EXHIBIT 10.6
GUARANTOR PAYMENT AGREEMENT
THIS GUARANTOR PAYMENT AGREEMENT, dated as of December 10, 2003 (this
"Agreement"), made by WCS ACQUISITION CORP., a Michigan corporation
("Guarantor"), d/b/a Westland Control Systems, in favor of BANK ONE, NA, with
its main office in Chicago, Illinois, and successor in interest to Bank One,
Michigan ("Lender").
RECITALS
A. Productivity Technologies Corp., a Delaware corporation ("PTC"), and
Lender are parties to a Term Loan Agreement dated February 23, 2000 (the "PTC
Term Loan Agreement"), pursuant to which Lender, subject to the terms and
conditions thereof, extended a term loan to PTC in the original principal amount
of $3,600,000.
B. Guarantor executed a Continuing Unlimited Guaranty dated as of February
23, 2000 (the "WCS Guaranty" in favor of Lender, pursuant to which, among other
things, Guarantor absolutely and unconditionally guaranteed to Lender, as
primary obligor and not merely as surety, the payment of the Liabilities (as
such term is defined in the WCS Guaranty), including without limitation the
loans and other credit advanced to PTC pursuant to the PTC Term Loan Agreement.
C. The PTC Term Loan Agreement, all promissory notes executed by PTC in
favor of Lender in connection with the PTC Term Loan Agreement, the WCS
Guaranty, and any and all security agreements, mortgages, guaranties, and other
instruments, documents or agreements of any kind evidencing or securing the
indebtedness of PTC in favor of Lender are sometimes referred to collectively as
the "Loan Documents."
D. In addition to its obligations under the Loan Documents, PTC also has
guaranteed to Lender the repayment of certain indebtedness of its subsidiary,
Atlas Technologies, Inc. ("Atlas"). Guarantor also has guaranteed to Lender the
repayment of such indebtedness of Atlas.
E. Each of PTC and Atlas is in default of its respective obligations owed
to Lender. As a consequence of such defaults, among other things, (i) Lender has
the right at any time to declare all indebtedness owed to Lender by PTC and/or
Atlas, including all obligations owed to Lender under the Loan Documents to be
immediately due and payable, and (ii) Lender has no obligation to advance
further loans or credit to PTC or Atlas.
F. Atlas has entered into a refinancing transaction with a third-party
lender, pursuant to which the indebtedness owed to Lender by Atlas will be
repaid. Pursuant to the requirements of such third-party lender, the security
interests and liens granted by PTC and/or Atlas in favor of Lender will be
discharged (notwithstanding the continuation of certain indebtedness owed to
Lender by PTC). In consideration for Lender's willingness and agreement to
discharge such security interests and liens, the parties have agreed that
Guarantor will make certain direct payments to Lender pursuant to its
obligations under the WCS Guaranty, as more fully set forth in this Agreement.
TERMS
In consideration of the premises and of the mutual agreements herein
contained, Guarantor agrees for the benefit of Lender as follows:
ARTICLE 1.
PERIODIC PAYMENTS
1.1 Affirmation of Recitals. Guarantor hereby acknowledges and affirms the
accuracy of the foregoing recitals.
1.2 Confirmation of Maturity Date. Guarantor hereby acknowledges and
affirms that, but for the occurrence of the defaults described in the recitals,
the original scheduled maturity date of the indebtedness owed by PTC to Lender
was February 23, 2005 (the "Scheduled Maturity Date"). Nothing contained in this
Agreement is intended to modify the Scheduled Maturity Date and, in the absence
of any prior default by Guarantor of its obligations as set forth in this
Agreement or any other event of default under the Loan Documents, all
obligations under the PTC Term Loan Agreement shall fully mature and be due and
payable on the Scheduled Maturity Date.
1.3 Interest Rate. Notwithstanding the provisions of the PTC Term Loan
Agreement and the applicable promissory note(s), all outstanding principal under
the PTC Term Loan Agreement shall, on and after the date hereof, bear interest
at a floating rate equal to three percent (3.0%) per annum above Lender's prime
rate (which prime rate need not necessarily be the lowest rate charged by Lender
to any of its customers), which rate automatically shall be adjusted with any
adjustment in Lender's prime rate. In the event of any default by Guarantor of
its obligations as set forth in this Agreement or any other event of default
under the Loan Documents, nothing contained in this Agreement shall impair the
right of Lender at any time thereafter to impose interest at the Overdue Rate of
five percent (5.0%) per annum above Lender's prime rate.
1.4 Monthly Interest Payments. Guarantor agrees, effective immediately, to
make all interest payments when due under the PTC Term Loan Agreement and the
applicable promissory note(s).
1.5 Monthly Fixed Payments. Commencing upon the date of execution of this
Agreement and thereafter on the first (1st) day of each month until the
Scheduled Maturity Date, Guarantor shall pay to Lender, in addition to the
payment of interest as required hereunder, consecutive monthly installments each
in the amount of Ten Thousand Dollars ($10,000.00).
1.6 Variable Payments.
(a) Monthly Variable Payments. Commencing December 15, 2003 and thereafter
on the fifteenth (15th) day of each month until the Scheduled Maturity Date,
Guarantor shall pay to Lender, in addition to the payment of interest and any
monthly fixed payments as required hereunder, an amount equal to twenty-five
percent (25%) of Guarantor's "Excess Cash Flow" for the prior month. For
purposes hereof, "Excess Cash Flow" for any month shall mean (i) the EBITDA of
Guarantor for such month, less (ii) the amount of any capital expenditures
actually paid by Guarantor during such month, less (iii) the amount of any
interest actually paid by Guarantor during such month in respect of borrowed
money, less (iv) the amount of any taxes actually paid by Guarantor during such
month, less (v) the amount of any payments made by Guarantor during such month
under Section 1.5 of this Agreement. Simultaneously with the making of any
payment under this Section 1.6(a), Guarantor shall submit to Lender a detailed
calculation, together with supporting documentation, of Excess Cash Flow for the
prior month. Notwithstanding the calculation of Excess Cash Flow for any month,
the payments required under this Section 1.6(a) shall not be required to exceed
$10,000.00 for any month.
(b) Senior Funding Variable Payments. If at any time the outstanding
principal amount funded by Guarantor's senior lenders (excluding Bank One or any
of its affiliates) shall exceed Two Million Dollars, then, immediately upon
receipt of such funding, and in addition to any other payments required
hereunder, an amount equal to the lesser of (i) $666,667 or (ii) one-third (1/3)
of the amount funded in excess of Two Million Dollars shall be paid to Lender.
1.7 Application of Payments; Maturity of Indebtedness. All payments
received by Lender hereunder shall first be applied against applicable fees and
charges, then against accrued interest and then to principal.
1.8 No Course of Dealing. Guarantor acknowledges and agrees that, in the
event of any default by Guarantor of its obligations under this Agreement, the
payment terms set forth herein shall not establish any course of dealing, and
instead all obligations of Guarantor under the WCS Guaranty shall be fully
applicable.
1.9 Expiration; No Further Forbearance Implied; No Waiver. Guarantor
acknowledges and agrees that Lender has no obligation to extend the Scheduled
Maturity Date or to forbear from enforcing its rights and remedies upon the
Scheduled Maturity Date or in the event of any prior default hereunder or under
the Loan Documents. All rights and remedies of Lender under the WCS Guaranty
and/or the other Loan Documents shall be preserved and shall be cumulative and
not exclusive. Nothing herein shall be deemed to constitute a waiver of any
existing defaults or of any provision of any of the documents referred to
herein, and nothing herein shall in any way prejudice the rights and remedies of
Lender under any of the documents referred to herein or applicable law. No
waiver of the rights or any condition of this Agreement and/or any other
document by Lender shall be effective unless the same shall be contained in a
writing signed by authorized representatives of Lender. No course of dealing on
the part of Lender nor any delay or failure on the part of Lender in exercising
any right, power or privilege hereunder shall operate as a waiver of such right,
power or privilege, nor shall any single or partial exercise thereof preclude
any further exercise thereof or the exercise of any other right, power or
privilege.
ARTICLE 2.
REPRESENTATIONS
Guarantor represents and warrants to Lender that:
2.1 The execution, delivery and performance of this Agreement are within
its powers, have been duly authorized and are not in contravention with any law,
of the terms of its Articles of Incorporation or By-laws, or any undertaking to
which it is a party or by which it is bound.
2.2 This Agreement is the legal, valid and binding obligation of Guarantor,
enforceable against Guarantor in accordance with the terms hereof.
ARTICLE 3.
MISCELLANEOUS.
3.1 Cross References. References in the PTC Term Loan Agreement, or in any
note, certificate, instrument or other document related thereto to any of such
agreements shall be deemed to be references to such agreements as amended hereby
and as further amended from time to time.
3.2 Release. Each of Guarantor and PTC (by execution of the consent at the
end of this Agreement) represents and warrants that it is not aware of any
claims or causes of action against Lender, or any of its successors or assigns,
and that it has no defenses, offsets or counterclaims with respect to the
indebtedness owed by such parties to Lender. Notwithstanding this representation
and as further consideration for the agreements and understandings herein, each
of Guarantor and PTC, on behalf of itself and their respective employees,
agents, executors, heirs, successors and assigns, hereby releases Lender, its
predecessors, officers, directors, employees, agents, attorneys, affiliates,
subsidiaries, successors and assigns, from any liability, claim, right or cause
of action which now exists or hereafter arises as a result of acts, omissions or
events occurring on or prior to the date hereof, whether known or unknown,
including but not limited to claims arising from or in any way related to the
PTC Term Loan Agreement, the Loan Documents, or the business relationship among
Guarantor, PTC and Lender.
3.3 Entire Agreement; Severability. The PTC Term Loan Agreement and the
other Loan Documents, as previously amended and as amended by this Agreement,
together with the other documents and instruments executed in connection
therewith, constitute the entire understanding of the parties with respect to
the subject matter hereof and may only be modified or amended by a writing
signed by the party to be charged. If any of the provisions of this Agreement
are in conflict with any applicable statute or rule of law or otherwise
unenforceable, such offending provisions shall be null and void only to the
extent of such conflict or unenforceability, but shall be deemed separate from
and shall not invalidate any other provision of this Agreement.
3.4 No Other Promises or Inducements. There are no promises or inducements
which have been made to any signatory hereto to cause such signatory to enter
into this Agreement other than those which are set forth in this Agreement.
Guarantor acknowledges that its authorized officers have thoroughly read and
reviewed the terms and provisions of this Agreement and are familiar with same,
that the terms and provisions contained herein are clearly understood by
Guarantor and have been fully and unconditionally consented to by Guarantor, and
that Guarantor has had full benefit and advice of counsel of its own selection,
or the opportunity to obtain the benefit and advice of counsel of its own
selection, in regard to understanding the terms, meaning and effect of this
Agreement, and that this Agreement has been entered into by Guarantor freely,
voluntarily, with full knowledge, and without duress, and that in executing this
Agreement, Guarantor is relying on no other representations, either written or
oral, express or implied, made to Guarantor by any other party hereto, and that
the consideration hereunder received by Guarantor has been actual and adequate.
3.5 Counterparts. This Agreement may be signed upon any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument. Facsimile copies of signatures shall be treated as
original signatures for all purposes under this Agreement.
3.6 Other Documents. Guarantor agrees to execute and deliver any and all
documents reasonably deemed necessary or appropriate by Lender to carry out the
intent of and/or to implement this Agreement.
3.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan without giving effect to
choice of law principles of such State.
3.8 Miscellaneous. This Agreement is made for the sole benefit and
protection of Guarantor, Lender and their respective successors and permitted
assigns (provided that Guarantor shall not be permitted, absent the prior
written consent of Lender, to assign any of its rights or obligations under this
Agreement). No other person or entity shall have any rights whatsoever under
this Agreement. Time shall be of the strictest essence in the performance of
each and every one of Guarantor's obligations hereunder.
3.9 Construction. This Agreement shall not be construed more strictly
against Lender merely by virtue of the fact that the same has been prepared by
Lender or its counsel, it being recognized that Guarantor and Lender have
contributed substantially and materially to the preparation of this Agreement,
and Guarantor waives any claim contesting the existence and the adequacy of the
consideration given by any of the other parties hereto in entering into this
Agreement.
3.10 Headings. The headings of the various paragraphs in this Agreement are
for convenience of reference only and shall not be deemed to modify or restrict
the terms or provisions hereof.
3.11 Waiver of Jury Trial. Guarantor, after consulting or having had the
opportunity to consult with counsel, knowingly, voluntarily and intentionally
waives any right it may have to a trial by jury in any litigation based upon or
arising out of this Agreement or any related instrument or agreement or any of
the transactions contemplated by this Agreement or any conduct, dealing,
statements (whether oral or written) or actions of Guarantor. Guarantor shall
not seek to consolidate, by counterclaim or otherwise, any such action in which
a jury trial has been waived with any other action in which a jury trial cannot
be or has not been waived. These provisions shall not be deemed to have been
modified in any respect or relinquished by any party hereto except by a written
instrument executed by such party.
3.12 Consent to Jurisdiction. Guarantor agrees that any legal action or
proceeding with respect to this Agreement or any related instrument or
agreement, or with respect to the transactions contemplated hereby, may be
brought in any court of the State of Michigan, sitting in or having jurisdiction
over the County of Wayne, Michigan, or in any federal court located within the
Eastern District of Michigan, and Guarantor hereby submits to and accepts
generally and unconditionally the non-exclusive jurisdiction of those courts
with respect to their person and property and irrevocably consent to service of
process in connection with any such action or proceeding by mailing such service
of process (certified or registered, if capable of certification or
registration) to Guarantor at the address it may have from time to time provided
to Lender. Guarantor hereby irrevocably waives any objection based upon
jurisdiction, improper venue or forum non conveniens in any such suit or
proceeding in the above-described courts. Nothing contained herein shall limit
the right of Lender to serve process in any other manner permitted by law or
limit the right of Lender to commence any such action or proceeding in the
courts of any other jurisdiction. Any judicial proceeding by Guarantor against
Lender involving this Agreement shall be brought only in a court in Xxxxx
County, Michigan or federal court located within the Eastern District of
Michigan.
IN WITNESS WHEREOF, Guarantor has caused this Agreement to be executed and
delivered as of the date and year first above written.
WCS ACQUISITION CORP.
By: __________________________________
Its: ____________________________
CONSENT AND AGREEMENT OF OBLIGOR
As of the date and year first above written, the undersigned hereby:
(a) fully consents to the terms and provisions of the above Agreement and
the consummation of the transactions contemplated thereby and agrees to all
terms and provisions of the above Agreement applicable to it;
(b) agrees that, except as discharged or terminated in writing by Lender,
each of the Loan Documents is hereby ratified and confirmed and shall remain in
full force and effect, and the undersigned acknowledges that it has no setoff,
counterclaim or defense with respect to any of the Loan Documents.
PRODUCTIVITY TECHNOLOGIES CORP.
By: __________________________________
Its: ____________________________
DETROIT 765897
