Exhibit 1
STOCK PURCHASE AND PLEDGE AGREEMENT
This STOCK PURCHASE AND PLEDGE AGREEMENT (this "Agreement"), dated as of
February 28, 2003, is made by and between Microfield Graphics, Inc. ("Pledgor")
and Steelcase Inc. ("Pledgee").
RECITALS
A. Pledgor desires to purchase from Pledgee 951,445 shares of Pledgor
Common Stock (the "Common Stock") owned by Pledgee (the "Purchase"), and Pledgee
desires to sell such Common Stock to Pledgor, pursuant to the terms and
conditions set forth below.
B. The purchase price for the Common Stock ("Purchase Price") will be paid
over three years, subject to adjustment as described below, and will be
evidenced by a Promissory Note from Pledgor to Pledgee dated as of the date
hereof (the "Note").
C. As a condition to permitting payment of the purchase price by the Note,
Pledgee has required that Pledgor grant Pledgee a continuing security interest
in the Common Stock, on the terms and conditions set forth in this Agreement,
and Pledgor has agreed to make such pledge.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Purchase and Sale. Upon the terms and conditions set forth in this
Agreement, Pledgee hereby sells, assigns and delivers to Pledgor, and Pledgor
hereby purchases and accepts from Pledgee, the Common Stock. Pledgee represents
and warrants to Pledgor (i) that it owns the Common Stock free and clear of any
liens (including tax liens), forfeitures, pledges, penalties, charges,
encumbrances, buy-sell agreements, rights of first refusal, equities or claims
or rights of others whatsoever, (ii) it is the owner of record and the
beneficial owner of the Common Stock and (iii) it has the requisite power,
authority and legal right to transfer the Common Stock to Pledgor, and this
Agreement constitutes the legal, valid and binding obligation of Pledgee,
enforceable against Pledgee in accordance with its terms. Except as set forth in
this Section 1, Pledgee makes no representations or warranties with regard to
the Common Stock or its ownership in such Common Stock, and Pledgor understands
and agrees that it is purchasing the Common Stock without relying upon any such
representations or warranties from Pledgee.
2. Purchase Price. In consideration of the sale, assignment and delivery of
the Common Stock, Pledgor will pay to Pledgee for the Common Stock an amount
equal to $0.22 per share of Common Stock, or $209,317.90, subject to adjustment
as described in Section 3 below. Notwithstanding anything in this Agreement to
the contrary, at any time within 180 days after the date of this Agreement,
Pledgor may prepay the entire deferred purchase price owed under the Note by
making a lump sum payment of $0.20 per share (as appropriately adjusted to
reflect the value of the Common Stock after giving effect to stock splits,
dividends, reorganizations and recapitalizations and other similar transactions
occurring after the date hereof), or $190,289, together with all accrued and
unpaid interest through the date of such prepayment.
1
3. Purchase Price Adjustment.
a. Maturity Date Adjustment. Unless previously calculated pursuant to
Section 3.b below, on the third anniversary of the date hereof (the
"Maturity Date"), the parties shall calculate the average closing price of
Pledgor's common stock on the principal market on which such common stock
is traded, for each day the common stock is traded within the 180 day
period ending on the last business day immediately prior to the Maturity
Date (the "Average Share Price"). If the Average Share Price is greater
than $0.22 per share, the purchase price payable hereunder will increase to
the amount equal to the sum of (a) $209,317.90 plus (b) an additional
amount which equals 951,445 shares (as appropriately adjusted to reflect
the value of the Common Stock after giving effect to stock splits,
dividends, reorganizations, recapitalizations and other similar
transactions occurring after the date hereof) multiplied by the excess of
the Average Share Price over $0.22 per share (as appropriately adjusted to
reflect the value of the Common Stock after giving effect to stock splits,
dividends, reorganizations and recapitalizations and other similar
transactions occurring after the date hereof). The principal amount payable
under the Note will be increased accordingly. Thus, for example, if the
Average Share Price is $0.30 per share, on the Maturity Date, the total
purchase price payable hereunder will equal $285,433.50 ($209,317.90 plus
$76,115.60 (951,445 shares (as adjusted) multiplied by $0.08 per share)).
Notwithstanding the foregoing, the maximum Average Share Price permitted
will be $0.35 (as appropriately adjusted to reflect the value of the Common
Stock after giving effect to stock splits, dividends, reorganizations and
recapitalizations and other similar transactions occurring after the date
hereof).
b. Prepayment Adjustment. If the Note is prepaid, after the initial
180 day period provided in Section 1, the Average Share Price shall be
calculated by using the average closing price of Pledgor's common stock on
the principal market on which such common stock is traded, for each day the
common stock is traded within the 180 day period ending on the last
business day immediately prior to the prepayment date. Once the Average
Share Price has been determined, the parties will use the formula set forth
in Section 3.a above to calculate any increase in the purchase price. Any
purchase price increase will be evidenced by an increase in the principal
amount due under the Note, and such increase will be paid on the prepayment
date. Notwithstanding the foregoing, the maximum Average Share Price
permitted will be $0.35 (as appropriately adjusted to reflect the value of
the Common Stock after giving effect to stock splits, dividends,
reorganizations and recapitalizations and other similar transactions
occurring after the date hereof). If the parties calculate the Average
Share Price pursuant to this Section 3.b, there shall be no additional
adjustment on the Maturity Date pursuant to Section 3.a above.
2
c. Sale Adjustment. Unless otherwise previously paid in accordance
with the terms of the Note, in addition to the purchase price adjustment
contemplated by Sections 3.a or 3.b above, if at any time within eighteen
(18) months of the date of this Agreement:
I. (i) Pledgor engages in a transaction or series of related
transactions which results in a sale of all or substantially all of
its assets or (ii) Pledgor and its shareholders engage in a
transaction or a series of related transactions (whether by stock
sale, merger, consolidation or other type of transaction) as a result
of which (x) the holders of the shares of Pledgor common stock issued
and outstanding immediately prior to such transaction(s) hold less
than 50% of the voting power of Pledgor or other surviving entity of
such transaction(s), and (y) the majority of the Board of Directors of
Pledgor or such surviving entity following such transaction(s) were
not members of the Board of Directors of Pledgor immediately prior to
such transaction(s), the Note shall become immediately due payable,
plus all accrued and unpaid interest, and payable and the purchase
price for the Common Stock shall be increased by an amount equal to
the excess value, over the amount of the Note, which Pledgee would
have received if it had been the owner of the Common Stock at the time
of such transaction(s), with such excess consideration payable in the
same form received by the shareholders of Pledgor in such
transaction(s).
II. Pledgor issues shares of its stock in a transaction or a
series of related transactions and, as a result, (x) the number of
shares of Pledgor common stock issued and outstanding following such
transaction(s) is more than twice the number of shares of Pledgor
common stock issued and outstanding as of the date of the Note
(excluding, for the purpose of such calculation, the Common Stock) and
(y) the majority of the Board of Directors of Pledgor following such
transaction(s) were not members of the Board of Directors of Pledgor
as of the date of the Note, then the Note shall become immediately due
and payable, plus all accrued and unpaid interest, and the purchase
price for the Common Stock shall be increased by an amount equal to
the market value of the Common Stock, measured immediately prior to
the time of such transaction(s), less the amount of the Note, payable
by the issuance by Pledgor of a number of shares of Pledgor common
stock equal to (a) such excess value divided by (b) the market value
of a share of Pledgor common stock measured immediately after the time
of such transaction(s).
4. Pledge. As collateral security for the payment and performance when due
of the Note, Pledgor hereby pledges, assigns, transfers and grants to Pledgee
for its benefit, a continuing first priority security interest in and to all of
the right, title and interest of Pledgor in, to and under the Common Stock,
including all dividends (including dividends payable in the form of additional
shares of Pledgor common stock), cash, options, warrants, rights, instruments,
distributions, returns of capital, income, profits and other property, interests
or proceeds from time to time received, receivable or otherwise distributed to
Pledgor in respect of or in exchange for any or all of the Common Stock (any
such distribution will be deemed to be part of the Common Stock). In addition,
the security interest will include all registration rights granted pursuant to
the Registration Rights Agreement, dated March 19, 1998, as amended, between
Pledgor and Pledgee.
3
5. Secured Obligations. This Agreement secures, and the Common Stock are
collateral security for, the payment and performance in full when due, whether
at stated maturity, by acceleration or otherwise of the Note (including, without
limitation, obligations to pay principal, interest and all other charges, fees,
expenses, commissions, reimbursements, premiums, indemnities and other payments
related to or in respect of the Note).
6. Delivery of Common Stock. All certificates or instruments representing
or evidencing the Common Stock will immediately upon execution of this Agreement
be delivered to the Pledgee and held by the Pledgee on the terms herein. All
Common Stock will be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Pledgee.
Pledgee may, from time to time, in its sole discretion, appoint one or more
agents or nominees to hold physical custody, for the account of Pledgee, of any
or all certificates representing the Common Stock.
7. Representations, Warranties and Covenants. Pledgor represents, warrants
and covenants as follows:
(a) No Liens. Following the sale transaction contemplated by this
Agreement, and at the time of any delivery of any Common Stock to Pledgee
pursuant to Section 6 of this Agreement Pledgor will be, the sole legal and
beneficial owner of the Common Stock. All shares of Common Stock are on the
date hereof, and will be, so owned by Pledgor free and clear of any liens
(including tax liens), forfeitures, pledges, penalties, charges,
encumbrances, buy-sell agreements, rights of first refusal, equities or
claims or rights of others whatsoever except for the lien created by this
Agreement.
(b) Authorization; Enforceability. Pledgor has the requisite power,
authority and legal right to pledge and grant a security interest in the
Common Stock pursuant to this Agreement, and this Agreement constitutes the
legal, valid and binding obligation of Pledgor, enforceable against Pledgor
in accordance with its terms.
(c) No Consents. No consent of any and no consent, authorization,
approval, license or other action by, and no notice to or filing with, any
governmental authority or regulatory body or other person is required on
the date hereof for the pledge by Pledgor of the Common Stock pursuant to
this Agreement or for the execution, delivery or performance of this
Agreement by Pledgor.
8. Voting Rights.
(a) So long as no Event of Default (as defined in the Note) will have
occurred, Pledgor will be entitled to exercise any and all voting and other
consensual rights pertaining to the Common Stock or any part thereof for
any purpose not inconsistent with the terms or purpose of this Agreement;
provided, however, that Pledgor will not in any event exercise such rights
in any manner which will reasonably be expected to have a material adverse
effect on the validity of the security interest intended to be provided by
this Agreement.
4
(b) Upon the occurrence of an Event of Default and delivery of the
Common Stock (as contemplated under Section 11 below), all rights to
exercise the voting and other consensual rights Pledgor would otherwise be
entitled to exercise pursuant to Section 8(a) hereof will cease, and all
such rights will thereupon become vested in the Pledgee, which will
thereupon have the sole right to exercise such voting and other consensual
rights.
9. Dividends on Common Stock. All dividends on the Common Stock shall be
paid to Pledgor, provided that no Event of Default shall have occurred and be
continuing.
10. Transfers. Pledgor will not (i) sell, convey, assign or otherwise
dispose of, or grant any option, right or warrant with respect to, any of the
Common Stock or (ii) create or permit to exist any lien upon or with respect to
any Common Stock other than the lien and security interest granted to Pledgee
pursuant to this Agreement.
11. Remedies upon Default. Upon the occurrence of an Event of Default,
Pledgee will have the right, in addition to any other remedy available to
Pledgee, to foreclose on the Common Stock from Pledgor and take and exercise all
rights of ownership with respect thereto, including causing the registration of
the Common Stock in the name of Pledgee or its designee(s).
12. No Waiver; Cumulative Remedies. No failure on the part of Pledgee to
exercise, no course of dealing with respect to, and no delay on the part of
Pledgee in exercising, any right, power or remedy hereunder will operate as a
waiver thereof; nor will any single or partial exercise of any such right, power
or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies herein provided are
cumulative and are not exclusive of any remedies provided by law, at equity or
otherwise.
13. Modification in Writing. No amendment, modification, supplement,
termination or waiver of or to any provision of this Agreement, nor consent to
any departure by Pledgor therefrom, will be effective unless in writing and
signed by Pledgor and Pledgee. Any amendment, modification or supplement of or
to any provision of this Agreement, any waiver of any provision of this
Agreement and any consent to any departure by Pledgor from the terms of any
provision of this Agreement will be effective only in the specific instance and
for the specific purpose for which made or given.
14. Termination; Release; Reinstatement.
(a) On the second anniversary of the date of this Agreement, if
Pledgor has made all due and owing payments in accordance with the terms of
this Agreement and the Note, Pledgee will execute and deliver a release of
its security interest on 317,148 shares of common stock (one-third of the
Common Stock) (the "Released Shares"), and will redeliver to Pledgor such
Released Shares.
5
(b) When the Note has been paid and performed in full, this Agreement
will terminate and Pledgee will return the Note to Pledgor, marked
"Cancelled". Upon termination of this Agreement, Pledgee will redeliver to
Pledgor the Common Stock as may still be in the possession of Pledgee and
as will not have been previously transferred to the Pledgee pursuant to the
terms hereof.
(c) If any of the payments under the Note are recovered or
subsequently set aside, invalidated, declared to be fraudulent or
preferential or required to be repaid, this Agreement will be reinstated
and Pledgor will take all steps reasonably required to effectuate such a
reinstatement, including the redelivery to Pledgee of the Common Stock to
be held as security hereunder.
15. Attorney-in-Fact. Pledgor hereby irrevocably appoints Pledgee as his
attorney-in-fact to arrange for the transfer, at any time after the occurrence
of an Event of Default, of the Common Stock on the books and records of Pledgor
to the name of Pledgee or his nominee.
16. Further Assurances. From time to time upon the written request of
either party, such other party will execute and deliver such further documents
and do such further things as the requesting party may reasonably request in
order to effect the purposes of this Agreement.
17. Notices. Any notice or other communication required or permitted to be
given under this Agreement will be sufficient if it is in writing and delivered
personally, telecopied or mailed, certified, registered or first-class mail, or
recognized overnight courier, postage prepaid, and will be deemed given when so
delivered personally or telecopied, or, if mailed by certified, registered or
first-class mail, five business days after the date of mailing, or, if mailed by
recognized overnight courier, one day after the date of mailing, addressed (or
as otherwise specified by any party by notice to the other party in accordance
with this Section, provided that change of address notices will be effective
only upon receipt thereof), in the case of Pledgee, to Steelcase Inc., 000-00xx
Xxxxxx X.X., Xxxxx Xxxxxx, Xxxxxxxx 00000, Attention: Chief Legal Officer, and
in the case of Pledgor, to Microfield Graphics, Inc., 0000 X.X. Xxxxxxx, 0xx
Xxxxx, Xxxxxxxx, Xxxxxx 00000, Attn: Xxxxxx X. Xxxxxx, President.
18. Governing Law. This Agreement and the rights, remedies and duties of
the parties in connection with this Agreement will be governed by, and will be
construed and enforced in accordance with, the laws of the State of Oregon,
without regard to principles of conflicts of laws.
19. Entire Agreement. This Agreement and the Note contain the entire
agreement among the parties with respect to the transactions contemplated by
this Agreement and the Note, and supersedes all prior agreements or commitments,
written or oral, with respect thereto.
20. Severability of Provisions. Any provision of this Agreement which is
prohibited or unenforceable will be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
6
21. Headings. The Section headings used in this Agreement are for
convenience of reference only and will not affect the construction of this
Agreement.
22. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
IN WITNESS WHEREOF, Pledgor and Pledgee have caused this Stock Purchase and
Pledge Agreement to be duly executed and delivered as of the date first above
written.
MICROFIELD GRAPHICS, INC.
By: /s/ Xxxxx Xxxxxx
------------------------------
Its: CEO/President
STEELCASE INC.
By: /s/ Xxxxxxxx X. Xxxxxxxx
------------------------------
Its: V.P. Corporate
Strategy & Development
2/28/03
7
