Exhibit 10.1

 

 

OPERATING AGREEMENT

 

by and among

 

NATURE’S SUNSHINE PRODUCTS, INC.,

 

FOSUN INDUSTRIAL CO., LIMITED

 

and

 

NATURE’S SUNSHINE HONG KONG LIMITED

 

Dated August 25, 2014

 

 

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Table of Contents

 

ARTICLE I THE COMPANY

1

 

 

 

Section 1.01

Business of Company

1

 

 

 

Section 1.02

Name

1

 

 

 

Section 1.03

Term

2

 

 

 

Section 1.04

Shareholder Obligations

2

 

 

 

ARTICLE II CORPORATE GOVERNANCE AND MANAGEMENT

2

 

 

 

Section 2.01

Board of Directors

2

 

 

 

Section 2.02

Board Meetings

3

 

 

 

Section 2.03

Director & Officer Liability Insurance

5

 

 

 

Section 2.04

General Shareholder Rights and Obligations

5

 

 

 

Section 2.05

Shareholder Actions

6

 

 

 

Section 2.06

Annual Budget

7

 

 

 

Section 2.07

Business Plan

7

 

 

 

Section 2.08

Senior Managers

7

 

 

 

Section 2.09

Reimbursement of Expenses

9

 

 

 

Section 2.10

Corporate Governance of the other JV Companies

9

 

 

 

ARTICLE III GENERAL AFFAIRS OF THE JV

9

 

 

 

Section 3.01

Books and Records

9

 

 

 

Section 3.02

Reports

10

 

 

 

Section 3.03

Ethical Business Practices

10

 

 

 

Section 3.04

Financial and Money Laundering Compliance

11

 

 

 

Section 3.05

Taxation

11

 

 

 

Section 3.06

Assistance & Independent Audit

11

 

 

 

ARTICLE IV DISTRIBUTIONS

12

 

 

 

Section 4.01

General

12

 

 

 

Section 4.02

Mandatory Tax Distributions

12

 

 

 

ARTICLE V TRANSFER OF EQUITY INTERESTS

12

 

 

 

Section 5.01

Limitation on Transfers

12

 

 

 

Section 5.02

Permitted Transfers

12

 

 

 

Section 5.03

Right of First Refusal

13

 

 

 

Section 5.04

Avoidance of Restrictions

14

 

 

 

Section 5.05

Notice of Transfer

14

 

 

 

Section 5.06

Deed of Adherence

14

 

 

 

ARTICLE VI CERTAIN OPERATING MATTERS

14

 

 

 

Section 6.01

Strategic Commitments

14

 

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Section 6.02

JV Funds

15

 

 

 

Section 6.03

Licensing

15

 

 

 

Section 6.04

Indemnification and Insurance

16

 

 

 

Section 6.05

Employee Equity Incentive Plan

16

 

 

 

Section 6.06

Annual Budget and Business Plan

16

 

 

 

ARTICLE VII EXCLUSIVITY; NON-SOLICITATION

16

 

 

 

Section 7.01

Exclusivity

16

 

 

 

Section 7.02

No Solicitation; No Hire

17

 

 

 

ARTICLE VIII CONFIDENTIALITY AND RESTRICTION ON ANNOUNCEMENTS

17

 

 

 

Section 8.01

General Obligation

17

 

 

 

Section 8.02

Exceptions

18

 

 

 

Section 8.03

Publicity

18

 

 

 

Section 8.04

Return/Destruction of Confidential Information

18

 

 

 

Section 8.05

Term

18

 

 

 

ARTICLE IX TERM AND TERMINATION

19

 

 

 

Section 9.01

Term; Termination

19

 

 

 

Section 9.02

Notice of Termination

19

 

 

 

Section 9.03

Buy-out; Wind-Up

19

 

 

 

Section 9.04

Other Terminations

20

 

 

 

Section 9.05

Liability

20

 

 

 

ARTICLE X NOTICES

20

 

 

 

Section 10.01

Notices

20

 

 

 

ARTICLE XI MISCELLANEOUS

21

 

 

 

Section 11.01

Definitions; Interpretation

21

 

 

 

Section 11.02

Legend

22

 

 

 

Section 11.03

Expenses

22

 

 

 

Section 11.04

Discrepancies

23

 

 

 

Section 11.05

Assignment

23

 

 

 

Section 11.06

No Agency

23

 

 

 

Section 11.07

No Partnership

23

 

 

 

Section 11.08

Amendment

23

 

 

 

Section 11.09

Waiver

23

 

 

 

Section 11.10

Entire Agreement

24

 

 

 

Section 11.11

Severability

24

 

 

 

Section 11.12

Counterparts

24

 

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Section 11.13

Consent to Specific Performance

24

 

 

 

Section 11.14

Language

24

 

 

 

ARTICLE XII GOVERNING LAW AND ARBITRATION

24

 

 

 

Section 12.01

Governing Law

24

 

 

 

Section 12.02

Arbitration

25

 

 

 

Appendix A

Definitions

 

 

 

 

Schedule 2.02(d)

Reserved Matters

 

 

 

 

Exhibit A

Deed of Adherence

 

 

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OPERATING AGREEMENT

 

This OPERATING AGREEMENT (this “Agreement”), dated as of August 25, 2014 is
entered into by and between:

 

Nature’s Sunshine Hong Kong Limited, a private company limited by shares
incorporated under the laws of Hong Kong with company number 2113072 (the
“Company”);

 

Nature’s Sunshine Products, Inc., a company incorporated under the laws of the
state of Utah, having its principal executive offices at 2500 West Executive
Parkway, Suite 100, Lehi, Utah (“NSP”); and

 

Fosun Industrial Co., Limited, a company incorporated under the Laws of Hong
Kong with company number 923961 (“Fosun Industrial”).

 

RECITALS

 

A.                                    Pursuant to a Share Subscription
Agreement, dated June 26, 2014 (the “Share Subscription Agreement”), NSP and
Fosun Industrial have agreed to subscribe for 16,000,000 Shares and 4,000,000
Shares, respectively, of the Company.

 

B.                                    It is the intention of NSP and Fosun
Industrial that the Company will establish two direct wholly-owned Subsidiaries
under the Laws of Hong Kong (the “HK Holdcos”), and the HK Holdcos will in turn
each establish a wholly-owned Subsidiary under the Laws of the PRC that will
engage in (a) the marketing and distribution (including wholesale, retail and
e-commerce, but excluding the Direct Selling) of NSP-branded and other
designated products in the PRC (the “Retail Subsidiary”) and (b) the Direct
Selling of Synergy-branded and other designated products in the PRC (the “DS
Subsidiary”), respectively (the DS Subsidiary, together with the Retail
Subsidiary, the “PRC Subsidiaries,” and together with the Company and HK
Holdcos, the “JV” and each a “JV Company”).

 

C.                                    The Parties are entering into this
Agreement to set out the relationship of the Parties, including, among others,
the rights and obligations of the Shareholders, in connection with the
management, control and operation of the Company.

 

NOW, THEREFORE, the Parties agree as follows:

 

ARTICLE I

 

THE COMPANY

 

Section 1.01                             Business of Company.  The business of
the Company shall be, directly and indirectly, to hold shares in the HK Holdcos
and the PRC Subsidiaries and through such PRC Subsidiaries, to manufacture,
distribute, market and sell NSP-branded, Synergy-branded, and other designated
products, including but not limited to herbs, vitamins, nutritional supplements,
immunity, cardiovascular, digestive, personal care, weight management and other
general health products, and such other businesses or activities, and to make
such other investments, as may be approved by the Board from time to time.

 

Section 1.02                             Name.  The name of the Company shall be
“Nature’s Sunshine Hong Kong Limited”; provided, however, that in the event of
the termination of the NSP License Agreement, (a) the Company shall promptly
cease using the name “Nature’s Sunshine Hong Kong Limited” or any other name
that includes the word “Nature’s Sunshine,” “NSP” or any

 

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word confusingly similar thereto and shall promptly cease using any trademark or
logo that had been licensed to the Company pursuant to the NSP License Agreement
and (b) the Shareholders shall promptly pass a special resolution of the Company
amending the Company Charter Documents and otherwise effecting such change of
name of the Company.  In such event, the Company also shall terminate any
sublicenses or other rights to use any such name or logo granted to any of its
Subsidiaries or any other Person, and shall promptly cause each of its
Subsidiaries to cease using any such name and logo and the amendment of such
Subsidiary’s articles of association or other applicable constitutional
documents to eliminate the word “Nature’s Sunshine,” “NSP” or any word
confusingly similar thereto from the name of such Subsidiary.

 

Section 1.03                             Term.  The term of the Company shall be
perpetual, and the Company shall continue (subject to the terms of the Companies
Ordinance) until dissolved in accordance with the terms of this Agreement and
applicable Law.

 

Section 1.04                             Shareholder Obligations.  Each Party
shall comply with the provisions of this Agreement in relation to the Company
and shall exercise its rights and powers with respect thereto in accordance
with, and so as to give effect to, this Agreement and, to the extent such
documents are not in conflict with this Agreement, the Company Charter
Documents.  To the extent there is any inconsistency between the terms and
conditions of this Agreement as they relate to the Company and the Company
Charter Documents, the Parties shall cause the Company Charter Documents to be
amended (to the extent reasonably practicable and permitted by applicable Law)
to conform as closely as practicable to the terms and conditions of this
Agreement.

 

ARTICLE II

 

CORPORATE GOVERNANCE AND MANAGEMENT

 

Section 2.01                             Board of Directors.  Number and
Composition.  The number of Directors constituting the entire Board shall be
three (3) and each Shareholder shall be entitled to designate such number of
Directors that is most closely proportional to its Company Pro Rata Share.  As
of the Closing, NSP shall be entitled to nominate two (2) Directors (any
Director nominated by NSP or its Affiliates being a “NSP Director”), and Fosun
Industrial shall be entitled to nominate one (1) Director (any Director
nominated by Fosun Industrial or its Affiliates being a “Fosun Industrial
Director”).  Each Shareholder agrees to vote its Shares at any shareholders
meeting for the election of each candidate nominated by another Shareholder in
accordance with this Section 2.01(a) and (b), to ensure such nominated candidate
will be elected.  One of the NSP Directors shall be appointed as the Chairman
for so long as NSP and/or its Affiliates hold a majority of the issued and
outstanding Shares; the Fosun Industrial Director shall be appointed as the Vice
Chairman.  The Vice Chairman shall have the authority to perform the duties of
the Chairman in the absence of the Chairman.

 

(b)                       Removal and Replacement of Directors.

 

(i)                                     A Director shall be removed from the
Board, with or without cause, upon, and only upon, the affirmative vote of the
Shareholders in accordance with this Section 2.01(b).  Each Shareholder shall
vote its Shares for the removal of a Director upon the written request of the
Shareholder that nominated such Director.  Otherwise, no Shareholder shall vote
for the removal of any Director.

 

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(ii)                                  If as a result of death, disability,
retirement, resignation of removal (with or without cause) of a Director, there
shall exist or occur any vacancy on the Board, the Shareholder that nominated
such Director will have the right to nominate such Director’s successor or
replacement, and the Shareholders and the Company shall cause such successor or
replacement Director to be elected to fill such vacancy as soon as practicable
after such vacancy occurs.

 

(c)                        Authority of the Board.  Subject only to the
provisions of this Agreement, the Company Charter Documents and applicable Law:

 

(i)                                     The Board shall have ultimate
responsibility for management and control of the Company; and

 

(ii)                                  The Board may from time to time and at any
time: (x) appoint Senior Managers of the Company, (y) delegate to such Senior
Managers any power or authority granted to the Board pursuant to this Agreement,
the Company Charter Documents or applicable Law, provided that any delegation of
power or authority to the Senior Managers with respect to any Reserved Matters
shall be subject to the resolution of such Reserved Matters pursuant to
Section 2.02(d) and (z) annul or vary such appointment and delegation.

 

Section 2.02                             Board Meetings.

 

(a)                       Frequency and Location.  Meetings of the Board shall
take place at least once each calendar quarter.  Meetings shall be held in a
location agreed upon by a NSP Director and a Fosun Industrial Director or
failing such agreement at the principal offices of the Company.  It is the
intention of the Shareholders that meetings of the Board will be held to the
extent possible in coordination and conjunction with meetings of the board of
directors of NSP to minimize travel and time commitments of Board members.

 

(b)                       Notice.  A meeting may be called by the Chairman or
Vice Chairman, by written notice to the Secretary specifying the date, time and
agenda for such meeting.  The Secretary shall, upon receipt of any such notice,
provide a copy of such notice to all Directors, accompanied by an agenda
specifying the business of such meeting and copies of all documents and other
information available and materially relevant for such meeting.  Not less than
ten (10) days’ prior notice of a Board meeting shall be given to all Directors;
provided, however, that such notice period (i) shall not apply in the case of an
adjourned meeting pursuant to Section 2.02(c), and (ii) may be waived or reduced
with the written consent of all of the Directors.  The attendance of any
Director at any meeting of the Board shall constitute a waiver of notice of such
meeting by such Director, except where such member attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting has not been properly called or convened.

 

(c)                                  Quorum.  All meetings of the Board shall
require a quorum of two (2) Directors including at least (i) one (1) NSP
Director and (ii) one (1) Fosun Industrial Director, in each case so long as at
least one NSP Director and one Fosun Industrial Director, respectively, are on
the Board.  If such a quorum is not present within two hours from the time
specified for the meeting, the meeting shall adjourn to such place and time as
the Chairman shall decide, which shall be no earlier than ten (10) days and no
later than sixty (60) days after written notice of such adjourned meeting has
been given to all Directors (unless all Directors otherwise consent to a
different date), and, if at such adjourned meeting, an NSP Director is present
but such quorum is still not present, then those Directors present at such

 

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adjourned meeting shall be deemed a quorum and may transact the business for
which such adjourned meeting was originally convened, provided, however, that at
such adjourned meeting, the Directors shall not act on any Reserved Matter
without the approval of the Fosun Industrial Director.

 

(d)                                 Voting; Reserved Matters.  At any Board
meeting, each Director may exercise one vote.  Any Director may, by written
notice to the Secretary, authorize any proxy to attend and vote as his alternate
at any Board meeting.  Except as otherwise required pursuant to the provisions
of this Agreement (including Section 2.02(e) and (f)), the adoption of any
resolution of the Board shall require the approval of a majority of the
Directors present at a duly constituted meeting of the Board, which approval
shall include the affirmative votes of at least one NSP Director and one Fosun
Industrial Director (in each case so long as at least one NSP Director and one
Fosun Industrial Director, respectively, are on the Board) for any matters
specified in Schedule 2.02(d) (each such matter, a “Reserved Matter”).  In the
event any Reserved Matter is included (and the specific terms thereof are
described) in the currently effective Annual Budget or Business Plan approved
pursuant to the requirements of this Section 2.02(d), such item shall be deemed
to also have been approved pursuant to such requirements.

 

(e)                        Actions Committed to the Discretion of the NSP
Directors.  So long as an NSP Director is on the Board, the NSP Directors, in
their capacity as such and their capacity as directors of the Governing Board of
each other JV Company, shall have sole and exclusive authority, and may exercise
all the powers of the Board and the Governing Board of each other JV Company, as
applicable, with respect to the following actions, and no such action shall be
taken by the Company or any of its Subsidiaries without the approval of the NSP
Directors:

 

(i)                                     the nomination of (A) officer(s) (other
than Directors) of the Company and the HK Holdcos, and (B) the general manager,
controller, supervisor and legal representative of each PRC Subsidiary; and

 

(ii)                                  the control and custody of all the chops,
stamps and seals of each JV Company.

 

(f)                         Actions Committed to the Discretion of the Fosun
Industrial Director.  So long as a Fosun Industrial Director is on the Board,
the Fosun Industrial Director, in its capacity as such and its capacity as
director of the Governing Board of each other JV Company, shall have sole and
exclusive authority, and may exercise all the powers of the Board and the
Governing Board of each other JV Company, as applicable, with respect to the
nomination of the vice general manager of each PRC Subsidiary, and no such
action shall be taken by the Company or any of its Subsidiaries without the
approval of the Fosun Industrial Director.

 

(g)                        Deadlock and Resolution Committee.

 

(i)                                     A “Deadlock” will be constituted under
this Agreement if (A) the required affirmative votes for any Reserved Matter,
cannot be obtained at two consecutive Board meetings on the same proposal, and
(B) either Shareholder has given written notice (the “Deadlock Notice”) to the
other Shareholder within ten (10) days following the end of the second Board
meeting setting out its position on the matter in dispute and its reasons
therefor.

 

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(ii)                                  If any Deadlock arises pursuant to
Section 2.02(g)(i), each Shareholder shall, within ten (10) days of issuance of
the Deadlock Notice promptly appoint two representatives who are, if possible,
senior to the NSP Directors or Fosun Industrial Director, as applicable (the
“Senior Representatives”), to form a resolution committee (the “Resolution
Committee”) to deal with the Deadlock and shall notify the other Shareholder of
such appointment.  The Resolution Committee members shall enter into reasonable,
good faith negotiations and make their best efforts to find a solution for the
Deadlock within thirty (30) days of the issuance of Deadlock Notice.

 

(iii)                               The Parties shall continue to perform all of
their respective obligations under this Agreement during the period of Deadlock,
provided that any Reserved Matters shall be resolved pursuant to
Section 2.02(d) and Section 2.02(g)(i) and (ii).

 

(h)                       Means of Participation.  Directors may participate in
a Board meeting by telephone or video conference; provided that each Director
can hear and be heard by all the other Directors throughout the meeting, and
such participation shall constitute presence for purposes of the quorum
provisions of Section 2.02(c).

 

(i)                           Expenses.  The Company shall reimburse the
Directors for their reasonable travel, lodging and other costs of attendance at
meetings of the Board, provided that such costs are within the Annual Budget as
approved by the Board.

 

(j)                          Action by Written Consent.  Any action that may be
taken by the Directors at a duly constituted meeting may be taken by a written
resolution (in one or more counterparts) signed by all the Directors.

 

(k)                       Committees.  If the Board so determines, it shall
establish an Audit Committee and a Compensation Committee and such other
committees as it deems appropriate.  The composition, power, responsibilities
and rules of procedures of such committees shall be adopted by the Board.

 

Section 2.03                             Director & Officer Liability
Insurance.  If the Board so determines, the Company shall purchase, and maintain
at all times from and after the Closing, director and officer liability
insurance (with the amount of the coverage determined by the Board) for all
directors and officers of the Company, retroactive to the date of formation of
the Company.

 

Section 2.04                             General Shareholder Rights and
Obligations.

 

(a)                       Effective from the Closing Date, (i) each Shareholder
shall vote its Shares at any annual general meeting or a general meeting of
Shareholders (each, a “Shareholders Meeting”), and (ii) each Party shall take
all other actions necessary, in each case to give effect to the provisions of
this Agreement and, to the extent such documents are not in conflict with this
Agreement, the Company Charter Documents.

 

(b)                       Each Shareholder shall be entitled to examine the
Books and Records of the JV Companies and shall have reasonable access, at all
reasonable times, to any and all properties and assets of the JV Companies.
Further, the Company, on its own behalf and on behalf of each of the other JV
Companies, undertakes to each of the Shareholders that it will supply each of
the Shareholders with all information, including copies of all published
accounts, reports, notices of meetings of the JV Companies and all other
circulars and notices issued or given to members of or those dealing with the JV
Companies, relating to their businesses or otherwise to the affairs and
financial or other position of the JV Companies.

 

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The Shareholders and the Company agree that, for this purpose, the Directors
shall be entitled to pass any information relating to the JV Companies, their
businesses or affairs to any Shareholder, and neither the other Shareholder nor
the Company shall raise any objection to such passing of information nor allege
any breach of any duty of confidence to the Company as a result of such action.

 

Section 2.05                             Shareholder Actions.

 

(a)                       Meetings.  The Company shall convene an annual general
meeting of Shareholders within four months after the end of each Financial Year,
and shall convene a general meeting of Shareholders when requested by
Shareholders representing not less than five percent (5%) of the issued and
outstanding Shares.  All such meetings shall be conducted in accordance with the
terms hereof, the Company Charter Documents and applicable Law and shall be
presided over by the Chairman or, in his absence, the Vice Chairman.

 

(b)                       Notice.  All Shareholders Meetings called for under
Section 2.05(a) shall be convened by the Chairman or, in his absence, the Vice
Chairman, giving notice to the Secretary specifying the date, time and agenda
for such meeting.  The Secretary shall, upon receipt of such notice, give a copy
of such notice to each Shareholder, accompanied by an agenda specifying the
business of such meeting.  Not less than twenty-one (21) days’ prior notice
shall be given to all Shareholders; provided, however, that such notice period
(i) shall not apply in the case of a general meeting pursuant to
Section 2.05(a), the notice period of which shall be fourteen (14) days,
(ii) shall not apply in the case of an adjourned meeting pursuant to
Section 2.05(c), and (iii) may be waived or reduced with the written consent of
all Shareholders.

 

(c)                        Quorum.  At any Shareholders Meeting, presence of the
Shareholders holding at least a majority of the issued and outstanding Shares
(including a duly authorized representative of each of NSP and Fosun Industrial
for any Shareholders Meeting at which a Reserved Matter will be discussed) shall
constitute a quorum.  If such a quorum is not present within two hours from the
time appointed for the Shareholders Meeting due to the absence of sufficient
Shareholders or of any duly authorized representative of a Shareholder (the
“Absent Shareholder”), the meeting shall adjourn to such place and time as the
Chairman shall decide, which shall be no earlier than ten (10) days and no later
than sixty (60) days after written notice of such adjourned meeting has been
given to all Shareholders, and, if at such adjourned meeting, NSP or a duly
authorized representative of NSP is present but such quorum is still not present
due to the absence of sufficient Shareholders or the continuing absence of the
Absent Shareholder, the Shareholder(s) present at such adjourned meeting shall
be deemed a quorum and may transact the business for which such adjourned
meeting was originally convened, provided, however, that at such adjourned
meeting, the Shareholders shall not act on any Reserved Matter without the
approval of the Fosun Industrial.

 

(d)                       Voting; Reserved Matters.  The adoption of any
resolution of a Shareholders Meeting shall require the approval of Shareholders
holding at least a majority of the issued and outstanding Shares represented at
a duly convened Shareholders Meeting, which approval shall include the
affirmative votes of each of NSP and Fosun Industrial acting in their capacities
as Shareholders for any Reserved Matters required by applicable Law to be
approved by the Shareholders (which Reserved Matters also require the approval
specified in Section 2.02(d)).

 

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(e)                        Means of Participation.  To the extent permitted by
applicable Law, (i) Shareholders may participate in a Shareholders Meeting by
means of a telephone or video conference allowing all Persons participating in
the meeting to hear each other at the same time, and (ii) participation by such
means shall constitute presence for purposes of the quorum provisions of
Section 2.05(c).

 

(f)                         Action by Written Consent.  Any action that may be
taken by the Shareholders at a duly constituted meeting may be taken by a
written resolution (in one or more counterparts) signed by all the Shareholders.

 

Section 2.06                             Annual Budget.

 

(a)                                 The Company shall prepare an Annual Budget
in respect of each year of operation of the JV.  The Board shall use all
reasonable efforts to agree to and adopt an initial Annual Budget in respect of
the Financial Year of the JV ending December 31, 2014 (the “Initial Budget”),
promptly following the date of this Agreement.  For each Financial Year of the
JV subsequent to that ending December 31, 2014, the general manager and
controller of each PRC Subsidiary shall jointly submit to the Board at least
ninety (90) days prior to the start of such Financial Year of the JV a proposed
Annual Budget for such ensuing Financial Year (the “Proposed Annual Budget”). 
The Proposed Annual Budget for any Financial Year of the JV (as it may be
amended by the Board), if approved by the Board as a Reserved Matter under
Section 2.02(d),  shall be the Annual Budget in effect for such Financial Year.

 

(b)                                 If by the first day of any Financial Year
that commences after the Financial Year ended December 31, 2014, a Proposed
Annual Budget for such Financial Year shall not have been approved by the Board,
then the Annual Budget in effect for the preceding Financial Year, with each
line item increased by 10% to the extent consistent with the Business Plan
covering such Financial Year of the Proposed Annual Budget, shall continue to be
in effect for such Financial Year until a Proposed Annual Budget for such
Financial Year shall have been approved by the Board as provided herein;
provided, however, that such deemed adoption shall not preclude a dispute with
respect to an Annual Budget from being the subject of a Deadlock Notice.

 

(c)                                  The Board may ratify any Annual Budget
deemed to be in effect pursuant to Section 2.06(b).

 

Section 2.07                             Business Plan.  Promptly following the
date of this Agreement, the Board shall use all reasonable efforts to agree to
and adopt an initial Business Plan of the JV for the period from the date of
this Agreement to December 31, 2019, which shall include plans and execution
items for the establishment of the HK Holdcos and PRC Subsidiaries as described
in Recital B hereto and the conduct of their respective businesses.  The
Business Plan shall be reviewed, revised and updated annually at least sixty
(60) days prior to the commencement of each Financial Year.  Any such revised
and updated Business Plan, if approved by the Board as a Reserved Matter under
Section 2.02(d), shall be the Business Plan in effect for such Financial Year.

 

Section 2.08                             Senior Managers.

 

(a)                                 The Company and the HK Holdcos shall each
maintain the minimum number of Senior Managers required under applicable Law. 
The Senior Managers of the

 

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Company shall be appointed by the Board and the Senior Managers of each HK
Holdco shall be appointed by its Governing Board.

 

(b)                                 In addition to a Chairman and a Vice
Chairman, each PRC Subsidiary’s Senior Managers shall include a general manager,
a vice general manager, a controller and a supervisor and such other officers
and executives as the Governing Board of such PRC Subsidiary may deem
appropriate.  The Senior Managers of each PRC Subsidiary shall be appointed by
its Governing Board.

 

(c)                                  Subject to Section 2.02(e), the general
manager of each PRC Subsidiary shall be a nominee appointed by the Governing
Board of such PRC Subsidiary, and shall hold office for a renewable term of up
to three (3) years, with such term expiring on the last day of the applicable
Financial Year of the JV.  The general manager shall report to the Governing
Board of such PRC Subsidiary.  The general manager may attend meetings of the
Governing Board of such PRC Subsidiary at the invitation of such Governing Board
but shall have no right to attend or vote at any meetings of such Governing
Board unless also elected as a director.  Notwithstanding anything else herein
to the contrary, the general manager may be removed from such office at any
time, with or without cause, by the Governing Board of such PRC Subsidiary. 
Subject to the supervision of such Governing Board, the general manager shall be
responsible for executing its resolutions and directives consistent with this
Agreement, including having overall responsibility for implementation of the
strategic initiatives and day-to-day management of the business of such PRC
Subsidiary.

 

(d)                                 Subject to Section 2.02(f), the vice general
manager of each PRC Subsidiary shall be a nominee appointed by the Governing
Board of such PRC Subsidiary,  and shall hold office for a renewable term of up
to three (3) years, with such term expiring on the last day of the applicable
Financial Year of the JV.  The vice general manager shall report to the general
manager and the Governing Board of such PRC Subsidiary, and may attend meetings
of the Governing Board of such PRC Subsidiary at the invitation of the Governing
Board but shall have no right to attend or vote at any meetings of such
Governing Board unless also elected as a director.  Notwithstanding anything
else herein to the contrary, the vice general manager may be removed from such
office at any time, with or without cause, by the Governing Board of such PRC
Subsidiary.  Subject to the supervision of such Governing Board, the vice
general manager shall be a senior administrative officer of such PRC Subsidiary
mainly responsible for administrative activities, and serve to facilitate
coordination and flow of information regarding such PRC Subsidiary to Fosun
Industrial with a view to ensure optimal and efficient communication with Fosun
Industrial and utilization of Fosun Industrial’s resources where appropriate for
the benefit of such PRC Subsidiary.

 

(e)                                  Subject to Section 2.02(e), the controller
of each PRC Subsidiary shall be a nominee appointed by the Governing Board of
such PRC Subsidiary, and shall hold office for a renewable term of up to
three (3) years, with such term expiring on the last day of the applicable
Financial Year of the JV.  The controller shall report to the general manager,
the Governing Board of such PRC Subsidiary, the Audit Committee of the Board (if
established), and may attend meetings of the Governing Board of such PRC
Subsidiary and/or Audit Committee at the invitation of such Governing Board or
Audit Committee, as applicable, but shall have no right to attend or vote at any
meetings of such Governing Board or Audit Committee unless also elected as a
director or member of the Audit Committee.  Subject to the supervision of such
Governing Board and Audit Committee, the controller shall be responsible for the
financial management of such PRC Subsidiary, including establishing and
overseeing internal controls and financial and tax reporting, shall inform the
vice general manager of the financial activities of such PRC Subsidiary, and
shall have

 

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supervisory authority over the other personnel of such PRC Subsidiary having
responsibility for financial and tax matters.

 

(f)                                   Notwithstanding the foregoing but subject
to applicable Law, the Board may remove any Senior Manager of the Company and
the Governing Board of each other JV Company may remove any Senior Manager of
such JV Company.  The requirements set forth above in this Section 2.08 and
Section 2.02(e) and (f) shall apply to the nomination and appointment of any
replacement general manager, vice general manager or controller of a PRC
Subsidiary.

 

Section 2.09                             Reimbursement of Expenses.  The Company
shall reimburse the officers of the Company for their reasonable travel and
other out-of-pocket expenses incurred in connection with their responsibilities
as such officers, provided that such costs are within the Annual Budget as
approved by the Board.

 

Section 2.10                             Corporate Governance of the other JV
Companies.  The total number and rights of directors and the right to appoint,
remove or nominate directors of all JV Companies shall be the same as set out in
Section 2.01, and the rights, terms and conditions set out in this ARTICLE II
shall be applied in respect of all JV Companies mutatis mutandis, to the extent
applicable and permissible under laws of the jurisdiction where such
Subsidiaries are incorporated.  To the extent that a Shareholder retains the
right to nominate any Director under Section 2.01, such Shareholder shall cause
the composition of such Governing Board of the HK Holdcos and PRC Subsidiaries
to be identical to the composition of the Board at all times.

 

ARTICLE III

 

GENERAL AFFAIRS OF THE JV

 

Section 3.01                             Books and Records.

 

(a)                       Each JV Company shall keep books, records, and
accounts (“Books and Records”), in reasonable detail, which accurately and
fairly reflect its transactions and dispositions of assets and liabilities.  The
Books and Records shall be maintained in (i) US dollars and in accordance with
the laws of Hong Kong and in accordance with US GAAP in the case of the JV
Companies established outside of the PRC, and (ii) Renminbi and in accordance
with the laws of the PRC and in accordance with PRC GAAP in the case of the JV
Companies established in the PRC.

 

(b)                       The accounts of the Company and of each other JV
Company shall be audited annually by a Designated Accounting Firm selected by
the Board.

 

(c)                        Each JV Company shall devise and maintain a system of
internal accounting controls sufficient to provide reasonable assurance that:

 

(i)                                     transactions are executed and access to
assets is permitted only in accordance with management’s general or specific
authorization;

 

(ii)                                  transactions are recorded as necessary to
permit preparation of periodic financial statements and to maintain
accountability for assets; and

 

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(iii)                               actual assets, and recorded assets (and
related accounting values) are compared at reasonable intervals and appropriate
action is taken to address any inconsistencies.

 

Section 3.02                             Reports.  The Company shall, and shall
cause each of the other JV Companies to, provide to each Shareholder:

 

(a)                       within ninety (90) days after the end of each
Financial Year, annual consolidated financial statements of each of the JV
Companies, audited by a Designated Accounting Firm;

 

(b)                       within forty-five (45) days after the end of each
fiscal quarter, unaudited consolidated quarterly financial statements of each of
the JV Companies;

 

(c)                        within fifteen (15) days after the end of each month,
unaudited consolidated monthly financial statements of each of the JV Companies;

 

(d)                       meeting minutes within fifteen (15) days following
each Board meeting or Shareholders meeting; and

 

(e)                        a copy of any notice or communication provided to or
received from any other Shareholder by any of the JV Companies.

 

The financial statements to be provided to the Shareholders under
Section 3.02(a) and (b) shall include an income statement, balance sheet, cash
flow statement and statement of changes in shareholder equity, prepared in
accordance with Section 3.01(a), and shall show the comparable figures for the
prior two Financial Years (if applicable) and results for the current period and
year to date; the financial statements to be provided to the Shareholders under
Section 3.02(c) shall include an income statement and balance sheet, prepared in
accordance with Section 3.01(a), and shall show results for the current period
and year to date.  All the financial statements and reports shall be prepared in
English.

 

Section 3.03                             Ethical Business Practices.

 

(a)                       Each JV Company shall adopt and implement written
rules, regulations, policies and compliance procedures on legitimate and ethical
business practices in relation to its commercial operations with a view to
following the best international practices and compliance implemented in the PRC
with respect to applicable anti-bribery and anti-corruption laws.

 

(b)                       In connection with the business of the JV Companies,
each JV Company shall (and to the extent that any Shareholder or any of its
agents or representatives are authorized to act on behalf of any JV Company,
such Shareholder shall and shall require its agents and representatives, in each
case in such instance, to): (i) make no payment or transfer of value which has
the purpose or effect of public or commercial bribery, and (ii) refuse to accept
or acquiesce in kickbacks or other unlawful means of obtaining business.

 

(c)                        In connection with the business of the JV Companies,
the JV Companies shall not use any sales agent or representative unless such
agent or representative has been screened to ensure that it has a good business
reputation and conducts its business in an ethical fashion and does not appear
on the US Treasury Office of Foreign Assets Control (“OFAC”) Specially
Designated Nationals List or other OFAC sanctions list.

 

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Section 3.04                             Financial and Money Laundering
Compliance.  The business of the JV shall be conducted at all times in
compliance with applicable financial record keeping and reporting requirements
and anti-money laundering statutes in Hong Kong, the PRC and all other
jurisdictions in which any JV Company conducts its business, the rules and
regulations thereunder, and any related or similar rules, regulations or
guidelines issued, administered, or enforced by any Governmental Authority in
such jurisdictions.

 

Section 3.05                             Taxation.

 

(a)                       Each Shareholder shall be solely responsible for, and
shall indemnify the Company from and against, any taxes (and related interest,
penalties, and additions to tax) imposed upon such Shareholder with respect to
its ownership interest in any JV Company, and shall bear any withholding taxes
properly payable (and related interest, penalties and additions to tax) that are
imposed in connection with dividends and other distributions paid to it by any
JV Company.  For the avoidance of doubt, if any governmental taxing authority
requires taxes to be withheld from payments made by the Company to a Shareholder
or collected on dividends or other distributions paid to such Shareholder by any
JV Company, such JV Company shall withhold and properly pay over and report such
withholding taxes to the applicable authority, and shall pay the Shareholder the
net dividend or distribution amount remaining, and the JV Company shall furnish
timely receipts or other official tax certificates showing the amount of
withholding taxes paid to the governmental taxing authority with respect to such
dividend or other distribution.

 

(b)                       The Company shall prepare and deliver to such
Shareholder such additional information and reports as such Shareholder shall
from time to time reasonably request, including without limitation such
information as such Shareholder or any of its Affiliates may need to comply with
applicable tax laws and regulations or otherwise for their tax purposes, which
information and reports shall be delivered as soon as practicable following such
request or on such timetable as such Shareholder may reasonably request.

 

Section 3.06                             Assistance & Independent Audit.

 

(a)                       The Company undertakes to each of the Shareholders
that it will, subject to reimbursement, provide reasonable assistance in the
preparation by any Shareholder (and/or Fosun Pharma) of any offering circular,
prospectus or other offering document (or supplemental document) required in
connection with: (i) any offering of securities (or rights to subscribe for such
securities) by that Shareholder or any Affiliate of that Shareholder, or
(ii) any requirements in order to comply with the rules of any Stock Exchange on
which either Shareholder or any Affiliate of that Shareholder is listed, or
(iii) as is otherwise necessary for them to comply with applicable law or
regulations as applied from time to time.

 

(b)                       The Company undertakes to each of the Shareholders
that it will allow each of the Shareholders from time to time (at such
Shareholder’s own cost) to carry out an audit or review of the businesses and
any other affairs of the JV Companies and to designate a person to carry out
such audit or review on such Shareholder’s behalf.  Such person (which may, but
need not be, the Shareholder itself, an adviser, consultant or contractor of the
Shareholder) shall be entitled:

 

(i)                                     to visit and inspect any premises of the
JV Companies and to discuss the affairs, finances and accounts of the JV
Companies with their officers and employees;

 

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(ii)                                  to inspect and request and retain copies
of any books, records or other documents relating to the businesses or any other
affairs of the JV Companies;

 

and the JV Companies shall afford such access and co-operation as may be
reasonable in the circumstances to facilitate the carrying out of such audit or
review.

 

ARTICLE IV

 

DISTRIBUTIONS

 

Section 4.01                             General.  All dividends and
distributions shall be paid to the Shareholders in proportion to their
respective interests in the Company.

 

Section 4.02                             Mandatory Tax Distributions.  In the
event the Company is to be treated as a partnership or disregarded entity for
United States tax purposes, as elected by the NSP Directors, the Company shall
(to the extent it has profits available for distribution within the meaning of
Section 297 of the Companies Ordinance or otherwise has funds legally available
for distribution, after reasonable consideration has been given to the
measurement and treatment of such profits and their distribution under the
relevant U.S. federal tax laws) make annual distributions to the Shareholders
(in proportion to their respective interests in the Company) so that the annual
amount paid to NSP is not less than NSP’s estimate of the combined federal,
state, local and foreign tax obligation of NSP and its Affiliates with respect
to NSP’s interest in the JV.  The Company shall (to the extent it is lawfully
able to do so) cause its Subsidiaries to pay such dividends or distributions to
the Company as may be necessary to fund such distributions to the Shareholders.

 

ARTICLE V

 

TRANSFER OF EQUITY INTERESTS

 

Section 5.01                             Limitation on Transfers.  Without the
prior written consent of each Shareholder, which each of them may grant or
withhold in its sole and absolute discretion, no Shareholder may Transfer any
Shares in the Company, except pursuant to Section 5.02 or Section 5.03.  Any
attempt to acquire or Transfer any Shares in violation of this Article V shall
be null and void ab initio, and the Company shall not register any such
acquisition or Transfer.  Under no circumstances may a Shareholder make a
Transfer of all or any part of its interest in the Company if such Transfer
would result in a breach of the non-competition provisions set forth in
Section 7.01.

 

Section 5.02                             Permitted Transfers.  A Shareholder may
Transfer all or part of its Shares to any wholly-owned Subsidiary of such
Shareholder (in the case of Fosun Industrial, to Fosun Pharma or any of its
wholly-owned Subsidiaries; each, a “Permitted Transferee”); provided, that
(a) such Shareholder shall pay all costs, including any taxes and fees,
associated with such Transfer, (b) any Permitted Transferee to whom Shares are
Transferred, prior to such Transfer, shall agree to be bound by the terms of
this Agreement by executing a Deed of Adherence substantially in the form
attached as Exhibit B, (c) no such Transfer shall relieve such Shareholder of
its obligations hereunder (and such Shareholder shall be jointly and severally
liable with the Permitted Transferee for any violation or breach hereof from the
effective date of such Transfer), and (d) all necessary third party consents and
Regulatory Approvals with respect to such Transfer shall have been obtained
prior to such Transfer.

 

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Section 5.03                             Right of First Refusal.

 

(a)                       At any time on or after the second (2nd) annual
anniversary of the Closing Date, if any Shareholder (the “Transferring
Shareholder”) seeks to Transfer all or part of its Shares (the Shares subject to
such potential Transfer being the “Offered Shares”), (i) the Transferring
Shareholder shall give to the Company and the other Shareholder a written notice
of its desire to Transfer the Offered Shares (the “Transfer Notice”), disclosing
the proposed transferee, purchase price and other terms and conditions of such
Transfer, and (ii) the other Shareholder (by it or through its designated
Affiliate) (the “Purchasing Shareholder”) shall have the right (but not the
obligation) to purchase all (but not part) of the Offered Shares in accordance
with the terms set out in the Transfer Notice by delivering a written notice to
the Transferring Shareholder and the Company within twenty (20) days of receipt
of the Transfer Notice (the “Option Period”) designating whether the purchase
price therefor will be that set forth in the Transfer Notice or the Fair Value.

 

(b)                       The fair value of the Offered Shares to be purchased
(the “Fair Value”) shall be determined under the following procedures: within
five (5) days after the expiration of the Option Period, the Transferring
Shareholder and the Purchasing Shareholder shall jointly appoint an
internationally-recognized “Big Four” accounting firm mutually agreed in writing
by the Transferring Shareholder and Purchasing Shareholder, or in the absence of
agreement between the Shareholders on the identity of the accounting firm within
15 days of the expiration of the Option Period, an internationally-recognized
“Big Four” accounting firm appointed by the President for the time being of the
Hong Kong Institute of Certified Public Accountants (or, if he is unavailable,
the next most senior officer) on the application of either Shareholder (the
“Common Appraiser”).  The Common Appraiser shall submit its written
determination of the Fair Value to the Shareholders within thirty (30) days
after its appointment.  The Fair Value shall be determined and certified by the
Common Appraiser based on the following principles and assumptions: (i) if the
Company is then carrying on business as a going concern, on the assumption that
it will continue to do so; (ii) the sale is to be on arms’ length terms between
a willing seller and a willing buyer; and (iii) the Shares are sold free of all
Encumbrances.  The cost of the Common Appraiser shall be shared equally by the
Transferring Shareholder and Purchasing Shareholder.  Notwithstanding the
foregoing, the Transferring Shareholder may, at its sole discretion, revoke the
Transfer Notice by serving a notice in writing to the Purchasing Shareholder
within ten (10) days after receipt of the valuation provided by the Common
Appraiser, in which case the Transfer shall cease to proceed.

 

(c)                        Upon the election of the Purchasing Shareholder to
exercise its right to purchase all (but not part) of the Offered Shares, and
provided that the Transfer Notice has not been revoked according to Section 5.03
(b), the Transferring Shareholder shall sell to the Purchasing Shareholder (or
its designated Affiliate), and the Purchasing Shareholder (or its designated
Affiliate) shall purchase, such Offered Shares at the price designated by the
Purchasing Shareholder in its written notice delivered during the Option Period
pursuant to subsection (a) above and otherwise in accordance with the terms set
out in the Transfer Notice.  The closing of any purchase and sale of such
Offered Shares pursuant to this Section 5.03 shall take place within sixty (60)
days after delivery of the Transfer Notice; provided that if the Purchasing
Shareholder designates the purchase price of the Offered Shares to be the Fair
Value, the closing of the purchase and sale of such Offered Shares shall take
place within ninety (90) days after delivery of the Transfer Notice.

 

(d)                       If the other Shareholder fails to answer or elects not
to purchase all of the Offered Shares by written notice delivered within the
Option Period, the Transferring

 

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Shareholder may transfer, sell or otherwise dispose of the Offered Shares to the
transferee disclosed in the Transfer Notice provided that the purchase price and
other terms and conditions of such transfer, sale or disposition shall be no
more favorable to the transferee than those set out in the Transfer Notice. In
addition, the Transferring Shareholder shall provide the other Shareholder with
a copy of the written agreements entered into with such transferee, provided
that the Transferring Shareholder may, at its sole discretion, remove such
confidential information relating to the Transfer other than those relating to
the price and terms as contemplated under the Transfer Notice.

 

(e)                        In the event that the sale of any Offered Shares to a
transferee disclosed in a Transfer Notice is not consummated within ninety (90)
days after delivery of the Transfer Notice under subsection (a) above, each
Shareholder’s rights under this Section 5.03 shall be re-invoked and shall be
applicable to any proposed Transfer of Shares by the Transferring Shareholder
pursuant to this Section 5.03.

 

Section 5.04                             Avoidance of Restrictions.  The Parties
agree that the Transfer restrictions in this Agreement and the Company Charter
Documents shall not be capable of being avoided by the holding of Shares
indirectly through a company or other entity that can itself be sold in order to
dispose of an interest in the Shares free of such restrictions.  Any Transfer or
other disposal of any shares (or other interest) resulting in any change in
Control of a Shareholder or of any company (or other entity) having Control over
that Shareholder shall be treated as a Transfer of the Shares held by that
Shareholder for all purposes hereof, and the provisions of this Agreement and
the Company Charter Documents that apply in respect of the Transfer of any
Shares shall thereupon apply in respect of the Shares so held.  Notwithstanding
the foregoing, neither this Section 5.04 or Section 11.05 nor any of the other
Transfer restrictions in this Agreement or the Company Charter Documents shall
apply to a merger, sale of all or any portion of the stock or all or any portion
of the assets of, reorganization, recapitalization or other significant
corporate transaction of (i) NSP or any of its direct or indirect shareholders
or (ii) Fosun Industrial or any of its direct or indirect shareholders, in each
case to the extent not resulting a change of control of such Person.

 

Section 5.05                             Notice of Transfer.  Within five
(5) Business Days after registering any Transfer of Shares on its books, the
Company shall send a notice to each Shareholder stating that such Transfer has
taken place and setting forth the name of the Transferor, the name of the
Transferee and the number and class of Shares involved.

 

Section 5.06                             Deed of Adherence.  Notwithstanding any
other provision of this Agreement, no Transfer may be made pursuant to this
ARTICLE V unless the transferee of the Shares (unless already bound hereby) has
agreed in writing to be bound by executing a Deed of Adherence substantially in
the form attached as Exhibit A as a “Shareholder.”

 

ARTICLE VI

 

CERTAIN OPERATING MATTERS

 

Section 6.01                             Strategic Commitments.

 

(a)                       The Company shall pursue and implement the
establishment of the HK Holdcos and the PRC Subsidiaries as described in Recital
B hereto and as contemplated in the Business Plan.

 

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(b)                       Responsibilities of NSP. NSP shall be responsible for
the following matters, unless otherwise agreed by the Parties:

 

(i)                                     to assist in setting up the management
and operating teams for the JV Companies;

 

(ii)                                  to assist in determining the products to
be sold by the PRC Subsidiaries in the PRC, which shall comply with applicable
PRC laws and regulations;

 

(iii)                               to assist the DS Subsidiary in establishing
the Direct Selling system for the DS Subsidiary (including bonus system)
pursuant to PRC laws and regulations, and the distribution network for the DS
Subsidiary;

 

(iv)                              to assist the JV in preparing the Business
Plan, and to assist the JV in an effort to meet not less than 80% of the sales
revenue target and net profits target as approved in the Business Plan; and

 

(v)                                 to assist the DS Subsidiary in applying for
all Governmental Approvals for the DS Subsidiary to engage in Direct Selling in
the PRC and to assist the PRC Subsidiaries to apply for all products
registrations with the relevant PRC Governmental Authorities.

 

(c)                        Responsibilities of Fosun Industrial. Fosun
Industrial shall be responsible for the following matters, unless otherwise
agreed by the Parties:

 

(i)                                     to assist the DS Subsidiary in applying
for all Governmental Approvals for the DS Subsidiary to engage in Direct Selling
in the PRC and to assist the PRC Subsidiaries to apply for all products
registrations with the relevant PRC Governmental Authorities;

 

(ii)                                  to assist the Retail Subsidiary in
accessing distribution and sales facilities and services for its products,
including shelf space at the retail locations owned or operated by Fosun or its
Affiliates, on terms no less favorable than those on which Fosun or its
Affiliates provide to any other manufacturer of nutritional supplements; and

 

(iii)                               to assist the DS Subsidiary in identifying,
accessing, securing and modifying appropriate facilities to serve as the
manufacturing plant for the products of the DS Subsidiary.

 

Section 6.02                             JV Funds.  The JV Companies shall not
commingle their funds with those of any other Person (other than another JV
Company).  If either Shareholder or any of such Shareholder’s Affiliates
receives any funds to which any JV Company is entitled, such funds shall
promptly (and, in any event, within five (5) Business Days following receipt) be
remitted to the applicable JV Company and deposited in the bank account of the
applicable JV Company.

 

Section 6.03                             Licensing.  NSP or its Affiliates will
license certain NSP-related trademarks and other intellectual property to the
Company or any of its wholly-owned Subsidiaries.  The Parties agree that NSP
shall be entitled to an annual licensing fee which equals 0.05% of the Company’s
total consolidated net sales (exclusive of VAT) in a Financial Year of products
bearing such trademarks and/or containing such intellectual property if in

 

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such Financial Year, the Company’s net profits, after the pre-tax expenses of
such licensing fee payment, exceed its cumulative losses forwarded from the
previous Financial Years.  The Parties shall take all reasonable steps to avail
themselves of the benefits of the applicable tax treaties.  Details of the
licensing arrangement shall be set forth in and subject to the terms and
conditions of the NSP License Agreement to be entered into by NSP (or its
Affiliates) and the applicable JV Company(s).

 

Section 6.04                             Indemnification and Insurance.  The
Company shall purchase insurance in Hong Kong and shall cause other JV Companies
to purchase insurance, in each case customary for an entity engaged in its line
of business.

 

Section 6.05                             Employee Equity Incentive Plan.  The
Company may adopt an equity incentive plan for employees of any JV Company.

 

Section 6.06                             Annual Budget and Business Plan.  Each
JV Company shall operate in strict conformity with the Annual Budget and
Business Plan then in effect.

 

ARTICLE VII

 

EXCLUSIVITY; NON-SOLICITATION

 

Section 7.01                             Exclusivity.

 

(a)                       During the Exclusivity Period, NSP and Fosun
Industrial agree that the DS Subsidiary shall be their respective exclusive
platform for carrying out Direct Selling in the PRC; neither NSP nor Fosun
Industrial shall (whether directly or indirectly (including by or through any of
its Affiliates), jointly with other parties or solely by itself), engage or
participate in Direct Selling in the PRC, and each of NSP and Fosun Industrial
shall cause its Affiliates to comply with such restriction.

 

(b)                                 During the Exclusivity Period, Fosun
Industrial shall not (whether directly or indirectly (including by or through
any of its Affiliates), jointly with other parties or solely by itself), invest
in, own, or control or participate in the ownership, operation or control of any
entity or business that engages or participates, by itself or through any of its
Affiliates, in Direct Selling in the PRC (each a “Direct Competitor”), and Fosun
Industrial shall cause its Affiliates to comply with such restriction.

 

(c)                                  Notwithstanding anything in the foregoing
to the contrary, Fosun Industrial and its Affiliates may (i) continue to conduct
and develop their retail and distribution operations, (ii) make or continue to
hold fully passive investments of less than three percent (3%) of the
outstanding share capital of any Direct Competitor, and (iii) in case that the
scope of products or services for which Direct Selling is permitted as of the
date hereof under the Administrative Regulation on Direct Selling (直销管理条例)
promulgated by the State Council of the PRC on August 23, 2005 and the Circular
on Scope of Products Permitted for Direct Selling (公布直销产品范围) issued by the
Ministry of Commerce of the PRC and the Administration for Industry and Commerce
of the PRC on November 2, 2005 has been expanded and additional products or
services are permitted for Direct Selling (“Expanded Products”),  engage or
participate in the Direct Selling of such Expanded Products, whether by itself
or with any third party (including but not limited to the investment in,
ownership of, or control or participation in the ownership, operation or control
of any Direct Competitor) ; provided, that Fosun Industrial has given the
Company (on behalf of

 

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itself and the JV Companies) the prior right to undertake Direct Selling of such
Expanded Products, and provided further that, the Company fails to respond, or
has declined such right within thirty (30) days after receipt of the written
notice from Fosun Industrial.

 

(d)                       The JV may, at its sole discretion, decide to conduct
business or operations in any jurisdictions other than the PRC.

 

(e)                        Each and every obligation under this Section 7.01
shall be treated as a separate obligation and shall be severally (not jointly)
enforceable as such and in the event of any such obligation or obligations being
or becoming unenforceable in whole or in part, such part or parts which are
unenforceable shall be deleted from such Section and any such deletion shall not
affect the enforceability of the remaining parts of such Section.

 

(f)                         The Parties agree that the restrictive covenants
contained in this Section 7.01 are reasonable and necessary for the protection
of the JV, and further agree that said covenants are not excessive or unduly
onerous upon NSP, Fosun Industrial or their respective Affiliates. However, it
is recognized that restrictions of the nature in question may fail for technical
reasons currently unforeseen and accordingly it is hereby agreed and declared
that if any of such restrictions shall be adjudged to be void as going beyond
what is reasonable in all the circumstances for the protection of the JV, but
would be valid if part of the wording thereof were deleted or the periods
thereof reduced or the range of activities or area dealt with thereby reduced in
scope, the said restriction shall apply with such modification as may be
necessary to make it valid and effective.

 

Section 7.02                             No Solicitation; No Hire.  The JV
Companies shall not solicit (directly or indirectly) or knowingly hire any
Person who was employed by any Shareholder or its Affiliates, without the
written consent of such Shareholder; and no Shareholder shall, and shall cause
its Affiliates not to, solicit (directly or indirectly) or knowingly hire any
Person who was employed by any JV Company or any other Shareholder for a period
commencing from the Closing up to and until the second (2nd) anniversary of the
date on which such Shareholder ceases to own all of its respective Shares,
without the written consent of the Company or such other Shareholder, unless
such hire is carried out through the open market.

 

ARTICLE VIII

 

CONFIDENTIALITY AND RESTRICTION ON ANNOUNCEMENTS

 

Section 8.01                             General Obligation.  Each Party
undertakes to the other Parties that it shall not reveal, and that it shall
cause that its respective directors, professional advisors, officers, employees,
agents and auditors (which shall further include, in the case of the Fosun
Industrial solely, Fosun Pharma and its directors, professional advisors,
officers, employees, agents and auditors) (collectively, “Representatives”) do
not reveal, to any third party any Confidential Information without the prior
written consent of the Company or the concerned Party (each, a “Disclosing
Party”), as the case may be, or use any Confidential Information in such manner
that is detrimental to the JV or the concerned Party, as the case may be.  The
Party receiving the Confidential Information (the “Receiving Party”) on its own
behalf and on behalf of each of its Representatives agrees to comply in full
with the confidentiality obligations set forth herein and to undertake and
ensure that, by its actions, neither the Receiving Party nor any of its
Representatives to whom Confidential Information may be disclosed by the
Receiving Party will breach the terms of the confidentiality obligations assumed
herein and that the Receiving Party will be liable for any breach by its
Representatives of the confidentiality obligations hereunder.  The term
“Confidential

 

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Information” means, (a) any information concerning the business, operations,
technology (including know-how), formulas, investment, finance, transactions,
marketing plans and strategies or affairs of any Party or its Affiliates or any
JV Company or any of their respective Representatives (whether conveyed in
written, oral or in any other form and whether such information is furnished
before, on or after the date of this Agreement); (b) the terms of this
Agreement; and (c) any other information or materials prepared by a Party or its
Affiliates or any JV Company or any of their respective Representatives that
contains or otherwise reflects, or is generated from, Confidential Information.

 

Section 8.02                             Exceptions.  The provisions of
Section 8.01 shall not apply to:

 

(a)                       disclosure of Confidential Information that is or
becomes generally available to the public other than as a result of disclosure
by or at the direction of a Party or any of its Representatives in violation of
this Agreement;

 

(b)                       disclosure by a Party to a Representative; provided
that such Representative (i) is under a similar obligation of confidentiality or
(ii) is otherwise under a binding professional obligation of confidentiality;

 

(c)                        disclosure, after giving prior notice to the other
Parties to the extent practicable under the circumstances and subject to any
practicable arrangements to protect confidentiality, to the extent required
under the rules of any stock exchange on which the shares of a Party or its
parent company are listed, or by applicable Law or any Governmental Authority
with authority or jurisdiction to require such disclosure, or in connection with
any judicial or arbitral process regarding any legal action, suit or proceeding
arising out of or relating to this Agreement; or

 

(d)                       disclosure to the extent required in connection with a
bona fide financing or other corporate transaction of a Party (and provided that
the Party obtains an agreement from the party to whom it intends to disclose
such information to hold such matters confidential or is otherwise acting in
conformity with custom and practice of a “roadshow”).

 

Section 8.03                             Publicity.  Except as required by
applicable Law in the reasonable opinion of legal counsel of a Party, by any
Governmental Authority, by any relevant stock exchange on which the shares of a
Party or its parent company are listed or otherwise agreed by all the Parties,
no publicity release or public announcement concerning the relationship or
involvement of the Parties shall be made by any Party without the prior written
consent of all the other Parties.  Each Party shall have the right to review and
comment on any such publicity release or public announcement of each other Party
prior to making any such publicity release or public announcement.

 

Section 8.04                             Return/Destruction of Confidential
Information.  If a Disclosing Party so requests in writing at any time following
the termination of this Agreement, the Receiving Party shall at its election
immediately (a) return to such Disclosing Party all the Confidential Information
of such Disclosing Party received by the Receiving Party, or (b) destroy or
permanently erase all Confidential Information of such Disclosing Party in
tangible form (whether in written form, electronically stored or otherwise).

 

Section 8.05                             Term.  The confidentiality obligations
set forth in this ARTICLE VIII shall survive the termination of this Agreement
for a period of two (2) years from and after such termination.

 

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ARTICLE IX

 

TERM AND TERMINATION

 

Section 9.01                             Term; Termination.  This Agreement
shall become effective upon the execution and delivery hereof by the Parties. 
Once this Agreement has become effective, it shall continue in effect until
(i) the Company is liquidated, dissolved or wound-up, or (ii) each of the
Parties hereto agrees to terminate this Agreement in writing, or (iii) Fosun
Industrial (individually or together with its Affiliates), holds less than 5% of
the issued and outstanding Shares; provided, however, that the provisions of
ARTICLE VII (Exclusivity; Non-Solicitation), ARTICLE VIII (Confidentiality and
Restriction on Announcements), this Section 9.01 (Term; Termination),
Section 9.05 (Liability), ARTICLE X (Notices), ARTICLE XI (Miscellaneous) and
Article XII (Governing Law and Arbitration) shall survive the termination of
this Agreement; and provided further, that this Agreement shall cease to have
effect with respect to any Person who is no longer a Shareholder of the Company
except that such Person shall continue to be bound by the foregoing specified
provisions.

 

Section 9.02                             Notice of Termination.  Each
Shareholder shall be entitled to serve a notice of termination on the other
Shareholder if any of the events set out below shall occur:

 

(a)                                 If commencing from (and including) the third
(3rd) Financial Year after Closing, the Company suffers losses for a consecutive
period of two (2) full Financial Years;

 

(b)                       if commencing from (and including) the fourth (4th)
full Financial Year after Closing, the JV’s sales revenue for any Financial Year
falls below the sales revenue target as stipulated in the Business Plan for that
Financial Year by 50% or more. For the purpose of this Section 9.02(b), the
sales revenue targets for each of the Financial Year 2018 and 2019 are as
follows: 458,000,000 RMB and 991,000,000 RMB;

 

(c)                        if the DS Subsidiary fails to obtain a Direct Selling
license within three (3) years after Closing; or

 

(d)                       if the other Shareholder becomes bankrupt, or is
subject to proceedings for liquidation or dissolution, ceases to carry on
business or becomes insolvent.

 

Section 9.03                             Buy-out; Wind-Up.  In the event either
Shareholder gives a notice of termination in accordance with Section 9.02, the
Shareholders shall within a period of sixty (60) days after such notice is given
conduct negotiations and endeavor to resolve the cause for such notification,
including which Shareholder will buy out the other Shareholder’s Shares in the
Company; provided, that any Shareholder giving the notice under
Section 9.02(d) (a “Solvent Shareholder”) will have the right to buy out the
other Shareholder’s Shares without negotiation.  In the event that (a) the
Shareholders agree that one Shareholder would buy out the other Shareholder’s
Shares in the Company or (b) a Solvent Shareholder agrees in writing to exercise
its right to buy out the other Shareholder’s Shares, that Shareholder shall buy
out the other Shareholder’s entire Shares in the Company at the Fair Value of
the other Shareholder’s Shares at the time of the buy-out.  The Fair Value shall
be determined pursuant to Section 5.03(b).  The sale and purchase of the Shares
shall be completed within thirty (30) days after the Common Appraiser has
submitted its determination of the Fair Value to the Shareholders.

 

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If (a) by the end of the sixty (60)-day period, the Shareholders have not agreed
as to which Shareholder will buy out the other’s Shares or a Solvent Shareholder
has not agreed in writing to buy out the other Shareholder’s Shares, or (b) in
the event an agreed sale and purchase of the Shares is not completed within
thirty (30) days after the Common Appraiser has submitted its determination of
the Fair Value to the Shareholders, the Shareholders shall procure that a
resolution is passed to wind-up the JV Companies.

 

Section 9.04                             Other Terminations.  Following the
expiration of the Lockup Period (as defined in the Stockholder Agreement), in
the event Fosun Pharma or any Affiliated Entity (as defined in the Stockholder
Agreement) seeks to Transfer any shares of common stock of NSP such that Fosun
Pharma and its Affiliated Entities will collectively own less than 5.0% of the
outstanding shares of common stock of NSP immediately following such Transfer
(the “Major Transfer”), then:

 

(a)                       Fosun Industrial shall sell to NSP, and NSP shall
purchase from Fosun Industrial, Fosun Industrial’s entire Shares in the Company
(the “JV Sale”) at the Fair Value of such Shares at the time of sale (as
determined pursuant to Section 5.03(b)); and

 

(b)                       the closing of the JV Sale and the closing of the
Major Transfer shall occur concurrently with each other, which shall be as soon
as practicable after the Common Appraiser has submitted its determination of the
Fair Value to the Shareholders in respect of the JV Sale.

 

Section 9.05                             Liability.  Nothing in this ARTICLE IX
shall be deemed to release any Party from any liability for any breach of this
Agreement prior to the effective date of such termination.

 

ARTICLE X

 

NOTICES

 

Section 10.01                      Notices.  All notices, requests, claims,
demands and other communications hereunder shall be in writing and shall be
given or made (and shall be deemed to have been duly given or made upon receipt)
by delivery in person, by an internationally recognized overnight courier
service, or by facsimile to the respective parties hereto at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 10.01):

 

If to NSP:

 

Nature’s Sunshine Products, Inc.
2500 West Executive Parkway, Suite 100
Lehi, Utah 84043
Attention: Chief Executive Officer
Facsimile: +1 (801) 341-7320

 

with a copy to:

 

Nature’s Sunshine Products, Inc.
2500 West Executive Parkway, Suite 100
Lehi, Utah 84043
Attention: General Counsel
Facsimile: +1 (801) 723-1334

 

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If to Fosun Industrial:

 

Shanghai Fosun Pharmaceutical (Group) Co., Ltd.
No. 2 East Fuxing Road
Shanghai 200010, P.R. China
Attention: Hu Jianglin, Vice President
Facsimile: +86 (21) 6332-5581

 

with a copy to:

 

Shanghai Fosun Pharmaceutical (Group) Co., Ltd.
No. 2 East Fuxing Road
Shanghai 200010, P.R. China
Attention: Chen Xingzhong
Facsimile: +86 (21) 6332-5581

 

If to the Company:

 

to the registered office of the Company in Hong Kong

 

with copies to:

 

NSP (at the address specified in or pursuant to this Section 10.01); and

 

Fosun Industrial (at the address specified in or pursuant to this Section 10.01)

 

ARTICLE XI

 

MISCELLANEOUS

 

Section 11.01                      Definitions; Interpretation.

 

(a)                       Certain Definitions.  Capitalized terms used but not
defined in the main body of this Agreement shall have the meanings assigned to
them in Appendix A.

 

(b)                       Treatment of Ambiguities.  The Parties acknowledge
that each Party has participated in the drafting of this Agreement, and that any
rule of construction to the effect that ambiguities are to be resolved against
the drafting party shall not be applied in the construction or interpretation of
this Agreement.

 

(c)                        References; Construction.  Unless otherwise indicated
herein, with respect to any reference made in this Agreement to a Section (or
Article, Subsection, Paragraph, Subparagraph or Clause), Appendix, Exhibit or
Schedule, such reference shall be to a section (or article, subsection,
paragraph, subparagraph or clause) of, or an appendix, exhibit or schedule to,
this Agreement.  The table of contents and any article, section, subsection,
paragraph or subparagraph headings contained in this Agreement and the recitals
at the beginning of this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.  Any
reference made in this Agreement to a statute or statutory provision shall mean
such statute or statutory provision as it has been amended through the date as
of which the particular portion of the Agreement is to take effect, or to any
successor statute or statutory provision relating to the same subject as the
statutory provision so referred to in this Agreement, and to any then applicable
rules or regulations promulgated thereunder. A Party or any other Person
referenced in this

 

21

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Agreement includes its successors in title, permitted assigns and permitted
transferees. Whenever the words “include,” “includes” or “including” are used in
this Agreement, they shall be deemed, unless the context clearly indicates to be
contrary, to be followed by the words “but (is/are) not limited to.”  The words
“herein,” “hereof,” “hereunder” and words of like import shall refer to this
Agreement as a whole (including its Appendices, Exhibits and Schedules), unless
the context clearly indicates to the contrary (for example, that a particular
section, schedule or exhibit is the intended reference).  Words used herein,
regardless of the number and gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context indicates is appropriate.  Where
specific language is used to clarify or illustrate by example a general
statement contained herein, such specific language shall not be deemed to
modify, limit or restrict the construction of the general statement which is
being clarified or illustrated.

 

Section 11.02                      Legend.  Each certificate for any Shares now
held or hereafter acquired by any Shareholder shall, for as long as this
Agreement is effective, bear a legend as follows:

 

NATURE’S SUNSHINE HONG KONG LIMITED (THE “COMPANY”) IS A COMPANY INCORPORATED
UNDER THE LAWS OF HONG KONG SPECIAL ADMINISTRATIVE REGION, AND THE ORDINARY
SHARES REPRESENTED BY THIS CERTIFICATE SHALL NOT BE SOLD, ASSIGNED, TRANSFERRED,
EXCHANGED, MORTGAGED, PLEDGED OR OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT
COMPLIANCE WITH THE PROVISIONS OF THAT OPERATING AGREEMENT, DATED AUGUST 25,
2014 AMONG THE SHAREHOLDERS OF THE COMPANY AND THE COMPANY OR SUBSEQUENTLY
ADHERING THERETO AND THE ARTICLES OF ASSOCIATION OF THE COMPANY.  COPIES OF SUCH
OPERATING AGREEMENT AND ARTICLES OF ASSOCIATION ARE ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY.  THE COMPANY WILL NOT REGISTER THE TRANSFER OF SUCH
ORDINARY SHARES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL THE TRANSFER HAS
BEEN MADE IN COMPLIANCE WITH THE TERMS OF SUCH OPERATING AGREEMENT AND AND
ARTICLES OF ASSOCIATION.

 

Section 11.03                      Expenses.  Except as otherwise noted herein,
each Party shall bear the expenses incurred by it in connection with the
negotiation and execution of this Agreement and the performance of its
obligations hereunder.  The costs of and incidental to incorporating and
establishing the Company, and for the Company or any JV Company to take actions
required to be taken by them by this Agreement shall be borne and paid by the
Company.  If any legal action, including, without limitation, an action for
arbitration in accordance with Section 12.02, injunctive relief, or enforcement
of any award or decision rendered thereto, is brought relating to a Dispute, the
prevailing Party in any final judgment or arbitration award, or the
non-dismissing Party in the event of a voluntary dismissal by the Party
instituting the action, shall be entitled to the full amount of all reasonable
expenses,

 

22

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including all court costs, arbitration fees and actual attorneys’ fees paid or
incurred in good faith.

 

Section 11.04                      Discrepancies.  If there is any discrepancy
between any provision of this Agreement and any provision of the Company Charter
Documents, the provisions of this Agreement shall prevail as between the
Shareholders only, and the Parties shall cause the Company Charter Documents to
be promptly amended, to the extent permitted by applicable Law, in order to
conform to this Agreement.

 

Section 11.05                      Assignment.  Without the prior written
consent of the other Parties (other than the Company), no Party may assign, or
suffer or permit an assignment (by operation of law or otherwise) of, its rights
or obligations under or interest in this Agreement other than, in the case of a
Shareholder, to its Permitted Transferee in connection with transfers of Shares
expressly permitted under this Agreement.  Any purported assignment or other
disposition without the prior written consent of the other Parties (other than
the Company) other than by a Shareholder to its Permitted Transferee shall be
null and void.  Subject to the foregoing, this Agreement shall be binding upon
and shall inure to the benefit of the Parties and their respective successors
and permitted assigns.

 

Section 11.06                      No Agency.  No Party to this Agreement,
acting solely in its capacity as such, shall act as an agent of the Company or
have any authority to act for or to bind the Company, except as authorized by
the Board.  Any Party that takes any action or binds the Company in violation of
this Section shall be solely responsible for, and shall indemnify the Company
and each other Party against, any losses, claims, damages, liabilities,
judgments, fines, obligations, expenses and liabilities of any kind or nature
whatsoever (including but not limited to any investigative, legal and other
expenses reasonably incurred in connection with, and any amounts paid in
settlement of, any pending or threatened legal action or proceeding) that the
Company, or such other Party, as the case may be, may at any time become subject
to or liable for by reason of such violation.  The provisions of this
Section 11.06 shall survive the termination of this Agreement for two years
commencing from such termination.

 

Section 11.07                      No Partnership.  The Parties expressly do not
intend hereby to form a partnership, either general or limited, under any
jurisdiction’s partnership law.  The Parties do not intend to be partners one to
another, or partners as to any third party, or create any fiduciary relationship
among themselves, solely by virtue of their status as Parties to this
Agreement.  To the extent that any Party, by word or action, represents to
another Person that any Party is a partner or that the Company is a partnership,
the Party making such representation shall be liable to any other Party that
incurs any losses, claims, damages, liabilities, judgments, fines, obligations,
expenses and liabilities of any kind or nature whatsoever (including any
investigative, legal or other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any pending or threatened legal action or
proceeding) arising out of or relating to such representation. The provisions of
this Section 11.07 shall survive the termination of this Agreement for two years
commencing from such termination.

 

Section 11.08                      Amendment.  Except as otherwise expressly
provided in this Agreement, this Agreement may not be amended, modified or
supplemented except by a written instrument executed by the Parties hereto.

 

Section 11.09                      Waiver.  No waiver of any provision of this
Agreement shall be effective unless set forth in a written instrument signed by
the Party waiving such provision.  No failure or delay by a Party in exercising
any right, power or remedy under this Agreement

 

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shall operate as a waiver thereof, nor shall any single or partial exercise of
the same preclude any further exercise thereof or the exercise of any other
right, power or remedy.  Without limiting the foregoing, no waiver by a Party of
any breach by any other Party of any provision hereof shall be deemed to be a
waiver of any subsequent breach of that or any other provision hereof.

 

Section 11.10                      Entire Agreement.  This Agreement, together
with the Share Subscription Agreement and each other agreement described herein
or therein, constitutes the entire agreement between the Parties relating to the
subject matter hereof and supersedes all prior and contemporaneous agreements
and understandings, inducements or conditions, express or implied, oral or
written, among the Parties.

 

Section 11.11                      Severability.

 

(a)                       Each and every obligation under this Agreement shall
be treated as a separate obligation and shall be severally enforceable as such.

 

(b)                       If a term of this Agreement is or becomes illegal,
invalid or unenforceable in any respect under any jurisdiction, that will not
affect (i) the legality, validity or enforceability in that jurisdiction of any
other term of this Agreement or (ii) the legality, validity or enforceability in
any other jurisdictions of that or any other term of this Agreement.

 

(c)                        If a term of this Agreement is or becomes illegal,
invalid or unenforceable in any respect under any jurisdiction, it shall be
replaced by a mutually acceptable provision, which being valid, legal,
enforceable and in compliance with applicable government policy comes closest to
the intention of the Parties underlying such illegal, invalid or unenforceable
provision

 

Section 11.12                      Counterparts.  This Agreement may be executed
in any number of counterparts, and by each Party on separate counterparts. Each
counterpart is an original, but all counterparts shall together constitute one
and the same instrument. Delivery of a counterpart of this Agreement by e-mail
attachment or telecopy shall be an effective mode of delivery.

 

Section 11.13                      Consent to Specific Performance.  The Parties
declare that it is impossible to measure in money the damages that would be
suffered by a Party by reason of the failure by any other Party to perform any
of the obligations hereunder, and that irreparable damage would occur in the
event that any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise breached.  Therefore, if any
Party shall institute any action or proceeding to enforce the provisions hereof,
any Party against whom such action or proceeding is brought hereby waives any
claim or defense therein that the other Parties have an adequate remedy at law.

 

Section 11.14                      Language.  This Agreement shall be executed
in English.

 

ARTICLE XII

 

GOVERNING LAW AND ARBITRATION

 

Section 12.01                      Governing Law.  This agreement shall be
governed by, and construed in accordance with, the laws of Hong Kong without
regard to the principles of conflicts of law of any jurisdiction.

 

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Section 12.02                      Arbitration.  Any dispute, controversy or
claim arising out of or relating to this Agreement, or the breach, termination
or invalidity thereof (each a “Dispute”), shall be settled by arbitration at the
Hong Kong International Arbitration Centre (“HKIAC”) under the Hong Kong
International Arbitration Centre Administered Arbitration Rules (the
“Arbitration Rules”) in force when the Notice of Arbitration (as defined by the
Arbitration Rules) is submitted in accordance with these Arbitration Rules.  The
number of arbitrators shall be three.  The arbitration proceedings shall be
conducted in English.  Each Party hereto shall cooperate with the other in
making full disclosure of and providing complete access to all information and
documents requested by the other in connection with such arbitration
proceedings, subject only to any confidentiality obligations binding on such
Party. Any award made by the arbitral tribunal shall be final and binding on
each of the Parties that were parties to the Dispute. Either Party shall be
entitled to seek preliminary injunctive relief, if possible, from any court of
competent jurisdiction pending the constitution of the arbitral tribunal.

 

[The remainder of this page is intentionally left blank]

 

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IN WITNESS WHEREOF this Agreement has been executed on the day and year first
above written.

 

 

Nature’s Sunshine Hong Kong Limited

 

 

 

 

 

By:

/s/ Gregory L. Probert

 

 

Name: Gregory L. Probert

 

 

Title: Director

 

 

 

 

 

 

Nature’s Sunshine Products, Inc.

 

 

 

 

 

By:

/s/ Gregory L. Probert

 

 

Name: Gregory L. Probert

 

 

Title: Chairman and CEO

 

 

 

 

 

 

Fosun Industrial Co., Limited

 

 

 

 

 

By:

/s/ Chen Qiyu

 

 

Name: Chen Qiyu

 

 

Title: Chairman

 

 

[Signature page of Operating Agreement]

 

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APPENDIX A

DEFINITIONS

 

In this Agreement, unless the context otherwise requires the following words and
expressions have the following meanings:

 

“Affiliate” means, with respect to any Person or group of Persons, a Person that
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with such Person or group of Persons;
provided, however, that for purposes of this Agreement, (x) “Affiliate” of Fosun
Industrial shall mean Fosun Pharma and any Person or group of Persons that are
directly or indirectly controlled by Fosun Pharma; and (y) the Company shall not
be considered an Affiliate of NSP or Fosun Industrial with respect to the period
following the Closing.

 

“Annual Budget” means, for any Financial Year, either (i) the budget and
projected balance sheet, income statement and sources and uses of funds
statement for the Company and its Subsidiaries, on a consolidated and
consolidating basis, for such Financial Year, as approved by the Board in
accordance with this Agreement, or (ii) the budget deemed to be the Annual
Budget pursuant to Section 2.06(b) for such Financial Year, in either case,
conforming in form to the Initial Budget and containing information in all
categories included in the Initial Budget, as amended or modified from time to
time pursuant to Section 2.06.  Unless the context otherwise requires,
references to the Annual Budget shall be deemed to be references to the Annual
Budget then in effect.

 

“Associate” means, with respect to any Person or group of Persons: (a) a
corporation, partnership, joint venture or other entity of which such Person or
group of Persons is an officer or partner or is, directly or indirectly, through
one or more intermediaries, the beneficial owner of ten percent (10%) or more of
(i) any class or type of equity securities or other profits interest or (ii) the
combined voting power of interests ordinarily entitled to vote for management or
otherwise; and (b) 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.

 

“Board” means the board of directors of the Company.

 

“Business Day” means any day that is not a Saturday, a Sunday or other day on
which banks are required or authorized by Law to be closed in the city of New
York, New York, Hong Kong or Beijing, China.  In the event that any action is
required or permitted to be taken under this Agreement on or by a date that is
not a Business Day, such action may be taken on or by the Business Day
immediately following such date.

 

“Business Plan” means a written plan setting forth the strategic, business and
operational plan of the JV for the applicable period (updated annually in
accordance with Section 2.07), including without limitation a plan for the
strategic direction of the JV’s business and a detailed plan for the operations
of the JV, including, inter alia, projections for manpower, capital expenditure,
external funding, and other operational and business areas.

 

“Chairman” means the chairman of the Board.

 

“Closing” has the meaning set forth in the Share Subscription Agreement.

 

Appendix A -1

--------------------------------------------------------------------------------

 

“Closing Date” has the meaning set forth in the Share Subscription Agreement.

 

“Companies Ordinance” means the Companies Ordinance (Chapter 622 of the Laws of
Hong Kong) and the Companies Ordinance (Winding Up and Miscellaneous Provisions)
(Chapter 32 of the Laws of Hong Kong).

 

“Company Charter Documents” means the Articles of Association of the Company, as
amended from time to time.

 

“Company Pro Rata Share” means, with respect to a Shareholder, the proportion
that the number of Shares held by such Shareholder bears to the aggregate number
of Shares held by all Shareholders.

 

“control” means (i) ownership of more than 50% of the outstanding shares or
other existing interests or registered capital of such Person or (ii) the power
to direct the management or policies of such Person, whether through the
ownership of more than 50% of the voting power of such Person, through the power
to appoint a majority of the members of the board of directors or similar
governing body of such Person, through contractual arrangements or otherwise.

 

“Designated Accounting Firm” means any of the following accounting firms, whose
appointment shall require the approval of the Board: Deloitte, Ernst & Young,
KPMG or PricewaterhouseCoopers.

 

“Direct Selling” means direct selling of goods or services in accordance with
the Administrative Regulation on Direct Selling (直销管理条例, “ARDS”) promulgated by
the State Council of the PRC on August 23, 2005 (as amended from time to time)
and pursuant to a direct selling license (直销经营许可证) issued under ARDS.

 

“Director” means a director of the Company.

 

“Encumbrance” means any lien, mortgage, pledge, license, covenant not to sue,
claim, charge, security interest or other encumbrance, option or defect on title
or any similar arrangement or interest in real or personal property, but
excluding restrictions on transfer created by applicable securities Laws.

 

“Equity Interests” means, with respect to any Person, such Person’s capital
stock, issued share capital, membership interests, partnership interests,
registered capital, joint venture or other ownership interests or any options,
warrants or other securities that are directly or indirectly convertible into,
or exercisable or exchangeable for, such capital stock, issued share capital,
membership interests, partnership interests, registered capital, joint venture
or other ownership interests (whether or not such derivative securities are
issued by such Person).

 

“Exclusivity Period” means the period commencing from the Closing up to and
until the date twenty-four (24) months following the date on which either NSP or
Fosun Industrial (and their respective Affiliate(s)) ceases to own all of their
respective Shares.

 

Appendix A -2

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“Fosun Pharma” means Shanghai Fosun Pharmaceutical (Group) Co., Ltd.
(上海复星医药(集团)股份有限公司), a company incorporated under the laws of the PRC, having its
registered address at 9/F, 510 Caoyang Road, Shanghai and 100% owner of Fosun
Industrial.

 

“Financial Year” means the financial or fiscal year of the Company, which ends
on December 31 of each year.

 

“Governing Board” means, with respect to any direct or indirect Subsidiary or
Associate of the Company, the board of directors or similar governing board of
such Subsidiary or Associate.

 

“Governmental Authority” means any government or political subdivision thereof;
any department, agency or instrumentality of any government or political
subdivision thereof; any court or arbitral tribunal; and the governing body of
any securities exchange, in each case having competent jurisdiction.

 

“Hong Kong” means the Hong Kong Special Administrative Region of the PRC.

 

“Laws” shall mean all applicable statutes, laws, regulations, rules, rulings,
ordinances, orders, restrictions, requirements, writs, judgments, injunctions,
decrees and other official acts of or by any Governmental Authority.

 

“NSP License Agreement” means a trademark license agreement pursuant to which
NSP or its Affiliates shall grant to the Company and/or any of its wholly-owned
Subsidiaries a license to use certain NSP-related trademarks or other
intellectual property.

 

“Party” means any signatory to this Agreement and any Person that subsequently
becomes a party to this Agreement as provided herein.

 

“Person” means any natural person, firm, company, Governmental Authority, joint
venture, partnership, association or other entity (whether or not having
separate legal personality).

 

“PRC” means the People’s Republic of China and solely for the purpose of this
Agreement shall exclude Hong Kong, Taiwan and the Special Administrative Region
of Macau.

 

“PRC GAAP” means the generally accepted accounting principles in the PRC.

 

“Regulatory Approvals” means any approvals required by any Governmental
Authority with competent jurisdiction (and “Regulatory Approval” shall be
construed accordingly).

 

“RMB” means Renminbi, the lawful currency of the PRC.

 

“Secretary” means the Person appointed to perform any or all of the duties of
secretary of the Company and includes any deputy or assistant secretary and any
Person appointed by the Board to perform any of the duties of the Secretary.

 

“Senior Managers” means officers (other than directors) or employees at or above
the department managerial rank of a JV Company, which in the case of the PRC
Subsidiaries

 

Appendix A -3

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may include the general manager, vice general manager and controller, or their
respective functional equivalents, as applicable.

 

“Shareholder” means each of NSP and Fosun Industrial.

 

“Shares” means the Company’s ordinary shares.

 

“Stockholder Agreement” means the Stockholder Agreement dated June 26, 2014
between NSP and Fosun Pharma.

 

“Subsidiary” means, with respect to any Person, any Affiliate of such Person
that is not a natural person and is directly or indirectly controlled by such
Person.

 

“Transfer” means, with respect to any security, any sale, transfer, assignment,
gift, disposition of, creation of any Encumbrance over or other transfer,
whether directly or indirectly and whether voluntarily or by operation of law,
of the legal or beneficial ownership or economic benefits of such security.

 

“Transaction Documents” has the meaning set forth in the Subscription Agreement.

 

“US” or “United States” means the United States of America.

 

“US GAAP” means the generally accepted accounting principles in the United
States.

 

“US$” means United States Dollars, the lawful currency of the United States.

 

“Vice Chairman” means the vice chairman of the Board.

 

Term

 

Section

Absent Shareholder

 

Section 2.05(c)

Agreement

 

Preamble

Books and Records

 

Section 3.01(a)

Common Appraiser

 

Section 5.03(b)

Company

 

Preamble

Confidential Information

 

Section 8.01

Deadlock Notice

 

Section 2.02(g)(i)

Disclosing Party

 

Section 5.03(a)

Direct Competitor

 

Section 7.01(b)

Dispute

 

Section 12.02

DS Subsidiary

 

Recitals

Fair Value

 

Section 5.03(b)

Fosun Industrial

 

Preamble

Fosun Industrial Director

 

Section 2.01(a)

HKIAC

 

Section 12.02

HK Holdcos

 

Recitals

Initial Budget

 

Section 2.06(a)

JV

 

Recitals

JV Company

 

Recitals

JV Sale

 

Section 9.04(a)

Major Transfer

 

Section 9.04(a)

 

Appendix A -4

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Term

 

Section

NSP

 

Preamble

NSP Director

 

Section 2.01(a)

OFAC

 

Section 3.03(c)

Offered Shares

 

Section 5.03(a)

Permitted Transferee

 

Section 5.02

Option Period

 

Section 5.03(a)

PRC Subsidiaries

 

Recitals

Proposed Annual Budget

 

Section 2.06(a)

Receiving Party

 

Section 8.01

Representatives

 

Section 8.01

Reserved Matter

 

Section 2.02(d)

Resolution Committee

 

Section 2.02(g)(ii)

Retail Subsidiary

 

Recitals

Senior Representatives

 

Section 2.02(g)(ii)

Share Subscription Agreement

 

Recitals

Shareholders Meeting

 

Section 2.04(a)

Solvent Shareholder

 

Section 9.03

Transfer Notice

 

Section 5.03(a)

Transferring Shareholder

 

Section 5.03(a)

 

Appendix A -5

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Schedule 2.02(d)
Reserved Matters

 

(a)                                 the approval of the Annual Budget and the
Business Plan and any amendment thereof or any material deviation from the
Annual Budget or Business Plan then in effect, such approval not to be
unreasonably withheld or delayed;

 

(b)                                 any amendment or modification of the
Articles of Association or bylaws (or comparable instrument) of any JV Company ;

 

(c)                                  the transfer of any Equity Interests in any
JV Company, other than a transfer to another JV Company;

 

(d)                                 the repurchase or redemption of any Equity
Interests or capital reduction in any JV Company or the issuance of new Equity
Interests or capital increase, or grant of any right or option to acquire any
such Equity Interests;

 

(e)                                  any stock split (or reverse stock split),
stock dividend, conversion or reclassification of any Equity Interests in any JV
Company;

 

(f)                                   any change to the composition of the Board
or any Governing Board other than in accordance with the provisions of
Section 2.01;

 

(g)                                  the liquidation or dissolution of any JV
Company;

 

(h)                                 the acquisition of any Equity Interests (or
any right to acquire any Equity Interests) in any other Person or entity,
including the establishment or capitalization of any Subsidiary, joint venture,
partnership or other similar enterprise except as contemplated in the
Transaction Documents or in the Annual Budget or Business Plan then in effect;

 

(i)                                     the approval of fundamental internal
control policies (including without limitation policies on use of chops, stamps
and seals) of any JV Company;

 

(j)                                    the incurring of any liability or
expenditure not contemplated by the Annual Budget then in effect exceeding
RMB1,000,000 in aggregate in any one Financial Year;

 

(k)                                 the creation or grant of any Encumbrance in
respect of all or any part of the undertaking, property or assets of any JV
Company with a value of more than RMB500,000;

 

(l)                                     the incurrence by any JV Company of any
borrowings or other indebtedness or obligation in the nature of borrowings
(including, without limitation, obligations pursuant to any debenture, bond,
note, loan stock or other security of such JV Company and obligations pursuant
to finance leases)  except for trade credit from suppliers in respect of the
sale of goods or services by such supplier in the ordinary course of business or
otherwise contemplated by the Annual Budget or Business Plan then in effect;

 

(m)                             any sale or other disposition of any assets or
rights of any JV Company in an amount exceeding RMB500,000 except for any sale
or disposition of inventory and current assets used in the ordinary course of
business or as contemplated in the Business Plan or Annual Budget then in
effect;

 

--------------------------------------------------------------------------------

 

(n)                                 the making of any loans or advances or
extensions of credit by any JV Company (other than extensions of credit to
customers in respect of the purchase of goods or services by such customer in
the ordinary course of business);

 

(o)                                 the commencement, settlement or abandonment
of any litigation or arbitration involving any JV Company that involves a
dispute in an amount exceeding RMB500,000 or any admission of liability by or on
behalf of any JV Company in an amount exceeding RMB500,000;

 

(p)                                 any transaction with any Person otherwise
than at arm’s length and for full value involving an amount exceeding RMB500,000
except as contemplated in the Transaction Documents or in the Annual Budget or
Business Plan then in effect (provided that any connected transaction involving
either Shareholder and/or their Affiliates which is required to be disclosed
pursuant to applicable securities exchange rules shall be disclosed
accordingly);

 

(q)                                 the cessation by any JV Company of the
businesses as a whole or the carrying on of the businesses on any materially
reduced scale as a whole;

 

(r)                                    the proposal of any compromise or
arrangement within the meaning of the Companies Ordinance;

 

(s)                                   the approval of the statutory accounts of
any JV Company;

 

(t)                                    the recommendation that any JV Company
should seek admission of all of or a majority of the issued share capital of
such JV Company to any recognized stock exchange and to trading on any
recognized stock exchange, and the agreement or recommendation of any matters
ancillary to such application (including any relevant changes to the Charter
Documents);

 

(u)                                 unless otherwise provided for in ARTICLE IV,
the authorization, declaration or payment of any dividend or other distribution
on any Equity Interests of any JV Company; and

 

(v)                                 the entering into of any contract,
agreement, commitment or arrangement to effect any of the foregoing.

 

--------------------------------------------------------------------------------

 

Exhibit A

DEED OF ADHERENCE

 

THIS DEED is made on [·]

 

BY [·] of [·] (the “New Party”)

 

WHEREAS:

 

(A)                                       On [[·], 2014] (1) Nature’s Sunshine
Products, Inc., (2) Fosun Industrial Co., Limited and (3) Nature’s Sunshine Hong
Kong Limited (the “Company”) entered into an operating agreement governing their
relationship as shareholders in the Company and establishing the manner in which
the affairs of the Company would be conducted (as amended, supplemented or
novated from time to time, the “Operating Agreement”).

 

(B)                                       [By a transfer dated [·], [·]
transferred to the New Party [·] Shares in the Company.]

 

(C)                                       [By an allotment of shares on [·], the
Company allotted [·] Shares to the New Party.]

 

(D)                                       This Deed is entered into in
compliance with the terms of ARTICLE V of the Operating Agreement.

 

NOW THIS DEED WITNESSES as follows:

 

1.                                              Words and expressions defined in
the Operating Agreement shall, unless the context otherwise requires, have the
same meanings when used in this Deed.

 

2.                                              The New Party hereby undertakes
with (a) the Company and each of the other persons in the Schedule to this Deed
and (b) each such other person who may from time to time expressly adhere to the
Operating Agreement, to be bound by and comply in all respects with the
Operating Agreement, and to assume the benefits of the Operating Agreement, as
if the New Party had executed the Operating Agreement and was named as a party
to it.

 

3.                                              Save as expressly set out in the
Operating Agreement, in favour of the New Party, none of the Parties to the
Operating Agreement:

 

(a)                                 makes any representations or warranty or
assumes any responsibility with respect to the legality, validity,
effectiveness, adequacy or enforceability of the Operating Agreement or any
agreement entered into pursuant thereto;

 

(b)                                 makes any representation or warranty or
assumes any responsibility with respect to the content of any information
regarding the Company or any member of the its corporate group or otherwise
related to the acquisition of Shares; or

 

--------------------------------------------------------------------------------

 

(c)                                  assumes any responsibility for the
financial condition of the Company or any other member of the Company’s
corporate group or any other party to the Operating Agreement or any other
document; or

 

(d)                                 assumes any responsibility for the
performance and observance by the Company or any other Party to the Operating
Agreement or any other document (save as expressly provided therein) of the
Operating Agreement or any other document,

 

and any and all conditions and warranties, whether express or implied by law or
otherwise, are to the extent legally possible excluded.

 

4.                                              For the purpose of the Operating
Agreement, the New Party’s address for notices shall be as follows:

 

Address: [·]

Fax No.: [·]

Email:    [·]

For the attention of: [·]

 

5.                                              This Deed shall be governed by
and construed in accordance with the laws of Hong Kong.

 

EXECUTED

)

and DELIVERED as a DEED by

)

[Insert name of New Party]

)

acting by two directors/a director and the secretary

)

 

[Execution block to be amended to reflect nature of New Party]

 

[Signed by [                                    ] )

in the presence of:                           ]]

 

[Signed by [ ] and ]
[               ] for and on behalf ]
of the Company ]]

 

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