Exhibit 10.36

 

Execution Version

 

SUBORDINATION AGREEMENT

 

This Subordination Agreement (the “Agreement”) is made as of May 7, 2018, by and
between JOHN SCHUTTE, an individual (the “Creditor”), and OXFORD FINANCE LLC, a
Delaware limited liability company with an office located at 133 North Fairfax
Street, Alexandria, Virginia 22314, in its capacity as Collateral Agent (as
hereinafter defined) for the Lenders (as hereinafter defined).

 

Recitals

 

A.           Pursuant to a certain Loan and Security Agreement, dated as of
December 27, 2013 (as amended, supplemented or otherwise modified from time to
time, the “Loan Agreement”), among OXFORD FINANCE LLC, a Delaware limited
liability company with an office located at 133 North Fairfax Street,
Alexandria, Virginia 22314 (“Oxford”), as collateral agent (in such capacity,
“Collateral Agent”), the Lenders listed on Schedule 1.1 thereof or otherwise a
party thereto from time to time including Oxford in its capacity as a Lender
(each a “Lender” and collectively, the “Lenders”), and ACURA PHARMACEUTICALS,
INC., a New York corporation with offices located at 616 N. North Court, Suite
120, Palatine, Illinois (“Parent”), and ACURA PHARMACEUTICAL TECHNOLOGIES, INC.,
an Indiana corporation with offices locates at 16235 State Road 17, Culver, IN
46511 (“APT”, and along with Parent, individually and collectively, jointly and
severally, “Borrower”), Borrower has obtained certain loans and other credit
accommodations from Lenders to Borrower which are secured by assets and property
of Borrower.

 

B.           Creditor has extended loans or other credit accommodations to
Borrower, and/or may extend loans or other credit accommodations to Borrower
from time to time.

 

C.           In order to induce Lenders to extend credit to Borrower and, at any
time or from time to time, at Lenders’ option, to make such further loans,
extensions of credit, or other accommodations to or for the account of Borrower,
or to purchase or extend credit upon any instrument or writing in respect of
which Borrower may be liable in any capacity, or to grant such renewals or
extension of any such loan, extension of credit, purchase, or other
accommodation as Lenders may deem advisable, Creditor is willing to subordinate:
(i) all of Borrower’s indebtedness to Creditor (including, without limitation,
principal, premium (if any), interest, fees, charges, expenses, costs,
professional fees and expenses, and reimbursement obligations), whether
presently existing or arising in the future (the “Subordinated Debt”) to all of
Borrower’s Obligations (as defined in the Loan Agreement), including without
limitation, the indebtedness to the Collateral Agent and/or the Lenders; and
(ii) all of Creditor’s security interests, if any, to all security interests in
the Borrower’s property in favor of the Collateral Agent and/or the Lenders.

 

NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

 

1.           Creditor hereby acknowledges and agrees that (i) Creditor does not
have any lien on or security interest in any property of Borrower, whether now
owned or hereafter acquired, including, without limitation, the “Collateral” as
defined in the Loan Agreement, (ii) Borrower is prohibited from granting to the
Creditor any lien on or security interest in any property of Borrower, whether
now owned or hereafter acquired, including, without limitation, the Collateral
and (iii) the Creditor shall not take any lien on or security interest in any
property of Borrower whether now owned or hereafter acquired, including without
limitation, the Collateral. In furtherance of the foregoing, Creditor hereby
subordinates to the Collateral Agent and the Lenders any security interest or
lien that Creditor may have in any property of Borrower, including without
limitation, the Collateral. Notwithstanding the respective dates of attachment
or perfection of any security interest of Creditor and the security interest of
the Collateral Agent and the Lenders, the lien and security interest of the
Collateral Agent and the Lenders in the any property of Borrower, whether now
owned or hereafter acquired, including, without limitation, the Collateral,
shall at all times be senior to the lien and security interest of Creditor.

 

2.           All Subordinated Debt is subordinated in right of payment to all
Obligations (as defined in the Loan Agreement) of Borrower to the Collateral
Agent and the Lenders now existing or hereafter arising, together with all costs
of collecting such Obligations (including attorneys’ fees), including, without
limitation, all interest accruing after the commencement by or against Borrower
of any bankruptcy, reorganization or similar proceeding, and all obligations
under the Loan Agreement (the “Senior Debt”).

 

   

 

 

3.           Creditor will not demand or receive from Borrower (and Borrower
will not pay to Creditor) all or any part of the Subordinated Debt, by way of
payment, prepayment, setoff, lawsuit or otherwise, nor will Creditor exercise
any remedy with respect to the Subordinated Debt or any property of the
Borrower, whether now owned or hereafter acquired, including, without
limitation, the Collateral, nor will Creditor accelerate the Subordinated Debt,
or commence, or cause to commence, prosecute or participate in any
administrative, legal or equitable action against Borrower, until such time as
(i) the Senior Debt is fully paid in cash, and (ii) the Lenders have no
commitment or obligation to lend any further funds to Borrower, and (iii) all
financing agreements among the Collateral Agent and the Lenders and Borrower are
terminated. Nothing in the foregoing paragraph shall prohibit Creditor from
converting all or any part of the Subordinated Debt into equity securities of
Borrower which do not have any call, put or other conversion features that would
obligate Borrower to pay any money (including the payment of any dividends or
other distributions for so long as the Senior Debt remains outstanding) or
deliver any other securities or consideration to the holder.

 

4.           Creditor shall hold in trust for the Collateral Agent and the
Lenders and promptly deliver to the Collateral Agent in the form received
(except for endorsement or assignment by Creditor where required by the
Collateral Agent), for application to the Senior Debt, any payment,
distribution, security or proceeds received by Creditor with respect to the
Subordinated Debt other than in accordance with this Agreement.

 

5.           In the event of Borrower’s insolvency, reorganization or any case
or proceeding under any bankruptcy or insolvency law or laws relating to the
relief of debtors, these provisions shall remain in full force and effect, and
the Collateral Agent’s and the Lenders’ claims against Borrower and the estate
of Borrower shall be paid in full before any payment is made to Creditor.

 

6.           Until the Senior Debt is fully paid in cash and Lenders’
arrangements to lend any funds to Borrower have been terminated, Creditor
irrevocably appoints the Collateral Agent as Creditor’s attorney-in-fact, and
grants to the Collateral Agent a power of attorney with full power of
substitution, in the name of Creditor or in the name of the Collateral Agent
and/or the Lenders, for the use and benefit of the Collateral Agent and the
Lenders, without notice to Creditor, to perform at the Collateral Agent’s option
the following acts in any bankruptcy, insolvency or similar proceeding involving
Borrower:

 

(i)           To file the appropriate claim or claims in respect of the
Subordinated Debt on behalf of Creditor if Creditor does not do so prior to 30
days before the expiration of the time to file claims in such proceeding and if
the Collateral Agent elects, in its sole discretion, to file such claim or
claims; and

 

(ii)          To accept or reject any plan of reorganization or arrangement on
behalf of Creditor and to otherwise vote Creditor’s claims in respect of any
Subordinated Debt in any manner that the Collateral Agent deems appropriate for
the enforcement of its rights hereunder.

 

7.           Creditor shall immediately affix a legend to the instruments
evidencing the Subordinated Debt stating that the instruments are subject to the
terms of this Agreement. By the execution of this Agreement, Creditor hereby
authorizes the Collateral Agent and the Lenders to amend any financing
statements filed by Creditor against Borrower as follows: “In accordance with a
certain Subordination Agreement by and among the Secured Party, the Debtor and
Oxford Finance LLC, in its capacity as Collateral Agent, the Secured Party has
subordinated any security interest or lien that Secured Party may have in any
property of the Debtor to the security interest of Oxford Finance LLC and the
Lenders identified therein in all assets of the Debtor, notwithstanding the
respective dates of attachment or perfection of the security interest of the
Secured Party and Oxford Finance LLC and the Lenders.”

 

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8.           Neither the Borrower nor the Creditor may amend the terms of any
Subordinated Debt without the prior written consent of the Collateral Agent and
the Lenders. Without limiting the foregoing, no amendment of the documents
evidencing or relating to the Subordinated Debt shall directly or indirectly
modify the provisions of this Agreement in any manner which might terminate or
impair the subordination of the Subordinated Debt or the subordination of any
security interest or lien that Creditor may have in any property of Borrower. By
way of example, such instruments shall not be amended to (i) increase the rate
of interest with respect to the Subordinated Debt, or (ii) accelerate the
payment of the principal or interest or any other portion of the Subordinated
Debt. The Collateral Agent and the Lenders shall have the sole and exclusive
right to restrict or permit, or approve or disapprove, the sale, transfer or
other disposition of any of the property or assets of the Borrower, including,
without limitation, the Collateral, except in accordance with the terms of the
Senior Debt. Upon written notice from the Collateral Agent of the Collateral
Agent’s and the Lenders’ agreement to release its lien on all or any portion of
the Collateral in connection with the sale, transfer or other disposition
thereof by the Collateral Agent and the Lenders (or by Borrower with consent of
the Collateral Agent and the Lenders), Creditor shall be deemed to have also,
automatically and simultaneously, released any lien or security interest on such
Collateral, and Creditor shall upon written request by the Collateral Agent,
immediately take such action as shall be necessary or appropriate to evidence
and confirm such release. All proceeds resulting from any such sale, transfer or
other disposition shall be applied first to the Senior Debt until payment in
full thereof, with the balance, if any, to the Subordinated Debt, or to any
other entitled party. If Creditor fails to release any lien or security interest
as required hereunder, Creditor hereby appoints the Collateral Agent as attorney
in fact for Creditor with full power of substitution to release Creditor’s liens
and security interests as provided hereunder. Such power of attorney being
coupled with an interest shall be irrevocable.

 

9.           All necessary action on the part of the Creditor, its officers,
directors, partners, members and shareholders, as applicable, necessary for the
authorization of this Agreement and the performance of all obligations of
Creditor hereunder has been taken. This Agreement constitutes the legal, valid
and binding obligation of Creditor, enforceable against Creditor in accordance
with its terms. The execution, delivery and performance of and compliance with
this Agreement by Creditor will not (i) result in any material violation or
default of any term of any of the Creditor’s charter, formation or other
organizational documents (such as Articles or Certificate of Incorporation,
bylaws, partnership agreement, operating agreement, etc.) or (ii) violate any
material applicable law, rule or regulation.

 

10.         If, at any time after payment in full of the Senior Debt any
payments of the Senior Debt must be disgorged by the Collateral Agent or the
Lenders for any reason (including, without limitation, the bankruptcy of
Borrower), this Agreement and the relative rights and priorities set forth
herein shall be reinstated as to all such disgorged payments as though such
payments had not been made and Creditor shall immediately pay over to the
Collateral Agent all payments received with respect to the Subordinated Debt to
the extent that such payments would have been prohibited hereunder. At any time
and from time to time, without notice to Creditor, the Collateral Agent and the
Lenders may take such actions with respect to the Senior Debt as the Collateral
Agent and the Lenders, in their sole discretion, may deem appropriate,
including, without limitation, terminating advances to Borrower, increasing the
principal amount, extending the time of payment, increasing applicable interest
rates, renewing, compromising or otherwise amending the terms of any documents
affecting the Senior Debt and any collateral securing the Senior Debt, and
enforcing or failing to enforce any rights against Borrower or any other person.
No such action or inaction shall impair or otherwise affect the Collateral
Agent’s and the Lenders’ rights hereunder.

 

11.         This Agreement shall bind any successors or assignees of Creditor
and shall benefit any successors or assigns of the Collateral Agent and the
Lenders. This Agreement shall remain effective until terminated in writing by
the Collateral Agent. This Agreement is solely for the benefit of Creditor and
the Collateral Agent and the Lenders and not for the benefit of Borrower or any
other party. Creditor further agree that if Borrower is in the process of
refinancing any portion of the Senior Debt with a new lender, and if the
Collateral Agent and/or the Lenders makes a request of Creditor, Creditor shall
agree to enter into a new subordination agreement with the new lender on
substantially the terms and conditions of this Agreement.

 

12.         Creditor hereby agrees to execute such documents and/or take such
further action as the Collateral Agent and the Lenders may at any time or times
reasonably request in order to carry out the provisions and intent of this
Agreement, including, without limitation, ratifications and confirmations of
this Agreement from time to time hereafter, as and when requested by the
Collateral Agent.

 

13.         This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
instrument.

 

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14.         This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to conflicts of laws
principles. Creditor and the Collateral Agent submit to the exclusive
jurisdiction of the State and Federal courts in the City of New York, Borough of
Manhattan in any action, suit, or proceeding of any kind, against it which
arises out of or by reason of this Agreement. CREDITOR AND COLLATERAL AGENT
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN.

 

15.         This Agreement represents the entire agreement with respect to the
subject matter hereof, and supersedes all prior negotiations, agreements and
commitments. Creditor is not relying on any representations by the Collateral
Agent, the Lenders or Borrower in entering into this Agreement and Creditor has
kept and will continue to keep itself fully apprised of the financial and other
condition of Borrower. This Agreement may be amended only by written instrument
signed by Creditor and the Collateral Agent.

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.

 

  OXFORD FINANCE LLC, as   Collateral Agent         By: /s/ Colette Featherly  
  Colette Featherly     Senior Vice President

 

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  CREDITOR:         By: /s/ John Schutte     John Schutte

 

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The undersigned approves of the terms of this Agreement.

 

BORROWER:       ACURA PHARMACEUTICALS, INC.         By: /s/ Peter A. Clemens    
Peter A. Clemens     Sr. VP & CFO       BORROWER:       ACURA PHARMACEUTICAL
TECHNOLOGIES, INC.         By: /s/ Peter A. Clemens     Peter A. Clemens     Sr.
VP & CFO  

 

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