Exhibit 10.13 

 

INTERCREDITOR AND SUBORDINATION AGREEMENT

 

THIS INTERCREDITOR AND SUBORDINATION AGREEMENT dated as of August 3, 2015 (as
amended, restated or supplemented from time to time, this "Agreement")

 

BETWEEN: STRYKER BIOTECH L.L.C
        (together with its successors or assigns hereinafter, "Stryker Bio")

 

AND: STRYKER CORPORATION

   (together with its successors or assigns hereinafter, "Stryker Corp.," and
together with Stryker Bio, "Stryker")

 

AND: KNIGHT THERAPEUTICS INC.

   (together with its successors or assigns hereinafter, "Knight")

 

AND: EMBER THERAPEUTICS, INC.

    (together with its successors or assigns hereinafter, the "Debtor")

 

AND: MARIEL THERAPEUTICS, INC.

    (together with its successors or assigns hereinafter, "Mariel")

 

WHEREAS pursuant to an asset purchase agreement by and among Stryker and Mariel,
dated as of June 30, 2014 (as amended by that certain Amendment No. 1 to Asset
Purchase Agreement, dated July 18, 2014, that certain Amendment No. 2 to Asset
Purchase Agreement, dated August 4, 2014, and as further amended, restated or
supplemented from time to time, the "Stryker APA"), Mariel acquired the
Purchased Assets (as such term is defined in the Stryker APA) from Stryker Bio
for an upfront purchase price of $1,500,000 (the "Upfront Purchase Price");

 

WHEREAS the Stryker APA also provided for additional consideration payable by
Mariel to Stryker in the form of development milestone payments, commercial
milestone payments and contingent payments (collectively, the "Additional
Payments");

 

WHEREAS the Stryker APA provided that a portion of the Upfront Purchase Price
would be paid by the delivery by Mariel to Stryker Bio. of a secured promissory
note in the original principal amount of $500,000 (as amended, restated or
supplemented from time to time, the "Prior Stryker Secured Note");

 

WHEREAS pursuant to the Prior Stryker Secured Note, as security for the payment
of principal, interest, and other obligations under the Prior Stryker Secured
Note, Mariel granted to Stryker Biotech a security interest in the certain
collateral;

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WHEREAS on March 11, 2015, Mariel, Ember Acquisition Corp. ("Ember Acquisition")
and the Debtor executed an Agreement and Plan of Merger, pursuant to which Ember
Acquisition merged into the Debtor and the Debtor became a wholly owned
subsidiary of Mariel;

 

WHEREAS pursuant to that certain Second Amended and Restated Secured Promissory
Note, dated as of August 3, 2015 (as amended, restated or supplemented from time
to time, the "A&R Stryker Secured Note"), the Prior Stryker Secured Note was
amended and restated to add the Debtor as an obligor and to increase the
principal amount to include certain obligations under the Stryker APA;

 

WHEREAS obligations under the A&R Stryker Secured Note (collectively, the
"Subordinated Obligations") are secured by security interests in substantially
all of the assets of the Debtor and Mariel (collectively, the "Collateral") as
security for the Subordinated Obligations;

 

WHEREAS pursuant to that certain Personal Guaranty dated as of August 3, 2015
(as amended, restated or supplemented from time to time, the "Guaranty") Joseph
Hernandez ("Hernandez") provided Stryker with an unconditional guaranty of the
prompt payment when due of $500,000 of the Subordinated Obligations;

 

WHEREAS pursuant to that certain Loan Agreement, dated as of August 3, 2015 (the
"Knight Loan Agreement"), Knight made a loan to the Debtor in the aggregate
principal amount of $1,000,000;

 

WHEREAS pursuant to that certain Security Agreement, dated as of August 3, 2015
(the "Knight Security Agreement"), the Debtor and Mariel granted to Knight a
security interest in the Collateral as security for the obligations under the
Knight Loan Agreement;

 

WHEREAS the parties wish to set out how the Collateral will be dealt with in the
event of a default under the Knight Loan Agreement or the A&R Stryker Secured
Note;

 

WHEREAS Stryker has agreed that the Subordinated Obligations will be
subordinated to the Senior Obligations;

 

THE PARTIES AGREE AS FOLLOWS:

 

ARTICLE 1- INTERPRETATION

 

1.01 Definitions

 

Terms which are not otherwise defined in this Agreement (including the recitals
above), shall have the following meanings:

 

"BMP-7" means the 13 grams of Bone Morphogenic Protein which forms part of the
Collateral.

 

"Business Day" means a day (other than Saturday or Sunday) on which banks are
generally open for business in Montreal, Quebec and New York, New York.

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"Liens" means any mortgage, debenture, pledge, hypothec, lien, charge,
assignment by way of security, consignment, capital lease, hypothecation,
security interest or other security agreement, trust or arrangement having the
effect of security for the payment of any debt, liability or obligations.

 

"Senior Lien" means a Lien granted by the Debtor and Mariel to Knight pursuant
to the Knight Security Agreement to secure the Senior Obligations.

 

"Senior Obligations" means a principal amount not to exceed $1,000,000, plus
interest and attorneys' fees and costs under the Knight Loan Agreement.

 

"Subordinated Lien" means a Lien granted by the Debtor and Mariel to Stryker
pursuant to the A&R Stryker Secured Note to secure the Subordinated
Obligations. 

ARTICLE 2 - SUBORDINATION

 

2.01Subordination

 

Stryker acknowledges and agrees that (i) the Subordinated Liens are subordinate
to the Senior Liens and (ii) payment of the Subordinated Obligations, whether in
whole or in part, is postponed to the prior payment in full of all the Senior
Obligations. Notwithstanding anything in the Stryker APA or the A&R Stryker
Secured Note to the contrary, neither the Debtor nor Mariel shall make, and
Stryker shall not accept, any payment of any of the Subordinated Obligations
until after payment and satisfaction in full of any and all of the Senior
Obligations, except as expressly permitted by this Agreement. For the avoidance
of doubt and notwithstanding anything herein to the contrary, obligations owed
to Stryker pursuant to the Guaranty and any Liens or other security now or
hereafter granted by Hernandez to secure the Guaranty shall not be subordinated
to the Senior Liens or the payment of any of the Senior Obligations.

 

2.02Amounts Outstanding

 

Stryker hereby represents that (i) $1,013,216.44 principal amount is owing under
the A&R Stryker Secured Note, (ii) obligations in respect of the Upfront
Purchase Price and the Prior Stryker Secured Note have been incorporated into
the A&R Stryker Secured Note, and (iii) no amount is currently owing under the
Stryker APA, including with respect to the Additional Payments.

 

2.03Enforcement Standstill

 

Until payment in full of all the Senior Obligations (unless Stryker has
purchased the Senior Obligations pursuant to Section 4.03 below), and except in
connection with actions during the Initial Standstill Period, Stryker will
refrain from making demand of the Debtor or Mariel for payment of the
Subordinated Obligations or exercising any rights for the enforcement of payment
of the Subordinated Obligations against the Debtor or Mariel, without the prior
written consent of Knight.

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2.04Related Undertakings

 

Until payment in full of all the Senior Obligations (unless Stryker has
purchased the Senior Obligations pursuant to Section 4.03 below), Stryker agrees
to hold as agent for Knight and forthwith remit to Knight any sum received from
the Debtor or Mariel to be applied in accordance with the Knight Loan
Agreement. 

ARTICLE 3- CESSION OF RANK

 

3.01Cession

 

Stryker hereby cedes and grants a priority of rank over and hereby subordinates
the Subordinated Liens to the Senior Liens and acknowledges that the Senior
Liens shall have priority over the Subordinated Liens so that for all legal
purposes the Senior Liens shall be deemed to have been executed and registered
prior to the execution and registration of the Subordinated Liens.

 

3.02Validity

 

The cession of priority of rank and subordination granted in favour of Knight
hereunder in respect of the Debtor or Mariel is valid, binding and enforceable
in all circumstances, notwithstanding:

 

(a)the date of the execution, the taking of effect, the registration,
publication, attachment, perfection, substitution or renewal of the A&R Stryker
Secured Note or the Knight Security Agreement;

 

(b)the date of any loan agreement or other credit or financing agreement or any
offer of same among Stryker, Knight, the Debtor and/or Mariel;

 

(c)the date of the occurrence of any default by the Debtor or Mariel pursuant to
the underlying indebtedness to Stryker or Knight; and

 

(d)any priority recognized by any applicable law including the Uniform
Commercial Code or any other law governing the pledge or granting of a security
interest in the Collateral.

 

ARTICLE 4- STANDSTILL AND COOPERATION

 

4.01Event of Default

 

If an event of default shall have occurred and be continuing pursuant to the A&R
Stryker Secured Note (a "Stryker Event of Default") or if an event of default
shall have occurred and be continuing under the Knight Security Agreement (a
"Knight Event of Default"), neither Stryker nor Knight shall, without the
written consent of the other party, be entitled to:

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(a)petition the Debtor or Mariel into bankruptcy or initiate or participate in
the initiation of any similar proceeding;

 

(b)commence or initiate any action or proceeding against the Debtor or Mariel to
recover or receive payment of its respective indebtedness;

 

(c)commence or initiate or exercise any recourse under its respective security
agreement granted by the Debtor or Mariel;

 

(d)demand payment of indebtedness from the Debtor or Mariel or institute action
against the Debtor or Mariel in connection therewith, unless the procedures set
forth in Sections 4.02, 4.03, and 4.04 below are complied with.

 

4.02Realization Proceedings

 

In the event of the occurrence of either a Stryker Event of Default or a Knight
Event of Default, Stryker will be given the opportunity for a period of six
months from the date of notice by Stryker to Knight or by Knight to Stryker of
the occurrence of such event of default (the "Initial Standstill Period") to
engage in efforts to realize value from the Collateral and the business of the
Debtor or Mariel through its knowledge of the industry and the potential
acquirers of the Collateral in order to maximize the possibility of recovering
the outstanding sums under the Knight Loan Agreement and under the A&R Stryker
Secured Note and the Debtor, Mariel, and Knight will cooperate with such
efforts. During the Initial Standstill Period, Stryker will be responsible for
the payment the following costs ("Standstill Period Costs"): (1) costs other
than those specified in (2), (3) and (4) below in this sentence that are
directly related to the conservation, preservation and maintenance of the
Collateral in an aggregate amount not to exceed $50,000 during the Initial
Standstill Period ("Capped Costs") plus (2) costs directly related to the
maintenance/annuity payments (but not the prosecution or litigation) of patents
owned by the Debtor and Mariel; plus (3) storage costs of the bone morphogenic
protein and cell lines owned by the Debtor and Mariel; plus (4) reasonable
casualty insurance premium costs, if any, for policies currently in effect with
respect to the Collateral directly related to the conservation and preservation
of the Collateral. Standstill Period Costs shall only include those costs
incurred during the Initial Standstill Period and shall in no event include any
costs generated prior to the Initial Standstill Period; provided, however, that
at any point during the Initial Standstill Period, by written notice to Knight,
Stryker can elect to terminate the Initial Standstill Period and cease to pay
any Standstill Period Costs incurred on or after the date of such written
notice; and, provided further, that, if the Capped Costs exceed $50,000 during
the Standstill Period, (i) Knight may, by written notice to Stryker specifying
in detail the amount of itemized Capped Costs that are unpaid, elect to
terminate the Initial Standstill Period effective ten (10) days after the giving
of such notice, and (ii) the Initial Standstill Period will terminate in
accordance with such notice unless Stryker within such ten (10) day period has
agreed in a written notice to Knight to pay such specified costs.

 

In the event of the Debtor's insolvency, reorganization or any case or
proceeding under any bankruptcy or insolvency law or laws relating to the relief
of debtors, unless Stryker has purchased the Senior Obligations as provided
herein, this Agreement shall remain in full force and effect, and the Senior
Obligations shall be paid in full before any payment is made to Stryker.

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4.03Standstill

 

During the Initial Standstill Period, Stryker shall keep Knight reasonably
informed of the process, the prospects of realization of value from Collateral
and the status of any potential offers to purchase the Collateral. Stryker will
provide to Knight, on a timely basis, copies of any written offers received for
the purchase of all or any part of the Collateral. Provided that the amounts
owing under the Knight Loan Agreement shall be fully repaid pursuant to the
conclusion of any such offer, Stryker shall have full and complete authority to
manage any such sale process as long as such sale is substantially on the same
terms and conditions as those presented to Knight.

 

Stryker shall have the option, at any time during the Initial Standstill Period
so long as any Senior Obligations remaining outstanding, to purchase all (but
not less than all) of the Senior Obligations from Knight by delivering a written
notice (the "Purchase Notice") to Knight that

(i) states that Stryker is irrevocably electing to purchase the Senior
Obligations and (ii) designates a purchase date, which shall not be less than
three (3) Business Days, nor more than ten (10) Business Days, after the receipt
by Knight of the Purchase Notice (the "Purchase Date") on which the purchase
will occur. On the Purchase Date, Knight shall sell to Stryker, and Stryker
shall purchase from Knight, the Senior Obligations for a price equal to
principal, plus accrued and unpaid interest on the Senior Obligations.

 

4.04End of Initial Standstill Period

 

In the event Stryker does not elect to exercise its realization proceeding
rights under Section 4.02 or at the end of the Initial Standstill Period,
whether by expiration or termination by Stryker, there remains any outstanding
Senior Obligations and Stryker has not purchased such outstanding Senior
Obligations pursuant to Section 4.03 above, Knight shall thereafter assume full
responsibility over the realization proceedings and shall control and supervise
any sale of the Collateral and will have full and complete authority to sell the
Collateral, or any part thereof, and apply the proceeds to first pay off any
such outstanding Senior Obligations, plus all costs and expenses incurred to
date, and then to pay any amounts outstanding under the A&R Stryker Secured
Note.

ARTICLE 5 - GENERAL PROVISIONS

 

5.01Applicable Law

 

This Agreement is governed by the laws of the State of New York.

 

5.02Obligations Not Reduced ; No Third Party Beneficiaries

 

Each of the Debtor and Mariel acknowledges that this Agreement does not reduce
or otherwise affect any of Senior Obligations or the any of the Subordinated
Obligations. Neither the Debtors nor Mariel is a third party beneficiary of this
Agreement.

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5.03Survival

 

The cession of priority of rank and subordination granted in favour of Knight
under the terms hereof shall continue to apply in respect of any security
obtained by Knight as a renewal, replacement, amendment or modification of the
Knight Loan Agreement or the Knight Security Agreement.

 

5.04No Waiver

 

The exercise by Knight or Stryker of any of its respective rights under this
Agreement does not preclude it from exercising any other such right. In
addition, any failure to exercise any such right will not constitute a
renunciation to the subsequent exercise of such right.

 

5.05Successors and assigns

 

The provisions of this Agreement will be binding upon and inure to the benefit
of Knight or Stryker and their respective successors and assigns.

 

5.06Notices

 

Unless otherwise provided, any notice to be given to a party in connection with
this Agreement will be given in writing and will be given by personal delivery,
by a reputable delivery service, by fax or by electronic mail, addressed to the
recipient at the following addresses or at such other address as may be notified
by such party to the others pursuant to this Section:

 

If to Knight:

 

Knight Therapeutics inc.

376 Victoria Avenue, Suite 220

Westmount, Quebec H3Z 1C3

Attention : Jeffrey Kadanoff

email: jkadanoff@gud-knight.com

 

If to Stryker Bio:

 

Stryker Biotech L.L.C.

One Broadway, 14th Floor

Cambridge, MA 62142

Attention: James Kemler, CEO

email: jamie.kemler@stryker.com

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If to Stryker Corp.:

 

Stryker Corporation

2825 Airview Blvd.

Kalamazoo, MI 49002

Attention: General Counsel

email: michael.hutchinson@stryker.com

 

If to the Debtor:

Mariel Therapeutics, Inc.

135 East 57th Street

New York, NY 10022

Attention: Joseph Hernandez

email: hernandez_joe@yahoo.com

 

If to Mariel:

 

Mariel Therapeutics, Inc.

135 East 57th Street

New York, NY 10022

Attention: Joseph Hernandez

email: hernandez_joe@yahoo.com

 

Any notice given by personal delivery or by a delivery service will be
conclusively deemed to have been given at the time of such delivery and, if
given by telecopier or by electronic mail, on the day of transmittal if before
3:00 p.m. on a Business Day, or on the following Business Day if such
transmission occurs on a day which is not a Business Day or after 3:00 p.m. on a
Business Day. If the telecopy or electronic transmission system suffers any
interruptions by way of a strike, slow-down, a force majeure, or any other
cause, a party giving a notice must do so using another means of communication
not affected by the disruption. 

 

 

[Execution page follows]

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IN WITNESS WHEREOF, the parties have signed this Agreement:

 

KNIGHT THERAPEUTICS INC.

 

per: /s/ Jeffrey Kadanoff

Name: Jeffrey Kadanoff
Title: CFO

 

STRYKER BIOTECH L.L.C.

 

per: /s/ James Kemler

Name: James Kemler

Title: CEO

 

STRYKER CORPORATION

 

per: /s/ Jeanne M. Blondia

Name: Jeanne M. Blondia

Title: VP, Finance & Treasurer

 

EMBER THERAPEUTICS, INC., solely for purposes of Sections 2.01, 4.02 and 5.02

 

per: /s/ Joseph Hernandez

Name: Joseph Hernandez

Title: Executive Chairman

 

MARIEL THERAPEUTICS, INC., solely for purposes of Sections 2.01, 4.02 and 5.02

 

per: /s/ Joseph Hernandez

Name: Joseph Hernandez 

Title: Executive Chairman

 

[Signature Page to Intercreditor and Subordination Agreement]

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