Recro Pharma, Inc. (NASDAQ:REPH) Files An 8-K 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 Baudaxs common stock, to Recros shareholders of record as of the close of business on November 15, 2019 (the entire transaction being referred to as the Separation).
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 partys 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 Baudaxs common stock to Recros 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 Baudaxs 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, Baudaxs active employees generally will no longer participate in benefit plans sponsored or maintained by Recro and will commence participation in Baudaxs benefit plans. The Employee Matters Agreement also provides that (i) the Distribution does not constitute a change in control under Recros 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.