Document:

Exhibit 4.1

[FORM OF
WARRANT]

NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.

MICROFIELD GROUP, INC.

WARRANT TO PURCHASE COMMON
STOCK

Warrant No.:                         

Number of Shares of Common Stock:_____________

Date of Issuance: June [___],
2006 (“Issuance Date”)

Microfield Group, Inc.,
an Oregon corporation (the “Company”),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, [LB I GROUP INC.] [OTHER BUYERS],
the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms
set forth below, to purchase from the Company, at the Exercise Price (as
defined below) then in effect, upon surrender of this Warrant to Purchase
Common Stock (including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the date hereof,
but not after 11:59 p.m., New York Time, on the Expiration Date (as
defined below), ______________ (_____________)(1) fully paid nonassessable
shares of Common Stock (as defined below) (the
“Warrant Shares”). Except as
otherwise defined herein, capitalized terms in this Warrant shall have the
meanings set forth in Section 15. This Warrant is one of the Warrants to
purchase Common Stock (the “SPA Warrants”)
issued pursuant to Section 1 of that certain Securities Purchase
Agreement, dated as of June __, 2006 (the “Subscription Date”), by and among the Company and the
investors (the “Buyers”) referred
to therein (the “Securities Purchase
Agreement”).

(1)           Insert number of shares equal to 75%
of the number of shares of Common Stock being purchased pursuant to the
Securities Purchase Agreement.

 

1.             EXERCISE OF WARRANT.

(a)   Mechanics of Exercise. Subject to the terms and conditions
hereof (including, without limitation, the limitations set forth in Section 1(f)),
this Warrant may be exercised by the Holder on any day on or after the
date  hereof, in whole or in part, by (i) delivery
of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this
Warrant (accompanied by the attached Warrant Shares Exercise Log) to the
Company (with a copy to its legal counsel) and (ii) (A) payment to
the Company of an amount equal to the applicable Exercise Price multiplied by
the number of Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in cash or by wire transfer of
immediately available funds or (B) by notifying the Company that this
Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section 1(d)).
The Holder shall not be required to deliver the original Warrant in order to
effect an exercise hereunder. Execution and delivery of the Exercise Notice
with respect to less than all of the Warrant Shares shall have the same effect
as cancellation of the original Warrant and issuance of a new Warrant
evidencing the right to purchase the remaining number of Warrant Shares. On or
before the first (1st)
Business Day following the date on which the Company (and its counsel) have
received each of the Exercise Notice and the Aggregate Exercise Price (or
notice of a Cashless Exercise) (the “Exercise Delivery
Documents”), the Company or its counsel shall transmit by facsimile
an acknowledgment of confirmation of receipt of the Exercise Delivery Documents
to the Holder and the Company’s transfer agent (the “Transfer
Agent”). On or before the third (3rd) Business Day following the date on
which the Company has received all of the Exercise Delivery Documents (the “Share Delivery Date”), the Company shall, (X) if
legends are not required to be placed on certificates of Common Stock pursuant
to the Securities Purchase Agreement provided that the Transfer Agent is
participating in The Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, upon the request of the Holder,
credit such aggregate number of shares of Common Stock to which the Holder is
entitled pursuant to such exercise to the Holder’s or its designee’s balance
account with DTC through its Deposit Withdrawal Agent Commission system, or (Y) if
the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and dispatch by overnight courier to the address as
specified in the Exercise Notice, a certificate, registered in the Company’s
share register in the name of the Holder or its designee, for the number of
shares of Common Stock to which the Holder is entitled pursuant to such
exercise. Upon delivery of the Exercise Notice and Aggregate Exercise Price
referred to in clause (ii)(A) above or notification to the Company of a
Cashless Exercise referred to in Section 1(d), the Holder shall be deemed
for all corporate purposes to have become the holder of record of the Warrant
Shares with respect to which this Warrant has been exercised, irrespective of
the date of delivery of the certificates evidencing such Warrant Shares. If
this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and
the number of Warrant Shares represented by this Warrant submitted for exercise
is greater than the number of Warrant Shares being acquired upon an exercise,
then the Company shall as soon as practicable and in no event later than three
Business Days after any exercise and at its own expense, issue a new Warrant
(in accordance with Section 7(d)) representing the right to purchase the
number of Warrant Shares purchasable immediately prior to such exercise under
this Warrant, less the number of Warrant Shares with respect to which this
Warrant is exercised. No fractional shares of Common Stock are to be issued
upon the exercise of this Warrant, but rather the number of shares of Common
Stock to be issued shall be rounded up to the nearest whole number. The Company
shall pay any and all taxes which may be

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payable with respect to the issuance and
delivery of Warrant Shares upon exercise of this Warrant.

(b)   Exercise Price. For purposes of this Warrant, “Exercise Price” means $3.00, subject to adjustment as
provided herein.

(c)   Company’s Failure to Timely Deliver Securities. If within
three (3) Trading Days after the Company’s receipt of the facsimile copy
of a Exercise Notice the Company shall fail to issue and deliver a certificate
to the Holder and register such shares of Common Stock on the Company’s share
register or credit the Holder’s balance account with DTC for the number of
shares of Common Stock to which the Holder is entitled upon the Holder’s
exercise hereunder, and if on or after such Trading Day the Holder purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of shares of Common Stock issuable upon
such exercise that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three (3) Trading
Days after the Holder’s request and in the Holder’s discretion, either (i) pay
cash to the Holder in an amount equal to the Holder’s total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased (the “Buy-In Price”), at which point
the Company’s obligation to deliver such certificate (and to issue such shares
of Common Stock) shall terminate, or (ii) promptly honor its obligation to
deliver to the Holder a certificate or certificates representing such shares of
Common Stock and pay cash to the Holder in an amount equal to the excess (if
any) of the Buy-In Price over the product of (A) such number of shares of
Common Stock, times (B) the Closing Bid Price on the date of exercise.

(d)   Cashless Exercise. Notwithstanding anything contained
herein to the contrary, if a Registration Statement (as defined in the
Registration Rights Agreement) covering the Warrant Shares that are the subject
of the Exercise Notice (the “Unavailable
Warrant Shares”) is not available for the resale of such Unavailable
Warrant Shares, the Holder may, in its sole discretion, exercise this Warrant
in whole or in part and, in lieu of making the cash payment otherwise
contemplated to be made to the Company upon such exercise in payment of the
Aggregate Exercise Price, elect instead to receive upon such exercise the “Net
Number” of shares of Common Stock determined according to the following formula
(a “Cashless Exercise”):

Net Number = (A
x B) - (A x C)

B

For purposes of
the foregoing formula:

A= the total number of shares with respect to which this Warrant is
then being exercised.

B= the Closing Sale Price of the shares of Common Stock (as reported by
Bloomberg) on the date immediately preceding the date of the Exercise Notice.

C= the Exercise Price then in effect for the applicable Warrant Shares
at the time of such exercise.

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(e)   Disputes. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall promptly issue to the Holder the number of Warrant Shares that
are not disputed and resolve such dispute in accordance with Section 12.

(f)    Limitations on Exercises; Beneficial Ownership. The
Company shall not effect the exercise of this Warrant, and the Holder shall not
have the right to exercise this Warrant, to the extent that after giving effect
to such exercise, such Person (together with such Person’s affiliates) would
beneficially own in excess of 4.99% (the “Maximum
Percentage”) of the shares of Common Stock outstanding immediately
after giving effect to such exercise. For purposes of the foregoing sentence,
the aggregate number of shares of Common Stock beneficially owned by such
Person and its affiliates shall include the number of shares of Common Stock
issuable upon exercise of this Warrant with respect to which the determination
of such sentence is being made, but shall exclude shares of Common Stock which
would be issuable upon (i) exercise of the remaining, unexercised portion
of this Warrant beneficially owned by such Person and its affiliates and (ii) exercise
or conversion of the unexercised or unconverted portion of any other securities
of the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding sentence, for
purposes of this paragraph, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934,
as amended. For purposes of this Warrant, in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (1) the Company’s most
recent Form 10-K, Form 10-Q, Current Report on Form 8-K
or other public filing with the Securities and Exchange Commission, as the case
may be, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. For any reason at any time, upon the
written or oral request of the Holder, the Company shall within one Business
Day confirm orally and in writing to the Holder the number of shares of Common
Stock then outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or exercise of
securities of the Company, including the SPA Securities and the SPA Warrants,
by the Holder and its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. By written notice to the
Company, the Holder may from time to time increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% specified in such
notice; provided that (i) any such increase will not be effective until
the sixty-first (61st) day after such notice is delivered to the Company, and
(ii) any such increase or decrease will apply only to the Holder and not
to any other holder of SPA Warrants.

(g)           Insufficient
Authorized Shares. If at any time while any of the Warrants remain
outstanding the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock (an “Authorized
Share Failure”) to
satisfy its obligation to reserve for issuance upon exercise of the Warrants at
least a number of shares of Common Stock equal to the number of shares of
Common Stock as shall from time to time be necessary to effect the exercise of
the SPA Warrants (the “Required Reserve Amount”), then the Company shall
immediately take all action necessary to increase the Company’s authorized
shares of

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Common Stock to an amount sufficient to allow the Company to reserve
the Required Reserve Amount for the Warrants then outstanding. Without limiting
the generality of the foregoing sentence, as soon as practicable after the date
of the occurrence of an Authorized Share Failure, but in no event later than
sixty (60) days after the occurrence of such Authorized Share Failure, the
Company shall hold a meeting of its stockholders for the approval of an
increase in the number of authorized shares of Common Stock. In connection with
such meeting, the Company shall provide each stockholder with a proxy statement
and shall use its best efforts to solicit its stockholders’ approval of such
increase in authorized shares of Common Stock and to cause its board of
directors to recommend to the stockholders that they approve such proposal.

2.     ADJUSTMENT OF EXERCISE
PRICE AND NUMBER OF WARRANT SHARES. If the Company at any time on or after
the Subscription Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced and the
number of Warrant Shares will be proportionately increased. If the Company at
any time on or after the Subscription Date 
combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination will
be proportionately increased and the number of Warrant Shares will be
proportionately decreased. Any adjustment under this Section 2(b) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.

3.     RIGHTS UPON DISTRIBUTION
OF ASSETS. If the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of
shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the
issuance of this Warrant, then, in each such case:

(a)   any Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of shares of
Common Stock entitled to receive the Distribution shall be reduced, effective
as of the close of business on such record date, to a price determined by
multiplying such Exercise Price by a fraction of which (i) the numerator
shall be the Closing Bid Price of the shares of Common Stock on the trading day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by the Company’s Board of Directors) applicable to one
share of shares of Common Stock, and (ii) the denominator shall be the Closing
Bid Price of the shares of Common Stock on the trading day immediately
preceding such record date; and

(b)   the number of Warrant Shares shall be increased to a number of
shares equal to the number of shares of Common Stock obtainable immediately
prior to the close of business on the record date fixed for the determination
of holders of shares of Common Stock entitled to receive the Distribution
multiplied by the reciprocal of the fraction set forth in the immediately
preceding paragraph (a); provided that in the event that the Distribution is of
shares

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of Common Stock (or common stock) (“Other Shares of Common Stock”) of a company whose common
shares are traded on a national securities exchange or a national automated
quotation system, then the Holder may elect to receive a warrant to purchase
Other Shares of Common Stock in lieu of an increase in the number of Warrant
Shares, the terms of which shall be identical to those of this Warrant, except
that such warrant shall be exercisable into the number of shares of Other
Shares of Common Stock that would have been payable to the Holder pursuant to
the Distribution had the Holder exercised this Warrant immediately prior to
such record date and with an aggregate exercise price equal to the product of
the amount by which the exercise price of this Warrant was decreased with
respect to the Distribution pursuant to the terms of the immediately preceding
paragraph (a) and the number of Warrant Shares calculated in accordance
with the first part of this paragraph (b).

4.     PURCHASE RIGHTS;
FUNDAMENTAL TRANSACTIONS.

(a)   Purchase Rights. In addition to any adjustments pursuant to
Section 2 above, if at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
shares of Common Stock (the “Purchase
Rights”), then the Holder will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which
the Holder could have acquired if the Holder had held the number of shares of
Common Stock issuable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of shares of Common Stock are to be determined for the grant, issue or sale of
such Purchase Rights.

(b)   Fundamental Transactions. The Company shall not enter into or
be party to a Fundamental Transaction unless  the Successor Entity assumes
in writing all of the obligations of the Company under this Warrant and the
other Transaction Documents in accordance with the provisions of this Section (4)(b) pursuant
to written agreements in form and substance satisfactory to the Required
Holders and approved by the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Warrants in exchange for
such Warrants a
security of the Successor
Entity evidenced by a written instrument substantially similar in form
and substance to this Warrant,
including, without limitation, an adjusted exercise price equal to the value
for the shares of Common Stock reflected by the terms of such Fundamental
Transaction, and exercisable for a corresponding number of shares of capital
stock equivalent to the shares of Common Stock issuable upon exercise of this
Warrant (without regard to any limitations on the exercise of this Warrant)
prior to such Fundamental Transaction, and satisfactory to the Required. Upon the occurrence of any
Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant referring to the “Company” shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under
this Warrant with the same effect as if such Successor Entity had been named as
the Company herein. Upon consummation of the Fundamental Transaction,
the Successor Entity shall deliver to the Holder confirmation that there shall
be issued upon exercise of this Warrant
at any time after the consummation of
the Fundamental Transaction, in lieu of the shares of the Common Stock (or

 6
 

 

other securities, cash, assets or other
property) issuable upon the exercise of the Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or
any other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to receive upon
the happening of such Fundamental Transaction had this Warrant been converted immediately prior to such Fundamental
Transaction, as adjusted in accordance with the provisions of this Warrant. In addition to and not in substitution for
any other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to
receive securities or other assets with respect to or in exchange for shares of
Common Stock (a “Corporate Event”), the Company
shall make appropriate provision to insure that the Holder will thereafter have
the right to receive upon an exercise of this Warrant at any time after the consummation of the Fundamental Transaction but
prior to the Expiration Date, in lieu of the
shares of the Common Stock (or other securities, cash, assets or other
property) issuable upon the exercise of the
Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property
whatsoever (including warrants or other purchase or subscription rights) which
the Holder would have been entitled to receive upon the happening of such
Fundamental Transaction had the Warrant been exercised immediately prior to
such Fundamental Transaction. Provision made pursuant to the preceding
sentence shall be in a form and substance reasonably satisfactory to the
Required Holders. The provisions of this Section shall apply similarly and
equally to successive Fundamental Transactions and Corporate Events and shall
be applied without regard to any limitations on the exercise of this Warrant. Notwithstanding the
foregoing, in the event of a Change of Control, then, at the request of the
Holder delivered before the 90th day after such Change of Control, the Company (or the Successor Entity) shall
purchase this Warrant from the Holder by paying to the Holder, within five
Business Days after such request (or, if later, on the effective date of the
Fundamental Transaction), cash in an amount equal to the value of the remaining
unexercised portion of this Warrant on the date of such Change of Control,
which value shall be determined by use of the Black-Scholes option pricing
model.

5.     NONCIRCUMVENTION.
The Company hereby covenants and agrees that the Company will not, by amendment
of its Certificate of Incorporation, Bylaws or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, dissolution,
issue or sale of securities, or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, and
will at all times in good faith carry out all the provisions of this Warrant
and take all action as may be required to protect the rights of the Holder. Without
limiting the generality of the foregoing, the Company (i) shall not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, (ii) shall
take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (iii) shall, so long
as any of the SPA Warrants are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued shares of Common
Stock, solely for the purpose of effecting the exercise of the SPA Warrants,
the number of shares of Common Stock as shall from time to time be necessary to
effect the exercise of the SPA Warrants (without regard to any limitations on
exercise).

6.     WARRANT
HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided
herein, the Holder, solely in such Person’s capacity as a holder of

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this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person’s capacity as the Holder of this Warrant, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company. Notwithstanding
this Section 6, the Company shall provide the Holder with copies of the
same notices and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the stockholders.

7.     REISSUANCE OF WARRANTS.

(a)   Transfer of Warrant. If this Warrant is to be transferred,
the Holder shall surrender this Warrant to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being transferred
by the Holder and, if less then the total number of Warrant Shares then
underlying this Warrant is being transferred, a new Warrant (in accordance with
Section 7(d)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred.

(b)   Lost, Stolen or Mutilated Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary form and, in the case of mutilation, upon surrender and cancellation
of this Warrant, the Company shall execute and deliver to the Holder a new
Warrant (in accordance with Section 7(d)) representing the right to
purchase the Warrant Shares then underlying this Warrant.

(c)   Exchangeable for Multiple Warrants. This Warrant is
exchangeable, upon the surrender hereof by the Holder at the principal office
of the Company, for a new Warrant or Warrants (in accordance with Section 7(d))
representing in the aggregate the right to purchase the number of Warrant
Shares then underlying this Warrant, and each such new Warrant will represent
the right to purchase such portion of such Warrant Shares as is designated by
the Holder at the time of such surrender.

(d)   Issuance of New Warrants. Whenever the Company is required
to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall
be of like tenor with this Warrant, (ii) shall represent, as indicated on
the face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 7(a) or Section 7(c), the Warrant Shares designated
by the Holder which, when added to the number of shares of Common Stock
underlying the other

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new Warrants issued in connection with such
issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of
such new Warrant which is the same as the Issuance Date, and (iv) shall
have the same rights and conditions as this Warrant.

8.     NOTICES. Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 9(f) of
the Securities Purchase Agreement, except that for purposes of the delivery of
the Exercise Notice hereunder, notice shall be sent to both the Company and its
counsel, Dunn Carney Allen Higgins & Tongue LLP., attention JoDee
Keegan , Esq. fax: (503) 224-7324. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this
Warrant, including in reasonable detail a description of such action and the
reason therefore. Without limiting the generality of the foregoing, the Company
will give written notice to the Holder (i) immediately upon any adjustment
of the Exercise Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least fifteen days prior to the
date on which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the shares of Common Stock, (B) with
respect to any grants, issuances or sales of any Options, Convertible Securities
or rights to purchase stock, warrants, securities or other property to holders
of shares of Common Stock or (C) for determining rights to vote with
respect to any Fundamental Transaction, dissolution or liquidation, provided in
each case that such information shall be made known to the public prior to or
in conjunction with such notice being provided to the Holder.

9.     AMENDMENT AND WAIVER.
Except as otherwise provided herein, the provisions of this Warrant may be
amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the Required Holders; provided that no such
action may increase the exercise price of any SPA Warrant, change the
expiration date of any SPA Warrant to any date prior to the Expiration Date or
decrease the number of shares or change the class of stock obtainable upon
exercise of any SPA Warrant without the written consent of the Holder. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the SPA Warrants then outstanding.

10.   GOVERNING LAW. This
Warrant shall be governed by and construed and enforced in accor­dance with,
and all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the
State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.

11.   CONSTRUCTION; HEADINGS.
This Warrant shall be deemed to be jointly drafted by the Company and all the
Buyers and shall not be construed against any person as the drafter hereof. The
headings of this Warrant are for convenience of reference and shall not form
part of, or affect the interpretation of, this Warrant.

12.   DISPUTE RESOLUTION. In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall submit

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the disputed
determinations or arithmetic calculations via facsimile within two Business
Days of receipt of the Exercise Notice giving rise to such dispute, as the case
may be, to the Holder. If the Holder and the Company are unable to agree upon
such determination or calculation of the Exercise Price or the Warrant Shares
within three Business Days of such disputed determination or arithmetic
calculation being submitted to the Holder, then the Company shall, within two
Business Days submit via facsimile (a) the disputed determination of the
Exercise Price to an independent, reputable investment bank selected by the
Company and approved by the Holder  or (b) the
disputed arithmetic calculation of the Warrant Shares to the Company’s
independent, outside accountant. The Company shall cause at its expense the
investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the
results no later than ten Business Days from the time it receives the disputed
determinations or calculations. Such investment bank’s or accountant’s
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error.

13.   REMEDIES, OTHER
OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this
Warrant shall be cumulative and in addition to all other remedies available
under this Warrant and the other Transaction Documents, at law or in equity
(including a decree of specific performance and/or other injunctive relief),
and nothing herein shall limit the right of the Holder right to pursue actual
damages for any failure by the Company to comply with the terms of this Warrant.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Holder and that the remedy at law for any such
breach may be inadequate. The Company therefore agrees that, in the event of
any such breach or threatened breach, the holder of this Warrant shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

14.   TRANSFER.  This Warrant may be offered for sale, sold,
transferred or assigned, in whole or in part, without the consent of the
Company, except as may otherwise be required by the Securities Purchase
Agreement.

15.   CERTAIN DEFINITIONS. For
purposes of this Warrant, the following terms shall have the following
meanings:

(a)   “Bloomberg”
means Bloomberg Financial Markets.

(b)   “Business Day”
means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain
closed.

(c)   “Change of Control”
means any Fundamental Transaction other than (i) any reorganization,
recapitalization or reclassification of the Common Stock in which holders of
the Company’s voting power immediately prior to such reorganization,
recapitalization or reclassification continue after such reorganization,
recapitalization or reclassification to hold publicly traded securities and,
directly or indirectly, the voting power of the surviving entity or entities necessary
to elect a majority of the members of the board of directors (or their
equivalent 

 10
 

 

if other
than a corporation) of such entity or entities, or (ii) pursuant to a
migratory merger effected solely for the purpose of changing the jurisdiction
of incorporation of the Company.

(d)   “Closing Bid Price”
and “Closing Sale Price” means, for any
security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York time, as reported by
Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing bid price or last trade
price, respectively, of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or,
if no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the “pink
sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).
If the Closing Bid Price or the Closing Sale Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Closing Bid
Price or the Closing Sale Price, as the case may be, of such security on such
date shall be the fair market value as mutually determined by the Company and
the Holder. If the Company and the Holder are unable to agree upon the fair
market value of such security, then such dispute shall be resolved pursuant to Section 12.
All such determinations to be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during the
applicable calculation period.

(e)   “Common Stock”
means (i) the Company’s shares of Common Stock, no par value per share,
and (ii) any share capital into which such Common Stock shall have been
changed or any share capital resulting from a reclassification of such Common
Stock.

(f)    “Convertible Securities”
means any stock or securities (other than Options) directly or indirectly
convertible into or exercisable or exchangeable for shares of Common Stock.

(g)   “Eligible Market”
means the Principal Market, the American Stock Exchange, The New York Stock
Exchange, Inc., the Nasdaq National Market or the Nasdaq Capital Market.

(h)   “Expiration Date”
means the date sixty (60) months after the Issuance Date or, if such date falls
on a day other than a Business Day or on which trading does not take place on
the Principal Market (a “Holiday”), the
next date that is not a Holiday.

(i)    “Fundamental Transaction”
means that the Company shall,
directly or indirectly, in one or more related transactions, (i) consolidate
or merge with or into (whether or not the Company is the surviving corporation)
another Person, or (ii) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Company
to another Person, or (iii) allow another Person to make a
purchase, tender or exchange offer that

 11
 

 

is accepted by the holders of more than the
50% of either the outstanding shares of Common Stock (not including any shares of Common
Stock held by the Person or Persons making or party to, or associated or
affiliated with the Persons making or party to, such purchase, tender or
exchange offer), or (iv) consummate a stock purchase agreement or
other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby such other
Person acquires more than the 50% of the outstanding shares of Common
Stock (not including any
shares of Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making or party
to, such stock purchase agreement or other business combination), (v) reorganize,
recapitalize or reclassify its Common Stock (other than a forward or reverse
stock split), or (vi) any “person” or “group” (as these terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall
become the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting
power represented by issued and outstanding Common Stock.

(j)    “Options” means
any rights, warrants or options to subscribe for or purchase shares of Common
Stock or Convertible Securities.

(k)   “Parent Entity”
of a Person means an entity
that, directly or indirectly, controls the applicable Person and whose common
stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such
Person or Parent Entity, the Person or Parent Entity with the largest public
market capitalization as of the date of consummation of the Fundamental
Transaction.

(l)    “Person” means
an individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, any other entity and a
government or any department or agency thereof.

(m)  “Principal Market”
means the NASD OTC Bulletin Board.

(n)   “Registration Rights
Agreement” means that certain registration rights agreement by and
among the Company and the Buyers.

(o)   “Required Holders”
means the holders of the SPA Warrants representing at least a majority of
shares of Common Stock underlying the SPA Warrants then outstanding.

(p)   “SPA Securities”
means the Common Stock purchased pursuant to the Securities Purchase Agreement.

(q)   “Successor Entity”
means the Person (or, if so
elected by the Required Holders, the Parent Entity) formed by, resulting from
or surviving any Fundamental Transaction or the Person (or, if so elected by
the Required Holders, the Parent Entity) with which such Fundamental
Transaction shall have been entered into.

[Signature
Page Follows]

 12

 

IN WITNESS WHEREOF, the Company has caused
this Warrant to Purchase Common Stock to be duly executed as of the Issuance
Date set out above.

	
  

  	
  MICROFIELD GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE
THIS

WARRANT TO PURCHASE
COMMON STOCK

MICROFIELD GROUP, INC.

The undersigned holder hereby exercises the right to
purchase _________________ of the shares of Common Stock (“Warrant Shares”) of Microfield Group, Inc.,
an Oregon corporation (the “Company”),
evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”). Capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Warrant.

1. Form of Exercise Price. The Holder intends
that payment of the Exercise Price shall be made as:

____________  a “Cash Exercise” with respect to
_________________ Warrant Shares; and/or

____________  a “Cashless Exercise” with respect to
_______________ Warrant Shares.

2. Payment of Exercise Price. In the event that the
holder has elected a Cash Exercise with respect to some or all of the Warrant
Shares to be issued pursuant hereto, the holder shall pay the Aggregate
Exercise Price in the sum of $___________________ to the Company in accordance
with the terms of the Warrant.

3. Delivery of Warrant Shares. The Company shall
deliver to the holder __________ Warrant Shares in accordance with the terms of
the Warrant.

Date: _______________ __, ______

 

	
   

  	
   

  
	
  Name of Registered Holder

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  	
   

  

 

 

ACKNOWLEDGMENT

The
Company hereby acknowledges this Exercise Notice and hereby directs [Insert Name of Transfer Agent] to issue
the above indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated [__], 2006 from the Company and acknowledged
and agreed to by [Insert Name of Transfer
Agent].

	
   

  	
  MICROFIELD GROUP, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  

 

Warrant Shares Exercise Log

	
  Date

  	
   

  	
  Number of Warrant Shares

  Available to be Exercised

  	
   

  	
  Number of Warrant

  Shares Exercised

  	
   

  	
  Number of Warrant Shares

  Remaining to be ExercisedExhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of June 30, 2006, among Microfield Group, Inc., an Oregon corporation (the “Company”), and the investors identified on the signature pages hereto
(each, an “Investor” and collectively, the “Investors”).

WHEREAS, subject to the terms and conditions set forth
in this Agreement and pursuant to Section 4(2) of the Securities Act
(as defined below) and Rule 506 promulgated thereunder, the Company desires
to issue and sell to each Investor, and each Investor, severally and not
jointly, desires to purchase from the Company certain securities of the
Company, as more fully described in this Agreement.

NOW, THEREFORE, IN CONSIDERATION of the mutual
covenants contained in this Agreement, and for other good and valuable
consideration the receipt and adequacy of which are hereby acknowledged, the
Company and the Investors agree as follows:

ARTICLE
1.

DEFINITIONS

1.1           Definitions.   In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms shall have the meanings indicated in this Section 1.1:

“Action” means any action, suit,
inquiry, notice of violation, proceeding (including any partial proceeding such
as a deposition) or investigation pending or, to the knowledge of the Company,
threatened in writing against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator, governmental
or administrative agency, regulatory authority (federal, state, county, local
or foreign), stock market, stock exchange or trading facility.

“Affiliate” means any Person
that, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person, as such terms are used
in and construed under Rule 144.

“Business Day” means any day
except Saturday, Sunday and any day which is a federal legal holiday or a day
on which banking institutions in the State of New York or State of Oregon are
authorized or required by law or other governmental action to close.

“Buy-In” has the
meaning set forth in Section 4.1(c).

“Closing” means the closing of
the purchase and sale of the Securities pursuant to Article II.

“Closing Date” means the
Business Day on which all of the conditions set forth in Sections 5.1 and 5.2
hereof are satisfied, or such other date as the parties may agree.

 

 

 

“Commission” means the
Securities and Exchange Commission.

“Common Stock” means the common
stock of the Company, no par value per share, and any securities into which
such common stock may hereafter be reclassified or changed into.

“Common Stock Equivalents” means
any securities of the Company or any Subsidiary which entitle the holder
thereof to acquire Common Stock at any time, including without limitation, any
debt, preferred stock, rights, options, warrants or other instrument that is at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock or other securities that entitle the holder to
receive, directly or indirectly, Common Stock.

“Company Counsel” means
Sichenzia Ross Friedman Ference LLP.

“Company Deliverables” has the
meaning set forth in Section 2.2(a).

“Disclosure Materials” has the
meaning set forth in Section 3.1(h).

“DTC” has the
meaning set forth in Section 6.2.

“Effective Date” means the date
that the initial Registration Statement required by Section 2(a) of
the Registration Rights Agreement is first declared effective by the
Commission.

“Effectiveness Date”
has the meaning set forth in the Registration Rights Agreement.

“Exchange Act” means the
Securities Exchange Act of 1934, as amended.

“GAAP” means U.S. generally
accepted accounting principles.

“Intellectual Property Rights”
has the meaning set forth in Section 3.1(p).

“Investment Amount” means, with
respect to each Investor, the Investment Amount indicated on such Investor’s
signature page to this Agreement.

“Investor Deliverables” has the
meaning set forth in Section 2.2(b).

“Investor Party” has the meaning
set forth in Section 4.7.

“Irrevocable Transfer Agent
Instructions” has the meaning set forth in Section 6.2.

“Lien” means any lien, charge,
encumbrance, security interest, right of first refusal or other restrictions of
any kind.

“Material Adverse Effect” means
any of (i) a material and adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material and adverse

 

 2
 

 

 

effect on the results of
operations, assets, prospects, business or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or (iii) an adverse
impairment to the Company’s ability to perform in any material respect on a
timely basis its obligations under any Transaction Document.

“New York Courts” means the
state and federal courts sitting in the City of New York, Borough of Manhattan.

 “Per Unit
Purchase Price” equals $2.00.

“Person” means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or
an agency or subdivision thereof) or other entity of any kind.

“Proceeding” means an action,
claim, suit, investigation or proceeding (including, without limitation, an
investigation or partial proceeding, such as a deposition), whether commenced
or threatened.

“Registration Rights Agreement”
means the Registration Rights Agreement, dated as of the date of this
Agreement, among the Company and the Investors, in the form of Exhibit A
hereto.

“Registration Statement” means a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by the Investors of the Shares and the
Warrant Shares.

“Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such Rule.

“SEC Reports” has the meaning
set forth in Section 3.1(h).

“Securities” means the Shares,
the Warrants and the Warrant Shares.

“Securities Act” means the
Securities Act of 1933, as amended.

“Share Delivery Date”
has the meaning set forth in Section 4.1(c).

“Shares” means the shares of
Common Stock issued or issuable to the Investors pursuant to this Agreement.

“Short Sales” include, without
limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act and all types of direct and indirect
stock pledges, forward sale contracts, options, puts, calls, swaps and similar
arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated brokers.

 

 3
 

 

 

“Subsidiary” means all subsidiaries
of the Company, as set forth on Schedule 3.1(a).

“Trading Day” means (i) a
day on which the Common Stock is traded on a Trading Market, or (ii) if
the Common Stock is not quoted on any Trading Market, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the
Pink Sheets, LLC (or any similar organization or agency succeeding to its
functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i) and (ii) hereof,
then Trading Day shall mean a Business Day.

“Trading Market” means whichever
of the New York Stock Exchange, the American Stock Exchange, the NASDAQ
National Market, the NASDAQ Capital Market or OTC Bulletin Board on which the
Common Stock is listed or quoted for trading on the date in question.

“Transaction Documents” means
this Agreement, the Warrants, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions and any other documents or agreements
executed in connection with the transactions contemplated hereunder.

“Warrants” means the Common
Stock purchase warrants in the form of Exhibit B, which are
issuable  to the Investors at the
Closing.

“Warrant Shares” means the
shares of Common Stock issuable upon exercise of the Warrants.

ARTICLE
2.

PURCHASE AND SALE

2.1.          Closing.   Subject to the
terms and conditions set forth in this Agreement, at the Closing the Company
shall issue and sell to each Investor, and each Investor shall, severally and
not jointly, purchase from the Company, the Shares and the Warrants
representing such Investor’s Investment Amount. The Closing shall take place at
the offices of Bryan Cave LLP, 1290 Avenue of the Americas, New York, NY 10104
on the Closing Date or at such other location or time as the parties may agree.

2.2.          Closing Deliveries.   (a) 
At the Closing, the Company shall deliver or cause to be delivered to each
Investor the following (the “Company Deliverables”):

(i)            a certificate evidencing a number of Shares equal to such
Investor’s Investment Amount divided by the Per Unit Purchase Price, registered
in the name of such Investor;

(ii)           a Warrant, registered in the name of such Investor,
pursuant to which such Investor shall have the right to acquire the number of
shares of Common Stock equal to 75% of the number of Shares issuable to such
Investor pursuant to Section 2.2(a)(i);

(iii)          the legal opinion of Company Counsel, in agreed form,
addressed to the Investors; and

 

 4
 

 

 

(iv)          the Registration Rights Agreement, duly executed by the
Company.

(b)           At the Closing, each Investor shall deliver or cause to be
delivered to the Company the following (the “Investor
Deliverables”):

(i)            its Investment Amount, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose; and

(ii)           the Registration Rights Agreement, duly executed by such
Investor.

ARTICLE
3.

REPRESENTATIONS AND WARRANTIES

3.1.          Representations and Warranties of
the Company.   The Company hereby makes the following representations
and warranties to each Investor:

(a)           Subsidiaries. The Company has no direct or indirect
Subsidiaries other than as specified in the SEC Reports.   The
Company owns, directly or indirectly, all of the capital stock of each
Subsidiary free and clear of any and all Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights.

(b)           Organization and Qualification. The Company and
each Subsidiary are duly incorporated or otherwise organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws
or other organizational or charter documents. The Company and each Subsidiary
are duly qualified to conduct its respective businesses and are in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, have
or reasonably be expected to result in a Material Adverse Effect.

(c)           Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company’s Board of Directors and no further action is
required by the Company, its Board of Directors or its stockholders in connection
therewith. Each Transaction Document has been (or upon delivery will have been)
duly executed by the Company and, when delivered

 

 5
 

 

 

in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable principles of general
application.

(d)           No Conflicts. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby do not and will
not (i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of, any agreement, credit facility, debt or other instrument (evidencing a
Company or Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company
or a Subsidiary is subject (including federal and state securities laws and
regulations and the rules and regulations of the Trading Market on which
the Common Stock is listed),or by which any property or asset of the Company or
a Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.

(e)           Filings, Consents and Approvals. The Company is not
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or any regulatory or self
regulatory agency or other Person in connection with the execution, delivery
and performance by the Company of the Transaction Documents, other than (i) the
filing with the Commission of one or more Registration Statements in accordance
with the requirements of the Registration Rights Agreement, (ii) filings
required by state securities laws, (iii) the filing of a Notice of Sale of
Securities on Form D with the Commission under Regulation D of the
Securities Act, (iv) the filings required in accordance with Section 4.5
and (v) those that have been made or obtained prior to the date of this
Agreement.

(f)            Issuance of the Securities. The Securities have
been duly authorized and, when issued and paid for in accordance with the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all taxes, charges and Liens, other than the
transfer restrictions set forth in the Transaction Documents. The Company has
reserved from its duly authorized capital stock the shares of Common Stock
issuable pursuant to this Agreement and the Warrants in order to issue the
Shares and the Warrant Shares.

(g)           Capitalization. The number of shares and type of
all authorized, issued and outstanding capital stock of the Company, and all
shares of Common Stock reserved for issuance under the Company’s various option
and incentive plans, is specified in the SEC Reports. Except as specified in
the SEC Reports, no securities of the Company are entitled to preemptive or
similar rights, and no Person has any right of first refusal, preemptive right,
right

 

 6
 

 

 

of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents. Except
as specified in the SEC Reports, there are no outstanding options, warrants,
scrip rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. The issue and sale of the Securities
will not, immediately or with the passage of time, obligate the Company to
issue shares of Common Stock or other securities to any Person (other than the
Investors) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities.

(h)           SEC Reports; Financial Statements. The Company has
filed all reports, schedules, forms statements and other documents required to
be filed by it under the Securities Act and the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the twelve
months preceding the date hereof (or such shorter period as the Company was
required by law to file such reports) (the foregoing materials being
collectively referred to herein as the “SEC
Reports” and, together with the Schedules to this Agreement (if
any), the “Disclosure Materials”)
on a timely basis or has timely filed a valid extension of such time of filing
and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.

(i)            Press Releases. The press releases disseminated by
the Company during the twelve months preceding the date of this Agreement taken
as a whole do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made and when made, not misleading.

(j)            Material Changes. Since the date of the latest
audited financial statements included within the SEC Reports, there has been no
event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect. Since the date of the latest
audited financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports, (i) the Company has not
incurred any liabilities (contingent or

 

 7
 

 

 

otherwise) other than (A) trade
payables, accrued expenses and other liabilities incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP
or required to be disclosed in filings made with the Commission, (ii) the
Company has not altered its method of accounting or the identity of its
auditors, (iii) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, and (iv) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any
request for confidential treatment of information.

(k)           Litigation. There is no Action which (i) adversely
affects or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) except as specifically
disclosed in the SEC Reports, could, if there were an unfavorable decision,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof (in his or her capacity as such), is or has been
the subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty, except
as specifically disclosed in the SEC Reports. There has not been, and to the
knowledge of the Company, there is not pending any investigation by the
Commission involving the Company or any current or former director or officer
of the Company (in his or her capacity as such). The Commission has not issued
any stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange Act or the
Securities Act.

(l)            Labor Relations. No material labor dispute exists
or, to the knowledge of the Company, is imminent with respect to any of the
employees of the Company.

(m)          Compliance. Except as disclosed in the SEC Reports
or on Schedule 3.1(m), neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is
in violation of any order of any court, arbitrator or governmental body, or (iii) is
or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal,
state and local laws relating to taxes, environmental protection, occupational
health and safety, product quality and safety and employment and labor matters,
except in each case as could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect. The Company is in
compliance with all effective requirements of the Sarbanes-Oxley Act of 2002,
as amended, and the rules and regulations thereunder, that are applicable
to it, except where such noncompliance could not have resulted or reasonably be
expected to result in a Material Adverse Effect.

(n)           Regulatory Permits. The Company and the
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign

 

 8
 

 

 

regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except where the
failure to possess such permits could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect, and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such permits.

(o)           Title to Assets. The Company and the Subsidiaries
have good and marketable title in fee simple to all real property owned by them
that is material to their respective businesses and good and marketable title
in all personal property owned by them that is material to their respective
businesses, in each case free and clear of all Liens, except for Liens as do
not materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Company and the Subsidiaries. Any real property and facilities held under lease
by the Company and the Subsidiaries are held by them under valid, subsisting
and enforceable leases of which the Company and the Subsidiaries are in
compliance, except as could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect.

(p)           Patents and Trademarks. The Company and the
Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary or material for use in
connection with their respective businesses as described in the SEC Reports and
which the failure to so have could, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect (collectively,
the “Intellectual Property Rights”).
Neither the Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any Subsidiary violates or
infringes upon the rights of any Person. Except as set forth in the SEC
Reports, to the knowledge of the Company, all such Intellectual Property Rights
are enforceable and there is no existing infringement by another Person of any
of the Intellectual Property Rights.

(q)           Insurance. The Company and the Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as are prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged. The Company has no reason
to believe that it will not be able to renew its and the Subsidiaries’ existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business on
terms consistent with market for the Company’s and such Subsidiaries’
respective lines of business.

(r)            Transactions With Affiliates and Employees. Except
as set forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $60,000,
other than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for

 

 9
 

 

 

expenses incurred on behalf of the Company
and (iii) for employee benefits, including stock option agreements under
any stock option plan of the Company.

(s)           Internal Accounting Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and
procedures to ensure that material information relating to the Company,
including its Subsidiaries, is made known to the certifying officers by others
within those entities, particularly during the period in which the Company’s Form 10-KSB
or 10-QSB, as the case may be, is being prepared. The Company’s
certifying officers have evaluated the effectiveness of the Company’s controls
and procedures in accordance with Item 307 of Regulation S-K under the Exchange
Act for the Company’s most recently ended fiscal quarter or fiscal year-end
(such date, the “Evaluation Date”).
The Company presented in its most recently filed Form 10-KSB or Form 10-QSB
the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Other than as described in the Company’s Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2005 and the specific SEC Reports
identified in Item 8 therein, the Company’s certifying officers are not aware
of any, nor has the Company been advised by its present or former independent
registered public accounting firms of any, material deficiencies in the Company’s
internal controls or disclosure controls. Since the Evaluation Date, there have
been no significant changes in the Company’s internal controls (as such term is
defined in Item 308(c) of Regulation S-K under the Exchange Act) or, to
the Company’s knowledge, in other factors that could significantly affect the
Company’s internal controls.

(t)            Solvency. Based on the financial condition of the
Company as of the Closing Date (and assuming that the Closing shall have
occurred), (i) the Company’s fair saleable value of its assets exceeds the
amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities)
as they mature, (ii) the Company’s assets do not constitute unreasonably
small capital to carry on its business for the current fiscal year as now
conducted and as proposed to be conducted including its capital needs taking
into account the particular capital requirements of the business conducted by
the Company, and projected capital requirements and capital availability
thereof, and (iii) the current cash flow of the Company, together with the
proceeds the Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would be sufficient
to pay all amounts on or in respect of its debt when such amounts are required
to be paid. The Company does not intend to incur debts beyond its ability to
pay such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).

 

 10
 

 

 

(u)           Certain Fees. Except as described in Schedule
3.1(u), no brokerage or finder’s fees or commissions are or will be payable
by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The Investors shall have no
obligation with respect to any fees or with respect to any claims (other than
such fees or commissions owed by an Investor pursuant to written agreements
executed by such Investor which fees or commissions shall be the sole
responsibility of such Investor) made by or on behalf of other Persons for fees
of a type contemplated in this Section that may be due in connection with
the transactions contemplated by this Agreement.

(v)           Certain Registration Matters. Assuming the accuracy
of the Investors’ representations and warranties set forth in Section 3.2(b)-(e),
no registration under the Securities Act is required for the offer and sale of
the Shares and Warrant Shares by the Company to the Investors under the Transaction
Documents. The Company is eligible to register its Common Stock for resale by
the Investors under Form S-1 promulgated under the Securities Act. The
Company has not granted or agreed to grant to any Person any rights (including “piggy-back”
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority that have not been satisfied.

(w)          Listing and Maintenance Requirements. Except as
specified in the SEC Reports, the Company has not, in the two years preceding
the date hereof, received notice from any Trading Market to the effect that the
Company is not in compliance with the listing or maintenance requirements
thereof. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with the listing and
maintenance requirements for continued listing of the Common Stock on the
Trading Market on which the Common Stock is currently listed or quoted. The
issuance and sale of the Securities under the Transaction Documents does not
contravene the rules and regulations of the Trading Market on which the
Common Stock is currently listed or quoted, and no approval of the shareholders
of the Company thereunder is required for the Company to issue and deliver to
the Investors the Securities contemplated by the Transaction Documents.

(x)            Investment Company. The Company is not, and is not
an Affiliate of, and immediately following the Closing will not have become, an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended.

(y)           Application of Takeover Protections. The Company
has taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover
provision under the Company’s Certificate of Incorporation (or similar charter
documents) or the laws of its state of incorporation that is or could become
applicable to the Investors as a result of the Investors and the Company
fulfilling their obligations or exercising their rights under the Transaction
Documents, including, without limitation, the Company’s issuance of the
Securities and the Investors’ ownership of the Securities.

(z)            No Additional Agreements. The Company does not
have any agreement or understanding with any Investor with respect to the
transactions contemplated by the Transaction Documents other than as specified
in the Transaction Documents.

 

 11
 

 

 

(aa)         Disclosure. The Company confirms that neither it nor
any Person acting on its behalf has provided any Investor or its respective
agents or counsel with any information that the Company believes constitutes
material, non-public information except insofar as the existence and terms of
the proposed transactions hereunder may constitute such information. The
Company understands and confirms that the Investors will rely on the foregoing
representations and covenants in effecting transactions in securities of the
Company. All disclosure provided to the Investors regarding the Company, its
business and the transactions contemplated hereby, furnished by or on behalf of
the Company (including the Company’s representations and warranties set forth
in this Agreement) are true and correct and do not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements made therein, in light of the circumstances under which
they were made, not misleading. The Company is not aware of any event or
circumstance or information with respect to the Company or any Subsidiary or
either of its or their respective business, properties, prospects, operations
or financial conditions, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not
been so publicly announced or disclosed (assuming for this purpose that the
Company’s reports filed under the Exchange Act, are being incorporated into an
effective registration statement filed by the Company under the 1933 Act).

(bb)         Manipulation of Price. The Company has not, and to
its knowledge no one acting on its behalf has taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
any of the Securities.

(cc)         No Integration. Neither the Company, nor any of its
affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the Securities Act or any applicable shareholder approval provision of any
Trading Market on which any of the securities of the Company are listed or
designated.

3.2.          Representations and Warranties of
the Investors.   Each Investor hereby, for itself and for no other
Investor, represents and warrants to the Company as follows:

(a)           Organization; Authority. Such Investor is an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations thereunder. The execution, delivery and performance by such
Investor of the transactions contemplated by this Agreement has been duly
authorized by all necessary corporate or, if such Investor is not a
corporation, such partnership, limited liability company or other applicable like
action, on the part of such Investor. Each of this Agreement and the
Registration Rights Agreement has been duly executed by such Investor, and when
delivered by such Investor in accordance with the terms hereof, will constitute
the valid and legally binding obligation of such Investor, enforceable against
it in accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or

 

 12
 

 

 

similar laws relating to, or affecting generally
the enforcement of, creditors’ rights and remedies or by other equitable
principles of general application.

(b)           Investment Intent. Such Investor is acquiring the
Securities as principal for its own account for investment purposes only and
not with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Investor’s right at all times to
sell or otherwise dispose of all or any part of such Securities in compliance
with applicable federal and state securities laws. Subject to the immediately
preceding sentence, nothing contained herein shall be deemed a representation
or warranty by such Investor to hold the Securities for any period of time. Such
Investor is acquiring the Securities hereunder in the ordinary course of its
business. Such Investor does not have any agreement or understanding, directly
or indirectly, with any Person to distribute any of the Securities.

(c)           Investor Status. At the time such Investor was
offered the Securities, it was, and at the date hereof it is, and on each date
on which it exercises Warrants it will be, an “accredited investor” as defined
in Rule 501(a) under the Securities Act. Such Investor is not a
registered broker-dealer under Section 15 of the Exchange Act.

(d)           General Solicitation. Such Investor is not
purchasing the Securities as a result of any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.

(e)           Access to Information. Such Investor acknowledges
that it has reviewed the Disclosure Materials and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and
conditions of the offering of the Securities and the merits and risks of
investing in the Securities; (ii) access to information about the Company
and the Subsidiaries and their respective financial condition, results of
operations, business, properties, management and prospects sufficient to enable
it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of such Investor or its representatives
or counsel shall modify, amend or affect such Investor’s right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company’s
representations and warranties contained in the Transaction Documents.

(f)            Certain Trading Activities. Such Investor has not
directly or indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with such Investor, engaged in any transactions in the
securities of the Company, including, without limitations, any Short Sales,
whether or not against the box, established any “put equivalent position” (as
defined in Rule 16a-1(h) under the Exchange Act) with respect
to the Common Stock, borrowed or pre-borrowed any shares of Common Stock, or
granted any other right (including, without limitation, any put or call option)
with respect to the Common Stock or with respect to any security that includes,
relates to or derived any significant part of its value from the Common Stock
or otherwise sought to hedge its position in the Securities (each, a “Prohibited Transaction”), since the time
that such Investor was first contacted by the Company or Roth Capital Partners,

 

 13
 

 

 

LLC regarding an investment in the Company as
contemplated hereunder. Prior to the earliest to occur of (i) the
termination of this Agreement or (ii) the earlier of (I) the
Effectiveness Date and (II) the Effective Date, such Investor shall not,
nor shall any Person acting on its behalf or pursuant to any understanding with
it, engage, directly or indirectly, in (a) a Prohibited Transaction nor (b) any
sale, assignment, pledge, hypothecation, put, call, or other transfer of any of
the shares of Common Stock, warrants or other securities of the issuer acquired
hereunder. Notwithstanding the foregoing, in the case of LB I Group Inc., the
representation set forth above shall only apply with respect to the Global
Trading Strategies group of Lehman Brothers Holdings Inc.

(g)           Independent Investment Decision. Such Investor has
independently evaluated the merits of its decision to purchase Securities
pursuant to the Transaction Documents, and such Investor confirms that it has
not relied on the advice of any other Investor’s business and/or legal counsel
in making such decision. Such Investor has not relied on the business or legal
advice of Roth Capital Partners, LLC or any of its agents, counsel or
Affiliates in making its investment decision hereunder, and confirms that none
of such Persons has made any representations or warranties to such Investor in
connection with the transactions contemplated by the Transaction Documents.

The Company
acknowledges and agrees that no Investor has made or makes any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in this Section 3.2.

ARTICLE
4.

OTHER AGREEMENTS OF THE PARTIES

4.1.          (a)           Securities
may only be disposed of in compliance with state and federal securities laws. In
connection with any transfer of the Securities other than pursuant to an
effective registration statement, to the Company, to an Affiliate of an
Investor or in connection with a pledge as contemplated in Section 4.1(b),
the Company may require the transferor thereof to provide to the Company an
opinion of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that
such transfer does not require registration of such transferred Securities
under the Securities Act.

(b)           Certificates evidencing the Securities will contain the
following legend, until such time as they are not required under Section 4.1(c) (and
a stop-transfer order may be placed against transfer of such stock
certificates):

THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE LAW,
AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH
TRANSACTION INVOLVING THESE SECURITIES OR (B) THE COMPANY RECEIVES AN
OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THESE SECURITIES (CONCURRED IN BY
LEGAL COUNSEL FOR THE

 

 14
 

 

 

COMPANY)
STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION OR (C) THE
COMPANY OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION.

The Company acknowledges and agrees that an Investor
may from time to time pledge, and/or grant a security interest in some or all
of the Securities pursuant to a bona fide margin agreement in connection with a
bona fide margin account and, if required under the terms of such agreement or
account, such Investor may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject to
approval or consent of the Company and no legal opinion of legal counsel to the
pledgee, secured party or pledgor shall be required in connection with the
pledge, but such legal opinion may be required in connection with a subsequent
transfer following default by the Investor transferee of the pledge. No notice
shall be required of such pledge. At the appropriate Investor’s expense, the
Company will execute and deliver such reasonable documentation as a pledgee or
secured party of Securities may reasonably request in connection with a pledge
or transfer of the Securities including the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) of the Securities
Act or other applicable provision of the Securities Act to appropriately amend
the list of Selling Stockholders thereunder.

(c)           Certificates evidencing Shares and Warrant Shares shall
not contain any legend (including the legend set forth in Section 4.1(b)):
(i) if such Shares or Warrant Shares are registered for resale under the
Securities Act, or (ii) following a sale or transfer of such Shares or
Warrant Shares pursuant to Rule 144 (assuming the transferee is not an
Affiliate of the Company), or (iii) while such Shares or Warrant Shares
are eligible for sale under Rule 144(k) or (iv) in connection
with a sale, assignment or other transfer, such Investor provides the Company
with an opinion of counsel, in a form reasonably acceptable to the Company, to
the effect that such sale or transfer of the Shares or Warrant Shares may be
made without registration under the applicable requirements of the Securities
Act. If an Investor shall make a sale or transfer of Shares or Warrant Shares
either (x) pursuant to Rule 144 or (y) pursuant to a
registration statement and in each case shall have delivered to the Company or
the Company’s transfer agent the certificate representing Shares or Warrant
Shares containing a restrictive legend which are the subject of such sale or
transfer and a representation letter in customary form  (the date
of such sale or transfer and Share or Warrant Share, as the case may be,
delivery being the “Share Delivery Date”)
and (1) the Company shall fail to deliver or cause to be delivered to such
Investor a certificate representing such Shares or Warrant Shares that is free
from all restrictive or other legends by the third Trading Day following the
Share Delivery Date and (2) following such third Trading Day after the
Share Delivery Date and prior to the time such Shares or Warrant Shares are
received free from restrictive legends, the Investor, or any third party on
behalf of such Investor, purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Investor of
such Shares or Warrant Shares (a “Buy-In”),
then the Company shall pay in cash to the Investor (for costs incurred either
directly by such Investor or on behalf of a third party) the amount by which
the total purchase price paid for Common Stock as a result of the Buy-In
(including brokerage commissions, if any) exceed the proceeds received by such
Investor as a result of the sale to which such Buy-In relates. The Investor
shall provide the Company written notice indicating the amounts payable to the
Investor in respect of the Buy-In.

 

 15

 

4.2.          Furnishing of Information. As
long as any Investor owns the Securities, the Company covenants to timely file
(or obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. As long as any Investor owns Securities, if the
Company is not required to file reports pursuant to such laws, it will prepare
and furnish to the Investors and make publicly available in accordance with Rule 144(c) such
information as is required for the Investors to sell the Shares and Warrant
Shares under Rule 144. The Company further covenants that it will take
such further action as any holder of Securities may reasonably request, all to
the extent required from time to time to enable such Person to sell the Shares
and Warrant Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.

4.3.          Integration. The Company shall
not, and shall use its best efforts to ensure that no Affiliate of the Company
shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in Section 2 of the Securities Act)
that would be integrated with the offer or sale of the Securities in a manner
that would require the registration under the Securities Act of the sale of the
Securities to the Investors, or that would be integrated with the offer or sale
of the Securities for purposes of the rules and regulations of any Trading
Market in a manner that would require stockholder approval of the sale of the
securities to the Investors.

4.4.          Subsequent Registrations. Other
than pursuant to the Registration Statement, prior to the Effective Date, the
Company may not file any registration statement (other than on Form S-8)  with the Commission with respect to any
securities of the Company.

4.5.          Securities Laws Disclosure;
Publicity. By 9:00 a.m. (New York time) on the Trading Day following
the execution of this Agreement, and by 9:00 a.m. (New York time) on the
Trading Day following the Closing Date, the Company shall issue press releases
disclosing the transactions contemplated hereby and the Closing. On the Trading
Day following the execution of this Agreement the Company will file a Current
Report on Form 8-K disclosing the material terms of the Transaction
Documents (and attach as exhibits thereto the Transaction Documents), and on
the Trading Day following the Closing Date the Company will file an additional
Current Report on Form 8-K to disclose the Closing. In addition, the
Company will make such other filings and notices in the manner and time
required by the Commission and the Trading Market on which the Common Stock is
listed. Notwithstanding the foregoing, the Company shall not publicly disclose
the name of any Investor, or include the name of any Investor in any filing
with the Commission (other than the Registration Statement and any exhibits to
filings made in respect of this transaction in accordance with periodic filing
requirements under the Exchange Act) or any regulatory agency or Trading
Market, without the prior written consent of such Investor, except to the
extent such disclosure is required by law or Trading Market regulations.

4.6.          Limitation on Issuance of Future
Priced Securities. During the six months following the Closing Date, the
Company shall not issue any “Future Priced Securities” as such term is
described by NASD IM-4350-1.

4.7.          Indemnification of Investors. In
addition to the indemnity provided in the Registration Rights Agreement, the
Company will indemnify and hold the Investors and their 

 16
 

 

directors, officers, shareholders, partners, employees
and agents (each, an “Investor Party”)
harmless from any and all losses, liabilities, obligations, claims, contingencies,
damages, costs and expenses, including all judgments, amounts paid in
settlements, court costs and reasonable attorneys’ fees and costs of
investigation (collectively, “Losses”) that
any such Investor Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred. Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 4.7 shall be the same as those set forth in
Section 5 of the Registration Rights Agreement.

4.8.          Non-Public Information. The
Company covenants and agrees that neither it nor any other Person acting on its
behalf will provide any Investor or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Investor shall have executed a written agreement regarding
the confidentiality and use of such information. The Company understands and
confirms that each Investor shall be relying on the foregoing representations
in effecting transactions in securities of the Company.

4.9.          Listing of Securities. The
Company agrees, (i) if the Company applies to have the Common Stock traded
on any other Trading Market, it will include in such application the Shares and
Warrant Shares, and will take such other action as is necessary or desirable to
cause the Shares and Warrant Shares to be listed on such other Trading Market
as promptly as possible, and (ii) it will take all action reasonably
necessary to continue the listing and trading of its Common Stock on a Trading
Market and will comply in all material respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the Trading
Market.

4.10.        Use of Proceeds. The Company will
use the net proceeds from the sale of the Securities hereunder for working
capital purposes and not for the satisfaction of any portion of the Company’s
debt (other than payment of trade payables and accrued expenses in the ordinary
course of the Company’s business and consistent with prior practices), or to
redeem any Common Stock or Common Stock Equivalents.

4.11.        Transfer Agent. As soon as
commercially practicable following the Closing Date, the Company shall
terminate its current agreement with its transfer agent (the “Transfer Agent”),
enter into a new agreement with a new transfer agent (the “New Transfer
Agent”), and promptly thereafter, deliver to each Buyer a copy of
the Irrevocable Transfer Agent Instructions, in the form of Exhibit D
attached hereto, which instructions shall have been delivered to and
acknowledged in writing by the Company’s Transfer Agent. Notwithstanding the foregoing
sentence, if the Company has delivered to each Buyer a copy of the
Irrevocable Transfer Agent Instructions, in the form of Exhibit D attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company’s Transfer Agent, the Company shall not be required to
terminate its relationship with the Transfer Agent.

 17
 

 

ARTICLE 5.

CONDITIONS PRECEDENT TO CLOSING

5.1.          Conditions Precedent to the
Obligations of the Investors to Purchase Securities. The obligation of each
Investor to acquire Securities at the Closing is subject to the satisfaction or
waiver by such Investor, at or before the Closing, of each of the following
conditions:

(a)           Representations
and Warranties. The representations and warranties of the Company contained
herein shall be true and correct in all material respects as of the date when
made and as of the Closing as though made on and as of such date;

(b)           Performance.
The Company shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by it at or
prior to the Closing;

(c)           No
Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents;

(d)           Adverse
Changes. Since the date of execution of this Agreement, no event or series
of events shall have occurred that reasonably could have or result in a
Material Adverse Effect;

(e)           No
Suspensions of Trading in Common Stock; Listing. Trading in the Common
Stock shall not have been suspended by the Commission or any Trading Market
(except for any suspensions of trading of not more than one Trading Day solely
to permit dissemination of material information regarding the Company) at any
time since the date of execution of this Agreement, and the Common Stock shall
have been at all times since such date listed for trading on a Trading Market;

(f)            Company
Deliverables. The Company shall have delivered the Company Deliverables in
accordance with Section 2.2(a); and

(g)           Termination.
This Agreement shall not have been terminated as to such Investor in accordance
with Section 7.5.

5.2.          Conditions Precedent to the
Obligations of the Company to sell Securities. The obligation of the
Company to sell Securities at the Closing is subject to the satisfaction or
waiver by the Company, at or before the Closing, of each of the following
conditions:

(a)           Representations
and Warranties. The representations and warranties of each Investor
contained herein shall be true and correct in all material respects as of the
date when made and as of the Closing Date as though made on and as of such
date;

(b)           Performance.
Each Investor shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by the Transaction

 18
 

 

Documents to be performed, satisfied or complied with
by such Investor at or prior to the Closing;

(c)           No
Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents;

(d)           Investors
Deliverables. Each Investor shall have delivered its Investors Deliverables
in accordance with Section 2.2(b); and

(e)           Termination.
This Agreement shall not have been terminated as to such Investor in accordance
with Section 7.5.

ARTICLE 6.

REGISTER; TRANSFER AGENT INSTRUCTIONS

6.1.          Register. The Company shall
maintain at its principal executive offices (or such other office or agency of
the Company as it may designate by notice to each holder of Securities), a
register for the Securities in which the Company shall record the name and
address of the Person in whose name the Securities have been issued (including
the name and address of each transferee) and the number of Shares and the
number of Warrant Shares issuable upon exercise of the Warrants held by such
Person. The Company shall keep the register open and available at all times
during business hours for inspection of any Investor or its legal
representatives upon reasonable notice.

6.2.          Transfer Agent Instructions. Subject
to Section 4.11, the Company shall issue irrevocable instructions to the
New Transfer Agent, and any subsequent transfer agent, to issue certificates or
credit shares to the applicable balance accounts at The Depository Trust
Company (“DTC”), registered in the name of each
Investor or its respective nominee(s), for the Shares and Warrant Shares issued
at the Closing or upon exercise of the Warrants in such amounts as specified
from time to time by each Investor to the Company (the “Irrevocable
Transfer Agent Instructions”). The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 6.2, and stop transfer instructions to give effect to Section 4.1(b) hereof,
will be given by the Company to the New Transfer Agent , and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the other
Transaction Documents. If an Investor effects a sale, assignment or transfer of
the Securities in accordance with Section 4.1, the Company shall permit
the transfer and shall promptly instruct the Transfer Agent or the New Transfer
Agent, as the case may be, to issue one or more certificates or credit shares
to the applicable balance accounts at DTC in such name and in such
denominations as specified by such Investor to effect such sale, transfer or
assignment. In the event that such sale, assignment or transfer involves Shares
or Warrant Shares sold, assigned or transferred pursuant to an effective
registration statement or pursuant to Rule 144, the Transfer Agent or the
New Transfer Agent, as applicable, shall issue such Securities to the Investor,
assignee or transferee, as the case may be, without any restrictive legend. The
Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to an Investor. Accordingly, the Company 

 19
 

 

acknowledges that the remedy at law for a breach of
its obligations under this Section 6.2 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section 6.2, that an Investor shall be entitled, in addition to all
other available remedies, to an order and/or injunction restraining any breach
and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.

ARTICLE 7.

MISCELLANEOUS

7.1.          Fees and Expenses. Each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of the
Transaction Documents; provided, however, that the Company shall
pay the legal fees of Schulte Roth & Zabel LLP for all reasonable
costs and expenses, not to exceed $5,000, incurred in connection with the
transactions contemplated by the Transaction Documents. The Company shall pay
all stamp and other taxes and duties levied in connection with the sale of the
Securities.

7.2.          Entire Agreement. The
Transaction Documents, together with the Exhibits and Schedules thereto,
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements, understandings, discussions
and representations, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules.

7.3.          Notices. Any and all notices or
other communications or deliveries required or permitted to be provided
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile (provided the sender receives a machine-generated
confirmation of successful transmission) at the facsimile number specified in
this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than
6:30 p.m. (New York City time) on any Trading Day, (c) the Trading
Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom
such notice is required to be given. The address for such notices and
communications shall be as follows:

	
   

  	
  If to the Company:

  	
   

  	
  Microfield Group, Inc.

  
	
   

  	
   

  	
   

  	
  111 Southwest
  Columbia, Suite 400

  
	
   

  	
   

  	
   

  	
  Portland, Oregon
  97201

  
	
   

  	
   

  	
   

  	
  Facsimile:

  	
   

  	
  (503) 419-3333

  
	
   

  	
   

  	
   

  	
  Attention:

  	
   

  	
  Chief Executive
  Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
   

  	
  Sichenzia Ross Friedman Ference LLP

  
	
   

  	
   

  	
   

  	
  1065 Avenue of
  the Americas, 21st Floor

  
	
   

  	
   

  	
   

  	
  New York, NY
  10018

  
	
   

  	
   

  	
   

  	
  Facsimile:

  	
   

  	
  (212) 930-9725

  

 

 20
 

 

 

	
  

  	
   

  	
   

  	
  Attention:

  	
   

  	
  Jeffrey
  Fessler, Esq.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  If to an
  Investor:

  	
   

  	
  To the address set forth under such Investor’s name
  on the signature pages hereof;

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
   

  	
  Schulte Roth & Zabel LLP

  
	
   

  	
   

  	
   

  	
  919 Third Avenue

  
	
   

  	
   

  	
   

  	
  New York, New
  York 10022

  
	
   

  	
   

  	
   

  	
  Telephone:

  	
   

  	
  (212) 756-2000

  
	
   

  	
   

  	
   

  	
  Facsimile:

  	
   

  	
  (212) 593-5955

  
	
   

  	
   

  	
   

  	
  Attention:

  	
   

  	
  Eleazer N. Klein, Esq.

  

 

or such other address as may be designated in writing
hereafter, in the same manner, by such Person.

7.4.          Amendments; Waivers; No Additional
Consideration. No provision of this Agreement may be waived or amended
except in a written instrument signed by the Company and the Investors holding
a majority of the Shares. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right. No consideration shall be offered or
paid to any Investor to amend or consent to a waiver or modification of any
provision of any Transaction Document unless the same consideration is also
offered to all Investors who then hold Shares.

7.5.          Termination. This Agreement may
be terminated prior to Closing:

(a)           by
written agreement of the Investors and the Company; and

(b)           by
the Company or an Investor (as to itself but no other Investor) upon written
notice to the other, if the Closing shall not have taken place by 6:30 p.m.
Eastern time on the Outside Date; provided, that the right to terminate
this Agreement under this Section 7.5(b) shall not be available to
any Person whose failure to comply with its obligations under this Agreement
has been the cause of or resulted in the failure of the Closing to occur on or
before such time.

In the event of a termination pursuant to this
Section, the Company shall promptly notify all non-terminating Investors. Upon
a termination in accordance with this Section 7.5, the Company and the
terminating Investor(s) shall not have any further obligation or liability
(including as arising from such termination) to the other and no Investor will
have any liability to any other Investor under the Transaction Documents as a
result therefrom.

7.6.          Construction. The headings
herein are for convenience only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof. The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict
construction will be applied against any party. This Agreement shall be
construed as if drafted jointly by the parties, and no presumption or 

 21
 

 

burden of proof shall arise favoring or disfavoring
any party by virtue of the authorship of any provisions of this Agreement or
any of the Transaction Documents.

7.7.          Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Investors. Any Investor may assign any or all of its rights
under this Agreement to any Person to whom such Investor assigns or transfers
any Securities, provided such transferee agrees in writing to be bound, with
respect to the transferred Securities, by the provisions hereof that apply to
the “Investors.”

7.8.          No Third-Party Beneficiaries. This
Agreement is intended for the benefit of the parties hereto and their
respective successors and permitted assigns and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 4.7 (as to each Investor Party).

7.9.          Governing Law. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed and enforced in accordance with
the internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective Affiliates, employees or agents) shall be
commenced exclusively in the New York Courts. Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any Proceeding, any claim that
it is not personally subject to the jurisdiction of any such New York Court, or
that such Proceeding has been commenced in an improper or inconvenient forum. Each
party hereto hereby irrevocably waives personal service of process and consents
to process being served in any such Proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law. Each
party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby. If either party shall commence a Proceeding to enforce any provisions
of a Transaction Document, then the prevailing party in such Proceeding shall
be reimbursed by the other party for its reasonable attorneys’ fees and other
costs and expenses incurred with the investigation, preparation and prosecution
of such Proceeding.

7.10.        Survival. The representations,
warranties, agreements and covenants contained herein shall survive the Closing
and the delivery of the Securities.

7.11.        Execution. This Agreement may be
executed in two or more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become 

 22
 

 

effective when counterparts have been signed by each
party and delivered to the other party, it being understood that both parties
need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page were
an original thereof.

7.12.        Severability. If any provision of
this Agreement is held to be invalid or unenforceable in any respect, the
validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affected or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.

7.13.        Rescission and Withdrawal Right. Notwithstanding
anything to the contrary contained in (and without limiting any similar
provisions of) the Transaction Documents, whenever any Investor exercises a
right, election, demand or option under a Transaction Document and the Company
does not timely perform its related obligations within the periods therein
provided, then such Investor may rescind or withdraw, in its sole discretion
from time to time upon written notice to the Company, any relevant notice,
demand or election in whole or in part without prejudice to its future actions
and rights.

7.14.        Replacement of Securities. If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any
reasonable third-party costs associated with the issuance of such replacement
Securities. If a replacement certificate or instrument evidencing any
Securities is requested due to a mutilation thereof, the Company may require
delivery of such mutilated certificate or instrument as a condition precedent
to any issuance of a replacement.

7.15.        Remedies. In addition to being
entitled to exercise all rights provided herein or granted by law, including
recovery of damages, each of the Investors and the Company will be entitled to
specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate. Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the Investors. The Company
therefore agrees that the Investors shall be entitled to seek temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages and without posting a bond or other security.

7.16.        Payment Set Aside. To the extent
that the Company makes a payment or payments to any Investor pursuant to any
Transaction Document or an Investor enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be 

 23
 

 

fraudulent or preferential, set aside, recovered from,
disgorged by or are required to be refunded, repaid or otherwise restored to
the Company, a trustee, receiver or any other person under any law (including,
without limitation, any bankruptcy law, state or federal law, common law or
equitable cause of action), then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.

7.17.        Independent Nature of Investors’
Obligations and Rights. The obligations of each Investor under any
Transaction Document are several and not joint with the obligations of any
other Investor, and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor under any Transaction
Document. The decision of each Investor to purchase Securities pursuant to the
Transaction Documents has been made by such Investor independently of any other
Investor. Nothing contained herein or in any Transaction Document, and no
action taken by any Investor pursuant thereto, shall be deemed to constitute
the Investors as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Investors are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. Each Investor acknowledges
that no other Investor has acted as agent for such Investor in connection with
making its investment hereunder and that no Investor will be acting as agent of
such Investor in connection with monitoring its investment in the Securities or
enforcing its rights under the Transaction Documents. Each Investor shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Investor to
be joined as an additional party in any proceeding for such purpose. The
Company acknowledges that each of the Investors has been provided with the same
Transaction Documents for the purpose of closing a transaction with multiple
Investors and not because it was required or requested to do so by any
Investor.

7.18.        Limitation of Liability. Notwithstanding
anything herein to the contrary, the Company acknowledges and agrees that the
liability of an Investor arising directly or indirectly, under any Transaction
Document of any and every nature whatsoever shall be satisfied solely out of
the assets of such Investor, and that no trustee, officer, other investment
vehicle or any other Affiliate of such Investor or any investor, shareholder or
holder of shares of beneficial interest of such a Investor shall be personally
liable for any liabilities of such Investor.

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOLLOW]

 24
 

 

IN WITNESS WHEREOF, the parties hereto have caused
this Securities Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.

	
   

  	
  MICROFIELD GROUP, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR INVESTORS FOLLOW]

 25
 

 

IN WITNESS WHEREOF, the parties hereto have caused
this Securities Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.

	
   

  	
  NAME OF INVESTOR

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Investment
  Amount: $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ADDRESS
  FOR NOTICE

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  c/o:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Street:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  City/State/Zip:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Tel:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Fax:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DELIVERY
  INSTRUCTIONS

  
	
   

  	
  (if different from above)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  c/o:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Street:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  City/State/Zip:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Tel:

  	
   

  
																

 

 26

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