UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 20, 2019
Recro Pharma, Inc.
(Exact name of registrant as specified in its charter)
| Pennsylvania | 001-36329 | 26-1523233 | ||
| (State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
| 490 Lapp Road, Malvern, Pennsylvania | 19355 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (484) 395-2470
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class |
Trading |
Name of Exchange | ||
| Common Stock, par value $0.01 | REPH | Nasdaq Capital Market |
Securities registered pursuant to Section 12(g) of the Act:
None
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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).
Emerging growth company ☒
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 |
Agreements with Baudax Bio, Inc.
On November 21, 2019, Recro Pharma, Inc. (“Recro” or the “Company”) completed the previously announced separation of its acute care business segment, and certain other assets and liabilities. The separation was effected by means of a distribution of all of the outstanding shares of common stock of its wholly-owned subsidiary Baudax Bio, Inc. (“Baudax”) through a dividend of Baudax’s common stock, to Recro’s shareholders of record as of the close of business on November 15, 2019 (the entire transaction being referred to as the “Separation”).
Separation Agreement
In connection with the Separation, Recro entered into a separation agreement with Baudax, dated as of November 20, 2019, that, among other things, sets forth its agreements with Baudax regarding the principal actions to be taken in connection with the Separation (the “Separation Agreement”). The Separation Agreement identifies assets to be transferred, liabilities to be assumed and contracts to be assigned to each of Baudax and Recro as part of the Separation and provides for when and how these transfers, assumptions and assignments will occur.
The Separation Agreement is intended to provide Baudax and Recro with assets to operate their respective businesses and retain or assume liabilities related to those assets. Each of Baudax and Recro agreed to cross indemnities with respect to pre- and post-Separation claims, that are principally designed to place financial responsibility for the obligations and liabilities allocated to Baudax under the Separation Agreement with Baudax and financial responsibility for the obligations and liabilities allocated to Recro under the Separation Agreement with Recro. Recro and Baudax each agreed to submit to binding arbitration to settle any dispute which may arise under the Separation Agreement and ancillary agreements entered into contemporaneous with the Separation.
Tax Matters Agreement
Recro and Baudax also entered into a tax matters agreement, dated as of November 20, 2019, governing each party’s respective rights, responsibilities and obligations to pay taxes for any tax period ending on or before the distribution of all of the outstanding shares of Baudax’s common stock to Recro’s shareholders (the “Distribution”), as well as tax periods ending after the Distribution (the “Tax Matters Agreement”). In addition, the Tax Matters Agreement addresses the allocation of liability for taxes incurred as a result of the Separation. The Tax Matters Agreement provides that each of Recro and Baudax will bear its own costs relating to the preparation, filing and payment of taxes due and payable on any tax returns filed by such entity. Both Recro and Baudax have agreed to indemnify the other party for all tax-related liabilities incurred by the other party arising out of its breach of any covenant in the Tax Matters Agreement.
Employee Matters Agreement
In connection with the Separation, Recro also entered into an employee matters agreement with Baudax, dated as of November 20, 2019 (the “Employee Matters Agreement”). The Employee Matters Agreement governs Recro and Baudax’s respective compensation and benefit obligations with respect to current and former employees, directors and consultants. The Employee Matters Agreement sets forth general principals relating to employee matters in connection with the Separation, such as the assignment of employees, the assumption and retention of liabilities and related assets, expense reimbursements, workers’ compensation, leaves of absence, the provision of comparable benefits, employee service credit, the sharing of employee information and the duplication or acceleration of benefits.
The Employee Matters Agreement allocates liabilities and responsibilities relating to employee compensation and benefit plans and programs with Recro retaining liabilities (both pre- and post-distribution) and responsibilities with respect to retained Recro employees and with Baudax retaining responsibilities with respect to Recro employees who will transfer to Baudax in connection with the Separation. The Employee Matters Agreement provides that, following transfer of employment to Baudax, Baudax’s active employees generally will no longer participate in benefit plans sponsored or maintained by Recro and will commence participation in Baudax’s benefit plans. The Employee Matters Agreement also provides that (i) the Distribution does not constitute a change in control under Recro’s plans, programs, agreements or arrangements and (ii) the Distribution and the assignment, transfer or continuation of employment of employees with another entity will not constitute a severance event under applicable plans, programs, agreements or arrangement.
Transition Services Agreement
Recro and Baudax also entered into a transition services agreement, dated as of November 20, 2019, which sets forth the terms on which Recro will provide to Baudax, and Baudax will provide to Recro, on a transitional basis, certain services or functions that the companies historically have shared (the “Transition Services Agreement”). Transition services include various corporate, administrative and information technology services. The Transition Services Agreement provides for the provision of specified transition services for an initial term of twelve months and will thereafter automatically renew for subsequent twelve-month periods unless one of the parties provides three months’ written notice of its intent to not renew the agreement.
The foregoing descriptions of the Separation Agreement, Tax Matters Agreement, Employee Matters Agreement and Transition Services Agreement are only summaries and are qualified in their entirety by reference to the complete terms and conditions of the Separation Agreement, Tax Matters Agreement, Employee Matters Agreement and Transition Services Agreement, which are attached as Exhibit 2.1, Exhibit 10.1, Exhibit 10.2 and Exhibit 10.3, respectively, to this Current Report on Form 8-K and incorporated herein by reference.
Bifurcation Agreement
Recro Gainesville LLC, a wholly-owned subsidiary of the Company (“Recro Gainesville”), is a party to the Asset Transfer and License Agreement by and between Alkermes Pharma Ireland Limited (“APIL”) and Recro Gainesville (as successor to DV Technology LLC), dated April 10, 2015 (as amended, the “Alkermes License Agreement”), pursuant to which Recro Gainesville exclusively licenses certain intellectual property from APIL, including nanotechnology intellectual property (the “Nanotechnology IP”) for use in the development, manufacturing and commercialization of IV meloxicam.
In connection with the Separation, on November 20, 2019, Recro Gainesville entered into a Partial Assignment, Assumption and Bifurcation Agreement (the “Bifurcation Agreement”) with APIL, pursuant to which Recro Gainesville assigned, conveyed and transferred to Baudax the exclusive worldwide license, to the Nanotechnology IP for use in the development, manufacturing and commercialization of IV meloxicam. Under the Bifurcation Agreement, Baudax agreed to satisfy certain obligations and liabilities under the Alkermes License Agreement, including the obligations to make up to $140 million in earn-out consideration payments to APIL for developmental and commercial milestones achieved relating to IV meloxicam and to pay an earn-out percentage of future net sales of IV meloxicam between 10% and 12%. Recro Gainesville remains responsible for all other rights and obligations under the Alkermes License Agreement that are not bifurcated, assigned to and/or assumed by Baudax.
The foregoing description of the Bifurcation Agreement is qualified in its entirety by reference to the complete terms and conditions of the Bifurcation Agreement, which is attached as Exhibit 10.4 to this Current Report on Form 8-K and incorporated into this Item 1.01 by reference.
| Item 2.01 | Completion of Acquisition or Disposition of Assets |
As described above, on November 21, 2019, Recro completed the Separation. As part of the Separation, Recro shareholders received one share of Baudax common stock for every two and one-half shares of Recro common stock held at the close of business on November 15, 2019. Recro did not issue fractional shares of Baudax’s common stock in the distribution. Instead, Recro shareholders are entitled to receive cash in lieu of fractional Baudax shares.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
The following exhibits are being filed herewith:
SIGNATURES
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, thereunto duly authorized.
| Recro Pharma, Inc. | ||
| By: | /s/ Gerri A. Henwood | |
| Name: | Gerri A. Henwood | |
| Title: | President and Chief Executive Officer | |
Date: November 26, 2019
Exhibit 2.1
SEPARATION AGREEMENT
by and between
RECRO PHARMA, INC.
and
BAUDAX BIO, INC.
Dated as of November 20, 2019
SEPARATION AGREEMENT
TABLE OF CONTENTS
| Page | ||||
| Article I DEFINITIONS AND INTERPRETATION |
2 | |||
| Article II THE SEPARATION |
15 | |||
| Article III CERTAIN ACTIONS AT OR PRIOR TO THE DISTRIBUTION |
24 | |||
| Article IV THE DISTRIBUTION |
24 | |||
| Article V CERTAIN COVENANTS |
27 | |||
| Article VI INDEMNIFICATION |
28 | |||
| Article VII PRESERVATION OF RECORDS; ACCESS TO INFORMATION; CONFIDENTIALITY; PRIVILEGE |
36 | |||
| Article VIII DISPUTE RESOLUTION |
44 | |||
| Article IX INSURANCE MATTERS |
46 | |||
| Article X MISCELLANEOUS |
47 | |||
List of Exhibits and Schedules
| Schedule 1.7(b) | Baudax Assets — Intellectual Property | |
| Schedule 1.7(g) | Baudax Assets — Contracts | |
| Schedule 1.7(k) | Baudax Assets — Other Assets | |
| Schedule 1.7(m) | Baudax Assets — Tangible Assets | |
| Schedule 1.15 | Baudax Product Candidates | |
| Schedule 1.18 | Baudax Trademarks | |
| Schedule 1.41 | Excluded Assets | |
| Schedule 1.42 | Excluded Liabilities | |
| Exhibit A | Employee Matters Agreement | |
| Exhibit B | Tax Matters Agreement | |
| Exhibit C | Transition Services Agreement | |
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SEPARATION AGREEMENT
This SEPARATION AGREEMENT (this “Agreement”), dated as of November 20, 2019, is entered into by and between Recro Pharma, Inc. (“Recro”), a Pennsylvania corporation, and Baudax Bio, Inc. (“Baudax”), a Pennsylvania corporation and a wholly owned Subsidiary of Recro. “Party” or “Parties” means Recro or Baudax, individually or collectively, as the case may be. Each capitalized term used and not elsewhere defined herein has the meaning set forth in Article I.
BACKGROUND
WHEREAS, as of the date of this Agreement, Baudax is a direct, wholly owned Subsidiary of Recro;
WHEREAS, Recro, acting together with its Subsidiaries, currently conducts the CDMO Business and the Acute Care Business;
WHEREAS, the Board of Directors of Recro (the “Board”) has determined that it is appropriate, desirable and in the best interests of Recro to separate Recro into two separate, publicly traded companies (i) the CDMO Business, which shall be owned and conducted, directly or indirectly, by Recro and (ii) the Acute Care Business, which shall be owned and conducted, directly or indirectly, by Baudax (the “Separation”);
WHEREAS, as part of and to implement the Separation, Recro shall cause the Distribution Agent to issue pro rata to the Record Holders pursuant to the Distribution Ratio, all of the issued and outstanding shares of Baudax Common Stock (such issuance, the “Distribution”) on the terms and conditions set forth in this Agreement;
WHEREAS, it is appropriate and desirable to set forth the principal corporate transactions required to effect the Separation and certain other agreements relating to the relationship of Recro and Baudax and their respective Subsidiaries following the Distribution;
WHEREAS, (i) the Board has (a) determined that the Separation and the other transactions contemplated by this Agreement and the Ancillary Agreements (as defined below) have a valid business purpose, are in furtherance of and consistent with its business strategy and are in the best interests of Recro and (b) approved this Agreement and each of the Ancillary Agreements, and (ii) the board of directors of Baudax has approved this Agreement and each of the Ancillary Agreements to which Baudax is a party; and
WHEREAS, the Parties acknowledge that this Agreement and the Ancillary Agreements represent the agreement of Recro and Baudax relating to the Separation and the Distribution, are being entered into together and would not have been entered into independently.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements, provisions and covenants contained in this Agreement, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
As used in this Agreement, the following terms shall have the following meanings:
1.1. “Action” means any demand, action, claim, suit, countersuit, arbitration, inquiry, subpoena, case, litigation, proceeding or investigation (whether civil, criminal, administrative or investigative) by or before any court or grand jury, any Governmental Entity or any arbitration or mediation tribunal.
1.2. “Acute Care Business” means the business, operations and activities conducted at any time prior to the Distribution Effective Time by either Party or any of its Subsidiaries to the extent relating to, arising out of or resulting from the discovery, research, development, manufacturing and commercialization the Baudax Product Candidates, including the discovery, research, manufacturing and development of such products worldwide and services similar to those provided for under the terms of the Transition Services Agreement.
1.3. “Affiliate” means, when used with respect to a specified Person and at a point in, or with respect to a period of, time, a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person at such point in or during such period of time. For the purposes of this definition, “control”, when used with respect to any specified Person 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 the ownership of voting securities or other interests, by Contract or otherwise. It is expressly agreed that no Party or member of its Group shall be deemed to be an Affiliate of the other Party or a member of such other Party’s Group solely by reason of having common stockholders or one or more directors in common or by reason of having been under common control of Recro prior to the Distribution Effective Time.
1.4. “Ancillary Agreements” means the Transaction Agreements other than this Agreement, all Conveyancing and Assumption Instruments and any and all other agreements entered into by the Parties or members of their respective Groups (but as to which no Third Party is a party) in connection with the Separation or the other transactions contemplated by the Transaction Agreements.
1.5. “Arbitrators” has the meaning set forth in Section 8.2(a).
1.6. “Assets” means all rights, title and ownership interests in and to all rights, properties, claims, Contracts, businesses, or assets (including goodwill), wherever located (including in the possession of vendors or other third parties or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible or intangible, whether accrued, contingent or otherwise, in each case, whether or not recorded or reflected on the books and records or financial statements of any Person. Except as otherwise specifically set forth herein or in the Tax Matters Agreement, the rights and obligations of the Parties with respect to Taxes shall be governed by the Tax Matters Agreement and, therefore, Taxes (including any Tax items, attributes or rights to receive any Tax Refunds (as defined in the Tax Matters Agreement)) shall not be treated as Assets governed by this Agreement.
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1.7. “Baudax Assets” means the following, but in each case excluding the Excluded Assets:
(a) all interests in the capital stock of, or any other equity interests in, the members of the Baudax Group held, directly or indirectly, by Recro immediately prior to the Distribution Effective Time (other than the capital stock of Baudax);
(b) all Intellectual Property owned or controlled by either Party immediately prior to the Distribution Effective Time that is exclusively related to the Acute Care Business, including the Intellectual Property identified on Schedule 1.7(b);
(c) any and all Assets that are expressly assigned by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Assets which have been or are to be retained by, or Transferred to, any member of the Baudax Group, including any and all cash and cash equivalents expressly assigned to Baudax pursuant to Section 2.4 and Section 2.12;
(d) any and all Assets reflected on the Baudax Balance Sheet (including accounts receivable outstanding as of the Distribution Date but excluding cash and cash equivalents, the allocation of which shall be governed by Section 2.12) or the accounting records supporting such balance sheet, subject to any dispositions of any of such Assets subsequent to the date of the Baudax Balance Sheet;
(e) any and all Assets acquired by or for any member of the Baudax Group subsequent to the date of the Baudax Balance Sheet which, had they been so acquired on or before such date and owned as of such date, would have been reflected on the Baudax Balance Sheet if prepared on a consistent basis, subject to any dispositions of any of such Assets subsequent to the date of the Baudax Balance Sheet;
(f) all rights, interests and claims of either Party or any of its Subsidiaries as of the Distribution Effective Time to the Baudax Product Candidates, including all rights and claims of either Party or any of its Subsidiaries as of the Distribution Effective Time to all compound, discovery, development and preclinical data; all clinical study data; reports and analyses; product registrations and applications; and marketing registrations and applications (which shall include all United States Food and Drug Administration and other similar regulatory approvals and licenses related to, and all related applications and other information submitted for the purposes of or prepared in connection with obtaining the approval for, a Baudax Product Candidate), to the extent related to the Baudax Product Candidates;
(g) all Contracts to which either Party or any member of its Group is a party or by which it or any member of its Group or any of their respective Assets is bound, in each case, as of immediately prior to the Distribution Effective Time exclusively related to the Acute Care Business and any rights or claims arising thereunder, including the Contracts listed on Schedule 1.7(g);
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(h) all transferable licenses, permits, registrations, approvals, designations and authorizations of either Party or any of the members of its Group as of immediately prior to the Distribution Effective Time which have been issued by any Governmental Entity and which relate exclusively to, or are used exclusively in, the Acute Care Business or the Baudax Assets, and any rights or claims arising thereunder;
(i) all rights, claims, credits, causes of action or rights of set-off against Persons other than members of the Recro Group relating exclusively to the Acute Care Business or the Baudax Assets, including unliquidated rights under Third Party manufacturers’ and vendors’ warranties;
(j) all Baudax Records to the extent in the possession of any member of the Recro Group or the Baudax Group immediately prior to the Distribution Effective Time (and other than Intellectual Property); provided, however, that: (A) Recro shall be entitled to retain a copy of any and all Baudax Records; (B) Recro shall be entitled to retain any materials in clauses (1) and (3) of the definition of Baudax Records that are not reasonably practicable to identify and extract subject to the right of access pursuant to Section 7.3, as determined in Recro’s commercially reasonable discretion; and (C) Recro shall be entitled to redact any portion of the Baudax Records to the extent related to any matter other than the Acute Care Business; provided, however, that such retained materials shall be deemed Confidential Information of Baudax and subject to the provisions of Section 7.6;
(k) the Assets listed or described on Schedule 1.7(k) (which for the avoidance of doubt is not a comprehensive listing of all Baudax Assets and is not intended to limit other clauses of this definition of “Baudax Assets”);
(l) the Malvern Lease;
(m) all tangible equipment (including information technology, equipment and machinery), infrastructure, wires, supplies and other tangible property that is owned by, leased to or licensed to Recro or any of its Subsidiaries immediately prior to the Distribution Effective Time and exclusively related to the Acute Care Business, including the tangible Assets listed or described on Schedule 1.7(m);
(n) any and all other Assets that relate exclusively to or are used exclusively in the Acute Care Business or exclusively related to a Baudax Asset that are held by the Baudax Group or the Recro Group immediately prior to the Distribution Effective Time; and
(o) any and all other Assets that were inadvertently omitted or assigned that, had the Parties given specific consideration to such Assets as of the date of this Agreement, would have otherwise been classified as Baudax Assets based on the principles set forth in this Section 1.7; provided, that no Asset shall be a Baudax Asset solely as a result of this clause (o) unless a claim with respect thereto is made by Baudax on or prior to the date that is six (6) months after the Distribution Date.
1.8. “Baudax Balance Sheet” means the pro forma balance sheet of the Baudax Group, including the notes thereto, as of June 30, 2019, as prepared in accordance with generally accepted accounting principles in the United States and Rule 11-02 of Regulation S-X, and included in the Information Statement.
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1.9. “Baudax Claim” has the meaning set forth in Section 6.2.
1.10. “Baudax Common Stock” means the common stock of Baudax, $0.01 par value.
1.11. “Baudax Designees” means any and all entities (including corporations, general or limited partnerships, trusts, joint ventures, unincorporated organizations, limited liability entities or other entities) designated by Baudax and that will be members of the Baudax Group as of immediately prior to the Distribution Effective Time.
1.12. “Baudax Group” means (a) Baudax, and any entity that is a Subsidiary of Baudax or will be a Subsidiary of Baudax immediately following the Distribution Effective Time, and (b) on and after the Distribution Effective Time, Baudax and any entity that is a Subsidiary of Baudax. Any member of the Baudax Group party to any Conveyancing and Assumption Instrument shall be a Baudax Designee for purposes of this Agreement.
1.13. “Baudax Indemnitees” means the members of the Baudax Group and their respective past, present and future directors, officers, employees and agents, in each case in their respective capacities as such, each of the heirs, executors, administrators, successors and assigns of any of the foregoing.
1.14. “Baudax Liabilities” means the following, but in each case excluding the Excluded Liabilities:
(a) any and all Liabilities to the extent relating to, arising out of or resulting from the conduct of the Acute Care Business, as conducted at any time, including prior to, at or after the Distribution Effective Time (including any Liability to the extent relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority) of the Baudax Group or the Recro Group);
(b) any and all Liabilities to the extent relating to, arising out of or resulting from the conduct of any business by any member of the Baudax Group at any time after the Distribution Effective Time (including any Liability to the extent relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority) of the Baudax Group);
(c) any and all Liabilities to the extent relating to, arising out of or resulting from any Baudax Asset, whether arising before, on or after the Distribution Effective Time;
(d) any and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be assumed or retired or satisfied by any member of the Baudax Group;
(e) any and all Liabilities to the extent relating to, arising out of or resulting from the Securities Litigation;
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(f) any and all Liabilities reflected on the Baudax Balance Sheet or the accounting records supporting such balance sheet and any and all Liabilities incurred by or for Baudax or any member of the Baudax Group or Recro Group subsequent to the date of the Baudax Balance Sheet which, had they been so incurred on or before such date, would have been reflected on the Baudax Balance Sheet if prepared on a consistent basis, subject to any discharge of any of such Liabilities subsequent to the date of the Baudax Balance Sheet; it being understood that (1) the Baudax Balance Sheet shall be used to determine the types of, and methodologies used to determine, those Liabilities that are included in the definition of Baudax Liabilities pursuant to this clause (f); and (2) the amounts set forth on the Baudax Balance Sheet with respect to any Liabilities shall not be treated as minimum amounts or limitations on the amount of such Liabilities that are included in the definition of Baudax Liabilities pursuant to this clause (f);
(g) any and all Liabilities to the extent relating to, arising out of or resulting from the development of Baudax Product Candidates prior to the Distribution Effective Time by any member of the Baudax Group or the Recro Group;
(h) any and all Liabilities relating to, arising out of or resulting from any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statement therein not misleading, with respect to all information contained in the Distribution Disclosure Documents, except to the extent specifically enumerated in clause (b) of the definition of “Excluded Liabilities”;
(i) any and all Liabilities arising directly or indirectly from Actions to the extent relating to the Baudax Assets, the Acute Care Business or any Baudax Liability, including in respect of any alleged tort, breach of Contract, violation or noncompliance with Law or any licenses, permits, registrations, approvals and authorizations, whether arising prior to, on or after the Distribution Date; and
(j) any and all other Liabilities that are held by the Baudax Group or the Recro Group immediately prior to the Distribution Effective Time that were inadvertently omitted or assigned that, had the Parties given specific consideration to such Liabilities as of the date of this Agreement, would have otherwise been classified as a Baudax Liability based on the principles set forth in this Section 1.14; provided that no Liability shall be a Baudax Liability solely as a result of this clause (j) unless a claim with respect thereto is made by Recro or Baudax on or prior to the date that is six (6) months after the Distribution Date.
1.15. “Baudax Product Candidates” means innovative products for hospital and related acute care settings, including, without limitation, those development, pre-clinical and clinical stage product candidates set forth on Schedule 1.15.
1.16. “Baudax Records” means, whether in paper, microfilm, microfiche, computer tape or disc, magnetic tape, digitally or any other form, or stored on remote servers accessed from the internet, (1) all business records to the extent exclusively related to the Baudax Assets or Baudax Liabilities; (2) all of the separate financial and property Tax records of the members of the Baudax Group that do not form part of the general ledger of any member of the
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Recro Group; (3) all other books, records, ledgers, files, documents, correspondence, lists, drawings, photographs, product literature, equipment test records, advertising and promotional materials, distribution lists, customer lists, supplier lists, studies, reports, operating, production and other manuals, manufacturing and quality control records and procedures, research and development files, accounting and business books (including the accounting records prepared in connection with the preparation of Baudax’s financial information included in the Information Statement or any subsequent filings or financial periods through the Distribution Date), records, files, documentation and materials, in all cases to the extent exclusively related to the Acute Care Business; and (4) copies of any Recro templates and form documents used in the operation of the Acute Care Business.
1.17. “Baudax Released Liabilities” has the meaning set forth in Section 6.1(a)(ii).
1.18. “Baudax Trademarks” means all Trademarks that are exclusively related to Baudax and the Acute Care Business, including but not limited to, the Trademarks identified on Schedule 1.18.
1.19. “Business Day” means any day other than Saturday or Sunday and any other day on which commercial banking institutions located in New York, New York are required, or authorized by Law, to remain closed.
1.20. “Cap” has the meaning set forth in Section 6.9(a).
1.21. “CDMO Business” means the contract development and manufacturing business, operations, and activities of Recro or any of its Subsidiaries (whether or not such businesses, operations or activities are or have been terminated, divested or discontinued) and such other activities incidental thereto, other than the Acute Care Business and, after the Distribution Effective Time, those entities or businesses acquired or established by or for any member of the Recro Group.
1.22. “Claiming Party” has the meaning set forth in Section 6.5(b).
1.23. “Code” has the meaning set forth in the Tax Matters Agreement.
1.24. “Commission” means the U.S. Securities and Exchange Commission.
1.25. “Confidential Information” means, with respect to a Party, all confidential or proprietary information to the extent concerning: (i) such Party or any of its Subsidiaries, (ii) the Acute Care Business, any Baudax Assets or any Baudax Liabilities, and (iii) the CDMO Business, any Recro Retained Assets or any Recro Retained Liabilities, in each case (clauses (i)-(iii)) including any such information furnished pursuant to Article II or otherwise pursuant to this Agreement or any Ancillary Agreement; provided, however, that Confidential Information shall not include any information that is (1) in the public domain or known to the public through no fault of the receiving Party or any of its Subsidiaries, (2) lawfully acquired after the Distribution Effective Time by the receiving Party or any of its Subsidiaries from Third Parties not known to be subject to confidentiality obligations with respect to such information or (3) independently developed by the receiving Party or any of its Subsidiaries after the Distribution Effective Time
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without reference to any Confidential Information of the disclosing Party or any of its Subsidiaries. For the avoidance of doubt, subject to the foregoing proviso, any information that Baudax receives from any Third Party to a Third Party Agreement retained by any member of the Recro Group regarding Recro’s technology, business or objectives shall be deemed to be Confidential Information of Recro. All confidential or proprietary information to the extent concerning the Acute Care Business, any Baudax Assets or any Baudax Liabilities is hereby deemed to be part of Baudax’s, but not Recro’s, Confidential Information. All confidential or proprietary information to the extent concerning the CDMO Business, any Recro Retained Assets or any Recro Retained Liabilities is hereby deemed to be part of Recro’s, but not Baudax’s, Confidential Information.
1.26. “Consents” means any consents, waivers, notices, reports or other filings to be obtained from or made, including with respect to any Contract, or any registrations, licenses, permits, authorizations to be obtained from, or approvals from, or notification requirements to, any Third Parties, including any Governmental Entity.
1.27. “Contract” means any agreement, contract, subcontract, obligation, binding understanding, note, indenture, instrument, option, lease, promise, arrangement, release, warranty, license, sublicense, insurance policy, benefit plan, purchase order or legally binding commitment or undertaking of any nature (whether written or oral and whether express or implied).
1.28. “Conveyancing and Assumption Instruments” means, collectively, the various Contracts (other than any Transaction Agreement) by and between or among any member(s) of the Recro Group, on the one hand, and any member(s) of the Baudax Group, on the other hand, including related asset transfer agreements or Intellectual Property assignment agreements and other documents entered into prior to the Distribution Effective Time and to be entered into, in each case to effect the Transfer of Assets and the Assumption of Liabilities in the manner contemplated by the Transaction Agreements, in such form or forms as the applicable parties thereto agree.
1.29. “Copyrights” copyrights and copyrightable subject matter, excluding Know-How, Patents and Trademarks.
1.30. “Deal Communications” has the meaning set forth in Section 10.23(d).
1.31. “Direct Claim” has the meaning set forth in Section 6.5(a).
1.32. “Dispute Notice” has the meaning set forth in Section 8.1.
1.33. “Disputes” has the meaning set forth in Section 8.1.
1.34. “Distribution Agent” means Broadridge Corporate Issuer Solutions, Inc.
1.35. “Distribution Date” means the date, as shall be determined by the Board, on which the Distribution occurs.
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1.36. “Distribution Disclosure Documents” means the Form 10 and all exhibits thereto (including the Information Statement), any current reports on Form 8-K and the registration statement on Form S-8 related to securities to be offered under Baudax’s employee benefit plans, in each case as filed or furnished by Baudax with or to the Commission in connection with the Distribution and including any amendments or supplements thereto.
1.37. “Distribution Effective Time” means 12:01 a.m. on , 2019, Eastern time, on the Distribution Date.
1.38. “Distribution Ratio” means one share of Baudax Common Stock for every two and one-half shares of Recro Common Stock.
1.39. “Employee Matters Agreement” means the Employee Matters Agreement by and between Recro and Baudax, in the form attached hereto as Exhibit A.
1.40. “Exchange Act” means the Securities Exchange Act of 1934, as amended.
1.41. “Excluded Assets” means: (a) the Assets listed or described on Schedule 1.41; (b) all cash and cash equivalents, except to the extent expressly assigned to the Baudax Group pursuant to Section 2.4 and Section 2.12; (c) subject to the rights of the Baudax Group pursuant to Article IX, all Policies binders and claims and rights thereunder and all prepaid insurance premiums (other than any insurance policies acquired prior to the Distribution Effective Time directly by and in the name of Baudax or a member of the Baudax Group); (d) any and all work papers of Recro’s auditors, excluding the accounting records prepared in connection with the preparation of Baudax’s financial information included in the Information Statement or any subsequent filings or financial periods through the Distribution Date, and any other Tax records (including accounting records, other than the accounting records prepared in connection with the preparation of the financial information included in the Information Statement or any subsequent filings or financial periods through the Distribution Date) of any Recro Group member (which will be addressed in the Tax Matters Agreement), excluding all Recro templates and form documents used in the operation of the Acute Care Business; and (e) any and all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Assets which have been or are to be retained by, or Transferred to, any member of the Recro Group.
1.42. “Excluded Liabilities” means (a) the Liabilities listed or described on Schedule 1.42; (b) with respect to all information contained in the Distribution Disclosure Documents, any and all Liabilities relating to, arising out of or resulting from any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statement therein not misleading described in the sections of the Distribution Disclosure Documents referenced on Schedule 1.42 that is expressly related to the Recro Group and not related to the Baudax Group or the Baudax Business; and (c) any and all Liabilities to the extent expressly contemplated by this Agreement or by any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be assumed or discharged by any member of the Recro Group.
1.43. “Existing Counsel” means Pepper Hamilton LLP.
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1.44. “Form 10” means the registration statement on Form 10 (Registration No. 001-39101) filed by Baudax with the Commission under the Exchange Act in connection with the Distribution, including any amendment or supplement thereto.
1.45. “Governmental Authority” means any supranational, international, national, federal, state, provincial or local court, government, department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority, including Nasdaq, the NYSE and any similar self-regulatory body under applicable securities Laws.
1.46. “Governmental Entity” means any nation or government, any state, municipality or other political subdivision thereof and any entity, body, agency, commission, department, board, bureau or court, whether domestic, foreign, multinational, or supranational exercising executive, legislative, judicial, regulatory, self-regulatory or administrative functions of or pertaining to government and any executive official thereof.
1.47. “Group” means (i) with respect to Recro, the Recro Group and (ii) with respect to Baudax, the Baudax Group, as the context requires.
1.48. “Indemnifiable Losses” means any and all Liabilities, including damages, losses, obligations, penalties, judgments, settlements, claims, payments, fines and other costs and expenses (but excluding consequential, punitive, incidental and similar damages except to the extent paid to a Third Party) of any and all Actions and demands, assessments, judgments, settlements and compromises relating thereto and the reasonable fees and expenses of attorneys, accountants, consultants and other professionals incurred in the investigation or defense thereof or the enforcement of rights hereunder.
1.49. “Indemnifying Party” means, with respect to any Direct Claim or Third Party Claim, the Party which is or may be required pursuant to Article VI to provide indemnification pursuant to such claim.
1.50. “Indemnitee” means, with respect to any Direct Claim or Third Party Claim, the Recro Indemnitee or Baudax Indemnitee, as the case may be, that may be entitled to indemnification hereunder with respect to such claim.
1.51. “Indemnity Payment” has the meaning set forth in Section 6.6(a).
1.52. “Information Statement” means the Information Statement attached as Exhibit 99.1 to the Form 10, to be distributed or made available to the holders of shares of Recro Common Stock in connection with the Distribution, including any amendment or supplement thereto.
1.53. “Insurance Proceeds” means those monies (a) received by an insured from a Third Party insurance carrier, or (b) paid by a Third Party insurance carrier on behalf of an insured, in either case net of any applicable deductible or retention.
1.54. “Intellectual Property” means all intellectual property, whether registered or unregistered and whether granted, pending or expired, of every kind and description throughout the world, including all U.S. and non-U.S.: (a) Trademarks; (b) Patents; (c) Copyrights; (d) rights in software; (e) all applications and registrations for the foregoing; (f) Know-How; and (g) all rights and remedies against past, present, and future infringement, misappropriation, or other violation thereof.
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1.55. “Intercompany Account” means any receivable, payable or loan between any member of the Recro Group, on the one hand, and any member of the Baudax Group, on the other hand, except for any such receivable, payable or loan that arises pursuant to this Agreement or any Ancillary Agreement.
1.56. “Internal Reorganization” means the allocation and transfer or assignment of Assets and Liabilities, including by means of the Conveyance and Assumption Instruments, resulting in (a) the Baudax Group owning and operating the Acute Care Business, and (b) the Recro Group continuing to own and operate the Recro Retained Business, as described in the steps plan provided to Baudax by Recro prior to the date hereof, as updated from time to time by Recro at its sole discretion prior to the Distribution.
1.57. “Know-How” means, all trade secrets, and all other confidential or proprietary information, know-how, trade secrets, clinical data, non-clinical data, pre-clinical data, inventions, processes, formulae and methodologies, excluding Patents.
1.58. “Law” means any applicable U.S. or non-U.S. federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, income tax treaty, order, requirement or rule of law (including common law) or other binding directives promulgated, issued, entered into or taken by any Governmental Entity.
1.59. “Liabilities” means any and all indebtedness, liabilities, costs, expenses, interest and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, known or unknown, reserved or unreserved, or determined or determinable, including those arising under any Law, Action, or in connection with any dispute, whether asserted or unasserted, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Entity and those arising under any Contract or any fines, damages or equitable relief which may be imposed and including all costs and expenses related thereto. Except as otherwise specifically set forth herein or in the Tax Matters Agreement, the rights and obligations of the Parties with respect to Taxes shall be governed by the Tax Matters Agreement and, therefore, Taxes shall not be treated as Liabilities governed by this Agreement.
1.60. “Malvern Lease” means that certain Lease Agreement, dated as of August 24, 2016, between WPT LAND 2 LP and Recro with respect to 420-500 Lapp Road, Malvern, PA 19355.
1.61. “Monetary Penalty” means any monetary payment ordered or imposed by a court and/or agreed with, or ordered or imposed by, any other entity, whether through a judgment, order, settlement agreement, deferred prosecution agreement, non-prosecution agreement, declination or otherwise, including, without limitation, fines, penalties, restitution, forfeiture and/or disgorgement.
1.62. “Nasdaq” means the Nasdaq Stock Market LLC.
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1.63. “Negotiation Period” has the meaning set forth in Section 8.1.
1.64. “Patents” means all patents and patent applications, and any and all related national or international counterparts thereto and utility models, design patents and certificates of invention, including any provisionals, divisionals, continuations, continuations-in-part, reissues, reexaminations, supplemental examinations, substitutions, converted provisionals, continued prosecution applications and extensions thereof (including supplementary protection certificates).
1.65. “Person” mean an individual, a general or limited partnership, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity and any Governmental Entity.
1.66. “Policies” means insurance policies and insurance contracts of any kind (other than life and benefits policies or contracts), including primary, excess and umbrella policies, commercial general liability policies, fiduciary liability, directors and officers liability, product liability, automobile, property and casualty, workers’ compensation and employee dishonesty insurance policies and bonds, together with the rights, benefits and privileges thereunder.
1.67. “Prime Rate” means the “prime rate” as published in The Wall Street Journal, Eastern Edition.
1.68. “Privilege” means all privileges, immunities or other protections from disclosure which may be asserted under applicable Law, including, but not limited to, attorney-client privilege, self-evaluative privilege, joint defense privilege, common interest privilege and protection under the work product doctrine.
1.69. “Privileged Deal Communications” has the meaning set forth in Section 10.23(d).
1.70. “Privileged Information” means information subject to Privilege.
1.71. “Record Date” means November 15, 2019, as determined by the Board as the record date for determining the holders of record of Recro Common Stock entitled to receive Baudax Common Stock in the Distribution.
1.72. “Record Holders” means the holders of record of Recro Common Stock as of the Record Date.
1.73. “Recro Claim” has the meaning set forth in Section 6.3.
1.74. “Recro Common Stock” means the common stock of Recro, par value $0.01 per share.
1.75. “Recro Designees” shall mean any and all entities (including corporations, general or limited partnerships, trusts, joint ventures, unincorporated organizations, limited liability entities or other entities) designated by Recro and that will be members of the Recro Group as of immediately prior to the Distribution Effective Time. For clarity, members of the Recro Group party to any Conveyancing and Assumption Instrument shall be a Recro Designee for purposes of this Agreement.
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1.76. “Recro Group” means (a) prior to the Distribution Effective Time, Recro and each entity that will be a Subsidiary of Recro immediately following the Distribution Effective Time, and (b) from and after the Distribution Effective Time, Recro and each entity that is a Subsidiary of Recro. Any member of the Recro Group party to any Conveyancing and Assumption Instrument shall be a Recro Designee for purposes of this Agreement.
1.77. “Recro Indemnitees” means the members of the Recro Group and their respective past, present and future directors, officers, employees and agents, in each case in their respective capacities as such, and each of the heirs, executors, administrators, successors and assigns of any of the foregoing.
1.78. “Recro Released Liabilities” has the meaning set forth in Section 6.1(a)(i).
1.79. “Recro Retained Assets” means (a) any and all Assets of Recro or any of its Subsidiaries that are not Baudax Assets and, after the Distribution Effective Time, any and all Assets that are acquired or otherwise become Assets of any member of the Recro Group and (b) any Assets that are held by the Baudax Group or the Recro Group immediately prior to the Distribution Effective Time not exclusively related to the Acute Care Business that were inadvertently omitted or assigned that, had the Parties given specific consideration to such Assets as of the date of this Agreement, would have otherwise been classified as a Recro Retained Asset based on the principles set forth in this Section 1.79; provided that no Asset shall be a Recro Retained Asset solely as a result of this clause (b) unless a claim with respect thereto is made by Recro on or prior to the date that is six (6) months after the Distribution Date. For clarity, Recro Retained Assets shall include all Excluded Assets.
1.80. “Recro Retained Liabilities” means (a) all Liabilities of Recro or any of its Subsidiaries that are not Baudax Liabilities, and, after the Distribution Effective Time, all Liabilities of each member of the Recro Group, and (b) any and all other Liabilities of Recro or any of its Subsidiaries immediately prior to the Distribution Effective Time that were inadvertently omitted or assigned that, had the Parties given specific consideration to such Liabilities as of the date of this Agreement, would have otherwise been classified as a Recro Retained Liability based on the principles set forth in this Section 1.80; provided, that no Liability shall be a Recro Retained Liability solely as a result of this clause (b) unless a claim with respect thereto is made by Recro or Baudax on or prior to the date that is six (6) months after the Distribution Date. For clarity, Recro Retained Liabilities shall include all Excluded Liabilities.
1.81. “Recro Third Party Credit Support Instruments” means that certain Credit Agreement, dated as of November 17, 2017, as amended, among Recro and certain domestic Subsidiaries of Recro (collectively, the “Loan Parties”), Athyrium Opportunities III Acquisition LP, as administrative agent, and the lenders from time to time party thereto, and any ancillary agreements executed and delivered by the Loan Parties in connection therewith.
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1.82. “Registered” means issued by, registered or filed with, renewed by or the subject of a pending application before any Governmental Authority or internet domain name registrar.
1.83. “Representatives” means with respect to any Person, any of such Person’s directors, officers, employees, agents, consultants, advisors, accountants, attorneys or other representatives.
1.84. “Retained Names and Marks” has the meaning set forth in Section 5.1.
1.85. “Securities Act” means the Securities Act of 1933, as amended.
1.86. “Securities Litigation” means the securities class action filed against Recro and certain of Recro’s officers and directors on May 31, 2018 (U.S. District Court for the Eastern District of Pennsylvania (Case No. 2:18-cv-02279-MMB)), for alleged violations of Section 10(b) and 20(a) of the Exchange Act and Rule 10(b)(5) promulgated thereunder.
1.87. “Securities Litigation Costs” means any legal fees, disbursements, costs and expenses incurred by either Party or its Affiliates in the course of the investigation, defense, management or settlement of the Securities Litigation, including, without limitation, court costs, external advisers’ costs and in-house legal costs and management time.
1.88. “Security Interest” means any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-entry, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever, excluding restrictions on transfer under securities Laws.
1.89. “Shared Privileged Information” has the meaning set forth in Section 7.7(b)(i).
1.90. “Subsidiary” means with respect to any Person (i) a corporation, fifty percent (50%) or more of the voting or capital stock of which is, as of the time in question, directly or indirectly owned by such Person and (ii) any other Person in which such Person, directly or indirectly, owns fifty percent (50%) or more of the equity or economic interest thereof or has the power to elect or direct the election of fifty percent (50%) or more of the members of the governing body of such Person.
1.91. “Tax” or “Taxes” has the meaning set forth in the Tax Matters Agreement.
1.92. “Tax Matters Agreement” means the Tax Matters Agreement by and between Recro and Baudax, in the form attached hereto as Exhibit B.
1.93. “Tax Returns” has the meaning set forth in the Tax Matters Agreement.
1.94. “Third Party” means any Person other than the Parties or any of their respective Subsidiaries.
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1.95. “Third Party Agreements” means any Contract between or among a Party (or any member of its Group) and any Third Party (it being understood that to the extent that the rights and obligations of the Parties and the members of their respective Groups under any such Contracts constitute Baudax Assets or Baudax Liabilities, or Recro Retained Assets or Recro Retained Liabilities, such Contracts shall be assigned or retained pursuant to Article II).
1.96. “Third Party Claim” has the meaning set forth in Section 6.5(b).
1.97. “Third Party Proceeds” has the meaning set forth in Section 6.6(a).
1.98. “Trademarks” means all trademarks, trade dress, service marks, certification marks, logos, slogans, design rights, names, corporate names, trade names, internet domain names, social media accounts and addresses and other similar designations of source or origin, together with the goodwill of the business symbolized by any of the foregoing.
1.99. “Transaction Agreement” means any of this Agreement, the Employee Matters Agreement, the Tax Matters Agreement and the Transition Services Agreement.
1.100. “Transfer” has the meaning set forth in Section 2.2(b)(i).
1.101. “Transition Services Agreement” means the Transition Services Agreement by and between Recro and Baudax, under which Baudax and Recro will temporarily provide certain services to each other, in the form attached hereto as Exhibit C.
ARTICLE II
THE SEPARATION
2.1. General. Subject to the terms and conditions of this Agreement, the Parties shall use, and shall cause their respective Subsidiaries to use, commercially reasonable efforts to consummate the transactions contemplated hereby, a portion of which may have already been implemented prior to the date hereof, including the completion of the Internal Reorganization.
2.2. Restructuring; Transfer of Assets; Assumption of Liabilities.
(a) Internal Reorganization. Prior to the Distribution Effective Time, the Parties shall complete the Internal Reorganization, except for such steps (if any) as Recro in its sole discretion shall have determined need not be completed or may be completed after the Distribution Effective Time; provided, however, that any such determination shall not limit the Parties’ respective obligations under Section 2.2(b).
(b) Transfer of Assets and Assumption of Liabilities. Unless otherwise provided in this Agreement or in any Ancillary Agreement, on or prior to the Distribution Effective Time and to the extent not previously effected pursuant to the Internal Reorganization:
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(i) Recro shall, and shall cause the applicable member of the Recro Group to, contribute, assign, transfer, convey and deliver (“Transfer”) to Baudax, or the applicable Baudax Designees, and Baudax or such Baudax Designees shall accept from Recro and the applicable members of the Recro Group, all of Recro’s and such Recro Group member’s respective direct or indirect right, title and interest in and to all Baudax Assets held by Recro or a member of the Recro Group (it being understood that if any Baudax Asset shall be held by a Person all of the outstanding equity of which is included in the Baudax Assets to be Transferred pursuant to this Section 2.2(b)(i), such Baudax Asset may be considered to be so Transferred to Baudax or the applicable Baudax Designee as a result of the Transfer of all of the equity interests in such Person from Recro or the applicable member(s) of the Recro Group to Baudax or the applicable Baudax Designee); and
(ii) Baudax shall, and shall cause the applicable members of the Baudax Group to, Transfer to Recro or the applicable Recro Designees, and Recro or such Recro Designees shall accept from Baudax and the applicable members of the Baudax Group, all of Baudax and such Baudax Group member’s respective direct or indirect right, title and interest in and to all Recro Retained Assets held by Baudax or a member of the Baudax Group (it being understood that if any Recro Retained Asset shall be held by a Person all of the outstanding equity of which is included in the Recro Retained Assets to be Transferred pursuant to this Section 2.2(b)(ii), such Recro Retained Asset may be considered to be so Transferred to Recro or the applicable Recro Designee as a result of the Transfer of all of the equity interests in such Person from Baudax or the applicable member(s) of the Baudax Group to Recro or the applicable Recro Designee).
(iii) Assumption of Liabilities. (1) Recro shall, or shall cause another member of the Recro Group to, accept, assume (or, as applicable, retain) and perform, discharge and fulfill, in accordance with their respective terms, all of the Recro Retained Liabilities and (2) Baudax shall, or shall cause another member of the Baudax Group to assume all of the Baudax Liabilities, in each case regardless of (A) when or where such Liabilities arose or arise, (B) where or against whom such Liabilities are asserted or determined, (C) whether such Liabilities arise from or are alleged to arise from negligence, gross negligence, recklessness, violation of law, willful misconduct, bad faith, fraud or misrepresentation by any member of the Recro Group or the Baudax Group, as the case may be, or any of their past or present respective directors, officers, employees, or agents, (D) which entity is named in any action associated with any Liability and (E) whether the facts on which such Liabilities are based occurred prior to, on or after the date hereof.
(c) The Parties shall use their respective commercially reasonable efforts to obtain the Consents required to Transfer any Contracts, licenses, permits, authorizations and other Assets as contemplated by this Agreement. Notwithstanding anything herein to the contrary, no Contract or other Asset shall be Transferred if it would violate applicable Law or, in the case of a Contract, the rights of any Third Party to such Contract; provided that Section 2.7, to the extent provided therein, shall apply to such Asset or Contract.
(d) It is understood and agreed by the Parties that certain of the Transfers or assumptions referenced in Section 2.2(a) have heretofore occurred and, as a result, no additional Transfers or assumptions by any member of the Recro Group or Baudax Group, as applicable, shall be deemed to occur upon the execution of this Agreement with respect thereto. Moreover, to the extent that any member of the Recro Group or Baudax Group, as applicable, is liable for any Recro Retained Liability or Baudax Liability, respectively, by operation of Law
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immediately following any Transfer in accordance with this Agreement or any Conveyancing and Assumption Instruments, there shall be no need for any other member of the Recro Group or Baudax Group, as applicable, to assume such Liability in connection with the operation of Section 2.2(a) and, accordingly, no other member of such Group shall assume such Liability in connection with Section 2.2(a).
(e) In connection with, and in furtherance of, the Transfers of Assets and the assumptions of Liabilities contemplated by this Agreement, the Parties shall execute or cause to be executed, on or after the date hereof by the appropriate entities to the extent not executed prior to the date hereof, any Conveyancing and Assumption Instruments necessary to evidence the valid Transfer to the applicable Party or member of such Party’s Group of all right, title and interest in and to its accepted Assets and the valid and effective assumption by the applicable Party or member of such Party’s Group of its respective Liabilities for Transfers and assumptions to be effected pursuant to Pennsylvania Law or the Laws of one of the other states of the United States or, if not appropriate for a given Transfer or assumption, and for Transfers or assumptions to be effected pursuant to non-U.S. Laws, in such form as the Parties shall reasonably agree.
(f) Recro hereby waives compliance by itself and each and every member of the Recro Group with the requirements and provisions of any “bulk-sale” or “bulk transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the Recro Retained Assets to Recro or any member of the Recro Group.
(g) Baudax hereby waives compliance by itself and each and every member of the Baudax Group with the requirements and provisions of any “bulk-sale” or “bulk transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the Baudax Assets to Baudax or any member of the Baudax Group.
2.3. Intercompany Accounts. Each Intercompany Account which exists and is reflected immediately prior to the Distribution Effective Time in any general ledger account or other records of Recro, Baudax or any of their respective Affiliates, shall terminate effective as of immediately prior to the Distribution Effective Time.
2.4. Cash Contribution. At or prior to the Distribution Effective Time, Recro shall have made a cash contribution of $19,000,000 to Baudax.
2.5. Limitation of Liability. Except as provided in this Section 2.5 and in Article VI, neither Recro nor Baudax nor any member of their respective Groups shall have any Liability to the other or any member of the other Party’s Group based upon, arising out of or resulting from any agreement, arrangement, course of dealing or understanding existing on or prior to the Distribution Effective Time other than pursuant to (a) this Agreement or any Ancillary Agreement, (b) any Third Party Agreement; or (c) any other Contract or agreement entered into in connection with the consummation of the transactions contemplated by the Transaction Agreements, and any such Liability, whether or not in writing, that is not reflected in any of the foregoing, is hereby irrevocably cancelled, released and waived effective as of the Distribution Effective Time. No such terminated agreement, arrangement, course of dealing or understanding (including any provision thereof that purports to survive termination) shall be of any further force or effect after the Distribution Effective Time.
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2.6. Credit Support.
(a) Third Party Credit Support. Each Party shall, and shall procure that each member of its respective Group shall, use commercially reasonable efforts to procure that, unless otherwise agreed in writing between the Parties, effective on or prior to, the Distribution Effective Time:
(i) each member of the Baudax Group is released from all Recro Third Party Credit Support Instruments; and
(ii) the beneficiaries of such Recro Third Party Credit Support Instruments provide written releases to Baudax indicating that Baudax or the relevant member of the Baudax Group shall, effective upon the consummation of the Separation, have no liability with respect to such Recro Third Party Credit Support Instruments, in a form reasonably satisfactory to Baudax.
(b) Credit Support Indemnitees. With effect as of the Distribution Effective Time, Recro shall indemnify on demand and hold harmless Baudax and each member of the Baudax Group and their respective directors, officers, managers, members, agents and employees against and in respect of all Liabilities actually suffered or incurred by any of them after the Distribution Effective Time under or by reason of any Recro Third Party Credit Support Instrument that is not released on or prior to the Distribution Effective Time.
2.7. Transfers Not Effected at or Prior to the Distribution Effective Time; Transfers Deemed Effective as of the Distribution Effective Time.
(a) If and to the extent that the valid, complete and perfected Transfer to the Baudax Group of any Baudax Asset or assumption by the Baudax Group of any Baudax Liability, in each case contemplated hereby, would be a violation of applicable Law or require any Consent in connection with the Separation that has not been obtained or made by the Distribution Effective Time then, unless the Parties mutually shall otherwise agree, the Transfer to the Baudax Group of such Baudax Assets or the assumption by the Baudax Group of such Baudax Liabilities, as the case may be, shall be automatically deemed deferred and any such purported Transfer or assumption shall be null and void until such time as all legal impediments are removed or such Consent has been obtained or made. Notwithstanding the foregoing, any such Baudax Asset or Baudax Liability shall continue to constitute a Baudax Asset or Baudax Liability, as applicable, for all other purposes of this Agreement.
(b) If and to the extent that the valid, complete and perfected Transfer to the Recro Group of any Recro Retained Asset or assumption by the Recro Group of any Recro Retained Liability, in each case contemplated hereby, would be a violation of applicable Law or require any Consent in connection with the Separation that has not been obtained or made by the Distribution Effective Time then, unless the Parties mutually shall otherwise agree, the Transfer to the Recro Group of such Recro Retained Assets or the assumption by the Recro Group of such Recro Retained Liabilities, as the case may be, shall be automatically deemed deferred and any such purported Transfer or assumption shall be null and void until such time as all legal impediments are removed or such Consent has been obtained or made. Notwithstanding the foregoing, any such Recro Retained Assets or Recro Retained Liabilities shall continue to constitute Recro Retained Assets and Recro Retained Liabilities for all other purposes of this Agreement.
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(c) With respect to Assets and Liabilities described in Section 2.7(a) and Section 2.7(b), each of Recro and Baudax shall, and shall cause the members of its respective Group to, (i) treat for all Tax purposes (1) the deferred Assets as assets having been Transferred to and owned by the Person entitled to such Assets not later than immediately prior to the Distribution Effective Time and (2) the deferred Liabilities as having been assumed by the Person intended to be subject to such Liabilities not later than immediately prior to the Distribution Effective Time and (ii) neither report nor take any Tax position (on a Tax Return or otherwise) inconsistent with such treatment (unless required by a change in applicable Tax Law or good faith resolution of a Tax dispute, as provided in the Tax Matters Agreement).
(d) In the event that any Transfer of Assets or assumption of Liabilities intended to be effected hereunder has not been consummated at or prior to the Distribution Effective Time, whether as a result of the provisions of Section 2.7(a) or Section 2.7(b) or for any other reason:
(i) unless the Parties shall otherwise agree, the Parties and their respective Group members shall cooperate and use commercially reasonable efforts to seek to obtain, in accordance with applicable Law, any necessary Consents for the Transfer of all Assets and the assumption of all Liabilities contemplated to be Transferred or assumed, as applicable, pursuant to this Article II to the fullest extent permitted by applicable Law; provided, however, that, except to the extent expressly provided in this Agreement or any of the Ancillary Agreements or as otherwise agreed between Recro and Baudax, neither Recro nor Baudax shall be obligated to make any payment, incur any Liability or offer or grant any accommodation (financial or otherwise, regardless of any provision to the contrary in any underlying Contract, including any requirements for the securing or posting of any bonds, letters of credit or similar instruments, or the furnishing of any guarantees) to any Third Party to obtain or make such Consent; and
(ii) (1) the Party (or the applicable member of its Group) retaining such Asset shall thereafter hold (or shall cause such member in its Group to hold) such Asset in trust for the use and benefit of the Party entitled thereto (at the expense of the Party entitled thereto) and (2) the Party intended to assume such Liability shall, or shall cause the applicable member of its Group to, pay or reimburse the Party retaining such Liability for all amounts paid or incurred in connection with the retention of such Liability. To the extent the foregoing applies to any Contracts to be assigned for which any necessary Consents are not received prior to the Distribution Effective Time, the treatment of such Contracts shall, for the avoidance of doubt, be subject to Section 2.9 and Section 2.10, to the extent applicable. In addition, the Party (or the applicable member of its Group) retaining such Asset or Liability shall (or shall cause such member in its Group to) treat, insofar as reasonably possible and to the extent permitted by applicable Law, such Asset or Liability in the ordinary course of business in accordance with past practice and take such other actions as may be reasonably requested by the Party to which such Asset is to be Transferred or by the Party assuming such Liability in order to
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place such Party, insofar as reasonably possible and to the extent permitted by applicable Law, in the same position as if such Asset or Liability had been Transferred or assumed as contemplated hereby, and so that all the benefits and burdens relating to such Asset or Liability, including possession, use, risk of loss, potential for income and gain, and dominion, control and command over such Asset or Liability, are to inure from and after the Distribution Effective Time to the applicable member or members of the Recro Group or the Baudax Group entitled to the receipt of such Asset or required to assume such Liability. In furtherance of the foregoing, the Parties agree that, as of the Distribution Effective Time, each Party shall be deemed to have acquired complete and sole beneficial ownership over all such Assets, together with all rights, powers and privileges incident thereto, and shall be deemed to have assumed in accordance with the terms of this Agreement all such Liabilities, and all duties, obligations and responsibilities incident thereto, which such Party is entitled to acquire or required to assume pursuant to the terms of the Transaction Agreements.
(e) If and when the Consents or conditions, the absence or non-satisfaction of which caused the deferral of Transfer of any Asset or deferral of the assumption of any Liability pursuant to Section 2.7(a) or Section 2.7(b), are obtained or satisfied, the Transfer or assumption of the applicable Asset or Liability shall be effected without further consideration in accordance with and subject to the terms of this Agreement (including Section 2.2) or the applicable Ancillary Agreement, and shall, to the extent possible without the imposition of any undue cost on any Party, be deemed to have become effective as of the Distribution Effective Time.
(f) The Party (or the applicable member of its Group) retaining any Asset or Liability due to the deferral of the Transfer of such Asset or the deferral of the assumption of such Liability pursuant to Section 2.7(a) or Section 2.7(b) or otherwise shall (i) not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced, assumed, or agreed in advance to be reimbursed by the Party (or the applicable member of its Group) entitled to such Asset or the Person intended to be subject to such Liability, other than reasonable attorneys’ fees and recording or similar or other incidental fees, all of which shall be promptly reimbursed by the Party (or the applicable member of its Group) entitled to such Asset or the Person intended to be subject to such Liability and (ii) be indemnified for all Indemnifiable Losses or other Liabilities arising out of any actions (or omissions to act) of such retaining Party taken (or not taken) at the written direction of the other Party (or the applicable member of its Group) in connection with and relating to such retained Asset or Liability, as the case may be.
2.8. Further Assurances.
(a) In addition to and without limiting the actions specifically provided for elsewhere in this Agreement and subject to the limitations expressly set forth in this Agreement, including Section 2.7, each of the Parties shall cooperate with each other and shall use (and shall cause its respective Subsidiaries to use) commercially reasonable efforts, from and after the Distribution Effective Time, to take, or to cause to be taken, all actions, and to do, or to cause to be done, all things reasonably necessary on its part under applicable Law or contractual obligations to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements as promptly as reasonably practicable.
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(b) Without limiting the foregoing, from and after the Distribution Effective Time:
(i) each Party shall cooperate with the other Party to execute and deliver, and use commercially reasonable efforts to cause to be executed and delivered, all instruments, including instruments of Transfer or title, and to make all filings with, and to obtain all Consents, and to take or cause to be taken all such other actions as such Party may reasonably be requested to take by any other Party from time to time, as promptly as reasonably practicable, 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 applicable Assets and the assignment and assumption of the applicable Liabilities and the other transactions contemplated hereby and thereby; and
(ii) in the event that any Party (or member of such Party’s Group) receives any Assets (including the receipt of payments made pursuant to Contracts and proceeds from accounts receivable with respect to such Asset) or is liable for any Liability that is otherwise assigned to any Person that is a member of the other Group pursuant to this Agreement or the Ancillary Agreements, such Party agrees to promptly Transfer, or cause to be Transferred, without further consideration such Asset or Liability to the other Party so entitled thereto (or to a member of such other Party’s Group as designated by such other Party) and, prior to any such Transfer, such Asset or Liability, as the case may be, shall be held in accordance with the provisions of Section 2.7; provided that the provisions of this Section 2.8(b)(ii) are not intended to, and shall not, be deemed to constitute an authorization by any Party to permit the other to accept service of process on its behalf and no Party is or shall be deemed to be the agent of any other Party for service of process purposes.
(c) From and after the Distribution Effective Time, except with respect to the Securities Litigation, with respect to any Action where any Party hereto is a defendant, when and if requested by such Party, the other Party shall use commercially reasonable efforts to petition the applicable court to remove the requesting Party as a defendant to the extent that such Action relates solely to Assets or Liabilities that the other Party (or any member of such other Party’s Group) has been assigned pursuant to this Article II, and the other Party shall cooperate and assist in any required communication with any plaintiff or other related Third Party.
2.9. Novation of Recro Retained Liabilities; Indemnification.
(a) Each of Recro and Baudax, at the request of the other Party, shall use its commercially reasonable efforts to obtain, or to cause to be obtained, as soon as reasonably practicable, any Consent, substitution or amendment required to novate or assign all obligations and other Liabilities for which a member of the Recro Group and a member of the Baudax Group are jointly or severally liable and that constitute Recro Retained Liabilities, so that, in any such case, the members of the Recro Group will be solely responsible for such Liabilities; provided, however, that except as expressly provided in any of the Ancillary Agreements, any Third Party Agreement, or as otherwise agreed between Recro and Baudax, neither Recro nor Baudax shall be obligated to make any payment, incur any Liability or offer or grant any accommodation (financial or otherwise, regardless of any provision to the contrary in any underlying Contract, including any requirements for the securing or posting of any bonds, letters of credit or similar instruments, or the furnishing of any guarantees) to any Third Party from whom any such Consent, substitution or amendment is requested.
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(b) If Recro or Baudax, as applicable, is unable to obtain, or to cause to be obtained, any such required Consent, substitution or amendment with respect to any such Liability, the applicable member of the Baudax Group shall from and after the Distribution Effective Time continue to be bound by such obligation or other Liability and, unless not permitted by the terms thereof or by Law, from and after the Distribution Effective Time, Recro shall or shall cause a member of the Recro Group to, as agent or subcontractor for such member of the Baudax Group pay, perform and discharge fully such Liability to the extent that it does not constitute a Baudax Liability. Baudax shall cause each member of the Baudax Group without further consideration to promptly pay and remit, or cause to be paid or remitted, to Recro or to another member of the Recro Group specified by Recro, all money, rights and other consideration received by Baudax or any member of the Baudax Group in respect of such performance (unless any such consideration is a Baudax Asset). If and when any such Consent, substitution or amendment shall be obtained or the Liability shall otherwise become assignable or able to be novated, without payment of further consideration, Baudax shall promptly assign, or cause to be assigned, such Liability to Recro or to another member of the Recro Group specified by Recro, and Recro shall, or shall cause such other member of the Recro Group to, assume such Liability.
2.10. Novation of Baudax Liabilities; Indemnification.
(a) Each of Recro and Baudax, at the request of the other Party, shall use its commercially reasonable efforts to obtain, or to cause to be obtained, as soon as reasonably practicable, any Consent, substitution or amendment required to novate or assign all obligations or other Liabilities for which a member of the Recro Group and a member of the Baudax Group are jointly or severally liable and that constitute Baudax Liabilities, so that, in any such case, the members of the Baudax Group will be solely responsible for such Liabilities; provided, however, that except as expressly provided in any of the Ancillary Agreements, any Third Party Agreement, or as otherwise agreed between Recro and Baudax, neither Recro nor Baudax shall be obligated to make any payment, incur any Liability or offer or grant any accommodation (financial or otherwise, regardless of any provision to the contrary in any underlying Contract, including any requirements for the securing or posting of any bonds, letters of credit or similar instruments, or the furnishing of any guarantees) to any Third Party from whom any such Consent, substitution or amendment is requested.
(b) If Recro or Baudax, as applicable, is unable to obtain, or to cause to be obtained, any such required Consent, substitution or amendment with respect to any such Liability, the applicable member of the Recro Group shall from and after the Distribution Effective Time continue to be bound by such obligation or other Liability and, unless not permitted by the terms thereof or by Law, from and after the Distribution Effective Time, Baudax shall or shall cause a member of the Baudax Group to, as agent or subcontractor for such member of the Recro Group pay, perform and discharge fully such Liability to the extent that it does not constitute a Recro Retained Liability. Recro shall cause each member of the Recro Group without further consideration to promptly pay and remit, or cause to be paid or remitted, to Baudax or to another member of the Baudax Group specified by Baudax, all money, rights and
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other consideration received by Recro or any member of the Recro Group in respect of such performance (unless any such consideration is a Recro Retained Asset). If and when any such Consent, substitution or amendment shall be obtained or the Liability shall otherwise become assignable or able to be novated, without payment of further consideration, Recro shall promptly assign, or cause to be assigned, such Liability to Baudax or to another member of the Baudax Group specified by Baudax, and Baudax shall, or shall cause such other member of the Baudax Group to, assume such Liability.
2.11. Disclaimer of Representations and Warranties.
(a) EACH OF RECRO (ON BEHALF OF ITSELF AND EACH MEMBER OF THE RECRO GROUP) AND BAUDAX (ON BEHALF OF ITSELF AND EACH MEMBER OF THE BAUDAX GROUP) UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, OR IN ANY ANCILLARY AGREEMENT, NO PARTY TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY, AND HEREBY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, AS TO THE ASSETS, BUSINESSES OR LIABILITIES CONTRIBUTED, TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, AS TO NON-INFRINGEMENT, VALIDITY OR ENFORCEABILITY OR ANY OTHER MATTER CONCERNING, ANY ASSETS OR BUSINESS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SETOFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY ACTION OR OTHER ASSET, INCLUDING ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY CONTRIBUTION, 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, IN THE CASE OF ANY REAL PROPERTY, BY MEANS OF A QUITCLAIM OR SIMILAR FORM DEED OR CONVEYANCE) AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (i) ANY CONVEYANCE SHALL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST AND (ii) ANY NECESSARY CONSENTS OR GOVERNMENTAL APPROVALS ARE NOT OBTAINED OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.
(b) Each of Recro (on behalf of itself and each member of the Recro Group) and Baudax (on behalf of itself and each member of the Baudax Group) further understands and agrees that if the disclaimer of express or implied representations and warranties contained in Section 2.11(a) is held unenforceable or is unavailable for any reason under the Laws of any jurisdiction outside the United States or if, under the Laws of a jurisdiction outside the United States, both Recro or any member of the Recro Group, on the one hand, and Baudax or any member of the Baudax Group, on the other hand, are jointly or severally liable for any
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Recro Retained Liability or any Baudax Liability, then the Parties intend that, notwithstanding any provision to the contrary under the Laws of such non-U.S. jurisdictions, the provisions of this Agreement and the Ancillary Agreements (including the disclaimer of all representations and warranties, allocation of Liabilities among the Parties and their respective Subsidiaries, releases, indemnification and contribution of Liabilities) shall prevail for any and all purposes among the Parties and their respective Subsidiaries.
2.12. Cash Management. From the date of this Agreement until the Distribution Effective Time, Recro and its Subsidiaries shall be entitled to use, retain or otherwise dispose of all cash generated by the Acute Care Business and the Baudax Assets in accordance with the ordinary course operation of Recro’s cash management systems. Prior to the Distribution Effective Time, in connection with the intended capitalization of the Baudax Group, Recro shall cause to be contributed to Baudax an amount in cash set forth in Section 2.4. All cash and cash equivalents held by any member of the Baudax Group as of the Distribution Effective Time shall be a Baudax Asset and all cash and cash equivalents held by any member of the Recro Group as of the Distribution Effective Time shall be a Recro Retained Asset.
ARTICLE III
CERTAIN ACTIONS AT OR PRIOR TO THE DISTRIBUTION
3.1. Transaction Agreements. At or prior to the Distribution Effective Time, Recro and Baudax shall enter into, or (where applicable) shall cause a member or members of their respective Groups to enter into each Transaction Agreement (other than this Agreement).
ARTICLE IV
THE DISTRIBUTION
4.1. Stock Dividend; Distribution. Immediately prior to the Distribution Effective Time, in furtherance of the Separation, Baudax shall issue to Recro as a stock dividend such number of shares of Baudax Common Stock as may be requested by Recro after consultation with Baudax in order to effect the Distribution (or Recro and Baudax shall take or cause to be taken such other appropriate actions to ensure that Recro has the requisite number of shares of Baudax Common Stock), which shares as of the date of issuance shall represent (together with such shares previously held by Recro) all of the issued and outstanding shares of Baudax Common Stock. Subject to the conditions and other terms set forth in this Article IV, Recro shall cause the Distribution Agent on the Distribution Date to make the Distribution, including by crediting the appropriate number of shares of Baudax Common Stock to book entry accounts for each Record Holder or designated transferee or transferees of such Record Holder. For shareholders who own Recro Common Stock through a broker or other nominee, their shares of Baudax Common Stock will be credited to their respective accounts by such broker or nominee. No action by any shareholder (or such shareholder’s designated transferee or transferees) shall be necessary to receive the applicable number of shares of Baudax Common Stock (and, if applicable, cash in lieu of any fractional shares) to which such shareholder is entitled in the Distribution. All stock distributions of the Baudax Common Stock to a Recro shareholder will be subject to the withholding of any Tax that Recro determines is to be withheld. If an amount is withheld, the shareholder from whom the withholding occurred will be deemed to have received the Baudax Common Stock for all purposes of this Agreement.
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4.2. Fractional Shares. Recro registered shareholders who, after aggregating the number of shares of Baudax Common Stock (or fractions thereof) to which such shareholder would be entitled on the Record Date, would be entitled to receive a fraction of a share of Baudax Common Stock in the Distribution, will be entitled to receive cash in lieu of fractional shares. Fractional shares of Baudax Common Stock will not be distributed by Recro in the Distribution. The Distribution Agent shall, as soon as practicable after the Distribution Date, (a) determine the number of whole shares and fractional shares of Baudax Common Stock allocable to each such Recro shareholder, (b) aggregate all such fractional shares into whole shares and sell the whole shares obtained thereby in open market transactions at then prevailing trading prices on behalf of holders who would otherwise be entitled to fractional share interests, and (c) distribute to each such holder, or for the benefit of each such beneficial owner, such holder’s or owner’s pro rata share of the aggregate net cash proceeds of these sales, after making appropriate deductions for any amount required to be withheld for U.S. federal income tax purposes. Recro shall bear the cost of brokerage fees and transfer Taxes incurred in connection with these sales of fractional shares, which such sales shall occur as soon after the Distribution Date as practicable and as determined by the Distribution Agent. None of Recro, Baudax or the Distribution Agent will guarantee any minimum sale price for the fractional shares of Baudax Common Stock. Neither Recro nor Baudax will pay any interest on the proceeds from the sale of fractional shares. The Distribution Agent will have the sole and absolute discretion to select the broker-dealers through which to sell the aggregated fractional shares and to determine when, how and at what price to sell such shares. Neither the Distribution Agent nor the selected broker-dealers will be Affiliates of Recro or Baudax.
4.3. Actions in Connection with the Distribution.
(a) Prior to the Distribution Date, Baudax shall file such amendments and supplements to its Form 10 as Recro may reasonably request, and such amendments as may be necessary in order to cause the same to become and remain effective as required by Law, including filing such amendments and supplements to its Form 10 as may be required by the Commission or federal, state or non-U.S. securities Laws. Recro shall, or at Recro’s election, Baudax shall, mail (or deliver by electronic means where not prohibited by Law) to the holders of Recro Common Stock, at such time on or prior to the Distribution Date as Recro shall determine, the Information Statement included in its Form 10 (or a Notice of Internet Availability of the Information Statement), as well as any other information concerning Baudax, its business, operations and management, the transactions contemplated herein and such other matters as Recro shall reasonably determine are necessary and as may be required by Law. Promptly after receiving a request from Recro, Baudax shall prepare and, in accordance with applicable Law, file with the Commission any such documentation that Recro reasonably determines is necessary or desirable to effectuate the Distribution, and Recro and Baudax shall each use commercially reasonable efforts to obtain all necessary approvals from the Commission with respect thereto as soon as practicable.
(b) Baudax shall use commercially reasonable efforts in preparing, filing with the Commission and causing to become effective, as soon as reasonably practicable (but in any case prior to the Distribution Effective Time), an effective registration statement or amendments thereof which are required in connection with the establishment of, or amendments to, any employee benefit plans of Baudax.
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(c) To the extent not already approved and effective, Baudax shall use commercially reasonable efforts to have approved and made effective, the application for the original listing on Nasdaq of the Baudax Common Stock to be distributed in the Distribution, subject to official notice of distribution.
(d) Nothing in this Section 4.3 shall be deemed to shift or otherwise impose Liability for any portion of the Form 10 or Information Statement to Recro.
4.4. Sole and Absolute Discretion of Recro. Recro, in its sole and absolute discretion, shall determine the Distribution Date, the Distribution Effective Time and all other terms of the Distribution, including the form, structure and terms of any transactions and/or offerings to effect the Distribution and the timing of and conditions to the consummation thereof. In addition, Recro may, in accordance with Section 10.10, at any time and from time to time until the completion of the Distribution decide to abandon the Distribution or modify or change the terms of the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution. Without limiting the foregoing, Recro shall have the right not to complete the Distribution if, at any time prior to the Distribution Effective Time, the Board shall have determined, in its sole and absolute discretion, that the Distribution is not in the best interests of Recro or its shareholders, that a sale or other alternative is in the best interests of Recro or its shareholders or that it is not advisable at that time for the Acute Care Business to separate from Recro.
4.5. Conditions to Distribution. Subject to Section 4.4, the obligation of Recro to consummate the Distribution is subject to the prior or simultaneous satisfaction, or, to the extent permitted by applicable Law, waiver by Recro, in its sole and absolute discretion, of the following conditions. None of Baudax, any other member of the Baudax Group, or any Third Party shall have any right or claim to require the consummation of the Distribution, which shall be effected at the sole and absolute discretion of the Board. Any determination by Recro, and any subsequent amendment, revision, withdrawal or change thereto made by Recro prior to the Distribution and concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 4.5 shall be conclusive and binding on the Parties. The conditions are for the sole benefit of Recro and shall not give rise to or create any duty on the part of Recro or the Board to waive or not waive any such condition. Each Party shall use its commercially reasonable efforts to keep the other Party apprised of its efforts with respect to, and the status of, each of the following conditions:
(a) the Commission shall have declared effective the Form 10, no stop order relating thereto will be in effect, no proceedings seeking any such stop order shall be pending before or threatened by the Commission, and the Information Statement (or the Notice of Internet Availability of the Information Statement) shall have been distributed to holders of Recro Common Stock;
(b) the shares of Baudax Common Stock to be distributed shall have been approved and accepted for listing by Nasdaq, subject to official notice of distribution;
(c) the receipt and continuing validity of an opinion from an independent appraisal firm to the Board, that is in form and substance acceptable to Recro in its sole and absolute discretion, confirming the solvency of Baudax after the Distribution;
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(d) all permits, registrations and Consents required under the securities or blue sky laws of states or other political subdivisions of the United States or of other foreign jurisdictions in connection with the Distribution shall have been received;
(e) no order, injunction, or decree issued by any Governmental Entity of competent jurisdiction, or other legal restraint or prohibition preventing the consummation of the Distribution or any of the related transactions shall be pending, threatened, issued or in effect, and no other event outside the control of Recro shall have occurred or failed to occur that prevents the consummation of all or any portion of the Distribution;
(f) the Internal Reorganization shall have been effectuated prior to the Distribution, except for such steps (if any) as Recro in its sole discretion shall have determined need not be completed or may be completed after the Distribution Effective Time;
(g) the Board shall have declared the Distribution and approved all related transactions (and such declaration or approval shall not have been withdrawn);
(h) Baudax shall have executed and delivered each of the other Transaction Agreements; and
(i) no events or developments shall have occurred or shall exist that, in the sole and absolute judgment of the Board, make it inadvisable to effect the Distribution or would result in the Distribution and related transactions not being in the best interest of Recro.
ARTICLE V
CERTAIN COVENANTS
5.1. Use of Retained Names and Marks. Baudax hereby acknowledges that Recro or its Affiliates or its or their licensors own all right, title and interest in and to Trademarks and all other identifiers of source or goodwill containing, incorporating or associated with Trademarks, excluding, on and after the Distribution Date, the Baudax Trademarks (collectively, the “Retained Names and Marks”), and that any and all right of Baudax to use the Retained Names and Marks shall terminate as of the Distribution Date and shall immediately revert to Recro or its Affiliates, along with any and all goodwill associated therewith. Baudax further acknowledges that it has no rights in any of the Retained Names and Marks, and that it is not acquiring any rights, directly or indirectly, to use the Retained Names and Marks, except as expressly provided herein. Recro hereby acknowledges that, on and after the Distribution Date, Baudax or its Affiliates or its or their licensors own all right, title and interest in and to the Baudax Trademarks, and that any and all right of Recro to use the Baudax Trademarks shall terminate as of the Distribution Date. Recro further acknowledges that, on and after the Distribution Date, it will have no rights in any of the Baudax Trademarks.
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ARTICLE VI
INDEMNIFICATION
6.1. Release of Pre-Distribution Claims.
(a) Except (i) as provided in Section 6.1(b), (ii) as may be otherwise expressly provided in this Agreement, or in any Ancillary Agreement, and (iii) for any matter for which either Party is entitled to indemnification pursuant to this Article VI:
(i) Recro, for itself and each member of the Recro Group and, to the extent permitted by Law, all Persons who at any time prior to the Distribution Effective Time were directors, officers, agents or employees of any member of the Recro Group (in their respective capacities as such), in each case, together with their respective heirs, executors, administrators, successors and assigns, does hereby remise, release and forever discharge Baudax and the other members of the Baudax Group and all Persons who at any time prior to the Distribution Effective Time were shareholders, directors, officers, agents or employees of any member of the Baudax Group (in their respective capacities as such), in each case, together with their respective heirs, executors, administrators, successors and assigns, from any and all (1) Recro Retained Liabilities and (2) Liabilities existing or arising: (A) in connection with the implementation of the Separation (including the Distribution); or (B) from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Distribution Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Distribution Effective Time), in each case to the extent relating to, arising out of or resulting from the CDMO Business, the Recro Retained Assets or the Recro Retained Liabilities, whether at Law or in equity (including any right of contribution), whether arising under any Contract, by operation of Law or otherwise, in each case, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Distribution Effective Time, including in connection with the Separation and any of the other transactions contemplated hereunder and under the Ancillary Agreements (such liabilities, the “Recro Released Liabilities”) and in any event shall not, and shall cause its respective Subsidiaries not to, bring any Action against any member of the Baudax Group in respect of any Recro Released Liabilities; provided, however, that nothing in this Section 6.1(a)(i) shall relieve any Person released in this Section 6.1(a)(i) who, after the Distribution Effective Time, is a director, officer or employee of any member of the Baudax Group and is no longer a director, officer or employee of any member of the Recro Group from Liabilities arising out of, relating to or resulting from his or her service as a director, officer or employee of any member of the Baudax Group after the Distribution Effective Time. Notwithstanding the foregoing, nothing in this Agreement shall be deemed to limit Recro, any member of the Recro Group, or their respective Affiliates from commencing any Actions against any Baudax officer, director, agent or employee, or their respective heirs, executors, administrators, successors and assigns with regard to matters arising from, or relating to willful misconduct or recklessness by any such officers, directors, agents or employees.
(ii) Baudax, for itself and each member of the Baudax Group and, to the extent permitted by Law, all Persons who at any time prior to the Distribution Effective Time were directors, officers, agents or employees of any member of the Baudax Group (in their respective capacities as such), in each case, together with their respective heirs, executors, administrators, successors and assigns, does hereby remise, release and forever discharge Recro and the other members of the Recro Group and all Persons who at any time prior to the Distribution Effective Time were shareholders, directors, officers, agents or employees of any member of the Recro Group (in their respective capacities as such), in each
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case, together with their respective heirs, executors, administrators, successors and assigns, from any and all (1) Baudax Liabilities and (2) Liabilities existing or arising: (A) in connection with the implementation of the Separation (including the Distribution); or (B) from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Distribution Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Distribution Effective Time), in each case to the extent relating to, arising out of or resulting from the Acute Care Business, the Baudax Assets or the Baudax Liabilities, whether at Law or in equity (including any right of contribution), whether arising under any Contract, by operation of Law or otherwise, in each case, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Distribution Effective Time, including in connection with the Separation and any of the other transactions contemplated hereunder and under the Ancillary Agreements (such liabilities, the “Baudax Released Liabilities”) and in any event shall not, and shall cause its respective Subsidiaries not to, bring any Action against any member of the Recro Group in respect of any Baudax Released Liabilities; provided, however, that for purposes of this Section 6.1(a)(ii), the members of the Baudax Group shall also release and discharge any officers or other employees of any member of the Recro Group, to the extent any such officers or employees served as directors or officers of any member of the Baudax Group prior to the Distribution, from any and all Liabilities or responsibilities for any and all past actions or failures to take action, in each case in their respective capacities as directors or officers, as the case may be, of any such member of the Baudax Group, prior to the date of the Distribution. Notwithstanding the foregoing, nothing in this Agreement shall be deemed to limit Baudax, any member of the Baudax Group, or their respective Affiliates from commencing any Actions against any Recro officer, director, agent or employee, or their respective heirs, executors, administrators, successors and assigns with regard to matters arising from, or relating to willful misconduct or recklessness by any such officers, directors, agents or employees.
(b) Nothing contained in this Agreement, including Section 6.1(a) or Section 2.5, shall impair or otherwise affect any right of any Party and, as applicable, a member of such Party’s Group, as well as their respective heirs, executors, administrators, successors and assigns, to enforce this Agreement, any Ancillary Agreement or any agreements, arrangements, commitments or understandings contemplated in this Agreement or in any Ancillary Agreement to continue in effect after the Distribution Effective Time. In addition, nothing contained in Section 6.1(a) shall:
(i) release any Person from any Liability assumed, Transferred or expressly assigned to a Party or a member of such Party’s Group pursuant to or as contemplated by, or any other Liability of any member of such Group under, this Agreement or any Ancillary Agreement including (1) with respect to Recro, any Recro Retained Liability, (2) with respect to Baudax, any Baudax Liability, (3) any Liability expressly preserved pursuant to Section 2.5, and (4) any Liability that the Parties may have with respect to indemnification or contribution pursuant to this Agreement or otherwise for Actions brought against the Parties by Third Parties, which Liability shall be governed by the provisions of this Agreement and, in particular, this Article VI and, if applicable, the appropriate provisions of the Ancillary Agreements;
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(ii) release any Person from any Liability provided for in or resulting from any other Contract or understanding that is entered into after the Distribution Effective Time between any Party (and/or a member of such Party’s Group), on the one hand, and the other Party (and/or a member of such Party’s Group), on the other hand;
(iii) release any Person other than the Persons released in Section 6.1(a); provided that the Parties agree not to bring any Action or permit any other member of their respective Group to bring any Action against a Person released in Section 6.1(a) with respect to such Liability; and
(iv) release any employee of Baudax from any Contract with any member of the Recro Group to the extent related to the Recro Retained Assets, Recro Retained Liabilities or CDMO Business.
In addition, nothing contained in Section 6.1(a) shall release Recro from indemnifying or providing advancement payments to, any director, officer or employee of Baudax who was a director, officer or employee of Recro or any of its Affiliates prior to the Distribution Effective Time, as the case may be, with respect to which he or she was entitled to such indemnification or advancement pursuant to an obligation existing immediately prior to the Distribution Effective Time; it being understood that if the underlying obligation giving rise to such Action is established by a court of competent jurisdiction to be a Baudax Liability, Baudax shall indemnify Recro for such Liability (including Recro’s costs to indemnify and/or provide advancement to the director, officer or employee) in accordance with the provisions set forth in this Article VI.
(c) Each Party shall not, and shall not permit any member of its Group to, make any claim for offset, or commence any Action, including any claim of contribution or any indemnification, against any other Party or any member of any other Party’s Group, or any other Person released pursuant to Section 6.1(a), with respect to any Liabilities released pursuant to Section 6.1(a).
(d) If any Person associated with a Party (including any director, officer or employee of a Party) initiates any Action with respect to claims released by this Section 6.1, the Party with which such Person is associated shall be responsible for the reasonable fees and expenses of counsel of the other Party and/or the members of such Party’s Group, as applicable, and such other Party shall be indemnified for all Liabilities incurred in connection with such Action in accordance with the provisions set forth in this Article VI.
6.2. Indemnification by Recro. In addition to any other provisions of this Agreement requiring indemnification and except as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, following the Distribution Effective Time, Recro shall and shall cause the other members of the Recro Group to indemnify, hold harmless and defend the Baudax Indemnitees from and against any and all Indemnifiable Losses of the Baudax Indemnitees to the extent relating to, arising out of, by reason of or otherwise in connection with (a) the Recro Retained Liabilities, including the failure of any member of the Recro Group or any other Person to pay, perform or otherwise discharge any Recro Retained Liability in accordance with its respective terms, whether arising prior to, on or after the Distribution Effective Time, or (b) any breach by Recro of any provision of this Agreement or any Ancillary Agreement unless such Ancillary Agreement expressly provides for separate indemnification therein, in which case any such indemnification claims shall be made thereunder (each, a “Baudax Claim”).
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6.3. Indemnification by Baudax. In addition to any other provisions of this Agreement requiring indemnification and except as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, following the Distribution Effective Time, Baudax shall and shall cause the other members of the Baudax Group to indemnify, hold harmless and defend the Recro Indemnitees from and against any and all Indemnifiable Losses of the Recro Indemnitees to the extent relating to, arising out of, by reason of or otherwise in connection with (a) the Baudax Liabilities, including the failure of any member of the Baudax Group or any other Person to pay, perform or otherwise discharge any Baudax Liability in accordance with its respective terms, whether prior to, on or after the Distribution Effective Time, or (b) any breach by Baudax of any provision of this Agreement or any Ancillary Agreement unless such Ancillary Agreement expressly provides for separate indemnification therein, in which case any such indemnification claims shall be made thereunder (each, an “Recro Claim”).
6.4. Baudax Securities Litigation Indemnity. Baudax shall advance Securities Litigation Costs and indemnify on demand and hold harmless Recro and each member of the Recro Group against any Monetary Penalty agreed with, imposed by, or ordered in connection with the Securities Litigation, to the extent that such Monetary Penalty results from or arises out of the Securities Litigation. Any amount paid or advanced by Baudax pursuant to this Section 6.4 shall be subject to reimbursement by Recro to the extent that Recro receives Insurance Proceeds in respect of such amounts.
6.5. Procedures for Indemnification.
(a) Direct Claims. Other than with respect to Third Party Claims, which shall be governed by Section 6.5(b):
(i) if a Baudax Indemnitee has made a determination that it is or may be entitled to indemnification in respect of any Baudax Claim, the Baudax Indemnitee shall so notify Recro as promptly as reasonably possible after becoming aware of the existence of such Baudax Claim; and
(ii) if a Recro Indemnitee has made a determination that it is or may be entitled to indemnification in respect of any Recro Claim, the Recro Indemnitee shall so notify Baudax as promptly as reasonably possible after becoming aware of the existence of such Recro Claim (any such claim made pursuant to Section 6.5(a)(i) or this Section 6.5(a)(ii), a “Direct Claim”). Each such notice shall be in writing and shall describe in reasonable detail the basis for the claim for indemnification hereunder and set forth, to the extent known, the estimated amount of Indemnifiable Losses for which indemnification may be sought hereunder relating to such claim (including, to the extent practicable, the method of computation thereof); provided, however, that the failure to provide such written notice shall not release the Indemnifying Party from any of its obligations except and solely to the extent the Indemnifying
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Party shall have been actually materially prejudiced as a result of such failure. The Indemnifying Party will have a period of forty-five (45) days after receipt of any such notice under this Section 6.5(a) to respond to the claimant thereto. If the Indemnifying Party fails to respond within such period, the claim specified in such notice from the Indemnitee shall be conclusively determined to be an indemnifiable claim for which the Indemnifying Party shall be liable to the applicable Indemnitee(s) hereunder.
(b) Third Party Claims. If a claim or demand is made against an Indemnitee by any Third Party (a “Third Party Claim”) as to which such Indemnitee is or may be entitled to indemnification pursuant to this Agreement, Recro (on behalf of the Recro Indemnitees) or Baudax (on behalf of the Baudax Indemnitees), as applicable (such claimant, the “Claiming Party”), shall notify the Indemnifying Party of the Third Party Claim in writing and in reasonable detail describing the basis for any claim for indemnification hereunder, referring to the provisions of this Agreement or any Ancillary Agreement in respect of which such right of indemnification is claimed by such Indemnitee or arises and including copies of all Third Party written notices and documents received by the Claiming Party (and any or all of its Indemnitees) relating to the Third Party Claim promptly (and in any event within twenty (20) days) after receipt by such Indemnitee of written notice of the Third Party Claim; provided, however, that the failure to provide notice of any such Third Party Claim pursuant to this sentence shall not release the Indemnifying Party from any of its obligations except and solely to the extent the Indemnifying Party shall have been actually materially prejudiced as a result of such failure. Thereafter, the Claiming Party shall deliver to the Indemnifying Party, promptly (and in any event within five (5) Business Days) after the receipt thereof by the Claiming Party (or any of its Indemnitees), copies of any and all additional Third Party written notices and documents (including court papers) received by the Claiming Party (or any of its Indemnitees) relating to the Third Party Claim.
(c) Subject to the provisions of this Section 6.5(c), the Indemnifying Party has the right, exercisable by written notice to the Claiming Party within thirty (30) days after receipt of notice from the Claiming Party pursuant to Section 6.5(b), to assume and conduct the defense (including, subject to the conditions of this Section 6.5(c), settlement) of such Third Party Claim in accordance with the limits set forth in this Agreement with counsel selected by the Indemnifying Party and reasonably acceptable to the applicable Indemnitees. If the Indemnifying Party does not assume the defense of a Third Party Claim in accordance with this Section 6.5(c), the Indemnitee may defend the Third Party Claim. If the Indemnifying Party has assumed the defense of a Third Party Claim as provided in this Section 6.5(c), the Indemnifying Party shall not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense of the Third Party Claim; provided, however, that if (i) in the reasonable judgment of the Indemnitee, after consultation with outside counsel, there exists a conflict of interest between the Indemnifying Party and the applicable Indemnitee(s) in the defense of such Third Party Claim by the Indemnifying Party, (ii) the party making such Third Party Claim is a Governmental Authority with regulatory or other authority over the Indemnitee or any of its material assets, (iii) the Third Party Claim seeks injunctive or other nonmonetary relief that, if granted, would reasonably be expected to have a material and adverse effect on the Indemnitee’s business, or (iv) the Indemnifying Party fails to take reasonable steps necessary to defend diligently such Third Party Claim, the Indemnitee may assume its own defense, and the Indemnifying Party shall be liable for all reasonable costs or expenses paid or incurred in
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connection with such defense. The Indemnifying Party or the Indemnitee, as the case may be, has the right to participate in (but, subject to the prior sentence, not control), at its own expense, the defense of any Third Party Claim that the other Person is defending as provided in this Agreement. The Indemnifying Party, if it has assumed the defense of any Third Party Claim as provided in this Agreement, may not, without the prior written consent of the Indemnitee (not to be unreasonably withheld, conditioned or delayed), consent to a settlement or compromise of, or the entry of any judgment arising from, any such Third Party Claim. The Indemnitee may consent to a settlement or compromise of, or the entry of any judgment arising from, any Third Party Claim, the defense of which has not been assumed by the Indemnifying Party, only with the prior written consent of the Indemnifying Party, not to be unreasonably withheld, conditioned or delayed.
(d) The Claiming Party and the Indemnifying Party shall (and the Claiming Party shall cause the applicable Indemnitee(s) to) make reasonably available to each other and their respective agents and representatives all relevant records available to them that are necessary or appropriate for the defense of any Third Party Claim, subject to any bona fide claims of attorney-client privilege, and each of the Indemnifying Party and the Claiming Party shall use its reasonable efforts to assist, and to cause the employees and counsel of such party to assist. in the defense of such Third Party Claim. If a Party asserts its right to participate in the defense and investigation of any Third Party Claim, the Party controlling the defense and investigation of such Third Party Claim shall act in good faith and reasonably consult and cooperate with the Indemnitee or the Indemnifying Party, as the case may be, in connection with any appearances, briefs, arguments and proposals made or submitted by or on behalf of any party in connection with the Third Party Claim (including considering in good faith all reasonable additions, deletions or changes suggested by the Indemnitee or the Indemnifying Party, as the case may be, in connection any filings made with any Governmental Entity or proposals to the Third Party claimant in connection therewith). With respect to any Third Party Claim that implicates both Parties in any material respect due to the allocation of Liabilities, responsibilities for management of defense and related indemnities pursuant to this Agreement or any of the Ancillary Agreements, the Parties agree to use commercially reasonable efforts to cooperate fully and maintain a joint defense (in a manner that, to the extent reasonably practicable, will preserve for all Parties any Privilege with respect thereto). The Party that is not responsible for managing the defense of any such Third Party Claim shall, upon reasonable request, be consulted with respect to significant matters relating thereto and may, if necessary or helpful, retain counsel to assist in the defense of such claims. Notwithstanding the foregoing, nothing in this Section 6.5(d) shall derogate from a Party’s right to control the defense of any Action in accordance with Section 6.5.
(e) Each of the Parties agrees that at all times from and after the Distribution Effective Time, if an Action is commenced by a Third Party naming two (2) or more Parties (or any member of such Parties’ respective Groups) as defendants and with respect to which one or more named Parties (or any member of such Party’s Group) is a nominal defendant and/or such Action is related solely to an Asset or Liability that the other Party has been assigned under this Agreement, any Ancillary Agreement or any Third Party Agreement, then the other Party or Parties shall use commercially reasonable efforts to cause such nominal defendant to be removed from such Action, as soon as reasonably practicable.
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(f) The provisions of this Section 6.5 (other than this Section 6.5(f)) and Section 6.8 (other than Section 6.8(g)) shall not apply to Taxes (Taxes being governed by the Tax Matters Agreement).
6.6. Indemnification Obligations Net of Insurance Proceeds and Other Amounts.
(a) Any recovery by any Party (including any of its Indemnitees) for any Indemnifiable Loss subject to indemnification pursuant to this Article VI shall be calculated (i) net of Insurance Proceeds actually received by such Party (or any of its Indemnitees) with respect to any Indemnifiable Loss and (ii) net of any proceeds actually received by such Party (or any of its Indemnitees) from any Third Party with respect to any such Liability corresponding to the Indemnifiable Loss (“Third Party Proceeds”), in the case of (i) and (ii) net of the costs of collection thereof and any specifically identifiable increase in premium attributable thereto under applicable Third Party Policies. Accordingly, the amount which any Indemnifying Party is required to pay pursuant to this Article VI to any Indemnitee pursuant to this Article VI shall be reduced by any Insurance Proceeds or Third Party Proceeds actually recovered by or on behalf of the Indemnitee corresponding to the related Indemnifiable Loss. If an Indemnitee receives a payment required by this Agreement from an Indemnifying Party corresponding to any Indemnifiable Loss (an “Indemnity Payment”) and subsequently receives Insurance Proceeds or Third Party Proceeds, then the Indemnitee shall pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds or Third Party Proceeds had been received, realized or recovered before the Indemnity Payment was made.
(b) Insurers and Other Third Parties Not Relieved. The Parties hereby agree that an insurer or other Third Party that would otherwise be obligated to pay any amount shall not be relieved of the responsibility with respect thereto or have any subrogation rights with respect thereto by virtue of any provision contained in this Agreement or any Ancillary Agreement, and that no insurer or any other Third Party shall be entitled to a “windfall” (e.g., a benefit they would not otherwise be entitled to receive, or the reduction or elimination of an insurance coverage obligation that they would otherwise have, in the absence of the indemnification or release provisions) by virtue of any provision contained in this Agreement or any Ancillary Agreement. Each Party shall, and shall cause its Subsidiaries to, use commercially reasonable efforts to collect or recover, or allow the Indemnifying Party to collect or recover, or cooperate with each other in collecting or recovering, any Insurance Proceeds that may be collectible or recoverable respecting the Liabilities for which indemnification may be available under this Article VI. Notwithstanding the foregoing, an Indemnifying Party may not delay making any indemnification payment required under the terms of this Agreement, or otherwise satisfying any indemnification obligation, pending the outcome of any Actions to collect or recover Insurance Proceeds, and an Indemnitee need not attempt to collect any Insurance Proceeds prior to making a claim for indemnification or receiving any Indemnity Payment otherwise owed to it under this Agreement or any Ancillary Agreement.
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6.7. Contribution. If the indemnification provided for in this Article VI is unavailable for any reason to an Indemnitee (other than failure to provide notice with respect to any Third Party Claims in accordance with Section 6.5(b)) in respect of any Indemnifiable Loss, then the Indemnifying Party shall, in accordance with this Section 6.7, contribute to the Indemnifiable Losses incurred, paid or payable by such Indemnitee as a result of such Indemnifiable Loss in such proportion as is appropriate to reflect the relative fault of Baudax and each other member of the Baudax Group, on the one hand, and Recro and each other member of the Recro Group, on the other hand, in connection with the circumstances which resulted in such Indemnifiable Loss. Solely for purposes of determining relative fault pursuant to this Section 6.7: (i) any fault associated with information contained in the Distribution Disclosure Documents shall be deemed to be allocated to Baudax and the other members of the Baudax Group; (ii) any fault associated with the conduct of the CDMO Business prior to the Distribution Effective Time shall be deemed to be allocated to Recro and the other members of the Recro Group, and no such fault shall be deemed to be the fault of Baudax or any other member of the Baudax Group; and (iii) any fault associated with the conduct of the Acute Care Business prior to the Distribution Effective Time shall be deemed to be the fault of Baudax and the other members of the Baudax Group, and no such fault shall be deemed to be the fault of Recro or any other member of the Recro Group.
6.8. Additional Matters; Survival of Indemnities.
(a) The agreements contained in this Article VI shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnitee; and (ii) the knowledge by the Indemnitee of Indemnifiable Losses for which it might be entitled hereunder. The agreements contained in this Article VI shall survive the Distribution.
(b) The rights and obligations of each Party and their respective Indemnitees under this Article VI shall survive (i) the sale or other Transfer by any Party or its respective Subsidiaries of any Assets or businesses or the assignment by it of any Liabilities and (ii) any merger, consolidation, business combination, sale of all or substantially all of the Assets, restructuring, recapitalization, reorganization or similar transaction involving either Party or any of its Subsidiaries.
(c) Except to the extent set forth in any Ancillary Agreement, absent fraud or willful misconduct by an Indemnifying Party, the provisions of this Article VI shall be the sole and exclusive remedy of an Indemnitee for any monetary or compensatory damages or losses resulting from any breach of this Agreement or any Ancillary Agreement and each Indemnitee expressly waives and relinquishes any and all rights, claims or remedies such Person may have with respect to the foregoing other than under this Article VI against any Indemnifying Party.
(d) Notwithstanding the foregoing, to the extent any Ancillary Agreement provides procedures for indemnification or contribution that differ from the provisions set forth in this Article VI, the terms of the Ancillary Agreement will govern.
(e) Any amounts payable pursuant to this Article VI shall be paid without duplication, and in no event shall any Party receive any payment in respect of an Indemnifiable Loss or receive contribution under different provisions of any Ancillary Agreement in respect of the same Liabilities.
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(f) Any amount to be paid or reimbursed by an Indemnifying Party (or a member of such Party’s Group) to an Indemnitee pursuant to this Article VI shall be paid in accordance with the procedures set forth in Section 10.11.
(g) The Parties shall report for all Tax purposes any amounts payable pursuant to this Article VI in accordance with Section 2.7 of the Tax Matters Agreement.
6.9. Limitations on Indemnity. Notwithstanding anything to the contrary contained herein, Recro and Baudax agree, for themselves and on behalf of the Baudax Indemnitees and the Recro Indemnitees that:
(a) The aggregate amount of Indemnifiable Losses for which Baudax shall be liable pursuant to Section 6.3 and Section 6.4 shall not exceed $19,000,000 (the “Cap”).
(b) The aggregate amount of Indemnifiable Losses for which Recro shall be liable pursuant to Section 6.2 shall not exceed the Cap.
ARTICLE VII
PRESERVATION OF RECORDS; ACCESS TO INFORMATION;
CONFIDENTIALITY; PRIVILEGE
7.1. Preservation of Information.
(a) Except as otherwise required or agreed in writing, or as otherwise provided in any Ancillary Agreement, with regard to any information referenced in Section 7.3, each Party shall use its commercially reasonable efforts, at its sole cost and expense, to retain, until the latest of, as applicable, (i) the date on which such information is no longer required to be retained pursuant to Recro’s applicable record retention policy as in effect immediately prior to the Distribution, including pursuant to any “Litigation Hold” issued by Recro or any of its Subsidiaries prior to the Distribution, (ii) the concluding date of any period as may be required by any applicable Law, (iii) the concluding date of any period during which such information relates to a pending or threatened Action which is known to the members of the Recro Group or Baudax Group, as applicable, in possession of such information at the time any retention obligation with regard to such information would otherwise expire, and (iv) the concluding date of any period during which the destruction of such information could interfere with a pending or threatened investigation by a Governmental Entity which is known to the members of the Recro Group or Baudax Group, as applicable, in possession of such information at the time any retention obligation with regard to such information would otherwise expire; provided, that with respect to any pending or threatened Action arising after the Distribution, clause (iii) of this sentence applies only to the extent that whichever member of the Recro Group or Baudax Group, as applicable, is in possession of such information has been notified in writing pursuant to a “Litigation Hold” by the other Party of the relevant pending or threatened Action. The Parties agree that upon written request from either Party that certain information relating to the Acute Care Business, the CDMO Business or the transactions contemplated hereby be retained in connection with an Action, the other Party shall use reasonable efforts to preserve and not to destroy or dispose of such information without the consent of the requesting Party.
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(b) Recro and Baudax intend that any transfer of information that would otherwise be within the attorney-client or attorney work product privileges not operate as a waiver of any potentially applicable privilege.
7.2. Financial Statements and Accounting.
(a) From the Distribution Effective Time until the completion of each Party’s audit for the fiscal year ending December 31, 2019, each Party agrees to provide reasonable assistance and, subject to Section 7.6, reasonable access to its properties, books and records, other information in its possession and control and personnel, and to use its commercially reasonable efforts to cooperate with the other Party’s requests, in each case to enable (i) such other Party to meet its timetable for dissemination of its earnings releases, financial statements and management’s assessment of the effectiveness of its disclosure controls and procedures and its internal control over financial reporting in accordance with Items 307 and 308, respectively, of Regulation S-K, (ii) such other Party’s accountants to timely complete their review of the quarterly financial statements and audit of the annual financial statements of such other Party, including, to the extent applicable to such Party, its auditor’s audit, if applicable, of its internal control over financial reporting and management’s assessment thereof in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the Commission’s and Public Company Accounting Oversight Board’s rules and auditing standards thereunder and (iii) such other Party to respond to any written request or official comment from a Governmental Entity, including in connection with responding to a comment letter from the Commission; provided, that in connection with this clause (iii), each Party shall provide reasonable access on the terms set forth in this Section 7.2 for a period of three (3) years following the Distribution Date. For the avoidance of doubt, this Section 7.2(a) shall not limit in any manner the obligations of the Parties under any Ancillary Agreement.
(b) Nothing in this Article VII shall require any Party to violate any agreement with any Third Party regarding the confidentiality of information relating to that Third Party or its business; provided, however, that in the event that a Party is required under this Section 7.2 to disclose any such information, such Party shall use commercially reasonable efforts to seek to obtain such Third Party’s written consent to the disclosure of such information.
7.3. Provision of Information. Other than in circumstances in which indemnification is sought pursuant to Article VI (in which event the provisions of such Article VI shall govern) or for matters related to provision of Tax records (in which event the provisions of the Tax Matters Agreement shall govern), and subject to appropriate restrictions for Privileged Information or Confidential Information:
(a) From and after the Distribution Effective Time, and subject to compliance with the terms of the Ancillary Agreements, upon the prior written reasonable request by, and at the expense of, Baudax for specific and identified: (i) information that primarily relates to Baudax or the Acute Care Business, as the case may be, prior to the Distribution Effective Time; (ii) information that is necessary for Baudax to comply with the terms of, or otherwise perform under, any Ancillary Agreement to which Recro and/or Baudax are parties; (iii) copies of Recro templates and form documents used in the operation of the Acute Care Business; (iv) information that is otherwise required by Baudax with regard to reasonable compliance with reporting, disclosure, filing or other requirements imposed on
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Baudax (including under applicable securities laws) by a Governmental Entity having jurisdiction over Baudax; or (v) information that is otherwise for use in any other judicial, regulatory, administrative or other proceeding or in order to satisfy audit, accounting, claims, regulatory, Action or other similar requirements, as applicable, Recro shall provide, as soon as reasonably practicable following the receipt of such request, appropriate access or, to the extent such information is reasonably practicable to identify and extract, copies of such information, templates or forms (or the originals thereof if Baudax has a reasonable need for such originals) in the possession or control of Recro or any of its Subsidiaries, but only to the extent such items so relate and are not already in the possession or control of Baudax or any of its Subsidiaries; provided that, to the extent any originals are delivered to Baudax pursuant to this Agreement or the Ancillary Agreements, Baudax shall, at its own expense, return them to Recro within a reasonable time after the need to retain such originals has ceased; provided, further, that, in the event that Recro, in its sole and absolute discretion, determines that any such access or the provision of any such information, templates or forms (including information requested under Section 7.2) would violate any Law or Contract with a Third Party or waive any attorney-client privilege, rights under the work product doctrine or other applicable privilege, Recro shall not be obligated to provide such information requested by Baudax. Notwithstanding the foregoing, Recro shall not be obligated to provide any requested information pursuant to clause (iv) or (v) above following the date that is eighteen (18) months from the date of this Agreement (or such later time or times as the Parties may agree).
(b) From and after the Distribution Effective Time, and subject to compliance with the terms of the Ancillary Agreements, upon the prior written reasonable request by, and at the expense of, Recro for specific and identified information that: (i) primarily relates to Recro or the CDMO Business, as the case may be, prior to the Distribution Effective Time; (ii) is necessary for Recro to comply with the terms of, or otherwise perform under, any Ancillary Agreement to which Recro and/or Baudax are parties; (iii) is otherwise required by Recro with regard to reasonable compliance with reporting, disclosure, filing or other requirements imposed on Recro (including under applicable securities laws) by a Governmental Entity having jurisdiction over Recro; or (iv) is otherwise for use in any other judicial, regulatory, administrative or other proceeding or in order to satisfy audit, accounting, claims, regulatory, Action or other similar requirements, as applicable, Baudax shall provide, as soon as reasonably practicable following the receipt of such request, appropriate access or, to the extent such information is reasonably practicable to identify and extract, copies of such information (or the originals thereof if Recro has a reasonable need for such originals) in the possession or control of Baudax or any of its Subsidiaries, but only to the extent such items so relate and are not already in the possession or control of Recro or any of its Subsidiaries; provided that, to the extent any originals are delivered to Recro pursuant to this Agreement or the Ancillary Agreements, Recro shall, at its own expense, return them to Baudax within a reasonable time after the need to retain such originals has ceased; provided, further, that, in the event that Baudax, in its sole and absolute discretion, determines that any such access or the provision of any such information (including information requested under Section 7.2) would violate any Law or Contract with a Third Party or waive any attorney-client privilege, the work product doctrine or other applicable privilege, Baudax shall not be obligated to provide such information requested by Recro. Notwithstanding the foregoing, Baudax shall not be obligated to provide any requested information pursuant to clause (iii) or (iv) above following the date that is eighteen (18) months from the date of this Agreement (or such later time or times as the Parties may agree).
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(c) In connection with the provision of information under this Section 7.3, the providing Party shall be entitled to redact any portion of the information to the extent related to any matter other than the receiving Party’s business. Each of Recro and Baudax agree to make their respective personnel available during regular business hours to discuss the information exchanged pursuant to this Section 7.3.
7.4. Witness Services; Cooperation. At all times from and after the Distribution Effective Time, each of Recro and Baudax shall use its commercially reasonable efforts to make available to the other Party, upon reasonable written request, its and its Subsidiaries’ officers, directors, employees and agents (taking into account the business demands of such individuals) as witnesses to the extent that (a) such Persons may reasonably be required to testify in connection with the prosecution or defense of any Action in which the requesting Party may from time to time be involved (except for claims, demands or Actions in which one or more members of one Group is adverse to one or more members of the other Group) and (b) there is no conflict in the Action between the requesting Party and the other Party. Notwithstanding any provisions of Article VII to the contrary, after the Distribution Effective Time, each Party shall use commercially reasonable efforts to assist (or cause the other members of its Group to assist) the other with respect to any Action or potential Action upon the request of such other Party, provided that any such expenses incurred in connection therewith shall be at such other Party’s sole expense.
7.5. Reimbursement; Other Matters. Except to the extent otherwise contemplated by this Agreement or any Ancillary Agreement, a Party providing information, access to information or services to the other Party pursuant to this Article VII shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses (which shall not include the costs of salaries and benefits of employees of such Party or any pro rata portion of overhead or other costs of employing such employees which would have been incurred by such employees’ employer regardless of the employees’ service with respect to the foregoing), as may be reasonably incurred and properly paid under applicable Law in providing such information, access to such information or services.
7.6. Confidentiality.
(a) Except as otherwise provided herein, in any Ancillary Agreement, or in any Contract between a Party or its Subsidiaries, on the one hand, and their respective employees, on the other hand, each of Recro and Baudax shall hold, and shall cause the other members of their respective Groups and their respective Representatives to hold, in strict confidence, with at least the same degree of care that applies to Recro’s Confidential Information pursuant to policies and procedures in effect as of the Distribution Effective Time, and not disclose or release, or permit to be disclosed or released, all Confidential Information of the other Party that is either in the first Party’s possession (including Confidential Information in its possession prior to the Distribution Effective Time) or furnished by the other Party or any member of its Group or their respective Representatives at any time pursuant to this Agreement or any Ancillary Agreement, and shall not use any such Confidential Information other than for
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such purposes as may be expressly permitted hereunder or under any Ancillary Agreement. If any Confidential Information is disclosed to any member of the other Party’s Group in connection with providing services to any member of such first Party’s Group under this Agreement or any Ancillary Agreement, then such disclosed Confidential Information shall be used by the applicable member of such other Party’s Group only as required to provide such services.
(b) Notwithstanding anything the contrary in this Section 7.6, each Party may disclose, or may permit disclosure of, the other Party’s Confidential Information: (i) to its Representatives who have a need to know such information for non-commercial purposes and are informed of the obligation to hold such information confidential and in respect of whose failure to comply with such obligations, the first Party will be responsible or (ii) if any Party or any other member of its Group is required or requested to disclose any such Confidential Information by judicial or administrative process or by other requirements of Law or stock exchange rule or is advised by outside counsel in connection with an Action brought by a Governmental Entity that it is advisable to do so. Notwithstanding the foregoing, in the event that any demand or request for disclosure of Confidential Information is made by a Third Party pursuant to clause (ii) above, each Party, as applicable, shall promptly notify (to the extent permissible by Law) the Party to whom the Confidential Information relates of the existence of such requirement or request and shall provide such affected Party a reasonable opportunity to seek an appropriate protective order or other remedy, which such Party will cooperate in obtaining to the extent reasonably practicable. In the event that such appropriate protective order or other remedy is not obtained, the Party which faces the disclosure requirement shall furnish only that portion of the Confidential Information that is required to be disclosed and shall take commercially reasonable steps to ensure that confidential treatment is accorded such Confidential Information.
(c) Each of Recro and Baudax shall inform their respective Representatives who have or have access to the other Party’s Confidential Information of their obligation to hold such information confidential in accordance with the provisions of this Agreement.
(d) Without limiting the foregoing, when any Confidential Information is no longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement, each Party shall, at its option and as promptly as practicable after receiving a written request from the other Party, either (i) return to such other Party all such information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or (ii) certify to such other Party that the first Party has destroyed such information (and such copies thereof and such notes, extracts or summaries based thereon); provided, that such first Party’s Representatives may retain one (1) copy of such information to the extent required by applicable Law or professional standards, and shall not be required to destroy any such information located in back-up, archival electronic storage; provided, further, that any such information so retained shall remain subject to the confidentiality provisions of this Agreement or any Ancillary Agreement.
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(e) Each Party acknowledges that it and its respective Subsidiaries may presently have and, following the Distribution Effective Time, may gain access to or possession of confidential or proprietary information of, or personal information relating to, Third Parties (i) that was received under confidentiality or non-disclosure agreements entered into between such Third Parties, on the one hand, and the other Party (or another member of its Group), on the other hand, prior to the Distribution Effective Time; or (ii) that, as between the two Parties, was originally collected by the other Party (or another member of its Group) and that may be subject to and protected by privacy, data protection or other applicable Laws. Each Party agrees that it shall hold, protect and use, and shall cause the other members of its Group and its and their respective Representatives to hold, protect and use, in strict confidence the confidential and proprietary information of, or personal information relating to, Third Parties in accordance with privacy, data protection or other applicable Laws and the terms of any agreements that were either entered into before the Distribution Effective Time or affirmative commitments or representations that were made before the Distribution Effective Time by, between or among the other Party (or other member(s) of its Group), on the one hand, and such Third Parties, on the other hand.
(f) The Parties agree that irreparable damage may occur in the event that the provisions of this Section 7.6 were not performed in accordance with their specific terms. Accordingly, it is hereby agreed that the Parties shall have the right to seek specific performance and injunctive or other equitable relief, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.
(g) For the avoidance of doubt and notwithstanding any other provision of this Section 7.6, (i) the sharing of Privileged Information shall be governed solely by Section 7.7, and (ii) information that is subject to any confidentiality provision or other disclosure restriction in any Ancillary Agreement shall be governed by the terms of such Ancillary Agreement.
7.7. Privilege Matters.
(a) Pre-Distribution Services. The Parties recognize that legal and other professional services that have been and will be provided prior to the Distribution Effective Time have been and will be rendered for the benefit of Recro and its Subsidiaries, including, the members of the Baudax Group. Accordingly, with respect to such pre-Distribution services, the Parties agree as follows:
(i) Recro shall be entitled, in perpetuity, to control the assertion or waiver of all privilege and immunities in connection with any Privileged Information that relates solely to the CDMO Business, whether or not the Privileged Information is in the possession or under the control of a member of the Recro Group or the Baudax Group and (B) Recro shall also be entitled, in perpetuity, to control the assertion or waiver of all privilege and immunities in connection with any Privileged Information that relates solely to any Recro Retained Liabilities resulting from any Actions that are now pending or may be asserted in the future whether or not the Privileged Information is in the possession or under the control of a member of the Recro Group or the Baudax Group;
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(ii) (1) Baudax shall be entitled, in perpetuity, to control the assertion or waiver of all privilege and immunities in connection with any Privileged Information that relates solely to the Acute Care Business, whether or not the Privileged Information is in the possession or under the control of a member of the Baudax Group or the Recro Group and (2) Baudax shall also be entitled, in perpetuity, to control the assertion or waiver of all privilege and immunities in connection with any Privileged Information that relates solely to any Baudax Liabilities, whether or not the Privileged Information is in the possession or under the control of a member of the Baudax Group or the Recro Group;
(iii) If Recro and Baudax do not agree as to whether certain information is Privileged Information, then the information shall be treated as Privileged Information and the Party who believes such information is Privileged Information shall be entitled to control the assertion or waiver of all privileges and immunities in connection with any such information unless the Parties otherwise agree;
(iv) Baudax agrees that it shall not (and shall cause the members of its Group not to) waive, or allege or purport to waive, any Privilege which could be asserted under any applicable Law, and in which Recro (or any member of its Group) has a Privilege, without the written consent of Recro; and
(v) Recro agrees that it shall not (and shall cause the members of its Group not to) waive, or allege or purport to waive, any Privilege which could be asserted under any applicable Law, and in which Baudax (or any member of its Group) has a Privilege, without the written consent of Baudax.
(b) Post-Distribution Services. The Parties recognize that legal and other professional services will be provided following the Distribution Effective Time to each of Recro (or any member of its Group) and Baudax (or any member of its Group). The Parties further recognize that certain of such post-Distribution services will be rendered solely for the benefit of Recro (or any member of its Group) or Baudax (or any member of its Group), as the case may be, while other such post-Distribution services may be rendered jointly to both Recro (or any member of its Group) and Baudax (or any member of its Group) with respect to claims, proceedings, litigation, disputes, or other matters which involve one or more members of both the Recro Group and the Baudax Group. With respect to such post-Distribution services and related Privileged Information, the Parties agree as follows:
(i) All Privileged Information based on post-Distribution services rendered jointly to both one or more members of the Recro Group and Baudax Group relating to any claims, proceedings, litigation, disputes or other matters which involve both the Recro Group and the Baudax Group (“Shared Privileged Information”) shall be subject to a shared Privilege among such parties involved in the claims, proceedings, litigation, disputes or other matters at issue;
(ii) Privileged Information relating to post-Distribution services provided solely to one of Recro (or any member of its Group) or Baudax (or any member of its Group) shall not be shared between the Parties (or among the members of their respective Groups);
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(iii) No Party may (or cause or permit any member of its Group to) waive, or allege or purport to waive, any Privilege which could be asserted under any applicable Law with respect to Shared Privileged Information, without the written consent of the other Party, which shall not be unreasonably withheld or delayed;
(iv) If a dispute arises between or among the Parties or their respective Group members regarding whether a Privilege should be waived to protect or advance the interest of any Party (or members of its Group) with respect to Shared Privileged Information, each Party agrees that it shall negotiate in good faith, shall endeavor to minimize any prejudice to the rights of the other Party and members of its Group, and shall not unreasonably withhold consent to any request for waiver by the other Party, and each Party specifically agrees that it shall not withhold consent to waive for any purpose except in good faith to protect the legitimate interests of its Group; and
(v) If, within fifteen (15) days of receipt by the requesting Party of written objection, the Parties have not succeeded in negotiating a resolution to any dispute regarding whether a Privilege should be waived with respect to Shared Privileged Information, and the requesting Party determines that a Privilege should nonetheless be waived to protect or advance the legitimate interests of its Group, the requesting Party shall provide the objecting Party fifteen (15) days’ written notice prior to effecting such waiver. Each Party specifically agrees that failure within fifteen (15) days of receipt of such notice to commence proceedings to enjoin such waiver under applicable Law, shall be deemed full and effective consent to such waiver. In the event proceedings are commenced as described above, the Parties agree that any such Privilege shall not be waived by either Party until the final determination of such dispute.
(c) The Parties agree that Shared Privileged Information shall continue to be held subject to Privilege even if adversity of interest may subsequently be discerned or arise between Parties or their respective Group members. Further, in the event a Party or any member of its Group becomes adverse to the other Party or any member of its Group, each Party agrees that it shall not (and shall not cause or permit any member of its Group to) seek to disqualify any law firms who have or have had access to Shared Privileged Information from continuing to represent members of the other Party’s Group, as applicable, solely by having, or having had access to such Shared Privileged Information.
(d) Nothing in this Section 7.7 shall be construed or interpreted to restrict the right or authority of the Parties to enter into any further agreement not otherwise inconsistent with the terms of this Agreement concerning the sharing of Privileged Information.
(e) The transfer of all information pursuant to this Agreement is made in reliance on the agreement of Recro or Baudax as set forth in Section 7.6 and this Section 7.7, to maintain the confidentiality of Privileged Information, and to assert and maintain any applicable Privilege. The access to information being granted pursuant to Section 7.2 and Section 7.3, the agreement to provide witnesses and individuals pursuant to Section 7.4, the furnishing of notices and documents and other cooperative efforts contemplated by Section 6.5 and the transfer of Privileged Information between the Parties and the members of their respective Groups pursuant to this Agreement shall not be deemed a waiver of any Privilege that has been or may be asserted under this Agreement or otherwise.
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7.8. Ownership of Information. Any information owned by one Party or any of its Subsidiaries that is provided to a requesting Party pursuant to this Article VII shall be deemed to remain the property of the providing Party. Unless expressly set forth herein, nothing contained in this Agreement shall be construed as granting a license or other rights to any Party with respect to any such information, whether by implication, estoppel or otherwise.
7.9. Other Agreements. The rights and obligations granted under this Article VII are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange or confidential treatment of information set forth in any Ancillary Agreement.
ARTICLE VIII
DISPUTE RESOLUTION
8.1. Negotiation. In the event of (a) a controversy, dispute or Action arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or the Ancillary Agreements or otherwise arising out of, or in any way related to, this Agreement or the Ancillary Agreements or the transactions contemplated hereby or thereby, including any Action based on contract, tort, statute or constitution, or (b) a claim with respect to the inadvertent transfer or omission of an Asset or Liability as contemplated by the definition of “Recro Retained Asset”, “Recro Retained Liability”, “Baudax Asset” or “Baudax Liability”, respectively (collectively, “Disputes”), the appropriate executives of the Parties who have authority to settle the Dispute (or such other individuals designated by the respective executives) shall negotiate for a reasonable period of time to settle such Dispute; provided, that such reasonable period shall not, unless otherwise agreed by the Parties in writing, exceed fifteen (15) Business Days from the time of receipt by a Party of written notice of such Dispute (“Dispute Notice”). If the Dispute has not been resolved within fifteen (15) Business Days after receipt of the Dispute Notice, the respective Chief Executive Officers or their respective designees (with full settlement authority) of Recro and Baudax shall meet in person (or where necessary, by phone) at a mutually acceptable time and, if applicable, place, and thereafter as often as they reasonably deem necessary, to attempt in good faith to resolve the Dispute. Any contractual time period or deadline under this Agreement or any Ancillary Agreement to which such Dispute relates occurring after the Dispute Notice is received shall not be deemed to have passed until such Dispute has been resolved pursuant to this Article VIII.
8.2. Binding Arbitration.
(a) Claims. Any Dispute that is not resolved pursuant to Section 8.1 within forty-five (45) days after receipt of the Dispute Notice (the “Negotiation Period”) shall be resolved by final and binding arbitration conducted in accordance with the Commercial Arbitration Rules and Supplementary Procedures of the American Arbitration Association (“AAA”) and as otherwise described in this Section 8.2. The arbitration shall be conducted by a panel of three (3) experts with relevant industry experience (the “Arbitrators”). One (1) Arbitrator shall be chosen by Baudax and one (1) Arbitrator shall be chosen by Recro within the Negotiation Period. The third Arbitrator shall be chosen by mutual agreement of the Arbitrator chosen by Baudax and the Arbitrator chosen by Recro within fifteen (15) days of the date that the last of such Arbitrators was appointed. If the Arbitrators selected by the Parties are unable or
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fail to agree upon the third Arbitrator, the third Arbitrator shall be appointed by the AAA of Philadelphia, Pennsylvania. The place of arbitration shall be Philadelphia, Pennsylvania, and all proceedings and communications shall be in English. The Arbitrators shall be instructed by the Parties to complete the arbitration within sixty (60) days after the selection of the third Arbitrator, subject to extension by mutual agreement executed by both Parties.
(b) Arbitrators’ Award. The Arbitrators shall make a final decision with respect to the Dispute within thirty (30) days following the arbitration proceeding; provided that the Arbitrators shall have no authority to award punitive or any other type of damages not measured by a Party’s compensatory damages. The decision of the Arbitrators shall be the sole, exclusive and binding remedy between the Parties regarding determination of each Dispute presented.
(c) Injunctive Relief. Either Party may apply to the Arbitrators for interim injunctive relief until the arbitration decision is rendered or the Dispute is otherwise resolved. Either Party also may, without waiving any right or remedy under this Agreement, seek from any court having jurisdiction any injunctive or provisional relief necessary to protect the rights or property of that Party pending resolution of the Dispute pursuant to this Section 8.2. The Parties further agree that irreparable harm would occur, and thus need not be established, in an Action to enforce the confidentiality obligations of Section 7.6 or to resolve a privilege dispute under Section 7.7, and that such Action may be brought pursuant to this Section 8.2(c). The Parties further agree that any Action brought under this Section 8.2(c) shall be brought exclusively in the state or federal courts within the Commonwealth of Pennsylvania and that such courts shall have personal jurisdiction over the Parties in such Action.
(d) Costs. Each Party shall bear its own costs and expenses and attorneys’ fees, and the Party that does not prevail in the arbitration proceeding shall pay the Arbitrators’ fees and any administrative fees of arbitration.
(e) Confidentiality of Arbitration. Except to the extent necessary to confirm an award or decision or as may be required by applicable Law, neither Party may, and the Parties shall instruct the Arbitrators not to, disclose the existence, content, or results of an arbitration without the prior written consent of both Parties. In no event shall an arbitration be initiated after the date when commencement of a legal or equitable proceeding based on the Dispute would be barred by the applicable Pennsylvania statute of limitations.
(f) Payment. The Parties hereby agree that any payment made by a Party pursuant to a decision of the Arbitrators shall be made in U.S. dollars.
8.3. Baseball Arbitration. Either Party may elect to have a Dispute resolved by expedited arbitration by an Arbitrator. The arbitration proceeding shall be conducted in accordance with the Commercial Arbitration Rules of the AAA and as otherwise described in this Section 8.3. Upon written request by either Party to the other Party, the Parties shall promptly negotiate in good faith to appoint an appropriate Arbitrator. If the Parties are not able to agree within ten (10) days after the receipt by a Party of the written request in the immediately preceding sentence, the AAA of Philadelphia, Pennsylvania, or such other similar entity as the Parties may agree, shall be responsible for selecting an Arbitrator with relevant industry
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experience within fifteen (15) days of being approached by a Party. The fees and costs of the Arbitrator and the AAA shall be shared equally (50%/50%) by the Parties. Within twenty (20) days after the designation of the Arbitrator, the Parties shall each simultaneously submit to the Arbitrator and one another a written statement of their respective positions on such Dispute. Each Party shall have fifteen (15) days from receipt of the other Party’s submission to submit a written response thereto. The Arbitrator shall have the right to meet with the Parties, either alone or together, as necessary to make a determination. Further, the Arbitrator shall have the right to request information and materials and to require and facilitate discovery as it shall determine is appropriate in the circumstances, taking into account the needs of the Parties and the desirability of making discovery expeditious and cost-effective determinations. No later than thirty (30) days after the Parties each submit their written statements to the Arbitrator, or as otherwise agreed by the Parties, the Arbitrator shall make a determination by selecting the resolution proposed by one of the Parties that as a whole is the most consistent with this Agreement and the most fair and reasonable to the Parties in light of the totality of the circumstances. The Arbitrator shall provide the Parties with a written statement setting forth the basis of the determination in connection therewith. The decision of the Arbitrator shall be final, binding and conclusive, absent manifest error.
8.4. Continuity of Service and Performance. Unless otherwise agreed in writing, the Parties shall continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of a Dispute with respect to all matters not subject to such Dispute.
ARTICLE IX
INSURANCE MATTERS
9.1. Rights to Recro Policies.
(a) Baudax acknowledges and agrees that, from and after the Distribution Effective Time, except as expressly provided in this Agreement or any Ancillary Agreement, neither Baudax nor any member of the Baudax Group shall have any rights to or under any Policies of Recro, other than any insurance Policies acquired prior to the Distribution Effective Time, including any tail coverage and any renewal thereof, directly by and in the name of Baudax or a member of the Baudax Group or as expressly provided in Section 6.6 or this Article IX. For the avoidance of doubt, Baudax acknowledges and agrees that the Baudax Group and not any member of the Recro Group shall be responsible for establishing any and all insurance programs covering the Baudax Group for its activities after the Distribution Effective Time as may be required to comply with the Baudax Group’s contractual obligations and such other insurance Policies required by Law or as necessary or appropriate to operate the Acute Care Business, including with respect to general liability, product liability, workers’ compensation, directors’ and officers’ liability and fiduciary liability.
(b) The Parties acknowledge that, as of the Distribution Date, Recro’s director and officer liability insurance policies will continue to provide insurance coverage for directors and officers of Baudax who served as directors or officers of Recro or any of its Subsidiaries prior to the Distribution Effective Time, but such coverage shall only extend to acts occurring prior to the Distribution Effective Time that would have been covered by Recro’s director and officer liability insurance policy if such individual was or remained a director or officer of Recro. Such coverage shall also extend to employees with respect to securities law claims only. Recro agrees not to terminate or amend this coverage in a manner materially adverse to these individuals.
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(c) This Agreement shall not be considered as an attempted assignment of any insurance Policy or as a contract of insurance and shall not be construed to waive any right or remedy of any member of the Recro Group in respect of any of the Recro insurance Policies and programs or any other contract or policy of insurance. Except as set forth in Section 9.1(b), the Recro Group may, at any time, without liability or obligation to any member of the Baudax Group, amend, commute, terminate, buy-out, extinguish liability under or otherwise modify any insurance Policies (and claims of the Baudax Group pursuant to this Article IX shall be subject to any such amendments, commutations, terminations, buy-outs, extinguishments and modifications).
(d) No member of the Recro Group shall have any obligation to secure extended reporting for any claims under any of the Recro Group’s claims-made or occurrence-reported liability policies for any acts or omissions by any member of the Baudax Group occurring prior to the Distribution Effective Time.
9.2. Claims. Nothing in this Article IX will be construed to limit or otherwise alter in any way the indemnity obligations of the Parties, including (a) with respect to the Baudax Group, Baudax Liabilities, (b) with respect to the Recro Group, Recro Retained Liabilities, and (c) those created by this Agreement, by operation of law or otherwise. The Parties acknowledge that Recro has used its commercially reasonable efforts to structure its director and officer insurance Policies consistent with such indemnity obligations.
ARTICLE X
MISCELLANEOUS
10.1. Complete Agreement; Construction. This Agreement, including the Exhibits and Schedules, and the Ancillary Agreements shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments, course of dealings and writings with respect to such subject matter. In the event of any inconsistency between this Agreement and any Schedule hereto, the Schedule shall prevail. In the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of any Ancillary Agreement, this Agreement shall control (except with respect to the Tax Matters Agreement and the Employee Matters Agreement, in which case such Ancillary Agreement shall control). Except as expressly set forth in this Agreement or any Ancillary Agreement: (a) all matters to the extent relating to Taxes and Tax Returns of the Parties and their respective Subsidiaries shall be governed exclusively by the Tax Matters Agreement and (b) for the avoidance of doubt, in the event of any conflict between this Agreement or any Ancillary Agreement, on the one hand, and the Tax Matters Agreement, on the other hand, with respect to such matters, the terms and conditions of the Tax Matters Agreement shall govern, except to the extent expressly provided herein or therein.
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10.2. Transaction Agreements. Except as expressly set forth herein, this Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the other Transaction Agreements.
10.3. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to each of the Parties.
10.4. Survival of Agreements. Except as otherwise contemplated by this Agreement or any Ancillary Agreement, all covenants and agreements of the Parties contained in this Agreement and each Ancillary Agreement shall survive the Distribution Effective Time and remain in full force and effect in accordance with their applicable terms.
10.5. Fees, Costs and Expenses.
(a) Except as otherwise agreed to in writing by the Parties, all out-of-pocket fees, costs and expenses incurred at or prior to the Distribution Effective Time in connection with, and as required by, the preparation, execution, delivery and implementation of this Agreement and any Ancillary Agreement, the Distribution Disclosure Documents and the consummation of the transactions contemplated hereby and thereby, including the Separation, shall be borne and paid by Recro; provided, however, that Recro shall bear the expense of all recordation of Intellectual Property Transferred at or prior to the Distribution Effective Time pursuant to this Agreement, whether such recordation occurs prior to or after the Distribution Effective Time.
(b) Except as otherwise expressly provided in this Agreement (including this Section 10.5) or any Ancillary Agreement or as otherwise agreed to in writing by the Parties, each Party shall bear its own out-of-pocket fees, costs and expenses incurred or accrued after the Distribution Effective Time; provided, however, that except as otherwise expressly provided in this Agreement, any fees, costs and expenses incurred in obtaining any Consents or novation from a Third Party in connection with the Transfer to or assumption by a Party or its Subsidiary of any Assets or Liabilities in connection with the Separation shall be borne by the Party or its Subsidiary to which such Assets are being Transferred or which is assuming such Liabilities.
(c) With respect to any post-Distribution expenses incurred pursuant to a request for further assurances granted under Section 2.8, the Parties agree that any and all fees, costs and expenses incurred by either Party shall be borne and paid by the requesting Party; it being understood that no Party shall be obligated to incur any Third Party accounting, consulting, advisor, banking or legal fees, costs or expenses, and the requesting Party shall not be obligated to pay such fees, costs or expenses, unless such fee, cost or expense shall have had the prior written approval of the requesting Party.
(d) Notwithstanding the foregoing, each Party shall be responsible for paying its own internal fees, costs and expenses (e.g., salaries of personnel and except as otherwise set forth in the Transition Services Agreement, which shall be allocated as stated therein) from and after the Distribution Effective Time.
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10.6. Notices. All notices, requests, claims, demands and other communications under this Agreement and, to the extent applicable and unless otherwise provided therein, under each of the Ancillary Agreements shall be in English, shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile with receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid. return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 10.6):
To Recro:
Recro Pharma, Inc.
1300 Gould Drive
Gainesville, GA 30504
Attn: Chief Financial Officer
Phone: 770-534-8239
Fax: 770 534-8247
To Baudax:
Baudax Bio, Inc.
490 Lapp Road
Malvern, PA 19355
Attn: Chief Financial Officer
Phone: 484-395-2440
Fax: 484-395-2471
10.7. Waivers. The delay or failure of either Party to exercise or enforce any of its rights under this Agreement will not constitute, or be deemed to be, a waiver of those rights, nor will any single or partial exercise of any such rights preclude any other or further exercise thereof or the exercise of any other right. No waiver of any provision of this Agreement will be effective unless it is in writing and signed by the Party against which it is being enforced.
10.8. Assignment. No Party may assign any rights or delegate any obligations arising under this Agreement, in whole or in part, directly or indirectly, without the prior written consent of the other Party (such consent not to be unreasonably withheld, conditioned or delayed), and any attempt to so assign any rights or delegate any obligations arising under this Agreement without such consent shall be void. Notwithstanding the foregoing, no such consent shall be required for any such assignment or delegation (a) with respect to Recro, to a Subsidiary of Recro (so long as such Subsidiary remains a Subsidiary of Recro), (b) with respect to Baudax, to a Subsidiary of Baudax (so long as such Subsidiary remains a Subsidiary of Baudax) or (c) to a bona fide Third Party in connection with a merger, reorganization, consolidation or the sale of all or substantially all the assets of a Party so long as the resulting, surviving or transferee entity assumes all the obligations of the assigning Party by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the non-assigning Party; provided, however, that in the case of each of the preceding clauses (a) and (b), no assignment permitted by this Section 10.8 shall release the assigning Party from liability for the full performance of its obligations under this Agreement.
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10.9. Successors and Assigns. 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 (whether by merger, acquisition of assets or otherwise) and permitted assigns.
10.10. Termination and Amendment. This Agreement (including Article VI hereof) may be terminated, modified or amended, and the Distribution may be amended, modified or abandoned, at any time prior to the Distribution Effective Time by and in the sole and absolute discretion of Recro without the approval of Baudax or the shareholders of Recro. In the event of such termination, no Party shall have any liability of any kind to the other Party or any other Person by reason of such termination. After the Distribution Effective Time, this Agreement may not be terminated, modified or amended except by an agreement in writing signed by Recro and Baudax.
10.11. Payment Terms.
(a) Except as set forth in Article VI or as otherwise expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount to be paid or reimbursed by a Party (and/or a member of such Party’s Group) to the other Party (and/or a member of such other Party’s Group) under this Agreement shall be paid or reimbursed hereunder within sixty (60) days after presentation of an invoice or a written demand therefor, in either case setting forth, or accompanied by, reasonable documentation or other reasonable explanation supporting such amount.
(b) Except as set forth in Article VI or as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount not paid when due pursuant to this Agreement (and any amount billed or otherwise invoiced or demanded and properly payable that is not paid within sixty (60) days of such bill, invoice or other demand) shall bear interest at a rate per annum equal to the Prime Rate, from time to time in effect, plus two percent (2%), calculated for the actual number of days elapsed, accrued from the date on which such payment was due up to the date of the actual receipt of payment.
(c) Without the consent of the Party receiving any payment under this Agreement specifying otherwise, all payments to be made by either Recro or Baudax under this Agreement shall be made in U.S. dollars. Except as expressly provided herein, any amount which is not expressed in U.S. dollars shall be converted into U.S. dollars by using the exchange rate published on Bloomberg at 5:00 p.m., Eastern time, on the day before the relevant date, or in The Wall Street Journal, Eastern Edition, on such date if not so published on Bloomberg. Except as expressly provided herein, in the event that any indemnification payment required to be made hereunder or under any Ancillary Agreement may be denominated in a currency other than U.S. dollars, the amount of such payment shall be converted into U.S. dollars on the date notice of the claim is given to the Indemnifying Party.
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10.12. Subsidiaries. Each of the Parties shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such Party or by any entity that becomes a Subsidiary of such Party at or after the Distribution Effective Time, in each case to the extent such Subsidiary remains a Subsidiary of the applicable Party.
10.13. Third Party Beneficiaries. Except (a) as provided in Article VI relating to Indemnitees and for the releases under Section 6.1 of any Person as provided therein and (b) as specifically provided in any Ancillary Agreement, this Agreement is solely for the benefit of the Parties and shall not be deemed to confer upon any Person other than the Parties any remedy, claim, liability, reimbursement, cause of Action or other right beyond any that exist without reference to this Agreement.
10.14. Titles and Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.
10.15. Exhibits and Schedules.
(a) The Exhibits and Schedules shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein.
(b) Subject to the prior written consent of the other Party (not to be unreasonably withheld or delayed), each Party shall be entitled to update the Schedules from and after the date hereof until the Distribution Effective Time.
10.16. Governing Law. This Agreement and any Dispute shall be governed by and construed in accordance with the Laws of the Commonwealth of Pennsylvania, U.S.A., without giving effect to the conflicts of laws principles thereof that might lead to the application of laws other than the Laws of the Commonwealth of Pennsylvania.
10.17. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
10.18. Public Announcements. From and after the Distribution Effective Time, Recro and Baudax shall consult with each other before issuing, and each shall give the other the opportunity to review and comment upon, that portion of any press release or other public statement, including a statement made to its investors, that relates to the transactions contemplated by this Agreement or the Ancillary Agreements, and shall not issue any such press release or make any such public statement prior to such consultation, except (a) as may be required by applicable Law, court process or obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system; (b) for disclosures made that are substantially identical to disclosure contained in any Distribution Disclosure Document or any prior written public statement not made in violation of this Section 10.18; or (c) with respect to a Party, for disclosure concerning the ordinary course operation of such Party’s business (other than any Dispute), notwithstanding that the disclosure may relate to arrangements under the Transition Services Agreement (including any exhibits and schedules thereto).
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10.19. References; Interpretation. References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa. Unless the context otherwise requires, the words “include”, “includes” and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation”. Unless the context otherwise requires, references in this Agreement to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Unless the context otherwise requires, the words “hereof”, “hereby” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement. The words “written request” when used in this Agreement shall include email. Reference in this Agreement to any time shall be to Eastern time unless otherwise expressly provided herein. Unless the context requires otherwise, references in this Agreement to “Recro” shall also be deemed to refer to the applicable member of the Recro Group, references to “Baudax” shall also be deemed to refer to the applicable member of the Baudax Group and, in connection therewith, any references to actions or omissions to be taken, or refrained from being taken, as the case may be, by Recro or Baudax shall be deemed to require Recro or Baudax, as the case may be, to cause the applicable members of the Recro Group or the Baudax Group, respectively, to take, or refrain from taking, any such action. The word “or” shall not be exclusive. References to any “statute” or “regulation” are to such statute or regulation as amended, modified, supplemented or replaced from time to time (and, in the case of any statute, include any rules and regulations promulgated under such statute) and to any “section of any statute or regulation” include any successor to such section. References to any Governmental Entity include any successor to such Governmental Entity, and references to any Affiliate include any successor to such Affiliate. Whenever the last day for the exercise of any right or the discharge of any duty under this Agreement falls on other than a Business Day, the Party having such right or duty shall have until the next Business Day to exercise such right or discharge such duty. Unless otherwise indicated, the word “day” shall be interpreted as a calendar day. The Parties have participated jointly in the negotiation and drafting of this Agreement. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted.
10.20. No Duplication; No Double Recovery. Nothing in this Agreement or any Ancillary Agreement is intended to confer to or impose upon any Party a duplicative right, entitlement, obligation or recovery with respect to any matter arising out of the same facts and circumstances (including with respect to the rights, entitlements, obligations and recoveries that may arise out of one or more of Section 6.2, Section 6.3, Section 6.5, Section 6.6 and Section 6.7).
10.21. No Waiver. No failure to exercise and no delay in exercising, on the part of any Party, any right, remedy, power or privilege hereunder or under the other Ancillary Agreements shall operate as a waiver hereof or thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
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10.22. No Admission of Liability. The allocation of Assets and Liabilities herein (including on the Schedules hereto) is solely for the purpose of allocating such Assets and Liabilities between Recro and Baudax and is not intended as an admission of liability or responsibility for any alleged Liabilities vis-a-vis any Third Party.
10.23. Waiver of Conflicts.
(a) Each of the parties acknowledges and agrees that Existing Counsel has acted as counsel to Recro and Baudax in connection with the negotiation of this Agreement and consummation of the transactions contemplated hereby.
(b) Recro hereby consents and agrees to, and agrees to cause the other members of the Recro Group to consent and agree to, Existing Counsel representing Baudax and the other members of the Baudax Group, including with respect to disputes in which the interests of the Recro Group may be directly adverse to the Baudax Group, and even though Existing Counsel may have represented Recro or another member of the Recro Group in a matter substantially related to any such dispute, or may be handling ongoing matters for the Recro Group.
(c) Baudax hereby consents and agrees to, and agrees to cause the other members of the Baudax Group to consent and agree to, Existing Counsel representing Recro and the other members of the Recro Group, including with respect to disputes in which the interests of the Baudax Group may be directly adverse to the Recro Group, and even though Existing Counsel may have represented Baudax or another member of the Baudax Group in a matter substantially related to any such dispute, or may be handling ongoing matters for the Baudax Group.
(d) Recro further agrees, on behalf of itself and, after the Distribution Effective Time, on behalf of the Recro Group, that all communications in any form or format whatsoever between or among any of Existing Counsel, the Recro Group, the Baudax Group, or any of their respective directors, officers, employees or other Representatives that relate in any way to the negotiation, documentation and consummation of the transactions contemplated by this Agreement or any dispute arising under this Agreement (collectively, the “Deal Communications”) shall be deemed to be retained and owned collectively by the Baudax Group, shall be controlled by Baudax on behalf of the Baudax Group and shall not pass to or be claimed by the Recro Group. All Deal Communications that are attorney- client privileged (the “Privileged Deal Communications”) shall remain privileged after the Distribution Effective Time and the Privilege and the expectation of client confidence relating thereto shall belong solely to the Baudax Group, shall be controlled by Baudax on behalf of the Baudax Group and shall not remain with or be claimed by the Recro Group.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written.
| RECRO PHARMA, INC. |
| By: /s/ Gerri Henwood |
| Name: Gerri Henwood |
| Title: President and Chief Executive Officer |
| BAUDAX BIO, INC. |
| By: /s/ Ryan Lake |
| Name: Ryan Lake |
| Title: Chief Financial Officer and Treasurer |
[Signature Page to Separation Agreement]
Exhibit 10.1
TAX MATTERS AGREEMENT
by and between
RECRO PHARMA, INC.
and
BAUDAX BIO, INC.
Dated as of November 20, 2019
TAX MATTERS AGREEMENT
THIS TAX MATTERS AGREEMENT (this “Agreement”), dated as of November 20, 2019 by and between Recro Pharma, Inc., a Pennsylvania corporation (“Recro”), and Baudax Bio, Inc.1, a Pennsylvania corporation (“Baudax”). Each of Recro and Baudax is sometimes referred to herein as a “Party” and, collectively, as the “Parties”. Capitalized terms used and not defined herein shall have the meaning set forth in the Separation Agreement entered into between the Parties as of the date hereof (the “Separation Agreement”).
WHEREAS, Recro, acting through itself and its direct and indirect Subsidiaries, currently conducts the CDMO Business and the Acute Care Business;
WHEREAS, the Board has determined that it is appropriate, desirable and in the best interests of Recro to separate the CDMO Business from the Acute Care Business, and to divest the Acute Care Business in the manner contemplated by the Separation Agreement;
WHEREAS, pursuant to the Separation Agreement (a) to the extent not previously effected pursuant to the Internal Reorganization, Recro will, and will cause its Subsidiaries to transfer certain assets and liabilities of the Acute Care Business to Baudax, as a result of which Baudax will own, directly and indirectly through its Subsidiaries, the Acute Care Business (collectively, the “Restructuring”), and (b) Recro will distribute, on a pro rata basis, all of the issued and outstanding shares of Baudax Common Stock owned by Recro to the holders of Recro Common Stock (the “Distribution”) as described therein; and
WHEREAS, the Parties wish to provide for the payment of Tax liabilities and entitlement to Refunds thereof, allocate responsibility for, and cooperation in, the filing of Tax Returns, and provide for certain other matters relating to Taxes.
NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. General. As used in this Agreement, the following terms shall have the following meanings:
“Accounting Firm” has the meaning set forth in Section 7.1.
“Adjustment” means an adjustment of any item of income, gain, loss, deduction, credit or any other item affecting Taxes of a taxpayer pursuant to a Final Determination.
“Baudax Entity” means any Subsidiary of Baudax immediately after the Distribution.
| 1 | Baudax was formerly known as Recro Enterprise, Inc. |
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“Baudax Group” means, individually or collectively, as the case may be, Baudax and any Baudax Entity.
“Baudax Ireland” means Baudax Ireland Limited, an Irish limited company.
“Code” means the Internal Revenue Code of 1986, as amended.
“Common Parent” means the common parent corporation of an affiliated group (in each case, within the meaning of Section 1504 of the Code) filing a U.S. federal consolidated Income Tax Return.
“Contribution” means the contribution, directly or indirectly, by Recro of all of the assets of the Acute Care Business to Baudax in exchange for all of the Baudax Common Stock and the assumption by Baudax of liabilities related thereto.
“Distribution Date” means the date on which the Distribution is effective.
“Due Date” means (a) with respect to a Tax Return, the date (taking into account all valid extensions) on which such Tax Return is required to be filed under applicable Law and (b) with respect to a payment of Taxes, the date on which such payment is required to be made to the applicable Taxing Authority to avoid the incurrence of interest penalties and/or additions to Tax.
“Extraordinary Transaction” means any action that is not in the Ordinary Course of Business, but shall not include (a) any action described in or contemplated by the Separation Agreement or any Ancillary Agreement, or (b) any action that is undertaken pursuant to the Restructuring or the Distribution.
“Final Determination” means the final resolution of liability for any Tax for any taxable period, by or as a result of (a) a final decision, judgment, decree or other order by any court of competent jurisdiction that can no longer be appealed to a court other than the Supreme Court of the United States, (b) a final settlement with the IRS, a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the Laws of other jurisdictions, which resolves the entire Tax liability for any taxable period, (c) any allowance of a Refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such Refund or credit may be recovered by the jurisdiction imposing the Tax, or (d) any other final resolution, including by reason of the expiration of the applicable statute of limitations or the execution of a pre-filing agreement with the IRS or other Taxing Authority.
“Income Tax Return” means any Tax Return on which Income Taxes are reflected or reported.
“Income Taxes” means any net income, net receipts, net profits, excess net profits or similar Taxes based upon, measured by, or calculated with respect to net income.
“Indemnified Party” means the Party which is entitled to seek indemnification from the other Party pursuant to the provisions of Article III.
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“Indemnifying Party” means the Party from which the other Party is entitled to seek indemnification pursuant to the provisions of Article III.
“Information” has the meaning set forth in Section 5.1(a).
“Ireland Loan” has the meaning set forth in Section 4.2(a)(i).
“IRS” means the United States Internal Revenue Service.
“Ordinary Course of Business” means an action taken by a Person only if such action is taken in the ordinary course of the normal operations of such Person.
“Past Practice” means past practices, accounting methods, elections and conventions.
“Post-Closing Period” means any taxable period (or portion thereof) beginning after the Distribution Date, including the portion of any Straddle Period beginning on the day after the Distribution Date.
“Pre-Closing Period” means any taxable period (or portion thereof) ending on or before the Distribution Date, including the portion of any Straddle Period through the end of the Distribution Date.
“Recro Consolidated Return” means the U.S. federal Income Tax Return required to be filed by Recro as the Common Parent.
“Recro Consolidated Taxes” means any U.S. federal Income Taxes attributable to any Recro Consolidated Return.
“Recro Entity” means any Subsidiary of Recro immediately after the Distribution.
“Recro Group” means, individually or collectively, as the case may be, Recro and any Recro Entity, excluding any member of the Baudax Group.
“Recro Taxes” means, without duplication, (a) any Recro Consolidated Taxes, (b) any Taxes imposed on Baudax or any member of the Baudax Group under Treasury Regulations Section 1.1502-6 (or any similar provision of other Law) as a result of Baudax or any such member being or having been included as part of a Recro Consolidated Return or a Recro Unified Tax Return, (c) any Taxes of the Recro Group and any former Subsidiary of Recro (excluding any member of the Baudax Group) for any Pre-Closing Period, (d) any Recro Transaction Taxes, and (e) any Recro Unified Taxes.
“Recro Transaction Taxes” means any Taxes imposed on or by reason of the Restructuring or the Distribution (including Transfer Taxes and Taxes payable by reason of deferred intercompany transactions or excess loss accounts triggered by the Contribution or the Distribution).
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“Recro Unified Tax Return” means any unified, combined, consolidated or similar Tax Returns (other than the Recro Consolidated Tax Return) which includes or included Recro and Baudax.
“Recro Unified Taxes” means any state or local Taxes attributable to a Recro Unified Tax Return.
“Refund” means any refund (or credit in lieu thereof) of Taxes (including any overpayment of Taxes that can be refunded or, alternatively, applied to other Taxes payable) including any interest paid on or with respect to such refund of Taxes.
“Retention Period” has the meaning set forth in Section 6.2.
“Straddle Period” means any taxable period that begins on or before and ends after the Distribution Date.
“Tax” or “Taxes” means all taxes, charges, fees, duties, levies imposts, or other similar assessments, imposed by any U.S. federal, state or local or foreign governmental authority, including net income, gross income, gross receipts, excise, real property, personal property, sales, use, service, service use, license, lease, capital stock, transfer, recording, franchise, business organization, occupation, premium, environmental, windfall profits, profits, customs, duties, payroll, wage, withholding, social security, employment unemployment, insurance, severance, workers compensation, excise, stamp, alternative minimum, estimated, value added, ad valorem, hospitality, accommodations, transient accommodations unclaimed property, escheat and other taxes, charges, fees, duties, levies, imposts, or other similar assessments, and any interest penalties or additions attributable thereto.
“Tax Attributes” means net operating losses, capital losses, tax credit carryovers earnings and profits, foreign tax credit carryovers, overall foreign losses, previously taxed income, tax bases, separate limitation losses and any other losses, deductions, credits or other comparable items that could affect a Tax liability for a past or future taxable period.
“Tax Benefit” means any Refund, credit, or other reduction in Tax payments otherwise required to be made to a Taxing Authority, including for the avoidance of doubt, any actual Tax savings if, as and when realized arising from a step-up in Tax basis or an increase in a Tax Attribute.
“Tax Cost” means any increase in Tax payments otherwise required to be made to a Taxing Authority (or any reduction in any Refund otherwise receivable from any Taxing Authority).
“Tax Group” means the members of a consolidated combined, unitary or other tax group (determined under applicable U.S., State or foreign Income Tax law) which includes Recro or Baudax, as the context requires recognizing that (i) Recro’s Tax Group does not include any members of the Baudax Group and (ii) Baudax’s Tax Group does not include any members of the Recro Group.
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“Tax Item” means any item of income, gain, loss, deduction, credit, recapture of credit or any other item which increases or decreases Taxes paid or payable.
“Tax Matter” has the meaning set forth in Section 6.1(a).
“Tax Proceeding” means any audit, assessment of Taxes, pre-filing agreement, other examination by any Taxing Authority, proceeding, appeal of a proceeding or litigation relating to Taxes, whether administrative or judicial including proceedings relating to competent authority determinations.
“Tax Return” means any return, report, certificate, form or similar statement or document (including any related or supporting information or schedule attached thereto and any information return, or declaration of estimated Tax) required to be supplied to, or filed with, a Taxing Authority in connection with the payment, determination, assessment or collection of any Tax or the administration of any Laws relating to any Tax and any amended Tax Return or claim for Refund.
“Taxing Authority” means any governmental authority or any subdivision agency commission or entity thereof or any quasi-governmental or private body having jurisdiction over the assessment determination collection or imposition of any Tax (including the IRS).
“Transfer Taxes” means all sales, use, transfer, real property transfer intangible, recordation, registration, documentary, stamp or similar Taxes imposed on the Restructuring or the Distribution.
“Treasury Regulations” means the final and temporary (but not proposed) Income Tax regulations promulgated under the Code; as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
“U.S.” means the United States of America.
ARTICLE II
PREPARATION, FILING AND PAYMENT OF TAXES SHOWN DUE ON TAX
RETURNS
Section 2.1. Recro Consolidated Returns.
(a) Recro Consolidated Returns. Recro shall prepare, or cause to be prepared, and file all Recro Consolidated Returns for any Pre-Closing Period and a Straddle Period and shall pay all Taxes shown to be due and payable on such Tax Returns.
(b) Extraordinary Transactions. For all Tax purposes, the Parties shall report any Extraordinary Transactions that are caused or permitted by Baudax or any Baudax Entity on the Distribution Date after the Distribution as occurring on the day after the Distribution Date pursuant to Treasury Regulation Section 1.1502-76(b) (1)(ii)(B) or any similar or analogous provision of state, local or foreign Law.
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Section 2.2. Recro Unified Tax Returns. Recro shall prepare and file any Recro Unified Tax Returns for a Pre-Closing Period and shall pay all Taxes shown to be due and payable on such Tax Returns.
Section 2.3. Tax Return Procedures.
(a) Recro Consolidated Returns. To the extent that the positions taken on any Recro Consolidated Tax Return would reasonably be expected to materially and adversely affect the Tax position of Baudax or a Baudax Entity for any period after the Distribution Date, Recro shall prepare the portions of such Tax Return that relates to the Acute Care Business in a manner that is consistent with Past Practice unless otherwise required by applicable Law or agreed to in writing by the Parties, and shall provide a draft of such portion of such Tax Return to Baudax for its review and comment at least forty five (45) days prior to the Due Date for such Tax Return. In the event that Past Practice is not applicable to a particular item or matter, Recro shall determine the reporting of such item or matter in good faith. The Parties shall negotiate in good faith to resolve all disputed issues. Any disputes that the Parties are unable to resolve shall be resolved by the Accounting Firm pursuant to Section 7.1. In the event that any dispute is not resolved (whether pursuant to good faith negotiations among the Parties or by the Accounting Firm) prior to the Due Date for the filing of any such Tax Return, such Tax Return shall be timely filed by Recro and Recro agrees to amend such Tax Return as necessary to reflect the resolution of such dispute in a manner consistent with such resolution. All Recro Consolidated Returns will be prepared in accordance with Section 4.2, below.
(b) Recro Unified Tax Returns. Recro shall prepare and file the Recro Unified Tax Returns for the taxable year that includes the Distribution Date. To the extent that the positions taken on any Recro Unified Tax Return would reasonably be expected to materially and adversely affect the Tax position of Baudax, Recro shall prepare the portions of such Tax Return that relates to the Acute Care Business in a manner that is consistent with Past Practice unless otherwise required by applicable Law or agreed to in writing by the Parties, and shall provide a draft of such portion of such Tax Return to Baudax for its review and comment at least forty five (45) days prior to the Due Date for such Tax Return, provided, however, that nothing herein shall prevent Recro from timely filing any such Tax Return. In the event that Past Practice is not applicable to a particular item or matter, Recro shall determine the reporting of such item or matter in good faith. The Parties shall negotiate in good faith to resolve all disputed issues. Any disputes that the Parties are unable to resolve shall be resolved by the Accounting Firm pursuant to Section 7.1. In the event that any dispute is not resolved (whether pursuant to good faith negotiations among the Parties or by the Accounting Firm) prior to the Due Date for the filing of any such Tax Return, such Tax Return shall be timely filed by Recro, and Recro agrees to amend such Tax Return as necessary to reflect the resolution of such dispute in a manner consistent with such resolution. All Recro Unifies Tax Returns will be prepared in accordance with Section 4.2, below.
Section 2.4. Amended Returns. Except as provided in Section 2.3 to reflect the resolution of any dispute by the Accounting Firm pursuant to Section 7.1, except with the prior written consent of Baudax (such consent not to be unreasonably withheld, delayed or conditioned), Recro shall not, and shall not permit any Recro Entity to, amend any Tax Return for any Pre-Closing Period to the extent such amendment could reasonably be expected to increase the Taxes of any member of the Baudax Group.
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Section 2.5. Timing of Payments. All Taxes required to be paid or caused to be paid pursuant to this Article II by either Recro or a Recro Entity or Baudax or a Baudax Entity, as the case may be, to an applicable Taxing Authority, shall be paid on or before the Due Date for the payment of such Taxes.
Section 2.6. Expenses. Except as provided in Section 7.1 in respect of the expenses relating to the Accounting Firm, each Party shall bear its own expenses incurred in connection with this Article II.
Section 2.7. Distribution Tax Reporting. The Parties shall cause the Distribution to be reported to holders of Recro Common Stock on IRS Form 1099-Div, or 1042-S, as appropriate. The Parties shall not take any position on any U.S. federal or state Income Tax Return or take any other U.S. tax reporting position that is inconsistent with the treatment of the Distribution as a distribution to which Section 301 of the Code applies, except as otherwise required by applicable Law. Recro will cause the Distribution Agent to comply with Section 1441 and Section 1442 of the Code, on the basis that the Distribution is a dividend as defined in Section 316 of the Code.
ARTICLE III
INDEMNIFICATION
Section 3.1. Indemnification by Recro. Subject to Section 3.3, Recro shall pay, and shall indemnify and hold the Baudax Group harmless from and against, without duplication, (a) Recro Taxes, (b) all Taxes incurred by Baudax or any Baudax Entity arising out of, attributable to, or resulting from the breach by Recro of any of its covenants hereunder, and (c) any out-of-pocket costs and expenses related to the foregoing (including reasonable attorneys’ fees and expenses).
Section 3.2. Indemnification by Baudax. Subject to Section 3.3, Baudax shall pay, and shall indemnify and hold the Recro Group harmless from and against, without duplication, (a) all Taxes incurred by Recro or any Recro Entity arising out of, attributable to, or resulting from the breach by Baudax of any of its covenants hereunder, and (b) any out-of-pocket costs and expenses related to the foregoing (including reasonable attorneys’ fees and expenses).
Section 3.3. Characterization of and Adjustments to Payments.
(a) For all Tax purposes, Recro and Baudax shall treat any payment by Recro to a member of the Baudax Group or by Baudax to a member of the Recro Group required by this Agreement (other than payments with respect to interest accruing after the Distribution Date) as either a contribution by Recro to Baudax or a distribution by Baudax to Recro, as the case may be, and, in each case, as occurring immediately prior to the Distribution.
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(b) Notwithstanding the foregoing, the amount that any Indemnifying Party is or may be required to provide indemnification to or on behalf of any Indemnified Party pursuant to this Article III shall be (i) decreased to take into account any Tax Benefit to the Indemnified Party (or any of its Affiliates) arising from the incurrence or payment of the relevant indemnified item and actually realized in or prior to the taxable year succeeding the taxable year in which the indemnified item is incurred (which Tax Benefit would not have arisen or been allowable but for such indemnified item), and (ii) increased to take into account any actual Tax Cost of the Indemnified Party (or any of its Affiliates) arising from the receipt of the relevant indemnity payment.2
Section 3.4. Timing of Indemnification Payments. Indemnification payments in respect of any liabilities for which an Indemnified Party is entitled to indemnification pursuant to this Article III shall be paid by the Indemnifying Party to the Indemnified Party within ten (10) days after written notification thereof by the Indemnified Party, including reasonably satisfactory documentation setting forth the basis for, and calculation of, the amount of such indemnification payment, or within ten (10) days after resolution pursuant to Section 7.1.
ARTICLE IV
REFUNDS AND TAX ATTRIBUTES
Section 4.1. Refunds and Credits. Recro shall be entitled to all Refunds of Taxes for which Recro is responsible pursuant to Article II, and Baudax shall be entitled to all Refunds of Taxes for which Baudax is responsible pursuant to Article II.
Section 4.2. Attributes.
(a) As soon as reasonably practicable after the Distribution Date, Recro shall reasonably determine in good faith the allocation of Tax Attributes, arising in a Pre-Closing Period, between the Recro Group and the Baudax Group in accordance with the Code and Treasury Regulations, including any applicable state, local and foreign Tax Laws. Subject to the preceding sentence, Recro shall be entitled to make any determination as to (i) basis, and (ii) valuation, and shall make such determinations reasonably and in good faith and consistent with Past Practice. Recro shall consult in good faith with Baudax regarding such allocation of Tax Attributes and determinations as to basis and valuation, and shall consider in good faith any comments received in writing from Baudax regarding such allocation and determinations. Recro and Baudax hereby agree to compute all Taxes for Post-Closing Periods consistently with the determination of the allocation of Tax Attributes pursuant to this Section 4.2(a) unless otherwise required by a Final Determination. Notwithstanding anything to the contrary in this Agreement, it is agreed that:
(i) For all Pre-Closing Tax Periods, the Recro Group will treat the historical advances (the “Ireland Loan”) provided by Recro to Baudax Ireland as indebtedness of Baudax Ireland for U.S. federal Income Tax purposes, and
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(ii) The Recro Group will treat the cancellation of the Ireland Loan, effective on July 12, 2019, prior to the close of business, as giving rise to (a) a partial bad debt deduction to Recro under Section 166(a) of the Code equal to Recro’s unrecovered basis in the Ireland Loan and (b) a capital contribution from Recro to Baudax, equal to the fair market value of Baudax Ireland’s assets.
(b) To the extent that the amount of any Tax Attribute is later reduced or increased by a Taxing Authority or Tax Proceeding, such reduction or increase shall be allocated to the Party to which such Tax Attribute was allocated pursuant to Section 4.2(a).
ARTICLE V
TAX PROCEEDINGS
Section 5.1. Notification of Tax Proceedings. Within ten (10) days after an Indemnifying Party becomes aware of the commencement of a Tax Proceeding that may give rise to Taxes for which the Indemnifying Party is responsible pursuant to Article II, the Indemnifying Party shall notify the Indemnified Party of such Tax Proceeding, and thereafter shall promptly forward or make available to the Indemnifying Party copies of notices and communications relating to such Tax Proceeding. The failure of the Indemnified Party to notify the Indemnifying Party of the commencement of any such Tax Proceeding within such ten (10) day period or promptly forward any further notices or communications shall not relieve the Indemnifying Party of any obligation which it may have to the Indemnified Party under this Agreement except to the extent that the Indemnifying Party is prejudiced by such failure.
Section 5.2. Tax Proceeding Procedures Generally. Recro shall be entitled to contest, compromise, control and settle any Adjustment or deficiency proposed, asserted or assessed pursuant to any Tax Proceeding with respect to any Recro Consolidated Return or Recro Unified Tax Return, provided that to the extent such Tax Proceeding could reasonably be expected to adversely affect the amount of Taxes for which Baudax is responsible, Recro shall (a) defend such Tax Proceeding diligently and in good faith (b) keep Baudax informed in a timely manner of all actions proposed to be taken by Recro with respect to such Tax Proceeding, and (c) in good faith consider any input from Baudax with respect to such Tax Proceeding.
ARTICLE VI
COOPERATION
Section 6.1. General Cooperation.
(a) The Parties shall each cooperate fully (and each shall cause its respective Subsidiaries to cooperate fully) with all reasonable requests in writing from another Party hereto, or from an agent, representative or advisor to such Party, in connection with the preparation and filing of Tax Returns, claims for Refunds, Tax Proceedings, and calculations of amounts required to be paid pursuant to this Agreement, in each case, related or attributable to or arising in connection with Taxes of either of the Parties or their respective Subsidiaries covered by this Agreement and in connection with any financial reporting matter relating to Taxes (a “Tax Matter”). Such cooperation shall include the provision of any information reasonably necessary or helpful in connection with a Tax Matter (“Information”) and shall include, without limitation:
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(i) the provision of any Tax Returns, other than any Recro Consolidated Return or Recro Unified Tax Return that does not include Baudax , of the Parties and their respective Subsidiaries, books, records (including information regarding ownership and Tax basis of property), documentation and other information relating to such Tax Returns, including accompanying schedules, related work papers, and documents relating to rulings or other determinations by Taxing Authorities;
(ii) the use of the Party’s reasonable best efforts to obtain any documentation in connection with a Tax Matter;
(iii) the use of the Party’s reasonable best efforts to obtain any Tax Returns (including accompanying schedules, related work papers, and documents) (other than any Recro Consolidated Return), documents, books, records or other information in connection with the filing of any Tax Returns of either of the Parties or their Subsidiaries; and
(iv) the making of each Party’s employees, advisors, and facilities available on a reasonable and mutually convenient basis in connection with the foregoing matters.
(b) Notwithstanding anything in this Agreement to the contrary, neither Party shall be required to provide the other Party or any of such other Party’s Subsidiaries access to or copies of information, documents or personnel if such action could reasonably be expected to result in the waiver of any Privilege. In the event that either Party determines that the Provision of any information or documents to the other Party or any of such other Party’s Subsidiaries could be commercially detrimental, violate any Law or agreement or waive any privilege, the Parties shall use commercially reasonable efforts to permit compliance with its obligations hereunder in a manner that avoids any such harm or consequence.
(c) The Parties shall perform all actions required or permitted under this Agreement in good faith. If one Party requests the cooperation of the other Party pursuant to this Section 6.1 or any other provision of this Agreement, except as otherwise expressly provided in this Agreement, the requesting Party shall reimburse such other Party for all reasonable out-of-pocket costs and expenses incurred by such other Party in complying with the requesting Party’s request.
Section 6.2. Retention of Records. Recro and Baudax shall retain or cause to be retained all Tax Returns, schedules and work papers and all material records or other documents relating thereto in their possession, in each case that relate to a Pre-Closing Period until the later of the six-year anniversary of the filing of the relevant Tax Return or, upon the written request of the other Party, for a reasonable time thereafter (the “Retention Period”). Upon the expiration of the Retention Period, the foregoing information may be destroyed or disposed of by the Party retaining such documentation or other information unless the other Party otherwise requests in writing before the expiration of the Retention Period. In such case, the Party retaining such documentation or other information shall deliver such materials to the other Party or continue to retain such materials, in either case at the expense of such other Party.
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ARTICLE VII
MISCELLANEOUS
Section 7.1. Dispute Resolution. For purposes of Article II of this Agreement, the Parties shall appoint a nationally recognized public accounting firm reasonably acceptable to both of the Parties (the “Accounting Firm”) to resolve solely the identified disputes. In this regard, the Accounting Firm shall make determinations with respect to the disputed items based solely on representations made by Recro and Baudax and their respective Representatives, and not by independent review, and shall function only as an expert and not as an arbitrator and shall be required to make a determination within the ranges submitted by the Parties. The Parties shall require the Accounting Firm to resolve all disputes no later than thirty (30) days after the submission of such dispute to the Accounting Firm, and agree that all decisions by the Accounting Firm with respect thereto shall be final and conclusive and binding on the Parties. The Accounting Firm shall resolve all disputes in a manner consistent with this Agreement and, to the extent not inconsistent with this Agreement, in a manner consistent with the Past Practices of Recro, except as otherwise required by applicable Law. The Parties shall require the Accounting Firm to render all determinations in writing and to set forth, in reasonable detail, the basis for such determination. The total costs and expenses of the Accounting Firm will be allocated and borne between Recro and Baudax based upon that percentage or such fees and expenses equal to the percentage of the dollar value of the proposed determinations submitted to the Accounting Firm determined in favor of the other Party; provided, that if in light of the nature of the dispute the foregoing is not feasible, such costs and expenses shall be borne equally by the Parties. Any initial retainer required by the Accounting Firm shall be funded equally by the Parties (and, following the Accounting Firm’s determination, the Parties shall make appropriate payments between themselves as are necessary to give effect to the preceding sentence).
Section 7.2. Interest on Late Payments. With respect to any payment between the Parties pursuant to this Agreement not made by the due date set forth in this Agreement for such payment (and any amount billed or otherwise invoiced or demanded and properly payable that is not paid within sixty (60) days of such bill, invoice or other demand) shall bear interest at a rate per annum equal to the Prime Rate, from time to time in effect, plus two percent (2%), calculated for the actual number of days elapsed, accrued from the date on which such payment was due up to the date of the actual receipt of payment.
Section 7.3. Survival of Covenants. Except as otherwise contemplated by this Agreement, all covenants and agreements of the Parties contained in this Agreement shall survive the Distribution and remain in full force and effect in accordance with their applicable terms.
Section 7.4. Successors. This Agreement shall be binding on and inure to the benefit of any successor by merger, acquisition of assets, or otherwise, to either of the Parties hereto (including without limitation any successor of Recro or Baudax succeeding to the Tax Attributes of either under Section 381 of the Code), to the same extent as if such successor had been an original party to this Agreement.
Section 7.5. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced under any Law or as a matter of public policy, all other conditions and provisions of this Agreement shall remain in full force and effect. Upon such determination that any term or other provision is invalid illegal or incapable of being enforced, the Parties to this Agreement shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner.
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Section 7.6. Entire Agreement. Except as otherwise expressly provided in this Agreement, the Separation Agreement, this Agreement and the other Ancillary Agreements constitute the entire agreement of the Parties hereto with respect to the subject matter of this Agreement and supersede all prior agreements and undertakings, both written and oral, between or on behalf of the Parties hereto with respect to the subject matter of this Agreement.
Section 7.7. Assignment; No Third-Party Beneficiaries. This Agreement shall not be assigned by any Party without the prior written consent of the other Party hereto, except that each Party may assign (a) any or all of its rights and obligations under this Agreement to any of its Subsidiaries and (b) any or all of its rights and obligations under this Agreement in connection with a sale or disposition of any of its assets or entities or lines of business, provided, however, that, in each case, no such assignment shall release such Party from any liability or obligation under this Agreement. This Agreement is for the sole benefit of the Parties to this Agreement and their respective Subsidiaries and their permitted successors and assigns. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Section 7.8. Specific Performance. From and after the Distribution, 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 who is or is to be thereby aggrieved shall have the right of specific performance and injunctive or other equitable relief of its 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, may be inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by the Parties to this Agreement.
Section 7.9. Amendment. No provision of this Agreement may be amended or modified except by a written instrument signed by the Parties to this Agreement. No waiver by any Party of any provision of this Agreement 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.
Section 7.10. Rules of Construction. Interpretation of this Agreement shall be governed by the following rules of construction (a) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires; (b) references to the terms Article, Section, paragraph, clause, Exhibit and Schedule are references to the Articles, Sections, paragraphs, clauses, Exhibits and schedules of this Agreement, unless otherwise specified; (c) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or similar words refer to this entire Agreement, including the Schedules and
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Exhibits hereto; (d) references to $ shall mean U.S. dollars; (e) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) references to “written” or “in writing” include in electronic form; (h) provisions shall apply, when appropriate, to successive events and transactions; (i) the headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; (j) Recro and Baudax have each participated in the negotiation and drafting of this Agreement and if an ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted jointly by the Parties hereto and no presumption or burden of proof shall arise favoring or burdening either Party by virtue of the authorship of any of the provisions in this Agreement or any interim drafts of this Agreement; and (k) a reference to any Person includes such Person’s successors and permitted assigns.
Section 7.11. Counterparts. This Agreement may be executed in one or more counterparts each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or portable document format (PDF) shall be as effective as delivery of a manually executed counterpart of any such Agreement.
Section 7.12. Expenses. Except as otherwise provided in this Agreement, whether or not the Distribution or the other transactions contemplated by this Agreement or the Separation Agreement are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such costs or expenses.
Section 7.13. Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the Commonwealth of Pennsylvania, without giving effect to the conflicts of laws principles thereof that might lead to the application of laws other than the Laws of the Commonwealth of Pennsylvania.
Section 7.14. Notices. Any notice, demand, claim or other communication under this Agreement will be in writing and will be deemed to have been given (a) on delivery if delivered personally, (b) on the date on which delivery thereof is guaranteed by the carrier if delivered by a national courier guaranteeing delivery within a fixed number of days of sending, or (c) on the date of facsimile or email transmission thereof if delivery is confirmed, but, in each case, only if addressed to the Parties in the following manner at the following addresses or facsimile numbers (or at the other address or other number as a Party may specify by notice to the others).
To Recro:
Recro Pharma, Inc.
1300 Gould Drive
Gainesville, GA 30504
Attn: Chief Financial Officer
Phone: 770-534-8239
Fax: 770 534-8247
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To Baudax:
Baudax Bio, Inc.
490 Lapp Road
Malvern, PA 19355
Attn: Chief Financial Officer
Phone: 484-395-2440
Fax: 484-395-2471
Section 7.15. Coordination with Ancillary Agreements. Except as explicitly set forth in the Separation Agreement or any other Ancillary Agreement, this Agreement shall be the exclusive agreement among the Parties with respect to all Tax Matters, including indemnification in respect of Tax Matters. The Parties agree that this Agreement shall take precedence over any and all agreements among the Parties with respect to Tax Matters.
Section 7.16. Effective Date. This Agreement shall become effective only upon the occurrence of the Distribution.
[Signature page follows]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written.
| RECRO PHARMA, INC. | ||
| By: | /s/ Gerri Henwood | |
| Name: | Gerri Henwood | |
| Title: | President and Chief Executive Officer | |
| BAUDAX BIO, INC. | ||
| By: | /s/ Ryan Lake | |
| Name: | Ryan Lake | |
| Title: | Chief Financial Officer and Treasurer | |
[Signature page to Tax Matters Agreement]
Exhibit 10.2
EMPLOYEE MATTERS AGREEMENT
by and between
RECRO PHARMA, INC.
and
BAUDAX BIO, INC.
Dated as of November 20, 2019
TABLE OF CONTENTS
| PAGE | ||||||
| ARTICLE I DEFINITIONS |
1 | |||||
| Section 1.1. |
General | 1 | ||||
| ARTICLE II TRANSFER OF BAUDAX EMPLOYEES; GENERAL PRINCIPLES |
3 | |||||
| Section 2.1. |
Transfer of Employment to Baudax of Additional Employees; Post-Effective Time Transfers; Independent Contractors | 3 | ||||
| Section 2.2. |
Assumption and Retention of Liabilities | 4 | ||||
| Section 2.3. |
Plan Participation | 5 | ||||
| Section 2.4. |
No Duplication of Benefits; Service and Other Credit | 5 | ||||
| Section 2.5. |
Reimbursements | 5 | ||||
| ARTICLE III DEFINED CONTRIBUTION AND NON-QUALIFIED DEFERRED COMPENSATION PLANS |
6 | |||||
| Section 3.1. |
401(k) Plan | 6 | ||||
| ARTICLE IV HEALTH AND WELFARE PLANS; PAYROLL; COBRA AND VACATION |
6 | |||||
| Section 4.1. |
Cessation of Participation in Recro H&W Plans | 6 | ||||
| Section 4.2. |
Allocation of Health and Welfare Plan Liabilities | 7 | ||||
| Section 4.3. |
Flexible Spending Plan Treatment | 7 | ||||
| Section 4.4. |
Workers’ Compensation Liabilities | 8 | ||||
| Section 4.5. |
Payroll Taxes and Reporting | 8 | ||||
| Section 4.6. |
COBRA and HIPAA Compliance | 9 | ||||
| Section 4.7. |
Vacation and Paid Time Off | 9 | ||||
| ARTICLE V INCENTIVE COMPENSATION, EQUITY COMPENSATION AND OTHER BENEFITS |
9 | |||||
| Section 5.1. |
Annual Cash-Based Incentive Plans | 9 | ||||
| Section 5.2. |
Treatment of Equity Incentives | 9 | ||||
| ARTICLE VI GENERAL AND ADMINISTRATIVE |
10 | |||||
| Section 6.1. |
Sharing of Participant Information | 10 | ||||
| Section 6.2. |
No Third Party Beneficiaries | 10 | ||||
| Section 6.3. |
Audit Rights with Respect to Information Provided | 11 | ||||
| Section 6.4. |
Fiduciary Matters | 11 | ||||
| Section 6.5. |
Consent of Third Parties | 11 | ||||
| Section 6.6. |
Proprietary Information and Inventions Agreements | 11 | ||||
| ARTICLE VII MISCELLANEOUS |
12 | |||||
| Section 7.1. |
General | 12 | ||||
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EMPLOYEE MATTERS AGREEMENT
This EMPLOYEE MATTERS AGREEMENT (this “Agreement”), dated as of November 20, 2019, is entered into by and between Recro Pharma, Inc. (“Recro”), a Pennsylvania corporation, and Baudax Bio, Inc. (“Baudax”), a Pennsylvania corporation and a wholly owned subsidiary of Recro. Capitalized terms used and not defined herein shall have the meaning set forth in the Separation Agreement between the Parties, dated as of November 20, 2019 (the “Separation Agreement”).
WHEREAS, as contemplated by the Separation Agreement, Recro and Baudax desire to enter into this Agreement to provide for the allocation of assets, Liabilities, and responsibilities with respect to certain matters relating to employees and other individual service providers (including employee compensation and benefit plans and programs) between them.
NOW, THEREFORE, the Parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. General. For purposes of this Agreement the following terms shall have the meaning ascribed to them in this Article I.
1.1. “401(k) Benefits Commencement Date” means January 1, 2020 or as soon as possible thereafter, but in no event later than March 31, 2020.
1.2. “Baudax 401(k) Plan” means the tax-qualified defined contribution savings plan with a cash or deferred arrangement under Section 401(k) of the Code adopted by Baudax or a Baudax Group member and effective as of the Benefits Commencement Date.
1.3. “Baudax Employee” means any individual who, as of the Distribution Effective Time, is either actively employed by or then on a short-term leave of absence from Baudax or a Baudax Group member (including maternity, paternity, family, sick, short-term disability leave, qualified military service under the Uniformed Services Employment and Reemployment Rights Act of 1994, and leave under the Family Medical Leave Act and other approved leaves) or who is employed by Recro or a Recro Group member and who becomes a Baudax Employee pursuant to the operation of this Agreement.
1.4. “Baudax Equity Plan” means the Baudax Bio, Inc. 2019 Equity Incentive Plan adopted by Baudax prior to the Distribution Effective Time.
1.5. “Baudax FSAs” has the meaning set forth in Section 4.3.
1.6. “Baudax H&W Plans” means the health and welfare plans sponsored and maintained by Baudax or any Baudax Group member immediately prior to the Distribution Effective Time which provide group health, life, dental, accidental death and dismemberment, health care reimbursements, dependent care assistance and disability benefits.
1.7. “Baudax Participant” means any individual who is a Baudax Employee or a Former Baudax Employee, and any beneficiary, dependent, or alternate payee of such individual, as the context requires.
1.8. “Benefits Commencement Date” means January 1, 2020.
1.9. “Change of Control” has the meaning given to it under the applicable Recro Equity-Based Plan.
1.10. “COBRA” means the continuation coverage requirements for “group health plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Code Section 4980B and ERISA Sections 601 through 608.
1.11. “Code” means the Internal Revenue Code of 1986, as amended, or any successor federal income tax law. Reference to a specific Code provision also includes any proposed, temporary, or final regulation in force under that provision.
1.12. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended. Reference to a specific provision of ERISA also includes any proposed, temporary, or final regulation in force under that provision.
1.13. “Former Baudax Employee” means any individual whose employment with either Party or any of its respective Subsidiaries and Affiliates terminated for any reason before the Distribution Effective Time, and who was primarily engaged in providing services to the Acute Care Business as of the date of his or her termination of employment.
1.14. “Former Recro Employee” means any individual whose employment with a Recro Group member terminated for any reason before the Distribution Effective Time, other than a Former Baudax Employee.
1.15. “HIPAA” means the health insurance portability and accountability requirements for “group health plans” under the Health Insurance Portability and Accountability Act of 1996, as amended.
1.16. “Plan” when immediately preceded by “Recro,” means any plan, policy, program, payroll practice, on-going arrangement, contract, trust, insurance policy or other agreement or funding vehicle (including a Recro H&W Plan) for which the eligible classes of participants include employees or former employees of Recro or a Recro Group member (which may include employees of Baudax Group members prior to the Distribution Effective Time), and when immediately preceded by “Baudax,” means any plan, policy, program, payroll practice, on-going arrangement, contract, trust, insurance policy or other agreement or funding vehicle (including a Baudax H&W Plan) for which the eligible classes of participants are limited to employees or former employees (and their eligible dependents) of Baudax or a Baudax Group member, but no other Recro Group member.
1.17. “Recro Defined Contribution Plan” means the Recro Pharma 401(k) Plan.
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1.18. “Recro Employee” means any individual who, as of the Distribution Effective Time, is either receiving compensation from a member of the Recro Group which is to be reported on IRS Form W-2 (in the case of individuals employed in the United States) or who is on the payroll of a Recro Group member (in the case of individuals outside the United States), but does not include any Baudax Employee.
1.19. “Recro Equity-Based Plan” means the Recro 2018 Amended and Restated Equity Incentive Plan and the Recro 2008 Stock Option Plan.
1.20. “Recro FSAs” means flexible spending accounts for health and dependent care expenses established or designated by Recro.
1.21. “Recro H&W Plans” means the health and welfare plans sponsored and maintained by Recro or any Recro Group member immediately prior to the Distribution Effective Time which provide group health, life, dental, accidental death and dismemberment, health care reimbursements, dependent care assistance and disability benefits.
1.22. “Recro Option” means each option to acquire Recro Common Stock granted under a Recro Equity-Based Plan.
1.23. “Recro Participant” means any individual who is a Recro Employee or a Former Recro Employee, and any beneficiary, dependent, or alternate payee of such individual, as the context requires.
1.24. “Recro PRSU” means each award of restricted share units with respect to Recro Common Stock granted under a Recro Equity-Based Plan subject to performance-based vesting conditions.
1.25. “Recro RSU” means each award of restricted share units with respect to Recro Common Stock granted under a Recro Equity-Based Plan (other than Recro PRSUs).
1.26. “Time-Based Award” means a Recro RSU or Recro Option that solely vests based on the continued employment or service of the recipient.
1.27. “TSA Term” means the “Term” as defined in the Transition Services, dated as of the date hereof, by and between Recro and Baudax.
ARTICLE II
TRANSFER OF BAUDAX EMPLOYEES; GENERAL PRINCIPLES
Section 2.1. Transfer of Employment to Baudax of Additional Employees; Post-Effective Time Transfers; Independent Contractors.
(a) Following the date hereof and prior to the Distribution Effective Time, Recro and Baudax may cause the employment of individuals designated by Recro who are not employed by a Baudax Group member as of the date hereof to be transferred to a Baudax Group member.
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(b) In the event that the Parties determine following the Distribution Effective Time that any individual employed outside the United States (other than an individual who the Parties intend to be a Recro Employee) has inadvertently become employed by a member of the Recro Group (due to the operation of transfer of undertakings or similar law or regulation), the Parties shall cooperate and take such actions as may be reasonably necessary in order to cause the employment of such individuals to be promptly transferred to a member of the Baudax Group.
(c) The Parties shall cooperate and take such actions as may be reasonably necessary in order to minimize potential statutory, contractual, plan-based or other severance or similar obligations to the Parties or their Affiliates in connection with any transfers of employment described in this Section 2.1.
(d) Baudax will determine which, if any, temporary workers, individual consultants or independent contractors who are performing service primarily related to the Acute Care Business, it wishes to transfer to Baudax and, the Parties shall use reasonable efforts to transfer the individual or to assign the applicable Contract to a member of the Baudax Group and Baudax shall, or shall cause a member of the Baudax Group to, assume and perform such Contract. In the event that a transfer fee is required to be paid in order to effect such transfer, Baudax shall be responsible for and pay the full amount of such fee.
Section 2.2. Assumption and Retention of Liabilities. Recro and Baudax intend that employment-related Liabilities associated with Recro Participants are to be retained or assumed by Recro or a Recro Group member, and employment-related Liabilities associated with Baudax Participants are to be assumed by Baudax or a Baudax Group member, in each case, except as specifically set forth herein. Accordingly, as of the Distribution Effective Time:
(a) Recro or the applicable member of the Recro Group hereby retains or assumes and agrees to pay, perform, fulfill, and discharge, except as expressly provided in this Agreement, (i) all Liabilities arising under or related to Recro Plans, (ii) all employment or service-related Liabilities with respect to (A) all Recro Participants and (B) any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker or in any other employment or similar relationship primarily connected to Recro or a Recro Group member and (iii) any Liabilities expressly transferred or allocated to Recro or a Recro Group member under this Agreement (it being understood and agreed that the provisions of this Agreement do not create or constitute a source of any such Liability); and
(b) Baudax hereby retains or assumes and agrees to pay, perform, fulfill, and discharge, except as expressly provided in this Agreement, (i) all Liabilities arising under or related to Baudax Plans, (ii) all employment or service-related Liabilities with respect to (A) all Baudax Participants and (B) any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker or in any other employment or similar relationship primarily connected to Baudax or a Baudax Group member and (iii) any Liabilities expressly transferred or allocated to Baudax or a Baudax Group member under this Agreement.
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Section 2.3. Plan Participation3.1. . Except as otherwise expressly provided in this Agreement, effective as of immediately prior to the applicable Benefits Commencement Date, (a) (i) all Baudax Participants shall cease any participation in, and benefit accrual under, Recro Plans and (ii) all members of the Baudax Group shall cease to be participating employers under the Recro Plans and, (b) to the extent applicable, (i) all Recro Participants shall cease any participation in, and benefit accrual under, Baudax Plans and (ii) all members of the Recro Group shall cease to be participating employers under the Baudax Plans. Prior to the Distribution Effective Time, Recro and Baudax shall take all actions necessary to effectuate the actions contemplated by this Section 2.3 and to cause (A) the applicable Baudax Group member to assume or retain all Liabilities with respect to each Baudax Plan and the applicable Recro Group member to assume or retain all Liabilities with respect to each Recro Plan, in each case, effective as of the Distribution Effective Time and (B) all assets of any Baudax Plan to be transferred to or retained by the applicable Baudax Group member in the applicable jurisdiction and all assets of any Recro Plan to be transferred to or retained by the applicable Recro Group member in the applicable jurisdiction, in each case, effective as of the Distribution Effective Time.
Section 2.4. No Duplication of Benefits; Service and Other Credit. Recro and Baudax shall adopt, or cause to be adopted, all reasonable and necessary amendments and procedures to prevent Baudax Participants from receiving duplicative benefits from the Recro Plans and the Baudax Plans. With respect to Baudax Employees, each Baudax Plan shall provide that for purposes of determining eligibility to participate, vesting, and entitlement to benefits, service prior to the Distribution Effective Time with Recro or a Recro Group member shall be treated as service with Baudax or the applicable Baudax Group member. Such service also shall apply for purposes of satisfying any waiting periods, evidence of insurability requirements, or the application of any preexisting condition limitations under any Baudax Plan. Each Baudax Plan shall, to the extent practicable, waive pre-existing condition limitations with respect to Baudax Employees. Baudax shall honor any deductible, co-payment and out-of-pocket maximums incurred by the Baudax Employees and their eligible dependents under the Recro Plans in which they participated immediately prior to the Benefits Commencement Date during the then-elapsed portion of the calendar year prior to the Benefits Commencement Date in satisfying any deductibles, co-payments or out-of-pocket maximums under the Baudax Plans in which they are eligible to participate after the Benefits Commencement Date in the same plan year in which such deductibles, co-payments or out-of-pocket maximums were incurred.
Section 2.5. Reimbursements. From time to time after the Distribution 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.
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ARTICLE III
DEFINED CONTRIBUTION AND NON-QUALIFIED DEFERRED
COMPENSATION PLANS
Section 3.1. 401(k) Plan.
(a) Effective as of the Distribution Effective Time, each Baudax Participant who participates in the Recro Defined Contribution Plan as of immediately prior to the 401(k) Benefits Commencement Date will cease active participation in the Recro Defined Contribution Plan. For the avoidance of doubt, all employee pre-tax deferrals and employer contributions with respect to the Baudax Participants will be made to the Baudax 401(k) Plan on and following the effective date of the Baudax 401(k) Plan.
(b) In accordance with applicable Law, Recro and Baudax shall cause, in the manner described herein, the accounts under the Recro Defined Contribution Plan of each Baudax Employee to be transferred to the Baudax 401(k) Plan, as soon as practicable after the effective date of the Baudax 401(k) Plan. On, or as soon as practicable after, the effective date of the Baudax 401(k) Plan: (i) Recro shall cause the accounts (including any outstanding loan balances and employer contributions described in Section 3.1(c)) of each Baudax Employee in the Recro Defined Contribution Plan to be transferred from the trust established under the Recro Defined Contribution Plan to the trust established under the Baudax 401(k) Plan; and (ii) Baudax shall cause such transferred accounts to be accepted by the Baudax 401(k) Plan and its related trust.
(c) If any Baudax Employees are eligible to receive true-up matching contributions under the Recro Defined Contribution Plan with respect to the 2019 plan year, and such contributions have not yet been deposited into the Baudax Employees’ accounts under the Recro Defined Contribution Plan as of the date such accounts are transferred from the trust established under the Recro Defined Contribution Plan to the trust established under the Baudax 401(k) Plan as set forth in Section 3.1(b), then Recro shall contribute the amount of such true-up matching contributions (and other employer contributions, if any) into the applicable Baudax Employees’ accounts under the Recro Defined Contribution Plan prior to such transfer based on all service performed and compensation accrued through the Distribution Effective Time.
ARTICLE IV
HEALTH AND WELFARE PLANS; PAYROLL; COBRA AND VACATION
Section 4.1. Cessation of Participation in Recro H&W Plans.
(a) Without limiting the generality of Section 2.3, effective as of the Benefits Commencement Date, Baudax Participants shall cease to participate in the Recro H&W Plans; provided that any participation in, and benefit accrual under, Recro H&W Plans by Baudax Participants during the period, if any, between the Distribution Effective Time and the Benefits Commencement Date (the “Benefits Transition Period”) shall be in accordance with, and pursuant to, the terms and conditions of the Transition Services Agreement.
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(b) Effective as of the Benefits Commencement Date, Baudax shall cause Baudax Participants who participate in a Recro H&W Plan immediately prior to the Benefits Commencement Date to be automatically enrolled or offered participation in a corresponding Baudax H&W Plan.
(c) To the extent applicable, Baudax shall cause Baudax H&W Plans to recognize and maintain all coverage and contribution elections made by Baudax Participants under the corresponding Recro H&W Plans as of the Benefits Commencement Date and apply such elections under the applicable Baudax H&W Plan for the remainder of the period or periods for which such elections are by their terms applicable.
(d) Neither the transfer or other movement of employment or service from any member of the Recro Group to any member of the Baudax Group at any time before the Benefits Commencement Date nor the Distribution Effective Time shall constitute or be treated as a “status change” under the Recro H&W Plans or the Baudax H&W Plans.
(e) Subject to the terms of the applicable Baudax H&W Plan and applicable Law, Baudax shall use its reasonable best efforts to waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to Baudax Participants under any Baudax H&W Plan in which such Baudax Participants may be eligible to participate on or after the applicable Benefits Commencement Date.
Section 4.2. Allocation of Health and Welfare Plan Liabilities. Effective as of the Distribution Effective Time, all Liabilities relating to, arising out of, or resulting from health and welfare coverage or claims incurred prior to, on or after the Distribution Effective Time by each Baudax Participant under the Recro H&W Plans shall cease to be Liabilities of the Recro Group and shall be assumed by the Baudax Group and deemed to be Baudax Liabilities. Without limiting the generality of the foregoing, any and all costs, expenses or Liabilities relating to participation by Baudax Participants in the Recro H&W Plans during the Benefits Transition Period shall be reimbursed by Baudax to the Recro Group in accordance with the terms of the Transition Services Agreement. For the avoidance of doubt, (a) all Liabilities arising under (i) any Recro H&W Plan with respect to Baudax Participants or (ii) any Baudax H&W Plan and (b) all Liabilities arising out of, relating to or resulting from the cessation of a Baudax Participant’s participation in any Recro H&W Plan and transfer to a Baudax H&W Plan as set forth herein (including any Actions or claims by any Baudax Participants related thereto) shall, in each case, be Baudax Liabilities.
Section 4.3. Flexible Spending Plan Treatment. Effective as of the Benefits Commencement Date, Baudax shall establish or designate flexible spending accounts for health and dependent care expenses (the “Baudax FSAs”). To the extent applicable, the Parties shall take all actions reasonably necessary or appropriate so that the account balances (positive or negative) under the Recro FSAs of each Baudax Participant who has elected to participate therein in the year in which the Benefits Commencement Date occurs shall be transferred, effective as of the Benefits Commencement Date, from the Recro FSAs to the corresponding Baudax FSAs. The Baudax FSAs shall assume responsibility as of the Benefits Commencement Date for all outstanding dependent care and health care claims under the Recro FSAs of each Baudax Participant for the year in which the Benefits Commencement Date occurs and shall
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assume the rights of and agree to perform the obligations of the analogous Recro FSA from and after the Benefits Commencement Date. The Parties shall cooperate in good faith to provide that the contribution elections of each such Baudax Participant as in effect immediately before the Benefits Commencement Date remain in effect under the Baudax FSAs from and after the Benefits Commencement Date.
Section 4.4. Workers’ Compensation Liabilities. All workers’ compensation Liabilities relating to, arising out of, or resulting from any claim by Baudax Employees or Former Baudax Employees that result from an accident that occurs, or from an occupational disease which is incurred or becomes manifest, as the case may be, on or before the Distribution Effective Time and while such individual was employed by Recro or a Recro Group member shall be assumed by Baudax as of the Distribution Effective Time; provided, however, that to the extent that either (1) such a Liability is covered under a workers compensation insurance policy of Recro or a Recro Group member or (2) Recro has received an invoice for a covered expense prior to the Distribution Effective Time, Baudax shall not assume such Liability. Notwithstanding the foregoing, Baudax shall assume worker’s compensation Liabilities to the extent they are imposed on Baudax under applicable Law or where the injury or illness related to the Liability is aggravated or subject to further injury after the Distribution Effective Time. A Liability which must be paid due to the existence of a deductible shall not be deemed to be covered by a workers compensation insurance policy for purposes of this Section 4.4. Subject to the foregoing, Baudax and each Baudax Group member shall also be solely responsible for all workers’ compensation Liabilities relating to, arising out of, or resulting from any claim incurred for a compensable injury sustained by a Baudax Employee that results from an accident or from an occupational disease which is incurred or becomes manifest, as the case may be, after the Distribution Effective Time. Recro, each Recro Group member, Baudax and each Baudax Group member shall cooperate with respect to processing of claims, any notification to appropriate governmental agencies of the disposition and the issuance of new, or the transfer of existing, workers’ compensation insurance policies and claims handling contracts.
Section 4.5. Payroll Taxes and Reporting. Recro and Baudax (i) shall, to the extent practicable, treat Baudax (or a Baudax Group member designated by Baudax) as a “successor employer” and Recro (or the appropriate Recro Group member) as a “predecessor,” within the meaning of Sections 3121(a)(l) and 3306(b)(l) of the Code, with respect to Baudax Employees for purposes of taxes imposed under the United States Federal Unemployment Tax Act or the United States Federal Insurance Contributions Act (“FICA”), 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, including all withholding obligations otherwise set forth therein, Recro, each Recro Group member, Baudax and each Baudax Group member shall each bear its responsibility for payroll tax obligations and for the proper reporting to the appropriate governmental authorities of compensation earned by their respective employees after the Distribution Effective Time.
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Section 4.6. COBRA and HIPAA Compliance. The Recro Group shall administer the Recro Group’s compliance with the health care continuation coverage requirements of COBRA, the certificate of creditable coverage requirements of HIPAA and the corresponding provisions of the Recro H&W Plans with respect to Baudax Participants who incur a COBRA “qualifying event” occurring on or before the applicable Benefits Commencement Date entitling them to benefits under a Recro H&W Plan; provided that, for the avoidance of doubt, any Liabilities related thereto shall constitute Baudax Liabilities. Baudax shall be solely responsible for all Liabilities incurred pursuant to COBRA and for administering, at Baudax’s expense, compliance with the health care continuation coverage requirements of COBRA, the certificate of creditable coverage requirements of HIPAA, and the corresponding provisions of the Baudax H&W Plans with respect to Baudax Participants who incur a COBRA “qualifying event” that occurs at any time after the applicable Benefits Commencement Date entitling them to benefits under a Baudax Plan. The Parties agree that neither the Separation, the Distribution nor any assignment or transfer of the employment or services of any employee or individual independent contractor as contemplated under this Agreement shall constitute a COBRA “qualifying event” for any purpose of COBRA.
Section 4.7. Vacation and Paid Time Off. As of the Distribution Effective Time, the applicable Baudax Group member shall credit each Baudax Employee with the vacation and earned sick time that such individual has accrued immediately prior to the Distribution Effective Time in accordance with the vacation and personnel policies applicable to such employee immediately prior to the Distribution Effective Time.
ARTICLE V
INCENTIVE COMPENSATION, EQUITY COMPENSATION AND OTHER BENEFITS
Section 5.1. Annual Cash-Based Incentive Plans. As of the Distribution Effective Time, Baudax shall assume the obligation, if any, to pay each Baudax Employee who is participating in a Recro annual cash incentive bonus program, including a sales incentive compensation plan, of Recro or a Recro Group member such Baudax Employee’s incentive or sales bonus under such plan, based upon the amount accrued by Recro in respect of such obligations. Baudax shall cause such payments to be made to the applicable Baudax Employees at the time any corresponding payments would be made under the corresponding Recro incentive bonus program.
Section 5.2. Treatment of Equity Incentives. Recro and, where applicable, Baudax, shall take all necessary or appropriate actions so that each outstanding Recro RSU, Recro PRSU or Recro Option outstanding immediately prior to the Distribution Effective Time shall be treated as set forth in this Section 5.2.
(a) No Adjustments in Connection with Distribution. No adjustments to the number of shares or exercise price, as applicable, shall be made to any Recro RSU, Recro PRSU or Recro Option in connection with the execution of this Agreement or the consummation of the transactions contemplated by the Separation Agreement.
(b) Recro Awards Held by Baudax Employees - Generally. Except as expressly provided in Section 5.2(c), Recro RSUs, Recro PRSUs and Recro Options that are outstanding and held by a Baudax Employee will remain outstanding and shall be subject to the same terms and conditions as of immediately prior to the Distribution Effective Time.
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(c) Recro Awards Held by Baudax Employees – Service. With respect to each Recro RSU, Recro PRSU and Recro Option held by a Baudax Employee, continued employment or service with a Baudax Group member shall be treated as continued employment and service for all purposes of such Recro RSU and Recro Option during the TSA Term; provided, that any outstanding Time-Based Awards that are still subject to time-based vesting conditions shall become fully vested as of the date of a Change of Control occurring during the TSA Term; provided further that the Baudax Employee remains an employee or service provider of a Baudax Group member through the consummation of such Change of Control and executes a release and waiver of claims against the Recro Group and the Baudax Group in a form reasonably prescribed by the Recro Group.
(d) Withholding and Reporting. Following the Distribution Effective Time, (i) Recro shall be solely responsible for all income, payroll and other tax remittance and reporting related to the compensation of Recro Participants in respect of Recro RSUs, Recro PRSUs, and Recro Options and (ii) Recro shall be solely responsible for all income, payroll and other tax remittance related to the compensation of Baudax Participants in respect of Recro RSUs, Recro PRSUs, and Recro Options, subject in each case to the Parties’ undertakings set forth in Section 4.5. The Parties will cooperate and communicate with each other and with third-party providers to effectuate the withholding and remittance of any such taxes, as well as any required tax reporting, in a timely, efficient and appropriate manner. To the maximum extent permitted under applicable Law, Recro and Baudax shall share, and shall cause each member of its respective Group to share, with each other and their respective agents and vendors all information reasonably necessary for the efficient and accurate administration of their payroll processes, each of the Recro Equity-Based Plans and the Baudax Equity Plan, including but not limited to information regarding terminations of employment and the attainment of any specified criteria set forth in any awards. Recro will be responsible for the employer share of FICA taxes that are paid in respect of income, payroll and other tax remittances relating to the compensation of Baudax Employees in respect of Recro RSUs, Recro PRSUs and Recro Options.
ARTICLE VI
GENERAL AND ADMINISTRATIVE
Section 6.1. Sharing of Participant Information. To the maximum extent permitted under applicable Law, Recro and Baudax shall share, and shall cause each member of its respective Group to 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 Recro Plans and the Baudax Plans. Recro and Baudax and their respective authorized agents shall, subject to applicable laws on confidentiality, be given reasonable and timely access to, and may make copies of, all information relating to the subjects of this Agreement in the custody of the other Party, to the extent necessary for such administration.
Section 6.2. No Third Party Beneficiaries. No provision of this Agreement or the Separation Agreement shall be construed to create any right, or accelerate entitlement, to any compensation or benefit whatsoever on the part of any future, present, or former employee of Recro, a Recro Group member, Baudax, or a Baudax Group member under this Agreement, the Separation Agreement, any Recro Plan or Baudax Plan or otherwise. Except as expressly
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provided in this Agreement, nothing in this Agreement shall preclude Baudax or any Baudax Group member, at any time , from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any Baudax Plan, any benefit under any Baudax Plan or any trust, insurance policy or funding vehicle related to any Baudax Plan; and (iii) except as expressly provided in this Agreement, nothing in this Agreement shall preclude Recro or any Recro Group member, at any time, from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any Recro Plan, any benefit under any Recro Plan or any trust, insurance policy or funding vehicle related to any Recro Plan.
Section 6.3. Audit Rights with Respect to Information Provided. Each of Recro and Baudax, 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 pursuant to this Agreement. The Parties shall cooperate to determine the procedures and guidelines for conducting audits under this Section 6.3, which shall require reasonable advance 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. Failure of a third party service provider to provide information shall not constitute a breach of this Section 6.3; provided, that the applicable Party has timely requested the information from such service provider.
Section 6.4. Fiduciary Matters. Recro and Baudax each 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 deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall fully release and indemnify the other Party for any Liabilities caused by the failure to satisfy any such responsibility.
Section 6.5. Consent of Third Parties. If any provision of this Agreement is dependent on the consent of any third party (such as a vendor or Governmental Authority), Recro and Baudax shall use commercially reasonable efforts to obtain such consent, and if such consent is not obtained, to implement the applicable provisions of this Agreement to the full extent practicable. If any provision of this Agreement cannot be implemented due to the failure of such third party to consent, Recro and Baudax 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 6.6. Proprietary Information and Inventions Agreements. Effective as of the Distribution Effective Time, Recro shall, or shall cause the appropriate member of the Recro Group to, waive such rights under any proprietary information, confidentiality, inventions, restrictive covenant or similar agreement between any Baudax Employee and any Recro Group member as Recro determines in its discretion to be necessary or appropriate to permit such Baudax Employee to perform his or her services to Baudax or a Baudax Group member from and after the Distribution Effective Time.
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ARTICLE VII
MISCELLANEOUS
Section 7.1. General. The provisions of Article X of the Separation Agreement, are hereby incorporated by reference into and deemed part of this Agreement and shall apply, mutatis mutandis, as if fully set forth in this Agreement.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written.
| RECRO PHARMA, INC. | ||
| By: | /s/ Gerri Henwood | |
| Name: Gerri Henwood | ||
| Title: President and Chief Executive Officer | ||
| BAUDAX BIO, INC. | ||
| By: | /s/ Ryan Lake | |
| Name: Ryan Lake | ||
| Title: Chief Financial Officer and Treasurer | ||
[Signature page to Employee Matters Agreement]
Exhibit 10.3
TRANSITION SERVICES AGREEMENT
by and between
RECRO PHARMA, INC.
and
BAUDAX BIO, INC.
Dated as of November 20, 2019
TABLE OF CONTENTS
| ARTICLE I DEFINITIONS; INTERPRETATION |
3 | |||||
| Section 1.1. |
General | 3 | ||||
| Section 1.2. |
Interpretation | 4 | ||||
| ARTICLE II SERVICES |
4 | |||||
| Section 2.1. |
General | 4 | ||||
| Section 2.2. |
Standard for Services | 4 | ||||
| Section 2.3. |
[Protection of Information Systems | 5 | ||||
| Section 2.4. |
Transitional Nature of the Services | 5 | ||||
| Section 2.5. |
Omitted Services | 5 | ||||
| Section 2.6. |
Additional Services | 6 | ||||
| Section 2.7. |
Use of Third Parties | 6 | ||||
| Section 2.8. |
Cooperation | 7 | ||||
| Section 2.9. |
Access | 7 | ||||
| Section 2.10. |
Intellectual Property | 7 | ||||
| ARTICLE III FEES AND PAYMENT |
7 | |||||
| Section 3.1. |
Fees | 7 | ||||
| Section 3.2. |
Expense | 8 | ||||
| Section 3.3. |
Invoice; Payment | 8 | ||||
| Section 3.4. |
Late Payments | 8 | ||||
| Section 3.5. |
Taxes | 8 | ||||
| Section 3.6. |
No Right to Set-Off | 8 | ||||
| ARTICLE IV SERVICE MANAGEMENT |
9 | |||||
| Section 4.1. |
Service Managers | 9 | ||||
| Section 4.2. |
Service Coordinators | 9 | ||||
| ARTICLE V SUB-CONTRACTING; THIRD PARTY AGREEMENTS |
9 | |||||
| Section 5.1. |
Sub-Contractors | 9 | ||||
| Section 5.2. |
Third Party Agreements | 9 | ||||
| Section 5.3. |
Consents | 9 | ||||
| ARTICLE VI TERM AND TERMINATION AND EFFECTS OF TERMINATION |
10 | |||||
| Section 6.1. |
Term | 10 | ||||
| Section 6.2. |
Termination for Breach | 10 | ||||
| Section 6.3. |
Early Termination of a Service | 10 | ||||
| Section 6.4. |
Termination Upon Insolvency | 11 | ||||
| Section 6.5. |
Accrued Rights | 11 | ||||
| Section 6.6. |
Effect of Termination | 11 | ||||
| ARTICLE VII LIMITATION OF LIABILITY; INDEMNIFICATION |
12 | |||||
| Section 7.1. |
Limited Liability | 12 | ||||
| Section 7.2. |
Services Provided “As-Is” | 12 | ||||
| Section 7.3. |
Indemnification | 12 | ||||
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| ARTICLE VIII INSURANCE MATTERS |
13 | |||||
| Section 8.1. |
Insurance | 13 | ||||
| ARTICLE IX CONFIDENTIALITY |
13 | |||||
| Section 9.1. |
Confidentiality | 13 | ||||
| ARTICLE X MISCELLANEOUS |
14 | |||||
| Section 10.1. |
General | 14 | ||||
| Section 10.2. |
Inconsistencies | 14 | ||||
| Section 10.3. |
Dispute Resolution | 14 | ||||
| Section 10.4. |
Force Majeure | 14 | ||||
| Section 10.5. |
Titles and Headings | 15 | ||||
| Section 10.6. |
Independent Contractor Status | 15 | ||||
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TRANSITION SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT (this “Agreement”), dated as of November 20, 2019, is entered into by and between Recro Pharma, Inc., a Pennsylvania corporation (“Recro”), and Baudax Bio, Inc., a Pennsylvania corporation (“Baudax”). “Party” or “Parties” means Recro or Baudax, individually or collectively, as the case may be.
RECITALS
WHEREAS, in conjunction with a Separation Agreement executed by and between Recro and Baudax of even date hereof (the “Separation Agreement”) each of Baudax and Recro desires to provide to the other certain transition services, as more particularly described herein and upon the terms and subject to the conditions hereinafter set forth; and
WHEREAS, the Parties agree and acknowledge that the efficient and effective transition of the Services (as defined below), in a manner that permits the successful operations of each Party following consummation of the transactions contemplated by the Separation Agreement, is a priority to the shareholders of each Party.
NOW, THEREFORE, in consideration of the foregoing and the respective warranties, covenants and agreements hereinafter set forth, and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
Section 1.1. General. Capitalized terms used but not otherwise defined in this Agreement shall have the meanings assigned to them in the Separation Agreement. As used herein, the following terms shall have the following meanings:
(a) “Service Provider” means, as the context may require, any member of the Recro Group or the Baudax Group, as applicable, in its capacity as the provider of any Services to any member of the Baudax Group or the Recro Group, respectively, or, any other Person providing the Services on behalf of the Recro Group or the Baudax Group, as applicable.
(b) “Service Recipient” means, as the context may require, any member of the Recro Group or the Baudax Group, as applicable, in its capacity as the recipient of any Services from any member of the Baudax Group or the Recro Group, respectively,
(c) “Services” means all of the services to be provided by or on behalf of Service Provider under this Agreement and described on Schedule I-A, with respect to the Services provided by or on behalf of the Recro Group, or Schedule I-B, with respect to the Services provided by or on behalf of the Baudax Group, respectively, as such Schedules may be updated and supplemented from time to time in accordance with the provisions of this Agreement, along with any Omitted Services and any Additional Services. “Service” means each such service.
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(d) “Term” means the period commencing on the date hereof and ending, subject to Section 6.1, on the date of the last to expire Service as set forth on Schedule I-A or Schedule I-B, as applicable.
(e) “Third Party” means any person or entity other than a member of the Recro Group, the Baudax Group, or their respective Affiliates.
Section 1.2. Interpretation. Except where the context otherwise requires, the singular will include the plural, the plural will include the singular, the use of any gender will be applicable to all genders, and the word “or” means “and/or.” References to a number of days, unless otherwise specified, means calendar days. The captions of this Agreement are for convenience of reference only and do not define, describe, extend or limit the scope or intent of any provision contained in this Agreement. The terms “including,” “include,” or “includes” are not intended to limit generality of any description preceding such term. The Parties have participated jointly in the negotiation and drafting of this Agreement. The language of this Agreement will be deemed to be the language mutually chosen by the Parties, and no rule of strict construction will be applied against either Party.
ARTICLE II
SERVICES
Section 2.1. General. During the Term, subject to Section 2.2, Service Provider shall provide to Service Recipient and, to the extent directed by Service Recipient, its Affiliates, the Services, in each case subject to the terms and conditions set forth herein. Notwithstanding anything to the contrary herein, Service Provider shall not be required to perform or cause to be performed any of the Services for the benefit of any Person other than Service Recipient and its Affiliates. The Parties agree to negotiate in good faith any proposed changes to the Services, including pricing related thereto, during the Term. Such proposed changes shall become effective only upon mutual agreement of the Parties as reflected in an addendum to Schedule I-A or Schedule I-B, as applicable. The Parties acknowledge and agree that the Services are generally intended to facilitate the transactions contemplated by the Separation Agreement, and, to the extent the Services described in the applicable Schedule I are general in nature, are intended to support the continued respective operations of the Parties following consummation of the transactions contemplated by the Separation Agreement.
Section 2.2. Standard for Services. The Services shall be provided hereunder (i) in accordance with the terms and conditions of this Agreement and in a manner generally consistent with the provision of such Services during the twelve (12) months immediately prior to the date hereof (the “Prior Period”), (ii) in a manner at least as complete in all material respects as the manner in which such Services have been provided during the Prior Period, (iii) with the same degree of skill, care and diligence as provided during the Prior Period, and (iv) giving substantially equal priority and substantially equal treatment that such Services received during the Prior Period; provided that if Service Provider has not previously provided any such Service to another Person, Service Provider will provide such Service in a manner substantially similar to similar services provided to its Affiliates or businesses. To the extent a more specific standard of care is specified in the respective Schedule I with respect to any Service, the Service Provider shall use its commercially reasonable efforts to comply with such more specific standard. It is the Parties’
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shared objective to transition responsibility for the performance of Services from Service Provider to Service Recipient and its Affiliates in a manner that minimizes, to the extent reasonably possible, disruption to the business operations of Service Provider and its Affiliates and the business operations of Service Recipient and its Affiliates. Notwithstanding any provision of this Agreement or the Separation Agreement to the contrary, Service Provider shall not be required to (i) perform any Service in any manner that violates or contravenes any restrictions imposed on Service Provider by applicable Law or (ii) perform any Service in any manner that breaches or contravenes any contractual obligations owed by Service Provider to any Third Party(ies), or (iii) perform any Service to the extent that the conduct of such would, in the good faith belief of Service Provider, infringe, violate or misappropriate intellectual property rights of any Third Party.
Section 2.3. Protection of Information Systems
(a) In providing any information technology Services hereunder, Service Provider shall have the right to implement reasonable processes from time to time under which there will be no greater threat to Service Provider’s information technology operating environment than would exist in the absence of the provision of such Services. Without limiting the foregoing, Service Recipient shall, and shall cause each of its employees with access to Service Provider’s information technology operating environment to, comply with the terms and conditions of Service Provider’s information technology use policies in place at the time of provision of such Services.
(b) If, in connection with the provision of any Services under this Agreement, it is reasonably necessary for Service Provider to implement any information technology connections, firewalls or the like (“Information System Additions”) specifically in connection with the provision of such Services and that would not have otherwise been implemented in the absence of the provision of the Services, the costs of implementing such Information System Additions shall be borne by Service Recipient, unless specifically provided otherwise in the respective Schedule I hereto or otherwise agreed to in writing by Service Recipient.
Section 2.4. Transitional Nature of the Services. Service Recipient understands that the Services provided hereunder are transitional in nature and are furnished by Service Provider as an accommodation and for the purpose of facilitating the transactions contemplated by the Separation Agreement. Service Recipient agrees to use, and shall cause its Affiliates to use, commercially reasonable efforts to transition from the Services as provided by Service Provider to services performed by Service Recipient or furnished by another party as soon as practically possible, but in no case later than the expiration of the Term. Service Recipient further understands that Service Provider is not in the business of providing Services to Third Parties and will not provide the Services beyond the Term.
Section 2.5. Omitted Services. If, during the sixty (60) day period immediately following the date of this Agreement, Service Recipient identifies a service that was provided in connection with Service Recipient’s business (other than those services expressly excluded hereunder) during the Prior Period, or which are reasonably anticipated as of the date hereof to be necessary to continue to support Service Recipient’s business during the Term, but such services were inadvertently omitted from the list of Services in the applicable Schedule I hereto (each, to
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the extent included in the Services pursuant to this Section 2.5, an “Omitted Service”), then Service Provider shall use commercially reasonable efforts to cooperate with Service Recipient to amend the applicable Schedule I to add such Omitted Service as a Service; provided that Service Provider shall not be obligated to provide any Omitted Service if it does not, in its reasonable judgment, have adequate resources to provide such Omitted Service or if the provision of such Omitted Service would significantly disrupt the operation of its business. In the event that the Parties agree that Service Provider should provide any such Omitted Service, the Parties shall execute amendments for such Omitted Service to the applicable Schedule I for such Omitted Service that shall set forth, among other things, (i) the time period during which such Omitted Service shall be provided, (ii) a description of such Omitted Service in reasonable detail, (iii) primary points of contact for each of the Parties with respect to the Service, (iv) any additional Fees, as applicable, related to such Omitted Service and agreed upon by the Parties, and (v) any additional terms and conditions specific to such Omitted Service. Service Provider’s obligations with respect to providing any such Omitted Service shall become effective only upon mutual agreement of the Parties as reflected in an amendment to the applicable Schedule I being duly executed and delivered by each Party. Notwithstanding the foregoing, the time period for any such Omitted Service shall expire not later than the expiration of the Term as calculated prior to the addition of such Omitted Service unless the Parties agree otherwise.
Section 2.6. Additional Services. The Parties acknowledge that Schedule I might not identify all of the Services that may be necessary or appropriate to affect the understanding set forth in this Agreement. Service Recipient may request such additional Services from Service Provider (each, to the extent included in the Services pursuant to this Section 2.6, an “Additional Service”) in writing during the Term. Service Provider will consider any such request for Additional Services promptly and in good faith, except to the extent such request is for Omitted Services (in which case Section 2.5 shall govern). In the event that the Parties agree that Service Provider should provide any such Additional Service, the Parties shall execute amendments for such Additional Service to the applicable Schedule I that shall set forth, among other things, (i) the time period during which such Additional Service shall be provided, (ii) a description of such Additional Service in reasonable detail, (iii) primary points of contact for each of the Parties with respect to the Service, (iv) any additional Fees, as applicable, related to such Additional Service and agreed upon by the Parties, and (iv) any additional terms and conditions specific to such Additional Service. Service Provider’s obligations with respect to providing any such Additional Service shall become effective only upon mutual agreement of the Parties as reflected in an amendment to the applicable Schedule I being duly executed and delivered by each Party. Notwithstanding the foregoing, the time period for any such Additional Service shall expire not later than the expiration of the Term as calculated prior to addition of such Additional Service unless the Parties agree otherwise.
Section 2.7. Use of Third Parties. Service Recipient understands that certain Services may be provided to it by Service Provider in accordance with this Section 2.7 and pursuant to agreements between Service Provider and various Third Parties. To the extent not prohibited by a Third Party and with Service Recipient’s consent not to be unreasonably withheld, conditioned, or delayed, Service Provider will coordinate the provision of Services by the Third Party to Service Recipient and Service Recipient will reasonably cooperate with any Third Party providing Services on behalf of Service Provider in order to facilitate the provision and receipt of such Services.
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Section 2.8. Cooperation. Service Recipient and its Affiliates who are recipients of the Services will reasonably cooperate with Service Provider in order to facilitate the provision and receipt of the Services. Service Recipient acknowledges that such Services are dependent on such reasonable cooperation, and that its or its Affiliates’ failure to so cooperate, if not reasonable, shall relieve Service Provider of its obligation to provide the related Services to the extent such failure renders such provision impractical or impossible. Service Recipient and its Affiliates who are recipients of the Services will comply in all material respects with all applicable policies and procedures of Service Provider.
Section 2.9. Access. Each Party shall allow the other Party and its Affiliates and Representatives reasonable access to the facilities of such Party and its Affiliates that is necessary for Service Provider to provide the Services or for Service Recipient and its Affiliates to receive the Services. Each Party agrees that all of its and its Affiliates’ employees shall, and that it shall use commercially reasonable efforts to cause its Representatives’ employees to, when on the property of the other Party or any of its Affiliates, or when given access to any facilities, information, systems, infrastructure or personnel of the other Party or any of its Affiliates, conform to the policies and procedures of such other Party and any of its Subsidiaries, as applicable, concerning health, safety, conduct and security which are made known to the Party receiving such access from time to time.
Section 2.10. Intellectual Property. Neither Party will gain, by virtue of this Agreement, any rights of ownership or use of copyrights, patents, trade secrets, trademarks or any other intellectual property rights (“Intellectual Property Rights”) owned by the other Party or its Affiliates. To the extent any Intellectual Property Rights are developed by Service Provider or its Affiliates solely, specifically and exclusively for Service Recipient in the course of the performance of the Services, all right, title and interest in and to any such Intellectual Property Rights shall be the sole and exclusive property of Service Recipient, and Service Provider shall (and shall cause its Affiliates to) assign, and does hereby assign, to Service Recipient all right, title and interest in and to any such Intellectual Property Rights. Except as expressly specified in the foregoing, as between the Parties, all right, title and interest in any Intellectual Property Rights developed by or on behalf of Service Provider in the course of providing the Services shall be owned by Service Provider. To the extent that Service Provider performs any Services through any Affiliate or subcontractor, Service Provider shall obligate such Affiliate or such subcontractor to assign to Service Recipient all Service Recipient’s Intellectual Property Rights, and Service Provider shall not utilize any such Affiliate or subcontractor in the performance of such Services unless such Affiliate or subcontractor is so obligated.
ARTICLE III
FEES AND PAYMENT
Section 3.1. Fees. The fees payable hereunder for the Services (the “Fees”) shall be equal to: (i) with respect to the Services provided by or on behalf of the Recro Group as the Service Provider, the amount specified for each such Service as set forth Schedule I-A; and (ii) with respect to the Services provided by or on behalf of the Baudax Group as the Service Provider, a fee of $100,000 per month for twelve (12) months during the Term (the “Baudax Monthly Fee”).
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Section 3.2. Expense. The Fees are exclusive of expenses related to travel (including long-distance and local transportation, accommodation and meal expenses and other incidental expenses) by Service Provider’s personnel or any subcontractor in connection with performing the Services. All of the costs and expenses described in this Section 3.2 (“Expenses”) shall be charged by Service Provider to the recipient of such Service on a pass-through basis. For the avoidance of doubt, the Expenses described in this Section 3.2 shall be consistent with Service Provider’s general approach with respect to such types of costs and expenses; provided that with respect to any Service, the recipient of such Service’s prior written approval shall be required to the extent that Expenses exceed $10,000. For clarity, there shall be no mark-up added to Expenses under this Agreement, unless such mark-up was actually paid by Service Provider’s personnel or subcontractor.
Section 3.3. Invoice; Payment. Not later than fifteen (15) days after the last day of each calendar month (or, if such date is not a Business Day, then on the immediately succeeding Business Day), Service Provider shall provide to Service Recipient an invoice for the preceding calendar month’s Services, which shall list (i) the Services provided by Service Provider to Service Recipient for such month, (ii) the Fees payable for such Services (and reasonable documentation supporting such Fees, to the extent requested by Service Recipient), and (iii) any Expenses for the preceding calendar month (and reasonable documentation verifying such Expenses). The amount stated in such invoices shall be paid by Service Recipient in full within thirty (30) calendar days of the issuance of the invoices (or, if such date is not a Business Day, then on the immediately succeeding Business Day) to an account designated by Service Provider, except to the extent such amount is the subject of a good faith dispute by Service Recipient as notified in writing to Service Provider.
Section 3.4. Late Payments. Without prejudice to Service Provider’s other rights and remedies, where any sum remains unpaid ten (10) Business Days after the applicable due date, it shall carry interest, which shall accrue daily, from the due date until the date of actual payment, at a rate based on the prime rate listed in the Wall Street Journal (Bond Yields and Rates) on the date such sum is due and payable plus 1 percent (1%).
Section 3.5. Taxes. All payments due to Service Provider under this Agreement shall be exclusive of any sales, use, value added, transfer, service, service use or other similar or analogous Tax (“Service Taxes”). Service Recipient will pay, and hold Service Provider harmless against, any Service Taxes applicable to the provision of the Services. Each Party agrees to provide to the other Party such information and data as reasonably requested from time to time, and to fully cooperate with the other Party, in connection with (a) the reporting of any Service Taxes payable pursuant to this Agreement, (b) any audit relating to any such Service Taxes, or (c) any assessment, refund, claim or proceeding relating to any such Service Taxes. To the extent any such reporting, audit, assessment, refund, claim, or proceeding is in relation to Service Taxes owed or claimed to be owed by Service Provider or any of its Affiliates by a Governmental Entity, Service Provider shall direct and control such reporting, audit, assessment, refund, claim, or proceeding.
Section 3.6. No Right to Set-Off. Each Party hereto acknowledges and agrees that it shall not be permitted to set-off any amount owed by such Party pursuant to this Agreement against any amount or obligation owed to such Party or an Affiliate hereunder or pursuant to the Separation Agreement or any other Ancillary Agreement.
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ARTICLE IV
SERVICE MANAGEMENT
Section 4.1. Service Managers. Each Party shall each appoint an employee to have overall responsibility for managing and coordinating the delivery of Services in accordance with this Agreement (such employee, a “Service Manager”). The initial Service Managers shall be identified on Exhibit A hereto and may thereafter be replaced from time to time upon written notice to the other Party. Service Managers shall consult and coordinate with one another regarding the provision of Services hereunder.
Section 4.2. Service Coordinators. Each Party has designated an employee or title as the principal point of contact for the day-to-day implementation or monitoring of each Service as specified in the applicable Schedule I (each, a “Service Coordinator”). Communications relating to specific Services shall be directed to the applicable Service Coordinators. The Service Coordinators will report to the applicable Service Manager from time to time, as directed by the Service Manager.
ARTICLE V
SUB-CONTRACTING; THIRD PARTY AGREEMENTS
Section 5.1. Sub-Contractors. Upon Service Recipient’s consent, not to be unreasonably withheld, conditioned, or delayed, Service Provider may delegate or sub-contract its duties under this Agreement to a qualified Third Party; provided that, notwithstanding such delegation or sub-contracting, Service Provider shall remain liable for the performance of its duties hereunder and shall ensure and guaranty that any Services provided by a subcontractor shall meet Service Provider’s obligations set forth in Sections 2.2(i), (ii), (iii) and (iv). For the avoidance of doubt, Service Provider will not be liable with respect to any agreement entered into directly by Service Recipient (or its Affiliates) and a subcontractor, other than as mutually agreed in writing by the Parties.
Section 5.2. Third Party Agreements. Service Recipient acknowledges that the Services that were provided through Third Parties prior to the date hereof are subject to the terms and conditions of any applicable agreements between Service Provider and such Third Parties, and Service Recipient agrees to comply with such terms and conditions to the extent applicable to Service Recipient and necessary for purposes of receiving such Services by Service Recipient. For any Service to be delegated to a Third Party after the date hereof, and so long as any such Service is provided solely to Service Recipient and not to Service Provider or any Affiliates of Service Provider, Service Provider shall provide Service Recipient with a copy of any agreement contemplated to be entered into with such Third Party in relation to such Service and seek Service Recipient’s consent to such delegation, which consent may not be unreasonably withheld, delayed, or conditioned. In the event any such consent is not granted, Service Provider shall not have any liability resulting from any delay in providing any such Service.
Section 5.3. Consents. Notwithstanding anything to the contrary contained herein, Service Provider shall use commercially reasonable efforts to obtain all consents from vendors that are necessary in order to provide any of the Services to Service Recipient under this Agreement; provided, however, that Service Provider shall not be required to pay any out-of-
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pocket fees to any vendor in order to obtain such consent, but shall, instead, request that Service Recipient pay such out-of-pocket fees. In the event that Service Provider is unable to obtain any such consent, the Parties will work together to agree upon a commercially reasonable alternative arrangement, which may include identification of alternate resources and equivalent services from such alternative resources on commercially reasonable terms. Any actual out-of-pocket fees levied on Service Provider (i) in connection with its efforts to obtain and implement such consents and (ii) in connection with the implementation of any such commercially reasonable alternative arrangement, shall be borne by Service Recipient.
ARTICLE VI
TERM AND TERMINATION AND EFFECTS OF TERMINATION
Section 6.1. Term. Except as otherwise provided herein or unless otherwise agreed in writing by the Parties, Service Provider’s obligation to provide or procure, and Service Recipient’s obligation to purchase, each Service shall cease as of the end of the term specified for such Service in the applicable Schedule I hereto, and the Agreement shall terminate in its entirety at the end of the Term; provided that (i) this Agreement may be extended, with respect to one or more Services, by mutual written agreement of the Parties, consent to which extension shall be in each Party’s absolute discretion, and (ii) in the event that a Service shall not have been transitioned to Service Recipient solely as a result of a material breach by Service Provider of its obligations under this Agreement, the term for such Service will be extended solely for such period as shall be necessary for Service Provider to cure such material breach; provided that the breach is curable with the use of commercially reasonable efforts and is not related to a Service that could reasonably be obtained or performed by Service Recipient itself.
Section 6.2. Termination for Breach. In the event that a Party hereto commits a material breach with respect to any of the Services, the other Party may terminate this Agreement with respect to such Service only, unless such breach is cured not later than thirty (30) days after receipt by the breaching Party of written notice of such breach.
Section 6.3. Early Termination of a Service. Subject to the restrictions set forth herein, if Service Recipient should wish to terminate a Service (in whole, but not in part), Service Recipient shall provide written notice to Service Provider not later than one hundred and eighty (180) days prior to the requested termination date for such Service; provided, however, that no such notice of termination may be delivered to Service Provider during the one hundred and eighty (180) day period immediately following the date hereof. Notwithstanding the foregoing provisions, the Parties acknowledge and agree that, in certain instances, terminating certain Services may require time periods longer than the one hundred and eighty (180) day period specified in this Section 6.3. In any such event, the Parties agree to negotiate in good faith a longer period of time for any and all such transfers following the termination notice. Service Recipient shall remain liable for any Fees or other amounts payable hereunder in connection with the terminated Service(s) incurred prior to the effective date of termination of such Service(s), including in the event that such terminated Services contemplated a deliverable that was not provided due to such early termination (for the avoidance of doubt, and notwithstanding anything to the contrary contained herein, in the event that any Services are terminated prior to the expiration of the Term by Recro, Recro shall remain liable for the Baudax Monthly Fee through the remainder of the Term). Service Recipient acknowledges and agrees that (i) Services provided by Third
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Parties may be subject to term-limited licenses and contracts between Service Provider and applicable Third Parties (collectively, “Provider Third Party Contracts”), (ii) the renewal periods under the Provider Third Party Contracts may be for fixed periods, and (iii) Service Provider may not have the right to renew certain Provider Third Party Contracts. As a result, Service Recipient agrees that (i) if Service Provider is required to extend any Provider Third Party Contract in order to continue to provide any Service during the Term, then Service Provider shall notify Service Recipient and, if Service Recipient informs Service Provider within fifteen (15) days of such notice that it wishes to continue to receive such Service, then Service Recipient shall be required to pay Service Provider the amount of any renewal fees or purchase commitments applicable to the relevant Service for the full renewal period specified in the applicable Provider Third Party Contract, regardless of whether the Term or Service Provider’s provision of the relevant Service ends prior to the end of the relevant renewal period, and (ii) Service Provider will not be required to provide any Service to the extent it is unable to renew any applicable Provider Third Party Contract or Service Recipient either informs Service Provider that it does not wish to continue to receive such Service under this Section 6.3 or does not respond to Service Provider’s notice in the applicable fifteen (15) day period.
Section 6.4. Termination Upon Insolvency. Either Party may terminate this Agreement immediately in the event the other Party (i) becomes insolvent, (ii) is generally unable to pay, or fails to pay, its debts as they become due, (iii) files, or has filed against it, a petition for voluntary or involuntary bankruptcy or pursuant to any other insolvency Law, (iv) makes or seeks to make a general assignment for the benefit of its creditors, or (v) applies for, or consents to, the appointment of a trustee, receiver or custodian for a substantial part of its property or business.
Section 6.5. Accrued Rights. Termination or expiration of this Agreement for any reason will be without prejudice to any rights that have accrued to the benefit of a Party prior to such termination or expiration. Such termination or expiration will not relieve a Party from obligations that are expressly indicated to survive the termination or expiration of this Agreement.
Section 6.6. Effect of Termination. Not later than thirty (30) days following the date it receives a final invoice from Service Provider following termination or expiration of any Services or this Agreement, Service Recipient shall pay to Service Provider all remaining monies due to Service Provider hereunder in respect of Services provided prior to such termination or expiration except for any amounts then the subject of a good faith dispute. In addition, at the end of the Term, each Party hereto shall, at the disclosing Party’s option, return or destroy the Confidential Information of the disclosing Party. In the event that the disclosing Party elects destruction, the other Party shall furnish to the disclosing Party a written certificate of destruction signed by an officer of the certifying Party. Any provision which by its nature should survive, including the provisions of this Section 6.6 (Effect of Termination), and Section 2.10 (Intellectual Property), Article III (Fees and Payment), Article VII (Limitation of Liability; Indemnification), Article IX (Confidentiality), and Article X (Miscellaneous), shall survive the termination of this Agreement.
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ARTICLE VII
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 7.1. Limited Liability.
(a) The aggregate Liabilities of Service Provider and its Affiliates and Representatives, collectively, under this Agreement for any act or failure to act in connection herewith (including the performance or breach of this Agreement), or from the sale, delivery, provision or use of any Services provided under or contemplated by this Agreement, whether in contract, tort (including negligence and strict liability) or otherwise, at law or equity, shall not exceed the aggregate amount of the Fees and Expenses paid (and not previously paid back as a Liability hereunder) to Service Provider (or its Affiliates) under this Agreement prior to the date on which Service Provider’s action or inaction giving rise to the Liability arises or occurs.
(b) Notwithstanding anything to the contrary contained in the Separation Agreement or this Agreement, Service Provider shall not be liable to Service Recipient or any of its Affiliates or Representatives, whether in contract, tort (including negligence and strict liability) or otherwise, at law or equity, for any special, indirect, incidental, punitive or consequential damages whatsoever (including lost profits or damages calculated on multiples of earnings approaches), which in any way arise out of, relate to or are a consequence of, the performance or nonperformance by Service Provider (including any Affiliates and Representatives of Service Provider and any unaffiliated third party providers, in each case, providing the applicable Services) under this Agreement or the provision of, or failure to provide, any Services under this Agreement, including with respect to loss of profits, business interruptions or claims of customers.
(c) The limitations in this Section 7.1 shall not apply with respect to any Liability arising out of, relating to, or in connection with (i) any Third Party claim to the extent a Party has an indemnification obligation to the other Party for such Liability under Section 7.3(a) or Section 7.3(b) (ii) any breach of Article IX or (iii) the gross negligence, willful misconduct, or fraud of or by the Party to be charged.
Section 7.2. Services Provided “As-Is”. SERVICE PROVIDER PROVIDES ANY AND ALL SERVICES ON AN “AS-IS” BASIS AND, EXCEPT AS SET FORTH IN SECTION 2.2, MAKES NO REPRESENTATIONS OR WARRANTIES AS TO THE SERVICES PROVIDED. SERVICE PROVIDER DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IN CONNECTION WITH THIS AGREEMENT.
Section 7.3. Indemnification.
(a) Subject to Section 7.1, Service Recipient hereby agrees to indemnify, defend and hold harmless Service Provider and its Affiliates and Representatives from and against any and all Liabilities arising from, relating to or in connection with (i) the use of any Services by Service Recipient or any of its Affiliates, Representatives or other Persons using such Services or (ii) a material breach by Service Recipient of any covenant or agreement contained in this Agreement, except in each case to the extent that such Liabilities arise out of, relate to or are a consequence of Service Provider’s or its Affiliates’ or Representatives’ gross negligence, willful misconduct or fraud.
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(b) Subject to Section 7.1, Service Provider hereby agrees to indemnify, defend and hold harmless Service Recipient and its Affiliates and Representatives from and against any and all Liabilities arising from, relating to or in connection with (i) the gross negligence or willful misconduct of Service Provider in connection with the provision of the Services or (ii) a material breach by Service Provider of any covenant or agreement contained in this Agreement, except in each case to the extent that such Liabilities arise out of, relate to or are a consequence of Service Recipient’s or its Affiliates’ or Representatives’ gross negligence, willful misconduct or fraud.
(c) The Party seeking to be indemnified (the “Indemnified Party”) shall provide prompt written notice of a Liability or events likely to give rise to a Liability to the Party with the obligation to indemnify (the “Indemnifying Party”) (in any event within sufficient time so as not to prejudice the defense of such claim). The Indemnifying Party shall be given the opportunity at all times to control the defense of the claim, with the cooperation and assistance of the Indemnified Party; provided, however, that the Indemnifying Party shall not settle any claim for which it has an indemnification obligation under this Section 7.3 with an admission of liability or wrongdoing by the Indemnified Party without such Party’s prior written consent.
(d) Indemnification pursuant to this Section 7.3 represents the Parties’ sole and exclusive remedy under this Agreement; provided that, if Service Provider commits an error with respect to, incorrectly performs or fails to perform any Service, at Service Recipient’s request, without prejudice to any other rights or remedies Service Recipient may have, Service Provider shall use commercially reasonable efforts to correct such error, re-perform such Service or perform such Service, as applicable, at no additional cost to Service Recipient. To the extent Service Provider is unable to provide in its entirety a Service because of a partial delay which excuses performance pursuant to Section 10.4, Service Provider shall allocate such resources and/or products as are then currently available to it and necessary for the performance of such Service ratably between Service Provider for its own account and Service Recipient for the performance of such Services hereunder.
ARTICLE VIII
INSURANCE MATTERS
Section 8.1. Insurance. Each Party hereto shall, throughout the term of this Agreement, carry appropriate insurance with a reputable insurance company covering property damage, business interruptions, automobile and general liability insurance (including contractual liability) to protect its own business and property interests; provided, that each Party shall be permitted to reasonably self-insure against the liabilities specified in Article VII.
ARTICLE IX
CONFIDENTIALITY
Section 9.1. Confidentiality. The provisions of Section 7.6 of the Separation Agreement shall apply to disclosures of information made pursuant to this Agreement mutatis mutandis.
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ARTICLE X
MISCELLANEOUS
Section 10.1. General. The provisions in Sections 10.1, 10.3, 10.6, 10.7, 10.8, 10.9, 10.10, 10.13, 10.15, 10.16, 10.17 and 10.21 of the Separation Agreement shall apply, mutatis mutandis, as if fully set forth in this Agreement.
Section 10.2. Inconsistencies. Nothing contained in this Agreement (or any Schedule or Exhibit) shall be deemed to supersede or change any of the agreements, obligations, representations or warranties of the Parties to the Separation Agreement or any other Ancillary Agreement. To the extent that any provision in this Agreement (or any Schedule or Exhibit) is inconsistent or conflicts with any provision of the Separation Agreement or any other Ancillary Agreement, the provisions of the Separation Agreement or such other Ancillary Agreement, as the case may be, shall control. To the extent that any provision of any Schedule or Exhibit is inconsistent or conflicts with any other provision of this Agreement, such other provision of this Agreement shall control.
Section 10.3. Dispute Resolution. The provisions in Article VIII of the Separation Agreement shall apply to any Dispute related to this Agreement, mutatis mutandis.
Section 10.4. Force Majeure.
(a) Neither Party hereto shall be liable for delay in performance (other than the payment of money) of its obligations to the extent caused by events which could not have been reasonably foreseen and are beyond the reasonable control of the Party affected (an event of “Force Majeure”), including, but not limited to (i) acts of God, the elements, epidemics, explosions, accidents, landslides, lightning, earthquakes, fires, storms (including but not limited to tornadoes and hurricanes or tornado and hurricane warnings), sinkholes, floods, or washouts; (ii) labor shortage or trouble including strikes or injunctions (whether or not within the reasonable control of such Party and provided that the settlement of strikes and other labor disputes shall be entirely within the discretion of the Party experiencing the difficulty); (iii) inability to obtain material, equipment or transportation; (iv) national defense requirements, war, blockades, insurrections, sabotage, terrorism, riots, arrests and restraints of the government, either federal or state, civil or military (including any governmental taking by eminent domain or otherwise); or (v) any changes in applicable Law, regulation or rule or the enforcement thereof by any governmental or regulatory agency having jurisdiction, that limits or prevents a Party from performing its obligations hereunder or any notice from any such agency of its intention to fine or penalize such Party or otherwise impede or limit such Party’s ability to perform its obligations hereunder.
(b) Service Provider will endeavor to provide to Service Recipient uninterrupted Services through the Term. In the event, however, that (i) Service Provider is wholly or partially prevented from providing a Service or Services either temporarily or permanently by reason of any Force Majeure event, or (ii) Service Provider, in the exercise of its reasonable good faith judgment, deems it necessary to suspend delivery of a Service hereunder for purposes of inspection, maintenance, repair, replacement of equipment parts or structures, or similar activities consistent with past practices, Service Provider shall not be obligated to deliver such Service during such periods, and, in the case of the immediately preceding clause (ii), Service Provider shall cooperate with Service Recipient with respect to the timing of such interruption. Notices provided under this Section 10.4 shall be provided to Service Recipient’s Service Manager (or other executive designated in writing by Service Recipient) in accordance with Section 10.6 of the Separation Agreement.
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Section 10.5. Titles and Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.
Section 10.6. Independent Contractor Status. Each Party shall be deemed to be an independent contractor to the other Party. Nothing contained in this Agreement shall create or be deemed to create the relationship of employer and employee between the Parties. The relationship created between the Parties pursuant to or by this Agreement is not and shall not be one of partnership or joint venture. No Party to this Agreement shall, by reason hereof, be deemed to be a partner or a joint venture of the other Party hereto in the conduct of their respective businesses and/or the conduct of the activities contemplated by this Agreement. No Party to this Agreement is now, shall become, or shall be deemed to be an agent or representative of the other Party. Except as herein explicitly and specifically provided, neither Party shall have any authority or authorization, of any nature whatsoever, to speak for or bind the other Party to this Agreement.
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IN WITNESS WHEREOF, the Parties have caused this Transition Services Agreement to be duly executed as of the day and year first above written.
| RECRO PHARMA, INC. | ||
| By: | /s/ Gerri Henwood | |
| Name: Gerri Henwood | ||
| Title: President and Chief Executive Officer | ||
| BAUDAX BIO, INC. | ||
| By: | /s/ Ryan Lake | |
| Name: Ryan Lake | ||
| Title: Chief Financial Officer and Treasurer | ||
[Signature Page to Transition Services Agreement]
Schedule I-A
Recro Group Services
| # |
Detailed Description of Service |
Service Coordinator |
Term | |||
| 1 | Assistance with transfer of ownership for any applications/INDs currently owned by Recro or its Subsidiaries (e.g. DMF, IND, NDA’s, etc.) that relate solely to Baudax to the extent not fully transferred to Baudax at Closing, provided that Recro and Baudax shall collaborate with respect to the letters/correspondence to be provided to Governmental Entities regarding transfer of regulatory responsibilities before such applications/INDs are transferred. | TBD | Until ownership is transferred | |||
| 2 | Assistance with transfer of patents patent applications and trademark registrations in the name of Baudax Bio, Inc. from the current owner of record; | TBD | Until patents are transferred | |||
| 3 | Payroll for Baudax Group employees | O’Conner Group | Thru 12/31/19 | |||
Schedule I-B
Baudax Group Services and Fees
| # |
Detailed Description of Service |
Service Coordinator |
Term | |||
| 1 | Transfer of emails and other electronic data (including electronic documents and employee data) related primarily to the Baudax Group to the extent not fully transferred to at Closing or prior to Closing. | Carol Bolger | Thru 12/31/19 | |||
| 2 | Transfer of any hard copy records related primarily to the Baudax to the extent not fully transferred to the Baudax Group at Closing. | Diane Myers | Thru 12/31/19 | |||
| 3 | Transfer of ownership for any applications/INDs currently owned by Recro or its Subsidiaries (e.g. DMF, IND, NDA’s, etc.) that relate solely to Baudax to the extent not fully transferred to Baudax at Closing, provided that Recro and Baudax shall collaborate with respect to the letters/correspondence to be provided to Governmental Entities regarding transfer of regulatory responsibilities before such applications/INDs are transferred. | Diane Myers | Until ownership is transferred | |||
| 4 | Assistance with the support and transfer to Recro of corporate finance functions including: • Financial audit, • Tax (federal, state, R&D tax credit), • RGD accounting, • stock based compensation maintenance and activity, • financial planning (forecasting), • SEC Filings, • Insurance, including claims handling, and • treasury functions. Baudax will collaborate with Recro to transfer such items after Closing. Baudax will support these functions until September 30, 2020 at the latest. The Parties shall develop a plan by August 15, 2020 for the transport on or before September 30, 2020. Such plan shall be mutually agreed upon by the parties. |
Carla Lusby | Thru 9/30/20 quarter end close | |||
| 5 | Transfer of information with respect to Baudax and in the possession and control of Recro or its Subsidiaries relating to R&D related primarily to the Baudax products, manufacturing and facilities, to the extent not fully transferred to Recipients at Closing. | Chris Sharr | Thru 12/31/19 | |||
| 6 | Transfer of information with respect to Baudax and in the possession and control of Recro relating to Clinical Trial Masterfiles and case report forms and nonclinical data relating to the Products, to the extent not fully transferred to Recipients at Closing. | Diane Myers | Thru 12/31/19 | |||
| 7 | Assistance to Recro employees who hold stock or stock options in Recro in exercising options, determining tax basis of equity grants, retrieving tax/transaction reports. | Jillian Dilmore | Thru 9/30/20 quarter end close | |||
| 8 | Transfer of flat files, data, and/or an alternate solution where appropriate) from the items listed below: • Compliance Wire Learning Management System • Veeva Vault (QA Doc Mgmt) • Microsoft Office Tenant • Intranet Support Services (Valo) • E-mail (SmartPhone, Tablet, Exchange, External gateways, Mobile Device Management, Spam Filtering, PGP) • IT Help Desk Application (Alphaserve) • End-user Computing Infrastructure (Internet, Wireless, PC Desktop control, P/W Management, PC desktop support) • Wide Area Network (switches, equipment) • Active Directory Domain Services Support (Alphaserve) • Network Infrastructure Services and Support (Backup/Replication, Monitoring, Anti-virus, VMware, Web Filtering, Firewalls, etc.) (Alphaserve) • IT Contracts Management and Support |
Carol Bolger | Thru 12/31/19 | |||
| 9 | Promptly following the Closing, file documentation with relevant patent authorities to effect recordal of transfer of patents, patent applications and trademark registrations in the name of Baudax Bio, Inc. from the current owner of record; provided, that if the Closing occurs before 10:00 a.m., prevailing Eastern time, on the Closing Date, such documentation shall be filed with the United States Patent and Trademark Office on the Closing Date. | Randall Mack | Until Patents are transferred | |||
| 10 | Services with respect to SOX controls, IT, Financial and Governance, for Recro. Baudax will support these functions for the 2019 audit year which is expected to complete by March 15, 2020. The Parties shall develop a plan by July 15, 2020 for the transport of SOX controls coordination and testing for the 2020 audit year and beyond on or before August 15, 2020. Such plan shall be mutually agreed upon by the parties. | Carla Lusby | Thru August 15, 2020 | |||
| 11 | Services with respect to Administrative Rights and maintenance for the following systems: • Intacct • Navex • Recro Pharma Inc. email (for Gerri Henwood and Ryan Lake) |
Carol Bolger | Thru 9/30/20 quarter end close | |||
| 12 | Corporate Mgmt/IR | Ryan Lake | TBD | |||
Exhibit A
Initial Service Managers
Baudax Group: Ryan D. Lake
Recro Group: Scott Rizzo
Exhibit 10.4
EXECUTION VERSION
PARTIAL ASSIGNMENT, ASSUMPTION AND BIFURCATION AGREEMENT
This PARTIAL ASSIGNMENT, ASSUMPTION AND BIFURCATION AGREEMENT (this “Agreement”) is made and entered into by and between Alkermes Pharma Ireland Limited, a private limited company incorporated in Ireland (registered number 448848) whose registered address is Connaught House, 1 Burlington Road, Dublin 4, Ireland (“APIL”), Recro Gainesville LLC, a Massachusetts limited liability company with an address of 1300 Gould Drive, Gainesville, GA 30504 (“Recro Gainesville”), as successor in interest to Recro Technology LLC (f/k/a DV Technology LLC) and a wholly-owned subsidiary of Recro Pharma, Inc., a Pennsylvania corporation with an address of 490 Lapp Road, Malvern PA 19355 (“Recro Pharma”), and Baudax Bio, Inc., a Pennsylvania corporation, with an address of 490 Lapp Road, Malvern PA 19355 (“Baudax”).
WHEREAS, APIL and Recro Gainesville (as successor in interest to Recro Technology LLC, who is f/k/a DV Technology LLC) are parties to that certain Asset Transfer and License Agreement dated April 10, 2015, as amended on December 23, 2015 and December 20, 2018, pursuant to which Recro Gainesville exclusively licenses the Nanotechnology IP and certain Licensed Trademarks for the Nanotechnology IP for the Meloxicam IV/IM and Meloxicam Parenteral Formulation from APIL (the “Asset Transfer and License Agreement”);
WHEREAS, Recro Pharma and Baudax are parties to that certain Separation Agreement, dated as of the date hereof, pursuant to which Recro Pharma will (i) assign, or cause its subsidiaries to assign, certain assets related to the Acute Care Business (as defined in the Separation Agreement) to Baudax (the “Separation”) and (ii) distribute all of the issued and outstanding common stock of Baudax to Recro Pharma’s shareholders (the “Distribution,” and the effective time of the Distribution, the “Distribution Time”);
WHEREAS, in order to effect the Separation, effective immediately prior to the Distribution Time (the “Effective Time”), Recro Gainesville desires to assign, convey, transfer and set over to Baudax certain of Recro Gainesville’s rights, benefits, privileges, interests and obligations under the Asset Transfer and License Agreement and Baudax desires to accept such assignment, conveyance, transfer and set over from Recro Gainesville and to assume certain of Recro Gainesville’s obligations under the Asset Transfer and License Agreement and to agree to satisfy, pay, perform and discharge, as and when due, such obligations, in each case, on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Effectiveness. This Agreement shall be effective as of the Effective Time. In the event that the Separation does not occur for any reason, this Agreement will be null and void with no further action required on the part of either party.
2. Bifurcation, Partial Assignment and Assumption. Recro Gainesville hereby irrevocably assigns, conveys and transfers to Baudax all of Recro Gainesville’s rights, benefits, privileges, interests, burdens, obligations and liabilities under the Asset Transfer and License
Agreement to the extent related to the Acute Care Business (whether occurring on, before or after the Effective Time) including, but not limited to, the rights and obligations set forth in Exhibit A of this Agreement (the “Assigned Rights and Obligations”). Recro Gainesville shall remain responsible for all other rights and obligations under the Asset Transfer and License Agreement that are not bifurcated, assigned to and/or assumed by Baudax hereunder. APIL agrees and acknowledges that Baudax’s Assigned Rights and Obligations under the Asset Transfer and License Agreement shall not be affected or limited by a breach of the Asset Transfer and License Agreement by Recro Gainesville.
3. Third Party Beneficiary. In connection with the partial bifurcation, assignment and assumption of the Asset Transfer and License Agreement pursuant to Section 2 above, the parties agree and acknowledge that Baudax Bio is a third party beneficiary of the Asset Transfer and License Agreement, entitled to enforce the provisions of the Asset Transfer and License Agreement as they relate to Assigned Rights and Obligations.
4. Mutual Acceptance. Baudax unconditionally accepts the assignment, conveyance and transfer of the Assigned Rights and Obligations and, without limiting the foregoing, assumes and agrees to satisfy, pay, perform and discharge, as and when due, all of the Assumed Obligations (as defined in Exhibit A of this Agreement) whether occurring on, before or after the Effective Time.
5. Consent and Acknowledgment. APIL hereby consents to the partial bifurcation of the Asset Transfer and License Agreement as it relates to the Assigned Rights and Obligations and the assignment by Recro Gainesville to Baudax of such Assigned Rights and Obligations. APIL hereby agrees that this Agreement satisfies any notice, consent or other procedural requirements under the Asset Transfer and License Agreement with respect to the assignment of the Assigned Rights and Obligations and acknowledges and agrees that, notwithstanding Section 2.4 of Exhibit D to the Asset Transfer and License Agreement, APIL shall have no further right of recourse against Recro Gainesville under the Asset Transfer and License Agreement with respect to the Assigned Rights and Obligations for periods after the Effective Time. APIL agrees to treat the Asset Transfer and License Agreement as partially bifurcated and assigned as set forth in Sections 2 and 3 hereof. Without limiting the generality of the foregoing, APIL shall communicate directly with Baudax as a third party beneficiary to the Asset Transfer and License Agreement with respect to the Assigned Rights and Obligations.
6. Disclaimer and Release. With respect to all Assigned Rights and Obligations under the Asset Transfer and License Agreement that are assigned to and assumed by Baudax hereunder, Recro Gainesville hereby, without any further action, disclaims and is released from the Assigned Rights and Obligations under the Asset Transfer and License Agreement, and Baudax shall have the sole right and responsibility in connection therewith. Recro Gainesville’s rights and obligations under the Asset Transfer and License Agreement shall not be affected or limited by a breach of the Asset Transfer and License Agreement by Baudax.
7. Further Actions. Each of the parties hereto agrees to execute, acknowledge and deliver, or cause the execution, acknowledgement and delivery of, such further documents and instruments and to perform such other reasonable actions as may reasonably be requested by a party hereto in order to effect the purposes of this Agreement.
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8. Assignment. This Agreement shall inure to the benefit of the parties hereto and their respective successors and assigns. Baudax may assign all or a portion of its Assigned Rights and Obligations to any purchaser of that portion of its business to which the Asset Transfer and License Agreement relates with the prior written consent of APIL, which will not be unreasonably withheld, conditioned or delayed.
9. Governing Law. This Agreement and the respective rights, duties and obligations of the parties hereunder shall be governed and construed in accordance with the laws of the State of Delaware, without giving effect to the conflict of laws provisions of that or any other jurisdiction.
10. Miscellaneous. This Agreement may not be modified except by an instrument in writing executed by the parties hereto. This Agreement may be executed in one or more counterparts and by facsimile, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument. The waiver by either party of any default, breach, or right of this Agreement shall not constitute a waiver of any other or subsequent default, breach, or right. Section and paragraph headings in this Agreement are included herein for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions of this Agreement. Capitalized terms used herein and not otherwise defined shall have the respective meanings given to them in the Asset Transfer and License Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Partial Assignment, Assumption and Bifurcation Agreement to be effective as of the Effective Time.
| ALKERMES PHARMA IRELAND | ||
| LIMITED | ||
| By: | /s/ Richie Paul | |
| Name: Richie Paul | ||
| Title: Director | ||
| RECRO GAINESVILLE LLC | ||
| By: | /s/ Gerri Henwood | |
| Name: Gerri Henwood | ||
| Title: President | ||
| BAUDAX BIO, INC. | ||
| By: | /s/ Gerri Henwood | |
| Name: Gerri Henwood | ||
| Title: President | ||
[Signature page to Partial Assignment, Assumption and Bifurcation Agreement]
EXHIBIT A
ASSIGNED RIGHTS OBLIGATIONS
Assigned Rights: The rights under the following sections of the Asset Transfer and License
Agreement: Section 3(a), Section 3(e) solely as it relates to the NanoCrystal Licensed Trademark, Section 3(f) solely as it relates to the Nanotechnology Patents, and Section 3(g) solely as it relates to the Nanotechnology Patents and Section 7.
Assumed Obligations: The obligations under the following sections of the Asset Transfer and License Agreement: Section 3(a), Section 3(e) solely as it relates to the NanoCrystal Licensed Trademark, Section 3(f) solely as it relates to the Nanotechnology Patents, Section 3(g) solely as it relates to the Nanotechnology Patents, and all obligations under Section 5 as it relates to Earn-Out Products and Exhibit D.