Document:

Exhibit 10.2

EXHIBIT A

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into as of June [  ], 2006, by and among Microfield
Group, Inc., an Oregon corporation (the “Company”),
and the investors signatory hereto (each a “Investor” and
collectively, the “Investors”).

This Agreement is made pursuant to the Securities
Purchase Agreement, dated as of the date hereof among the Company and the
Investors (the “Purchase Agreement”).

The Company and the Investors hereby agree as follows:

1.             Definitions. Capitalized terms used and not
otherwise defined herein that are defined in the Purchase Agreement will have
the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms have the respective meanings set forth in this Section 1:

“Advice” has the meaning set
forth in Section 6(d).

“Effective Date” means, as to a
Registration Statement, the date on which such Registration Statement is first
declared effective by the Commission.

“Effectiveness Date” means (a) with
respect to the initial Registration Statement required to be filed under Section 2(a),
the earlier of: (a)(i) the 90th day following the Closing Date; provided,
that, if the Commission reviews and has written comments to the filed
Registration Statement that would require the filing of a pre-effective
amendment thereto with the Commission, then the Effectiveness Date under this
clause (a)(i) shall be the 120th day following the Closing Date, and (ii) the
fifth Trading Day following the date on which the Company is notified by the
Commission that the initial Registration Statement will not be reviewed or is
no longer subject to further review and comments; (b) with respect to any
additional Registration Statements that may be required pursuant to Section 2(b),
the earlier of (i) the 90th day following (x) if such Registration
Statement is required because the Commission shall have notified the Company in
writing that certain Registrable Securities were not eligible for inclusion on
a previously filed Registration Statement, the date or time on which the
Commission shall indicate as being the first date or time that such Registrable
Securities may then be included in a Registration Statement, or (y) if
such Registration Statement is required for a reason other than as described in
(x) above, the date on which the Company first knows, or reasonably should
have known, that such additional Registration Statement(s) is required; provided,
that, if the Commission reviews and has written comments to a Registration
Statement filed under Section 2(b) that would require the filing of a
pre-effective amendment thereto with the Commission, then the Effectiveness
Date under this clause (b)(i) for such Registration Statement shall be the
120th day following the date that the Company first
knows, or reasonably should have known, that such additional Registration
Statement is required under such Section, and (ii) the fifth Trading Day
following the date on which the Company is notified by the 

 

Commission that such
additional Registration Statement will not be reviewed or is no longer subject
to further review and comments; and (c) with respect to a Registration
Statement required to be filed under Section 2(c), the earlier of: (c)(i) the
90th day following the date on which the Company
becomes eligible to utilize Form S-3 to register the resale of
Common Stock; provided, that, if the Commission reviews and has written
comments to such filed Registration Statement that would require the filing of
a pre-effective amendment thereto with the Commission, then the Effectiveness
Date under this clause (c)(i) shall be the 120th day following the date on which the Company
becomes eligible to utilize Form S-3 to register the resale of
Common Stock, and (ii) the fifth Trading Day following the date on which
the Company is notified by the Commission that the initial Registration
Statement will not be reviewed or is no longer subject to further review and
comments.

“Effectiveness Period” has the
meaning set forth in Section 2(a).

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

“Filing Date” means (a) with
respect to the initial Registration Statement required to be filed under Section 2(a),
the 30th day following the Closing Date; (b) with
respect to any additional Registration Statements that may be required pursuant
to Section 2(b), the 30th day following (x) if such Registration
Statement is required because the Commission shall have notified the Company in
writing that certain Registrable Securities were not eligible for inclusion on
a previously filed Registration Statement, the date or time on which the
Commission shall indicate as being the first date or time that such Registrable
Securities may then be included in a Registration Statement, or (y) if
such Registration Statement is required for a reason other than as described in
(x) above, the date on which the Company first knows, or reasonably should
have known, that such additional Registration Statement(s) is required;
and (c) with respect to a Registration Statement required to be filed
under Section 2(c), the 30th day following the date on which the Company
becomes eligible to utilize Form S-3 to register the resale of
Common Stock; provided, that in no event shall the Filing Date for any
Registration Statement required to be filed pursuant to subsections (b) or
(c) above be prior to the Effective Date of the initial Registration
Statement filed in accordance with subsection (a) above.

“Holder” or “Holders”
means the holder or holders, as the case may be, from time to time of
Registrable Securities.

“Indemnified Party” has the
meaning set forth in Section 5(c).

“Indemnifying Party” has the
meaning set forth in Section 5(c).

“Losses” has the meaning set
forth in Section 5(a).

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

“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.

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“Prospectus” means the
prospectus included in a Registration Statement (including, without limitation,
a prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Securities covered by a Registration Statement, and all
other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.

“Registrable Securities” means: (i) the
Shares, (ii) the Warrant Shares and (iii) any securities issued or
issuable upon any stock split, dividend or other distribution, recapitalization
or similar event, or any exercise price adjustment with respect to any of the
securities referenced in (i) or (ii) above, without regard to any
limitations on the exercise of Warrants.

“Registration Statement” means
the initial registration statement required to be filed in accordance with Section 2(a) and
any additional registration statement(s) required to be filed under Section 2(b) and
2(c), including (in each case) the Prospectus, amendments and supplements to
such registration statements or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference therein.

“Required
Holders” means the holders of at least a majority of the
Registrable Securities.

“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.

“Rule 415” means Rule 415
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.

“Rule 424” means Rule 424
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.

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

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

“Warrants” means the Common
Stock purchase warrants issued or issuable to the Investors pursuant to the
Purchase Agreement and to any placement agent identified in Schedule 3.1(u) to
the Purchase Agreement in accordance with the terms of the engagement or
similar agreements between the Company and any such agents.

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

2.             Registration.

(a)           On or prior to each
Filing Date, the Company shall prepare and file with the Commission a
Registration Statement covering the resale of all Registrable Securities not
already covered by an existing and effective Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415, on Form S-1
(or on such other form appropriate for such purpose). Such Registration
Statement shall contain (except if otherwise required pursuant to written
comments received from the Commission upon a review of such Registration
Statement) the “Plan of Distribution” attached hereto as Annex A. The Company
shall cause such Registration Statement to be declared effective under the
Securities Act as soon as possible but, in any event, no later than its
Effectiveness Date, and shall use its reasonable best efforts to keep such
Registration Statement continuously effective under the Securities Act until
all Registrable Securities covered by such Registration Statement have been
sold or may be sold without volume restrictions pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion letter
to such effect, addressed and acceptable to the Company’s transfer agent and
the affected Holders (the “Effectiveness
Period”). By 5:00 p.m. (New York City time) on the Effective
Date, the Company shall file with the Commission in accordance with Rule 424
under the Securities Act the final prospectus to be used in connection with
sales pursuant to such Registration Statement (whether or not such filing is
technically required under such Rule).

(b)           If for any reason the
Commission does not permit all of the Registrable Securities to be included in
the Registration Statement filed pursuant to Section 2(a), or for any
other reason any outstanding Registrable Securities are not then covered by an
effective Registration Statement, then the Company shall prepare and file by
the Filing Date for such Registration Statement, an additional Registration
Statement covering the resale of all Registrable Securities not already covered
by an existing and effective Registration Statement for an offering to be made
on a continuous basis pursuant to Rule 415, on Form S-1 (or on
such other form appropriate for such purpose). Each such Registration Statement
shall contain (except if otherwise required pursuant to written comments
received from the Commission upon a review of such Registration Statement) the “Plan
of Distribution” attached hereto as Annex A. The Company shall cause
each such Registration Statement to be declared effective under the Securities
Act as soon as possible but, in any event, by its Effectiveness Date, and shall
use its reasonable best efforts to keep such Registration Statement
continuously effective under the Securities Act during the entire Effectiveness
Period. By 5:00 p.m. (New York City time) on the Effective Date of such
Registration Statement, the Company shall file with the Commission in
accordance with Rule 424 under the Securities Act the final prospectus to
be used in connection with sales pursuant to such Registration Statement
(whether or not such filing is technically required under such Rule).

(c)           Promptly following any date on
which the Company becomes eligible to use a registration statement on Form S-3
to register the Registrable Securities for resale, the Company shall file a
registration statement on Form S-3 covering the Registrable
Securities (or a post-effective amendment on Form S-3 to the then
effective Registration Statement) and shall 

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cause such Registration Statement to be declared effective as soon
as possible thereafter, but in any event prior to the Effectiveness Date
therefor. Such Registration Statement shall contain (except if otherwise
required pursuant to written comments received from the Commission upon a review
of such Registration Statement) the “Plan of Distribution” attached hereto as Annex
A. The Company shall cause such Registration Statement to be declared
effective under the Securities Act as soon as possible but, in any event, by
its Effectiveness Date, and shall use its reasonable best efforts to keep such
Registration Statement continuously effective under the Securities Act during
the entire Effectiveness Period. By 5:00 p.m. (New York City time) on the
Effective Date of such Registration Statement, the Company shall file with the
Commission in accordance with Rule 424 under the Securities Act the final
prospectus to be used in connection with sales pursuant to such Registration
Statement (whether or not such filing is technically required under such Rule).

(d)           If: (i) a
Registration Statement is not filed on or prior to its Filing Date (if the
Company files a Registration Statement without affording the Holders the
opportunity to review and comment on the same as required by Section 3(a) hereof,
the Company shall not be deemed to have satisfied this clause (i)), or (ii) a
Registration Statement is not declared effective by the Commission on or prior
to its required Effectiveness Date, or if by the Business Day immediately
following the Effective Date the Company shall not have filed a “final”
prospectus for the Registration Statement with the Commission under Rule 424(b) in
accordance with Section 2(a), 2(b) or 2(c) herein, as the case
may be (whether or not such a prospectus is technically required by such Rule),
or (iii) after its Effective Date, without regard for the reason
thereunder or efforts therefor, such Registration Statement ceases for any
reason to be effective and available to the Holders as to all Registrable
Securities to which it is required to cover at any time prior to the expiration
of its Effectiveness Period for more than an aggregate of 30 Trading Days
(which need not be consecutive) (any such failure or breach being referred to
as an “Event,” and for purposes of
clauses (i) or (ii) the date on which such Event occurs, or for
purposes of clause (iii) the date which such 30 Trading Day-period is
exceeded, being referred to as “Event Date”),
then in addition to any other rights the Holders may have hereunder or under
applicable law:  on such Event Date and
on each monthly anniversary of each such Event Date (if the applicable Event
shall not have been cured by such date) until the applicable Event is cured the
Company shall pay to each Holder, as partial liquidated damages and not as a
penalty, an amount in cash equal to 1.0% of the aggregate Investment Amount
paid by such Holder for Shares pursuant to the Purchase Agreement. The parties
agree that the Company will not be liable for liquidated damages under this Section in
respect of the Warrants. In no event will the Company be liable for damages in
excess of 1.0% of the aggregate Investment Amount of the Holders in any 30-day
period and the maximum aggregate liquidated damages payable to a Holder under
this Section 2(d) shall not exceed ten percent (10%) of the aggregate
Investment Amount paid by such Holder pursuant to the Purchase Agreement. The
partial liquidated damages pursuant to the terms hereof shall apply on a daily
pro-rata basis for any portion of a month prior to the cure of an Event, except
in the case of the first Event Date.

(e)           Each Holder agrees
to furnish to the Company a completed Questionnaire in the form attached to
this Agreement as Annex B (a “Selling
Holder Questionnaire”). The Company shall not be required to include
the Registrable Securities of a Holder in a Registration Statement and shall
not be required to pay any liquidated or other damages under Section 2(d) to
any Holder who fails to furnish to the Company a fully completed Selling Holder
Questionnaire 

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at least five Trading Days prior to the Filing Date (subject to the
requirements set forth in Section 3(a)).

(f)            Subject to Section 5
hereof, the Required Holders shall have the right to select one legal counsel
to review and oversee any registration pursuant to this Section 2 (“Legal Counsel”), which shall be Schulte Roth &
Zabel LLP or such other counsel as thereafter designated by the Required
Holders. The Company and Legal Counsel shall reasonably cooperate with each
other in performing the Company’s obligations under this Agreement.

3.             Registration Procedures.

In connection with the Company’s registration
obligations hereunder, the Company shall:

(a)           Not less than four
Trading Days prior to the filing of a Registration Statement or any related
Prospectus or any amendment or supplement thereto, the Company shall furnish to
each Holder and Legal Counsel copies of the “Selling Stockholders” section of
such document, the “Plan of Distribution” and any risk factor contained in such
document that addresses specifically this transaction or the Selling
Stockholders, as proposed to be filed which documents will be subject to the
review of such Holder and Legal Counsel 
The Company shall not file a Registration Statement, any Prospectus or
any amendments or supplements thereto in which the “Selling Stockholder”
section thereof differs in any material respect from the disclosure received
from a Holder in its Selling Holder Questionnaire (as amended or supplemented).

(b)           (i)  Prepare
and file with the Commission such amendments, including post-effective
amendments, to each Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep such Registration Statement
continuously effective as to the applicable Registrable Securities for its
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities
Act all of the Registrable Securities; (ii) cause the related Prospectus
to be amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond
as promptly as reasonably possible to any comments received from the Commission
with respect to each Registration Statement or any amendment thereto and, as
promptly as reasonably possible provide the Holders true and complete copies of
all correspondence from and to the Commission relating to such Registration
Statement that would not result in the disclosure to the Holders of material
and non-public information concerning the Company; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange
Act with respect to the Registration Statements and the disposition of all
Registrable Securities covered by each Registration Statement.

(c)           Notify the Holders
and Legal Counsel as promptly as reasonably possible (and, in the case of (i)(A) below,
not less than three Trading Days prior to such filing and, in the case of (v) below,
not less than three Trading Days prior to the financial statements in any
Registration Statement becoming ineligible for inclusion therein) and (if
requested by any such Person) confirm such notice in writing no later than one
Trading Day following the day (i)(A) 

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when a Prospectus or any Prospectus supplement or post-effective
amendment to a Registration Statement is proposed to be filed; (B) when
the Commission notifies the Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement (the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders that pertain
to the Holders as a Selling Stockholder or to the Plan of Distribution, but not
information which the Company believes would constitute material and non-public
information); and (C) with respect to each Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of
any request by the Commission or any other Federal or state governmental
authority for amendments or supplements to a Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of a Registration
Statement covering any or all of the Registrable Securities or the initiation
of any Proceedings for that purpose; (iv) of the receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that
makes the financial statements included in a Registration Statement ineligible
for inclusion therein or any statement made in such Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to such
Registration Statement, Prospectus or other documents so that, in the case of
such Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

(d)           Use its reasonable
best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any
order suspending the effectiveness of a Registration Statement, or (ii) any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest
practicable moment.

(e)           Furnish to each
Holder, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto and all exhibits to the extent requested
by such Person (including those previously furnished) promptly after the filing
of such documents with the Commission.

(f)            Promptly deliver to
each Holder, without charge, as many copies of each Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request. The Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.

(g)           Prior to any public
offering of Registrable Securities, register or qualify such Registrable
Securities for offer and sale under the securities or Blue Sky laws of all
jurisdictions within the United States, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable 

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Securities covered by the Registration Statements; provided,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified, subject the Company to any
material tax in any such jurisdiction where it is not then so subject or file a
general consent to service of process in any such jurisdiction. The Company
shall promptly notify Legal Counsel and each Holder who holds Registrable
Securities of the receipt by the Company of any notification with respect to
the suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or Blue Sky laws of any jurisdiction
in the United States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.

(h)           Cooperate with the
Holders to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be delivered to a transferee pursuant to
the Registration Statements, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such
names as any such Holders may request.

(i)            Upon the occurrence
of any event contemplated by Section 3(c)(v), as promptly as reasonably
possible, prepare a supplement or amendment, including a post-effective
amendment, to the affected Registration Statements or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, no Registration Statement nor any Prospectus will contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.

(j)            The Company may
require each selling Holder to furnish to the Company a certified statement as
to the number of shares of Common Stock beneficially owned by such Holder and
the person thereof that has voting and dispositive control over the Shares. During
any periods that the Company is unable to meet its obligations hereunder with
respect to the registration of the Registrable Securities solely because any Holder
fails to furnish such information within three Trading Days of the Company’s
request, any liquidated damages that are accruing at such time as to such
Holder only shall be tolled and any Event that may otherwise occur solely
because of such delay shall be suspended as to such Holder only, until such
information is delivered to the Company.

(k)           The Company shall
use its best efforts either to (i) cause all the Registrable Securities
covered by a Registration Statement to be listed on each securities exchange on
which securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (ii) secure designation and
quotation of all the Registrable Securities covered by a Registration Statement
on The NASDAQ Capital Market and, without limiting the generality of the
foregoing, to use its best efforts to arrange for at least two market makers to
register with the National Association of Securities Dealers, Inc. (“NASD”) as such with respect to such Registrable Securities. The
Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(k).

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(l)            If requested by a
Holder, the Company shall (i) as soon as practicable incorporate in a
prospectus supplement or post-effective amendment such information as an
Investor reasonably requests to be included therein relating to the sale and
distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being offered
or sold, the purchase price being paid therefor and any other terms of the
offering of the Registrable Securities to be sold in such offering; (ii) as
soon as practicable make all required filings of such prospectus supplement or
post-effective amendment after being notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment; and (iii) as
soon as practicable, supplement or make amendments to any Registration
Statement if reasonably requested by a Holder holding any Registrable
Securities.

4.             Registration Expenses. All fees and expenses
incident to the performance of or compliance with this Agreement by the Company
shall be borne by the Company whether or not any Registrable Securities are
sold pursuant to a Registration Statement. The fees and expenses referred to in
the foregoing sentence shall include, without limitation, (i) all registration
and filing fees (including, without limitation, fees and expenses (A) with
respect to filings required to be made with any Trading Market on which the
Common Stock is then listed for trading, and (B) in compliance with
applicable state securities or Blue Sky laws), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is reasonably requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel
for the Company, (v) Securities Act liability insurance, if the Company so
desires such insurance and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation
of the transactions contemplated by this Agreement (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit and the fees and
expenses incurred in connection with the listing of the Registrable Securities
on any securities exchange as required hereunder. In no event shall the Company
be responsible for any broker or similar commissions or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Holders.

5.             Indemnification.

(a)           Indemnification
by the Company. The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless each Holder, the officers, directors,
agents, investment advisors, partners, members and employees of each of them,
each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses,
claims, damages, liabilities, costs (including, without limitation, reasonable
costs of preparation and reasonable attorneys’ fees) and expenses
(collectively, “Losses”), as
incurred, arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in any Registration Statement, any Prospectus or
any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the 

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statements therein (in the case of any Prospectus or form of prospectus
or supplement thereto, in light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that (1) such
untrue statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in
any amendment or supplement thereto (it being understood that the Holder has
approved Annex A hereto for this purpose) or (2) in the case of an
occurrence of an event of the type specified in Section 3(c)(ii)-(v), the
use by such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective
and prior to the receipt by such Holder of an Advice or an amended or
supplemented Prospectus, but only if and to the extent that following the
receipt of the Advice or the amended or supplemented Prospectus the
misstatement or omission giving rise to such Loss would have been corrected. The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with
the transactions contemplated by this Agreement.

(b)           Indemnification
by Holders. Each Holder shall, severally and not jointly, indemnify and
hold harmless the Company, its directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses, as incurred,
arising solely out of or based solely upon: (x) such Holder’s failure to
comply with the prospectus delivery requirements of the Securities Act or (y) any
untrue statement of a material fact contained in any Registration Statement,
any Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent that, (1) such
untrue statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement (it being understood that the Holder has approved
Annex A hereto for this purpose), such Prospectus or such form of Prospectus or
in any amendment or supplement thereto or (2) in the case of an occurrence
of an event of the type specified in Section 3(c)(ii)-(v), the use by such
Holder of an outdated or defective Prospectus after the Company has notified
such Holder in writing that the Prospectus is outdated or  defective and prior to the receipt by such
Holder of an Advice or an amended or supplemented Prospectus, but only if and
to the extent that following the receipt of the Advice or the amended or
supplemented Prospectus the misstatement or omission giving rise to such Loss
would have been corrected. In no event shall the liability of any selling
Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.

(c)           Conduct of
Indemnification Proceedings. If any Proceeding shall be brought or asserted
against any Person entitled to indemnity hereunder (an “Indemnified 

 10
 

 

Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is
sought (the “Indemnifying Party”)
in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with
defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.

An Indemnified Party shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless: 
(1) the Indemnifying Party has agreed in writing to pay such fees
and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the
named parties to any such Proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.

All fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection
with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).

(d)           Contribution.
If a claim for indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in 

 11
 

 

question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying
Party or Indemnified Party, and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c),
any reasonable attorneys’ or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification provided for
in this Section was available to such party in accordance with its terms.

The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were
determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the proceeds actually received by such Holder
from the sale of the Registrable Securities subject to the Proceeding exceeds
the amount of any damages that such Holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission.

The indemnity and contribution agreements contained in
this Section are in addition to any liability that the Indemnifying Parties
may have to the Indemnified Parties.

6.             Miscellaneous.

(a)           Remedies. In
the event of a breach by the Company or by a Holder, of any of their
obligations under this Agreement, each Holder or the Company, as the case may
be, in addition to being entitled to exercise all rights granted by law and
under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of
this Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

(b)           No Piggyback on
Registrations. Except as and to the extent specified in Schedule 3.1(v) to
the Purchase Agreement, neither the Company nor any of its security holders
(other than the Holders in such capacity pursuant hereto) may include
securities of the Company in a Registration Statement other than the
Registrable Securities, and the Company shall not during the Effectiveness
Period enter into any agreement providing any such right to any of its security
holders.

(c)           Compliance. Each
Holder covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement.

 12
 

 

(d)           Discontinued
Disposition. Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c), such Holder will
forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until such Holder’s receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the “Advice”)
by the Company that the use of the applicable Prospectus may be resumed, and,
in either case, has received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement. The Company may provide appropriate stop
orders to enforce the provisions of this paragraph.

(e)           Piggy-Back
Registrations. If at any time during the Effectiveness Period  there is not an effective Registration
Statement covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or their
then equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity securities
issuable in connection with stock option or other employee benefit plans, then
the Company shall send to each Holder written notice of such determination and,
if within fifteen days after receipt of such notice, any such Holder shall so
request in writing, the Company shall include in such registration statement
all or any part of such Registrable Securities such holder requests to be
registered, subject to customary underwriter cutbacks applicable to all holders
of registration rights; provided, however, that, the Company shall not
be required to register any Registrable Securities pursuant to this Section 6(e) that
are eligible for resale pursuant to Rule 144(k) promulgated under the
Securities Act or that are the subject of a then effective Registration
Statement.

(f)            Amendments and
Waivers. The provisions of this Agreement, including the provisions of this
Section 6(f), may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
same shall be in writing and signed by the Company and the Required Holders. Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of certain Holders
and that does not directly or indirectly affect the rights of other Holders may
be given by Holders of at least a majority of the Registrable Securities to
which such waiver or consent relates.

(g)           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 

 13
 

 

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

  
	
   

  	
   

  	
  Attention: Jeffrey
  Fessler, Esq.

  
	
   

  	
   

  	
   

  
	
  If to a
  Investor:

  	
   

  	
  To the address set forth under such Investor’s name
  on the signature pages hereto.

  
	
   

  	
   

  	
   

  
	
  If to Legal
  Counsel:

  	
   

  	
  Schulte Roth & Zabel LLP

  
	
   

  	
   

  	
  919 Third Avenue

  
	
   

  	
   

  	
  New York, New
  York 10022

  
	
   

  	
   

  	
  Facsimile: (212)
  593-5955

  
	
   

  	
   

  	
  Attention:
  Eleazer Klein, Esq.

  
	
   

  	
   

  	
   

  
	
  If to any other
  Person who is then the registered Holder:

  
	
   

  	
   

  	
  To the address of such Holder as it appears in the
  stock transfer books of the Company

  

 

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

(h)           Successors and
Assigns. This Agreement shall inure to the benefit of and be binding upon
the successors and permitted assigns of each of the parties and shall inure to
the benefit of each Holder. The Company may not assign its rights or
obligations hereunder without the prior written consent of each Holder. Each
Holder may assign their respective rights hereunder in the manner and to the
Persons as permitted under the Purchase Agreement.

(i)            Execution and
Counterparts. This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original and, all of
which taken together shall constitute one and the same Agreement. In the event
that any signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

(j)            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 

 14
 

 

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 (whether brought against a party
hereto or its respective Affiliates, employees or agents) will be commenced 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, 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 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 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 this Agreement, then the prevailing party in such Proceeding
shall be reimbursed by the other party for its attorney’s fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such Proceeding.

(k)           Cumulative
Remedies. The remedies provided herein are cumulative and not exclusive of
any remedies provided by law.

(l)            Severability.
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.

(m)          Headings. The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

(n)           Independent
Nature of Investors’ Obligations and Rights. The obligations of each
Investor under this Agreement are several and not joint with the obligations of
each other Investor, and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor under this Agreement. 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
this Agreement or any other Transaction Document. Each Investor acknowledges
that no other Investor will be acting as agent of such Investor in enforcing
its rights under this Agreement. Each Investor shall be entitled to 

 15
 

 

independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement, 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 Registration Rights Agreement for the
purpose of closing a transaction with multiple Investors and not because it was
required or requested to do so by any Investor.

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK

SIGNATURE PAGES TO FOLLOW]

 

 16

 

IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.

	
  

  	
   

  	
  MICROFIELD GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK

SIGNATURE PAGES OF INVESTORS TO FOLLOW]

 

 17

 

IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

	
  

  	
  NAME OF INVESTING ENTITY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ADDRESS FOR NOTICE

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  c/o: 

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Street: 

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  City/State/Zip:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attention: 

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Tel:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Fax:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Email:

  	
   

  
						

 

 18
 

 

 

Annex A

Plan of Distribution

The Selling Stockholders and any of their pledgees,
donees, transferees, assignees and successors-in-interest may, from time to
time, sell any or all of their shares of Common Stock on any stock exchange,
market or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices. The Selling
Stockholders may use any one or more of the following methods when selling
shares:

·                  ordinary brokerage transactions and
transactions in which the broker-dealer solicits Investors;

·                  block trades in which the broker-dealer
will attempt to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction;

·                  purchases by a broker-dealer as
principal and resale by the broker-dealer for its account;

·                  an exchange distribution in
accordance with the rules of the applicable exchange;

·                  privately negotiated transactions;

·                  to cover short sales made after the
date that this Registration Statement is declared effective by the Commission;

·                  through the writing or settlement of
options or other hedging transactions, whether through an options exchange or
otherwise;

·                  broker-dealers may agree with
the Selling Stockholders to sell a specified number of such shares at a
stipulated price per share;

·                  a combination of any such methods of
sale; and

·                  any other method permitted pursuant
to applicable law.

The Selling Stockholders may also sell shares under Rule 144
under the Securities Act, if available, rather than under this prospectus.

Broker-dealers engaged by the Selling
Stockholders may arrange for other brokers-dealers to participate in
sales. Broker-dealers may receive commissions or discounts from the
Selling Stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
Selling Stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.

The Selling Stockholders may from time to time pledge
or grant a security interest in some or all of the Shares owned by them and, if
they default in the performance of their secured obligations, the pledgees or
secured parties may offer and sell shares of Common Stock from time to time
under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933 amending the list of
selling 

 19
 

 

 

stockholders to include
the pledgee, transferee or other successors in interest as selling stockholders
under this prospectus.

In connection with the sale of our common stock or
interests therein, the selling stockholders may enter into hedging transactions
with broker-dealers or other financial institutions, which may in turn engage
in short sales of the common stock in the course of hedging the positions they
assume. The selling stockholders may also sell shares of our common stock short
and if such short sale shall take place after the date that this Registration
Statement is declared effective by the Commission, the selling stockholders may
deliver these securities to close out such short sales, or loan or pledge the
common stock to broker-dealers that in turn may sell these securities. The
selling stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

Upon the Company being notified in writing by a
Selling Stockholder that any material arrangement has been entered into with a
broker-dealer for the sale of Common Stock through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a
broker or dealer, a supplement to this prospectus will be filed, if required,
pursuant to Rule 424(b) under the Securities Act, disclosing (i) the
name of each such Selling Stockholder and of the participating
broker-dealer(s), (ii) the number of shares involved, (iii) the price
at which such the shares of Common Stock were sold, (iv)the commissions paid or
discounts or concessions allowed to such broker-dealer(s), where applicable, (v) that
such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus, and (vi) other
facts material to the transaction. In addition, upon the Company being notified
in writing by a Selling Stockholder that a donee or pledgee intends to sell
more than 500 shares of Common Stock, a supplement to this prospectus will be
filed if then required in accordance with applicable securities law.

The Selling Stockholders also may transfer the shares
of Common Stock in other circumstances, in which case the transferees, pledgees
or other successors in interest will be the selling beneficial owners for
purposes of this prospectus.

The Selling Stockholders and any broker-dealers
or agents that are involved in selling the shares may be deemed to be “underwriters”
within the meaning of the Securities Act in connection with such sales. In such
event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. Discounts,
concessions, commissions and similar selling expenses, if any, that can be
attributed to the sale of Securities will be paid by the Selling Stockholder
and/or the purchasers. Each Selling Stockholder has represented and warranted
to the Company that it acquired the securities subject to this registration
statement in the ordinary course of such Selling Stockholder’s business and, at
the time of its purchase of such securities such Selling Stockholder had no
agreements or understandings, directly or indirectly, with any person to
distribute any such securities.

 20
 

 

 

The Company has advised each Selling Stockholder that
it may not use shares registered on this Registration Statement to cover short
sales of Common Stock made prior to the date on which this Registration
Statement shall have been declared effective by the Commission. If a Selling
Stockholder uses this prospectus for any sale of the Common Stock, it will be
subject to the prospectus delivery requirements of the Securities Act. The
Selling Stockholders will be responsible to comply with the applicable
provisions of the Securities Act and Exchange Act, and the rules and
regulations thereunder promulgated, including, without limitation, Regulation
M, as applicable to such Selling Stockholders in connection with resales of
their respective shares under this Registration Statement.

The Company is required to pay all fees and expenses
incident to the registration of the shares, but the Company will not receive
any proceeds from the sale of the Common Stock. The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.

 

 21

 

Annex B

MICROFIELD
GROUP, INC.

Selling
Securityholder Notice and Questionnaire

The undersigned beneficial owner of common stock (the “Common Stock”), of Microfield Group, Inc., an Oregon
corporation (the “Company”) understands that the
Company has filed or intends to file with the Securities and Exchange
Commission (the “Commission”) a Registration
Statement for the registration and resale of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement, dated as of June [  ], 2006 (the “Registration
Rights Agreement”), among the Company and the Investors named
therein. A copy of the Registration Rights Agreement is available from the
Company upon request at the address set forth below. All capitalized terms used
and not otherwise defined herein shall have the meanings ascribed thereto in
the Registration Rights Agreement.

The undersigned hereby provides the following
information to the Company and represents and warrants that such information is
accurate:

QUESTIONNAIRE

1. Name.

	
  

  	
  (a)

  	
  Full Legal Name of Selling Securityholder

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Full Legal Name of Registered Holder (if not the
  same as (a) above) through

  which Registrable Securities Listed in Item 3 below are held:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Full Legal Name of Natural Control Person (which
  means a natural person who

  directly or indirectly alone or with others has power to vote or dispose of
  the

  securities covered by the questionnaire):

  
	
   

  	
   

  	
   

  

 

2. Address
for Notices to Selling Securityholder:

	
  

  
	
   

  
	
   

  
	
  Telephone:

  	
   

  

 

 22
 

 

 

	
  Fax:

  	
   

  
	
  Contact Person:

  	
   

  
			

 

3. Beneficial Ownership of
Registrable Securities:

	
  

  	
  Type and Principal Amount of Registrable Securities
  beneficially owned:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

4. Broker-Dealer Status:

	
  

  	
  (a)

  	
  Are you a broker-dealer?

  
	
   

  	
   

  	
  Yes  o     No 
  o

  
	
   

  	
   

  	
   

  
	
   

  	
  Note:

  	
  If yes, the Commission’s staff has indicated that
  you should be identified as an

  underwriter in the Registration Statement.

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Are you an affiliate of a broker-dealer?

  
	
   

  	
   

  	
  Yes  o     No 
  o

  
	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  If you are an affiliate of a broker-dealer, do you
  certify that you bought the

  Registrable Securities in the ordinary course of business, and at the time of
  the

  purchase of the Registrable Securities to be resold, you had no agreements or

  understandings, directly or indirectly, with any person to distribute the
  Registrable

  Securities?

  
	
   

  	
   

  	
  Yes  o     No 
  o

  
	
   

  	
   

  	
   

  
	
   

  	
  Note:

  	
  If no, the Commission’s staff has indicated that you
  should be identified as an

  underwriter in the Registration Statement.

  

 

5. Beneficial Ownership of Other
Securities of the Company Owned by the Selling Securityholder.

Except
as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable
Securities listed above in Item 3.

	
  

  	
  Type and Amount of Other Securities beneficially
  owned by the Selling Securityholder:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

 23
 

 

 

6. Relationships with the Company:

Except
as set forth below, neither the undersigned nor any of its affiliates,
officers, directors or principal equity holders (owners of 5% of more of the
equity securities of the undersigned) has held any position or office or has
had any other material relationship with the Company (or its predecessors or
affiliates) during the past three years.

	
  

  	
  State any exceptions here:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

The undersigned agrees to promptly notify the Company
of any inaccuracies or changes in the information provided herein that may
occur subsequent to the date hereof and prior to the Effective Date for the
Registration Statement.

By signing below, the undersigned consents to the disclosure
of the information contained herein in its answers to Items 1 through 6 and the
inclusion of such information in the Registration Statement and the related
prospectus. The undersigned understands that such information will be relied
upon by the Company in connection with the preparation or amendment of the
Registration Statement and the related prospectus.

IN WITNESS WHEREOF the undersigned, by authority duly
given, has caused this Notice and Questionnaire to be executed and delivered
either in person or by its duly authorized agent.

	
  Dated:

  	
   

  	
   

  	
  Beneficial Owner:

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
						

 

PLEASE
FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
THE ORIGINAL BY OVERNIGHT MAIL, TO:

[               ]

 24Exhibit 10.1

NATROL,
INC. 2006 STOCK OPTION AND INCENTIVE PLAN

SECTION 1. GENERAL PURPOSE OF THE PLAN;
DEFINITIONS

The name of the plan is the Natrol, Inc. 2006
Stock Option and Incentive Plan (the “Plan”). The purpose of the Plan is to
encourage and enable the officers, employees, Non-Employee Directors and other
key persons (including consultants and prospective employees) of Natrol, Inc.
(the “Company”) and its Subsidiaries upon whose judgment, initiative and
efforts the Company largely depends for the successful conduct of its business
to acquire a proprietary interest in the Company. It is anticipated that
providing such persons with a direct stake in the Company’s welfare will assure
a closer identification of their interests with those of the Company and its
stockholders, thereby stimulating their efforts on the Company’s behalf and
strengthening their desire to remain with the Company.

The following terms shall be defined as set forth
below:

“Act” means the
Securities Act of 1933, as amended, and the rules and regulations
thereunder.

“Award” or “Awards,” except where referring to a
particular category of grant under the Plan, shall include Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights, Deferred Stock
Awards, Restricted Stock Awards, Unrestricted Stock Awards and Dividend
Equivalent Rights.

“Board” means the
Board of Directors of the Company.

“Code” means the
Internal Revenue Code of 1986, as amended, and any successor Code, and related
rules, regulations and interpretations.

“Committee” means
the compensation committee of the Board or a similar committee performing the
functions of the compensation committee and which is comprised of not less than
two Non-Employee Directors who are independent.

“Covered Employee”
means an employee who is a “Covered Employee” within the meaning of Section 162(m) of
the Code.

“Deferred Stock Award”
means Awards granted pursuant to Section 8.

“Dividend Equivalent Right”
means Awards granted pursuant to Section 11.

“Effective Date”
means the date on which the Plan is approved by stockholders as set forth in Section 19.

“Exchange Act”
means the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.

 

 

 

“Fair Market Value”
of the Stock on any given date means the fair market value of the Stock
determined in good faith by the Committee; provided, however, that if the Stock
is admitted to quotation on the National Association of Securities Dealers
Automated Quotation System (“NASDAQ”), NASDAQ National System or a national
securities exchange, the determination shall be made by reference to market
quotations. If there are no market quotations for such date, the determination
shall be made by reference to the last date preceding such date for which there
are market quotations.

“Incentive Stock Option”
means any Stock Option designated and qualified as an “incentive stock option”
as defined in Section 422 of the Code.

“Non-Employee Director”
means a member of the Board who is not also an employee of the Company or any
Subsidiary.

“Non-Qualified Stock Option”
means any Stock Option that is not an Incentive Stock Option.

“Option” or “Stock Option” means any option to
purchase shares of Stock granted pursuant to Section 5.

“Performance Cycle”
means one or more periods of time, which may be of varying and overlapping
durations, as the Committee may select, over which the attainment of one or
more performance criteria will be measured for the purpose of determining a
grantee’s right to and the payment of a Restricted Stock Award or Deferred
Stock Award.

“Restricted Stock Award”
means Awards granted pursuant to Section 7.

“Section 409A” means Section 409A
of the Code and the regulations and other guidance promulgated thereunder.

“Stock” means the
Common Stock, par value $.01 per share, of the Company, subject to adjustments
pursuant to Section 3.

“Stock Appreciation Right”
means any Award granted pursuant to Section 6.

“Subsidiary” means
any corporation or other entity (other than the Company) in which the Company
has at least a 50 percent interest, either directly or indirectly.

“Ten Percent Owner” means an
employee who owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than 10 percent of the combined
voting power of all classes of stock of the Company or any parent or subsidiary
corporation. 

“Unrestricted Stock Award”
means any Award granted pursuant to Section 9.

SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE
AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS

(a)           Committee. The
Plan shall be administered by the Committee.

 2
 

 

(b)           Powers
of Committee. The Committee shall have the power and authority to grant
Awards consistent with the terms of the Plan, including the power and
authority:

(i)            to select the
individuals to whom Awards may from time to time be granted;

(ii)           to determine the
time or times of grant, and the extent, if any, of Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock
Awards, Deferred Stock Awards, Unrestricted Stock Awards and Dividend
Equivalent Rights, or any combination of the foregoing, granted to any one or
more grantees;

(iii)          to determine the
number of shares of Stock to be covered by any Award;

(iv)          to determine and
modify from time to time the terms and conditions, including restrictions, not
inconsistent with the terms of the Plan, of any Award, which terms and
conditions may differ among individual Awards and grantees, and to approve the
form of written instruments evidencing the Awards;

(v)           to accelerate at any
time the exercisability or vesting of all or any portion of any Award;

(vi)          subject to the
provisions of Section 5(a)(ii), to extend at any time the period in which
Stock Options may be exercised; and

(vii)         at any time to
adopt, alter and repeal such rules, guidelines and practices for administration
of the Plan and for its own acts and proceedings as it shall deem advisable; to
interpret the terms and provisions of the Plan and any Award (including related
written instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection with
the Plan; and to otherwise supervise the administration of the Plan.

All decisions and interpretations of the Committee
shall be binding on all persons, including the Company and Plan grantees.

(c)           Delegation
of Authority to Grant Awards. The Committee, in its discretion, may
delegate to the Chief Executive Officer of the Company all or part of the
Committee’s authority and duties with respect to the granting of Awards, to
individuals who are not subject to the reporting and other provisions of Section 16
of the Exchange Act or Covered Employees. Any such delegation by the Committee
shall include a limitation as to the amount of Awards that may be granted
during the period of the delegation and shall contain guidelines as to the
determination of the exercise price of any Stock Option or Stock Appreciation
Right, the conversion ratio or price of other Awards and the vesting criteria. The
Committee may revoke or amend the terms of a delegation at any time but such
action shall not invalidate any prior actions of the Committee’s delegate or
delegates that were consistent with the terms of the Plan.

(d)           Indemnification.
Neither the Board nor the Committee, nor any member of either or any delegate
thereof, shall be liable for any act, omission, interpretation, construction or
determination made in good faith in connection with the Plan, and the members
of the Board and 

 3
 

 

the Committee (and any delegate thereof) shall be
entitled in all cases to indemnification and reimbursement by the Company in
respect of any claim, loss, damage or expense (including, without limitation,
reasonable attorneys’ fees) arising or resulting therefrom to the fullest
extent permitted by law and/or under any directors’ and officers’ liability
insurance coverage which may be in effect from time to time and/or any
indemnification agreement between such individual and the Company.

SECTION 3. STOCK ISSUABLE UNDER THE PLAN;
MERGERS; SUBSTITUTION

(a)           Stock Issuable.
The maximum number
of shares of Stock reserved and available for issuance under the Plan shall be
such aggregate number of shares of Stock as does not exceed the sum of (i) 3,970,500
shares; plus (ii) as of each June 30 and December 31 (after June 30,
2006), an additional positive number equal to 15 percent of the shares of Stock
issued by the Company during the six-month period then ended; provided,
however, that the maximum number of shares of Stock for which Incentive Stock
Options may be granted under the Plan shall not exceed 3,970,500 shares,
subject to adjustment as provided in Section 3(b). For purposes of this
limitation, the shares of Stock underlying any Awards that are forfeited,
canceled, held back upon exercise of an Option or settlement of an Award to
cover the exercise price or tax withholding, reacquired by the Company prior to
vesting, satisfied without the issuance of Stock or otherwise terminated (other
than by exercise) shall be added back to the shares of Stock available for
issuance under the Plan. Subject to such overall limitations, shares of Stock
may be issued up to such maximum number pursuant to any type or types of Award;
provided, however, that Stock Options or Stock Appreciation Rights with respect
to no more than 500,000 shares of Stock may be granted to any one individual
grantee during any one calendar year period. The shares available for issuance
under the Plan may be authorized but unissued shares of Stock or shares of
Stock reacquired by the Company. 

(b)           Changes in Stock.
Subject to Section 3(c) hereof, if, as a result of any
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other similar change in the Company’s capital
stock, the outstanding shares of Stock are increased or decreased or are
exchanged for a different number or kind of shares or other securities of the
Company, or additional shares or new or different shares or other securities of
the Company or other non-cash assets are distributed with respect to such
shares of Stock or other securities, or, if, as a result of any merger or
consolidation, sale of all or substantially all of the assets of the Company,
the outstanding shares of Stock are converted into or exchanged for a different
number or kind of securities of the Company or any successor entity (or a
parent or subsidiary thereof), the Committee shall make an appropriate or
proportionate adjustment in (i) the maximum number of shares reserved for
issuance under the Plan, (ii) the number of Stock Options or Stock
Appreciation Rights that can be granted to any one individual grantee and the
maximum number of shares that may be granted under a Performance-based Award, (iii) the
number and kind of shares or other securities subject to any then outstanding
Awards under the Plan, (iv) the repurchase price, if any, per share
subject to each outstanding Restricted Stock Award, and (v) the price for
each share subject to any then outstanding Stock Options and Stock Appreciation
Rights under the Plan, without changing the aggregate exercise price (i.e., the
exercise price multiplied by the number of Stock Options and Stock Appreciation
Rights) as to which such Stock Options and Stock Appreciation Rights remain
exercisable. The adjustment by the Committee shall be final, binding and
conclusive. No fractional shares of Stock shall be 

 4
 

 

issued under the Plan resulting from any such
adjustment, but the Committee in its discretion may make a cash payment in lieu
of fractional shares.

The Committee may also adjust the number of shares
subject to outstanding Awards and the exercise price and the terms of
outstanding Awards to take into consideration material changes in accounting
practices or principles, extraordinary dividends, acquisitions or dispositions
of stock or property or any other event if it is determined by the Committee
that such adjustment is appropriate to avoid distortion in the operation of the
Plan.

No adjustment shall be made under this Section 3(b) in
the case of an Option or Stock Appreciation Right, without the consent of the
grantee, if it would constitute a modification, extension or renewal of the
Option within the meaning of Section 424(h) of the Code or a
modification of the Option or Stock Appreciation Right such that the Option or
Stock Appreciation Right becomes treated as “nonqualified deferred compensation”
subject to Section 409A. 

(c)           Mergers and Other
Transactions. In the case of and subject to the consummation of (i) the
dissolution or liquidation of the Company, (ii) the sale of all or
substantially all of the assets of the Company on a consolidated basis to an
unrelated person or entity, (iii) a merger, reorganization or
consolidation in which the outstanding shares of Stock are converted into or
exchanged for a different kind of securities of the successor entity and the
holders of the Company’s outstanding voting power immediately prior to such
transaction do not own a majority of the outstanding voting power of the
successor entity immediately upon completion of such transaction, or (iv) the
sale of all of the Stock of the Company to an unrelated person or entity (in
each case, a “Sale Event”), 50% of unvested Options and Stock Appreciation
Rights (and all unvested Options and Stock Appreciation Rights held by
non-employee directors) that are not exercisable immediately prior to the
effective time of the Sale Event shall become fully exercisable as of the
effective time of the Sale Event and all other Awards shall become fully vested
and nonforfeitable as of the effective time of the Sale Event, except as the
Committee may otherwise specify with respect to particular Awards in the
relevant Award documentation, and Awards with conditions and restrictions
relating to the attainment of performance goals may become vested and nonforfeitable
in connection with a Sale Event in the Committee’s discretion. Upon the
effective time of the Sale Event, the Plan and all outstanding Awards granted
hereunder shall terminate, unless provision is made in connection with the Sale
Event in the sole discretion of the parties thereto for the assumption or
continuation of Awards theretofore granted by the successor entity, or the
substitution of such Awards with new Awards of the successor entity or parent
thereof, with appropriate adjustment as to the number and kind of shares and,
if appropriate, the per share exercise prices, as such parties shall agree
(after taking into account any acceleration hereunder). In the event of such
termination, each grantee shall be permitted, within a specified period of time
prior to the consummation of the Sale Event as determined by the Committee, to
exercise all outstanding Options and Stock Appreciation Rights held by such
grantee, including those that will become exercisable upon the consummation of
the Sale Event; provided, however, that the exercise of Options and Stock
Appreciation Rights not exercisable prior to the Sale Event shall be subject to
the consummation of the Sale Event. Notwithstanding anything herein to the
contrary, in the event that provision is made in connection with the Sale Event
for the assumption or continuation of Awards, or the substitution of such
Awards with new Awards of the successor entity or parent thereof, then, except
as the Committee may otherwise 

 5
 

 

determine with respect to particular Awards, any Award
so assumed or continued or substituted therefor shall be deemed vested and
exercisable in full upon the date on which the grantee’s employment or service
relationship with the Company and its subsidiaries or successor entity terminates
if such termination occurs (i) within eighteen (18) months after such Sale
Event and (ii) such termination is by the Company or its Subsidiaries or
successor entity without Cause (as defined below) or by the grantee for Good
Reason (as defined below). For purposes of this Section 3(c), the term “Cause”
means a vote of the Board of Directors of the Company or the successor entity,
as the case may be, resolving that the grantee should be dismissed as a result
of (i) any material breach by the grantee of any agreement to which the
grantee and the Company are parties, (ii) any act (other than retirement)
or omission to act by the grantee which would reasonably be likely to have a
material adverse effect on the business of the Company or its subsidiaries or successor
entity, as the case may be, or on the grantee’s ability to perform services for
the Company or its subsidiaries or successor entity, as the case may be,
including, without limitation, the conviction of any crime (other than ordinary
traffic violations), or (iii) any material misconduct or willful and
deliberate non-performance of duties by the grantee in connection with the
business or affairs of the Company or its subsidiaries or successor entity, as
the case may be; and the term “Good Reason” means the occurrence of any of the
following events: (A) a substantial adverse change in the nature or scope
of the grantee’s responsibilities, authorities, title, powers, functions, or
duties; (B) a reduction in the grantee’s annual base salary except for across-the-board
salary reductions similarly affecting all or substantially all management
employees; or (C) the relocation of the offices at which the grantee is
principally employed to a location more than fifty (50) miles from such
offices.

Notwithstanding anything to the contrary in this Section 3(c),
in the event of a Sale Event pursuant to which holders of the Stock of the
Company will receive upon consummation thereof a cash payment for each share
surrendered in the Sale Event, the Company shall have the right, but not the
obligation, to make or provide for a cash payment to the grantees holding
Options and Stock Appreciation Rights, in exchange for the cancellation
thereof, in an amount equal to the difference between (A) the value as
determined by the Committee of the consideration payable per share of Stock
pursuant to the Sale Event (the “Sale Price”) times the number of shares of
Stock subject to outstanding Options and Stock Appreciation Rights (to the
extent then exercisable at prices not in excess of the Sale Price) and (B) the
aggregate exercise price of all such outstanding Options and Stock Appreciation
Rights.

(d)           Substitute Awards.
The Committee may grant Awards under the Plan in substitution for stock and
stock based awards held by employees, directors or other key persons of another
corporation in connection with the merger or consolidation of the employing
corporation with the Company or a Subsidiary or the acquisition by the Company
or a Subsidiary of property or stock of the employing corporation. The
Committee may direct that the substitute awards be granted on such terms and
conditions as the Committee considers appropriate in the circumstances. Any
substitute Awards granted under the Plan shall not count against the share
limitation set forth in Section 3(a).

SECTION 4. ELIGIBILITY

Grantees under the Plan will be such full or part-time
officers and other employees, Non-Employee Directors and key persons (including
consultants and prospective employees) of the 

 6
 

 

Company and its Subsidiaries as are selected from time
to time by the Committee in its sole discretion.

SECTION 5. STOCK OPTIONS

Any Stock Option granted under the Plan shall be in
such form as the Committee may from time to time approve.

Stock Options granted under the Plan may be either
Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock Options
may be granted only to employees of the Company or any Subsidiary that is a “subsidiary
corporation” within the meaning of Section 424(f) of the Code. To the
extent that any Option does not qualify as an Incentive Stock Option, it shall
be deemed a Non-Qualified Stock Option.

(a)           Stock Options
Granted to Employees and Key Persons. The Committee in its discretion may
grant Stock Options to eligible employees and key persons of the Company or any
Subsidiary. Stock Options granted pursuant to this Section 5(a) shall
be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan,
as the Committee shall deem desirable. If the Committee so determines, Stock
Options may be granted in lieu of cash compensation at the optionee’s election,
subject to such terms and conditions as the Committee may establish.

(i)            Exercise Price.
The exercise price per share for the Stock covered by a Stock Option granted
pursuant to this Section 5(a) shall be determined by the Committee at
the time of grant but shall not be less than 100 percent of the Fair Market
Value on the date of grant. In the case of an Incentive Stock Option that is
granted to a Ten Percent Owner, the option price of such Incentive Stock Option
shall be not less than 110 percent of the Fair Market Value on the grant date.

(ii)           Option Term.
The term of each Stock Option shall be fixed by the Committee, but no Stock
Option shall be exercisable more than ten years after the date the Stock Option
is granted. In the case of an Incentive Stock Option that is granted to a Ten
Percent Owner, the term of such Stock Option shall be no more than five years from
the date of grant.

(iii)          Exercisability;
Rights of a Stockholder. Stock Options shall become exercisable at such
time or times, whether or not in installments, as shall be determined by the
Committee at or after the grant date. The Committee may at any time accelerate
the exercisability of all or any portion of any Stock Option. An optionee shall
have the rights of a stockholder only as to shares acquired upon the exercise
of a Stock Option and not as to unexercised Stock Options.

(iv)          Method of Exercise.
Stock Options may be exercised in whole or in part, by giving written notice of
exercise to the Company, specifying the number of shares to be purchased. Payment
of the purchase price may be made by one or more of the following methods to
the extent provided in the Option Award agreement:

(A)          In cash, by certified or bank check or
other instrument acceptable to the Committee;

 7
 

 

(B)           Through the delivery
(or attestation to the ownership) of shares of Stock that have been purchased
by the optionee on the open market or that are beneficially owned by the
optionee and are not then subject to restrictions under any Company plan. Such
surrendered shares shall be valued at Fair Market Value on the exercise date. To
the extent required to avoid variable accounting treatment under FAS 123R or
other applicable accounting rules, such surrendered shares shall have been
owned by the optionee for at least six months; or

(C)           By the optionee delivering to the
Company a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company cash or a check
payable and acceptable to the Company for the purchase price; provided that in
the event the optionee chooses to pay the purchase price as so provided, the
optionee and the broker shall comply with such procedures and enter into such
agreements of indemnity and other agreements as the Committee shall prescribe
as a condition of such payment procedure.

Payment instruments will be received subject to
collection. The transfer to the optionee on the records of the Company or of
the transfer agent of the shares of Stock to be purchased pursuant to the
exercise of a Stock Option will be contingent upon receipt from the optionee
(or a purchaser acting in his stead in accordance with the provisions of the
Stock Option) by the Company of the full purchase price for such shares and the
fulfillment of any other requirements contained in the Option Award agreement
or applicable provisions of laws (including the satisfaction of any withholding
taxes that the Company is obligated to withhold with respect to the optionee). In
the event an optionee chooses to pay the purchase price by previously-owned
shares of Stock through the attestation method, the number of shares of Stock
transferred to the optionee upon the exercise of the Stock Option shall be net
of the number of shares attested to.

(v)           Annual Limit on
Incentive Stock Options. To the extent required for “incentive stock option”
treatment under Section 422 of the Code, the aggregate Fair Market Value
(determined as of the time of grant) of the shares of Stock with respect to
which Incentive Stock Options granted under this Plan and any other plan of the
Company or its parent and subsidiary corporations become exercisable for the
first time by an optionee during any calendar year shall not exceed $100,000. To
the extent that any Stock Option exceeds this limit, it shall constitute a
Non-Qualified Stock Option.

(vi)          Reload Options.
At the discretion of the Committee, Options granted under the Plan may include
a “reload” feature pursuant to which an optionee exercising an option by the
delivery of a number of shares of Stock in accordance with Section 5(a)(iv)(B) hereof
would automatically be granted an additional Option (with an exercise price
equal to the Fair Market Value of the Stock on the date the additional Option
is granted and with the same expiration date as the original Option being
exercised, and with such other terms as the Committee may provide) to purchase
that number of shares of Stock equal to the number delivered to exercise the
original Option.

 8
 

 

SECTION 6. STOCK APPRECIATION RIGHTS

(a)           Nature of Stock
Appreciation Rights. A Stock Appreciation Right is an Award entitling the
recipient to receive shares of Stock having a value equal to the excess of the
Fair Market Value of the Stock on the date of exercise over the exercise price
of the Stock Appreciation Right, which price shall not be less than 100 percent
of the Fair Market Value of the Stock on the date of grant (or more than the
option exercise price per share, if the Stock Appreciation Right was granted in
tandem with a Stock Option) multiplied by the number of shares of Stock with
respect to which the Stock Appreciation Right shall have been exercised.

(b)           Grant and Exercise
of Stock Appreciation Rights. Stock Appreciation Rights may be granted by
the Committee in tandem with, or independently of, any Stock Option granted
pursuant to Section 5 of the Plan. In the case of a Stock Appreciation
Right granted in tandem with a Non-Qualified Stock Option, such Stock
Appreciation Right may be granted either at or after the time of the grant of
such Option. In the case of a Stock Appreciation Right granted in tandem with
an Incentive Stock Option, such Stock Appreciation Right may be granted only at
the time of the grant of the Option.

A Stock Appreciation Right or applicable portion
thereof granted in tandem with a Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Option.

(c)           Terms and
Conditions of Stock Appreciation Rights. Stock Appreciation Rights shall be
subject to such terms and conditions as shall be determined from time to time
by the Committee, subject to the following:

(i)            Stock Appreciation
Rights granted in tandem with Options shall be exercisable at such time or
times and to the extent that the related Stock Options shall be exercisable.

(ii)           Upon exercise of a
Stock Appreciation Right, the applicable portion of any related Option shall be
surrendered.

SECTION 7. RESTRICTED STOCK AWARDS

(a)           Nature of
Restricted Stock Awards. A Restricted Stock Award is an Award entitling the
recipient to acquire, at such purchase price (which may be zero) as determined
by the Committee, shares of Stock subject to such restrictions and conditions
as the Committee may determine at the time of grant (“Restricted Stock”). Conditions
may be based on continuing employment (or other service relationship) and/or
achievement of pre-established performance goals and objectives. The grant of a
Restricted Stock Award is contingent on the grantee executing the Restricted
Stock Award agreement. The terms and conditions of each such agreement shall be
determined by the Committee, and such terms and conditions may differ among
individual Awards and grantees.

(b)           Rights as a
Stockholder. Upon execution of a written instrument setting forth the
Restricted Stock Award and payment of any applicable purchase price, a grantee
shall have the rights of a stockholder with respect to the voting of the
Restricted Stock, subject to such 

 9
 

 

conditions contained in the written instrument
evidencing the Restricted Stock Award. Unless the Committee shall otherwise
determine, (i) uncertificated Restricted Stock shall be accompanied by a
notation on the records of the Company or the transfer agent to the effect that
they are subject to forfeiture until such Restricted Stock are vested as
provided in Section 7(d) below, and (ii) certificated Restricted
Stock shall remain in the possession of the Company until such Restricted Stock
is vested as provided in Section 7(d) below, and the grantee shall be
required, as a condition of the grant, to deliver to the Company such
instruments of transfer as the Committee may prescribe.

(c)           Restrictions.
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered or disposed of except as specifically provided herein or in the
Restricted Stock Award agreement. Except as may otherwise be provided by the
Committee either in the Award agreement or, subject to Section 16 below,
in writing after the Award agreement is issued, if any, if a grantee’s
employment (or other service relationship) with the Company and its
Subsidiaries terminates for any reason, any Restricted Stock that has not
vested at the time of termination shall automatically and without any
requirement of notice to such grantee from or other action by or on behalf of,
the Company be deemed to have been reacquired by the Company at its original
purchase price from such grantee or such grantee’s legal representative
simultaneously with such termination of employment (or other service
relationship), and thereafter shall cease to represent any ownership of the
Company by the grantee or rights of the grantee as a stockholder. Following
such deemed reacquisition of unvested Restricted Stock that are represented by
physical certificates, a grantee shall surrender such certificates to the
Company upon request without consideration.

(d)           Vesting of
Restricted Stock. The Committee at the time of grant shall specify the date
or dates and/or the attainment of pre-established performance goals, objectives
and other conditions on which the non-transferability of the Restricted Stock
and the Company’s right of repurchase or forfeiture shall lapse. Subsequent to
such date or dates and/or the attainment of such pre-established performance
goals, objectives and other conditions, the shares on which all restrictions
have lapsed shall no longer be Restricted Stock and shall be deemed “vested.”  Except as may otherwise be provided by the
Committee either in the Award agreement or, subject to Section 16 below,
in writing after the Award agreement is issued, a grantee’s rights in any
shares of Restricted Stock that have not vested shall automatically terminate
upon the grantee’s termination of employment (or other service relationship)
with the Company and its Subsidiaries and such shares shall be subject to the
provisions of Section 7(c) above.

SECTION 8. DEFERRED STOCK AWARDS

(a)           Nature of
Deferred Stock Awards.  A Deferred
Stock Award is an Award of phantom stock units to a grantee, subject to
restrictions and conditions as the Committee may determine at the time of grant.
Conditions may be based on continuing employment (or other service
relationship) and/or achievement of pre-established performance goals and
objectives. The grant of a Deferred Stock Award is contingent on the grantee
executing the Deferred Stock Award agreement. The terms and conditions of each
such agreement shall be determined by the Committee, and such terms and
conditions may differ among individual Awards and grantees. At the end of the
deferral period, the Deferred Stock Award, to the extent vested, shall be paid
to the grantee in the form of shares of Stock.

 10
 

 

(b)           Election
to Receive Deferred Stock Awards in Lieu of Compensation. The Committee
may, in its sole discretion, permit a grantee to elect to receive a portion of
future cash compensation otherwise due to such grantee in the form of a
Deferred Stock Award. Any such election shall be made in writing and shall be
delivered to the Company no later than the date specified by the Committee and
in accordance with Section 409A and such other rules and procedures
established by the Committee. The Committee shall have the sole right to
determine whether and under what circumstances to permit such elections and to
impose such limitations and other terms and conditions thereon as the Committee
deems appropriate. Any such deferred compensation shall be converted to a fixed
number of phantom stock units based on the Fair Market Value of Stock on the
date the compensation would otherwise have been paid to the grantee but for the
deferral.

(c)           Rights as a
Stockholder. During the deferral period, a grantee shall have no rights as
a stockholder; provided, however, that the grantee may be credited with
Dividend Equivalent Rights with respect to the phantom stock units underlying
his Deferred Stock Award, subject to such terms and conditions as the Committee
may determine.

(d)           Termination. Except
as may otherwise be provided by the Committee either in the Award agreement or,
subject to Section 16 below, in writing after the Award agreement is
issued, a grantee’s right in all Deferred Stock Awards that have not vested
shall automatically terminate upon the grantee’s termination of employment (or
cessation of service relationship) with the Company and its Subsidiaries for
any reason.

SECTION 9. UNRESTRICTED STOCK AWARDS

Grant or Sale of Unrestricted Stock.
The Committee may, in its sole discretion, grant (or sell at par value or such
higher purchase price determined by the Committee) an Unrestricted Stock Award
to any grantee pursuant to which such grantee may receive shares of Stock free
of any restrictions (“Unrestricted Stock”) under the Plan. Unrestricted Stock
Awards may be granted in respect of past services or other valid consideration,
or in lieu of cash compensation due to such grantee.

SECTION 10. PERFORMANCE-BASED AWARDS TO
COVERED EMPLOYEES

Notwithstanding anything to the contrary contained
herein, if any Restricted Stock Award or Deferred Stock Award granted to a
Covered Employee is intended to qualify as “Performance-based Compensation”
under Section 162(m) of the Code and the regulations promulgated
thereunder (a “Performance-based Award”), such Award shall comply with the
provisions set forth below:

(a)           Performance
Criteria. The performance criteria used in performance goals governing
Performance-based Awards granted to Covered Employees may include any or all of
the following:  (i) the Company’s
return on equity, assets, capital or investment:  (ii) pre-tax or after-tax profit levels
of the Company or any Subsidiary, a division, an operating unit or a business
segment of the Company, or any combination of the foregoing; (iii) cash
flow, funds from operations or similar measure; (iv) total stockholder
return; (v) changes in the market price of the Stock; (vi) sales or
market share; or (vii) earnings per share.

 11

 

 

(b)           Grant of
Performance-based Awards. With respect to each Performance-based Award
granted to a Covered Employee, the Committee shall select, within the first 90
days of a Performance Cycle (or, if shorter, within the maximum period allowed
under Section 162(m) of the Code) the performance criteria for such
grant, and the achievement targets with respect to each performance criterion
(including a threshold level of performance below which no amount will become
payable with respect to such Award). Each Performance-based Award will specify
the amount payable, or the formula for determining the amount payable, upon
achievement of the various applicable performance targets. The performance
criteria established by the Committee may be (but need not be) different for
each Performance Cycle and different goals may be applicable to
Performance-based Awards to different Covered Employees.

(c)           Payment of
Performance-based Awards. Following the completion of a Performance Cycle,
the Committee shall meet to review and certify in writing whether, and to what
extent, the performance criteria for the Performance Cycle have been achieved
and, if so, to also calculate and certify in writing the amount of the
Performance-based Awards earned for the Performance Cycle. The Committee shall
then determine the actual size of each Covered Employee’s Performance-based
Award, and, in doing so, may reduce or eliminate the amount of the
Performance-based Award for a Covered Employee if, in its sole judgment, such
reduction or elimination is appropriate.

(d)           Maximum Award
Payable. The maximum Performance-based Award payable to any one Covered
Employee under the Plan for a Performance Cycle is 500,000 Shares (subject to
adjustment as provided in Section 3(b) hereof).

SECTION 11. DIVIDEND EQUIVALENT RIGHTS

(a)           Dividend
Equivalent Rights. A Dividend Equivalent Right is an Award entitling the
grantee to receive credits based on cash dividends that would have been paid on
the shares of Stock specified in the Dividend Equivalent Right (or other award
to which it relates) if such shares had been issued to and held by the grantee.
A Dividend Equivalent Right may be granted hereunder to any grantee as a
component of another Award or as a freestanding award. The terms and conditions
of Dividend Equivalent Rights shall be specified in the Award agreement. Dividend
equivalents credited to the holder of a Dividend Equivalent Right may be paid
currently or may be deemed to be reinvested in additional shares of Stock,
which may thereafter accrue additional equivalents. Any such reinvestment shall
be at Fair Market Value on the date of reinvestment or such other price as may
then apply under a dividend reinvestment plan sponsored by the Company, if any.
Dividend Equivalent Rights may be settled in cash or shares of Stock or a
combination thereof, in a single installment or installments. A Dividend
Equivalent Right granted as a component of another Award may provide that such
Dividend Equivalent Right shall be settled upon exercise, settlement, or
payment of, or lapse of restrictions on, such other award, and that such
Dividend Equivalent Right shall expire or be forfeited or annulled under the
same conditions as such other award. A Dividend Equivalent Right granted as a
component of another Award may also contain terms and conditions different from
such other award.

(b)           Interest
Equivalents. Any Award under this Plan that is settled in whole or in part
in cash on a deferred basis may provide in the grant for interest equivalents
to be credited with 

 12
 

 

respect to such cash payment. Interest equivalents may
be compounded and shall be paid upon such terms and conditions as may be
specified by the grant.

(c)           Termination. Except
as may otherwise be provided by the Committee either in the Award agreement or,
subject to Section 16 below, in writing after the Award agreement is
issued, a grantee’s rights in all Dividend Equivalent Rights or interest
equivalents granted as a component of another Award that has not vested shall
automatically terminate upon the grantee’s termination of employment (or
cessation of service relationship) with the Company and its Subsidiaries for
any reason.

SECTION 12. Transferability of Awards

(a)           Transferability.
Except as provided in Section 12(b) below, during a grantee’s
lifetime, his or her Awards shall be exercisable only by the grantee, or by the
grantee’s legal representative or guardian in the event of the grantee’s
incapacity. No Awards shall be sold, assigned, transferred or otherwise
encumbered or disposed of by a grantee other than by will or by the laws of
descent and distribution. No Awards shall be subject, in whole or in part, to
attachment, execution, or levy of any kind, and any purported transfer in
violation hereof shall be null and void.

(b)           Committee Action.
Notwithstanding Section 12(a), the Committee, in its discretion, may
provide either in the Award agreement regarding a given Award or by subsequent
written approval that the grantee (who is an employee or director) may transfer
his or her Awards (other than any Incentive Stock Options) to his or her
immediate family members, to trusts for the benefit of such family members, or
to partnerships in which such family members are the only partners, provided
that the transferee agrees in writing with the Company to be bound by all of
the terms and conditions of this Plan and the applicable Award.

(c)           Family Member.
For purposes of Section 12(b), “family member” shall mean a grantee’s
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former
spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, any person sharing the grantee’s household (other than a tenant
of the grantee), a trust in which these persons (or the grantee) have more than
50 percent of the beneficial interest, a foundation in which these persons (or
the grantee) control the management of assets, and any other entity in which
these persons (or the grantee) own more than 50 percent of the voting interests.

(d)           Designation of
Beneficiary. Each grantee to whom an Award has been made under the Plan may
designate a beneficiary or beneficiaries to exercise any Award or receive any
payment under any Award payable on or after the grantee’s death. Any such
designation shall be on a form provided for that purpose by the Committee and
shall not be effective until received by the Committee. If no beneficiary has
been designated by a deceased grantee, or if the designated beneficiaries have
predeceased the grantee, the beneficiary shall be the grantee’s estate.

SECTION 13. TAX WITHHOLDING

(a)           Payment by
Grantee. Each grantee shall, no later than the date as of which the value
of an Award or of any Stock or other amounts received thereunder first becomes 

 13
 

 

includable in the gross income of the grantee for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any Federal, state, or
local taxes of any kind required by law to be withheld by the Company with
respect to such income. The Company and its Subsidiaries shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the grantee. The Company’s obligation to deliver
evidence of book entry (or stock certificates) to any grantee is subject to and
conditioned on tax withholding obligations being satisfied by the grantee.

(b)           Payment in Stock.
Subject to approval by the Committee, a grantee may elect to have the Company’s
minimum required tax withholding obligation satisfied, in whole or in part, by (i) authorizing
the Company to withhold from shares of Stock to be issued pursuant to any Award
a number of shares with an aggregate Fair Market Value (as of the date the
withholding is effected) that would satisfy the withholding amount due, or (ii) transferring
to the Company shares of Stock owned by the grantee with an aggregate Fair
Market Value (as of the date the withholding is effected) that would satisfy
the withholding amount due.

SECTION 14. Additional Conditions Applicable
to Nonqualified Deferred Compensation Under Section 409A.

In the event any Stock Option or Stock Appreciation
Right under the Plan is granted with an exercise price of less than 100 percent
of the Fair Market Value on the date of grant (regardless of whether or not
such exercise price is intentionally or unintentionally priced at less than
Fair Market Value), or such grant is materially modified and deemed a new grant
at a time when the Fair Market Value exceeds the exercise price, or any other
Award is otherwise determined to constitute “nonqualified deferred compensation”
within the meaning of Section 409A (a “409A Award”), the following
additional conditions shall apply and shall supersede any contrary provisions
of this Plan or the terms of any agreement relating to such 409A Award.

(a)           Exercise and
Distribution. Except as provided in Section 14(b) hereof, no 409A
Award shall be exercisable or distributable earlier than upon one of the
following:

(i)            Specified Time.
A specified time or a fixed schedule set forth in the written instrument
evidencing the 409A Award.

(ii)           Separation from
Service. Separation from service (within the meaning of Section 409A)
by the 409A Award grantee; provided, however, that if the 409A Award grantee is
a “key employee” (as defined in Section 416(i) of the Code without
regard to paragraph (5) thereof) and any of the Company’s Stock is
publicly traded on an established securities market or otherwise, exercise or
distribution under this Section 14(a)(ii) may not be made before the
date that is six months after the date of separation from service.

(iii)          Death. The
date of death of the 409A Award grantee.

(iv)          Disability. The
date the 409A Award grantee becomes disabled (within the meaning of Section 14(c)(ii) hereof).

 14
 

 

(v)           Unforeseeable
Emergency. The occurrence of an unforeseeable emergency (within the meaning
of Section 14(c)(iii) hereof), but only if the net value (after
payment of the exercise price) of the number of shares of Stock that become
issuable does not exceed the amounts necessary to satisfy such emergency plus
amounts necessary to pay taxes reasonably anticipated as a result of the
exercise, after taking into account the extent to which the emergency is or may
be relieved through reimbursement or compensation by insurance or otherwise or
by liquidation of the grantee’s other assets (to the extent such liquidation
would not itself cause severe financial hardship).

(vi)          Change in Control
Event. The occurrence of a Change in Control Event (within the meaning of Section 14(c)(i) hereof),
including the Company’s discretionary exercise of the right to accelerate
vesting of such grant upon a Change in Control Event or to terminate the Plan
or any 409A Award granted hereunder within 12 months of the Change in Control
Event.

(b)           No Acceleration.
A 409A Award may not be accelerated or exercised prior to the time specified in
Section 14(a) hereof, except in the case of one of the following
events:

(i)            Domestic
Relations Order. The 409A Award may permit the acceleration of the exercise
or distribution time or schedule to an individual other than the grantee as may
be necessary to comply with the terms of a domestic relations order (as defined
in Section 414(p)(1)(B) of the Code).

(ii)           Conflicts of
Interest. The 409A Award may permit the acceleration of the exercise or
distribution time or schedule as may be necessary to comply with the terms of a
certificate of divestiture (as defined in Section 1043(b)(2) of the
Code).

(iii)          Change in
Control Event. The Committee may exercise the discretionary right to
accelerate the vesting of such 409A Award upon a Change in Control Event or to
terminate the Plan or any 409A Award granted thereunder within 12 months of the
Change in Control Event and cancel the 409A Award for compensation.

(c)           Definitions. Solely
for purposes of this Section 14 and not for other purposes of the Plan,
the following terms shall be defined as set forth below:

(i)            “Change in Control
Event” means the occurrence of a change in the ownership of the Company, a
change in effective control of the Company, or a change in the ownership of a
substantial portion of the assets of the Company (as defined in Section 1.409A-3(g) of
the proposed regulations promulgated under Section 409A by the Department
of the Treasury on September 29, 2005 or any subsequent guidance).

(ii)           “Disabled” means a
grantee who (i) is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months, or (ii) is, by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months, receiving income replacement benefits for a period of not less than
three months under an accident and health plan covering employees of the
Company or its Subsidiaries.

 15
 

 

(iii)          “Unforeseeable
Emergency” means a severe financial hardship to the grantee resulting from an
illness or accident of the grantee, the grantee’s spouse, or a dependent (as
defined in Section 152(a) of the Code) of the grantee, loss of the
grantee’s property due to casualty, or similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the grantee.

SECTION 15. TRANSFER, LEAVE OF ABSENCE, ETC.

For purposes of the Plan, the following events shall
not be deemed a termination of employment:

(a)           a transfer to the
employment of the Company from a Subsidiary or from the Company to a
Subsidiary, or from one Subsidiary to another; or

(b)           an approved leave of
absence for military service or sickness, or for any other purpose approved by
the Company, if the employee’s right to re-employment is guaranteed either by a
statute or by contract or under the policy pursuant to which the leave of
absence was granted or if the Committee otherwise so provides in writing.

SECTION 16. AMENDMENTS AND TERMINATION

The Board may, at any time, amend or discontinue the
Plan and the Committee may, at any time, amend or cancel any outstanding Award
for the purpose of satisfying changes in law or for any other lawful purpose,
but no such action shall adversely affect rights under any outstanding Award
without the holder’s consent. Except as provided in Section 3(b) or
3(c), in no event may the Committee exercise its discretion to reduce the
exercise price of outstanding Stock Options or Stock Appreciation Rights or
effect repricing through cancellation and re-grants. Any material Plan
amendments (other than amendments that curtail the scope of the Plan),
including any Plan amendments that (i) increase the number of shares
reserved for issuance under the Plan, (ii) expand the type of Awards
available under, materially expand the eligibility to participate in, or
materially extend the term of, the Plan, or (iii) materially change the
method of determining Fair Market Value, shall be subject to approval by the
Company stockholders entitled to vote at a meeting of stockholders. In
addition, to the extent determined by the Committee to be required by the Code
to ensure that Incentive Stock Options granted under the Plan are qualified
under Section 422 of the Code or to ensure that compensation earned under
Awards qualifies as performance-based compensation under Section 162(m) of
the Code, Plan amendments shall be subject to approval by the Company
stockholders entitled to vote at a meeting of stockholders. Nothing in this Section 16
shall limit the Committee’s authority to take any action permitted pursuant to Section 3(c).

SECTION 17. STATUS OF PLAN

With respect to the portion of any Award that has not
been exercised and any payments in cash, Stock or other consideration not
received by a grantee, a grantee shall have no rights greater than those of a
general creditor of the Company unless the Committee shall otherwise expressly
determine in connection with any Award or Awards. In its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet
the Company’s 

 16
 

 

obligations to deliver Stock or make payments with
respect to Awards hereunder, provided that the existence of such trusts or
other arrangements is consistent with the foregoing sentence.

SECTION 18. GENERAL PROVISIONS

(a)           No Distribution;
Compliance with Legal Requirements. The Committee may require each person
acquiring Stock pursuant to an Award to represent to and agree with the Company
in writing that such person is acquiring the shares without a view to
distribution thereof.

No shares of Stock shall be issued pursuant to an
Award until all applicable securities law and other legal and stock exchange or
similar requirements have been satisfied. The Committee may require the placing
of such stop-orders and restrictive legends on certificates for Stock and
Awards as it deems appropriate.

(b)           Delivery of Stock
Certificates. Stock certificates to grantees under this Plan shall be
deemed delivered for all purposes when the Company or a stock transfer agent of
the Company shall have mailed such certificates in the United States mail,
addressed to the grantee, at the grantee’s last known address on file with the
Company. Uncertificated Stock shall be deemed delivered for all purposes when
the Company or a Stock transfer agent of the Company shall have given to the
grantee by electronic mail (with proof of receipt) or by United States mail,
addressed to the grantee, at the grantee’s last known address on file with the
Company, notice of issuance and recorded the issuance in its records (which may
include electronic “book entry” records).

(c)           Other
Compensation Arrangements; No Employment Rights. Nothing contained in this
Plan shall prevent the Board from adopting other or additional compensation
arrangements, including trusts, and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of this Plan and
the grant of Awards do not confer upon any employee any right to continued
employment with the Company or any Subsidiary.

(d)           Trading Policy
Restrictions. Option exercises and other Awards under the Plan shall be
subject to such Company’s insider trading policy and procedures, as in effect
from time to time.

(e)           Forfeiture of
Awards under Sarbanes-Oxley Act. If the Company is required to prepare an
accounting restatement due to the material noncompliance of the Company, as a
result of misconduct, with any financial reporting requirement under the
securities laws, then any grantee who is one of the individuals subject to
automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002
shall reimburse the Company for the amount of any Award received by such
individual under the Plan during the 12-month period following the first
public issuance or filing with the United States Securities and Exchange
Commission, as the case may be, of the financial document embodying such
financial reporting requirement.

 17
 

 

SECTION 19. EFFECTIVE
DATE OF PLAN

This Plan shall become effective upon approval by the
holders of a majority of the votes cast at a meeting of stockholders at which a
quorum is present. No grants of Stock Options and other Awards may be made
hereunder after the tenth anniversary of the Effective Date and no grants of
Incentive Stock Options may be made hereunder after the tenth anniversary of
the date the Plan is approved by the Board.

SECTION 20. GOVERNING LAW

This Plan and all Awards and actions taken thereunder
shall be governed by, and construed in accordance with, the laws of the State
of Delaware, applied without regard to conflict of law principles.

	
  DATE APPROVED BY BOARD OF
  DIRECTORS:

  	
  April 25, 2006

  
	
   

  	
   

  
	
  DATE APPROVED BY
  STOCKHOLDERS:

  	
  June 8, 2006

  

 

 18

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