LOAN AGREEMENT
DATE: April 19, 2004
PARTIES: XXXXXXX INVESTMENTS, LLC ("LENDER")
00000 XX Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
AND: JMW GROUP, LLC ("BORROWER")
0000 XX Xxxxxxx Xxxxxx, Xxx. 000
Xxxxxxxx, XX 00000
AGREEMENT:
1. LOAN. Subject to all of the provisions of this Loan Agreement,
Lender will lend to Borrower the sum of One Million Dollars ($1,000,000). The
loan shall be evidenced by a promissory note (the "Note"), in a form
satisfactory to Lender, and shall be secured in the manner set forth in Section
4 below. The loan, the Note and the security for the Note are hereinafter
sometimes referred to collectively as the "Loan." The Loan and the indebtedness
evidenced by the Note shall be subordinate to an $800,000 Line of Credit to
Sterling Bank as described in the Note. Lender agrees to execute a subordination
or inter-creditor agreement that may be requested by Sterling Bank for an amount
not to exceed $800,000.
2. USE OF PROCEEDS. Borrower shall use the proceeds of the Loan
exclusively for the purpose of purchasing approximately 2,631.579 Series 4
Preferred shares of Microfield Group, Inc. at a price of $380.00 per share (for
a total purchase price of $1,000,000), with a cumulative preferred dividend rate
of 6.5% per annum (the "Microfield Stock").
3. TERMS.
3.1 INTEREST RATE. Borrower agrees to pay Lender interest
on the Loan at the rate of Key Bank prime, fully floating, plus eight percent
(8%) per annum. Payments of interest only shall be payable monthly in arrears.
Borrower agrees that should an Event of Default occur, Borrower shall pay Lender
interest on the Loan at the rate of Key Bank prime, fully floating, plus eleven
percent (11%) per annum (the "Default Rate") on any unpaid principal calculated
from the date of the last interest payment made by Borrower before the Event of
Default occurred.
3.2 MATURITY AND PAYMENT. The Loan, including principal
and accrued and unpaid interest, shall be due and payable in full on or before
the third anniversary of the Note. After occurrence of an Event of Default, the
outstanding principal and all accrued interest shall be payable on demand. All
payments shall be credited first to expenses for which Borrower is liable
hereunder, next to accrued interest and then to principal.
3.3 PREPAYMENT. In the event Borrower pays all or any
portion of the outstanding principal prior to April 19, 2007, Lender is entitled
to and Borrower shall pay a prepayment privilege fee as follows: (a) 6% of any
prepayment made prior to the first anniversary of this Note, (b) 5% of any
prepayment made on or after the first anniversary of this
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Note and prior to the second anniversary of the Note, and (c) 4% of any
prepayment made thereafter. Except for the foregoing, all or any portion of this
Note may be prepaid at any time.
3.4 LOAN FEE. Borrower shall pay Lender a loan commitment
fee of $20,000 upon the initial funding of the Loan.
3.5 LENDER'S COSTS AND ATTORNEYS FEES. Borrower shall,
upon initial funding of the Loan, pay Lender's attorneys fees and costs.
4. SECURITY. The Loan shall be secured by the following (the
"Collateral"):
4.1 STOCK PLEDGE. (a) A pledge of the Microfield Stock,
(b) a pledge of all of the outstanding shares of JMW Capital Partners, Inc., and
(c) a pledge of 1,500 Series 3 Preferred shares of Microfield Group, Inc. held
by Xxxxxxxxxxx Leasing Company, LLC.
4.2 SECURED UNCONDITIONAL GUARANTY. An Unconditional
Guaranty by Xxxxxx X. Jesenik, Xxxxxxxxx X. Jesenik, Xxxxx X. Xxxxxx, and Xxxxxx
X. Xxxxxx. The guaranty shall provide that, while this Agreement is in effect
and the Loan remains unpaid, the guarantors will not incur any additional
obligations as a guarantor or otherwise in addition to obligations disclosed in
Guarantor's personal financial statements dated April 1, 2004, without Lender's
written consent, which consent shall not be unreasonably withheld, except for
obligations for personal or household purposes not to exceed $50,000, in the
aggregate, per family unit. The guaranty shall be secured by a pledge of the
members' ownership and economic interests in Borrower as owned by the
guarantors.
4.3 PLEDGE RESTRICTIONS. Lender acknowledges that the
Microfield Stock and other Microfield shares which may be pledged to Lender may
be subject to pledge and transfer restrictions (including a 12-month lockup
restriction) imposed by Microfield and/or the Securities Act of 1933, as amended
from time to time, and all rules and regulations promulgated thereunder, and
that Lender may be required to be bound by the terms of lockup agreements with
Microfield Group, Inc.
4.4 OTHER DOCUMENTS. Borrower shall execute such
additional documents as Lender shall deem reasonably necessary to perfect its
interest in the security given by Borrower.
5. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants:
5.1 Borrower is an Oregon limited liability company duly
organized and validly existing under the laws of the State of Oregon with its
principal place of business in Portland, Oregon.
5.2 The collateral pledged as described in Section 4
above, is not subject to any other pledge agreement, lien, or encumbrance;
provided, however, 70.42 shares of the JMW Capital Partners, Inc. stock has been
pledged as collateral to Xxxxxx Xxxx whose debt is to be paid in full by
September 2004; provided, further, that another 63 shares of JMW Capital
Partners, Inc., not currently outstanding, would be delivered to Xxxx XxXxxxxx
and thereafter outstanding if there is a default in the obligation owed to him.
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5.3 This Loan Agreement, and all instruments required
herein, when executed and delivered, will be valid and binding on Borrower.
5.4 All required consents, permissions and licenses
required by any governmental regulatory body to which Borrower is subject and
which may be necessary in relation to this Loan Agreement and the borrowing
hereunder have been obtained.
5.5 All required consents of the parties to this
transaction have been obtained, and upon funding by Lender, the Loan Agreement,
the Note, and all related documents signed in connection herewith shall be fully
enforceable according to their terms.
5.6 As of the date of this Loan Agreement, there is no
litigation, proceeding or dispute pending against Borrower, the Security, or the
Guarantors, the adverse determination of which might substantially affect
Borrower's or Guarantor's ability to repay the Loan or perform as required by
this Loan Agreement.
5.7 Borrower shall secure the pledge of the unencumbered
Microfield Preferred Stock owned by Xxxxxxxxxxx Leasing Company, LLC, as
provided in Section 4.1 above.
5.8 Borrower owns 70% of Destination Capital, LLC, an
Oregon limited liability company. Destination Capital, LLC owns not less than
100% of Xxxxxxxxxxx Leasing, LLC, an Oregon limited liability company, which in
turn owns 1500 Series 3 Preferred Shares of Microfield Group, Inc. Borrower,
through its control of Destination Capital, LLC and Xxxxxxxxxxx Leasing, LLC,
shall not at any time during which the Loan is still outstanding, sell, pledge,
or otherwise encumber the 1500 Series 3 Preferred Shares of Microfield Group,
Inc., except as provided by this Loan Agreement.
5.9 Borrower owns 100% of the outstanding stock of JMW
Capital Partners, Inc., an Oregon corporation, and Borrower owns 63% of
Xxxxxxxxxxx Group, LLC. Borrower agrees that, through its control of JMW Capital
Partners, Inc., it will not, at any time during which the Loan is still
outstanding, permit or cause the sale, transfer, pledge, or encumbrance of the
members' interest in Xxxxxxxxxxx Group, LLC, owned by Borrower.
5.10 Borrower agrees that it will not, at any time during
which the Loan is still outstanding (a) sell, transfer, pledge, or encumber the
member's interests it owns in Destination Capital, or (2) sell or permit the
sale of any additional member's interests in Destination Capital, LLC,
Xxxxxxxxxxx Group LLC, or Xxxxxxxxxxx Leasing Company, LLC. Provided, however,
that Destination Capital, LLC may complete its Preferred Membership Unit
offering which could result in the issuance of additional Common Membership
Units representing 12.5% of all outstanding Common Membership Units.
6. POSITIVE COVENANTS. Borrower covenants and agrees that so long
as this Loan Agreement is in effect and until a full and final payment of all
indebtedness incurred hereunder, it will, unless Lender waives compliance in
writing:
6.1 Use the proceeds of the Loan for the purposes and in
the manner set forth in Section 2 hereof.
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6.2 Pay all obligations, including tax claims, at
maturity, except such as may be contested in good faith or as to which a bona
fide dispute may exist.
6.3 Maintain and keep in force in adequate amounts all
insurance customarily carried by those in the business of Borrower.
7. NEGATIVE COVENANTS. Borrower covenants and agrees that, so
long as this Loan Agreement is in effect and until full and final payment of all
indebtedness incurred hereunder, it will not, without the prior written consent
of Lender:
7.1 Engage in any business activity substantially
different from present business activities and operations.
7.2 Sell, convey, transfer, alienate, hypothecate,
mortgage or encumber its interest in the Collateral or allow any adverse liens,
security interests, or encumbrances to attach to the Collateral except as agreed
to in writing by Lender, which consent cannot be unreasonably withheld.
8. EVENTS OF DEFAULT. Regardless of the terms of the Note issued
hereunder, the occurrence of any of the following events shall terminate any
obligation on the part of Lender to make or continue this Loan and, at the
option of Lender, shall make all sums of interest and principal remaining on
this Loan immediately due and payable, without notice of default, presentment or
demand for payment, protest or notice of nonpayment or dishonor, or other
notices or demands of any kind or character, except as hereinafter specified:
8.1 Borrower fails to pay any Loan obligation within five
(5) days after the due date; or
8.2 Borrower becomes insolvent, or suffers or consents to
or applies for the appointment of a receiver, trustee, custodian or liquidator
of its property, or shall generally be unable to or fails to pay its debts as
they become due, or makes a general assignment for the benefit of creditors; or
8.3 Borrower files a voluntary petition in bankruptcy, or
seeks to effect a plan or other arrangement with creditors or any other relief
under the Bankruptcy Code, or under any state or other Federal law granting
relief to debtors, whether now or hereafter in effect; or any involuntary
petition or proceeding pursuant to the Bankruptcy Code or any other applicable
state or other Federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower and is not dismissed,
stayed or vacated within 60 days thereafter; Borrower files an answer admitting
the jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower is adjudicated a bankrupt, or an order for relief is
entered by any court of competent jurisdiction under the Bankruptcy Code or any
other applicable state or Federal law relating to bankruptcy, reorganization or
other relief for debtors; or
8.4 Any judgment or order for the payment of money (net
of anticipated insurance proceeds, as determined in good faith by Borrower's
Manager) in excess of $250,000 is rendered against Borrower and either (i)
enforcement proceedings are commenced by any creditor upon such judgment or
order or (ii) there shall be any period of 10 consecutive days
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during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, is not in effect; or
8.5 Borrower is in breach of or in default under any
term, condition, representation or warranty contained herein, or in the Note, or
in any other loan agreement or promissory note in effect between Borrower and
Lender; or
8.6 There is a default in the Unconditional Guaranty
signed in connection herewith and pursuant to paragraph 4.2 hereof.
9. RIGHT TO CURE. If any Event of Default has occurred, other
than a default in payment, and such Event of Default is curable, and if Borrower
has not been given a notice of a breach of the same provision of this Agreement
within the preceding twelve (12) months, such Event of Default may be cured (and
no Event of Default will have occurred) if Borrower, after receiving written
notice from Lender demanding cure of such default: (a) cures the default within
fifteen (15) days, or (b) if the cure requires more than 15 days, immediately
initiates steps which Lender deems in Lender's sole discretion to be sufficient
to cure the default and thereafter continues and completes all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.
10. REMEDIES. In the event Borrower or the Guarantors fail to
perform any of the terms, covenants, conditions or obligations of this Loan
Agreement or the Note, time of payment and performance being of the essence,
Lender shall have any or all of the following remedies:
10.1 The right to declare the full unpaid balance of the
Loan immediately due and payable;
10.2 The right to exercise each and all of the remedies
granted to Lender under any Pledge or Security Agreement or by the Oregon
Uniform Commercial Code; and/or
10.3 The right to exercise any other remedy available to
Lender.
11. STOCK OPTION. As additional consideration for Lender providing
the Loan, Borrower grants to Lender the right to purchase, at any time during
the period the Loan is outstanding and for 90 days thereafter, forty percent
(40%) of the Microfield Stock purchased by Borrower (rounded to the nearest
whole share). The purchase price will be $380 per Preferred share. This option
may be exercised in whole or in part by delivering written notice to Borrower
and by tendering the purchase price in cash, check or immediately available
funds. Lender acknowledges that the Microfield Stock may be subject to transfer
and pledge restrictions (including a 12-month lockup restriction) imposed by
Microfield and/or the Securities Act of 1933, as amended from time to time, and
all rules and regulations promulgated thereunder. Lender's right to purchase is
subject to any such restrictions and may only be exercised if the exercise would
not violate applicable federal or state securities laws. Borrower shall not take
any action to impede, restrict, or undermine in any way, the Stock Option
granted to Lender. Borrower shall cooperate, as necessary, to assist in
furthering Lender's purchase of the 40% of Microfield Stock should Lender elect
to purchase it.
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12. NOTE REPAYMENT. As additional consideration for Lender
providing the Loan, Borrower shall cause Destination Capital, LLC to repay to
Lender all amounts due under that certain Promissory Note dated January 21, 2004
in the original amount of $300,000 with a maturity date of July 22, 2004 which
represents one of the CVI Funding Notes as described therein. Repayment shall
occur promptly after the closing of the purchase of the Microfield Stock and
receipt of funds by Destination Capital, LLC from Xxxxxxxxxxx Velagio, Inc.
Borrower shall secure, in writing, confirmation that Destination Capital, LLC is
to receive 50% of the warrants to purchase Microfield Preferred Stock pursuant
to paragraph 38 of the Contract of Sale and Security Agreement between
Xxxxxxxxxxx Velagio, Inc. and Destination Capital, LLC, made effective January
22, 2004.
13. NOTICE. Any notice required to be given to Borrower shall be
deemed given when actually delivered or three (3) business days after deposit in
the U.S. Mail, postage prepaid, certified with return receipt requested, to
Borrower at the address appearing on the face of this Loan Agreement or such
other address as Borrower may from time to time file with Lender.
14. SURVIVAL. All representations, warranties and agreements
herein contained on the part of Borrower shall survive the making of this Loan
and the execution of Borrower's promissory note, and shall be effective as long
as this Loan Agreement shall remain in effect.
15. WAIVER. The waiver by Lender of any breach or default of
Borrower under this Loan Agreement or the failure to exercise any right, power
or remedy occurring to Lender shall not operate or be construed as a waiver of
any subsequent breach or default by Borrower. All remedies, either under this
Loan Agreement or by law, or otherwise afforded to Lender, shall be cumulative
and not alternative.
16. ATTORNEYS' FEES. In the event suit or action is instituted
arising out of or related to this Loan Agreement or any provision thereof, the
prevailing party, in addition to any other relief awarded, shall be entitled to
recover its reasonable attorneys' fees, including fees in any appellate or
bankruptcy proceeding.
17. ENTIRE AGREEMENT. This instrument and the note and security
agreements referenced herein contain the entire agreement of the parties. It may
not be changed orally, but only by an agreement in writing signed by both
parties.
18. SEVERABILITY. The invalidity of any provision of this Loan
Agreement as determined by a court of competent jurisdiction shall in no way
affect the validity of any other provision hereof.
19. ASSIGNMENT. Borrower shall not assign, pledge or transfer its
interest in this Loan Agreement without first obtaining the written consent of
Lender.
20. BINDING EFFECT. Subject to the limitations on transfer of
Borrower's interest, this Loan Agreement shall bind and inure to the benefit of
the parties, their respective heirs, successors and permitted assigns.
21. TIME OF ESSENCE. Time is of the essence.
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22. AUTHORITY. Each individual executing this Loan Agreement on
behalf of Borrower represents and warrants that he or she is duly authorized to
execute and deliver this Loan Agreement on behalf of Borrower. If Lender
requests, Borrower shall deliver to Lender evidence of such authority
satisfactory to Lender.
23. LAW. This Loan Agreement shall be governed by the laws of the
State of Oregon, regardless of the residence of the parties either at the time
of this Loan Agreement or hereafter. The proper venue for any dispute arising
out of this Loan Agreement shall be the Circuit Court of Multnomah County,
Oregon.
IN WITNESS WHEREOF, the parties have executed this Agreement.
LENDER: BORROWER:
XXXXXXX INVESTMENTS, LLC JMW GROUP, LLC
By: JMW Capital Partners, Inc., Manager
By: /s/ XXXXXXX XXXXXXX By: /s/ XXXXXX XXXXXXX
----------------------------------- -------------------------------------
Xxxxxxx Xxxxxxx, Managing Member Xxxxxx Xxxxxxx, CEO
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