NOTE PAYMENT AND MEMBERSHIP INTEREST SALE AGREEMENT
THIS NOTE PAYMENT AND MEMBERSHIP INTEREST SALE AGREEMENT ("Agreement")
is effective August 1, 2004 (the "Effective Date"), by and among ▇▇▇▇▇▇▇▇▇▇▇
GROUP LLC, an Oregon limited liability company ("▇▇▇▇▇▇▇▇▇▇▇"), ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇▇▇"), JMW GROUP, LLC ("JMW") and ▇▇▇▇▇▇▇▇▇▇▇ LEASING
COMPANY, LLC ("CLC").
RECITALS:
A. Christopher is a member of ▇▇▇▇▇▇▇▇▇▇▇ and owns a 23.783%
membership interest in ▇▇▇▇▇▇▇▇▇▇▇ (the "Membership Interest").
▇. ▇▇▇▇▇▇▇▇▇▇▇ holds promissory notes made by ▇▇▇▇▇▇▇▇▇▇▇, or has
made loans to Christenson, (collectively the "▇▇▇▇▇▇▇▇▇▇▇ Notes") as follows:
(1) Subordinated Promissory Note (Amended and Restated) dated April 22, 2004 in
the face amount of $1,053,065.52; (2) Subordinated Promissory Note dated May 31,
2004 in the face amount of $333,370.63; and (3) Promissory Note dated July 7,
2003 in the face amount of $5,000.00. In addition, ▇▇▇▇▇▇▇▇▇▇▇ holds one or more
promissory notes made by CLC (collectively the "CLC Notes"), including: (1)
Subordinated Promissory Note dated January 10, 2003 in the face amount of
$200,000; and (2) Subordinated Promissory Note dated June 11, 2003 in the face
amount of $21,710.00.
▇. ▇▇▇▇▇▇▇▇▇▇▇ owns all of the outstanding stock of CEAC, Inc.
("CEAC") and CEAC owns all of the outstanding stock of ▇▇▇▇▇▇▇▇▇▇▇ Electric,
Inc. ("CE").
▇. ▇▇▇▇▇▇▇▇▇▇▇ also owns an indirect interest in CLC as a result
of being a member of CLC's parent, Destination Capital, LLC ("Destination").
▇▇▇▇▇▇▇▇▇▇▇ has provided a personal guaranty of a loan for $3,500,000 made
December 31, 2002 by Sterling Savings Bank to CLC (the "Sterling Loan") to
finance the purchase of certain equipment subsequently leased by CLC to CE. CLC,
▇▇▇▇▇▇▇▇▇▇▇ and other guarantors of that loan entered into an Indemnification
and Contribution Agreement dated June 16, 2003 (the "Indemnification Agreement")
to provide for indemnification and reimbursement of any guarantor who was
required to pay more than a prorata portion of any obligation arising out of the
loan guaranty.
▇. ▇▇▇▇▇▇▇▇▇▇▇ and CLC desire to make payments to ▇▇▇▇▇▇▇▇▇▇▇ to
apply to the ▇▇▇▇▇▇▇▇▇▇▇ and CLC Notes. ▇▇▇▇▇▇▇▇▇▇▇ further desires to purchase
the Membership Interest and ▇▇▇▇▇▇▇▇▇▇▇ desires to sell his Membership Interest
to ▇▇▇▇▇▇▇▇▇▇▇ on the terms and conditions set forth below.
Now, therefore, in consideration of the foregoing, the parties agree as
follows:
AGREEMENT:
1. ▇▇▇▇▇▇▇▇▇▇▇ PAYMENTS. ▇▇▇▇▇▇▇▇▇▇▇ will make payments to
▇▇▇▇▇▇▇▇▇▇▇ as follows:
1.1 ▇▇▇▇▇▇▇▇▇▇▇ will assign and transfer 1,680,812Common
shares of Microfield Group, Inc. ("Microfield"). These shares are currently
subject to lock-up restrictions
1 - NOTE PAYMENT AND MEMBERSHIP INTEREST SALE AGREEMENT
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pursuant to an agreement with Microfield. The lock-up restrictions will expire
September 16, 2004 and ▇▇▇▇▇▇▇▇▇▇▇ will transfer the shares promptly after the
expiration date. Upon transfer of the Microfield shares transferred to
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ will have good and marketable title to the shares, free
and clear of all security interests, liens, pledges, encumbrances or other
restrictions or claims, subject only to restrictions as to marketability imposed
by securities laws.
1.2 ▇▇▇▇▇▇▇▇▇▇▇ will pay ▇▇▇▇▇▇▇▇▇▇▇ a sum equal to
0.7015% of the gross revenues collected by CE during the 5-year period
commencing on the Effective Date. Payments shall be calculated and paid to
▇▇▇▇▇▇▇▇▇▇▇ on a monthly basis (within 30 days after the end of the prior month)
and shall be subject to retroactive adjustment in the event it is subsequently
determined that revenues were overstated due to customer disputes, mistakes or
similar occurrences. ▇▇▇▇▇▇▇▇▇▇▇ will make an initial payment of $6,000 to
▇▇▇▇▇▇▇▇▇▇▇ upon execution of this Agreement which will be applied against the
final monthly payment(s) due to ▇▇▇▇▇▇▇▇▇▇▇. The monthly payment due with
respect to the period ending the later of (i) December 31, 2005, or (ii) the
date the Tax Liabilities referenced below have been paid, shall not be less than
$6,000; if the $6,000 payment exceeds the payment otherwise due (0.7015% of
gross revenues), the amount of the excess payment will be applied to reduce the
final monthly payment(s) due to ▇▇▇▇▇▇▇▇▇▇▇. In addition, until CE has satisfied
certain outstanding payroll tax liabilities and Washington state excise tax
liabilities in the approximate aggregate amount of $1,075,000 (the "Tax
Liabilities"), the monthly payments shall not exceed $6,000. If the payment
otherwise due for a month (0.7015% of gross revenues) before the Tax Liabilities
have been satisfied exceeds $6,000, the excess amount shall accrue and be
subsequently paid to ▇▇▇▇▇▇▇▇▇▇▇ ratably over the number of months remaining in
the original 5-year payment period once the Tax Liabilities have been paid in
full. Interest shall accrue after 90 days at the rate of 12% per annum on any
payment that is past due. ▇▇▇▇▇▇▇▇▇▇▇ or his representatives may audit
▇▇▇▇▇▇▇▇▇▇▇'▇ and CE's records (once each year) to verify the payment amounts
determined by ▇▇▇▇▇▇▇▇▇▇▇ to be due. If the audit discloses that the payments
claimed to be due are 5% or more less than the correct amounts, ▇▇▇▇▇▇▇▇▇▇▇
shall be responsible for the cost of the audit. ▇▇▇▇▇▇▇▇▇▇▇ will provide
▇▇▇▇▇▇▇▇▇▇▇ with quarterly financial statements and (if available) audited
annual financial statements for CE.
1.3 In the event that substantially all of the assets or
stock of CE are sold pursuant to an agreement executed within the 4-year period
beginning with the Effective Date, ▇▇▇▇▇▇▇▇▇▇▇ will pay to ▇▇▇▇▇▇▇▇▇▇▇ an amount
equal to (a) Christopher's Percentage of the net after-tax (if any) sale
proceeds received in connection with the sale after deducting transaction costs,
and corporate obligations and debt of CE and CEAC other than liabilities or
expenses attributable to consulting/success fees payable to JMW which have not
been disclosed to ▇▇▇▇▇▇▇▇▇▇▇, less (b) the amount of payments made to
▇▇▇▇▇▇▇▇▇▇▇ pursuant to Section 1.2 above. "Christopher's Percentage" means the
percentage membership interest that ▇▇▇▇▇▇▇▇▇▇▇ would have in ▇▇▇▇▇▇▇▇▇▇▇
(currently 23.783%) at the time the sale is closed if ▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ had retained their current number of membership units, taking into
account future changes in the number of outstanding membership units of
▇▇▇▇▇▇▇▇▇▇▇. Upon full payment of all amounts due under this Section 1.3, the
payments to be made pursuant to Section 1.2 above will terminate.
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2. SALE OF MEMBERSHIP INTEREST. ▇▇▇▇▇▇▇▇▇▇▇ hereby sells and
▇▇▇▇▇▇▇▇▇▇▇ hereby purchases the Membership Interest. As of the Effective Date,
▇▇▇▇▇▇▇▇▇▇▇ shall cease to be a member of ▇▇▇▇▇▇▇▇▇▇▇.
3. APPLICATION OF PAYMENTS. All payments made to ▇▇▇▇▇▇▇▇▇▇▇ as
set forth above are to be applied first to payment of the ▇▇▇▇▇▇▇▇▇▇▇ Notes, and
then applied in payment of the Membership Interest. The sole source of payment
for all such obligations of ▇▇▇▇▇▇▇▇▇▇▇ to ▇▇▇▇▇▇▇▇▇▇▇ shall be as set forth
above. The parties represent to each other that they know of no other
obligations of ▇▇▇▇▇▇▇▇▇▇▇ to ▇▇▇▇▇▇▇▇▇▇▇. Simultaneously with the
extinguishment of ▇▇▇▇▇▇▇▇▇▇▇'▇ obligations to ▇▇▇▇▇▇▇▇▇▇▇, the following
additional debt of ▇▇▇▇▇▇▇▇▇▇▇ will be extinguished: (a) Subordinated Promissory
Note dated May 31, 2004 in the face amount of $585,957.16 in favor of JMW; (b)
Amended and Restated Subordinated Promissory Note dated May 1, 2004 in the face
amount of $881,996.24 in favor of Destination; and (c) indebtedness in favor of
various parties related to JMW incurred prior to January 1, 2004 in the
approximate current amount of $393,523.79.
4. EMPLOYMENT MODIFICATIONS. ▇▇▇▇▇▇▇▇▇▇▇ and CE entered into an
Amended and Restated Employment Agreement dated March 22, 2000 which was amended
effective October 1, 2003 (the "Employment Agreement"). The terms of the
Employment Agreement are further modified to provide that (a) Christopher's base
salary will be $2,000 per month effective September 1, 2004; (b) ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇
earn commissions equivalent to 5% of the gross profit margin derived by CE from
work originated by ▇▇▇▇▇▇▇▇▇▇▇ without the assistance of third parties who may
also be entitled to commission from CE; (c) ▇▇▇▇▇▇▇▇▇▇▇ will continue to receive
an automobile allowance of $300 per month; (d) ▇▇▇▇▇▇▇▇▇▇▇ will be entitled to
health insurance benefits as set forth in the Employment Agreement; and (e)
Christopher's employment will terminate December 31, 2005 unless extended by
mutual agreement.
5. CLC PAYMENTS.
5.1 CLC will transfer to ▇▇▇▇▇▇▇▇▇▇▇ free and clear title
to the 1946 Chevrolet truck now owned by CLC. This transfer will be credited as
a $10,000 principal payment against the CLC Notes owed by CLC to ▇▇▇▇▇▇▇▇▇▇▇.
5.2 The CLC Notes will be combined and amended following
the transfer of the 1946 Chevrolet to provide for an adjusted total balance,
including principal and unpaid interest, of $200,000 and minimum semi-annual
payments of $16,752.50 beginning in December 2004 with a maturity date of 5
years from the Effective Date. The amended note will evidence any and all
remaining obligations of CLC to ▇▇▇▇▇▇▇▇▇▇▇ and any other obligations of CLC are
deemed paid, satisfied or contributed as additional capital.
5.3 At such time as the Sterling Loan has been paid in
full or otherwise satisfied by CLC, CLC will assign to ▇▇▇▇▇▇▇▇▇▇▇ its right to
purchase 23.783% of the shares of Microfield which are subject to the warrant(s)
issued by Microfield to CLC (to the extent not used by CLC to pay the Sterling
Loan) in connection with CLC's loan of approximately $500,000 to ▇▇▇▇▇▇▇▇▇▇▇
Velagio, Inc. scheduled to be consummated in August 2004 or later. CLC agrees to
deliver to ▇▇▇▇▇▇▇▇▇▇▇ copies of the loan terms and loan documents of the CLC
loan to ▇▇▇▇▇▇▇▇▇▇▇ Velagio, Inc.
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6. LOAN TRANSACTIONS.
6.1 STERLING LOAN RESTRUCTURE. CLC is presently
negotiating with Sterling Savings Bank to restructure the Sterling Loan
obligations. Upon execution of this Agreement, it is hereby agreed by CLC and
JMW that the obligations of ▇▇▇▇▇▇▇▇▇▇▇ pursuant to his Sterling Loan personal
guaranty are limited to $125,000 and the Indemnification Agreement will be
modified to reflect this release. In addition, CLC, JMW and ▇▇▇▇▇▇▇▇▇▇▇ will use
their best efforts and proceed in good faith to cause ▇▇▇▇▇▇▇▇▇▇▇ to be released
as a guarantor under the Sterling Loan documents. ▇▇▇▇▇▇▇▇▇▇▇ or his authorized
representatives shall have the right to receive information and to communicate
with Sterling Bank representatives to review and discuss any conditions to his
release as a guarantor under those loan documents.
6.2 DESTINATION TRANSACTIONS. ▇▇▇▇▇▇▇▇▇▇▇ is continuing
as a member of Destination. ▇▇▇▇▇▇▇▇▇▇▇ agrees to cooperate with future lender
requests to confirm the authority of Destination and its manager to engage in
loan transactions within the scope of authority granted pursuant to the
operating agreement of Destination.
7. CHRISTOPHER'S REPRESENTATIONS.
7.1 DISCLOSURE. ▇▇▇▇▇▇▇▇▇▇▇ is familiar with the business
and properties of ▇▇▇▇▇▇▇▇▇▇▇ and, in making his decision to sell the Membership
Interest, has not relied on representations or warranties of Christenson or any
other person, other than those provided in Section 4 below, or their agents,
officers or employees. ▇▇▇▇▇▇▇▇▇▇▇ has had an opportunity to review all
documents, records and books pertaining to his membership interest in
▇▇▇▇▇▇▇▇▇▇▇, obtain any additional information necessary to verify the accuracy
of all information obtained, and ask questions of and receive answers from
Christenson or any persons authorized to act on its behalf concerning the terms
and conditions of this transaction.
7.2 TITLE. ▇▇▇▇▇▇▇▇▇▇▇ has, and upon purchase thereof by
▇▇▇▇▇▇▇▇▇▇▇ pursuant to the terms of this Agreement ▇▇▇▇▇▇▇▇▇▇▇ will have, good
and marketable title to the Membership Interest, free and clear of all security
interests, liens, pledges, encumbrances or other restrictions or claims, subject
only to restrictions as to marketability imposed by securities laws and other
liens, claims, debts or matters within the actual knowledge of ▇▇▇▇▇▇▇▇▇▇▇, CLC,
JMW, Destination and their respective subsidiaries, affiliates and key
personnel.
7.3 NO OUTSTANDING REQUESTS FOR REIMBURSEMENT.
▇▇▇▇▇▇▇▇▇▇▇ represents that there are no outstanding or unsubmitted requests for
reimbursement of expenses to which ▇▇▇▇▇▇▇▇▇▇▇ is entitled. ▇▇▇▇▇▇▇▇▇▇▇ has not
incurred any obligations on behalf of ▇▇▇▇▇▇▇▇▇▇▇ that are not now reflected on
the books and records of ▇▇▇▇▇▇▇▇▇▇▇. If ▇▇▇▇▇▇▇▇▇▇▇ incurs any obligation or
expense for which ▇▇▇▇▇▇▇▇▇▇▇ is responsible, ▇▇▇▇▇▇▇▇▇▇▇ will promptly
reimburse any such expense and authorize ▇▇▇▇▇▇▇▇▇▇▇ to withhold any such amount
out of any payments otherwise due to be paid to ▇▇▇▇▇▇▇▇▇▇▇.
8. MISCELLANEOUS.
8.1 FURTHER DOCUMENTS. Each of the parties hereby agrees
to execute and deliver any and all instruments or documents and to take any
further action which may be or become necessary or appropriate to give effect to
the terms of this Agreement.
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8.2 WAIVER. The waiver by any party of any breach or
default of the other party under this Agreement or the failure of a party to
exercise any right, power or remedy shall not operate or be construed as a
waiver of any subsequent breach or default by the other party.
8.3 INTEGRATION. This Agreement contains the entire
agreement of the parties with respect to the subject matter of this Agreement
and may be modified only by an agreement in writing signed by all parties.
8.4 BINDING EFFECT. This Agreement is legally effective
and binding, both upon the parties and upon their respective estates, heirs,
legal representatives, successors and permitted assigns.
8.5 GOVERNING LAW. This Agreement shall be subject to and
governed by the laws of the State of Oregon.
8.6 SEVERABILITY OF AGREEMENT. The parties intend that
this be a binding and enforceable agreement. If a provision or provisions of
this Agreement are invalid or unenforceable, the remainder of this Agreement
shall be valid and enforceable without such provision or provisions.
8.7 ATTORNEY FEES. If suit or action is filed to enforce
this Agreement, or otherwise with respect to the subject matter of this
Agreement, the prevailing party shall be entitled to recover reasonable attorney
fees incurred in preparation for and litigation of such suit or action at trial,
on appeal and on any petition for review.
8.8 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
8.9 RELEASE. In consideration of the representations and
agreements set forth above, and provided the parties fulfill their respective
obligations as set forth herein, the parties release each other and their
respective employees, agents, successors and assigns from all claims arising out
of their ownership of ▇▇▇▇▇▇▇▇▇▇▇.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective
the day and year first above written.
▇▇▇▇▇▇▇▇▇▇▇ GROUP LLC
By: JMW Capital Partners, Inc.,
its Manager
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------------- -------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CEO
▇▇▇▇▇▇▇▇▇▇▇ LEASING COMPANY, LLC JMW GROUP, LLC
By: JMW Capital Partners, Inc., its Manager By: JMW Capital Partners, Inc.,
its Manager
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------- --------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CEO ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CEO
6 - NOTE PAYMENT AND MEMBERSHIP INTEREST SALE AGREEMENT
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