Equity Purchase Agreement, dated as of January 8, 2019, by and among TheFaceShop Co., Ltd., Avon Asia Holdings Company and Avon Products (China) Co., Ltd

TheFaceShop Co., Ltd., a company incorporated and existing under the laws of Korea and having its registered address at 58 Saemunan-ro, Jongno-gu, Seoul, Korea (“Purchaser”);

Avon Asia Holdings Company, a company incorporated and existing under the laws of Republic of Mauritius and having its registered address at 2nd Floor, 22 Saint Georges Street, Port Louis, Republic of Mauritius (“Avon Asia”); and

Avon Products (China) Co., Ltd. (“雅Å芳¼༈¨中Ð国ú༉©有Ð限Þ公«司¾” in Chinese), a company incorporated and existing under the laws of the PRC and having its registered address at Unit 03-04, FL 7, No. 18, Hua Cheng Avenue, Tianhe District, Guangzhou, PRC (“Avon China” and together with Avon Asia, collectively, “Sellers” and individually, a “Seller”).

Defined Terms.

Sale and Purchase.

USD 28,400,000, representing Avon Asia’s pro rata portion of the Purchase Price based on its Allocation Percentage (the “Avon Asia Consideration”), shall be paid by Purchaser to Avon Asia; and

RMB 295,460,820, which is the RMB amount equivalent to USD 42,600,000 converted using the Agreed USD/RMB Rate, representing Avon China’s pro rata portion of the Purchase Price based on its Allocation Percentage (the “Avon China Consideration”), shall be paid by Purchaser to Avon China,

to Avon Asia, the Avon Asia Consideration, less the sum of (i) the Avon Asia Escrow Amount, and (ii) the Avon Asia Holdback Amount, by wire transfer of immediately available funds in USD to the bank account of Avon Asia designated and notified to Purchaser in writing by Avon Asia at least five (5) Business Days prior to the Closing Date; and

to Avon China, the Avon China Consideration (the “Avon China Closing Payment”), by wire transfer of immediately available funds in RMB to the Avon China Escrow Account.

Within five (5) Business Days after Purchaser’s receipt of a written notice from Avon China notifying that Avon China has set up the Asset Realization Account for purpose of receiving its portion of the Closing Payments, Purchaser and Avon China shall irrevocably instruct the Escrow Agent to release from the Avon China Escrow Account to Avon China an amount equal to the Intercompany Loan Balances outstanding on the Closing Date (the “Avon China First Release Amount”), by wire transfer of immediately available funds in RMB to the Asset Realization Account; and

Within five (5) Business Days after the completion of the repayment of Intercompany Loan Balances in accordance with Section 3.4, Purchaser and Avon China shall irrevocably instruct the Escrow Agent to release from the Avon China Escrow Account to Avon China, the Avon China Consideration, less the sum of (i) Avon China Escrow Amount and (ii) the Avon China First Release Amount, by wire transfer of immediately available funds in RMB to the Asset Realization Account.

    Purchaser’s Deliverables at the Closing. At the Closing, Purchaser shall deliver (or cause to be delivered) to each Seller the following items:

    a written receipt confirming Purchaser’s receipt of such Seller’s portion of the Sale Equity, duly executed by Purchaser;

an executed copy of each of the Avon Asia Escrow Agreement and the Avon China Escrow Agreement, duly executed by Purchaser;

    all other documents or instruments required to be delivered by Purchaser pursuant hereto or reasonably requested by Sellers to consummate the Transaction.

    Sellers’ Deliverables at the Closing. At the Closing, each Seller shall deliver (or cause to be delivered) to Purchaser the following items:

    original capital contribution certificate issued by the Company representing Purchaser’s holding of all Sale Equity in the Company;

copy of the shareholders registry of the Company with the Company’s seal chopped in which Purchaser is recorded as the sole legal and beneficial owner of all of the Sale Equity, free and clear of any and all Encumbrances, as of the Closing Date;

a written letter confirming the waiver of the right of first refusal and consent to the Transaction by each Seller;

a copy of the resolutions of the board of directors of the Company approving the Transaction;

a written receipt issued by Avon Asia confirming Avon Asia’s receipt of its portion of the Closing Payment, duly executed by such Seller, provided that the foregoing portion of the Closing Payment is fully received by Avon Asia on the Closing Date;

    the original letter of resignation, waiver, and release of each of the directors of the Company in the form attached hereto as Exhibit 5.4(a), along with all other documents required for the registration of such resignations with the competent SAMR;

an executed copy of the Manufacturing and Supply Agreement, duly executed by the Company and ACL;

an executed copy of each of the Avon Asia Escrow Agreement and the Avon China Escrow Agreement, duly executed by the Seller which is a party thereto;

a copy of the new business license of the Company and other necessary supporting documents evidencing the completion of the SAMR Registration and showing Purchaser as the sole equity holder of the Company;

a copy of the certificate regarding the MOFCOM Filing and other necessary supporting documents evidencing the completion of the MOFCOM Filing and showing Purchaser as the sole equity holder of the Company; and

    all other documents or instruments required to be delivered by each Seller pursuant hereto or reasonably requested by Purchaser to consummate the transactions contemplated by this Agreement.

Avon Asia shall complete the CGT Reporting and Payment and provide the documents set forth in (x) or (y) above, as applicable, as soon as practicable but no later than three (3) months after the Closing.

Purchaser shall deduct and withhold USD 1,181,000, which is equivalent to ten percent (10%) of the Avon Asia Estimated Capital Gain (the “Avon Asia Holdback Amount”), from the Avon Asia Consideration. “Avon Asia Estimated Capital Gain” means, for the sole purpose of determining the Avon Asia Holdback Amount, the difference between the Avon Asia Consideration and the aggregate

At the Closing, Purchaser shall deposit with the Escrow Agent (i) (x) USD 3,000,000 (the “Avon Asia Escrow Amount”) and (y) the Avon Asia Holdback Amount in USD 1,181,000, to be held in the Avon Asia Escrow Account pursuant to the Avon Asia Escrow Agreement, and (ii) (x) an RMB amount equivalent to USD 4,500,000 converted using the Agreed USD/RMB Rate, which is RMB 31,210,650, to the Avon China Escrow Account (the “Avon China Escrow Amount” and together with the Avon Asia Escrow Amount, the “Escrow Amounts”), and (y) the difference between the Avon China Consideration and Avon China Escrow Amount, which is RMB 264,250,170, in each case to be held in the Avon China Escrow Account pursuant to Avon China Escrow Agreement. The Avon Asia Escrow Amount and the Avon China Escrow Amount shall be available for and used to satisfy any claim arising in relation to Sellers’ indemnities set forth in Section 7.1(a) of this Agreement (but subject to the limitations set forth in Section 7.3); provided, however, that the Avon Asia Escrow Amount shall be available for and used to satisfy any claim arising in relation to Avon Asia’s indemnities set forth in Section 3.6(c). Each Escrow Account shall be maintained for 24 months (the “Escrow Term”) following the Closing.

For the avoidance of doubt, to the extent that any claim which has been notified to Sellers by Purchaser remains unresolved at the expiration of each Escrow Account, the Escrow Amount corresponding to such claim amount shall not be released from such Escrow Account until such claim is resolved in accordance with Section 9.4, and the Parties shall (i) extend the Escrow Term until such claim is resolved so that the Escrow Amount corresponding to such claim shall remain in such Escrow Account in the same manner; and (ii) cause the Escrow Agent to release the undisputed Escrow Amounts remaining in the respective Escrow Accounts upon expiration of the initial Escrow Term pursuant to Section 3.7(d). Purchaser agrees not to abuse its right of claim without any reasonable cause.

In the event that any breach or non-fulfillment of any of Sellers’ representations, warranties, covenants, agreements or obligations under this Agreement is made known to Purchaser prior to the Closing, subject to the limitations as provided in Section 7.3, Purchaser shall prepare and deliver to Seller a statement setting forth in reasonable detail the description of the alleged breaches/non-fulfillments and the amount of Losses incurred by the Company or Purchaser in connection with such breach or non-fulfillment, as applicable. In such event, the Parties shall negotiate in good faith to agree on the amount of Losses arising from such breach or non-fulfillment, which shall be deducted from the Purchase Price, with the Escrow Amount being reduced by the same amount. In the event that the Parties cannot agree on the full amount of such Losses after such good-faith negotiation, the portion of the Losses to which the Parties agree shall be deducted from the Purchase Price (with corresponding reduction of the Escrow Amount), and Purchaser shall have the right to seek indemnification in respect of the excess amount of such Losses after the Closing in accordance with Article VII.

On the expiry date of the Escrow Term, Purchaser and the respective Seller shall, in accordance with the Avon Asia Escrow Agreement and Avon China Escrow Agreement, respectively, irrevocably instruct the Escrow Agent to:

release to Avon Asia the Avon Asia Escrow Amount remaining in the Avon Asia Escrow Account, by wire transfer of immediately available funds in USD to the bank account of Avon Asia designated and notified to Purchaser in writing by Avon Asia at least five (5) Business Days prior to such expiry date; and

release to Avon China the Avon China Escrow Amount remaining in the Avon China Escrow Account, by wire transfer of immediately available funds in RMB to the bank account of Avon China designated

Organization and Existence; Authorization. Each Seller is duly organized and validly existing under the Laws of the jurisdiction of its incorporation, and has requisite power and authority required to conduct its business as it is now being conducted. Each Seller has full authority and capacity to execute and deliver this Agreement and to perform its obligations hereunder and the execution and delivery by such Seller of this Agreement, the performance of its obligations hereunder, and the consummation by such Seller of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate proceedings on the part of such Seller. This Agreement has been duly executed and delivered by each Seller, and this Agreement constitutes the legal, valid and binding obligation of such Seller enforceable against such Seller in accordance with its terms, except insofar as the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, rehabilitation, special liquidation, fraudulent conveyance, or other similar Laws affecting the enforcement of creditors’ rights generally.

Absence of Conflicts; No Consents. Neither the execution, delivery and performance of this Agreement, nor the Transaction, will contravene, conflict with, or result in a violation of (i) any provision of the Organizational Documents of any Seller or the Company, (ii) any Law applicable to any Seller or the Company or any of the assets owned by the Company, (iii) any of the terms or requirements of, or give any Government Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Approval that is held by the Company, or (iv) any Material Contract. No Governmental Approval or consent or approval by or notification to any Person is required to be obtained by each Seller in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.

Sale Equity. Each Seller holds of record and legally and beneficially owns its portion of the Sale Equity set forth next to its name on Exhibit 1, in each case free and clear of any Encumbrances. At the Closing, Purchaser shall acquire all of the Sale Equity free and clear of any Encumbrances. Such Sale Equity to be transferred to Purchaser at the Closing shall (i) have had its corresponding registered capital fully paid-in, (ii) have been issued in compliance with all applicable Laws and (iii) not be subject to any pre-emptive, subscription or other similar rights of any other Person, except for the right of refusal that will be waived pursuant to Section 3.5(b)(iii) below.

Litigation. There are no Proceedings pending or, to the Knowledge of Sellers, threatened against any of Sellers that prohibits or restricts the Transaction.

No Brokers. No Person has acted, directly or indirectly, as a broker, finder or financial advisor for each Seller or any of its Affiliates in connection with the Transaction for which the Company has incurred or will incur any liability.

Organization and Existence. The Company is a company duly organized and validly existing under the Laws of PRC, and has all requisite power and authority required to conduct its business as it is now being conducted and to own, lease and operate all of its properties and assets. Sellers have made available to Purchaser true, correct and complete copies of the Organizational Documents of the Company and such documents are in full force and effect.

Capitalization.

Section 4.2(b) of the Disclosure Schedules sets forth an accurate list as of the date hereof and as of the Closing Date of the registered capital of the Company, the paid-in registered capital of the Company and the legal ownership thereof. The Sale Equity represents one hundred percent (100%) of the equity interests in the Company. There are no outstanding options, warrants, purchase rights, subscription rights, conversion rights, exchange rights or other Contracts or commitments that may require the Company to issue any equity interests of the Company.

There are no obligations, contingent or otherwise, of the Company to repurchase, redeem or otherwise acquire any equity interests of the Company or provide material funds to, or make any material investment in (in the form of a loan, capital contribution or otherwise) or provide any guarantee with respect to the obligations of, any Person. There are no outstanding stock appreciation, phantom stock, profit participation or similar rights with respect to the Company. There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote or consent (or, convertible into, or exchangeable for, securities having the right to vote or consent) on any matters on which shareholders (or other equity holders) of the Company may vote.

The Company does not have any Subsidiaries or branches.

Financial Statements; Internal Controls.

Section 4.2(c) of the Disclosure Schedules sets forth the audited financial statements of the Company as of and for each of the fiscal year ended December 31, 2016 and December 31, 2017, and the reviewed financial statements of the Company as of and for the ten-month period ended September 30, 2018 (collectively, the “Financial Statements”). The Financial Statements (including the notes thereto) have been prepared in accordance with the Accounting Standards and fairly present in all material respects the financial condition and the results of operations of the Company as at and for the relevant period covered in the applicable Financial Statements.

The Company maintains (i) books, records and accounts that reflect, in reasonable detail, the character and amount of all transactions of the Company, its assets and liabilities and such books, records and accounts are complete and accurate in all material respects and (ii) adequate and effective internal accounting controls which provide commercially reasonable assurance that (A) all assets, liabilities and transactions of the Company are accounted for in accordance with the Accounting Standards and (B) the Company has not established or maintained any unrecorded funds or accounts.

No Undisclosed Liabilities. The Company does not have any Liabilities, except (i) Liabilities that are specifically stated in the Financial Statements, or (ii) Liabilities incurred in the Ordinary Course of Business since the Balance Sheet Date.

Absence of Changes. Since the Balance Sheet Date, except as set forth in Section 4.2(e) of the Disclosure Schedules, (i) the Company has conducted its business in the Ordinary Course of Business, (ii) there has been no Material Adverse Effect and (iii) there has not occurred any matter that would require the consent of Purchaser pursuant to Section 5.1 had such matter occurred after the date hereof.

Litigation. There is no Proceeding pending or, to the Knowledge of Seller, threatened against the Company (or any of its directors, officers or employees with respect to whom the Company may be obligated to indemnify for any Losses incurred as a result of any such Proceeding) or any assets or properties material to the Company.

Compliance with Laws; Governmental Approvals.

The Company has been in all material respects in compliance with all Laws applicable to the Company and its assets, and has not received any written notices or other communications from any Governmental Authority regarding any actual or possible material violation of Law.

The Company is not a party or subject to any Order and the Company holds all Governmental Approvals that are required for the conduct of its business (including the manufacture and assembly of its products) as now being conducted, and such Governmental Approvals are valid and in full force and effect. The Company has been in compliance with all Governmental Approvals in all material respects. All such Governmental Approvals are renewable in the Ordinary Course of Business, and there is no fact, condition or circumstance that could reasonably be expected to lead to any modification, suspension, revocation or non-renewal of any of such Governmental Approvals.

Unless otherwise disclosed in the Disclosure Schedules, none of the Company or any Associated Person of the Company, have: (i) violated, or engaged in any activity, practice or conduct which would violate, any applicable Anti-Corruption Law or AML Law; (ii) used corporate funds or assets for any unlawful contribution, gift, entertainment or other unlawful expense, or made any unlawful bribe, rebate, payoff, influence payment, facilitation payment, kickback or other unlawful payment; or (iii) directly, or indirectly through its agents, representatives or any other Associated Person, offered, promised, paid, given or authorized payment or the giving of money or anything else of value to any Government Official or Governmental Entity for the purpose of (A) influencing any act or decision of such Government Official or Governmental Entity in his, her or its official capacity, including a decision to do or omit to do any act in violation of his, her or its lawful duties, or (B) inducing such Government Official or Governmental Entity to use his, her or its influence or position to influence any act or decision of any Governmental Entity, in either case in order to obtain or retain business for, direct business to, or secure an improper advantage for, any of Sellers or the Company.

The Company has adopted and maintains in effect adequate policies, procedures and controls to ensure that the Company has complied and is in compliance with applicable Anti-Corruption Laws and AML Laws.

Title to Assets. The Company has good, valid and marketable title to, or has a valid leasehold, license or other similar interest in, all of its material tangible and intangible assets owned, leased or otherwise used by the Company (including, for the avoidance of doubt, the Company Owned Real Property, the Company Leased Real Property and the Company Intellectual Property, the “Company Assets”), free and clear of all Encumbrances. Such Company Assets comprise all of the material assets required by the Company to conduct its business as now being conducted and are sufficient, in all material respects, for the continued conduct of its business after the Closing in substantially the same manner as conducted prior to the Closing. There is no claim or right entitling any Governmental Authority, or other Person, to use, have access to, possess or control any of the Company Assets or any part thereof or otherwise to limit the right of the Company to use or possess any of the Company Assets in any form. The Company has obtained all requisite Governmental Approvals entitling the Company to construct, purchase, own, operate, use and dispose of the Company Assets as they are being presently used. All Company Assets are in good working order and repair (normal wear and tear excepted) and have been regularly and appropriately maintained according to appropriate technical specification, environmental, occupational health and safety rules and the terms and conditions of any applicable Contract and Law.

Real Property.

Section 4.2(i)(i) of the Disclosure Schedules sets forth an accurate and complete list of the Company Owned Real Property.

Section 4.2(i)(ii) of the Disclosure Schedules sets forth an accurate and complete list of the Company Leased Real Property.

With regard to each Company Lease, except as disclosed in Section 4.2(i)(iii) of the Disclosure Schedules, (i) such Company Lease is valid and effective in accordance with the terms thereof, (ii) neither the Company nor to the Knowledge of each Seller, any other party to a Company Lease is in breach thereof, (iii) to the Knowledge of each Seller, no event or circumstance has occurred or currently exists which, with notice, lapse of time or both, would become a material default by the Company or any other party thereto, and (iv) to the Knowledge of each Seller, no events or circumstances exist which may prevent or hinder (A) the renewal of such Company Lease in the Ordinary Course of Business or (B) the refund of any key money deposit upon expiration of the Company Lease.

With regard to the land parcel located at Industrial district C3-1, C3-2, Taiping Village, Conghua City, PRC, (i) the Company has complied with the relevant procedures for the grant of the land-use right as required by applicable Laws, (ii) has complied, and is in compliance, with the relevant land-use right grant agreement (“Land-Use Right Grant Agreement”) (“国ú有Ð建¨设è用Ã地Ø使¹用Ã权¨出ö让Ã合

The Company has not entered into any sublease, license, option, right concession or other agreement or arrangement granting to any person the right to use or occupy any Company Owned Real Property or Company Leased Real Property or any portion thereof and the Company has not received notice from any Governmental Authority or other Person that the use and occupancy of any of the Company Owned Real Property or the Company Leased Real Property, and the conduct of its business thereon, violates in any material respects any applicable Law applicable to the construction, maintenance and use of the Company Owned Real Property or Company Leased Real Property, including, without limitation, the building codes, zoning, subdivision or other land use or similar Laws.

There is no pending or, to the Knowledge of Sellers, threatened condemnation or eminent domain proceeding with respect to any Company Owned Real Property or Company Leased Real Property or any part thereof.

Permits.

The Company holds all material Permits which are required for the conduct of the business of the Company (including the manufacture and assembly of its products and acting as a foreign trade dealer) as it is being conducted as of the date hereof. Except as set forth in Section 4.2(j)(i) of the Disclosure Schedules, all requirements, conditions and provisions ordered by any Governmental Authority or contained in a Permit were complied with and have been fulfilled in material respects.

No revocation relating to any Permit has been announced or to the Knowledge of Sellers threatened in writing by a Governmental Authority; and

The Company conducts its business in compliance with all material provisions of the Permits. No capital expenditures will be required to ensure compliance by the Company with such Permits, as in force at the Closing Date.

Material Contracts. Except for the Contracts set forth in Section 4.2(k) of the Disclosure Schedules (each such Contract, a “Material Contract”), the Company is not a party to any of the following types of Contracts which are valid and effective:

Non-Competes. Any Contract containing covenants limiting or purporting to limit (or that following the Closing could limit) the freedom of the Company to compete or operate in any line of business or geographical area;

Indebtedness; Guarantees. Any Contract with any other Person which relates to indebtedness for borrowed money or the deferred purchase price of property (in either case, whether incurred, assumed, guaranteed or secured by any asset) in any single transaction or series of related transactions in excess of RMB 1 million, or the guarantee by the Company of any such obligation;

Capital Expenditures. Any Contract (together with related Contracts) containing covenants requiring capital expenditures by the Company in any single transaction or series of related transactions in excess of RMB 1 million in any twelve (12)-month period;

Joint Ventures. Any partnership, consortium, profit (loss) sharing or joint venture agreement;

Employment-related Contracts. Any collective bargaining agreement, trade union agreements, any other Contract with any other representatives of workers, or any indemnification agreement with any director or officer of the Company;

Governmental Authorities. Any Contract with a Governmental Authority to which the Company is a party;

Outsourcing Agreements. Any Contract entered into for purposes of outsourcing of the functions of the Company;

Lease Agreements. Any Contract for lease of the Company Leased Real Property under which the security deposit exceeds RMB 1 million;

Related Party Agreements. Any Related Party Contracts;

Consequential. Any Contract under the terms of which, as a direct result of the entry into and performance of this Agreement, (A) any other Person will be entitled to exercise any material right (including any

Expenditure. Any Contract (together with related Contracts) which involves, or is reasonably likely to involve, aggregate expenditure by the Company (or by the Company) in excess of RMB 5 million in any twelve (12)-month period or which obliges the Company to make any minimum purchase;

Revenue. Any Contract (together with related Contracts) which involves, or is reasonably likely to involve, aggregate revenue for the Company in excess of RMB 5 million in any twelve (12)-month period;

Tax Sharing. Any tax-sharing agreement; or

Other Contracts. Any Contract which has an annual contract value in excess of RMB 1 million which was entered into otherwise than in the Ordinary Course of Business or which is not on arm’s-length terms.

Sellers have made available to Purchaser copies of all insurance certificates and coverage maintained by or otherwise relating to the Company and its properties and assets and business. All insurance policies are in full force and effect, all premiums due and payable thereunder have been paid in full, and neither the Company nor its Affiliate is in default with respect to the obligations under any such policies or has otherwise failed to comply in all respects with the terms and conditions of such policies in all material respects.

Since the Balance Sheet Date, the Company has not received any notice of cancellation or termination or denial of coverage with respect to any insurance policies referred to in sub-paragraph (i) of this Section 4.2(l) except to the extent such policy has expired and been replaced in the Ordinary Course of Business.

No claim has been made by, or in relation to, the Company under any such insurance policy in the last three (3) years and there are no outstanding claims related to the Company under any insurance policy or default with respect to the provisions in any such policy.

Company Benefits Plan Matters.

With respect to each Company Benefits Plan, the Company has made available to Purchaser true, complete and correct copies of each of the following, as applicable: (i) the Company Benefits Plan document, together with all amendments thereto, and (ii) all relevant regulatory approvals received from any Governmental Authority.

With respect to each Company Benefits Plan, it has been, in all material respects, established, operated and maintained in accordance with its terms and in compliance with applicable Laws. With respect to each Company Benefits Plan that is intended to be, or required by applicable Law to be, funded and/or book-reserved, such plan is funded and/or book reserved, as appropriate, based upon reasonable actuarial assumptions, and to the extent no funding is required under applicable Law, adequate accruals under applicable accounting principles are reflected in the Financial Statements.

The Company provides each Company Employee with all compensation and benefits, the key aspects of which are set out in Schedule E.

Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated thereunder will (either alone or together with any other event, contingent or otherwise, including a termination of employment or service) (i) entitle any current or former employee, director, officer or independent contractor of the Company to any payment (other than severance pay required by any applicable Law or severance pay pursuant to the internal regulations of the Company), or (ii)

Employee Matters.

The Company is not a party to any collective bargaining agreements. For the last three (3) years, the Company has not experienced any strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to any employees of the Company.

The Transaction will not give rise to any obligations to obtain consent from any labor union, works council or other employee representative bodies representing all or any category of employees of the Company.

The Company is, and for the last three (3) years has been, in compliance in all material respects with all applicable Laws respecting labor, employment and employment practices, terms and conditions of employment, wages and hours, employee classification, reduction in force, dispatched employment, unemployment compensation benefits and occupational safety and health. Except as disclosed in Section 4.2(n) of the Disclosure Schedules, no Proceedings relating to non-compliance with the foregoing have been brought in the last three (3) or are pending or, to the Knowledge of each Seller, are threatened.

There is no amount that is past due and owing by the Company to any of the current or former directors, officers, employees or independent contractors of the Company (including, without limitation, any salary, bonus, overtime allowance, severance pay, unused leave compensation, social insurance, housing fund or any other compensation or benefit).

Intellectual Property. Each Company Intellectual Property is subsisting, valid and enforceable. The Company (i) owns all right, title and interest in and to each item of or otherwise have valid right to use all Company Intellectual Property, free and clear of all Encumbrances or (ii) has the valid right, free and clear of any Encumbrances, to use all the Intellectual Property used in, or otherwise necessary for, the conduct of the business of the Company. Neither the Company nor its operation of its business infringes, misappropriates, dilutes or otherwise violates, nor has it infringed, misappropriated, diluted or otherwise violated, any Intellectual Property of any third party. The Company has taken all commercially reasonable measures to protect the secrecy, confidentiality and value of all trade secrets, and there has not been any material unauthorized disclosure of any such trade secrets. There has been no material failure or other material substandard performance of any Company’s IT Systems that has caused any material disruption to its business. There has been no material unauthorized intrusion or breach of the security of the Company’s IT Systems, nor any material loss of data.

Taxes.

(A) All Tax Returns of the Company that are required to be filed on or before the Closing Date have been or will be timely filed on or before the Closing Date with the appropriate Tax Authorities in the manner required by applicable Laws, (B) all such Tax Returns are or will be true and complete when filed, (C) all Taxes due (whether or not shown or required to be shown on a Tax Return) have been or will be timely paid when due, (D) all deficiencies asserted or assessments made prior to the Closing Date by the relevant Tax Authority in connection with any Taxes have been or will be timely paid on or before the Closing Date (except for Taxes that are being contested in good faith);

No issue that has been raised by the relevant Tax Authority in connection with any such Tax Return is currently pending, and there is no Proceeding or audit now in progress or pending against the Company with respect to any Tax;

The Company is not party to or bound by any Tax indemnity agreement, Tax allocation agreement or Tax sharing agreement (except, in each case, any agreement entered into in the Ordinary Course of Business and not primarily related to Taxes);

The Company has properly withheld and paid to the relevant Tax Authority all Taxes required to have been withheld and paid with respect to third parties; and

No agreement or document extending the period of assessment or collection of any Tax payable by the Company is currently in effect, and the Company has not consented to any such extension.

Environmental Matters and Production Safety. The Company has obtained and holds all Permits in respect of the design, construction and operation of its environment protection facilities and production safety. The Company is currently in compliance with, and has complied with, all such Permits and applicable Environmental Laws in all material respects. There is no pending or, to the Knowledge of Sellers, threatened Proceedings, notice of noncompliance or information request, in each case seeking to impose, or that would result in the imposition of, any material liability on the Company arising under any Environmental Law or arising from the release or presence of or exposure to Hazardous Substances. There has been no release or presence of or exposure to any Hazardous Substance, whether on or off the property currently or formerly owned or operated by the

Related Party Transactions. Except as disclosed in Section 4.2(r) of the Disclosure Schedules and the Intercompany Loan Agreements, no Seller Party (a) owns any asset, properties or rights, tangible or intangible, used in its business of the Company, (b) initiated or, to the Knowledge of Sellers, threatened to bring any Proceedings against the Company, (c) provides goods or services to, or receives goods or services from, the Company, (d) owes any Indebtedness to, is owed any Indebtedness by, has guaranteed or provided other credit support in respect of any Indebtedness of, or owes any Indebtedness guaranteed by the Company or secured by any assets of the Company, or (e) is engaged in any other transaction with the Company. All Contracts entered into between the Company, on the one hand, and any Seller Party, on the other hand (each of the foregoing, a “Related Party Contract”) were entered into in the Ordinary Course of Business and upon terms no less favorable to the Company than would reasonably be expected to be obtainable in a comparable arm’s-length transaction with a Person that is not a Seller Party in accordance with the relevant transfer pricing policies. A true, correct and complete copy of each Related Party Contract has been made available to Purchaser.

Suppliers. Section 4.2(s)(i) of the Disclosure Schedules sets forth a list of the top twenty (20) suppliers (each, a “Material Supplier”) of the Company during the last full fiscal year. Except as disclosed in Section 4.2(s)(ii) of the Disclosure Schedules, no Material Supplier has notified the Company or each Seller that it intends to discontinue or materially decrease the rate of, or materially and adversely change the terms (whether related to payment, price or otherwise) with respect to, its business relationship with its business or the Company. To the Knowledge of each Seller, no events or circumstances exist which may reasonably cause any Material Supplier to discontinue or materially decrease the rate of, or materially and adversely change the terms (whether with respect to payment, price or otherwise) with respect to, its business relationship with the Company or its business.

Inventory. All inventory material for the business conducted by the Company is of a quality and quantity usable and salable in the Ordinary Course of Business as of the Closing Date, except for obsolete or slow-moving inventory and items of below-standard quality, all of which have been written off or written down to net realizable value to the extent required by the policy of the Company described in Section 4.2(t) of the Disclosure Schedules.

Insolvency. There has been no petition in bankruptcy, insolvency or reorganization filed against the Company or the Company’s going into receivership or otherwise becoming insolvent, or any analogous event. The Company is not in liquidation and no order has been made or effective resolution passed for the liquidation or winding up of the Company.     

Accuracy of Information. To the Knowledge of Sellers, all written information which was disclosed to Purchaser or its advisors in the Disclosure Schedules and the due diligence materials have been, taken as a whole, correct and complete and there are no circumstances that were not disclosed in the Disclosure Schedules and the due diligence materials that would make the information as disclosed as at the date of this Agreement and as of the Closing Date false or misleading.

Representations and Warranties of Purchaser.

Organization and Existence; Authorization. Purchaser is duly organized and validly existing under the Laws of the jurisdiction of its organization, and has requisite power and authority required to conduct its business as it is now being conducted. Purchaser has full authority and capacity to execute and deliver this Agreement and to perform its obligations hereunder and the execution and delivery by Purchaser of this Agreement, the performance of its obligations hereunder, and the consummation by Purchaser of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate proceedings on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser, and this Agreement constitutes the legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms, except insofar as the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, rehabilitation, special liquidation, fraudulent conveyance, or other similar Laws affecting the enforcement of creditors’ rights generally.

Absence of Conflicts; No Consents. Neither the execution, delivery and performance of this Agreement, nor the Transaction, will contravene, conflict with, or result in a violation of (i) any provision of the Organizational Documents of Purchaser, or (ii) any Law applicable to Purchaser. Other than the Purchaser Required Approvals, no Governmental Approval or consent or approval by or notification to any Person is required to be obtained by each Seller in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.

Litigation. As of the date hereof, there is no Proceeding pending or, to the Knowledge of Purchaser, threatened against Purchaser that prohibits or restricts the Transaction.

No Brokers. No Person has acted, directly or indirectly, as a broker, finder or financial advisor for Purchaser or any of its Affiliates in connection with the Transaction for which the Company will incur any liability.

Sufficiency and Legitimacy of Funds. As of the Closing Date, Purchaser will have sufficient and legitimate immediately available funds to make all payments required to be made under or in connection with this Agreement, including the payment of the Purchase Price, in each case when such payments become due.

Conduct of Business.

amend any Organizational Documents of the Company;

merge or consolidate with or into any other Person, dissolve or liquidate;

declare, set aside, make or pay any dividend or other distribution, payable in cash, stock or property, with respect to any capital stock or other equity or ownership interest in the Company or enter into any agreement with respect to the voting of the capital stock of the Company;

take any action that would require unanimous approval by all directors of the Company, except for those resolutions that may be required to effectuate and carry out the terms and conditions of this Agreement;

make any change in accounting methods, policies, principles or procedures, other than as required by Law, as then in effect;

(A) accelerate, terminate, cancel, renew, amend, grant a waiver under or otherwise modify any Material Contract or (B) enter into any Contract that would constitute a Material Contract if in effect as of the date hereof, in each case other than in the Ordinary Course of Business;

make any loans, advances or capital contributions to or investments in any Person in excess of RMB 1 million, other than in the Ordinary Course of Business;

incur, assume or guarantee any Indebtedness or liability of any Person, other than in the Ordinary Course of Business;

authorize for issuance, issue, sell, grant, pledge, deliver or agree or commit to issue, sell, grant, pledge or deliver (whether through the issuance or granting of options, warrants, convertible or exchangeable securities, commitments, subscriptions, rights to purchase or otherwise) any registered capital or any other securities convertible or exchangeable into or exercisable for any registered capital of the Company, or amend any of the terms of any such securities;

sell or lease, transfer or otherwise dispose of any of assets having a value exceeding RMB 1 million, other than in the Ordinary Course of Business;

make any capital expenditures in any single transaction in excess of RMB 1 million, or series of related transactions in excess of RMB 2 million in the aggregate, other than in the Ordinary Course of Business;

commence, dismiss or settle, pay or discharge, consent to any non-monetary relief in connection with of any material Proceeding;

hire, engage, transfer, terminate the employment or services of (except for cause as determined by the Company in good faith consistent with past practice) or promote any (A) employee at the director level or above or individual who has an annual compensation greater than RMB 1 million, or (B) other than in the Ordinary Course of Business, any independent contractor or employee not described in clause (A) above;

increase salary, bonus or other compensation or benefit of employees or other equivalent change of employment terms, or grant or commit to severance pay, special bonus, special employee benefits or other similar or equivalent amount or consideration, except for (i) as required by Law or the Company Benefits Plan, or (ii) payment of retention bonus to certain employees prior to the Closing provided that the Sellers shall fully indemnify and reimburse, or cause to be indemnified and reimbursed, the Company prior to the Closing such retention bonus made by the Company;

acquire any corporation, partnership or other business organization or division or business unit or material asset thereof or any equity interest therein;

make, change, or rescind any material election relating to Taxes unless otherwise required by Law, amend any Tax Return, surrender any material right or claim to a refund of Taxes, consent to any extension or waiver of the statute of limitations period applicable to any Taxes, Tax Returns or claims for taxes; or

enter into any Contract or arrangement to do any of the foregoing.

Best Efforts; Cooperation and Assistance.

Each Seller and Purchaser shall use their reasonable best efforts to take all actions and do all things necessary, proper or advisable to consummate and make effective, in compliance with all of the terms of this Agreement, the transactions contemplated hereby (including satisfaction, but not waiver, of the conditions precedent which it is responsible for or otherwise in control of, as set forth in Article VI below) as soon as possible but no later than the Long-Stop Date.

Subject to Section 5.2(c), Purchaser shall use its reasonable best efforts to give any notices to, make any filings with, and obtain, as soon as practicable, any Governmental Approvals for which it is solely responsible and, to the extent necessary, each Seller shall use its reasonable best efforts to assist Purchaser in respect of the foregoing. Subject to and conditional upon the execution of the Avon Asia Escrow Agreement and the Avon China Escrow Agreement in accordance with Section 5.2(d), each Seller shall use its reasonable best efforts to give any notices to, make any filings with, and obtain, as soon as practicable, any Governmental Approval for which it is solely responsible or jointly responsible with Purchaser and, to the extent necessary, Purchaser shall use its reasonable best efforts to assist each Seller in respect of the foregoing. Without limiting the generality of the foregoing, each Party shall (i) cooperate with each other and file an application for obtaining the Purchaser Required Approvals as soon as practicable after the date hereof, (ii) respond promptly to inquiries from any applicable Governmental Authority in connection with such filings, including providing any supplemental information that may be requested by such Governmental Authority and (iii) reasonably update each other of the status of progress of such filing.

Subject to and conditional upon the execution of the Avon Asia Escrow Agreement and the Avon China Escrow Agreement in accordance with Section 5.2(d), each Seller shall immediately and cause the Company to immediately, and, with respect to the procedures, applications and filings that need to be undertaken by Purchaser, Purchaser shall, immediately proceed with any and all procedures, applications and filings for the SAMR Registration (which shall be made as one single filing to effectuate the transfer of Sale Equity, and for which

As soon as practicable after the date of this Agreement but no later than one (1) month after the date hereof, the Parties shall negotiate in good faith and enter into the Avon Asia Escrow Agreement and the Avon China Escrow Agreement.

From and after the date of this Agreement until the earlier of the Closing Date or termination of this Agreement, each Seller shall, and shall cause the Company to, use its and their commercially reasonable efforts, obtain, prior to the Closing, all consents and approvals from any Person other than a Governmental Authority that may be required in connection with the Transaction (including any counterparty to a Material Contract under which such counterparty will become entitled to terminate it as a result of the Transaction or which require the consent of such counterparty in connection with the Transaction) (the “Third Party Consent”).

Each of Sellers shall use its reasonable best efforts for the Company to renew the New Avon MSA and shall provide full cooperation in connection therewith as reasonably requested by Purchaser.

From and after the date of this Agreement until the earlier of the Closing Date or termination of this Agreement, each Seller shall give prompt notice to Purchaser and Purchaser shall give prompt notice to each Seller of (i) any representation or warranty made by it contained in this Agreement becoming inaccurate and (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement within the time contemplated hereby.

Access and Information.

    For three (3) years after the date hereof, each of the Parties shall maintain in confidence, and shall cause their respective directors, officers, employees, agents, and Affiliates to maintain in confidence, and not use for any purpose other than the consummation of the Transaction or the exercise of rights or performance of obligations hereunder, any information obtained in confidence from the other Party pursuant to this Agreement, except to

Each Party shall also maintain the terms of this Agreement and the Transaction in confidence, and shall cause its directors, officers, employees, agents and Affiliates to maintain the same in confidence, except for any press releases agreed by the Parties in writing, and except to the extent that (i) the Parties otherwise agree so in writing, or (ii) the furnishing or use of such information is required by Law (including reporting obligations under U.S. and Korean securities laws) or in connection with a Proceeding applicable to or involving such Party or its Affiliates.

Notwithstanding Section 5.6(a) and (b), the Parties shall consult with each other before issuing any press releases or otherwise making any public statements with respect to this Agreement or the Transaction, and neither Party shall issue any press release or make any public statement prior to obtaining the other Party’s written approval, except that no such approval shall be necessary to the extent disclosure may be required by applicable Laws on the condition that prior to such disclosure the disclosing Party provides the other Party with the draft of such press release or public statement reasonably in advance, consults with the other Party about their content, and endeavors to obtain the other Party’s consent for such disclosure.

For the avoidance of doubt, the Confidentiality and Non-Disclosure Agreement, dated August 16, 2018, between Avon Products Inc. and Purchaser shall be terminated as of the date hereof, and neither party thereto shall have any liability or further obligation to the other party thereunder.

terminate each of the Related Party Contracts (which, for the avoidance of doubt, does not include the New Avon MSA and the Manufacturing and Supply Agreement), except for those otherwise specifically provided in this Agreement, as of the Closing Date, on terms and conditions that release the Company from all past or future Liabilities or obligations from and after the Closing Date and deliver to Purchaser written evidence of such termination reasonably satisfactory to Purchaser; provided, however, that each Seller shall and shall cause the relevant Seller Party to extend the contract term of each of the Related Party Contracts otherwise agreed upon

if requested by Purchaser, enter into, or cause to be entered into, a transitional services agreement in form and substance reasonably requested by Purchaser and acceptable to Sellers, that is necessary for the stand-alone operations of the Company on and after the Closing.

Non-Competition; Non-Solicitation.

From the Closing Date until the date that is five (5) years after the Closing Date, each Seller shall not, and shall cause its Affiliates not to, without the prior written consent of Purchaser, directly or indirectly, (i) hire or solicit for employment any officer or employee of the Company or (ii) induce or encourage any such officer or employee to no longer be employed by the Company; provided, however, that nothing in this ýSection 5.10(a) shall prohibit each Seller or any of its Affiliates from engaging in general solicitations to the public or general advertising not targeted at employees of the Company.

From the Closing Date until the date that is five (5) years after the Closing Date, Purchaser shall not, and shall cause its Affiliates not to, without the prior written consent of Sellers, directly or indirectly, (i) hire or solicit for employment any officer or employee of any of Sellers or Avon Beauty & Cosmetics Research and Development (Shanghai) Co., Ltd. (“Avon R&D”) or (ii) induce or encourage any such officer or employee to no longer be employed by any of Sellers or Avon R&D; provided, however, that nothing in this ýSection 5.10(b) shall prohibit Purchaser or any of its Affiliates from engaging in general solicitations to the public or general advertising not targeted at employees of any of Sellers or Avon R&D.

From the Closing Date until the date that is five (5) years after the Closing Date, each Seller shall not, and shall cause its Affiliates not to, without the prior written consent of Purchaser, directly or indirectly, (i) engage in the Competing Business anywhere in the Restricted Territory, or (ii) control (including as a joint venture partner, agent, representative, consultant or lender) any Person that engages directly or indirectly in the Competing Business in the Restricted Territory. For purposes of this Agreement, (A) “Competing Business” means the manufacturing of cosmetic products and (B) “Restricted Territory” means PRC. For the avoidance of doubt, any of Sellers or its Affiliates’ engagement with any contract manufacturer in the PRC for the manufacture and supply of cosmetic products shall not be restricted by this Section 5.10(c).

The Parties accept and agree that the provisions of this Section 5.10 are necessary to protect the legitimate business and proprietary interests of the Company and of Purchaser after the Closing Date and that their terms and conditions (including the scope, duration and geographical areas of restriction) are fair and reasonable. It is the intention of the Parties that if any restriction or covenant contained in this Section 5.10 is held to cover a geographic area or to be for a length of time which is not permitted by applicable Laws, or in any way construed to be too broad or to any extent invalid, such restriction or covenant shall not be construed to be null, void and of no effect, but valid and enforceable to the maximum extent permitted under the applicable Laws, and a court of competent jurisdiction or the arbitral tribunal shall construe and interpret or reform this ýSection 5.10 to provide for a covenant having the maximum enforceable geographic area, time period and other provisions that would be valid and enforceable under such applicable Laws.

Conditions Precedent to the Obligations of each Seller to Sell the Sale Equity.

    No Injunction. No Law or Order shall have been enacted, entered, promulgated or endorsed by any Governmental Authority of competent jurisdiction that prohibits the consummation of the Transaction or any part thereof.

Governmental Approvals. All requisite Governmental Approvals (including the Purchaser Required Approvals) required to have been obtained prior to the Closing shall have been obtained without any condition (through the expiration of any applicable waiting period or otherwise).

Representations and Warranties. The representations and warranties of Purchaser in Section 4.3 shall be true and correct in all material respects (except for those representations and warranties which are qualified as to materiality, in which case such representations and warranties shall be true and correct in all respects) as of the Closing Date as though made on and as of such date (other than representations and warranties which address matters only as of a certain date, which shall be as of such date).

    Performance. Purchaser shall have performed, satisfied and complied with, in all material respects, all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by it at or prior to the Closing Date.

Escrow Agreement. Each of the Avon Asia Escrow Agreement and Avon China Escrow Agreement shall have been entered into by and among the parties thereto.

Conditions Precedent to the Obligations of Purchaser to Purchase the Sale Equity.

    No Injunction. No Law or Order shall have been enacted, entered, promulgated or endorsed by any Governmental Authority of competent jurisdiction that prohibits the consummation of the Transaction or any part thereof.

Governmental Approvals. All requisite Governmental Approvals (including the Purchaser Required Approvals) required to have been obtained prior to the Closing shall have been obtained without any condition (through the expiration of any applicable waiting period or otherwise).

    Representations and Warranties. The representations and warranties of each Seller in Sections 4.1 and 4.2 shall be true and correct in all material respects (except for those representations and warranties which are qualified as to materiality, in which case such representations and warranties shall be true and correct in all respects) as

    Performance. Each Seller shall have performed, satisfied and complied with, in all material respects, all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by each Seller at or prior to the Closing Date.

Escrow Agreement. Each of the Avon Asia Escrow Agreement and Avon China Escrow Agreement shall have been entered into by and among the parties thereto.

Manufacturing and Supply Agreement. The Manufacturing and Supply Agreement shall be in full force and effect as from the Closing Date without being amended or terminated as of the Closing Date.

License Agreement. The License Agreement shall have been entered into by and between the parties thereto.

No Material Adverse Effect. Since the date of this Agreement, there shall not have occurred any Material Adverse Effect.

Reimbursement of Retention Bonus. The Company shall have been fully reimbursed of any retention bonus paid in accordance with Section 5.1(n).

Indemnification.

    From and after the Closing, Purchaser agrees to indemnify, defend and hold harmless each Seller and its Affiliates, shareholders, directors, officers, employees, agents and advisors (the “Seller Indemnified Parties”) from and against any and all Losses that are actually incurred by such Seller Indemnified Parties as a result of or in connection with any inaccuracy in or breach of any of the representations and warranties made by Purchaser in Section 4.3 of this Agreement or any breach of, or failure by Purchaser to perform any of Purchaser’s covenants, agreements or other obligations contained in this Agreement.

    From and after the Closing, Sellers agree to, jointly and severally, indemnify, defend and hold harmless Purchaser and its Affiliates, shareholders, directors, officers, employees, agents and advisors (including, for the avoidance of doubt, the Company after the Closing) (the “Purchaser Indemnified Parties”) from and against any and all Losses that are actually incurred by such Purchaser Indemnified Parties as a result of or in connection with any inaccuracy in or breach of any of the representations or warranties made by any Seller in Sections 4.1 or 4.2 in this Agreement or any breach of, or failure by any Seller to perform any of Sellers’ covenants, agreements or other obligations contained in this Agreement.

Survival of Claims.

Limitations on Liability.

    Sellers shall not be exempted from liability for breach of their representations and warranties or any covenants, agreements or other obligations under this Agreement by reason of Purchaser’s knowledge of such breach, whether through the access to information under Section 5.3 or otherwise.

For any claims against Sellers or Purchaser from whom indemnification is sought (the “Indemnifying Party”), as the case may be, pursuant to Section 7.1(a) or Section 7.1(b), other than any claims arising out of or based on (i) any breach of the Fundamental Representations or any of the representations or warranties contained in Section 4.2(p)(Taxes), (ii) any breach or failure to perform any of the covenants, agreements or obligations contained in this Agreement (including the Purchaser’s obligation to pay the Purchase Price) or (iii) fraud or willful misconduct, by such Indemnifying Party, the indemnification obligations of the Indemnifying Party in the aggregate shall not exceed fifteen percent (15%) of the Purchase Price; notwithstanding the foregoing, in no event shall the aggregate indemnification obligation of Sellers in relation to all claims exceed the Purchase Price. With respect to any claims against any Indemnifying Party for breach of any of its representations and warranties hereunder other than the Fundamental Representations or any of the representations or warranties contained in Section 4.2(p)(Taxes), such Indemnifying Party shall not be liable (x) for any individual occurrence, event, circumstance, act or omission where the Loss resulting therefrom is less than RMB 1 million (the “De Minimis”) and (y) for any Losses unless the aggregate amount of all Losses (it being understood that any such individual claims for amounts less than the De Minimis shall be ignored in determining whether the Aggregate Basket Amount has been exceeded) of the Indemnifying Party exceeds three percent (3%) of the Purchase Price (the “Aggregate Basket Amount”), in which case the Indemnifying Party shall be liable for all such Losses including the amount constituting the Aggregate Basket Amount.

In calculating the amount of any Losses payable to an Indemnified Party hereunder, the amount of the Losses (i) shall not be duplicative of any other Loss for which an indemnification claim has been made, (ii) shall be computed net of any amounts actually recovered by such Indemnified Party (the “Third Party Indemnification Amount”) under any other indemnification agreements, understanding or similar arrangements other than this Agreement with respect to such Losses, and (iii) shall be computed net of any amounts actually recovered by such Indemnified Party under any insurance policy with respect to such Losses and (iv) shall be computed net of any tax benefit actually realized by the Indemnified Party (or any of its Affiliates) with respect to such Loss for the taxable year of such Loss, as calculated on a with and without basis.

    Notwithstanding anything in this Agreement to the contrary, neither Party shall be liable to the other Party for any consequential, indirect, special, punitive or incidental damages.

Claims for Indemnification.

    Third-Party Claims. All claims for indemnification made under this Agreement resulting from, related to or arising out of a third-party claim against an Indemnified Party (a “Third Party Claim”) shall be made in accordance with this Section 7.4(a). An Indemnified Party shall give prompt written notification (not more than thirty (30) calendar days after becoming aware of any third party claim) (a “Third Party Claim Notice”) to the Indemnifying Party of the commencement of any action, suit or proceeding relating to a Third Party Claim for which indemnification may be sought or, if earlier, upon the assertion of any such claim by a third party; provided, however, that if the Indemnified Party fails to provide the Indemnifying Party with such notice in a timely manner, or in reasonable detail to apprise the Indemnifying Party of the nature of such Third Party Claim, in each case taking into account the facts and circumstances with respect to such Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party to the extent that the Indemnifying Party's position is prejudiced as a result thereof, but for the avoidance of doubt then only to the extent of such prejudice.. Such Third Party Claim Notice shall include a description in reasonable detail, to the extent known or on hand at the time, of the facts constituting the basis for such third-party claim, documents reasonably evidencing the existence and material contents of the Third Party Claim and the amount of the Losses claimed. At any time after delivery of such Third Party Claim Notice, the Indemnifying Party may, upon written notice thereof to the Indemnified Party within 14 calendar days of its receipt of the Third Party Claim Notice, assume control of the defense of such action, suit, proceeding or claim by acknowledging its indemnification obligations as provided in this Article VII in writing to the Indemnified Party; provided, however, that the Indemnifying Party shall not be permitted to assume control of the defense if the Third Party Claim involves a claim for non-monetary relief against the Indemnified Party. If the Indemnifying Party does not assume control of such defense or fails to give a written notice to assume control of such defense within the 14-day period, then the Indemnified Party shall have the right to defend or prosecute such Third Party Claim on its own and settle, compromise or discharge such Third Party Claim at its sole direction, and the Indemnifying Party shall remain liable for any Losses resulting therefrom to the extent that such Losses are subject to indemnification in accordance with this Article 7. Neither any Seller nor Purchaser shall take any action the purpose of which is to prejudice the defense of any claim subject to indemnification hereunder or to induce a third party to assert a claim subject to indemnification hereunder.

    Procedure for Claims. In the event an Indemnified Party claims a right to payment pursuant hereto with respect to any matter not involving a Third-Party Claim (a “Direct Claim”), such Indemnified Party shall send written notice of such claim to the Indemnifying Party (a “Notice of Claim”). Such Notice of Claim shall specify in detail the legal basis for and the underlying facts of such Direct Claim. For the avoidance of doubt, the Parties agree and understand that Notices of Claim in respect of a breach of a representation or warranty must be delivered prior to the expiration of the survival period for such representation or warranty under Section 7.2. In case the Indemnifying Party disputes the liability asserted under such Direct Claim, the Indemnifying Party shall send a notice of such dispute to the Indemnified Party within thirty (30) days following its receipt of such Notice of Claim. In the event the Indemnifying Party disputes its liability with respect to such Direct Claim as provided above, as promptly as possible, such Indemnified Party and the Indemnifying Party shall establish the merits and amount of such Direct Claim (by mutual agreement or otherwise pursuant to an enforceable decision or award rendered in accordance with Section 9.4 in respect of such dispute) and, within ten (10) Business Days following the final agreement between the Parties or the date of an enforceable decision or award rendered in accordance with Section 9.4 with respect to the merits and amount of such Direct Claim, the Indemnifying Party shall pay to the Indemnified Party immediately available funds in an amount equal to such Direct Claim as determined hereunder.  

If a Tax Claim shall be made by any Taxing Authority, which, if successful, might result in an indemnity payment to any Indemnified Party pursuant to Section 7.1, the Indemnified Party shall promptly notify the Indemnifying Party in writing of such Tax Claim. If the Indemnified Party fails to provide the Indemnifying Party with notice of a Tax Claim for which the Indemnifying Party may be liable under Section 7.1 within a sufficient period of time to allow the Indemnifying Party to effectively contest such Tax Claim, or in reasonable detail to apprise the Indemnifying Party of the nature of the Tax Claim, in each case taking into account the facts and circumstances with respect to such Tax Claim, the Indemnifying Party shall not be liable to any Indemnified Party to the extent that the Indemnifying Party's position is prejudiced as a result thereof, but for the avoidance of doubt then only to the extent of such prejudice.

Sellers shall control all proceedings taken in connection with any Tax Claim (including selection of counsel).

All written communications pertaining to any Tax Claim relating to Taxes of the Company for a Pre-Closing Tax Period or a Straddle Period which are transmitted to or received from the relevant Tax Authority by Purchaser shall be copied to Sellers as soon as reasonably practicable after such communications have been so transmitted to or received by Purchaser.

Notwithstanding the above Section 7.5(b) and (c), for any Tax Claim relating to Taxes of the Company for a Pre-Closing Tax Period or a Straddle Period, Sellers shall have the right to control all proceedings taken in connection with any such Tax Claim (including in respect of the selection of counsel) and, in furtherance thereto, Purchaser shall take such action and procure that the Company shall, at Sellers’ sole cost and expense (such cost and expense to only include reasonable third party costs and expenses properly incurred by the Company) take such action as Seller may promptly by written notice to Purchaser request to dispute, resist or compromise such liabilities, costs, damages, Taxes, Losses or expenses; provided, however, that Purchaser (and counsel of its own choosing) shall have the right to participate fully in all aspects of the prosecution or defense of any Tax Claim relating to a Straddle Period, at Purchaser's sole expense and Seller shall not be entitled to settle, either administratively or after the commencement of litigation, any Tax Claim which would adversely affect the liability for Taxes of Purchaser or the Company for any period after the Closing Date to any extent (including, but not limited to, the imposition of income tax deficiencies, the reduction of asset basis or cost adjustments, the lengthening of any amortization or depreciation periods, the denial of amortization or depreciation, or the reduction of loss or credit carryforwards) without the prior consent of Purchaser, which shall not be unreasonably withheld or delayed.

Purchaser shall (and will be entitled to procure that the Company shall) be at liberty without reference to Seller to admit, compromise or otherwise deal with any Tax Claim after the service of a notice in writing on Purchaser by Sellers stating that Sellers consider that the Tax Claim should no longer be resisted.

Purchaser shall and shall procure that the Company shall cooperate with Sellers in contesting any Tax Claim, which cooperation shall include the retention (and upon Sellers' reasonable request) of records and information which are reasonably relevant to such Tax Claim, and making employees available on a mutually convenient basis to provide additional information or explanation of any material provided hereunder or to testify at proceedings relating to such Tax Claim, in each case at Sellers’ sole expense.

Notwithstanding anything to the contrary in this Section, Purchaser shall not be obliged to: (i) appeal or procure that the Company appeal against any Tax Claim in any forum beyond the first relevant appellate body; or (ii) take or procure that the Company takes any action the effect of which is likely to affect the future conduct of the business of Purchaser, the Company, and/or any member of Purchaser's group or affect the rights or reputations of any of them; in each case of the foregoing the Parties shall discuss in good faith any reasonable alternative measure to mitigate such risks.

Additional Indemnification.

Sole and Exclusive Remedy.

Termination.

    by mutual written agreement of Sellers and Purchaser;

    by either Sellers acting as one party or Purchaser, in the event that the Closing has not occurred by the Long-Stop Date by reason of failure of any conditions set forth in Section 6.1 (in the case of termination by Sellers) or Section 6.2 (in the case of termination by Purchaser), provided, however, that a Party to which failure of any conditions applicable to it under Article VI is attributable may not terminate this Agreement pursuant to this Section 8.1(b);

    by either Sellers acting as one party or Purchaser with a written notice to the other Party if the other Party has materially breached any of its covenants or obligations under this Agreement and has failed to cure such breach within twenty (20) days following such written notice;

    by either Sellers acting as one party or Purchaser with immediate effect upon the filing of a petition in bankruptcy, insolvency or reorganization against or by the other Party, or such other Party becoming subject to a composition for creditors, whether by law or agreement, or such other Party going into receivership or otherwise becoming insolvent, or any analogous event occurring under the laws of the jurisdiction in which a Party is incorporated; or

by Sellers acting as one party, in case of failure to complete the MOFCOM Filing within fifteen (15) Business Days after the application therefor is submitted.

Effect of Termination.

Entire Agreement.

Assignment.

Tax and Expenses.

Governing Law and Dispute Resolution.

Amendments.

Severability.

Notices.

Language; Counterparts.

No Third Party Beneficiary.

any inconsistency among the total area on the real estate certificate, the environmental protection facility acceptance approval and approval for fire control acceptance on construction which were issued or granted to the Company prior to the Closing Date;

any expired Permits relating to cosmetics that the Company is still operating prior to the Closing Date;

the Company’s having not obtained all Governmental Approvals required for the Company to implement the flexible working-hour system prior to the Closing Date;

the Company’s any noncompliance with applicable Law relating to social insurance and housing fund by the Company or any labor dispute agency with respect to labor dispatch employees prior to the Closing Date;

the Company’s failure, as of the Closing Date, (i) to pay overtime allowances under the standard working hour system or (ii) to ensure that the corresponding proportion of the overall dispatched employees against the total number of the employees currently working in the Company does not exceed the maximum rate as permitted by applicable Law;

the Company’s failure to file the renewal of the registration of the quality standards (whether national, industrial or corporate) and the certificate thereof prior to the Closing Date;

the Company’s failure to complete the update or recordation of the current name of the Company’s legal representative (i.e. Ronald Chua Tamayo) in all of the Company’s licenses, certificates and Permits (including but not limited to the Certificate of Registration of Customs Declaration Entity, the Recordation of Inspection Declaration Entity, the Opening Bank Account Permit and the Pollution Discharge Permission); or

the Company’s failure to duly obtain any and all Governmental Approvals required for special purpose’s cosmetics and non-special purpose’s cosmetics required in connection with its business as currently conducted on the Closing Date.