INDEMNIFICATION ESCROW AGREEMENT
THIS INDEMNIFICATION ESCROW AGREEMENT ("Indemnification Agreement")
dated July 20, 2005, is by and among MICROFIELD GROUP, INC., an Oregon
corporation ("MICG"), CPS ACQUISITION CO., an Oregon corporation ("CPS"), CEAC,
INC., an Oregon corporation ("CEAC"), ▇▇▇▇▇▇▇▇▇▇▇ ELECTRIC, INC., an Oregon
corporation ("▇▇▇▇▇▇▇▇▇▇▇"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("Escrow Agent").
RECITALS
WHEREAS, MICG, CPS, CEAC, and ▇▇▇▇▇▇▇▇▇▇▇ are parties to that certain
Merger Agreement ("Agreement") entered into contemporaneously with this
Indemnification Agreement, which provides, among other things, that CPS, a
wholly-owned subsidiary of MICG, merged with ▇▇▇▇▇▇▇▇▇▇▇, wholly owned by CEAC.
WHEREAS, the Agreement provides that an "Indemnification Amount" (as
defined below) consisting of Two Million (2,000,000) shares of Microfield Common
Stock shall be placed in an escrow against which MICG shall be able to make
claim, and be indemnified and/or reimbursed for Damages (as defined in the
Agreement), to which MICG is entitled pursuant to the Agreement.
NOW, THEREFORE, it is agreed by and among the parties hereto as
follows:
SECTION 1. ESTABLISHMENT OF ESCROW
Escrow Agent hereby accepts and acknowledges receipt of Two Million
(2,000,000) shares of common stock of Microfield as the "Indemnification Amount"
to be held for the benefit of MICG, CPS, CEAC, and Christenson and their
respective successors and assigns, as provided herein.
CEAC has deposited 2,000,000 shares of Microfield common stock into
escrow.
SECTION 2. APPLICATION OF ESCROW FUNDS
2.1 PURPOSE. The Agreement provides, among other things, that CEAC
shall indemnify, save, and hold harmless MICG from and against Damages which are
described in the Agreement; provided, however, that MICG shall not be entitled
to assert a Claim (as hereafter defined) on account of the indemnity contained
in Article 6 of the Agreement unless and until the aggregate amount of Damages
with respect to aggregate Claims asserted exceeds Five Hundred Thousand Dollars
($500,000). The first Five Hundred Thousand Dollars ($500,000) of Damages shall
be borne solely by MICG, and any Claims under this Indemnification Agreement
shall only be for Claims for Damages in excess of Five Hundred Thousand Dollars
($500,000) and shall not include the first Five Hundred Thousand Dollars
($500,000) of such Claims. Furthermore, the liability of CEAC and ▇▇▇▇▇▇▇▇▇▇▇
under the Agreement for any and all Damages incurred by MICG shall be limited by
the Indemnification Amount, and further limited to Claims as to which written
Claim Notice (as defined in Article 7) thereof shall have been given to CEAC and
Escrow Agent on or prior to the date which is 52 weeks from the date of this
Indemnification
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Agreement ("Survival Date"), whether or not the damage has actually been
sustained (which Claim Notice shall to the extent possible specify the details
of the Claim).
2.2 CLAIMS BY MICG. If, on or prior to the applicable Survival
Date, MICG claims to be entitled to make a Claim to the Indemnification Amount
held by Escrow Agent, it shall advise Escrow Agent and CEAC of the Claim in
writing (a "Claim Notice"), describing in such Claim Notice the nature of the
Claim, its amount (if then determinable), and the provision(s) of the Agreement
on which the Claim is based. Unless CEAC sends Escrow Agent a written approval
of the Claim, with a copy concurrently to MICG, within 15 days after CEAC and
Escrow Agent receive such Claim Notice, CEAC shall be conclusively presumed to
have rejected the Claim. If CEAC has approved the Claim in whole or in part,
Escrow Agent shall, within 10 days thereafter, deliver to MICG such portion of
the Indemnification Amount as necessary to satisfy the approved Claim. However,
if the amount of the Claim is not then determinable, Escrow Agent shall set
aside in reserve such portion of the Indemnification Amount (in shares of
Microfield Common Stock based on Microfield Stock Value determined in accordance
with Section 7.6 of the Agreement) necessary to cover the Claim (the "Reserve
Amount"), and any such portion of the Indemnification Amount held as Reserve
Amounts shall be held by Escrow Agent until such time as the amount of the Claim
is ascertainable, and shall thenceforth deliver to MICG the portion of the
Reserve Amount of the Indemnification Amount necessary to satisfy the Claim. In
all events, Escrow Agent shall have no liability for any calculation of an
Indemnification Amount or release of Microfield Common Stock so long as Escrow
Agent acts in good faith.
2.3 TERMINATION OF Escrow. On the date that is 52 weeks from the
date of this Indemnification Agreement, the Escrow Agent shall deliver to CEAC
all of the Indemnification Amount remaining in Escrow, less any Reserve Amounts
and less the amounts of any Claim Notice(s) for which MICG has not then been
paid in full. Escrow Agent shall deliver to CEAC or MICG funds remaining in the
escrow account after the date that is 52 weeks from the date of this
Indemnification Agreement, on account of Claim Notices for which MICG has not
been paid in full, or for funds remaining in previously established Reserve
Accounts, only under joint written instructions signed by CEAC and MICG.
When all of the Indemnification Amount has been finally distributed in
accordance herewith, this Indemnification Agreement shall terminate.
SECTION 3. LIABILITY OF ESCROW AGENT
3.1 CONFLICTING DEMANDS. Escrow Agent will be obligated to perform
only the duties that are expressly set forth herein and need not take notice of
any provisions of the Agreement. In case of conflicting demands upon Escrow
Agent, it may (i) refuse to comply therewith as long as such disagreement
continues and make no delivery or other disposition of any funds then held (and
Escrow Agent shall not be or become liable in any way for such failure or
refusal to comply with such conflicting demands); and (ii) continue to so
refrain and so refuse to act until all differences have been adjusted by
agreement and Escrow Agent has been notified thereof in writing signed jointly
by CEAC and MICG; or (iii) deposit the portion of the Indemnification Amount in
dispute with the Clerk of Oregon Circuit Court and institute an interpleader
action.
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3.2 NO OBLIGATION TO TAKE LEGAL ACTION. Escrow Agent shall not be
under any obligation to take any legal action in connection with this
Indemnification Agreement or for its enforcement, or to appear in, prosecute, or
defend any action or legal proceeding which, in its opinion, would or might
involve it in any costs, expenses, loss, or liability, unless (and as often as
required by it) it is furnished with satisfactory security and indemnity against
all such costs, expenses, losses, or liabilities.
3.3 STATUS OF ESCROW AGENT. In consideration of Escrow Agent's
acceptance of this Indemnification Agreement, the parties agree that Escrow
Agent's obligations and duties in connection with this Indemnification Agreement
are confined to those specifically enumerated in this Indemnification Agreement;
that Escrow Agent shall not be in any manner liable or responsible for the
sufficiency, correctness, genuineness or validity of any instruments deposited
with Escrow Agent, or with reference to the form of execution of the instruments
or the identity, authority or rights of any person executing or depositing the
instruments; that Escrow Agent is under no obligation to ascertain the terms or
conditions of any instruments or to comply in any respect with the terms of the
instruments; and that Escrow Agent shall not be liable for any loss that may
occur by reason of forgeries or false representations by others, due to the
exercise of Escrow Agent's discretion, or for any other reason except Escrow
Agent's gross negligence or willful misconduct. The parties acknowledge that
Escrow Agent is not acting in his capacity as an attorney.
3.4 WRITTEN INSTRUCTIONS OF PARTIES. Notwithstanding any contrary
provisions contained herein, Escrow Agent shall, at all times, have full right
and authority to pay over and disburse the principal of the Indemnification
Amount in accordance with any joint written instructions signed by CEAC and
MICG.
SECTION 4. NOTICES
All notices, requests, demands, and other communications required or
permitted hereunder shall be in writing and will be deemed to have been duly
given when delivered by hand (including delivery by courier service) or two days
after deposit in the U.S. Mail by certified or registered mail, return receipt
requested, with postage prepaid:
If to MICG:
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Microfield Group, Inc.
Attn: A. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
--------------
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Tongue LLP
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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If to CEAC and ▇▇▇▇▇▇▇▇▇▇▇:
--------------------------
CEAC, Inc.
c/o Aequitas Capital Management, Inc.
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
--------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Aequitas Capital Management, Inc.
▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Escrow Agent:
------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Black ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other address as may be furnished pursuant to the above.
SECTION 5. ESCROW AGENT'S FEE
For services hereunder, Escrow Agent shall be paid a fee based on
Escrow Agent's normal hourly rate for legal services (currently $260), and shall
be paid or reimbursed for all expenses, disbursements, and advances, including
reasonable attorney fees incurred or paid in connection with carrying out its
duties hereunder, all amounts to be payable by MICG and CEAC in equal shares. If
the conditions of this Indemnification Agreement are not promptly fulfilled, or
if Escrow Agent renders any requested service not provided for in this
Indemnification Agreement, or if there is any assignment of interest in the
subject matter of this Indemnification Agreement or any modification in the
terms of the Agreement relating to this Indemnification Agreement, or if any
controversy arises under the Agreement, or if Escrow Agent is made a party to or
intervenes in any litigation pertaining to this Indemnification Agreement or its
subject matter, Escrow Agent shall be reasonably compensated for the
extraordinary services and reimbursed for all costs and expenses caused by such
default, delay, controversy or litigation.
SECTION 6. TITLES AND SECTION HEADINGS
Titles of sections and subsections contained in this Indemnification
Agreement are inserted for convenience of reference only, and neither form a
part of this Indemnification Agreement nor are to be used in its construction or
interpretation.
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SECTION 7. COUNTERPARTS
This Indemnification Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
SECTION 8. NON-WAIVER
No waiver by any party of any breach of any term or condition of this
Indemnification Agreement shall operate as a waiver of any other breach of such
term or condition or of any term or condition. No failure to enforce such
provision shall operate as a waiver of such provision or of any other provision
hereof, or constitute or be deemed a waiver or release of any other party for
anything arising out of, connected with, or based upon this Indemnification
Agreement.
SECTION 9. BINDING EFFECT
This Indemnification Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective transferees, successors, and
assigns. The parties recognize and acknowledge that the powers and authority
granted to Escrow Agent herein are each irrevocable and coupled with an
interest.
SECTION 10. NONLIMITATION OF LIABILITY
Nothing contained herein shall in any way limit any party's liability
or obligations in relation to the Agreement, and any party shall have all the
rights and remedies set forth in the Agreement
SECTION 11. GOVERNING LAW
This Indemnification Agreement has been made entirely within the state
of Oregon. This Indemnification shall be governed by and construed in accordance
with the laws of the state of Oregon. If any suit or action is filed by any
party to enforce this Indemnification or otherwise with respect to the subject
matter hereof, jurisdiction and venue shall be in the Multnomah County, Oregon
Circuit Court.
SECTION 12. TIME OF ESSENCE
Time is of the essence of this Indemnification Agreement.
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SECTION 13. ENTIRE AGREEMENT; MODIFICATION
This Indemnification Agreement supersedes all prior indemnification
agreements and constitutes the entire agreement with respect to the subject
matter hereof. It may not be altered or modified without the written consent of
all parties.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Indemnification Agreement to be executed on its behalf by its duly authorized
officers, all as of the day and year first above written.
MICROFIELD GROUP, INC., ▇▇▇▇▇▇▇▇▇▇▇ ELECTRIC, INC.,
an Oregon corporation an Oregon corporation
By: /s/ A. ▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. JESENIK
-------------------------------- -------------------------------------
A. ▇▇▇▇ ▇▇▇▇▇▇, President ▇▇▇▇▇▇ ▇. Jesenik, CEO & President
CPS ACQUISITION CO., CEAC, INC.,
an Oregon corporation an Oregon corporation
By: /s/ A. ▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. JESENIK
-------------------------------- -------------------------------------
A. ▇▇▇▇ ▇▇▇▇▇▇, President ▇▇▇▇▇▇ ▇. Jesenik, CEO & President
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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