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 XXXXXXXXXXX
GROUP LLC, an Oregon limited liability company ("Xxxxxxxxxxx"), XXXXX X.
XXXXXXXXX ("Xxxxxxxxx"), JMW GROUP, LLC ("JMW") and XXXXXXXXXXX LEASING COMPANY,
LLC ("CLC").
RECITALS:
X. Xxxxxxxxx is a member of Xxxxxxxxxxx and owns a 10.120%
membership interest in Xxxxxxxxxxx (the "Membership Interest").
X. Xxxxxxxxx holds promissory notes made by Xxxxxxxxxxx (the
"Xxxxxxxxxxx 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, Xxxxxxxxx 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.
X. Xxxxxxxxxxx owns all of the outstanding stock of CEAC, Inc.
("CEAC") and CEAC owns all of the outstanding stock of Xxxxxxxxxxx Electric,
Inc. ("CE").
X. Xxxxxxxxx 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 Xxxxxxxxx) 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, Xxxxxxxxx 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.
X. Xxxxxxxxxxx and CLC desire to make payments to Xxxxxxxxx to
apply to the Xxxxxxxxxxx and CLC Notes. Xxxxxxxxxxx further desires to purchase
the Membership Interest and Xxxxxxxxx desires to sell his Membership Interest to
Xxxxxxxxxxx on the terms and conditions set forth below.
Now, therefore, in consideration of the foregoing, the parties agree as
follows:
AGREEMENT:
1. Xxxxxxxxxxx Payments. Xxxxxxxxxxx will make payments to
Xxxxxxxxx as follows:
1.1 Xxxxxxxxxxx will assign and transfer 204,712 Common
shares of Microfield Group, Inc. ("Microfield"). These shares are currently
subject to lock-up restrictions
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pursuant to an agreement with Microfield. The lock-up restrictions will expire
September 16, 2004 and Xxxxxxxxxxx will transfer the shares promptly after the
expiration date. Upon transfer of the Microfield shares transferred to
Xxxxxxxxx, Xxxxxxxxx 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 Xxxxxxxxxxx will pay Xxxxxxxxx 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 Xxxxxxxxx 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 Xxxxxxxxx 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. Xxxxxxxxx or his representatives may audit Xxxxxxxxxxx'x and CE's
records (once each year) to verify the payment amounts determined by Xxxxxxxxxxx
to be due. If the audit discloses that the payments claimed to be due are 5% or
more less than the correct amounts, Xxxxxxxxxxx shall be responsible for the
cost of the audit. Xxxxxxxxxxx will provide Xxxxxxxxx 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, Xxxxxxxxxxx will pay to Xxxxxxxxx an amount
equal to (a) Xxxxxxxxx'x 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 Xxxxxxxxx, less (b) the amount of payments made to Xxxxxxxxx
pursuant to Section 1.2 above. "Xxxxxxxxx'x Percentage" means the percentage
membership interest that Xxxxxxxxx would have in Xxxxxxxxxxx (currently 10.120%)
at the time the sale is closed if Xxxxxxxxx and Xxxxx Xxxxxxxxxxx had retained
their current number of membership units, taking into account future changes in
the number of outstanding membership units of Xxxxxxxxxxx. 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. Xxxxxxxxx hereby sells and
Xxxxxxxxxxx hereby purchases the Membership Interest. As of the Effective Date,
Xxxxxxxxx shall cease to be a member of Xxxxxxxxxxx.
3. APPLICATION OF PAYMENTS. All payments made to Xxxxxxxxx as set
forth above are to be applied first to payment of the Xxxxxxxxxxx Notes, and
then applied in payment of the Membership Interest. The sole source of payment
for all such obligations of Xxxxxxxxxxx to Xxxxxxxxx shall be as set forth
above. The parties represent to each other that they know of no other
obligations of Xxxxxxxxxxx to Xxxxxxxxx. Simultaneously with the extinguishment
of
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Xxxxxxxxxxx'x obligations to Xxxxxxxxx, the following additional debt of
Xxxxxxxxxxx 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. Xxxxxxxxx has previously been granted certain options
to purchase additional interests in Xxxxxxxxxxx, Destination and other related
entities. The option to purchase an interest in Destination shall continue in
effect as provided in Xxxxxxxxx'x option agreement and Xxxxxxxxx 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.
Xxxxxxxxx'x options to purchase interests in the other related entities is
hereby terminated. Xxxxxxxxxxx and JMW will cause Xxxxxxxxx'x 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 Xxxxxxxxx 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 Xxxxxxxxx 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 Xxxxxxxxxxx
Velagio, Inc. scheduled to be consummated in August 2004 or later. CLC agrees to
deliver to Xxxxxxxxx copies of the loan terms and loan documents of the CLC loan
to Xxxxxxxxxxx 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 Xxxxxxxxx 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. Xxxxxxxxx is continuing as
a member of Destination. Xxxxxxxxx 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. XXXXXXXXX'X REPRESENTATIONS.
7.1 DISCLOSURE. Xxxxxxxxx is familiar with the business
and properties of Xxxxxxxxxxx and, in making his decision to sell the Membership
Interest, has not relied on representations or warranties of Xxxxxxxxxxx or any
other person, other than those provided in Section 4 below, or their agents,
officers or employees. Xxxxxxxxx has had an opportunity to review all documents,
records and books pertaining to his membership interest in Xxxxxxxxxxx, 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. Xxxxxxxxx has, and upon purchase thereof by
Xxxxxxxxxxx pursuant to the terms of this Agreement Xxxxxxxxxxx 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 Xxxxxxxxxxx, CLC,
JMW, Destination and their respective subsidiaries, affiliates and key
personnel.
7.3 NO OUTSTANDING REQUESTS FOR REIMBURSEMENT. Xxxxxxxxx
represents that there are no outstanding or unsubmitted requests for
reimbursement of expenses to which Xxxxxxxxx is entitled. Xxxxxxxxx has not
incurred any obligations on behalf of Christenson that are not now reflected on
the books and records of Xxxxxxxxxxx. If Xxxxxxxxxxx incurs any obligation or
expense for which Xxxxxxxxx is responsible, Xxxxxxxxx will promptly reimburse
any such expense and authorize Xxxxxxxxxxx to withhold any such amount out of
any payments otherwise due to be paid to Xxxxxxxxx.
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 Xxxxxxxxxxx.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
the day and year first above written.
XXXXXXXXXXX GROUP LLC
By: JMW Capital Partners, Inc.,
its Manager
/s/ XXXXX X. XXXXXXXXX By: /s/ XXXXXX XXXXXXX
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Xxxxx X. Xxxxxxxxx Xxxxxx Xxxxxxx, CEO
XXXXXXXXXXX LEASING COMPANY, LLC JMW GROUP, LLC
By: JMW Capital Partners, Inc., its Manager By: JMW Capital Partners, Inc.,
its Manager
By: /s/ XXXXXX XXXXXXX By: /s/ XXXXXX XXXXXXX
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Xxxxxx Xxxxxxx, CEO Xxxxxx Xxxxxxx, CEO
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