SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT ("Agreement"), dated as of March
__, 1997, entered into between Safeguard Scientifics (Delaware), Inc.
("Creditor") and FINOVA Capital Corporation ("Lender").
W I T N E S S E T H
WHEREAS, Creditor is financially interested in Core
Technologies, Inc., a Delaware corporation ("Company"), in that Company is
indebted to Creditor in the aggregate original principal amount of Eight Hundred
Seventy-Seven Thousand Dollars and No/100 ($877,000) pursuant to the terms of
that certain Subordinated Note executed by Company in favor of Creditor (the
"Subordinated Note"), a copy of which is attached hereto as Exhibit A;
WHEREAS, Company may become indebted to Lender in connection
with the advances of monies and other financial arrangements by Lender to
Company;
WHEREAS, such advances of monies and other financial
arrangements are evidenced by various agreements, instruments and documents,
including, without limitation, that certain Loan and Security Agreement of even
date herewith among Company, Airo Clean, Inc., Maris Equipment Company, Inc. and
Lender (the "Loan Agreement");
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by Creditor, Creditor
hereby agrees with Lender as hereinafter set forth.
1. Standby; Subordination; Subrogation. Creditor will not ask,
demand, xxx for, take or receive from Company or any other party, by setoff or
in any other manner:
(a) The whole or any part of any indebtedness, obligations and
liabilities which may now or hereafter be owing by Company, or any successor or
assign of Company, including, without limitation, a receiver, trustee or debtor
in possession (the term "Company" hereinafter shall include any such successor
and assign of Company), to Creditor (all such indebtedness, obligations and
liabilities being hereinafter referred to as the "Subordinated Debt"); or
(b) Any security for any of the foregoing;
unless and until all obligations, liabilities, and indebtedness of Company to
Lender, whether now existing or hereafter arising directly between Company and
Lender, or acquired outright, conditionally or as collateral security from
another by Lender, shall have been fully paid and satisfied in cash with
interest, including, without limitation, any interest accruing after the
commencement of insolvency proceedings with respect to Company, whether or not
such interest is allowed as a claim in such proceeding (all such obligations,
indebtedness and liabilities of Company to Lender being hereinafter referred to
as the "Senior Debt"; provided, that the Senior Debt shall not include the
principal amount of indebtedness in excess of Ten Million Dollars ($10,000,000)
(but Senior debt shall include all fees, interest and expenses owing to Lender,
regardless of whether Lender has made advances to pay such interest, fees and
expenses)) and all financing arrangements between Company and Lender have been
terminated. Creditor shall not have any lien or security interest in any of the
assets of Company, and all liens and security interests of Creditor, whether now
or hereafter arising and howsoever existing, in any assets of Company or any
assets securing the Senior Debt shall be and hereby are subordinated to the
rights and interests of Lender in those assets irrespective of whether Lender's
liens and security interests have been perfected, or the time or order of
attachment or perfection of liens or security interests, or the time of filing
or recording of financing statements, mortgages or other agreements or
documents, or the time of giving or failure to give notice of acquisition of
purchase money or other security interests or liens; Creditor shall not have any
right to possession of any such assets, to notify account debtors of Company or
to foreclose upon or exercise any other right or remedy with respect to any such
assets, whether by judicial action or otherwise, unless and until all of the
Senior Debt shall have been fully paid and satisfied in cash and all financing
arrangements between Company and Lender have been terminated. Creditor also
hereby agrees that, (i) the Senior Debt shall include all obligations,
indebtedness and liabilities of Company to Lender, notwithstanding the
invalidity or unenforceability of all or any part of the Senior Debt, or any
right or power of Company or any other entity or individual to assert any claim
or defense as to the invalidity or unenforceability of any such obligation,
indebtedness or liability and no such claim or defense shall affect or impair
the agreements and obligations of Creditor hereunder; and (ii) regardless of
whether the Senior Debt is secured or unsecured, Lender shall be subrogated for
Creditor with respect to Creditor's claims with respect to the Subordinated Debt
against Company and Creditor's rights, liens and security interests, if any, in
any of Company's assets and the proceeds thereof until all of the Senior Debt
shall have been fully paid and satisfied in cash and all financing arrangements
between Company and Lender have been terminated.
2. Subordinated Debt Owed Only to Creditor. Creditor warrants
and represents that Creditor has not previously assigned or transferred any
interest in the Subordinated Debt, that no other party owns an interest in the
Subordinated Debt other than Creditor and that the entire Subordinated Debt is
owing only to Creditor and covenants that the entire Subordinated Debt shall
continue to be owing only to Creditor unless assigned or transferred subject to
the terms of this Agreement. Creditor will not, without the prior written
consent of Lender: (A) cancel, waive, forgive, or subordinate to any other
indebtedness of Company (other than the Senior Debt), any of the Subordinated
Debt or any rights in respect thereof; (b) take any collateral security for any
of the Subordinated Debt; or (c) commence, or join with any other creditor in
commencing, any bankruptcy, reorganization or insolvency proceedings with
respect to Company.
3. Lender Priority; Grant of Authority to Lender. In the event
of any distribution, division or application, partial or complete, voluntary or
involuntary, by operation of law or otherwise, of all or any part of the assets
of Company or the proceeds thereof to the creditors of Company or readjustment
of the obligations and indebtedness of Company, whether by reason of
liquidation, bankruptcy, arrangement, receivership, assignment for the benefit
of creditors or any other action or proceeding involving the readjustment of all
or any part of the Subordinated Debt, or the application of the assets of
Company to the payment or liquidation thereof, or upon the dissolution,
liquidation, cessation or other winding up of Company's business, or upon the
sale of all or substantially all of Company's assets, then, and in any such
event, (i) Lender shall be entitled to receive payment in cash in full of any
and all of the Senior Debt then owing prior to the payment of all or any part of
the Subordinated Debt and (ii) any payment or distribution of any kind or
character, whether in cash, securities or other property, which shall be payable
or deliverable upon or with respect to any or all of the Subordinated Debt shall
be paid or delivered directly to Lender for application on any of the Senior
Debt, due or not due, until such Senior Debt shall have first been fully paid
and satisfied in cash. Lender is hereby irrevocably authorized and empowered, in
its discretion, to make and present for and on behalf of Creditor such proofs of
claim against Company on account of the Subordinated Debt as Lender may deem
expedient or proper and to vote such proofs of claim in any such proceeding and
to receive and collect any and all dividends or other payments or disbursements
made thereon in whatever form the same may be paid or issued and to apply the
same on account of any of the Senior Debt. Creditor irrevocably authorizes and
empowers Lender to demand, xxx for, collect and receive each of the aforesaid
payments and distributions and give acquaintance therefor and to file claims and
take such other actions, in Lender's own name or in the name of Creditor or
otherwise, as Lender may deem necessary or advisable for the enforcement of this
Agreement; and Creditor will execute and deliver to Lender such powers of
attorney, assignments and other instruments or documents, including notes
(together with such assignments or endorsements as Lender shall deem necessary
or appropriate) as may be requested by Lender in order to enable Lender to
enforce any and all claims upon or with respect to any or all of the
Subordinated Debt and to collect and receive any and all payments and
distributions which may be payable or deliverable at any time upon or with
respect to the Subordinated Debt, all for Lender's own benefit. Following
payment in full of the Senior Debt in cash, Lender will remit to Creditor, to
the extent of Creditor's interest therein, all dividends or other payments or
distributions paid to and held by Lender in excess of the Senior Debt.
4. Payments Received by Creditor. Should any payment,
distribution, security or instrument, or any proceeds thereof, be received by
Creditor upon or with respect to the Subordinated Debt prior to the satisfaction
of all of the Senior Debt in cash and termination of all financing arrangements
between Company and Lender, Creditor shall receive and hold the same in trust,
as trustee, for the benefit of Lender and shall forthwith deliver the same to
Lender in precisely the form received (except for the endorsement or assignment
by Creditor where necessary), for application on any of the Senior Debt, due or
not due, and, until so delivered, the same shall be held in trust by Creditor as
the property of Lender. In the event of the failure of Creditor to make any such
endorsement or assignment to Lender, Lender, or any of its officers or
employees, is hereby irrevocably authorized to make the same.
5. Instrument Legend; Amendments. Any instrument or
certificate evidencing any of the Subordinated Debt, or any portion thereof,
will be inscribed with a legend conspicuously indicating that payment thereof is
subordinated to the claims of Lender pursuant to the terms of this Agreement,
and a copy thereof will be delivered to Lender. Any instrument or certificate
evidencing any of the Subordinated Debt, or any portion thereof, which is
hereafter executed by Company will, on the date thereof, be inscribed with the
aforesaid legend and a copy thereof will be delivered to Lender on the date of
its execution or within five (5) business days thereafter and the original
thereof will be delivered as and when described hereinabove.
6. Continuing Nature of Subordination; Subrogation. This
Agreement shall be irrevocable and shall continue to be effective
(notwithstanding the insolvency, liquidation or dissolution of Company) until
the Senior Debt shall have been paid in cash in full and all financing
arrangements between Company and Lender have been terminated. This is a
continuing agreement of subordination and Lender may continue, at any time and
without notice to Creditor, to extend credit or other financial accommodations
and loan monies to or for the benefit of Company on the faith hereof. This
Agreement shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any of the Senior Debt is rescinded or must
otherwise be returned by any holder of Senior Debt, all as though such payment
had not been made. Upon the payment in full in cash of all Senior Debt and
termination of all financing arrangements between Company and Lender, Creditor
shall be subrogated to the extent of the payments or distributions made to
Lender, or otherwise applied to payment of, the Senior Debt pursuant to the
provisions of this Agreement.
7. Additional Agreements Between Company and Lender. Lender
may, at any time and from time to time, without notice to Creditor, enter into
such agreement or agreements with Company as Lender may deem proper, extending
the time of payment of or renewing or otherwise altering, amending, modifying or
supplementing the terms of the Loan Agreement, other agreements, instruments and
documents evidencing the Senior Debt or all or any of the Senior Debt or
affecting the collateral or any guaranty underlying any or all of the Senior
Debt, and may exchange, sell, release, surrender or otherwise deal with any such
security or guaranties, without in any way thereby impairing or affecting this
Agreement.
8. Creditor's Waivers. Creditor expressly waives all notice of
(i) the existence or creation or non-payment of all or any portion of the Senior
Debt and (ii) the acceptance by Lender of the subordination and other provisions
of this Agreement and all the notices not specifically required pursuant to the
terms of this Agreement whatsoever and Creditor expressly waives reliance by
Lender upon the subordination and other agreements as herein provided. This
Agreement shall remain valid and effective and the provisions of this Agreement
shall apply to Creditor and Lender regardless of the validity, enforceability or
priority of the Senior Debt or any liens securing the Senior Debt. Creditor
agrees that Lender has made no warranties or representations with respect to the
due execution, legality, validity, completeness or enforceability of the Loan
Agreement, or the collectibility of the Senior Debt, that Lender shall be
entitled to manage and supervise its financial arrangements with Company without
affecting the validity or enforceability of this Agreement and without regard to
the existence of any rights that Creditor may now or hereafter have in or to any
of the assets of Company, and that Lender shall have no liability to Creditor
for, and waives any claim which Creditor may now or hereafter have against,
Lender arising out of (i) any and all actions which Lender takes or omits to
take (including, without limitation, actions with respect to the creation,
perfection or continuation of liens or security interests in any existing or
future collateral for the Senior Debt (the "Collateral"), actions with respect
to the occurrence of an Event of Default (as defined in the Loan Agreement),
actions with respect to the foreclosure upon, sale, release, or depreciation of,
or failure to realize upon, any of the Collateral and actions with respect to
the collection of any claim for all or any part of the Senior Debt from any
account debtor, guarantor or any other party) with respect to the Loan Agreement
or any other agreement related thereto or to the collection of the Senior Debt
or the valuation, use, protection or release of the Collateral, (ii) Lender's
election, in any proceeding instituted under Chapter 11 of Title 11 of the
United States Code (11 U.S.C. ss. 101 et seq.) (the "Bankruptcy Code"), of the
application of Section 1111(b)(2) of the Bankruptcy Code and/or (iii) any use of
cash collateral under Section 363 of the Bankruptcy Code or any borrowing or
grant of a security interest under Section 364 of the Bankruptcy Code by
Company, as debtor in possession. In that regard, Creditor agrees that (A) if
Borrower desires to use cash collateral under Section 363 of the Bankruptcy Code
and Lender consents to such use, Creditor will also consent to such use without
asserting any objection of any kind (including an objection on the grounds of
failure to provide adequate protection or Creditor's junior lien on such
Collateral), and (B) if Borrower desires to obtain credit from Lender under
Section 364 of the Bankruptcy Code to be secured by the Collateral, Creditor
will consent to such credit without asserting any objection of any kind
(including an objection on the grounds of failure to provide adequate protection
for Creditor's junior lien on such Collateral). Without limiting the generality
of the foregoing, Creditor waives the right to assert the doctrine of
marshalling with respect to any of the Collateral, and consents and agrees that
Lender may proceed against any or all of the Collateral in such order as Lender
shall determine in its sole discretion.
9. Lender's Waivers. No waiver shall be deemed to be made by
Lender of any of its rights hereunder, unless the same shall be in a writing,
and each waiver, if any, shall be a waiver only with respect to the specific
instance involved and shall in no way impair the rights of Lender or the
obligations of Creditor to Lender in any other respect at any other time. No
delay on the part of Lender in the exercise of any right or remedy shall operate
as a waiver thereof, and no single or partial exercise by Lender of any right or
remedy shall preclude other or further exercise thereof or the exercise of any
other right or remedy.
10. Information Concerning Financial Condition of Company.
Creditor hereby assumes responsibility for keeping itself informed of the
financial condition of Company, any and all endorsers and any and all guarantors
of the Senior Debt and/or the Subordinated Debt and of all other circumstances
bearing upon the risk of nonpayment of the Senior Debt and/or Subordinated Debt
that diligent inquiry would reveal, and Creditor hereby agrees that Lender shall
have no duty to advise Creditor of information known to Lender regarding such
condition or any such circumstances. In the event Lender, in its sole
discretion, undertakes, at any time or from time to time, to provide any such
information to Creditor, Lender shall be under no obligation (i) to provide any
such information to Creditor on any subsequent occasion or (ii) to undertake any
investigation not a part of its regular business routine and shall be under no
obligation to disclose any information which, pursuant to accepted or reasonable
commercial finance practices, Lender wishes to maintain confidential. Creditor
hereby agrees that all payments received by Lender may be applied, reversed, and
reapplied, in whole or in part, to any of the Senior Debt, without affecting the
validity or enforceability of this Agreement and assents to any extension or
postponement of the time of payment of the Senior Debt or to any other
indulgence with respect thereto, to any substitution, exchange or release of all
or any of the Collateral and to the addition or release of any other party or
person primarily or secondarily liable therefor.
11. No Offset. In the event Creditor at any time is indebted
to Company, Creditor hereby irrevocably agrees that Creditor shall not deduct
from or setoff against any amounts owing by Creditor to Company any amounts
Creditor claims are due to Creditor with respect to the Subordinated Debt.
12. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVERS. THIS
AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF ARIZONA AND SHALL BE
INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF ARIZONA AND NOT THE CONFLICT
OF LAWS RULES OF THE STATE OF ARIZONA GOVERNING CONTRACTS TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE. CREDITOR HEREBY AGREES TO THE EXCLUSIVE JURISDICTION
OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF MARICOPA, STATE OF
ARIZONA OR, AT THE SOLE OPTION OF LENDER, IN ANY OTHER COURT IN WHICH LENDER
SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. CREDITOR WAIVES ANY OBJECTION OF
FORUM NON CONVENIENS AND VENUE. LENDER AND CREDITOR EACH HEREBY WAIVE THE RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN
ANY WAY RELATING TO THIS AGREEMENT, WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
13. Section Titles; Gender; No Prejudice of Rights. The
section titles contained in this Agreement are and shall be without substantive
meaning or content of any kind whatsoever and are not a part of the agreement
between the parties hereto. The singular form of any word used in this Agreement
shall include the plural form and the neuter form of any word used in this
Agreement shall include the masculine and feminine forms, and vice versa. Lender
shall not be prejudiced in its rights under this Agreement by any act or failure
to act of Company or Creditor, or any noncompliance of Company or Creditor with
any agreement or obligation, regardless of any knowledge thereof which Lender
may have or with which Lender may be charged; and no action of Lender permitted
hereunder shall in any way affect or impair the rights of Lender and the
obligations of Creditor under this Agreement.
14. Notices. Any notice required hereunder shall be in writing
and addressed to the party to be notified as follows:
If to Lender, at: FINOVA Capital Corporation
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: _____________
If to Creditor, at: Safeguard Scientifics (Delaware), Inc.
c/o Safeguard Scientifics, Inc.
800 The Safeguard Building
000 Xxxxx Xxxx Xxxxx
Xxxxx, Xxxxxxxxxxxx 00000
Attention: Senior Vice President,
Finance
or to such other address as each party may designate for itself by notice.
Notice shall be deemed to have been duly given (i) if delivered personally or
otherwise actually received, (ii) if sent by overnight delivery service, (iii)
if mailed by first class United States mail, postage prepaid, registered or
certified, with return receipt requested or (iv) if sent by telex with telex
confirmation of receipt (with duplicate notice sent by United States mail as
provided above). Notice mailed as provided in clause (iii) above shall be
effective upon the expiration of three (3) business days after its deposit in
the United States mail. Notice given in any other manner described in this
paragraph shall be effective upon receipt by the addressee thereof; provided,
however, that if any notice is tendered to an addressee and delivery thereof is
refused by such addressee, such notice shall be effective upon such tender.
15. Successors and Assigns. This Agreement shall be binding
upon Creditor and Creditor's successors and assigns and inure to the benefit of
Lender and its successors and assigns.
IN WITNESS WHEREOF, this Agreement has been signed as of the
date first above written.
SAFEGUARD SCIENTIFICS (DELAWARE), INC.
By.......................................
Its......................................
FINOVA CAPITAL CORPORATION
By.......................................
Its......................................
The undersigned hereby consents to, and acknowledges receipt of a copy of, the
foregoing Subordination Agreement this _____ day of March, 1997, and agrees that
it will not pay any of the Subordinated Debt or grant any security therefor,
until the Senior Debt shall have been paid in full in cash and all financing
arrangements between Company and Lender have been terminated. In the event of
payment by Company to Creditor in violation of the foregoing Agreement, a grant
of a security interest by Company to Creditor in any of Company's assets or such
other breach by Company of any of the provisions herein or of the foregoing
Agreement, all of the Senior Debt shall, without presentment, demand, protest or
notice of any kind, at the election of Lender, become immediately due and
payable.
CORE TECHNOLOGIES, INC.
By.......................................
Its......................................
EXHIBIT A
SUBORDINATED NOTE
See Attached
