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:
▇. ▇▇▇▇▇▇▇▇▇ is a member of ▇▇▇▇▇▇▇▇▇▇▇ and owns a 10.120%
membership interest in ▇▇▇▇▇▇▇▇▇▇▇ (the "Membership Interest").
▇. ▇▇▇▇▇▇▇▇▇ holds promissory notes made by ▇▇▇▇▇▇▇▇▇▇▇ (the
"▇▇▇▇▇▇▇▇▇▇▇ Notes") as follows: (1) Subordinated Promissory Note dated May 31,
2004 in the face amount of $110,000.00; (2) Subordinated Promissory Note dated
August 1, 2004 in the face amount of $100,000.00; and (3) Promissory Note dated
July 7, 2003 in the face amount of $1,000.00. In addition, ▇▇▇▇▇▇▇▇▇ holds one
or more promissory notes made by CLC (collectively the "CLC Notes", including:
(1) Subordinated Promissory Note dated January 3, 2003 and amended effective
February 1, 2003 in the amended face amount of $245,000; and (2) Subordinated
Promissory Note dated June 11, 2003 in the face amount of $11,000.00.
▇. ▇▇▇▇▇▇▇▇▇▇▇ 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"). The
former individual members of CLC (not including ▇▇▇▇▇▇▇▇▇) 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 the 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 204,712 Common
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 0.2985%
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. No
monthly payments shall be made 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 amount
of any monthly payments that would otherwise be due (0.2985% of gross revenues)
before the Tax Liabilities have been satisfied 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) ▇▇▇▇▇▇▇▇▇'▇ 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. "▇▇▇▇▇▇▇▇▇'▇ Percentage" means the percentage
membership interest that ▇▇▇▇▇▇▇▇▇ would have in ▇▇▇▇▇▇▇▇▇▇▇ (currently 10.120%)
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.
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
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▇▇▇▇▇▇▇▇▇▇▇'▇ 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. OPTIONS. ▇▇▇▇▇▇▇▇▇ has previously been granted certain options
to purchase additional interests in ▇▇▇▇▇▇▇▇▇▇▇, Destination and other related
entities. The option to purchase an interest in Destination shall continue in
effect as provided in ▇▇▇▇▇▇▇▇▇'▇ option agreement and ▇▇▇▇▇▇▇▇▇ shall have the
additional option to purchase an additional 1% interest in Destination Capital
(based on currently outstanding interests) for the purchase price of $20,000.
▇▇▇▇▇▇▇▇▇'▇ options to purchase interests in the other related entities is
hereby terminated. ▇▇▇▇▇▇▇▇▇▇▇ and JMW will cause ▇▇▇▇▇▇▇▇▇'▇ option agreements
to be appropriately modified.
5. CLC NOTE.
5.1 The CLC Note in the face amount of $245,000 (plus
accrued and unpaid interest to the date of this Agreement) will be amended to
provide for (a) no payments for 2 years, (b) interest for the initial 2 years to
be paid at maturity, (c) interest on the principal balance to be paid quarterly
beginning after the first quarter of the third year, and (d) a maturity date of
5 years from the Effective Date. The CLC Note as amended will evidence any and
all remaining obligations of CLC to ▇▇▇▇▇▇▇▇▇ and any other notes and
obligations of CLC are deemed paid, satisfied or contributed as additional
capital. JMW agrees that the CLC debt payable to JMW Capital Partners, Inc. in
the approximate amount of $192,776 will be subject to the same repayment terms.
5.2 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 10.120% 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.
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 ▇▇▇▇▇▇▇▇▇ is released from his indemnification obligations with respect
to the Sterling Loan and the Indemnification Agreement will be modified to
reflect this release.
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.
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7. ▇▇▇▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇▇▇▇▇▇ 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 Christenson 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.
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.
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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 ▇▇▇▇▇▇▇▇▇▇▇.
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/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, 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
5 - NOTE PAYMENT AND MEMBERSHIP INTEREST SALE AGREEMENT
PDX/112816/141153/DLH/1386449.1
