and for so long as nothing is paid up on any of the Shares dividends may be declared and paid according to the par
value of the Shares. No amount paid on a Share in advance of calls shall, while carrying interest, be treated for the purposes of this Article as paid on
the Share.
130.
If several Persons are registered as joint holders of any Share, any of them may give effective receipts for any dividend or other moneys payable on or
in respect of the Share.
131.
No dividend shall bear interest against the Company.
132.
Any dividend unclaimed after a period of six calendar years from the date of declaration of such dividend may be forfeited by the Board of Directors
and, if so forfeited, shall revert to the Company.
133.
The books of account relating to the Companys affairs shall be kept in such manner as may be determined from time to time by the Directors.
28
134.
The books of account shall be kept at the Registered Office, or at such other place or places as the Directors think fit, and shall always be open to the
inspection of the Directors.
135.
The Directors may from time to time determine whether and to what extent and at what times and places and under what conditions or regulations
the accounts and books of the Company or any of them shall be open to the inspection of Shareholders not being Directors, and no Shareholder (not
being a Director) shall have any right of inspecting any account or book or document of the Company except as conferred by law or authorised by
the Directors or by Ordinary Resolution.
136.
The accounts relating to the Companys affairs shall be audited in such manner and with such financial year end as may be determined from time to
time by the Directors or failing any determination as aforesaid shall not be audited.
137.
The Directors may appoint an auditor of the Company who shall hold office until removed from office by a resolution of the Directors and may fix
his or their remuneration.
138.
Every auditor of the Company shall have a right of access at all times to the books and accounts and vouchers of the Company and shall be entitled
to require from the Directors and officers of the Company such information and explanation as may be necessary for the performance of the duties of
the auditors.
139.
The auditors shall, if so required by the Directors, make a report on the accounts of the Company during their tenure of office at the next annual
general meeting following their appointment, and at any time during their term of office, upon request of the Directors or any general meeting of the
Members.
140.
The Directors in each calendar year shall prepare, or cause to be prepared, an annual return and declaration setting forth the particulars required by
the Companies Law and deliver a copy thereof to the Registrar of Companies in the Cayman Islands.
141.
Subject to the Companies Law, the Directors may, with the authority of an Ordinary Resolution:
(a)
resolve to capitalise an amount standing to the credit of reserves (including a Share Premium Account, capital redemption reserve and profit
and loss account), which is available for distribution;
(b)
appropriate the sum resolved to be capitalised to the Shareholders in proportion to the nominal amount of Shares (whether or not fully paid)
held by them respectively and apply that sum on their behalf in or towards:
(i)
paying up the amounts (if any) for the time being unpaid on Shares held by them respectively, or
(ii)
paying up in full unissued Shares or debentures of a nominal amount equal to that sum,
29
and allot the Shares or debentures, credited as fully paid, to the Shareholders (or as they may direct) in those proportions, or partly in one way and
partly in the other, but the Share Premium Account, the capital redemption reserve and profits which are not available for distribution may, for the
purposes of this Article, only be applied in paying up unissued Shares to be allotted to Shareholders credited as fully paid;
(c)
make any arrangements they think fit to resolve a difficulty arising in the distribution of a capitalised reserve and in particular, without
limitation, where Shares or debentures become distributable in fractions the Directors may deal with the fractions as they think fit;
(d)
authorise a Person to enter (on behalf of all the Shareholders concerned) into an agreement with the Company providing for either:
(i)
the allotment to the Shareholders respectively, credited as fully paid, of Shares or debentures to which they may be entitled on the
capitalisation, or
(ii)
the payment by the Company on behalf of the Shareholders (by the application of their respective proportions of the reserves
resolved to be capitalised) of the amounts or part of the amounts remaining unpaid on their existing Shares,
and any such agreement made under this authority being effective and binding on all those Shareholders; and
(e)
142.
generally do all acts and things required to give effect to the resolution.
Notwithstanding any provisions in these Articles, the Directors may resolve to capitalise an amount standing to the credit of reserves (including the
share premium account, capital redemption reserve and profit and loss account) or otherwise available for distribution by applying such sum in
paying up in full unissued Shares to be allotted and issued to:
(a)
employees (including Directors) or service providers of the Company or its Affiliates upon exercise or vesting of any options or awards
granted under any share incentive scheme or employee benefit scheme or other arrangement which relates to such persons that has been
adopted or approved by the Directors or the Members;
(b)
any trustee of any trust or administrator of any share incentive scheme or employee benefit scheme to whom shares are to be allotted and
issued by the Company in connection with the operation of any share incentive scheme or employee benefit scheme or other arrangement
which relates to such persons that has been adopted or approved by the Directors or Members; or
(c)
any depositary of the Company for the purposes of the issue, allotment and delivery by the depositary of ADSs to employees (including
Directors) or service providers of the Company or its Affiliates upon exercise or vesting of any options or awards granted under any share
incentive scheme or employee
30
benefit scheme or other arrangement which relates to such persons that has been adopted or approved by the Directors or the Members.
143.
The Directors shall in accordance with the Companies Law establish a Share Premium Account and shall carry to the credit of such account from
time to time a sum equal to the amount or value of the premium paid on the issue of any Share.
144.
There shall be debited to any Share Premium Account on the redemption or purchase of a Share the difference between the nominal value of such
Share and the redemption or purchase price provided always that at the discretion of the Directors such sum may be paid out of the profits of the
Company or, if permitted by the Companies Law, out of capital.
NOTICES
145.
Except as otherwise provided in these Articles, any notice or document may be served by the Company or by the Person entitled to give notice to
any Shareholder either personally, or by posting it by airmail or air courier service in a prepaid letter addressed to such Shareholder at his address as
appearing in the Register, or by electronic mail to any electronic mail address such Shareholder may have specified in writing for the purpose of
such service of notices, or by facsimile or by placing it on the Companys Website should the Directors deem it appropriate provided that the
Company shall notify the Shareholders of the placement of such notice by any of the means set out above. In the case of joint holders of a Share, all
notices shall be given to that one of the joint holders whose name stands first in the Register in respect of the joint holding, and notice so given shall
be sufficient notice to all the joint holders.
146.
Notices posted to addresses outside the Cayman Islands shall be forwarded by prepaid airmail.
147.
Any Shareholder present, either personally or by proxy, at any meeting of the Company shall for all purposes be deemed to have received due notice
of such meeting and, where requisite, of the purposes for which such meeting was convened.
148.
Any notice or other document, if served by:

(a)
post, shall be deemed to have been served five calendar days after the time when the letter containing the same is posted;
(b)
facsimile, shall be deemed to have been served upon production by the transmitting facsimile machine of a report confirming transmission
of the facsimile in full to the facsimile number of the recipient;
(c)
recognised courier service, shall be deemed to have been served 48 hours after the time when the letter containing the same is delivered to
the courier service; or
(d)
electronic mail, shall be deemed to have been served immediately upon the time of the transmission by electronic mail.
31
In proving service by post or courier service it shall be sufficient to prove that the letter containing the notice or documents was properly addressed
and duly posted or delivered to the courier service.
149.
Any notice or document delivered or sent by post to or left at the registered address of any Shareholder in accordance with the terms of these Articles
shall notwithstanding that such Shareholder be then dead or bankrupt, and whether or not the Company has notice of his death or bankruptcy, be
deemed to have been duly served in respect of any Share registered in the name of such Shareholder as sole or joint holder, unless his name shall at
the time of the service of the notice or document have been removed from the Register as the holder of the Share, and such service shall for all
purposes be deemed a sufficient service of such notice or document on all Persons interested (whether jointly with or as claiming through or under
him) in the Share.
150.
Notice of every general meeting of the Company shall be given to:

(a)
all Shareholders holding Shares with the right to receive notice and who have supplied to the Company an address for the giving of notices
to them; and
(b)
every Person entitled to a Share in consequence of the death or bankruptcy of a Shareholder, who but for his death or bankruptcy would be
entitled to receive notice of the meeting.
No other Person shall be entitled to receive notices of general meetings.

INFORMATION
151.
No Member shall be entitled to require discovery of any information in respect of any detail of the Companys trading or any information which is or
may be in the nature of a trade secret or secret process which may relate to the conduct of the business of the Company and which in the opinion of
the Board would not be in the interests of the Members of the Company to communicate to the public.
152.
The Board shall be entitled to release or disclose any information in its possession, custody or control regarding the Company or its affairs to any of
its Members including, without limitation, information contained in the Register and transfer books of the Company.
INDEMNITY
153.
Every Director (including for the purposes of this Article any alternate Director appointed pursuant to the provisions of these Articles), Secretary,
assistant Secretary, or other officer for the time being and from time to time of the Company (but not including the Companys auditors) and the
personal representatives of the same (each an Indemnified Person) shall be indemnified and secured harmless against all actions, proceedings,
costs, charges, expenses, losses, damages or liabilities incurred or sustained by such Indemnified Person, other than by reason of such Indemnified
Persons own dishonesty, wilful default or fraud, in or about the conduct of the Companys business or affairs (including as a result of any mistake of
judgment) or in the execution or discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the
foregoing, any costs, expenses, losses or
32
liabilities incurred by such Indemnified Person in defending (whether successfully or otherwise) any civil proceedings concerning the Company or
its affairs in any court whether in the Cayman Islands or elsewhere.
154.
No Indemnified Person shall be liable:

(a)
for the acts, receipts, neglects, defaults or omissions of any other Director or officer or agent of the Company; or
(b)
for any loss on account of defect of title to any property of the Company; or
(c)
on account of the insufficiency of any security in or upon which any money of the Company shall be invested; or
(d)
for any loss incurred through any bank, broker or other similar Person; or
(e)
for any loss occasioned by any negligence, default, breach of duty, breach of trust, error of judgement or oversight on such Indemnified
Persons part; or
(f)
for any loss, damage or misfortune whatsoever which may happen in or arise from the execution or discharge of the duties, powers,
authorities, or discretions of such Indemnified Persons office or in relation thereto;
unless the same shall happen through such Indemnified Persons own dishonesty, willful default or fraud.
FINANCIAL YEAR
155.
Unless the Directors otherwise prescribe, the financial year of the Company shall end on December 31 st in each calendar year and shall begin on
January 1st in each calendar year.
156.
No Person shall be recognised by the Company as holding any Share upon any trust and the Company shall not, unless required by law, be bound by
or be compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any Share or
(except only as otherwise provided by these Articles or as the Companies Law requires) any other right in respect of any Share except an absolute
right to the entirety thereof in each Shareholder registered in the Register.
WINDING UP
157.
If the Company shall be wound up the liquidator may, with the sanction of a Special Resolution of the Company and any other sanction required by
the Companies Law, divide amongst the Members in species or in kind the whole or any part of the assets of the Company (whether they shall
consist of property of the same kind or not) and may for that purpose value any assets and determine how the division shall be carried out as between
the Members or different classes of Members. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon
such trusts for the benefit of the Members as the liquidator, with the like sanction, shall
33
think fit, but so that no Member shall be compelled to accept any asset upon which there is a liability.
158.
If the Company shall be wound up, and the assets available for distribution amongst the Members shall be insufficient to repay the whole of the
share capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the Members in proportion to the par value of
the Shares held by them. If in a winding up the assets available for distribution amongst the Members shall be more than sufficient to repay the
whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst the Members in proportion to the par
value of the Shares held by them at the commencement of the winding up subject to a deduction from those Shares in respect of which there are
monies due, of all monies payable to the Company for unpaid calls or otherwise. This Article is without prejudice to the rights of the holders of
Shares issued upon special terms and conditions.
159.
Subject to the Companies Law, the Company may at any time and from time to time by Special Resolution alter or amend these Articles in whole or
in part.
160.
For the purpose of determining those Shareholders that are entitled to receive notice of, attend or vote at any meeting of Shareholders or any
adjournment thereof, or those Shareholders that are entitled to receive payment of any dividend, or in order to make a determination as to who is a
Shareholder for any other purpose, the Directors may provide that the Register shall be closed for transfers for a stated period which shall not exceed
in any case thirty calendar days in any calendar year.
161.
In lieu of or apart from closing the Register, the Directors may fix in advance a date as the record date for any such determination of those
Shareholders that are entitled to receive notice of, attend or vote at a meeting of the Shareholders and for the purpose of determining those
Shareholders that are entitled to receive payment of any dividend the Directors may, at or within ninety calendar days prior to the date of declaration
of such dividend, fix a subsequent date as the record date for such determination.
162.
If the Register is not so closed and no record date is fixed for the determination of those Shareholders entitled to receive notice of, attend or vote at a
meeting of Shareholders or those Shareholders that are entitled to receive payment of a dividend, the date on which notice of the meeting is posted
or the date on which the resolution of the Directors declaring such dividend is adopted, as the case may be, shall be the record date for such
determination of Shareholders. When a determination of those Shareholders that are entitled to receive notice of, attend or vote at a meeting of
Shareholders has been made as provided in this Article, such determination shall apply to any adjournment thereof.
163.
The Company may by Special Resolution resolve to be registered by way of continuation in a jurisdiction outside the Cayman Islands or such other
jurisdiction in
34
which it is for the time being incorporated, registered or existing. In furtherance of a resolution adopted pursuant to this Article, the Directors may
cause an application to be made to the Registrar of Companies to deregister the Company in the Cayman Islands or such other jurisdiction in which
it is for the time being incorporated, registered or existing and may cause all such further steps as they consider appropriate to be taken to effect the
transfer by way of continuation of the Company.
DISCLOSURE
164.
The Directors, or any service providers (including the officers, the Secretary and the registered office agent of the Company) specifically authorised
by the Directors, shall be entitled to disclose to any regulatory or judicial authority any information regarding the affairs of the Company including
without limitation information contained in the Register and books of the Company.
35
Exhibit 4.4
SHAREHOLDERS AGREEMENT
dated as of
August 18, 2015
among
LAI MEISONG
LAI JIANFA
WANG JILEI
HU XIANGLIANG
PARTIES LISTED ON SCHEDULE I
PARTIES LISTED ON SCHEDULE II
and
PARTIES LISTED ON SCHEDULE III
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions
Section 1.02. Other Definitional and Interpretative Provisions
2
11
ARTICLE 2
CORPORATE GOVERNANCE
Section 2.01. Composition of the Board

Section 2.02. Removal
Section 2.03. Vacancies
Section 2.04. Board Observers
Section 2.05. Meetings
Section 2.06. Action by the Board
Section 2.07. Actions Requiring Consent
Section 2.08. Memorandum and Articles
Section 2.09. Chief Compliance Officer
Section 2.10. Appointment of WP Nominee
Section 2.11. Appointment of Sequoia Nominee
Section 2.12. Termination of Rights
12
12
12
13
13
14
14
16
16
16
16
17
ARTICLE 3
GENERAL PROVISIONS ON TRANSFER
Section 3.01. General Restrictions on Transfer

Section 3.02. Permitted Transfer
Section 3.03. Transfer During Transfer Lock-up Period
17
17
17
ARTICLE 4
RIGHT OF FIRST REFUSAL; CO-SALE RIGHTS; PREEMPTIVE RIGHTS
Section 4.01. Right of First Refusal
Section 4.02. Co-Sale Rights
Section 4.03. Preemptive Rights
18
19
21
ARTICLE 5
REGISTRATION RIGHTS
Section 5.01. Demand Registration
Section 5.02. Piggyback Registration
Section 5.03. Lock-Up Agreements
Section 5.04. Registration Procedures
Section 5.05. Indemnification by the Company
Section 5.06. Indemnification by Participating Shareholders
Section 5.07. Conduct of Indemnification Proceedings
Section 5.08. Contribution
22
25
26
26
29
29
30
31
Section 5.09. Participation in Public Offering

Section 5.10. Other Indemnification
Section 5.11. Cooperation by the Company
Section 5.12. Applicability of Rights
32
32
32
32
ARTICLE 6
CERTAIN COVENANTS AND AGREEMENTS
Section 6.01. Qualified IPO

Section 6.02. IPO Adjustments
Section 6.03. Future Funding
Section 6.04. Dividend Policy
Section 6.05. Anti-Dilution Protection
Section 6.06. Confidentiality
Section 6.07. Noncompetition and Non-Solicitation
Section 6.08. Books and Records
Section 6.09. Reports
Section 6.10. Limitations on Subsequent Registration Rights
Section 6.11. Related Party Transactions
Section 6.12. Conflicting Agreements
Section 6.13. Compliance with Circular 37
Section 6.14. Compliance with Laws
Section 6.15. No Promotion
Section 6.16. Captive Structure
32
33
36
36
37
37
38
40
40
41
41
41
41
41
43
43
ARTICLE 7
MISCELLANEOUS
Section 7.01. Binding Effect; Assignability; Benefit

Section 7.02. Notices
Section 7.03. Waiver; Amendment; Termination
Section 7.04. Fees and Expenses
Section 7.05. Governing Law
Section 7.06. Dispute Resolution
Section 7.07. Counterparts; Effectiveness
Section 7.08. Entire Agreement
Section 7.09. Severability
Section 7.10. Specific Enforcement
Section 7.11. Effective Date; Termination
Section 7.12. Effect of Termination
SCHEDULE I:
SCHEDULE II:
SCHEDULE III:
SCHEDULE IV:
SCHEDULE V:
SCHEDULE VI:
SCHEDULE VII:
43
44
44
44
45
45
45
46
46
46
46
46
LIST OF PRINCIPALS
LIST OF OTHER SHAREHOLDERS
LIST OF NEW INVESTORS
LIST OF COMPETITORS
LIST OF RESTRICTED AFFILIATES
ADDRESS FOR NOTICES
PROTECTIVE MEASURES
ii
EXHIBIT A:
EXHIBIT B:
EXHIBIT C:
DEED OF ADHERENCE
MEMORANDUM AND ARTICLES
FORM OF INSTRUMENT OF TRANSFER
iii
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDER AGREEMENT (this Agreement) dated as of August 18, 2015 by and among:
(a)
Mr. Lai Meisong (), a PRC citizen, (the Founder);
(b)
Mr. Lai Jianfa (), a PRC citizen;
(c)
Mr. Wang Jilei (), a PRC citizen;
(d)
Mr. Hu Xiangliang (), a PRC citizen, (each individual listed in (a) to (d), a Key Shareholder);
(e)
ZTO Express (Cayman) Inc., a company limited by shares incorporated and existing under the laws of Cayman Islands (the Company);
(f)
Each Person (as defined below) listed on Schedule I (together with the Key Shareholders, the Principals);
(g)
Each Person listed on Schedule II (each, a Existing Institutional Shareholder); and
(h)
Each Person listed on Schedule III (each, a New Investor).

W I T N E S S E T H:
WHEREAS, the Company, the Founder, WP and other parties listed thereto have entered into a Share Purchase and Subscription Agreement (the
Share Purchase Agreement) on May 21, 2015, under which, the new investors specified therein have agreed to purchase 38,241,600 of Ordinary Shares (as
defined below) in total from the Companys shareholders and to subscribe for 30,079,918 of Series A Preferred Shares (as defined below) in total from the
Company;
WHEREAS, as at the date hereof, the Shareholders collectively hold 100% outstanding Ordinary Shares and Series A Preferred Shares;
WHEREAS, the Domestic Company, Sequoias Affiliates and other parties listed therein have entered into the Termination Agreement (
) to terminate a series of investment agreements relating to the Domestic Company among those parties respectively on August 18, 2015; and
WHEREAS, the parties hereto desire to enter into this Agreement to govern certain of their rights, duties and obligations after consummation of the
transactions contemplated by the Share Purchase Agreement and other Transaction Documents;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01.
Definitions. (a) As used in this Agreement, the following terms have the following meanings:
Accounting Standards means as applicable, (i) the international financial reporting standards promulgated from time to time by the International
Accounting Standards Board (including standards and interpretations approved thereby), together with the pronouncements thereon by the International
Accounting Standards Board from time to time, (ii) the generally accepted accounting principles in the United States of America or (iii) any other accounting
standards agreed by the New Investors Holding a Majority in Interest.
Affiliate means, with respect to any Person, any other Person directly or indirectly Controlling, Controlled by, or under common Control with
such Person. With respect to a New Investor and Sequoia, the term Affiliate also includes (i) any shareholder of such Person, (ii) such Persons or its
shareholders general partners or limited partners, and (iii) the fund manager managing such Person or its shareholder (and general partners, limited partners
and officers thereof) and other funds managed by such fund manager (for the avoidance of doubt, excluding their respective Portfolio Companies). With
respect to any natural Person, each of the following Persons is such Persons Affiliate for purposes of this Agreement and the other Transaction Documents:
(i) spouse; (ii) parents; (iii) children; (iv) siblings; (v) any other Person who is a lineal ascendant or descendant of such Person; and (vi) any other Person who
is a relative of such Person and lives in the same house with such Person. Notwithstanding the foregoing, the parties acknowledge and agree that (a) the name
Sequoia Capital is commonly used to describe a variety of entities (collectively, the Sequoia Entities) that are affiliated by ownership or operational
relationship and engaged in a broad range of activities related to investing and securities trading and (b) notwithstanding any other provision of this
Agreement to the contrary, this Agreement shall not be binding on, or restrict the activities of, any (i) Sequoia Entity outside of the Sequoia China Sector
Group or (ii) Sequoia Entity primarily engaged in investment and trading in the secondary securities market. For purposes of the foregoing, the Sequoia
China Sector Group means all Sequoia Entities (whether currently existing or formed in the future) that are principally focused on companies located in, or
with connections to, the PRC.
Alternate Director means a person appointed pursuant to Section 2.01(c) and appointed as an alternate Director by the appointing Director.
Anti-Bribery Law means (i) the Foreign Corrupt Practices Act of 1977 of the United States of America, as amended, (ii) the UK Bribery Act 2010,
as amended (iii) the relevant provisions of the Criminal Law of the PRC (including Articles 93, 163, 164, 389, 390, 391, 392 and 393), (iv) the relevant
provisions of the PRC Anti-Unfair Competition Law (including Articles 8 and 10), (v) the Interim Provisions Prohibiting Commercial Bribery Conducts
issued by the State Administration for Industry and Commerce of the PRC and (vi) any other applicable laws, rules and regulations relating to commercial
2
bribery, anti-corruption or related matters, in each case as amended and supplemented from time to time.
Applicable Law means, with respect to any Person, any transnational, domestic or foreign federal, state or local law (statutory, common or
otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted,
adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person, as amended.
Big 4 Accounting Firm shall mean any of Deloitte & Touche, Ernst & Young, KPMG or PricewaterhouseCoopers.
Business Day means a day, other than Saturday, Sunday or other day on which commercial banks in New York, Hong Kong or the PRC are
authorized or required by Applicable Law to close.
BVI Holding Company means ZTO Express Limited, a company limited by shares incorporated and existing under the laws of the British Virgin
Islands.
Captive Structure has the meaning ascribed to it in the Share Purchase Agreement.
Charter Documents means, with respect to a particular legal entity, the articles of incorporation, certificate of incorporation, formation or
registration (including, if applicable, certificates of change of name), memorandum of association, articles of association, bylaws, articles of organization,
limited liability company agreement, trust deed, trust instrument, operating agreement, joint venture agreement, business license, or similar or other
constitutive, governing, or charter documents, or equivalent documents, of such entity.
Chief Compliance Officer means the chief compliance officer of the Company.
Circular 37 means the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents to Engage in Overseas
Financing and Round Trip Investment via Overseas Special Purpose Companies (
) issued by SAFE on July 14, 2014.
Closing Date has the meaning ascribed to it in the Share Purchase Agreement.
Company Securities means the Equity Securities of the Company.
Competitor means any Person listed on Schedule IV.
Compliance Laws has the meaning ascribed to it in the Share Purchase Agreement.
3
Consent means any consent, approval, authorization, release, waiver, permit, grant, agreement, license, exemption or order of, registration,
certificate, declaration or filing with, or report or notice to, any Person, including any Governmental Authority.
Control of a given Person means the power or authority, whether exercised or not, to direct the business, management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by Contract or otherwise; provided, that such power or authority shall conclusively
be presumed to exist upon possession of beneficial ownership or power to direct the vote of fifty percent (50%) or more of the votes entitled to be cast at a
meeting of the members or shareholders of such Person or power to control the composition of a majority of the board of directors of such Person. The terms
Controlled and Controlling have meanings correlative to the foregoing.
Control Documents has the meaning ascribed to it in the Share Purchase Agreement.
Director means any director of the Company.
Domestic Company means ZTO Express Co., Ltd. (), a company limited by shares incorporated and existing under the
laws of the PRC.
Equity Securities means, with respect to any Person that is a legal entity, any and all shares of capital stock, membership interests, units, profits
interests, ownership interests, equity interests, registered capital, and other equity securities of such Person, and any right, warrant, option, call, commitment,
conversion privilege, preemptive right or other right to acquire any of the foregoing, or security convertible into, exchangeable or exercisable for any of the
foregoing.
Exchange Act means the United States Securities Exchange Act of 1934, as amended.
Excluded Issuance means the proposed issuance of 16,800,000 shares of Ordinary Shares in total to (i) the directors, officers, employees and
franchisees pursuant an equity incentive plan or a similar plan to be adopted by the Company after the date hereof and (ii) to the Target Franchisees in
connection with the acquisition of them.
Financial Investor means each of (i) the New Investors, (ii) Sequoia and (iii) Hao Min.
FINRA means the Financial Industry Regulatory Authority.
First Closing Date has the meaning ascribed to it in the Share Purchase Agreement.
Form F-3 means Form F-3 promulgated by the SEC under the Securities Act or any substantially similar form then in effect.
Founder SPV means ZTO LMS Holding Limited, a company limited by shares incorporated and existing under the laws of the British Virgin
Islands.
4
Group means, collectively, the Group Companies.

Group Company means each of the Company, the BVI Holding Company, the HK Holding Company, the WFOE and the Domestic Company,
together with each of their respective Subsidiaries.
Gopher means Gopher China S.O. Project Limited, a company established and existing under the laws of the British Virgin Islands.
Governmental Action means any consent, approval, authorization, waiver, permit, grant, franchise, concession, agreement, license, certificate,
exemption, order, decree, judgment, injunction, registration, declaration, filing, report or notice of, with or to any Governmental Authority.
Governmental Authority means (i) any national, federal, state, county, municipal, local or foreign government or other political subdivision or
instrumentality thereof, (ii) any entity, authority or body exercising executive, legislative, judicial, regulatory, taxing or administrative functions of or
pertaining to government, (iii) any agency, division, bureau, department, or other political subdivision of any government, entity, authority or body
described in the foregoing clauses (i) and (ii) of this definition, (iv) any court, tribunal or arbitrator, or (v) any self-regulatory organization. A Government
Authority also includes public international organizations, i.e. organizations whose members are countries, or territories, governments of countries or
territories, other public international organizations or any mixture of the foregoing.
Guaranteed Return of any New Investor means the lower of (i) the aggregate purchase price for the portion of Series A Preferred Shares subscribed
by such New Investor under the Share Purchase Agreement and then held by such New Investor immediately prior to the consummation of a Qualified IPO
plus return on such investment calculated based on 25% per annual compound rate of return; and (ii) 200% of the aggregate purchase price for the portion of
Series A Preferred Shares subscribed by such New Investor under the Share Purchase Agreement and then held by such New Investor immediately prior to the
consummation of a Qualified IPO.
Hao Min means, collectively, Hao Min Representative, ZTO LBZ Holding Limited, ZTO MSM Holding Limited, ZTO WW Holding Limited and
ZTO TJY Holding Limited.
Hao Min Representative means ZTO WLM Holding Limited, a company limited by shares incorporated and existing under the laws of the British
Virgin Islands.
Hillhouse means Hillhouse ZT Holdings Limited, and / or its Permitted Transferees, if applicable.
HK Holding Company means ZTO Express (Hong Kong) Limited, a limited company incorporated and existing under the laws of Hong Kong.
Hong Kong means the Hong Kong Special Administrative Region of the PRC.
5
Internal Control Plan means a plan of internal policies and procedures to manage and strengthen the Companys practices in connection with
accounts management, book keeping and expense approvals, prepared in consultation with a Big 4 Accounting Firm.
Key Employees has the meaning ascribed to it in the Share Purchase Agreement.
Material Group Company means any Group Company (other than the Company) either gross revenue or net income of which of the preceding
financial year accounts for 5% or more of the total gross revenue or total net income of the Group of the preceding financial year.
Memorandum and Articles means the Amended and Restated Memorandum and Articles of Association of the Company, in the form as attached
as Exhibit B hereto, as the same may be amended from time to time.
New Investors Holding a Majority in Interest means, collectively, the New Investors holding at least a majority of Series A Preferred Shares held
by all New Investors.
Ordinary Share means the ordinary share, par value $0.0001 per share of the Company.
Permitted Transferee means (i) with respect to each of the Financial Investors, any Person that is an Affiliate of such Shareholder and (ii) with
respect to the Founder SPV, the Founder and his immediate family and a Person that is wholly owned, directly or indirectly, by the Founder and/or his
immediate family, in each case, excluding any Competitor.
Person means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a
Governmental Authority.
Portfolio Companies means, with respect to the New Investors and Sequoia, any company in which such Person or its Affiliates have invested as
part of their respective ordinary course of private equity investment business.
PRC means the Peoples Republic of China, but solely for the purposes of this Agreement and the other Transaction Documents, excluding Hong
Kong, the Macau Special Administrative Region and Taiwan.
PRC GAAP means the generally accepted accounting principles in the PRC.
Preemptive Portion means, with respect to a Preemptive Rightholder, a fraction, the numerator of which shall be the aggregate number of
Ordinary Shares held by such Preemptive Rightholder (including all Preferred Shares held by such Shareholder on an as-converted to Ordinary Share basis)
and the denominator of which shall be the total number of Ordinary Shares held by all Preemptive Rightholders (including all Preferred Shares held by such
Shareholders on an as-converted to Ordinary Share basis) then
6
outstanding immediately prior to the issuance of the Company Securities specified in the Issuance Notice.
Preemptive Rightholder means each Financial Investor.
Principal Business means the business as currently conducted by the Group, taken as a whole, as of the date hereof.
Public Offering means a firm underwritten public offering of Registrable Securities or derivatives thereof and the listing of such securities for
trading on a stock or investment exchange or other public market.
Qualified IPO means a firm underwritten initial public offering of the Ordinary Shares and the listing of such shares for trading on the New York
Stock Exchange, NASDAQ Global Market, Main Board of the Hong Kong Stock Exchange or any other stock exchange as approved by the New Investors
Holding a Majority in Interest.
Registrable Securities means, at any time, any Ordinary Shares and any securities issued or issuable in respect of such Ordinary Shares by way of
conversion, exchange, stock dividend, split or combination, recapitalization, merger, consolidation, other reorganization or otherwise until (i) a registration
statement covering such shares has been declared effective by the SEC and such Ordinary Shares have been disposed of pursuant to such effective registration
statement, (ii) such Ordinary Shares are sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in
force) under the Securities Act are met or (iii) such Ordinary Shares are otherwise Transferred, the Company has delivered a new certificate or other evidence
of ownership for such Ordinary Shares and such Ordinary Shares may be resold without subsequent registration under the Securities Act.
Registration Expenses means all expenses, other than all underwriting discounts and selling commissions applicable to the sale of Registrable
Securities pursuant to this Agreement, incurred in connection with Registrations, filings or qualifications pursuant to this Agreement, including all
registration, filing and qualification fees, printers and accounting fees, fees and disbursements of counsel for the Company and underwriters.
Related Party means, with respect to a Person, (i) any Affiliate of such Person, (ii) any Person 20% or more of whose outstanding voting securities
are directly or indirectly owned, Controlled or held with power to vote by such Person or its Affiliates, (iii) any Person directly or indirectly owning,
Controlling or holding with power to vote, 20% or more of the outstanding voting securities of such Person or its Affiliates, (iv) any director or officer of such
Person or its Affiliates or any Related Party of any such director or officer, (v) any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary capacity or (vi) any relative or spouse of such Person, or any relative of such
spouse.
7
Restricted Affiliate means, with respect to each New Investor and Sequoia, any Person listed opposite its name on Schedule V. For the avoidance
of doubt, the term of Restricted Affiliate does not include any Portfolio Company.
Restricted Party means a Person that is: (i) listed on, or owned or controlled by a Person listed on, or acting on behalf of a Person listed on, any
Sanctions List; (ii) located in, incorporated under the laws of, or owned or (directly or indirectly) controlled by, or acting on behalf of, a Person located in or
organized under the laws of a country or territory that is the target of country-wide or territory-wide Sanctions; or (iii) otherwise a target of Sanctions (target
of Sanctions signifying a Person with whom a U.S. Person or other national of a Sanctions Authority would be prohibited or restricted by law from engaging
in trade, business or other activities).
RMB means the lawful currency of the PRC.
Rule 144 means Rule 144 (or any successor provisions) under the Securities Act.
SAFE means the State Administration of Foreign Exchange of the PRC.
Sanctions means the economic sanctions laws, regulations, embargoes or restrictive measures administered, enacted or enforced by any Sanction
Authority.
Sanction Authority means any of (i) the United States government; (ii) the United Nations; (iii) the European Union; (iv) the United Kingdom; or
(v) the respective governmental institutions and agencies of any of the foregoing, including, without limitation, the Office of Foreign Assets Control of the
US Department of Treasury, the United States Department of State, and Her Majestys Treasury.
Sanctions List means (i) the Specially Designated Nationals and Blocked Persons list maintained by the Office of Foreign Assets Control of the
US Department of Treasury, (ii) the Consolidated List of Financial Sanctions Targets and the Investment Ban List maintained by Her Majestys Treasury, or
(iii) any similar list maintained by, or public announcement of Sanctions designation made by, any of the Sanctions Authorities.
SC means Standard Chartered Private Equity (Mauritius) III Limited, and / or its Permitted Transferees, if applicable.
SEC means the Securities and Exchange Commission of United States.
Second Closing has the meaning ascribed to it in the Share Purchase Agreement.
Securities Act means the United States Securities Act of 1933, as amended.
Sequoia means, collectively, Max Alpha Limited and Max Beyond Limited, each a company established and existing under the laws of the
Cayman Islands.
Sequoia Director means the Director appointed by Sequoia.
8
Series A Preferred Shares or Preferred Shares means the series A preferred share, par value of $0.0001 per share of the Company.
Shareholder means each shareholder of the Company.
Strategic Investor means (i) Alibaba, (ii) Tencent, (iii) Baidu, or (iv) a reputable airline, airport or railway company, at least 50% of whose total
revenue of the last financial year is generated from airline transportation, airport or railway transportation business (as the case may be) and which would
bring strategic, meaningful and tangible resources or assistance to the Principal Business.
Subsidiary means, with respect to any Person, any other Person that is Controlled directly or indirectly by such Person.
Target Franchisee has the meaning ascribed to it in the Share Purchase Agreement.
Transaction Documents has the meaning ascribed to it in the Share Purchase Agreement.
Transfer means, with respect to any Equity Securities of any Person, (i) when used as a verb, to sell, assign, dispose of, exchange, pledge,
encumber, hypothecate or otherwise transfer such Company Securities or any participation or interest therein, whether directly or indirectly (including
pursuant to a derivative transaction), or agree or commit to do any of the foregoing and (ii) when used as a noun, a direct or indirect sale, assignment,
disposition, exchange, pledge, encumbrance, hypothecation, or other transfer of such Company Securities or any participation or interest therein or any
agreement or commitment to do any of the foregoing.
Transfer Lock-Up Period means the period from and including the First Closing Date to the date that is the earlier of (i) the consummation of an
initial Public Offering and (ii) the fourth anniversary of the First Closing Date.
US$ or $ or US Dollars means the lawful currency of the United States of America.
WFOE means Shanghai Zhong Tong Ji Network Technology Co., Ltd. (), a wholly foreign-owned enterprise
incorporated and existing under the laws of the PRC.
WP means Onyx Gem Investment Holdings Limited, a company incorporated and existing under the laws of the British Virgin Islands, and / or its
Permitted Transferees, if applicable.
WP Director means the Director appointed by WP.

(b)
Each of the following terms is defined in the Section set forth opposite such term:
9
Term
Section
Agreement
Anti-Bribery Procedures
Arbitration Notice
Board Observer
Company
Compensation Notice
Competitors Competing Business
Confidential Information
Co-Sale Rightholder
Damages
Demand Registration
Dispute
Exempted Issuance
Exercise Notice
Exercising Co-Sale Rightholder
Exercising Shareholder
Existing Institutional Shareholder
Founder
Gopher Portion
HKIAC
HKIAC Rules
Indemnified Party
Indemnifying Party
Inspectors
IPO Adjustments
IPO Adjustment Notice
Issuance Notice
Key Shareholder
Lock-Up Period
Maximum Offering Size
New Investor
Non-exercising Co-Sale Rightholder
Offered Securities
Option Period
Piggyback Registration
Preferred IPO Adjustment
Principal
Pro Rata Share
Records
Registering Shareholders
Replacement Nominee
Representatives
Requesting Shareholder
Responsible Shareholder
Rightholder
Second Co-Sale Notice
Preamble
Section 6.14(b)
Section 7.06(a)
Section 2.04(a)
Preamble
Section 6.02(e)
Section 6.07(b)
Section 6.06(b)
Section 4.02(a)
Section 5.05
Section 5.01(a)
Section 7.06(a)
Section 4.03(e)
Section 4.03(b)
Section 4.02(c)
Section 4.01(c)
Preamble
Preamble
Section 6.02(e)
Section 7.06(b)
Section 7.06(b)
Section 5.07
Section 5.07
Section 5.04(g)
Section 6.02(a)
Section 6.02(a)
Section 4.03(a)
Preamble
Section 5.03
Section 5.01(e)
Preamble
Section 4.02(c)
Section 4.01(a)
Section 4.01(b)
Section 5.02
Section 6.02(a)
Preamble
Section 4.01(b)
Section 5.04(g)
Section 5.01(a)
Section 2.03(a)
Section 6.06(b)
Section 5.01(a)
Section 6.02(a)
Section 4.01(a)
Section 4.02(c)
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Term
Section
Second Notice
Secondary Option Period
Sequoia Portion
Share Purchase Agreement
Shortfall Amount
Transferor
Transfer Notice
Section 4.01(c)
Section 4.01(c)
Section 6.02(e)
Recital
Section 6.02(a)
Section 4.01(a)
Section 4.01(a)
Section 1.02.
Other Definitional and Interpretative Provisions. The words hereof, herein and hereunder and words of like import used in
this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for
convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are
to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein
are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not
otherwise defined therein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural,
and any plural term the singular. Whenever the words include, includes or including are used in this Agreement, they shall be deemed to be followed
by the words without limitation, whether or not they are in fact followed by those words or words of like import. Writing, written and comparable
terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract
are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; provided that with
respect to any agreement or contract listed on any schedules hereto, all such amendments, modifications or supplements must also be listed in the appropriate
schedule. References to any law include all rules and regulations promulgated thereunder. References to any Person include the successors and permitted
assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.
References to law, laws or to a particular statute or law shall be deemed also to include an and all Applicable Law. In calculations of share numbers or
percentages, references to fully-diluted and as-converted basis mean that the calculation is to be made assuming that all outstanding options, warrants and
other Company Securities convertible into or exercisable or exchangeable for Ordinary Shares (whether or not by their terms then currently convertible,
exercisable or exchangeable), have been so converted, exercised or exchanged. Any share calculation shall be appropriately adjusted to take into account
any share split, share consolidation, recapitalization, bonus issue, reclassification or similar event. References to a Persons stake, interest or similar terms
shall unless the context deems otherwise refer to the aggregate amount of Equity Securities held or beneficially owned by such Person in the applicable
entity.
11
ARTICLE 2
CORPORATE GOVERNANCE
Section 2.01.
Composition of the Board. (a) The Board shall consist of 11 Directors, of whom (i) eight shall be appointed by the Founder SPV,
(ii) one shall be appointed by the Hao Min Representative for so long as Hao Min holds at least 1% of the then issued and outstanding Company Securities
(calculated on a fully-diluted and as-converted basis), (iii) one shall be appointed by Sequoia for so long as Sequoia and Gopher jointly hold at least 1% of
the then issued and outstanding Company Securities (calculated on a fully-diluted and as-converted basis) and (iv) one shall be appointed by WP, for so long
as it holds at least 1% of the then issued and outstanding Company Securities (calculated on a fully-diluted and as-converted basis).
(b)
Each Shareholder agrees that, if at any time it is then entitled to vote for the election of the Directors, it shall vote all of its Company
Securities or execute proxies or written consents, as the case may be, and take all other necessary actions (including causing the Company to call a special
meeting of members / shareholders) in order to ensure that the composition of the Board is as set forth in this Section 2.01.
(c)
Each of the Directors may appoint an Alternative Director from time to time to act during his absence and such Alternative Director shall be
entitled, while holding such office at such, to receive notices of meetings of the Board or any committee thereof (if the Director who has appointed the
Alternative Director is a member of such committee), and attend and vote as a Director at any such meeting at which the appointing Director is not present
and generally to exercise all the powers, rights, duties and authorities and to perform all functions of the appointing Director.
(d)
The Company shall enter into an indemnification agreement with the Sequoia Director in the form set forth in the Share Purchase
Agreement on the same date hereof.
Section 2.02.
Removal. Each Shareholder agrees that, if at any time it is then entitled to vote for the removal of any Director from the Board, it
shall not vote any of its Company Securities or execute proxies or written consents, as the case may be, in favor of the removal of any Director who shall have
been appointed pursuant to Section 2.01 or Section 2.03, unless the Person or Persons entitled to designate or nominate or appoint such Director pursuant to
Section 2.01 shall have consented to such removal in writing; provided that, if the Person or Persons entitled to appoint any Director pursuant to Section 2.01
shall request in writing the removal, with or without cause, of such Director, each Shareholder shall vote all of its Company Securities or execute proxies or
written consents, as the case may be, in favor of such removal.
Section 2.03.
Vacancies. If, as a result of death, disability, retirement, resignation, removal (with or without cause) or otherwise, there shall exist
or occur any vacancy on the Board:
(a)
the Person or Persons entitled under Section 2.01 to appoint such Director whose death, disability, retirement, resignation or removal
resulted in such vacancy,
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subject to the provisions of Section 2.01, shall have the exclusive right to appoint another individual (the Replacement Nominee) to fill such vacancy and
serve as a Director; and
(b)
subject to Section 2.01, each Shareholder agrees that if it is then entitled to vote for the election of the Directors, it shall vote all of its
Company Securities, or execute proxies or written consents, as the case may be, in order to ensure that the Replacement Nominee be elected to the Board.
Section 2.04.
Board Observers. (a) Each of Hillhouse and SC, for so long as it holds at least 0.5% of the then issued and outstanding Company
Securities (calculated on a fully-diluted and as-converted basis) shall have the right to appoint one non-voting observer (each, a Board Observer).
(b)
The appointment of a Board Observer shall become effective upon written notice from Hillhouse or SC, as applicable, to the Company of
the name and contact information of the individual so appointed. Each of Hillhouse and SC may from time to time replace its Board Observer by notifying
the Company in writing name and contact information of the new Board Observer at least two Business Days prior to any meeting of the Board.
(c)
Except as otherwise expressly provided herein, each Board Observer shall have the same rights as a Director with respect to receipt of
information and the right to notice of and to participate in all meetings of the Board; provided that each Board Observer shall execute a confidentiality
undertaking reasonably requested by the Company which shall not be more stringent than those imposed on the Shareholders herein. It is understood and
agreed that no Board Observer shall have voting rights, nor shall Board Observers be counted towards a quorum. The Company shall send to each such Board
Observer the notice of the time and place of each meeting of the Board in the same manner and at the same time as it shall send such notice to the Directors.
The Company shall also provide to each such Board Observer copies of all notices, reports, minutes, consents and any other materials at the time and in the
manner as they are provided to the Directors.
Section 2.05.
Meetings. (a) The Board shall hold a regularly scheduled meeting at least once every calendar quarter. The Directors may
participate in any meetings of the Board or any committee thereof through remote communication device where the participates can hear one another, and the
Company shall at all times facilitate the participation of the Directors by teleconference or other remote communication device if such Persons are not
physically present.
(b)
The Company shall pay all reasonable out-of-pocket expenses incurred by each Director in connection with attending regular and special
meetings of the Board and any committee thereof, and any such meetings of the board of directors of any other Group Company and any committee thereof.
(c)
The Company agrees to give each Director (by mail or otherwise) notice and the agenda for each meeting of the Board or any committee
thereof at least 15 days prior to such meeting, or such shorter period as may be agreed to by such Director.
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(d)
The Company shall reimburse reasonable out-of-pocket expenses incurred by each Director and each Board Observer to attend meetings of
the Board and meetings of any committee thereof, if applicable.
Section 2.06.
Action by the Board. (a) A quorum of the Board shall consist of a majority of the Directors who shall include each of the WP
Director and the Sequoia Director for so long as WP and Sequoia (as the case may be) has the right to appoint a Director. If at any meeting of the Board, due
to absence of the WP Director or the Sequoia Director, a quorum is not present within one hour of the time appointed for a meeting or ceases to be present at
any time during the meeting, the meeting shall stand adjourned to the same place and time at least seven days after the original date set for such meeting of
the Board. If at the reconvened meeting after such adjournment, due to absence of the WP Director or the Sequoia Director, a quorum is not present within
one hour of the time appointed for the meeting, the meeting shall stand adjourned to the same place and time at least five days after the original date set for
such reconvened meeting. If at the second reconvened meeting, due to the absence of the WP Director or the Sequoia Director, a quorum is not present within
one hour of the time appointed for the meeting, the presence of a majority of the Directors shall constitute a quorum.
(b)
Subject to Section 2.07, all actions of the Board shall require (i) the affirmative vote of at least two-thirds of the Directors present at a dulyconvened meeting of the Board at which a quorum is present or (ii) the unanimous written consent of the Board; provided that, if there is a vacancy on the
Board and an individual has been nominated to fill such vacancy, the first order of business shall be to fill such vacancy.
Section 2.07.
Actions Requiring Consent. (a) The Company agrees that it will not, and it shall cause each other Group Company not to, take
any action (including any action by the Board or any committee thereof) with respect to any of the following matters of each Group Company without written
consent from each New Investor:
(i)
Company;
(ii)
any voluntary commencement of liquidation, dissolution or other similar procedure of the Company or any Material Group
termination or suspension of the Principal Business; and
(iii)
any amendment to, modification of or change in its Anti-Bribery Procedures or compliance process, policies and procedures
covering Sanctions.
(b)
The Company further agrees that it will not, and it shall cause each other Group Company not to, take any action (including any action by
the Board or any committee thereof) with respect to any of the following matters of each Group Company (as applicable) without written consent from the
New Investors Holding a Majority in Interest:
(i)
any amendment to the Charter Documents of the Company, BVI Holding Company, HK Holding Company, the WFOE or the
Domestic Company (except that new issuance of Equity Securities of the Company shall be governed by Section 2.07(b)(ii) below and except for
amendment to the Charter Documents
14
of the Company for purpose of an initial Public Offering); and any amendment to the Charter Documents of any other Group Company to the extent
that such amendments could reasonably be expected to adversely affect the New Investors rights or privileges hereunder or under other Transaction
Documents;
(ii)
the issuance price of any new issue of Company Securities (excluding (A) any issue pursuant to any employee benefit plan,
employee stock option plan or similar plan in which the total Company Securities to be reserved or issued account for not more than 3% of the then
outstanding Company Securities (calculated on a fully-diluted and as-converted basis), (B) any issue to the Strategic Investors which is not primarily
for equity financing purpose and in which the total Company Securities to be issued account for no more than 15% of the then outstanding
Company Securities (calculated on a fully-diluted and as-converted basis) and (C) any issue pursuant to an initial Public Offering) or any
redemption, repurchase, recapitalization, reclassification or combination of any Company Securities if not on a pro rata basis with respect to all
shareholders;
(iii)
entry into a transaction or a series of transactions with its Related Party that provides for payment to or from the Group Companies
of RMB200 million or more and on terms less favorable than those that could be obtained if such transaction were entered into with a third party on
the arms-length basis;
(iv)
any amendment to, modification of or change in any Control Document; and
(v)
entry into a complete new line of business substantially different from the Principal Business.
(c)
The Company further agrees that it will not, and it shall cause each other Group Company not to, take any action (including any action by
the Board or any committee thereof) with respect to any of the following matters of each Group Company without the affirmative vote by the WP Director at
the applicable Board meeting:
(i)
subject to Section 2.07(c)(ii), any sale, transfer, lease, pledge or other disposition by any Group Company of any assets (tangible or
intangible), businesses, interests or properties, in a single transaction or a series of related transactions, with a value in the aggregate in excess of
RMB200 million; or any sale, transfer or other disposition by any Group Company of any Person whose gross revenue or net income of the
preceding financial year accounts for 5% or more of the total gross revenue or net income of the Group of the preceding financial year;
(ii)
any provision of guarantee or security for a Person that is neither a Group Company nor a delivery hub or franchisee transacting
with the Group Companies; or provision of loans providing for either (A) a total principal amount of RMB10 million or more to a single Person that
is not a Group Company or (B) a total principal amount of RMB30 million or more to all Persons that are not Group Companies; and
15
(iii)
any appointment and removal of the independent auditor of the Company who will be responsible to audit and opine on the
consolidated financial statements of the Company reflecting the financial position of the Group, or any material change in accounting principles
except as required by law.
Section 2.08.
Memorandum and Articles. (a) Each Shareholder agrees to vote all of its Company Securities or execute proxies or written
consents, as the case may be, and to take all other actions necessary, to ensure that the Memorandum and Articles (i) facilitate, and do not at any time conflict
with, any provision of this Agreement, (ii) permit each Shareholder to receive the benefits to which each such Shareholder is entitled under this Agreement,
and (iii) are filed and registered with the applicable Governmental Authority pursuant to the Share Purchase Agreement.
(b)
The Company and each Shareholder agree to take all actions necessary (including causing its representatives on the Board to vote and take
other appropriate action) to ensure that the Charter Documents of each other Group Company (i) facilitate, and do not at any time conflict with, any provision
of this Agreement, (ii) permit WP (or its designated Person holding Equity Interests in any Group Company) and any directors appointed by any New Investor
or its Affiliates to the board of any Group Company receive the same or similar rights and privileges as provided under Section 2.07, (iii) permit each
Shareholder to receive the same benefits, rights and privileges to which each such Shareholder is entitled under this Agreement, and (iv) are amended,
adopted and registered with the applicable Governmental Authority in accordance with all Applicable Laws, if applicable.
(c)
Without limiting the generality of the foregoing, the Company and each Shareholder agree to take all actions necessary (including causing
its representatives on the Board to vote and take other appropriate action) to ensure that each of the shareholders agreement and the articles of association of
the Domestic Company shall maintain the arrangements set forth in Schedule VII for so long as WP holds any Equity Securities in the Company.
Section 2.09.
Chief Compliance Officer. As soon as practicable, the Company shall appoint a full time Chief Compliance Officer who shall
have sufficient knowledge of the Compliance Laws and relevant working experience to the satisfaction to the New Investors Holding a Majority in Interest,
who shall report directly to the Board.
Section 2.10.
Appointment of WP Nominee. The Company and each Shareholder (other than the New Investors) agree to use their respective best
efforts to procure that the individual nominee designated by WP will be appointed and / or elected to the board of directors of the Domestic Company as
contemplated under the Share Purchase Agreement.
Section 2.11.
Appointment of Sequoia Nominee. The Company and each Shareholder (other than the New Investors) agree to use their
respective best efforts to procure that the individual nominee jointly designated by Tianjin Sequoia Ju Ye Equity Investment Partnership (Limited
Partnership)() and Beijing Sequoia Xin Yuan Equity Investment Center (Limited Partnership) (
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), will be appointed and / or elected to the board of directors of the Domestic Company.
Section 2.12.
Termination of Rights. The provisions of this Article 2 shall terminate upon the consummation of an initial Public Offering.
ARTICLE 3
GENERAL PROVISIONS ON TRANSFER
Section 3.01.
General Restrictions on Transfer. (a) Each Shareholder agrees that it shall not Transfer any Company Securities (or solicit any
offer in respect of any Transfer of any Company Securities), except in compliance with all Applicable Laws and the terms and conditions of this Agreement.
(b)
With respect to an initial Public Offering of the Company, each Shareholder further agrees to strictly comply with all restrictions and
limitations on Transfer under all Applicable Laws of the proposed place of listing, including any and all restrictions and limitations on Transfer by a
Controlling Shareholder.
(c)
Notwithstanding anything to the contrary herein, no Shareholder may Transfer any of its Companies Securities to a Restricted Party.
(d)
Notwithstanding anything to the contrary herein, no Shareholder may Transfer any of its Company Securities to a Competitor without the
consent from the Company and the New Investors Holding a Majority in Interest.
(e)
Any attempt to Transfer any Company Securities not in compliance with this Agreement shall be null and void, and the Company shall not,
and shall cause any transfer agent not to, give any effect in the Companys share register or equivalent documents to such attempted Transfer.
Section 3.02.
Permitted Transfer. Notwithstanding anything in this Agreement to the contrary, (a) any Financial Investor may at any time
Transfer any or all of its Company Securities (including Ordinary Shares and Series A Preferred Shares) to one or more of its Permitted Transferees without the
consent of the Board or any other Shareholder and without compliance with Section 3.03, and (b) the Founder SPV may at any time Transfer any or all of its
Company Securities to one or more of its Permitted Transferees without the consent of the Board or any other Shareholder and without compliance with
Sections 3 .03, 4 .01 or 4 .02; provided that, in each case, such Permitted Transferee shall have executed an agreement in the form attached as Exhibit A,
agreeing to comply with and be bound by the terms of this Agreement as if it were the Transferring Shareholder.
Section 3.03.
Transfer During Transfer Lock-up Period. (a) The Founder agrees not to Transfer any Company Securities held by him during the
Transfer Lock-up Period unless otherwise approved by the New Investors Holding a Majority in Interest and in compliance with Article 4.
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(b)
Each of the Financial Investors agrees not to Transfer any Company Securities held by it during the Transfer Lock-up Period unless
otherwise consented by the Founder, except that:
(i)
it may Transfer any of its Company Securities to a Permitted Transferee; provided that the Permitted Transferee shall have
executed an agreement in the form attached as Exhibit A, agreeing to comply with and be bound by the terms of this Agreement as if it were such
Transferring Shareholder;
(ii)
it may Transfer any Ordinary Shares held by it as of the date hereof; or
(iii)
from and after the first anniversary of the First Closing Date, it may only Transfer any Series A Preferred Shares held by it to the
Company (or its designee) by a one-month advance written notice at the price equal to (A) the total purchase price paid by such Transferring
Shareholder under the Share Purchase Agreement for such Series A Preferred Shares to be Transferred; plus (B) such total purchase price multiplied
by the compound annual rate of return at 8% for the period from the applicable Closing Date to the date of the consummation of such Transfer up to
four full years; plus (C) any declared but unpaid dividends on all of such Series A Preferred Shares at the time of the consummation of such Transfer;
provided that, within one month from the date of such notice from the relevant Financial Investor to the Company, if the Company elects not to
purchase all of such Series A Preferred Shares offering for Transfer at the foregoing price or fails to respond to such Financial Investor in writing,
such Financial Investor may Transfer such Series A Preferred Shares to any Person other than the Company.
(c)
For the avoidance of doubt, after expiration of the Transfer Lock-up Period, subject to Sections 3 .01(a), (c) and (d), each Financial Investors
shall the right to Transfer its Company Securities to any third party without any restriction.
ARTICLE 4
RIGHT OF FIRST REFUSAL; CO-SALE RIGHTS; PREEMPTIVE RIGHTS
Section 4.01.
Right of First Refusal. (a) Subject to Article 3, if any Principal (a Transferor) proposes to Transfer any Company Securities or
any interest therein to one or more Persons, the Transferor shall give the Company and each Financial Investor (each such Financial Investor, a
Rightholder) a written notice of the Transferors intention to make the Transfer (the Transfer Notice), which shall include (i) a description of the
Company Securities to be transferred (the Offered Securities), (ii) the identity and address of the prospective transferee and (iii) the consideration and other
material terms and conditions upon which the proposed Transfer is to be made. The Transfer Notice shall certify that the Transferor has received a definitive
offer from the prospective transferee and in good faith believes a binding agreement for the Transfer is obtainable on the terms set forth in the Transfer
Notice. The Transfer Notice shall also include a copy of any written proposal, term sheet or letter of intent or other agreements relating to the proposed
Transfer.
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(b)
Each Rightholder shall have an option for a period of 30 Business Days following receipt of the Transfer Notice (the Option Period) to
elect to purchase all or any portion of its respective Pro Rata Share of the Offered Securities at the same price and subject to the same terms and conditions as
described in the Transfer Notice, by notifying the Transferor and the Company in writing before expiration of the Option Period as to the number of such
Offered Securities that it wishes to purchase. For purpose of this Section 4.01, the Rightholders Pro Rata Share of such Offered Securities shall be equal
to (i) the total number of such Offered Securities, multiplied by (ii) a fraction, the numerator of which shall be the aggregate number of Ordinary Shares held
by such Rightholder on the date of the Transfer Notice (including all Preferred Shares held by such Rightholder on an as-converted to Ordinary Share basis)
and the denominator of which shall be the total number of Ordinary Shares held by all Rightholders on such date (including all Preferred Shares held by such
Rightholders on an as-converted to Ordinary Share basis).
(c)
If any Investor fails to exercise its right to purchase its full Pro Rata Share of such Offered Securities, the Company shall deliver a written
notice thereof (the Second Notice), within five days after the expiration of the Option Period, to the Transferor and to each Rightholder that elected to
purchase its entire Pro Rata Share of the Offered Securities (an Exercising Shareholder). The Exercising Shareholders shall have a right of re-allotment,
and may exercise an additional right to purchase such unpurchased Offered Securities by notifying the Transferor and the Company in writing within 30
Business Days (the Secondary Option Period) after receipt of the Second Notice; provided that if the Exercising Shareholders desire to purchase in
aggregate more than the number of such unpurchased Offered Securities, then such unpurchased Offered Securities will be allocated to the extent necessary
among the Exercising Shareholders in accordance with their relative Pro Rata Shares.
(d)
If any Rightholder gives the Transferor and the Company notice that it desires to purchase Offered Securities, payment for the Offered
Securities to be purchased shall be made by wire transfer in immediately available funds of the appropriate currency, against delivery of such Offered
Securities to be purchased, remotely via the exchange of documents and signatures on the 30 th day after expiration of the Option Period or the Secondary
Option Period, as applicable, or other time as agreed by the Transferor, the Company and all Exercising Shareholders. The Company will update its register of
members upon the consummation of any such Transfer.
(e)
(f)
Section 6.02.
These provisions of this Section 4.01 shall apply mutatis mutandis to any Transfer of any or all Equity Securities of any Principal.
These provisions of this Section 4.01 shall not apply to any Transfer relating to or in connection with any IPO Adjustment pursuant to
Section 4.02.
Co-Sale Rights. (a) To the extent that the Rightholders do not exercise their right of first refusals as to any Offered Securities
proposed to be sold by the Transferor to the prospective transferee identified in the Transfer Notice, such Rightholders (each, a Co-Sale Rightholder) shall
have the right to participate in such sale, to the prospective transferee identified in the Transfer Notice on the same terms and
19
conditions as specified in the Transfer Notice by notifying the Transferor in writing within the Option Period.
(b)
Subject to Section 4.02(c), the maximum number of Company Securities that each Co-Sale Rightholder may elect to sell shall be equal to
the product of (i) the total Companies Securities owned by the Transferor (including all Preferred Shares held by the Transferor on an as-converted to
Ordinary Share basis), multiplied by (ii) a fraction, the numerator of which shall be the number of Ordinary Shares owned by such Co-Sale Rightholder
(including all Preferred Shares held by such Co-Sale Rightholder on an as-converted to Ordinary Share basis) and the denominator of which shall be the total
number of Ordinary Shares held by the Transferor and all participating Co-Sale Rightholders immediately prior to the proposed Transfer (including all
Preferred Shares held by such Shareholders on an as-converted to Ordinary Share basis).
(c)
If any Co-Sale Rightholder (the Non-exercising Co-Sale Rightholder) fails to exercise its right to sell its full portion of the Company
Securities held by it as determined pursuant to Section 4.02(b), the Company shall deliver a written notice thereof (the Second Co-Sale Notice), within five
days after the expiration of the Option Period, to the Transferor and to each Co-Sale Rightholder that elected to sell its full portion of the Company Securities
held by it as determined pursuant to Section 4.02(b) (an Exercising Co-Sale Rightholder). The Exercising Co-Sale Rightholders shall have a right of reallotment, and may exercise an additional right to sell the Company Securities held by it but not included in the proposed Transfer pursuant to this section
by notifying the Transferor and the Company in writing within 30 Business Days after receipt of the Second Co-Sale Notice; provided that if the Exercising
Co-Sale Rightholders desire to sell in aggregate more than the number of such portion entitled to be included by all Non-Exercising Co-Sale Rightholders,
then such remaining portion will be allocated to the extent necessary among the Exercising Co-Sale Rightholder on a pro rata basis.
(d)
Each Co-Sale Rightholder shall effect its participation in the sale by promptly delivering to the Transferor for Transfer to the prospective
transferee, before the applicable closing, one or more certificates, which represent the type and number of Company Securities which the Co-Sale Rightholder
elects to sell. In any such Transfer, each Co-Sale Righholder shall not be required to provide any representations, warranties or indemnities in connection
with such sale of its Company Securities (other than representations, warranties and indemnities with respect to its title to, and ownership of, such Company
Securities held and to be sold by such Co-Sale Rightholder).
(e)
The share certificate or certificates that each Co-Sale Righholder delivers to the Transferor pursuant to Section 4.02(d) shall be submitted to
the Company for cancellation and the Company shall, upon the consummation of the sale of the Company Securities pursuant to the terms and conditions
specified in the Co-Sale Notice, issue a new certificate to each Co-Sale Rightholder for the remaining balance. The Transferor shall concurrently therewith
remit to each Co-Sale Rightholder that portion of the sale proceeds to which the Co-Sale Rightholder is entitled by reason of its participation in such
Transfer. The Company shall update its register of members upon consummation of such Transfer.
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(f)
To the extent that any prospective purchaser prohibits the participation by the Co-Sale Rightholder exercising its co-sale rights hereunder
in a proposed Transfer or otherwise refuses to purchase Company Securities from such Co-Sale Righholder, the Transferor shall not sell to such prospective
purchaser any Company Securities unless and until, simultaneously with such sale, the Transferor shall purchase from the Co-Sale Rightholder such
Company Securities that the Co-Sale Rightholder would otherwise be entitled to sell to the prospective purchase pursuant to its co-sale rights for the same
consideration and on the terms and conditions as the proposed Transfer described in the Co-Sale Notice.
(g)
These provisions of this Section 4.02 shall apply mutatis mutandis to any Transfer of any or all Equity Securities of any Principal.
(h)
The provisions of this Section 4.02 shall terminate upon the consummation of an initial Public Offering.
Section 4.03.
Preemptive Rights. (a) The Company shall give each Preemptive Rightholder notice (an Issuance Notice) of any proposed
issuance by the Company of any Company Securities at least 30 days prior to the proposed issuance date. The Issuance Notice shall specify the price at
which such Company Securities are to be issued and the other material terms of the issuance. Subject to Section 4.03 (e) below, each Preemptive Rightholder
shall be entitled to purchase up to its Preemptive Portion of the Company Securities proposed to be issued, at the price and on the terms specified in the
Issuance Notice.
(b)
Each Preemptive Rightholder who desires to purchase any or all of its Preemptive Portion of the Company Securities specified in the
Issuance Notice shall deliver notice to the Company (each, an Exercise Notice) of its election to purchase such Company Securities within 30 Business
Days of receipt of the Issuance Notice. The Exercise Notice shall specify the number (or amount) of Company Securities to be purchased by such Preemptive
Rightholder and shall constitute exercise by such Preemptive Rightholder of its rights under this Section 4.03 and a binding agreement of it to purchase, at
the price and on the terms specified in the Issuance Notice, the number (or amount) of Company Securities specified in the Exercise Notice. If, at the
termination of such 30-Business Day period, any Preemptive Rightholder shall not have delivered an Exercise Notice to the Company, such Preemptive
Rightholder shall be deemed to have waived all of its rights under this Section 4.03 with respect to the purchase of such Company Securities. Promptly
following the termination of such 30-Business Day period, the Company shall deliver to each Preemptive Rightholder a copy of all Exercise Notices it
received.
(c)
The Company shall have 120 days from the date of the Issuance Notice to consummate the proposed issuance of any or all of such
Company Securities that the Shareholders have not elected to purchase to a third party at the price and upon terms that are not less favorable to the Company
than those specified in the Issuance Notice; provided that, if such issuance is subject to regulatory approval, such 120-day period shall be extended until the
expiration of five Business Days after all such approvals have been received, but in no event later than 210 days from the date of the Issuance Notice. If the
21
Company proposes to issue any such Company Securities after such 120-day (or 210-day) period, it shall again comply with the procedures set forth in this
Section 4.03.
(d)
At the consummation of the issuance of such Company Securities, the Company shall deliver a copy of its register of members updated to
reflect such issuance and issue certificates representing the Company Securities to be purchased by each Preemptive Rightholder exercising preemptive
rights pursuant to this Section 4.03 registered in the name of such Preemptive Rightholder, against payment by such Shareholder of the purchase price for
such Company Securities in accordance with the terms and conditions as specified in the Issuance Notice.
(e)
Notwithstanding the foregoing, no Preemptive Rightholder shall be entitled to purchase Company Securities as contemplated by this
Section 4.03 in connection with issuances of Company Securities (A) to employees or officers pursuant to any employee benefit plan, employee stock option
plan or similar plan, including the Excluded Issuance, (B) in connection with any bona fide, arms-lengths direct or indirect merger, acquisition or similar
transaction as duly approved by the Shareholders or the Board pursuant to the Memorandum and Articles, including the acquisition of Target Franchisees as
contemplated by the Share Purchase Agreement, (C) in connection with any exercise of conversion rights by any Shareholder holding any Preferred Shares
pursuant to the Memorandum and Articles, or (D) in connection with any IPO Adjustment (collectively, the Exempted Issuance).
(f)
The provisions of this Section 4.03 shall not apply to any issuance of the Company Securities made relating to or in connection with any
IPO Adjustment pursuant to Section 6.02 and shall terminate upon the consummation of an initial Public Offering.
ARTICLE 5
REGISTRATION RIGHTS
Section 5.01.
Demand Registration. (a) If at any time following the earlier of (x) 180 days after the effective date of the registration statement for
a Public Offering and (y) the expiration of the period during which the managing underwriters for such Public Offering shall prohibit the Company from
effecting any other public sale or distribution of Registrable Securities, the Company shall receive a request from any Financial Investor (the Requesting
Shareholder) that the Company effect the registration under the Securities Act of all or any portion of such Requesting Shareholders Registrable Securities,
and specifying the intended method of disposition thereof, then the Company shall promptly give notice of such requested registration (each such request, a
Demand Registration) at least 30 Business Days prior to the anticipated filing date of the registration statement relating to such Demand Registration to
the other Shareholders and thereupon shall use its best efforts to effect, as expeditiously as possible, the registration under the Securities Act of:
(i)
all Registrable Securities for which the Requesting Shareholder has requested registration under this Section 5.01; and
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(ii)
subject to the restrictions set forth in Sections 5 .01(e) and 5 .02, all other Registrable Securities of the same class as those requested
to be registered by the Requesting Shareholder that any Shareholders with rights to request registration under Section 5.01 (all such Shareholders,
together with the Requesting Shareholders, and any Shareholders participating in a Piggyback Registration pursuant to Section 5.02, the
Registering Shareholders) have requested the Company to register by request received by the Company within 25 Business Days after such
Shareholders receive the Companys notice of the Demand Registration;
all to the extent necessary to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be
registered; provided that, subject to Section 5.01(d), the Company shall not be obligated to effect more than two Demand Registrations for such Financial
Investor, other than Demand Registration to be effected pursuant to a Registration Statement on Form F-3, for which an unlimited number of Demand
Registrations shall be permitted. In no event shall the Company be required to effect more than one Demand Registration hereunder within any six-month
period.
(b)
Promptly after the expiration of the 25-Business Day-period referred to in Section 5.01(a)(ii), the Company will notify all Registering
Shareholders of the identities of the other Registering Shareholders and the number of shares of Registrable Securities requested to be included therein. At
any time prior to the effective date of the registration statement relating to such registration, the Requesting Shareholders may revoke such request, without
liability to any of the other Registering Shareholders, by providing a notice to the Company revoking such request.
(c)
The Company shall be liable for and pay all Registration Expenses in connection with any Demand Registration, regardless of whether
such Registration is effected.
(d)
A Demand Registration shall not be deemed to have occurred:
(i)
(A) unless the registration statement relating thereto (1) has become effective under the Securities Act and (2) has remained
effective for a period of at least 180 days (or such shorter period in which all Registrable Securities of the Registering Shareholders included in such
registration have actually been sold thereunder); provided that such registration statement shall not be considered a Demand Registration if, after
such registration statement becomes effective, (1) such registration statement is interfered with by any stop order, injunction or other order or
requirement of the SEC or other governmental agency or court and (2) less than 75% of the Registrable Securities included in such registration
statement have been sold thereunder; or
(ii)
if the Maximum Offering Size is reduced in accordance with Section 5.01(e) such that less than 66 2/ 3% of the Registrable
Securities of the Requesting Shareholders sought to be included in such registration are included.
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(e)
If a Demand Registration involves an underwritten Public Offering and the managing underwriter advises the Company and the Requesting
Shareholders that, in its view, the number of shares of Registrable Securities requested to be included in such registration (including any securities that the
Company proposes to be included that are not Registrable Securities) exceeds the largest number of shares that can be sold without having an adverse effect
on such offering, including the price at which such shares can be sold (the Maximum Offering Size), the Company shall include in such registration, in the
priority listed below, up to the Maximum Offering Size:
(i)
first, all Registrable Securities requested to be registered by the Requesting Shareholders;
(ii)
second, all Registrable Securities requested to be included in such registration by any other Registering Shareholder (allocated, if
necessary for the offering not to exceed the Maximum Offering Size, pro rata among such other Shareholders on the basis of the relative number of
Registrable Securities so requested to be included in such registration by each such Shareholder); and
(iii)
third, any securities proposed to be registered by any other Persons (including the Company), with such priorities among them as
the Company shall determine.
(f)
Upon notice to each Requesting Shareholder, the Company may postpone effecting a registration pursuant to this Section 5.01 on one
occasion during any period of six consecutive months for a reasonable time specified in the notice but not exceeding 90 days (which period may not be
extended or renewed), if (i) an investment banking firm of recognized national standing shall advise the Company and the Requesting Shareholders in
writing that effecting the registration would materially and adversely affect an offering of securities of such Company the preparation of which had then been
commenced or (ii) the Company is in possession of material non-public information the disclosure of which during the period specified in such notice the
Company reasonably believes would not be in the best interests of the Company.
(g)
At any time following the consummation of the initial Public Offering and when the Company is eligible to use a Form F-3 registration
statement, each Financial Investor may request the Company in writing to file an unlimited number of Registration Statements on Form F-3 (or any successor
form to Form F-3, or any comparable form for Registration in a jurisdiction other than the United States) for a public offering of Registrable Securities for
which the Company is entitled to use Form F-3 or a comparable form to register the requested Registrable Securities. Upon receipt of such a request the
Company shall (i) promptly give written notice of the proposed registration to all other Shareholders and (ii) as soon as practicable, and in any event within
ninety (90) days of the receipt of such request, cause the Registrable Securities specified in the request to be registered and qualified for sale and distribution
in such jurisdictions as such Financial Investor may reasonably request. Each Financial Investor may at any time, and from time to time, require the
Company to effect the registration of Registrable Securities under this (g).
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Section 5.02.
Piggyback Registration. (a) If at any time following an initial Public Offering the Company proposes to register any Company
Securities under the Securities Act (other than a registration relating to Company Securities issuable upon exercise of employee stock options or in
connection with any employee benefit or similar plan of the Company or in connection with a direct or indirect acquisition by the Company of another
Person), whether or not for sale for its own account, the Company shall each such time give prompt notice at least 30 Business Days prior to the anticipated
filing date of the registration statement relating to such registration to each Shareholder, which notice shall set forth such Shareholders rights under this
Section 5.02 and shall offer such Shareholder the opportunity to include in such registration statement the number of Registrable Securities of the same class
or series as those proposed to be registered as each such Shareholder may request (a Piggyback Registration), subject to the provisions of Section 5.02(b).
Upon the request of any such Shareholder made within 15 Business Days after the receipt of notice from the Company (which request shall specify the
number of Registrable Securities intended to be registered by such Shareholder), the Company shall use its best efforts to effect the registration under the
Securities Act of all Registrable Securities that the Company has been so requested to register by all such Shareholders, to the extent requisite to permit the
disposition of the Registrable Securities so to be registered; provided that (i) if such registration involves an underwritten Public Offering, all such
Shareholders requesting to be included in the Companys registration must sell their Registrable Securities to the underwriters selected as provided in Section
5.04(f) on the same terms and conditions as apply to the Company or the Requesting Shareholders, as applicable, and (ii) if, at any time after giving notice of
its intention to register any Company Securities pursuant to this Section 5.02(a) and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any reason not to register such securities, the Company shall give notice to all such
Shareholders and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration. No registration
effected under this Section 5.02 shall relieve the Company of its obligations to effect a Demand Registration to the extent required by Section 5.01. The
Company shall pay all Registration Expenses in connection with each Piggyback Registration.
(b)
If a Piggyback Registration involves an underwritten Public Offering (other than any Demand Registration, in which case the provisions
with respect to priority of inclusion in such offering set forth in Section 5.01(e) shall apply) and the managing underwriter advises the Company that, in its
view, the number of Registrable Securities that the Company and such Shareholders intend to include in such registration exceeds the Maximum Offering
Size, the Company shall include in such registration, in the following priority, up to the Maximum Offering Size:
(i)
first, so much of the Registrable Securities proposed to be registered for the account of the Company as would not cause the
offering to exceed the Maximum Offering Size;
(ii)
second, all Registrable Securities requested to be included in such registration by any Shareholders pursuant to Section 5.02
(allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such
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Shareholders on the basis of the relative number of shares of Registrable Securities so requested to be included in such registration by each); and
(iii)
third, any securities proposed to be registered for the account of any other Persons with such priorities among them as the
Company shall determine.
Section 5.03.
Lock-Up Agreements. If any registration of Registrable Securities shall be effected in connection with a Public Offering, neither
the Company nor any Shareholder shall effect any public sale or distribution, including any sale pursuant to Rule 144, of Registrable Securities (except as
part of such Public Offering) during the period beginning 14 days prior to the effective date of the applicable registration statement until the earlier of (i) such
time as the Company and the lead managing underwriter shall agree and (ii) 180 days (such period, the Lock-Up Period for the applicable registration
statement).
Section 5.04.
Registration Procedures. Whenever Shareholders request that any Registrable Securities be registered pursuant to Section 5 .01 or
5 .02, subject to the provisions of such Sections, the Company shall use its best efforts to effect the registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof as quickly as practicable, and, in connection with any such request:
(a)
The Company shall as expeditiously as possible prepare and file with the SEC a registration statement on any form for which the Company
then qualifies or that counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Securities to be
registered thereunder in accordance with the intended method of distribution thereof, and use its best efforts to cause such filed registration statement to
become and remain effective for a period of not less than 180 days, or in the case of a shelf registration statement, one year (or such shorter period in which all
of the Registrable Securities of the Shareholders included in such registration statement shall have actually been sold thereunder).
(b)
Prior to filing a registration statement or prospectus or any amendment or supplement thereto, the Company shall, if requested, furnish to
each participating Shareholder and each underwriter, if any, of the Registrable Securities covered by such registration statement copies of such registration
statement as proposed to be filed, and thereafter the Company shall furnish to such Shareholder and underwriter, if any, such number of copies of such
registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference
therein), the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus) and such other
documents as such Shareholder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such
Shareholder. Each Shareholder shall have the right to request that the Company modify any information contained in such registration statement,
amendment and supplement thereto pertaining to such Shareholder and the Company shall use its best efforts to comply with such request; provided,
however, that the Company shall not have any obligation so to modify any information if the Company reasonably expects that so doing would cause the
prospectus to contain an untrue
26
statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.
(c)
After the filing of the registration statement, the Company shall (i) cause the related prospectus to be supplemented by any required
prospectus supplement, and, as so supplemented, to be filed pursuant to the Securities Act, (ii) comply with the provisions of the Securities Act with respect
to the disposition of all Securities covered by such registration statement during the applicable period in accordance with the intended methods of
disposition by the Shareholders thereof set forth in such registration statement or supplement to such prospectus and (iii) promptly notify each Shareholder
holding Registrable Securities covered by such registration statement of any stop order issued or threatened by the SEC or any state securities commission
and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered.
(d)
The Company shall use its best efforts to (i) register or qualify the Registrable Securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions in the United States as any Registering Shareholder holding such Registrable Securities reasonably
(in light of such Shareholders intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and
things that may be reasonably necessary or advisable to enable such Shareholder to consummate the disposition of the Registrable Securities owned by such
Shareholder; provided that the Company shall not be required to (B) qualify generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 5.04(d), (C) subject itself to taxation in any such jurisdiction or (D) consent to general service of process in any such
jurisdiction.
(e)
The Company shall immediately notify each Registering Shareholder holding such Registrable Securities covered by such registration
statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of an event requiring the
preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus
will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements
therein not misleading and promptly prepare and make available to each such Shareholder and file with the SEC any such supplement or amendment.
(f)
(i) The New Investors shall have the right, in their sole discretion, to select an underwriter or underwriters in connection with any Public
Offering resulting from the exercise by any such New Investor of a Demand Registration, which underwriter or underwriters may include any Affiliate of any
New Investor, and (ii) the New Investors Holding a Majority in Interest shall have the right to select an underwriter or underwriters in connection with a
Demand Registration of a New Investor, which selection shall be subject to the approval of the Company, not to be unreasonably withheld. In connection
with any Public Offering, the Company shall enter into customary agreements (including an underwriting agreement in customary form) and take such all
other actions as are required in order to expedite or facilitate the disposition of such Registrable Securities in
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any such Public Offering, including the engagement of a qualified independent underwriter in connection with the qualification of the underwriting
arrangements with FINRA.
(g)
Upon execution of confidentiality agreements in form and substance reasonably satisfactory to the Company, the Company shall make
available for inspection by any Shareholder and any underwriter participating in any disposition pursuant to a registration statement being filed by the
Company pursuant to this Section 5.04 and any attorney, accountant or other professional retained by any such Shareholder or underwriter (collectively, the
Inspectors), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the Records) as shall be
reasonably necessary or desirable to enable them to exercise their due diligence responsibility, and cause the Companys officers, directors and employees to
supply all information reasonably requested by any Inspector in connection with such registration statement. Records that the Company determines, in good
faith, to be confidential and that it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such registration statement or (ii) the release of such Records is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction. Each Shareholder agrees that information obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it or its Affiliates as the basis for any market transactions in the Registrable Securities unless and until such information
is made generally available to the public. Each Shareholder further agrees that, upon learning that disclosure of such Records is sought in a court of
competent jurisdiction, it shall give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of
the Records deemed confidential.
(h)
The Company shall furnish to each Registering Shareholder and to each such underwriter, if any, a signed counterpart, addressed to such
Registering Shareholder or underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) a comfort letter or comfort letters from the
Companys independent public accountants, each in customary form and covering such matters of the kind customarily covered by opinions or comfort
letters, as the case may be, as a majority of such Shareholders or the managing underwriter therefor requests.
(i)
The Company shall otherwise use its best efforts to comply with all applicable rules and regulations of the SEC.
(j)
The Company may require each Shareholder promptly to furnish in writing to the Company such information regarding the distribution of
the Registrable Securities as the Company may from time to time reasonably request and such other information as may be legally required in connection
with such registration.
(k)
Each Shareholder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in
Section 5.04(e), such Shareholder shall forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Shareholders receipt of the copies of the supplemented or amended prospectus contemplated by Section
28
5.04(e), and, if so directed by the Company, such Shareholder shall deliver to the Company all copies, other than any permanent file copies then in such
Shareholders possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. If the Company shall give
such notice, the Company shall extend the period during which such registration statement shall be maintained effective (including the period referred to in
Section 5.04(a)) by the number of days during the period from and including the date of the giving of notice pursuant to Section 5.04(e) to the date when the
Company shall make available to such Shareholder a prospectus supplemented or amended to conform with the requirements of Section 5.04(e).
(l)
The Company shall use its best efforts to list all Registrable Securities covered by such registration statement on any securities exchange or
quotation system on which any of the Registrable Securities are then listed or traded.
(m)
The Company shall have appropriate officers of the Company (i) prepare and make presentations at any road shows and before analysts
and rating agencies, as the case may be, (ii) take other actions to obtain ratings for any Registrable Securities and (iii) otherwise use their best efforts to
cooperate as reasonably requested by the underwriters in the offering, marketing or selling of the Registrable Securities.
Section 5.05.
Indemnification by the Company. (a) The Company agrees to indemnify and hold harmless each Shareholder beneficially owning
any Registrable Securities covered by a registration statement, its officers, directors, employees, partners and agents, and each Person, if any, who controls
such Shareholder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims,
damages, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys fees and expenses) (Damages) caused by or
relating to any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable
Securities (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus or free
writing prospectus (as defined in Rule 405 under the Securities Act), or caused by or relating to any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such Damages are caused by or related to any
such untrue statement or omission or alleged untrue statement or omission so made based upon information furnished in writing to the Company by such
Shareholder or on such Shareholders behalf expressly for use therein. The Company also agrees to indemnify any underwriters of the Registrable Securities,
their officers and directors and each Person who controls such underwriters within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act on substantially the same basis as that of the indemnification of the Shareholders provided in this Section 5.05.
Section 5.06.
Indemnification by Participating Shareholders. Each Shareholder holding Registrable Securities included in any registration
statement agrees, severally but not jointly, to indemnify and hold harmless the Company, its officers, directors and agents and each Person, if any, who
controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Shareholder, but only with respect to
29
information furnished in writing by such Shareholder or on such Shareholders behalf expressly for use in any registration statement or prospectus relating to
the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus. Each such Shareholder also agrees to indemnify and hold
harmless underwriters of the Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Company provided in
this Section 5.06. As a condition to including Registrable Securities in any registration statement filed in accordance with Article 5, the Company may
require that it shall have received an undertaking reasonably satisfactory to it from any underwriter to indemnify and hold it harmless to the extent
customarily provided by underwriters with respect to similar securities. No Shareholder shall be liable under this Section 5.06 for any Damages in excess of
the net proceeds realized by such Shareholder in the sale of Registrable Securities of such Shareholder to which such Damages relate.
Section 5.07.
Conduct of Indemnification Proceedings. If any proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to this Article 5, such Person (an Indemnified Party) shall promptly notify the
Person against whom such indemnity may be sought (the Indemnifying Party) in writing and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses; provided that
the failure of any Indemnified Party so to notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the
extent that the Indemnifying Party is materially prejudiced by such failure to notify. In any such proceeding, any Indemnified Party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) in the reasonable judgment of such Indemnified Party representation of
both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that, in connection with
any proceeding or related proceedings in the same jurisdiction, the Indemnifying Party shall not be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by the Indemnified
Parties. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent,
or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss
or liability (to the extent stated above) by reason of such settlement or judgment. Without the prior written consent of the Indemnified Party, no
Indemnifying Party shall effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability arising out of such proceeding.
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Section 5.08.
Contribution. If the indemnification provided for in this Article 5 is unavailable to the Indemnified Parties in respect of any
Damages, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Damages (i) as between the Company and the Shareholders holding Registrable Securities covered by a registration
statement on the one hand and the underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company and
such Shareholders on the one hand and the underwriters on the other, from the offering of the Registrable Securities, or if such allocation is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company and such Shareholders
on the one hand and of such underwriters on the other in connection with the statements or omissions that resulted in such Damages, as well as any other
relevant equitable considerations and (ii) as between the Company on the one hand and each such Shareholder on the other, in such proportion as is
appropriate to reflect the relative fault of the Company and of each such Shareholder in connection with such statements or omissions, as well as any other
relevant equitable considerations. The relative benefits received by the Company and such Shareholders on the one hand and such underwriters on the other
shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company and such Shareholders bear to the total underwriting discounts and commissions received by such underwriters, in each
case as set forth in the table on the cover page of the prospectus. The relative fault of the Company and such Shareholders on the one hand and of such
underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information supplied by the Company and such Shareholders or by such underwriters. The
relative fault of the Company on the one hand and of each such Shareholder on the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party,
and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
The Company and the Shareholders agree that it would not be just and equitable if contribution pursuant to this Section 5.08 were determined by
pro rata allocation (even if the underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the Damages
referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of
this Section 5.08, no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any Damages that such underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no Shareholder shall be required to
31
contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such Shareholder were offered to the public
(less underwriters discounts and commissions) exceeds the amount of any Damages that such Shareholder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Each Shareholders
obligation to contribute pursuant to this Section 5.08 is several in the proportion that the proceeds of the offering received by such Shareholder bears to the
total proceeds of the offering received by all such Shareholders and not joint.
Section 5.09.
Participation in Public Offering. No Shareholder may participate in any Public Offering hereunder unless such Shareholder
(a) agrees to sell such Shareholders Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting arrangements and the provisions of this Agreement in respect of registration rights.
Section 5.10.
Other Indemnification. Indemnification similar to that specified herein (with appropriate modifications) shall be given by the
Company and each Shareholder participating therein with respect to any required registration or other qualification of securities under any federal or state
law or regulation or governmental authority other than the Securities Act.
Section 5.11.
Cooperation by the Company. If any Shareholder shall transfer any Registrable Securities pursuant to Rule 144, the Company
shall cooperate with such Shareholder and shall provide to such Shareholder such information as such Shareholder shall reasonably request.
Section 5.12.
Applicability of Rights. If the Public Offering will not be conducted in the United States of America, each Financial Investor shall
be entitled to reasonably analogous or equivalent rights with respect to any other offering of the Company Securities in any other jurisdiction in which the
Company undertakes a Public Offering.
ARTICLE 6
CERTAIN COVENANTS AND AGREEMENTS
Section 6.01.
Qualified IPO. (a) The Company shall, and the Shareholders shall use their respective reasonable best efforts to procure the
Company, to consummate a Qualified IPO on or prior to the fourth anniversary of the First Closing Date. Each Shareholder hereby agrees that unless
otherwise agreed by the New Investors Holding a Majority in Interest, the Company shall be the sole entity for any initial Public Offering of the business and
assets of the Group.
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(b)
If no investment bank(s) have been appointed to advise on a Qualified IPO by the third anniversary of the First Closing, the Board shall
meet within 30 days to discuss and consider the prospects and timing of conducting a Qualified IPO.
(c)
Following the appointment of investment bank(s) for purpose of conducting a Qualified IPO,
(i)
the Founder shall procure the Company to use its best efforts to prepare a Qualified IPO, including to provide all relevant
information (including financial information) and to make sufficient resources available;
(ii)
all Shareholders shall discuss in good faith the appointment of other advisors as may need to be appointed in connection with the
Qualified IPO, including counsel and accountant; and
(iii)
the investment bank(s) and the other advisors shall, together with the Company and in consultation with the Founder and the New
Investors, commence the preparation of a prospectus (or similar document) and such other documents as may be required in connection with the
Qualified IPO and take any other actions necessary or desirable to implement a Qualified IPO.
(d)
Each of the Shareholders agrees to provide all cooperation and assistance reasonably required in connection with the above through actions
of such Person or any of its or his Affiliates, including by (i) voting, and procuring its appointed Director(s) to vote, in favor of any and all required
resolutions, (ii) allowing the Company to issue new Company Securities (subject to other provisions of this Agreement) in connection with the Qualified IPO
if so advised by the investment bank(s); provided that such new issuance shall be limited to attain the minimum public free float as required by the
Applicable Law of the place of listing, if applicable, and (iii) executing any and all documents as may be required by the relevant Governmental Authorities
in connection with the Qualified IPO.
Section 6.02.
IPO Adjustments. (a) The Company and each of the Shareholders (other than the New Investors) (the Responsible Shareholders)
further agree and covenant to each New Investor that, with respect to Series A Preferred Shares subscribed by such New Investor, upon consummation of a
Qualified IPO, valuation of all or the portion of Series A Preferred Shares then held by it immediately prior to the consummation of the Qualified IPO
determined by reference to the per-share offering price in the Qualified IPO shall not be less than the Guaranteed Return. If the valuation of all or the portion
(as the case may be) of Series A Preferred Shares then held by a New Investor immediately prior to the consummation of the Qualified IPO determined by
reference to the offering price in the Qualified IPO shall be less than the Guaranteed Return upon the completion of the Qualified IPO (such shortfall, the
Shortfall Amount), (i) the Company shall issue warrants to such New Investor or have the conversion price or conversion rate applicable to Series A
Preferred Shares held by such New Investor automatically adjusted upon a written notice from such New Investor (each, a Preferred IPO Adjustment), or
(ii) to the extent that none of the Preferred IPO Adjustments is permitted by the Applicable Law (including the Applicable Law of the place of listing), cash or
share compensation (at the election of such New Investor) shall
33
be payable from the Company and / or all Responsible Shareholders to such New Investor (together with the Preferred IPO Adjustments, the IPO
Adjustments) upon a written notice (the IPO Adjustment Notice) from such New Investor to the Company. For the avoidance of doubt, the New Investors
shall not seek or recover more than the Shortfall Amount from the Company and the Responsible Shareholders for purposes of the IPO Adjustment pursuant
to this Section 6.02. Notwithstanding the foregoing, the adoption and implementation of any IPO Adjustment contemplated by this Section 6.02 shall not
cause the post-money valuation of the Company after the completion of the Second Closing by all New Investors to be less than RMB30 billion.
(b)
If such New Investor requests the Company to issue warrants, the Company shall within two Business Days issue the warrants which
(i) grants such New Investor to purchase or subscribe for additional Company Securities at par value of such Company Securities, (ii) provides for cashless
exercise by such New Investor and (iii) will remain effective until six months after the consummation of the Qualified IPO. The parties hereby agree that the
number of Ordinary Shares to be purchased or subscribed for by such New Investor by exercising such warrant(s) shall be determined in accordance with the
following formula:
X=(A-BC)B
where, X is the number of Ordinary Shares to be issued;
B is the offering price per Ordinary Share in the Qualified IPO; and
C is the number of Ordinary Shares converted or convertible from all Series A Preferred Shares then held by such New Investor.
(c)
If such New Investor requests the Company to adjust the conversion price or conversion rate of its Series A Preferred Shares, such
conversion price shall be automatically adjusted in accordance with the following formula and the conversion rate shall be adjusted accordingly:
Y= [(DC)B]A
where, Y is the adjusted conversion price pursuant to the requested Preferred IPO Adjustment,
B is the offering price per Ordinary Share in the Qualified IPO;
C is the number of Ordinary Shares converted or convertible from all Series A Preferred Shares then held by such New Investor based on the
conversion price without regard to the Preferred IPO Adjustment; and
34
D is the conversion price of such Series A Preferred Shares as determined pursuant to the Memorandum and Articles without regard to the Preferred
IPO Adjustment.
(d)
If such New Investor in the IPO Adjustment Notice requests compensation to be made by combination of the Preferred IPO Adjustments,
such New Investor shall state in the IPO Adjustment Notice the allocation of compensation it seeks under each Preferred IPO Adjustment.
(e)
To the extent that none of the Preferred IPO Adjustments is permitted by the Applicable Law (including the Applicable Law of the place of
listing), if such New Investor elects cash compensation, it shall set forth in the IPO Adjustment Notice (i) the total amount of cash compensation sought from
the Company, if applicable, (ii) the total amount of cash compensation sought from the Responsible Shareholders, if applicable, (iii) its calculation in
reasonable detail, (iv) currency in which such cash compensation should be made and (v) such New Investors bank account information. In case that such
New Investor demands cash compensation from (i) the Responsible Shareholders or (ii) both of the Company and the Responsible Shareholders, within five
days after its receipt of the IPO Adjustment Notice, the Company shall, taking into consideration of the arrangement in the last second sentence of this
Section 6.02(e), calculate cash compensation each Responsible Shareholder is liable on a pro rata basis in proportion to each such Responsible Shareholders
shareholding percentage in the Company (calculated on a fully-diluted and as-converted basis) as at the consummation of the Qualified IPO and notify each
such Responsible Shareholder accordingly (such notice as a Compensation Notice). Subject to the immediately following sentence, the Company and each
Responsible Shareholder, as applicable, shall pay its portion of cash compensation to such New Investor no later than 10 days after the Compensation Notice
is delivered. Notwithstanding anything to the contrary herein, if the Sequoia Portion is not more than the Gopher Portion, Sequoia shall only be liable to pay
Sequoia Portion to Gopher in accordance with the payment schedule to be agreed by Gopher and Sequoia and Gopher shall have the right to request other
Responsible Shareholders to pay the deficit between the Gopher Portion and the Sequoia Portion. For purpose of this Section 6.02(e), Sequoia Portion
means the portion of cash compensation Sequoia shall be liable for, which shall be the product of all cash compensation payable to all New Investors by all
Responsible Shareholders (for the avoidance of doubt, including Sequoia) multiplied by Sequoias shareholding percentage in the Company among all
Responsible Shareholders (calculated on a fully-diluted and as-converted basis) as at the consummation of the Qualified IPO; and Gopher Portion means
the portion of cash compensation Gopher shall be entitled to, which shall be the product of all cash compensation payable to all New Investors by all
Responsible Shareholders (for the avoidance of doubt, including Sequoia) multiplied by Gophers shareholding percentage in the Company among all New
Investors (calculated on a fully-diluted and as-converted basis) as at the consummation of the Qualified IPO.
(f)
To the extent that none of the Preferred IPO Adjustments is permitted by the Applicable Law (including the Applicable Law of the place of
listing), if such New Investor elects share compensation, it shall set forth in the IPO Adjustment Notice (i) the class of Company Securities and total share
number of each class to be transferred to such
35
New Investor, (ii) its calculation in reasonable detail and (iii) transferees name and address. The Company shall, within five days after its receipt of the IPO
Adjustment Notice, calculate share compensation each Responsible Shareholder is liable on a pro rata basis in proportion to each Responsible Shareholders
shareholding percentage in the Company (calculated on a fully-diluted and as-converted basis) as at the consummation of the Qualified IPO and send the
Compensation Notice to each Responsible Shareholder accordingly. Within five days after the Company sends the Compensation Notice, each Responsible
Shareholder shall deliver its original share certificate(s) to the Company for cancellation or in exchange for new share certificate(s), as the case may be, and
execute and deliver all documents necessary or desirable to effectuate the share transfer (including the instrument of transfer in the form attached hereto as
Exhibit C) to such New Investor or the Company, as applicable. The Company shall issue share certificate(s) to the transferee designated by such New
Investor in the IPO Adjustment Notice and have the register of members updated within two days after it receives the executed instrument of transfer from
each Responsible Shareholder.
(g)
The parties hereto agree to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable to
effectuate the IPO Adjustments as requested by any New Investor, including (i) voting all of its Company Securities or execute proxies or written consents, as
the case may be, and (ii) preparing and filing as promptly as practicable with any Governmental Authority or other third party all documentation to effect all
necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents.
(h)
Notwithstanding anything contained herein to the contrary, none of the Shareholders shall have any right under Article 4 for issue or
Transfer of any Company Securities pursuant to an IPO Adjustment.
Section 6.03.
Future Funding. (a) The Board shall from time to time evaluate the capital needs of the Group, and in the event it is determined
that such capital needs shall be financed through further equity issuances by the Company, such issuances shall be subject to the provisions in Section 4.03.
(b)
From the date hereof, if any party (including any Principal and any Existing Institutional Shareholder) acquiring any Company Securities
has been granted any more preferential treatment compared with those rights the New Investors are entitled under this Agreement and other Transaction
Documents, the Company and the Founder shall procure such preferential treatment to be applied to each New Investor equally based on the overall
consideration and negotiation taking into specific terms and conditions of such additional funding and investment. The Company and the Founder shall
provide all documents (including letter of intent, term sheets and definitive transaction documents) relating to or in connection with all such funding and
investment to the New Investors.
Section 6.04.
Dividend Policy. (a) Subject to the Applicable Laws, the Board may from time to time determines to declare and pay dividends to
any of the Principals and the Existing Institutional Shareholders, each New Investor shall have the same rights to dividends distribution as such other
Shareholders in proportion to the Company
36
Securities held by such New Investor (including all Preferred Shares held by such New Investor on an as-converted to Ordinary Share basis).
(b)
In the event that a Qualified IPO has not been completed by the end of 2018, Sequoia shall, at any time from the year of 2019, have the
right to request the Company to, and, unless otherwise agreed by the Company and Sequoia upon such request the Company shall, declare and authorize
payment of dividends in cash to all Shareholders on an annual basis out of the funds of the Company lawfully available therefore, amounting to no less than
50% of the aggregate amount of the funds of the Company lawfully available for declaration of dividends for the applicable year.
Section 6.05.
Anti-Dilution Protection. The Company covenants to each New Investor that any issue of any Company Securities for
implementation of the Excluded Issuance (including any adjustment of per share issue price or number of Companies Securities to be issued as contemplated
by the relevant transaction documents thereof), regardless of the date of completion, shall not dilute each New Investors shareholding percentage of
Companies Securities as at each Closing. For purpose of this Section 6.05, calculation of each New Investors shareholding percentage of the Company
Securities as at each Closing shall take into account the issuance of 16,800,000 shares of Ordinary Shares as contemplated by the Excluded Issuance as if
such issuance has been consummated as immediately before the applicable Closing.
Section 6.06.
Confidentiality. (a) Each Shareholder agrees that Confidential Information furnished and to be furnished to it has been and may
in the future be made available in connection with such Shareholders investment in the Company. Each Shareholder agrees that it shall use, and that it shall
cause any Person to whom Confidential Information is disclosed pursuant to clause (i) below to use, the Confidential Information only in connection with its
investment in the Company and not for any other purpose (including to disadvantage competitively the Company, any of its Affiliates or any other
Shareholder). Each Shareholder further acknowledges and agrees that it shall not disclose any Confidential Information to any Person, except that
Confidential Information may be disclosed:
(i)
to such Shareholder and its Affiliates and their respective Representatives in the normal course of the performance of their duties
or to any financial institution providing credit to such Shareholder;
(ii)
to the extent required by any Applicable Law (including complying with any oral or written questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar process to which a Shareholder is subject; provided that such
Shareholder agrees to give the Company prompt notice of such request(s), to the extent practicable, so that the Company may seek an appropriate
protective order or similar relief (and the Shareholder shall cooperate with such efforts by the Company, and shall in any event make only the
minimum disclosure required by such Applicable Law));
(iii)
to any Person to whom such Shareholder is contemplating a Transfer of its Company Securities; provided that such Transfer would
not be in
37
violation of the provisions of this Agreement and such potential transferee is advised of the confidential nature of such information and agrees to be
bound by a confidentiality agreement consistent with the provisions hereof;
(iv)
to any regulatory authority to which the Shareholder or any of its Affiliates is subject; provided that such authority is advised of
the confidential nature of such information;
(v)
to the extent related to the tax treatment and tax structure of the transactions contemplated by this Agreement (including all
materials of any kind, such as opinions or other tax analyses that the Company, its Affiliates or its Representatives have provided to such
Shareholder relating to such tax treatment and tax structure); provided that the foregoing does not constitute an authorization to disclose the
identity of any existing or future party to the transactions contemplated by this Agreement or their Affiliates or Representatives, or, except to the
extent relating to such tax structure or tax treatment, any specific pricing terms or commercial or financial information; or
(vi)
if the prior written consent of the Board shall have been obtained.
Nothing contained herein shall prevent the use (subject, to the extent possible, to a protective order) of Confidential Information in connection with the
assertion or defense of any claim by or against the Company or any Shareholder.
(b) Confidential Information means any information concerning the Company or any Persons that are or become its Subsidiaries or the
financial condition, business, operations or prospects of the Company or any such Persons in the possession of or furnished to any Shareholder (including by
virtue of its present or former right to designate a director of the Company); provided that the term Confidential Information does not include information
that (i) is or becomes generally available to the public other than as a result of a disclosure by a Shareholder or its directors, officers, employees, stockholders,
members, partners, agents, counsel, advisers or other representatives (all such persons being collectively referred to as Representatives) in violation of this
Agreement or other Transaction Documents, (ii) was available to such Shareholder on a non-confidential basis prior to its disclosure to such Shareholder or its
Representatives by the Company, (iii) becomes available to such Shareholder on a non-confidential basis from a source other than the Company after the
disclosure of such information to such Shareholder or its Representatives by the Company, which source is (at the time of receipt of the relevant information)
not, to the best of such Shareholders Knowledge, bound by a confidentiality agreement with (or other confidentiality obligation to) the Company or another
Person or (iv) is independently developed by such Shareholder without violating any confidentiality agreement with, or other obligation of secrecy to, the
Company.
Section 6.07.
Noncompetition and Non-Solicitation. (a) Each Key Shareholder agrees and covenants that from the date hereof until such Person
or his Affiliates (including each of the management, directors and employees of such Affiliates) are no longer shareholders, directors, officers or employees of
any Group Companies or their respective Affiliates and within two full years afterwards, such Person shall not, and shall
38
cause any of its Affiliates (including shareholders, directors, officers and employees of such Affiliates, as applicable) not to, engage, either directly or
indirectly, as a principal or for his or its own account or solely or jointly with others, or as shareholders in any corporation or joint stock association, or
otherwise enjoy any economic interests or benefits, in any business that competes with the business currently and proposed to be conducted by the Group
Companies, provided that nothing herein shall prohibit a Key Shareholder or its Affiliates (including each of the management, directors and employees of
such Affiliates) from acquiring or holding Equity Securities of a Competitor whose Equity Securities are traded on a national or regional stock exchange or
on the over-the-counter market so long as such Persons ownership represents less than 1% of such Competitors Equity Securities on a fully diluted basis as
reported by such Competitor as of December 31 of the preceding year.
(b)
(i) WP agrees and covenants that as long as it holds not less than 1% of the Equity Securities of any Group Companies (calculated on a
fully-diluted and as-converted basis), and (ii) each of Gopher and Sequoia agrees and covenants that as long as Gopher and Sequoia jointly hold not less than
1% of the Equity Securities of any Group Companies (calculated on a fully-diluted and as-converted basis), neither it nor its Restricted Affiliates shall invest,
either directly or indirectly, for its own account or jointly with others, in any Competitors courier / express delivery services business in the PRC (the
Competitors Competing Business); provided that nothing herein shall prohibit such New Investor or their respective Restricted Affiliates from acquiring
or holding Equity Securities of a Competitor whose Equity Securities are traded on a national or regional stock exchange or on the over-the-counter market
so long as its and/or its Restricted Affiliates ownership represents less than 1% of such Competitors Equity Securities on a fully diluted basis as reported by
such Competitor as of December 31 of the preceding year.
(c)
SC agrees and covenants that as long as it holds not less than 0.5% of the Equity Securities of any Group Companies (calculated on a fullydiluted and as-converted basis), neither it nor its Restricted Affiliates shall invest, either directly or indirectly, for its own account or jointly with others, in
any Competitors Competing Business; provided that nothing herein shall prohibit SC or its Restricted Affiliates from acquiring or holding Equity Securities
of a Competitor whose Equity Securities are traded on a national or regional stock exchange or on the over-the-counter market so long as its and/or its
Restricted Affiliates ownership represents less than 1% of such Competitors Equity Securities on a fully diluted basis as reported by such Competitor as of
December 31 of the preceding year.
(d)
Hillhouse ZT Holdings Limited agrees and covenants that as long as it holds not less than 0.5% of the Equity Securities of any Group
Companies (calculated on a fully-diluted and as-converted basis), neither it nor its Restricted Affiliate shall invest, either directly or indirectly, for its own
account or jointly with others, in any Competitors Competing Business; provided that nothing herein shall prohibit Hillhouse ZT Holdings Limited or its
Restricted Affiliate from acquiring or holding Equity Securities of a Competitor whose Equity Securities are traded on a national or regional stock exchange
or on the over-the-counter market so long as its and/or its Restricted Affiliates ownership
39
represents less than 5% of such Competitors Equity Securities on a fully diluted basis as reported by such Competitor as of December 31 of the preceding
year.
(e)
Each of the Key Shareholders agrees and covenants that, from the date hereof through the third anniversary of the First Closing Date,
without the prior written consent of the New Investors, such Person and its Affiliates (including each of the management, directors and employees of such
Affiliates) shall not, directly or indirectly, as a principal or for its or his own account or solely or jointly with others, solicit, induce or hire, or enter into
employment contract with any Key Employee or receive or accept the performance of services by any Key Employee, in each case which may result in the
termination of such Key Employees employment with the relevant Group Company.
Section 6.08.
Books and Records. (a) The Company shall, and all Shareholders shall use its reasonably best efforts to cause the Company to,
keep proper books of records, in which full and correct entries shall be made of all financial transactions and the assets and business of the Company in
accordance with the Accounting Standards, applied on a consistent basis.
(b)
Each the Company and the Shareholders shall use its reasonably best efforts to procure each Group Company to keep proper books of
records an account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Company in accordance with
the accounting standards as required by the Applicable Law, applied on a consistent basis.
(c)
The Company will, and the Company will procure each other Group Company to, give each of the Shareholders, their respective counsel,
auditors and other authorized representatives access, during regular business hours, to its offices, internal whistleblowers, properties, books and records,
compliance training logs and investigation records and instruct its employees, counsel, auditor and other advisors to cooperate with the Shareholders in their
investigation of the Group Companies.
Section 6.09.
Reports. The Company agrees to furnish to each Financial Investor, for so long as it owns any Company Securities:
(a)
as soon as practicable after the end of each fiscal year, in any event, within 120 days thereafter, a consolidated or combined balance sheet of
the Company and other Group Companies, as of the end of such fiscal year, and consolidated or combined statements of income and cash flows of the
Company and other Group Companies, for such year, prepared in English by the independent auditor of the Company, which shall be a Big 4 Accounting
Firm, in accordance with the Accounting Standards; and
(b)
as soon as practicable and, in any event, within 45 days after the end of each fiscal quarter, the unaudited consolidated or combined balance
sheet of the Company and other Group Companies as at the end of such quarter and the related unaudited statement of operations and cash flow for such
quarter and for the portion of the fiscal year then ended, in each case prepared in accordance with the Accounting Standards, or with respect to any Group
Company that is a PRC Person, in accordance with PRC GAAP.
40
Section 6.10.
Limitations on Subsequent Registration Rights. The Company agrees that it shall not enter into any agreement with any holder or
prospective holder of any securities of the Company (a) that would allow such holder or prospective holder to include such securities in any Demand
Registration or Piggyback Registration unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such
registration only to the extent that their inclusion would not reduce the amount of the Registrable Securities of all Financial Investors included therein or
(b) on terms otherwise more favorable than this Agreement. The Company also represents and warrants to each Shareholder that it has not previously entered
into any agreement with respect to any of its securities granting any registration rights to any Person.
Section 6.11.
Related Party Transactions. The Company shall not, and shall not permit any of the other Group Companies to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase, lease or otherwise acquire any property or assets from,
or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with or for the benefit of, any Affiliate of the
Company, any Shareholder or any Related Party of any Shareholder, except for (i) such transaction on arms-lengths basis, (ii) any transaction approved
pursuant to Section 2.07(b) and (iii) any transaction between any Group Company and Standard Chartered Bank and / or its Affiliates (acting as a bank) in
their respective ordinary course lending business.
Section 6.12.
Conflicting Agreements. The Company and each Shareholder represents and agrees that it shall not (a) grant any proxy or enter
into or agree to be bound by any voting trust or agreement with respect to the Company Securities, except as expressly contemplated by this Agreement,
(b) enter into any agreement or arrangement of any kind with any Person with respect to any Company Securities inconsistent with the provisions of this
Agreement or for the purpose or with the effect of denying or reducing the rights of any other Shareholder under this Agreement, including agreements or
arrangements with respect to the Transfer or voting of its Company Securities or (c) act, for any reason, as a member of a group or in concert with any other
Person in connection with the Transfer or voting of its Company Securities in any manner that is inconsistent with the provisions of this Agreement.
Section 6.13.
Compliance with Circular 37. Each Shareholder, to the extent it is subject to or under the jurisdiction of Circular 37, hereby
covenants to the Company that it shall fully comply with in all respects with Circular 37.
Section 6.14.
Compliance with Laws. (a) The Company shall, and shall cause each other Group Company to, and each Shareholder shall cause
each Group Company to comply with all Applicable Laws, including the Anti-Bribery Law, laws regarding foreign investments, corporate registration and
filing, courier business, road transportation, foreign exchange, intellectual property rights, labor and social welfare and taxation, and obtain, make and
maintain in effect, all Consents from any Governmental Authorities or other Person required in respect of the due and proper establishment and operations of
each of the Company and any other Group Company as now conducted or proposed to be conducted in accordance with all Applicable Laws.
41
(b)
Each of the Group Company represents that it shall not, and shall not permit any of its Subsidiaries or Affiliates or any of its or their
respective directors, officers, managers, employees, independent contractors, representatives or agents to, promise, authorize or make any payment to, or
otherwise contribute any item of value to, directly or indirectly, to any third party, including any Non-US Public Official (as defined in applicable AntiBribery Laws), in each case, in violation of any Anti-Bribery Laws. Each of the Group Companies further represents that it shall, and shall cause each of its
Subsidiaries and Affiliates to, cease all of its or their respective activities, as well as remediate any actions taken by such Group Company, its Subsidiaries or
Affiliates, or any of their respective directors, officers, managers, employees, independent contractors, representatives or agents in violation of any AntiBribery Laws. Each of the Group Company further represents that it shall, and shall cause each of its Subsidiaries and Affiliates to, maintain systems of
internal controls (including, but not limited to, accounting systems, purchasing systems and billing systems) to ensure compliance with the Anti-Bribery
Laws. Each of the Shareholders shall procure (insofar as it lawfully can) that no Group Company engages in any activity or conduct that would result in a
violation of any Anti-Bribery Laws. Each of the Shareholders shall further procure (insofar as it lawfully can) that each of the Group Companies shall, within
6 months after the First Closing, duly adopt procedures to prevent bribery that are reasonably acceptable to each New Investor (the Anti-Bribery
Procedures) and the Internal Control Plan.
(c)
Each Shareholder agrees to vote, or cause to be voted, all shares owned or held by such Shareholder, or over which such Shareholder has
voting Control, from time to time and at all times, in whatever manner as shall be necessary to ensure that (i) at each annual or special meeting of the
Shareholders at which an election of Directors is held or pursuant to any written consent of the Shareholders, no Restricted Party is elected to the Board and
(ii) any Director that becomes a Restricted Party shall be removed from the Board immediately and replaced according to the provisions of this Agreement.
(d)
Each Shareholder covenants that it shall not at any time conduct, or cause or permit any Group Company to conduct, any business with any
Restricted Party or that could cause any Group Company or any Shareholder to become a Restricted Party.
(e)
Each Shareholder agrees to cause each Group Company to adopt and maintain policies and procedures designed to ensure compliance with
applicable Sanctions.
(f)
Without limiting the generality of the foregoing, each Shareholder and the Company shall ensure that all filings and registrations with
Governmental Authorities in the PRC so required by them shall be duly completed in accordance with the relevant rules and regulations.
(g)
The Company covenants to each New Investor that it will not, directly or indirectly, use the proceeds of any investment provided by the
New Investors, or lend, contribute or otherwise make available such proceeds to any other Group Company, joint venture partner or other individual or
entity: (i) to fund or facilitate any activity or business of or with any individual or entity or in any country or territory that, at the time of such funding or
facilitation, is the subject of Sanctions; or (ii) in any other manner that
42
will result in a violation of Sanctions by any individual or entity (including any individual or entity participating in the investment transaction as described
herein, whether as advisor, investor or otherwise).
(h)
The Company covenants to each New Investor that it shall promptly notify such New Investor when it is aware of violation of any
Compliance Laws by it or any other Group Company or any director, officer or employees of the foregoing, whether pending, alleged, threatened, settled or
confirmed.
Section 6.15.
No Promotion. Each other parties hereto agree that it will not, without the prior written consent of the applicable New Investor,
use, publish, reproduce or refer to the name of such New Investor and its Affiliates, or any name, trade name, trademark, service mark, logo, symbol or any
abbreviation of such New Investor and its Affiliates (including (i) Warburg Pincus, WP, and Huaping with respect to WP, (ii) Hillhouse, and
Gaoling with respect to Hillhouse, (iii) Standard Chartered, Standard Chartered Bank, Standard Chartered Private Equity, Standard Chartered Private Equity
(Mauritius) III Limited, SC, SCB, SCPE, SCPEM, , , and Zhada with respect to SC, (iv) Sequoia Capital, Sequoia, , and
Hongshan with respect to Sequoia, and (v) Gopher, and Gefei with respect to Gopher) in any discussion, documents or materials for marketing or other
purposes.
Section 6.16.
Captive Structure. In the event that the Captive Structure is terminated or collapses for any reason, upon the request of any New
Investor (other than WP), the Company and each of the Principals shall use their respective best efforts to procure that such New Investors investment in the
Company (including all of the rights and privileges granted to such New Investor under this Agreement and other Transaction Documents) shall be
exchanged for equity interests with equivalent rights and privileges in the Domestic Company in accordance with the implementation measures as agreed by
the Company and such New Investor.
ARTICLE 7
MISCELLANEOUS
Section 7.01.
Binding Effect; Assignability; Benefit. (a) This Agreement shall inure to the benefit of and be binding upon the parties hereto and
their respective heirs, successors, legal representatives and permitted assigns. Any Shareholder that ceases to own beneficially any Company Securities shall
cease to be bound by the terms hereof (other than (i) the provisions of Article 5 applicable to such Shareholder with respect to any offering of Registrable
Securities completed before the date such Shareholder ceased to own any Company Securities and (ii) Section 6.06 and Article 7.
(b)
Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by any party
hereto pursuant to any Transfer of Company Securities or otherwise, except that any Person acquiring Company Securities from any Shareholder in a Transfer
in compliance with Article 3 (but excluding any such Transfer made in a Public Offering) or any Person acquiring Company Securities that is required or
permitted by the terms of this Agreement or any employment agreement or share purchase, option, share option or other compensation plan of the Company
or any
43
other Group Company to become a party hereto shall (unless already bound hereby) execute and deliver to the Company an agreement to be bound by this
Agreement in the form of Exhibit A hereto and shall thenceforth be a Shareholder.
(c)
Nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto, and their respective
heirs, successors, legal representatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
Section 7.02.
Notices. Any notice required or permitted pursuant to this Agreement shall be given in writing and shall be given either
personally or by sending it by next-day or second-day courier service, fax, electronic mail or similar means to the address of the relevant party as showed on
Schedule VI (or at such other address as such party may designate by 15 days advance written notice to the other parties to this Agreement given in
accordance with this Section). Where a notice is sent by next-day or second-day courier service, service of the notice shall be deemed to be effected by
properly addressing, pre-paying and sending by next-day or second-day service through an internationally-recognized courier a letter containing the notice,
with a written confirmation of delivery, and to have been effected at the earlier of (a) delivery (or when delivery is refused) and (b) expiration of two Business
Days after the letter containing the same is sent as aforesaid. Where a notice is sent by fax or electronic mail, service of the notice shall be deemed to be
effected by properly addressing, and sending such notice through a transmitting organization, with a written confirmation of delivery, and to have been
effected on the day the same is sent as aforesaid, if such day is a Business Day and if sent during normal business hours of the recipient, otherwise the next
Business Day. Any Person that becomes a Shareholder shall provide its address and fax number to the Company, which shall promptly provide such
information to each other Shareholder.
Section 7.03.
Waiver; Amendment; Termination. (a) Subject to Section 7.03(b), no provision of this Agreement may be amended, waived or
otherwise modified except by an instrument in writing executed by (i) the Company, (ii) the Shareholders holding not less than two-thirds of the voting
power of the Ordinary Shares then issued and outstanding (which shall include Sequoia), and (iii) the New Investors Holding a Majority in Interest. In
addition, any party may waive any provision of this Agreement with respect to itself by an instrument in writing executed by the party against whom the
waiver is to be effective.
(b)
In addition, any amendment, waiver or modification of any provision of this Agreement that would adversely affect any Shareholder in a
manner that is disparate from the manner in which it affects other Shareholders may be effected only with the consent of the Shareholder so affected.
Section 7.04.
Fees and Expenses. Except as otherwise provided in the Share Purchase Agreement, all costs and expenses incurred in connection
with the preparation of this Agreement, or any amendment or waiver hereof, and the transactions contemplated hereby shall be paid by the party incurring
such costs or expenses.
44
Section 7.05.
Governing Law. This Agreement shall be governed by and construed under the laws of Hong Kong, without regard to principles of
conflict of laws thereunder.
Section 7.06.
Dispute Resolution. (a) Any dispute, controversy or claim (each, a Dispute) arising out of, relating to or in connection with this
Agreement, or the interpretation, breach, termination, validity or invalidity thereof, shall be referred to arbitration upon the demand of any party to the
dispute with notice (the Arbitration Notice) to the other parties.
(b)
The Dispute shall be settled by arbitration in Hong Kong by the Hong Kong International Arbitration Centre (the HKIAC) in accordance
with the Hong Kong International Arbitration Centre Administered Arbitration Rules (the HKIAC Rules) in force when the Arbitration Notice is submitted
in accordance with the HKIAC Rules. To the extent that the HKIAC Rules are in conflict with any provisions of this Agreement, including the provisions
concerning the appointment of the arbitrators, the provisions of this Section 7.06 shall prevail.
(c)
There shall be three arbitrators, of whom one arbitrator shall be appointed by the claiming party(ies), one arbitrator appointed by the
responding party(ies), and the third arbitrator shall be appointed by the two arbitrators designated by the parties. If a party(ies) fails to designate an arbitrator
within 30 days after designation of an arbitrator by the other party(ies), the second arbitrator shall be appointed by the HKIAC Council. If the two arbitrators
designated by the parties are unable to agree upon a third arbitrator within 30 days after the first two arbitrators are appointed, the third arbitrator shall be
appointed by the HKIAC Council.
(d)
Each party to the arbitration shall cooperate with the other parties to the arbitration in making full disclosure of and providing complete
access to all information and documents requested by the other parties in connection with such arbitral proceedings, subject only to any confidentiality
obligations binding on such party.
(e)
The award of the arbitral tribunal shall be final and binding upon the parties thereto, and the prevailing party may apply to a court of
competent jurisdiction for enforcement of such award.
(f)
Any party to the Dispute shall be entitled to seek preliminary injunctive relief, if possible, from any court of competent jurisdiction pending
the constitution of the arbitral tribunal.
(g)
During the course of the arbitral tribunals adjudication of the Dispute, each party shall continue to perform its respective obligation and
duty herein except with respect to the part in dispute and under adjudication.
Section 7.07.
Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall
45
become effective when each party hereto shall have received a counterpart hereof signed by all of the other parties hereto.
Section 7.08.
Entire Agreement. This Agreement and other Transaction Documents (as supplemented), together with all schedules and exhibits
hereto and thereto, constitute the full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof, and supersede
all other agreements between or among any of the parties with respect to the subject matters hereof and thereof.
Section 7.09.
Severability. If any term, provision, covenant or restriction of this Agreement is held by the HKIAC, a court of competent
jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.
Section 7.10.
Specific Enforcement. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to
enforce specifically the performance of the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity.
Section 7.11.
Effective Date; Termination. This Agreement shall become effective on the date hereof and shall continue in force until the earlier
to occur of (a) with respect to any Shareholder, the date upon which such Shareholder ceases to hold any Company Securities and (b) any date agreed upon in
writing by all parties hereto.
Section 7.12.
Effect of Termination. If this Agreement is terminated in accordance with Section 7.11, it shall be of no further force and effect to
the Shareholder ceasing to hold any Company Securities or all parties hereto, as the case may be, except that the provisions of this Section 7.12 and those
provisions of Sections 5 .05 (Indemnification by the Company), 5 .06 (Indemnification by Participating Shareholders), 5 .07 (Conduct of Indemnification
Proceedings), 5 .08 (Contribution), 5 .10 (Other Indemnification), 6 .02 (IPO Adjustment), 6 .06 (Confidentiality), 6 .07(a) (Noncompetition and NonSolicitation), 7 .02 (Notices), 7 .05 (Governing Law) and 7 .06 (Dispute Resolution), provided that the termination will not relieve any party from any liability
for any breach of this Agreement prior to such termination.
[Signature page follows]
46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and
year first above written.
By:
/s/ Lai Meisong

Name:
Lai Meisong
Title
Director
[Signature Page to Shareholders Agreement]
ZTO LMS HOLDING LIMITED
By:
/s/ Lai Meisong

Name:
Lai Meisong
Title:
Director
LAI MEISONG
By:
/s/ Lai Meisong
ZTO LJF HOLDING LIMITED
By:
/s/ Lai Jianfa

Name:
Lai Jianfa
Title:
Director
LAI JIANFA
By:
/s/ Lai Jianfa
ZTO WJL HOLDING LIMITED
By:
/s/Wang Jilei
Name:
Wang Jilei
Title:
Director
WANG JILEI
By:
/s/ Wang Jilei
ZTO HXL HOLDING LIMITED
By:
/s/ Hu Xiangliang
Name:
Hu Xiangliang
Title:
Director
HU XIANGLIANG
By:
/s/Hu Xiangliang
IN WITNESS WHEREOF. the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and
ZTO ZSC HOLDING LIMITED
By:
/s/ Zhang Shunchang

Name:
Zhang Shunchang
Title:
Director
ZTO SXB HOLDING LIMITED
By:
/s/ Shang Xuebing

Name:
Shang Xuebing
Title:
Director
IN WITNESS WHEREOF. the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the dayand year first above written.
ZTO QFX HOLDING LIMITED
By:
/s/ Qiu Feixiang

Name:
Qiu Feixiang
Title:
Director
ZTO LBX HOLDING LIMITED
By:
/s/ Lan Baixi

Name:
Lan Baixi
Title:
Director
ZTO MF HOLDING LIMITED
By:
/s/ Meng Feng

Name:
Meng Feng
Title:
Director
year first above ritten.
ZTO XHJ HOLDING LIMITED
By:
/s/ Xu Hongjun
Name:
Xu Hongjun
Title:
Director
ZTO ZYR HOLDING LIMITED
By:
/s/ Zhang Yaoren

Name:
Zhang Yaoren
Title:
Director
ZTO WSL HOLDING LIMITED
By:
/s/ Wang Senliang

Name:
Wang Senliang
Title:
Director
ZTO ZYW HOLDING LIMITED
By:
/s/ Zeng Youwang

Name:
Zeng Youwang
Title:
Director
ZTO HZR HOLDING LIMITED
By:
/s/ Hong Zongrui

Name:
Hong Zongrui
Title:
Director
ZTO HLJ HOLDING LIMITED
By:
/s/ Huang Lijun

Name:
Huang Lijun
Title:
Director
ZTO LZM HOLDING LIMITED
By:
/s/ Lin Zhiming

Name:
Lin Zhiming
Title:
Director
ZTO ZGF HOLDING LIMITED
By:
/s/ Zhu Genfu

Name:
Zhu Genfu
Title:
Director
ZTO WR HOLDING LIMITED
By:
/s/ Wang Rui

Name:
Wang Rui
Title:
Director
ZTO XMY HOLDING LIMITED
By:
/s/ Xu Minye
Name:
Xu Minye
Title:
Director
ZTO CSF HOLDING LIMITED
By:
/s/ Chen Shunfeng

Name:
Chen Shunfeng
Title:
Director
ZTO CFS HOLDING LIMITED
By:
/s/ Cui Fushan

Name:
Cui Fushan
Title:
Director
ZTO ZJSD HOLDING LIMITED
By:
/s/ Zhang Jian

Name:
Zhang Jian
Title:
Director
ZTO PSM HOLDING LIMITED
By:
/s/ Pan Shunmei

Name:
Pan Shunmei
Title:
Director
ZTO YXL HOLDING LIMITED
By:
/s/ Yuan Xiaoliang

Name:
Yuan Xiaoliang
Title:
Director
ZTO LJC HOLDING LIMITED
By:
/s/ Lai Jianchang

Name:
Lai Jianchang
Title:
Director
ZTO MS HOLDING LIMITED
By:
/s/ Lai Mingsong

Name:
Lai Mingsong
Title:
Director
ZTO ZHF HOLDING LIMITED
By:
/s/ Zhou Haifeng

Name:
Zhou Haifeng
Title:
Director
year first above NN ritten.
ZTO XJX HOLDING LIMITED
By:
/s/ Xi Jiangxiu
Name:
Xi Jiangxiu
Title:
Director
ZTO XKM HOLDING LIMITED
By:
/s/ Xiao Kunman

Name:
Xiao Kunman
Title:
Director
ZTO YWJ HOLDING LIMITED
By:
/s/ Yao Weijun

Name:
Yao Weijun
Title:
Director
ZTO YB HOLDING LIMITED
By:
/s/ Yang Bo
Name:
Yang Bo
Title:
Director
ZTO ZJGZ HOLDING LIMITED
By:
/s/ Zhang Jian

Name:
Zhang Jian
Title:
Director
ZTO PYF HOLDING LIMITED
By:
/s/ Pan Yongfang

Name:
Pan Yongfang
Title:
Director
ZTO WLM HOLDING LIMITED
By:
/s/ Wu Lemou
Name:
Wu Lemou
Title:
Director
ZTO TJY HOLDING LIMITED
By:
/s/Teng Jianying
Name:
Teng Jianying
Title:
Director
ZTO LBZ HOLDING LIMITED
By:
/s/ Li Baozhen
Name:
Li Baozhen
Title:
Director
ZTO MSM HOLDING LIMITED
By:
/s/ Ma Shumin
Name:
Ma Shumin
Title:
Director
ZTO WW HOLDING LIMITED
By:
/s/ Wang Wei

Name:
Wang Wei
Title:
Director
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be ctu:y executed try- their respe.ctiw autnorized officers as of the day
and year first above wriccri.
ZTO CZW HOLDING LIMITED
By:
/s/ Chen Ziwen

Name:
Chen Ziwen
Title:
Director
ZTO RDY HOLDING LIMITED
By:
/s/ Ren Dianyuan

Name:
Ren Dianyun
Title:
Director
GOPHER CHINA S.O. PROJECT LIMITED
By:
/s/ Liu Hui

Name:
Liu Hui
Title:
Director
MAX ALPHA LIMITED
By:
/s/ Zhang Lianqing

Name:
Zhang Lianqing
Title:
Authorized SIgnatory
MAX BEYOND LIMITED
By:
/s/Zhang Lianqing
Name:
Zhang Lianqing
Title:
Authorized Signatory
ONYX GEM INVESTMENT HOLDINGS LIMITED
By:
/s/ Timothy J. Curt

Name:
Timothy J. Curt
Title:
Director
HILLHOUSE ZT HOLDINGS LIMITED
By:
/s/ Meng Shan

Name:
Meng Shan
Title:
Director
STANDARD CHARTERED PRIVATE EQUITY (MAURITIUS) III
LIMITED
By:
/s/ Andrew Dawson

Name:
Andrew Dawson
Title:
Director
SCHEDULE I
LIST OF PRINCIPALS
Principal
ZTO LMS Holding Limited

ZTO LJF Holding Limited
ZTO WJL Holding Limited
ZTO HXL Holding Limited
ZTO ZSC Holding Limited
ZTO SXB Holding Limited
ZTO QFX Holding Limited
ZTO LBX Holding Limited
ZTO MF Holding Limited
ZTO XHJ Holding Limited
ZTO ZYR Holding Limited
ZTO WSL Holding Limited
ZTO ZYW Holding Limited
ZTO HZR Holding Limited
ZTO HLJ Holding Limited
ZTO LZM Holding Limited
ZTO ZGF Holding Limited
ZTO WR Holding Limited
ZTO XMY Holding Limited
ZTO CSF Holding Limited
ZTO CFS Holding Limited
ZTO ZJSD Holding Limited
ZTO PSM Holding Limited
ZTO YXL Holding Limited
ZTO LJC Holding Limited
Jurisdiction
British Virgin Islands

Principal
ZTO MS Holding Limited

ZTO ZHF Holding Limited
ZTO XJX Holding Limited
ZTO XKM Holding Limited
ZTO YWJ Holding Limited
ZTO YB Holding Limited
ZTO ZJGZ Holding Limited
ZTO PYF Holding Limited
ZTO CZW Holding Limited
ZTO RDY Holding Limited
Jurisdiction

SCHEDULE II
LIST OF EXISTING INSTITUTIONAL SHAREHOLDERS
Name
Max Alpha Limited

Max Beyond Limited
ZTO WLM Holding Limited
ZTO LBZ Holding Limited
ZTO MSM Holding Limited
ZTO WW Holding Limited
ZTO TJY Holding Limited
Jurisdiction
Cayman Islands
Cayman Islands
SCHEDULE III
LIST OF NEW INVESTORS
Name
Onyx Gem Investment Holdings Limited

Standard Chartered Private Equity (Mauritius) III Limited
Jurisdiction

Mauritius
SCHEDULE IV
LIST OF COMPETITORS
1.
2.
3.
4.
5.
6.
7.
8.
9.
EMS
SCHEDULE V
New Investor
WP
Restricted Affiliates
(a) Warburg Pincus LLC;

(b) any fund managed by Warburg Pincus LLC which is still in its investment period as at the date of this Agreement in accordance
with the terms of the relevant fund documents (exclusive of Warburg Pincus Energy, L. P. and any future funds to be raised and
under the management of Warburg Pincus LLC);
(c) the general partner of such fund mentioned in (b) above; and
(d) any investment vehicle established and majority owned by such fund mentioned in (b) above.
SC
(a) Standard Chartered Principal Finance (Cayman) Limited;

(b) Standard Chartered Private Equity (Singapore) Pte. Ltd.;
(c) Standard Chartered Private Equity Limited;
(d) Standard Chartered Private Equity (Mauritius) Limited;
(e) Standard Chartered Private Equity (Mauritius) II Limited; and
(f) any investment vehicle established and majority owned by such companies mentioned in (a) to (e) above.
Hillhouse
(a) Hillhouse Fund II, L.P.
Sequoia
(a) Tianjin Sequoia Ju Ye Equity Investment Partnership (Limited Partnership)();

(b) Beijing Sequoia Xin Yuan Equity Investment Center (Limited Partnership) ());
(c) the general partner of such fund mentioned in (a) and (b) above; and
(d) any investment vehicle established and majority owned by such fund mentioned in (a) to (c) above.
Gopher
(a) Gopher China Harvest Fund LP; and

(b) Gopher China Special Opportunity Fund II LP.
SCHEDULE VI
ADDRESS FOR NOTICES
If to any Principal:
c/o ZTO Express Co., Ltd.
Address: No. 1685, Huazhi Road, Qingpu District
Shanghai 201708, China
Attention: Xu Feng
Fax: +86 21 59139333
Email: xufeng@zto.com
If to the Company and/or other Group Company:
Attention: Xu Feng
Fax: +86 21 59139333
If to Onyx Gem Investment Holdings Limited:
c/o Warburg Pincus LLC
Address: 450 Lexington Avenue, New York, NY, USA 10017
Attention: Timothy J. Curt/Tara ONeill
Fax: +1(21)878-9200
Email: timothy.curt@warburgpincus.com; tara.oneill@warburgpincus.com
With a copy to:
Warburg Pincus Asia LLC
Address: Suite 6703, Two IFC, Hong Kong
Attention: Andrew Chan
Fax: +(852)30103338
Email: andrew.chan@warburgpincus.com
If to Hillhouse ZT Holdings Limited:
Attention: Cao Wei
Address: Floor 28, Building B, PingAn International Financial Center, No. 1-3, Xinyuan South Road, Chaoyang District, Beijing 100027 PRC (
3B28)
Fax: +86-10-59520882
Email: wcao@hillhousetca.com
With a copy to:

Attention: Adam HORNUNG
Address: Suite 1608, One Exchange Square, 8 Connaught Place, Central, Hong Kong
Fax:+(852) 2179 1900
Email: Legal@hillhousecap.com
If to Standard Chartered Private Equity (Mauritius) III Limited:
c/o Abax Corporate Services Ltd.
Address: 6th Floor, Tower A, 1 CyberCity, Ebene, Mauritius
With a copy to:
Standard Chartered Principal Finance
Address: Marina Bay Financial Centre (Tower 1),
8, Marina Boulevard, Level 23
Singapore 018981
Fax: +(8610) 5918 6199
Email:gilbert.zeng@sc.com
Attention: Gilbert Zeng
If to Max Alpha Limited and / or Max Beyond Limited:
Address: 3606, China Central Place Tower 3
77 Jianguo Road, Beijing 100025, China
Attention: Liu Xing
Fax: +852 2501-5249
Email: liu@sequoiacap.com
If to Gopher China S.O. Project Limited:
Address: Room 903-4, Li Po Chun Chambers
189 Des Voeux Road, Central, Hong Kong
Attention: Annie Choy/ Lin Xiang
Fax: +852 3791 2282
Email: annie.choy@noahwm.hk; leo.lin@noahwm.hk
If to Hao Min:
Attention: Xu Feng
Fax: +86 21 59139333
SCHEDULE VII
PROTECTIVE MEASURES
I.
WP Designees shareholding percentage in the Domestic Company

WP Designee shall own 10,000 to 20,000 shares of the Domestic Company.
II.
Protection at Corporate Governance
1.
WP Director Appointment: Under the Control Documents and the shareholders agreement of the Domestic Company, each of the other shareholders of
the Domestic Company shall promise to vote for the director nominated by WP Designee to elect such nominee on the board of the Domestic Company.
2.
Board Level: The following clause will be included in the shareholders agreement and the articles of association of the Domestic Company before the
First Closing and become effective only in the event of (i) termination of the Control Documents for any reasons; or (ii) collapse of the Captive Structure.
The following key business decisions (Key Matters) of the Domestic Company and its subsidiaries (collectively the Domestic Group and each a
Domestic Group Member) will be approved by a simple majority of the board of directors of the Domestic Company (which must include the approval
of the director nominated by WP Designee):
(a) IPO of the Domestic Group;
(b) any amendment to, modification of or change in any Control Documents;
(c) any increase or deduction of the registered capital of the Domestic Company;
(d) merger, acquisition, division, reorganization, change of corporate form or other similar procedure of the Domestic Company;
(e) any amendment to the articles of association of the Domestic Company; and any amendment to the articles of association of any other Domestic
Group Member to the extent such amendments could reasonably be expected to adversely affect WP Designee rights or privileges in relation to the
onshore investment;
(f) any voluntary commencement of liquidation, dissolution or other similar procedure of the Domestic Company or any Material Domestic Group
Member, and Material Domestic Group Member means any Domestic Group Member (other than the Domestic Company) either gross revenue or
net income of which of the preceding financial year accounts for 5% or more of the total gross revenue or total net income of the Domestic Group of
the preceding financial year;
(g) termination or suspension of the business as currently conducted by the Domestic Group, taken as a whole, as of the date hereof or entry into a
complete new line of business substantially different from the business as conducted by the Domestic Group, taken as a whole, as of the date hereof;
(h) any amendment to, modification of or change in its Anti-Bribery Procedures or compliance process, policies and procedures covering Sanctions;
(i) the issuance price of any new issue of Equity Securities of the Domestic Company (excluding (A) any issue pursuant to any employee benefit plan,
employee stock option plan or similar plan in which the total Equity Securities to be reserved or issued account for not more than 3% of the then
outstanding Equity Securities (calculated on a fully-diluted and as-converted basis) and (B) any issue to the Strategic Investors which is not
primarily for equity financing purpose and in which the total Equity Securities to be issued account for no more than 15% of the then outstanding
Equity Securities (calculated on a fully-diluted and as-converted basis)) or any redemption, repurchase,
recapitalization, reclassification or combination of its Equity Securities if not on a pro rata basis with respect to all shareholders;
(j) entry into a transaction or a series of transactions with its Related Party that provides for payment to or from the Domestic Group Member of RMB200
million or more and on terms less favorable than those that could be obtained if such transaction were entered into with a third party on the armslength basis;
(k) any sale, transfer, lease, pledge or other disposition by any Domestic Group Member of any assets (tangible or intangible), businesses, interests or
properties, in a single transaction or a series of related transactions, with a value in the aggregate in excess of RMB200 million; or any sale, transfer
or other disposition by any Domestic Group Member of any Person whose gross revenue or net income of the preceding financial year accounts for
5% or more of the total gross revenue or net income of the Domestic Group of the preceding financial year;
(l) any provision of guarantee or security for a Person that is neither a Domestic Group Member nor a delivery hub or franchisee transacting with the
Domestic Group Members; or provision of loans providing for either (A) a total principal amount of RMB10 million or more to a single Person that
is not a Domestic Group Member or (B) a total principal amount of RMB30 million or more to all Persons that are not Domestic Group Members;
(m) any appointment or removal of the independent auditor of each Domestic Company who will be responsible to audit and opine on the consolidated
financial statements of the Domestic Company reflecting the financial position of the Domestic Group; or any material change in accounting
principles, except as required by law.
3.
Shareholders Level:
A unanimous shareholders approval would be required if the shareholders would like to amend or revise the articles of association of the Domestic
Company;
For the following Key Matters that fall under shareholders meetings authority (requiring two-third affirmative votes) under the PRC Company Law,
without the recommendation of the board to the shareholder meeting to approve such Key Matters, the shareholders meeting shall not discuss or
resolve or vote on such matters:
(a) any increase or deduction of the registered capital of the Domestic Company.
III.
Increase of Share Percentage at the Collapse of Captive Structure

Upon collapse of the Captive Structure for any reasons, (i) WP Designee, WP and/or any other individual or entity designated by WP then
shall have the right, at its sole discretion, to request the Domestic Company to issue new shares to WP Designee, WP and/or any other individual or
entity designated by WP then at the par value of the shares so that WP Designee, WP and/or any other individual or entity designated by WP then
will hold directly the exact same stake, (in terms of percentage interest), in the Domestic Company as it then holds in ZTO Express (Cayman) Inc. in
terms of percentage interest on a fully-diluted and as-converted basis; and (ii) WP Designee is entitled to freely transfer any or all of the shares of the
Domestic Company that WP Designee then holds to WP and/or any other individual or entity designated by WP and all other shareholders of the
Domestic Company shall waive all rights and privileges arising from or in connection with such equity transfer, including without limitation the
right of first refusal, whether under contract or by law.
IV.
Other Measures
When WP exits investment from the Company before the collapse of the Captive Structure, WP Designee shall be obligated to exit from the
Domestic Company by electing to (i) sell its shares in the Domestic Company to a third party, Mr. Lai Meisong or other individual shareholders, or
(ii) request the Domestic Company to repurchase such equity stake, in each case, at the investment cost for such shares paid by WP Designee. For
the avoidance of doubt, upon the election of WP Designee, Mr. Lai Meisong and the Domestic Company, as the case maybe, shall have the
obligation to purchase such shares offered by WP Designee at the investment cost for such shares paid by WP Designee.
Each party shall be responsible for all of its own costs and expenses incurred by it or on its behalf in connection with the transaction under
Section III and Section IV of this Schedule; provided that WP shall reimburse the Domestic Company, Mr. Lai or other individual shareholders for
all taxes incurred by them or on their behalf in connection with the transaction under Section III and Section IV of this Schedule.
EXHIBIT A
DEED OF ADHERENCE
EXHIBIT B
MEMORANDUM OF ARTICLES
EXHIBIT C
Exhibit 5.1
Our ref
Direct tel
Email
KKZ/704613-000002/10151771v4
+852 3690 7432
Karen.zhang@maplesandcalder.com

No. 1685 Huazhi Road
Qingpu District
Shanghai 201708
China
30 September 2016
Dear Sirs
We have acted as Cayman Islands legal advisers to ZTO Express (Cayman) Inc. (the Company) in connection with the Companys registration statement on
Form F-1, including all amendments or supplements thereto (the Registration Statement), filed with the Securities and Exchange Commission under the
U.S. Securities Act of 1933, as amended to date relating to the offering by the Company of certain American Depositary Shares (the ADSs) representing the
Companys ordinary shares of par value US$0.0001 each (the Shares).
We are furnishing this opinion as Exhibit 5.1 to the Registration Statement.
1
Documents Reviewed
For the purposes of this opinion, we have reviewed only originals, copies or final drafts of the following documents and such other documents as we have
deemed necessary in order to render the opinions below:
1.1
The certificate of incorporation dated 8 April 2015 issued by the Registrar of Companies in the Cayman Islands.
1.2
The amended and restated memorandum and articles of association of the Company as adopted by special resolution passed on 18 August 2015 (the
Pre-IPO M&A).
1.3
The second amended and restated memorandum and articles of association of the Company as adopted by a special resolution passed on 30
September 2016 and effective conditional and immediately prior to the completion of the Companys initial public offering of the ADSs
representing the Shares (the IPO M&A).
1.4
The written resolutions of the directors of the Company dated 30 September 2016 (the Directors Resolutions).
1.5
The written resolutions of the shareholders of the Company dated 30 September 2016 (the Shareholders Resolutions).
1.6
A certificate from a Director of the Company addressed to this firm dated 30 September 2016, a copy of which is attached hereto (the Directors
Certificate).
1.7
A certificate of good standing dated 27 September, 2016, issued by the Registrar of Companies in the Cayman Islands (the Certificate of Good
Standing).
1.8
The Registration Statement.
Assumptions
The following opinions are given only as to, and based on, circumstances and matters of fact existing and known to us on the date of this opinion letter.
These opinions only relate to the laws of the Cayman Islands which are in force on the date of this opinion letter. In giving these opinions we have relied
(without further verification) upon the completeness and accuracy of the Directors Certificate and the Certificate of Good Standing. We have also relied
upon the following assumptions, which we have not independently verified:
2.1
Copy documents or drafts of documents provided to us are true and complete copies of, or in the final forms of, the originals.
2.2
The genuineness of all signatures and seals.
2.3
There is nothing contained in the minute book or corporate records of the Company (which we have not inspected) which would or might affect the
opinions set out below.
2.4
There is nothing under any law (other than the law of the Cayman Islands) which would or might affect the opinions set out below.
Opinion
Based upon the foregoing and subject to the qualifications set out below and having regard to such legal considerations as we deem relevant, we are of the
opinion that:
3.1
The Company has been duly incorporated as an exempted company with limited liability and is validly existing and in good standing under the
laws of the Cayman Islands.
3.2
The authorised share capital of the Company, with effect immediately prior to the completion of the Companys initial public offering of the ADSs
representing the Shares, will be US$1,000,000 divided into 10,000,000,000 ordinary shares with a par value of US$0.0001 each.
3.3
The issue and allotment of the Shares have been duly authorised and when allotted, issued and paid for as contemplated in the Registration
Statement, the Shares will be legally issued and allotted, fully paid and non-assessable. As a matter of Cayman law, a share is only issued when it has
been entered in the register of members (shareholders).
3.4
The statements under the caption Taxation in the prospectus forming part of the Registration Statement, to the extent that they constitute
statements of Cayman Islands law, are accurate in all material respects and that such statements constitute our opinion.
Qualifications
Except as specifically stated herein, we make no comment with respect to any representations and warranties which may be made by or with respect to the
Company in any of the documents or instruments cited in this opinion or otherwise with respect to the commercial terms of the transactions the subject of this
opinion.
2
In this opinion the phrase non-assessable means, with respect to Shares in the Company, that a shareholder shall not, solely by virtue of its status as a
shareholder, be liable for additional assessments or calls on the Shares by the Company or its creditors (except in exceptional circumstances, such as
involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstances in which a court may be prepared to
pierce or lift the corporate veil).
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our name under the headings
Enforceability of Civil Liabilities and Legal Matters and elsewhere in the prospectus included in the Registration Statement. In giving such consent, we
do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the U.S. Securities Act of 1933, as amended,
or the Rules and Regulations of the Commission thereunder.
Yours faithfully
/s/ Maples and Calder
Encl
3
Exhibit 10.1
AMENDED AND RESTATED 2016 SHARE INCENTIVE PLAN
ARTICLE 1
PURPOSE
The purpose of the Plan is to promote the success and enhance the value of ZTO Express (Cayman) Inc., an exempted company formed under the
laws of the Cayman Islands (the Company), by linking the personal interests of the Directors, Employees, and Consultants to those of the Companys
shareholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to the Companys shareholders.
ARTICLE 2
DEFINITIONS AND CONSTRUCTION
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The
singular pronoun shall include the plural where the context so indicates.
2.1
Applicable Laws means the legal requirements relating to the Plan and the Awards under applicable provisions of the corporate,
securities, tax and other laws, rules, regulations and government orders, and the rules of any applicable stock exchange or national market system, of any
jurisdiction applicable to Awards granted to residents therein.
2.2
Award means an Option, Restricted Share or other types of award approved by the Committee granted to a Participant pursuant to the
Plan.
2.3
Award Agreement means any written agreement, contract, or other instrument or document evidencing an Award, including through
electronic medium.
2.4
Board means the Board of Directors of the Company.
2.5
Cause with respect to a Participant means (unless otherwise expressly provided in the applicable Award Agreement, or another applicable
contract with the Participant that defines such term for purposes of determining the effect that a for cause termination has on the Participants Awards) a
termination of employment or service based upon a finding by the Service Recipient, acting in good faith and based on its reasonable belief at the time, that
the Participant:
(a)
has been negligent in the discharge of his or her duties to the Service Recipient, has refused to perform stated or assigned duties or
is incompetent in or (other than by reason of a disability or analogous condition) incapable of performing those duties;
(b)
has been dishonest or committed or engaged in an act of theft, embezzlement or fraud, a breach of confidentiality, an unauthorized
disclosure or use of inside information, customer lists, trade secrets or other confidential information;
(c)
has breached a fiduciary duty, or willfully and materially violated any other duty, law, rule, regulation or policy of the Service
Recipient; or has been convicted of, or plead guilty or nolo contendere to, a felony or misdemeanor (other than minor traffic violations or similar offenses);
(d)
has materially breached any of the provisions of any agreement with the Service Recipient;
(e)
has engaged in unfair competition with, or otherwise acted intentionally in a manner injurious to the reputation, business or assets
of, the Service Recipient; or
(f)
has improperly induced a vendor or customer to break or terminate any contract with the Service Recipient or induced a principal
for whom the Service Recipient acts as agent to terminate such agency relationship.
A termination for Cause shall be deemed to occur (subject to reinstatement upon a contrary final determination by the Committee) on the date on
which the Service Recipient first delivers written notice to the Participant of a finding of termination for Cause.
2.6
Code means the Internal Revenue Code of 1986 of the United States, as amended.
2.7
Committee means a committee of the Board described in Article 9.
2.8
Consultant means any consultant or adviser if: (a) the consultant or adviser renders bona fide services to a Service Recipient; (b) the
services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or
indirectly promote or maintain a market for the Companys securities; and (c) the consultant or adviser is a natural person who has contracted directly with
the Service Recipient to render such services.
2.9
Corporate Transaction, unless otherwise defined in an Award Agreement, means any of the following transactions, provided, however,
that the Committee shall determine under (d) and (e) whether multiple transactions are related, and its determination shall be final, binding and conclusive:
(a)
an amalgamation, arrangement or consolidation or scheme of arrangement (i) in which the Company is not the surviving entity,
except for a transaction the principal purpose of which is to change the jurisdiction in which the Company is incorporated or (ii) following which the holders
of the voting securities of the Company do not continue to hold more than 50% of the combined voting power of the voting securities of the surviving
entity;
(b)
the sale, transfer or other disposition of all or substantially all of the assets of the Company;
(c)
the complete liquidation or dissolution of the Company;
(d)
any reverse takeover or series of related transactions culminating in a reverse takeover (including, but not limited to, a tender offer
followed by a reverse takeover) in which the Company is the surviving entity but (A) the Companys equity securities
2
outstanding immediately prior to such takeover are converted or exchanged by virtue of the takeover into other property, whether in the form of securities,
cash or otherwise, or (B) in which securities possessing more than fifty percent (50%) of the total combined voting power of the Companys outstanding
securities are transferred to a person or persons different from those who held such securities immediately prior to such takeover or the initial transaction
culminating in such takeover, but excluding any such transaction or series of related transactions that the Committee determines shall not be a Corporate
Transaction; or
(e)
acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a
Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Companys outstanding securities but excluding any such transaction or series of related
transactions that the Committee determines shall not be a Corporate Transaction.
2.10
Director, means a member of the Board or a member of the board of directors of any Subsidiary of the Company.
2.11
Disability, unless otherwise defined in an Award Agreement, means that the Participant qualifies to receive long-term disability payments
under the Service Recipients long-term disability insurance program, as it may be amended from time to time, to which the Participant provides services
regardless of whether the Participant is covered by such policy. If the Service Recipient to which the Participant provides service does not have a long-term
disability plan in place, Disability means that a Participant is unable to carry out the responsibilities and functions of the position held by the Participant
by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. A Participant will not be
considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Committee in its discretion.
2.12
Effective Date shall have the meaning set forth in Section 10.1.
2.13
Employee means any person, including an officer or a Director, who is in the employment of a Service Recipient, subject to the control
and direction of the Service Recipient as to both the work to be performed and the manner and method of performance. The payment of a directors fee by a
Service Recipient shall not be sufficient to constitute employment by the Service Recipient.
2.14
Exchange Act means the Securities Exchange Act of 1934 of the United States, as amended.
2.15
Fair Market Value means, as of any date, the value of Shares determined as follows:
(a)
If the Shares are listed on one or more established stock exchanges or national market systems, including without limitation, the
New York Stock Exchange or the NASDAQ Stock Market, its Fair Market Value shall be the closing sales price for such shares (or the closing bid, if no sales
were reported) as quoted on the principal exchange or system on which the Shares are listed (as determined by the Committee) on the date of determination
(or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was
reported), as reported on the website
3
maintained by such exchange or market system or such other source as the Committee deems reliable; or
(b)
In the absence of an established market for the Shares of the type described in (a) above, the Fair Market Value thereof shall be
determined by the Committee in good faith and in its discretion by reference to (i) the placing price of the latest private placement of the Shares and the
development of the Companys business operations and the general economic and market conditions since such latest private placement, (ii) other third party
transactions involving the Shares and the development of the Companys business operation and the general economic and market conditions since such
transaction, (iii) an independent valuation of the Shares, or (iv) such other methodologies or information as the Committee determines to be indicative of Fair
Market Value.
2.16
Group Entity means any of the Company and Subsidiaries of the Company.
2.17
Incentive Share Option means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision
thereto.
2.18
Independent Director means (i) if the Shares or other securities representing the Shares are not listed on a stock exchange, a Director of the
Company who is a Non-Employee Director; and (ii) if the Shares or other securities representing the Shares are listed on one or more stock exchange, a
Director of the Company who meets the independence standards under the applicable corporate governance rules of the stock exchange(s).
2.19
Non-Employee Director means a member of the Board who qualifies as a Non-Employee Director as defined in Rule 16b-3(b)(3) of the
Exchange Act, or any successor definition adopted by the Board.
2.20
Non-Qualified Share Option means an Option that is not intended to be an Incentive Share Option.
2.21
Option means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified number of Shares at a specified
price during specified time periods. An Option may be either an Incentive Share Option or a Non-Qualified Share Option.
2.22
Participant means a person who, as a Director, Consultant or Employee, has been granted an Award pursuant to the Plan.
2.23
Parent means a parent corporation under Section 424(e) of the Code.
2.24
Plan means the 2016 Share Incentive Plan of ZTO Express (Cayman) Inc., as amended and/or restated from time to time.
2.25
Related Entity means any business, corporation, partnership, limited liability company or other entity in which the Company, a Parent or
Subsidiary of the Company holds a substantial ownership interest, directly or indirectly, or controls through contractual arrangements and consolidates the
financial results according to applicable accounting standards, but which is not a Subsidiary and which the Board designates as a Related Entity for purposes
of the Plan.
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2.26
Restricted Share means a Share awarded to a Participant pursuant to Article 6 that is subject to certain restrictions and may be subject to
risk of forfeiture.
2.27
Securities Act means the Securities Act of 1933 of the United States, as amended.
2.28
Service Recipient means the Company or Subsidiary of the Company to which a Participant provides services as an Employee, a
Consultant or a Director.
2.29
Share means the ordinary shares of the Company, par value US$0.00001 per share, and such other securities of the Company that may be
substituted for Shares pursuant to Article 8.
2.30
Subsidiary means any corporation or other entity of which a majority of the outstanding voting shares or voting power is beneficially
owned directly or indirectly by the Company.
2.31
Trading Date means the closing of the first sale to the general public of the Shares pursuant to a registration statement filed with and
declared effective by the U.S. Securities and Exchange Commission under the Securities Act.
ARTICLE 3
SHARES SUBJECT TO THE PLAN
3.1
Number of Shares.
(a)
Subject to the provisions of Article 8 and Section 3.1(b), the maximum aggregate number of Shares which may be issued pursuant
to all Awards (including Incentive Share Options) (the Award Pool) shall initially be 3,000,000, plus an annual increase on the first day of each fiscal year
of the Company during the term of this Plan commencing with the fiscal year beginning January 1, 2017, by an amount equal to the least of (i) 0.5% of the
total number of Shares issued and outstanding on the last day of the immediately preceding fiscal year; (ii) 3,000,000 Shares or (iii) such number of Shares as
may be determined by the Board, the size of the Award Pool to be equitably adjusted in the event of any share dividend, subdivision, reclassification,
recapitalization, split, reverse split, combination, consolidation or similar transactions.
(b)
To the extent that an Award terminates, expires, or lapses for any reason, any Shares subject to the Award shall again be available
for the grant of an Award pursuant to the Plan. To the extent permitted by Applicable Laws, Shares issued in assumption of, or in substitution for, any
outstanding awards of any entity acquired in any form or combination by a Group Entity shall not be counted against Shares available for grant pursuant to
the Plan. Shares delivered by the Participant or withheld by the Company upon the exercise of any Award under the Plan, in payment of the exercise price
thereof or tax withholding thereon, may again be optioned, granted or awarded hereunder, subject to the limitations of Section 3.1(a). If any Restricted
Shares are forfeited by the Participant or repurchased by the Company, such Shares may again be optioned, granted or awarded hereunder, subject to the
limitations of Section 3.1(a). Notwithstanding the provisions of this Section 3.1(b), no Shares may again be optioned, granted or awarded if such action
would
5
cause an Incentive Share Option to fail to qualify as an incentive share option under Section 422 of the Code.
3.2
Shares Distributed. Any Shares distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares,
treasury Shares (subject to Applicable Laws) or Shares purchased on the open market. Additionally, at the discretion of the Committee, any Shares
distributed pursuant to an Award may be represented by American Depository Shares. If the number of Shares represented by an American Depository Share
is other than on a one-to-one basis, the limitations of Section 3.1 shall be adjusted to reflect the distribution of American Depository Shares in lieu of Shares.
ARTICLE 4
ELIGIBILITY AND PARTICIPATION
4.1
Eligibility. Persons eligible to participate in this Plan include Employees, Consultants, and Directors, as determined by the Committee.
4.2
Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from among all eligible individuals, those
to whom Awards shall be granted and shall determine the nature and amount of each Award. No individual shall have any right to be granted an Award
pursuant to this Plan.
ARTICLE 5
OPTIONS
5.1
General. The Committee is authorized to grant Options to Participants on the following terms and conditions:
(a)
Exercise Price. The exercise price per Share subject to an Option shall be determined by the Committee and set forth in the Award
Agreement which may be a fixed price or a variable price related to the Fair Market Value of the Shares. The exercise price per Share subject to an Option
may be amended or adjusted in the absolute discretion of the Committee, the determination of which shall be final, binding and conclusive. For the
avoidance of doubt, to the extent not prohibited by Applicable Laws or any exchange rule, a downward adjustment of the exercise prices of Options
mentioned in the preceding sentence shall be effective without the approval of the Companys shareholders or the approval of the affected Participants.
(b)
Time and Conditions of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole
or in part, including exercise prior to vesting; provided that the term of any Option granted under the Plan shall not exceed ten years, except as provided in
Section 11.1. The Committee shall also determine any conditions, if any, that must be satisfied before all or part of an Option may be exercised.
(c)
Payment. The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment,
including, without limitation (i) cash or check denominated in U.S. Dollars, (ii) to the extent permissible under the Applicable Laws, cash or check in Chinese
Renminbi, (iii) cash or check denominated in any other local currency as approved by the Committee, (iv) Shares held for such period of time as may be
6
required by the Committee in order to avoid adverse financial accounting consequences and having a Fair Market Value on the date of delivery equal to the
aggregate exercise price of the Option or exercised portion thereof, (v) after the Trading Date the delivery of a notice that the Participant has placed a market
sell order with a broker with respect to Shares then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of
the net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided that payment of such proceeds is then made to the
Company upon settlement of such sale, (vi) other property acceptable to the Committee with a Fair Market Value equal to the exercise price, or (vii) any
combination of the foregoing. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a member of the Board or an executive
officer of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an Option in any method
which would violate Section 13(k) of the Exchange Act.
(d)
Effects of Termination of Employment or Service on Options. Termination of employment or service shall have the following
effects on Options granted to the Participants:
(i)
Dismissal for Cause. Unless otherwise provided in the Award Agreement, if a Participants employment by or service to
the Service Recipient is terminated by the Service Recipient for Cause, the Participants Options will terminate upon such termination, whether or not the
Option is then vested and/or exercisable;
(ii)
Death or Disability. Unless otherwise provided in the Award Agreement, if a Participants employment by or service to the
Service Recipient terminates as a result of the Participants death or Disability:
(a)
the Participant (or his or her legal representative or beneficiary, in the case of the Participants Disability or death,
respectively), will have until the date that is 12 months after the Participants termination of Employment to exercise the
Participants Options (or portion thereof) to the extent that such Options were vested and exercisable on the date of the
Participants termination of Employment on account of death or Disability;
(b)
the Options, to the extent not vested and exercisable on the date of the Participants termination of Employment or
service, shall terminate upon the Participants termination of Employment or service on account of death or Disability;
and
(c)
the Options, to the extent exercisable for the 12-month period following the Participants termination of Employment or
service and not exercised during such period, shall terminate at the close of business on the last day of the 12-month
period.
(iii)
Other Terminations of Employment or Service. Unless otherwise provided in the Award Agreement, if a Participants
employment by or service to the Service Recipient terminates for any reason other than a termination by the Service Recipient for Cause or because of the
Participants death or Disability:
7
(a)
the Participant will have until the date that is 90 days after the Participants termination of Employment or service to
exercise his or her Options (or portion thereof) to the extent that such Options were vested and exercisable on the date of
the Participants termination of Employment or service;
(b)
the Options, to the extent not vested and exercisable on the date of the Participants termination of Employment or
service, shall terminate upon the Participants termination of Employment or service; and
(c)
the Options, to the extent exercisable for the 90-day period following the Participants termination of Employment or
service and not exercised during such period, shall terminate at the close of business on the last day of the 90-day period.
5.2
Incentive Share Options. Incentive Share Options may be granted to Employees of the Company or a Subsidiary of the Company.
Incentive Share Options may not be granted to employees of a Related Entity or to Independent Directors or Consultants. The terms of any Incentive Share
Options granted pursuant to the Plan, in addition to the requirements of Section 5.1, must comply with the following additional provisions of this
Section 5.2:
(a)
Individual Dollar Limitation. The aggregate Fair Market Value (determined as of the time the Option is granted) of all Shares with
respect to which Incentive Share Options are first exercisable by a Participant in any calendar year may not exceed $100,000 or such other limitation as
imposed by Section 422(d) of the Code, or any successor provision. To the extent that Incentive Share Options are first exercisable by a Participant in excess
of such limitation, the excess shall be considered Non-Qualified Share Options.
(b)
Exercise Price. The exercise price of an Incentive Share Option shall be equal to the Fair Market Value on the date of grant.
However, the exercise price of any Incentive Share Option granted to any individual who, at the date of grant, owns Shares possessing more than ten percent
of the total combined voting power of all classes of shares of the Company or any Parent or Subsidiary of the Company may not be less than 110% of Fair
Market Value on the date of grant and such Option may not be exercisable for more than five years from the date of grant.
(c)
Transfer Restriction. The Participant shall give the Company prompt notice of any disposition of Shares acquired by exercise of an
Incentive Share Option within (i) two years from the date of grant of such Incentive Share Option or (ii) one year after the transfer of such Shares to the
Participant.
(d)
Expiration of Incentive Share Options. No Award of an Incentive Share Option may be made pursuant to this Plan after the tenth
anniversary of the Effective Date.
(e)
Right to Exercise. During a Participants lifetime, an Incentive Share Option may be exercised only by the Participant.
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ARTICLE 6
RESTRICTED SHARES
6.1
Grant of Restricted Shares. The Committee, at any time and from time to time, may grant Restricted Shares to Participants as the
Committee, in its sole discretion, shall determine. The Committee, in its sole discretion, shall determine the number of Restricted Shares to be granted to
each Participant.
6.2
Restricted Shares Award Agreement. Each Award of Restricted Shares shall be evidenced by an Award Agreement that shall specify the
period of restriction, the number of Restricted Shares granted, and such other terms and conditions as the Committee, in its sole discretion, shall determine.
Unless the Committee determines otherwise, Restricted Shares shall be held by the Company as escrow agent until the restrictions on such Restricted Shares
have lapsed.
6.3
Issuance and Restrictions. Restricted Shares shall be subject to such restrictions on transferability and other restrictions as the Committee
may impose (including, without limitation, limitations on the right to vote Restricted Shares or the right to receive dividends on the Restricted Shares).
These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee
determines at the time of the grant of the Award or thereafter.
6.4
Forfeiture/Repurchase. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon
termination of employment or service during the applicable restriction period, Restricted Shares that are at that time subject to restrictions shall be forfeited
or repurchased in accordance with the Award Agreement; provided, however, the Committee may (a) provide in any Restricted Share Award Agreement that
restrictions or forfeiture and repurchase conditions relating to Restricted Shares will be waived in whole or in part in the event of terminations resulting from
specified causes, and (b) in other cases waive in whole or in part restrictions or forfeiture and repurchase conditions relating to Restricted Shares.
6.5
Certificates for Restricted Shares. Restricted Shares granted pursuant to the Plan may be evidenced in such manner as the Committee shall
determine. If certificates representing Restricted Shares are registered in the name of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Shares, and the Company may, at its discretion, retain physical possession of the
certificate until such time as all applicable restrictions lapse.
6.6
Removal of Restrictions. Except as otherwise provided in this Article 6, Restricted Shares granted under the Plan shall be released from
escrow as soon as practicable after the last day of the period of restriction. The Committee, in its discretion, may accelerate the time at which any restrictions
shall lapse or be removed. After the restrictions have lapsed, the Participant shall be entitled to have any legend or legends under Section 6.5 removed from
his or her Share certificate, and the Shares shall be freely transferable by the Participant, subject to applicable legal restrictions. The Committee (in its
discretion) may establish procedures regarding the release of Shares from escrow and the removal of legends, as necessary or appropriate to minimize
administrative burdens on the Company.
ARTICLE 7
PROVISIONS APPLICABLE TO AWARDS
7.1
Award Agreement. Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for
each Award which may include the term of an Award, the provisions applicable in the event the Participants employment or service terminates, and the
Companys authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award.
7.2
No Transferability; Limited Exception to Transfer Restrictions.
7.2.1
Limits on Transfer. Unless otherwise expressly provided in (or pursuant to) this Section 7.2, by applicable law and by the Award
Agreement, as the same may be amended:
(a)
encumbrance or charge;
(b)
all Awards are non-transferable and will not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge,
Awards will be exercised only by the Participant; and
(c)
amounts payable or shares issuable pursuant to an Award will be delivered only to (or for the account of), and, in the case of Shares,
registered in the name of, the Participant.
In addition, the shares shall be subject to the restrictions set forth in the applicable Award Agreement.
7.2.2
Further Exceptions to Limits on Transfer. The exercise and transfer restrictions in Section 7.2.1 will not apply to:
(a)
transfers to the Company or a Subsidiary;
(b)
transfers by gift to immediate family as that term is defined in SEC Rule 16a-1(e) promulgated under the Exchange Act;
(c)
the designation of a beneficiary to receive benefits if the Participant dies or, if the Participant has died, transfers to or exercises by
the Participants beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution; or
(d)
if the Participant has suffered a disability, permitted transfers or exercises on behalf of the Participant by the Participants duly
authorized legal representative; or
(e)
subject to the prior approval of the Committee or an executive officer or director of the Company authorized by the Committee,
transfer to one or more natural persons who are the Participants family members or entities owned and controlled by the Participant and/or the Participants
family members, including but not limited to trusts or other entities whose beneficiaries or beneficial owners are the Participant and/or the Participants
family members, or to such other persons or entities as may be expressly approved by the Committee, pursuant to such conditions and procedures as the
Committee or
10
may establish. Any permitted transfer shall be subject to the condition that the Committee receives evidence satisfactory to it that the transfer is being made
for estate and/or tax planning purposes and on a basis consistent with the Companys lawful issue of securities.
Notwithstanding anything else in this Section 7.2.2 to the contrary, but subject to compliance with all Applicable Laws, Incentive Share
Options and Restricted Shares will be subject to any and all transfer restrictions under the Code applicable to such Awards or necessary to maintain the
intended tax consequences of such Awards. Notwithstanding clause (b) above but subject to compliance with all Applicable Laws, any contemplated transfer
by gift to immediate family as referenced in clause (b) above is subject to the condition precedent that the transfer be approved by the Administrator in
order for it to be effective.
7.3
Beneficiaries. Notwithstanding Section 7.2, a Participant may, in the manner determined by the Committee, designate a beneficiary to
exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participants death. A beneficiary, legal guardian,
legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement
applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or
appropriate by the Committee. If the Participant is married and resides in a community property state, a designation of a person other than the Participants
spouse as his or her beneficiary with respect to more than 50% of the Participants interest in the Award shall not be effective without the prior written
consent of the Participants spouse. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto
pursuant to the Participants will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a
Participant at any time provided the change or revocation is filed with the Committee.
7.4
Performance Objectives and Other Terms. The Committee, in its discretion, shall set performance objectives or other vesting criteria which,
depending on the extent to which they are met, will determine the number or value of the Awards that will be granted or paid out to the Participants.
ARTICLE 8
CHANGES IN CAPITAL STRUCTURE
8.1
Adjustments. In the event of any dividend, share split, combination or exchange of Shares, amalgamation, arrangement or consolidation,
spin-off, recapitalization or other distribution (other than normal cash dividends) of Company assets to its shareholders, or any other change affecting the
shares of Shares or the share price of a Share, the Committee shall make such proportionate adjustments, if any, as the Committee in its discretion may deem
appropriate to reflect such change with respect to (a) the aggregate number and type of shares that may be issued under the Plan (including, but not limited to,
adjustments of the limitations in Section 3.1); (b) the terms and conditions of any outstanding Awards (including, without limitation, any applicable
performance targets or criteria with respect thereto); and (c) the grant or exercise price per share for any outstanding Awards under the Plan.
11
8.2
Corporate Transactions. Except as may otherwise be provided in any Award Agreement or any other written agreement entered into by and
between the Company and a Participant, if the Committee anticipates the occurrence, or upon the occurrence, of a Corporate Transaction, the Committee
may, in its sole discretion, provide for (i) any and all Awards outstanding hereunder to terminate at a specific time in the future and shall give each Participant
the right to exercise the vested portion of such Awards during a period of time as the Committee shall determine, or (ii) the purchase of any Award for an
amount of cash equal to the amount that could have been attained upon the exercise of such Award (and, for the avoidance of doubt, if as of such date the
Committee determines in good faith that no amount would have been attained upon the exercise of such Award, then such Award may be terminated by the
Company without payment), or (iii) the replacement of such Award with other rights or property selected by the Committee in its sole discretion or the
assumption of or substitution of such Award by the successor or surviving corporation, or a Parent or Subsidiary thereof, with appropriate adjustments as to
the number and kind of Shares and prices, or (iv) payment of such Award in cash based on the value of Shares on the date of the Corporate Transaction plus
reasonable interest on the Award through the date as determined by the Committee when such Award would otherwise be vested or have been paid in
accordance with its original terms, if necessary to comply with Section 409A of the Code.
8.3
Outstanding Awards Other Changes. In the event of any other change in the capitalization of the Company or corporate change other
than those specifically referred to in this Article 8, the Committee may, in its absolute discretion, make such adjustments in the number and class of shares
subject to Awards outstanding on the date on which such change occurs and in the per share grant or exercise price of each Award as the Committee may
consider appropriate to prevent dilution or enlargement of rights.
8.4
No Other Rights. Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or
consolidation of Shares of any class, the payment of any dividend, any increase or decrease in the number of shares of any class or any dissolution,
liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the
Committee under the Plan, and no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number of Shares subject to an Award or the grant or exercise price of any Award.
ARTICLE 9
ADMINISTRATION
9.1
Committee. The Plan shall be administered by the Board or a committee of one or more members of the Board (the Committee) to whom
the Board shall delegate the authority to grant or amend Awards to Participants other than any of the Committee members, Independent Directors and
executive officers of the Company. Reference to the Committee shall refer to the Board in absence of the Committee. Notwithstanding the foregoing, the full
Board, acting by majority of its members in office, shall conduct the general administration of the Plan if required by Applicable Laws, and with respect to
Awards granted to the Committee members, Independent Directors and executive officers of the Company and for purposes of such Awards the term
Committee as used in the Plan shall be deemed to refer to the Board.
12
9.2
Action by the Committee. A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any
meeting at which a quorum is present, and acts approved unanimously in writing all members of the Committee in lieu of a meeting, shall be deemed the acts
of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by
any officer or other employee of a Group Entity, the Companys independent certified public accountants, or any executive compensation consultant or other
professional retained by the Company to assist in the administration of the Plan.
9.3
discretion to:
Authority of the Committee. Subject to any specific designation in the Plan, the Committee has the exclusive power, authority and
(a)
designate Participants to receive Awards;
(b)
determine the type or types of Awards to be granted to each Participant;
(c)
determine the number of Awards to be granted and the number of Shares to which an Award will relate;
(d)
determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price,
grant price, or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability
of an Award, and accelerations or waivers thereof, and any provisions related to non-competition and recapture of gain on an Award, based in each case on
such considerations as the Committee in its sole discretion determines;
(e)
determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an
Award may be paid in, cash, Shares, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;
(f)
prescribe the form of each Award Agreement, which need not be identical for each Participant;
(g)
decide all other matters that must be determined in connection with an Award;
(h)
establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;
(i)
interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement;
(j)
amend terms and conditions of Award Agreements; and
(k)
make all other decisions and determinations that may be required pursuant to the Plan or as the Committee deems necessary or
advisable to administer the Plan, including design and adopt from time to time new types of Awards that are in compliance with Applicable Laws.
9.4
Decisions Binding. The Committees interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement and all
decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.
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ARTICLE 10
EFFECTIVE AND EXPIRATION DATE
10.1
Effective Date. The Plan shall become effective as of the date on which the Board adopts the Plan (the Effective Date). The Plan shall be
ratified by the shareholders of the Company by written resolutions or at a meeting duly held in accordance with the applicable provisions of the Companys
Memorandum of Association and Articles of Association within 12 months of the Effective Date.
10.2
Expiration Date. The Plan will expire on, and no Award may be granted pursuant to the Plan after, the tenth anniversary of the Effective
Date. Any Awards that are outstanding on the tenth anniversary of the Effective Date shall remain in force according to the terms of the Plan and the
applicable Award Agreement.
ARTICLE 11
AMENDMENT, MODIFICATION, AND TERMINATION
11.1
Amendment, Modification, and Termination. At any time and from time to time, the Board may terminate, amend or modify the Plan;
provided, however, that (a) to the extent necessary and desirable to comply with Applicable Laws or stock exchange rules, the Company shall obtain
shareholder approval of any Plan amendment in such a manner and to such a degree as required, unless the Company decides to follow home country
practice, and (b) unless the Company decides to follow home country practice, shareholder approval is required for any amendment to the Plan that
(i) increases the number of Shares available under the Plan (other than any adjustment as provided by Article 8 or Section 3.1(a)), or (ii) permits the
Committee to extend the term of the Plan or the exercise period for an Option beyond ten years from the date of grant.
11.2
Awards Previously Granted. Except with respect to amendments made pursuant to Section 11.1, no termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award previously granted pursuant to the Plan without the prior written consent of the
Participant.
ARTICLE 12
GENERAL PROVISIONS
12.1
No Rights to Awards. No Participant, employee, or other person shall have any claim to be granted any Award pursuant to the Plan, and
neither the Company nor the Committee is obligated to treat Participants, employees, and other persons uniformly.
12.2
No Shareholders Rights. No Award gives the Participant any of the rights of a shareholder of the Company unless and until Shares are in
fact issued to such person in connection with such Award.
12.3
Taxes. No Shares shall be delivered under the Plan to any Participant until such Participant has made arrangements acceptable to the
Committee for the satisfaction of any income and employment tax withholding obligations under Applicable Laws. The Company or any Subsidiary shall
have the authority and the right to deduct or withhold, or
14
require a Participant to remit to the Company, an amount sufficient to satisfy all applicable taxes (including the Participants payroll tax obligations)
required or permitted by Applicable Laws to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan. The
Committee may in its discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have the Company withhold Shares otherwise
issuable under an Award (or allow the return of Shares) having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other
provision of the Plan, the number of Shares which may be withheld with respect to the issuance, vesting, exercise or payment of any Award (or which may be
repurchased from the Participant of such Award after such Shares were acquired by the Participant from the Company) in order to satisfy any income and
payroll tax liabilities applicable to the Participant with respect to the issuance, vesting, exercise or payment of the Award shall, unless specifically approved
by the Committee, be limited to the number of Shares which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate
amount of such liabilities based on the minimum statutory withholding rates for the applicable income and payroll tax purposes that are applicable to such
supplemental taxable income.
12.4
No Right to Employment or Services. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the
Service Recipient to terminate any Participants employment or services at any time, nor confer upon any Participant any right to continue in the
employment or services of any Service Recipient.
12.5
Unfunded Status of Awards. The Plan is intended to be an unfunded plan for incentive compensation. With respect to any payments not
yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater
than those of a general creditor of the relevant Group Entity.
12.6
Indemnification. To the extent allowable pursuant to Applicable Laws, each member of the Committee or of the Board shall be indemnified
and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection
with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action
or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or
proceeding against him or her; provided he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she
undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled pursuant to the Companys Memorandum of Association and Articles of Association, as a matter of
law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
12.7
Expenses. The expenses of administering the Plan shall be borne by the Group Entities.
12.8
Fractional Shares. No fractional Shares shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in
lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding up or down as appropriate.
12.9
Government and Other Regulations. The obligation of the Company to make payment of awards in Shares or otherwise shall be subject to
all Applicable Laws, and to such
15
approvals by government agencies as may be required. The Company shall be under no obligation to register any of the Shares paid pursuant to the Plan
under the Securities Act or any other similar law in any applicable jurisdiction. If the Shares paid pursuant to the Plan may in certain circumstances be
exempt from registration pursuant to the Securities Act or other Applicable Laws, the Company may restrict the transfer of such Shares in such manner as it
deems advisable to ensure the availability of any such exemption.
12.10
Governing Law. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the Cayman
Islands.
12.11 Section 409A. To the extent that the Committee determines that any Award granted under the Plan is or may become subject to
Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code.
To the extent applicable, the Plan and the Award Agreements shall be interpreted in accordance with Section 409A of the Code and the U.S. Department of
Treasury regulations and other interpretative guidance issued thereunder, including without limitation any such regulation or other guidance that may be
issued after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Committee
determines that any Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury
guidance as may be issued after the Effective Date), the Committee may adopt such amendments to the Plan and the applicable Award agreement or adopt
other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Committee
determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits
provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related U.S. Department of Treasury guidance.
16
Exhibit 10.2
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this Agreement) is made as of
, 2016 by and between ZTO Express (Cayman) Inc., an exempted
company with limited liability incorporated and existing under the laws of the Cayman Islands (the Company), and
([Passport/ID] Number
) (the Indemnitee).
WHEREAS, the Indemnitee has agreed to serve as a director or executive officer of the Company and in such capacity will render valuable services
to the Company; and
WHEREAS, in order to induce and encourage highly experienced and capable persons such as the Indemnitee to render valuable services to the
Company, the board of directors of the Company (the Board of Directors) has determined that this Agreement is not only reasonable and prudent, but
necessary to promote and ensure the best interests of the Company and its shareholders;
NOW, THEREFORE, in consideration of the premises and mutual agreements hereinafter set forth, and other good and valuable consideration,
including, without limitation, the service of the Indemnitee, the receipt of which hereby is acknowledged, and in order to induce the Indemnitee to render
valuable services the Company, the Company and the Indemnitee hereby agree as follows:
1.
Definitions. As used in this Agreement:
(a)
Change in Control shall mean a change in control of the Company of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar or successor schedule or form) promulgated under the
United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (collectively, the Act), whether or not
the Company is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have
occurred (irrespective of the applicability of the initial clause of this definition) if (i) any person (as such term is used in Sections 13(d) and 14(d) of the
Act, but excluding any trustee or other fiduciary holding securities pursuant to an employee benefit or welfare plan or employee share plan of the Company
or any subsidiary or affiliate of the Company, or any entity organized, appointed, established or holding securities of the Company with voting power for or
pursuant to the terms of any such plan) becomes the beneficial owner (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the Companys then outstanding securities without the prior approval of at least twothirds of the Continuing Directors (as defined below) in office immediately prior to such persons attaining such interest; (ii) the Company is a party to a
merger, consolidation, scheme of arrangement, sale of assets or other reorganization, or a proxy contest, as a consequence of which Continuing Directors in
office immediately prior to such transaction or event constitute less than a majority of the Board of Directors of the Company (or any successor entity)
thereafter; or (iii) during any period of two
(2) consecutive years, Continuing Directors cease for any reason to constitute at least a majority of the Board of Directors of the Company.
(b)
Continuing Director shall mean an individual (i) who served on the Board of Directors of the Company at the effective date of
the Companys registration statement on Form F-1 relating to the Companys initial public offering; or (ii) whose election or nomination for election by the
Companys shareholders was approved by a vote of at least two-thirds of the Continuing Directors then in office.
(c)
Disinterested Director with respect to any request by the Indemnitee for indemnification or advancement of expenses hereunder
shall mean a director of the Company who neither is nor was a party to the Proceeding (as defined below) in respect of which indemnification or advancement
is being sought by the Indemnitee.
(d)
The term Expenses shall mean, without limitation, expenses of Proceedings, including attorneys fees, disbursements and
retainers, accounting and witness fees, expenses related to preparation for service as a witness and to service as a witness, travel and deposition costs,
expenses of investigations, judicial or administrative proceedings and appeals, amounts paid in settlement of a Proceeding by or on behalf of the Indemnitee,
costs of attachment or similar bonds, any expenses of attempting to establish or establishing a right to indemnification or advancement of expenses, under
this Agreement, the Companys Memorandum of Association and Articles of Association as currently in effect (the Articles), applicable law or otherwise,
and reasonable compensation for time spent by the Indemnitee in connection with the investigation, defense or appeal of a Proceeding or action for
indemnification for which the Indemnitee is not otherwise compensated by the Company or any third party. The term Expenses shall not include the
amount of judgments, fines, interest or penalties, which are actually levied against or sustained by the Indemnitee to the extent sustained after final
adjudication.
(e)
The term Independent Legal Counsel shall mean any firm of attorneys reasonably selected by the Board of Directors of the
Company, so long as such firm has not represented the Company, the Companys subsidiaries or affiliates, the Indemnitee, any entity controlled by the
Indemnitee, or any party adverse to the Company, within the preceding five (5) years. Notwithstanding the foregoing, the term Independent Legal Counsel
shall not include any person who, under applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either
the Company or the Indemnitee in an action to determine the Indemnitees right to indemnification or advancement of expenses under this Agreement, the
Companys Articles, applicable law or otherwise.
(f)
The term Proceeding shall mean any threatened, pending or completed action, suit, arbitration, alternate dispute resolution
mechanism, or other proceeding (including, without limitation, an appeal therefrom), formal or informal, whether brought in the name of the Company or
otherwise, whether of a civil, criminal, administrative or investigative nature, and whether by, in or involving a court or an administrative, other
governmental or private entity or body (including, without limitation, an investigation by the Company or its Board of Directors), by reason of (i) the fact
that the Indemnitee is or was a director or officer of the Company, or is or was serving at the request of the Company as an agent of another enterprise, whether
or not
2
the Indemnitee is serving in such capacity at the time any liability or expense is incurred for which indemnification or reimbursement is to be provided under
this Agreement, (ii) any actual or alleged act or omission or neglect or breach of duty, including, without limitation, any actual or alleged error or
misstatement or misleading statement, which the Indemnitee commits or suffers while acting in any such capacity, or (iii) the Indemnitee attempting to
establish or establishing a right to indemnification or advancement of expenses pursuant to this Agreement, the Companys Articles, applicable law or
otherwise.
(g)
The phrase serving at the request of the Company as an agent of another enterprise or any similar terminology shall mean, unless
the context otherwise requires, serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint
venture, limited liability company, trust, employee benefit or welfare plan or other enterprise, foreign or domestic. The phrase serving at the request of the
Company shall include, without limitation, any service as a director/an executive officer of the Company which imposes duties on, or involves services by,
such director/executive officer with respect to the Company or any of the Companys subsidiaries, affiliates, employee benefit or welfare plans, such plans
participants or beneficiaries or any other enterprise, foreign or domestic. In the event that the Indemnitee shall be a director, officer, employee or agent of
another corporation, partnership, joint venture, limited liability company, trust, employee benefit or welfare plan or other enterprise, foreign or domestic,
50% or more of the ordinary shares, combined voting power or total equity interest of which is owned by the Company or any subsidiary or affiliate thereof,
then it shall be presumed conclusively that the Indemnitee is so acting at the request of the Company.
2.
Services by the Indemnitee. The Indemnitee agrees to serve as a director or officer of the Company under the terms of the Indemnitees
agreement with the Company for so long as the Indemnitee is duly elected or appointed or until such time as the Indemnitee tenders a resignation in writing
or is removed from the Indemnitees position; provided, however, that the Indemnitee may at any time and for any reason resign from such position (subject
to any other contractual obligation or other obligation imposed by operation of law).
3.
Proceedings by or in the Right of the Company. The Company shall indemnify the Indemnitee if the Indemnitee is a party to or threatened
to be made a party to or is otherwise involved in any Proceeding by or in the right of the Company to procure a judgment in its favor by reason of the fact that
the Indemnitee is or was a director or officer of the Company, or is or was serving at the request of the Company as an agent of another enterprise, against all
Expenses, judgments, fines, interest or penalties, which are actually and reasonably incurred by the Indemnitee in connection with the defense or settlement
of such a Proceeding, if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in, or not opposed to, the best interests
of the Company; except that no indemnification under this section shall be made in respect of any claim, issue or matter as to which such person shall have
been adjudicated by final judgment by a court of competent jurisdiction to be liable to the Company for willful misconduct in the performance of his/her
duty to the Company, unless and only to the extent that the court in which such Proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the
3
case, such person is fairly and reasonably entitled to indemnity for such amounts which such other court shall deem proper.
4.
Proceeding Other Than a Proceeding by or in the Right of the Company. The Company shall indemnify the Indemnitee if the Indemnitee is
a party to or threatened to be made a party to or is otherwise involved in any Proceeding (other than a Proceeding by or in the right of the Company) by
reason of the fact that the Indemnitee is or was a director or officer of the Company, or is or was serving at the request of the Company as an agent of another
enterprise, against all Expenses, judgments, fines, interest or penalties, which are actually and reasonably incurred by the Indemnitee in connection with such
a Proceeding, to the fullest extent permitted by applicable law; provided, however, that any settlement of a Proceeding must be approved in advance in
writing by the Company (which approval shall not be unreasonably withheld).
5.
Indemnification for Costs, Charges and Expenses of Witness or Successful Party. Notwithstanding any other provision of this Agreement
(except as set forth in subparagraph 9(a) hereof), and without a requirement for determination as required by Paragraph 8 hereof, to the extent that the
Indemnitee (a) has prepared to serve or has served as a witness in any Proceeding in any way relating to (i) the Company or any of the Companys
subsidiaries, affiliates, employee benefit or welfare plans or such plans participants or beneficiaries or (ii) anything done or not done by the Indemnitee as a
director or officer of the Company or in connection with serving at the request of the Company as an agent of another enterprise, or (b) has been successful in
defense of any Proceeding or in defense of any claim, issue or matter therein, on the merits or otherwise, including the dismissal of a Proceeding without
prejudice or the settlement of a Proceeding without an admission of liability, the Indemnitee shall be indemnified against all Expenses actually and
reasonably incurred by the Indemnitee in connection therewith to the fullest extent permitted by applicable law.
6.
Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a
portion of the Expenses, judgments, fines, interest or penalties, which are actually and reasonably incurred by the Indemnitee in the investigation, defense,
appeal or settlement of any Proceeding, but not, however, for the total amount of the Indemnitees Expenses, judgments, fines, interest or penalties, then the
Company shall nevertheless indemnify the Indemnitee for the portion of such Expenses, judgments, fines, interest or penalties to which the Indemnitee is
entitled.
7.
Advancement of Expenses. The Expenses incurred by the Indemnitee in any Proceeding shall be paid promptly by the Company in
advance of the final disposition of the Proceeding at the written request of the Indemnitee, to the fullest extent permitted by applicable law; provided,
however, that the Indemnitee shall set forth in such request reasonable evidence that such Expenses have been incurred by the Indemnitee in connection with
such Proceeding, a statement that such Expenses do not relate to any matter described in subparagraph 9(a) of this Agreement, and an undertaking in writing
to repay any advances if it is ultimately determined as provided in subparagraph 8(b) of this Agreement that the Indemnitee is not entitled to indemnification
under this Agreement.
8.
Indemnification Procedure; Determination of Right to Indemnification.

4
(a)
Promptly after receipt by the Indemnitee of notice of the commencement of any Proceeding, the Indemnitee shall, if a claim for
indemnification or advancement of Expenses in respect thereof is to be made against the Company under this Agreement, notify the Company of the
commencement thereof in writing. The failure and delay to so notify the Company will not relieve the Company from any liability which the Company may
have to the Indemnitee under this Agreement unless the Company shall have lost significant substantive or procedural rights with respect to the defense of
any Proceeding as a result of such omission to so notify.
(b)
The Indemnitee shall be conclusively presumed to have met the relevant standards of conduct, if any, as defined by applicable law,
for indemnification pursuant to this Agreement and shall be absolutely entitled to such indemnification, unless a determination is made that the Indemnitee
has not met such standards by (i) the Board of Directors by a majority vote of a quorum thereof consisting of Disinterested Directors, (ii) the shareholders of
the Company by majority vote of a quorum thereof consisting of shareholders who are not parties to the Proceeding due to which a claim for indemnification
is made under this Agreement, (iii) Independent Legal Counsel as set forth in a written opinion (it being understood that such Independent Legal Counsel
shall make such determination only if the quorum of Disinterested Directors referred to in clause (i) of this subparagraph 8(b) is not obtainable or if the Board
of Directors of the Company by a majority vote of a quorum thereof consisting of Disinterested Directors so directs), or (iv) a court of competent jurisdiction;
provided, however, that if a Change in Control shall have occurred and the Indemnitee so requests in writing, such determination shall be made only by a
court of competent jurisdiction.
(c)
If a claim for indemnification or advancement of Expenses under this Agreement is not paid by the Company within thirty (30)
days after receipt by the Company of written notice thereof, the rights provided by this Agreement shall be enforceable by the Indemnitee in any court of
competent jurisdiction. Such judicial proceeding shall be made de novo. The burden of proving that indemnification or advances are not appropriate shall be
on the Company. Neither the failure of the directors or shareholders of the Company or Independent Legal Counsel to have made a determination prior to the
commencement of such action that indemnification or advancement of Expenses is proper in the circumstances because the Indemnitee has met the
applicable standard of conduct, if any, nor an actual determination by the directors or shareholders of the Company or Independent Legal Counsel that the
Indemnitee has not met the applicable standard of conduct shall be a defense to an action by the Indemnitee or create a presumption for the purpose of such
an action that the Indemnitee has not met the applicable standard of conduct. The termination of any Proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself (i) create a presumption that the Indemnitee did not act in good faith and in
a manner which he reasonably believed to be in the best interests of the Company and/or its shareholders, and, with respect to any criminal Proceeding, that
the Indemnitee had reasonable cause to believe that his conduct was unlawful or (ii) otherwise adversely affect the rights of the Indemnitee to
indemnification or advancement of Expenses under this Agreement, except as may be provided herein.
5
(d)
If a court of competent jurisdiction shall determine that the Indemnitee is entitled to any indemnification or advancement of
Expenses hereunder, the Company shall pay all Expenses actually and reasonably incurred by the Indemnitee in connection with such adjudication
(including, but not limited to, any appellate proceedings).
(e)
With respect to any Proceeding for which indemnification or advancement of Expenses is requested, the Company will be entitled
to participate therein at its own expense and, except as otherwise provided below, to the extent that it may wish, the Company may assume the defense
thereof, with counsel reasonably satisfactory to the Indemnitee. After notice from the Company to the Indemnitee of its election to assume the defense of a
Proceeding, the Company will not be liable to the Indemnitee under this Agreement for any Expenses subsequently incurred by the Indemnitee in connection
with the defense thereof, other than as provided below. The Company shall not settle any Proceeding in any manner which would impose any penalty or
limitation on the Indemnitee without the Indemnitees written consent. The Indemnitee shall have the right to employ his/her own counsel in any Proceeding,
but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense of the Proceeding shall be at the expense of
the Indemnitee, unless (i) the employment of counsel by the Indemnitee has been authorized by the Company, (ii) the Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct of the defense of a Proceeding, or (iii) the
Company shall not in fact have employed counsel to assume the defense of a proceeding, in each of which cases the fees and expenses of the Indemnitees
counsel shall be advanced by the Company. The Company shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the
Company or as to which the Indemnitee has reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee.
9.
Limitations on Indemnification. No payments pursuant to this Agreement shall be made by the Company:
(a)
To indemnify or advance funds to the Indemnitee for Expenses with respect to (i) Proceedings initiated or brought voluntarily by
the Indemnitee and not by way of defense, except with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement
or any other statute or law or otherwise as required under applicable law or (ii) Expenses incurred by the Indemnitee in connection with preparing to serve or
serving as a witness in cooperation with any party or entity who or which has threatened or commenced any action or proceeding against the Company, or
any director, officer, employee, trustee, agent, representative, subsidiary, parent corporation or affiliate of the Company, but such indemnification or
advancement of Expenses in each such case may be provided by the Company if the Board of Directors finds it to be appropriate;
(b)
To indemnify the Indemnitee for any Expenses, judgments, fines, interest or penalties sustained in any Proceeding for which
payment is actually made to the Indemnitee under a valid and collectible insurance policy, except in respect of any excess beyond the amount of payment
under such insurance;
(c)
To indemnify the Indemnitee for any Expenses, judgments, fines, interest or penalties sustained in any Proceeding for an
accounting of profits made from the purchase or
6
sale by the Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Act or similar provisions of any foreign or United
States federal, state or local statute or regulation;
(d)
To indemnify the Indemnitee for any Expenses, judgments, fines, interest or penalties for which the Indemnitee is indemnified by
the Company otherwise than pursuant to this Agreement;
(e)
To indemnify the Indemnitee for any Expenses (including without limitation any Expenses relating to a Proceeding attempting to
enforce this Agreement), judgments, fines, interest or penalties on account of the Indemnitees conduct if such conduct shall be finally adjudged to have been
knowingly fraudulent or deliberately dishonest or to have constituted willful misconduct, including, without limitation, breach of the duty of loyalty; or
(f)
If a court of competent jurisdiction finally determines that any indemnification hereunder is unlawful. In this respect, the Company
and the Indemnitee have been advised that the Securities and Exchange Commission takes the position that indemnification for liabilities arising under
securities laws is against public policy and is, therefore, unenforceable;
(g)
To indemnify the Indemnitee in connection with Indemnitees personal tax matter; or
(h)
To indemnify the Indemnitee with respect to any claim related to any dispute or breach arising under any contract or similar
obligation between the Company or any of its subsidiaries or affiliates and such Indemnitee.
10.
Continuation of Indemnification. All agreements and obligations of the Company contained herein shall continue during the period that
the Indemnitee is a director or officer of the Company (or is or was serving at the request of the Company as an agent of another enterprise, foreign or
domestic) and shall continue thereafter so long as the Indemnitee shall be subject to any possible Proceeding by reason of the fact that the Indemnitee was a
director or officer of the Company or serving in any other capacity referred to in this Paragraph 10.
11.
Indemnification Hereunder Not Exclusive. The indemnification provided by this Agreement shall not be deemed to be exclusive of any
other rights to which the Indemnitee may be entitled under the Companys Articles, any agreement, vote of shareholders or vote of Disinterested Directors,
provisions of applicable law, or otherwise, both as to action or omission in the Indemnitees official capacity and as to action or omission in another capacity
on behalf of the Company while holding such office.
12.
Successors and Assigns.
(a)
This Agreement shall be binding upon the Indemnitee, and shall inure to the benefit of, the Indemnitee and the Indemnitees heirs,
executors, administrators and assigns, whether or not the Indemnitee has ceased to be a director or officer, and the Company and its successors and assigns.
Upon the sale of all or substantially all of the business, assets or share
7
capital of the Company to, or upon the merger of the Company into or with, any corporation, partnership, joint venture, trust or other person, this Agreement
shall inure to the benefit of and be binding upon both the Indemnitee and such purchaser or successor person. Subject to the foregoing, this Agreement may
not be assigned by either party without the prior written consent of the other party hereto.
(b)
If the Indemnitee is deceased and is entitled to indemnification under any provision of this Agreement, the Company shall
indemnify the Indemnitees estate and the Indemnitees spouse, heirs, executors, administrators and assigns against, and the Company shall, and does hereby
agree to assume, any and all Expenses actually and reasonably incurred by or for the Indemnitee or the Indemnitees estate, in connection with the
investigation, defense, appeal or settlement of any Proceeding. Further, when requested in writing by the spouse of the Indemnitee, and/or the Indemnitees
heirs, executors, administrators and assigns, the Company shall provide appropriate evidence of the Companys agreement set out herein to indemnify the
Indemnitee against and to itself assume such Expenses.
13.
Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable
the Company effectively to bring suit to enforce such rights.
14.
Severability. Each and every paragraph, sentence, term and provision of this Agreement is separate and distinct so that if any paragraph,
sentence, term or provision thereof shall be held to be invalid, unlawful or unenforceable for any reason, such invalidity, unlawfulness or unenforceability
shall not affect the validity, unlawfulness or enforceability of any other paragraph, sentence, term or provision hereof. To the extent required, any paragraph,
sentence, term or provision of this Agreement may be modified by a court of competent jurisdiction to preserve its validity and to provide the Indemnitee
with the broadest possible indemnification permitted under applicable law. The Companys inability, pursuant to a court order or decision, to perform its
obligations under this Agreement shall not constitute a breach of this Agreement.
15.
Savings Clause. If this Agreement or any paragraph, sentence, term or provision hereof is invalidated on any ground by any court of
competent jurisdiction, the Company shall nevertheless indemnify the Indemnitee as to any Expenses, judgments, fines, interest or penalties, which are
incurred with respect to any Proceeding to the fullest extent permitted by any (a) applicable paragraph, sentence, term or provision of this Agreement that has
not been invalidated or (b) applicable law.
16.
Interpretation; Governing Law. This Agreement shall be construed as a whole and in accordance with its fair meaning and any ambiguities
shall not be construed for or against either party. Headings are for convenience only and shall not be used in construing meaning. This Agreement shall be
governed and interpreted in accordance with the laws of the State of New York.
17.
Amendments. No amendment, waiver, modification, termination or cancellation of this Agreement shall be effective unless in writing
signed by the party against whom
8
enforcement is sought. The indemnification rights afforded to the Indemnitee hereby are contract rights and may not be diminished, eliminated or otherwise
affected by amendments to the Companys Articles, or by other agreements, including directors and officers liability insurance policies, of the Company.
18.
Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by each party and delivered to the other.
19.
Notices. Any notice required to be given under this Agreement shall be directed to the Chief Financial Officer of the Company at Building
One, No. 1685 Huazhi Road, Qingpu District, Shanghai 201708, Peoples Republic of China, and to the Indemnitee at
or
to such other address as either shall designate to the other in writing.
[The remainder of this page is intentionally left blank.]
9
IN WITNESS WHEREOF, the parties have executed this Indemnification Agreement as of the date first written above.
INDEMNITEE
Name:
By:
Name:
Title:
[Signature Page to Indemnification Agreement]
Exhibit 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the Agreement) is entered into as of
, 20 by and between ZTO Express (Cayman) Inc., an exempted
company incorporated and existing under the laws of the Cayman Islands (the Company) and
, an individual with [
passport/ID number
] (the Executive).
RECITALS
WHEREAS, the Company desires to employ the Executive and to assure itself of the services of the Executive during the term of Employment (as defined
below) and under the terms and conditions of the Agreement;
WHEREAS, the Executive desires to be employed by the Company during the term of Employment and under the terms and conditions of the Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Executive agree as
follows:
1.
EMPLOYMENT
The Company hereby agrees to employ the Executive and the Executive hereby accepts such employment, on the terms and conditions hereinafter
set forth (the Employment).
2.
TERM
Subject to the terms and conditions of the Agreement, the initial term of the Employment shall be
years, commencing on
,
(the
Effective Date) and ending on
,
(the Initial Term), unless terminated earlier pursuant to the terms of the Agreement. Upon
expiration of the Initial Term of the Employment, the Employment shall be automatically extended for successive periods of
months each
(each, an Extension Period) unless either party shall have given 60 days advance written notice to the other party, in the manner set forth in
Section 19 below, prior to the end of the Extension Period in question, that the term of this Agreement that is in effect at the time such written notice
is given is not to be extended or further extended, as the case may be (the period during which this Agreement is effective being referred to hereafter
as the Term).
3.
POSITION AND DUTIES

(a)
During the Term, the Executive shall serve as

of the Company or in such other position or positions with a level of duties and
responsibilities consistent with the foregoing with the Company and/or its subsidiaries and affiliated entities as the board of directors of the
Company (the Board) may specify from time to time and shall have the duties, responsibilities and
obligations customarily assigned to individuals serving in the position or positions in which the Executive serves hereunder and as
assigned by the Board, or with the Boards authorization, by the Companys Chief Executive Officer.
4.
(b)
The Executive agrees to serve without additional compensation, if elected or appointed thereto, as a director of the Company or any
subsidiaries or affiliated entities of the Company (collectively, the Group) and as a member of any committees of the board of directors of
any such entity, provided that the Executive is indemnified for serving in any and all such capacities on a basis no less favorable than is
currently provided to any other director of any member of the Group.
(c)
The Executive agrees to devote all of his/her working time and efforts to the performance of his/her duties for the Company and to
faithfully and diligently serve the Company in accordance with the Agreement and the guidelines, policies and procedures of the Company
approved from time to time by the Board.
NO BREACH OF CONTRACT
The Executive hereby represents to the Company that: (i) the execution and delivery of the Agreement by the Executive and the performance by the
Executive of the Executives duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any other agreement or policy to
which the Executive is a party or by which the Executive is otherwise bound, except that the Executive does not make any representation with
respect to agreements required to be entered into by and between the Executive and any member of the Group pursuant to the applicable law of the
jurisdiction in which the Executive is based, if any; (ii) that the Executive is not in possession of any information (including, without limitation,
confidential information and trade secrets) the knowledge of which would prevent the Executive from freely entering into the Agreement and
carrying out his/her duties hereunder; and (iii) that the Executive is not bound by any confidentiality, trade secret or similar agreement with any
person or entity other than any member of the Group.
5.
LOCATION
The Executive will be based in
6.
or any other location as requested by the Company during the Term.
COMPENSATION AND BENEFITS

(a)
Cash Compensation. As compensation for the performance by the Executive of his/her obligations hereunder, during the Term, the
Company shall pay the Executive cash compensation (inclusive of the statutory benefit contributions that the Company is required to set
aside for the Executive under applicable law) pursuant to Schedule A hereto, subject to annual review and adjustment by the Board or any
committee designated by the Board.
2
7.
(b)
Equity Incentives. During the Term, the Executive shall be eligible to participate, at a level comparable to similarly situated executives of
the Company, in such long-term compensation arrangements as may be authorized from time to time by the Board, including any share
incentive plan the Company may adopt from time to time in its sole discretion.
(c)
Benefits. During the Term, the Executive shall be entitled to participate in all of the employee benefit plans and arrangements made
available by the Company to its similarly situated executives, including, but not limited to, any retirement plan, medical insurance plan
and travel/holiday policy, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and
arrangements.
TERMINATION OF THE AGREEMENT

The Employment may be terminated as follows:
(a)
Death. The Employment shall terminate upon the Executives death.
(b)
Disability. The Employment shall terminate if the Executive has a disability, including any physical or mental impairment which, as
reasonably determined by the Board, renders the Executive unable to perform the essential functions of his/her position at the Company,
even with reasonable accommodation that does not impose an undue burden on the Company, for more than 180 days in any 12-month
period, unless a longer period is required by applicable law, in which case that longer period shall apply.
(c)
Cause. The Company may terminate the Executives employment hereunder for Cause. The occurrence of any of the following, as
reasonably determined by the Company, shall be a reason for Cause, provided that, if the Company determines that the circumstances
constituting Cause are curable, then such circumstances shall not constitute Cause unless and until the Executive has been informed by the
Company of the existence of Cause and given an opportunity of ten business days to cure, and such Cause remains uncured at the end of
such ten-day period:
(1)
continued failure by the Executive to satisfactorily perform his/her duties;
(2)
willful misconduct or gross negligence by the Executive in the performance of his/her duties hereunder, including
insubordination;
(3)
the Executives conviction or entry of a guilty or nolo contendere plea of any felony or any misdemeanor involving
moral turpitude;
(4)
the Executives commission of any act involving dishonesty that results in material financial, reputational or other harm,
monetary or otherwise, to any member of the Group, including but not limited to an act constituting misappropriation or
embezzlement of
3
the property of any member of the Group as determined in good faith by the Board; or
(5)
any material breach by the Executive of this Agreement.
(d)
Good Reason. The Executive may terminate his/her employment hereunder for Good Reason upon the occurrence, without the written
consent of the Executive, of an event constituting a material breach of this Agreement by the Company that has not been fully cured within
ten business days after written notice thereof has been given by the Executive to the Company setting forth in sufficient detail the conduct
or activities the Executive believes constitute grounds for Good Reason, including but not limited to: the failure by the Company to pay to
the Executive any portion of the Executives current compensation or to pay to the Executive any portion of an installment of deferred
compensation under any deferred compensation program of the Company, within twenty business days of the date such compensation is
due.
(e)
Without Cause by the Company; Without Good Reason by the Executive. The Company may terminate the Executives employment
hereunder at any time without Cause upon 60-day prior written notice to the Executive. The Executive may terminate the Executives
employment voluntarily for any reason or no reason at any time by giving 60-day prior written notice to the Company.
(f)
Notice of Termination. Any termination of the Executives employment under the Agreement shall be communicated by written notice of
termination (Notice of Termination) from the terminating party to the other party. The notice of termination shall indicate the specific
provision(s) of the Agreement relied upon in effecting the termination.
(g)
Date of Termination. The Date of Termination shall mean (i) the date specified in the Notice of Termination, or (ii) if the Executives
employment is terminated by the Executives death, the date of his/her death.
(h)
Compensation upon Termination.

(1)
Death. If the Executives employment is terminated by reason of the Executives death, the Company shall have no
further obligations to the Executive under this Agreement and the Executives benefits shall be determined under the
Companys retirement, insurance and other benefit and compensation plans or programs then in effect in accordance with
the terms of such plans and programs.
(2)
By Company without Cause or by the Executive for Good Reason. If the Executives employment is terminated by the
Company other than for Cause or by the Executive for Good Reason, the Company shall (i) continue to pay and otherwise
provide to the Executive, during any notice period, all compensation, base salary and
4
previously earned but unpaid incentive compensation, if any, and shall continue to allow the Executive to participate in
any benefit plans in accordance with the terms of such plans during such notice period; and (ii) pay to the Executive, in
lieu of benefits under any severance plan or policy of the Company, any such amount as may be agreed between the
Company and the Executive.
(3)
8.
By Company for Cause or by the Executive other than for Good Reason. If the Executives employment shall be
terminated by the Company for Cause or by the Executive other than for Good Reason, the Company shall pay the
Executive his/her base salary at the rate in effect at the time Notice of Termination is given through the Date of
Termination, and the Company shall have no additional obligations to the Executive under this Agreement.
(i)
Return of Company Property. The Executive agrees that following the termination of the Executives employment for any reason, or at any
time prior to the Executives termination upon the request of the Company, he/she shall return all property of the Group that is then in or
thereafter comes into his/her possession, including, but not limited to, any Confidential Information (as defined below) or Intellectual
Property (as defined below), or any other documents, contracts, agreements, plans, photographs, projections, books, notes, records,
electronically stored data and all copies, excerpts or summaries of the foregoing, as well as any automobile or other materials or equipment
supplied by the Group to the Executive, if any.
(j)
Requirement for a Release. Notwithstanding the foregoing, the Companys obligations to pay or provide any benefits shall (1) cease as of
the date the Executive breaches any of the provisions of Sections 8, 9 and 11 hereof, and (2) be conditioned on the Executive signing the
Companys customary release of claims in favor of the Group and the expiration of any revocation period provided for in such release.
CONFIDENTIALITY AND NONDISCLOSURE

(a)
Confidentiality and Non-Disclosure.

(1)
The Executive acknowledges and agrees that: (A) the Executive holds a position of trust and confidence with the
Company and that his/her employment by the Company will require that the Executive have access to and knowledge of
valuable and sensitive information, material, and devices relating to the Company and/or its business, activities, products,
services, customers and vendors, including, but not limited to, the following, regardless of the form in which the same is
accessed, maintained or stored: the identity of the Companys actual and prospective customers and, as applicable, their
representatives; prior, current or future research or
5
development activities of the Company; the products and services provided or offered by the Company to customers or
potential customers and the manner in which such services are performed or to be performed; the product and/or service
needs of actual or prospective customers; pricing and cost information; information concerning the development,
engineering, design, specifications, acquisition or disposition of products and/or services of the Company; user base
personal data, programs, software and source codes, licensing information, personnel information, advertising client
information, vendor information, marketing plans and techniques, forecasts, and other trade secrets (Confidential
Information); and (B) the direct and indirect disclosure of any such Confidential Information would place the Company
at a competitive disadvantage and would do damage, monetary or otherwise, to the Companys business.
(b)
(2)
During the Term and at all times thereafter, the Executive shall not, directly or indirectly, whether individually, as a
director, stockholder, owner, partner, employee, consultant, principal or agent of any business, or in any other capacity,
publish or make known, disclose, furnish, reproduce, make available, or utilize any of the Confidential Information
without the prior express written approval of the Company, other than in the proper performance of the duties
contemplated herein, unless and until such Confidential Information is or shall become general public knowledge
through no fault of the Executive.
(3)
In the event that the Executive is required by law to disclose any Confidential Information, the Executive agrees to give
the Company prompt advance written notice thereof and to provide the Company with reasonable assistance in obtaining
an order to protect the Confidential Information from public disclosure.
(4)
The failure to mark any Confidential Information as confidential shall not affect its status as Confidential Information
under this Agreement.
Third Party Information in the Executives Possession. The Executive agrees that he/she shall not, during the Term, (i) improperly use or
disclose any proprietary information or trade secrets of any former employer or other person or entity with which the Executive has an
agreement or duty to keep in confidence information acquired by Executive, if any, or (ii) bring into the premises of Company any
document or confidential or proprietary information belonging to such former employer, person or entity unless consented to in writing by
such former employer, person or entity. The Executive will indemnify the Company and hold it harmless from and against all claims,
liabilities, damages and expenses,
6
including reasonable attorneys fees and costs of litigation, arising out of or in connection with any violation of the foregoing.
(c)
Third Party Information in the Companys Possession. The Executive recognizes that the Company may have received, and in the future
may receive, from third parties their confidential or proprietary information subject to a duty on the Companys part to maintain the
confidentiality of such information and to use it only for certain limited purposes. The Executive agrees that the Executive owes the
Company and such third parties, during the Term and thereafter, a duty to hold all such confidential or proprietary information in strict
confidence and not to disclose such information to any person or firm, or otherwise use such information, in a manner inconsistent with the
limited purposes permitted by the Companys agreement with such third party.
This Section 8 shall survive the termination of the Agreement for any reason. In the event the Executive breaches this Section 8, the Company shall
have right to seek remedies permissible under applicable law.
9.
INTELLECTUAL PROPERTY
(a)
Prior Inventions. The Executive has attached hereto, as Schedule B, a list describing all inventions, ideas, improvements, designs and
discoveries, whether or not patentable and whether or not reduced to practice, original works of authorship and trade secrets made or
conceived by or belonging to the Executive (whether made solely by the Executive or jointly with others) that (i) were developed by
Executive prior to the Executives employment by the Company (collectively, Prior Inventions), (ii) relate to the Company actual or
proposed business, products or research and development, and (iii) are not assigned to the Company hereunder; or, if no such list is
attached, the Executive represents that there are no such Prior Inventions. Except to the extent set forth in Schedule B, the Executive hereby
acknowledges that, if in the course of his/her service for the Company, the Executive incorporates into a Company product, process or
machine a Prior Invention owned by the Executive or in which he/she has an interest, the Company is hereby granted and shall have a
nonexclusive, royalty-free, irrevocable, perpetual, worldwide right and license (which may be freely transferred by the Company to any
other person or entity) to make, have made, modify, use, sell, sublicense and otherwise distribute such Prior Invention as part of or in
connection with such product, process or machine.
(b)
Assignment of Intellectual Property. The Executive hereby assigns to the Company or its designees, without further consideration and free
and clear of any lien or encumbrance, the Executives entire right, title and interest (within the United States and all foreign jurisdictions) to
any and all inventions, discoveries, improvements, developments, works of authorship, concepts, ideas, plans, specifications, software,
formulas, databases, designees, processes and contributions to Confidential Information created, conceived, developed or reduced to
practice by the Executive (alone or with others) during the Term which
7
(i) are related to the Companys current or anticipated business, activities, products, or services, (ii) result from any work performed by
Executive for the Company, or (iii) are created, conceived, developed or reduced to practice with the use of Company property, including
any and all Intellectual Property Rights (as defined below) therein (Work Product). Any Work Product which falls within the definition
of work made for hire, as such term is defined in the U.S. Copyright Act, shall be considered a work made for hire, the copyright in
which vests initially and exclusively in the Company. The Executive waives any rights to be attributed as the author of any Work Product
and any droit morale (moral rights) in Work Product. The Executive agrees to immediately disclose to the Company all Work Product.
For purposes of this Agreement, Intellectual Property shall mean any patent, copyright, trademark or service mark, trade secret, or any
other proprietary rights protection legally available.
(c)
Patent and Copyright Registration. The Executive agrees to execute and deliver any instruments or documents and to do all other things
reasonably requested by the Company in order to more fully vest the Company with all ownership rights in the Work Product. If any Work
Product is deemed by the Company to be patentable or otherwise registrable, the Executive shall assist the Company (at the Companys
expense) in obtaining letters of patent or other applicable registration therein and shall execute all documents and do all things, including
testifying (at the Companys expense) as necessary or appropriate to apply for, prosecute, obtain, or enforce any Intellectual Property right
relating to any Work Product. Should the Company be unable to secure the Executives signature on any document deemed necessary to
accomplish the foregoing, whether due to the Executives disability or other reason, the Executive hereby irrevocably designates and
appoints the Company and each of its duly authorized officers and agents as the Executives agent and attorney-in-fact to act for and on the
Executives behalf and stead to take any of the actions required of Executive under the previous sentence, with the same effect as if
executed and delivered by the Executive, such appointment being coupled with an interest.
This Section 9 shall survive the termination of the Agreement for any reason. In the event the Executive breaches this Section 9, the Company shall
have right to seek remedies permissible under applicable law.
10.
CONFLICTING EMPLOYMENT.
The Executive hereby agrees that, during the Term, he/she will not engage in any other employment, occupation, consulting or other business
activity related to the business in which the Company is now involved or becomes involved during the Term, nor will the Executive engage in any
other activities that conflict with his/her obligations to the Company without the prior written consent of the Company.
11.
NON-COMPETITION AND NON-SOLICITATION

8
(a)
Non-Competition. In consideration of the compensation provided to the Executive by the Company hereunder, the adequacy of which is
hereby acknowledged by the parties hereto, the Executive agree that during the Term and for a period of one year following the termination
of the Employment for whatever reason, the Executive shall not engage in Competition (as defined below) with the Group. For purposes of
this Agreement, Competition by the Executive shall mean the Executives engaging in, or otherwise directly or indirectly being
employed by or acting as a consultant or lender to, or being a director, officer, employee, principal, agent, stockholder, member, owner or
partner of, or permitting the Executives name to be used in connection with the activities of, any other business or organization which
competes, directly or indirectly, with the Group in the Business; provided, however, it shall not be a violation of this Section 11(a) for the
Executive to become the registered or beneficial owner of up to five percent (5%) of any class of the capital stock of a publicly traded
corporation in Competition with the Group, provided that the Executive does not otherwise participate in the business of such corporation.
For purposes of this Agreement, Business means express delivery services, transportation and courier services, and any other business
which the Group engages in, or is preparing to become engaged in, during the Term.
(b)
(c)
Non-Solicitation; Non-Interference. During the Term and for a period of one year following the termination of the Executives employment
for any reason, the Executive agrees that he/she will not, directly or indirectly, for the Executives benefit or for the benefit of any other
person or entity, do any of the following:
(1)
approach the suppliers, clients, direct or end customers or contacts or other persons or entities introduced to the Executive
in his/her capacity as a representative of the Group for the purpose of doing business of the same or of a similar nature to
the Business or doing business that will harm the business relationships of the Group with the foregoing persons or
entities;
(2)
assume employment with or provide services to any competitors of the Group, or engage, whether as principal, partner,
licensor or otherwise, any of the Groups competitors, without the Groups express consent; or
(3)
seek, directly or indirectly, to solicit the services of, or hire or engage, any person who is known to be employed or
engaged by the Group; or
(4)
otherwise interfere with the business or accounts of the Group.
Injunctive Relief; Indemnity of Company. The Executive agrees that any breach or threatened breach of subsections (a) and (b) of this
Section 11 would result in irreparable injury and damage to the Company for which an award of money to
9
the Company would not be an adequate remedy. The Executive therefore also agrees that in the event of said breach or any reasonable
threat of breach, the Company shall be entitled to seek an immediate injunction and restraining order to prevent such breach and/or
threatened breach and/or continued breach by the Executive and/or any and all persons and/or entities acting for and/or with the Executive.
The terms of this paragraph shall not prevent the Company from pursuing any other available remedies for any breach or threatened breach
hereof, including, but not limited to, remedies available under this Agreement and the recovery of damages. The Executive and the
Company further agree that the provisions of this Section 11 are reasonable. The Executive agrees to indemnify and hold harmless the
Company from and against all reasonable expenses (including reasonable fees and disbursements of counsel) which may be incurred by the
Company in connection with, or arising out of, any violation of this Agreement by the Executive. This Section 11 shall survive the
termination of the Agreement for any reason.
12.
WITHHOLDING TAXES
Notwithstanding anything else herein to the contrary, the Company may withhold (or cause there to be withheld, as the case may be) from any
amounts otherwise due or payable under or pursuant to the Agreement such national, state, provincial, local or any other income, employment, or
other taxes as may be required to be withheld pursuant to any applicable law or regulation.
13.
ASSIGNMENT
The Agreement is personal in its nature and neither of the parties hereto shall, without the consent of the other, assign or transfer the Agreement or
any rights or obligations hereunder; provided, however, that the Company may assign or transfer the Agreement or any rights or obligations
hereunder to any member of the Group without such consent. If the Executive should die while any amounts would still be payable to the Executive
hereunder if the Executive had continued to live, all such amounts unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executives devisee, legatee, or other designee or, if there be no such designee, to the Executives estate. The Company will
require any and all successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company
would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the
same amount and on the same terms as the Executive would be entitled to hereunder if the Company had terminated the Executives employment
other than for Cause, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Section, Company shall mean the Company as herein before defined and any successor to its
business and/or assets as aforesaid which executes and delivers the
10
agreement provided for in this Section 13 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.
14.
SEVERABILITY
If any provision of the Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of the
Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of the Agreement are declared to
be severable.
15.
ENTIRE AGREEMENT
The Agreement constitutes the entire agreement and understanding between the Executive and the Company regarding the terms of the Employment
and supersedes all prior or contemporaneous oral or written agreements concerning such subject matter. The Executive acknowledges that he/she has
not entered into the Agreement in reliance upon any representation, warranty or undertaking which is not set forth in the Agreement.
16.
GOVERNING LAW
The Agreement shall be governed by and construed in accordance with the law of the State of New York.
17.
AMENDMENT
The Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring
to the Agreement, which agreement is executed by both of the parties hereto.
18.
WAIVER
Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under the Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of
any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a
waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed
by the party asserted to have granted such waiver.
19.
NOTICES
All notices, requests, demands and other communications required or permitted under the Agreement shall be in writing and shall be deemed to have
been duly given and made if (i) delivered by hand, (ii) otherwise delivered against receipt therefor, (iii) sent by a recognized courier with next-day or
second-day delivery to the last known address of the other party; or (iv) sent by e-mail with confirmation of receipt.
11
20.
COUNTERPARTS
The Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature
appears thereon, and all of which together shall constitute one and the same instrument. The Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. Photographic
copies of such signed counterparts may be used in lieu of the originals for any purpose.
21.
NO INTERPRETATION AGAINST DRAFTER

Each party recognizes that the Agreement is a legally binding contract and acknowledges that such party has had the opportunity to consult with
legal counsel of choice. In any construction of the terms of the Agreement, the same shall not be construed against either party on the basis of that
party being the drafter of such terms.
[Remainder of the page intentionally left blank.]
12
IN WITNESS WHEREOF, the Agreement has been executed as of the date first written above.
COMPANY:

a Cayman Islands exempted company
By:
Name:
Title:
EXECUTIVE:
Name:
Address:
13
SCHEDULE A
Cash Compensation
14
SCHEDULE B
Prior Inventions
15
Exhibit 10.4
Executed Version
ZTO EXPRESS CO., LTD.
and
SHANGHAI ZHONGTONGJI NETWORK TECHNOLOGY CO., LTD.
EXCLUSIVE CONSULTING AND SERVICES AGREEMENT
August 18, 2015
EXCLUSIVE CONSULTING AND SERVICES AGREEMENT

This Exclusive Consulting and Services Agreement (the Agreement) is entered into on August 18, 2015 by and between:
(1)
SHANGHAI ZHONGTONGJI NETWORK TECHNOLOGY CO., LTD., a limited liability company registered under the laws of the PRC with
registered address at Block 5, 1685 Hua Zhi Road, Qingpu District, Shanghai and Meisong Lai as its legal representative (Party A); and
(2)
ZTO EXPRESS CO., LTD., a limited liability company registered under the laws of the PRC with registered address at Block 1, 1685 Hua Zhi
Road, Qingpu District, Shanghai and Meisong Lai as its legal representative (Party B)
(each a Party, collectively the Parties)

WHEREAS
1.
The principal business of Party A is to conduct development of computer network technology; software integration of computer network systems;
transfer of self-owned technology; design and production of computer software; sale of self-produced products; and to provide relevant technical
consulting and services; wholesale, commission agency (excluding auction), import and export of the products of the same category as the foregoing
and relevant accessory equipment and providing relevant accessory services; enterprise management consulting, business information consulting
(excluding financial information) (business activities relating to items subject to approvals according to the law shall be conducted after approved
by relevant authority).
2.
The principal business of Party B include domestic express services, international express services (excluding those specialized business of postal
enterprises); marine, air, road international freight transport agency; warehousing services; moving, loading and downloading services; domestic
freight transport agency; enterprise image planning; marketing planning; PR activities planning; enterprise management consulting; business
information consulting; supply chain management; mechanic equipment leasing; sale of mechanic equipment, mechanical and electrical products,
electronic products, communication appliances, garments, footwear and headwear, office equipment and articles.
3.
Party B wishes to engage Party A to provide technical support and consulting services.
THEREFORE, the Parties hereby reach the following agreement upon mutual
friendly consultations:
Article 1 Definition
1.1
Except as otherwise defined in the terms or context hereof, the following terms in this Agreement shall have the following meanings:
Party Bs Business
means any and all businesses engaged in and developed by Party B currently and at any time during the
valid term hereof.
Services
means the services to be provided by Party A to Party B, which are related to Party Bs Business, including
but not limited to:
(1)
provision of professional consulting services relating to Party Bs business;
(2)
provision of training for Party Bs personnel;
(3)
provision of market research, planning and development services;
(4)
provision of business planning and business strategies (advisory suggestions); and
(5)
provision of client support and development services (advisory suggestions).
Service Team
means the team of personnel established by Party A for the purpose of provision of Services to Party B
pursuant to this Agreement, including the employees of Party A, independent professional advisors and
other contractors.
Service Fees
means all fees payable by Party B to Party A pursuant to Article 3 of this Agreement in respect of the
Services provided by Party A.
Operating Revenue
means in any single fiscal year during the term of this Agreement, the total revenue generated by Party B in
its daily operation of business of that year as recorded under the Revenue of Primary Business in the
audited balance sheet prepared in accordance with the PRC accounting standards.
Annual Business Plan
means the development plan and budget report for Party Bs Business in the next calendar year which is
prepared by Party B with the assistance of Party
A pursuant to this Agreement before November 30 of each year.

Equipment
shall mean any and all equipment owned by Party A or purchased by Party A from time to time, which are to
be used for the purpose of provision of the Services.
1.2
The references to any laws and regulations (the Laws) herein shall be deemed to include (1) the references to the amendments, changes,
supplements and reenactments of such Laws, irrespective of whether they take effect before or after the execution of this Agreement; and (2) the
references to other decisions, notices or regulations enacted in accordance therewith or effective as a result thereof.
1.3
Except as otherwise stated in the context herein, all references to an article, clause, item or paragraph shall refer to the relevant article, clause, item or
paragraph of this Agreement.
Article 2 Services of Party A
2.1
In order to better operate its business, Party B whishes to engage Party A to provide the Services to it, and Party A agrees to provide such Services to
Party B. Therefore, Party B appoints Party A as its exclusive consulting and services provider to provide Party B with the Services defined herein,
and Party A agrees to accept such engagement.
2.2
Party A shall provide the Services to Party B in accordance with the terms of this Agreement, and Party B shall use its best efforts to facilitate Party A
to provide the Services.
2.3
Party A shall be equipped with various kinds of Equipment and Service Team reasonably necessary for its provision of Services and purchase,
acquire new Equipment and personnel according to Party Bs Annual Business Plan and Party Bs reasonable requirements to satisfy the needs of
Party A in order to provide Party B with high-quality services in accordance with this Agreement. However, from time to time, Party A may replace
any member of the Service Team or change the work duties and responsibilities of any member of the Service Team at its sole discretion, provided
that such replacement or change of work duties and responsibilities shall not materially adversely affect the day-to-day business operations of Party
B.
2.4
Notwithstanding the other provisions in this Agreement, Party A is entitled to appoint any third party to provide any or all Services hereunder or to
perform
any of its obligations hereunder on its behalf. Party B hereby agrees that Party A is entitled to assign its rights and obligations hereunder to any third
party.
Article 3 Service Fees
3.1
With respect to the Services to be provided by Party A pursuant to this Agreement, Party A and Party B estimate that within fifty (50) years Party B
will pay to Party A the Service Fees of RMB 10 billion. Notwithstanding the foregoing, Party A and Party B will separately negotiate to determine
the amount of annual service fees payable by Party B to Party A after the end of each calendar year throughout the term of this Agreement.
3.2
Party B shall within three months of the end of each calendar year pay the Service Fees determined under Article 3.1 hereof into a bank account
designated by Party A on a lump-sum basis. In case that Party A changes its bank account, it shall notify Party B in writing of such change seven
(7) working days in advance.
3.3
The Parties agree that, in principle, the payment of said Service Fees shall not cause any difficulty to the operation of either Party of that year. For
the aforesaid purposes, Party A may agree to the deferred payment of Service Fees by Party B, or upon the mutual agreement by the Parties through
negotiation, Party A may adjust in writing the percentage of calculation and/or the specific amount of Service Fees payable by Party B to Party A
specified in Article 3.1 above.
Article 4 Obligations of Party B
4.1
The Services provided by Party A under this Agreement shall be exclusive. During the term of this Agreement, without prior written consent of Party
A, Party B may not enter into any agreement with any third party or otherwise engage such third party to provide services the same as or similar to
those provided by Party A hereunder.
4.2
Party B shall provide Party A with the finalized Annual Business Plan of Party B of the next year before November 30 of each year, in order to
facilitate Party A to arrange plans of Services, purchase necessary software and Equipment and secure necessary personnel and technical service
force accordingly. In case Party B needs Party A to purchase certain new Equipment or have additional personnel, it shall consult with Party A
fifteen (15) days in advance in order to reach mutual agreement between the Parties.
4.3
In order to facilitate provision of the Services by Party A, Party B shall provide
Party A with relevant materials required by Party A in an accurate and timely manner.
4.4
Party B shall pay Service Fees to Party A on time and in full amount in accordance with Article 3 hereof.
4.5
Party B shall maintain its good standing and presence, actively develop its business and make effort to maximize the returns.
4.6
The Parties hereby acknowledge that, pursuant to the terms and conditions of the Equity Interest Pledge Agreement entered into by all of the
registered shareholders of Party B as of the date of this Agreement (the Existing Shareholders) with Party A, each of the Existing Shareholders has
pledged all of the equity interests in Party B held by it to Party A as security for Party Bs performance of its obligations under this Agreement and
all of the ancillary agreements.
4.7
During the term of this Agreement, Party B agrees to cooperate with Party A and Party As direct or indirect parent company in the audit of related
party transactions and other audits, to provide related information and materials about Party Bs business, operation, customers, finance and
employees to Party A, its parent company or its authorized auditor, and agrees that Party As parent company may disclose such related information
and materials for purpose of satisfying the regulatory requirements of the stock exchange on which Party As parent company is listed.
Article 5 Intellectual Property
5.1
To the extent permitted by the then effective applicable PRC Laws, intellectual property on the work products created in the course of Party As
provision of Services and the intellectual property on the work product developed by Party B on the basis of Party As intellectual property shall
belong to Party A. Such intellectual property includes, but not limited to, copyright, patent, know-how, trade secret and other intellectual property.
In case the applicable PRC Laws expressly prohibits such intellectual property from being owned by Party A, Party B shall hold such intellectual
property for the benefit of Party A, and shall immediately transfer such intellectual property to Party A at the lowest price permitted by law to Party B
once Party Bs ownership of intellectual property is no longer prohibited by PRC Laws; if there is no requirement on the lowest price for such
transfer, Party B shall transfer such intellectual property to Party A free of consideration and use its best effort to assist Party A in completing all the
filing and registration procedure as required by the relevant government authorities in respect of such transfer.
5.2
For the purpose of performing this Agreement, Party B may use the work products created by Party A in the course of provision of Services, subject
to the terms and conditions of this Agreement. However, under no circumstances shall this Agreement grant or be deemed to have granted Party B
any license or right to use such work product for any other purpose.
5.3
Each Party warrants to the other Party that it will indemnify the other Party against any and all economic losses incurred by the other Party arising
from its infringement of any other persons intellectual property rights (including copyright, trademark, patent and know-how).
Article 6 Confidentiality Obligations
6.1
Within the term of this Agreement, all customer information (the Customer Information) and other related materials in connection with Party Bs
Business and Services provided by Party A shall be owned by Party A.
6.2
Notwithstanding the termination of this Agreement, the Parties shall be obliged to keep in strict confidence the trade secrets and proprietary
information of the other Party acquired during the performance of this Agreement, the Customer Information jointly owned by both Parties and any
non-public information of the other Party (collectively, the Confidential Information). The receiving party of the Confidential Information (the
Receiving Party) shall not disclose the Confidential Information or any part thereof to any third parties unless it obtains prior written consent of
the other Party, or required by relevant laws and regulations or requirements of relevant stock exchange. The Receiving Party may not use, directly
or indirectly, such Confidential Information or any part thereof for purposes other than performing its obligations under this Agreement.
6.3
The following information shall not constitute Confidential Information:

(a) any information which, as shown by written evidence, has previously been known to the Receiving Party;
(b) any information which enters the public domain not due to the fault of the Receiving Party or is known by the public for other reasons; or
(c) any information lawfully acquired by the Receiving Party from another source subsequent to the receipt of relevant information.
6.4
The Receiving Party may disclose the Confidential Information to its relevant employees, agents or professionals it retains, but shall secure that the
above persons should be bound by this Agreement, keep the Confidential Information confidential, and use such Confidential Information solely for
the purpose of
performing this Agreement.

6.5
Upon termination of this Agreement, the Receiving Party of the Confidential Information shall return any and all documents, information or software
containing any such Confidential Information to the original owner or provider of such Confidential Information; or with prior consent of the
original owner or provider, destroy and delete all of such Confidential Information from any electronic device, and cease to use it in all
circumstances.
6.6
The Parties agree that this Article shall survive the amendment, expiration or termination of this Agreement.
Article 7 Representations and Warranties
7.1
7.2
Party A hereby represents and warrants as follows:

7.1.1
it is a limited liability company duly registered and validly existing under the laws of its incorporation place with independent legal person
status, and has full and independent legal status and legal capacity to execute, deliver and perform this Agreement, and may act as an
independent party in any lawsuits;
7.1.2
it has full corporate power and authority to execute and deliver this Agreement and all the other documents related to the transaction
contemplated hereunder which are to be executed by it, and has full power and authority to consummate the transaction hereunder. This
Agreement shall be lawfully and duly executed and delivered by it and shall constitute its legal, valid and binding obligations, enforceable
against it pursuant to the terms hereof.
Party B hereby represents and warrants as follows:

7.2.1
it is a limited liability company duly registered and validly existing under the laws of its incorporation place with independent legal person
status, and has full and independent legal status and legal capacity to execute, deliver and perform this Agreement, and may act as an
independent party in any lawsuits;
7.2.2
it has full corporate power and authority to execute and deliver this Agreement and all the other documents related to the transaction
contemplated hereunder which are to be executed by it, and it has full power and authority to consummate the transaction contemplated
hereunder. This Agreement shall be lawfully and duly executed and delivered by it and shall constitute its legal, valid and binding
obligations, enforceable against it pursuant to the terms hereof;

7.2.3
as of the effectiveness of this Agreement, it has obtained complete operating permits necessary for its operations, and has full right and
qualification to conduct Party Bs Business as is currently conducted within the PRC;
7.2.4
it shall notify Party A in a timely manner any litigation and other adverse situations it is involved in that has or may have material adverse
effect on Party Bs Business and its operations, and make its best efforts to prevent further losses therefrom;
7.2.5
without written consent of Party A, Party B shall not dispose of its material assets in any form nor change its current shareholding structure;
7.2.6
it shall not enter into or consummate any transaction that may have material impact on the assets, obligations, business operation,
shareholding structure of Party B, any equity interests in any third party and any other legitimate right held by Party B (except for those
transactions incurred in the ordinary course of business or those transactions which have been disclosed to and approved in writing by Party
A).
7.2.7
it waives any right to require the amendment and cancellation of any provision of this Agreement on the ground of material
misunderstanding or unconscionability, whether with respect to the percentage and amount of the Service Fees provided hereunder, or the
quantity and quality of any service provided by Party A, or with respect to the stipulation prohibiting Party B to engage a third party to
provide the same services as, or other services similar to, those provided by Party A, or any other stipulation hereof.
Article 8 Term of Agreement
8.1
The Parties hereby acknowledge that this Agreement shall become effective upon duly execution by the Parties hereto, and shall remain valid until
it is terminated by written agreement of the Parties hereto or by the opeartaion of applicable PRC Laws and regulations.
8.2
Each Party shall complete the approval and registration formalities for extension of its business term three (3) months before the expiry of its term of
business such that the validity of this Agreement shall be maintained.
8.3
Following the termination of this Agreement, the Parties shall continue to settle
the Service Fees already incurred pursuant to Article 3 hereof, and continue to comply with its obligations under Article 6 hereof.
Article 9 Notice
9.1
Any notice, request, demand and other correspondences required by or made in accordance with this Agreement shall be in writing and delivered to
the relevant Party.
9.2
The aforesaid notice or other correspondences shall be deemed to have been delivered upon delivery when it is transmitted by facsimile; or upon
handed over to the receiver when it is delivered in person; or on the fifth (5) day after posting if delivered by mail.
Article 10 Default Liabilities
10.1
10.2
The Parties agree and confirm that, if any Party (the Defaulting Party) breaches substantially any of the agreements or substantially fails to
perform any of the obligations hereunder, such a breach or failure shall constitute a default hereunder (the Default), and the non-defaulting Party
shall be entitled to demand the Defaulting Party to rectify such Default or take remedial measures within a reasonable period of time. If the
Defaulting Party fails to rectify such Default or take remedial measures within such reasonable period of time or within ten (10) days upon receipt of
the written notice from the non-defaulting party, the non-defaulting party shall be entitled to decide to, at its discretion:
10.1.1
provided that if the Defaulting Party is Party B, Party A shall be entitled to terminate this Agreement and require the Defaulting Party to
indemnify all the damages; or
10.1.2
provided that if the Defaulting Party is Party A, Party B shall be entitled to require the Defaulting Party to indemnify all the damages.
However, unless otherwise provided by the laws, under no circumstances shall Party B be entitled to terminate or rescind this Agreement.
Notwithstanding any other provisions herein, this Article 10 shall survive the suspension or termination of this Agreement.
Article 11 Force Majeure
11.1
In the event of earthquake, typhoon, flood, fire, war, change of policies or laws,
and other unforeseeable or unpreventable or unavoidable event of force majeure, which directly prevents a Party from performing this Agreement
pursuant to the agreed conditions, the Party affected by such a force majeure event shall forthwith issue a notice by facsimile and, within thirty (30)
days, present the documents evidencing the details of such force majeure event and the reasons for failure of or delay in its performance, and such
documents shall be issued by the notary institution of the area where such force majeure event takes place. The Party affected by such a force
majeure event shall take appropriate measures to mitigate or eliminate the effects resulting from such event and shall make its efforts to reassume the
obligations the performance of which have been delayed or impeded by such force majeure event. The Parties shall consult each other and decide
whether this Agreement shall be waived in part or postponed in its performance with regard to the extent of impact of such force majeure event on
the performance of this Agreement. No Party shall be liable for the economic losses suffered by the other Party resulting from the force majeure
event.
Article 12 Miscellaneous Provisions
12.1
This Agreement is made in Chinese in three (3) originals with each Party holding one (1) original and Beijng Wudao Technology Investment
Management Co., Ltd. holding one (1) original.
12.2
The formation, effectiveness, performance, amendment, interpretation and termination of this Agreement shall be governed by the PRC Laws.
12.3
Any disputes arising hereunder and in connection herewith shall be settled through consultations between the Parties, and if the Parties cannot reach
an agreement regarding such disputes within thirty (30) days of their occurrence, such disputes shall be submitted to Shanghai International
Economic and Trade Arbitration Commission for arbitration in accordance with the arbitration rules thereof. The place of arbitration shall be in
Shanghai, the language to be used in arbitration is Chinese and the arbitration award shall be final and equally binding on the Parties.
12.4
Any rights, powers and remedies empowered to any Party by any provisions herein shall not preclude any other rights, powers and remedies enjoyed
by such Party in accordance with laws and other provisions under this Agreement, and the exercise of its rights, powers and remedies by a Party shall
not preclude its exercise of its other rights, powers and remedies by such Party.
12.5
No failure or delay by a Party in exercising any of its rights, powers and remedies hereunder or in accordance with law (the Rights) shall be
construed as a waiver of such Rights, and the waiver of any single or partial exercise of the Rights shall not preclude its exercising of such Rights in
any other way and other Rights.
12.6
The headings of the Articles herein are for reference only, and in no circumstances shall such headings be used in or affect the interpretation of the
provisions hereof.
12.7
This Agreement, upon its execution, supersedes any other agreements, orally or written, between the Parties in respect of the same subject hereof, and
constitutes the complete agreement between the Parties.
12.8
Each provision contained herein shall be severable and independent from other provisions, and if at any time one or more articles herein become
invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions herein shall not be affected as a result thereof.
12.9
Any amendments or supplements to this Agreement shall be made in writing and shall take effect upon due execution by the Parties hereto.
12.10
Party B shall not assign any of its rights and/or obligations hereunder to any third parties without the prior written consent of Party A. Party A shall
be entitled to assign any of its rights and/or obligations hereunder to any third party upon issuance of notice of such assignment to Party B and to
the extent as permitted by PRC Laws.
12.11
This Agreement shall be binding on the legal successors and assigns of the Parties.
12.12
The Parties undertake that they shall make their respective tax declaration and payment pursuant to Law in connection with the transaction
hereunder.
12.13
Party A, Party B and all of Party Bs shareholders have separately entered into two ancillary agreement to this Agreement on the date hereof, namely
the Exclusive Call Option Agreement and Shareholders Voting Rights Agreement, both of which have become effective as of the date of execution.
[The following is intentionally left blank]
[This page is the signature page of the Exclusive Consulting and Services Agreement and contains no body text]
IN WITNESS HEREOF, the Parties have caused this Exclusive Consulting and Services Agreement to be executed on the date first above written.
SHANGHAI ZHONGTONGJI NETWORK TECHNOLOGY CO., LTD.
(Company seal: /s/ Shanghai Zhongtongji Network Technology Co., Ltd.)
By: /s/ Meisong Lai
Name: Meisong Lai
Title: Legal Representative
(Company seal: /s/ ZTO Express Co., Ltd.)
By: /s/ Meisong Lai
Name: Meisong Lai
Exhibit 10.5
Executed Version
Exclusive Call Option Agreement
Regarding
ZTO Express Co., Ltd.
Among
Meisong Lai
Jianfa Lai
Jilei Wang
Xiangliang Hu
Shunchang Zhang
Shareholders listed in Appendix
And
Shanghai Zhongtongji Network Technology Co., Ltd.
August 18, 2015
EXCLUSIVE CALL OPTION AGREEMENT

This EXCLUSIVE CALL OPTION AGREEMENT (this Agreement), dated August 18, 2015, is made by and among:
1.
ZTO Express Co., Ltd. (the Company)

Registered address: Block 1, 1685 Hua Zhi Road, Huaxin Town, Qingpu District, Shanghai
Legal representative: Meisong Lai
2.
Shanghai Zhongtongji Network Technology Co., Ltd. (the WFOE)

3.
Meisong Lai
4.
Jianfa Lai
5.
Jilei Wang
6.
Xiangliang Hu
7.
Shunchang Zhang
8.
Xuebing Shang,
9.
Feixiang Qiu
10.
Baixi Lan
11.
Feng Meng
12.
Hongjun Xu
13.
Yaoren Zhang
14.
Beijing Sequoia Xinyuan Equity Investment Center (L.P.), business license No. 110114015001641
15.
Tianjin Sequoia Juye Equity Investment Centre (L.P.), business license No. 120192000071010
16.
Lemou Wu
17.
Jianying Teng
1
18.
Baozhen Li
19.
Shumin Ma
20.
Wei Wang
21.
Jianchang Lai
22.
Mingsong Lai
23.
Senliang Wang
24.
Youwang Zeng
25.
Zongrui Hong
26.
Lijun Huang
27.
Zhiming Lin
28.
Rui Wang
29.
Dianyuan Ren
30.
Minye Xu
31.
Ziwen Chen
32.
Shunfeng Chen
33.
Fushan Cui
34.
Jian Zhang
35.
Shunmei Pan
36.
Xiaoliang Yuan
37.
Haifeng Zhou
38.
Jiangxiu Xi
39.
Kunman Xiao
40.
Weijun Yao
41.
Bo Yang
42.
Genfu Zhu
2
43.
Jian Zhang
44.
Yongfang Pan
45.
Beijng Wudao Technology Investment Management Co., Ltd., business license No. 110108018485177
(the above No. 3 to No. 45 are collectively referred to as the Existing Shareholders)
(Each of the above individually being referred to as a Party and collectively the Parties)
Whereas,
(1)
The Existing Shareholders are registered shareholders of the Company holding in aggregate all of the Companys shares, and as of the date hereof,
their respective contribution amount and percentage in the Companys registered capital are specified in Appendix I hereof.
(2)
To the extent not in violation of the PRC laws, the Existing Shareholders intend to transfer to the WFOE, and the WFOE is willing to be transferred,
the entire shares they hold in the Company.
(3)
To the extent not in violation of the PRC laws, the Company intends to transfer to the WFOE, and the WFOE is willing to be transferred, the assets
held by the Company.
(4)
In order to effect such transfer of shares or assets, the Existing Shareholders and the Company agree to grant the WFOE an exclusive and irrevocable
share transfer option and an exclusive and irrevocable asset purchase option respectively, pursuant to which the Existing Shareholders or the
Company shall, to the extent allowed by the PRC laws, transfer the Option Shares or the Company Assets (as defined below) to the WFOE and/or any
other entity or individual designated by the WFOE in accordance with the terms hereof and as required by the WFOE.
(5)
The Company agrees that the Existing Shareholders will grant the WFOE with a Share Transfer Option in accordance with this Agreement.
(6)
The Existing Shareholder agree that the Company will grant the WFOE with an Asset Purchase Option in accordance with this Agreement.
NOW, THEREFORE, the Parties hereby agree as follows through negotiations:

3
ARTICLE I
DEFINITIONS
1.1
Unless otherwise explained as required by the context, in this Agreement, the following terms shall have the following meanings:
PRC Laws
mean the then-effective laws, administrative regulations, administrative rules, local decrees, judicial interpretations
and other binding documents of the PRC.
Share Transfer Option
means the option to purchase the shares of the Company that is granted by the Existing Shareholders to the WFOE in
accordance with the terms and conditions hereof.
Asset Purchase Option
means the option to purchase any of the Company Assets that is granted by the Company to the WFOE in
accordance with the terms and conditions hereof.
Option Shares
mean, with respect to an Existing Shareholder, all the shares it holds in the Companys Registered Capital (as
defined below); with respect to all of the Existing Shareholders, 100% shares of the Company.
Companys Registered Capital
means the registered capital of the Company as of the date hereof, i.e. RMB 600 million, which also includes the
increased registered capital as a result of any form of capital increase during the effective term of this Agreement.
Transferred Shares
mean the shares of the Company that the WFOE is entitled to require the Existing Shareholders to transfer to it or its
designated entity or person pursuant to Article 3 hereof in exercising the Share Transfer Option, and the quantity of
such Transferred Shares may be all or part of the Option Shares and is to be determined at the sole discretion of the
WFOE in accordance with the then-current PRC Laws and depending upon its own commercial considerations.
Transferred Assets
mean the Company Assets that the WFOE is entitled to require the Company to transfer to it or its designated entity
or person pursuant to Article 3 hereof in exercising the Asset Purchase Option, and the quantity of such Transferred
Assets may be all or part of the Company Assets and is to be determined at the sole discretion of the WFOE in
accordance with the then-current PRC Laws and depending upon its own commercial considerations.
Exercise
means the exercise of the Share Transfer Option or Asset Purchase

4
Option by the WFOE.

Transfer Price
means the entire consideration payable by the WFOE or its designated entity or person in each Exercise to the
Existing Shareholders or the Company for acquiring the Transferred Shares or the Company Assets.
Business License
means any approval, permit, filing, registration, etc. that is necessary to be held by the Company for the legitimate
and valid conduct of all its business, including without limitation the Business License for Enterprise Legal Person,
Tax Registration Certificate and other permits and licenses then required under the PRC Laws.
Company Assets
mean all of the tangible and intangible assets that is owned by the Company or the Company has the right of
disposal during the effective term of this Agreement, including without limitation any real property, current property
and trademarks, authorship, patents, know-how, domain names, software use right and such other intellectual
property rights.
Material Agreement
means any agreement to which the Company is a party and that may have material impact on the Companys
business or assets, including without limitation the Exclusive Consulting and Services Agreement executed
concurrently with this Agreement and other material agreements regarding the business of the Company.
Exercise Notice
has the meaning ascribed to it in Section 3.7 hereof.
Confidential Information
Defaulting Party
Default
Rights

1.2
Any reference to the PRC Laws herein shall be deemed:
(a)
to also include the reference to any revision, amendment, supplement and reenactment of such PRC Laws, irrespective of
whether such revision, amendment, supplement and reenactment comes into force before or after the date hereof; and
(b)
to also include the reference to any other decision, notice and rule formulated under, or that becomes effective as a result of,
any provision of such PRC Laws.
5
1.3
Unless otherwise specified in the context herein, any reference to an article, section, paragraph or item shall mean the
corresponding article, section, paragraph or item in this Agreement.
ARTICLE II
GRANT OF SHARE TRANSFER OPTION AND ASSET PURCHASE OPTION
2.1
The Existing Shareholders agree to unconditionally and irrevocably grant the WFOE, and the WFOE agrees to accept, an exclusive
share transfer option, pursuant to which the WFOE is entitled to require the Existing Shareholders, to the extent permissible by the PRC Laws, to transfer the
Option Shares to it or to an entity or person designated by it in accordance with the terms and conditions herein.
2.2
The Company hereby agrees that the Existing Shareholders shall grant the Share Transfer Option in accordance with the above
Section 2.1 and other provisions herein.
2.3
The Company hereby agrees to unconditionally and irrevocably grants the WFOE, and the WFOE agrees to accept, an exclusive
asset purchase option, pursuant to which the WFOE is entitled to require the Company, to the extent permissible by the PRC Laws, to transfer any and portion
of the Option Shares to it or to an entity or person designated by it in accordance with the terms and conditions herein.
2.4
The Existing Shareholders hereby agrees that the Company shall grant the Asset Purchase Option in accordance with the above
Section 2.3 and other provisions herein.
ARTICLE III
MANNER OF EXERCISE
3.1
Subject to the terms and conditions herein and to the extent permissible by the PRC Laws, the WFOE has the absolute discretion to
decide the time, manner and number of times of its Exercise.
3.2
Subject to the terms and conditions herein and to the extent not in violation of the then-current PRC Laws, the WFOE is entitled to
require at any time that the WFOE itself or other entity or person it designates be transferred all or part of the shares from the Existing Shareholders.
6
3.3
Subject to the terms and conditions herein and to the extent not in violation of the then-current PRC Laws, the WFOE is entitled to
require at any time that the WFOE itself or other entity or person it designates be transferred all or part of the Company Assets from the Company.
3.4
In respect of the Share Transfer Option, for each Exercise, the WFOE is entitled to decide the amount of the Transferred Shares to
be transferred by the Existing Shareholders to the WFOE and/or its designated entity or person in such Exercise, and the Existing Shareholders shall sell the
Transferred Shares to the WFOE and/or its designated entity or person in such amount determined by the WFOE. The WFOE and/or its designated entity or
person shall pay Transfer Price to the Existing Shareholders selling the Transferred Shares in respect of the Transferred Shares sold in each Exercise.
3.5
In respect of the Asset Purchase Option, for each Exercise, the WFOE is entitled to decide the specific Company Assets to be
transferred by the Company to the WFOE and/or its designated entity or person in such Exercise, and the Company shall sell the Transferred Assets to the
WFOE and/or its designated entity or person as determined by the WFOE. The WFOE and/or its designated entity or person shall pay Transfer Price to the
Company in respect of the Transferred Assets sold in each Exercise.
3.6
In each Exercise, the WFOE may require the Transferred Shares or Transferred Assets to be transferred to itself or designate any
third party to be transferred all or part of the Transferred Shares or Transferred Assets.
3.7
Each time the WFOE has made the decision of Exercise, it shall serve a Share Transfer Exercise Notice or Asset Purchase Option
Notice (each an Exercise Notice, the form of which is attached as Appendix 2 and Appendix 3) to the Existing Shareholders or the Company, as the case
may be. The Existing Shareholders or the Company shall, upon its receipt of the Exercise Notice, act as required in the Exercise Notice and transfer in a lump
sum all of the Transferred Shares or Transferred Assets to the WFOE and/or its designated entity or person in the manner provided in Section 3.4 or 3.5 hereof.
ARTICLE IV
PURCHASE PRICE
4.1
With respect to the Share Transfer Option, the entire Transfer Price of each Exercise payable by the WFOE or its designated entity
or person to the Existing Shareholders shall be equal to the lower of (i) the amount of contribution in the Companys Registered Capital to which the
Transferred Shares correspond to, or (ii) the lowest price permissible under the then-current PRC Laws.
7
4.2
With respect to the Asset Purchase Option, the WFOE or its designated entity or person shall pay to the Company the lowest price
permissible under the then-current PRC Laws for each Exercise.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1
Each of the Existing Shareholders hereby represents and warrants that:
5.1.1
it is a PRC citizen with full capacity of conduct, a limited partnership or a limited liability company; it has full and independent
legal status and capacity to execute, deliver and perform and can independently act as a party to a lawsuit.
5.1.2
the Company is a company limited by shares and duly registered and validly existing under the PRC Laws, and has independent
legal status; it has full and independent legal status and capacity to execute, deliver and perform and can independently act as a party to a lawsuit.
5.1.3
it has full power and authority to execute, deliver and perform this Agreement and all the other documents to be signed by it
relating to the transactions contemplated hereby, and to consummate the transactions contemplated hereby.
5.1.4
this Agreement is duly and legally executed and delivered by the Existing Shareholders and constitutes its legal and binding
obligation and may be enforced against it in accordance with the terms hereof.
5.1.5
it is the registered legal owner of the Option Shares as of the date hereof, and the Option Shares are free of any lien, pledge, claim
or other security interest or third party right, except for (i) the pledge created in accordance with the Share Pledge Agreement executed by and
among the Company, the WFOE and the Existing Shareholders on the date hereof, and (ii) the proxy right created in accordance with the
Shareholders Voting Proxy Agreement executed on the date hereof. According to this Agreement, the WFOE and/or its designated entity or person
may, after the Exercise, acquire the sound ownership of the Transferred Shares free of any lien, pledge, claim or other security interest or third party
right.
5.1.6
to its knowledge, the Company Assets are free of any lien, pledge, claim or other security interest or third party right. According to
this Agreement, the WFOE and/or its designated entity or person may, after the Exercise, acquire the sound ownership of the Company Assets free of
any lien, pledge, claim or other security interest or third party right.
5.1.7
unless as required by compulsory PRC Laws, it shall not require the Company to declare distribution of or actually grant any
distributable profits, bonus or dividends, and once it receives any profits, bonus or dividends from the Company, it shall,
8
to the extent in compliance with the PRC Laws, promptly give such profits, bonus or dividends (net of relevant taxes) to the WFOE or any eligible
entity or person designated by the WFOE.
5.2
The Company hereby represents and warrants that:
5.2.1
it is a company limited by shares and duly registered and validly existing under the PRC Laws, and has independent legal status; it
has full and independent legal status and capacity to execute, deliver and perform and can independently act as a party to a lawsuit.
5.2.2
5.2.3
this Agreement is duly and legally executed and delivered by it and constitutes its legal and binding obligation.
5.2.4
the Company Assets are free of any lien, pledge, claim or other security interest or third party right. According to this Agreement,
the WFOE and/or its designated entity or person may, after the Exercise, acquire the sound ownership of the Company Assets free of any lien,
pledge, claim or other security interest or third party right.
5.2.5
dividends.
5.3
unless as required by compulsory PRC Laws, it shall not declare distribution or actually grant any distributable profits, bonus or
The WFOE hereby represents and warrants that:
5.3.1
it is a foreign investment company duly registered and validly existing under the PRC Laws, and has independent legal status; it
has full and independent legal status and capacity to execute, deliver and perform and can independently act as a party to a lawsuit.
5.3.2
5.3.3
this Agreement is duly and legally executed and delivered by it and constitutes its legal and binding obligation.
9
ARTICLE VI
COVENANTS OF THE EXISTING SHAREHOLDERS
Each of the Existing Shareholders hereby covenants that:

6.1
without prior written consent by the WFOE, throughout the effective term hereof,
6.1.1
it will not transfer or otherwise dispose of, or create any security interest or other third party right on, any Option Shares;
6.1.2
it will not increase or decrease the Companys Registered Capital, or otherwise cause the Company to merge with any other entity;
6.1.3
it will not dispose of or cause the Companys management to dispose of any material Company Assets, except those in the
ordinary course of business;
6.1.4
it will not terminate or cause the Companys management to terminate any material agreement executed by the Company, or sign
any other agreement that is in conflict with any existing material agreement;
6.1.5
it will not appoint or dismiss any director, supervisor or any other managerial person that should be appointed or dismissed by all
the Existing Shareholders;
6.1.6
it will not cause the Company to declare declaration of or actually grant any distributable profits, bonus or dividends;
6.1.7
it will ensure that the Company is validly existing and will not be terminated, liquidated or dissolved;
6.1.8
it will not amend the Companys articles of association; and
6.1.9
it will ensure that the Company will not lend or borrow loans, or provide security or otherwise provide guarantee, or assume any
substantial obligation other than in the ordinary course of business.
6.2
throughout the effective term of this Agreement, it must use its best efforts to develop the Companys business and ensure the due
and compliant operations of the Company, and it will not conduct any act or omission that may jeopardize the Company Assets, goodwill or the validity of
the Companys Business License.
6.3
throughout the effective term of this Agreement, it shall timely inform the WFOE of any circumstances that may have material
adverse effect on the Companys existence,
10
operations, financial performance, assets or goodwill, and shall take all measures accepted by the WFOE to preclude such adverse circumstances or take
effective remedial measures.
6.4
once the WFOE serves the Exercise Notice:
6.4.1
it shall immediately hold a shareholders meeting, adopt resolutions at such meeting and take all other necessary actions to
approve the transfer by the Existing Shareholders or the Company of all of the Transferred Shares or Transferred Assets to the WFOE and/or
WFOEs designated entity or person at the Transfer Price, and shall waive any right of first refusal (if any) it may own;
6.4.2
it shall immediately execute a share transfer agreement with the WFOE and/or WFOEs designated entity or person to transfer all of
the Transferred Shares to the WFOE and/or WFOEs designated entity or person at the Transfer Price, and provide necessary support to the
WFOE (including providing and executing all relevant legal documents, performing all government approval and registration procedures
and assuming all relevant obligations) as required by the WFOE and the laws and regulations, to enable the WFOE and/or WFOEs
designated entity or person to acquire all of the Transferred Shares free of any legal defects, or any security interest, third party restriction or
any other restriction on the shares.
6.5
if the aggregate amount of the Transfer Price received by it in respect of the Transferred Shares it holds is higher than its
contribution to the Company, or it receives any form of profit distribution, dividend or bonus from the Company, then the Existing Shareholder agrees to
waive, to the extent not in violation of the PRC Laws, the proceeds from such premium and any such profit distribution, dividend or bonus (net of relevant
taxes), and the WFOE shall be entitled to such part of proceeds. The Existing Shareholders shall instruct relevant assignee or the Company to pay such part of
proceeds to the bank account then designated by the WFOE.
ARTICLE VII
COVENANTS BY THE COMPANY
7.1
The Company hereby covenants that:
7.1.1
it will try its best to provide assistance in obtaining any third party consent, permit, waiver, authorization or any government
approval, permit, waiver, or completing any registration or filing procedures (if legally required) with any government authority in
connection with the execution and performance of this Agreement and the grant of the Share Transfer Option and Asset Purchase Option
hereunder.
11
7.1.2
without prior written consent of the WFOE, it will not assist or permit the Existing Shareholders to transfer or otherwise dispose of
any Option Shares or create any security interest or other third party right on any Option Shares.
7.1.3
without prior written consent of the WFOE, it will not transfer or otherwise dispose of any material Company Assets, other than in
the ordinary course of business, or create any security interest or other third party right on any Company Assets.
7.1.4
it will not conduct or permit the conduct of any act or action that may have material adverse effect on the interests entitled by the
WFOE hereunder, including without limitation any act or action subject to the restrictions provided in Section 6.1.
7.2
once the WFOE serves the Exercise Notice:
7.2.1
the Company shall immediately cause the Existing Shareholders to hold a shareholders meeting, adopt resolutions at such
meeting and take all other necessary actions to approve the transfer by the Company of all of the Transferred Assets to the WFOE and/or
WFOEs designated entity or person at the Transfer Price;
7.2.2
the Company shall immediately execute an asset transfer agreement with the WFOE and/or WFOEs designated entity or person to
transfer all of the Transferred Assets to the WFOE and/or WFOEs designated entity or person at the Transfer Price, and cause the
shareholders to provide necessary support to the WFOE (including providing and executing all relevant legal documents, performing all
government approval and registration procedures and assuming all relevant obligations) as required by the WFOE and the laws and
regulations, to enable the WFOE and/or WFOEs designated entity or person to acquire all of the Transferred Assets free of any legal
defects, or any security interest, third party restriction or any other restriction on the Company Assets.
ARTICLE VIII
CONFIDENTIALITY OBLIGATIONS
8.1
Whether or not this Agreement is terminated, all Parties shall keep in strict confidence the trade secrets, proprietary information,
client information and all other information of a confidential nature regarding the other Parties acquired in the conclusion and performance of this Agreement
(collectively the Confidential Information). Except with a prior written consent of the disclosing party of the Confidential Information or except the
disclosure that must be made in accordance with relevant laws and regulations or the requirements of the place where a Partys affiliate is listed, the Party
receiving the Confidential Information shall not disclose any Confidential Information to any other third party; the Party receiving the Confidential
12
Information shall not directly or indirectly use any Confidential Information except for purposes of performing this Agreement.
8.2
The following information shall not constitute Confidential Information:

(a)
any information which, as shown by written evidence, has previously been known to the receiving Party through legal
(b)
any information that enters into the public domain not due to the fault of the receiving Party; or
(c)
any information that is acquired by the receiving Party from legal sources subsequent to the receipt of Confidential
means;
Information.
8.3
The receiving Party may disclose the Confidential Information to its relevant employees, agents or professionals retained by it,
provided that the receiving Party shall make sure that such persons will comply with the relevant terms and conditions of this Agreement and assume any
liabilities arising as a result of such persons breach of the relevant terms and conditions of this Agreement.
8.4
Notwithstanding anything else contained herein, this article shall survive the termination of this Agreement.
ARTICLE IX
TERM
This Agreement shall be effective as of the date of its due execution by the Parties, and shall terminate after all of the Option Shares and Company
Assets have been duly transferred under the name of the WFOE and/or its designated entity or person pursuant to the provisions hereof.
ARTICLE X
NOTICES
10.1
Any notices, requests, demands and other communications required to be given or made pursuant to this Agreement shall be made
in writing and delivered to relevant Parties.
13
10.2
Such notices or other communications shall be deemed to be duly served upon delivery if sent by fax or telex, or upon delivery if
sent by personal delivery, or after five (5) days upon delivered to the post if sent by mail.
ARTICLE XI
LIABILITIES FOR BREACH OF CONTRACT
11.1
The Parties agree and acknowledge that if any Party (Defaulting Party) materially breaches any provision of this Agreement, or
materially fails to perform or delays performing any of its obligations hereunder, such breach, failure or delay shall constitute a default hereunder (the
Default), and the non-defaulting Party may require the Defaulting Party to rectify or correct the Default or take remedial measures; if the Defaulting Party
fails to rectify or correct the Default or take remedial measures within such reasonable period of time or within ten (10) days upon the issuance of the written
notice by the non-defaulting Party requiring such rectification or correction, the non-defaulting Party may decide at its sole discretion:
11.1.1 if the Existing Shareholders or the Company is the Defaulting Party, the WFOE may terminate this Agreement and require damages
from the Defaulting Party;
11.1.2 if the WFOE is the Defaulting Party, the non-defaulting Party may require damages from the Defaulting Party, but in no event may
such non-defaulting Party terminate or rescind this Agreement unless otherwise provided by the law.
11.2
Notwithstanding anything else contained herein, this article shall survive the termination of this Agreement.
ARTICLE XII
MISCELLANEOUS
12.1
This Agreement is written in Chinese in ten (10) originals, with Beijng Wudao Technology Investment Management Co., Ltd.
holding one (1), Beijing Sequoia Xinyuan Equity Investment Center (L.P.) and Tianjin Sequoia Juye Equity Investment Centre (L.P.) holding two (2) and all
the other Parties holding the remaining seven (7) originals.
12.2
The formation, effectiveness, performance, amendment, interpretation and termination of this Agreement shall be governed by the
PRC Laws.
14
12.3
Any dispute arising under or in connection with this Agreement shall be resolved through negotiations between the Parties. In case
the Parties fail to reach agreement within thirty (30) days upon the occurrence of the dispute, such dispute shall be submitted to Shanghai International
Economic and Trade Arbitration Commission for arbitration in accordance with the then-effective arbitration rules. The place for the arbitration shall be in
Shanghai and the language used in the arbitration shall be Chinese. The arbitral award shall be final and equally binding on all the Parties.
12.4
No right, power and remedy of a Party empowered by any provision hereof shall preclude such Party from any other right, power or
remedy entitled by it under the laws and other provisions hereof, nor shall any Partys exercise of its rights, powers and remedies preclude such Party from
exercising any other right, power or remedy entitled by it.
12.5
Any Partys failure to exercise or delay in exercising any right, power and remedy (the Rights) entitled by it under this
Agreement or any law will not result in its waiver of such Rights, and any single or partial waiver of such Rights shall not preclude other exercise of such
Rights or the exercise of other rights.
12.6
The taxes and legal expenses and costs to be undertaken by one or more Parties hereto according to express requirements of
applicable law in connection with the transactions hereunder (including without limitation the WFOEs exercise of the Share Transfer Option and/or Asset
Purchase Option hereunder) shall be fully reimbursed by the WFOE to such Party or Parties; provided, however, that the foregoing shall not apply to the taxes
relating to any profits, bonus or dividends under Section 5.1.7 and 6.5 as well as the taxes on the premium of the Transferred Shares, for which the WFOE will
not need to make any compensation to such Party or Parties.
12.7
The headings contained in this Agreement are for the convenience of reference only and shall not be used to interpret, explain or
otherwise affect the meaning of the provisions of this Agreement.
12.8
Each provision hereof is severable and independent of each other provision. If any one or more provisions of this Agreement is
held void, invalid or unenforceable at any time, the validity, legality and enforceability of the other provisions hereof shall not be affected or impaired in any
way.
12.9
This Agreement, once executed, shall supersede all other prior legal documents entered into by the Parties with respect to the
subject matters herein. Any amendments or supplements to this Agreement shall be made in writing and come into effect after duly signed by the Parties.
15
12.10
No Party shall transfer any of its rights and/or obligations hereunder to any third party without prior written consent of the other
12.11
This Agreement shall be binding on the legal assigns or successors the Parties.
Parties.
(No text below)

16
(This page is the signature page of the Exclusive Call Option Agreement and contains no body text)
IN WITNESS THEREOF, this Exclusive Call Option Agreement has been signed by the Parties as of the date first written above.
(Company seal: /s/ ZTO Express Co., Ltd.)
By: /s/ Meisong Lai
Name: Meisong Lai
Shanghai ZTO Ji Network Technology Co., Ltd.
(Company seal: /s/ Shanghai ZTO Ji Network Technology Co., Ltd.)
By: /s/ Meisong Lai
Name: Meisong Lai
1
Meisong Lai
Signature:
/s/ Meisong Lai

2
Jianfa Lai
Signature:
/s/ Jianfa Lai

3
Jilei Wang
Signature:
/s/ Jilei Wang

4
Xiangliang Hu
Signature:
/s/ Xiangliang Hu
5
Shunchang Zhang
Signature:
/s/ Shunchang Zhang

6
Xuebing Shang
Signature:
/s/ Xuebing Shang

7
Feixiang Qiu
Signature:
/s/ Feixiang Qiu

8
Baixi Lan
Signature:
/s/ Baixi Lan

9
Feng Meng
Signature:
/s/ Feng Meng

10
Hongjun Xu
Signature:
/s/ Hongjun Xu
11
Yaoren Zhang
Signature:
/s/ Yaoren Zhang

12
Lemou Wu
Signature:
/s/ Lemou Wu
13
Jianying Teng
Signature:
/s/ Jianying Teng

14
Baozhen Li
Signature:
/s/ Baozhen Li
15
Shumin Ma
Signature:
/s/ Shumin Ma
16
Wei Wang
Signature:
/s/ Wei Wang

17
Jianchang Lai
Signature:
/s/ Jianchang Lai

18
Mingsong Lai
Signature:
/s/ Mingsong Lai

19
Senliang Wang
Signature:
/s/ Senliang Wang

20
Youwang Zeng
Signature:
/s/ Youwang Zeng

21
Zongrui Hong
Signature:
/s/ Zongrui Hong

22
Lijun Huang
Signature:
/s/ Lijun Huang

23
Zhiming Lin
Signature:
/s/ Zhiming Lin

24
Rui Wang
Signature:
/s/ Rui Wang

25
Dianyuan Ren
Signature:
/s/ Dianyuan Ren

26
Minye Xu
Signature:
/s/ Minye Xu
27
Ziwen Chen
Signature:
/s/ Ziwen Chen

28
Shunfeng Chen
Signature:
/s/ Shunfeng Chen

29
Fushan Cui
Signature:
/s/ Fushan Cui

30
Jian Zhang
Signature:
/s/ Jian Zhang

31
Shunmei Pan
Signature:
/s/ Shunmei Pan

32
Xiaoliang Yuan
Signature:
/s/ Xiaoliang Yuan

33
Haifeng Zhou
Signature:
/s/ Haifeng Zhou

34
Jiangxiu Xi
Signature:
/s/ Jiangxiu Xi
35
Kunman Xiao
Signature:
/s/ Kunman Xiao

36
Weijun Yao
Signature:
/s/ Weijin Yao

37
Bo Yang
Signature:
/s/ Bo Yang
38
Genfu Zhu
Signature:
/s/ Genfu Zhu

39
Jian Zhang
Signature:
/s/ Jian Zhang

40
Yongfang Pan
Signature:
/s/ Yongfang Pan

41
Beijing Sequoia Xinyuan Equity Investment Center (L.P.)

(Company seal: /s/ Beijing Sequoia Xinyuan Equity Investment Center (L.P.))
Tianjin Sequoia Juye Equity Investment Centre (L.P.)
(Company seal: /s/ Tianjin Sequoia Juye Equity Investment Centre (L.P.))
Beijng Wudao Technology Investment Management Co., Ltd.
(Company seal: /s/ Beijng Wudao Technology Investment Management Co., Ltd.)
By: /s/ Yi Sun
Name: Yi Sun
42
Appendix 1:
Basic Information of the Company
Company Name: ZTO Express Co., Ltd.
Shareholding structure:
Name of Shareholder
Number of Shares/Contribution
to Companys Registered Capital
Shareholding
Percentage
Meisong Lai
206,100,000
34.35%
Jianfa Lai
72,000,000
12.00%
Jilei Wang
60,000,000
10.00%
Xiangliang Hu
42,300,000
7.05%
Shunchang Zhang
36,000,000
6.00%
Xuebing Shang
26,400,000
4.40%
Feixiang Qiu
18,000,000
3.00%
Baixi Lan
8,400,000
1.40%
Feng Meng
6,000,000
1.00%
10
Hongjun Xu
3,529,860
0.59%
11
Yaoren Zhang
6,000,000
1.00%
No.
12
Beijing Sequoia Xinyuan Equity Investment

Center (L.P.)
24,000,000
4.00%
13
Tianjin Sequoia Juye Equity Investment

Centre (L.P.)
12,000,000
2.00%
14
Lemou Wu
16,762,050
2.79%
15
Jianying Teng
30,143,462
5.02%
16
Baozhen Li
3,202,746
0.53%
17
Shumin Ma
2,313,492
0.39%
18
Wei Wang
1,568,250
0.26%
19
Jianchang Lai
6,330,000
1.06%
20
Mingsong Lai
6,250,000
1.04%
21
Senliang Wang
2,960,088
0.49%
22
Youwang Zeng
1,480,044
0.25%
23
Zongrui Hong
903,900
0.15%
24
Lijun Huang
259,986
0.04%
25
Zhiming Lin
259,986
0.04%
26
Rui Wang
609,006
0.10%
27
Dianyuan Ren
470,820
0.08%
28
Minye Xu
689,868
0.11%
29
Ziwen Chen
410,610
0.07%
30
Shunfeng Chen
370,000
0.06%
31
Fushan Cui
160,000
0.03%
32
Jian Zhang
160,000
0.03%
33
Shunmei Pan
150,000
0.03%
34
Xiaoliang Yuan
75,000
0.01%
35
Haifeng Zhou
450,000
0.08%
36
Jiangxiu Xi
550,000
0.09%
37
Kunman Xiao
940,000
0.16%
38
Weijun Yao
504,000
0.08%
39
Bo Yang
830,832
0.14%
40
Genfu Zhu
126,000
0.02%
41
Jian Zhang
165,000
0.03%
42
Yongfang Pan
165,000
0.03%
43
Beijng Wudao Technology Investment

Management Co., Ltd.
10,000
0.0017%
Total
600,000,000
100%
Appendix 2:
Form of Exercise Notice
To: Meisong Lai, Jianfa Lai, Jilei Wang, Xiangliang Hu, Shunchang Zhang, Xuebing Shang, Feixiang Qiu, Baixi Lan, Feng Meng, Hongjun Xu, Yaoren
Zhang, Beijing Sequoia Xinyuan Equity Investment Center (L.P.), Tianjin Sequoia Juye Equity Investment Centre (L.P.), Lemou Wu, Jianying Teng,
Baozhen Li, Shumin Ma, Wei Wang, Jianchang Lai, Mingsong Lai, Senliang Wang, Youwang Zeng, Zongrui Hong, Lijun Huang, Zhiming Lin, Rui Wang,
Dianyuan Ren, Minye Xu, Ziwen Chen, Shunfeng Chen, Fushan Cui, Jian Zhang, Shunmei Pan, Xiaoliang Yuan, Haifeng Zhou, Jiangxiu Xi, Kunman Xiao,
Weijun Yao, Bo Yang, Genfu Zhu, Jian Zhang, Yongfang Pan and Beijng Wudao Technology Investment Management Co., Ltd.
WHEREAS, we, ZTO Express Co., Ltd. (the Company) and you entered into an Exclusive Call Option Agreement (the Option Agreement) on August 18,
2015 and reached an agreement that you shall transfer the equity interest you hold in the Company to us or any third party designated by us at our request to
the extent permitted by the PRC laws and regulations.
Therefore, we hereby give this notice to you as follows:
We hereby request to exercise the Share Transfer Option under the Option Agreement and we/[name of company/individual] designated by us will acquire the
[]% of the equity interest you hold in the Company (the Proposed Acquired Shares). Upon your receipt of this notice, you shall immediately transfer all
the Proposed Acquired Equity to us/[name of designated company/individual] pursuant to the provisions of the Option Agreement.
Regards,
Authorized representative:
Date:
5
Appendix 3:
Form of Exercise Notice
To: ZTO Express Co., Ltd.
WHEREAS, we, your Company and Meisong Lai, Jianfa Lai, Jilei Wang, Xiangliang Hu, Shunchang Zhang, Xuebing Shang, Feixiang Qiu, Baixi Lan, Feng
Meng, Hongjun Xu, Yaoren Zhang, Beijing Sequoia Xinyuan Equity Investment Center (L.P.), Tianjin Sequoia Juye Equity Investment Centre (L.P.), Lemou
Wu, Jianying Teng, Baozhen Li, Shumin Ma, Wei Wang, Jianchang Lai, Mingsong Lai, Senliang Wang, Youwang Zeng, Zongrui Hong, Lijun Huang,
Zhiming Lin, Rui Wang, Dianyuan Ren, Minye Xu, Ziwen Chen, Shunfeng Chen, Fushan Cui, Jian Zhang, Shunmei Pan, Xiaoliang Yuan, Haifeng Zhou,
Jiangxiu Xi, Kunman Xiao, Weijun Yao, Bo Yang, Genfu Zhu, Jian Zhang, Yongfang Pan and Beijng Wudao Technology Investment Management Co., Ltd.
entered into an Exclusive Call Option Agreement (the Option Agreement) on August 18, 2015 and reached an agreement that your company shall transfer
your assets to us or any third party designated by us at our request to the extent permitted by the PRC laws and regulations.
Therefore, we hereby give this notice to your company as follows:
We hereby request to exercise the Asset Purchase Option under the Option Agreement and we/[name of company/individual] designated by us will acquire
the assets owned by your company as stated in a separate list (the Proposed Acquired Assets). Upon your receipt of this notice, your company shall
immediately transfer all the Proposed Acquired Assets to us/[name of designated company/individual] pursuant to the provisions of the Option Agreement.
Regards,
Authorized representative:
Date:
6
Exhibit 10.6
Regarding
Among
Meisong Lai
Jianfa Lai
Jilei Wang
Xiangliang Hu
Shunchang Zhang
All Shareholders Listed in Schedule 1
And
August 18, 2015
1

This Equity Pledge Agreement (this Agreement) has been executed by and among the following parties on August 18, 2015:
1.
ZTO Express Co., Ltd., (the Company), with its registered address at Building 1, 1685 Huazhi Road, Huaxin Town, Qingpu District, Shanghai,
and LAI Meisong as its legal representative;
2.
Shanghai Zhongtongji Network Technology Co., Ltd., (the Pledgee), with its registered address at Building 5, 1685 Huazhi Road, Huaxin
Town, Qingpu District, Shanghai, and LAI Meisong as its legal representative;
3.
LAI Meisong
4.
LAI Jianfa
5.
WANG Jilei
6.
HU Xiangliang
7.
ZHANG Shunchang
8.
SHANG Xuebing
9.
QIU Feixiang
10.
LAN Baixi
11.
MENG Feng
12.
XU Hongjun
13.
ZHANG Yaoren
14.
Beijing Sequoia Xinyuan Equity Investment Center (L.P.), whose business license number is 110114015001641;
15.
Tianjin Sequoia Juye Equity Investment Centre (L.P.), whose business license number is 120192000071010;
16.
WU Lemou
17.
TENG Jianying
18.
LI Baozhen
19.
MA Shumin
20
WANG Wei
1
21.
LAI Jianchang
22.
LAI Mingsong
23.
WANG Senliang
24.
ZENG Youwang
25.
HONG Zongrui
26.
HUANG Lijun
27.
LIN Zhiming
28.
WANG Rui
29.
REN Dianyuan
30.
XU Minye
31.
CHEN Ziwen
32.
CHEN Shunfeng
33.
CUI Fushan
34.
ZHANG Jian
35.
PAN Shunmei
36.
YUAN Xiaoliang
37.
ZHOU Haifeng
38.
XI Jiangxiu
39.
XIAO Kunman
40.
YAO Weijun
41.
YANG Bo
42.
ZHU Genfu
43.
ZHANG Jian
44.
PAN Yongfang
45.
Beijing Wudao Technology Investment Management Co., Ltd., whose

2
business license number is 110108018485177

(Parties from Paragraph 3 to Paragraph 45, collectively the Plegors)
(In this Agreement, the above Parties is referred to individually as a Party, collectively the Parties)
WHEREAS:
1.
Each of the Pledgors is a registered shareholder of the Company and jointly has ownership of all shares of the Company (the Shares). Each of its
contribution to the registered capital of and shareholding percentage in the Company prior to the date hereof is set forth in Schedule 1.
2.
Pursuant to the Exclusive Consulting and Services Agreement between the Company and the Pledgee dated hereof (the Consulting Services
Agreement), the Company has engaged the Pledgee to provide consulting services on exclusive basis, and agreed to pay service fee to the Pledgee for
its provision of such services.
3.
As security for performance of the Contractual Obligations (as defined below) and payment of the Secured Indebtedness (as defined below) by the
Pledgors, the Pledgors agree to pledge all of the equity interests in the Company held by the Pledgors holds in favor of the Pledgee and grant to the
Pledgee the first ranking pledge of the equities interests so pledged, and the Company agrees to such pledge arrangement.
NOW, THEREFORE, the Parties agree as follows through negotiations:
1.
1.1
Definitions
Unless otherwise provided herein, the terms below shall have the following meanings:
Contractual Obligations means all obligations of the Pledgors and the Company under the Consulting Services Agreement and all other
ancillary agreements to which it is a party, as well as their respective obligations hereunder.
Secured Indebtedness means any and all direct, indirect and derivative loss and loss of anticipated profits incurred by the Pledgee as a result of
any Event of Default (as defined below), the amount of which loss shall be calculated in accordance with the reasonable business plan and profit
forecast of the Pledgee, and all expenses occurred in connection with enforcement by Pledgee of Pledgors and/or the Companys Contract
Obligations and etc.
Transaction Documents mean this Agreement, the Consulting Agreement and all of its ancillary agreements.
Event of Default means breach by any Pledgor or the Company of any of
3
its Contractual Obligations under the Consulting Agreement, any ancillary agreement thereof and hereunder.
Pledged Equity Interest means all equity interests in the Company legally owned as of the date hereof by the Pledgors and pledged in favor of
the Plegee hereunder as security for performance of its Contractual Obligations by the Pldgors and the Company, as well as the increased capital
contribution and dividends set forth in Sections 2.6 and 2.7 hereof.
PRC Laws means the laws, administrative regulations, rules, local regulations, judicial interpretations and any other binding guidelines of the
Peoples Republic of China.
1.2
In this Agreement, reference to any PRC Laws shall be deemed to include (1) any of its amendments, modifications, supplements and restatements,
before or after the date hereof; and (2) any decision, notice or regulation promulgated or enacted thereunder.
1.3
Unless otherwise provided in the context, reference to all articles, sections, paragraphs and clauses means the corresponding articles, sections,
paragraphs and clauses in this Agreement.
2.
Pledge
2.1
Each of the Pledgors agrees to pledge all the Equity Interest legally owned by it as security for performance of the Contract Obligations and
payment of the Secured Indebtedness under this Agreement. The Company hereby agrees that each of the Pledgor pledges the Equity Interest to
the Pledgee pursuant to this Agreement.
2.2
Each of the Pledgors covenants to reflect the equity interest pledge arrangement under this Agreement (the Pledge) in the shareholder register
of the Company on the date hereof and then immediately apply for its registration of the competent industrial and commercial registration
authority. The Company covenants to use its best efforts to support registration with the competent industrial and commercial registration
authority by the Pledgors. The Pledge shall be created upon completion of its registration with the competent industrial and commercial
authority.
2.3
During the term of this Agreement, none of the Pledgors shall be held liable for any decrease in the value of the Pledged Equity Interest, nor the
Pledgee shall have any right to make any claim or request against any Pledgor for such decrease, unless it is directly resulted from any willful or
material misconduct by the Pledgors.
2.4
Subject to Section 2.3, if any notable decrease in the value of the Pledged Equity Interest could be detrimental to the interests of the Pledgee, the
Pledgee may dispose the Pledged Equity Interest at its discretion and, upon agreement with the Pledgors, use the proceeds from such disposal for
early payment of the Secured Indebtedness. At the request of the Pledgee, the
4
Pledgors shall also provide any other assets as security for the Secured Indebtedness.
3.
2.5
Upon occurrence of any Event of Default, the Pledgee shall have the right to dispose the Pledged Equity Interest under Article 4.
2.6
The Pledgors may not increase capital of the Company without prior written consent from the Pledgee. Any contribution made by the Pledgors
in connection with its increase of the capital of the Company shall constitute part of the Pledged Equity Interest.
2.7
The Pledgors may not receive any dividend or bonus from the Pledged Equity Interest without prior written consent of the Pledgor. Any
dividend or bonus received by the Pledgors from the Pledged Equity Interest shall be made to an account designated by the Pledgee for payment
of the Secured Indebtedness.
2.8
Upon occurrence of any Event of Default, the Pledgee shall have the right to dispose the Pledged Equity Interest pursuant to the terms of this
Agreement.
Release of Pledge
3.1
4.
Upon sufficient and complete performance of all Contractual Obligations and payment of all Secured Indebtedness by the Pledgors and the
Company, the Pledgee shall, at the request of the Pledgors, release the Pledged Equity Interest and provide support for the Pledgors to re-register
the Pledge in the shareholder register of the Company. The costs and expenses reasonably incurred in connection with such release shall be paid
by the Pledgor.
Disposal of the Pledged Equity Interest

4.1
It is agreed that upon occurrence of any Event of Default and with notice to the Plegors in writing, the Pledgee shall have the right to exercise all
remedial rights and powers available to it under the PRC Laws, the Transaction Documents and hereunder, including without limitation sale or
disposal of the Pledged Equity Interest. The Pledgor shall not be held liable for any loss arising from its reasonable exercise of such rights or
powers.
4.2
The Pledgee shall have the right to appoint in writing its attorney or any other agent to exercise any and all of such rights and powers in
Section 4.1, to which none of the Pledgors or the Company may raise any objection.
4.3
The Pledgee shall have the right to deduct from the proceeds received from its exercise of the rights and powers in Section 4.1 any costs and
expenses reasonably incurred by it in connection with such exercise.
4.4
The proceeds received by the Pledgor from exercise of its rights and powers in Section 4.1 shall be applied in the following sequence:
5
1. to pay all costs and expenses incurred by it in connection with disposal of the Pledged Equity Interest and exercise of its rights and powers,
including payment of attorney and agent fees;
2.
to pay all taxes payable due to disposal of the Pledged Equity Interest; and
3.
to Pay the Secured Indebtedness to the Pledgor.
The amount remaining after the above applications, if any, shall be returned to the Pledgors or deposited to any other person entitled to it or the
local notary public having jurisdiction over the Pledgee (any costs and expenses thereof shall be paid by the Pledgee).
4.5
5.
The Pledgee shall have the discretion to exercise any of its remedial rights and powers concurrently or subsequently. The Pledgee may exercise
its right to sell or dispose the Pledged Equity Interest without prior exercise of any other remedy.
Costs and Expenses

5.1 All costs and expenses incurred in connection with creation of the Pledge under this Agreement (other than those provided under Section 7.11),
including without limitation stamp duty, any other taxes and all legal fees, shall be paid by the Pledgee. If such taxes have been paid by any Party other
than the Pledgee, such Party may require full reimbursement of such payment from the Pledgee.
6.
Continuity and No Waiver

6.1 The Pledge created under this Agreement constitutes a continual security and will survive until the Contractual Obligations are fully performed or
the Secured Indebtedness is fully paid. No waiver, grace or delay to enforce any of its rights under the Transaction Documents or this Agreement by the
Pledgee against any default by the Pledgee shall affect any right of the Pledgee under this Agreement, the PRC Laws or the Transaction Documents to
require strict performance of the Transaction Documents or this Agreement by the Pledgors.
7.
Representations and Warranties of Pledgors

Each of the Pledgors represents and warrants to the Pledgee that as the date hereof:
7.1
It is a PRC citizen, limited liability partnership or limited liability company, has full powers and authorities requisite to enter this Agreement
and perform the obligations hereunder.
7.2
All reports, documents and information provided by it to the Pledgee regarding the subject matter of this Agreement prior to the date hereof
are in all material aspects true and accurate as of the date hereof.
6
7.3
All reports, documents and information provided by it to the Pledgee regarding the subject matter of this Agreement after the date hereof shall
be in all material aspects true and accurate as of the date thereof.
7.4
It is the sole and legal owner of the respective Pledged Equity Interest which ownership is subject to no challenge or dispute, and has the right
to dispose any and all of such Pledged Equity Interest.
7.5
Other than the security interest created hereunder and any other right created under any other Transaction Document, the Pledged Equity
Interest has no security interest or any other third party interest or restriction.
7.6
The Pledged Equity Interest may be legally assignable and transferrable, and it has full rights and powers to assign and transfer the Pledged
Equity Interest to the Pledgor.
7.7
This Agreement, once duly executed by it, constitutes its legal, valid and binding obligation.
7.8
All consents, licenses, waivers, authorizations from any third party or any approvals, licenses, waivers from or filings with any government
authority necessary to execute, deliver and perform this Agreement have been obtained or completed and will be fully valid during the term
of this Agreement.
7.9
Its execution, delivery and performance of this Agreement is no breach of and has no conflict with any applicable law, agreement binding
upon it or any of its assets, judgment from any court or arbitration authority, or decision from any administrative authority.
7.10 The Pledge is the first ranking security interest upon the Pledged Equity Interest.
7.11 All taxes and levies payable for receipt of the Pledged Equity Interest have been fully paid by it.
7.12 There is no pending or, to its knowledge, threatened claims, suits or proceedings against the Pledged Equity Interest before any court,
arbitration authority, government department or administrative agency which may have material or adverse effect on its economic conditions
or ability to perform this Agreement or the security obligations.
7.13 It warrants to the Pledgor that above representations and warranties are true, accurate and will be fully complied as of the date hereof and
upon full performance of the Contractual Obligations or payment of the secured Indebtedness.
8.
Representations and Warranties of the Company

7
The Company represents and warrants to the Pledgee as follows:
9.
8.1
The Company is an equity limited company duly incorporated and validly existing under the PRC Laws, is an independent legal entity and the
full legal status and capabilities to execute, delivery and perform this Agreement, and act as an independent party in any lawsuit.
8.2
All reports, documents and information provided by it to the Pledgee regarding the subject matter of this Agreement prior to the date hereof are in
all material aspects true and accurate as of the date hereof.
8.3
All reports, documents and information provided by it to the Pledgee regarding the subject matter of this Agreement after the date hereof shall be
in all material aspects true and accurate as of the date thereof
8.4
This Agreement, once duly executed by it, constitutes its legal, valid and binding obligation.
8.5
It has full powers and authorities to execute, deliver and perform this Agreement and any other Transaction Documents.
8.6
There is no pending or, to its knowledge, threatened claims, suits or proceedings against the Pledged Equity Interest before any court, arbitration
authority, government department or administrative agency which may have material or adverse effect on its economic conditions or ability to
perform this Agreement or the security obligations.
8.7
The Company agrees to be jointly liable to the Pledgee for the representations and warranties made by the Pledgors under Sections 7.4, 7.5, 7.6,
7.8 and 7.10 under this Agreement.
8.8
The Company warrants to the Pledgor that above representations and warranties are true, accurate and will be fully complied as of the date hereof
and upon full performance of the Contractual Obligations or payment of the secured Indebtedness.
8.9
If the Company is mandatorily required to be dissolved or liquidated under the PRC Laws, its assets shall sold to the Pledgee or any qualified
entity/individual designated by the Pledgee at the lowest price permitted under the PRC Laws subject to compliance with the PRC Laws.
Covenants of the Plegors
Each of the Pledgors covenants to the Pledgee as follows:

9.1 Without prior written consent of the Pledgee, it will not create or cause to create any new pledge or any other security interest upon the Pledged
Security Interest, and any such pledge or security interest created upon the Pledged Security Interest without prior written consent of the Pledgee
shall
8
be null and void.

9.2 Without prior written notice to and receipt of written consent from the Pledgee, it may not transfer or propose to transfer the Pledged Equity
Interest. Subject to consent from the Pledgee, the proceeds received from such transfer shall be used on priority basis to pay the Secured
Indebtedness or deposit to any third party based on agreement with the Pledgee.
9.3 In the event of any lawsuit, arbitration or claim which may have adverse effect upon the interest of the Pledgee under this Agreement or any other
Transaction Document or upon the Pledged Equity Interest, it warrants to notify the Pledgee immediately in writing and, at the reasonable request
of the Pledgee, take all measures necessary to protect the interest of the Pledgee upon the Pledged Equity Interest.
9.4 It covenants to complete all registration procedures necessary to extend the business term of the Company within three months prior to the expiry
of such term.
9.5 It may not make or cause to make any conduct or action which may have any adverse effect upon the interest of the Pledgee under this Agreement
or any other Transaction Document or upon the Pledged Equity Interest, and it waives any right of first offer upon realization of the Pledge by the
Pledgee.
9.6 It will use its best efforts to take all measures necessary to complete registration of the Pledge with the competent industrial and commercial
authority immediately after execution of this Agreement. Upon reasonable request of the Pledgee, it will take all measures and execute all
documents (including without limitation any supplement hereto and the form power of attorney attached hereto as Schedule 2) necessary to ensure
realization and perfection of the Pledged Equity Interest by the Pledgee.
9.7 It will take all measures necessary to complete any transfer of the Pledged Equity Interest arising from enforcement of the Pledge under this
Agreement.
9.8 Convention of the shareholders meeting and the board meeting of the Company for purpose of execution of this Agreement, creation and
performance of the Pledge shall not breach any laws, administrative regulations or articles of the Company in any convention or voting procedures.
9.9 Unless with prior consent from the Pledgee, it shall not transfer any of its rights and obligations under this Agreement.
9.10 Subject to Section 9.2 of this Agreement, it warrants to the Pledgor that the representations and warranties made by it under Article 7 are true,
accurate and will be fully complied as of the date hereof and upon full performance of the Contractual Obligations or payment of the secured
Indebtedness
In the event of its failure to perform any of its representations and warranties
9
under Sections 7.8 and 7.9 due to enactment or change of any PRC Laws, regulations or rules, or change of any interpretation or application
thereto, or change of any applicable registration procedures, it agrees that the provisions under Section 11.1 of this Agreement shall apply.
9.11 Subject to compliance with Section 2.7 of this Agreement, any bonus, distribution or dividend received by it from the Company during the term of
this Agreement shall be unconditionally granted to the Pledgee or any entity or individual designated by the Pledgee.
9.12 If the Company is mandatorily required to be dissolved or liquidated under the PRC Laws, any gains received by the Pledgors upon completion of
the dissolution or liquidation procedures shall be granted to the Pledgee or any entity or individual designated by the Pledgee subject to
compliance with the PRC Laws.
10. Covenants of the Company
10.1 If execution, delivery and performance of this Agreement and the Pledged Equity Interest hereunder requires any consent, license, waiver,
authorization from any third party or any approval, license, waiver from or registration or filing with any government authority, the Company
shall use its best efforts to secure and maintain such consent, license, waiver, authorization, approval, registration or fiing.
10.2 Without prior written consent of the Pledgee, it will not assist or cause the Pledgors to create any new pledge or any other security interest upon
the Pledged Security Interest,.
10.3 Without prior written consent of the Pledgee, it will not assist or cause the Pledgors to transfer the Pledged Equity Interest.
10.4 In the event of any lawsuit, arbitration or claim which may have adverse effect upon the interest of the Company or Pledgee under this Agreement
or any other Transaction Document or upon the Pledged Equity Interest, it warrants to notify the Pledgee immediately in writing and, at the
reasonable request of the Pledgee, take all measures necessary to protect the interest of the Pledgee upon the Pledged Equity Interest
10.5 It may not make or cause to make any conduct or action which may have any adverse effect upon the interest of the Pledgee under this
Agreement or any other Transaction Document or upon the Pledged Equity Interest.
10.6 The Pledgors shall provide quarterly financial statements, including the balance sheet, income statement and cash flow statement, of the
Company within the first month of the immediately next quarter to the Pledgee.
10.7 It will use its best efforts to take all measures necessary to complete registration of the Pledge with the competent industrial and commercial
authority immediately after execution of this Agreement. Upon
10
reasonable request of the Pledgee, it will take all measures and execute all documents (including without limitation any supplement hereto)
necessary to ensure realization and perfection of the Pledged Equity Interest by the Pledgee.
10.8 It will take all measures necessary to complete any transfer of the Pledged Equity Interest arising from enforcement of the Pledge under this
Agreement.
11. Change of Circumstances
11.1
As supplement to and without conflict with other provisions under the Transaction Documents and this Agreement, if the Pledgee believes that
performing this Agreement or disposing the Pledged Equity Interest under this Agreement is illegal or conflicting with any laws, regulations or
rules due to enactment or change of any PRC Laws, regulations or rules, or change of any interpretation or application thereto, or change of any
applicable registration procedures, the Pledgors and the Company agree, upon receipt of reasonable request from the Pledgee in writing, take any
action and/or execute any agreement or other document, in order to:
(1) Maintain this Agreement to be effective;

(2) Facilitate disposition of the Pledged Equity Interest pursuant to this Agreement; and/or
(3) Maintain or perfect the security created or intended to be created under this Agreement.
12. Effect and Term
12.1
This Agreement shall be effective after it is duly executed by the Parties.
The Pledgors shall reflect the Pledge under this Agreement in the shareholders register of the Company and provide to the Pledgee a
registration evidencing such reflection in a form acceptable to the Pledgee.
12.2
The term of this Agreement will not end until all Contractual Obligations are fully performed or Secured Indebtedness are fully paid.
13. Notice
13.1
Any notice, request, requirement or other communication required or made under this Agreement shall be in writing.
13.2
Any of the above notices or communications shall be deemed duly given, if sent by facsimile or telex or by person, upon delivery; if sent by
post, five days upon deposit with the post service provider.
14. Miscellaneous
11
14.1
The Pledgors and the Company agree that the Pledgee may transfer its rights and/or obligations under this Agreement to any third party with
notice to the Pledgors and the Company. Without prior written consent from the Pledgee, none of the Pledgors or the Company may transfer any
of its rights, obligations or liabilities to any third party. The successor or permitted assign of the Pledgors and the Company, if any, shall
continue to perform the obligations of the Pledgors and the Company under this Agreement.
14.2
The amount of the Secured Indebtedness determined by the Pledgee at its discretion upon exercise its right upon the Pledge under this
Agreement shall be the final evidence of the Secured Indebtedness under this Agreement.
14.3
This Agreement is made in Chinese in ten originals, with Beijing Wudao Technology Investment Management Co., Ltd. holding one original,
each of Beijing Sequoia Xinyuan Equity Investment Center (L.P.) and Tianjin Sequoia Juye Equity Investment Centre (L.P.) holding two
originals, the other Parties holding six originals, and one original for registration of the Pledge with the competent industrial and commercial
authority.
14.4
The execution, validity, performance, amendment, interpretation and termination of this Agreement shall be governed by the PRC Laws.
14.5
Any dispute arising from or in connection with Agreement shall be resolved by the Parties through negotiations or, if no agreement is reached
within 30 days after occurrence of the dispute, be submitted by any Party to Shanghai International Economic and Trade Arbitration Commission
for arbitration in accordance with its arbitration rules then in effect. The arbitration shall take place in Shanghai and in Chinese. The arbitrary
award shall final and binding upon each of the Parties.
14.6
Any right, power and remedy provided to each Party under this Agreement will not operate as an exclusion of any other right, power or remedy
provided under laws and regulations, and the enforcement of any right, power and remedy under this Agreement by any Party will not prevent its
enforcement of any other right, power and remedy.
14.7
Failure or delay to exercise any of its rights, powers and remedies under this Agreement or at law will not operate as waiver of such rights, powers
or remedies, and single or partial exercise of such rights, powers and remedies will not prevent further exercise of such rights, powers and
remedies or exercise of any other rights, powers and remedies.
14.8
The headings are for ease of reference only and will not be used for or affect interpretation of this Agreement.
14.9
Each section of this Agreement is severable and independent from any other sections. If any one or more sections of this Agreement is held
12
illegal, invalid or unenforceable, it will not affect the illegality, invalidity or unenforceability of the other sections of this Agreement.
14.10 Any amendment or supplement to this Agreement shall be writing and, other than transfer of any of its rights and/or obligations under this
Agreement by the Pledgee under Section 14.1, shall not be effective until it is duly executed by each of the Parties.
14.11 This Agreement shall be binding upon legal successors of each Party.
14.12 In concurrence with or within 10 days after execution of this Agreement, the Pledgors shall sign a power of attorney in the form attached hereto
as Schedule 2 (the Power of Attorney) to authorize any person appointed by the Pledgee to execute on behalf of it any and all legal documents
necessary for the Pledgee to exercise its rights under this Agreement. If the Pledgee needs to change the person appointed by it, it shall issue a
change notice to the Pledgors in writing for the Pledgors to sign and issue a new Power of Attorney. The Power of Attorney shall be maintained
by the Pledgee and, if necessary, may be delivered to competent government authority by the Pledgee.
The Remainder of this page is intentionally left blank
13
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Pledge Agreement as of the date first above
written.
ZTO Express Co., Ltd. (seal)
/s/ZTO Express Co., Ltd.
By:
/s/LAI Meisong
Title:
Legal Representative
Shanghai Zhongtongji Network Technology Co., Ltd. (seal)
/s/Shanghai Zhongtongji Network Technology Co., Ltd.
By:
/s/LAI Meisong
Title:
14
[Execution page to the Equity Pledge Agreement]

By:
/s/LAI Meisong
15

By:
/s/LAI Jianfa
1

By:
/s/WANG Jilei
1

By:
/s/HU Xiangliang
1

By:
/s/ZHANG Shunchang
1

By:
/s/SHANG Xuebing
1
By:
/s/QIU Feixiang
1

By:
/s/LAN Baixi
1

By:
/s/MENG Feng
1

By:
/s/XU Hongjun
1

By:
/s/ZHANG Yaoren
1

By:
/s/WU Lemou
1

By:
/s/TENG Jianying
1

By:
/s/LI Baozhen
1

By:
/s/MA Shumin
1

By:
/s/WANG Wei
1
By:
/s/LAI Jianchang
1

By:
/s/LAI Mingsong
1

By:
/s/WANG Senliang
1

By:
/s/ZENG Youwang
1

By:
/s/HONG Zongrui
1

By:
/s/HUANG Lijun
1

By:
/s/LIN Zhiming
1

By:
/s/WANG Rui
1

By:
/s/REN Dianyuan
1

By:
/s/XU Minye
1
By:
/s/CHEN Ziwen
1

By:
/s/CHEN Shunfeng
1

By:
/s/CUI Fushan
1

By:
/s/ZHANG Jian
1

By:
/s/PAN Shunmei
1

By:
/s/YUAN Xiaoliang
1

By:
/s/ZHOU Haifeng
1

By:
/s/XI Jiangxiu
1

By:
/s/XIAO Kunman
1

By:
/s/YAO Weijun
1
By:
/s/YANG Bo
1

By:
/s/ZHU Genfu
1

By:
/s/ZHANG Jian
1

By:
/s/PAN Yongfang
1

Beijing Sequoia Xinyuan Equity Investment Center (L.P.) (seal)
Tianjin Sequoia Juye Equity Investment Centre (L.P.)(seal)
(Company seal: /s/ Tianjin Sequoia Juye Equity Investment Centre (L.P.))
Beijing Wudao Technology Investment Management Co., Ltd. (seal)
(Company seal: /s/ Beijing Wudao Technology Investment Management Co., Ltd.)
By:
/s/SUN Yi
Title: Legal representative
1
Schedule 1
BASIC INFORMATION OF THE COMPANY
Name:
Shareholding Structure
No.
Number of
Shares/Contribution to
Companys Registered
Capital
Name of Shareholder
1
2
3
4
5
6
7
8
9
10
11
Meisong Lai
Jianfa Lai
Jilei Wang
Xiangliang Hu
Shunchang Zhang
Xuebing Shang
Feixiang Qiu
Baixi Lan
Feng Meng
Hongjun Xu
Yaoren Zhang
206,100,000
72,000,000
60,000,000
42,300,000
36,000,000
26,400,000
18,000,000
8,400,000
6,000,000
3,529,860
6,000,000
Shareholding
Percentage
34.35%
12.00%
10.00%
7.05%
6.00%
4.40%
3.00%
1.40%
1.00%
0.59%
1.00%
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27

Lemou Wu
Jianying Teng
Baozhen Li
Shumin Ma
Wei Wang
Jianchang Lai
Mingsong Lai
Senliang Wang
Youwang Zeng
Zongrui Hong
Lijun Huang
Zhiming Lin
Rui Wang
Dianyuan Ren
24,000,000
12,000,000
16,762,050
30,143,462
3,202,746
2,313,492
1,568,250
6,330,000
6,250,000
2,960,088
1,480,044
903,900
259,986
259,986
609,006
470,820
4.00%
2.00%
2.79%
5.02%
0.53%
0.39%
0.26%
1.06%
1.04%
0.49%
0.25%
0.15%
0.04%
0.04%
0.10%
0.08%
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
Minye Xu
Ziwen Chen
Shunfeng Chen
Fushan Cui
Jian Zhang
Shunmei Pan
Xiaoliang Yuan
Haifeng Zhou
Jiangxiu Xi
Kunman Xiao
Weijun Yao
Bo Yang
Genfu Zhu
Jian Zhang
Yongfang Pan
Total
689,868
410,610
370,000
160,000
160,000
150,000
75,000
450,000
550,000
940,000
504,000
830,832
126,000
165,000
165,000
10,000
600,000,000
0.11%
0.07%
0.06%
0.03%
0.03%
0.03%
0.01%
0.08%
0.09%
0.16%
0.08%
0.14%
0.02%
0.03%
0.03%
0.0017%
100 %
Schedule 2
FORM POWER OF ATTORNEY
The undersigned, [ ], hereby irrevocably authorizes [ ], whose identification number is [ ], as my/our duly authorized attorney to execute any and all
documents necessary or advisable in respect of any and all rights under the Equity Pledge Agreement Regarding ZTO Express Co., Ltd. by and among ZTO
Express Co., Ltd., the undersigned, and Shanghai Zhongtongji Network Technology Co., Ltd.
By:
Date:
1
POWER OF ATTORNEY
The undersigned, Beijing Sequoia Xinyuan Equity Investment Center (L.P.), hereby irrevocably authorizes LAI Meisong, whose identification number is
***, as our duly authorized attorney to execute any and all documents necessary or advisable in respect of any and all rights under the Equity Pledge
Agreement Regarding ZTO Express Co., Ltd. by and among ZTO Express Co., Ltd., the undersigned, and Shanghai Zhongtongji Network Technology
Co., Ltd.
By: /s/Beijing Sequoia Xinyuan Equity Investment Center (L.P.)
Date: August 18, 2015
1
POWER OF ATTORNEY
The undersigned, Beijing Wudao Technology Investment Management Co., Ltd., hereby irrevocably authorizes LAI Meisong, whose identification number
is ***, as our duly authorized attorney to execute any and all documents necessary or advisable in respect of any and all rights under the Equity Pledge
Agreement Regarding ZTO Express Co., Ltd. by and among ZTO Express Co., Ltd., the undersigned, and Shanghai Zhongtongji Network Technology
Co., Ltd.
By: /s/ SUN Yi
1
POWER OF ATTORNEY
The undersigned, ZENG Youwang, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as our duly authorized attorney to
execute any and all documents necessary or advisable in respect of any and all rights under the Equity Pledge Agreement Regarding ZTO Express Co., Ltd.
by and among ZTO Express Co., Ltd., the undersigned, and Shanghai Zhongtongji Network Technology Co., Ltd.
By: /s/ZENG Youwang
1
POWER OF ATTORNEY
The undersigned, Tianjin Sequoia Juye Equity Investment Centre (L.P.), hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as
our duly authorized attorney to execute any and all documents necessary or advisable in respect of any and all rights under the Equity Pledge Agreement
Regarding ZTO Express Co., Ltd. by and among ZTO Express Co., Ltd., the undersigned, and Shanghai Zhongtongji Network Technology Co., Ltd.
By: /s/Tianjin Sequoia Juye Equity Investment Centre (L.P.)
1
POWER OF ATTORNEY
The undersigned, XIAO Kunman, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
any and all documents necessary or advisable in respect of any and all rights under the Equity Pledge Agreement Regarding ZTO Express Co., Ltd. by and
among ZTO Express Co., Ltd., the undersigned, and Shanghai Zhongjitong Network Technology Co., Ltd.
By: /s/ XIAO Kunman
1
POWER OF ATTORNEY
The undersigned, HU Xiangliang, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to
By: /s/ HU Xiangliang
1
POWER OF ATTORNEY
The undersigned, ZHOU Haifeng, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
among ZTO Express Co., Ltd., the undersigned, and Shanghai Zhongtongji Network Technology Co., Ltd.
By: /s/ ZHOU Haifeng
1
POWER OF ATTORNEY
The undersigned, XI Jiangxiu, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By: /s/ XI Jiangxiu
1
POWER OF ATTORNEY
The undersigned, QIU Feixiang, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By: /s/ QIU Feixiang
1
POWER OF ATTORNEY
The undersigned, ZHU Genfu, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By: /s/ ZHU Genfu
1
POWER OF ATTORNEY
The undersigned, HUANG Lijun, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By: /s/ HUANG Lijun
1
POWER OF ATTORNEY
The undersigned, LIN Zhiming, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By: /s/ LIN Zhiming
1
POWER OF ATTORNEY
The undersigned, HONG Zongrui, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to
By: /s/ HONG Zongrui
1
POWER OF ATTORNEY
The undersigned, WANG Senliang, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to
By: /s/ WANG Senliang
1
POWER OF ATTORNEY
The undersigned, XU Minye, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute any
and all documents necessary or advisable in respect of any and all rights under the Equity Pledge Agreement Regarding ZTO Express Co., Ltd. by and among
ZTO Express Co., Ltd., the undersigned, and Shanghai Zhongtongji Network Technology Co., Ltd.
By: /s/ XU Minye
1
POWER OF ATTORNEY
The undersigned, TENG Jianying, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to
By: /s/ TENG Jianying
1
POWER OF ATTORNEY
The undersigned, LAI Mingsong, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By: /s/ LAI Mingsong
1
POWER OF ATTORNEY
The undersigned, LAI Jianchang, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By: /s/ LAI Jianchang
1
POWER OF ATTORNEY
The undersigned, WANG Jilei, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By: /s/ WANG Jilei
1
POWER OF ATTORNEY
The undersigned, LAI Meisong, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By: /s/ LAI Meisong
1
POWER OF ATTORNEY
The undersigned, LAI Jianfa, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute any
By: /s/ LAI Jianfa
1
POWER OF ATTORNEY
The undersigned, CHEN Ziwen, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By: /s/ CHEN Ziwen
1
POWER OF ATTORNEY
The undersigned, PAN Shunmei, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By: /s/ PAN Shunmei
1
POWER OF ATTORNEY
The undersigned, ZHANG Yaoren, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to
By: /s/ ZHANG Yaoren
1
POWER OF ATTORNEY
The undersigned, CHEN Shunfeng, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to
By: /s/ CHEN Shunfeng
1
POWER OF ATTORNEY
The undersigned, WANG Rui, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By: /s/ WANG Rui
1
POWER OF ATTORNEY
The undersigned, YAO Weijun, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By: /s/ YAO Weijun
1
POWER OF ATTORNEY
The undersigned, LAN Baixi, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By: /s/ LAN Baixi
1
POWER OF ATTORNEY
The undersigned, YUAN Xiaoliang, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to
By: /s/ YUAN Xiaoliang
1
POWER OF ATTORNEY
The undersigned, REN Dianyuan, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to
By: /s/ REN Dianyuan
1
POWER OF ATTORNEY
The undersigned, ZHANG Jian, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By: /s/ ZHANG Jian
1
POWER OF ATTORNEY
The undersigned, MENG Feng, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By:
/s/ MENG Feng
1
POWER OF ATTORNEY
The undersigned, PAN Yongfang, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to
By:
/s/ PAN Yongfang
1
POWER OF ATTORNEY
The undersigned, YANG Bo, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute any
By:
/s/ YANG Bo
1
POWER OF ATTORNEY
The undersigned, XU Hongjun, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By:
/s/ XU Hongjun
1
POWER OF ATTORNEY
The undersigned, ZHANG Shunchang, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to
By:
/s/ ZHANG Shunchang
1
POWER OF ATTORNEY
The undersigned, MA Shumin, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By:
/s/ MA Shumin
1
POWER OF ATTORNEY
The undersigned, WU Lemou, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By:
/s/ WU Lemou
1
POWER OF ATTORNEY
The undersigned, LI Baozhen, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By:
/s/ LI Baozhen
1
POWER OF ATTORNEY
The undersigned, WANG Wei, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to execute
By:
/s/ WANG Wei
1
POWER OF ATTORNEY
The undersigned, SHANG Xuebing, hereby irrevocably authorizes LAI Meisong, whose identification number is ***, as my duly authorized attorney to
By:
/s/ SHANG Xuebing
Strictly Confidential
1
Exhibit 10.7
Executed Version
Voting Rights Proxy Agreement
Regarding
Among
Meisong Lai
Jianfa Lai
Jilei Wang
Xiangliang Hu
Shunchang Zhang
Shareholders listed in Annex I
And
August 18, 2015
Voting Rights Proxy Agreement

This Voting Rights Proxy Agreement (this Agreement), dated August 18, 2015, is made by and among:
1.
ZTO Express Co., Ltd. (the Company)

2.
Shanghai Zhongtongji Network Technology Co., Ltd. (the WFOE)

3.
Meisong Lai
4.
Jianfa Lai
5.
Jilei Wang
6.
Xiangliang Hu
7.
Shunchang Zhang
8.
Xuebing Shang
9.
Feixiang Qiu
10.
Baixi Lan
11.
Feng Meng
12.
Hongjun Xu
13.
Yaoren Zhang
14.
Beijing Sequoia Xinyuan Equity Investment Center (L.P.), business license No. 110114015001641
15.
Tianjin Sequoia Juye Equity Investment Centre (L.P.), business license No. 120192000071010
16.
Lemou Wu
17.
Jianying Teng
18.
Baozhen Li
1
19.
Shumin Ma
20.
Wei Wang
21.
Jianchang Lai
22.
Mingsong Lai
23.
Senliang Wang
24.
Youwang Zeng
25.
Zongrui Hong
26.
Lijun Huang
27.
Zhiming Lin
28.
Rui Wang
29.
Dianyuan Ren
30.
Minye Xu
31.
Ziwen Chen
32.
Shunfeng Chen
33.
Fushan Cui
34.
Jian Zhang
35.
Shunmei Pan
36.
Xiaoliang Yuan
37.
Haifeng Zhou
38.
Jiangxiu Xi
39.
Kunman Xiao
40.
Weijun Yao
41.
Bo Yang
42.
Genfu Zhu
43.
Jian Zhang
2
44.
Yongfang Pan
45.
Beijng Wudao Technology Investment Management Co., Ltd., business license No. 110108018485177
(the above No. 3 to No. 45 are collectively referred to as the Shareholders)

(Each of the above individually being referred to as a Party and collectively the Parties)
Whereas:
1.
2.
The Shareholders are the registered shareholders of the Company, who hold in aggregate 100% shares of the Company; and
The Shareholders intend to severally entrust all of their voting rights in the Company to the individuals designated by the WFOE, and the WFOE intends
to designate the individuals to accept such entrust.
Now THEREFORE, the Parties hereby reach the agreement as follows:

ARTICLE I
VOTING RIGHT DELEGATION
1.1
The Shareholders hereby irrevocably undertake to respectively sign a power of attorney in substance and form as set forth in Annex 2 hereof after the
signing of this Agreement, to respectively entrust the individual then designated by the WFOE (hereinafter, the Proxy) to exercise, on behalf of
each of the Shareholders, the following rights that the Shareholders are entitled to in the capacity of shareholders of the Company under the then
effective articles of association of the Company (collectively, the Proxy Rights):
(1)
To propose to convene and attend Shareholders meetings of the Company as the representative of each of the Shareholders in accordance
to the articles of association of the Company;
(2)
To exercise the voting rights and all the other rights of the Shareholders as specified in the PRC laws and the articles of association of the
Company, including without limitation, the sale, transfer, pledge or disposal of its shares or the Companys assets in whole or in part;
(3)
To exercise, on behalf of each of the Shareholders, their voting rights on all matters requiring discussion or resolutions of the Shareholders
meetings of the Company, including without limitation, the appointment and election of the Companys directors and other senior
management to be appointed and removed by the Shareholders meeting;
3
(4)
To exercise, as an agent of the Shareholders, other voting rights of the shareholders set forth in the articles of association of the Company,
as amended from time to time.
The WFOE or the Proxy may execute the transfer documents and any other relevant documents necessary for the Shareholders to perform their
obligations under the Equity Pledge Agreement and the Exclusive Option Agreement entered into on the same day as the date of the power of
attorney, within the scope of authorization and on behalf of the Shareholders, and timely perform any other obligation thereunder.
Any action taken or any document executed by the WFOE or the Proxy relating to the Company shall be deemed as an action taken or a document
executed by the Shareholders themselves. The Shareholders hereby recognize, acknowledge and approve any action taken and document executed
by the WFOE or the Proxy.
The Proxy may sub-delegate their Proxy Rights and may entrust other persons or entities with any of the abovementioned matters without first
sending a notice to or obtaining the consent of the Shareholders.
The power of attorney shall be irrevocable and remain valid upon the date of its execution for so long as the Shareholder remain as a shareholder of
the Company.
Throughout the term of the power of attorney, the Shareholders hereby waive all the rights relating to their shares already authorized to the Proxy
through the power of attorney and shall cease to exercise such rights on their own.
The above authorization and entrustment are granted on the condition that the Proxy is a PRC citizen and that the WFOE approves such
authorization and entrustment. Upon and only upon written notice of dismissing or replacing the Proxy(ies) given by the WFOE to each of the
Shareholders shall the Shareholder promptly entrust another PRC citizen then designated by the WFOE to exercise the above Proxy Rights, and the
new authorization and entrustment shall, upon the grant, supersede the previous authorization and entrustment. The Shareholders shall not revoke
the authorization and entrustment to the Proxy(ies) unless as provided in this Article.
1.2
The WFOE shall cause the Proxy to perform its obligations in respect of the entrustment hereunder to the extent authorized hereunder with due care
and diligence and in compliance with laws. The Shareholders acknowledge and shall assume liabilities for any legal consequences arising as a result
of the Proxys exercise of the foregoing Proxy Rights.
1.3
The Shareholders hereby confirm that the Proxy is not required to seek opinions from the relevant Shareholder prior to their exercise of the foregoing
Proxy Rights. However, the Proxy shall inform the Shareholders in a timely manner of any
4
resolution or proposal on convening an interim shareholders meeting after such resolution or proposal is made.
1.4
All the Shareholders acknowledge and agree that they shall, at the Shareholders meeting held for election of the Board directors of the Company,
(i) vote for the candidate recommended or appointed by Beijng Wudao Technology Investment Management Co., Ltd. and make sure such
candidate will be elected as a director; and (ii) vote for the candidate jointly recommended or appointed by Beijing Sequoia Xinyuan Equity
Investment Center (L.P.) and Tianjin Sequoia Juye Equity Investment Centre (L.P.) and make sure such candidate will be elected as a director. The
Proxy hereby agrees that he as the agent of the Shareholders shall, at the Shareholders meeting held for election of the Board directors of the
Company, (i) vote for the candidate recommended or appointed by Beijng Wudao Technology Investment Management Co., Ltd. and make sure
such candidate will be elected as a director; and (ii) vote for the candidate jointly recommended or appointed by Beijing Sequoia Xinyuan Equity
Investment Center (L.P.) and Tianjin Sequoia Juye Equity Investment Centre (L.P.) and make sure such candidate will be elected as a director.
ARTICLE II
RIGHT TO INFORMATION
2.1
For the purpose of exercising the Proxy Rights hereunder, the Proxy is entitled to get knowledge of various relevant information of the Company
such as those in respect of its operation, business, customers, finance and employees, and shall have access to the relevant documentations and
materials of the Company. The Company shall fully cooperate with the Proxy in this regard.
ARTICLE III
EXERCISE OF THE PROXY RIGHTS
3.1
The Shareholders will provide sufficient assistance to the Proxy with regard to his exercise of the Proxy Rights, including timely execution where
necessary of resolutions of shareholders meetings adopted by the Proxy or other pertinent legal documents (e.g., where the same is required in order
to submit documents for purpose of governmental approvals, registrations or filings.).
3.2
If at any time within the term of this Agreement, the grant or exercise of the Proxy Rights hereunder is unrealizable for whatever cause (except for
default of any Shareholder or the Company), the Parties shall immediately seek the most similar alternative solution and, if necessary, enter into a
supplementary agreement to amend or adjust the provisions herein, in order to ensure the realization of the purpose of this Agreement.
5
ARTICLE IV
EXEMPTION AND COMPENSATION
4.1
The Parties acknowledge that in no case shall the WFOE be required to be liable to or compensate (monetary or otherwise) the other Parties or any
third party in respect of exercise of the Proxy Rights hereunder by the individuals designated by it.
4.2
The Company agrees to indemnify and hold the WFOE and the Proxy free from and harmless against all losses incurred or likely to be incurred due
to exercise of the Proxy Rights by the Proxy, including without limitation, any loss resulting from any litigation, demand, arbitration or claim by
any third party against it or from administrative investigation or penalty, provided, however, that no indemnification is available for any losses
caused by a willful default or gross negligence of the WFOE or the Proxy.
ARTICLE V
5.1
5.2
Each Shareholder hereby represents and warrants that:

5.1.1.
It is a PRC citizen with full capacity of conduct, a limited partnership or a limited liability company It has the complete and independent
legal status and legal capacity to execute, deliver and perform this Agreement and can independently act as a party to a lawsuit.
5.1.2.
It has the full power and authority to execute and deliver this Agreement and all other documents relating to the transaction contemplated
hereby that are to be executed by it; and the full power and authority to consummate the transaction contemplated hereby. This Agreement
is duly executed and delivered by it. This Agreement shall constitute its legal and binding obligation and may be enforceable against it in
accordance with the terms hereof.
5.1.3.
It is the registered legal shareholder of the Company as of the effective date of this Agreement. Except for those rights created under this
Agreement, the Equity Interest Pledge Agreement and the Exclusive Option Agreement entered into by and between the Shareholders, the
Company and the WFOE, the Proxy Rights are free of any third-party right. Pursuant to this Agreement, the Proxy may exercise the Proxy
Rights fully and completely in accordance with the then effective articles of association of the Company.
Each of the WFOE and the Company hereby represents and warrants severally that:
6
5.3
5.2.1.
It is a limited liability company duly registered and validly existing under the laws where it is registered and has the independent legal
person status. It has the full and independent legal status and legal capacity to execute, deliver and perform this Agreement and can
independently act as a party to a lawsuit.
5.2.2.
It has the full corporate power and authority to execute and deliver this Agreement and all other documents relating to the transaction
contemplated hereby that are to be executed by it. It has the full power and authority to consummate the transaction contemplated hereby.
The Company further represents and warrants that:

5.3.1.
Each Shareholder is the registered legal shareholder of the Company as of the effective date of this Agreement. Except for those rights
created under this Agreement, the Equity Interest Pledge Agreement and the Exclusive Option Agreement entered into by and between the
Shareholders, the Company and the WFOE, the Proxy Rights are free of any third-party right. Pursuant to this Agreement, the Proxy may
exercise the Proxy Rights fully and completely in accordance with the then effective articles of association of the Company.
ARTICLE VI
TERM OF THIS AGREEMENT
6.1
This Agreement shall come into force as of the date of being signed by the Parties, and shall remain valid unless it is terminated at an earlier date
upon the written agreement of the Parties.
6.2
If any Shareholder transfers all of the equity interest it holds in the Company to any person with the WFOEs prior consent, the Shareholder will no
longer be a Party hereto and the obligations and undertakings of any other Parties hereunder will not be adversely affected.
ARTICLE VII
NOTICES
7.1
Any notice, request, demand and other correspondences required by this Agreement or made in accordance with this Agreement shall be delivered in
writing to the relevant Party(ies).
7.2
The above notices or other correspondence shall be deemed delivered (i) upon being sent out if by facsimile or electric transmission, or (ii) upon
handover in person if by hand delivery; or (iii) upon the fifth (5th) day of being posted if by mail.
7
ARTICLE VIII
CONFIDENTIALITY
8.1
Regardless of the termination of this Agreement, each Party is obligated to keep strictly confidential trade secrets, proprietary information, clients
information and all other information of confidential nature related to the other Parties that are known to the former Party during the course of its
execution and performance of this Agreement (the Confidential Information). Unless as agreed to by the Party who disclosed the Confidential
Information in writing in advance, or as required by the relevant laws, regulations or the requirements applicable where an affiliate of any Party is
listed, the receiving party of the Confidential Information shall not disclose to any third party any of such Confidential Information. Except for the
purpose of performing this Agreement, the receiving Party shall not use any Confidential Information.
8.2
The Confidential Information does not include:

(a)
the information that has previously been lawfully acquired by the Party receiving the information as evidenced by certain written evidence;
(b)
the information entering the public domain without attribution to any fault of the Party receiving the information; or
(c)
the information lawfully acquired by the Party receiving the information from other sources after being received by the Party.
8.3
The receiving Party may disclose Confidential Information to its relevant employees, agents or professionals engaged by it, provided, however, the
receiving Party shall ensure that such persons shall abide by the relevant terms and conditions of this Agreement, and shall assume any liability
incurred as a result of the breach by any of such persons of the relevant terms and conditions of this Agreement.
8.4
Notwithstanding any other provision of this Agreement, this Article 8 shall survive the termination of this Agreement.
ARTICLE IX
LIABILITIES FOR BREACH
9.1
The Parties agree and confirm that, if any of the Parties (the Breaching Party) is materially in breach of any provision hereof, or materially fails or
delays in performing any of the obligations hereunder, a breach hereof is constituted (a Breach), and any of the other Parties which does not
commit any Breach (a Non-breaching Party) has the right to require that the Breaching Party rectify it or take a remedial action within a
reasonable period. If the Breaching Party fails
8
to rectify the Breach or take remedial actions within the reasonable period or within ten (10) days of the other Partys written rectification notice,
then:
9.2
9.1.1.
if any Shareholder or the Company is the Breaching Party, the WFOE is entitled to terminate this Agreement and require the Breaching
Party to indemnify it against its damage;
9.1.2.
if the WFOE is the Breaching Party, each of the Non-defaulting Parties is entitled to require the Breaching Party to indemnify it against its
damage; but unless otherwise provided for by law, in no case does it have the right to terminate or rescind this Agreement.
Notwithstanding any other provision herein, this Article 9 shall survive the suspension or termination of this Agreement.
ARTICLE X
MISCELLANEOUS
10.1
This Agreement is written in Chinese in ten (10) originals, with Beijng Wudao Technology Investment Management Co., Ltd. holding one (1),
Beijing Sequoia Xinyuan Equity Investment Center (L.P.) and Tianjin Sequoia Juye Equity Investment Centre (L.P.) holding two (2) and all the
other Parties holding the remaining seven (7) originals.
10.2
The formation, effectiveness, performance, amendment, interpretation and termination of this Agreement shall be governed by the PRC laws.
10.3
Any dispute arising out of or in connection with this Agreement shall be resolved by the Parties through consultation. In the event the Parties fail to
agree with each other within thirty (30) days after the dispute arises, the dispute shall be submitted to Shanghai International Economic and Trade
Arbitration Commission for arbitration in Shanghai in accordance with the arbitration rules thereof effective at the submission of the application for
arbitration. The arbitration award shall be final and binding upon the Parties.
10.4
None of the rights, powers or remedies granted to each of the Parties by any provision of this Agreement shall preclude any other rights, powers or
remedies that such Party is entitled to under the laws and under any other provisions of this Agreement, nor shall any Partys exercise of any of its
rights, powers or remedies preclude its exercise of any other rights, powers or remedies that it is entitled to.
10.5
A Partys failure or delay in exercising any of its rights, powers or remedies that it is entitled to under this Agreement or under the laws (the
Available Rights) shall not constitute its waiver of such rights, nor shall any single or partial waiver of any Available Rights by a Party preclude
its exercise of those rights in another manner or its exercise of any other Available Rights.
9
10.6
The taxes and legal expenses and costs to be undertaken by one or more Parties hereto according to express requirements of applicable law in
connection with the transactions hereunder shall be fully reimbursed by the WFOE to such Party or Parties.
10.7
The headings in this Agreement are written for the ease of reference only, and in no event, shall be used for, or affect, the interpretation to this
Agreement.
10.8
Each provision herein is separable and independent from all other provisions herein. If any one provision or more provisions of this Agreement
become invalid, illegal or unenforceable at any time, the validity, legality and enforceability of other provisions herein shall not be affected.
10.9
Any amendment or supplement hereto shall be made in writing and shall not become effective until its due execution by the Parties hereto.
10.10
Without the prior written consent of each other Party, no Party may transfer any of its rights and/or obligations hereunder to any third party.
10.11
This Agreement shall be binding on the legal successors of the Parties.

[INTENTIONALLY LEFT BLANK BELOW]
10
(This page is the signature page of the Voting Rights Proxy Agreement and contains no body text)
IN WITNESS THEREOF, this Agreement has been signed by the Parties as of the date first written above.
(seal)
(Company seal: /s/ZTO Express Co., Ltd.)
By: /s/Meisong Lai
Name: Meisong Lai
(seal)
(Company seal: /s/Shanghai Zhongtongji Network Technology Co., Ltd.)
By: /s/Meisong Lai
Name: Meisong Lai
Meisong Lai
Signature:
/s/Meisong Lai
Jianfa Lai
Signature:
/s/Jianfa Lai
Jilei Wang
Signature:
/s/Jilei Wang
Xiangliang Hu
Signature:
/s/Xiangliang Hu
Shunchang Zhang
Signature:
/s/Shunchang Zhang
Xuebing Shang
Signature:
/s/Xuebing Shang
Feixiang Qiu
Signature:
/s/Feixiang Qiu
Baixi Lan
Signature:
/s/Baixi Lan
Feng Meng
Signature:
/s/Feng Meng
Hongjun Xu
Signature:
/s/Hongjun Xu
Yaoren Zhang
Signature:
/s/Yaoren Zhang
Lemou Wu
Signature:
/s/Lemou Wu
Jianying Teng
Signature:
/s/Jianying Teng
Baozhen Li
Signature:
/s/Baozhen Li
Shumin Ma
Signature:
/s/Shumin Ma
Wei Wang
Signature:
/s/Wei Wang
Jianchang Lai
Signature:
/s/Jianchang Lai
Mingsong Lai
Signature:
/s/Mingsong Lai
Senliang Wang
Signature:
/s/Senliang Wang
Youwang Zeng
Signature:
/s/Youwang Zeng
Zongrui Hong
Signature:
/s/Zongrui Hong
Lijun Huang
Signature:
/s/Lijun Huang
Zhiming Lin
Signature:
/s/Zhiming Lin
Rui Wang
Signature:
/s/Rui Wang
Dianyuan Ren
Signature:
/s/Dianyuan Ren
Minye Xu
Signature:
/s/Minye Xu
Ziwen Chen
Signature:
/s/Ziwen Chen
Shunfeng Chen
Signature:
/s/Shunfeng Chen
Fushan Cui
Signature:
/s/Fushan Cui
Jian Zhang
Signature:
/s/Jian Zhang
Shunmei Pan
Signature:
/s/Shunmei Pan
Xiaoliang Yuan
Signature:
/s/Xiaoliang Yuan
Haifeng Zhou
Signature:
/s/Haifeng Zhou
Jiangxiu Xi
Signature:
/s/Jiangxiu Xi
Kunman Xiao
Signature:
/s/Kunman Xiao
Weijun Yao
Signature:
/s/Weijun Yao
Bo Yang
Signature:
/s/Bo Yang
Genfu Zhu
Signature:
/s/Genfu Zhu
Jian Zhang
Signature:
/s/Jian Zhang
Yongfang Pan
Signature:
/s/Yongfang Pan

(seal)
(seal)
(Company seal: /s/ Tianjin Sequoia Juye Equity Investment Partnership (L.P.))
(seal)
(Company seal: /s/ Beijng Wudao Technology Investment Management Co., Ltd.)
By: /s/Yi Sun
Name: Yi Sun
Appendix 1:
Basic Information of the Company
Company Name: ZTO Express Co., Ltd.
Shareholding structure:
No.
Name of Shareholder
1
2
3
4
5
6
7
8
9
10
11
Meisong Lai
Jianfa Lai
Jilei Wang
Xiangliang Hu
Shunchang Zhang
Xuebing Shang
Feixiang Qiu
Baixi Lan
Feng Meng
Hongjun Xu
Yaoren Zhang
Number of
Shares/Contribution to
Company Registered Capital
206,100,000
72,000,000
60,000,000
42,300,000
36,000,000
26,400,000
18,000,000
8,400,000
6,000,000
3,529,860
6,000,000
Shareholding
Percentage
34.35%
12.00%
10.00%
7.05%
6.00%
4.40%
3.00%
1.40%
1.00%
0.59%
1.00%
12
13
14
15
16
17
18
19
20
21
22
23
24
25

Lemou Wu
Jianying Teng
Baozhen Li
Shumin Ma
Wei Wang
Jianchang Lai
Mingsong Lai
Senliang Wang
Youwang Zeng
Zongrui Hong
Lijun Huang
Zhiming Lin
24,000,000
12,000,000
16,762,050
30,143,462
3,202,746
2,313,492
1,568,250
6,330,000
6,250,000
2,960,088
1,480,044
903,900
259,986
259,986
4.00%
2.00%
2.79%
5.02%
0.53%
0.39%
0.26%
1.06%
1.04%
0.49%
0.25%
0.15%
0.04%
0.04%
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
Rui Wang
Dianyuan Ren
Minye Xu
Ziwen Chen
Shunfeng Chen
Fushan Cui
Jian Zhang
Shunmei Pan
Xiaoliang Yuan
Haifeng Zhou
Jiangxiu Xi
Kunman Xiao
Weijun Yao
Bo Yang
Genfu Zhu
Jian Zhang
609,006
470,820
689,868
410,610
370,000
160,000
160,000
150,000
75,000
450,000
550,000
940,000
504,000
830,832
126,000
165,000
0.10%
0.08%
0.11%
0.07%
0.06%
0.03%
0.03%
0.03%
0.01%
0.08%
0.09%
0.16%
0.08%
0.14%
0.02%
0.03%
42
43
Yongfang Pan
Total
165,000
10,000
600,000,000
0.03%
0.0017%
100 %
Exhibit 10.8
Power of Attorney
The undersigned, LAI Meisong (with residence address at ***, and Identification Card No. ***), a holder of 34.35% of the shares in ZTO Express
Co., Ltd. (the Company) (the Shares), having executed this Power of Attorney (the Power of Attorney) as of August 18, 2015, hereby irrevocably
authorizes Shanghai Zhongtongji Network Technology Co., Ltd. (WFOE), with its address at Building 5, 1685 Huazhi Road, Qingpu District, Shanghai, to
exercise the following rights:
The WFOE hereby appoints LAI Meisong (with residence address at ***, and Identification Card No. ***), a qualified person, as the sole and exclusive
agent and attorney (the Agent) with respect to all matters concerning my holding of the Shares, including without limitation to:
(1)
attend shareholders meetings of the Company convened under the articles of the Company;
(2)
exercise all shareholders rights and shareholders voting rights the undersigned is entitled to under the laws of China and articles of the
Company, including but not limited to the sale, transfer, pledge or disposition of all or any part of my holding of the Shares;
(3)
designate and appoint my Agent to vote on all matters discussed or resolved at the shareholders meetings, including without limitation
designating and appointing any director of the Company or and other senior management to be appointed or removed at the shareholders meeting; and
(4)
exercise on my behalf any other voting rights granted to shareholders under the articles of the Company, as amended.
The WFOE or the Agent shall have the power and authority to, on behalf of the undersigned, execute the transfer documents and any other documents
required to be executed by the undersigned under the Equity Pledge Agreement and the Exclusive Call Option Agreement entered into by the undersigned
dated hereof, and perform any other obligations thereunder.
All actions in connection with the Company conducted by the WFOE or the Agent shall be deemed as actions conducted by the undersigned, and all
documents relating to the Company executed by the WFOE or the Agent shall be deemed executed by the undersigned. The undersigned hereby
acknowledges, consents and ratifies any such action taken and document executed by the WFOE or the Agent.
The Agent is entitled to re-authorize its rights relating to the aforesaid matters to any other person or entity at its own discretion and without notice to
or consent from the undersigned.
As long as the undersigned is a shareholder of the Company, this Power of
Attorney shall be irrevocable, effective and valid as of the date of its execution. During the term of this Power of Attorney, the undersigned hereby waives all
rights associated with my holding of the Shares which have been authorized to the Agent under this Power of Attorney, and shall not exercise such rights by
myself.
The undersigned irrevocably acknowledges that unless with instruction from the WFOE to change the Agent, this Power of Attorney will be effective
until expiration or early termination of the the Shareholders Voting Proxy Agreement made by and among the WFOE, the Company and the undersigned as
of August 18, 2015.
LAI Meisong
By:
/s/LAI Meisong
Power of Attorney
The undersigned, LAI Jianfa (with residence address at ***, and Identification Card No. ***), a holder of 12.00% of the shares in ZTO Express Co., Ltd.
(the Company) (the Shares), having executed this Power of Attorney (the Power of Attorney) as of August 18, 2015, hereby irrevocably authorizes
Shanghai Zhongtongji Network Technology Co., Ltd. (WFOE), with its address at Building 5, 1685 Huazhi Road, Qingpu District, Shanghai, to exercise
the following rights:
(1)
(2)
(3)
(4)
myself.
until expiration or early termination of the Shareholders Voting Proxy Agreement made by and among the WFOE, the Company and the undersigned as of
August 18, 2015.
LAI Jianfa
By:
/s/LAI Jianfa
Power of Attorney
The undersigned, WANG Jilei (with residence address at ***, and Identification Card No. ***), a holder of 10.00% of the shares in ZTO Express
(1)
(2)
(3)
(4)
myself.
August 18, 2015.
WANG Jilei
By:
/s/WANG Jilei
Power of Attorney
The undersigned, HU Xiangliang (with residence address at ***, and Identification Card No. ***), a holder of 7.05% of the shares in ZTO Express
(1)
(2)
(3)
(4)
As long as the undersigned is a shareholder of the Company, this Power of Attorney shall be irrevocable, effective and valid as of the date of its
execution. During the term of this Power of Attorney, the undersigned hereby waives all rights associated with my holding of the Shares which have been
authorized to the Agent under this Power of Attorney, and shall not exercise such rights by myself.
August 18, 2015.
HU Xiangliang
By:
/s/HU Xiangliang
Power of Attorney
The undersigned, ZHANG Shunchang (with residence address at ***, and Identification Card No. ***), a holder of 6.00% of the shares in ZTO Express
(1)
(2)
(3)
(4)
August 18, 2015.
ZHANG Shunchang
By:
/s/ZHANG Shunchang
Power of Attorney
The undersigned, SHANG Xuebing (with residence address at ***, and Identification Card No. ***), a holder of 4.40% of the shares in ZTO Express
(1)
(2)
(3)
(4)
August 18, 2015.
SHANG Xuebing
By:
/s/SHANG Xuebing
Power of Attorney
The undersigned, QIU Feixiang (with residence address at ***, and Identification Card No. ***), a holder of 3.00% of the shares in ZTO Express
(1)
(2)
(3)
(4)
August 18, 2015.
QIU Feixiang
By:
/s/ QIU Feixiang
Power of Attorney
The undersigned, LAN Baixi (with residence address at ***, and Identification Card No. ***), a holder of 1.40% of the shares in ZTO Express Co., Ltd.
(1)
(2)
(3)
(4)
August 18, 2015.
LAN Baixi
By:
/s/LAN Baixi
Power of Attorney
The undersigned, MENG Feng (with residence address at ***, and Identification Card No. ***), a holder of 1.00% of the shares in ZTO Express
(1)
(2)
(3)
(4)
August 18, 2015.
MENG Feng
By:
/s/MENG Feng
Power of Attorney
The undersigned, XU Hongjun (with residence address at ***, and Identification Card No. ***), a holder of 0.59% of the shares in ZTO Express
(1)
(2)
(3)
(4)
August 18, 2015.
XU Hongjun
By:
/s/XU Hongjun
Power of Attorney
The undersigned, ZHANG Yaoren (with residence address at ***, Identification Card No. ***), a holder of 1.00% of the shares in ZTO Express Co., Ltd.
(1)
(2)
(3)
(4)
August 18, 2015.
ZHANG Yaoren
By:
/s/ZHANG Yaoren
Power of Attorney
The undersigned, WU Lemou (with residence address at ***, Identification Card No. ***), a holder of 2.79% of the shares in ZTO Express Co., Ltd. (the
Company) (the Shares), having executed this Power of Attorney (the Power of Attorney) as of August 18, 2015, hereby irrevocably authorizes Shanghai
Zhongtongji Network Technology Co., Ltd. (WFOE), with its address at Building 5, 1685 Huazhi Road, Qingpu District, Shanghai, to exercise the
following rights:
(1)
(2)
(3)
(4)
August 18, 2015.
WU Lemou
By:
/s/WU Lemou
Power of Attorney
The undersigned, TENG Jianying (with residence address at ***, Identification Card No. ***), a holder of 5.02% of the shares in ZTO Express Co., Ltd.
(1)
(2)
(3)
(4)
August 18, 2015.
TENG Jianying
By:
/s/TENG Jianying
Power of Attorney
The undersigned, LI Baozhen (with residence address at ***, Identification Card No. ***), a holder of 0.53% of the shares in ZTO Express Co., Ltd. (the
following rights:
(1)
(2)
(3)
(4)
August 18, 2015.
LI Baozhen
By:
/s/LI Baozhen
Power of Attorney
The undersigned, MA Shumin (with residence address at ***, Identification Card No. ***), a holder of 0.39% of the shares in ZTO Express Co., Ltd.
(1)
(2)
(3)
(4)
August 18, 2015.
MA Shumin
By:
/s/MA Shumin
Power of Attorney
The undersigned, WANG Wei (with residence address at ***, Identification Card No. ***), a holder of 0.26% of the shares in ZTO Express Co., Ltd. (the
following rights:
(1)
(2)
(3)
(4)
August 18, 2015.
WANG Wei
By:
/s/WANG Wei
Power of Attorney
The undersigned, LAI Jianchang (with residence address at ***, and Identification Card No. ***), a holder of 1.06% of the shares in ZTO Express
(1)
(2)
(3)
(4)
myself.
of August 18, 2015.
LAI Jianchang
By:
/s/LAI Jianchang
Power of Attorney
The undersigned, LAI Mingsong (with residence address at ***, and Identification Card No. ***), a holder of 1.04% of the shares in ZTO Express
(1)
(2)
(3)
(4)
myself.
of August 18, 2015.
LAI Mingsong
By:
/s/LAI Mingsong
Power of Attorney
The undersigned, WANG Senliang (with residence address at ***, and Identification Card No. ***), a holder of 0.49% of the shares in ZTO Express
(1)
(2)
(3)
(4)
myself.
of August 18, 2015.
WANG Senliang
By:
/s/WANG Senliang
Power of Attorney
The undersigned, ZENG Youwang (with residence address at ***, and Identification Card No. ***), a holder of 0.25% of the shares in ZTO Express
(1)
(2)
(3)
(4)
myself.
of August 18, 2015.
ZENG Youwang
By:
/s/ZENG Youwang
Power of Attorney
The undersigned, HONG Zongrui (with residence address at ***, Identification Card No. ***), a holder of 0.15% of the shares in ZTO Express Co., Ltd.
(1)
(2)
(3)
(4)
August 18, 2015.
HONG Zongrui
By:
/s/HONG Zongrui
Power of Attorney
The undersigned, HUANG Lijun (with residence address at ***, Identification Card No. ***), a holder of 0.04% of the shares in ZTO Express Co., Ltd.
(1)
(2)
(3)
(4)
August 18, 2015.
HUANG Lijun
By:
/s/HUANG Lijun
Power of Attorney
The undersigned, LIN Zhiming (with residence address at ***, Identification Card No. ***), a holder of 0.04% of the shares in ZTO Express Co., Ltd.
(1)
(2)
(3)
(4)
August 18, 2015.
LIN Zhiming
By:
/s/LIN Zhiming
Power of Attorney
The undersigned, WANG Rui (with residence address at ***, Identification Card No. ***), a holder of 0.10% of the shares in ZTO Express Co., Ltd. (the
following rights:
(1)
(2)
(3)
(4)
August 18, 2015.
WANG Rui
By:
/s/WANG Rui
Power of Attorney
The undersigned, REN Dianyuan (with residence address at ***, Identification Card No. ***), a holder of 0.08% of the shares in ZTO Express Co., Ltd.
(1)
(2)
(3)
(4)
August 18, 2015.
REN Dianyuan
By:
/s/REN Dianyuan
Power of Attorney
The undersigned, XU Minye (with residence address at ***, Identification Card No. ***), a holder of 0.11% of the shares in ZTO Express Co., Ltd. (the
following rights:
(1)
(2)
(3)
(4)
August 18, 2015.
XU Minye
By:
/s/XU Minye
Power of Attorney
The undersigned, CHEN Ziwen (with residence address at ***, Identification Card No. ***), a holder of 0.07% of the shares in ZTO Express Co., Ltd.
(1)
(2)
(3)
(4)
August 18, 2015.
CHEN Ziwen
By:
/s/CHEN Ziwen
Power of Attorney
The undersigned, CHEN Shunfeng (with residence address at ***, Identification Card No. ***), a holder of 0.06% of the shares in ZTO Express
(1)
(2)
(3)
(4)
August 18, 2015.
CHEN Shunfeng
By:
/s/CHEN Shunfeng
Power of Attorney
The undersigned, CUI Fushan (with residence address at ***, Identification Card No. ***), a holder of 0.03% of the shares in ZTO Express Co., Ltd. (the
following rights:
(1)
(2)
(3)
(4)
August 18, 2015.
CUI Fushan
By:
/s/CUI Fushan
Power of Attorney
The undersigned, ZHANG Jian (with residence address at ***, Identification Card No. ***), a holder of 0.03% of the shares in ZTO Express Co., Ltd.
(1)
(2)
(3)
(4)
August 18, 2015.
ZHANG Jian
By:
/s/ZHANG Jian
Power of Attorney
The undersigned, PAN Shunmei (with residence address at ***, Identification Card No. ***), a holder of 0.03% of the shares in ZTO Express Co., Ltd.
(1)
(2)
(3)
(4)
August 18, 2015.
PAN Shunmei
By:
/s/PAN Shunmei
Power of Attorney
The undersigned, YUAN Xiaoliang (with residence address at ***, Identification Card No. ***), a holder of 0.01% of the shares in ZTO Express
(1)
(2)
(3)
(4)
August 18, 2015.
YUAN Xiaoliang
By:
/s/YUAN Xiaoliang
Power of Attorney
The undersigned, ZHOU Haifeng (with residence address at ***, Identification Card No. ***), a holder of 0.08% of the shares in ZTO Express Co., Ltd.
(1)
(2)
(3)
(4)
August 18, 2015.
ZHOU Haifeng
By:
/s/ZHOU Haifeng
Power of Attorney
The undersigned, XI Jiangxiu (with residence address at ***, Identification Card No. ***), a holder of 0.09% of the shares in ZTO Express Co., Ltd. (the
following rights:
(1)
(2)
(3)
(4)
August 18, 2015.
XI Jiangxiu
By:
/s/XI Jiangxiu
Power of Attorney
The undersigned, XIAO Kunman (with residence address at ***, Identification Card No. ***), a holder of 0.16% of the shares in ZTO Express Co., Ltd.
(1)
(2)
(3)
(4)
August 18, 2015.
XIAO Kunman
By:
/s/XIAO Kunman
Power of Attorney
The undersigned, YAO Weijun (with residence address at ***, Identification Card No. ***), a holder of 0.08% of the shares in ZTO Express Co., Ltd.
(1)
(2)
(3)
(4)
August 18, 2015.
YAO Weijun
By:
/s/YAO Weijun
Power of Attorney
The undersigned, YANG Bo (with residence address at ***, Identification Card No. ***), a holder of 0.14% of the shares in ZTO Express Co., Ltd. (the
following rights:
(1)
(2)
(3)
(4)
August 18, 2015.
YANG Bo
By:
/s/YANG Bo
Power of Attorney
The undersigned, ZHU Genfu (with residence address at ***, Identification Card No. ***), a holder of 0.02% of the shares in ZTO Express Co., Ltd. (the
following rights:
(1)
(2)
(3)
(4)
August 18, 2015.
ZHU Genfu
By:
/s/ZHU Genfu
Power of Attorney
The undersigned, ZHANG Jian (with residence address at ***, Identification Card No. ***), a holder of 0.03% of the shares in ZTO Express Co., Ltd.
(1)
(2)
(3)
(4)
August 18, 2015.
ZHANG Jian
By:
/s/ZHANG Jian
Power of Attorney
The undersigned, PAN Yongfang (with residence address at ***, Identification Card No. ***), a holder of 0.03% of the shares in ZTO Express Co., Ltd.
(1)
(2)
(3)
(4)
August 18, 2015.
PAN Yongfang
By:
/s/PAN Yongfang
Power of Attorney
The undersigned, Tianjin Sequoia Juye Equity Investment Centre (L.P.), (with residence address at 202-C417, Second Floor, Wing of Ligang Building,
82 Xierdao, Konggang Economic Zone, Tianjin, Business License No. 120192000071010), a holder of 2.00% of the shares in ZTO Express Co., Ltd. (the
following rights:
agent and attorney (the Agent) with respect to all matters concerning our holding of the Shares, including without limitation to:
(1)
(2)
Company, including but not limited to the sale, transfer, pledge or disposition of all or any part of our holding of the Shares;
(3)
designate and appoint our Agent to vote on all matters discussed or resolved at the shareholders meetings, including without limitation
(4)
exercise on our behalf any other voting rights granted to shareholders under the articles of the Company, as amended.
or consent from
the undersigned.
execution. During the term of this Power of Attorney, the undersigned hereby waives all rights associated with our holding of the Shares which have been
authorized to the Agent under this Power of Attorney, and shall not exercise such rights by us.
August 18, 2015.
Tianjin Sequoia Juye Equity Investment Centre (L.P.) (seal)
By:
Title:
/s/Tianjin Sequoia Juye Equity Investment Centre (L.P.)
Power of Attorney
The undersigned, Beijing Sequoia Xinyuan Equity Investment Center (L.P.), (with residence address at 2002, 7 Chuangxin Road, Technology Zone,
Changping District, Beijing, Business License No. 110114015001641), a holder of 4.00% of the shares in ZTO Express Co., Ltd. (the Company) (the
Shares), having executed this Power of Attorney (the Power of Attorney) as of August 18, 2015, hereby irrevocably authorizes Shanghai Zhongtongji
Network Technology Co., Ltd. (WFOE), with its address at Building 5, 1685 Huazhi Road, Qingpu District, Shanghai, to exercise the following rights:
(1)
(2)
(3)
(4)
or consent from
the undersigned.
August 18, 2015.
Beijing Sequoia Xinyuan Equity Investment Center (L.P.) (seal)
By:
Title:
/s/Beijing Sequoia Xinyuan Equity Investment Center (L.P.)
Power of Attorney
The undersigned, Beijing Wudao Technology Investment Management Co., Ltd. (with residence address at 5199, Floor 5, Shenchang Building, 51
Zhichun Road, Haidian District, Beijing, Business License No. 110108018485177), a holder of 0.0017% of the shares in ZTO Express Co., Ltd. (the
following rights:
(1)
(2)
(3)
(4)
or consent from
the undersigned.
August 18, 2015.
Beijing Wudao Technology Investment Management Co., Ltd. (seal)
By:
/s/SUN Yi
/s/Beijing Wudao Technology Investment Management Co., Ltd.
Title: Legal representative
Exhibit 10.9
Spousal Consent Letter
The undersigned of the Spouse Consent Letter (the Consent Letter), hereby acknowledges, agrees and confirms that: I, FU Aiyun, a citizen of the Peoples
Republic of China identification card number of ***, is the spouse of HU Xiangliang, whose is a shareholder of ZTO Express Co., Ltd., a citizen of the
Peoples Republic of China with identification card number of *** (the Shareholder).
The undersigned hereby unconditionally and irrevocably acknowledges and confirms that: I am in the knowledge that the Shareholder has signed as of
August 18, 2015 the Exclusive Call Option Agreement, the Shareholders Voting Rights Agreement and the Power of Attorney attached thereto, and the
Equity Pledge Agreement and the Power of Attorney attached thereto, each with ZTO Express Co., Ltd. (the Company) and Shanghai Zhongtongji Network
Technology Co., Ltd. (the WFOE), and the WFOE and Company has signed the Exclusive Consulting and Services Agreement (the above four agreements,
the VIE Agreements), and have read and understood the contents of the VIE Agreements.
The undersigned further acknowledges, confirms and unconditionally and irrevocably understands and agrees that the Shareholder shall perform all of his
obligations under the VIE Agreements, including without limitation, granting to the WFOE share transfer option and assets purchase option, authorizing the
representative designated by the WFOE to exercise all of his voting rights as a shareholder of the Company on his behalf, and pledge all of the shares held by
him to the WFOE. The undersigned covenants not to make any claims against the valid existence of any of the VIE Agreements or impose any interference or
adverse effect upon the Shareholders performance of any of the VIE Agreements due to the existence or termination of the marriage between her and the
Shareholder.
This Consent Letter is governed by and construed in accordance with the laws of the Peoples Republic of China (without regards to the rule of conflict of
laws thereof). The undersigned acknowledges that: I may engage legal advisor at my discretion in connection with execution of this Consent Letter, but I
expressly refuse to do so. The undersigned agrees to be bound by this Consent Letter as of the date hereof. This Consent Letter will become effective upon
execution and continue to have effect as long as the VIE Agreements are valid.
/s/ FU Aiyun
Date:
June 18, 2016

The undersigned of the Spouse Consent Letter (the Consent Letter), hereby acknowledges, agrees and confirms that: I, CHEN Xinyu, a citizen of the
Peoples Republic of China identification card number of ***, is the spouse of ZHANG Shunchang, whose is a shareholder of ZTO Express Co., Ltd., a citizen
of the Peoples Republic of China with identification card number of *** (the Shareholder).
The undersigned hereby unconditionally and irrevocably acknowledges and confirms that: I am in the knowledge that the Shareholder has signed as of
August 18, 2015 the Exclusive Call Option Agreement, the Shareholders Voting Rights Agreement and the Power of Attorney attached thereto, and the
Equity Pledge Agreement and the Power of Attorney attached thereto, each with ZTO Express Co., Ltd. (the Company) and Shanghai Zhongtongji Network
Technology Co., Ltd. (the WFOE), and the WFOE and Company has signed the Exclusive Consulting and Services Agreement (the above four agreements,
the VIE Agreements), and have read and understood the contents of the VIE Agreements.
Shareholder.
/s/ CHEN Xinyu
Date:
June 17, 2016
2

The undersigned of the Spouse Consent Letter (the Consent Letter), hereby acknowledges, agrees and confirms that: I, SHEN Linxian, a citizen of the
Peoples Republic of China identification card number of ***, is the spouse of LAI Jianfa, whose is a shareholder of ZTO Express Co., Ltd., a citizen of the
The undersigned hereby unconditionally and irrevocably acknowledges and confirms that that: I am in the knowledge that the Shareholder has signed as of
August 18, 2015 the Exclusive Call Option Agreement, the Shareholder Voting Proxy s Voting Rights Agreement and the Power of Attorney attached
thereto, and the Equity Interest Pledge Agreement and the Power of Attorney attached thereto, each with ZTO Express Co., Ltd. (the Company) and
Shanghai Zhongtongji Network Technology Co., Ltd. (the WFOE), and the WFOE and Company has signed the Exclusive Consulting and Services
Agreement with the WFOE (the above four agreements, the VIE Agreements), and have read and understood the contents of the VIE Agreements.
Shareholder.
laws thereof). The undersigned acknowledges that I may engage legal advisor at my discretion in connection with execution of this Consent Letter, but I
/s/ SHEN Linxian
Date:
June 18, 2016
3

The undersigned of the Spouse Consent Letter (the Consent Letter), hereby acknowledges, agrees and confirms that I, LAI Yufeng, a citizen of the Peoples
Republic of China identification card number of ***, is the spouse of LAI Meisong, whose is a shareholder of ZTO Express Co., Ltd., a citizen of the Peoples
Republic of China with identification card number of *** (the Shareholder).
Shareholder.
/s/ LAI Yufeng
Date:
June 15, 2016
4

The undersigned of the Spouse Consent Letter (the Consent Letter), hereby acknowledges, agrees and confirms that: I, WU Yanfen, a citizen of the Peoples
Republic of China identification card number of ***, is the spouse of WANG Jilei, whose is a shareholder of ZTO Express Co., Ltd., a citizen of the Peoples
Republic of China with identification card number of *** (the Shareholder).
Shareholder.
/s/ WU Yanfen
Date:
June 15, 2016
5

The undersigned of the Spouse Consent Letter (the Consent Letter), hereby acknowledges, agrees and confirms that I, FAN Feiqun, a citizen of the Peoples
Republic of China identification card number of ***, is the spouse of SHANG Xuebing, whose is a shareholder of ZTO Express Co., Ltd., a citizen of the
Shareholder.
/s/ FAN Feiqun
Date:
June 18, 2016
6
Exhibit 10.10
Road Transportation Agreement
Party A (Shipper): ZTO Express Co., Ltd.
Address: Building 1, No. 1685, Huazhi Road, Huaxin Twon, Qingpu District, Shanghai
Party B (Carrier): Tonglu Tongze Logistics Ltd.
Address: 12 Floor, HSBC Tower, Yinchun South Road, Tonglu County, Zhejiang Province
Due to the need for logistics business, Party A and Party B enter into this Road Transportation Agreement (this Agreement), in which Party A pays
the freight and Party B provides parcel transportation services to Party A. In accordance with relevant laws and regulations, Party A and Party B have
sufficiently negotiated the specific matters and voluntarily reached the following Agreement based on equality, reciprocity and integrity. This Agreement is
to be complied by both Parties.
1.
Party B shall provide parcel transportation services on highway line-haul routes based on the needs of Party A.
2.
Period of transportation services: this Agreement is valid for an indefinite term. Subsequent contracts might be entered in case of special business.
3.
Freight and payment method:
4.
(a)
Verification of freight: Party A pays freight based on carload rate (such freight includes pick-up charges, door-to-door delivery charges and
tax fees).
(b)
Party A shall not pay any other charges other than the freight.
(c)
Clearance of freight: the clearance method is based on both Parties fund clearance arrangement and the final clearance amount is subject to
actual carriage amount and EX-warehouse (EXW) weight determined by Party A. Party B shall attach Party As parcel EXW originals or
copies for Party As verification for clearance of freight.
Transportation route, time and relevant rules

(a)
Transportation time:
(b)
Any changes to the line-haul route and time are subject to both Parties negotiation and written supplemental clauses.
(c)
Party B shall have its own loading crews and the parcel shall be loaded by Party Bs loading crews.
(d)
5.
Drivers, loading crews and attendant crews shall be employed and remunerated by Party B. Party A shall not interfere such matter.
In order to guarantee rapid transfer of Party As parcel, Party B shall strictly comply with the following obligations:
(a)
During the transportation, Part B shall completely comply with Party As transportation arrangement and relevant systems. Party B shall
bear any consequences and legal liability arising out of Party Bs non-compliance, and Party A shall have no liability. Party A has the right
to terminate this Agreement without further legal liability in the case that Party B does not comply with Party As management and
arrangement.
(b)
Based on the business needs, Party A can negotiate with Party B to modify the transportation route and time whenever necessary, which
shall be executed by signing supplemental agreements upon consensus of both Parties.
(c)
Party B shall ensure the vehicles are in good conditions, the compartments are properly sealed without leakage and the vehicles are
equipped with fire-fighting equipment. In the event of parcel damage resulting from leakage or fire, Party B shall indemnify at the standard
rate of RMB200 per parcel, and indemnify the actual price for high-end insured parcel (or indemnify by the value of the parcel provided by
arbitration department determined by Party A).
(d)
Party B shall have valid and legal licenses for national road transportation. In the event of loss caused to Party A by delivery delay due to
vehicles detention for the lack of license, Party B shall compensate for any loss to Party A.
(e)
Party B shall arrive at the network partners determined by Party A according to the time and route stipulated in this Agreement, and strictly
comply with the start time and end time. Unless otherwise approved by Party A, in the event of parcel transfer due to Party Bs vehicle
delay, Party B shall pay liquidated damages to Party A at the standard rate of RMB500 per trip on the first working day, RMB1,000 per trip
on the second working day and RMB2,000 per trip on the third working day (based on the time records on the parcel transfer documents)
and such liquidated damages will be deducted from the current months freight. In the special event of changes to route and time and severe
weather (or other force majeure events), Party B shall be in touch with Party A in time and record such special event on the parcel transfer
documents with Party As approval.
(f)
In the event of delay by vehicle malfunction or traffic accidents, Party B shall settle such malfunction or accidents within half an hour. In
the event of vehicle operation failure, Party B shall notify Party A within two hours and shall manage to deliver Party As parcel to the
destination designated by the contract.
(g)
Party B shall provide copies of driver licenses, working licenses, occupation licenses, insurance documents, operation licenses, outsourcing
contracts, tax certificates, business licenses, road transportation permits and business code
2
licenses to Party A, and guarantee the authenticity, completeness, legality and validity of such licenses and materials. Party Bs drivers shall
have at least two years driving experience in large trucks and have relevant licenses. Party B shall bear any consequences and legal liability
arising out of Party Bs non-compliance, and Party A shall have no liability.
(h)
Party B shall bear any consequences and economic punishments arising out of the breach of traffic rules by Party Bs drivers and other staff,
and Party A shall have no liability.
(i)
Party B shall be responsible for driving safety. Party B shall bear any legal liability arising out of severe traffic accidents causing vehicle
damage and personnel casualties, and Party A shall have no liability. Party B shall be responsible for any damages resulting from severe
accidents causing Party As personnel casualties. Party A has the right to indemnify from Party B upon advance payment of damages.
6.
Party B shall purchase sufficient insurance for the transportation vehicles. The coverage of third-party liability insurance shall not be lower than
RMB1 million. In addition to vehicle personnel insurance, Party B shall at least purchase injury insurance for two persons with coverage not lower
than RMB500,000 per person. Party B shall bear any consequence arising out of the non-compliance of insurance purchase, and Party A shall have
no liability.
7.
Any parcel damage resulting from the fault of Party Bs employees shall be compensated by Party B in accordance with Party As relevant rules.
Party B shall be responsible for all of Party As economic loss and relevant liquidated damages arising out of any theft and disposal of stolen goods
conducted by Party Bs personnel. Such payment shall be deducted from the current months freight and be topped up by Party B in case of
inadequacy. The personnel breaching the rules shall be dismissed by Party B.
8.
In the event the vehicle space insufficiency which causes Party As need unable to be satisfied nor can it be adjusted to satisfy Party As need, Party
A can terminate this Agreement without any compensation.
9.
Party A has the right to terminate this Agreement if Party B has breached the above articles in this Agreement. The termination of this Agreement
shall not prejudice Party As right to hold Party B responsible for breach of contract.
10.
Party B shall obtain Party As written consent in the case the early termination of the Agreement. Party B shall pay one-month freight as liquidated
damages in case of termination of the Agreement without consent. Within the contract period, Party B shall not charge the freight difference if Party
A rents same-level vehicles. Party B shall also compensate Party As other losses.
11.
Without Party As approval, Party B shall not transfer the carriage of goods to any third party in the designated route. Otherwise, Party A has the
right to terminate this Agreement directly.
3
12.
Any dispute arising out of the execution of this Agreement, which cannot be negotiated and settled by both Parties, shall be subject to the
jurisdiction of the Peoples Court where this Agreement is signed.
13.
The annex of this Agreement constitutes a part of this Agreement and has the same effect as this Agreement. Any undealt matter can be negotiated
and added by both Parties.
14.
This Agreement takes effect upon the signatures and seals of both Parties in triplicate. Party A shall have two copies and Party B shall have one
copy.
15.
Any different interpretation of this Agreement by both Parties is subject to final interpretation by Party A.
Party A: ZTO Express Co., Ltd.
Party B:Tonglu Tongze Logistics Ltd.
Company seal: /s/ ZTO Express Co., Ltd.
Company seal: /s/ Tonglu Tongze Logistics Ltd.
Date: December 22, 2014
Date: December 22, 2014

4
Exhibit 10.11
Cooperation Agreement
Agreement number:
Party A: ZTO Express Co., Ltd.
Registered address: 1685 Huazhi Road, Huaxin Town, Qingpu District, Shanghai
Postal code:
Business license number:
Courier services business license number:
Legal representative:
Party B:
Registered address:
Postal code:
Business license number:
Courier services business license number:
Responsible person:
E-mail:
This Cooperation Agreement (this Agreement) is entered into by and between the Party A and Party B through friendly negotiations in the principles of free
will, equality, fairness and good faith:
1. Qualifications of Party A
1.1 Party A is a business enterprise that is duly incorporated and has obtained the courier services business license to provide courier services.
1.2 Party A owns the registered trademarks of (registration number: 3179716) and ZTO (registration number: 3514763), the corporate logos of
, ZTO EXPRESS and relevant graphics, and courier services computer information system and other business resources.
1.3 Party A owns at least two directly operated offices within China, each of which has been engaged in courier services for more than one year.
2. Qualifications of Party B
1
2.1 Party B is a business enterprise that is duly incorporated, has obtained the courier services business license to provide courier services, and is entitled to
carry out courier business within the geographic areas provided under Section 3.1.
2.2 Party B is equipped with the premise requisite for provision of courier services, which shall have a construction area of no less than [ ] square meters and
business area of no less than [ ] square meters. Party B shall provide to Party A proof of ownership or lease of such premise.
2.3 Party B shall have at least [ ] employees, each of whom has obtained the national vocational qualification to act as courier service provider.
2.4 Party B shall have at least [ ] telephones and [ ] mobile phones for the provision of courier services, the numbers of which are attached hereto. Any
change of the telephone/mobile phone number shall be immediately filed with Party A.
2.5 Party B shall have a registered capital of no less than RMB500,000.
2.6 Party B owns [ ] motor vehicles for the provision of courier services, the license plate numbers of which are attached hereto.
2.7 Party B owns facilities and equipment that can be connected to Party As computer information system for courier services.
3. Grant of Authority
3.1 During the term of this Agreement, within the geographic area of [ ], Party A grants Party B a general license to use, according to the terms of this
Agreement, the registered trademarks of (registration number: 3179716) and ZTO (registration number: 3514763), corporate logos of ,
and trademarks and corporate logos of ZTO EXPRESS and relevant graphics . Party B may, in the course of its courier services business, use the trademarks
and corporate logos licensed by Party A on employee uniforms, operation premises, courier vehicles, and for advertising, marketing and promotion of courier
services.
3.2 Without the written consent from Party A, Party B may not alter the management content granted by Party A, or expand the scope of the management, or
license any other party to use the trademarks and logos of Party A.
3.3 Upon expiration of this Agreement, Party B shall immediately cease any use of Party As trademarks and logos, and remove such trademarks and logos
from its employee uniforms, business premises or motor vehicles.
4. Term
4.1 The effective term of this Cooperation Agreement shall be from [ ] until [ ].
4.2 Unless otherwise provided herein, this Agreement may not be terminated by any Party unless such Party notifies its intention to terminate this Agreement
in writing to the counter Party with no less than three months in advance, and both Parties reach a mutual consensus for such termination.
2
5. Cooperation Fee
Party B shall pay the cooperation fee to Party A after the date on which this Agreement becomes effective according to following item [ ]:
(1) pay one lump-sum cooperation fee in the amount of RMB[ ] within [ ] days after the date hereof;
(2) pay cooperation fee in the amount of RMB[ ] on the [ ] day of each month during the term of this Agreement; and
(3) pay cooperation fee in the amount of RMB[ ] for each delivery made by it, which payment shall be settled on an annual basis.
The cooperation fee may not be returned after Party B commences use of Party Bs resources in the course of its business operations .
6. Performance Bond
6.1 Within three days after the date hereof, Party B shall pay a performance bond in the amount of RMB[ ] to Party A.
6.2 Party B shall pay the performance bond to the following account:
Bank name:
Name of beneficiary:
Account number:
6.3 Use of performance bond (and its procedures):
Upon occurrence of any of the following events, Party A shall have the right to deduct the corresponding amount from the performance bond as damages
payable from Party B:
(1) Any delay, loss or damage of the delivery caused by Party B;
(2) Any customer complaint caused by Party B;
(3) Party Bs breach of Party As guidelines regarding service quality, operations, settlement system and other normative documents;
(4) Any loss incurred by Party A due to actions of Party B; or
(5) Any other breach of this Agreement or any system of Party A by Party B.
Party B shall be liable for any actual loss incurred by Party A due to any of the above event.
6.4 Upon expiration or termination of this Agreement, the performance bond shall be returned to Party B without interest after due settlement of all accounts
between Party A and Party B.
7. Obligations of Party A
7.1 Party A shall provide to Party B the following products and services:
(1) an electronic file or software of the complete enterprise identification and management system;
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(2) a unified business model, courier network usage guide and employee training;
(3) sufficient, continued and quality supply of materials;
(4) a unified image standard template;
(5) an integrated advertising and promotion support; and
(6) remote transport and transit services of deliveries.
7.2 Upon execution of this Agreement, Party A has provided to Party B relevant information of the system such as the business model, management system,
premise decoration, employee dress code and network connection, including the ZTO Express Manual. Such information shall form as an exhibit to this
Agreement and have a binding effect upon both Parties. Party B confirms that it has fully read and understood the ZTO Express Manual and relevant
documents, and agrees to be bound thereby, including any amendment and supplement adopted by Party A from time to time.
7.3 Upon execution of this Agreement, Party A has provided sufficient training and written information to Party B regarding the management matter of this
Agreement. Party A may organize relevant trainings for Party B from time to time based on actual business operations, market conditions and legal or
regulatory changes.
7.4 Party A shall promptly disclose any material change of management authority, any litigation or arbitration in which Party A is involved, or any other
information which may have a material effect on Party B.
8. Obligations of Party B
8.1 Party B shall be responsible for its own operations, independent accounting, profit and loss, assume independent legal liabilities, and shall have no
agency or affiliate relationship with Party A. Party B shall properly identify itself in its business operations as its own legal entity and may not do so in the
name of Party A, and shall not advertise itself in a manner which would cause confusion to the customers.
Party B shall be solely responsible for any economic loss or legal lability arising from its courier business operations. Any dispute with a third party shall be
duly handled by Party B. If Party B fails to do so and the dispute gives rise to any claim from any third party, Party B shall be liable for all expenses and
losses incurred by Party A, including without limitation any penalty, damages, travel or legal expenses.
8.2 Party B shall conduct business operations in accordance with the fee standards and business model provided by Party A, and settle accounts and
payments with Party A and any other network partners of Party A based on the fee standards and other relevant regulations of Party A.
8.3 Party B shall use the schedule form and envelop provided by the vendor appointed by Party A in connection with its delivery, and may not use any
material from any other source without consent of Party A.
8.4 Upon knowledge of the occurrence of any of the following events, Party B shall report to Party A in writing within three business days:
4
(1) a change to any shareholder, legal representative, principal management, registered capital, business premise of Party B and other material events;
(2) actual or potential material liability dispute which may have a material effect on the business operations;
(3) Party B is under government investigation or penalty, which could lead to revocation or suspension of its business license:
(4) actual or potential bankruptcy, dissolution or liquidation; or
(5) any other material occurrence which could affect Party Bs business capacity or ability to perform this Agreement.
8.5 During the term of this Agreement and the two years thereafter, Party B and its employees shall maintain confidence of all information of Party A in its
possession, including without limitation its pricing plan and client information, and they may not disclose, use or permit use of such information by any third
party without consent of Party A.
8.6 During the term of this Agreement, without consent from Party A, Party B may not conduct courier services under any brand other than that of Party A,
and may not conduct courier services under the brand of Party A for any other party.
8.7 Party Bs collection, transportation and delivery in connection with its couriers services shall comply with the standards of Party A. Party B shall accept
guidance, supervision and inspection of its services by Party A, and correct any breach of such standards.
8.8 Party B shall maintain detail bills and other original information relating to its delivery for the time and in the form requested by Party A, and submit
financial, business, delivery information statistics and other reports to Party A on a periodic basis.
8.9 Without written consent of Party A, Party B may not transfer any or all of its rights and obligations under this Agreement to any third party, or transfer the
entity to any third party for operation or control by way of change of shareholder, change of responsible person, investment or dividend distribution method.
If Party B is required to transfer its rights and obligations under this Agreement to any third party, Article 10 of this Agreement shall apply.
8.10 Party Bs collection and delivery in connection with its courier services shall comply with relevant laws and regulations as well as rules of Party A,
specifically:
(1) advise clients to read the terms at the back of the waybill and instruct clients to fill in requisite waybill information as requested; with respect to the use of
electronic waybill, advise clients to read the relevant terms published on the website of Party A, or enter into a written contract agreeing on the terms of rights
and obligations client.
(2) inspect packages under delivery in accordance with the ZTO Express Manual and other relevant regulations, and reject collection of packages that are
forbidden and restricted to deliver, inappropriate to deliver or exceedingly high-valued items that are uninsured.
(3) confirm identification of the recipient of packages at delivery, with respect to
5
authorized recipients, confirm identification of the authorized recipient by way of telephone or other communication methods with the recipient.
8.11 Party B shall comply with the regulations of Party A regarding delay, management of loss and penalties, and shall be subject to arbitration or penalty for
any delay, damage, theft, robbery, unauthorized detainment, seizure, loss or destruction unless there is evidence showing otherwise.
8.12 Party B shall follow in strict accordance the operating guidelines on information input and management of Party A, achieve scanning of arrival and
delivery packages and uploading of signed packages. Party B may not falsify or amend any relevant information, and shall ensure a smooth execution of
package tracking and management work.
8.13 Party B shall enter into employment agreement with and provide social insurances for its employees in accordance with the Labor Law, Labor Contract
Law and other relevant laws and regulations. Any employee of Party B, whether or not having entered into a labor contract, shall have no labor or
employment relationship with Party A. If an employee of Party B asserts claim for compensation from Party A citing reason of labor conflict with Party A
(including without limitation workers compensation), Party B shall duly handle such claim. Any payment of fees by Party A arising out of such event shall be
wholly reimbursed by Party B.
8.14 If Party B or its insurer is liable for any damages to any third party which liability is caused by Party A or any of its subsidiaries or affiliates, Party B shall
follow procedures of Party A for internal claim of reimbursement of such damages, and may not make such claim against such third party or transfer such
claim to any other party.
8.15 Party B shall duly and timely handle complaints from clients, and promptly take remedial measures if the rights of the consumers are harmed. In respect
of any complaint from clients or negative publicity online, in the media or through other means due to reason of Party B, Party A shall have the right to
request payment of damages from Party B.
8.16 Party B shall promptly report any incident which is or could be detrimental to the reputation or brand of Party A upon knowledge, and act in accordance
with relevant regulations or rules of Party A on media handling.
9 Advertising and Promotion
9.1 In Party As advertising and promotion of its brand, Party A may charge an advertising fee from Party B, the details of which is subject to separate
negotiations of the Parties.
9.2 Party B may conduct advertising or promotion in connection with its courier services, which shall be subject to consent of Party A if it relates to the
intellectual property, business vision, or trade secret of Party A in order to be published.
10. Contract Amendment and Termination
10.1 If both Parties agree, the terms of this Agreement may be amended in writing.
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10.2 Without consent from Party A, Party B may not terminate this Agreement, cease business operations or cease performance of its obligations hereunder,
otherwise Party A shall have the right to hold Party B liable for damages equal to RMB300,000.
10.3 Party B may apply to terminate this Agreement with Party A in writing three months in advance, and Party A may waive the liability of Party B to
unilaterally terminate this Agreement in writing provided that Party B has completed its business transition work with its subsequent new ZTO Express
network partner in the designated area.
10.3 Subject to the application in writing thirty days in advance to and receipt of consent from Party A in writing, Party B may transfer its rights and
obligations under this Agreement in entirety to any third party in the following procedures:
(1) Party B submits transfer application to the network management department of Party A along with relevant transfer information, such as the time and price
of the transfer;
(2) Party A will review the qualifications and abilities of the transferee before deciding whether to permit such transfer;
(3) Subject to permission of Party A, Party B will enter into a transfer agreement with the transferee, such agreement shall be provided to Party A for record;
(4) Party B shall pay a transfer management fee in the amount of 10% of the transfer price to Party A, provided that the transfer management fee shall be no
less than the price set by Party A based on the market conditions in the specific area; and
(5) Party B and Party A shall complete the procedures to terminate this Agreement while the transferee and Party A shall enter into a cooperation agreement.
Any dispute arising out of the transfer transaction between Party B and the transferee shall not involve Party A, and any expenses incurred therewith by Party
A, including without limitation damages, penalties, legal and travel expenses, shall be borne by Party B.
10.4 Party B shall have the right to terminate this Agreement within seven days after its execution hereof by notice to Party A; however, Party B may not
terminate this Agreement if it has begun to use the resources of Party A to provide services to clients or exercise its principal rights under this Agreement.
10.5 Party B shall have the right to terminate this Agreement with notice to Party A in writing if Party B is unable to continue courier services due to issues of
Party As operating system.
10.6 Party A shall have the right to terminate this Agreement with notice to Party B in writing if Party B fails to achieve the level of service quality required
by Party A and such failure continues 15 days after it is advised to make improvement or such failure has affected the corporate image of Party A.
10.7 Party A may terminate this Agreement immediately without prior notice to Party B in the occurrence of any of the following events:
(1) Party B fails to achieve the business volume required by Party A or the average market share rate;
(2) Party B has been ranked among the last ten for its loss rate, delay rate, complaint
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rate or any one indicator of service quality for three consecutive months or an aggregate of six months;
(3) Party B has evaded taxes or other expenses payable to Party A amounting to more than RMB20,000 by way of concealing, misrepresenting, falsifying or
other improper means;
(4) occurrence of a material operational or safety incident of Party B;
(5) Party B is in violation of any criminal law which has constituted a criminal offense;
(6) any other occurrence under which the poorly managed operations or misconduct of Party B could have an effect on the ordinary business operations of
Party A or other network partners; or
(7) Party B is overdue to pay any fees to Party A or fails to perform any of its obligations under this Agreement and such overdue payment or failure is not
corrected within seven days after notice from Party A.
Any review mentioned above shall be conducted on monthly basis, and the contents and details of such review shall be separately provided by Party A.
If Party A terminates this Agreement under this Article 10, Party B may be provided with economic compensation based on the average number of deliveries
in the past three months provided that Party B is cooperative in connection with such termination and transition. Party A or any third party designated by it
may purchase at discount the assets purchased by Party B for operation of courier services. The economic compensation, assets purchase price and other
relevant terms shall be separated provided by Party A.
10.8 Upon termination of this Agreement, Party B shall take appropriate measures to deal with employee relocation and transition of business operations. If
there is any dispute involving any of its employees or clients which may have effect on the interest of the new network partner, Party B shall take appropriate
measures to deal with it. If Party B fails to do so, Party A shall have the right to deal with such matter on behalf of Party B at the expense of Party B,
including without limitation any indemnity or legal fees. Any amount payable from Party A to Party B may be delayed until such matter is resolved or
alternatively used to pay any expense incurred in connection with resolving such matter.
11. Breach Liability
11.1 Party A shall have the right to hold Party B liable for liquidated damages equal to RMB200,000 if Party B is found:
(1) to have conducted courier services beyond the geographic area provided in this Agreement;
(2) to have increased or reduced its fee standards without authorization;
(3) to have disclosed, used or permitted others to use any trade secret of Party A;
(4) to have transferred the entity in whole or in part to any third party:
(5) to conduct courier services under any brand other than that of Party A or to
8
conduct courier services under Party As brand for any other party; or
(6) to have failed in its notice or disclosure obligation in Section 8.4.
11.2 Party A shall have the right to hold Party B liable for liquidated damages equal to RMB500,000 if Party B is found:
(1) to have concealed, opened, seized or destroyed any courier package;
(2) to have caused backlog of delivery thus affecting the timeliness of transit and delivery due to mismanagement;
(3) to have failed to appropriately deal with complaints or claims from clients which led to any report or information online or in the newspaper or through
other means which has been detrimental to the reputation of Party A; or
(4) to have had any other conduct which has a material harm to the brand or reputation of Party A.
11.3 If Party A fails to make disclosure to Party B or perform any of its obligations under this Agreement, it shall indemnify any loss actually incurred by
Party B.
11.4 Any overdue payment, including business settlement amounts and indemnities, shall be subject to a late penalty fee equal to 0.01% of the overdue
amount for each day that it is outstanding.
11.5 Party A may deduct any damages, penalties, indemnities or compensations due from Party B from the performance bond or any amount due to Party B
with prompt notice to Party B. If Party B objects to it, it shall present its objection in writing within three business days upon receipt of such notice,
otherwise it is deemed to have consented to such deduction.
11.6 Party B shall make up any difference of the performance bond within two business days upon receipt of notice from Party A for deduction of
performance bond. If it fails to do so, Party A may deduct an amount equal to such difference from the business settlement amount due to Party B.
12. Notice
It is agreed that in addition to the addresses set forth on the first page of this Agreement, any announcement or notice addressed to Party B by Party A on its
official website, internal office system and internal communication software shall be deemed duly given.
13. Guaranty
The responsible person of Party B set forth on the first page of this Agreement understands and agrees that it shall provide guaranty for any liability of Party
B under this Agreement, which guaranty shall become effective upon execution of this Agreement by Party B.
14. Dispute Resolution
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Any dispute arising from this Agreement shall be resolved through negotiations or submitted to competent agency or association for mediation or, if
negotiations or mediation fail, to the peoples court with jurisdiction for litigation.
15. Miscellaneous
This Agreement is executed in three originals, of which two for Party A and one for Party B. Each original has the same effect.
(Signature page only)
Party A:
Party B:
Authorized agent:
Authorized agent:
Date:
Date:
Venue of execution:
10
Exhibit 10.12
SHARE PURCHASE AND SUBSCRIPTION AGREEMENT
dated as of
May 21, 2015
among
ZTO EXPRESS LIMITED
ZTO EXPRESS (HONG KONG) LIMITED
DONGGUAN JINSHENG INDUSTRIAL CO., LTD.
JIAXING ZHONGTONGJI LOGISTICS CO., LTD.
NANJING HUIJITONG LOGISTICS CO., LTD.
TAIZHOU ZHONGRUI LOGISTICS CO., LTD.
ZHEJIANG LITONG LOGISTICS CO., LTD.
ZHONG TONG JI AIR LOGISTICS CO., LTD.
PARTIES LISTED ON SCHEDULE I
PARTIES LISTED ON SCHEDULE II
and
PARTIES LISTED ON SCHEDULE III
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS
Section 1.01.
Section 1.02.
Definitions
Other Definitional and Interpretative Provisions
2
12
ARTICLE 2
Purchase and Sale
Section 2.01.
Section 2.02.
Section 2.03.
Section 2.04.
Purchase and Sale

Closings
Adjustment
Use of Proceeds
13
14
16
17
ARTICLE 3
Representations and Warranties of Warrantors
Section 3.01.
Corporate Existence and Power of Group Companies
17
Section 3.02.
Section 3.03.
Section 3.04.
Section 3.05.
Section 3.06.
Section 3.07.
Section 3.08.
Section 3.09.
Section 3.10.
Section 3.11.
Section 3.12.
Section 3.13.
Corporate Authorization
Governmental Authorization and Consents
Noncontravention
Capitalization
Valid Issue of Shares
Financial Statements
Absence of Certain Changes
No Undisclosed Material Liabilities
Related Party Transactions
Material Contracts
Litigation
Compliance with Laws
18
18
18
18
19
19
19
20
20
21
22
22
Section 3.14.
Section 3.15.
Section 3.16.
Section 3.17.
Section 3.18.
Section 3.19.
Section 3.20.
Section 3.21.
Section 3.22.
Section 3.23.
Section 3.24.
Section 3.25.
Section 3.26.
Section 3.27.
Properties
Intellectual Property
Insurance Coverage
Permits
Receivables
Employees and Labor Matters
Environmental Matters
Taxes
Anti-bribery, Anti-Corruption, Anti-Money Laundering and Sanctions
Internal Controls
Personal Data
Financial Performance of Target Franchisees
Target Franchisees
Finders Fee
22
23
25
25
26
26
26
27
27
28
29
29
29
29
ii
ARTICLE 4
Representations and Warranties of Sellers
Section 4.01.
Section 4.02.
Section 4.03.
Section 4.04.
Section 4.05.
Section 4.06.
Section 4.07.
Corporate Existence and Power

Authorization
Governmental Authorization and Consents
Noncontravention
Ownership of Shares
Finders Fee
Sanctions
30
30
30
30
30
30
30
ARTICLE 5
Representations and Warranties of Investors
Section 5.01.
Section 5.02.
Section 5.03.
Section 5.04.
Section 5.05.
Corporate Existence and Power

Corporate Authorization
Governmental Authorization
Financing
Purchase for Investment
31
31
31
31
31
ARTICLE 6
Interim Period Covenants
Section 6.01.
Section 6.02.
Section 6.03.
Section 6.04.
Section 6.05.
Section 6.06.
Section 6.07.
Section 6.08.
Access to Information
Conduct of the Group
Notices of Certain Events
Filing of Memorandum and Articles
Circular 37 Registration
Exclusivity
Onshore Investment
Further Assurances
32
32
34
35
35
35
35
36
ARTICLE 7
Post-Closing Covenants and Other Agreements
Section 7.01.
Section 7.02.
Section 7.03.
Section 7.04.
Section 7.05.
Section 7.06.
Section 7.07.
Section 7.08.
Section 7.09.
Section 7.10.
Section 7.11.
Section 7.12.
Confidentiality
Public Announcements
Noncompetition
Non-Solicitation
Plan of Compliance and Risk Control
Financial Statements
Related Party Transaction
Compliance with Laws by First-Tier Franchisees
Consummation of Post-Reorganization Matters
Sole Listed Company
Specified Matters
Chief Compliance Officer
36
37
37
38
38
38
38
38
39
39
39
39
iii
ARTICLE 8
Conditions to Closings
Section 8.01.
Section 8.02.
Section 8.03.
Section 8.04.
Section 8.05.
Conditions to Obligations of Investors for Each Closing

Additional Conditions of Obligations of Investors for First Closing
Additional Conditions of Obligations of Investors for Second Closing
Conditions to Obligation of Company and Sellers for Each Closing
Additional Conditions to Obligation of Company and Sellers for First Closing
39
40
42
43
43
ARTICLE 9
Survival; Indemnification
Section 9.01.
Section 9.02.
Section 9.03.
Section 9.04.
Section 9.05.
Section 9.06.
Survival
Indemnification by Warrantors
Indemnification by Other Shareholders
Penalty for Late Payment by Investors
Third Party Claim Procedures
Direct Claim Procedures
43
43
45
45
46
47
ARTICLE 10
Termination
Section 10.01.
Section 10.02.
Grounds for Termination

Effect of Termination
47
48
ARTICLE 11
Miscellaneous
Section 11.01.
Section 11.02.
Section 11.03.
Section 11.04.
Section 11.05.
Section 11.06.
Section 11.07.
Section 11.08.
Section 11.09.
Section 11.10.
Section 11.11.
Section 11.12.
SCHEDULE I:
SCHEDULE II:
SCHEDULE III:
SCHEDULE IV:
SCHEDULE V:
SCHEDULE VI:
Notices
Amendments and Waivers
Disclosure Schedule References
Expenses
Successors and Assigns
Governing Law
Dispute Resolution
Counterparts; Effectiveness; Third Party Beneficiaries
Entire Agreement
Severability
Specific Performance
Independent Nature of Investors Obligations and Rights
48
48
49
49
49
49
49
50
50
51
51
51
LIST OF PRINCIPALS
LIST OF INVESTORS
CAPITALIZATION TABLE OF THE COMPANY
TERRITORIES OF TARGET FRANCHISEES
LIST OF CONTRACTS
iv
SCHEDULE VII:
SCHEDULE VIII:
SCHEDULE IX:
SCHEDULE X:
SCHEDULE XI:
SCHEDULE XII:
SCHEDULE XIII:
SCHEDULE XIV:
EXHIBIT A:
EXHIBIT B:
EXHIBIT C:
EXHIBIT D:
EXHIBIT E:
EXHIBIT F:
EXHIBIT G:
EXHIBIT H:
LIST OF ZTO TRADEMARKS

ADDRESS FOR NOTICES
SPECIFIED MATTERS
LIST OF COMPETITORS
SPECIFIC ARRANGEMENTS ON ONSHORE INVESTMENT
LIST OF KEY MANAGEMENT PERSONNEL
KEY TERMS OF THE EXCLUDED ISSUANCE
REORGANIZATION PLAN
FORM OF AMENDED AND RESTATED MEMORANDUM AND ARTICLES
FORM OF SHAREHOLDERS AGREEMENT
TRADEMARK LICENSE AGREEMENT
TRADEMARK TRANSFER AGREEMENT
FORMS OF PRC AND CAYMAN LEGAL OPINIONS
FORM OF INDEMNIFICATION AGREEMENT
v
SHARE PURCHASE AND SUBSCRIPTION AGREEMENT
THIS SHARE PURCHASE AND SUBSCRIPTION AGREEMENT (this Agreement) dated as of May 21, 2015 among:
(a)
ZTO Express (Cayman) Inc., a company limited by shares incorporated and existing under the laws of Cayman Islands (the Company);
(b)
ZTO Express Limited, a company limited by shares incorporated and existing under the laws of British Virgin Islands and a wholly-owned
Subsidiary of the Company (the BVI Holding Company);
(c)
ZTO Express (Hong Kong) Limited, a limited company incorporated and existing under the laws of Hong Kong (as defined below) and a
wholly-owned Subsidiary of the BVI Holding Company (the HK Holding Company);
(d)
ZTO Express Co., Ltd. (), a company limited by shares incorporated and existing under the laws of the PRC (the
Domestic Company);
(e)
Dongguan Jinsheng Industrial Co., Ltd. (), a limited liability company incorporated and existing under the laws
of the PRC;
(f)
Jiaxing Zhongtongji Logistics Co., Ltd. (), a limited liability company incorporated and existing under the laws
of the PRC;
(g)
Nanjing Huijitong Logistics Co., Ltd. (), a limited liability company incorporated and existing under the laws of
the PRC;
(h)
Taizhou Zhongrui Logistics Co., Ltd. (), a limited liability company incorporated and existing under the laws of the
PRC;
(i)
Zhejiang Litong Logistics Co., Ltd. (), a limited liability company incorporated and existing under the laws of the
PRC;
(j)
Zhong Tong Ji Air Logistics Co., Ltd. (), a limited liability company incorporated and existing under the laws of
the PRC;
(k)
Each Person (as defined below) listed on Schedule I (each, a Principal);
(l)
Each Person listed on Schedule II (each, a Other Shareholder); and
(m)
Each Person listed on Schedule III (each, a Investor).

1
WHEREAS, the Domestic Company, WP and other parties listed thereto entered into the Investment Framework Agreement () on
February 16, 2015 in connection with the potential investment in the Company by WP;
WHEREAS, the Domestic Company, Hillhouse and other parties listed thereto entered into the Investment Framework Agreement (
) on March 11, 2015 in connection with the potential investment in the Company by Hillhouse;
WHEREAS, the Domestic Company, SC and other parties listed thereto entered into the Investment Framework Agreement () on
February 25, 2015 in connection with the potential investment in the Company by SC;
WHEREAS, each Seller is the record and beneficial owner of the Sale Shares (as defined below) set forth opposite its or his name on Schedule I or
Schedule II (as applicable), and desires to sell certain number of the Sale Shares held by it or him to the applicable Investors, and such applicable Investors
desire to purchase such Sale Shares from such Seller, upon the terms and conditions set forth herein; and
WHEREAS, subject to the terms and conditions set forth herein, the Company desires to issue and allot to the Investors, and the Investors desire to
subscribe for, certain Series A Preferred Shares (as defined below);
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01.
Definitions. (a)The following terms, as used herein, have the following meanings:
Accounting Standards means, as applicable, (i) the international financial reporting standards promulgated from time to time by the International
Accounting Standards Board (including standards and interpretations approved thereby), together with the pronouncements thereon by the International
Accounting Standards Board from time to time, (ii) the generally accepted accounting principles in the United States of America or (iii) any other accounting
standards agreed by the Investors Holding a Majority in Interest.
Affiliate means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such
Person. With respect to an Investor, the term Affiliate also includes (i) any shareholder of such Person, (ii) such Persons or its shareholders general
partners or limited partners, and (iii) the fund manager managing such Person or its shareholder (and general partners, limited partners and officers thereof)
and other funds managed by such fund manager (for the
2
avoidance of doubt, excluding their respective Portfolio Companies). With respect to any natural Person, each of the following Persons is such Persons
Affiliate for purposes of this Agreement and the other Transaction Documents: (i) spouse; (ii) parents; (iii) children; (iv) siblings; (v) any other Person who is
a lineal ascendant or descendant of such Person; and (vi) any other Person who is a relative of such Person and lives in the same house with such Person.
Agent means, with respect to any Person that is an entity, any director, officer, employee, representative, Subsidiaries, franchisees or any person
who performs or has performed services for or on behalf of such Person.
AIC means the State Administration of Industry and Commerce of the PRC and its local counterpart or, with respect to the issuance of any
business license or filing or registration to be effected by or with the State Administration of Industry and Commerce and its local counterpart, any
Governmental Authority having authority to issue such business license or accept such filing or registration under the laws of the PRC.
Ancillary Agreements means, collectively, the Trademark License Agreement, the Trademark Transfer Agreement and the Indemnification
Agreement.
Anti-Bribery Law means (i) the Foreign Corrupt Practices Act of 1977 of the United States of America, as amended, (ii) the UK Bribery Act 2010,
as amended, (iii) the relevant provisions of the Criminal Law of the PRC (including Articles 93, 163, 164, 389, 390, 391, 392 and 393), (iv) the relevant
provisions of the PRC Anti-Unfair Competition Law (including Articles 8 and 10), (v) the Interim Provisions Prohibiting Commercial Bribery Conducts
issued by the State AIC and (vi) any other applicable laws, rules and regulations relating to commercial bribery, anti-corruption or related matters, in each
case as amended and supplemented from time to time.
Applicable Law means, with respect to any Person, any transnational, domestic or foreign federal, state or local law (statutory, common or
otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted,
adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person, as amended.
Balance Sheet means the unaudited combined balance sheet of the Domestic Company as of March 31, 2015.
Balance Sheet Date means March 31, 2015.
Big 4 Accounting Firm shall mean any of Deloitte, Ernst & Young, KPMG or PricewaterhouseCoopers.
Business Day means a day, other than Saturday, Sunday or other day on which commercial banks in New York, Hong Kong or the PRC are
authorized or required by Applicable Law to close.
3
Captive Structure means the structure under which the WFOE Controls the Domestic Company through the Control Documents.
Charter Documents means, with respect to a particular legal entity, the articles of incorporation, certificate of incorporation, formation or
registration (including, if applicable, certificates of change of name), memorandum of association, articles of association, bylaws, articles of organization,
limited liability company agreement, trust deed, trust instrument, operating agreement, joint venture agreement, business license, or similar or other
constitutive, governing, or charter documents, or equivalent documents, of such entity.
Chief Compliance Officer means the chief compliance officer of the Company.
Circular 7 means the Notice on Relevant Issues on Corporate Income Tax from Indirect Transfer by Non-PRC Residents (
) issued by the State Administration of Taxation on February 3, 2015.
Circular 37 means the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents to Engage in Overseas
Financing and Round Trip Investment via Overseas Special Purpose Companies (
) issued by SAFE on July 14, 2014.
Circular 698 means the Notice of the Ministry of Finance and the State Administration of Taxation Regarding Several Issues on Corporate
Income Tax Treatment for Corporate Reorganization () issued on April 30,
2009.
Closing Date means the date of each Closing.
Competitor means any Person listed on Schedule X.
Consent means any consent, approval, authorization, release, waiver, permit, grant, agreement, license, exemption or order of, registration,
certificate, declaration or filing with, or report or notice to, any Person, including any Governmental Authority.
Contract means a contract, agreement, indenture, note, bond, loan, instrument, lease, mortgage, franchise, license, commitment, purchase order,
and other legally binding arrangement, whether written or oral.
Control of a given Person means the power or authority, whether exercised or not, to direct the business, management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by Contract or otherwise; provided, that such power or authority shall conclusively
be presumed to exist upon possession of beneficial ownership or power to direct the vote of fifty percent (50%) or more of the votes entitled to be cast at a
meeting of the members or shareholders of such Person or power to control the composition of a majority of the board of directors of such Person. The terms
Controlled and Controlling have meanings correlative to the foregoing.
4
Control Documents means any Contract to be entered into between the WFOE, on one hand, and the Domestic Company and/or its shareholders,
on the other hand, for the purpose of consolidating the financial statements of the Domestic Company and its Subsidiaries by the Company in accordance
with the Accounting Standards.
Deloitte means Deloitte Touche Tohmatsu Limited or its Affiliates.
Equity Securities means, with respect to any Person that is a legal entity, any and all shares of capital stock, membership interests, units, profits
interests, ownership interests, equity interests, registered capital and other equity securities of such Person, and any right, warrant, option, call, commitment,
conversion privilege, preemptive right or other right to acquire any of the foregoing, or security convertible into, exchangeable or exercisable for any of the
foregoing.
Excluded Issuancemeans the proposed issuance of 16,800,000 shares of Ordinary Shares in total to (i) the directors, officers, employees and
franchisees pursuant an equity incentive plan or a similar plan to be adopted by the Company after the date hereof and (ii) to the Target Franchisees in
connection with the acquisition of them, with the key terms of such proposed issuance attached hereto as Schedule XIV.
First Closing Date means the date of the First Closing.
First-Tier Franchisee means any franchisee directly transacting business with any Group Company.
Fundamental Representation means the Warrantors representations contained in Sections3 .02 (Corporate Authorization), 3 .04
(Noncontravention), 3 .05 (Capitalization)(a) and 3 .06 (Valid Issue of Shares), and the Sellers representations contained in Sections 4 .01 (Corporate
Existence and Power), 4 .02 (Authorization), 4 .04 (Noncontravention) and 4 .05 (Ownership of Shares).
Group means, collectively, the Group Companies.
Group Company means each of the Company, the BVI Holding Company, the HK Holding Company and the Domestic Company, together with
each of their respective Subsidiaries.
Gopher means Gopher China S.O. Project Limited, a company established and existing under the laws of the British Virgin Islands.
Governmental Authority means (i) any national, federal, state, county, municipal, local or foreign government or other political subdivision or
instrumentality thereof, (ii) any entity, authority or body exercising executive, legislative, judicial, regulatory, taxing or administrative functions of or
pertaining to government, (iii) any agency, division, bureau, department, or other political subdivision of any government, entity, authority or body
described in the foregoing clauses (i) and (ii) of this definition, (iv) any court, tribunal or arbitrator, or (v) any self-regulatory organization. A Government
Authority also includes public international organizations, i.e. organizations whose
5
members are countries, or territories, governments of countries or territories, other public international organizations or any mixture of the foregoing.
Hillhouse means Hillhouse ZT Holdings Limited.
Hong Kong means the Hong Kong Special Administrative Region of the PRC.
Indemnification Agreement means the indemnification agreement in the form attached hereto as Exhibit H.
Intellectual Property Rights means (i) inventions, whether or not patentable, reduced to practice or made the subject of one or more pending
patent applications, (ii) national and multinational statutory invention registrations, patents and patent applications (including all reissues, divisions,
continuations, continuations-in-part, extensions and reexaminations thereof) registered or applied for in the PRC and all other nations throughout the world,
all improvements to the inventions disclosed in each such registration, patent or patent application, (iii) trademarks, service marks, trade dress, logos, domain
names, trade names and corporate names (whether or not registered) in the PRC and all other nations throughout the world, including all variations,
derivations, combinations, registrations and applications for registration of the foregoing, (iv) copyrights (whether or not registered) and registrations and
applications for registration thereof in the PRC and all other nations throughout the world, including all derivative works, moral rights, renewals, extensions,
reversions or restorations associated with such copyrights, now or hereafter provided by law, regardless of the medium of fixation or means of expression,
(v) computer software (including source code, object code, firmware, operating systems and specifications), (vi) trade secrets and, whether or not confidential,
business information (including pricing and cost information, business and marketing plans and customer and supplier lists) and know-how (including
manufacturing and production processes and techniques and research and development information), (vii) industrial designs (whether or not registered),
(viii) databases and data collections, (ix) copies and tangible embodiments of any of the foregoing, in whatever form or medium, (x) all rights to obtain and
rights to apply for patents, and to register trademarks and copyrights, and (xi) all rights in all of the foregoing provided by treaties, conventions and common
law.
Internal Control Plan means a plan of internal policies and procedures to manage and strengthen the Companys practices in connection with
accounts management, book keeping and expense approvals, prepared in consultation with a Big 4 Accounting Firm.
Investors Holding a Majority in Interest means, collectively, the Investors that subscribe for a majority of the Subscription Shares pursuant to
this Agreement.
Key Employee means any employee of the Domestic Company with the title of vice president or higher and any employee of each Group
Company that is directly managed by the Domestic Company with the title of general manager or higher.
6
Knowledge means, (i) with respect to the Group or any Group Company, the actual knowledge of the individuals listed in Schedule XIII after
reasonable inquiry; (ii) with respect to any other Person that is not an individual, the actual knowledge of such Persons officers after reasonable inquiry, and
(iii) with respect to any natural Person, such Persons actual knowledge after reasonable inquiry.
Licensed Intellectual Property Rights means all Intellectual Property Rights owned by a third party and licensed or sublicensed to any Group
Company.
Lien means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest or other encumbrance in respect of such
property or asset. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or
asset.
Material Adverse Effect means any event, occurrence, fact, condition, change or development that has had, has, or could reasonably be expected
to have, individually or together with other events, occurrences, facts, conditions, changes or developments, a material adverse effect on (i) the business,
properties, results of operations, condition (financial or otherwise), assets or liabilities of the Group, taken as a whole, (ii) the ability of any party (other than
the Investors) to perform the obligations of such party under any Transaction Documents; or (iii) material and irreparable impairment of the completion of a
Qualified IPO or the delay of the completion of a Qualified IPO in accordance with the schedule as agreed by the Company and the Investors Holding a
Majority in Interest that is incapable of being cured within the relevant period for the Qualified IPO, excluding any effect resulting from (A) changes in
political conditions in the PRC not having a disproportionate effect on the Group, taken as a whole; (B) changes in any Applicable Law (or interpretation
thereof) generally affecting the industry in which the Group operates and not specifically relating to or having a disproportionate effect on the Group, taken
as a whole, (C) changes in the Accounting Standards or the PRC GAAP, (D) any act of terrorism, war, military action, act of God, natural disaster or similar
calamity involving the PRC not having a disproportionate effect on the Group, taken as a whole, or (E) any action, omission, change, effect, circumstance or
condition attributable to or contemplated by the execution, delivery or performance of the Transaction Documents or transactions contemplated thereby.
Memorandum and Articles means the amended and restated memorandum of association of the Company and the amended and restated articles
of association of the Company in the form attached hereto as Exhibit C.
Ordinary Share means the ordinary share, par value $0.0001 per share of the Company.
Owned Intellectual Property Rights means all Intellectual Property Rights owned by any Group Company.
7
Permit means, with respect to any Person, any license, permit, certificate, approval or other similar authorization affecting, or relating in any way
to, the assets or business of such Person, including those relating to environmental or labor matters.
Person means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a
Governmental Authority.
Personal Data means any and all personal, private or confidential information of the end customers that each Group Company has collected,
gathered or accessed, or has the right to collect, gather or access, in the conduct of the business.
Portfolio Companies means, with respect to the Investors, any company in which such Person or its Affiliates have invested as part of their
respective ordinary course of private equity investment business.
Post-Reorganization Matters means all transactions set forth under Post-Restructuring Matters () of the Reorganization Plan.
PRC means the Peoples Republic of China, but solely for the purposes of this Agreement and the other Transaction Documents, excluding Hong
Kong, the Macau Special Administrative Region and Taiwan.
PRC GAAP means the generally accepted accounting principles in the PRC.
Public Official means any executive, official, officer (regardless of rank) or employee of a Governmental Authority or political party, political
candidate; executive, employee or officer of a public international organization; or director, officer or employee or agent of a wholly or partially state-owned
or controlled enterprise, including a PRC state-owned or controlled enterprise. Officers, employees (regardless of rank) or persons acting on behalf of an
entity that is financed in large measure through public appropriations, is widely perceived to be performing government functions, provides services to all
inhabitants of a jurisdiction, or has its key officers and directors appointed by a government should also be considered Public Official.
Qualified IPO means a firm underwritten initial public offering of the Ordinary Shares and the listing of such shares for trading on the New York
Stock Exchange, NASDAQ Global Market, Main Board of the Hong Kong Stock Exchange or any other stock exchange as approved by the Investors Holding
a Majority in Interest.
Related Party means, with respect to a Person, (i) any Affiliate of such Person, (ii) any Person 20% or more of whose outstanding voting securities
are directly or indirectly owned, Controlled or held with power to vote by such Person or its Affiliates, (iii) any Person directly or indirectly owning,
Controlling or holding with power to vote, 20% or more of the outstanding voting securities of such Person or its Affiliates, (iv) any director or officer of such
Person or its Affiliates or any Related Party of any such director or officer, (v) any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary capacity or (vi) any relative or spouse of such Person, or any relative of such
spouse.
8
Reorganization means, collectively, the reorganization transactions of the Group for the purpose of receiving investment from the Investors and
prospective Qualified IPO, including incorporation of the Company, establishment of the offshore corporate structure and establishment and implementation
of the Captive Structure, with details of such reorganization transactions described in Part II Reorganization Steps () of the Reorganization Plan.
Reorganization Plan means the Reorganization Plan of ZTO Express Co., Ltd. () prepared by Zhong Lun Law
Firm attached hereto as Exhibit A.
Reported Net Profit of any Target Franchisee means net profits of such Target Franchisee as adjusted by the Domestic Company by applying the
same principles or standards in respect of Taxes and social insurance allocation or reserve as those adopted and applied by the Domestic Company on a
consistent basis.
Restricted Affiliate means, with respect to each Investor, any Person listed opposite its name on Schedule XI. For the avoidance of doubt, the term
of Restricted Affiliate does not include any Portfolio Company.
Restricted Party means a Person that is: (i) listed on, or owned or controlled by a Person listed on, or acting on behalf of a Person listed on, any
Sanctions List; (ii) located in, incorporated under the laws of, or owned or (directly or indirectly) controlled by, or acting on behalf of, a Person located in or
organized under the laws of a country or territory that is the target of country-wide or territory-wide Sanctions; or (iii) otherwise a target of Sanctions (target
of Sanctions signifying a Person with whom a U.S. Person or other national of a Sanctions Authority would be prohibited or restricted by law from engaging
in trade, business or other activities).
RMB or Renminbi means the lawful currency of the PRC.
SAFE means the State Administration of Foreign Exchange of the PRC.
Sanctions means the economic sanctions laws, regulations, embargoes or restrictive measures administered, enacted or enforced by any Sanction
Authority.
Sanction Authority means any of (i) the United States government; (ii) the United Nations; (iii) the European Union; (iv) the United Kingdom; or
(v) the respective governmental institutions and agencies of any of the foregoing, including, without limitation, the Office of Foreign Assets Control of the
US Department of Treasury, the United States Department of State, and Her Majestys Treasury.
Sanctions List means (i) the Specially Designated Nationals and Blocked Persons list maintained by the Office of Foreign Assets Control of the
US Department of Treasury, (ii) the Consolidated List of Financial Sanctions Targets and the Investment Ban List maintained by Her Majestys Treasury, or
(iii) any similar list maintained by, or public announcement of Sanctions designation made by, any of the Sanctions Authorities.
9
Sequoiameans, collectively, Max Alpha Limited and Max Beyond Limited, each a company established and existing under the laws of the
Cayman Islands.
SC means Standard Chartered Private Equity (Mauritius) III Limited.
Scheduled First Closing Date means, with respect to each Investor, the 30th day after satisfaction of all of those conditions precedent to such
Investors obligation to complete the First Closing in Article 8.
Second Closing Date means the date of the Second Closing.
Seller means each of the Principals (other than ZTO LMS Holding Limited) and the Other Shareholders.
Series A Preferred Shares means the series A preferred share, par value of $0.0001 per share of the Company.
Shares means, collectively, the Subscription Shares and the Sale Shares.
Shareholders Agreement means the Shareholders Agreement to be entered into by and among the parties named therein on or prior to the First
Closing, which shall be in the form attached hereto as Exhibit D.
Subsidiary means, with respect to any Person, any other Person that is Controlled directly or indirectly by such Person.
Target Franchisee means the franchisee contracting with the Domestic Company or its Subsidiaries as of the date hereof conducting the courier
business within the territories listed on Schedule V.
Tax means (i) in the PRC: (a) any national, provincial, municipal, or local taxes, charges, fees, levies, or other assessments, including, without
limitation, all net income (including enterprise income tax and individual income withholding tax), turnover (including value-added tax, business tax, and
consumption tax), resource (including urban and township land use tax), special purpose (including land value-added tax, urban maintenance and
construction tax, and additional education fees), property (including urban real estate tax and land use fees), documentation (including stamp duty and deed
tax), filing, recording, tariffs (including import duty and import value-added tax), and estimated and provisional taxes, charges, fees, levies, or other
assessments of any kind whatsoever, (b) all interest, penalties (administrative, civil or criminal), or additional amounts imposed by any Governmental
Authority in connection with any item described in clause (a) above, and (c) any form of transferee liability imposed by any Governmental Authority in
connection with any item described in clauses (a) and (b) above and (ii) in any jurisdiction other than the PRC: all similar liabilities as described in clause (i)
(a), (i)(b) and (i)(c) above.
TMO means the Trademark Office of the State AIC.
10
Trademark License Agreement means the Trademark License Agreement () entered into by and between the Domestic
Company and Zhong Tong Ji on December 1, 2014 relating to all ZTO Trademarks attached hereto as Exhibit E.
Trademark Transfer Agreement means the Trademark Transfer Agreement () entered into by and between the Domestic Company
and Zhong Tong Ji on December 1, 2014 relating to all ZTO Trademarks attached hereto as Exhibit F.
Transaction Documents means this Agreement, the Shareholders Agreement, the Memorandum and Articles, the Ancillary Agreements and each
of the other agreements and documents delivered or otherwise required in connection with implementing the transactions contemplated by any of the
foregoing.
US$ or $ or US Dollars means the lawful currency of the United States of America.
Warrantors means, collectively, the Company, the BVI Holding Company, the HK Holding Company, the Domestic Company, Dongguan
Jinsheng Industrial Co., Ltd., Jiaxing Zhongtongji Logistics Co., Ltd., Nanjing Huijitong Logistics Co., Ltd., Taizhou Zhongrui Logistics Co., Ltd., Zhejiang
Litong Logistics Co., Ltd., Zhong Tong Ji Air Logistics Co., Ltd. and the Principals.
WFOE means a wholly-owned Subsidiary of the HK Holding Company to be formed in the PRC during the Reorganization.
WP means Onyx Gem Investment Holdings Limited, a company incorporated and existing under the laws of the British Virgin Islands.
Zhong Tong Ji means Shanghai Zhong Tong Ji Express Services Company Limited (), a limited liability company
incorporated and existing under the laws of the PRC.
ZTO Trademark means any trademark registered in the PRC owned by Zhong Tong Ji as of the date hereof listed on Schedule VII.
(b)
Each of the following terms is defined in the Section set forth opposite such term:
Term
Adjusted Exchange Rate

Agreement
Agreed RMB Price
Arbitration Notice
Base Exchange Rate
Basket
Section
Section 2.03
Preamble
Section 2.03
Section 11.07(a)
Section 2.03
Section 9.02(a)
Closing
Company
Company Account
Section 2.02(a)
Preamble
Section 2.02(b)(iii)
11
Term
Competitors Competing Business

Compliance Laws
Damages
Disclosure Schedule
Dispute
Domestic Company
Draft Audit Report
Electing Investor
First Closing
HK Holding Company
HKIAC
HKIAC Rules
Indemnified Party
Indemnifying Party
Investor
Lease
Material Contract
Onshore Investment
Other Shareholder
Permitted Lien
Principal
Rectification Plan
Related Party Loan
Sale Share
Second Closing
Seller Account
Subscription Share
Third Party Claim
Warranty Breach
WP Designee
Section
Section 7.03(b)
Section 3.22(a)
Section 9.02
Article 3
Section 11.07(a)
Preamble
Section 8.02(e)
Section 2.01(b)
Section 2.02(b)
Preamble
Section 11.07(b)
Section 11.07(b)
Section 9.02
Section 9.05(a)
Preamble
Section 3.14(c)
Section 3.11(a)
Section 6.07(a)
Preamble
Section 3.14(a)
Preamble
Section 8.02(e)
Section 3.10
Section 2.01
Section 2.02(c)
Section 2.02(b)(iii)
Section 2.01
Section 9.05(a)
Section 9.02(a)
Section 6.07(a)
Section 1.02.
Other Definitional and Interpretative Provisions. The words hereof, herein and hereunder and words of like import used in
this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for
convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are
to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein
are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not
otherwise defined therein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural,
and any plural term the singular. Whenever the words include, includes or including are used in this Agreement, they shall be deemed to be followed
by the words without limitation, whether or not they are in fact followed by those words or words of like import. Writing, written and comparable
terms refer to printing, typing and other means of reproducing words (including electronic
12
media) in a visible form. References to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations
promulgated thereunder. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time
in accordance with the terms hereof and thereof; provided that with respect to any agreement or contract listed on any schedules hereto, all such amendments,
modifications or supplements must also be listed in the appropriate schedule. References to any Person include the successors and permitted assigns of that
Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to
law, laws or to a particular statute or law shall be deemed also to include an and all Applicable Law.In calculations of share numbers or percentages,
references to fully-diluted and as-converted basis mean that the calculation is to be made assuming that all outstanding options, warrants and other Equity
Securities of the Company convertible into or exercisable or exchangeable for Ordinary Shares (whether or not by their terms then currently convertible,
exercisable or exchangeable), have been so converted, exercised or exchanged. Any share calculation shall be appropriately adjusted to take into account
any share split, share consolidation, recapitalization, bonus issue, reclassification or similar event. References to a Persons stake, interest or similar terms
shall unless the context deems otherwise refer to the aggregate amount of Equity Securities held or beneficially owned by such Person in the applicable
entity.
ARTICLE 2
PURCHASE AND SALE
Section 2.01.
Purchase and Sale. (a) Upon the terms and subject to the conditions of this Agreement, at each Closing, (i) each Investor,
severally but not jointly, agrees to subscribe for and purchase, and the Company agrees to issue and sell to such Investor, the number of Series A Preferred
Shares set forth opposite such Investors name on Schedule III (the Subscription Shares) at a per-share purchase price of $9.973432, with full rights
attached to such Shares and free and clear of Liens; and (ii) each Investor, severally but not jointly, agrees to purchase, and each Seller, jointly and severally,
agrees to sell to such Investor, the number of Ordinary Shares set forth opposite such Investors name on Schedule III (the Sale Shares) at a per-share
purchase price of $7.844860, with full rights attached to such Shares and free and clear of Liens. The purchase price per share in US Dollars to be paid by
each Investor to the Company or Sellers (as the case may be) at each Closing shall be subject to adjustment as provided in Section 2.03 and the number of
Subscription Shares and Sale Shares to be purchased by each Investor at each Closing shall be adjusted accordingly.
(b)
In the case where a Seller breaches any of its obligation under this Agreement, without prejudice to the other provisions under this
Agreement, each Investor shall have a right but no obligation to elect to continue to consummate the Closings (Electing Investor) and perform its
obligations under this Agreement with respect to the Sale Shares to be sold by the other Sellers who are not in breach in accordance with this Section 2.01.
The Sale Shares to be purchased by each Electing Investor as set out in Schedule III (subject to adjustment as provided in Section 2.03) shall be reduced prorata or as otherwise agreed between the Electing Investors. However, such election by the
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Electing Investors shall not diminish or otherwise affect any of the Investors rights for any claims under this Agreement and/or all Applicable Laws with
respect to the breach by the relevant Seller. For the avoidance of doubt, any breach by the Seller(s) do not reduce, release or otherwise vary the Company or
the other Sellers from their respective obligations under this Agreement.
Section 2.02.
Closings. (a) The consummation of the purchase and sale of the Shares pursuant to Section 2.01 shall be completed through two
closings (each, a Closing) and each Closing shall take place remotely via the exchange of documents and signatures. For the avoidance of doubt, unless
otherwise agreed by the Investors Holding a Majority in Interest, each Closing for the sale of Shares by the Company and Sellers and the purchase of Shares
by the Investors shall occur simultaneously.
(b)
The first Closing (the First Closing) shall take place as soon as practicable, but in no event later than 30 days after the receipt of a written
notice from the Company to the Investors confirming the satisfaction or, to the extent permissible, waiver by the party or parties entitled to the benefit, of the
conditions set forth in Article 2 and Article 8 (other than conditions that by their nature are to be satisfied at such Closing, but subject to the satisfaction or,
to the extent permissible, waiver of those conditions at such Closing), or at such other time as the parties may agree. At the First Closing,
(i)
in addition to any item the delivery of which is made an express condition to such Investors obligation at the First Closing
pursuant to Article 8, the Company shall deliver to such Investor:
(A)
the updated register of members of the Company, certified by a director or the company secretary of the Company,
reflecting the issue to such Investor of the Shares as of the First Closing being subscribed and purchased by such Investor at the First
Closing;
(B)
duly executed share certificates issued in the name of such Investor representing the Shares as of the First Closing being
subscribed and purchased by it at the First Closing; and
(C)
the updated register of directors of the Company, certified by a director or the company secretary of the Company,
evidencing the appointment of the director as contemplated by Section 8.01(g).
(ii)
in addition to any item the delivery of which is made an express condition to such Investors obligation at the First Closing
pursuant to Article 8, each Seller shall deliver to such Investor:
(A)
the original share certificate(s) in respect of the Sale Shares for cancellation, and in case of loss of any original share
certificate by such Seller, an original written declaration or similar instrument duly executed by such Seller to evidence the loss of such
original share certificate(s); and
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(B)
an instrument of transfer in the form attached hereto as Exhibit B, duly executed by such Seller with such Investor as a
transferee in respect of the transfer of the Sale Shares to such Investor.
(iii)
Subject to Section 2.02(d) below, each Investor shall pay to (A) the Company its aggregate purchase price (net of any applicable
withholding tax, if applicable) for the Subscription Shares being subscribed by it as at the First Closing in immediately available funds by wire
transfer to an account of the Company with a bank designated by the Company (the Company Account) by notice to such Investor, which notice
shall be delivered not later than 5 Business Days prior to the First Closing Date, and (B) each Seller its aggregate purchase price (net of any
applicable withholding tax, if applicable) for the Sale Shares being purchased from such Seller as at the First Closing in immediately available funds
by wire transfer to an account of such Seller with a bank designated by such Seller (each, a Seller Account) by notice to such Investor, which
notice shall be delivered not later than 5 Business Days prior to the First Closing Date.
(c)
The second Closing (the Second Closing) shall take place on or prior to December 31, 2015, provided that the Company shall deliver a
written notice to the Investors no later than December 16, 2015 confirming the satisfaction or, to the extent permissible, waiver by the party or parties entitled
to the benefit, of the conditions set forth in Article 2 and Article 8 (other than conditions that by their nature are to be satisfied at such Closing, but subject to
the satisfaction or, to the extent permissible, waiver of those conditions at such Closing), or at such other time as the parties may agree. Without limiting the
generality of the foregoing, unless otherwise agreed by the Company and the relevant Investor, if the Second Closing does not occur before or on February 1,
2016, neither the Company or Sellers nor such Investor shall have the obligation to proceed to the Second Closing. At the Second Closing,
(i)
in addition to any item the delivery of which is made an express condition to such Investors obligation at the Second Closing
pursuant to Article 8, the Company shall deliver to such Investor:
(A)
the updated register of members of the Company, certified by a director or the company secretary of the Company,
reflecting the issue to such Investor of the Shares as of the Second Closing being subscribed and purchased by such Investor at the Second
Closing; and
(B)
duly executed share certificates issued in the name of such Investor representing the Shares as of the Second Closing
being subscribed and purchased by it at the Second Closing.
(ii)
in addition to any item the delivery of which is made an express condition to such Investors obligation at the Second Closing
pursuant to Article 8, each Seller shall deliver to such Investor:
(A)
certificate by
the original share certificate(s) in respect of the Sale Shares for cancellation, and in case of loss of any original share
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such Seller, an original written declaration or similar instrument duly executed by such Seller to evidence the loss of such original share
certificate(s); and
(B)
an instrument of transfer in the form attached hereto as Exhibit B, duly executed by such Seller with such Investor as a
transferee in respect of the transfer of the Sale Shares to such Investor.
(iii)
Subject to Section 2.02(d) below, each Investor shall pay to (A) the Company its aggregate purchase price (net of any applicable
withholding tax, if applicable) for the Subscription Shares being subscribed by it as at the Second Closing in immediately available funds by wire
transfer to the Company Account, and (B) each Seller its aggregate purchase price (net of any applicable withholding tax, if applicable) for the Sale
Shares being purchased from such Seller as at the Second Closing in immediately available funds by wire transfer to the applicable Seller Account.
(d)
(i) Each of the WFOE and Sellers shall comply with applicable PRC Tax law and shall, jointly and severally, report to the State Tax Bureau in
charge of the WFOE the transaction with respect to the transfer of Sale Shares as soon as possible but in any event no later than 30 days after the WFOE
completes its business and tax registration, with reasonable evidence thereof to be provided to the Investors within five Business Days after completion of
such reporting. Each Investor shall have the right (but not an obligation) to review any and all application documents to be submitted by the WFOE or any
Seller and to report the transactions by itself if such Investor determines that the WFOE and Sellers fail to appropriately report the transactions with respect to
the transfer of Sale Shares as required by applicable PRC Tax law in its sole discretion. (ii) Each Investor shall withhold 10% (or the then applicable tax rate,
if applicable) of the total purchase price to be paid to each Seller by such Investor as PRC corporate / individual income Tax and remit such amounts to the
appropriate Government Authority within the time specified by applicable PRC Tax law (if required). Upon payment of the withholding tax by the Investors
on behalf of Sellers, the Investors shall provide Sellers with the original receipt or official copies thereof for the corresponding Tax payment (if applicable).
To the extent that there are any surplus of the withheld amounts after any Investor has paid the required withholding tax to the appropriate Governmental
Authority pursuant to the preceding sentence, such Investor shall remit all surplus to each applicable Seller within 20 Business Days. (iii) Each of the WFOE
and Sellers shall provide any documents, information and/or other assistance reasonably requested by each Investor in order for the Investor to comply with
its obligation under the applicable PRC Tax law.
Section 2.03.
Adjustment. The parties hereto acknowledge that the purchase price per Subscription Share denominated in Renminbi shall be
RMB61.835279 and the purchase price per Sale Share denominated in Renminbishall be RMB48.638132(each, an Agreed RMB Price) and the per share
purchase price in US Dollars set forth in Section 2.01 is calculated based on the exchange rate between US Dollars and Renminbi as 1:6.20 (the Base
Exchange Rate). The parties further agree that (a) if Renminbi depreciates 5% or more based on the exchange rate between US Dollars and Renminbi as
published by The Wall Street Journal at http://quotes.wsj.com/fx/USDCNYat 12:00 pm on the 2 th day
16
prior to each Closing Date(each, a Adjusted Exchange Rate) compared to the Base Exchange Rate, the Agreed RMB Price and the aggregate purchase
price to be paid by each Investor at each Closing set forth in Schedule III shall remain unchanged, but the purchase price per share to be paid in US Dollars by
each Investor shall be determined based on the applicable Adjusted Exchange Rate and the number of Subscription Shares and Sale Shares to be purchased
by each Investor at each Closing shall be adjusted accordingly; and (b) if Renminbi appreciates 5% or more based on the applicable Adjustment Exchange
Rate compared to the Base Exchange Rate, and the Agreed RMB Price and the number of Subscription Shares and Sale Shares to be purchased by each
Investor at each Closing set forth in Schedule III shall remain unchanged, but the purchase price per share denominated in US Dollars and the aggregate
purchase price to be paid in US Dollars by each Investorat each Closing set forth in Schedule III shall be adjusted based on the applicable Adjusted Exchange
Rate.
Section 2.04.
Use of Proceeds. The Company shall use the proceeds from the issuance and sale of the Subscription Shares (i) for purpose of its
business expansion, capital expenditures and general working capital needs in order to improve and strengthen the competiveness of the Group, (ii) to
consummate the Post-Reorganization Matters in a manner as agreed by the Investors Holding a Majority in Interest, and (iii) to develop and explore other
business opportunities as approved by the Board in accordance with the Charter Documents of the Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF WARRANTORS
Subject to Section 11.03, except as set forth in the disclosure schedule delivered by the Company to each Investor as of the date hereof (the
Disclosure Schedule), each of the Warrantors, jointly and severally, represents and warrants to each Investor as of the date hereof and as of each Closing
Date that:
Section 3.01.
Corporate Existence and Power of Group Companies. (a)Section 3.01 of the Disclosure Schedule sets forth the accurate and
complete corporate chart of the Group and other Persons in which any Group Company holds any Equity Securities, indicating the ownership and Control
relationship, the nature of the legal entity which each Person constitutes and the jurisdiction in which each Person was incorporated. Except as disclosed in
Section 3.01 of the Disclosure Schedule, no Group Company owns or Controls, directly or indirectly, any Equity Security in any other Person.
(b)
Except as disclosed in Section 3.01 of the Disclosure Schedule, each Group Company is a corporation duly incorporated, validly existing
and in good standing (or equivalent status in the relevant jurisdiction) under the laws of its jurisdiction of incorporation and has all corporate powers and
authority to own its properties and assets and to carry on its business as now conducted and as proposed to be conducted, and to perform its obligations under
each Transaction Document to which it is a party. Each Group Company has a valid business license issued by the relevant Governmental Authority
(including the AIC in respect of any PRC entity), if applicable, and has, since its
17
establishment, carried on its business in all material respects in compliance with the business scope set forth in its business license, if applicable.
(c)
The Company has made available to each Investor a true and complete copy of (i) the effective Charter Documents of each Group
Company, (ii) the latest register of members or shareholders ledger of each Group Company, as applicable, and (iii) the latest register of directors of each
Group Company. Each Group Company has been in compliance with its Charter Documents in all material respects.
Section 3.02.
Corporate Authorization. The execution, delivery and performance by any Group Company of each Transaction Document to
which it is a party and the consummation of the transactions contemplated thereby are within its corporate powers and have been duly authorized by all
necessary corporate action on its part. Each of the Transaction Documents to which it is a party constitutes a valid and binding agreement of each Group
Company enforceable against such Group Company in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws affecting creditors rights generally and general principles of equity).
Section 3.03.
Governmental Authorization and Consents. The execution, delivery and performance by any Group Company or any Seller of the
Transaction Documents and the consummation of the transactions contemplated thereby (other than the Onshore Investment) require no action by or in
respect of, or filing with, any Governmental Authority other than those set forth in Section 3.03 of the Disclosure Schedule.
Section 3.04.
Noncontravention. The execution, delivery and performance by any Group Company of the Transaction Documents and the
consummation of the transactions contemplated thereby do not and will not (i) violate its Charter Documents, as applicable, (ii) assuming compliance with
the matters referred to in Section 3.03, materially violate any Applicable Law, (iii) require any consent or other action by any Person (other than those which
have obtained or shall have obtained prior to the First Closing) under, constitute a material default or an event that, with or without notice or lapse of time or
both, would constitute a material default under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of such Group
Company or to a loss of any benefit to which such Group Company is entitled under any provision of any agreement or other instrument binding upon such
Group Company or (iv) result in the creation or imposition of any Lien on any asset of any Group Company, other than the Permitted Liens.
Section 3.05.
Capitalization. (a) As of the date hereof and as of immediately prior to the First Closing, the authorized share capital of the
Company consists of 10,000,000,000 shares of Ordinary Shares. As of the date hereof, 564,000,000shares of Ordinary Shares have been issued, fully paid up
and non-assessable, and as of immediately prior to the First Closing, 600,000,000 shares of Ordinary Shares shall have been issued, fully paid up and nonassessable.The Company has reserved 16,800,000 shares of Ordinary Shares for the Excluded Issuance.
18
(b)
Section 3.05 of the Disclosure Schedule sets forth all Equity Securities of each Group Company other than the Company (including the total
amount of investment of each Group Company that is a PRC foreign-invested enterprise), together with an accurate and complete list of the record and
beneficial owners of such Equity Securities and the vesting schedule, if applicable.
(c)
Except as disclosed in Section 3.05 of the Disclosure Schedule, all issued Equity Securities of each Group Company were duly and validly
issued or subscribe for in compliance with all Applicable Laws and Contracts and all Equity Securities of each Group Company that is a PRC Person have
been duly paid in accordance with its Charter Documents and has been verified by a qualified accountant firm (if required by the Applicable Law). Except as
contemplated by the applicable Transaction Documents and Reorganization, and except as in connection with the issuance by the Company and
subscription by Sequoia of 36,000,000 shares of Ordinary Shares, there are no (i) resolutions pending to increase the share capital of any Group Company or
cause the liquidation, winding up or dissolution of any Group Company, (ii) dividends which have accrued or been declared but are unpaid by any Group
Company except as disclosed in Section 3.05 of the Disclosure Schedule, (iii) obligations, contingent or otherwise, of any Group Company to repurchase,
redeem or otherwise acquire any Equity Securities, or (iv) outstanding or authorized equity appreciation, phantom equity, equity plans or similar rights with
respect to any Group Company except for the Excluded Issuance.
Section 3.06.
Valid Issue of Shares. All Subscription Shares, when issued, delivered and paid for in accordance with the terms of this
Agreement, will be duly and validly issued and fully paid, free from any Lien (except for any restriction on transfer under the Applicable Law and the
Transaction Documents). The issue of the Subscription Shares is not subject to any preemptive rights, rights of first refusal or similar rights other than those
that have been duly waived in full.
Section 3.07.
Financial Statements. Immediately prior to the First Closing, the Company shall have delivered all unaudited quarterly
consolidated or combined financial statements of the Domestic Company for the quarter immediately preceding the First Closing Date and, if available,
unaudited monthly consolidated or combined management accounts of the Group as of and for the period to the end of each following month. Such financial
statements and management accounts, except as otherwise noted therein, (a) have been prepared in accordance with the books and records of the Domestic
Company and its Subsidiaries, as applicable, (b) fairly present, in all material respects, the financial condition and position of the Domestic Company and its
Subsidiaries as of the dates indicated therein and the results of operations and cash flows of the Domestic Company and its Subsidiaries for the periods
indicated therein, except for the omission of notes thereto and subject to normal year-end audit adjustments that are not expected to be material; and (c) were
prepared, in all material respects, in accordance with PRC GAAP.
Section 3.08.
Absence of Certain Changes. (a) Since the Balance Sheet Date, except for those contemplated by the Transaction Documents, the
business of each Group Company has been conducted in all material respects in the ordinary course consistent with past practices and there has not been any
event, occurrence, development or state of
19
circumstances or facts that has had or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(b)
From the Balance Sheet Date until the date hereof, there has not been any action taken by any Group Company that, if taken during the
period from the date hereof through the First Closing Date without the Investors prior written consent, would constitute a breach of Section 6.02.
Section 3.09.
No Undisclosed Material Liabilities. There are no liabilities of any Group Company of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than:
(a)
liabilities provided for in the Balance Sheet or disclosed in the notes thereto;
(b)
liabilities incurred in the ordinary course of business since the Balance Sheet Date; and
(c)
other undisclosed liabilities which, individually or in the aggregate, are not material to the Group, taken as a whole.
Section 3.10.
Related Party Transactions. Other than as set forth in Section 3.10 of the Disclosure Schedule and any transaction involving any
Related Party with an aggregate amount of less than $500,000, no Related Party of any Group Company has any Contract, understanding, or proposed
transaction with, or is indebted to, any Group Company or has any direct or indirect interest in any Group Company (other than as set forth in Section 3.01 of
the Disclosure Schedule), nor is any Group Company indebted (or committed to make loans or extend or guarantee credit) to any of its Related Party (other
than for accrued salaries for the current pay period, reimbursable expenses or other standard employee benefits). No Related Party of any Group Company has
any direct or indirect interest in any Person with which a Group Company is affiliated or with which a Group Company has a material business relationship
(including any Person which purchases from or sells, licenses or furnishes to a Group Company any goods, intellectual or other property rights or services) or
in any Contract to which a Group Company is a party or by which it may be bound or affected, and no Related Party of any Group Company directly or
indirectly competes with or has any interest in any Person that directly or indirectly competes with any Group Company or any business conducted or
proposed to be conducted by any Group Company (other than ownership of less than one percent (1%) of the stock of publicly traded companies), in each
case except for as specifically disclosed in Section 3.10 of the Disclosure Schedule. No Group Company has paid, and no Related Party of any Group
Company has received or will receive, any interest on any Related Party loan disclosed pursuant to this Section (the Related Party Loans). Neither any
Group Company nor any Related Party thereof has been subject to any penalty relating to or in connection with any Related Party Loan from any
Governmental Authority since the incorporation of such Person.
20
Section 3.11.
Material Contracts. (a)Section 3.11 of the Disclosure Schedule contains a true, correct and complete list of all outstanding
Contracts (each, a Material Contract) in effect as of the date hereof to which a Group Company or any of its properties or assets is bound or subject to that:
(i)
any lease (whether of real or personal property) providing for annual rentals of RMB5 million or more;
(ii)
any agreement for the purchase of materials, supplies, goods, services, equipment or other assets providing for either (A) annual
payments by the Group of RMB10 million or more or (B) aggregate payments by the Group of RMB50 million or more;
(iii)
any sales, distribution or other similar agreement that provides for either (A) annual payments from or to the Group of RMB10
million or more or (B) aggregate payments from or to the Group of RMB50 million or more;
(iv)
any partnership, joint venture or other similar agreement or arrangement that provides for aggregate capital contribution by the
Group of RMB2 million or more;
(v)
any agreement relating to the acquisition or disposition of any business or assets other than those contemplated by the
Reorganization (whether by merger, consolidation, sale of Equity Securities, sale of assets or otherwise);
(vi)
any agreement relating to indebtedness for borrowed money or the deferred purchase price of property (in either case, whether
incurred, assumed, guaranteed or secured by any asset), except any such agreement (A) with an aggregate outstanding principal amount not
exceeding RMB5 million and which may be prepaid on not more than 30 days notice without the payment of any penalty and (B) entered into
subsequent to the date of this Agreement as permitted by Section 6.02(g);
(vii)
involves the ownership or lease of, title to, use of, or any leasehold or other interest in, any real or personal property (except for
personal property leases involving payments of less than RMB5 million per annum), including the Leases;
(viii)
any license, franchise or similar agreement with the top 50 First-Tier Franchisees of the Group;
(ix)
any agency, dealer, sales representative, marketing or other similar agreement that provides for either annual payments from or to
the Group of RMB2 million or more;
(x)
any agreement that limits the freedom of any Group Company to compete in any line of business or with any Person or in any area
or which would so limit the freedom of any Group Company after the First Closing Date;
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(xi)
any agreement with or involving a Related Party under Section 3.10;
(xii)
involves the waiver, compromise, or settlement of any material action, suit, investigation or proceeding, the amount of each of
which is reasonably expected to exceed RMB2 million; or
(xiii)
Company.
any other agreement, commitment, arrangement or plan not made in the ordinary course of business that is material to any Group
(b)
Each Material Contract is a valid and binding agreement of any Group Company, and is in full force and effect. None of the Group
Companies or, to the Knowledge of each Warrantor, any other party thereto is in default or breach in any material respect under the terms of any such Material
Contract, and, to the Knowledge of each Warrantor, no event or circumstance has occurred that, with notice or lapse of time or both, would constitute any
event of default thereunder. True and complete copies of each such Material Contract have been made available to the Investors.
Section 3.12.
Litigation. There is no action, suit, investigation or proceeding or any basis therefor pending against, or to the Knowledge of the
Warrantors, threatened against or affecting, any Group Company or any of their respective properties before (or, in the case of threatened actions, suits,
investigations or proceedings, would be before) any Governmental Authority or arbitrator which could result in damages in excess $2 million individually or
$5 million in the aggregate, or which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated by the
Transaction Documents.
Section 3.13.
Compliance with Laws. To the Knowledge of the Warrantorsand except as disclosed in Section 3.13 of the Disclosure Schedule,
each of the Group Companies is in compliance in all material respects with all Applicable Laws, and is not under investigation with respect to and has not
been threatened to be charged with or given notice of any violation of, any Applicable Law. To the Knowledge of the Warrantors, there is no judgment,
decree, injunction, rule or order of any arbitrator or Governmental Authority outstanding against any Group Company that has had or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on each Group Company or that in any manner seeks to prevent, enjoin, alter or
materially delay the consummation of the transactions contemplated by the Transaction Documents.
Section 3.14.
Properties. (a)Except as disclosed in Section 3.14(a) of the Disclosure Schedule, each Group Company has good and marketable,
or in the case of leased property and assets has valid leasehold interests in, all property and assets (whether real, personal, tangible or intangible) reflected on
the Balance Sheet or acquired after the Balance Sheet Date, except for properties and assets sold since the Balance Sheet Date in the ordinary course of
business consistent with past practices. None of such property or assets is subject to any Lien, except:
(i)
Liens disclosed on the Balance Sheet;

22
(ii)
Liens for taxes not yet due or being contested in good faith (and for which adequate accruals or reserves have been established on
the Balance Sheet); or
(iii)
Liens or any minor imperfections of title which do not materially detract from the value or materially interfere with any present or
intended use of such property or assets of such Group Company (clauses (i) (iii) of this Section 3.14 are, collectively, the Permitted Liens).
(b)
To the Knowledge of the Warrantors, there are no developments affecting any such property or assets pending or threatened which could
materially detract from the value, materially interfere with any present or intended use or materially adversely affect the marketability of any such property or
assets.
(c)
Section 3.14(c) of the Disclosure Schedule lists each leasehold interest pursuant to which any Group Company holds any real property
(other than the land use rights) or personal property (except for such leases involving payments of less than RMB5 million per annum) or land use rights
(each, a Lease), indicating the particulars of such real or personal property, rents payable under the Lease and the term of the Lease. All Leases of such real
property and personal property are in good standing and are valid, binding and enforceable in accordance with their respective terms and there does not exist
under any such Lease any material default or any event which with notice or lapse of time or both would constitute a material default.
(d)
Section 3.14(d) of the Disclosure Schedule lists all land use rights and the plants, buildings and structures located on such land owned by
the Group Companies. True and complete ownership certificates of such property and all other documents evidencing the ownership of the Group
Companies have been made available to the Investors. With respect to any land use rights owned by the Group Companies, all land grant premiums required
under the Applicable Law and the relevant Contract have been paid in full. With respect to any plant, building and structure located on such land, the Group
Companies have complied with the Applicable Law in respect of the development and construction of such plant, building or structure. The plants,
buildings, structures and equipment owned by each Group Company have no material defects, are in good operating condition and have been reasonably
maintained consistent with standards generally followed in the industry (giving due account to the age and length of use of same, ordinary wear and tear
excepted), are adequate and suitable for their present and intended uses and, in the case of plants, buildings and other structures, are structurally sound.
(e)
The property and assets owned or leased by the Group Companies, or which they otherwise have the right to use, constitute all of the
property and assets used or held for use in connection with the businesses of the Group and are adequate to conduct such businesses in substantially the same
manner as currently conducted and as proposed to be conducted.
Section 3.15.
Intellectual Property. (a) Section 3.15(a)(i) of the Disclosure Schedule contains a true and complete list of each of the
registrations and applications for registrations of the Owned Intellectual Property Rights. Section 3.15(a)(ii) of the
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Disclosure Schedule contains a true and complete list of all material agreements (whether written or otherwise, including license agreements, development
agreements, distribution agreements, settlement agreements, consent to use agreements and covenants not to sue, but excluding licenses for personal
computer software that are generally available on nondiscriminatory pricing terms and have an individual acquisition cost of $1,000 per seat or less) to which
any Group Company is a party or otherwise bound, granting or restricting any right to use, exploit or practice any Licensed Intellectual Property Rights.
(b)
Except for any off-the-shelf personal computer software used by the Group Companies having an individual acquisition cost of $1,000 per
seat or less or $1 million in the aggregate, the Licensed Intellectual Property Rights and the Owned Intellectual Property Rights together constitute all the
Intellectual Property Rights necessary to, or used or held for use in, the conduct of the business of the Group in substantially the same manner as currently
conducted and as proposed to be conducted. There exist no material restrictions on the disclosure, use, license or transfer of the Owned Intellectual Property
Rights. The consummation of the transactions contemplated by the Reorganization or the Transaction Documents will not alter, encumber, impair or
extinguish any Owned Intellectual Property Rights or Licensed Intellectual Property Rights other than those contemplated by the Ancillary Agreements.
(c)
None of the Group Companies has given to any Person an indemnity in connection with any Intellectual Property Right.
(d)
To the Knowledge of the Warrantors, none of the Group Companies has infringed, misappropriated or otherwise violated any Intellectual
Property Right of any third party. There is no claim, action, suit, investigation or proceeding pending against, or, to the Knowledge of the Warrantors,
threatened against or affecting, any Group Company, any present or former officer, director or employee of any Group Company (i) based upon, or
challenging or seeking to deny or restrict, the rights of any Group Company in any of the Owned Intellectual Property Rights and the Licensed Intellectual
Property Rights, (ii) alleging that the use of the Owned Intellectual Property Rights or the Licensed Intellectual Property Rights or any services provided,
processes used or products manufactured, used, imported or sold by the Group Company do or may conflict with, misappropriate, infringe or otherwise
violate any Intellectual Property Right of any third party or (iii) alleging that any Group Company has infringed, misappropriated or otherwise violated any
Intellectual Property Right of any third party.
(e)
None of the Owned Intellectual Property Rights and Licensed Intellectual Property Rights material to the operation of the business of the
Group has been adjudged invalid or unenforceable in whole or part, and, to the Knowledge of the Warrantors, all such Owned Intellectual Property Rights
and Licensed Intellectual Property Rights are valid and enforceable.
(f)
Except as disclosed in Section 3.15(f) of the Disclosure Schedule, the Group Companies hold all right, title and interest in and to all Owned
Intellectual Property Rights and all of each Group Companys licenses under the Licensed Intellectual Property Rights, free and clear of any Lien. In each
case where a patent or patent application, trademark registration or trademark application, service mark registration or service mark application,
24
or copyright registration or copyright application included in the Owned Intellectual Property is held by assignment, the assignment has been duly recorded
with the Governmental Authority from which the patent or registration issued or before which the application or application for registration is pending. The
Group Companies have taken all actions necessary to maintain and protect the Owned Intellectual Property Rights and their rights in the Licensed
Intellectual Property Rights, including payment of applicable maintenance fees and filing of applicable statements of use.
(g)
Except as disclosed in Section 3.15(g) of the Disclosure Schedule, no Person has infringed, misappropriated or otherwise violated any
Owned Intellectual Property Right or Licensed Intellectual Property Right.
(h)
With respect to pending applications and applications for registration of the Owned Intellectual Property Rights and the Licensed
Intellectual Property Rights that are material to the business or operation of any Group Company, none of the Warrantors is aware of any reason that could
reasonably be expected to prevent any such application or application for registration from being granted with coverage substantially equivalent to the latest
amended version of the pending application or application for registration. None of the trademarks, service marks, applications for trademarks and
applications for service marks included in the Owned Intellectual Property Rights that are material to the business or operation of any Group Company has
been the subject of an opposition or cancellation procedure. None of the patents and patent applications included in the Owned Intellectual Property Rights
that are material to the business or operation of any Group Company has been the subject of an interference, protest or third party reexamination request.
Section 3.16.
Insurance Coverage. The Group Companies have maintained all material and customary insurance policies relating to the assets,
business, operations, employees, officers or directors for their respective business. There is no claim by any Group Company pending under any of such
policies as to which coverage has been questioned, denied or disputed by the underwriters of such policies or in respect of which such underwriters have
reserved their rights. All premiums payable under all such policies have been timely paid and the Group Companies have otherwise complied fully with the
terms and conditions of all such policies. Such policies are of the type and in amounts customarily carried by Persons conducting businesses similar to those
of the Group Companies. Each Warrantor does not know of any threatened termination of, premium increase with respect to, or material alteration of
coverage under, any of such policies. The Group Companies shall after the First Closing continue to have coverage under such policies with respect to events
occurring prior to the First Closing.
Section 3.17.
Permits. (a) Section 3.17 of the Disclosure Schedule correctly describes, with respect to each of the Group Companies, each
material Permit together with a general description of the name of the Governmental Authority in charge of issue of such Permits. Except as disclosed in
Section 3.17 of the Disclosure Schedule, (i) none of the Group Companies is required by any Applicable Law to obtain or maintain any other material Permit
for its assets and business, (ii) the material Permits are valid and in full force and effect, (iii) none of the Group Companies is in default under, and no
condition exists that with notice or lapse of time or both would constitute a default under, the material Permits and (iv) none of the material Permits will be
terminated or impaired or
25
become terminable, in whole or in part, as a result of the transactions contemplated by the Transaction Documents.
Section 3.18.
Receivables. All accounts, notes receivable and other receivables (other than receivables collected since the Balance Sheet Date)
reflected on the Balance Sheet are, and all accounts and notes receivable arising from or otherwise relating to the business of the Group Companies as of each
Closing Date will be valid, genuine and fully collectible in the aggregate amount thereof, subject to normal and customary trade discounts, less any reserves
for doubtful accounts recorded on the Balance Sheet. All accounts, notes receivable and other receivables arising out of or relating to such business of the
Group Companies as of the Balance Sheet Date have been included in the Balance Sheet, and all accounts, notes receivable and other receivables arising out
of or relating to the business of the Group as of each Closing Date will be included in Section 3.18 of the Disclosure Schedule, in accordance with the
Accounting Standards applied on a consistent basis.
Section 3.19.
Employees and Labor Matters. (a) Except as disclosed in Section 3.19 of the Disclosure Schedule, (i) each Group Company has
complied in all material respects with all Applicable Laws in respect of employment and labor and (ii) each Group Company has entered into a written
employment contract with its employees and made all social security contributions or similar contributions in respect of or on behalf of its employees in
accordance with all Applicable Laws.
(b)
Each Key Employee has entered into an employment contract with the relevant Group Company. The employment contract with each Key
Employee or other contracts between each Key Employee and the relevant Group Company contains the customary confidentiality provisions and such Key
Employees obligations of non-compete and non-solicitation. None of the Key Employees has indicated to any Warrantor that he intends to resign or retire
as a result of the transactions contemplated by the Reorganization or the Transaction Documents or otherwise within two years after the First Closing Date.
(c)
None of the Group Company has adopted, authorized, maintained or contributed to or otherwise has any liability under any equity
appreciation, phantom equity, equity plans or similar rights with respect to any Group Company.
(d)
There has not been, and there is not now pending or, to the Knowledge of the Warrantors, threatened, any strike, union organization
activity, slowdown or work stoppage against any Group Company. None of the Group Company is bound by or otherwise subject to any Contract with any
labor union or any collective bargaining agreements.
Section 3.20.
Environmental Matters. (a) No notice, notification, demand, request for information, citation, summons or order has been
received, no complaint has been filed, no penalty has been assessed and no investigation, action, claim, suit, proceeding or review is pending, or to the
Knowledge of the Warrantors, threatened by any Governmental Authority or other Person with respect to any matters relating to any Group Company and
relating to or arising out of any environmental law.
26
(b)
There are no material liabilities of or relating to any Group Company, whether accrued, contingent, absolute, determined, determinable or
otherwise, arising under or relating to any environmental law, and there are no facts, conditions, situations or set of circumstances which could reasonably be
expected to result in or be the basis for any such liability.
Section 3.21.
Taxes. (a) Except as disclosed in Section 3.21 of the Disclosure Schedule, (i) each Group Company is and has been in compliance
all Applicable Laws with respect to Tax in all material respects, (ii) there are no material Taxes due and payable by any Group Company which have not been
duly and timely paid or withheld, (iii) each Group Company has obtained appropriate supporting documents with respect to costs and expenses incurred for
Tax deduction purpose and (iv) each Group Company has withheld all Taxes from payments to employees, individual shareholders, agents, nonresidents
required by the Applicable Laws to be withheld by such Group Company and such amounts have been remitted to the appropriate Governmental Authority.
(b)
Except as disclosed in Section 3.21 of the Disclosure Schedule, (i) each Group Company has duly and timely filed all Tax returns as
required by the Applicable Law, and such Tax returns are true, correct and complete in all material respects, and (ii) the methods adopted by each Group
Company on preparing Tax returns are in line with all Applicable Laws and agreed by the Governmental Authority. With respect to all Tax returns of each
Group Company, there is no unassessed Tax deficiency proposed or, to the Knowledge of the Warrantors, threatened against any Group Company.
(c)
No dispute, proceeding or claim concerning any Tax liability of any Group Company has been raised, and to the Knowledge of the
Warrantors, threatened to be claimed by any Governmental Authority.
Section 3.22.
Anti-bribery, Anti-Corruption, Anti-Money Laundering and Sanctions. (a) Each Group Company and each other Warrantor and,
to the Knowledge of the Warrantors, their respective Agents are and have been in compliance with all Applicable Laws relating to anti-bribery, anticorruption, anti-money laundering, record keeping and internal control laws (collectively, the Compliance Laws) including the Anti-Bribery Law as if it
were a U.S. Person and no Group Company nor, to the Knowledge of the Warrantors, any of its Agents has taken or will take any action (directly or indirectly)
that has resulted in or will result in a violation of any Compliance Law, including the Anti-Bribery Law. Except as disclosed in Section 3.22(a) of the
Disclosure Schedule, to the Knowledge of the Warrantors, no Public Official (i) holds an ownership or other economic interest, direct or indirect, in any Group
Company or First-Tier Franchisee or in the contractual relationship formed by any Transaction Document, or (ii) serves as an officer, director or employee of
any Group Company or First-Tier Franchisee. No Group Company has received any past or present allegation or conducted any internal investigation related
to a violation or potential violation of the Compliance Laws. No Warrantor has any information that would lead a reasonable person to believe that there is a
high likelihood that any person has offered or made any payment or other thing of value in violation of any Anti-Bribery Law on behalf of or for the benefit
of any Group Company. Without limiting the foregoing, neither any Group Company nor, to the Knowledge of the Warrantors, any Agent has taken or will
take any act in furtherance of a
27
payment, directly or indirectly, to offer, authorize, promise, condone, participate in or consummate, or has received notice of any allegation of,
(i)
the making of any gift or payment of anything of value to any Public Official by any Person to obtain any improper advantage,
affect or influence any act or decision of any such Public Official, or assist any Group Company in obtaining or retaining business for, or with, or
directing business to, any Person;
(ii)
the taking of any action by any Person which (A) would violate the Anti-Bribery Law, if taken by an entity subject to the AntiBribery Law, or (B) could reasonably be expected to constitute a violation of any applicable Compliance Law, or
(iii)
the making of any false or fictitious entries in the books or records of any Group Company or First-Tier Franchisee by any Person,
or
(iv)
the using of any assets of any Group Company or First-Tier Franchisee for the establishment of any unlawful or unrecorded fund of
monies or other assets, or the making of any unlawful or undisclosed payment.
(b)
None of the Group Companies and other Warrantors and their respective Agents is or has ever been found by a Governmental Authority to
have violated any criminal or securities law or is subject to any indictment or any government investigation for bribery. Except as disclosed in
Section 3.22(a) of the Disclosure Schedule, to the Knowledge of the Warrantors, none of the beneficial owners of any Equity Securities or other interest in any
Group Company are Public Officials.
(c)
To the Knowledge of the Warrantors, none of the Warrantors or any of their respective Affiliates or joint ventures, or any of their respective
directors, officers or employees, or any Person acting on any of their behalf: (i) is in violation of any applicable Sanctions or is a Restricted Party; (ii) directly
or indirectly, conducts any business dealings or transactions with or, so far as the Warrantors is aware for the benefit of, any Restricted Party; or (iii) has
received notices of or is aware of any claim, action, suit, proceeding or investigation against it with respect to Sanctions by any Sanction Authority.
Section 3.23.
Internal Controls. Except as disclosed in Section 3.23 of the Disclosure Schedule, each Group Company maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (a) transactions by it are executed in accordance with managements general or
specific authorization, (b) transactions by it are recorded as necessary to permit preparation of financial statements in conformity with the applicable
accounting standards and to maintain asset accountability, (c) access to assets of it is permitted only in accordance with managements general or specific
authorization, (d) the recorded inventory of assets is compared with the existing tangible assets at reasonable intervals and appropriate action is taken with
respect to any material difference between recorded and actual assets, and (e) segregating duties for cash deposits, cash reconciliation, cash payment, proper
approval is established.
28
Section 3.24.
Personal Data. (a) Except as disclosed in Section 3.24 of the Disclosure Schedule, each Group Company has at all times complied
with all Applicable Laws relating to privacy, data protection and the collection and use of the Personal Data. Each Group Company has established rules,
policies and procedures from time to time with respect to the foregoing and has complied in all respects with such rules, policies and procedures. No claims
have been asserted or, to the Knowledge of the Warrantors, threatened against any Group Company by any Person alleging a violation of such Persons
privacy, personal or confidentiality rights under any Applicable Law and such rules, policies and procedures. The consummation of the transactions
contemplated by the Transaction Documents will not breach or otherwise cause any violation of any Applicable Law, or such rules, policies or procedures.
(b)
Except as disclosed in Section 3.24 of the Disclosure Schedule, with respect to all Personal Data, each Group Company has at all times
taken all steps reasonably necessary (including implementing and monitoring compliance with adequate measures with respect to technical and physical
security) to ensure that the information is protected against loss and against unauthorized access, use, modification, alteration, disclosure or other misuse. To
the Knowledge of each Warrantor, there has been no unauthorized access to or other misuse of any Personal Data.
Section 3.25.
Financial Performance of Target Franchisees. The aggregate Reported Net Profits of all Target Franchisees for the financial year
of 2014 are not less than RMB120 million.
Section 3.26.
Target Franchisees. (a) The Target Franchisees respective titles to all property and assets (whether real, personal, tangible or
intangible) and Intellectual Property Rights to be acquired by the Group from such Target Franchisees are effective and valid and none of such property and
assets, when and after acquired by the Group, is subject to any Lien, except for Permitted Liens.
(b)
With respect to each Target Franchisee, each material franchisee Contract which has or will be transferred, assigned to or otherwise assumed
by the Group is in full force and effect and can be assigned or transferred to any Group Company on its current terms and provisions in connection with the
acquisition of such Target Franchisee by the Group. To the Knowledge of the Warrantors, any other party to such franchisee Contract is not in default or
breach in any material respect under the terms of such franchisee Contract.
Section 3.27.
Finders Fee. There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to
act on behalf of the Warrantors who might be entitled to any fee or commission in connection with the transactions contemplated by the Transaction
Documents.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller, severally but not jointly, represents and warrants to each Investor as of the date hereof and as of each Closing Date:
29
Section 4.01.
Corporate Existence and Power. Seller that is an entity is a corporate duly incorporated, validly existing and in good standing (or
equivalent status in the relevant jurisdiction) under the laws of its jurisdiction of incorporation. Seller that is a natural Person has the full capacity for any
civil acts required under all Applicable Laws.
Section 4.02.
Authorization. With respect to any Seller that is an entity, the execution, delivery and performance by it of each Transaction
Document to which it is a party and the consummation of the transactions contemplated thereby are within its corporate powers and have been duly
authorized by all necessary corporate action on its part. Each of the Transaction Documents to which it is a party constitutes a valid and binding agreement
of such Seller enforceable against it in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws affecting creditors rights generally and general principles of equity).
Section 4.03.
Governmental Authorization and Consents. The execution, delivery and performance by such Seller of the Transaction
Documents and the consummation of the transactions contemplated thereby require no action by or in respect of, or filing with, any Governmental Authority
other than those set forth in Section 3.03 of the Disclosure Schedule.
Section 4.04.
Noncontravention. The execution, delivery and performance by such Seller of the Transaction Documents and the consummation
of the transactions contemplated thereby do not and will not (i) violate its Charter Documents, as applicable, (ii) assuming compliance with the matters
referred to in Section 3.03, violate any Applicable Law, or (iii) require any consent or other action by any Person (other than those which have obtained or
shall have obtained prior to the First Closing) under, constitute a material default or an event that, with or without notice or lapse of time or both, would
constitute a material default under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of such Seller or to a loss of
any benefit to which such Seller is entitled under any provision of any agreement or other instrument binding upon such Seller.
Section 4.05.
Ownership of Shares. All Sale Shares are duly and validly issued and fully paid. The Sale Shares when sold by such Seller
pursuant to this Agreement is free and clear of any Lien and any other limitation or restriction, and will transfer and deliver to the applicable Investor at each
Closing valid title to such Sale Shares free and clear of any Lien and any such limitation or restriction. The sale of the Sale Shares is not subject to any rights
of first refusal, co-sale right or similar rights other than those that have been duly waived in full.
Section 4.06.
Finders Fee. There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to
act on behalf of such Seller who might be entitled to any fee or commission in connection with the transactions contemplated by the Transaction Documents.
Section 4.07.
such Seller, any Person
Sanctions. Such Seller or any of its Affiliates, or any of their respective directors, officers or employees, or to the Knowledge of
30
acting on any of its behalf: (i) is not in violation of any applicable Sanctions or is a Restricted Party; (ii) does not directly or indirectly, conduct any business
dealings or transactions with or, so far as such Seller is aware for the benefit of, any Restricted Party; or (iii) has not received notices of or is aware of any
claim, action, suit, proceeding or investigation against it with respect to Sanctions by any Sanction Authority.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF INVESTORS
Each Investor, severally but not jointly, represents and warrants to the Company and Sellers as of the date hereof and as of each Closing Date that:
Section 5.01.
Corporate Existence and Power. Such Investor is a corporation duly incorporated, validly existing and in good standing (or
equivalent status in the relevant jurisdiction) under the laws of the jurisdiction of its incorporation.
Section 5.02.
Corporate Authorization. The execution, delivery and performance by such Investor of this Agreement and other Transaction
Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby are within its corporate powers and all actions
on the part of such Investor necessary for the authorization, execution and delivery of this Agreement and other Transaction Documents to which it is a party
has been made or will be made prior to the First Closing. This Agreement constitutes a valid and binding agreement of such Investor and is enforceable
against such Investor in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other
laws affecting creditors rights generally and general principles of equity).
Section 5.03.
Governmental Authorization. The execution, delivery and performance by such Investor of this Agreement and the consummation
of the transactions contemplated hereby require no material action by or in respect of, or material filing with, any Governmental Authority other than those
set forth in Section 3.03 of the Disclosure Schedule.
Section 5.04.
Financing. Such Investor has, or will have prior to each Closing, sufficient cash or other sources of immediately available funds
to enable it to make payment to be paid by it as at each such Closing.
Section 5.05.
Purchase for Investment. Such Investor is purchasing the Shares for investment for its own account and not with a view to, or for
sale in connection with, any distribution thereof. Such Investor (either alone or together with its advisors) has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Shares and is capable of bearing the economic
risks of such investment.
31
ARTICLE 6
INTERIM PERIOD COVENANTS
Section 6.01.
Access to Information. (a) From the date hereof until the First Closing Date, the Warrantors will, upon reasonable advance notice,
(i) give, and will cause the Group Companies to give, the Investors, their respective counsel, financial advisors, auditors and other authorized representatives
access to the offices, internal whistleblowers, properties, books and records, compliance training logs and investigation records of the Group Companies
during the relevant Group Companys regular business hours, (ii) furnish, and will cause the Group Companies to furnish, to the Investors, their respective
counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information relating to the Group
Companies as such Persons may reasonably request and (iii) instruct the employees, counsel and financial advisors of the Group Companies to cooperate with
the Investors in their investigation of the Group Companies.
(b)
The Warrantors will further use their respective best efforts to cause each Target Franchisee to (i) give, WP, its counsel, financial advisor,
auditors and other authorized representatives reasonable access to offices, properties, books and records of each Target Franchisee, (ii) furnish WP, its
counsel, financial advisor, auditors and other authorized representatives such financial and operating data and other information relating to each Target
Franchisee as such Persons may reasonably request for the purpose to determine the operation and profit conditions of the Target Franchisees.
(c)
Any investigation pursuant to this Section shall be conducted in such manner as not to interfere unreasonably with the conduct of the
business of the Group Companies or the Target Franchisees (as applicable) and the applicable Investor shall bear all of the out-of-pocket costs and expenses
(including attorneys fees, but excluding reimbursement for general overhead, salaries and employee benefits) reasonably incurred in connection with such
investigation. No investigation by the Investors or other information received by the Investors shall operate as a waiver or otherwise affect any representation,
warranty or agreement given or made by the Warrantors hereunder.
Section 6.02.
Conduct of the Group. From the date hereof until the First Closing Date, except for matters expressly contemplated by the
Reorganization Plan or the Transaction Documents, the Warrantors shall cause each Group Company to conduct its business in all material respects in the
ordinary course consistent with past practice and use its commercially reasonable best efforts to (i) preserve intact its present business organization,
(ii) maintain in effect all of its material Permits, (iii) keep available the services of its directors, officers and Key Employees, (iv) maintain satisfactory
relationships with its customers, franchisees, lenders, suppliers and others having material business relationships with it, and (v) manage its working capital
(including the timing of collection of accounts receivable and of the payment of accounts payable) in the ordinary course of business consistent with past
practice. Without limiting the generality of the foregoing, except as expressly contemplated by the Reorganization or the Transaction Documents or
otherwise approved by the Investors Holding a Majority in Interest in
32
advance (such approval shall not be unreasonably withheld), the Warrantors shall not permit any of the Group Company to:
(a)
amend its Charter Documents;
(b)
issue, sell or authorize to the issuance or sale of the Equity Securities (other than the issuance by the Company and subscription by Sequoia
of 36,000,000 shares of Ordinary Shares); split, combine or reclassify any Equity Securities or declare, set aside or pay any dividend or other distribution
(other than dividends or distributions in cash in the amount not exceeding RMB500,000,000) (whether in cash, stock or property or any combination thereof)
in respect of its Equity Securities, or redeem, repurchase or otherwise acquire or offer to redeem, repurchase, or otherwise acquire its Equity Securities;
(c)
incur any capital expenditures or any obligations or liabilities in respect thereof, except for (i) any capital expenditure incurred for purchase
of land use rights (through direct purchase / assignment of the land use rights or acquisition of Equity Securities of a Person whose material assets solely
consist of such land use rights) not to exceed $20 million individually or $40 million in the aggregate or (ii) any other capital expenditures not to exceed $5
million individually or $20 million in the aggregate;
(d)
acquire (by merger, consolidation, acquisition of stock or assets or otherwise), directly or indirectly, any assets, Equity Securities,
properties, interests or businesses, other than (i) supplies in the ordinary course of business of such Group Company consistent with past practice,
(ii) acquisitions with a purchase price (including assumed indebtedness) that does not exceed $5 million individually or $20 million in the aggregate,
(iii) subscribe for Equity Securities newly issued by Rookie Network Technology Co., Ltd. () on a pro rata basis and (iv) those
permitted by Section 6.02(c);
(e)
sell, lease or otherwise transfer, or create or incur any Lien on its assets, Equity Securities, properties, interests or businesses, other than sales
of assets, Equity Securities, properties, interests or businesses with a sale price (including any related assumed indebtedness) that does not exceed $5 million
individually or $20 million in the aggregate;
(f)
other than in connection with actions permitted by Section 6.02(c) or Section 6.02(d), make any loans, advances or capital contributions to,
or investments in, any other Person, other than in the ordinary course of business consistent with past practice;
(g)
create, incur, assume, suffer to exist or otherwise be liable with respect to any indebtedness for borrowed money or guarantees thereof other
than in the ordinary course of business and in amounts and on terms consistent with past practices;
(h)
(i) enter into any agreement or arrangement that limits or otherwise restricts in any material respect any of the Group Companies or any of
their respective Affiliates or any successor thereto or that could, after the First Closing Date, limit or restrict in any material respect any of the Group
Companies, the Investors or any of their respective Affiliates, from engaging or competing in any line of business, in any location or with any
33
Person or (ii) enter into, amend or modify in any material respect or terminate any contract required to be disclosed by Section 3.11 or otherwise waive,
release or assign any material rights, claims or benefits of the Group Companies other than those made in the ordinary course of business consistent with past
practice;
(i)
make any change in any compensation arrangement or Contract with any employee (including the Key Employees) other than that
contemplated by Section 8.02(g);
(j)
change the methods of accounting of any Group Company, except as required by concurrent changes in its applicable accounting
standards, as agreed to by such Group Companys independent public accountants;
(k)
settle, or offer or propose to settle, (i) any litigation, investigation, arbitration, proceeding or other claim involving or against any Group
Company or any of the directors or officers of any Group Company involving an amount exceeding RMB3 million (or its equivalent in other currencies) or
(ii) any litigation, arbitration, proceeding or dispute that relates to the transactions contemplated by the Transaction Documents;
(l)
make any entry into any agreement in respect of material Taxes, settlement of any claim or assessment in respect of any material Taxes, or
consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of any material Taxes, entry into or change of any
material Tax election, change of any method of accounting resulting in a material amount of additional Tax or filing of any material amended Tax return; or
(m)
agree, resolve or commit to do any of the foregoing.
Section 6.03.
Notices of Certain Events. From the date hereof until the First Closing Date, the Company shall promptly notify each Investor of:
(a)
any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the
transactions contemplated by the Transaction Documents;
(b)
Documents;
any notice or other communication from any Governmental Authority in connection with the transactions contemplated by the Transaction
(c)
any actions, suits, claims, investigations or proceedings commenced or, to its Knowledge threatened, against, relating to or involving or
otherwise affecting any Group Company that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to
Section 3.12 or that relate to the consummation of the transactions contemplated by the Transaction Documents;
(d)
any inaccuracy of any representation or warranty contained in this Agreement at any time during the term hereof that could reasonably be
expected to cause the conditions set forth in Article 8 not to be satisfied; and
34
(e)
hereunder;
any failure of the Warrantors to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by them
provided, however, that the delivery of any notice pursuant to this Section 6.03 shall not limit or otherwise affect the remedies available hereunder to the
party receiving that notice.
Section 6.04.
Filing of Memorandum and Articles. The Company shall file the Memorandum and Articles with the Governmental Authority
within five Business Days after the First Closing Date and shall promptly provide a certified copy of the Memorandum and Articles to the Investors.
Section 6.05.
Circular 37 Registration. Each Person who, directly or indirectly through a holding company, holds any Equity Securities of the
Company as at the First Closing shall comply with the registration and any other requirement of Circular 37, to the extent that such Person is subject to or
under the jurisdiction of Circular 37 and evidence thereof shall be provided to the Investors.
Section 6.06.
Exclusivity. (a) From the date hereof until the earlier of the First Closing and the termination of this Agreement, each Warrantor
covenants to the Investors that it shall not, and shall cause its Affiliates, directors, officers, agents or representatives not to, (i) solicit, initiate, encourage,
conduct or engage in any discussions, or enter into any Contract with any other Person regarding any transaction similar in nature to those contemplated by
the Transaction Documents or (ii) disclose any nonpublic information relating itself, or afford access to its properties, books and records, facilities or
personnel, to any other Person that may be considering a transaction similar in nature to those contemplated by the Transaction Documents.
(b)
From the date hereof until the earlier of (i) the First Closing and (ii) the termination of this Agreement, each of the Investors and their
respective Restricted Affiliates covenants to the Company that it shall not make or commit in writing to make any equity investment in any Competitors
Competing Business.
Section 6.07.
Onshore Investment. (a) WP shall have the right to designate one or more individuals or entities (each, a WP Designee) to invest
in the Domestic Company through subscription of new registered capital of the Domestic Company, purchase of registered capital of the Domestic Company
from its shareholders or by other means as agreed by WP and the Company (the Onshore Investment), in accordance with Schedule XII and other details of
implementation to be agreed by WP and the Company in compliance with all Applicable Laws. The Warrantors covenant to WP that they shall use their
respective best efforts to complete the Onshore Investment in accordance with this Section on or before the First Closing Date.
(b)
WP shall be responsible for any and all Taxes incurred by each WP Designee, the Domestic Company and its shareholders (if applicable)
relating to or in connection with the Onshore Investment.
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(c)
Unless otherwise agreed by WP, prior to the First Closing Date, each of the shareholders agreement and the articles of association of the
Domestic Company shall have been amended, executed and delivered by each shareholder of the Domestic Company to reflect the arrangements set forth in
Schedule XII and substantially in form and substance satisfactory to WP and the Domestic Company shall have promptly filed such amended articles of
association with the Governmental Authority with evidence thereof provided to WP.
Section 6.08.
Further Assurances. Subject to the terms and conditions of this Agreement, the parties hereto shall take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary or desirable under Applicable Laws to consummate the transactions contemplated by the
Transaction Documents (including the Reorganization and Post-Reorganization Matters), including but not limited to (i) preparing and filing as promptly as
practicable with any Governmental Authority or other third party all documentation to effect all necessary filings, notices, petitions, statements, registrations,
submissions of information, applications and other documents, (ii) obtaining and maintaining all approvals, consents, registrations, permits, authorizations
and other confirmations required to be obtained from any Governmental Authority or other third party that are necessary, proper or advisable to consummate
the transactions contemplated by the Transaction Documents, and (iii) any other acts necessary or desirable to cause all of the applicable procedures and
conditions set forth in Article 2 and Article 8 to be satisfied. The parties hereto shall cooperate with one another (i) in determining whether any action by or
in respect of, or filing with, any Governmental Authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to
any material Contracts, in connection with the consummation of the transactions contemplated by the Transaction Documents and (ii) in taking such actions
or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or
waivers.
ARTICLE 7
POST-CLOSING COVENANTS AND OTHER AGREEMENTS
Section 7.01.
Confidentiality. Each party hereto agrees and acknowledges that the terms and conditions of the Transaction Documents,
including their existence, shall be considered confidential information and shall not be disclosed to any other Person except that (a) each party hereto, as
appropriate, may disclose any of such terms and conditions to its current or bona fide prospective investors, partners, employees, investment bankers, lenders,
accountants, attorneys, Affiliates and their respective directors, officers, employees and advisers, in each case only where such Persons are under appropriate
nondisclosure obligations; (b) each Investor may disclose any of such terms and conditions to its fund manager and the employees thereof so long as such
Persons are under appropriate nondisclosure obligations; (c) each party hereto may disclose any of such terms and conditions as required during any judicial
or regulatory process including in connection with any dispute, controversy or claim arising from or in connection with such Transaction Documents, and
(d) if any party hereto is requested or becomes legally compelled by any Governmental Authority or as required by the Applicable Laws (including pursuant
to rules of an applicable stock exchange) to disclose the existence or
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content of any of the Transaction Documents in contravention of the provisions of this Section, such party shall promptly provide the other parties with
written notice of that fact so that such other parties may seek a protective order, confidential treatment or other appropriate remedy and in any event shall
furnish only that portion of the information that is legally required and shall exercise reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded such information.
Section 7.02.
Public Announcements. None of the parties hereto shall make, or cause to be made, any press release or public announcement in
respect of this Agreement and other Transaction Documents or any transactions contemplated hereby and thereby or otherwise communicate with any news
media without the prior written consent of the Investors and the Company unless otherwise required by the Applicable Laws.
Section 7.03.
Noncompetition. (a) Each Principal agrees and covenants that from the date hereof until such Person or his Affiliates (including
each of the management, directors and employees of such Affiliates) are no longer shareholders, directors, officers or employees of any Group Companies or
their respective Affiliates and within two full years afterwards, such Person shall not, and shall cause any of its Affiliates (including shareholders, directors,
officers and employees of such Affiliates, as applicable) not to, engage, either directly or indirectly, as a principal or for his or its own account or solely or
jointly with others, or as shareholders in any corporation or joint stock association, or otherwise enjoy any economic interests or benefits, in any business that
competes with the business currently and proposed to be conducted by the Group Companies, provided that nothing herein shall prohibit a Principal or its
Affiliates (including each of the management, directors and employees of such Affiliates) from acquiring or holding Equity Securities of a Competitor whose
Equity Securities are traded on a national or regional stock exchange or on the over-the-counter market so long as such Principals ownership represents less
than 1% of such Competitors Equity Securities on a fully diluted basis as reported by such Competitor as of December 31 of the preceding year.
(b)
(i)WP agrees and covenants that as long as it holds not less than 1% of the Equity Securities of any Group Companies (calculated on a
fully-diluted and as-converted basis), and (ii) Gopher agrees and covenants that as long as itand Sequoia jointly hold not less than 1% of the Equity
Securities of any Group Companies (calculated on a fully-diluted and as-converted basis), neither it nor its Restricted Affiliates shall invest, either directly or
indirectly, for its own account or jointly with others, in any Competitors courier / express delivery services business in the PRC (the Competitors
Competing Business); provided that nothing herein shall prohibit such Investor or their respective Restricted Affiliates from acquiring or holding Equity
Securities of a Competitor whose Equity Securities are traded on a national or regional stock exchange or on the over-the-counter market so long as its and/or
its Restricted Affiliates ownership represents less than 1% of such Competitors Equity Securities on a fully diluted basis as reported by such Competitor as
of December 31 of the preceding year.
(c)
SC agrees and covenants that as long as it holds not less than 0.5% of the Equity Securities of any Group Companies, neither it nor its
Restricted Affiliates shallinvest, either directly or indirectly, for its own account or jointly with others, in any Competitors Competing Business; provided
that nothing herein shall prohibit SCor its
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Restricted Affiliates from acquiring or holding Equity Securities of a Competitor whose Equity Securities are traded on a national or regional stock exchange
or on the over-the-counter market so long as its and/or its Restricted Affiliatesownership represents less than 1% of such Competitors Equity Securities on a
fully diluted basis as reported by such Competitor as of December 31 of the preceding year.
(d)
Hillhouse agrees and covenants that as long as it holds not less than 0.5% of the Equity Securities of any Group Companies, neither it nor
its Restricted Affiliate shall invest, either directly or indirectly, for its own account or jointly with others, in any Competitors Competing Business; provided
that nothing herein shall prohibit Hillhouseor its Restricted Affiliate from acquiring or holding Equity Securities of a Competitor whose Equity Securities are
traded on a national or regional stock exchange or on the over-the-counter market so long as its and/or its Restricted Affiliatesownership represents less than
5% of such Competitors Equity Securities on a fully diluted basis as reported by such Competitor as of December 31 of the preceding year.
Section 7.04.
Non-Solicitation. Each Principal agrees and covenants that, from the date hereof through the third anniversary of the First Closing
Date, without the prior written consent of the Investors, such Person and its Affiliates (including each of the management, directors and employees of such
Affiliates) shall not, directly or indirectly, as a principal or for its or his own account or solely or jointly with others, solicit, induce or hire, or enter into
employment contract with any Key Employee or receive or accept the performance of services by any Key Employee, in each case which may result in the
termination of such Key Employees employment with the relevant Group Company.
Section 7.05.
Plan of Compliance and Risk Control. Within six months following the First Closing, the Company shall develop and submit a
compliance and risk control plan to be considered and approved by its shareholders or its board of directors, as the case may be, and shall regulate its
business operation, risk management and other matters with such plan. WP shall have the right to oversee the implementation of such plan.
Section 7.06.
Financial Statements. (a) Each Warrantor shall use its best efforts to ensure that with respect to a Qualified IPO of the Company,
the period from the 2015 financial year to the 2017 financial year will qualify for the three-year reporting period as required by the Applicable Law in respect
of the Qualified IPO.
(b)
Prior to December 31, 2015, the Company shall establish its financial and accounting system and prepare financial reports in accordance
with the Accounting Standards.
Section 7.07.
Related Party Transaction. All transactions of each Group Company with any of its Related Parties should be duly approved in
accordance with its Charter Documents, as applicable.
Section 7.08.
Compliance with Laws by First-Tier Franchisees. The Company will use its commercial reasonable best efforts to procure that the
First-Tier Franchisees operate in compliance in all material respects with Applicable Laws.
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Section 7.09.
Consummation of Post-Reorganization Matters. As soon as practicable after the First Closing, the Warrantors shall promptly
complete all of the Post-Reorganization Matters in accordance with Part III Post-Restructuring Matters of the Reorganization Plan and in the manner as
agreed by the Investors Holding a Majority in Interest.
Section 7.10.
Sole Listed Company. Each Warrantor covenants to the Investors that, unless otherwise agreed by WP, the Company shall be the
sole entity for any listing of the business and assets of the Group.
Section 7.11.
Specified Matters. The Company shall, and each Warrantor shall cause the applicable Group Company to, use its best efforts to
complete each matter specified on Schedule IX.
Section 7.12.
Chief Compliance Officer. As soon as practicable, the Company shall appoint a full time Chief Compliance Officer who shall
have sufficient knowledge of the Compliance Laws and relevant working experience satisfactory to the Investors Holding a Majority in Interest and the Chief
Compliance Officer shall directly report to the Board.
ARTICLE 8
CONDITIONS TO CLOSINGS
Section 8.01.
Conditions to Obligations of Investors for Each Closing. The obligations of each Investor to consummate each Closing are
subject to the satisfaction or waiver by such Investor of the following conditions:
(a)
Each of the representations and warranties of the Warrantors and Sellers contained in Article 3 and Article 4 (i) that are qualified by
materiality or Material Adverse Effect shall be true and correct at and as of the applicable Closing Date as if made at and as of such date and (ii) that are not
qualified by materiality or Material Adverse Effect shall be true and correct in all material respects at and as of the applicable Closing Date as if made at and
as of such date.
(b)
Each Warrantor and each Seller shall have performed and complied in all material respects with all of its or his obligations and conditions
contained in the Transaction Documents and the Rectification Plan (if applicable) that are required to be performed or complied with by it or him on or before
such Closing.
(c)
Since the date hereof and until and including such Closing, there shall have been no Material Adverse Effect.
(d)
No provision of any Applicable Law then in effect shall prohibit the consummation of such Closing. All Consents of any competent
Governmental Authority or of any other Person (including the Shanghai Qingpu Branch of the Agricultural Bank of China) that are required to be obtained
by the Warrantors or Sellers in connection with the consummation of the transactions contemplated by the Transaction Documents including necessary board
and shareholder approvals of each Group Company which is a party
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hereto, shall have been duly obtained and effective, and evidence thereof shall have been delivered to such Investor.
(e)
Such Investor shall have received respectively from PRC counsel and Cayman counsel for the Company an opinion, dated as of such
Closing, substantially in such form and substance as those attached hereto as Exhibit G.
(f)
The chairman of the Board shall have executed and delivered to such Investor at such Closing a certificate dated the applicable Closing
Date stating that the relevant conditions specified in this Article 8 have been fulfilled as of such Closing.
(g)
The Company shall have taken all necessary corporate actions such that immediately after the First Closing, the Board shall have 11
members, one of whom shall be appointed by WP.
(h)
There shall be no litigation, action, suit, investigation or proceeding challenging the legality of, or seeking to restrain, prohibit or
materially modify, the transactions contemplated by the Transaction Documents that is pending.
(i)
No personal bank account of any employees, directors or officers of any Group Company shall be mingled with the corporate assets or
corporate account of any Group Company during its operation of business and each Group Company shall not use any personal bank accounts of any of its
employees, directors or officers thereof during its operation of business.
Section 8.02.
Additional Conditions of Obligations of Investors for First Closing. In addition to Section 8.01, the obligations of each Investor
to consummate the First Closing are subject to the satisfaction or waiver by such Investor of the following further conditions:
(a)
Each party to the Transaction Documents to which such Investor is a party (other than the Investors) shall have executed and delivered such
Transaction Documents to such Investor.
(b)
The Memorandum and Articles shall have been duly adopted by all necessary actions of the Board and/or the members of the Company,
and such adoption shall have become effective immediately prior to or concurrently with the First Closing with no alternation or amendment as of the First
Closing, and reasonable evidence thereof shall have been delivered to the Investors. The Charter Documents of each of the other Group Companies shall be
in the form and substance reasonably satisfactory to the Investors.
(c)
The Reorganization has been duly completed in accordance with the Reorganization Plan and all Applicable Laws and in the manner as
approved by the Investors Holding a Majority in Interest and reasonable evidence thereof shall have been delivered to such Investor.
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(d)
The Company and its Subsidiaries shall have completed acquisition of all of the Target Franchisees and as a result of such acquisition, the
Company and its Subsidiaries shall directly hold the right of operation in all territories listed on Schedule V without any restriction, limitation or
encumbrance and own and hold all assets and business of such Target Franchisees as at the date hereof.
(e)
The Company shall have engaged Deloitte as its auditor and Deloitte shall have issued a draft consolidated or combined audit report on the
Group for the financial year of 2014 (the Draft Audit Report), which shall contain matters to be rectified by the Group Companies. The Company, the
Domestic Company, the Investors Holding a Majority in Interest and Deloitte shall have discussed and agreed on the solutions to rectify such matters set
forth in the Draft Audit Report (such written agreement as the Rectification Plan), aiming to ensure that the period from the 2015 financial year to the 2017
financial year will qualify for the three-year reporting period required in a Qualified IPO as a result of implementation of the Rectification Plan by the Group
Companies.
(f)
The Company shall have delivered the unaudited quarterly interim consolidated or combined financial statements of the Domestic
Company for the quarter immediately preceding the First Closing Date and, if available, unaudited monthly consolidated or combined management accounts
of the Domestic Company as of and for the period to the end of each following month to such Investor.
(g)
Each Key Employee shall have entered into an employment agreement with the relevant Group Company for a term of at least two years,
and such Key Employee shall be subject to customary non-solicitation, non-competition (for a minimum restrictive term of the entire term of such
employment plus two years afterwards) and confidentiality obligations to the satisfaction to such Investor.
(h)
The Company shall have delivered to such Investor its good standing certificate from the applicable Governmental Authority dated no
more than ten (10) days prior to the First Closing.
(i)
All Contracts listed on Schedule VI shall have been duly assigned to the Domestic Company by Zhong Tong Ji or each of the
counterparties thereto shall have signed a new Contract on terms and conditions not less favorable to the Domestic Company. Copies of each assignment or
new Contract have been delivered to such Investor.
(j)
The Domestic Company shall have been granted with an exclusive, royalty free, perpetual and worldwide license to use all ZTO
Trademarks under the Trademark License Agreement and the relevant license agreement together with all other application documents shall be submitted to
TMO and reasonable evidence thereof shall have been delivered to such Investor.
(k)
Each trademark transfer application with respect to any ZTO Trademark shall have been duly submitted to TMO evidenced by
receipt(s) from TMO, a copy of which shall have been delivered to such Investor.
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(l)
The Company shall have duly executed and delivered to WP the Indemnification Agreement between the Company and the WP Director
(as defined in the Shareholders Agreement).
(m)
The Company shall have initiated the recruiting program for a chief financial officer or financial director with each of the job description,
proposed reporting line and engaged headhunter satisfactory to such Investor.
(n)
The Company shall facilitate the discussions between the independent auditor advising the Investors on the transactions and its authorized
representatives and Deloitte to inquire and discuss on the audit work performed by Deloitte on the Group for the financial year of 2014.
(o)
The Company shall have set up settlement corporate bank account enabling direct settlement between parcel-collecting franchisees and
parcel-delivery franchisees satisfactory to Deloitte (with evidence thereof provided to such Investor) and such Investor.
Section 8.03.
Additional Conditions of Obligations of Investors for Second Closing. In addition to Section 8.01, the obligations of each
Investor to consummate the Second Closing are subject to the satisfaction or waiver by such Investor of the following further conditions:
(a)
Zhong Tong Ji shall have been either (A) dissolved and deregistered in compliance with all Applicable Law or (B) otherwise disposedin
compliance with all Applicable Law as the result of such disposition none of the Group Company would be held liable, directly or indirectly, under any
Applicable Law or Contract for any liabilities of Zhong Tong Ji,and in each case evidence thereof shall have been provided to such Investor.
(b)
All of the entities specified in the Rectification Plan which shall be dissolved and deregistered or otherwise disposed shall have been either
(A) dissolved and deregistered in compliance with all Applicable Law or (B) otherwise disposed in compliance with all Applicable Law, as the result of such
disposition none of the Group Company would be held liable, directly or indirectly, under any Applicable Law or Contract for any liabilities of such
entities,and in each caseevidence thereofshall have been provided to such Investor. WP shall have the right to review and inspect the completion of such
matters.
(c)
All of the matters specified in the Rectification Plan which shall be completed prior to the Second Closing shall have been completed in
accordance with the Rectification Plan and Applicable Laws, evidence of which shall have been provided to such Investor. WP shall have the right to review
and inspect the completion of such matters.
(d)
Such Investor shall have completed its First Closing as contemplated hereby.
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Section 8.04.
Conditions to Obligation of Company and Sellers for Each Closing. The obligations of each of Sellers and the Company to
consummate each Closing are subject to the satisfaction or waiver by such Seller or the Company (as applicable) of the following conditions:
(a)
Each of the representations and warranties of the applicable Investor contained in Article 5 shall be true and complete in all material
respects when made and on and as of each Closing with the same effect as though such representations and warranties had been made on and as of such
Closing Date, except in either case for those representations and warranties that address matters only as of a particular date, which representations shall have
been true and complete in all material respects as of such particular date.
(b)
The applicable Investor shall have performed and complied with all of its obligations and conditions contained in the Transaction
Documents that are required to be performed or complied with by it on or before such Closing.
(c)
No provision of any Applicable Law shall prohibit the consummation of such Closing.
(d)
There shall be no litigation, action, suit, investigation or proceeding challenging the legality of, or seeking to restrain, prohibit or
materially modify, the transactions contemplated by the Transaction Documents that is pending.
Section 8.05.
Additional Conditions to Obligation of Company and Sellers for First Closing. The obligations of the Company and the Sellers
to consummate the First Closing are further subject to that the applicable Investor shall have executed and delivered to it or him such Transaction Documents
to which such Investor is a party to it or him.
ARTICLE 9
SURVIVAL; INDEMNIFICATION
Section 9.01.
Survival. The representations and warranties of the parties hereto contained in this Agreement or in any certificate or other writing
delivered pursuant hereto or in connection herewith shall survive each such Closing until 30 months after the First Closing Date. Notwithstanding the
foregoing, if notice of any claim or demand for indemnification shall have been given within the time period described in the preceding sentence in
accordance with the terms of this Article 9, such claim or demand shall survive the time at which it would otherwise terminate.
Section 9.02.
Indemnification by Warrantors. Effective at and after the First Closing, each of the Warrantors hereby, jointly and severally,
indemnifies each Investor, its Affiliates and their respective successors and assignees (each, a Indemnified Party) against and agrees to hold each
Indemnified Party harmless from any and all damage, loss, liability and expense (including reasonable expenses of investigation and reasonable attorneys
fees and reasonable expenses in connection with any action, suit or proceeding whether involving a third party claim or a claim solely among the parties
hereto) (the
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Damages), incurred or suffered by each Indemnified Party arising out of, relating to or in connection with, directly or indirectly:
(a)
any misrepresentation or breach of warranty (the amount of Damages (but not breach or misrepresentation)) determined without regard to
any qualification or exception contained therein relating to materiality or Material Adverse Effect or any similar qualification or standard) (each such
misrepresentation and breach of warranty a Warranty Breach), provided that with respect to indemnification by any Warrantor for Warranty Breach
pursuant to this Section, the Warrantors shall not be liable unless the aggregate amount of Damages with respect to such Warranty Breach exceeds RMB20
million (the Basket) and then the Warrantors shall be liable for all Damages including the Basket, provided further that the limitation in this
Section 9.02(a) shall not apply to any breach of or inaccuracy in any Fundamental Representation made by the Warrantors.
(b)
any breach of covenant or agreement made or to be performed by the Warrantors pursuant to this Agreement;
(c)
any Taxes assessed against or incurred by any Indemnified Party due to, arising out of or as a result of the failure by any of the Warrantors or
any Group Companies to pay Taxes or file any Tax return due prior to each Closing Date or to pay, and the failure by any Indemnified Party to withhold or to
assist in withholding from payments to any of the Warrantors or any Group Company, any applicable Taxes in connection with or related to the
consummation of the transactions contemplated by this Agreement and the other Transaction Documents, or the Reorganization, including Taxes related to
Circular 698 and Circular 7, including any additional Taxes assessed against or incurred by the Indemnified Parties upon any transfer of any Equity
Securities in or assets of any Group Company as a result of a determination by any Governmental Authority that the Tax basis assigned to the Shares;
(d)
any monetary penalties and fines (including interests or other amounts in connection therewith) assessed by a Governmental Authority due
to, arising out of or as a result of the failure by any shareholder of the Company to comply with any and all rules and regulations of SAFE (including Circular
37) or to successfully update any filings or registrations required by such rules and regulations to give effect to the transactions contemplated by this
Agreement and the other Transaction Documents;
(e)
any monetary penalties and fines (including interests or other amounts in connection therewith) assessed by a Governmental Authority due
to, arising out of or as a result of breach or incompliance with any Applicable Law with respect to any material Permit as required for or in connection with
the business conducted by any Group Company, including the courier business license and the road transportation license;
(f)
any payments, monetary penalties and fines (including interests or other amounts in connection therewith) assessed by a Governmental
Authority or any other payments paid by any Group Company due to, arising out of or as a result of breach or incompliance with any Applicable Law with
respect to employment and labor matters; and
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(g)
any Taxes imposed on or with respect to a Group Company with respect to any Tax period ending on or prior to each Closing Date and with
respect to any Tax period that begins prior to such Closing Date and ends thereafter, any Tax allocable to the portion of the period ending on such Closing
Date; provided that (i) any Tax based on or measured by income or receipts of a Group Company shall be allocated among the respective portions of the
period based on an interim closing of the books as of the close of business on the day of such Closing Date and (ii) the amount of any other Taxes of a Group
Company allocable to the portion of the period ending on such Closing Date shall be deemed to be the amount of such Tax for the entire Tax period
multiplied by a fraction the numerator of which is the number of days in the period ending on such Closing Date and the denominator of which is the number
of days in such Tax period.
Notwithstanding the foregoing, the maximum liability of the Indemnified Parties (in the absence of fraud or gross negligence on the part of all
Indemnifying Parties) shall not exceed $300 million. The amount of any Damages payable under this Section 9.02 shall be net of any amounts actually
recovered by the Indemnified Party from any Person other than the Indemnifying Parties, if any.
Without prejudicing the maximum amount of $300 million prescribed in the foregoing paragraph, the sole and exclusive recourse for the
indemnification for the aggregate amount of the Damages incurred or suffered by any and all Indemnified Parties for which any Principal shall be liable
pursuant to this Section 9.02 shall be limited to the Equity Securities in the Group Companies held by such Principal.
Section 9.03.
Indemnification by Other Shareholders. Effective at and after the First Closing, each of the Other Shareholders hereby, severally
but not jointly, indemnifies each Indemnified Party against and agrees to hold each Indemnified Party harmless from any and all Damages incurred or suffered
by each Indemnified Party arising out of, relating to or in connection with, directly or indirectly, any misrepresentation or breach of warranty, covenant or
agreement made or to be performed by such Other Shareholder pursuant to this Agreement, provided that the aggregate amount of all Damages incurred or
suffered by an Indemnified Party for which such Other Shareholder (in the absence of fraud or gross negligence on the part of such Other Shareholder) shall be
liable pursuant to this Section 9.03 shall not exceed the amount of proceeds such Other Shareholder shall receive from the sale of such Other Shareholders
Sale Shares.
Section 9.04.
Penalty for Late Payment by Investors. (a) Each Investor shall pay a late payment interest of penalty of its aggregate purchase
price to be paid as at the First Closing in accordance with this Agreement at an annual interest rate of 20% for the period from the Scheduled First Closing
Date through and until the First Closing Date (exclusive) if such purchase price from such Investor is received after the Scheduled First Closing Date.
(b)
Subject to the Companys fulfillment of its obligation under Section 2.02(c), each Investor shall pay a late payment interest of penalty of its
aggregate purchase price to be paid as at the Second Closing in accordance with this Agreement at an annual interest rate of 20% for the period from
January 1, 2016 to the Second Closing Date (exclusive) if such purchase price from such Investor is received after December 31, 2015.
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Section 9.05.
Third Party Claim Procedures. (a)The Indemnified Party agrees to give prompt notice in writing to the Warrantors or Other
Shareholders (each, a Indemnifying Party), as applicable, of the assertion of any claim or the commencement of any suit, action or proceeding by any third
party (the Third Party Claim) in respect of which indemnity may be sought under Section 9.02 or Section 9.03 and provide the Indemnifying Party of
available material evidence of such Third Party Claim including court paper. Such notice shall set forth the nature and description in reasonable detail such
Third Party Claim and the basis for indemnification (taking into account the information then available to the Indemnified Party). The failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have actually prejudiced the
Indemnifying Party.
(b)
The Indemnifying Party shall be entitled to participate in the defense of any Third Party Claim and, subject to the limitations set forth in
this Section, shall be entitled to control and appoint lead counsel for such defense, in each case at its own expense; provided that prior to assuming control of
such defense, the Indemnifying Party must (i) acknowledge that it would have an indemnity obligation for the Damages resulting from such Third Party
Claim as provided under this Article 9 and (ii) furnish the Indemnified Party with evidence that the Indemnifying Party has adequate resources to defend the
Third Party Claim and fulfill its indemnity obligations hereunder.
(c)
The Indemnifying Party shall not be entitled to assume or maintain control of the defense of any Third Party Claim and shall pay the fees
and expenses of counsel retained by the Indemnified Party if (i) the Indemnifying Party does not deliver the acknowledgment referred to in
Section 9.05(b) within 30 days of receipt of notice of the Third Party Claim pursuant to Section 9.05(a), (ii) the Third Party Claim relates to or arises in
connection with any criminal proceeding, action, indictment, allegation or investigation, (iii) the Indemnified Party reasonably believes an adverse
determination with respect to the Third Party Claim would be detrimental to the reputation or future business prospects of the Indemnified Party or any of its
Affiliates (for this purpose including each Group Company), (iv) the Third Party Claim seeks an injunction or equitable relief against the Indemnified Party or
any of its Affiliates or (v) the Indemnifying Party has failed or is failing to prosecute or defend vigorously the Third Party Claim.
(d)
If the Indemnifying Party shall assume the control of the defense of any Third Party Claim in accordance with the provisions of this
Section 9.05, the Indemnifying Party shall obtain the prior written consent of the Indemnified Party before entering into any settlement of such Third Party
Claim, if the settlement does not expressly unconditionally release the Indemnified Party and its Affiliates (for this purpose including each Group Company)
from all liabilities and obligations with respect to such Third Party Claim or the settlement imposes injunctive or other equitable relief against the
Indemnified Party or any of its Affiliates.
(e)
In circumstances where the Indemnifying Party is controlling the defense of a Third Party Claim in accordance with paragraphs (c) and
(d) above, the Indemnified Party shall be entitled to participate in the defense of any Third Party Claim and to employ separate counsel of its choice for such
purpose, in which case the fees and expenses of
46
such separate counsel shall be borne by the Indemnified Party; provided that in such event the Indemnifying Party shall pay the fees and expenses of such
separate counsel (i) incurred by the Indemnified Party prior to the date the Indemnifying Party assumes control of the defense of the Third Party Claim or
(ii) if representation of both the Indemnifying Party and the Indemnified Party by the same counsel would create a conflict of interest.
(f)
Each party shall cooperate, and cause their respective Affiliates to cooperate, in the defense or prosecution of any Third Party Claim and
shall furnish or cause to be furnished such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials or appeals,
as may be reasonably requested in connection therewith.
Section 9.06.
Direct Claim Procedures. In the event an Indemnified Party has a claim for indemnity under Section 9.02 or Section 9.03 against
an Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party agrees to give prompt notice in writing of such claim to the
Indemnifying Party. Such notice shall set forth the nature and description of such claim in reasonable detail and the basis for indemnification (taking into
account the information then available to the Indemnified Party). The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of
its obligations hereunder, except to the extent such failure shall have actually prejudiced the Indemnifying Party. If the Indemnifying Party has timely
disputed its indemnity obligation for any Damages with respect to such claim, the parties shall proceed in good faith to negotiate a resolution of such dispute
and, if not resolved through negotiations, such dispute shall be resolved by arbitration pursuant to Section 11.07.
ARTICLE 10
TERMINATION
Section 10.01.
Grounds for Termination. This Agreement may be terminated at any time prior to the First Closing:
(a)
by mutual written agreement of the Company, Sellers and the Investors;
(b)
by either the Company, any Seller or any Investor if the First Closing shall not have been consummated on or before December 31, 2015;
(c)
by either the Company, any Seller or any Investor if there shall be any Applicable Law that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or if consummation of the transactions contemplated hereby would violate any nonappealable final
order, decree or judgment of any Governmental Authority having competent jurisdiction;
(d)
by any Investor, if a breach of any representation or warranty or failure to perform any covenant or agreement on the part of any Warrantor
or Other Shareholder set forth in this Agreement or any other Transaction Documents shall have occurred that would cause any of the conditions set forth in
Section 8.01 or Section 8.02 not to be satisfied and is incapable of being cured by any Warrantor or, if capable of being cured by any Warrantor or Other
Shareholder, such Warrantor or Other Shareholder does not cure
47
such breach or failure within 10 days after its receipt of written notice thereof from the Investor; or
(e)
by the Company or any Seller, if a breach of any representation or warranty or failure to perform any covenant or agreement on the part of
the Investor set forth in this Agreement or any other Transaction Documents shall have occurred that would cause any of the conditions set forth in
Section 8.04 or Section 8.05 not to be satisfied and is incapable of being cured by the Investor or, if capable of being cured by the Investor, the Investor does
not cure such breach or failure within 10 days after its receipt of written notice thereof from the Company.
The party desiring to terminate this Agreement pursuant to Section 10.01(b) to Section 10.01(e) shall give notice of such termination to the other
parties.
Section 10.02. Effect of Termination. If this Agreement is terminated as permitted by Section 10.01, this Agreement shall be of no further force or
effect except that the termination will not relieve any party from any liability for any breach of this Agreement prior to such termination.
ARTICLE 11
MISCELLANEOUS
Section 11.01. Notices. Any notice required or permitted pursuant to this Agreement shall be given in writing and shall be given either
personally or by sending it by next-day or second-day courier service, fax, electronic mail or similar means to the address of the relevant party as showed on
Schedule VIII (or at such other address as such party may designate by 15 days advance written notice to the other parties to this Agreement given in
accordance with this Section). Where a notice is sent by next-day or second-day courier service, service of the notice shall be deemed to be effected by
properly addressing, pre-paying and sending by next-day or second-day service through an internationally-recognized courier a letter containing the notice,
with a written confirmation of delivery, and to have been effected at the earlier of (a) delivery (or when delivery is refused) and (b) expiration of two Business
Days after the letter containing the same is sent as aforesaid. Where a notice is sent by fax or electronic mail, service of the notice shall be deemed to be
effected by properly addressing, and sending such notice through a transmitting organization, with a written confirmation of delivery, and to have been
effected on the day the same is sent as aforesaid, if such day is a Business Day and if sent during normal business hours of the recipient, otherwise the next
Business Day.
Section 11.02. Amendments and Waivers. (a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the
waiver is to be effective, with the understanding that any Investor may give its consent or waive any of its rights under this Agreement without obtaining the
consent of the other Investors. Any amendment or waiver effected in accordance with this Section 11.02 shall be binding upon each Investor and each
transferee of the Shares, each future holder of all such securities, and the Company;
48
provided, however, that any party may waive any of its rights hereunder in writing without obtaining the consent of any other parties.
(b)
No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies provided by law.
Section 11.03. Disclosure Schedule References. The parties hereto agree that any reference in a particular Section of the Disclosure Schedule
shall only be deemed to be an exception to (or, as applicable, a disclosure for purposes of) the representations and warranties (or covenants, as applicable) of
the relevant party that are contained in the corresponding Section of this Agreement, provided that any information disclosed in the Disclosure Schedule
under any section number shall be deemed to be disclosed and incorporated in any other sections or subsections of the Disclosure Schedule if it would be
readily apparent on the face of such disclosure that such information applies to such other sections or subsections.
Section 11.04. Expenses. Each party shall be responsible for all of its own costs expenses incurred by it or on its behalf in connection with the
negotiation, execution, delivery and performance of this Agreement and other Transaction Documents and the transactions contemplated hereby and thereby;
provided that subject to the occurrence of the First Closing, the Company shall reimburse WP for all costs and expenses incurred by it or on its behalf in
connection with the negotiation, execution, delivery and performance of this Agreement and other Transaction Documents and the transactions contemplated
hereby and thereby up to a maximum of US$300,000.
Section 11.05. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto; except that any Investor may transfer or assign its rights and obligations under this Agreement, in whole or
from time to time in part, to one or more of its Affiliates at any time.
Section 11.06. Governing Law. This Agreement shall be governed by and construed under the laws of Hong Kong, without regard to principles of
conflict of laws thereunder.
Section 11.07. Dispute Resolution. (a) Any dispute, controversy or claim (each, a Dispute) arising out of, relating to or in connection with this
Agreement, or the interpretation, breach, termination, validity or invalidity thereof, shall be referred to arbitration upon the demand of any party to the
dispute with notice (the Arbitration Notice) to the other parties.
(b)
The Dispute shall be settled by arbitration in Hong Kong by the Hong Kong International Arbitration Centre (the HKIAC) in accordance
with the Hong Kong
49
International Arbitration Centre Administered Arbitration Rules (the HKIAC Rules) in force when the Arbitration Notice is submitted in accordance with
the HKIAC Rules. To the extent that the HKIAC Rules are in conflict with any provisions of this Agreement, including the provisions concerning the
appointment of the arbitrators, the provisions of this Section 11.07 shall prevail.
(c)
There shall be three arbitrators, of whom one arbitrator shall be appointed by the claiming party(ies), one arbitrator appointed by the
responding party(ies), and the third arbitrator shall be appointed by the two arbitrators designated by the parties. If a party(ies) fails to designate an arbitrator
within 30 days after designation of an arbitrator by the other party(ies), the second arbitrator shall be appointed by the HKIAC Council. If the two arbitrators
designated by the parties are unable to agree upon a third arbitrator within 30 days after the first two arbitrators are appointed, the third arbitrator shall be
appointed by the HKIAC Council.
(d)
Each party to the arbitration shall cooperate with the other parties to the arbitration in making full disclosure of and providing complete
access to all information and documents requested by the other parties in connection with such arbitral proceedings, subject only to any confidentiality
obligations binding on such party.
(e)
The award of the arbitral tribunal shall be final and binding upon the parties thereto, and the prevailing party may apply to a court of
competent jurisdiction for enforcement of such award.
(f)
Any party to the Dispute shall be entitled to seek preliminary injunctive relief, if possible, from any court of competent jurisdiction pending
the constitution of the arbitral tribunal.
(g)
During the course of the arbitral tribunals adjudication of the Dispute, each party shall continue to perform its respective obligation and
duty herein except with respect to the part in dispute and under adjudication.
Section 11.08. Counterparts; Effectiveness; Third Party Beneficiaries. This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received a counterpart hereof signed by all of the other parties hereto. No provision of this Agreement is intended to confer
any rights, benefits, remedies, obligations, or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns.
Section 11.09. Entire Agreement. Unless otherwise expressly supplemented by another written agreement signed by all parties hereto, this
Agreement and other Transaction Documents, together with all schedules and exhibits hereto and thereto, constitute the full and entire understanding and
agreement among the parties with regard to the subjects hereof and thereof, and supersede all other agreements between or among any of the parties with
respect to the subject matters hereof and thereof.
50
Section 11.10. Severability. If any term, provision, covenant or restriction of this Agreement is held by HKIAC, a court of competent jurisdiction
or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the fullest extent possible.
Section 11.11. Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to
enforce specifically the performance of the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity.
Section 11.12. Independent Nature of Investors Obligations and Rights. The obligations of each Investor under this Agreement are several but
not joint, and no Investor is responsible in any way for the performance or conduct of any other Investor in connection with the transactions contemplated
hereby. Nothing contained herein, and no action taken by any Investor pursuant hereto or thereto, shall be or shall be deemed to constitute a partnership,
association, joint venture, or joint group with respect to the Investors. Each Investor agrees that no other Investor has acted as an agent for such Investor in
connection with the transactions contemplated hereby.
[Signature page follows]
51
LAI MEISONG ()
By:
/s/ Lai Meisong
[Signature Page to Share Purchase and Subscription Agreement]
LAI JIANFA ()
By:
/s/ Lai Jianfa
WANG JILEI ()
By:
/s/ Wang Jilei
HU XIANGLIANG ()
By:
/s/ Hu Xiangliang
By:
/s/ Lai Meisong

Name: Lai Meisong ()
Title: Director
ZTO EXPRESS LIMITED
By:
/s/ Lai Meisong

Name:
Lai Meisong ()
Title:
Director
ZTO EXPRESS (HONG KONG) LIMITED
By:
/s/ Lai Meisong

Name:
Lai Meisong ()
Title:
Director
ZTO EXPRESS CO., LTD. (Seal)
()
/s/ ZTO Express Co., Ltd.
By:
/s/ Lai Meisong
Name:
Lai Meisong ()
Title:
DONGGUAN JINSHENG INDUSTRIAL CO., LTD. (seal)
()
/s/ Dongguan Jinsheng Industrial Co., Ltd.
By:
/s/ Hu Xiangliang
Name:
Hu Xiangliang ()
Title:
NANJING HUIJITONG LOGISTICS CO., LTD. (seal)
()
/s/ Nanjing Huijitong Logistics Co., Ltd.
By:
/s/ Lai Shengfeng
Name:
Lai Shengfeng()
Title:
JIAXING ZHONGTONGJI LOGISTICS CO., LTD. (seal)
()
/s/ Jiaxing Zhongtongji Logistics Co., Ltd.
By:
/s/ Lai Jianfa
Name:
Lai Jianfa ()
Title:
TAIZHOU ZHONGRUI LOGISTICS CO., LTD. (seal)
()
/s/ Taizhou Zhongrui Logistics Co., Ltd.
By:
/s/ Lai Meisong
Name:
Lai Meisong ()
Title:
ZHEJIANG LITONG LOGISTICS CO., LTD. (seal)
()
/s/ Zhejiang Litong Logistics CO., Ltd.
By:
/s/ Shen Linxian
Name:
Shen Linxian()
Title:
ZHONG TONG JI AIR LOGISTICS CO., LTD. (seal)
()
/s/ Zhong Tong Ji Air Logistics Co., Ltd.
By:
/s/ Lai Jianfa
Name:
Lai Jianfa ()
Title:
ZTO LMS HOLDING LIMITED
By:
/s/ Lai Meisong

Name:
Lai Meisong ()
Title:
Director
ZTO LJF HOLDING LIMITED
By:
/s/ Lai Jianfa

Name:
Lai Jianfa ()
Title:
Director
ZTO WJL HOLDING LIMITED
By:
/s/ Wang Jilei

Name:
Wang Jilei ()
Title:
Director
ZTO HXL HOLDING LIMITED
By:
/s/ Hu Xiangliang
Name:
Hu Xiangliang ()
Title:
Director
ZTO ZSC HOLDING LIMITED
By:
/s/ Zhang Shunchang

Name:
Zhang Shunchang ()
Title:
Director
ZTO SXB HOLDING LIMITED
By:
/s/ Shang Xuebing

Name:
Shang Xuebing ()
Title:
Director
ZTO LBX HOLDING LIMITED
By:
/s/ Lan Baixi

Name:
Lan Baixi ()
Title:
Director
ZTO XHJ HOLDING LIMITED
By:
/s/ Xu Hongjun
Name:
Xu Hongjun ()
Title:
Director
ZTO LJC HOLDING LIMITED
By:
/s/ Lai Jianchang

Name:
Lai Jianchang ()
Title:
Director
ZTO WLM HOLDING LIMITED
By:
/s/ Wu Lemou
Name:
Wu Lemou ()
Title:
Director
ZTO TJY HOLDING LIMITED
By:
/s/ Teng Jianying

Name:
Teng Jianying ()
Title:
Director
ZTO LBZ HOLDING LIMITED
By:
/s/ Li Baozhen
Name:
Li Baozhen ()
Title:
Director
ZTO MSM HOLDING LIMITED
By:
/s/ Ma Shumin
Name:
Ma Shumin ()
Title:
Director
ONYX GEM INVESTMENT HOLDINGS LIMITED
By:
/s/ Timothy J. Curt

Name:
Timothy J. Curt
Title:
Director
HILLHOUSE ZT HOLDINGS LIMITED
By:
/s/ Meng Shan

Name:
Meng Shan
Title:
Director
Standard Chartered Private Equity (Mauritius) III Limited
By:
/s/ Andrew Dawson

Name:
Andrew Dawson
Title:
Director
GOPHER CHINA S.O. PROJECT LIMITED
By:
/s/ Liu Hui

Name:
Liu Hui
Title:
Director
SCHEDULE I
LIST OF PRINCIPALS
First Closing
Principal
Number of
Ordinary Shares
Number of Sale
Shares
Transferee
Aggregate
Purchase Price
(USD)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
PRC
n/a
n/a
n/a
n/a
n/a
n/a
n/a
6,000,000
3,000,000
WP
23,534,580
3,000,000
WP
23,534,580
PRC
n/a
6,000,000
n/a
3,000,000
n/a
WP
n/a
23,534,580
n/a
3,000,000
n/a
WP
n/a
23,534,580
PRC
n/a
4,440,000
n/a
2,220,000
n/a
WP
n/a
17,415,590
n/a
2,220,000
n/a
WP
n/a
17,415,590
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Jurisdiction/Nationality
ZTO LMS Holding

Limited
Lai Meisong (
)
ZTO LJF Holding
Limited
Lai Jianfa ()
ZTO WJL Holding
Limited
Wang Jilei ()
ZTO HXL Holding
Limited
Hu Xiangliang (
)
Second Closing
PRC
Transfer
Aggregate
Purchase Price
(USD)
Number of Sale
Shares
SCHEDULE II
Name
ZTO ZSC
Holding
Limited
ZTO ZSC
Holding
Limited
ZTO SXB
Holding
Limited
ZTO LBX
Holding
Limited
ZTO XHJ
Holding
Limited
ZTO LJC
Holding
Limited
ZTO TJY
Holding
Limited
ZTO TJY
Holding
Limited
ZTO TJY
Holding
Limited
Jurisdiction
Number of Sale
Shares
British Virgin
Islands
2,933,800
British Virgin
Islands
66,200
British Virgin
Islands
First Closing
Aggregate Purchase Price to be
Transferees
Paid by Transferee (USD)
Second Closing
Aggregate Purchase Price to be
Transferees
Paid by Transferee (USD)
23,015,250
2,933,800
Hillhouse
519,330
66,200
Hillhouse
519,330
1,500,000
Hillhouse
11,767,290
1,500,000
Hillhouse
11,767,290
British Virgin
Islands
300,000
Hillhouse
2,353,458
300,000
Hillhouse
2,353,458
British Virgin
Islands
105,000
Hillhouse
823,710
105,000
Hillhouse
823,710
British Virgin
Islands
600,000
Hillhouse
4,706,916
600,000
Hillhouse
4,706,916
British Virgin
Islands
615,600
Hillhouse
4,829,296
615,600
Hillhouse
4,829,296
British Virgin
Islands
2,868,120
Gopher
22,500,000
2,868,120
Gopher
22,500,000
British Virgin
Islands
1,012,080
SC
7,939,626
1,012,080
SC
7,939,626
WP
Number of Sale
Shares
WP
23,015,250
ZTO WLM
Holding
Limited
ZTO LBZ
Holding
Limited
ZTO MSM
Holding
Limited
Total
British Virgin
Islands
255,000
SC
2,000,439
255,000
SC
2,000,439
British Virgin
Islands
225,000
SC
1,765,094
225,000
SC
1,765,094
420,000
19,120,800
SC
3,294,841
150,000,000
420,000
19,120,800
SC
3,294,841
150,000,000
British Virgin
Islands
SCHEDULE III
LIST OF INVESTORS
First Closing
Name
Onyx Gem Investment

Holdings Limited
Hillhouse ZT Holdings
Limited
Standard Chartered
Private Equity
(Mauritius) III Limited
Gopher China S.O.
Project Limited
Total
Mauritius
British Virgin
Islands
Aggregate
Purchase
Price for
Sale Shares
(USD)
Number
of
Subscription
Shares
Aggregate
Purchase
Price for
Subscription
Shares
(USD)
87,500,000 11,153,800
87,500,000
8,773,309
87,500,000
2,506,660
25,000,000
3,186,800
25,000,000
2,506,660
25,000,000
1,503,996
15,000,000
1,912,080
15,000,000
1,503,996
15,000,000
Number
of Sale
Shares
Aggregate
Purchase
Price for
Sale Shares
(USD)
Number
of
Subscription
Shares
11,153,800
87,500,000
8,773,309
3,186,800
25,000,000
1,912,080
15,000,000
Jurisdiction
British Virgin
Islands
British Virgin
Islands
Second Closing
Aggregate
Purchase
Price for
Subscription
Shares (USD)
Number
of Sale
Shares
2,868,120 22,500,000 2,255,994 22,500,000 2,868,120 22,500,000 2,255,994 22,500,000

19,120,800 150,000,000 15,039,959 150,000,000 19,120,800 150,000,000 15,039,959 150,000,000
SCHEDULE IV
CAPITALIZATION TABLE OF THE COMPANY
Shareholders
ZTO LMS Holding Limited
ZTO LJF Holding Limited
ZTO WJL Holding Limited
ZTO HXL Holding Limited
ZTO ZSC Holding Limited
ZTO SXB Holding Limited
ZTO QFX Holding Limited
ZTO LBX Holding Limited
ZTO MF Holding Limited
ZTO XHJ Holding Limited
ZTO ZYR Holding Limited
ZTO WSL Holding Limited
ZTO ZYW Holding Limited
ZTO HZR Holding Limited
ZTO HLJ Holding Limited
ZTO LZM Holding Limited
ZTO ZGF Holding Limited
ZTO WR Holding Limited
ZTO XMY Holding Limited
ZTO CSF Holding Limited
Number of Ordinary
Shares
206,100,000
69,000,000
57,000,000
40,080,000
33,000,000
24,900,000
18,000,000
8,100,000
6,000,000
3,424,860
6,000,000
2,960,088
1,480,044
903,900
259,986
259,986
126,000
609,006
689,868
370,000
Shareholders
ZTO CFS Holding Limited
ZTO ZJSD Holding Limited
ZTO PSM Holding Limited
ZTO YXL Holding Limited
ZTO LJC Holding Limited
ZTO MS Holding Limited
ZTO ZHF Holding Limited
ZTO XJX Holding Limited
ZTO XKM Holding Limited
ZTO YWJ Holding Limited
ZTO YB Holding Limited
ZTO ZJGZ Holding Limited
ZTO PYF Holding Limited
ZTO CZW Holding Limited
ZTO RDY Holding Limited
ZTO WLM Holding Limited
ZTO LBZ Holding Limited
ZTO MSM Holding Limited
ZTO WW Holding Limited
ZTO TJY Holding Limited
Number of Ordinary
Shares
160,000
160,000
150,000
75,000
5,730,000
6,250,000
450,000
550,000
940,000
504,000
830,832
165,000
165,000
410,610
470,820
16,507,050
2,977,746
1,893,492
1,568,250
25,657,662
First Closing
Number of Series A Preferred
Shares
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Second Closing
Number of Ordinary
Shares
Shares
206,100,000
66,000,000
54,000,000
37,860,000
30,000,000
23,400,000
18,000,000
7,800,000
6,000,000
3,319,860
6,000,000
2,960,088
1,480,044
903,900
259,986
259,986
126,000
609,006
689,868
370,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Second Closing
Number of Ordinary
Shares
Shares
160,000
160,000
150,000
75,000
5,130,000
6,250,000
450,000
550,000
940,000
504,000
830,832
165,000
165,000
410,610
470,820
16,252,050
2,752,746
1,473,492
1,568,250
21,161,862
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
First Closing
Shares
Max Alpha Limited

Max Beyond Limited
Shareholders
Onyx Gem Investment Holdings Limited
Standard Chartered Private Equity (Mauritius) III
Limited
TOTAL (excluding reserved shares)
Reserved Shares
TOTAL (including reserved shares)
24,000,000
12,000,000
0
0
Number of Ordinary
Shares
11,153,800
3,186,800
First Closing
Shares
8,773,309
2,506,660
1,912,080
2,868,120
600,000,000
16,800,000
616,800,000
1,503,996
2,255,994
15,039,959
0
15,039,959
24,000,000
12,000,000
0
0
Second Closing
Number of Ordinary
Shares
Shares
22,307,600
17,546,618
6,373,600
5,013,320
3,824,160
5,736,240
600,000,000
16,800,000
616,800,000
3,007,992
4,511,988
30,079,918
0
30,079,918
SCHEDULE V
TERRITORIES OF TARGET FRANCHISEES
Fujian
Liaoning (Shenyang)
Shaanxi
Tianjin
Jiangxi
Shanxi
Jilin
Anhui (Hefei)
Shandong
Hebei
Yunnan
Chongqing
Heilongjiang
Guizhou
SCHEDULE VI
LIST OF CONTRACTS
1.
An express delivery service contract between Zhong Tong Ji and Beijing Dangdang Information Technology Co., Ltd. (
) (undated);
2.
An express delivery service contract between Zhong Tong Ji and Guangzhou Danmei Cosmetic Products Co., Ltd. ()
dated January 11, 2013;
3.
An express delivery service contract between Zhong Tong Ji and Guangzhou Aibao Shidai Trading Co., Ltd. () dated
December 12, 2012;
4.
A delivery contract between Zhong Tong Ji and Nanjing Guanbai Clothing Co., Ltd. () dated August 1, 2013;
5.
A delivery contract between Zhong Tong Ji and Shanghai Kaichun Industrial Co., Ltd. () March 28, 2013.
SCHEDULE VII
LIST OF ZTO TRADEMARKS
No.
Registration No.
Registered Owner
Class
Term
Status
1.
Trademark
3514763
39
2005.01.07-2015.01.06
Renewal application has

been accepted by the
competent
governmental authority
2.
3179716
39
2013.08.28-2023.08.27
Registered
3.
3514764
Shanghai Zhong Tong Ji

Express
Services Co., Ltd.

Express
Services Co., Ltd.

Express
Services Co., Ltd.
39
2005.05.21-2015.05.20
Renewal application has

been submitted to the
competent
governmental authority
and the acceptance of
such application is yet
to be obtained
SCHEDULE VIII
ADDRESS FOR NOTICES
If to any Principal and/or Other Shareholder:
Address:
No. 1685, Huazhi Road, Qingpu District
Attention: Xu Feng
Fax: +86 21 59139333
If to the Company and/or other Group Company:
Address:
No. 1685, Huazhi Road, Qingpu District
Attention: Xu Feng
Fax: +86 21 59139333
If to Onyx Gem Investment Holdings Limited:
c/o Warburg Pincus LLC
Attention: Timothy J. Curt/Tara ONeill
Address: 450 Lexington Avenue, New York, NY, USA 10017
Fax: +1(21)878-9200
Email: timothy.curt@warburgpincus.com; tara.oneill@warburgpincus.com
With a copy to:
Warburg Pincus Asia LLC

Attention: Andrew Chan
Address: Suite 6703, Two IFC, Hong Kong
Fax: +(852)30103338
Email: andrew.chan@warburgpincus.com
If to Hillhouse ZT Holdings Limited:
Attention: Cao Wei
Address: Floor 28, Building B, PingAn International Financial Center, No. 1-3, Xinyuan South Road, Chaoyang District, Beijing 100027
PRC (3B28)
Fax: +86-10-59520882
Email: wcao@hillhousetca.com
With a copy to:

Attention: Adam HORNUNG
Address: Suite 1608, One Exchange Square, 8 Connaught Place, Central, Hong Kong
Fax:+(852) 2179 1900
Email: Legal@hillhousecap.com
If to Standard Chartered Private Equity (Mauritius) III Limited:
c/o Abax Corporate Services Ltd.
Address: 6th Floor, Tower A, 1 CyberCity, Ebene, Mauritius
With a copy to:
Standard Chartered Principal Finance
Attention: Gilbert Zeng
Address: MarinaBay Financial Centre (Tower 1),
8, Marina Boulevard, Level 23
Singapore 018981
Fax: +(8610) 5918 6199
Email:gilbert.zeng@sc.com
If to Gopher China S.O. Project Limited:
Address: Room 903-4, Li Po Chun Chambers
189 Des Voeux Road, Central, Hong Kong
Attention: Annie Choy/ Lin Xiang
Fax: +852 3791 2282
Email: annie.choy@noahwm.hk; leo.lin@noahwm.hk
SCHEDULE IX
SPECIFIED MATTERS
1.
Courier Business Licenses. Within twelve months after the First Closing, each of the Group Companies that conducts courier services as of the relevant
time, as applicable, shall (i) submit all application documents to the relevant Governmental Authority for the courier business license ()
for each jurisdiction where it conducts courier business on its own and/or via franchisees, and/or (ii) rectify any and all incompliance matters relating to
or in connection with its existing courier business license, including filing with the Governmental Authority for its services provided to e-commerce
operators and to resume its courier business which have been suspended as of the date hereof. Each of the foregoing Group Companies shall, in any
event within two years after the First Closing, duly obtain such courier business license and duly complete all rectifications and corrections of all
incompliance matters relating to or in connection with its existing courier business license.
2.
Road Transportation License. Each of Dalian Zhong Tong Ji Logistics Company Limited (), Nanjing Hui Ji Tong Logistics
Company Limited (), Suzhou ZTO Express Co., Ltd. () and any other Group Company which engages
in road transportation business, shall (i) within twelve months after the First Closing, submit all application documents to the relevant Governmental
Authority for the road transportation license () and (ii) in any event within two years after the First Closing, to duly obtain such
license.
3.
Food Distribution Permit. The Domestic Company and each Group Company which engages in food courier/transportation business shall (i) within six
months after the First Closing, submit all application documents to the relevant Governmental Authority for the food distribution permit (
) to the extent and only if such food distribution permit is mandatorily required pursuant to Applicable Laws and as confirmed by the relevant
Governmental Authority and (ii) use their respective best efforts to duly obtain such Permit within two years after the First Closing, if mandatorily
required by the Applicable Law then in effect.
4.
Other Permits. Each Group Company shall, (i) within six months after the First Closing, use its best efforts to submit all application or
amendment/updating applications documents to the relevant Governmental Authority for any and all material Permits required for its business that it has
not obtained, maintained, updated and/or amended prior to the First Closing, including the business license, special equipment use registration (
) and non-profitable Internet website filing () and (ii) use its commercially reasonable best efforts to amend or update
each such material Permit within two years after the First Closing, in each case, if mandatorily required by the Applicable Law then in effect.
5.
Logistics Centers. The Company shall use its best efforts to (i) within six months after the First Closing, submit all application documents to the relevant
Governmental Authority to register each logistics center respectively in Guiyang, Wenzhou, Ningbo,
Nantong, Wuhu and Bengbu as a branch office and (ii) in any event within one year after the First Closing, complete such registration and obtain all
required material Permits in connection therewith.
6.
Franchise Filing. Within two years after the First Closing, each of the Domestic Company and any other Group Companies which has signed any
franchise Contracts, shall use its commercially reasonable best efforts to file all of its franchise Contracts with the applicable Governmental Authority, if
such filing is mandatorily required by the Applicable Law then in effect.
7.
Franchise Contracts. Within two years after the First Closing, each Group Company, as applicable, shall use its best efforts to amend its existing
franchise Contracts (either by signing an amendment to the existing franchise Contract or signing a new amended franchise Contract) to procure that
each First-Tier Franchisee only receive performance or services from a third party that holds suitable Permits for the courier and/or road transportation
services as required by Applicable Laws.
8.
Properties. As soon as practicable but in any event within two years after the First Closing, each Group Company, as applicable, shall use its best efforts
to duly obtain ownership certificates of land use rights, plants, buildings and structures owned by it and complete all procedures and formalities and pay
all payments in connection therewith; except that with respect to a parcel of land in the west to the Company which is about 40 Mu and used by the
Company, the Company shall use its commercially reasonable best efforts to duly obtain ownership certificates of the land use rights, plants, buildings
and structures used by it within two years after the First Closing.
9.
Employment and Labor Matters.(a)As soon as practicable after the First Closing, each Group Company shall amend the employment Contract with each
Key Employee or enter into a new employment Contract with each Key Employee containing customary Intellectual Property Rights development and
assignment, work-for-hire, non-compete and non-solicitation arrangements and provisions to the satisfaction of the Investors Holding a Majority in
Interest.
(b)
As soon as practicable after the First Closing and no later than March 1, 2016, each Group Company, as applicable, shall use its commercially
reasonable best efforts to terminate or otherwise adjust the secondment arrangement adopted by any Group Company as of the date hereof so as to
comply with all Applicable Laws then in effect.
(c)
Within twelve months after the First Closing, each Group Company shall use its best efforts to enter into a written employment Contract with
each of its employees who has not signed an employment Contract with it as of the First Closing.
(d)
Each Group Company, as applicable, shall amend its employees handbook and other internal policies and rules with respect to employment and
labor matters to comply with all Applicable Laws.
10. Intellectual Property Rights.(a) Each Group Company, as applicable, shall within six months after the First Closing, use its best efforts to submit all
application documents to the relevant Governmental Authority to register self-owned copyright works and, shall use its best efforts to complete such
registration within one year after the First Closing.
(b)
With respect to any domain name used by any Group Company during its operation but owned by a third party (including zto.cn and
ztbest.com), such Group Company shall, within six months after the First Closing, use its best efforts to enter into a bona fide, arms-lengths
transfer/assignment agreement or similar Contract with such third party owners to obtain ownership of such domain names, free of any Lien and, shall use
its best efforts to, within one year, complete such transfer, including any registrations or filings with any Governmental Authority.
(c)
Within two years after the First Closing, each Group Company that uses any computer software and systems owned by a third party for its
operation, shall use its best efforts to enter into a bona fide, arms-lengths license Contract with the third party owner, to the extent that it has not entered
into such Contracts.
(d)
The Domestic Company shall complete the filing of all license Contracts with respect to ZTO Trademarks contemplated by Section 8.02(j) of
this Agreement with TMO no later than six months after the First Closing.
(e)
Within one year after the First Closing, the Domestic Company shall have all ZTO Trademarks (as applicable) duly renewed and evidence
thereof shall be provided to the Investors.
11. Rectification Plan. Each Warrantor covenants to the Investors that it shall, and shall procure the Group Companies to, carry out the Rectification Plan in
accordance with the terms thereof.
12. Taxes. Each Warrantor covenants to the Investors that it shall, and shall procure the Group Companies that is a PRC Person to comply with, in all
material respects, all Applicable Laws with respect to Taxes in the financial year of 2015.
13. Internal Audit Department. Each Warrantor covenants to the Investors that it shall, and shall procure the Company to, establish an internal department
responsible for audit, which shall directly report to the general manager or the board of directors of the Company.
14. Acquisition of Target Franchisees. WP shall have the right to review and inspect on-site account books or other documents to determine the operation
and profit conditions of the Target Franchisees.
SCHEDULE X
LIST OF COMPETITORS
1.
2.
3.
4.
5.
6.
7.
8.
9.
EMS
SCHEDULE XI
New Investor
WP
Restricted Affiliates
(a) Warburg Pincus LLC;

(b) any fund managed by Warburg Pincus LLC which is still in its investment period as at the date of this Agreement in accordance
with the terms of the relevant fund documents (exclusive of Warburg Pincus Energy, L. P. and any future funds to be raised and
under the management of Warburg Pincus LLC);
(c) the general partner of such fund mentioned in (b) above; and
(d) any investment vehicle established and majority owned by such fund mentioned in (b) above.
SC
(a) Standard Chartered Principal Finance (Cayman) Limited;

(b) Standard Chartered Private Equity (Singapore) Pte. Ltd.;
(c) Standard Chartered Private Equity Limited;
(d) Standard Chartered Private Equity (Mauritius) Limited;
(e) Standard Chartered Private Equity (Mauritius) II Limited; and
(f) any investment vehicle established and majority owned by such companies mentioned in (a) to (e) above.
Hillhouse
(a) Hillhouse Fund II, L.P.
Gopher
(a) Gopher China Harvest Fund LP; and

(b) Gopher China Special Opportunity Fund II LP.
SCHEDULE XII
SPECIFIC ARRANGEMENTS ON ONSHORE INVESTMENT
I.
WP Designees shareholding percentage in the Domestic Company

WP Designee shall own 10,000 to 20,000 shares of the Domestic Company.
II.
Protection at Corporate Governance
1.
WP Director Appointment: Under the Control Documents and the shareholders agreement of the Domestic Company, each of the other shareholders of
the Domestic Company shall promise to vote for the director nominated by WP Designee to elect such nominee on the board of the Domestic Company.
2.
Board Level: The following clause will be included in the shareholders agreement and the articles of association of the Domestic Company before the
First Closing and become effective only in the event of (i) termination of the Control Documents for any reasons; or (ii) collapse of the Captive Structure.
The following key business decisions (Key Matters) of the Domestic Company and its subsidiaries (collectively the Domestic Group and each a
Domestic Group Member) will be approved by a simple majority of the board of directors of the Domestic Company(which must include the approval
of the director nominated by WP Designee):
(a)
(b)
(c)
(d)
(e)
IPO of the Domestic Group;

any amendment to, modification of or change inany Control Documents;
any increase or deduction of the registered capital of the Domestic Company;
merger, acquisition, division, reorganization, change of corporate form or other similar procedure of the Domestic Company;
any amendment to thearticles of association of the Domestic Company; and any amendment to the articles of association of any other Domestic
Group Member to the extent such amendments could reasonably be expected to adversely affect WP Designee rights or privileges in relation to
the onshore investment;
(f) any voluntary commencement of liquidation, dissolution or other similar procedure of the Domestic Company or any Material Domestic Group
Member, and Material Domestic Group Member means any Domestic Group Member (other than the Domestic Company) either gross revenue
or net income of which of the preceding financial year accounts for 5% or more of the total gross revenue or total net income of the Domestic
Group of the preceding financial year;
(g) termination or suspension of the business as currently conducted by the Domestic Group, taken as a whole, as of the date hereof or entry into a
complete new line of business substantially different from the business as conducted by the Domestic Group, taken as a whole, as of the date
hereof;
(h) any amendment to,modification of or change in its Anti-Bribery Procedures or compliance process, policies and procedures covering Sanctions;
(i) the issuance price of any new issue of Equity Securities of the Domestic
Company(excluding (A) any issue pursuant to any employee benefit plan, employee stock option plan or similar plan in which the total Equity
Securities to be reserved or issued account for not more than 3% of the then outstanding Equity Securities (calculated on a fully-diluted and asconverted basis) and (B) any issue to the Strategic Investors which is not primarily for equity financing purpose and in which the total Equity
Securities to be issued account for no more than 15% of the then outstanding Equity Securities (calculated on a fully-diluted and as-converted
basis)) or any redemption, repurchase, recapitalization, reclassification or combination of its Equity Securities if not on a pro rata basis with
respect to all shareholders;
(j) entry into a transaction or a series of transactions with its Related Party that provides for payment to or from the Domestic Group Member of
RMB200 million or more and on terms less favorable than those that could be obtained if such transaction were entered into with a third party on
the arms-length basis;
(k) any sale, transfer, lease, pledge or other disposition by any Domestic Group Member of any assets (tangible or intangible), businesses, interests or
properties, in a single transaction or a series of related transactions, with a value in the aggregate in excess of RMB200 million; or any sale, transfer
or other disposition by any Domestic Group Member of any Person whose gross revenue or net income ofthe preceding financial year accounts for
5% or more of the total gross revenue or net income of the Domestic Groupof the preceding financial year;
(l) any provision of guarantee or security for a Person that is neither a Domestic Group Member nor a delivery hub or franchisee transacting with the
Domestic Group Members; or provision of loans providing for either (A) a total principal amount of RMB10 million or more to a single Person that
is not a Domestic Group Member or (B) a total principal amount of RMB30 million or more to all Persons that are not Domestic Group Members;
(m) any appointment or removal of the independent auditor of each Domestic Company who will be responsible to audit and opine on the consolidated
financial statements of the Domestic Company reflecting the financial position of the Domestic Group; or any material change in accounting
principles, except as required by law.
3.
Shareholders Level:
A unanimous shareholders approval would be required if the shareholders would like to amend or revise the articles of association of the Domestic
Company;
For the following Key Matters that fall under shareholders meetings authority (requiring two-third affirmative votes) under the PRC Company Law,
without the recommendation of the board to the shareholder meeting to approve such Key Matters, the shareholders meeting shall not discuss or
resolve or vote on such matters:
(a) any increase or deduction of the registered capital of the Domestic Company.
III.
Increase of Share Percentage at the Collapse of Captive Structure

Upon collapse of the Captive Structure for any reasons, (i) WP Designee, WP and/or any other individual or entity designated by WP then
shall have the right, at its sole discretion, to request the Domestic Company to issue new shares to WP Designee, WP and/or any other individual or
entity designated by WP then at the par value of the shares so that WP Designee, WP and/or any other individual or entity designated by WP then
will hold directly the exact same stake, (in terms of percentage interest), in the Domestic Company as it then holds in ZTO Express (Cayman) Inc. in
terms of percentage interest on a fully-diluted and as-converted basis; and (ii) WP Designee is entitled to freely transfer any or all of thesharesof the
Domestic Company that WP Designee then holds to WP and/or any other individual or entity designated by WP and all other shareholders of the
Domestic Company shall waive all rights and privileges arising from or in connection with such equity transfer, including without limitation the
right of first refusal, whether under contract or by law.
IV.
Other Measures
When WP exits investment from the Company before the collapse of the Captive Structure, WP Designee shall be obligated toexit from the
Domestic Company by electing to (i) sell its shares in the Domestic Company to a third party, Mr. Lai Meisong or other individual shareholders, or
(ii) request the Domestic Company to repurchase such equity stake, in each case, at the investment cost for such shares paid by WP Designee. For
the avoidance of doubt, upon the election of WP Designee, Mr. Lai Meisong and the Domestic Company, as the case maybe, shall have the
obligation to purchase such shares offered by WP Designee at the investment cost for such shares paid by WP Designee.
Each party shall be responsible for all of its own costs and expenses incurred by it or on its behalf in connection with the transaction under
Section III and Section IV of this Schedule; provided that WP shall reimburse the Domestic Company, Mr. Lai or other individual shareholders for
all taxes incurred by them or on their behalf in connection with the transaction under Section III and Section IV of this Schedule.
SCHEDULE XIII
LIST OF KEY MANAGEMENT PERSONNEL
Name
Company
Department
Title
IT
IT
SCHEDULE XIV
KEY TERMS OF THE EXCLUDED ISSUANCE
1.360
2.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
IT
IT
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
IT
IT
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
IT
IT
IT
360
3.
100616.67
4.
5. :
6
111312015
35%5%50%
1320
2015
EXHIBIT A
REORGANIZATION PLAN
EXHIBIT B
EXHIBIT C
FORM OF AMENDED AND RESTATED MEMORANDUM
AND ARTICLES
EXHIBIT D
FORM OF SHAREHOLDERS AGREEMENT
EXHIBIT E
TRADEMARK LICENSE AGREEMENT
EXHIBIT F
TRADEMARK TRANSFER AGREEMENT
EXHIBIT G
FORMS OF PRC AND CAYMAN LEGAL OPINIONS
EXHIBIT H
FORM OF INDEMNIFICATION AGREEMENT
Exhibit 10.13
SHARE SUBSCRIPTION AGREEMENT
This Share Subscription Agreement (this Agreement) is made and entered into as of June 28, 2016 by and between:
(1)
ZTO Express (Cayman) Inc., an exempted company limited by shares incorporated and existing under the laws of the Cayman Islands (the
Company); and
(2)
Zto Es Holding Limited, a BVI business company incorporated and existing under the laws of the British Virgin Islands (the Subscriber).
The Subscriber on the one hand, and the Company on the other hand, are sometimes herein referred to each as a Party, and collectively as the
Parties.
WHEREAS, the Company wishes to issue, allot and sell to the Subscriber, and the Subscriber wishes to subscribe for and acquire, a certain number of
Ordinary Shares (as defined below) upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter set forth, the Parties hereto agree as follows:
ARTICLE I
ISSUANCE AND SUBSCRIPTION
Section 1.1
Subscription of Ordinary Shares. Upon the terms and subject to the conditions of this Agreement, the Company shall issue and
allot to the Subscriber, and the Subscriber shall subscribe and pay for, 16,000,000 ordinary shares (the Ordinary Shares) of the Company, par value
US$0.0001 each (the Subscribed Shares), at U.S. dollar equivalent of RMB80,000,000 (the Purchase Price), free and clear of all liens or encumbrances
(except for restrictions arising under the Securities Act of 1933, as amended (the Securities Act) or created by virtue of this Agreement).
Section 1.2
Closing.
(a)
Closing. The closing (the Closing) of the issuance and subscription of the Subscribed Shares pursuant to Section 1.1 shall
take place on the date hereof or on such date and at such place as the Company and the Subscriber may mutually agree. The date and time of the Closing are
referred to herein as the Closing Date.
(b)
Payment and Delivery. At the Closing, (i) the Subscriber shall pay and deliver the Purchase Price to the Company in U.S.
dollars by wire transfer, or by such other method mutually agreeable to the Company and the Subscriber, of immediately available funds to such bank
account designated in writing by the Company; and upon receipt of the same (ii) the Subscriber shall execute and deliver the waiver in the form of Exhibit A
1
hereto as a deed (the Waiver) and (iii) the Company shall issue to the Subscriber the Subscribed Shares, enter in the register of members of the Company
the name of the Subscriber as the holder of the Subscribed Shares, and, if requested by the Subscriber, deliver one or more duly executed share certificates in
original form, registered in the name of the Subscriber, together with a certified true copy of the register of the members of the Company, evidencing the
Subscribed Shares being issued and sold to the Subscriber.
(c)
Register of Members. The Subscriber agrees to take the Subscribed Shares subject to the memorandum of association and the
articles of association of the Company and authorizes the Company to enter its name and address as set forth below in the register of members of the
Company:
Name: Zto Es Holding Limited
Address: c/o Sertus Incorporations (BVI) Limited
Sertus Chambers, P.O. Box 905, Quastisky Building
Road Town, Tortola, British Virgin Islands
(e)
Restrictive Legend. Each certificate representing Subscribed Shares shall be endorsed with the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (AS AMENDED, THE ACT) OR UNDER THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OF AMERICA. THIS SECURITY MAY NOT BE TRANSFERRED, SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT, (2) AN EXEMPTION OR QUALIFICATION UNDER THE ACT AND OTHER APPLICABLE SECURITIES LAWS OR (3) DELIVERY TO THE
COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT. ANY ATTEMPT TO TRANSFER, SELL, PLEDGE OR HYPOTHECATE THIS SECURITY IN VIOLATION OF
THESE RESTRICTIONS SHALL BE VOID.
ARTICLE II
Section 2.1
Date, as follows:
Representations and Warranties of the Company. The Company hereby represents and warrants to the Subscriber, as of the Closing
(a)
Due Formation. The Company is a company duly incorporated as an exempted company with limited liability, validly
existing and in good standing under the laws of the Cayman Islands. The Company has all requisite power and authority to carry on its business as it is
currently being conducted.
2
(b)
Authority. The Company has full power and authority to enter into, execute and deliver this Agreement and each
agreement, certificate, document and instrument to be executed and delivered by the Company pursuant to this Agreement and to perform its obligations
hereunder. The execution and delivery by the Company of this Agreement and any agreements, certificates, documents and instruments to be executed and
delivered by the Company pursuant to this Agreement, and the performance by the Company of its obligations hereunder, have been duly authorized by all
requisite actions on its part.
(c)
Valid Agreement. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as limited by (i) the laws from time to time in
effect relating to bankruptcy, insolvency, liquidation, possessory liens, rights of set off, reorganisation, amalgamation, merger, consolidation, moratorium or
any other laws or legal procedures, whether of a similar nature or otherwise, generally affecting the rights of creditors as well as applicable international
sanctions, (ii) statutory limitation of the time within which proceedings may be brought and (iii) laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
(d)
Due Issuance of the Subscribed Shares. The Subscribed Shares have been duly authorized and when issued and allotted to
and paid for by the Subscriber pursuant to this Agreement, will be validly issued, fully paid and non-assessable (which term means that no further sums are
required to be paid by the holders thereof in connection with the issue thereof) and free and clear of any pledge, mortgage, security interest, encumbrance,
lien, charge, assessment, right of first refusal, right of pre-emption, third party right or interest, claim or restriction of any kind or nature, except for restrictions
arising under the Securities Act or created by virtue of this Agreement and upon delivery and entry into the register of members of the Company the name of
the Subscriber as holder of the Subscribed Shares, the Subscriber will have good and valid title to the Subscribed Shares.
(e)
Noncontravention. Neither the execution and the delivery of this Agreement, nor the transactions contemplated hereby,
violate any provision of the organizational documents of the Company or its subsidiaries or violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government, governmental entity or court to which the Company or its subsidiaries is
subject.
Section 2.2
Representations and Warranties of the Subscriber. The Subscriber hereby represents and warrants to the Company, as of the
Closing Date, as follows:
(a)
Due Formation. If the Subscriber is a company limited by shares with limited liability under the BVI Business Company Act
(as amended), it is duly incorporated, validly existing and in good standing under the laws of the British Virgin Islands. The Subscriber has all requisite
power and authority to carry on its business as it is currently being conducted.
(b)
Authority. The Subscriber has full power and authority to enter into, execute and deliver this Agreement and each
agreement, certificate, document and instrument to be executed and delivered by the Subscriber pursuant to this Agreement and to perform its obligations
hereunder. If the Subscriber is a partnership, corporation, limited
3
liability company or other entity, the execution and delivery by the Subscriber of this Agreement and any agreements, certificates, documents and
instruments to be executed and delivered by the Subscriber pursuant to this Agreement, and the performance by the Subscriber of its obligations hereunder
have been duly authorized by all requisite actions on its part.
(c)
Valid Agreement. This Agreement has been duly executed and delivered by the Subscriber and constitutes the legal, valid
and binding obligations of the Subscriber, enforceable against the Subscriber in accordance with its terms, except as limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors rights generally, and (ii) laws relating to the
availability of specific performance, injunctive relief, or other equitable remedies.
(d)
Noncontravention. Neither the execution and the delivery of this Agreement, nor the transactions contemplated hereby,
violate, if the Subscriber is a partnership, corporation, limited liability company or other entity, any provision of the organizational documents of the
Subscriber or violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government,
governmental entity or court to which the Subscriber is subject.
ARTICLE III
OTHER AGREEMENTS
Section 3.1
Subscriber Waiver. The Subscriber shall promptly notify the Company of any transfer of the limited partnership interest of any of
the limited partnerships which are shareholders of the Subscriber to any employee of the Company. Upon receipt of proof of such transfer satisfactory to the
Company, the Subscriber shall have the right to amend the Waiver to reduce the number of Ordinary Shares subject to the Waiver by an amount equal to the
product of the multiplication of (x) 16,000,000 (y) the percentage of shares of the Subscriber held by the applicable limited partnership (z) a fraction
calculated by dividing the amount of limited partnership interest that is the subject of the transfer by that limited partnerships total equity interest.
ARTICLE IV
INDEMNIFICATION
Section 4.1
Indemnification. Each of the Company and the Subscriber (an Indemnifying Party) shall indemnify and hold each other and
their directors, officers, employees, advisors and agents (collectively, the Indemnified Party) harmless from and against any losses, claims, damages, fines,
expenses and liabilities of any kind or nature whatsoever, including but not limited to any investigative, legal and other expenses incurred in connection
with, and any amounts paid in settlement of, any pending or threatened legal action or proceeding, and any taxes or levies that may be payable by such
person by reason of the indemnification of any indemnifiable loss hereunder (collectively, Losses) resulting from or arising out of: (i) the breach of any
representation or warranty of such Indemnifying Party contained in this Agreement or in any schedule or exhibit hereto; or (ii) the violation or
nonperformance, partial or total, of any covenant or agreement of such Indemnifying Party contained in this Agreement for reasons other than gross
negligence or willful misconduct of
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such Indemnified Party. In calculating the amount of any Losses of an Indemnified Party hereunder, there shall be subtracted the amount of any insurance
proceeds and third-party payments received by the Indemnified Party with respect to such Losses, if any.
Section 4.2
Third Party Claims.
(a)
If any third party shall notify any Indemnified Party in writing with respect to any matter involving a claim by such third
party (a Third Party Claim) which such Indemnified Party believes would give rise to a claim for indemnification against the Indemnifying Party under
this Article IV, then the Indemnified Party shall promptly (i) notify the Indemnifying Party thereof in writing within thirty (30) days of receipt of notice of
such claim and (ii) transmit to the Indemnifying Party a written notice (Claim Notice) describing in reasonable detail the nature of the Third Party Claim, a
copy of all papers served with respect to such claim (if any), and the basis of the Indemnified Partys request for indemnification under this Agreement.
(b)
Upon receipt of a Claim Notice with respect to a Third Party Claim, the Indemnifying Party shall have the right to assume
the defense of any Third Party Claim by, within (30) days of receipt of the Claim Notice, notifying the Indemnified Party in writing that the Indemnifying
Party elects to assume the defense of such Third Party Claim, and upon delivery of such notice by the Indemnifying Party, the Indemnifying Party shall have
the right to fully control and settle the proceeding, provided, that any such settlement or compromise shall be permitted hereunder only with the written
consent of the Indemnified Party.
(c)
If requested by the Indemnifying Party, the Indemnified Party shall, at the sole cost and expense of the Indemnifying Party,
cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claim which the Indemnifying Party elects to contest, including the
making of any related counterclaim against the person asserting the Third Party Claim or any cross complaint against any person. The Indemnified Party shall
have the right to receive copies of all pleadings, notices and communications with respect to any Third Party Claim, other than any privileged
communications between the Indemnifying Party and its counsel, and shall be entitled, at its sole cost and expense, to retain separate co-counsel and
participate in, but not control, any defense or settlement of any Third Party Claim assumed by the Indemnifying Party pursuant to Section 4.2(b).
(d)
In the event of a Third Party Claim for which the Indemnifying Party elects not to assume the defense or fails to make such
an election within the 30 days of the Claim Notice, the Indemnified Party may, at its option, defend, settle, compromise or pay such action or claim at the
expense of the Indemnifying Party; provided, that any such settlement or compromise shall be permitted hereunder only with the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
Section 4.3
Other Claims. In the event any Indemnified Party should have a claim against the Indemnifying Party hereunder which does not
involve a Third Party Claim, the Indemnified Party shall promptly transmit to the Indemnifying Party a written notice (the Indemnity Notice) describing in
reasonable detail the nature of the claim, the Indemnified Partys best estimate of the amount of Losses attributable to such claim and the basis of the
Indemnified Partys request for indemnification under this Agreement. If the Indemnifying
Party does not notify the Indemnified Party within thirty (30) days from its receipt of the Indemnity Notice that the Indemnifying Party disputes such claim,
the Indemnifying Party shall be deemed to have accepted and agreed with such claim.
ARTICLE V
MISCELLANEOUS
Section 5.1
Survival of the Representations and Warranties. All representations and warranties made by any party hereto shall survive for two
years and shall terminate and be without further force or effect on the second anniversary of the date hereof, except as to (i) any claims thereunder which have
been asserted in writing pursuant to Section 4.1 against the party making such representations and warranties on or prior to such second anniversary, and
(ii) the Companys representations contained in Section 2.1(a), (b), (c) and (d) hereof, and (iii) the Subscribers representations contained in
Section 2.2(a) hereof, each of which shall survive indefinitely.
Section 5.2
Governing Law; Arbitration. This Agreement shall be governed and interpreted in accordance with the laws of the State of New
York. Any dispute arising out of or relating to this Agreement, including any question regarding its existence, validity or termination (Dispute) shall be
referred to and finally resolved by arbitration at the Hong Kong International Arbitration Centre in accordance with the Hong Kong International Arbitration
Centre Administered Arbitration Rules then in force. There shall be three arbitrators. Each Party has the right to appoint one arbitrator and the third arbitrator
shall be appointed by the Hong Kong International Arbitration Centre. The language to be used in the arbitration proceedings shall be English. The seat of
arbitration shall be Hong Kong. Each of the Parties irrevocably waives any immunity to jurisdiction to which it may be entitled or become entitled (including
without limitation sovereign immunity, immunity to pre-award attachment, post-award attachment or otherwise) in any arbitration proceedings and/or
enforcement proceedings against it arising out of or based on this Agreement or the transactions contemplated hereby.
Section 5.3
parties hereto.
Amendment. This Agreement shall not be amended, changed or modified, except by another agreement in writing executed by the
Section 5.4
Successors and Assigns. This Agreement shall inure to the benefit of, and be binding upon, the Subscriber, the Company, and their
respective heirs, successors and permitted assigns.
Section 5.5
Assignment. Neither this Agreement nor any of the rights, duties or obligations hereunder may be assigned by the Company or the
Subscriber without the express written consent of the other Party, except that the Subscriber may assign all or any part of its rights and obligations hereunder
to any affiliate of the Subscriber without the consent of the Company, provided that no such assignment shall relieve the Subscriber of its obligations
hereunder if such assignee does not perform such obligations. Any purported assignment in violation of the foregoing sentence shall be null and void.
Section 5.6
Third Party Beneficiaries. The terms and provisions of this Agreement are intended solely for the benefit of the Parties and their
respective successors or permitted assigns, and it is not the intention of the Parties to confer third-party beneficiary rights, and
6
this Agreement does not confer any such rights.

Section 5.7
Notices. All notices, requests, demands, and other communications under this Agreement shall be in writing and shall be
sufficiently given to or served on a Party if delivered or sent:
If to the Company, to:

Address: No.1685, Huazhi Road, Qingpu District
Attention: Xu Feng
Fax: +86 21 59139333
If to the Subscriber, to:
c/o Zto Es Holding Limited.

Address: No.1685, Huazhi Road, Qingpu District
Attention: Xu Feng
Fax: +86 21 59139333
Any notice may be delivered by hand or sent by facsimile number with confirmation receipt followed by first-class mail posted within 24 hours, or
by overnight courier. Without prejudice to the foregoing, any notice shall be deemed to have been received on the next business day in the place to which it
is sent, if sent by fax, or three business days from the time of posting, if sent by overnight courier, at the time of delivery, if delivered by hand, or if delivered
by e-mail, on the same business day, if a receipt of the e-mail is requested and received. Any party hereto may change its address for purposes of this
Section 5.7 by giving the other Party written notice of the new address in the manner set forth above.
Section 5.8
Entire Agreement. This Agreement constitutes the entire understanding and agreement between the Parties with respect to the
matters covered hereby, and all prior agreements and understandings, oral or in writing, if any, between the Parties with respect to the matters covered hereby
are merged and superseded by such agreements.
Section 5.9
Severability. If any provisions of this Agreement shall be adjudicated to be illegal, invalid or unenforceable in any action or
proceeding whether in its entirety or in any portion, then such provision shall be deemed amended, if possible, or deleted, as the case may be, from the
Agreement in order to render the remainder of the Agreement and any provision thereof both valid and enforceable, and all other provisions hereof shall be
given effect separately therefrom and shall not be affected thereby.
Section 5.10
Fees and Expenses. Except as otherwise provided in this Agreement, the Company and the Subscriber will bear their respective
expenses incurred in connection with the negotiation, preparation and execution of this Agreement and the transactions contemplated hereby, including fees
and expenses of attorneys, accountants, consultants and financial advisors.
Section 5.11
Confidentiality. Each party hereto shall keep in confidence, and shall not use (except for the purposes of the transactions
contemplated hereby) or disclose, any non-public information disclosed to it or its affiliates, representatives or agents in connection
7
with this Agreement or the transactions contemplated hereby. Each party hereto shall ensure that its affiliates, representatives and agents keep in confidence,
and do not use (except for the purposes of the transactions contemplated hereby) or disclose, any such non-public information.
Section 5.12
Headings. The headings of the various articles and sections of this Agreement are inserted merely for the purpose of convenience
and do not expressly or by implication limit, define or extend the specific terms of the section so designated.
Section 5.13
Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute but one and the same instrument. Facsimile, e-mail or other electronic signatures shall have the same legal effect as
original signatures.
Section 5.14
No Waiver. Except as specifically set forth herein, the rights and remedies of the parties to this Agreement are cumulative and not
alternative. No failure or delay on the part of any party in exercising any right, power or remedy under this Agreement will operate as a waiver of such right,
power or remedy, and no single or partial exercise of any such right, power or remedy will preclude any other or further exercise of such right, power or
remedy or the exercise of any other right, power or remedy. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this
Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party
will be deemed to be a waiver of any obligation of that party or of the right of the party giving such notice or demand to take further action without notice or
demand as provided in this Agreement.
REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK
8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.
For and on behalf of
By:
Name:
Title:
/s/LAI Meisong
LAI Meisong
Director and Chief Executive Officer
[Signature Page to Share Subscription Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.
For and on behalf of
ZTO ES HOLDING LIMITED
By:
Name:
Title:
/s/LAI Meisong
LAI Meisong
Director
[Signature Page to Share Subscription Agreement]
Exhibit 21.1
List of Significant Subsidiaries and Consolidated Affiliated Entities of ZTO Express (Cayman) Inc.
Subsidiaries
Place of Incorporation
ZTO Express Limited

ZTO Wheat Holding Limited
Zto Cn Holding Limited
ZTO Express (Hong Kong) Limited
Shanghai Zhongtongji Logistics Co., Ltd.
Zhejiang Zhong Ji Network Technology Co., Ltd.
BVI
BVI
BVI
Hong Kong
PRC
PRC
PRC
Consolidated Affiliated Entity
PRC
Subsidiaries of Consolidated Affiliated Entity

Taizhou Zhongrui Logistics Co., Ltd.
Huaian ZTO Logistics Co., Ltd.
Changzhou Shunrui Logistics Consulting Co., Ltd.
Nanjing Huijitong Logistics Co., Ltd.
Zhejiang Litong Logistics Co., Ltd.
Taizhou Yongjinda Packaging Co., Ltd.
Jiaxing Zhongtongji Logistics Co., Ltd.
Jinhua Zhongrui Shipping Co., Ltd.
Dongguan Jinsheng Industrial Co., Ltd.
Guangdong Jirui Shipping Co., Ltd.
Beijing Zhongrui Logistics Co., Ltd.
Hubei Zhongtongji Logistics Co., Ltd.
Wenzhou ZTO Jirui Express Co., Ltd.
Chengdu Zhongjing Logistics Co., Ltd.
Hunan Zhonghan Express Services Co., Ltd.
Henan Jirui Storage Services Co., Ltd.
Fujian ZTO Express Co., Ltd.
Jinan ZTO Storage Services Co., Ltd.
ZTO (Tianjin) Express Services Co., Ltd.
Hefei Anan Logistics Co., Ltd.
Shanghai Zemao Investment Management Co., Ltd.
Zhong Tong Ji Air Logistics Co., Ltd.
Wuxi ZTO Express Co., Ltd.
Shanghai Zhongtongji Logistics Co., Ltd.
Shenzhen Zhongtongji Logistics Co., Ltd.
Jinan Zhongtongji Logistics Co., Ltd.
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
* Other subsidiaries of ZTO Express (Cayman) Inc. and subsidiaries of consolidated affiliated entity have been omitted from this list since, considered in the
aggregate as a single entity, they would not constitute a significant subsidiary.
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form F-1 of our report dated June 23, 2016 (August 29, 2016 as to the convenience translation
described in Note 2 (f)) relating to the consolidated financial statements and financial statement schedule of ZTO Express (Cayman) Inc., its subsidiaries,
consolidated variable interest entity and subsidiaries of such variable interest entity (which report expresses an unqualified opinion and includes an
explanatory paragraph relating to the translation of Renminbi amounts into United States dollar amounts) appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the heading Experts in such Prospectus.
/s/ Deloitte Touche Tohmatsu Certified Public Accountants LLP
Shanghai, China
September 30, 2016
Exhibit 23.4
September 30, 2016
ZTO Express (Cayman) Inc. (the Company)
Building One, No. 1685 Huazhi Road
Qingpu District, Shanghai 201708
Peoples Republic of China
Tel: +86 21 5980-4508
Ladies and Gentlemen:
Pursuant to Rule 438 under the Securities Act of 1933, as amended, I hereby consent to the reference of my name as a director of the Company, effective
immediately upon the effectiveness of the Companys registration statement on Form F-1 initially filed by the Company on September 30, 2016 with the U.S.
Securities and Exchange Commission.
Sincerely yours,
/s/ Charles Huang
Name: Charles Huang
Exhibit 99.1
CODE OF BUSINESS CONDUCT AND ETHICS
(Adopted by the Board of Directors of ZTO Express (Cayman) Inc. on September 30, 2016, effective upon the effectiveness of its registration statement
on Form F-1 relating to its initial public offering)
I.
PURPOSE
This Code of Business Conduct and Ethics (the Code) contains general guidelines for conducting the business of ZTO Express (Cayman) Inc. and
its subsidiaries and affiliates (collectively, the Company) consistent with the highest standards of business ethics, and is intended to qualify as a code of
ethics within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. To the extent this Code requires a higher
standard than required by commercial practice or applicable laws, rules or regulations, the Company adheres to these higher standards.
This Code is designed to deter wrongdoing and to promote:
II.
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional
relationships;
full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company files with, or submits to, the U.S. Securities and
Exchange Commission (the SEC) and in other public communications made by the Company;
compliance with applicable laws, rules and regulations;
prompt internal reporting of violations of the Code; and
accountability for adherence to the Code.

APPLICABILITY
This Code applies to all directors, officers and employees of the Company, whether they work for the Company on a full-time, part-time,
consultative or temporary basis (each, an employee and collectively, the employees). Certain provisions of the Code apply specifically to our chief
executive officer, chief financial officer, other chief officers, senior financial officer, controller, senior vice presidents, vice presidents and any other persons
who perform similar functions for the Company (each, a senior officer, and collectively, the senior officers).
The Board of Directors of ZTO Express (Cayman) Inc. (the Board) has appointed the head of the Legal Department of ZTO Express (Cayman) Inc.
as the Compliance Officer for the Company (the Compliance Officer). If you have any questions regarding the Code or would
like to report any violation of the Code, please contact the Compliance Officer by email at compliance.officer@zto.cn.
III.
CONFLICTS OF INTEREST
Identifying Conflicts of Interest

A conflict of interest occurs when an employees private interest interferes, or appears to interfere, in any way with the interests of the Company as a
whole. An employee should actively avoid any private interest that may impact such employees ability to act in the interests of the Company or that may
make it difficult to perform the employees work objectively and effectively. In general, the following are considered conflicts of interest:
Competing Business. No employee may be employed by a business that competes with the Company or deprives it of any business.
Corporate Opportunity. No employee may use corporate property, information or his/her position with the Company to secure a business
opportunity that would otherwise be available to the Company. If an employee discovers a business opportunity that is in the Companys line of
business through the use of the Companys property, information or position, the employee must first present the business opportunity to the
Company before pursuing the opportunity in his/her individual capacity.
Financial Interests.
(i)
No employee may have any financial interest (ownership or otherwise), either directly or indirectly through a spouse or other family
member, in any other business or entity if such interest adversely affects the employees performance of duties or responsibilities to the
Company, or requires the employee to devote time to it during such employees working hours at the Company;
(ii)
No employee may hold any ownership interest in a privately held company that is in competition with the Company;
(iii)
An employee may hold less than 5% ownership interest in a publicly traded company that is in competition with the Company;
provided that if the employees ownership interest in such publicly traded company increases to 5% or more, the employee must
immediately report such ownership to the Compliance Officer;
(iv)
Unless pre-approved by the Compliance Officer, no employee may hold any ownership interest in a company that has a business
relationship with the Company if such employees duties at the Company include managing or supervising the Companys business
relations with that company; and
(v)
Notwithstanding the other provisions of this Code,
(a) a director or any family member of such director (collectively, Director Affiliates) or a senior officer or any family member of such
senior officer (collectively, Officer Affiliates) may continue to hold his/her investment or other financial interest in a business or
entity (an Interested Business) that:
(1) was made or obtained either (x) before the Company invested in or otherwise became interested in such business or entity; or
(y) before the director or senior officer joined the Company (for the avoidance of doubt, regardless of whether the Company had or had
not already invested in or otherwise become interested in such business or entity at the time the director or senior officer joined the
Company); or
(2) may in the future be made or obtained by the director or senior officer, provided that at the time such investment or other
financial interest is made or obtained, the Company has not yet invested in or otherwise become interested in such business or entity;
provided that such director or senior officer shall disclose such investment or other financial interest to the Board;
(b) an interested director or senior officer shall refrain from participating in any discussion among senior officers of the Company
relating to an Interested Business and may not be involved in any proposed transaction between the Company and an Interested
Business; and
(c) before any Director Affiliate or Officer Affiliate (i) invests, or otherwise acquires any equity or other financial interest, in a business
or entity that is in competition with the Company; or (ii) enters into any transaction with the Company, the related director or senior
officer shall obtain prior approval from the Audit Committee of the Board.
For purposes of this Code, a company or other entity is deemed to be in competition with the Company if it competes with the Companys express
delivery services, transportation and courier services, and any other business in which the Company engages in.
Loans or Other Financial Transactions. No employee may obtain loans or guarantees of personal obligations from, or enter into any other personal
financial transaction with, any company that is a material customer, supplier or competitor of the Company. This guideline does not prohibit armslength transactions with recognized banks or other financial institutions.
Service on Boards and Committees. No employee may serve on a board of directors or trustees or on a committee of any entity (whether profit or notfor-profit) whose interests could reasonably be expected to conflict with those of the Company. Employees must obtain prior approval from the
Board before accepting any such board or committee
position. The Company may revisit its approval of any such position at any time to determine whether an employees service in such position is still
appropriate.
The above is in no way a complete list of situations where conflicts of interest may arise. The following questions might serve as a useful guide in
assessing a potential conflict of interest situation not specifically addressed above:
Is the action to be taken legal?
Is it honest and fair?
Is it in the best interests of the Company?
Disclosure of Conflicts of Interest

The Company requires that employees fully disclose any situations that could reasonably be expected to give rise to a conflict of interest. If an
employee suspects that he/she has a conflict of interest, or a situation that others could reasonably perceive as a conflict of interest, the employee must report
it immediately to the Compliance Officer. Conflicts of interest may only be waived by the Board, or the appropriate committee of the Board, and will be
promptly disclosed to the public to the extent required by law and applicable rules of the applicable stock exchange.
Family Members and Work
The actions of family members outside the workplace may also give rise to conflicts of interest because they may influence an employees
objectivity in making decisions on behalf of the Company. If a member of an employees family is interested in doing business with the Company, the
criteria as to whether to enter into or continue the business relationship and the terms and conditions of the relationship must be no less favorable to the
Company compared with those that would apply to an unrelated party seeking to do business with the Company under similar circumstances.
Employees are required to report any situation involving family members that could reasonably be expected to give rise to a conflict of interest to
their supervisor or the Compliance Officer. For purposes of this Code, family members or members of employees family include an employees spouse,
parents, children and siblings, whether by blood, marriage or adoption or anyone residing in such employees home.
IV.
GIFTS, MEALS AND ENTERTAINMENT

All employees are required to comply with the anti-corruption compliance policy of the Company regarding gifts, meals and entertainment.
VI.
PROTECTION AND USE OF COMPANY ASSETS
Employees should protect the Companys assets and ensure their efficient use for legitimate business purposes only. Theft, carelessness and waste
have a direct impact on the
Companys profitability. Any use of the funds or assets of the Company, whether for personal gain or not, for any unlawful or improper purpose is strictly
prohibited.
To ensure the protection and proper use of the Companys assets, each employee is required to:
Exercise reasonable care to prevent theft, damage or misuse of Company property;
Promptly report any actual or suspected theft, damage or misuse of Company property;
Safeguard all electronic programs, data, communications and written materials from unauthorized access; and
Use Company property only for legitimate business purposes.
Except as approved in advance by the Chief Executive Officer or Chief Financial Officer of the Company, the Company prohibits political
contributions (directly or through trade associations) by any employee on behalf of the Company. Prohibited political contributions include:
VII.
any contributions of the Companys funds or other assets for political purposes;
encouraging individual employees to make any such contribution; and
reimbursing an employee for any political contribution.
INTELLECTUAL PROPERTY AND CONFIDENTIALITY
Employees shall abide by the Companys rules and policies in protecting the intellectual property and confidential information, including the
following:
All inventions, creative works, computer software, and technical or trade secrets developed by an employee in the course of performing the
employees duties or primarily through the use of the Companys assets or resources while working at the Company are the property of the
Company.
Employees shall maintain the confidentiality of information entrusted to them by the Company or entities with which the Company has
business relations, except when disclosure is authorized or legally mandated. Confidential information includes all non-public information
that might be of use to competitors, or harmful to the company or its business associates, if disclosed.
The Company maintains a strict confidentiality policy. During an employees term of employment with the Company, the employee shall
comply with any and all written or unwritten rules and policies concerning confidentiality and shall fulfill the duties and responsibilities
concerning confidentiality applicable to the employee.
VIII.
In addition to fulfilling the responsibilities associated with his/her position in the Company, an employee may not, without obtaining prior
approval from the Company, disclose, announce or publish trade secrets or other confidential business information of the Company, nor
may an employee use such confidential information outside the course of his/her duties to the Company.
Even outside the work environment, an employee must maintain vigilance and refrain from disclosing important information regarding the
Company or its business, business associates or employees.
An employees duty of confidentiality with respect to the confidential information of the Company survives the termination of such
employees employment with the Company for any reason until such time as the Company discloses such information publicly or the
information otherwise becomes available in the public sphere through no fault of the employee.
Upon termination of employment, or at such time as the Company requests, an employee must return to the Company all of its property
without exception, including all forms of medium containing confidential information, and may not retain duplicate materials.
ACCURACY OF FINANCIAL REPORTS AND OTHER PUBLIC COMMUNICATIONS
The Company is required to report its financial results and other material information about its business to the public and the SEC. It is the
Companys policy to promptly disclose accurate and complete information regarding its business, financial condition and results of operations. Employees
must strictly comply with all applicable standards, laws, regulations and policies for accounting and financial reporting of transactions, estimates and
forecasts. Inaccurate, incomplete or untimely reporting will not be tolerated and can severely damage the Company and result in legal liability.
Employees should be on guard for, and are required to promptly report, any possibility of inaccurate or incomplete financial reporting. Particular
attention should be paid to:
Financial results that seem inconsistent with the performance of the underlying business;
Transactions that do not seem to have an obvious business purpose; and
Requests to circumvent ordinary review and approval procedures.
The Companys senior financial officers and other employees working in the finance department have a special responsibility to ensure that all of
the Companys financial disclosures are full, fair, accurate, timely and understandable. These individuals are required to report any practice or situation that
might undermine this objective to the Compliance Officer.
Employees are prohibited from directly or indirectly taking any action to coerce, manipulate, mislead or fraudulently influence the Companys
independent auditors for the purpose of rendering the financial statements of the Company materially misleading. Prohibited actions include but are not
limited to:
IX.
issuing or reissuing a report on the Companys financial statements that is not warranted in the circumstances (due to material violations of
U.S. GAAP, generally accepted auditing standards or other professional or regulatory standards);
not performing audit, review or other procedures required by generally accepted auditing standards or other professional standards;
not withdrawing an issued report when withdrawal is warranted under the circumstances; or
not communicating matters as required to the Companys Audit Committee.
COMPANY RECORDS
Accurate and reliable records are crucial to the Companys business and form the basis of its earnings statements, financial reports and other
disclosures to the public. The Companys records are a source of essential data that guides business decision-making and strategic planning. Company
records include, but are not limited to, booking information, payroll, timecards, travel and expense reports, e-mails, accounting and financial data,
measurement and performance records, electronic data files and all other records maintained in the ordinary course of business.
All Company records must be complete, accurate and reliable in all material respects. There is never an acceptable reason to make false or
misleading entries. Undisclosed or unrecorded funds, payments or receipts are strictly prohibited. An employee is responsible for understanding and
complying with the Companys recordkeeping policy. An employee should contact the Compliance Officer if he/she has any questions regarding the
recordkeeping policy.
X.
COMPLIANCE WITH LAWS AND REGULATIONS
Each employee has an obligation to comply with the laws of the cities, provinces, regions and countries in which the Company operates. This
includes, without limitation, laws covering commercial bribery and kickbacks, patent, copyrights, trademarks and trade secrets, information privacy, insider
trading, offering or receiving gratuities, employment harassment, environmental protection, occupational health and safety, false or misleading financial
information, misuse of corporate assets and foreign currency exchange activities. Employees are expected to understand and comply with all laws, rules and
regulations that apply to their positions at the Company. If any doubt exists about whether a course of action is lawful, the employee should seek advice
immediately from the Compliance Officer.
XI.
DISCRIMINATION AND HARASSMENT
The Company is firmly committed to providing equal opportunity in all aspects of employment and will not tolerate any illegal discrimination or
harassment based on race, ethnicity, religion, gender, age, national origin or any other protected class. For further information, employees should consult the
Compliance Officer.
XII.
FAIR DEALING
Each employee should endeavor to deal fairly with the Companys customers, suppliers, competitors and employees. No employee may take unfair
advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair-dealing
practice.
XIII.
HEALTH AND SAFETY
The Company strives to provide employees with a safe and healthy work environment. Each employee has responsibility for maintaining a safe and
healthy workplace for other employees by following environmental, safety and health rules and practices and reporting accidents, injuries and unsafe
equipment, practices or conditions. Violence or threats of violence are not permitted.
Each employee is expected to perform his/her duty to the Company in a safe manner, free of any influence of alcohol, illegal drugs or other
controlled substances. The use of illegal drugs or other controlled substances in the workplace is prohibited.
XIV.
VIOLATIONS OF THE CODE
All employees have a duty to report any known or suspected violation of this Code, including any violation of laws, rules, regulations or policies
that apply to the Company. Reporting a known or suspected violation of this Code by others will not be considered an act of disloyalty, but an action to
safeguard the reputation and integrity of the Company and its employees.
If an employee knows of or suspects a violation of this Code, it is such employees responsibility to immediately report the violation to the
Compliance Officer, who will work with the employee to investigate his/her concern. All questions and reports of known or suspected violations of this Code
will be treated with sensitivity and discretion. The Compliance Officer and the Company will protect the employees confidentiality to the extent possible,
consistent with the law and the Companys need to investigate the employees concern.
It is the Companys policy that any employee who violates this Code will be subject to appropriate discipline, including termination of
employment, based upon the facts and circumstances of each particular situation. An employees conduct, if it does not comply with the law or with this
Code, can result in serious consequences for both the employee and the Company.
The Company strictly prohibits retaliation against an employee who, in good faith, seeks help or reports known or suspected violations. An
employee inflicting reprisal or retaliation
against another employee for reporting a known or suspected violation will be subject to disciplinary action, including termination of employment.
XV.
WAIVERS OF THE CODE
Waivers of this Code will be granted on a case-by-case basis and only in extraordinary circumstances. Waivers of this Code may be made only by the
Board, or the appropriate committee of the Board, and may be promptly disclosed to the public if so required by applicable laws and regulations and rules of
the applicable stock exchange.
XVI.
CONCLUSION
This Code contains general guidelines for conducting the business of the Company consistent with the highest standards of business ethics. If
employees have any questions about these guidelines, they should contact the Compliance Officer. The Company expects all employees to adhere to these
standards. Each employee is separately responsible for his/her actions. Conduct that violates the law or this Code cannot be justified by claiming that it was
ordered by a supervisor or someone in higher management positions. If an employee engages in conduct prohibited by the law or this Code, such employee
will be deemed to have acted outside the scope of his/her employment. The prohibited conduct will subject the employee to disciplinary action, including
termination of employment.
*************
Exhibit 99.2
LEGAL OPINION
To

Building One, No. 1685, Huazhi Road, Qingpu District
Shanghai 201708
September 30, 2016
Dear Sirs:
1.
We are lawyers qualified in the Peoples Republic of China (the PRC) and are qualified to issue opinions on the PRC Laws (as defined in Section 4).
For the purpose of this legal opinion (this Opinion), the PRC does not include the Hong Kong Special Administrative Region, the Macau Special
Administrative Region and Taiwan.
2.
We act as PRC counsel to ZTO Express (Cayman) Inc. (the Company), a company incorporated under the laws of the Cayman Islands, in connection
with (a) the proposed initial public offering (the Offering) by the Company of American Depositary Shares (ADSs), representing Class A ordinary
shares of par value US$0.0001 per share of the Company (together with the ADSs, the Offered Securities), in accordance with the Companys
registration statement on Form F-1, including all amendments or supplements thereto (the Registration Statement), filed by the Company with the
U.S. Securities and Exchange Commission under the U.S. Securities Act of 1933, as amended, and (b) the Companys proposed listing of the Offered
Securities on the New York Stock Exchange.
3.
In so acting, we have examined the Registration Statement, the originals or copies certified or otherwise identified to our satisfaction, of documents
provided to us by the Company and such other documents, corporate records, certificates, approvals and other instruments as we have deemed
necessary for the purpose of rendering this Opinion, including, without limitation, originals or copies of the agreements and certificates issued by PRC
authorities and officers of the Company (Documents). In such examination, we have assumed the accuracy of the factual matters described in the
Registration Statement and that
BEIJING SHANGHAI SHENZHEN GUANGZHOU WUHAN
CHENGDU CHONGQING QINGDAO TOKYO HONG KONG
LONDON NEWYORK LOS ANGELES SAN FRANCISCO
LIMITED LIABILITY PARTNERSHIP
1
the Registration Statement and other documents will be executed by the parties in the forms provided to and reviewed by us. We have also assumed
the genuineness of all signatures, seals and chops, the authenticity of all Documents submitted to us as originals, and the conformity with the originals
of all Documents submitted to us as copies, and the truthfulness, accuracy and completeness of all factual statements in the Documents.
4.
The following terms as used in this Opinion are defined as follows:

M&A Rules
means the Rules on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors jointly promulgated by
the Ministry of Commerce, the State Assets Supervision and Administration Commission, the State Administration of
Taxation, the State Administration of Industry and Commerce, China Securities Regulatory Commission (CSRC)
and the State Administration of Foreign Exchange of the PRC on August 8, 2006 and amended on June 22, 2009.
PRC Group Companies
means the PRC Subsidiaries, the Variable Interest Entity and any and all subsidiaries of the Variable Interest Entity.
PRC Group Company shall be construed accordingly.
PRC Laws
mean any and all laws, regulations, statutes, rules, decrees, notices, and supreme courts judicial interpretations
currently in force and publicly available in the PRC as of the date hereof.
PRC Subsidiaries
mean any and all subsidiaries of the Company established in the PRC which are, directly or indirectly, owned by the
Company.
Prospectus
means the prospectus, including all amendments or supplements thereto, that forms part of the Registration
Statement.
Variable Interest Entity or

ZTO Express
means ZTO Express Co., Ltd.
Zhongtongji Internet
means Shanghai Zhongtongji Internet Technology Co., Ltd.

2
Capitalized terms used herein and not otherwise defined herein shall have the same meanings described in the Registration Statement.
5.
Based upon and subject to the foregoing and subject to the qualifications set out below, we are of the opinion that:
(1) Corporate Structure. The descriptions of the corporate structure of the PRC Group Companies set forth under the heading Corporate History and
Structure in the Prospectus are true and accurate and nothing has been omitted from such description which would make the same misleading in
any material respects.
The ownership structures of ZTO Express and Zhongtongji Internet, both currently and immediately after giving effect to this Offering, does not
and will not result in any violation of PRC Laws. Each of the contractual arrangements among Zhongtongji Internet, ZTO Express and its
shareholders, both currently and immediately after giving effect to this Offering, is valid, binding and enforceable and will not result in any
violation of PRC Laws.
The statements set forth in the Prospectus under the captions Risk Factors Risks Related to Our Corporate Structure If the PRC
government finds that the agreements that establish the structure for operating certain of our operations in China do not comply with PRC
regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could
be subject to severe penalties or be forced to relinquish our interests in those operations are fair and accurate summaries of the matters
described therein, and nothing has been omitted from such summaries that would make the same misleading in any material respect.
(2) M&A Rules. We have advised the Company as to the content of the M&A Rules, in particular the relevant provisions thereof that purport to
require offshore special purpose vehicles formed for the purpose of obtaining a stock exchange listing outside of the PRC and controlled
directly or indirectly by Chinese companies or natural persons to obtain the approval of the CSRC prior to the listing and trading of their
securities on any stock exchange located outside of PRC.
Based on our understanding of the PRC Laws, the CSRCs approval is not required for this Offering or the listing and trading of the Companys
ADSs on the New York Stock Exchange in the context of this Offering, because (i) Zhongtongji Internet, Zhejiang Zhong Ji Internet
Technology
3
Co., Ltd. and Shanghai Wanhong Financial Leasing Co., Ltd. were incorporated as wholly foreign-owned enterprises by means of direct
investment rather than by merger or acquisition of equity interest or assets of a PRC domestic company owned by PRC companies or
individuals as defined under the M&A Rules that are the beneficial owners of the Company; and (ii) no provision in the M&A Rules clearly
classifies contractual arrangements as a type of transaction subject to the M&A Rules.
The statements set forth in the Prospectus under the captions Risk Factors Risks Related to Our ADSs and This Offering The approval of
the China Securities Regulatory Commission may be required in connection with this offering under PRC law are fair and accurate summaries
of the matters described therein, and nothing has been omitted from such summaries that would make the same misleading in any material
respect.
(3) Enforceability of Civil Procedures. We have advised the Company that there is uncertainty as to whether the courts of the PRC would:
(i) recognize or enforce judgments of United States courts obtained against the Company or directors or officers of the Company predicated upon
the civil liability provisions of the securities laws of the United States or any state in the United States; or (ii) entertain original actions brought
in each respective jurisdiction against the Company or directors or officers of the Company predicated upon the securities laws of the United
States or any state in the United States.
We have further advised the Company that the recognition and enforcement of foreign judgments are provided for under the PRC Civil
Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law
based either on treaties between the PRC and the country where the judgment is made or on principles of reciprocity between jurisdictions. The
PRC does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal
recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a
foreign judgment against the Company or the directors and officers of the Company if they decide that the judgment violates the basic principles
of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a
judgment rendered by a court in the United States or in the Cayman Islands. Under the PRC Civil Procedures Law, foreign shareholders may
originate actions based on PRC law against
4
a company in the PRC for disputes relating to contracts or other property interests, the PRC court may accept a course of action based on the laws
or the parties express mutual agreement in contracts choosing PRC courts for dispute resolution if (a) the contract is signed and/or performed
within the PRC, (b) the subject of the action is located within the PRC, (c) the company (as defendant) has seizable properties within the PRC,
(d) the company has a representative organization within the PRC, or (e) other circumstances prescribed under the PRC law. The action may be
initiated by a shareholder through filing a complaint with the PRC court. The PRC court will determine whether to accept the complaint in
accordance with the PRC Civil Procedures Law. The shareholder may participate in the action by itself or entrust any other person or PRC legal
counsel to participate on behalf of such shareholder. Foreign citizens and companies will have the same rights as PRC citizens and companies in
an action unless the home jurisdiction of such foreign citizens or companies restricts the rights of PRC citizens and companies.
(4) Taxation. The statements set forth under the heading Taxation in the Registration Statement, insofar as they constitute statements of PRC law,
are true and accurate in all material respects and constitute our opinion.
(5) Statements in the Prospectus. The statements in the Prospectus under the headings Prospectus Summary, Risk Factors, Corporate History
and Structure, Managements Discussion and Analysis of Financial Condition and Results of Operations, Enforceability of Civil Liabilities,
Dividend Policy, Business, Management, Related Party Transactions, Regulation, Taxation and Legal Matters (other than the
financial statements and related schedules and other financial data contained therein to which we express no opinion), to the extent such
statements relate to matters of the PRC Laws or documents, agreements or proceedings governed by the PRC Laws, are true and accurate in all
material respects, and fairly present and fairly summarize in all material respects the PRC Laws, documents, agreements or proceedings referred to
therein, and nothing has been omitted from such statements which would make the statements, in light of the circumstance under which they were
made, misleading in any material respect.
6.
This Opinion is subject to the following qualifications:

(1) This Opinion relates only to the PRC Laws and we express no opinion as to any other laws and regulations. There is no guarantee that any of the
PRC Laws, or the interpretation thereof or enforcement therefor, will not be changed, amended or replaced in the immediate future or in the
longer term with or without retrospective effect.
5
(2) This Opinion is intended to be used in the context which is specifically referred to herein and each section should be looked on as a whole
regarding the same subject matter and no part shall be extracted for interpretation separately from this Opinion.
(3) This Opinion is subject to the effects of (i) certain legal or statutory principles affecting the enforceability of contractual rights generally under
the concepts of public interest, national security, good faith and fair dealing, applicable statutes of limitation, and the limitations by bankruptcy,
insolvency, reorganization or similar laws affecting the enforcement of creditors rights generally; (ii) any circumstance in connection with
formulation, execution or performance of any legal documents that would be deemed materially mistaken, clearly unconscionable or fraudulent;
(iii) judicial discretion with respect to the availability of injunctive relief, the calculation of damages, and the entitlement of attorneys fees and
other costs; and (iv) the discretion of any competent PRC legislative, administrative or judicial bodies in exercising their authority in connection
with the interpretation, implementation and application of relevant PRC Laws.
This Opinion is rendered to you for the purpose hereof only, and save as provided herein, this Opinion shall not be quoted nor shall a copy be given to any
person (apart from the addressee) without our express prior written consent except where such disclosure is required to be made by applicable law or is
requested by the U.S. Securities and Exchange Commission or any other regulatory agencies.
We hereby consent to the use of this Opinion in, and the filing hereof as an exhibit to, the Registration Statement. In giving such consent, we do not thereby
admit that we fall within the category of the person whose consent is required under Section 7 of the U.S. Securities Act of 1933, as amended, or the
regulations promulgated thereunder.
[The remainder of this page is intentionally left blank.]
6
[Signature Page]
Yours faithfully,
/s/ Zhong Lun Law Firm
Zhong Lun Law Firm
Exhibit 99.3
21 st June, 2016
Building One
No. 1685 Huazhi Road, Qingpu District
Shanghai, 201708
Re: Consent of iResearch Consulting Group
Ladies and Gentlemen,
We understand that ZTO Express (Cayman) Inc. (the Company) plans to file a registration statement on Form F-1 (the Registration Statement) with the
United States Securities and Exchange Commission (the SEC) in connection with its proposed initial public offering (the Proposed IPO).
We hereby consent to the references to our name and the inclusion of information, data and statements from our research reports and amendments thereto,
including but not limited to the Chinese version and the English translation of the industry research reports titled Project Zillion Industry Report
(collectively, the Reports), and any subsequent amendments to the Reports, as well as the citation of our research reports and amendments thereto, (i) in the
Registration Statement and any amendments thereto, (ii) in any written correspondences with the SEC, (iii) in any other future filings with the SEC by the
Company, including, without limitation, filings on Form 20-F, Form 6-K orother SEC filings (collectively, the SEC Filings), (iv) on the websites of the
Company and its subsidiaries and affiliates, (v) in institutional and retail road shows and other activities in connection with the Proposed IPO, and in other
publicity materials in connection with the Proposed IPO.
We further hereby consent to the filing of this letter as an exhibit to the Registration Statement and any amendments thereto and as an exhibit to any other
SEC Filings.
In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the U.S. Securities
Act of 1933, as amended, or the rules and regulations of the SEC thereunder.
For and on behalf of Shanghai iResearch Co., Ltd., China
Company seal: /s/ Shanghai iResearch Co., Ltd., China
/s/ Shanghai iResearch Co., Ltd., China

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SECURITIES AND EXCHANGE COMMISSION

ZTO Express (Cayman) Inc.

Building One, No. 1685 Huazhi Road, Qingpu District

David Zhang, Esq.

Approximate date of commencement of proposed sale to the public:

Source: ZTO Express (Cayman) Inc., F-1, September 30, 2016

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CALCULATION OF REGISTRATION FEE

Title of each class of securities

Source: ZTO Express (Cayman) Inc., F-1, September 30, 2016

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PROSPECTUS (Subject to Completion)

American Depositary Shares

ZTO Express (Cayman) Inc.

Class A Ordinary Shares

ZTO Express (Cayman) Inc. is offering

We have granted the underwriters the right to purchase up to an additional

ADSs to cover over-allotments.

GOLDMAN SACHS (ASIA) L.L.C.

(in alphabetical order)

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Source: ZTO Express (Cayman) Inc., F-1, September 30, 2016

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Source: ZTO Express (Cayman) Inc., F-1, September 30, 2016

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Source: ZTO Express (Cayman) Inc., F-1, September 30, 2016

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Source: ZTO Express (Cayman) Inc., F-1, September 30, 2016

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Source: ZTO Express (Cayman) Inc., F-1, September 30, 2016

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Source: ZTO Express (Cayman) Inc., F-1, September 30, 2016

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Source: ZTO Express (Cayman) Inc., F-1, September 30, 2016

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leading and fastest growing express delivery company in China;

highly scalable network partner model enabling China's e-commerce growth;

strong operational capabilities and cost leadership;

superior service quality; and

experienced and entrepreneurial management team and strong corporate culture.

strengthen our leading market position in China;

enhance our technology platform and infrastructure;

expand our presence in the cross-border e-commerce market;

pursue strategic alliances and select acquisition opportunities.

expand and diversify our customer base and service offerings;

manage our growth and expansion effectively;

Source: ZTO Express (Cayman) Inc., F-1, September 30, 2016

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cope with intense competition;

Source: ZTO Express (Cayman) Inc., F-1, September 30, 2016

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Implication of Being an Emerging Growth Company

Source: ZTO Express (Cayman) Inc., F-1, September 30, 2016

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"ADSs" are to our American depositary shares, each of which represents

"BVI" are to the British Virgin Islands;

Class A ordinary shares;

Source: ZTO Express (Cayman) Inc., F-1, September 30, 2016

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"RMB" or "Renminbi" are to the legal currency of China;

Source: ZTO Express (Cayman) Inc., F-1, September 30, 2016