ABVC 8-K
Abvc Biopharma, Inc. (ABVC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
CURRENT REPORT
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement
On August 21, 2026, ABVC BioPharma, Inc. (the “Company”) completed the previously announced partial legal and structural separation (the “Reorganization Transactions”) of its subsidiary, BioKey (Cayman), Inc., an exempted company incorporated with limited liability under the laws of the Cayman Islands (“BioKey Cayman”), by distributing approximately 15% of the issued and outstanding ordinary shares, par value $0.0001 per share (“Ordinary Shares”), of BioKey Cayman to holders of common stock of the Company (the “ABVC Common Stockholders”) as a pro rata dividend (the “Distribution”), pursuant to the terms of that certain Separation and Distribution Agreement, dated as of June 22, 2026, between the Company and BioKey Cayman (the "Separation Agreement").
The Reorganization Transactions consist of two distinct steps: (i) the legal separation of BioKey Cayman from ABVC (the “Separation”) and (ii) the subsequent Distribution. To effect the Separation, BioKey Cayman filed a Registration Statement on Form 10 pursuant to the Exchange Act (File No. 000-56853), which became effective on June 25, 2026 (the “Form 10”). Upon effectiveness of the Form 10 and execution of the Separation Agreement, BioKey Cayman became a separate Exchange Act reporting company, although we continued to own 100% of the Ordinary Shares. Pursuant to the Distribution, the ABVC Common Stockholders received 0.169464 of an Ordinary Share for each share of common stock of the Company held at the close of business on July 24, 2026 (the “Record Date”).
Ultimately, we distributed 4,500,390 Ordinary Shares to ABVC Common Stockholders. The Distribution became effective as of 11:59 p.m., New York City time, on August 21, 2026 (the “Distribution Date”). Following the Distribution, ABVC Common Stockholders collectively maintain a 15% ownership in BioKey Cayman’s issued and outstanding Ordinary Shares and we remain BioKey Cayman’s controlling shareholder, holding approximately 85% of BioKey Cayman's issued and outstanding Ordinary Shares. All ownership percentages included herein are based on the number of Ordinary Shares issued and outstanding as of August 21, 2026. As both steps have been completed, BioKey Cayman is no longer one of our wholly owned subsidiaries and exists as an independent, separate Exchange Act reporting and trading entity, over which we only maintain a controlling interest.
The Form 10 includes a preliminary information statement that describes the Reorganization Transactions and provides important information regarding BioKey Cayman’s business and management. The final information statement, dated August 27, 2026 (the “Information Statement”), is attached as Exhibit 99.1 to the Current Report on Form 8-K that BioKey Cayman filed on August 27, 2026.
No trading market for the Ordinary Shares currently exists. BioKey Cayman intends to apply to have its Ordinary Shares quoted on the OTC Markets. Because BioKey Cayman is not currently listed on the OTC Markets, it has not yet been assigned a trading symbol. A trading symbol will be assigned in connection with, and upon completion of, the OTC listing process.
In connection with the Reorganization Transactions, the Company and BioKey Cayman entered into several agreements that, among other things, govern the ongoing relationship between the Company and BioKey Cayman following the Reorganization Transactions, including: (i) the Separation Agreement; (ii) the Transitional Services Agreement, dated as of June 22, 2026 (the “TSA”); (iii) the Tax Matters Agreement, dated as of June 22, 2026 (the “Tax Matters Agreement”); and (iv) the Employee Matters Agreement, dated as of June 22, 2026 (the “Employee Matters Agreement”). The Separation Agreement governs the relationship between the Company and BioKey Cayman up to and after completion of the Reorganization Transactions and allocates between the Company and BioKey Cayman various assets, rights, liabilities, and obligations, including employee benefits, intellectual property, and tax-related assets and liabilities.
The Separation Agreement includes various post-closing covenants, including agreements relating to the parties’ insurance policies, information sharing and other operational matters. The Separation Agreement also includes a mutual release by the Company, on the one hand, and ABVC, on the other hand, of the other party from certain specified liabilities, as well as mutual indemnification covenants pursuant to which the Company and ABVC have agreed to indemnify each other from certain specified liabilities.
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A summary of the material terms of the Separation Agreement is set forth under the caption “Certain Relationships and Related Party Transactions – Agreements with ABVC – Separation and Distribution Agreement” in the Information Statement and is incorporated by reference herein. The respective descriptions of the Separation Agreement contained in this Current Report and the Information Statement do not purport to be complete and are qualified in their entirety by reference to the full text of the Separation and Distribution Agreement, which is attached as Exhibit 2.1 to this Current Report and incorporated by reference herein.
The foregoing descriptions of the TSA, the Tax Matters Agreement, and the Employee Matters Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of such agreements, copies of which are filed as Exhibits 10.1, 10.2, and 10.3, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.01.
Item 7.01. Regulation FD Disclosure.
The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 7.01.
The information furnished pursuant to this Item 7.01 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description | |
| 2.1 | Separation and Distribution Agreement, dated as of June 22, 2026, by and between ABVC BioPharma, Inc. and BioKey (Cayman), Inc. | |
| 10.1 | Transitional Services Agreement, dated as of June 22, 2026, by and between ABVC BioPharma, Inc. and BioKey (Cayman), Inc. | |
| 10.2 | Tax Matters Agreement, dated as of June 22, 2026, by and between ABVC BioPharma, Inc. and BioKey (Cayman), Inc. | |
| 10.3 | Employee Matters Agreement, dated as of June 22, 2026, by and between ABVC BioPharma, Inc. and BioKey (Cayman), Inc. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ABVC BioPharma, Inc. | ||
| August 27, 2026 | By: | /s/ Uttam Patil |
| Uttam Patil | ||
| Chief Executive Officer | ||
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Exhibit 2.1
SEPARATION AND DISTRIBUTION AGREEMENT
THIS SEPARATION AND DISTRIBUTION AGREEMENT (the “Agreement”) is made and entered into as of the 22nd day of June 2026, by and between ABVC BioPharma, Inc., a Nevada corporation (“Parent”), and BioKey (Cayman), Inc., a Cayman Islands exempted company with limited liability and wholly owned subsidiary of Parent (“Subsidiary”) (each, a “Party,” and collectively, the “Parties”).
R E C I T A L S
WHEREAS, the Board of Directors of Parent has determined that it is in the best interests of Parent and its shareholders to separate the business of the Subsidiary from that of the Parent through a spin-off transaction in which Parent will distribute a portion of its equity interest in Subsidiary while retaining a controlling interest therein (the “Separation”);
WHEREAS, in order to effect the Separation, the Board of Directors of Parent has determined that it is in the best interests of Parent and its shareholders to distribute to Parent’s shareholders, on a pro rata basis on terms contained in this Agreement, 15% of the Subsidiary’s ordinary shares, par value $0.0001 per share (the “Ordinary Shares”) held by the Parent (the “Distribution”);
WHEREAS, following the Distribution, Parent will continue to own the remaining 85% of the Ordinary Shares; and
WHEREAS, the Parties intend to set forth the principal corporate arrangements between the Parties with respect to the Separation and the Distribution in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the terms, conditions, covenants, and provisions of this Agreement, the Parties agree as follows:
ARTICLE
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DEFINITIONS
Section 1.1.
General. As used in this Agreement, the following capitalized terms shall have the following meanings:
“Action” means any demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any federal, state, local, foreign, or international Governmental Authority or any arbitration or mediation tribunal.
“Affiliate” means, when used with respect to a specified Person, a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person, including, without limitation, a General Subsidiary (as defined below). As used herein, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or other interests, by contract or otherwise.
“Agent” shall have the meaning set forth in Section 3.2(a).
“Ancillary Agreements” means this Agreement, the Transition Services Agreement, Tax Matters Agreement, Indemnification Agreements, the Employee Matters Agreement, all of which are related to the SpinOff (as hereinafter defined) and that the Parties are entering into on this same date, and all of the agreements, instruments, assignments or other arrangements entered into in connection with the transactions contemplated hereby.
“Assets” means assets, properties, claims and rights (including goodwill), wherever located (including in the possession of vendors or other Third Parties or elsewhere on behalf of the owner), of every kind, character and description, whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the records or financial statements of any Person.
“Combined Books and Records” shall have the meaning set forth in Section 5.1(c).
“Commission” means the United States Securities and Exchange Commission or any successor agency thereto.
“Consents” means any consents, waivers, or approvals from, or notification requirements to any Third Parties.
“Contract” means any contract, obligation, indenture, agreement, lease, purchase order, commitment, permit, license, note, bond, mortgage, arrangement or undertaking (whether written or oral and whether express or implied) that is legally binding on any Person or any part of its property under applicable Law, but excluding this Agreement and any Ancillary Agreement save as otherwise expressly provided in this Agreement or any Ancillary Agreement.
“Distribution” shall have the meaning set forth in the recitals hereto.
“Distribution Date” means the date upon which the Distribution shall be effective, as determined by the Board of Directors of Parent.
“Effective Time” means 11:59 p.m. Eastern Daylight Time on the Distribution Date at which time the Distribution is effective.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time that reference is made thereto.
“Form 10” means the registration statement on Form 10 under the Exchange Act filed by Subsidiary with the Commission relating to the Ordinary Shares, as amended from time to time.
“General Subsidiary” means any corporation or other organization of which at least a majority of the securities or interests have voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by a Person.
“Governmental Approvals” means any notices, reports, or other filings to be made, or any consents, registrations, approvals, permits or authorizations to be obtained from, any Governmental Authority.
“Governmental Authority” means any federal, state, local, foreign, or international court, government department, commission, board, bureau, agency, official or other regulatory, administrative, or governmental authority.
“Indemnifying Party” shall have the meaning set forth in Section 4.5(c).
“Indemnitee” shall have the meaning set forth in Section 4.5(c).
“Information” means information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including without limitation, studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), communications and materials otherwise related to or made or prepared in connection with or in preparation for any legal proceeding, and other technical, financial, employee or business information or data.
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“Intellectual Property” means all intellectual property and industrial property rights of any kind or nature, including all United States and foreign (i) patents, patent applications, patent disclosures, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions and extensions thereof, (ii) trademarks and all goodwill associated therewith, (iii) copyrights and copyrightable subject matter, whether statutory or common law, registered or unregistered and published or unpublished, (iv) rights of publicity, (v) moral rights and rights of attribution and integrity, (vi) rights in Software, (vii) trade secrets and all other confidential and proprietary information, know-how, inventions, improvements, processes, formulae, models and methodologies, (viii) rights to personal information, (ix) telephone numbers and internet protocol addresses, (x) applications and registrations for the foregoing, and (xi) rights and remedies against past, present, and future infringement, misappropriation, or other violation of the foregoing.
“Law” means any federal, national, state, provincial, local, or similar statute, law, ordinance, regulation, rule, code, order, requirement, or rule of law (including common law).
“Liabilities” means any and all debts, liabilities, and obligations, whether accrued or fixed, known or unknown, absolute or contingent, matured or unmatured, reserved or unreserved of any kind or nature whatsoever.
“Operations Data” shall have the meaning set forth in Section 5.2.
“Parent Books and Records” shall have the meaning set forth in Section 5.1(b).
“Parent Business” means all of the business and operations of Parent and its General Subsidiaries, other than the Subsidiary Business.
“Parent Common Stock” means the Common Stock, $0.001 par value per share, of Parent.
“Parent Liabilities” means any and all Liabilities of Parent and its Affiliates (other than Subsidiary and its Affiliates) to the extent relating to, arising out of or resulting from the Parent Business or any acts or omissions of Parent or its Affiliates (other than Subsidiary and its Affiliates).
“Party” shall have the meaning set forth in the preamble hereof.
“Person” means any natural person, firm, individual, corporation, business trust, joint venture, association, company, limited liability company, partnership or other organization or entity, whether incorporated or unincorporated, or any governmental entity.
“Record Date” means the close of business on June 23, 2026, the date determined by the Parent Board of Directors as the record date for the Distribution.
“Separation” shall have the meaning set forth in the recitals hereto.
“Software” means all computer programs (whether in source code, object code or other form), algorithms, databases and data, and technology supporting the foregoing, and all documentation, including flowcharts and other logic and design diagrams, technical, functional, and other specifications, and user manuals and training materials related to any of the foregoing.
“Subsidiary Assets” means (a) any and all Assets expressly set forth on Schedule 2.1(a) hereto under the caption “Subsidiary Assets,” (b) any and all Assets reflected in the Subsidiary Balance Sheet, and any and all Intellectual Property used primarily in the Subsidiary Business, which have not been disposed of or removed from the Subsidiary Balance Sheet between the date of the Subsidiary Balance Sheet and the Distribution Date, and (c) any and all Assets acquired by Subsidiary (or Parent on behalf of Subsidiary) after the date of the Subsidiary Balance Sheet that would be reflected in the balance sheet of Subsidiary as of the Distribution Date, if such balance sheet was prepared by Subsidiary in accordance with the same accounting principles under which the Subsidiary Balance Sheet was prepared.
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“Subsidiary Balance Sheet” means the unaudited balance sheet of Subsidiary as of March 31, 2026 included in the Form 10 and attached hereto as Schedule 1.1(a).
“Subsidiary Books and Records” shall have the meaning set forth in Section 5.1(a).
“Subsidiary Business” means all of the business and operations of the Subsidiary as described in the Form 10.
“Third Party” means any Person other than Parent, Subsidiary or Affiliate thereof.
“Third Party Claim” shall have the meaning set forth in Section 4.5(c).
“Transfer” shall have the meaning set forth in Section 2.1(a).
Section 1.2.
References; Interpretation. References in this Agreement to the singular shall include the plural and vice versa and words of one gender shall include the other gender as the context requires. The terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules and Exhibits hereto) and not to any particular provision of this Agreement. Article, Section, Exhibit and Schedule references are to the Articles, Sections, Exhibits and Schedules to this Agreement unless otherwise specified. The word “including” and words of similar import when used in this Agreement (or the applicable Ancillary Agreement) means “including, without limitation,” unless the context otherwise requires or unless otherwise specified. The word “or” shall not be exclusive.
ARTICLE 2
THE SEPARATION
Section 2.1.
Subsidiary Assets.
| a) | As of the date hereof, and immediately prior to the Effective Time, Subsidiary shall retain all Subsidiary Assets, as defined in Section 1.1 above. Subsidiary Assets shall include, but not be limited to, those assets set forth in Schedule 2.1(a) attached hereto and by this reference made a part hereof. To the extent any of the Subsidiary Assets are currently held in the name of Parent, as of the date hereof, and immediately prior to the Effective Time, Parent hereby transfers, contributes, assigns, distributes and conveys to Subsidiary all of Parent’s right, title, and interest, if any, in and to the Subsidiary Assets (the “Transfer,” together with the Separation and Distribution, the “SpinOff”). Subsidiary hereby accepts any such Transfer from Parent, effective concurrently therewith. |
| b) | If at any time (whether prior to or after the Effective Time) either Party hereto shall receive or otherwise possess an Asset that is allocated to any other Person pursuant to this Agreement or any Ancillary Agreement, such Party shall promptly transfer or cause to be transferred, at such Party’s expense, for no additional consideration, such Asset, including any and all economic benefits generated from such Asset after the Effective Time, to such Party hereto. |
| c) | In furtherance of the Transfer, and simultaneously with the execution and delivery of this Agreement, Parent shall execute and deliver, and shall cause its Affiliates to execute and deliver, such bills of sale, stock powers, certificates of title, assignments of contracts and other instruments of transfer, conveyance, and assignment as and to the extent necessary to evidence the Transfer. |
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Section 2.2.
(Reserved).
Section 2.3.
Governmental Approvals; Waivers or Consents.
| a) | To the extent that the Separation requires any Governmental Approvals, Waivers, or Consents, the Parties shall use commercially reasonable efforts to obtain any such Governmental Approvals, Waivers, or Consents prior to the Separation and Distribution, as applicable. No Party shall be obligated to pay any consideration to any Third Party from whom any such Waiver or Consent is requested. |
| b) | If the transfer of any Subsidiary Assets intended to be transferred hereunder is not consummated prior to the Effective Time for any reason, then Parent shall thereafter hold such Subsidiary Asset for the use and benefit of Subsidiary if permitted by law. If and when the Governmental Approvals, Consents, Waivers, or other impediments to transfer, that caused the deferral of transfer of such Asset are obtained or removed, the transfer of the applicable Asset shall be effected in accordance with the terms of this Agreement and/or the applicable Ancillary Agreement. |
| c) | If the Parties are unable to obtain any required Governmental Approvals, Waivers, or Consents, Parent shall continue to be bound by such Contract, license, or other obligation; provided, however, that Parent shall not be obligated to extend, renew or otherwise cause such Contract, license or other obligation to remain in effect beyond the term in effect as of the Effective Time. If and when any such Governmental Approval, Consent or Waiver is obtained or such agreement, lease, license or other rights or obligations shall otherwise become assignable or capable of novation, Parent shall promptly assign, or cause to be assigned, all rights, obligations and other Liabilities thereunder to Subsidiary without payment of any further consideration and Subsidiary, without the payment of any further consideration, shall assume such rights and obligations and other Liabilities. |
Section 2.4.
(Reserved).
Section 2.5.
Disclaimer of Representations and Warranties. ON BEHALF OF THE PARTIES, THE PARTIES UNDERSTAND AND AGREE THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, NO PARTY TO THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES CONTRIBUTED, TRANSFERRED, DISTRIBUTED OR ASSUMED HEREBY OR THEREBY, AS TO ANY CONSENTS, WAIVERS, OR GOVERNMENTAL APPROVALS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SETOFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM OR OTHER ASSET OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY CONTRIBUTION, DISTRIBUTION, ASSIGNMENT, DOCUMENT, CERTIFICATE OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS,” “WHERE IS” BASIS AND, THE SUBSIDIARY SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE SHALL PROVE TO BE INSUFFICIENT TO VEST IN THE SUBSIDIARY GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY CONSENTS, WAIVERS, OR GOVERNMENTAL APPROVALS ARE NOT OBTAINED OR THAT THE REQUIREMENTS OF LAWS, CONTRACTS, OR JUDGMENTS ARE NOT COMPLIED WITH.
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ARTICLE 3
THE DISTRIBUTION
Section 3.1.
The Distribution.
| a) | Subject to Section 3.2, on or prior to the Distribution Date, for the benefit of and distribution to the holders of Parent Common Stock on the Record Date, Parent will deliver stock certificates, endorsed by Parent in blank, to the distribution agent, VStock Transfer, LLC (the “Agent”), representing the equivalent of 10% of Subsidiary’s outstanding Ordinary Shares on such date. Parent shall instruct the Agent to distribute in electronic or certificated form the appropriate number of such Ordinary Shares to each such holder or designated transferee or transferees of such holder. |
| b) | Subject to Section 3.2, each holder of Parent Common Stock on the Record Date (or such holder’s designated transferee or transferees) will be entitled to receive in the Distribution as of the Effective Time such holder’s pro rata portion of 4,500,000 Ordinary Shares currently held by Parent,, based on the number of shares of Parent Common Stock held of record by such holder on the Record Date. No fractional shares will be issued. In the event a holder of Parent Common Stock would otherwise be entitled to a fractional Ordinary Share of Subsidiary, the number of Ordinary Shares such holder of Parent Common Stock will receive in the Distribution will be rounded up to the nearest whole number of Ordinary Shares. No action by any such shareholder shall be necessary for such shareholder (or such shareholder’s designated transferee or transferees) to receive the Ordinary Shares. Subsidiary and Parent will provide to the Agent any and all information required in order to complete the Distribution. |
Section 3.2.
Actions in Connection with the Distribution.
| a) | Prior to the Distribution Date, Parent and Subsidiary shall have prepared and informed the holders of Parent Common Stock such information concerning Subsidiary, the Subsidiary Business, operations and management, the Distribution, the Separation, and such other matters as Parent shall reasonably determine and as may be required by law. |
| b) | Subsidiary shall have prepared and, in accordance with applicable Law, filed with the Commission the Form 10, including amendments, supplements and any such other documentation which is necessary or desirable to effectuate the Distribution, and Subsidiary shall have obtained all necessary approvals from the Commission with respect thereto as soon as practicable. |
| c) | Parent and Subsidiary shall take all such action as may be necessary or appropriate under the securities or blue sky laws of the states or other political subdivisions of the United States or of other foreign jurisdictions in connection with the Distribution. |
| d) | Following the Separation, Subsidiary and/or its market makers will prepare and file an application for the original listing or quotation on the OTC Bulletin Board, and/or the OTC Markets Group, Inc., of the Ordinary Shares. |
| e) | Parent and Subsidiary shall take all reasonable steps necessary to cause the conditions set forth in Section 3.3 to be satisfied and to effect the Distribution on the Distribution Date. |
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Section 3.3.
Conditions to the SpinOff. Subject to Section 3.2, the following are conditions to the consummation of the SpinOff. The conditions are for the sole benefit of Parent and shall not give rise to or create any duty on the part of Parent or the Board of Directors of Parent to waive or not waive any such condition:
| a) | The Form 10 shall have been filed with the Commission for the purpose of registering the Ordinary Shares under the Exchange Act, with no stop order in effect with respect thereto and Subsidiary shall have cleared all Commission comments related to the Form 10. |
| b) | An information statement satisfying the requirements of Commission shall have been filed with the Commission and delivered to all holders of Parent Common Stock. |
| c) | All Government Approvals and other Consents necessary to consummate the SpinOff shall have been obtained and be in full force and effect, except for any such Government Approvals or Consents the failure of which to obtain would not have material adverse effect on the business, operations, or condition (financial or otherwise) of either Parent or Subsidiary. |
| d) | No order, injunction or decree issued by any court or agency of competent jurisdiction preventing the consummation of the SpinOff shall be in effect and no other event outside the control of Parent shall have occurred or failed to occur that prevents the consummation of the SpinOff. |
| e) | The Board of Directors of Parent shall have authorized and approved the SpinOff and not withdrawn such authorization and approval. |
| f) | No other events or developments shall have occurred that, in the sole discretion of the Board of Directors of Parent, would result in the SpinOff having a material adverse effect on Parent, its shareholders or its creditors, or not being in the best interest of Parent, its shareholders and creditors. |
| g) | The Ancillary Agreements shall have been executed by each party to those agreements. |
ARTICLE 4
COVENANTS
Section 4.1.
Post Closing Cooperation. Following the SpinOff, Parent and Subsidiary shall cooperate with respect to access to data relevant to their respective businesses.
Section 4.2.
Conduct of Business. From the date of this Agreement until the earlier of the Effective Time or the termination of this Agreement in accordance with its terms (the “Interim Period”), the Subsidiary shall, except as expressly contemplated by this Agreement, as consented to in writing by Parent (which consent shall not be unreasonably conditioned, withheld or delayed) or as required by applicable law, conduct and operate its business in the ordinary course of business in all material respects. Without limiting the generality of the foregoing, during the Interim Period, except as contemplated by this Agreement or any Ancillary Agreement or as disclosed in the Schedules, as consented to by Parent in writing (such consent not to be unreasonably conditioned, withheld or delayed), or as required by applicable law, Subsidiary shall:
| a) | preserve and protect the Subsidiary Assets in the ordinary course of business consistent with past practice; |
| b) | not sell, transfer, assign, license, pledge, encumber, or otherwise dispose of any of the Subsidiary Assets without Parent’s prior written consent; |
| c) | not take any action that would cause any of the representations and warranties of Subsidiary contained in this Agreement to be untrue or inaccurate in any material respect; |
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| d) | promptly notify Parent in writing of any event, occurrence, or circumstance that would reasonably be expected to have a material adverse effect on the business, operations, or condition (financial or otherwise) of Subsidiary; |
| e) | provide Parent with reasonable access to the Subsidiary Assets, books, records, and personnel of Subsidiary during normal business hours upon reasonable advance notice; and |
| f) | use commercially reasonable efforts to satisfy all conditions to the SpinOff set forth in Section 3.3. |
Section 4.3.
Confidentiality.
| a) | Notwithstanding any termination of this Agreement and subject to Section 4.3(c), for a period of two (2) years from the Distribution Date, each Party agrees to hold, and to cause its respective Affiliates, directors, officers, employees, agents, accountants, counsel and other advisors and representatives to hold, in strict confidence, and undertake all reasonable precautions to safeguard and protect the confidentiality of, all Information concerning the other Party that is in its possession after the Distribution Date or furnished by the other Party or its respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives at any time pursuant to this Agreement, any Ancillary Agreement or otherwise, and shall not use any such Information other than for such purposes as shall be expressly permitted hereunder or thereunder, except, in each case, to the extent that such Information has been (i) in the public domain through no fault of such Party or any of their respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives, (ii) lawfully acquired from other sources, which are not bound by a confidentiality obligation, by such Party, or (iii) independently generated without reference to any proprietary or confidential Information of the other Party. Notwithstanding the foregoing, nothing in this Section 4.3 shall restrict or limit Parent’s right, in its capacity as the holder of 85% of the outstanding Ordinary Shares, to receive, access, or use Information of Subsidiary to the extent reasonably necessary for Parent’s financial reporting, tax compliance, consolidation, corporate governance, regulatory compliance, or other legitimate purposes arising from Parent’s ownership interest in Subsidiary, in each case subject to applicable Law. |
| b) | Each Party agrees not to release or disclose, or permit to be released or disclosed, any such Information to any other Person, except its directors, officers, employees, agents, accountants, counsel and other advisors and representatives who need to know such Information and who are informed and advised that the Information is confidential and subject to the obligations hereunder, except in compliance with Section 4.3(c). Without limiting the foregoing, when any Information is no longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement, each Party will promptly after request of the other Party either (i) destroy all copies of the Information in such Party’s possession, custody or control (including any that may be stored in any computer, word processor, or similar device, to the extent not commercially impractical to destroy such copies) including, without limitation, any copies, summaries, analyses, reports, extracts or other reproductions, in whole or in part, of such written, electronic or other tangible material or any other materials in written, electronic or other tangible format based on, reflecting or containing Information prepared by such Party, and/or (ii) return to the requesting Party, at the expense of the requesting Party, all copies of the Information furnished to such Party by or on behalf of the requesting Party; provided, however, that the foregoing destruction and return obligations shall not apply to Information that Parent reasonably requires in its capacity as the holder of 85% of the outstanding Ordinary Shares for purposes of financial reporting, tax compliance, consolidation, corporate governance, or regulatory compliance. |
| c) | In the event that either Party (i) determines after consultation with counsel, in the opinion of such counsel that it is required by law to disclose any Information or (ii) receives any demand under lawful process or from any Governmental Authority to disclose or provide Information of the other Party that is subject to the confidentiality provisions hereof, such Party shall notify the other Party prior to disclosing or providing such Information and shall cooperate at the expense of the requesting party (and to the extent legally permissible) in seeking any reasonable protective arrangements requested by such other Party. Subject to the foregoing, the Party that received such request may thereafter (1) furnish only that portion of the confidential Information that is legally required, (2) give notice to the other Party of the information to be disclosed as far in advance as is practical, and (3) exercise reasonable best efforts to obtain reliable assurance that the confidential nature of such Information shall be maintained. |
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Section 4.4.
Litigation cooperation.
| a) | Each of Parent and Subsidiary agrees that at all times from and after the Effective Time, if an Action currently exists or is commenced by a third-party with respect to which a Party is a named defendant but such Action is otherwise not a Liability allocated to such named Party under this Agreement or any Ancillary Agreement, then the other Party shall use commercially reasonable efforts to cause such named but not liable defendant to be removed from such Action and such defendant shall not be required to make any payments or contribution in connection therewith. |
| b) | Each of Parent and Subsidiary shall each use commercially reasonable efforts to make available to the other, upon written request, its officers, directors, employees and agents, and the officers, directors, employees, and agents thereof, as witnesses to the extent that such individuals may reasonably be required in connection with any legal, administrative, or other proceedings in which the requesting Party may be involved. The requesting Party shall bear all out-of-pocket expenses in connection therewith. On and after the Effective Time, in connection with any matter contemplated by this Section 4.4, the Parties will maintain any attorney-client privilege or work product immunity of each Party as required by this Agreement or any Ancillary Agreement. |
Section 4.5.
Indemnification
| a) | Except as otherwise provided in this Agreement or any Ancillary Agreement, following the Distribution Date and for a period of one (1) year thereafter, Subsidiary shall indemnify, defend and hold harmless Parent and its Affiliates, including each of their respective directors and officers, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “Parent Indemnitees”), from and against any and all Liabilities and related losses of the Parent Indemnitees relating to, arising out of or resulting from any of (a) the failure of Subsidiary or its Affiliates or any other Person to pay, perform or otherwise promptly discharge after the Distribution Date any Subsidiary Liabilities incurred after the Distribution in accordance with their respective terms, (b) any untrue statement, alleged untrue statement, omission or alleged omission of a material fact in the Form 10, resulting in a misleading statement, with respect to all information contained in the Form 10, (c) any Liability or loss arising from fraud, an intentional misrepresentation, gross negligence or willful misconduct by the Subsidiary in this Agreement or in any schedule, exhibit, certificate, financial statement, agreement or other instrument delivered under or in connection with this Agreement, and (d) any breach by Subsidiary of this Agreement or any of the Ancillary Agreements; provided, however, that no claim for indemnification under this Section 4.5(a) may be asserted after the date that is one (1) year following the Distribution Date. The Parties acknowledge that, as of the Distribution Date, Parent will hold 85% of the outstanding Ordinary Shares, and accordingly, any indemnification payment made by Subsidiary to any Parent Indemnitee pursuant to this Section 4.5(a) shall be borne economically by Subsidiary’s shareholders (including Parent) in proportion to their respective ownership interests. |
| b) | Except as otherwise provided in this Agreement or any Ancillary Agreement, following the Distribution Date and for a period of one (1) year thereafter, Parent shall indemnify, defend and hold harmless Subsidiary, and its Affiliates, including each of their respective directors and officers, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “Subsidiary Indemnitees”), from and against any and all Liabilities and related losses of the Subsidiary Indemnitees relating to, arising out of or resulting from any of (a) the failure of Parent or its Affiliates to pay, perform or otherwise promptly discharge after the Distribution Date any Parent Liabilities arising from acts, omissions, or events occurring prior to the Effective Time, (b) the Parent Liabilities, solely to the extent arising from acts, omissions, or events occurring prior to the Effective Time, (c) any breach by Parent of this Agreement or any of the Ancillary Agreements, and (d) any Liabilities and related losses incurred by Subsidiary or its minority shareholders arising from Parent’s exercise of its rights as the holder of 85% of the outstanding Ordinary Shares in a manner that constitutes fraud, willful misconduct, gross negligence, or a breach of any fiduciary duty owed by Parent to Subsidiary or its minority shareholders under applicable Law; provided, however, that no claim for indemnification under this Section 4.5(b) may be asserted after the date that is one (1) year following the Distribution Date, except that claims arising under clause (d) of this Section 4.5(b) may be asserted at any time during the period in which Parent holds a majority of the outstanding Ordinary Shares. |
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| c) | If a party entitled to indemnification hereunder (an “Indemnitee”) shall receive notice or otherwise learn of the assertion by a Third Party (including any Governmental Authority) of any claim or of the commencement by any such Person of any Action (collectively, a “Third Party Claim”) with respect to which a party required to provide indemnification hereunder (an “Indemnifying Party”) may be obligated to provide indemnification to such Indemnitee, such Indemnitee shall give such Indemnifying Party and each Party to this Agreement written notice thereof as soon as reasonably practicable, but no later than thirty (30) days after becoming aware of such Third Party Claim. Any such notice shall describe the Third Party Claim in reasonable detail. If any Party shall receive notice or otherwise learn of the assertion of a Third Party Claim which may reasonably be determined to be a Liability of the Parties, such Party shall give the other Party to this Agreement written notice thereof within thirty (30) days after becoming aware of such Third Party Claim. Any such notice shall describe the Third Party Claim in reasonable detail. Notwithstanding the foregoing, the failure of any Indemnitee or other Party to give notice as provided in this Section 4.5(c) shall not relieve the related Indemnifying Party of its obligations under this ARTICLE 4, except to the extent that such Indemnifying Party is prejudiced by such failure to give notice. |
| i) | An Indemnifying Party shall be entitled to participate in the defense of any Third Party Claim, at such Indemnifying Party’s own expense and by such Indemnifying Party’s own counsel; provided that if the defendants in any such claim include both the Indemnifying Party and one or more Indemnitees and in such Indemnitees’ reasonable judgment a conflict of interest between such Indemnitees and such Indemnifying Party exists in respect of such claim, such Indemnitees shall have the right to employ separate counsel and in that event the reasonable fees and expenses of such separate counsel (but not more than one separate counsel reasonably satisfactory to the Indemnifying Party) shall be paid by such Indemnifying Party. Within thirty (30) days after the receipt of notice from an Indemnitee in accordance with Section 4.5 (or sooner, if the nature of such Third Party Claim so requires), the Indemnifying Party shall notify the Indemnitee of its election whether the Indemnifying Party will assume responsibility for defending such Third Party Claim. After notice from an Indemnifying Party to an Indemnitee of its election to assume the defense of a Third Party Claim, such Indemnitee shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise or settlement thereof, but the fees and expenses of such counsel shall be the expense of such Indemnitee. |
| ii) | With respect to any Third Party Claim, the Indemnifying Party and Indemnitees agree, and shall cause their respective counsel (if applicable), to cooperate fully (in a manner that will preserve all attorney- client privilege or other privileges) to mitigate any such claim and minimize the defense costs associated therewith. |
| iii) | If an Indemnifying Party fails to assume the defense of a Third Party Claim within thirty (30) days after receipt of written notice of such claim, the Indemnitee will, upon delivering notice to such effect to the Indemnifying Party, have the right to undertake the defense, compromise or settlement of such Third Party Claim on behalf of and for the account of the Indemnifying Party subject to the limitations as set forth in this Section 4.5(c); provided, however, that such Third Party Claim shall not be compromised or settled without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, delayed or conditioned. If the Indemnitee assumes the defense of any Third Party Claim, it shall keep the Indemnifying Party reasonably informed of the progress of any such defense, compromise or settlement. The Indemnifying Party shall reimburse all such costs and expenses of the Indemnitee in the event it is ultimately determined that the Indemnifying Party is obligated to indemnify the Indemnitee with respect to such Third Party Claim. In no event shall an Indemnifying Party be liable for any settlement effected without its consent, which consent will not be unreasonably withheld, delayed, or conditioned. |
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| d) | Any claim on account of a Liability or related loss which does not result from a Third Party Claim shall be asserted by written notice given by the Indemnitee to the related Indemnifying Party. Such Indemnifying Party shall have a period of thirty (30) days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such thirty (30) day period, such Indemnifying Party shall be deemed to have accepted responsibility to make payment. If such Indemnifying Party rejects such claim in whole or in part, such Indemnitee shall be free to pursue such remedies as may be available to such party as contemplated by this Agreement and the Ancillary Agreements. |
| e) | In the event of payment by or on behalf of any Indemnifying Party to any Indemnitee in connection with any Third Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third Party Claim or against any other person. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense (including allocated costs of in-house counsel and other in-house personnel) of such Indemnifying Party, in prosecuting any subrogated right, defense or claim. |
| f) | In the event of an Action in which the Indemnifying Party is not a named defendant, if the Indemnifying Party shall so request, the Parties shall endeavor to substitute the Indemnifying Party for the named defendant and add the Indemnifying Party as a named defendant if at all practicable. If such substitution or addition cannot be achieved for any reason or is not requested, the named defendant shall allow the Indemnifying Party to manage the Action as set forth in this section and subject to Section 4.5 with respect to Liabilities, the Indemnifying Party shall fully indemnify the named defendant against all costs of defending the Action (including court costs, sanctions imposed by a court, attorneys’ fees, experts’ fees and all other external expenses, and the allocated costs of in-house counsel and other in-house personnel), the costs of any judgment or settlement, and the costs of any interest or penalties relating to any judgment or settlement. |
| g) | The rights and obligations of each Party and their respective Indemnitees under this Section 4.5 shall survive the Distribution Date for a period of one (1) year and shall terminate and be of no further force or effect upon the expiration of such one (1)-year period, except with respect to claims for indemnification that have been asserted in writing prior to the expiration of such period, which claims shall survive until final resolution thereof. In the event that Subsidiary or its successors or assigns consolidates with or merges into any other Person and shall not be the continuing or surviving company or entity of such consolidation or merger or transfers or conveys all or substantially all of its properties and assets (including but not limited to the Assets) to any Person during such one one-year period, then, and in each such case, Subsidiary shall ensure, and cause its subsidiaries to ensure, that proper provision shall be made so that the successors and assigns of Subsidiary shall succeed to the obligations set forth in this Section 4.5. |
ARTICLE 5
ACCESS TO INFORMATION AND SERVICES
Section 5.1.
Provision of Corporate Records.
| a) | Except as otherwise provided in any Ancillary Agreement, upon the prior written request by Subsidiary for specific and identified books and records which relate to (x) Subsidiary or the conduct of the Subsidiary Business, as the case may be, up through the Distribution Date, or (y) any Ancillary Agreement to which Subsidiary and Parent are parties (the “Subsidiary Books and Records”), Parent shall, at the expense of Subsidiary, provide for the transport of the Subsidiary Books and Records in its possession or control to a location provided by Subsidiary as soon as practicable but no later than thirty (30) calendar days following the date of such request, except to the extent such items are already in the possession of Subsidiary or a Subsidiary Affiliate. |
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| b) | Except as otherwise provided in any Ancillary Agreement, upon the prior written request by Parent for specific and identified books and records which relate to (x) Parent or the conduct of the Parent Business, as the case may be, up through the Distribution Date, or (y) any Ancillary Agreement to which Subsidiary and Parent are parties (the “Parent Books and Records”), Subsidiary shall, at the expense of Parent, provide the transport of the Parent Books and Records in its possession or control to a location provided by Parent as soon as practicable but no later than thirty (30) calendar days following the date of such request, except to the extent such items are already in the possession of Parent or a Parent Affiliate. |
| c) | With respect to books and records that relate to both the Subsidiary Business and the Parent Business (the “Combined Books and Records”), (i) the Parties shall use good faith efforts to divide such Combined Books and Records into Subsidiary Books and Records and Parent Books and Records, as appropriate, and (ii) to the extent such Combined Books and Records are not so divided, each Party shall each keep and maintain copies of such Combined Books and Records as reasonably appropriate under the circumstances, subject to applicable confidentiality provisions hereof and of any Ancillary Agreement. |
Section 5.2.
Access to Information. Except as otherwise provided herein or in an Ancillary Agreement, from and after the Distribution Date, Parent shall provide Subsidiary and its authorized accountants, counsel and other designated representatives reasonable access and duplicating rights during normal business hours to all records, books, contracts, instruments, computer data and other data and information relating to pre-Distribution operations of the Subsidiary Business (collectively, “Operations Data”) within Parent’s possession or control (including using reasonable best efforts to give access to persons or firms possessing information) insofar as such access is reasonably required by Subsidiary for the conduct of the Subsidiary Business, subject to appropriate restrictions for classified or privileged information. Similarly, except as otherwise provided in an Ancillary Agreement, Subsidiary shall provide Parent and its authorized accountants, counsel and other designated representatives reasonable access (including using reasonable best efforts to give access to persons or firms possessing information) and duplicating rights during normal business hours to Operations Data, within Subsidiary’s possession, insofar as such access is reasonably required by Parent for the conduct of the Parent Business, subject to appropriate restrictions for classified or privileged information. Operations Data and other documents may be requested under this ARTICLE 5 for the legitimate business purposes of either Party, including, without limitation, audit, accounting, claims (including claims for indemnification hereunder), litigation and tax purposes, as well as for purposes of fulfilling disclosure and reporting obligations and for performing under this Agreement and the transactions contemplated hereby.
Section 5.3.
Reimbursement. Except to the extent otherwise contemplated in any Ancillary Agreement, a Party providing Operations Data or witness services to the other Party under this ARTICLE 5 shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payments of such amounts, relating to supplies, disbursements and other out-of-pocket expenses (at cost) and direct and indirect expenses of employees who are witnesses or otherwise furnish assistance (at cost), as may be reasonably incurred in providing such Operations Data or witness services.
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ARTICLE 6
FURTHER ASSURANCES
Section 6.1.
Further Assurances. In addition to and without limiting the actions specifically provided in this Agreement, each of the Parties hereto shall use its reasonable best efforts, prior to, on and after the Distribution Date, to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws, regulations and agreements to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements. Without limiting the foregoing, prior to, on and after the Distribution Date, each Party hereto shall cooperate with the other Party, and without any further consideration, but at the expense of the requesting Party, to execute and deliver, or use its reasonable best efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all consents, approvals or authorizations of, any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument (including any Consents or Governmental Approvals), and to take all such other actions as such Party may reasonably be requested to take by the other Party hereto from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the transfers of the Subsidiary Assets and the other transactions contemplated hereby and thereby.
For the avoidance of doubt, nothing in this Section 6.1 or elsewhere in this Agreement shall be construed to require Parent to provide any ongoing operational, developmental, regulatory, scientific, or commercial services to Subsidiary following the Effective Time. The obligations of Parent under Article 5 and this Section 6.1 are solely ministerial and incidental to the consummation of the SpinOff and shall not be construed as consideration for, or a condition to the vesting or receipt of, the Securities or any portion thereof. Notwithstanding the foregoing, the Parties acknowledge that Parent will continue to hold 85% of the outstanding Ordinary Shares following the Effective Time, and nothing in this Agreement shall be construed to terminate or limit any rights, obligations, or duties arising from Parent’s continuing ownership interest in Subsidiary, including without limitation Parent’s obligations under Section 4.5 and Article 5, which shall survive the Effective Time in accordance with their respective terms.
ARTICLE 7
TERMINATION
Section 7.1.
Termination. Notwithstanding anything to the contrary herein, this Agreement may be terminated, and the Distribution may be amended, modified, or abandoned at any time prior to the Effective Time by and in the sole discretion of Parent without the approval of Subsidiary or the shareholders of Parent. In the event of such termination, no Party shall have any Liability to the other Party or any other Person. After the Effective Time, this Agreement may not be terminated except by an agreement in writing signed by each of the Parties.
ARTICLE 8
MISCELLANEOUS
Section 8.1.
Counterparts; Entire Agreement.
| a) | This Agreement and each Ancillary Agreement may be executed in separate counterparts, each such counterpart being deemed to be an original instrument, and which counterparts shall together constitute the same agreement. |
| b) | This Agreement, the Ancillary Agreements and the Exhibits and Schedules hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein. Except with respect to tax matters, in the event of any conflict between the terms and conditions of this Agreement and the terms and conditions of any Ancillary Agreement, the terms and conditions of this Agreement (including amendments hereto) shall control. |
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Section 8.2.
Governing Law. This Agreement, except as expressly provided herein, and, unless expressly provided therein, each Ancillary Agreement, shall be governed by and construed and interpreted in accordance with the laws of the State of Nevada, irrespective of the choice of laws principles of the State of Nevada as to all matters, including matters of validity, construction, effect, enforceability, performance, and remedies.
Section 8.3.
Tax Matters. Notwithstanding anything to the contrary in this Agreement, the rights and obligations of the Parties with respect to any and all tax matters shall be exclusively governed by the provisions of the Tax Matters Agreement, except as set forth therein.
Section 8.4.
Assignability. The provisions of this Agreement, each Ancillary Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against) the Parties and their respective successors and permitted transferees and assigns. Notwithstanding the foregoing, this Agreement shall not be assignable, in whole or in part, by any Party without the prior written consent of the other Party, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be null and void; provided, that a Party may assign this Agreement in connection with a merger transaction in which such Party is not the surviving entity or the sale by such Party of all or substantially all of its Assets, and upon the effectiveness of such assignment the assigning Party shall be released from all of its obligations under this Agreement if the surviving entity of such merger or the transferee of such Assets shall agree in writing, in form and substance reasonably satisfactory to the other Party, to be bound by all terms of this Agreement as if named as a “Party” hereto.
Section 8.5.
Third Party Beneficiaries. Except for the indemnification rights under this Agreement of any Parent Indemnitee or Subsidiary Indemnitee in their respective capacities as such, (a) the provisions of this Agreement and each Ancillary Agreement are solely for the benefit of the Parties and are not intended to confer upon any Person except the Parties any rights or remedies hereunder, and (b) there are no Third Party beneficiaries of this Agreement or any Ancillary Agreement and neither this Agreement nor any Ancillary Agreement shall provide any Third Party with any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement.
Section 8.6.
Notices. All notices, requests, claims, demands or other communications under this Agreement or any Ancillary Agreement shall be in writing and shall be deemed to be duly given when (a) delivered in person, (b) sent via email, or (c) upon receipt after being deposited in the United States mail or private express mail, postage prepaid, addressed as follows:
If to Parent, to:
ABVC BioPharma, Inc.
44370 Old Warm Springs Blvd.
Fremont, CA 94538
Attn: Uttam Patil
Email: [email protected]
If to Subsidiary, to:
BioKey (Cayman), Inc.
44370 Old Warm Springs Blvd.
Fremont, CA 94538
Attn: T.S. Jiang
Email: [email protected]
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Either Party may, by notice to the other Party, change the address to which such notices are to be given.
Section 8.7.
Severability. If any provision of this Agreement or any Ancillary Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby or thereby, as the case may be, is not affected in any manner adverse to any Party. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to affect the original intent of the Parties.
Section 8.8.
Publicity. Prior to the Distribution, each of Subsidiary and Parent shall consult with each other prior to issuing any press releases or otherwise making public statements with respect to the Separation, the Distribution or any of the other transactions contemplated hereby and prior to making any filings with any Governmental Authority with respect thereto.
Section 8.9.
Expenses. Except as expressly set forth in this Agreement or in any Ancillary Agreement, whether or not the Separation or the Distribution is consummated, all Third Party fees, costs and expenses paid or incurred in connection with the Separation and Distribution shall be paid by the Parent. All such fees, costs, and expenses so advanced shall be repaid by Subsidiary following the Distribution, pursuant to the terms and conditions negotiated by the Parent and the Subsidiary.
Section 8.10.
Headings. The article, section and paragraph headings contained in this Agreement and in the Ancillary Agreements are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement or any Ancillary Agreement.
Section 8.11.
Survival of Covenants. Except as expressly set forth in any Ancillary Agreement, all covenants, representations, and warranties contained in this Agreement and each Ancillary Agreement, and liability for the breach of any obligations contained herein, shall survive after the Distribution Date and remain in full force and effect in accordance with their applicable terms.
Section 8.12.
Waivers of Default. No action taken pursuant to this Agreement, including any investigation by or on behalf of any Party, shall be deemed to constitute a waiver by the Party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any Party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any Party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.
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Section 8.13.
Specific Performance. The Parties agree that irreparable damage would occur in the event that the provisions of this Agreement were not performed in accordance with their specific terms. Accordingly, it is hereby agreed that the Parties shall be entitled, in addition to any other remedy or relief to which they may be entitled, to injunctive relief (including provisional or temporary injunctive relief) to enforce specifically the terms and provisions hereof and enforcement of any such award of an arbitral tribunal in any court of the United States, or any other any court or tribunal sitting in any state of the United States or in any foreign country that has jurisdiction.
Section 8.14.
Amendments. This Agreement may not be modified or amended except by an agreement in writing signed by each of the Parties.
Section 8.15.
Waiver of Jury Trial. EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY COURT PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF AND PERMITTED UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 8.15.
Section 8.16.
Arbitration. Any dispute with respect to this Agreement or any Ancillary Agreement shall be arbitrated in Alameda County, California, in accordance with the rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. There will be a single neutral arbitrator selected who resides in Alameda County, California. The American Arbitration Association will provide a list of five (5) neutral arbitrators. The claimant and respondent will take turns, with the respondent going first, striking one name at a time from the list of five neutral arbitrators. Each Party will have no more than twenty- four (24) hours to take its turn striking the name of a neutral arbitrator. The final remaining arbitrator will serve as the neutral arbitrator. Either Party may apply to the arbitrator seeking injunctive relief until the arbitrator’s award is rendered or the controversy is otherwise resolved. Either Party also may, without waiving any remedy under this Agreement or any Ancillary Agreement, seek from any California court having jurisdiction, any interim or provisional relief that is necessary to protect the rights and/or property of that Party, pending the determination of the arbitrator.
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Section 8.17.
Post-Distribution Relationship. The Parties acknowledge that, following the Distribution, Parent will continue to hold 85% of the outstanding Ordinary Shares and will therefore exercise control over Subsidiary. In connection therewith, the Parties agree to the following provisions, which shall remain in effect for so long as Parent holds a majority of the outstanding Ordinary Shares:
| ● | Any transaction between Parent (or any of its Affiliates, other than Subsidiary) and Subsidiary entered into after the Distribution Date shall be on terms no less favorable to Subsidiary than those that would be obtainable in an arm’s-length transaction with an unrelated Third Party. Any such transaction involving consideration in excess of $100,000 shall require the prior approval of a majority of the independent members of the Board of Directors of Subsidiary (or, if no independent directors have been appointed, a committee of the Board of Directors of Subsidiary composed of directors who are not officers, directors, or employees of Parent). |
| ● | Parent shall, and shall cause its Affiliates (other than Subsidiary) to, present to Subsidiary any business opportunity that relates primarily to the Subsidiary Business before pursuing such opportunity for its own |
| ● | account or for the account of any of its other Affiliates. Subsidiary shall have a period of thirty (30) days following written notice of any such opportunity to elect to pursue such opportunity. If Subsidiary declines or fails to respond within such period, Parent and its Affiliates shall be free to pursue such opportunity without further obligation to Subsidiary. |
| ● | Parent shall not, and shall cause its Affiliates not to, take any action, directly or indirectly, to (a) cause Subsidiary to issue additional Ordinary Shares or other equity securities to Parent or its Affiliates (other than Subsidiary) at a price below fair market value, or (b) effect any merger, consolidation, or similar transaction the purpose or effect of which is to eliminate or materially reduce the ownership interest of the minority holders of Ordinary Shares, in each case without the prior approval of a majority of the independent members of the Board of Directors of Subsidiary and, to the extent required by applicable Law, the affirmative vote of a majority of the Ordinary Shares held by shareholders other than Parent and its Affiliates. |
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IN WITNESS WHEREOF, the Parties have caused this Separation and Distribution Agreement to be executed by their duly authorized representatives as of the day and year first above written.
| ABVC BioPharma, Inc. | ||
| a Nevada corporation | ||
| By: | /s/ Uttam Patil | |
| Name: | Uttam Patil | |
| Title: | Chief Executive Officer | |
| BioKey (Cayman), Inc. | ||
| a Cayman Island exempted company with limited liability | ||
| By: | /s/ T.S. Jiang | |
| Name: | T.S. Jiang | |
| Title: | Chief Executive Officer | |
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Exhibit 10.1
TRANSITIONAL SERVICES AGREEMENT
This Transitional Services Agreement (the “Agreement”) is dated as of June 22, 2026, between ABVC BioPharma, Inc., a Nevada corporation (“Parent”), and BioKey (Cayman), Inc., a Cayman Islands exempted company with limited liability (“Subsidiary”). As used herein, Parent on the one hand, and Subsidiary, on the other hand, are sometimes referred to individually as a “Party”, or together, as “Parties”.
WHEREAS, prior to the Distribution (as defined below), Subsidiary is a wholly owned subsidiary of Parent;
WHEREAS, the Board of Directors of Parent has determined that it is in the best interests of Parent and its shareholders to separate the Subsidiary’s business from that of the Parent through a spin-off transaction;
WHEREAS, following the consummation of the distribution (the “Distribution”) contemplated by the Separation and Distribution Agreement dated of even date herewith among Parent and Subsidiary (the “Separation Agreement”), Subsidiary desires that Parent provide certain administrative services to Subsidiary; and
WHEREAS, subject to the terms and conditions of this Agreement, each Party is willing to provide the other Party with such services for a transitional period.
NOW, THEREFORE, the parties agree as follows:
Section 1. Services. Commencing at the time of the Distribution, Parent agrees to provide, or to coordinate the provision by others, to Subsidiary the transitional services set forth on Exhibit A hereto (the “Services”). Without limiting the foregoing, the Parties may modify the Services from time to time and may identify additional services to incorporate into this Agreement via the written consent of both parties, which shall not be unreasonably withheld.
Section 2. Provision of Services.
(a) In providing the Services Parent may, subject to the prior written consent of Subsidiary, employ consultants and other advisors in addition to utilizing its own employees, in accordance with Section 6 hereof. Such Services are intended to be generally comparable in type and quantity to that which Parent provided to Subsidiary, its affiliates and its businesses prior to the Distribution.
(b) Limitation of Liability; Indemnification of Subsidiary. Parent shall have no liability to Subsidiary with respect to Parent’s furnishing any of the Services hereunder, including Services provided by any subcontractor or other personnel appointed pursuant to Section 6 hereof, except for liabilities arising out of willful misconduct or gross negligence occurring after the Distribution. Parent will indemnify, defend and hold harmless Subsidiary, its affiliates and its businesses in respect of all liabilities related to, arising from, asserted against or associated with such willful misconduct or gross negligence. Such indemnification obligation shall be a liability of Parent. In no event shall Parent have any liability for any incidental, indirect, special or consequential damages, whether caused by or resulting from negligence or breach of obligations hereunder and whether or not aware of the possibility of the existence of such damages.
(c) Limitation of Liability; Indemnification of Parent. Subsidiary shall indemnify and hold harmless Parent, its affiliates and its businesses in respect of all liabilities related to, arising from, asserted against or associated with Parent’s furnishing or failing to furnish the Services provided for in this Agreement, other than liabilities arising out of the willful misconduct or gross negligence of Parent following the Distribution. Such indemnification obligation shall be a liability of Subsidiary. In no event shall Subsidiary have any liability for any incidental, indirect, special or consequential damages, whether caused by or resulting from negligence or breach of obligations hereunder and whether informed or aware of the possibility of the existence of such damages.
(d) Subrogation of Rights Vis-A-Vis Third Party Contractors. In the event any liability arises from the performance of Services hereunder by a third party contractor, upon indemnification of Parent and/or its representatives, including but not limited to Parent’s officers, directors, employees, accountants, counsel, investment bankers, financial advisors and consultants, Subsidiary shall be subrogated to such rights, if any, as Parent may have against such third party contractor with respect to the Services provided by such third party contractor.
(e) Laws and Governmental Regulations. Subsidiary shall be solely responsible for compliance with all applicable laws, rules and regulations.
(f) Relationship of Parties. Nothing in this Agreement shall be deemed or construed by the Parties or any third party as creating the relationship of principal and agent, partnership or joint venture between the Parties, it being understood and agreed that no provision contained herein, and no actions of the Parties, shall be deemed to create any relationship between the Parties other than the relationship of independent contractor nor be deemed to vest any rights, interest or claims in any third parties.
Section 3. Term; Standard of Care. Parent shall provide the Services to Subsidiary as Subsidiary may request for a period of up to six (6) months from the date of the Distribution (“Term”); provided that, such initial Term may be extended thereafter for subsequent three month terms in whole or in part by mutual agreement of the Parties; provided, further, that Subsidiary may terminate the Services at any time and for any reason on not less than ten (10) business days’ prior written notice to Parent. In providing the Services hereunder, Parent will exercise the same degree of care as it has exercised in providing such Services to its affiliates prior to the date hereof.
Section 4. Designated Representatives.
(a) Appointment. Each Party shall designate its Chief Executive Officer as its representative (each, a “Designated Representative”) for the Term. The Designated Representatives shall oversee the implementation and application of this Agreement and shall always reasonably and in good faith attempt to resolve any dispute between the Parties. Each Party shall have the right to designate an alternative senior officer of comparable authority to act in place of its Chief Executive Officer as its Designated Representative upon reasonable prior written notice to the other Party.
(b) Decision Making. All decisions of the Designated Representatives under this Agreement shall be taken unanimously. If the Designated Representatives fail to make a decision, resolve a dispute, or agree upon any necessary action within thirty (30) days, or if a Party so requests in the event of a material breach of this Agreement, the dispute shall be referred to an independent senior officer of each Party, neither of whom shall have any direct oversight or responsibility for the subject matter in dispute, who shall attempt within a period of thirty (30) days thereafter to conclusively resolve any such unresolved issue, which such decision shall be final and binding on all Parties. In the event that such senior officers are unable to conclusively resolve the dispute within such thirty (30) day period, the dispute shall be referred to and finally resolved by binding arbitration in accordance with Section 9(n) hereof.
(c) Consultation. During the Term, the Designated Representatives shall consult, in person or via teleconference, at least once each fiscal quarter, or less frequently if agreed by the Designated Representatives. In addition, the Designated Representatives shall consult as often as necessary to promptly resolve any disputes submitted by any representative of either Party.
Section 5. Compensation.
(a) Charges for Services. Subsidiary will pay Parent the charges, if any, set forth on Exhibit A hereto (collectively, the “Transition Services Schedules”) for the Services set forth herein as may be adjusted, from time to time, in accordance with this Agreement; provided that, if no charges are specifically indicated otherwise on the Transition Services Schedules, the cost of Services provided under the Transitional Services Schedules will be charged at a flat fee of $5,000 per month. The Parties intend, having regard to the reciprocal and transitional nature of the Agreement as well as other factors, for the charges to be easy to administer and justify; and therefore, recognize it may be counter-productive to try and recover every cost, charge or expense, particularly those which are insignificant or de minimis.
(b) Taxes. The fees and charges payable under this Agreement are exclusive of any sales tax or excise tax or other similar charges which may be imposed by a governmental authority. Each Party agrees to remit to the other any such charges promptly upon being billed by the other Party.
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(c) Corrections/Adjustments. The Parties agree to develop, through the Designated Representatives or their Boards of Directors, mutually acceptable reasonable processes and procedures for conducting any reviews and adjusting thereof. Payments will then be promptly billed and paid.
Section 6. Personnel.
(a) Right to designate and change personnel. Parent will have the right to designate which personnel it will assign to perform such Services. Parent also will have the right to remove and replace any such personnel at any time or designate any of its affiliates or a Subcontractor (as defined below) at any time to perform the Services, subject to the provisions of Section 6(c) hereof: provided, however, that Parent will use Commercially Reasonable Efforts (as defined below) to limit the disruption to Subsidiary in the transition of the Services to different personnel or to a Subcontractor. In the event that personnel with the designated level of experience are not then employed by Parent, Parent will use Commercially Reasonable Efforts to provide such personnel or Subcontractor personnel having an adequate level of experience; provided, however, that Parent will have no obligation to retain any individual employee for the sole purpose of providing the applicable Services. For the purposes of this Agreement, the term “Commercially Reasonable Efforts” means the efforts that a reasonable and prudent person desirous of achieving a business result would use in similar circumstances to ensure that such result is achieved as expeditiously as possible in the context of commercial relations of the type envisaged by this Agreement; provided, however, that an obligation to use Commercially Reasonable Efforts under this Agreement does not require the person subject to that obligation to assume any material obligations or pay any material amounts to a third party.
(b) Financial Responsibility. Parent will pay for all personnel expenses, including wages, of its employees performing the Services.
(c) Service Managers and Chief Representatives. During the Term of this Agreement, Parent will appoint (i) one of its employees (the “Service Manager”) who will have overall responsibility for managing and coordinating the delivery of the Services and who shall serve as such Party’s Designated Representative and (ii) one of its employees for each service as indicated in each Transition Services Schedule (the “Chief Representative”). The Service Manager and the Chief Representatives will coordinate and consult with Subsidiary. Parent may, at its discretion, select other individuals to serve in these capacities during the Term upon providing notice to the other Party. For the avoidance of doubt, a Chief Representative may serve as such in respect of one or more Transition Services Schedules.
(d) Subcontractors.
| (1) | Subcontractors. Parent may, subject to Section 6(d)(2) hereof, engage a “Subcontractor” to perform all or any portion of Parent’s duties under this Agreement, provided that any such Subcontractor agrees in writing to be bound by confidentiality obligations at least as protective as the terms of Section 9(m) of this Agreement regarding confidentiality and non-use of information, and provided further that Parent remains responsible for the performance of such Subcontractor and for paying the Subcontractor. As used in this Agreement, “Subcontractor” will mean any person or entity engaged to perform hereunder, other than employees of Parent or its affiliates. |
| (2) | Assignment. In the event of any subcontracting by Parent to a non-affiliate of Parent of all or any portion of Parent’s duties under this Agreement, Parent shall assign and transfer to Subsidiary the full benefit of all such non-affiliate subcontractor’s performance covenants, guarantees, warranties or indemnities (if any), to the extent same are transferable or assignable, in the respect of the portion of the Services provided to Subsidiary pursuant to such subcontracting; and if such guarantees, warranties, indemnities and benefits are not assignable, Parent shall use Commercially Reasonable Efforts to procure the benefit of same for Subsidiary through other legal permissible means. Parent will also reasonably endeavor to permit the assignment of any Subcontractor engagement to Subsidiary or its affiliates at the request of Subsidiary upon termination of Service hereunder. |
(e) Insurance. Each Party shall obtain and maintain at its own expense insurance of the type generally maintained in the ordinary course of its business. Except as otherwise specified in the Transition Services Schedules, Parent shall not be required to obtain and maintain any insurance in relation to providing any Service.
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Section 7. Consents of Third Parties. Each Party shall use commercially reasonable efforts, at the other Party’s direction and expense, to obtain any consents from third parties necessary for the continuation of the requested Services; provided, that such Party shall have no obligation to provide Services for which such consent is required and shall not have been obtained, despite such Party’s use of commercially reasonable efforts to obtain such consent.
Section 8. Disclaimer of Warranties. SUBJECT TO SECTION 3 HEREOF, EACH OF THE PARTIES DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE SERVICES PROVIDED HEREUNDER. NEITHER PARENT NOR SUBSIDIARY MAKES ANY REPRESENTATIONS OR WARRANTIES AS TO THE QUALITY, SUITABILITY OR ADEQUACY OF THE SERVICES FOR ANY PURPOSE OR USE.
Section 9. Miscellaneous Provisions.
(a) Complete Agreement; Construction. This Agreement, the Ancillary Agreements and the Exhibits and Schedules hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein. Except with respect to tax matters, in the event of any conflict between the terms and conditions of this Agreement and the terms and conditions of any Ancillary Agreement, the terms and conditions of this Agreement (including amendments hereto) shall control.
(b) Modification or Amendment. This Agreement may not be modified or amended except by an agreement in writing signed by each of the Parties.
(c) Counterparts. This Agreement and each Ancillary Agreement may be executed in separate counterparts, each such counterpart being deemed to be an original instrument, and which counterparts shall together constitute the same agreement.
(d) Governing Law. This Agreement, except as expressly provided herein, and, unless expressly provided therein, each Ancillary Agreement, shall be governed by and construed and interpreted in accordance with the laws of the State of Nevada, irrespective of the choice of laws principles of the State of Nevada as to all matters, including matters of validity, construction, effect, enforceability, performance, and remedies.
(e) Notices. Any notice, request or other document required or permitted to be given or delivered pursuant hereto shall be delivered in accordance with the notice provisions of the Separation Agreement.
(f) Headings. The article, section and paragraph headings contained in this Agreement and in the Ancillary Agreements are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement or any Ancillary Agreement.
(g) Third Party Beneficiaries. Except for the indemnification rights under this Agreement of any Parent Indemnitee or Subsidiary Indemnitee in their respective capacities as such, (a) the provisions of this Agreement and each Ancillary Agreement are solely for the benefit of the Parties and are not intended to confer upon any Person except the Parties any rights or remedies hereunder, and (b) there are no third party beneficiaries of this Agreement or any Ancillary Agreement and neither this Agreement nor any Ancillary Agreement shall provide any third party with any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement.
(h) Assignability. The provisions of this Agreement, each Ancillary Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against) the Parties and their respective successors and permitted transferees and assigns. Notwithstanding the foregoing, this Agreement shall not be assignable, in whole or in part, by any Party without the prior written consent of the other Party, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be null and void; provided, that a Party may assign this Agreement in connection with a merger transaction in which such Party is not the surviving entity or the sale by such Party of all or substantially all of its Assets, and upon the effectiveness of such assignment the assigning Party shall be released from all of its obligations under this Agreement if the surviving entity of such merger or the transferee of such Assets shall agree in writing, in form and substance reasonably satisfactory to the other Party, to be bound by all terms of this Agreement as if named as a “Party” hereto.
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(i) Certain Obligations. Whenever this Agreement requires any of the Subsidiaries of any Party to take any action, this Agreement will be deemed to include an undertaking on the part of such Party to cause such Subsidiary to take such action.
(j) Specific Performance. The Parties agree that irreparable damage would occur in the event that the provisions of this Agreement were not performed in accordance with their specific terms. Accordingly, it is hereby agreed that the Parties shall be entitled, in addition to any other remedy or relief to which they may be entitled, to injunctive relief (including provisional or temporary injunctive relief) to enforce specifically the terms and provisions hereof and enforcement of any such award of an arbitral tribunal in any court of the United States, or any other court or tribunal sitting in any state of the United States or in any foreign country that has jurisdiction.
(k) Severability. If any provision of this Agreement or any Ancillary Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby or thereby, as the case may be, is not affected in any manner adverse to any Party. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.
(l) Cooperation; Further Assurances. The Parties will use good faith efforts to cooperate with each other in all matters relating to the provision of the Services. Each Party will take such actions as may be necessary or reasonably appropriate to implement or give effect to this Agreement.
(m) Records; Confidentiality. Each Party shall keep full and detailed records dealing with all aspects of the Services performed by it and shall provide access to the other Party to such records at all reasonable times. Each Party hereto shall keep, and shall cause its officer, directors, employees, accountants, counsel, investment bankers, financial advisors, consultants and other representatives (“Representatives”) to keep the other Party’s information, whether furnished orally or in writing or by any other means or gathered by inspection and regardless of whether the same is specifically marked or designated as “confidential” or “proprietary,” together with any and all notes, memoranda, analyses, compilations, studies or other documents (whether in hard copy or electronic media) prepared by the receiving Party or any of its Representatives which contain or otherwise reflect such information, together with any and all copies, extracts or other reproductions of any of the same (the “Information”), strictly confidential and will disclose such Information only to such of its Representatives who need to know such Information, and who agree to be bound by this Section 9(m) and not to disclose such Information to any other person. Without the prior written consent of the other parties, neither Party nor any of its respective Representatives shall disclose the other Party’s Information to any person or entity except as may be required by law or judicial process and in accordance with this Section 9(m). The term “Information” does not include information that: (i) is or becomes generally available to the public through no wrongful act of the receiving Party or its Representatives; (ii) is or becomes available to the receiving Party on a non-confidential basis from a source other than the providing Party or its Representatives, provided that such source is not known by the receiving Party to be subject to a confidentiality agreement with the providing Party; or (iii) has been independently acquired or developed by the receiving Party without violation of any of the obligations of the receiving Party or its Representatives under this Agreement.
(n) Arbitration. Any dispute with respect to this Agreement or any Transaction Document shall be arbitrated in Alameda County, California, in accordance with the rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. There will be a single neutral arbitrator selected who resides in Alameda County, California. The American Arbitration Association will provide a list of five (5) neutral arbitrators. The claimant and respondent will take turns, with the respondent going first, striking one name at a time from the list of five neutral arbitrators. Each Party will have no more than twenty-four (24) hours to take its turn striking the name of a neutral arbitrator. The final remaining arbitrator will serve as the neutral arbitrator. Either Party may apply to the arbitrator seeking injunctive relief until the arbitrator’s award is rendered or the controversy is otherwise resolved. Either Party also may, without waiving any remedy under this Agreement or any Ancillary Agreement, seek from any California court having jurisdiction, any interim or provisional relief that is necessary to protect the rights and/or property of that Party, pending the determination of the arbitrator.
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(o) Waiver of Jury Trial. EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY COURT PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF AND PERMITTED UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9(o).
(p) Waivers of Default. No action taken pursuant to this Agreement, including any investigation by or on behalf of any Party, shall be deemed to constitute a waiver by the Party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any Party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any Party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.
(q) Survival of Covenants. Except as expressly set forth in any Ancillary Agreement, all covenants, representations, and warranties contained in this Agreement and each Ancillary Agreement, and liability for the breach of any obligations contained herein, shall survive after the Distribution Date and remain in full force and effect in accordance with their applicable terms.
(r) Expenses. Except as expressly set forth in this Agreement or in any Ancillary Agreement, whether or not the Separation or the Distribution is consummated, all third party fees, costs and expenses paid or incurred in connection with the Separation and Distribution shall be paid by Parent. All such fees, costs, and expenses so advanced shall be repaid by Subsidiary following the Distribution, pursuant to the terms and conditions negotiated by Parent and Subsidiary.
(s) Publicity. Prior to the Distribution, each of Subsidiary and Parent shall consult with each other prior to issuing any press releases or otherwise making public statements with respect to the Separation, the Distribution or any of the other transactions contemplated hereby and prior to making any filings with any Governmental Authority with respect thereto.
(t) Tax Matters. Notwithstanding anything to the contrary in this Agreement, the rights and obligations of the Parties with respect to any and all tax matters shall be exclusively governed by the provisions of the Tax Matters Agreement, except as set forth therein.
[Signature page follows]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first above written.
| ABVC BIOPHARMA, INC. | ||
| By: | /s/ Uttam Patil | |
| Name: | Uttam Patil | |
| Title: | Chief Executive Officer | |
| BIOKEY (CAYMAN), INC. | ||
| By: | /s/ T.S. Jiang | |
| Name: | T.S. Jiang | |
| Title: | Chief Executive Officer | |
[Signature Page to Transitional Services Agreement]
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Exhibit A
Services
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Exhibit 10.2
TAX MATTERS AGREEMENT
This Tax Matters Agreement (the “Agreement”) is dated as of June 22, 2026, between ABVC BioPharma, Inc., a Nevada corporation (“Parent”), and BioKey (Cayman), Inc., a Cayman Islands exempted company with limited liability and wholly owned subsidiary of Parent (“Subsidiary”). As used herein, Parent on the one hand, and Subsidiary, on the other hand, are sometimes referred to individually as a “Party”, or together, as “Parties”.
WHEREAS, prior to the Distribution, Subsidiary is a wholly owned subsidiary of Parent, and the Parties have entered into a Separation and Distribution Agreement, dated as of June 22, 2026 (the “Separation Agreement”), pursuant to which Parent and Subsidiary have agreed to effect the Separation;
WHEREAS, the Board of Directors of Parent has determined that it is in the best interests of Parent and its shareholders to partially separate the business of the Subsidiary from that of the Parent through the Separation;
WHEREAS, in furtherance of the foregoing, the Board of Directors of Parent has determined that it is in the best interests of Parent and its shareholders to distribute to the holders of the issued and outstanding shares of common stock of Parent (the “Parent Common Stock”), by means of a pro rata distribution, 15% of the ordinary shares of Subsidiary (the “Subsidiary Ordinary Shares”) (the “Distribution”), with 85% of the Subsidiary Ordinary Shares to be retained by Parent;
WHEREAS, for United States federal income tax purposes, the Parties acknowledge and agree that the Distribution is not intended to qualify as a tax-free transaction under Section 355(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and shall be treated as a taxable transaction;
WHEREAS, this Agreement, together with the Separation Agreement and the other Ancillary Agreements (as defined in the Separation Agreement), is intended to govern the rights and obligations of the Parties with respect to Tax matters; and
WHEREAS, the Parties desire to provide for and agree upon the allocation between the Parties of Liabilities for Taxes arising prior to, because of, and after Distribution, and to provide for and agree upon other matters relating to Taxes.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE I
Definitions
1.1 Definitions. As used in this Agreement, the following terms shall have the following respective meanings:
“Affiliate” of any Person shall mean another Person that directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such first Person; provided, however, that for the purposes of this Agreement, the Subsidiary Companies shall be treated as a separate group from the Parent Companies notwithstanding that Parent retains a controlling interest in Subsidiary following the Distribution.
“Ancillary Agreements” shall have the meaning ascribed to such term in the Separation Agreement.
“Code” shall have the meaning set forth in the Recitals hereto.
“Combined State Tax” means, with respect to each state or local Tax Authority, any income or franchise tax payable to such state or local Tax Authority in which any of the Subsidiary Companies files Tax Returns with any of the Parent Companies on a consolidated, combined or unitary basis for purposes of such income tax or franchise tax, including any related interest and any penalties, additions to such tax, or additional amounts imposed with respect thereto.
“Distribution” shall have the meaning set forth in the Recitals hereto.
“Distribution Date” shall mean the date on which the Distribution becomes effective.
“Equity Interests” means any stock or other securities treated as equity for Tax purposes, options, warrants, rights, convertible debt, or any other instrument or security that affords any Person the right, whether conditional or otherwise, to acquire stock or to be paid an amount determined by reference to the value of stock.
“Federal Income Tax” means any Tax imposed under Subtitle A of the Code and any related interest and any penalties, additions to such Tax, or additional amounts imposed with respect thereto.
“Final Determination” shall mean (i) with respect to Federal Income Taxes, a “determination” as defined in Section 1313(a) of the Code or execution of an Internal Revenue Service Form 870-AD and, with respect to taxes other than Federal Income Taxes, any decision, judgment, decree or other order by a court of competent jurisdiction that, under applicable law, is not subject to further appeal, review or modification through proceedings or otherwise; (ii) a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the laws of a State, local, or foreign Tax Authority; (iii) the payment of Tax by any member of the Parent Consolidated Group with respect to any item disallowed or adjusted by a Tax Authority, provided that Parent determines that no action should be taken to recoup such payment; or (iv) any other final disposition, by mutual agreement of the Parties or by reason of the expiration of a statute of limitations or period for the filing of claims for refunds, amended returns, or appeals from adverse determinations.
“IRS” shall mean the United States Internal Revenue Service.
“Liabilities” shall mean any and all debts, liabilities, commitments and obligations, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or not accrued, known or unknown, whenever or however arising and whether or not the same would be required by generally accepted accounting principles to be reflected in financial statements or disclosed in the notes thereto.
“Parent Businesses” shall mean all the businesses conducted at any time prior to the Distribution by Parent or its Subsidiaries which are not Subsidiary Businesses.
“Parent Common Stock” shall have the meaning set forth in the Recitals hereto.
“Parent Companies” shall mean Parent and its Subsidiaries (other than the Subsidiary Companies) after giving effect to the Distribution.
“Parent Consolidated Group” shall mean the affiliated group of corporations (within the meaning of Section 1504(a) of the Code) of which Parent is the common parent corporation and of which Subsidiary is or was a member, including during and after the Pre-Distribution Period, to the extent that Subsidiary continues to meet the requirements for inclusion in such group under Section 1504(a) of the Code following the Distribution.
“Person” shall mean any natural person, corporation, general or limited partnership, limited liability company, joint venture, trust, association or entity of any kind.
“Pre-Distribution Period” means any taxable year (or portion thereof) ending on or before the close of business on the Distribution Date.
“Separation Agreement” shall have the meaning set forth in the Recitals hereto.
“Separation Transactions” shall mean the Distribution and the other transactions contemplated by the Separation Agreement.
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“Subsidiary Businesses” shall mean all of the businesses and operations of the Subsidiary as described in the Form 10 (as defined in the Separation Agreement).
“Subsidiary Companies” shall mean Subsidiary and its Subsidiaries determined after giving effect to the Distribution (and, for the avoidance of doubt, excluding Parent and any other Parent Companies, notwithstanding Parent’s retained ownership interest in Subsidiary following the Distribution).
“Subsidiary Federal Income Tax Liability” shall mean, with respect to any taxable year (or portion thereof) in the Pre-Distribution Period, the sum of each of the Subsidiary Companies’ Liabilities for Federal Income Taxes (except to the extent attributable to Parent’s negligence) for such taxable year (or portion thereof), computed on a stand-alone basis as if such Subsidiary Company was not and never was part of the Parent Consolidated Group (provided, however, that transactions with the Parent Companies or between the Subsidiary Companies shall be reflected in such computation according to the provisions of the consolidated return regulations promulgated under the Code governing intercompany transactions), to the extent applicable. Such computation shall be made: (A) without regard to the income, deductions (including net operating loss and capital loss deductions) and credits in any taxable year of any of the Parent Companies, (B) with regard to net operating loss, capital loss and credit carryforwards and carrybacks from earlier taxable years of the Subsidiary Companies, (C) reflecting the positions, elections and accounting methods and periods used with respect to the Subsidiary Companies in preparing Parent’s consolidated Federal Income Tax Returns and (D) in the case of a Subsidiary Company that is a disregarded entity, partnership or other flow-through entity for U.S. federal income tax purposes, by treating such entity as a separate entity subject to U.S. federal corporate income tax.
“Subsidiary State Tax Liability” shall mean with respect to any taxable year (or portion thereof) in the Pre-Distribution Period (i) in which the Parent Companies and any of the Subsidiary Companies filed a consolidated, unitary or combined state income tax or franchise Tax Return (a “Combined Return”), Subsidiary’s share of the Combined State Taxes with respect to a Combined Return (except to the extent attributable to Parent’s negligence), determined by taking the aggregate state income tax or franchise tax Liabilities of each of the Subsidiary Companies included in the Combined Return computed on a stand-alone basis over the total state income tax or franchise tax Liabilities of the Parent Consolidated Group with respect to such Combined Return, multiplied times the total state income tax or franchise tax Liability of the Parent Consolidated Group with respect to such Combined Return, and (ii) in which any of the Subsidiary Companies filed a Tax Return that was not a consolidated, unitary or combined state income tax or franchise Tax Return with the Parent Companies (a “Stand Alone Return”), the aggregate state income tax and franchise tax liability of such Subsidiary Companies with respect to such Stand Alone Return. In the case of any Subsidiary Company that is treated as a disregarded entity, partnership or other flow-through entity for state income or franchise tax purposes for any taxable year during the Pre-Distribution Period, such entity shall be treated as a separate entity subject to state income tax or franchise tax (as applicable) for purposes of computing the Subsidiary State Tax Liability for such taxable year.
“Straddle Period” shall mean any Tax Period that begins on or before and ends after the Distribution
Date.
“Subsidiary” shall mean, with respect to any Person, any corporation or other organization, whether incorporated or unincorporated, of which (i) such Person or any other Subsidiary of such Person is a general partner or (ii) at least 50% of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization or 50% of the value of the outstanding equity is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries.
“Tax” or “Taxes” shall mean any federal, state, county, local or foreign taxes, charges, fees, levies or other assessments, including all net income, gross income, sales and use, ad valorem, transfer, gains, profits, excise, franchise, real and personal property, gross receipt, capital stock, share, production, business and occupation, disability, employment, payroll, license, estimated, stamp, custom duties, severance or withholding taxes or charges imposed by any governmental entity, and includes any interest and penalties (civil or criminal) on or additions to any such taxes.
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“Tax Advisor” shall mean any Tax counsel or accountant of recognized national standing in the United States.
“Tax Asset” means any federal or state net operating loss, net capital loss, general business credit, foreign tax credit, charitable deduction, or any other loss, credit, deduction, or tax attribute which could reduce any Tax (including, without limitation, deductions, credits, alternative minimum net operating loss carryforwards related to alternative minimum taxes or additions to the basis of property).
“Tax Authority” shall mean, with respect to any Tax, the governmental authority or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision.
“Tax Benefit” shall mean any reduction in Liability for Tax as a result of any loss, deduction, refund, credit or other item reducing Taxes otherwise payable.
“Tax Contest” shall mean an audit, review, examination, assessment or any other administrative or judicial proceeding with the purpose or effect of redetermining Taxes (including any administrative or judicial review of any claim for refund).
“Tax Law” shall mean the law of any governmental authority or political subdivision thereof relating to any Tax.
“Tax Period” shall mean, with respect to any Tax, the period for which the Tax is reported as provided under the Code or other applicable Tax Law.
“Tax Records” shall mean any Tax Returns, Tax Return workpapers, documentation relating to any Tax Contests and any other books of account or records (whether or not in written, electronic or other tangible or intangible forms and whether or not stored on electronic or any other media) required to be maintained under the Code or other applicable Tax Laws or under any record retention agreement with any Tax Authority.
“Tax Return” shall mean any report, return or other information required to be supplied to a governmental entity with respect to Taxes.
ARTICLE II
Tax Matters
2.1 Assumption and Indemnification of Tax Liabilities.
(a) Subsidiary shall be liable for any unpaid Subsidiary Federal Income Tax Liability and Subsidiary State Tax Liability, whether arising before, at or after the Distribution.
(b) Parent shall be liable for all Tax Liabilities other than those described in Section 2.1(a) of this Agreement.
(c) Each Party hereto agrees to save, indemnify, defend and hold harmless the other, its Subsidiaries and each of their respective directors, officers, employees, agents, successors and assigns from and against their respective Tax Liabilities.
2.3 Refunds.
(a) If, with respect to any Tax for which the Subsidiary Companies are liable pursuant to this Agreement, Parent receives a refund, offset or credit, Parent shall remit to Subsidiary within thirty (30) days of receipt the amount of such refund, offset or credit, together with any interest received thereon.
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(b) If, with respect to any Tax for which any of the Parent Companies are liable pursuant to this Agreement, Subsidiary receives a refund, offset or credit, Subsidiary shall remit to Parent within thirty (30) days of receipt the amount of such refund, offset or credit, together with any interest received thereon.
(c) Any payments required to be made by Sections 2.3(a) or (b) of this Agreement shall be paid net of any Tax Liability and expenses incurred by a Party resulting from such Party’s receipt of such refund from the Tax Authority.
2.4 Tax Returns/Cooperation.
(a) Parent shall prepare and file any Tax Return required to be filed with (1) the Internal Revenue Service with respect to the determination of the Federal Income Tax Liability of the Parent Consolidated Group, and (2) the appropriate Tax Authorities with respect to the determination of the Combined State Tax Liability of the Parent Consolidated Group. With respect to such return preparation, Parent shall not discriminate among any members of the Parent Consolidated Group. Parent shall have the right with respect to any such consolidated Federal Income Tax Returns or Combined State Tax Returns that it has filed or will file to determine (i) the manner in which such returns, documents or statements shall be prepared and filed, including, without limitation, the manner in which any item of income, gain, loss, deduction or credit shall be reported; (ii) whether any extensions should be requested; and (iii) the elections that will be made by any member of the Parent Consolidated Group. Each of the Subsidiary Companies hereby irrevocably appoints Parent as its agent and attorney-in-fact to take any action (including the execution of documents) Parent may deem necessary or appropriate to implement this Section 2.4.
(b) With respect to any other Tax Return, the Party that bears indemnification responsibility under this Article II shall be responsible for the preparation and filing of such Tax Return; provided, however, that in the preparation and filing of such Tax Return, such Party shall not take any position (or make any election) that is inconsistent with any position or election made by Parent in connection with the preparation and filing of any Tax Return required to be filed by Parent pursuant to Section 2.4(a) above.
(c) Each of Parent and Subsidiary will, and will cause their respective personnel to, cooperate fully with each other in connection with the preparation and review of Tax Returns and in connection with any examinations of any Tax Returns by any Tax Authority.
2.5 Indemnification Procedures.
(a) Any claim for indemnification under this Article II shall be made by written notice from the Party seeking to be indemnified (the “Tax Indemnitee”) to the Party from which indemnification is sought (the “Tax Indemnifying Party”). If a Tax Indemnitee becomes aware during an examination of a Tax Return that the Tax Authority conducting the examination is considering asserting a Tax subject to indemnification under this agreement, the Tax Indemnitee will (i) promptly notify the Tax Indemnifying Party of this fact, (ii) to the extent reasonably practicable, segregate the issue from any other issues being examined by the Tax Authority, (iii) permit the Tax Indemnifying Party to control the Tax examination insofar as it relates to that issue and any administrative or judicial appeals relating to the issue (including whether to settle the issue or to appeal from an adverse determination with regard to the issue) and (iv) cooperate with the Tax Indemnifying Party in all reasonable respects to establish that such Tax is not due and payable.
(b) Upon a determination that a Tax Indemnifying Party is liable for a payment of Taxes to a Tax Indemnitee, the Tax Indemnifying Party shall pay the Tax Indemnitee such Taxes. Such payment will be made on an after-Tax basis promptly following the submission by the Tax Indemnitee of written evidence of the payment of the indemnified Tax.
2.6 Sole Tax Sharing Agreement. Any and all existing Tax sharing agreements or arrangements, written or unwritten, between any of the Parent Companies, on the one hand, and any of the Subsidiary Companies, on the other hand (other than this Agreement), if not previously terminated, shall be terminated as of the Distribution Date without any further action by the parties thereto. Following the Distribution, none of the Subsidiary Companies, on the one hand, and none of the Parent Companies, on the other hand, shall have any further rights or Liabilities thereunder, and this Agreement shall be the sole Tax sharing agreement between the Subsidiary Companies, on the one hand, and the Parent Companies, on the other hand. For the avoidance of doubt, nothing in this Section 2.6 shall affect the obligation of any Subsidiary Company to be included in the consolidated Federal Income Tax Return of the Parent Consolidated Group or any Combined Return to the extent required by applicable Tax Law for so long as Subsidiary remains a member of the Parent Consolidated Group.
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2.7 [Reserved].
2.8 Retention of Tax Records. Each of Parent and Subsidiary and their respective Affiliates shall preserve and keep all Tax Records relating to Pre-Distribution Periods and Straddle Periods for so long as the contents thereof may become material in the administration of any matter under the Code or other applicable Tax Law, but in any event until the later of (a) the expiration of any applicable statutes of limitations (taking into account extensions), or (b) seven (7) years after the Distribution Date (such later date, the “Retention Date”). After the Retention Date, Parent and Subsidiary may dispose of such Tax Records upon ninety (90) days’ prior written notice to the other Party. If, prior to the Retention Date, either Parent or Subsidiary reasonably determines that any Tax Records that it or its Affiliates would otherwise be required to preserve and keep under this Section 2.8 are no longer material in the administration of any matter under the Code or other applicable Tax Law, and the other Party agrees, then such first Party may dispose of such Tax Records upon ninety (90) days’ prior notice to the other Party. Any notice of an intent to dispose given pursuant to this Section 2.8 shall include a list of the Tax Records to be disposed of describing in reasonable detail the files, books or other records being disposed of. The notified Party shall have the opportunity, at its cost and expense, to copy or remove, within such ninety (90) day period, all or any part of such Tax Records.
2.9 Access to Tax Records. Parent and Subsidiary and their respective Affiliates shall make available to each other for inspection and copying/scanning during normal business hours upon reasonable notice all Tax Records for Pre-Distribution Periods or Straddle Periods to the extent reasonably required by the other Party in connection with the preparation of financial accounting statements, audits, litigation or the resolution of items under this Agreement.
2.10 Certain Covenants. Each of Subsidiary and Parent shall not, and shall not permit any of their respective Subsidiaries to, take or fail to take any action in a manner that management of such Party knows, or should know, is reasonably likely to contravene any agreement with a Tax Authority entered into prior to the Distribution Date to which any member of the Subsidiary Companies or the Parent Companies is a party.
ARTICLE III
Miscellaneous
3.1 Modification or Amendment. No provision of this Agreement or any Ancillary Agreement may be amended or modified except by a written instrument signed by authorized officers of each of the Parties. No waiver by any Party of any provision hereof shall be effective unless explicitly set forth in writing and executed by the Party so waiving. The waiver by any Party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other subsequent breach.
3.2 Entire Agreement; Counterparts. This Agreement, the Separation Agreement and the other Ancillary Agreements, and all schedules and exhibits hereto and thereto, constitute the entire agreement between the Parties with respect to the subject matter hereof and thereof and supersede all prior negotiations, agreements, understandings and arrangements, both oral and written, between the Parties with respect to such subject matter. For the convenience of the Parties, this Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall together constitute one and the same instrument.
3.3 Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Nevada, without reference to its conflicts of law principles, as to all matters, including matters of validity, construction, effect, enforceability, performance and remedies.
3.4 Notices. Any notice, request or other document required or permitted to be given or delivered pursuant hereto shall be delivered in accordance with the notice provisions of the Separation Agreement.
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3.5 Captions. All Article, Section and paragraph captions herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof.
3.6 No Third Party Beneficiaries. Except for the indemnification rights under this Agreement of any Parent Company or Subsidiary Company in their respective capacities as such, (a) the provisions of this Agreement are solely for the benefit of the Parties hereto and are not intended to confer upon any Person, except the Parties hereto, any rights or remedies hereunder, and (b) there are no third party beneficiaries of this Agreement and this Agreement shall not provide any third person with any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement.
3.7 Successors and Assigns. No Party to this Agreement shall convey, assign or otherwise transfer any of its rights or obligations under this Agreement without the express written consent of the other Party in its sole and absolute discretion. Any such conveyance, assignment or transfer without the express written consent of the other Party shall be void ab initio. No assignment of this Agreement or any rights hereunder shall relieve the assigning Party of its obligations hereunder. Notwithstanding the foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns, and any successor or permitted assignee of any Party hereto shall be entitled to the rights and benefits of such Party under this Agreement. Any successor by merger or by acquisition of all or substantially all of the assets of a Party to this Agreement shall be substituted for such Party as a Party to this Agreement, and all obligations, duties and Liabilities of the substituted party under this Agreement shall continue in full force and effect as obligations, duties and Liabilities of the substituting Party, enforceable against the substituting party as a principal, as though no substitution had been made.
3.8 Certain Obligations. Whenever this Agreement requires any of the Subsidiaries of any Party to take any action, this Agreement will be deemed to include an undertaking on the part of such Party to cause such Subsidiary to take such action.
3.9 Specific Performance. Subject to the provisions of Section 3.11, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party or Parties who are or are to be thereby aggrieved shall have the right of specific performance and injunctive relief giving effect to its or their rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is hereby waived. Any requirements for the securing or posting of any bond or other security with such remedy are hereby waived.
3.10 Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances other than those remaining provisions hereof, or the application of such provision to Persons or circumstances other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any Party. Upon any such determination, the Parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the Parties.
3.11 Dispute Resolution. Any dispute with respect to this Agreement shall be resolved in accordance with the dispute resolution provisions set forth in the Separation Agreement. Either Party may apply to any court of competent jurisdiction seeking injunctive relief pending the resolution of any such dispute. Either Party also may, without waiving any remedy under this Agreement or any Ancillary Agreement, seek from any court having jurisdiction any interim or provisional relief that is necessary to protect the rights and/or property of that Party.
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3.12 Waiver of Jury Trial. EACH PARTY HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 3.12.
3.13 Waivers of Default. No failure or delay of any Party in exercising any right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Parties hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have hereunder.
3.14 Survival of Covenants. Except as expressly set forth in this Agreement, the covenants, representations and warranties contained in this Agreement, and the Liabilities for the breach of any obligations contained herein, shall survive the Distribution and shall remain in full force and effect.
3.15 Expenses. Except as otherwise expressly set forth in this Agreement, each Party shall bear its own fees, costs and expenses incurred in connection with the preparation of, or any amendment or waiver of any provision of, this Agreement and the consummation of the transactions contemplated hereby.
3.16 Publicity. Each Party shall consult with the other Party prior to issuing any press releases or otherwise making any public statements with respect to this Agreement or the transactions contemplated hereby, and no Party shall issue any such press release or make any such public statement without the prior written consent of the other Party, except as may be required by applicable law or by obligations pursuant to any listing agreement with any national securities exchange, in which case the Party proposing to issue such press release or make such public statement shall use commercially reasonable efforts to consult in good faith with the other Party before issuing any such press release or making any such public statement.
3.17 Arbitration. Any dispute with respect to this Agreement or any Ancillary Agreement shall be arbitrated in Alameda County, California, in accordance with the rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. There will be a single neutral arbitrator selected who resides in Alameda County, California. The American Arbitration Association will provide a list of five (5) neutral arbitrators. The claimant and respondent will take turns, with the respondent going first, striking one name at a time from the list of five neutral arbitrators. Each Party will have no more than twenty-four (24) hours to take its turn striking the name of a neutral arbitrator. The final remaining arbitrator will serve as the neutral arbitrator. Either Party may apply to the arbitrator seeking injunctive relief until the arbitrator’s award is rendered or the controversy is otherwise resolved. Either Party also may, without waiving any remedy under this Agreement or any Ancillary Agreement, seek from any California court having jurisdiction, any interim or provisional relief that is necessary to protect the rights and/or property of that Party, pending the determination of the arbitrator.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the Parties hereto as of the date first above written.
| ABVC BIOPHARMA, INC. | ||
| By: | /s/ Uttam Patil | |
| Name: | Uttam Patil | |
| Title: | Chief Executive Officer | |
| BIOKEY (CAYMAN), INC. | ||
| By: | /s/ T.S. Jiang | |
| Name: | T.S. Jiang | |
| Title: | Chief Executive Officer | |
[Signature Page to the Tax Matters Agreement]
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Exhibit 10.3
EMPLOYEE MATTERS AGREEMENT
This EMPLOYEE MATTERS AGREEMENT, dated as of June 22, 2026 (this “Agreement”), is entered into by and among ABVC BioPharma, Inc., a Nevada corporation (“Parent”), and BioKey (Cayman), Inc., a Cayman Islands exempted company with limited liability and wholly owned subsidiary of Parent (“Subsidiary”). Each of Parent and Subsidiary is referred to herein as a “Party” and collectively as the “Parties.” Capitalized terms used in this Agreement and not otherwise defined shall have the meanings ascribed to such terms in the Separation Agreement (as defined below).
RECITALS
WHEREAS, pursuant to that certain Separation and Distribution Agreement (the “Separation Agreement”) dated as of the date hereof, by and among Parent and Subsidiary, Parent and Subsidiary have set out the terms on which, and the conditions subject to which, they wish to implement the Separation and Distribution of Subsidiary; and
WHEREAS, as of the date hereof, Subsidiary has no Employees and has not previously employed any individuals, and all Employees whose services relate to the Subsidiary Business are currently employed by Parent or its Affiliates; and
WHEREAS, in connection with the foregoing, the Parties have entered into this Agreement to provide for the transfer of certain Employees from Parent to Subsidiary and to allocate, among Parent and Subsidiary, Assets, Liabilities and responsibilities with respect to certain employee compensation, benefits, labor and other employment matters, all pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. As used in this Agreement, the following terms shall have the meanings indicated below:
“Closing Plan Year” means the calendar year in which the Effective Time occurs.
“COBRA” shall have the meaning specified in Section 2.03(d).
“Code” means the Internal Revenue Code of 1986, as amended.
“Continuing Employee” means each of Uttam Patil and each other Employee of Parent identified on Schedule 2 hereto who will continue as an Employee of Parent following the Distribution as determined by Parent prior to the Distribution, in each case, in their capacities as Employees of Parent. For the avoidance of doubt, an Employee shall be deemed a “Continuing Employee” if he or she is expected to serve as an Employee of both Parent and Subsidiary following the Distribution. A Continuing Employee who also serves as an Employee of Subsidiary shall, in his or her capacity as an Employee of Subsidiary, also be deemed a Subsidiary Employee.
“Employee” means with respect to any entity, an individual who is considered, according to the payroll and other records of such entity, to be employed by such entity, whether active or inactive, on disability leave, or on other leave of absence.
“Employment Agreement” means each individual employment, offer, retention, consulting, change in control, split dollar life insurance, sale bonus, incentive bonus, severance, restrictive covenant or other employment related or individual compensatory agreement between any current or former employee and Parent or any of its Affiliates (including Subsidiary), in each case, that is related to the Subsidiary Business, other than those between Parent and any Continuing Employee, in his or her capacity as an employee of Parent.
“Employment Claim” means any actual, threatened or potential lawsuit, arbitration, ERISA claim, or federal, state, or local judicial or administrative proceeding of whatever kind involving a demand by or on behalf of or relating to an employee, former employee, job applicant, intern or volunteer, independent contractor, leased employee, or anyone claiming to be an employee or joint employee, or by or relating to a collective bargaining agent of employees, or by or relating to any federal, state, or local government agency alleging liability against an entity as an employer or against an employee pension, welfare or other benefit plan, or an administrator, trustee or fiduciary thereof.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Former Subsidiary Employee” means each former Employee of Parent or its Affiliates identified on Schedule 3 hereto whose last employment with Parent or its Affiliates before the Effective Time was primarily related to the Subsidiary Business and not primarily related to the Parent Business.
“IRS” means the United States Internal Revenue Service.
“Subsidiary” has the meaning specified in the preamble of this Agreement.
“Subsidiary Benefit Plans” means any Plan that is sponsored or maintained by Subsidiary or a Subsidiary Entity.
“Subsidiary Employee” means each Employee of Parent identified on Schedule 1 hereto who will be transferred to and become an Employee of Subsidiary or any member of the Subsidiary Group in connection with the Distribution, in each case, in his or her capacity as an Employee of Subsidiary. For the avoidance of doubt, a Continuing Employee who is expected to serve as an Employee of both Parent and Subsidiary following the Distribution shall be deemed a Subsidiary Employee solely in his or her capacity as an Employee of Subsidiary (and not in his or her capacity as an Employee of Parent).
“Subsidiary Entity” means any entity that is a direct or indirect subsidiary of Subsidiary.
“Subsidiary Group” means Subsidiary and each Subsidiary Entity.
“Subsidiary FSAs” has the meaning specified in Section 2.03(c).
“Subsidiary Health and Welfare Benefit Plans” has the meaning specified in Section 2.03(b).
“Subsidiary Retirement Plan” has the meaning specified in Section 2.02(b).
“Parent” has the meaning specified in the preamble of this Agreement.
“Parent Benefit Plan” means any of (i) the Parent Health and Welfare Benefit Plans, the Parent Retirement Plan, and (ii) any other Plan that, as of the close of business on the Business Day before the Effective Time, is sponsored or maintained solely by Parent or a Parent Group member.
“Parent Entity” means Parent and any entity that is a direct or indirect Subsidiary of Parent (other than Subsidiary and the other members of the Subsidiary Group).
“Parent Group” means Parent and each Parent Entity.
“Parent FSAs” has the meaning specified in Section 2.03(c).
“Parent Health and Welfare Benefit Plans” means the health and welfare plans sponsored and maintained by Parent or any of its Subsidiaries or Affiliates, including any flexible benefit plan.
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“Parent Retirement Plan” means the ABVC BioPharma, Inc. 401(k) Plan, as in effect immediately prior to the Effective Time.
“Party” and “Parties” have the meanings specified in the preamble of this Agreement.
“Plan” means any plan, policy, arrangement, contract or agreement providing compensation or benefits for any group of Employees or individual Employee, or the dependents or beneficiaries of any such Employee(s), whether formal or informal or written or unwritten, and including, without limitation, any means, whether or not legally required, pursuant to which any benefit is provided by an employer to any Employee or the beneficiaries of any such Employee. The term “Plan” as used in this Agreement does not include any Contract relating to settlement of actual or potential Employment Claims. Notwithstanding the foregoing, no Employment Agreement will constitute a “Plan” for purposes hereof.
“Plan Payee” means an individual who is entitled to payment of Plan benefits in his or her capacity as a beneficiary with respect to the benefits of a deceased participant in the Plan or an alternate payee under a qualified domestic relations order within the meaning of Section 414(p)(1)(A) of the Code and Section 206(d)(3)(B)(i) of ERISA with respect to the benefits of a participant in the Plan.
“Separation Agreement” has the meaning specified in the recitals of this Agreement.
“WARN” has the meaning specified in Section 3.01.
“Workers’ Compensation Event” means the event, injury, illness or condition giving rise to a workers’ compensation claim.
Section 1.02 Interpretation; Construction.
(a) Unless the context of this Agreement otherwise requires: (i) words of any gender include each other gender and neuter form; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) derivative forms of defined terms will have correlative meanings; (iv) the terms “hereof,” “herein,” “hereby,” “hereto,” “herewith,” “hereunder” and derivative or similar words refer to this entire Agreement; (v) the terms “Article,” “Section,” and “Schedule” refer to the specified Article, Section, or Schedule, as the case may be, of this Agreement and references to “paragraphs” or “clauses” shall be to separate paragraphs or clauses, respectively, of the section or subsection in this Agreement in which the reference occurs; (vi) the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation;” (vii) the word “or” shall be disjunctive but not exclusive; (viii) the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if;” and (ix) the terms “writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form.
(b) Unless the context of this Agreement otherwise requires: references to Contracts (including this Agreement) and other documents or Laws shall be deemed to include references to such Contract or Law as amended, restated, supplemented or modified from time to time in accordance with its terms and the terms hereof, as applicable, and in effect at any given time (and, in the case of any Law, to any successor provisions).
(c) Unless the context of this Agreement otherwise requires, references to any federal, state, local, or foreign statute or Law shall include all regulations promulgated thereunder.
(d) Unless the context of this Agreement otherwise requires, references to any Person include references to such Person’s successors and permitted assigns, and in the case of any Governmental Authority, to any Person succeeding to its functions and capacities.
(e) The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent. The Parties acknowledge that each Party and its attorneys have reviewed and participated in the drafting of this Agreement and that any rule of construction to the effect that any ambiguities are to be resolved against the drafting Party, or any similar rule operating against the drafter of a Contract, shall not be applicable to the construction or interpretation of this Agreement.
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(f) Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. If any action is to be taken or given on or by a particular day, and such day is not a Business Day, then such action may be deferred until the next Business Day.
(g) All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP unless the context otherwise requires.
Section 1.03 Survival. If the Distribution is consummated, the obligations set forth in this Agreement shall remain in full force and effect and shall survive the Effective Time.
ARTICLE II
EMPLOYEES AND EMPLOYEE BENEFITS
Section 2.01 Employment.
(a) Transfer of Employment to Subsidiary. At or prior to the Effective Time, Parent and Subsidiary shall take all steps necessary and appropriate to transfer, or cause to become effective, the employment of the Subsidiary Employees from Parent to Subsidiary or the applicable Subsidiary Entity. The Continuing Employees shall continue as Employees of Parent or the applicable Parent Entity following the Distribution. The Parties shall cooperate to effect any transfers of employment contemplated by this Section 2.01 in a manner that does not result in severance or termination payments or benefits becoming due to any affected Employee.
(b) Continued Employment. Between the date hereof and the Effective Time, neither Party shall, without the consent of the other Party, affirmatively terminate or cause its applicable Affiliate to affirmatively terminate, the employment of any Employees other than in the ordinary course of business and shall not transfer the employment of such Employees except as provided in Section 2.01(a).
(c) Allocation of Responsibilities as Employer; Assumption of Employment-Related Liabilities. At the Effective Time, Subsidiary or the applicable member of the Subsidiary Group shall assume responsibility as employer of the Subsidiary Employees. In addition, at the Effective Time, Subsidiary shall assume all Liabilities related to the employment or retention of Subsidiary Employees and Former Subsidiary Employees, except as specifically provided herein, including Liabilities for any Employment Claim with respect to a Subsidiary Employee or Former Subsidiary Employee.
(d) Employment Agreements. At or prior to the Effective Time, the Parties shall cause Subsidiary to enter into, assume, or otherwise become a party to, as applicable, Employment Agreements with or in respect of the Subsidiary Employees and to be solely and exclusively responsible for all obligations and Liabilities with respect thereto; provided, however, that employment agreements with Uttam Patil shall, as described in the Information Statement, be entered into following the Effective Time, subject to the approval of Subsidiary’s Compensation Committee following the Distribution. On and after the Effective Time, Parent and its Affiliates (other than Subsidiary Entities) shall have no obligations or liabilities with respect to the Employment Agreements entered into or assumed by Subsidiary. To the extent an Employment Agreement to be entered into or assumed by Subsidiary is not executed or transferred in accordance with this Section 2.01(d), Subsidiary shall fully indemnify Parent and any applicable Parent Group member with respect to all Liabilities associated with such Employment Agreement (including any termination thereof) to the extent arising out of events occurring following the Effective Time. From and after the Effective Time, Subsidiary shall assume all Liabilities under and perform all obligations under all Subsidiary Benefit Plans.
(e) Service Credit. From and after the Effective Time, Subsidiary shall give each Subsidiary Employee full credit for determining the amount of paid time off, vacation or sick leave, and the level of employer contributions under any defined contribution retirement plan, and for purposes of eligibility to participate and vesting (but not benefit accruals (if applicable)) under any employee benefit plans, arrangements, collective agreements and employment- related entitlements (including under any applicable pension, defined contribution (for example, 401(k)), deferred compensation, savings, medical, dental, life insurance, disability, vacation, long-service leave or other leave entitlements, post-retirement health and life insurance, termination indemnity, severance or separation pay plans) provided, sponsored, maintained or by or contributed to Subsidiary or any of its Affiliates under which such Subsidiary Employee is eligible to participate after the Effective Time for such Subsidiary Employee’s service with Parent, Subsidiary or their respective Subsidiaries prior to the Effective Time, to the same extent recognized by any of Parent, Subsidiary and their respective Subsidiaries immediately prior to the Effective Time, except to the extent such credit would result in the duplication of benefits for the same period of service.
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(f) Independent Contractors. With respect to any independent contractor agreements or similar Contract with independent contractors that relate primarily to the Subsidiary Business and that are with Parent or a member of the Parent Group (and are not with Subsidiary or a Subsidiary Group member), the Parties shall use commercially reasonable efforts to assign the applicable Contract and related Liabilities to Subsidiary or a member of the Subsidiary Group or a Subsidiary Group member designated by Subsidiary. With respect to any independent contractor agreements or similar Contract with independent contractors that relate primarily to the Parent Business and that are with Subsidiary or a member of the Subsidiary Group (and not with Parent or a Parent Group member), the Parties shall use commercially reasonable efforts to assign the applicable Contract and related Liabilities to Parent or a Parent Group member designated by Parent.
Section 2.02 Retirement Plans.
(a) Parent Retirement Plan. Effective on the Effective Time, Subsidiary Employees (other than those that are Continuing Employees) shall cease to be eligible to: (i) have elective deferrals contributed on their behalf to the Parent Retirement Plan with respect to pay paid after the Effective Time, (ii) be credited with future employer contributions (for example, matching contributions) in the Parent Retirement Plan, or (iii) make contributions (for example, rollovers or loan repayments) to the Parent Retirement Plan, and shall cease to be active participants in the Parent Retirement Plan. Effective on the Effective Time, each Subsidiary Group member shall cease to be a participating employer in the Parent Retirement Plan.
(b) Subsidiary Retirement Plan. Prior to Effective Time, Subsidiary shall take all actions necessary or appropriate to establish or maintain for the benefit of Subsidiary Employees (i) a defined contribution plan qualified under Section 401(a) of the Code that includes a cash or deferred arrangement qualified under Section 401(k) of the Code that is a participant-directed individual account plan that complies with Section 404(c) of ERISA, and (ii) a related trust or trusts exempt under Section 501(a) of the Code, each to be effective no later than the Effective Time (such plan and trust(s), the “Subsidiary Retirement Plan”).
(c) 401(k) Transfer of Assets and Liabilities. Subsidiary shall cause each Subsidiary Employee who is covered under the Parent Retirement Plan immediately prior the Effective Time to be covered under the Subsidiary Retirement Plan immediately following the Effective Time. Parent shall cause to be transferred from the Parent Retirement Plan to the Subsidiary Retirement Plan the full cash value of the Subsidiary Employees’ account balances under the Parent Retirement Plan as of the Effective Time (or in the case of Subsidiary Employees that are Continuing Employees, such portion of each such Continuing Employees’ respective account balance under the Parent Retirement Plan as determined by the Continuing Employee), including any outstanding participant loans, and Subsidiary shall cause the Subsidiary Retirement Plan to accept such transfers. The transfers of assets and the related liabilities shall take place as soon as practicable following the Effective Time. Parent and the Parent Retirement Plan shall be relieved of the liability for the Subsidiary Employees’ accounts under the Parent Retirement Plan following the transfer of assets and liabilities described in this paragraph (except with respect to any balance retained by the Parent with respect to a Continuing Employee).
Section 2.03 Health and Welfare Benefits.
(a) Parent Health and Welfare Benefit Plans. Effective as of the Effective Time, Subsidiary Employees (other than those that are Continuing Employees, in their capacities as such) will cease to participate in the Parent Health and Welfare Benefit Plans and each member of the Subsidiary Group shall cease to be a participating employer in the Parent Health and Welfare Plans. The Parent Health and Welfare Benefit Plans shall continue to be responsible for the payments of any claims for benefits with respect to Subsidiary Employees that occur prior to the Effective Time to the extent such claims are covered under applicable insurance.
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(b) Establishment of Subsidiary Health and Welfare Benefit Plans. Prior to the Effective Time, Subsidiary shall or shall cause one of its Affiliates to take, or cause to be taken, or have taken, all action necessary and appropriate to establish or designate and administer a group welfare benefits plan for the benefit of all Subsidiary Employees effective as of the Effective Time (the “Subsidiary Health and Welfare Benefit Plans”) and to provide benefits thereunder for all eligible Subsidiary Employees who choose to enroll in such Plans that are substantially comparable to those provided under the Parent Health and Welfare Benefit Plans as of the Effective Time. Subsidiary will cause such Subsidiary Health and Welfare Benefit Plans to cover those Subsidiary Employees and their dependents who immediately prior to the Effective Time were participating in, or entitled to present or future benefits under, the corresponding Parent Health and Welfare Benefit Plans. Except as otherwise provided in Section 2.03(a), Subsidiary will be responsible for all Liabilities associated with claims incurred prior to the Effective Time by Subsidiary Employees (other than Continuing Employees, in their capacities as Employees of Parent) and Former Subsidiary Employees and their dependents under the Parent Health and Welfare Benefit Plans, which are paid on or after the Effective Time, regardless of when such claims are incurred, filed and/or paid, and shall promptly reimburse Parent for any such amounts following receipt from Parent of adequate documentation.
(c) Prior to the Effective Time, Subsidiary shall establish or designate a dependent care spending account and a medical care spending account (the “Subsidiary FSAs”). The Parties shall take all steps reasonably necessary or appropriate so that the account balances (positive or negative) under the dependent care spending account and a medical care spending account plans sponsored by Parent (the “Parent FSAs”) of each Subsidiary Employee who has elected to participate therein in the year in which the Effective Time occurs shall be transferred on, or as soon as practicable after, the Effective Time from the Parent FSAs to the corresponding Subsidiary FSAs; provided that the account balances of each Subsidiary Employee who is also a Continuing Employee may be transferred in such amount as the applicable Continuing Employee may designate. The Subsidiary FSAs shall assume responsibility as of the Effective Time for all outstanding dependent care and medical care claims under the Parent FSAs of each Subsidiary Employee for the year in which the Effective Time occurs and shall assume the rights of and agree to perform the obligations of the analogous Parent FSA from and after the day following the date of the Effective Time, in each case, other than in respect of claims under the Parent FSAs of a Continuing Employee, in his or her capacity as an Employee of Parent. The Parties shall cooperate to provide that the contribution elections of each such Subsidiary Employee as in effect immediately before the Effective Time remain in effect under the Subsidiary FSAs following the Effective Time. As soon as practicable after the Effective Time, Parent shall transfer to Subsidiary an amount equal to the sum of (i) the total contributions made to the Parent FSAs by Subsidiary Employees who are not also Continuing Employees and (ii) the contributions made to the Parent FSAs by Subsidiary Employees who are also Continuing Employees in proportion to the percentage of their account balances are transferred to the Subsidiary FSAs, in the case of each of clauses (i) and (ii), in respect of the plan year in which the Effective Time occurs, reduced by an amount equal to the total claims already paid in respect of such plan year. From and after the Effective Time, Parent shall (subject to applicable Law) provide Subsidiary with such information as Subsidiary may reasonably request to enable it to verify any claims information pertaining to a Parent FSA.
(d) Continuation Coverage. As of the Effective Time, Subsidiary and the Subsidiary Health and Welfare Benefit Plans shall assume or retain and shall be solely responsible for providing and meeting the continuation coverage requirements imposed by Section 4980B of the Code and Sections 601 through 608 of ERISA (“COBRA”) or similar state law for all Subsidiary Employees (other than those that are also Continuing Employees, in their capacities as Employees of Parent) and all Former Subsidiary Employees, as well as their “qualified beneficiaries” (as defined under COBRA), regardless of whether such Liabilities arose before, on or after the Effective Time.
(e) 6055/6056 Reporting. Subsidiary shall be solely responsible for ensuring that Subsidiary complies with the reporting obligations under Section 6056 of the Code (Reporting of Offers of Coverage) with respect to Subsidiary Employees for the Closing Plan Year (including while Subsidiary was owned by Parent) and periods after the Effective Time, for which Subsidiary has a reporting obligation, provided that Parent shall be responsible for complying with all reporting obligations with respect to the year prior to the Closing Plan Year. In this regard, Subsidiary shall be responsible for distributing IRS Form 1095-C to applicable individuals and filing IRS Forms 1094-C and 1095-C with the IRS, all according to the applicable rules and regulations governing such forms. Subsidiary shall also be solely responsible for ensuring that Subsidiary complies with the reporting obligations under Section 6055 of the Code (Reporting of Enrollment in Minimum Essential Coverage) with respect to all Subsidiary Employees who are enrolled in a self-insured medical plan under the Parent Health and Welfare Benefit Plans. Subsidiary may meet this obligation either through IRS Forms 1094-C and 1095-C or IRS Forms 1094-B and 1095-B, all in accordance with applicable rules and regulations. The reporting obligations under Section 6055 of the Code for Subsidiary Employees who are enrolled in a fully insured medical plan under the Parent Health and Welfare Benefit Plans shall be met by the applicable insurance carrier or HMO. Parent shall cooperate with Subsidiary to provide all necessary, pre-Effective Time information for Subsidiary to meet its reporting obligation, which information shall be complete and accurate (in all material respects) and timely provided to Subsidiary.
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(f) Credit for Benefits. Subsidiary shall (i) waive for each Subsidiary Employee and his or her dependents, any waiting period provision, payment requirement to avoid a waiting period, pre-existing condition limitation, actively-at-work requirement and any other restriction that would prevent immediate or full participation under the Subsidiary Health and Welfare Benefit Plans to the extent such waiting period, pre-existing condition limitation, actively-at-work requirement or other restriction was satisfied by or would not have been applicable to such Subsidiary Employee or dependent under the terms of the welfare plans of Subsidiary and its Affiliates (including Parent) immediately prior to the Effective Time, and (ii) give full credit under the Subsidiary Health and Welfare Benefit Plans applicable to each Subsidiary Employee and his or her dependents for all co-payments and deductibles satisfied prior to the Effective Time in the Closing Plan Year, and for any lifetime maximums, as if there had been a single continuous employer.
Section 2.05 Workers’ Compensation. Effective as of the Effective Time, Subsidiary will be solely responsible for all workers’ compensation claims of Subsidiary Employees and Former Subsidiary Employees with respect to Workers’ Compensation Events occurring on or following the Effective Time. Parent shall retain responsibility for all workers’ compensation claims of Subsidiary Employees and Former Subsidiary Employees with respect to Workers’ Compensation Events occurring prior to the Effective Time, including to the extent covered by a Parent workers’ compensation insurance policy. The Parties shall cooperate with respect to any notification to appropriate governmental agencies of the disposition and the issuance of new, or the transfer of existing, workers’ compensation insurance policies and contracts governing the handling of claims.
Section 2.06 Vacation and Sick Pay Liabilities. On and after the Effective Time, (i) Subsidiary shall provide the Subsidiary Employees with the same vested and unvested balances of vacation and sick leave as credited to the Subsidiary Employees on Parent’s or its Affiliate’s payroll system immediately prior to the Effective Time and (ii) Subsidiary shall continue to accrue vacation and sick leave in respect of each Subsidiary Employee according to Parent’s accrual schedule as in effect immediately prior to the Effective Time.
Section 2.07 Severance. Effective as of the Effective Time, Subsidiary shall assume all severance obligations with respect to any Subsidiary Employee arising on or after the Effective Time. With respect to any Former Subsidiary Employee, Subsidiary shall assume all severance obligations under any Parent Benefit Plan to the extent such obligations have not been fully satisfied prior to the Effective Time.
Section 2.08 Preservation of Right To Amend or Terminate Plans. Except as otherwise expressly provided in this Agreement or the Separation Agreement, no provisions of this Agreement shall be construed as a limitation on the right of Parent or Subsidiary or any Affiliate thereof to amend any Plan or terminate its participation therein which Parent or Subsidiary or any Affiliate thereof would otherwise have under the terms of such Plan or otherwise, and no provision of this Agreement shall be construed to create a right in any Employee or former Employee, or dependent or beneficiary of such Employee or former Employee, or any Plan Payee under a Plan which such person would not otherwise have under the terms of the Plan itself.
Section 2.09 No Right to Continued Employment or Engagement or Acceleration of Benefits. Notwithstanding anything to the contrary set forth in this Agreement, no provision of this Agreement or the Separation Agreement shall be deemed to guarantee any employee, independent contractor or individual service provider continued employment or engagement (or any terms or benefits of employment or engagement) for any period of time or to grant any such person any rights as a third party beneficiary hereunder, including any right to any compensation or benefit whatsoever under any Parent Benefit Plan or Subsidiary Benefit Plan or otherwise.
Section 2.10 Cash Incentives. At the Effective Time, the participation by each Subsidiary Employee (other than those who are also Continuing Employees, in their capacities as Employees of Parent) in any cash annual bonus, commission, sign-on, retention, stay bonus, transaction bonus or similar plan or agreement of Parent or a Parent Group member shall end, and Subsidiary shall assume all Liabilities with respect to such cash incentives provided to such Subsidiary Employees.
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Section 2.11 Equity Awards and Plans.
(a) Parent Equity Awards. The vesting of all outstanding equity awards (including stock options) granted under Parent’s equity compensation plans shall accelerate in full as of the Effective Time. Parent shall be responsible for the compensation costs associated with such vesting acceleration and remain responsible for Parent’s equity compensation plans and all obligations and Liabilities related thereto.
(b) Subsidiary Equity Compensation Plans. On and after the Distribution Date, Subsidiary shall be solely responsible for its equity compensation plans and all awards granted thereunder, and, in each case, all obligations and Liabilities related thereto.
ARTICLE III
LABOR AND EMPLOYMENT MATTERS
Notwithstanding any other provision of this Agreement or any other agreement between Subsidiary and Parent to the contrary, the Parties understand and agree as follows:
Section 3.01 WARN Obligations. Before and after the Effective Time, each Party shall comply in all material respects with the Worker Adjustment and Retraining Notification Act and similar state and local laws (“WARN”). As of the Effective Time, Subsidiary and its Affiliates shall be responsible for all obligations and liabilities under WARN relating to the Subsidiary Employees arising from mass layoffs or plant closings (each as defined under WARN) occurring on or after the Effective Time, and Parent shall be responsible for all obligations and liabilities under WARN arising from mass layoff or plant closings (each as defined under WARN) occurring prior to the Effective Time.
Section 3.02 Last Payroll; Payroll Taxes and Reporting.
(a) On the applicable Parent Group member’s first ordinary payroll date occurring on or after the Effective Time, Parent shall cause to be paid to all Subsidiary Employees all unpaid wages and other compensation due and payable through the Effective Time.
(b) Parent and Subsidiary (i) shall, to the extent practicable, treat Subsidiary (or a Subsidiary Group member designated by Subsidiary) as a “successor employer” and Parent (or the appropriate Parent Group member) as a “predecessor,” within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the Code, with respect to Subsidiary Employees for purposes of taxes imposed under the United States Federal Unemployment Tax Act or the United States Federal Insurance Contributions Act, and (ii) hereby agree to use commercially reasonable efforts to implement the alternate procedure described in Section 5 of Revenue Procedure 2004-53. Without limiting in any manner the obligations and Liabilities of the Parties under the Tax Matters Agreement, Subsidiary and each Subsidiary Group member shall bear its responsibility for payroll tax obligations and for the proper reporting to the appropriate governmental authorities of compensation of Subsidiary Employees earned after the Effective Time.
ARTICLE
IV
OTHER MATTERS
Section 4.01 Sharing of Information; Audit Rights with Respect to Information Provided; Privilege.
(a) Subject to applicable Law, Parent and Subsidiary shall share, and shall cause each member of its respective Group to reasonably cooperate with the other Party hereto to (i) share, with each other and their respective agents and vendors all participant information reasonably necessary for the efficient and accurate administration of each of the Parent Benefit Plans and the Subsidiary Benefit Plans, (ii) facilitate the transactions and activities contemplated by this Agreement and (iii) resolve any and all employment-related claims regarding Employees.
(b) Each of Parent and Subsidiary, and their duly authorized representatives, shall have the right to conduct reasonable audits with respect to all information provided to it by the other Party. The Parties shall cooperate to determine the procedures and guidelines for conducting audits under this Section 4.01, which shall require reasonable advance written notice by the auditing Party. The auditing Party shall have the right to make copies of any records at its expense, subject to applicable Law.
(c) The foregoing paragraphs (a) and (b) and the other provisions herein requiring the Parties to cooperate shall not be deemed to be a waiver of the attorney-client privilege for the Parties nor shall it require the Parties to waive their attorney-client privilege. In the event of any conflict between the applicable terms of the Separation Agreement and the terms of this Agreement with respect to matters relating to attorney-client privilege, the work product doctrine and all other evidentiary privileges and nondisclosure doctrines, the applicable terms of the Separation Agreement, as applicable (including Section 6.8 of the Separation Agreement), shall prevail.
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(d) The parties hereby agree that the confidentiality provisions of the Separation Agreement shall apply to all information and material furnished by either Party or its representatives hereunder to the other Party or any of its representatives, including, without limitation, any information shared pursuant to this Section 4.01.
Section 4.02 Fiduciary Matters. Each of Parent and Subsidiary acknowledge that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other applicable Law, and no Party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good faith determination (as supported by advice from counsel experienced in such matters) that to do so would violate such a fiduciary duty or standard. Each Party shall be responsible for taking such actions as are reasonably deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall release and indemnify the other Party for any Liabilities caused by the failure to satisfy any such responsibility.
Section 4.03 Consent of Third Parties. If any provision of this Agreement is dependent on the consent of any Third Party (including any Governmental Authority) and such consent is withheld, Parent and Subsidiary shall use commercially reasonable efforts to implement the applicable provisions of this Agreement to the full extent practicable. If any provision of this Agreement cannot be so implemented due to the failure of such Third Party to consent, Parent and Subsidiary shall negotiate in good faith to implement the provision in a mutually satisfactory manner. The phrase “commercially reasonable efforts” as used herein shall not be construed to require the incurrence of any non-routine or unreasonable expense or Liability or the waiver of any right.
Section 4.04 Reimbursement. From time to time after the Effective Time, the Parties shall promptly reimburse one another, upon reasonable request of the Party requesting reimbursement and the presentation by such Party of such substantiating documentation as the other Party shall reasonably request, for the cost of any Liabilities satisfied or assumed by the Party requesting reimbursement or its Affiliates that are made, pursuant to this Agreement, the responsibility of the other Party or any of its Affiliates.
ARTICLE
V
MISCELLANEOUS
Section 5.01 Counterparts; Entire Agreement.
(a) This Agreement may be executed in separate counterparts, each such counterpart being deemed to be an original instrument, and which counterparts shall together constitute the same agreement.
(b) This Agreement, the Separation Agreement and the other Ancillary Agreements and the Exhibits and Schedules hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein. In the event of any conflict between the terms and conditions of the Separation Agreement and the terms and conditions of this Agreement, the terms and conditions of the Separation Agreement (including amendments thereto) shall control, except as otherwise expressly provided herein.
Section 5.02 Governing Law. This Agreement, except as expressly provided herein, shall be governed by and construed and interpreted in accordance with the laws of the State of Nevada, irrespective of the choice of laws principles of the State of Nevada as to all matters, including matters of validity, construction, effect, enforceability, performance, and remedies.
Section 5.03 Tax Matters. Notwithstanding anything to the contrary in this Agreement, the rights and obligations of the Parties with respect to any and all tax matters shall be exclusively governed by the provisions of the Tax Matters Agreement, except as set forth therein.
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Section 5.04 Assignability. The provisions of this Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against) the Parties and their respective successors and permitted transferees and assigns. Notwithstanding the foregoing, this Agreement shall not be assignable, in whole or in part, by any Party without the prior written consent of the other Party, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be null and void; provided, that a Party may assign this Agreement in connection with a merger transaction in which such Party is not the surviving entity or the sale by such Party of all or substantially all of its Assets, and upon the effectiveness of such assignment the assigning Party shall be released from all of its obligations under this Agreement if the surviving entity of such merger or the transferee of such Assets shall agree in writing, in form and substance reasonably satisfactory to the other Party, to be bound by all terms of this Agreement as if named as a “Party” hereto.
Section 5.05 Third Party Beneficiaries. Except for the indemnification rights under this Agreement of any Parent Indemnitee or Subsidiary Indemnitee in their respective capacities as such, (a) the provisions of this Agreement are solely for the benefit of the Parties and are not intended to confer upon any Person except the Parties any rights or remedies hereunder, and (b) there are no third party beneficiaries of this Agreement and this Agreement shall not provide any third party with any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.
Section 5.06 Notices. Any notice, request or other document required or permitted to be given or delivered pursuant hereto shall be delivered in accordance with the notice provisions of the Separation Agreement.
Section 5.07 Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any Party. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to affect the original intent of the Parties.
Section 5.08 Publicity. Prior to the Distribution, each of Subsidiary and Parent shall consult with each other prior to issuing any press releases or otherwise making public statements with respect to the Separation, the Distribution or any of the other transactions contemplated hereby and prior to making any filings with any Governmental Authority with respect thereto.
Section 5.09 Expenses. Except as expressly set forth in this Agreement or in the Separation Agreement, whether or not the Separation or the Distribution is consummated, all third party fees, costs and expenses paid or incurred in connection with the Separation and Distribution shall be paid by the Parent. All such fees, costs, and expenses so advanced shall be repaid by Subsidiary following the Distribution, pursuant to the terms and conditions negotiated by the Parent and the Subsidiary.
Section 5.10 Headings. The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
Section 5.11 Survival of Covenants. Except as expressly set forth in the Separation Agreement or any Ancillary Agreement, all covenants, representations, and warranties contained in this Agreement, and liability for the breach of any obligations contained herein, shall survive after the Distribution Date and remain in full force and effect in accordance with their applicable terms.
Section 5.12 Waivers of Default. No action taken pursuant to this Agreement, including any investigation by or on behalf of any Party, shall be deemed to constitute a waiver by the Party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any Party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any Party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.
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Section 5.13 Specific Performance. The Parties agree that irreparable damage would occur in the event that the provisions of this Agreement were not performed in accordance with their specific terms. Accordingly, it is hereby agreed that the Parties shall be entitled, in addition to any other remedy or relief to which they may be entitled, to injunctive relief (including provisional or temporary injunctive relief) to enforce specifically the terms and provisions hereof and enforcement of any such award of an arbitral tribunal in any court of the United States, or any other any court or tribunal sitting in any state of the United States or in any foreign country that has jurisdiction.
Section 5.14 Amendments. This Agreement may not be modified or amended except by an agreement in writing signed by each of the Parties.
Section 5.15 Waiver of Jury Trial. EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY COURT PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF AND PERMITTED UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 5.15.
Section 5.16 Arbitration. Any dispute with respect to this Agreement or any Ancillary Agreement shall be arbitrated in Alameda County, California, in accordance with the rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. There will be a single neutral arbitrator selected who resides in Alameda County, California. The American Arbitration Association will provide a list of five (5) neutral arbitrators. The claimant and respondent will take turns, with the respondent going first, striking one name at a time from the list of five neutral arbitrators. Each Party will have no more than twenty-four (24) hours to take its turn striking the name of a neutral arbitrator. The final remaining arbitrator will serve as the neutral arbitrator. Either Party may apply to the arbitrator seeking injunctive relief until the arbitrator’s award is rendered or the controversy is otherwise resolved. Either Party also may, without waiving any remedy under this Agreement or any Ancillary Agreement, seek from any California court having jurisdiction, any interim or provisional relief that is necessary to protect the rights and/or property of that Party, pending the determination of the arbitrator.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed on the date first written above by their respective duly authorized officers.
| ABVC BIOPHARMA, INC. | ||
| By: | /s/ Uttam Patil | |
| Name: | Uttam Patil | |
| Title: | Chief Executive Officer | |
| BIOKEY (CAYMAN), INC. | ||
| By: | /s/ T.S. Jiang | |
| Name: | T.S. Jiang | |
| Title: | Chief Executive Officer | |
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