Exhibit 10.2

FOURTH AMENDMENT TO CREDIT AGREEMENT AND INVESTMENT DOCUMENTS

THIS FOURTH AMENDMENT TO CREDIT AGREEMENT AND INVESTMENT DOCUMENTS (this
“Agreement”), dated as of November 5, 2020 (the “Fourth Amendment Effective
Date”), is entered into among RECRO PHARMA, INC., a Pennsylvania corporation
(the “Borrower”), the Guarantors party hereto, the Lenders party hereto
(including in their capacity as holders of the Warrants) and ATHYRIUM
OPPORTUNITIES III ACQUISITION LP, as Administrative Agent (the “Administrative
Agent”).  All capitalized terms used herein and not otherwise defined herein
shall have the meanings given to such terms in the Credit Agreement (as defined
below).

RECITALS

WHEREAS, the Borrower, the Guarantors party thereto, the Lenders from time to
time party thereto and the Administrative Agent have entered into that certain
Credit Agreement, dated as of November 17, 2017 (as amended, restated,
supplemented or modified from time to time prior to the date hereof, the “Credit
Agreement”);

WHEREAS, the Borrower has requested that the Lenders amend the Credit Agreement
and certain other Investment Documents to provide for certain modifications of
the terms as set forth below; and

WHEREAS, the Lenders and the Administrative Agent are willing to amend the
Credit Agreement and other Investment Documents referred to herein, in each
case, subject to the terms and conditions hereof.

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

1.Amendments to Credit Agreement.

a.The following definitions are added to Section 1.01 of the Credit Agreement in
the appropriate alphabetical order to read as follows:

“Fourth Amendment” means that certain Fourth Amendment to Credit Agreement and
Investment Documents, dated as of the Fourth Amendment Effective Date, by and
among the Loan Parties, the Lenders and the Administrative Agent.

“Fourth Amendment Effective Date” means November 5, 2020.

“Fourth Amendment Fee Letter” means that certain letter agreement, dated as of
the Fourth Amendment Effective Date, by and among the Borrower and the
Administrative Agent.

“PPP Loan” means the “Small Business Loan” obtained by the Borrower under the
federal Paycheck Protection Program provided in Section 7(a) of the Small
Business Act of 1953, as amended by the Coronavirus Aid, Relief, and Economic
Security Act, in an original aggregate principal amount of $4,415,500 from PNC
Bank, National Association pursuant to the terms of that certain Paycheck
Protection Program Term Note, dated as of May 12, 2020, issued by the Borrower
in favor of the PNC Bank, National Association.

 

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b.The definition of “Agreement” in Section 1.01 of the Credit Agreement is
amended and restated in its entirety to read as follows:

“Agreement” means this Credit Agreement, as amended or otherwise modified from
time to time (including as amended by the First Amendment, the Second Amendment,
the Third Amendment and the Fourth Amendment).

c.The definition of “Consolidated CDMO EBITDA” in Section 1.01 of the Credit
Agreement is amended and restated in its entirety to read as follows:

“Consolidated CDMO EBITDA” means, for any period, for the CDMO Loan Parties on a
consolidated basis, an amount equal to the total of: (a) Consolidated CDMO Net
Income for such period plus (b) the following (without duplication), in each
case (other than with respect to clause (b)(x)), to the extent deducted in
calculating such Consolidated CDMO Net Income, all as determined in accordance
with GAAP, (i) gross interest expense for such period in connection with
borrowed money (including capitalized interest) or in connection with the
deferred purchase price of assets, (ii) the provision for current and deferred
federal, state, local and foreign income taxes paid or accrued for such period,
(iii) depreciation and amortization expense for such period, (iv) unusual,
infrequent or non-recurring losses, charges or expenses for such period
(including without limitation any such losses, charges or expenses for such
period resulting from the impact of the adoption by the CDMO Loan Parties of ASU
2014-09 for revenue recognition and similar timing impacts for the adoption of
new accounting standards); provided, that, the aggregate amount added back to
Consolidated CDMO EBITDA pursuant to this clause (b)(iv) for such period shall
not exceed ten percent (10%) of Consolidated CDMO EBITDA (calculated prior to
giving effect to the add backs permitted pursuant to this clause (b)(iv)) for
such period, (v) non-cash charges (including, without limitation, stock-based
compensation expense, contingent consideration expense and warrant
mark-to-market adjustment expense (but excluding non-cash charges related to
receivables)) for such period which do not represent a cash item in such period
or any future period, (vi) any losses in such period resulting from any
Disposition outside of the ordinary course of business, including any net loss
from discontinued operations (and including, without limitation, any
discontinued operations to the extent discontinued in connection with the
Reorganization), (vii) all losses in such period with respect to foreign
exchange transactions, (viii) solely with respect to the fiscal quarter ending
on December 31, 2019, costs and expenses to the extent related to the
Reorganization; provided, that, the aggregate amount added back to Consolidated
CDMO EBITDA pursuant to this clause (b)(viii) for such quarter shall not exceed
$5,000,000 and shall be supported by evidence of such costs and expenses
reasonably satisfactory to the Administrative Agent and certified as true and
correct by a Responsible Financial Officer of the Borrower, (ix) fees, costs and
expenses of the CDMO Loan Parties incurred directly in connection with the
Investment Documents (excluding, for the avoidance of doubt, any fees, costs and
expenses incurred in connection with the Equity Interests of the Borrower (other
than the Warrants) and any transactions with respect thereto); provided, that,
the aggregate amount added back to Consolidated CDMO EBITDA pursuant to this
clause (b)(ix) for any consecutive four fiscal quarter period of the Borrower
shall not exceed $500,000; provided, further, that, the Borrower shall deliver a
certificate executed by a Responsible Financial Officer of the Borrower
providing evidence reasonably satisfactory to the Administrative Agent that all
amounts added back pursuant to this clause (b)(ix) represent bona fide fees,
costs and

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expenses of the CDMO Loan Parties that were actually incurred by the CDMO Loan
Parties during such period, and (x) solely to the extent not already included in
Consolidated CDMO Net Income, the principal amount of the PPP Loan that is
permanently and irrevocably forgiven in such period in accordance with the terms
of the PPP Loan and applicable Law; provided, that, without duplication in any
other period, any such amount so forgiven after the end of such period but prior
to the date on which the financial statements of the Borrower and its
Subsidiaries are required to be delivered to the Administrative Agent for such
period pursuant to Section 7.01(a) or (b), as applicable, shall be deemed to
have been so forgiven during the period most recently ended (and not, for the
avoidance of doubt, during the period in which such forgiveness actually
occurred) for purposes of calculating the amount to be added back to
Consolidated CDMO EBITDA pursuant to this clause (b)(x); provided, further,
that, the aggregate amount added back to Consolidated CDMO EBITDA pursuant to
this clause (b)(x) for all periods shall not exceed $3,316,000, and minus (c)
the following (without duplication), in each case, to the extent included in
calculating such Consolidated CDMO Net Income, all as determined in accordance
with GAAP, (i) federal, state, local and foreign income tax credits for such
period, (ii) all non-cash income or gains for such period, (iii) all gains for
such period in connection with any Disposition outside of the ordinary course of
business, including any gains from discontinued operations and (iv) all gains in
such period with respect to foreign exchange transactions.  Notwithstanding the
foregoing, for all purposes herein, Consolidated CDMO EBITDA for the fiscal
quarter ending March 31, 2019 shall be deemed to be $11,610,000, and
Consolidated CDMO EBITDA for the fiscal quarter ending June 30, 2019 shall be
deemed to be $15,008,000.

d.Effective as of September 30, 2020, the definition of Consolidated Leverage
Ratio in Section 1.01 of the Credit Agreement is amended and restated in its
entirety to read as follows:

“Consolidated Leverage Ratio” means, as of any date of determination, the ratio
of (a) Consolidated Funded Indebtedness as of such date minus Unrestricted Cash
of the Borrower and its Subsidiaries held in Deposit Accounts for which the
Administrative Agent shall have received a Deposit Account Control Agreement as
of such date to (b) Consolidated CDMO EBITDA for the period of the four fiscal
quarters of the Borrower most recently ended.

e.The definition of “Funded Indebtedness” in Section 1.01 of the Credit
Agreement is amended by adding the following sentence to the end of such
definition:

For the avoidance of doubt, the outstanding principal amount of the PPP Loan
shall not constitute “Funded Indebtedness” prior to January 1, 2022, after which
such amount shall constitute “Funded Indebtedness” to the extent that it is not
permanently and irrevocably forgiven prior to such date.

f.The definition of “Loan Documents” in Section 1.01 of the Credit Agreement is
amended and restated in its entirety to read as follows:

“Loan Documents” means this Agreement, the First Amendment, the Second
Amendment, the Third Amendment, the Fourth Amendment, each Note, the Fee Letter,
the First Amendment Fee Letter, the Fourth Amendment Fee Letter, the Disclosure
Letter, the Second Amendment Disclosure Letter, the Third Amendment Disclosure
Letter, each Joinder Agreement, each Collateral Document and any other
agreement,

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instrument or document designated by its terms as a “Loan Document”, excluding,
for the avoidance of doubt, the Warrants.

g.The table in Section 2.05 of the Credit Agreement is amended and restated in
its entirety to read as follows:

Payment Dates

Principal Amortization Payment

Fourth Amendment Effective Date

$9,000,000

March 31, 2022

$3,000,000

June 30, 2022

$3,000,000

September 30, 2022

$3,000,000

December 31, 2022

$3,000,000

Maturity Date

Outstanding Principal Balance of Loans

h.Section 2.07(a) of the Credit Agreement is amended and restated in its
entirety to read as follows:

(a)Closing Fees and Amendment Fees.  The Borrower shall pay to the
Administrative Agent and the Lenders the fees and original issue discount in the
Fee Letter, the First Amendment Fee Letter and the Fourth Amendment Fee Letter,
in the amounts and at the times specified in the Fee Letter, the First Amendment
Fee Letter and the Fourth Amendment Fee Letter.  Such fees and original issue
discount shall be fully earned when paid and shall be non-refundable for any
reason whatsoever.  It is understood and agreed that the Administrative Agent
and each Lender reserves the right to allocate, in whole or in part, to its
Affiliates, the fees and original issue discount payable thereunder in such
manner as the Administrative Agent, such Lenders and such Affiliates shall agree
in their sole discretion.

i.Section 7.03(a) of the Credit Agreement is amended and restated in its
entirety to read as follows:

(a)Promptly (and in any event, within three (3) Business Days after a
Responsible Officer of any Loan Party obtains knowledge thereof) notify the
Administrative Agent of the occurrence of any Default (including, for the
avoidance of doubt, any Default that occurs as a result of a Responsible Officer
of any Loan Party obtaining knowledge that, even if the full amount permitted to
be added back pursuant to clause (b)(x) of the definition of “Consolidated CDMO
EBITDA” were to be added back pursuant to such definition with respect to a
particular period, the Loan Parties would not be in compliance with the
financial covenant set forth in Section 8.16(b) for such period).

j.Section 8.16(a) of the Credit Agreement is amended and restated in its
entirety to read as follows:

(a)Liquidity.  Permit Unrestricted Cash of the Loan Parties held in Deposit
Accounts for which the Administrative Agent shall have received a Deposit
Account Control Agreement on a consolidated basis to be less than: (i) during
the period

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commencing on the Closing Date and continuing through and including the fiscal
month ended September 30, 2020, $12,000,000 as of the end of any fiscal month of
the Borrower, (ii) during the period commencing on October 1, 2020 and
continuing through and including the fiscal month ended March 31, 2021,
$10,000,000 as of the end of any fiscal month of the Borrower, and (iii) at all
times thereafter, $12,000,000 as of the end of any fiscal month of the Borrower.

 

k.Effective as of September 30, 2020, Section 8.16(b) of the Credit Agreement is
amended and restated in its entirety to read as follows:

(b)Consolidated Leverage Ratio.  Permit the Consolidated Leverage Ratio as of
the end of any fiscal quarter of the Borrower to be greater than: (i) with
respect to any fiscal quarter of the Borrower ending prior to September 30,
2020, 5.00:1.00, (ii) with respect to any fiscal quarter of the Borrower ending
during the period commencing on September 30, 2020 and continuing through and
including December 31, 2021, 5.60:1.00, and (iii) with respect to any fiscal
quarter of the Borrower ending thereafter, 5.00:1.00.

l.Exhibit E to the Credit Agreement is amended and restated in its entirety to
read as provided on Annex 1 hereto.

2.Amendment to Warrants. Each of the Warrants is amended by amending and
restating the definition of “Exercise Price” appearing therein in its entirety
to read as follows:

“Exercise Price” means $1.73, as adjusted from time to time pursuant to Section
5.

3.Conditions Precedent to Effectiveness.  This Agreement shall be effective upon
satisfaction of the following conditions precedent:

(a)receipt by the Administrative Agent of counterparts of (i) this Agreement
duly executed by the Borrower, the Guarantors, the Lenders and the
Administrative Agent, and (ii) the Fourth Amendment Fee Letter duly executed by
the Borrower and the Administrative Agent;

(b)receipt by the Administrative Agent of satisfactory evidence that (i) the
repayment of the Loans to be made on the Fourth Amendment Effective Date
pursuant to Section 2.05 of the Credit Agreement shall have been made, together
with all accrued and unpaid interest thereon, and (ii) the exit fee required by
Section 2.07 of the Credit Agreement in connection with such repayment to be
made on the Fourth Amendment Effective Date pursuant to Section 2.05 of the
Credit Agreement shall have been paid to the Lenders, for their respective
ratable accounts;

(c)receipt by the Administrative Agent and the Lenders of any and all other fees
required to be paid on or prior to the Fourth Amendment Effective Date
(including, for the avoidance of doubt, the fee set forth in the Fourth
Amendment Fee Letter); and

(d)receipt by the Administrative Agent of all reasonable and documented
out-of-pocket fees, charges and disbursements of counsel to the Administrative
Agent and all reasonable and documented out-of-pocket due diligence expenses of
the Administrative Agent and the Lenders, in each case, incurred in connection
with this Agreement and the transactions contemplated hereby and for which
invoices have been issued (provided, that, the issuance of such invoices shall
not thereafter preclude a final settling of accounts between the Borrower and
the Administrative Agent).

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4.Reaffirmation.  Each of the Loan Parties acknowledges and reaffirms (a) that
it is bound by all of the terms of the Investment Documents to which it is a
party and (b) that it is responsible for the observance and full performance of
all Obligations, including without limitation, the repayment of the
Loans.  Furthermore, the Loan Parties acknowledge and confirm (i) that the
Lenders have performed fully all of their obligations under the Credit Agreement
and the other Investment Documents arising on or before the date hereof other
than their respective obligations specifically set forth in this Agreement and
(ii) that by entering into this Agreement, the Lenders do not, except as
expressly set forth herein, waive or release any term or condition of the Credit
Agreement or any of the other Investment Documents or any of their rights or
remedies under such Investment Documents or any applicable law or any of the
Obligations of the Loan Parties thereunder.

5.Release.  As a material part of the consideration for the Administrative Agent
and the Lenders entering into this Agreement, the Loan Parties agree as follows
(the “Release Provision”):

(a)The Administrative Agent, the Lenders, each of their respective Affiliates
and each of the foregoing Persons’ respective officers, managers, members,
directors, advisors, sub-advisors, partners, agents and employees, and their
respective successors and assigns (hereinafter all of the above collectively
referred to as the “Lender Group”), are irrevocably and unconditionally
released, discharged and acquitted from any and all actions, causes of action,
claims, demands, damages and liabilities of whatever kind or nature, in law or
in equity, now known or unknown, suspected or unsuspected to the extent that any
of the foregoing arises from any action or failure to act under or otherwise
arising in connection with the Investment Documents, in each case arising on or
prior to the Fourth Amendment Effective Date, except to the extent such actions,
causes of action, claims, demands, damages and liabilities result from the gross
negligence or willful misconduct of any of the Lender Group as determined by a
court of competent jurisdiction in a final and nonappealable judgment; provided,
however, that, the Loan Parties do not release, discharge or acquit the Lender
Group from their respective obligations specifically set forth in this
Agreement.

(b)Each Loan Party hereby acknowledges, represents and warrants to the Lender
Group that:

(i)it has read and understands the effect of the Release Provision. Each Loan
Party has had the assistance of independent counsel of its own choice, or has
had the opportunity to retain such independent counsel, in reviewing,
discussing, and considering all the terms of the Release Provision; and if
counsel was retained, counsel for such Loan Party has read and considered the
Release Provision and advised such Loan Party with respect to the same.  Before
execution of this Agreement, such Loan Party has had adequate opportunity to
make whatever investigation or inquiry it may deem necessary or desirable in
connection with the subject matter of the Release Provision.

(ii)no Loan Party is acting in reliance on any representation, understanding, or
agreement not expressly set forth herein or in the Credit Agreement or other
Investment Documents.  Each Loan Party acknowledges that the Lender Group has
not made any representation with respect to the Release Provision except as
expressly set forth herein.

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(iii)each Loan Party has executed this Agreement and the Release Provision
thereof as its free and voluntary act, without any duress, coercion, or undue
influence exerted by or on behalf of any person.

(iv)the Loan Parties are the sole owners of the claims released by the Release
Provision, and no Loan Party has heretofore conveyed or assigned any interest in
any such claims to any other Person.

(c)Each Loan Party understands that the Release Provision was a material
consideration in the agreement of the Administrative Agent and the Lenders to
enter into this Agreement.  The Release Provision shall be in addition to any
rights, privileges and immunities granted to the Administrative Agent and the
Lenders under the Investment Documents.

6.Miscellaneous.

(a)The Credit Agreement and the Obligations of the Loan Parties thereunder and
under the other Investment Documents, are hereby ratified and confirmed and
shall remain in full force and effect according to their terms, as amended by
this Agreement.  This Agreement is a Loan Document.

(b)Each Guarantor (i) acknowledges and consents to all of the terms and
conditions of this Agreement, (ii) affirms all of its Obligations under the
Investment Documents, and (iii) agrees that this Agreement and all documents
executed in connection herewith do not operate to reduce or discharge its
Obligations under the Credit Agreement or the other Investment Documents.

(c)The Loan Parties represent and warrant to the Administrative Agent and the
Lenders that:

(i)each Loan Party has taken all necessary corporate, limited liability company
or other organizational action to authorize the execution, delivery and
performance of this Agreement.

(ii)this Agreement has been duly executed and delivered by each Loan Party and
constitutes a legal, valid and binding obligation of each Loan Party,
enforceable against each such Loan Party in accordance with its terms, subject
to bankruptcy, insolvency and similar laws affecting enforceability of
creditors’ rights generally and to general principles of equity.

(iii)no approval, consent, exemption, authorization or other action by, or
notice to, or filing with, any Governmental Authority or any other Person is
necessary or required in connection with the execution, delivery or performance
by, or enforcement against, any Loan Party of this Agreement other than (A)
those that have already been obtained and are in full force and effect and (B)
those that may be required under any applicable notices under securities laws.

(iv)(A) the representations and warranties of the Borrower and each other Loan
Party contained in Article VI of the Credit Agreement or any other Investment
Document, or which are contained in any document furnished at any time under or
in connection therewith, are true and correct in all material respects (and in
all respects if any such representation and warranty is already qualified by
materiality or reference to Material Adverse Effect) on and as of the date
hereof, except to the extent that such

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representations and warranties specifically refer to an earlier date, in which
case they are true and correct in all material respects (and in all respects if
any such representation and warranty is already qualified by materiality or
reference to Material Adverse Effect) as of such earlier date and (B) no event
has occurred and is continuing which constitutes a Default or an Event of
Default.

(d)Each of the Loan Parties hereby affirms the Liens created and granted in the
Loan Documents in favor of the Administrative Agent, for the benefit of the
Secured Parties, and agrees that this Agreement does not adversely affect or
impair such Liens and security interests in any manner.

(e)This Agreement may be executed in counterparts (and by different parties
hereto in different counterparts), each of which shall constitute an original,
but all of which when taken together shall constitute a single
contract.  Delivery of an executed counterpart of a signature page of this
Agreement by facsimile or other electronic imaging means (e.g. “pdf” or “tif”)
shall be effective as delivery of a manually executed counterpart of this
Agreement.

(f)If any provision of this Agreement is held to be illegal, invalid or
unenforceable, (i) the legality, validity and enforceability of the remaining
provisions of this Agreement shall not be affected or impaired thereby and (ii)
the parties shall endeavor in good faith negotiations to replace the illegal,
invalid or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the illegal, invalid or
unenforceable provisions.  The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

(g)THIS AGREEMENT AND ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION
(WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.

[SIGNATURE PAGES FOLLOW]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

BORROWER:

RECRO PHARMA, INC.,

 

a Pennsylvania corporation

 

 

 

By:

/s/ Ryan D. Lake

 

 

Name: Ryan D. Lake

 

 

Title: Chief Financial Officer

 

 

GUARANTORS:

RECRO GAINESVILLE LLC,

 

a Massachusetts limited liability company

 

 

 

By:

/s/ Ryan D. Lake

 

 

Name: Ryan D. Lake

 

 

Title: Treasurer

 

 

 

RECRO GAINESVILLE DEVELOPMENT LLC,

 

A Delaware limited liability company

 

 

 

By:

/s/ Ryan D. Lake

 

 

Name: Ryan D. Lake

 

 

Title: Secretary and Treasurer

 

 

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ADMINISTRATIVE AGENT:

ATHYRIUM OPPORTUNITIES III ACQUISITION LP,

 

a Delaware limited partnership

 

 

 

By:  Athyrium Opportunities Associates III LP, its General Partner

 

 

 

By:  Athyrium Opportunities Associates III GP LLC, the General Partner of
Athyrium Opportunities Associates III LP

 

 

 

By:

/s/ Andrew C. Hyman

 

 

Name: Andrew C. Hyman

 

 

Title: Authorized Signatory

 

 

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LENDERS:

ATHYRIUM OPPORTUNITIES III ACQUISITION LP,

 

a Delaware limited partnership

 

 

 

By:  Athyrium Opportunities Associates III LP, its General Partner

 

 

 

By:  Athyrium Opportunities Associates III GP LLC, the General Partner of
Athyrium Opportunities Associates III LP

 

 

 

By:

/s/ Andrew C. Hyman

 

 

Name: Andrew C. Hyman

 

 

Title: Authorized Signatory

 

 

 

ATHYRIUM OPPORTUNITIES II ACQUISITION LP,

 

a Delaware limited partnership

 

 

 

By:  Athyrium Opportunities Associates II LP, its General Partner

 

 

 

By:  Athyrium GP Holdings LLC, the General Partner of Athyrium Opportunities
Associates II LP

 

 

 

By:

/s/ Andrew C. Hyman

 

 

Name: Andrew C. Hyman

 

 

Title: Authorized Signatory

 

 

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Annex 1

Exhibit E to Credit Agreement

(See attached)

 

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Exhibit E

 

FORM OF Compliance Certificate

 

Financial Statement Date: __________, 20___ (the “Financial Statement Date”)

 

To:Athyrium Opportunities III Acquisition LP, as Administrative Agent

 

Re:

Credit Agreement dated as of November 17, 2017 (as amended, modified, restated,
supplemented or extended from time to time, the “Credit Agreement”) among Recro
Pharma, Inc., a Pennsylvania corporation (the “Borrower”), the Guarantors party
thereto, the Lenders from time to time party thereto and Athyrium Opportunities
III Acquisition LP, as Administrative Agent.  Capitalized terms used but not
otherwise defined herein have the meanings provided in the Credit Agreement.

 

Date:

__________, 20___

 

Ladies and Gentlemen:

 

The undersigned Responsible Financial Officer hereby certifies as of the date
hereof that [he][she] is the _______________1 of the Borrower, and that, in
[his][her] capacity as such, [he][she] is authorized to execute and deliver this
Compliance Certificate to the Administrative Agent on the behalf of the
Borrower, and that:

 

[Use following paragraph 1 for fiscal year‑end financial statements:]

 

[1.Attached hereto as Schedule 1 are the year‑end consolidated audited and
consolidating financial statements required by Section 7.01(a) of the Credit
Agreement for the fiscal year of the Borrower ended as of the Financial
Statement Date, together with the report and opinion of an independent certified
public accountant with respect to the consolidated financial statements, as
required by such Section.  Such consolidating statements are fairly stated in
all material respects when considered in relation to such consolidated financial
statements.]

 

[Use following paragraph 1 for fiscal quarter‑end financial statements:]

 

[1.Attached hereto as Schedule 1 are the unaudited financial statements required
by Section 7.01(b) of the Credit Agreement for the fiscal quarter of the
Borrower ended as of the Financial Statement Date.  Such financial statements
fairly present in all material respects the financial condition, results of
operations, shareholders’ equity and cash flows of the Borrower and its
Subsidiaries in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes.]

 

2.The undersigned has reviewed and is familiar with the terms of the Credit
Agreement and has made, or has caused to be made, a reasonably detailed review
of the transactions and condition (financial or otherwise) of the Borrower
during the accounting period covered by the attached financial statements.

 

3.A review of the activities of the Borrower during such fiscal period has been
made under the supervision of the undersigned with a view to determining whether
during such fiscal period the Borrower performed and observed all of its
Obligations, and

 

 

1 

Must be signed by chief executive officer, chief financial officer, chief
accounting officer, treasurer or controller.

 

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[select one:]

 

[to the knowledge of the undersigned during such fiscal period, the Borrower
performed and observed each covenant and condition of the Loan Documents
applicable to it, and no Default has occurred and is continuing.]

 

[or:]

 

[the following covenants or conditions have not been performed or observed and
the following is a list of each such Default and its nature and status:]

 

4.The analysis of the financial covenants set forth in Section 8.16 of the
Credit Agreement and calculation of Consolidated Leverage Ratio, in each case,
for the four fiscal quarter period ending as of the Financial Statement Date,
set forth on Schedule 2 attached hereto are true and accurate on and as of the
date of this Compliance Certificate.

 

5.Set forth below is information regarding the amount of all Dispositions and
Involuntary Dispositions, in each case, the Net Cash Proceeds of which, when
taken together with the Net Cash Proceeds of all other Dispositions and
Involuntary Dispositions in the applicable fiscal year, exceed $1,000,000, all
Debt Issuances, all Extraordinary Receipts, the Net Cash Proceeds of which, when
taken together with the Net Cash Proceeds of all other Extraordinary Receipts in
the applicable fiscal year, exceed $1,000,000, and Acquisitions that occurred
during the period covered by the financial statements attached hereto as
Schedule 1: [__].

 

6.Attached hereto as Schedule 3 is (i) a list of (A) all applications with the
United States Copyright Office or the United States Patent and Trademark Office
by any Loan Party, if any, for Copyrights, Patents or Trademarks made since [the
Closing Date] [the date of the prior Compliance Certificate], (B) all issuances
of registrations or letters patent by the United States Copyright Office or the
United States Patent and Trademark Office on existing applications by any Loan
Party for Copyrights, Patents and Trademarks received since [the Closing Date]
[the date of the prior Compliance Certificate], and (C) any license of Material
Intellectual Property entered into by any Loan Party since [the Closing Date]
[the date of the prior Compliance Certificate] and (ii) with respect to any
insurance coverage of any Loan Party or any Subsidiary that was renewed,
replaced or modified during the period covered by the financial statements, such
information with respect to such insurance coverage as is required to be
included on Schedule 6.10 to the Credit Agreement.

 

7.Attached hereto as Schedule 4 is a written summary of material changes in GAAP
and in the consistent application thereof, in each case made during the
accounting period covered by the attached financial statements.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the undersigned has executed this Compliance Certificate as
of the date set forth above.

 

Recro Pharma, Inc.,

a Pennsylvania corporation

 

 

By:

Name:

Title:

 

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Schedule 1

 

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Schedule 2

 

1.Consolidated Leverage Ratio:

$____________

 

 

A.Consolidated Funded Indebtedness as of the Financial Statement Date2:

 

i. all obligations, whether current or long-term, for borrowed money (including
the Obligations) and all obligations evidenced by bonds, debentures, notes, loan
agreements or other similar instruments:

$____________

 

 

ii.   all purchase money Indebtedness:

$____________

 

 

iii.the principal portion of all obligations under conditional sale or other
title retention agreements relating to property purchased by the Borrower or any
of its Subsidiaries (other than customary reservations or retentions of title
under agreements with suppliers entered into in the ordinary course of
business):

$____________

 

 

iv.all obligations arising under letters of credit (including standby and
commercial), bankers’ acceptances, bank guaranties, surety bonds and similar
instruments:

$____________

 

 

v.all obligations in respect of the deferred purchase price of property or
services (other than trade accounts payable in the ordinary course of business
and any Earn Out Obligations unless such Earn Out Obligations have not been paid
after becoming due and payable):

$____________

 

 

vi.the Attributable Indebtedness of Capital Leases, Securitization Transactions
and Synthetic Leases:

$____________

 

 

vii.all obligations of the Borrower and its Subsidiaries to purchase, redeem,
retire, defease or otherwise make any payment in respect of any Disqualified
Capital Stock in such Person or any other Person, valued, in the case of a
redeemable preferred interest, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends:

$____________

 

 

viii. all Funded Indebtedness of others secured by (or for which the holder of
such Funded Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on, or payable out of the proceeds of production from,
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed:

$____________

 

 

ix.all Guarantees with respect to Funded Indebtedness of the

$____________

 

2 

For the avoidance of doubt, the outstanding principal amount of the PPP Loan
shall not constitute “Funded Indebtedness” prior to January 1, 2022, after which
such amount shall constitute “Funded Indebtedness” to the extent that it is not
permanently and irrevocably forgiven prior to such date.

 

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types specified in lines (i) through (viii) above of another Person:

 

 

x.all Funded Indebtedness of the types referred to in lines (i) through (ix)
above of any partnership or joint venture (other than a joint venture that is
itself a corporation or limited liability company) in which such Person is a
general partner or joint venture, except to the extent that Funded Indebtedness
is expressly made non-recourse to such Person:

$____________

 

 

xi. Consolidated Funded Indebtedness as of the Financial Statement Date:

[1.A.i + 1.A.ii +1.a.iii + 1.A.iv + 1.A.v + 1.A.vi + 1.A.vii + 1.A.viii + 1.A.ix
+ 1.A.x]

$____________

 

 

B. Unrestricted Cash of the Borrower and its Subsidiaries held in Deposit
Accounts for which the Administrative Agent shall have received a Deposit
Account Control Agreement as of such date

$____________

 

 

C.Consolidated CDMO EBITDA for the period of the four fiscal quarters most
recently ended on the Financial Statement Date:

 

 

 

i. Consolidated CDMO Net Income for such period:

$____________

 

ii. gross interest expense for such period in connection with borrowed money
(including capitalized interest) or in connection with the deferred purchase
price of assets (to the extent deducted in calculating Consolidated CDMO Net
Income):

 

$____________

 

iii. the provision for current and deferred federal, state, local and foreign
income taxes paid or accrued for such period (to the extent deducted in
calculating Consolidated CDMO Net Income):

 

$____________

 

iv. depreciation and amortization expense for such period:

$____________

 

v. unusual, infrequent or non-recurring losses, charges or expenses for such
period (including without limitation any such losses, charges or expenses for
such period resulting from the impact of the adoption by the CDMO Loan Parties
of ASU 2014-09 for revenue recognition and similar timing impacts for the
adoption of new accounting standards) (to the extent deducted in calculating
Consolidated CDMO Net Income):3

 

$____________

 

vi. non-cash charges (including, without limitation, stock-based

 

$____________

 

 

3 

The aggregate amount added back to Consolidated CDMO EBITDA pursuant to Line
C.v. for such period shall not exceed ten percent (10%) of Consolidated CDMO
EBITDA (calculated prior to giving effect to the add backs permitted pursuant to
this Line C.v. for such period).

 

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compensation expense, contingent consideration expense and warrant
mark-to-market adjustment expense (but excluding non-cash charges related to
receivables)) for such period which do not represent a cash item in such period
or any future period (to the extent deducted in calculating Consolidated CDMO
Net Income):

 

$____________

 

vii. any losses in such period resulting from any Disposition outside of the
ordinary course of business, including any net loss from discontinued operations
(and including, without limitation, any discontinued operations to the extent
discontinued in connection with the Reorganization) (to the extent deducted in
calculating Consolidated CDMO Net Income):

$____________

 

viii. all losses in such period with respect to foreign exchange transactions
(to the extent deducted in calculating Consolidated CDMO Net Income):

 

$____________

 

ix. solely with respect to the fiscal quarter ending on December 31, 2019, costs
and expenses to the extent related to the Reorganization4:

$0

 

x. fees, costs and expenses of the CDMO Loan Parties incurred directly in
connection with the Investment Documents (excluding, for the avoidance of doubt,
any fees, costs and expenses incurred in connection with the Equity Interests of
the Borrower (other than the Warrants) and any transactions with respect
thereto); provided, that, the aggregate amount added back to Consolidated CDMO
EBITDA pursuant to this Line 1.C.x for any consecutive four fiscal quarter
period of the Borrower shall not exceed $500,0005:

$____________

 

xi. solely to the extent not already included in Consolidated CDMO Net Income,
the principal amount of the PPP Loan that is permanently and irrevocably
forgiven in such period in accordance with the terms of the PPP Loan and
applicable Law; provided, that, without duplication in any other period, any
such amount so forgiven after the end of such period but prior to the date on
which the financial statements of the Borrower and its Subsidiaries are required
to be delivered to the Administrative Agent for such period pursuant to Section
7.01(a) or (b) of the Credit Agreement, as applicable, shall be deemed to have
been so forgiven during

$____________

 

 

4 

The aggregate amount added back to Consolidated CDMO EBITDA pursuant to this
Line 1.C.ix for such quarter shall not exceed $5,000,000 and shall be supported
by evidence of such costs and expenses reasonably satisfactory to the
Administrative Agent and certified as true and correct by a Responsible
Financial Officer of the Borrower.

5 

The Borrower shall deliver a certificate executed by a Responsible Financial
Officer of the Borrower providing evidence reasonably satisfactory to the
Administrative Agent that all amounts added back pursuant to this Line 1.C.x
represent bona fide fees, costs and expenses of the CDMO Loan Parties that were
actually incurred by the CDMO Loan Parties during such period.

 

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the period most recently ended (and not, for the avoidance of doubt, during the
period in which such forgiveness actually occurred) for purposes of calculating
the amount to be added back to Consolidated CDMO EBITDA pursuant to this Line
1.C.xi; provided, further, that, the aggregate amount added back to Consolidated
CDMO EBITDA pursuant to this Line 1.C.xi for all periods shall not exceed
$3,316,000:

 

xii. federal, state, local and foreign income tax credits for such period (to
the extent included in calculating Consolidated CDMO Net Income):

 

$____________

 

xiii. all non-cash income or gains for such period (to the extent included in
calculating Consolidated CDMO Net Income):

 

$____________

 

xiv. all gains for such period in connection with any Disposition outside of the
ordinary course of business, including any gains from discontinued operations
(to the extent included in calculating Consolidated CDMO Net Income):

 

$____________

 

xv. all gains in such period with respect to foreign exchange transactions (to
the extent included in calculating Consolidated CDMO Net Income):

 

$____________

 

xvi. Consolidated CDMO EBITDA for such period:

[1.C.i + 1.C.ii +1.C.iii + 1.C.iv + 1.C.v + 1.C.vi + 1.C.vii + 1.C.viii + 1.C.ix
+ 1.C.x - 1.C.xi - 1.C.xii – 1.C.xiii – 1.C.xiv – 1.C.xv]

$____________

 

D.   Consolidated Leverage Ratio

       [(1.A.xi – B) / 1.C.xvi]:

________:1.00

 

 

E. maximum Consolidated Leverage Ratio permitted by Section 8.16(b) of the
Credit Agreement for such period:

[5.00:1:00]6

[5.60:1.00]7

Compliance?

                       [Yes] [No]

 

 

6 

With respect to any fiscal quarter of the Borrower ending prior to September 30,
2020 and any fiscal quarter of the Borrower ending after December 31, 2021.

7 

With respect to any fiscal quarter of the Borrower ending during the period
commencing on September 30, 2020 and continuing through and including December
31, 2021.

 

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2.Liquidity:

 

 

A.Unrestricted Cash of the Loan Parties held in Deposit Accounts for which the
Administrative Agent has received a Deposit Account Control Agreement:

 

$

 

B.amount required by Section 8.16(a) of the Credit Agreement:

 

[$12,000,000]8

[$10,000,000]9

 

Compliance?

                       [Yes] [No]

 

 

 

8 

During the period commencing on the Closing Date and continuing through and
including the fiscal month ended September 30, 2020 and at all times after March
31, 2021.

9 

During the period commencing on October 1, 2020 and continuing through and
including the fiscal month ended March 31, 2021.

 

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Schedule 3

 

 

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Schedule 4