Exhibit 10.2

 

INTERCREDITOR AND SUBORDINATION AGREEMENT

 

THIS INTERCREDITOR AND SUBORDINATION AGREEMENT, dated as of April __, 2016,
(this “Agreement”), is by and among Intellect Neurosciences, Inc., a Delaware
corporation (the “Company”), the parties identified on Schedule A hereto
(“Senior Lenders”) and the parties identified on Schedule B hereto (the “Junior
Lenders” and together with Company and Senior Lenders each a “Party” and
collectively the “Parties”).

 

WITNESSETH:

 

WHEREAS, Seniors Lenders have entered into financing arrangements with the
Company pursuant to a Securities Purchase Agreement of date herewith (the “SPA”)
pursuant to which the Company has issued or will issue the notes to the Senior
Lenders as set forth on Schedule A (the “Senior Notes” and all the Company’s
obligations under the Senior Notes referred as the “Senior Debt”); and

 

WHEREAS, Company previously issued notes to the Junior Lenders as set forth on
Schedule B (the “Junior Notes” and all the Company’s obligations under the
Junior Notes referred as the “Junior Debt”); and

 

WHEREAS, as a condition to the Senior Lenders agreeing to enter into the SPA and
purchase the Senior Notes, the Senior Lenders have required the Parties to enter
into this Agreement to (i) set the relative priority of the payments of the
Senior Debt and Junior Debt, and (ii) provide for the orderly sharing payments
by the Company among the Senior Lenders and Junior Lenders.

 

NOW THEREFORE, in consideration of the mutual benefits accruing to Parties
hereunder and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto do hereby agree as follows:

 

1.DEFINITIONS.

 

As used in this Agreement, the following terms shall have the meanings ascribed
to them below:

 

“Available Proceeds” means the gross proceeds of a Minor Liquidity Event less
$750,000 and less any license payments due by the Company to its Licensors
required to be immediately paid as a result of the occurrence of the Minor
Liquidity Event.

 

“Electing Holders” means the Senior Lender, if any, that elect to accelerate a
portion of the Notes pursuant to Section 6(b)(ii) of the Senior Notes.

 

“Insolvency Proceeding” means, as to the Company, any of the following,
occurring after the date hereof: (i) any case or proceeding with respect to the
Company under the U.S. Bankruptcy Code, any other federal, state or provincial
bankruptcy, insolvency, reorganization or other law affecting creditors’ rights
generally or any other or similar proceedings of any other jurisdiction or
otherwise seeking any stay, reorganization, arrangement, liquidation,
dissolution, composition or readjustment of the obligations and indebtedness of
the Company, or (ii) any proceeding seeking the appointment of any receiver,
administrative receiver, receiver and manager, examiner, judicial custodian,
trustee, liquidator, official manager, administrator or similar official for the
Company or any material part of its properties, or (iii) any proceedings for
liquidation, dissolution or other winding up of the business of the Company, or
(iv) the sale of all or substantially all of the assets or capital stock of the
Company, or (v) any assignment for the benefit of creditors or any marshaling of
assets of the Company.

 

“Major Liquidity Event” shall have the meaning set forth in the Senior Notes.

 

“Minor Liquidity Event” shall have the meaning set forth in the Senior Notes.

 

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“Senior Notes” shall mean all notes issued pursuant to the SPA. In the event of
multiple closings under the SPA, Schedule A shall be amended to include all
Senior Notes issued in the future.

 

2.Priority

 

2.1           Subordination. Except as set forth in Section 2.2, Junior Lenders,
hereby agree that during the term of this Agreement, and notwithstanding
anything in the Junior Debt documents to the contrary, the Junior Notes are
subordinated in right of payment to the prior final and indefeasible payment in
cash to the Senior Lenders and performance of the Senior Debt in full, in the
manner and to the extent provided for herein, and that such subordination is for
the benefit of the Senior Lenders. The Junior Lenders hereby further agree that
except as otherwise specifically permitted herein, prior to the final and
indefeasible payment in cash to Senior Lenders and performance of the Senior
Debt in full, Junior Lenders will not request, demand, take, accept, or receive
any distribution from or on behalf of the Company in connection with the Junior
Debt. Junior Lenders further agree not to commence any action to collect the
Junior Debt until the senior Debt is indefeasibly paid in cash to the Senior
Lenders.

 

2.2           Payments to a Specified Junior Lender. Upon the closing of the
funding pursuant to the SPA, the Company shall pay the sum of $100,000 to the
Junior Lenders to be credited against the amounts outstanding on the Junior
Notes. Upon the occurrence of a Major Liquidity Event, the Company shall make a
payment or series of payments of $1,000,000 in the aggregate to the Junior
Lenders to be credited against the amounts outstanding on the Junior Notes (the
“Major Liquidity Junior Payment”). Upon a Minor Liquidity Event, the Company
shall make a payment to the Junior Lenders against the Junior Notes in an amount
determined by multiplying $1,000,000 by a percentage determined by dividing the
proceeds received in the Minor Liquidity Event by $7,500,000 (the “Minor
Liquidity Junior Payment” and together with the Major Liquidity Junior Payment
the “Junior Liquidity Payments”). However, in no event shall the Company be
obligated to pay more than the Available Proceeds upon a Minor Liquidity Event.
If the Available Proceeds are less than the aggregate of the Minor Event
Payments (as defined in the Senior Notes) due to all Electing Holders plus the
Minor Liquidity Junior Payment (the “Accelerated Amount”), then the Available
Proceeds shall be apportioned among the Electing Holders and Junior Lenders pro
rata to their portion of the Accelerated Amount. Any Minor Liquidity Junior
Payment in excess of the Junior Lenders’ pro rata portion of the Accelerated
Amount will be deemed not to have been accelerated. Further no Junior Liquidity
Payments shall be made unless the Company previously or contemporaneously pays
to the Senior Lenders any amounts due on the Senior Notes as a result of any
acceleration elections made by the Senior Lenders upon a Major Liquidity Event
or Minor Liquidity Event.

 

2.3           Extension of Maturity.  The Company and Junior Lenders hereby
agree that the Maturity Date of each Junior Note is hereby extended to the later
of (i) the Second Anniversary of the Milestone Liquidity Event; or (ii) April
[RC], 2021.

 

3.MISCELLANEOUS.

 

3.1           Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, the successors and permitted assigns of the Parties.
Neither party hereto may assign or permit the assignment of its obligations
without first requiring the assignee of such obligation to assume such assigning
party’s rights and obligations under this Agreement. Except as required by the
preceding sentence, neither party may assign its rights or obligations under
this Agreement without the other party’s prior written consent.

 

3.2           Insolvency. This Agreement shall be applicable both before and
after any Insolvency Proceeding by or against the Company and all converted or
succeeding cases in respect thereof, and all references herein to the Company
shall be deemed to apply to an agent for the Company as debtor-in-possession.
The relative rights of Senior Lenders, on the one hand, and Junior Debtors, on
the other, to repayment of the Senior Debt and the Junior Debt, respectively,
and in or to any distributions from or in respect of the Company, shall continue
after the filing thereof on the same basis as prior to the date of the petition,
subject to any court order approving the financing of, or use of cash collateral
by, the Company as debtor-in-possession.

 

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3.3           Governing Law; Jurisdiction; Waiver of Jury Trial. (a) This
Agreement shall be governed by and construed under the laws of the State of New
York applicable to contracts made and to be performed entirely within the State
of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in the State and County of New York for
the adjudication of any dispute hereunder or in connection herewith or therewith
or with any transaction contemplated hereby or thereby, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.

 

(b) EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES AND AGREES THAT ANY DISPUTE OR
CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED
AND DIFFICULT ISSUES AND, THEREFORE, EACH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS AGREEMENT AND HAS HAD AN
OPPORTUNITY TO SEEK SEPARATE COUNSEL OF ITS OWN CHOICE TO REVIEW THIS AGREEMENT,
(III) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

3.4           Injunctive Relief. Each Party acknowledges and agrees that a
breach by it of its obligations hereunder will cause irreparable harm to the
other and that the remedy or remedies at law for any such breach will be
inadequate and agrees, in the event of any such breach, in addition to all other
available remedies, the non-breaching party shall be entitled to an injunction
restraining any breach and requiring immediate and specific performance of such
obligations without the necessity of showing economic loss or the posting of any
bond.

 

3.5           Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that in such case the parties shall negotiate
in good faith to replace such provision with a new provision which is not
illegal, unenforceable or void, as long as such new provision does not
materially change the economic benefits of this Agreement to the Parties.

 

3.6           Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. This Agreement may be
executed and delivered by facsimile transmission.

 

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3.7           Notices. Any notice, demand or request required or permitted to be
given by the respective parties hereto pursuant to the terms of this Agreement
shall be in writing and shall be deemed delivered (i) when delivered personally
or by verifiable facsimile transmission, unless such delivery is made on a day
that is not a Business Day, in which case such delivery will be deemed to be
made on the next succeeding Business Day, (ii) on the next Business Day after
timely delivery to an overnight courier and (iii) on the Business Day actually
received if deposited in the U.S. mail (certified or registered mail, return
receipt requested, postage prepaid), addressed as follows:

 

To the Company:

 

Intellect Neurosciences, Inc.

Attn: Mr. Elliot M. Maza, Chief Executive Officer

550 Sylvan Ave., Englewood Cliffs, NJ 07632

Email: emaza@intellectns.com

Tel: (201) 608–5101

Fax: (201) 608–5103

 

With a copy by telecopier only to:

 

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32nd Floor

New York, NY 10006

Attn: Arthur Marcus, Esq.

Tel: (212) 930-9700

Fax: (212) 930-9725

 

To Senior Lenders:      To the addresses and facsimile numbers listed on
Schedule A hereto.

 

To Junior Lenders:      To the addresses and facsimile numbers listed on
Schedule B hereto.

 

Any Party may change the address(es) to which all notices, requests and other
communications are to be sent by giving written notice of such address change to
the other Parties in conformity with this Section, but such change shall not be
effective until notice of such change has been received by the other Party.

 

3.8           Entire Agreement; Amendments. This Agreement constitutes the
entire agreement between the parties with regard to the subject matter hereof
and thereof, superseding all prior agreements or understandings, whether written
or oral, between or among the parties. No amendment, modification or other
change to this Agreement or waiver of any agreement or other obligation of the
parties under this Agreement may be made or given unless such amendment,
modification or waiver is set forth in writing and is signed by Assignors and
Secured Lenders. Any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

 

3.9           Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.

 

[Signatures begin on next page]

 

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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.

 

COMPANY

 

INTELLECT NEUROSCIENCES, INC.           A Delaware corporation           By:    
        Name: Elliot Maza           Title: Chief Executive Officer and CFO     

 

SENIOR LENDERS

 

By:     By:         Name:   Name:       Title:     Title:       By:     By:    
    Name:   Name:       Title:   Title:       By:     By:         Name:   Name:
      Title:   Title:       By:     By:         Name:   Name:       Title:  
Title:       By:     By:         Name:   Name:       Title:   Title:

 

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JUNIOR LENDERS

 

By:     By:         Name:   Name:       Title:   Title:       By:     By:      
  Name:   Name:       Title:   Title:       By:             Name:          
Title:    

 

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TABLE OF SCHEDULES

 

Schedule A: List of Senior Lenders

 

Schedule B: List of Junior Lenders

 

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