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                                                                  EXHIBIT 10.16

                                    EXHIBIT C

                          REGISTRATION RIGHTS AGREEMENT

         This Agreement, dated June ____, 2000, is between Microfield Graphics,
Inc. (the "Company") and JMW Capital Partners, Inc. (the "Investor"). SECTION 8
contains an index of all defined terms.

                                    RECITALS

         A. The Company has issued to Investor, pursuant to the Note and Warrant
Purchase Agreement dated as of the date hereof, warrants to purchase shares of
Common Stock from the Company.

         B. The Investor has requested, and the Company is willing to grant to
the Investor, registration rights, all on the terms and conditions of this
Agreement.

                                    AGREEMENT

         The parties agree as follows:

1.       REQUEST FOR REGISTRATION.

         1.1 REQUEST AND NOTICE. If the Company shall receive, at any time after
the date hereof, a written request from the Holders of at least 50% of the
Registrable Securities (a "Notice") that the Company file a registration
statement under the Securities Act of 1933, as amended (the "1933 Act"), then
the Company shall, subject to the limitations of this Agreement, use all
reasonable efforts to effect as soon as practicable, and in any event within 90
days of the receipt of such request, the registration under the 1933 Act of all
Registrable Securities which the Investor shall have specified in the Notice,
provided that the aggregate proceeds from the sale of Registrable Securities
under such registration are reasonably expected to be at least $5 million. Any
written request from the Holders pursuant to this SECTION 1.1 shall state that
the request is being made pursuant to this SECTION 1.1. The Company will
promptly give written notice of a request for a proposed registration to all
Holders and include all Registrable Securities of any Holder or Holders joining
in such request as are specified in a written request received by the Company
within twenty (20) days after the date of such written notice from the Company.
The Company is obligated to effect only three such registrations pursuant to
this SECTION 1.1 (counting for this purpose only registrations that have been
declared or ordered effective and registrations that have been withdrawn by the
Holders as to which the Holders have not elected to bear the expenses of such
registration

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pursuant to Section 3.3 and would, absent such election, have been required to
bear such expenses).

         1.2 SHARES INCLUDED. The Holders shall include in such registration an
aggregate of at least 200,000 shares (appropriately adjusted for any stock
dividend, stock split, or combination applicable to the Registrable Securities)
of the Registrable Securities then held by them, or all of the remaining
Registrable Securities then held by the Holders if less.

         1.3 UNDERWRITING. If any Holders intend to distribute the Registrable
Securities covered by its request by means of an underwriting, it shall so
advise the Company as a part of its request made pursuant to SECTION 1.1. In
such event, the Holders shall (together with the Company as provided in SECTION
2.5) enter into an underwriting agreement in customary form with the underwriter
or underwriters selected for such underwriting by the Investor and reasonably
acceptable to the Company. Notwithstanding any other provision of this SECTION
1, if the underwriter advises the Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Holders agrees to limit the number of shares of Registrable Securities that may
be included in the underwriting; provided, however, that the number of shares of
Registrable Securities to be included in such underwriting shall not be reduced
unless all other securities, including any shares offered by the Company, are
first entirely excluded from the underwriting.

         1.4 DEFERRAL. Notwithstanding the foregoing, (a) the Company shall not
be obligated to effect a registration pursuant to SECTION 1.1 during the period
starting with the date 60 days prior to the Company's good faith estimated date
of filing of, and ending on the date 90 days following the effective date of, a
registration statement pertaining to an underwritten public offering of
securities for the account of the Company (the "Preclusion Period"), provided,
however, that the Company is at all times during such period diligently pursuing
such registration, and further provided that the Company notifies the Holders at
least 20 days before the beginning of the Preclusion Period and (b) if the
Company shall furnish to the Holders a certificate signed by the President or
Chief Financial Officer of the Company stating that, in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company for the Company to comply with such request and it is therefore
essential to defer the filing of the registration statement relating thereto,
the Company shall have the right to defer such filing for a period of not more
than 90 days after receipt of the Holder Notice; provided, however, that the
Company may not exercise this right more than twice (for a total of up to 120
days) in any 12-month period.

         1.5 COMPANY REGISTRATION. If (but without any obligation to do so) the
Company proposes to register any of its stock or other securities under the 1933
Act in connection with the public offering of such securities solely for cash
(other than a registration relating solely to the sale of securities to
participants in a Company stock plan or a registration on any form that does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Registrable Securities),
the Company shall, at

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such time, promptly give the Holders written notice of such registration. Upon
the written request of a Holder given within ten (10) business days after
mailing of such notice by the Company in accordance with Section 7.5, the
Company shall, subject to the provisions of Section 4.4, include in the
registration statement all of the Registrable Securities that such Holder has
requested to be registered. The Holder's rights under this Section may be
exercised an unlimited number of times.

         1.6 FORM S-3 REGISTRATION. In the event that the Company receives a
written request from the Holder that the Company effect a registration on Form
S-3 and any related qualification or compliance with respect to all or a part of
the Registrable Securities owned thereby, the Company will, as soon as
practicable, effect such registration and all such qualifications and
compliances as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of the Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any other Holders joining in such request as are specified in a
written request given within twenty (20) days after receipt of a written notice
from the Company of the proposed registration; provided, however, that the
Company shall not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 1.6 (i) if Form S-3 is not available for
such offering by the Holders; (ii) if the Company believes in good faith that it
will file a registration statement pertaining to an underwritten public offering
of securities for the account of the Company within 90 days of receiving a
request to register pursuant to this Section 1.6 or a registration statement
relating to such an offering by the Company has been declared effective within
90 days of the Company receiving such notice; (iii) if the anticipated aggregate
offering price of the Registrable Securities to be registered (before deductions
for underwriters' discounts and commissions) does not exceed $500,000; (iv) if
the Company shall have effected a registration under this Section 1.6 within the
12-month period preceding such request for registration under this Section 1.6;
or (v) if the Company shall furnish to the Holders a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than ninety (90) days after
receipt of the request for registration under this Section 1.6; provided,
however, that the Company shall not utilize this right to delay any requested
registration more than twice (for a total of up to 120 days) in any 12-month
period.

         Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request of the Investor. Registrations effected pursuant to this Section 1.6
shall not be counted as demands for registration or registrations effected
pursuant to Sections 1.1 or 1.5, respectively.

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2.       OBLIGATIONS OF THE COMPANY.

         Whenever required under SECTION 1 to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as reasonably
possible:

         2.1 REGISTRATION STATEMENT. Prepare and file with the SEC a
registration statement with respect to such Registrable Securities and use
commercially reasonably efforts to cause such registration statement to become
effective, and keep such registration statement effective for up to nine months
(or, if earlier, until participating Holders have sold the Registrable
Securities held by them).

         2.2 AMENDMENTS. Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.

         2.3 PROSPECTUS. Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by it.

         2.4 BLUE SKY. Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such states or jurisdictions as shall be reasonably requested
by the Holders, provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.

         2.5 UNDERWRITING. In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering.

         2.6 NOTIFICATION. Notify the Holders, at any time when a prospectus
covered by such registration statement is required to be delivered under the
1933 Act, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, either (a) includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing or (b) to the
Company's knowledge, fails to comply with the 1933 Act or any other applicable
federal or state securities laws.

         2.7 LISTING. Cause all such Registrable Securities registered hereunder
to be listed on each securities exchange on which the Common Stock is then
listed.

         2.8 OPINIONS AND COMFORT LETTERS. Furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 1, on
the date that such

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Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to Section 1, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (a) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (b) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.

3.       EXPENSES.

         3.1 REGISTRATION EXPENSES. All expenses (other than underwriting
discounts and commissions relating to Registrable Securities), including without
limitation, all registration, filing, and qualification fees, printing and
accounting fees and legal fees and expenses of the Company's counsel and counsel
for the Holders (which counsel shall be selected by the Holders and shall be
reasonably acceptable to the Company) incurred in connection with a registration
pursuant to SECTION 1.1, SECTION 1.5 OR Section 1.6 shall be borne by the
Company.

         3.2 UNDERWRITING EXPENSES. All underwriting discounts and commissions
relating to the Registrable Securities shall be borne by the Holders.

         3.3 WITHDRAWN REGISTRATION. The Company shall not be required to pay
for any expenses of any registration proceeding begun pursuant to SECTION 1.1 if
the registration request is subsequently withdrawn at any time at the request of
the Investor (in which case the Investor shall bear such expenses), unless the
Holders agree to forfeit their right to a demand registration pursuant to
SECTION 1.1. Notwithstanding the foregoing, however, if the Holders' request for
such withdrawal is preceded by and a consequence of a material adverse change in
the condition, business or prospects of the Company that the Holders were not
aware of at the time of their request, then the Investor shall not be required
to bear such expenses and shall not forfeit its right to demand one registration
pursuant to SECTION 1.1 as a consequence of such withdrawal request.

4.       CERTAIN REQUIREMENTS.

         4.1 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement that
the Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required under applicable federal and
state securities laws and regulations to effect the registration of its
Registrable Securities.

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         4.2 DELAY OF REGISTRATION. So long as the Company has given any notice
required by this Agreement, the Holders shall not have any right to take any
action to restrain or otherwise delay any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Agreement.

         4.3 LIMITS ON REGISTRATIONS. The Company shall not be obligated to
register any Registrable Securities under this Agreement at any time after June
____, 2005. This Agreement shall automatically expire on June ____, 2005.
Notwithstanding the foregoing, termination of this Agreement shall not affect
any obligations to register pursuant to a demand received prior to the
termination of this Agreement.

         4.4 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.5 to include any of the Holders'
securities in such underwriting unless it accepts the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it and then
only in such quantity as the underwriters determine in their sole discretion
will not, jeopardize the success of the offering by the Company. If the total
amount of securities, including Registrable Securities, requested by
shareholders (including, without limitation, Steelcase) to be included in such
offering exceeds the amount of securities sold (other than by the Company) that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling shareholders (including, without limitation, Steelcase)
according to the total amount of securities entitled to be included therein
owned by each selling shareholder or in such other proportions as shall mutually
be agreed to by such selling shareholders) but in no event shall the amount of
Registrable Securities included in the offering be reduced below 25% of the
total amount of securities included in the offering.

         4.5 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS.

                  (a) Schedule A attached hereto lists all registration rights
granted by the Company as of the date hereof.

                  (b) From and after the date of this Agreement, the Company
shall not, without the prior written consent of the Holders of a majority of the
outstanding Registrable Securities, enter into any agreement or modify or amend
any existing agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder to (i)
include such securities in any registration filed under Section 1.1, 1.5 or 1.6,
unless under the terms of such agreement such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of its securities will not reduce the amount of the Registrable
Securities of the Holders which is

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included or (ii) make a demand registration which could result in such
registration statement being declared effective prior to the date set forth in
Section 1.1 or within 270 days of the effective date of any registration
effected pursuant to Section 1.1.

5.       INDEMNIFICATION.

         If any Registrable Securities are included in a registration statement
under this Agreement:

         5.1 BY THE COMPANY. To the extent permitted by law, the Company will
indemnify and hold harmless the Holders, the officers and directors of the
Investor, any underwriter (as defined in the 1933 Act) for the Holders and each
person, if any, who controls the Investor or underwriter within the meaning of
the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the 1933 Act, the 1934 Act, or any other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions, or violations (collectively a "Violation"): (a)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (b) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(c) any violation or alleged violation by the Company, or any of the Company'
officers, directors, employees or affiliates of the 1933 Act, the 1934 Act, or
any rule or regulation promulgated under the 1933 Act, the 1934 Act, or any
state or other federal securities law. The Company will reimburse the Holders
and each such officer or director, or underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this SECTION 5.1
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any the Holders,
underwriter or controlling person.

         5.2 BY THE HOLDERS. To the extent permitted by law, the Holders will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each person, if any, who
controls the Company within the meaning of the 1933 Act and each agent and any
underwriter for the Company, against any losses, claims, damages, or liabilities
(joint or several) to which the Company or any such director, officer,
controlling person, agent, or underwriter or controlling person, may become
subject, under the 1933 Act, the 1934 Act, or any other federal or state law,
insofar as such losses, claims,

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damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished by a Holder expressly for use in connection with such
registration; and the Holders will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
person, agent, or underwriter or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this SECTION 5.2
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Holders, which consent shall not be unreasonably withheld.

         5.3 PROCEDURE. Promptly after receipt by an indemnified party under
this SECTION 5 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this SECTION 5, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, reasonably satisfactory to the
indemnifying party, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
conflicts of interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to
the indemnified party under this SECTION 5 except to the extent the indemnifying
party is prejudiced as to its ability to defend such action as a result thereof;
and the omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this SECTION 5.

         5.4 SURVIVAL. The obligations of each party under this SECTION 5 shall
survive the completion of any offering of Registrable Securities in a
registration statement under this Agreement.

         5.5 CONTRIBUTION. To the extent the indemnification provided for in
this Section 1.5 is held by a court of competent jurisdiction to be unavailable
to an indemnified party with respect to any losses, claims, damages or
liabilities referred to herein, the indemnifying party, in lieu of indemnifying
such indemnified party hereunder, shall to the extent permitted by applicable
law contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other, in connection with the
Violation(s) that resulted in such loss, claim, damage or liability, as well as
any other relevant equitable considerations. The relative fault of the
indemnifying

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party and of the indemnified party shall be determined by a court of law by
reference to, among other things, whether the untrue or allegedly untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.

6.       REPORTS, ASSIGNMENT AND STAND-OFF.

         6.1 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Investor the benefits of Rule 144 promulgated under the
1933 Act and any other rule or regulation of the SEC that may at any time permit
the Holders to sell securities of the Company to the public without
registration, the Company agrees to:

                  (a) Make and keep public information available, as those terms
are understood and defined in Rule 144, at all times;

                  (b) File with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act; and

                  (c) Furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 and the
1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing the Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.

         6.2 ASSIGNMENT. The rights to cause the Company to register Registrable
Securities pursuant to this Agreement may not be assigned by a Holder to a
transferee or assignee of such securities without the Company's prior written
consent, which shall not be unreasonably withheld (the Company shall be deemed
to have consented to any transfer of rights under this Agreement in connection
with the transfer or assignment of the Warrants, in whole or in part, as
permitted under the terms of the Warrants); provided that such transferee or
assignee assumes the transferor's or assignor's obligations hereunder; provided,
further, the Company is, within a reasonable time after such transfer, furnished
with written notice of the name and address of such transferee or assignee and
the securities with respect to which such registration rights are being
assigned; provided, further, in each of the foregoing instances, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act. For the purpose of determining the number of
shares of Registrable Securities held by a transferee or assignee, the holdings
of transferees and assignees of a partnership, corporation or limited liability
company who are partners, shareholders or members or retired partners or former
shareholders or members of such entity (including spouses and ancestors, lineal
descendants

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and siblings of such partners, shareholders or members or spouses who acquire
Registrable Securities by gift, will or intestate succession) shall be
aggregated together and with the entity; provided that all assignees and
transferees who would not qualify individually for assignment of registration
rights shall have a single attorney-in-fact for the purpose of exercising any
rights, receiving notices or taking any action under this Agreement.

         6.3 "MARKET STAND-OFF" AGREEMENT. The Holders hereby agree that they
shall not, to the extent requested by the Company and an underwriter of Common
Stock (or other securities) of the Company, sell or otherwise transfer or
dispose (other than to donees who agree to be similarly bound) any Registrable
Securities during the period requested by such underwriter (not to exceed 90
days following the effective date of a registration statement of the Company
filed under the 1933 Act); provided, however, that all officers and directors of
the Company also enter into similar agreements.

7.       MISCELLANEOUS.

         7.1 Binding Effect; NO THIRD PARTY BENEFITS. This Agreement shall be
binding upon and inure to the benefit of the Company, the Investor, the Holders
and their respective successors, heirs, legal representatives and permitted
assigns. Nothing in this Agreement, express or implied, is intended to confer
upon any third party any rights, remedies, obligations, or liabilities under or
by reason of this Agreement, except as expressly provided in this Agreement.

         7.2 GOVERNING LAW. This Agreement and all transactions contemplated
hereby, shall be governed, construed and enforced in accordance with the laws of
the State of Oregon, without reference to its choice of law provisions.

         7.3 COUNTERPARTS. This Agreement may be executed in several
counterparts each of which shall be deemed to be an original, and all of which
when taken together shall constitute one single agreement between the parties.

         7.4 HEADINGS. The headings and subheadings used in this Agreement are
for convenience only and shall not control or affect the meaning or construction
of this Agreement.

         7.5 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given (a) upon personal delivery to the
party notified, (b) three days after deposit with the United States Post Office,
by registered or certified mail, postage prepaid and addressed to the party to
be notified at the address for such party, (c) one day after deposit with a
nationally recognized air courier service such as DHL or Federal Express for
next day delivery, or (d) on the date of facsimile transmission, with confirmed
transmission, provided that notice is also given under clauses (a), (b) or (c),
above. Addresses for notices are on the signature page hereof, or such other
address as such party may designate by ten days' advance written notice to the
other party in accordance with this SECTION 7.5.

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         7.6 AMENDMENT; WAIVERS. No amendment or modification of this Agreement
shall be effective unless it is set forth in a writing executed by authorized
representatives of both parties. No failure or delay by either party in
exercising any right, power or remedy will operate as a waiver of any such
right, power or remedy and any waiver as to a breach of any particular provision
will not be deemed to be a waiver of any future breach of that same provision.

         7.7 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.

         7.8 ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties regarding the subject matter of this Agreement and supersedes any
other agreements among the parties regarding such subject matter, each of which
is hereby terminated and of no further force or effect.

8.       DEFINITIONS.

         The following terms are defined as follows or in the indicated sections
of this Agreement:

         "1933 ACT" shall have the meaning set forth in SECTION 1.1;

         "1934 ACT" shall have the meaning set forth in SECTION 5.1;

         "COMMON STOCK" means the common stock of the Company;

         "COMPANY" means Microfield Graphics, Inc., an Oregon corporation;

         "HOLDER" means Investor and any assignees of Registrable Securities
pursuant to Section 6.2.

         "INVESTOR" means JMW Capital Partners, Inc., an Oregon corporation;

         "NOTE" shall have the meaning set forth in Recital A;

         "NOTICE" shall have the meaning set forth in SECTION 1.1;

         "REGISTER," "registration," and "registered" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act of 1933, as amended, and the declaration or
ordering of effectiveness of such registration statement or document;

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         "REGISTRABLE SECURITIES" means (a) the Common Stock issuable or issued
upon exercise of the Warrants and (b) any Common Stock issued (or issuable upon
the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for,
or in replacement of such Common Stock;

         "SEC" means the Securities and Exchange Commission;

         "STEELCASE" means Steelcase, Inc.

         "VIOLATION" shall have the meaning set forth in SECTION 5.1; and

         "WARRANTS" means Warrants Nos. 2000-W-1 and 2000-W-2 issued to the
Investor for the purchase of an aggregate of 2,066,000 shares of the Company's
Common Stock, of even date hereof, and all other Warrants issued in connection
therewith.

                                       12
<PAGE>

         The parties have executed this Registration Rights Agreement as of the
date first written above.

                                         MICROFIELD GRAPHICS, INC.

                                         By:____________________________________
                                                   John B. Conroy
                                                   Chief Executive Officer

Mailing Address:                         16112 SW 72nd Avenue
                                         Portland, OR  97224
                                         Attention:  John B. Conroy
                                                     Chief Executive Officer
                                         Fax:  503/620-4090

                                         JMW CAPITAL PARTNERS, INC.

                                         By:____________________________________
                                         Name:
                                         Its:

Mailing Address:                         8201 SE 17th Avenue
                                         Portland, OR 97702
                                         Attn:  Robert Jesenik
                                         Fax:  503/905-6033

                                       13
<PAGE>

                                   SCHEDULE A

                          EXISTING REGISTRATION RIGHTS

Those registration rights granted pursuant to that certain Registration Rights
Agreement dated as of March 19, 1998 between the Company and Steelcase, Inc., as
amended March 25, 1999.

                                       14<PAGE>

                                                                   EXHIBIT 10.17

                            MICROFIELD GRAPHICS, INC.

                       Note and Warrant Purchase Agreement

                                   DATED AS OF

                                  JUNE 30, 2000

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

<S>      <C>                                                                                            <C>

1.       Purchase and Sale of Note and Issuance of the Warrant...........................................1

         1.1.     Sale and Purchase of the Note..........................................................1

         1.2.     Issuance of Warrants...................................................................1

         1.3.     Authorization of Note and Securities...................................................1

         1.4.     Issuance and Delivery of the Note and Warrants.........................................1

2.       Representations and Warranties of the Company...................................................2

         2.1.     Due Incorporation, Qualification, etc..................................................2

         2.2.     Authority; Enforceability..............................................................2

         2.3.     Non-Contravention......................................................................2

         2.4.     Approvals..............................................................................2

         2.5.     Capitalization.........................................................................3

         2.6.     Subsidiaries and Affiliates............................................................3

         2.7.     Securities.............................................................................3

         2.8.     SEC Documents..........................................................................3

         2.9.     Absence of Undisclosed Liabilities and Certain Changes.................................4

         2.10.    Compliance with Laws...................................................................4

         2.11.    Claims and Legal Proceedings...........................................................4

         2.12.    Full Disclosure........................................................................4

         2.13.    Directors' and Officers' Insurance.....................................................5

         2.14.    Brokers or Finders.....................................................................5

         2.15.    Intellectual Property Rights...........................................................5

3.       Representations and Warranties of the Purchaser.................................................5

         3.1.     Purchase for Own Account...............................................................5

<PAGE>

         3.2.     Unregistered Securities................................................................6

         3.3.     Receipt of Information.................................................................6

         3.4.     Purchaser Status and Risk..............................................................6

         3.5.     Knowledge and Experience...............................................................7

         3.6.     Residence..............................................................................7

         3.7.     Authorization of Agreement.............................................................7

4.       Conditions to Company's Obligations at the Closing..............................................7

         4.1.     Representations and Warranties.........................................................7

         4.2.     Payment of Purchase Price and Performance..............................................8

         4.3.     Covenants..............................................................................8

         4.4.     Transaction Documents..................................................................8

5.       Conditions to Purchaser's Obligations at the Closing............................................8

         5.1.     Representations and Warranties.........................................................8

         5.2.     Performance............................................................................8

         5.3.     Covenants..............................................................................8

         5.4.     Transaction Documents..................................................................8

         5.5.     Board of Directors Seats...............................................................9

         5.6.     Loan Restructuring.....................................................................9

         5.7.     Consents...............................................................................9

6.       General and Financial Covenants.................................................................9

         6.1.     Payment of Notes and Maintenance of Office.............................................9

         6.2.     Debt Restrictions......................................................................9

         6.3.     Merger, Consolidation, etc............................................................10

         6.4.     Charter Amendments....................................................................10

7.       Reporting Covenants............................................................................10

<PAGE>

         7.1.     Financial and Business Information....................................................10

         7.2.     Officer's Certificates; Management Reports............................................13

         7.3.     Accountants' Certificates.............................................................13

         7.4.     Inspection............................................................................14

         7.5.     Confidential Information..............................................................14

8.       Additional Covenants...........................................................................15

         8.1.     Use of Proceeds.......................................................................15

         8.2.     Publicity.............................................................................15

         8.3.     Blue Sky Laws.........................................................................15

         8.4.     Directors' and Officers' Insurance....................................................15

         8.5.     Further Assurances....................................................................15

9.       General Provisions.............................................................................16

         9.1.     Survival of Warranties................................................................16

         9.2.     Notices...............................................................................16

         9.3.     Amendments and Waivers................................................................16

         9.4.     Governing Law.........................................................................16

         9.5.     Expenses..............................................................................16

         9.6.     Successors and Assigns................................................................17

         9.7.     Severability..........................................................................17

         9.8.     Entire Agreement and Counterparts.....................................................17

</TABLE>

<PAGE>

                            MICROFIELD GRAPHICS, INC.

                       NOTE AND WARRANT PURCHASE AGREEMENT

         THIS CONVERTIBLE NOTE PURCHASE AGREEMENT (this "Agreement") is made as
of June30, 2000, by and among Microfield Graphics, Inc., an Oregon Corporation
(the "Company"), and JMW Capital Partners, Inc. (the "Purchaser").

         Certain capitalized terms used herein have the meanings ascribed
thereto in Schedule A attached hereto.

1.       PURCHASE AND SALE OF NOTE AND ISSUANCE OF THE WARRANT

         1.1.     SALE AND PURCHASE OF THE NOTE

         Upon the terms and subject to the conditions contained herein, the
Purchaser hereby agrees to lend to the Company Four Hundred Thousand and No/100
Dollars ($400,000) in exchange for a subordinated, promissory note in the form
attached as Exhibit A (the "Note").

         1.2.     ISSUANCE OF WARRANTS

         The Company will issue to the Purchaser two stock purchase warrants,
each in the form attached as EXHIBIT B (collectively, the "Warrants"), to
purchase 1,033,000 shares of the Company's Common Stock ("Common Stock") at an
exercise price of $0.50 per share and 1,033,000 shares of Common Stock at an
exercise price of $0.38722 per share, respectively. The Warrants are being
issued in aggregate consideration for $100.00. The Warrants will be exercisable
for a period of five years.

         1.3.     AUTHORIZATION OF NOTE AND SECURITIES

         The Company will, prior to the Closing (as defined in Section 1.4),
authorize the issuance of the Note in the principal amount of Four Hundred
Thousand and No/100 Dollars ($400,000), the Warrants and the shares of Common
Stock issuable upon exercise of the Warrants (the "Warrant Shares").

         1.4.     ISSUANCE AND DELIVERY OF THE NOTE AND WARRANTS

         The issuance of the Note and the Warrants shall take place at the
closing to be held at such place and time and on such date (the "Closing Date")
as the Company and Purchaser may determine (the "Closing"). At the Closing, the
Company will deliver to Purchaser the Note, which shall be registered in the
name of "JMW Capital Partners, Inc.," against receipt by the Company, at account
number 153600083502 at U.S. Bank in the name of the Company of amount in
immediately available funds equal to Four Hundred Thousand and No/100 Dollars
($400,000), which amount shall be a loan under the Note.

                                     PAGE 1
<PAGE>

2.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company hereby represents and warrants to Purchaser as follows as
of the date hereof:

         2.1.     DUE INCORPORATION, QUALIFICATION, ETC.

         The Company is (i) a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation; and (ii)
is duly qualified, licensed to do business and in good standing as foreign
corporation in each jurisdiction where the failure to be so qualified or
licensed could reasonably be expected to have a material adverse effect on the
Company and its subsidiaries taken as a whole.

         2.2.     AUTHORITY; ENFORCEABILITY

         The execution, delivery and performance of the Company of this
Agreement, the Note, the Warrants, the Registration Rights Agreement and the
Engagement Letter (collectively, the "Transaction Documents") will be, at or
prior to Closing, duly authorized by all requisite action of the Company and its
directors and shareholders. This Agreement and each of the other Transactions
Documents has been duly executed and delivered by the Company, and this
Agreement constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.

         2.3.     NON-CONTRAVENTION

         The execution and delivery by the Company of this Agreement and the
other Transaction Documents and the performance and consummation of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Warrant Shares pursuant to the Warrants, do not and will not (i)
violate the Articles of Incorporation or Bylaws of the Company or any judgment,
order, writ, decree, statute, rule or regulation applicable to the Company; (ii)
violate any provision of, or result in the breach or the acceleration of, or
entitle any other person to accelerate (whether after the giving of notice or
lapse of time or both), any mortgage, indenture, agreement, instrument or
contract to which the Company is a party or by which it is bound; or (iii)
result in the creation or imposition of any lien upon any property, asset or
revenue of the Company or the suspension, revocation, impairment, forfeiture, or
renewal of any material permit, license, authorization or approval applicable to
the Company, its business or operations, or any of its assets or properties.

         2.4.     APPROVALS

         No consent, approval, order of authorization of, or registration,
declaration or filing with any governmental authority or other person or entity
(including, without limitation the shareholders of the Company or any other
person or entity) is required in connection with the execution and delivery of
this Agreement and the other Transaction Documents and the performance and
consummation of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Warrant Shares

                                     PAGE 2
<PAGE>

pursuant to the Warrants), other than those that may be necessary to perfect
exemptions from the registration requirements federal and state securities laws.

         2.5.     CAPITALIZATION

         The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock and no shares of the Company's Preferred Stock. As of
April 11, 2000, the issued and outstanding capital stock of the Company
consisted solely of 4,135,185 shares of Common Stock. All of such shares are
duly authorized and validly issued, fully paid and nonassessable, and have been
issued in compliance with all applicable federal and state securities laws.
Other than (a) options to purchase up to 481,881 shares of Common Stock which
have been granted under the Company's 1986 Stock Option Plan and Restated 1995
Stock Incentive Plan (the "Plans") and were outstanding as of January 1, 2000,
(b) warrants to purchase up to 280,000 shares of Common Stock, and (c) pursuant
to that certain Amended and Restated Share Ownership, Voting and Right of First
Refusal Agreement dated as of March 25, 1999 by and among the Company,
Steelcase, Inc. and the Executives named therein, there are no outstanding
rights of first refusal or offer, co-sale rights, preemptive rights, options
(other than options granted under the Plans since January 1, 2000 in the
ordinary course of business and consistent with past practice), warrants, or
other rights or agreements, either directly or indirectly, for the purchase or
acquisition from the Company of any shares of Company capital stock or any
securities convertible into or exchangeable for shares of Company capital stock,
and the Company is not committed to issue or grant any such rights, options,
warrants or other agreements.

         2.6.     SUBSIDIARIES AND AFFILIATES

         Other than the Company's wholly-owned foreign sales corporation formed
under the laws of Barbados, the Company does not own or control, and has not in
the past owned or controlled, directly or indirectly, any corporation,
partnership, limited liability company or other business entity or any interest
therein, and the Company has no agreement or commitment to purchase any such
interest.

         2.7.     SECURITIES

         The Warrant Shares have been duly reserved and authorized for issuance,
and the Warrant Shares, when issued and delivered pursuant to the exercise of
the Warrants in accordance with the terms thereof, shall be validly issued,
fully paid and nonassessable. Assuming the accuracy of the representations and
warranties contained in Section 3, the Warrants are being issued in compliance
with applicable federal and state securities laws.

         2.8.     SEC DOCUMENTS

         The Company has furnished or made available to Purchaser true and
complete copies of its Annual Report on Form 10-K for the fiscal year ended
January 1, 2000, and all Forms 10-Q and 8-K filed after the date of such Form
10-K (collectively, the "SEC Documents"). As of their respective filing dates,
each of the SEC Documents complied in all material respects with the
requirements of the Securities Exchange Act of 1934, as

                                     PAGE 3
<PAGE>

amended (the "Exchange Act"), and the rules and regulations of the SEC
promulgated thereunder. All contracts and agreements to which the Company is a
party or by which it is bound and that are described by Item 601 of Regulation
S-K under the Securities Act are included as Exhibits to the SEC Documents.

         2.9.     ABSENCE OF UNDISCLOSED LIABILITIES AND CERTAIN CHANGES

         The Company has no liabilities or obligations of any nature (absolute,
contingent or otherwise) that are not fully reflected or reserved against in the
January1, 2000 audited balance sheet included in the SEC Documents, except (x)
liabilities or obligations incurred since the date of such balance sheet in the
ordinary course of business and consistent with past practice and (y) such other
liabilities and obligations incurred prior to such date that have not had, or
could reasonably be expected to have, a material adverse effect on the business,
operations, assets, liabilities, condition (financial or other) or prospects of
the Company (a "Material Adverse Effect").

         Since the January 1, 2000 financial statements included in the SEC
Documents, there has not been any change which by itself or in conjunction with
all other such changes, has had, or could reasonably be expected to have, a
Material Adverse Effect, except as disclosed in the SEC Documents.

         2.10.    COMPLIANCE WITH LAWS

         The Company is in compliance in all material respects with all federal,
state, local and foreign laws, rules, regulations, ordinances, decrees and
orders applicable to it, to its employees or to any of its properties,
including, without limitation, all such laws, rules, regulations, ordinances,
decrees and orders relating to intellectual property protection, environmental
protection, equal employment opportunity, health and occupational safety,
pension and employee benefit matters, securities and investor protection
matters, and labor and employment matters. Except as disclosed in the SEC
Documents, the Company has not received any notification of any asserted present
or past unremedied failure by the Company to comply with any of such laws,
rules, regulations, ordinances, decrees or orders.

         2.11.    CLAIMS AND LEGAL PROCEEDINGS

         Except as disclosed in the SEC Documents, there are no material claims,
actions, suits, arbitrations, investigations or proceedings pending or involving
or, to the Company's knowledge, threatened against the Company before or by any
court or governmental or nongovernmental department, commission, board, bureau,
agency or instrumentality, or any other person or entity. There are no
outstanding or unsatisfied judgments, orders, decrees or stipulations to which
the Company is a party.

         2.12.    FULL DISCLOSURE

         No information furnished by the Company to Purchaser in connection with
this Agreement or the other Transaction Documents contains any untrue statement
of a

                                     PAGE 4
<PAGE>

material fact or omits to state a material fact necessary in order to make the
statements so made or information so delivered not misleading.

         2.13.    DIRECTORS' AND OFFICERS' INSURANCE

         The Company has provided to Purchaser a true and complete copy of its
current directors' and officers' liability insurance policy. Such policy is in
full force and effect as of the date hereof.

         2.14.    BROKERS OR FINDERS

         The Company has not incurred, and will not incur, directly or
indirectly, as a result of any action taken by or on behalf of the Company, any
liability for brokerage or finders' fees or agents' commissions or any similar
changes in connection with this Agreement or any transaction contemplated
hereby, except pursuant to the Engagement Letter.

         2.15.    INTELLECTUAL PROPERTY RIGHTS

         The Company owns or otherwise has a right to use all patented
inventions, trademarks, trade names, service marks and copyrights (collectively
"Intellectual Property Rights") used by the Company in the conduct of its
business as currently conducted, except for those Intellectual Property Rights
the lack of which could not reasonably be expected to have a Material Adverse
Effect. There is no material claim, action or cause of action challenging the
Company's use of the Intellectual Property Rights or challenging or questioning
the validity or effectiveness of any Intellectual Property Rights. To the
Company's knowledge, neither the Company's operations nor the Intellectual
Property Rights infringe upon any validly issued or pending patent, trademark,
trade name, service mark, copyright or other right of any person or entity.

3.       REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

         The Purchaser represents and warrants to the Company as follows:

         3.1.     PURCHASE FOR OWN ACCOUNT

         Purchaser is acquiring the Warrants and/or Warrant Shares and the Note
(collectively, the "Securities") for Purchaser's own account, not as nominee or
agent, for investment and not with a view to, or for resale in connection with,
any distribution or public offering thereof within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"). By executing this Agreement,
Purchaser further represents that Purchaser does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to any such person or to any third person, with respect to the
Warrants.

                                     PAGE 5
<PAGE>

         3.2.     UNREGISTERED SECURITIES

         Purchaser understands that (i) the Securities have not been registered
under either the Securities Act or the securities laws of any state by reason of
specific exemptions therefrom; (ii) the Securities must be held by indefinitely,
and, therefore, must bear the economic risk of such investment indefinitely,
unless a subsequent disposition thereof is registered under the Securities Act
and the securities laws of any applicable state or is exempt from such
registrations; (iii) each of the Securities will be endorsed with a legend
substantially as follows:

                  THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
         REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
         ACT") OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD,
         TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS PURSUANT TO SEC RULE 144
         OR UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933
         ACT AND THE SECURITIES LAWS OF ANY STATE COVERING SUCH SECURITIES OR
         THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THE
         SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH
         SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
         REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND
         THE SECURITIES LAWS OF ANY STATE.

and (iv) the Company will instruct any transfer agent not to register the
transfer of the Securities unless the conditions specified in the foregoing
legend are satisfied.

         3.3.     RECEIPT OF INFORMATION

         Purchaser has been furnished with such materials and has been given
access to such information relating to the Company as Purchaser has requested
and Purchaser has been afforded the opportunity to ask questions regarding the
Company and the Securities, all as Purchaser has found necessary to make an
informed investment decision. Without limiting the foregoing, Purchaser and
Designees have reviewed the Company's filings under the Securities Exchange Act
of 1934, as amended. Purchaser has been solely responsible for its own due
diligence investigation of the Company and its proposed business, for its own
analysis of the merits and risks of its investment made pursuant to this
Agreement and for its own analysis of the terms of its investment.

         3.4.     PURCHASER STATUS AND RISK

         Purchaser is an "accredited investor" as defined in Rule 501
promulgated under the Securities Act of 1933, as amended. Purchaser is in a
financial position to hold the Securities and is able to bear the economic risk
and withstand a complete loss of Purchaser's investment in the Securities.
Purchaser recognizes that the Securities as an

                                     PAGE 6
<PAGE>

investment involve a high degree of risk. Purchaser understands and acknowledges
that there can be no assurance that the Company will be able to meet its
projected goals and that the Company will need significant additional capital to
be successful, which capital may not be readily available.

         3.5.     KNOWLEDGE AND EXPERIENCE

         Purchaser has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of an investment
in the Company and is able to bear the economic risks of an investment in the
Company. Purchaser acknowledges hereby that it has been advised to and has
obtained, to the extent Purchaser deems necessary, professional (including
legal) advice with respect to the risks inherent in the investment in the
Securities, the condition of the Company, the suitability of the investment in
the Securities in light of Purchaser's condition and investment needs, and the
terms and conditions of this Agreement and documents relating to the investment
in the Securities. The investment in the Securities is suitable for Purchaser
based upon Purchaser's investment objectives and financial needs, and Purchaser
has adequate net worth and means for providing for its current financial needs
and contingencies and has no need for liquidity of the investment with respect
to the Securities. Purchaser's overall commitments to investments that are
illiquid or not readily marketable are not disproportionate to Purchaser's net
worth, and investment in the Securities will not cause such overall commitment
to become excessive.

         3.6.     RESIDENCE

         For purposes of the application of state securities laws, Purchaser
represents that it is domiciled in the state of Oregon.

         3.7.     AUTHORIZATION OF AGREEMENT

         The execution, delivery and performance by Purchaser of this Agreement
have been duly authorized by all requisite action of Purchaser. This Agreement
has been duly executed and delivered by Purchaser and constitutes a legal, valid
and binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms.

4.       CONDITIONS TO COMPANY'S OBLIGATIONS AT THE CLOSING

         The obligations of the Company to the Purchaser under this Agreement
are subject to the fulfillment on or before the Closing of the following
conditions, unless waived in writing by the Purchaser:

         4.1.     REPRESENTATIONS AND WARRANTIES

         The representations and warranties of Purchaser contained in Section 3
of this Agreement shall be true in all material respects on and as of the
Closing with the same effect as though such representations and warranties had
been made as of the Closing.

                                     PAGE 7
<PAGE>

         4.2.     PAYMENT OF PURCHASE PRICE AND PERFORMANCE

         Purchaser shall have delivered the purchase price specified in Section
1.3 of this Agreement to be delivered at the closing, in the form specified in
Section 1.3 of this Agreement. Purchaser shall also have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before Closing.

         4.3.     COVENANTS

         Purchaser shall have performed all covenants set forth in this
Agreement required to be performed prior to the Closing.

         4.4.     TRANSACTION DOCUMENTS

         Purchaser shall have duly executed and delivered to Company this
Agreement, the Registration Rights Agreement in the form attached as EXHIBIT C
(the "Registration Rights Agreement"), and the Engagement Letter in the form
attached as EXHIBIT D (the "Engagement Letter").

5.       CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE CLOSING

         The obligations of Purchaser to Company under this Agreement are
subject to the fulfillment at or before Closing (unless otherwise specified) to
each of the following conditions, unless waive in writing by the Company.

         5.1.     REPRESENTATIONS AND WARRANTIES

         The representations and warranties of the Company contained in Section
2 of this Agreement shall be true in all material respects on and as of the
Closing with the same effect as though such representations and warranties had
been made as of the date of the Closing.

         5.2.     PERFORMANCE

         The Company shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement that are required to be
performed or complied with by it on or before such Closing.

         5.3.     COVENANTS

         Company shall have performed all covenants set forth in this Agreement
required to be performed prior to the Closing.

         5.4.     TRANSACTION DOCUMENTS

         Company shall have duly executed and delivered to Purchaser this
Agreement, the Warrants, the Note, the Registration Rights Agreement and the
Engagement Letter.

                                     PAGE 8
<PAGE>

         5.5.     BOARD OF DIRECTORS SEATS

         The Board of Directors of the Company shall have elected to the Board
of Directors, contingent upon the Closing, two individuals selected by
Purchaser.

         5.6.     LOAN RESTRUCTURING

         The Company's inventory loan with Silicon Valley Bank (the "Loan")
shall have been restructured to Purchaser's satisfaction to provide for a
maximum pay-down of $75,000, with the balance to be repaid over a period of no
less than six months from the Closing Date.

         5.7.     CONSENTS

         The Company shall have delivered to Purchaser copies of all consents
required to authorize or approve the transactions contemplated by the
Transaction Documents.

6.       GENERAL AND FINANCIAL COVENANTS

         The Company covenants for the benefit of the holders of the Note that
on and after the Closing Date and so long as the Note shall be outstanding:

         6.1.     PAYMENT OF NOTES AND MAINTENANCE OF OFFICE

         The Company will punctually pay, or cause to be paid, the principal of
and interest on the Note, as and when the same shall become due according to the
terms hereof and of the Note, and the Company will maintain an office at the
address of the Company as provided in Section 9.2. Such office will be
maintained at such address until such time as the Company notifies Purchaser of
any change of location of such office, which office will in any event be located
within the United States of America.

         6.2.     DEBT RESTRICTIONS

                  (a) COMPANY DEBT RESTRICTIONS. The Company will not directly
or indirectly, at any time create, incur, issue, assume, guarantee or otherwise
become liable with respect to any Debt, except:

                           (i)      Debt evidenced by the Note;

                           (ii)     Senior Debt (as defined in the Note); and

                           (iii)    Qualified Revolving Facility Debt, PROVIDED,
                                    that the aggregate principal amount
                                    outstanding in respect thereof does not at
                                    any time exceed the Company's total revenues
                                    for the immediately preceding 90 days and,
                                    PROVIDED FURTHER, that immediately after
                                    giving effect to the incurrence from time to
                                    time of such Debt and the

                                     PAGE 9
<PAGE>

                                    application of the proceeds thereof, no
                                    Default or Event of Default would exist.

                  (b) COMPLIANCE WITH LAW. The Company will, and will cause each
         Subsidiary to, comply with all laws, ordinances and governmental rules
         and regulations to which it is subject and obtain all licenses,
         certificates, permits, franchises and other governmental authorizations
         necessary for the ownership of its Properties and the conduct of its
         business except for such violations and failures to obtain that, in the
         aggregate, could not reasonably be expected to have a Material Adverse
         Effect.

         6.3.     MERGER, CONSOLIDATION, ETC.

         The Company will not, nor will the Company permit any Subsidiary to,
merge into, consolidate with, or sell, lease, transfer or otherwise dispose of
all or substantially all of its Property to, any other Person or permit any
other Person to consolidate with or merge into it.

         6.4.     CHARTER AMENDMENTS

         The Company will not amend, or permit any of its Subsidiaries to amend,
its articles or certificate of incorporation or bylaws (or other similar
documents).

7.       REPORTING COVENANTS

         7.1.     FINANCIAL AND BUSINESS INFORMATION

         The Company shall deliver to Purchaser:

                           (a) MONTHLY FINANCIAL STATEMENTS -- as soon as
                  practicable after the end of each monthly fiscal period in
                  each fiscal year of the Company, and in any event within
                  thirty (30) days thereafter:

                                    (i) a consolidated balance sheet as of the
                           end of such month; and

                                    (ii) consolidated statements of income,
                           changes in shareholders' equity and cash flows for
                           such month and for the portion of such fiscal year
                           ending with such month;

                  for the Company and its Subsidiaries, setting forth in each
                  case, in comparative form, the financial statements for such
                  month and for the portion of such fiscal year ending with and
                  including such month, together with the figures for the
                  corresponding periods in the previous fiscal year, all in
                  reasonable detail, prepared in accordance with GAAP applicable
                  to monthly financial statements generally, certified by a
                  senior financial officer of the Company that such financial
                  statements present fairly, in all material respects, the
                  financial position of the companies being reported

                                    PAGE 10
<PAGE>

                  upon and their results of operations and cash flows and have
                  been prepared in conformity with GAAP applicable to monthly
                  financial statements generally, subject to adjustment, and
                  accompanied by the certificate as required by Section 7.2;
                  PROVIDED that delivery within the time period specified above
                  of copies of the Company's Quarterly Report on Form 10-Q
                  prepared in compliance with the requirements therefor and
                  filed with the Securities and Exchange Commission (or any
                  successor agency) shall be deemed to satisfy the requirements
                  of this Section 7.1(a), so long as such financial statements
                  are contained therein;

                           (b) ANNUAL FINANCIAL STATEMENTS -- as soon as
                  practicable after the end of each fiscal year of the Company,
                  and in any event within ninety (90) days thereafter:

                                    (i) a consolidated balance sheet as at the
                           end of such year; and

                                    (ii) consolidated statements of income,
                           changes in shareholders' equity and cash flows for
                           such year;

                  for the Company and its Subsidiaries, setting forth, in the
                  case of each financial statement, in comparative form, the
                  financial statement for the immediately preceding fiscal year,
                  all in reasonable detail, prepared in accordance with GAAP,
                  and accompanied by:

                                    (A) an opinion thereon of independent
                           certified public accountants of recognized national
                           standing (or independent certified public accountants
                           approved by Purchaser in writing) selected by the
                           Company, which opinion shall, without qualification,
                           state that such financial statements present fairly,
                           in all material respects, the financial position of
                           the companies being reported upon and their results
                           of operations and cash flows and have been prepared
                           in conformity with GAAP, and that the examination of
                           such accountants in connection with such financial
                           statements has been made in accordance with generally
                           accepted auditing standards, and that such audit
                           provides a reasonable basis for such opinion in the
                           circumstances;

                                    (B) a certification by a senior financial
                           officer of the Company that such statements are
                           complete and correct in all material respects; and

                                    (C) the certificates as required by Section
                           7.2 and Section 7.3;

         PROVIDED that the delivery within the time period specified above of
         the Company's Annual Report on Form 10-K for such fiscal year (together
         with the Company's annual report to shareholders, if any, prepared
         pursuant to Rule 14a-3

                                    PAGE 11
<PAGE>

         under the Securities Exchange Act of 1934, as amended) prepared in
         accordance with the requirements therefor and filed with the Securities
         and Exchange Commission, together with the accountant's certificate
         described in clause (A) above, shall be deemed to satisfy the
         requirements of this Section 7.1(b), so long as such financial
         statements are contained therein;

                  (c) AUDIT REPORTS AND MANAGEMENT LETTERS -- promptly upon
         receipt thereof, a copy of each other report (including, without
         limitation, any letters to the Company from the Company's auditors
         concerning the internal accounting controls of the Company) submitted
         to the Company by independent accountants in connection with any
         annual, interim or special audit made by them of the books of the
         Company or any of the Subsidiaries;

                  (d) SEC AND OTHER REPORTS -- promptly upon their becoming
         available:

                           (i) each financial statement, report, notice or proxy
                  statement sent by the Company or any Subsidiary to
                  shareholders or creditors generally;

                           (ii) each regular or periodic report (including,
                  without limitation, each Form 10-K, Form 10-Q and Form 8-K),
                  any registration statement which shall have become effective,
                  and each final prospectus and all amendments thereto filed by
                  the Company or any Subsidiary with the Securities and Exchange
                  Commission (or any successor agency) or any securities
                  exchange (including, without limitation, any electronic stock
                  quotation system); and

                           (iii) all press releases and other statements made
                  available by the Company or any Subsidiary to the public
                  concerning material developments in the business of the
                  Company or any Subsidiary;

                  (e) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- within two
         business days of any officer of the Company becoming aware of the
         existence of any condition or event which constitutes a Default or an
         Event of Default, a written notice specifying the nature and period of
         existence thereof and what action the Company is taking or proposes to
         take with respect thereto;

                  (f) NOTICE OF CLAIMED DEFAULT -- within two business days of
         any officer of the Company becoming aware that the holder of the Note,
         or of any Debt or other security of the Company, shall have given
         notice or taken any other action with respect to a claimed Default,
         Event of Default or default or event of default, a written notice
         specifying the nature of the claimed Default, Event of Default or
         default or event of default and the notice given or action taken (if
         any) by such holder and what action the Company is taking or proposes
         to take with respect thereto;

                                    PAGE 12
<PAGE>

                  (g) REQUESTED INFORMATION -- with reasonable promptness, such
         other data and information as from time to time may be reasonably
         requested by Purchaser.

         7.2.     OFFICER'S CERTIFICATES; MANAGEMENT REPORTS

                  (a) CERTIFICATE OF SENIOR OFFICER -- Each set of financial
         statements delivered pursuant to Section 7.1(a) and Section 7.1(b)
         shall be accompanied by a certificate of a senior financial officer of
         the Company, which certificate shall:

                           (i) COVENANT COMPLIANCE - set forth the financial
                  information (including calculations in reasonable detail and
                  determinations of all defined values used therein) required in
                  order to establish whether the Company was in compliance with
                  the requirements of Section 6.4, Section 6.5, Section 6.7 and
                  Section 6.9, in each case where such Sections impose numerical
                  financial requirements at all times during, or as of the end
                  of, the period covered by the financial statements then being
                  furnished (including with respect to each such requirement,
                  where applicable, the calculations of the maximum or minimum
                  amount, ratio or percentage, as the case may be, permissible
                  under the terms of such Sections, and the calculation of the
                  amount, ratio or percentage then in existence); and

                           (ii) EVENT OF DEFAULT - set forth a statement that
                  the signer has reviewed the relevant terms of this Agreement
                  and the Note and has made, or caused to be made, under his or
                  her supervision, a review of the transactions and conditions
                  of the Company from the beginning of the accounting period
                  covered by the income statements being delivered therewith to
                  the date of the certificate and that such review did not
                  disclose the existence during such period of any condition or
                  event that constitutes a Default or an Event of Default or, if
                  any such condition or event existed or exists, specifying the
                  nature and period of existence thereof and what action the
                  Company shall have taken or proposes to take with respect
                  thereto.

         7.3.     ACCOUNTANTS' CERTIFICATES

         Each set of annual financial statements delivered pursuant to Section
7.1(b) shall be accompanied by a certificate of the accountants who certify such
financial statements, stating:

                  (a) that their audit examination has included a review of
         Section 6.4 through Section 6.10, inclusive, as such Sections relate to
         accounting matters and that such review is sufficient to enable them to
         make the statement referred to in clause (c) of this Section 7.3;

                  (b) whether, in the course of their audit examination, there
         has been disclosed the existence, during the fiscal year covered by
         such financial statements (or whether they have knowledge of the
         existence as of the date of

                                    PAGE 13
<PAGE>

         such accountants' certificate), of any condition or event which
         constitutes a Default or Event of Default, and if during their audit
         examination there has been disclosed (or if they have knowledge of)
         such a condition or event, specifying the nature and period of
         existence thereof (it being understood, however, that such accountants
         shall not be liable to any Person by reason of their failure to obtain
         knowledge of any Default or Event of Default which would not be
         disclosed in the course of an audit conducted in accordance with
         generally accepted auditing standards); and

                  (c) that based on their annual audit examination nothing came
         to their attention which caused them to believe that the Company was
         not in compliance with the provisions of Section 6.4 through Section
         6.10, inclusive, as set forth in the officer's certificate delivered
         therewith pursuant to Section 7.2.

         7.4.     INSPECTION

         The Company shall permit the representatives of Purchaser, at the
expense of Purchaser (or, if a Default or Event of Default shall exist at such
time, at the expense of the Company), to visit and inspect any of the Properties
of the Company or any Subsidiary, to examine all their respective books of
account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants (and by
this provision the Company authorizes said accountants to discuss the finances
and affairs of the Company and the Subsidiaries) all at such reasonable times
and as often as may be reasonably requested.

         7.5.     CONFIDENTIAL INFORMATION

         For the purposes of this Section 7.5, "Confidential Information" means
information delivered to Purchaser by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by Purchaser
as being confidential information of the Company or such Subsidiary, PROVIDED
that such term does not include information that (a) was publicly known or
otherwise known to Purchaser prior to the time of such disclosure, (b)
subsequently becomes publicly known through no act or omission by Purchaser or
any Person acting on its behalf, (c) otherwise becomes known to Purchaser other
than through disclosure by the Company or any Subsidiary or (d) constitutes
financial statements delivered to Purchaser under Section 7.1 that are otherwise
publicly available. Purchaser will maintain the confidentiality of such
Confidential Information in accordance with procedures adopted by Purchaser in
good faith to protect confidential information of third parties delivered to it,
PROVIDED that Purchaser may deliver or disclose Confidential Information to (i)
its directors, officers, employees, agents, attorneys and affiliates (to the
extent such disclosure relates to the administration of the transaction
contemplated by this Agreement), (ii) its financial advisors and other
professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this Section 7.5,
(iii) any other

                                    PAGE 14
<PAGE>

holder of the Note, (iv) any federal or state regulatory authority having
jurisdiction over Purchaser, or (v) any other Person to whom such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to Purchaser, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
Purchaser is a party or (z) if an Event of Default has occurred and is
continuing, to the extent Purchaser may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under this Agreement and the Note. In the
event of any proposed disclosure pursuant to clauses (x) and (y) of clause (v)
above, Purchaser will use reasonable efforts to notify the Company of such
proposed disclosure prior to effecting such proposed disclosure.

8.       ADDITIONAL COVENANTS

         8.1.     USE OF PROCEEDS

         The Company will use up to $75,000 of the proceeds of the loan
evidenced by the Note to pay-down the Loan and the balance for working capital.
The Company will use no proceeds to redeem or repurchase any Company equity or
equity-equivalent securities.

         8.2.     PUBLICITY

         The Company shall issue within one business day of the Closing Date a
press release acceptable to Purchaser disclosing the transaction contemplated
hereby. The parties shall issue no other press releases or public statements
regarding the transaction contemplated hereby without the prior consent of the
other party (which shall not be unreasonably withheld).

         8.3.     BLUE SKY LAWS

         The Company shall take all commercially reasonable steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the Warrant Shares issuable upon
exercise of the Warrants.

         8.4.     DIRECTORS' AND OFFICERS' INSURANCE

         Without the prior written consent of Purchaser, the Company will not
let its directors' and officers' liability insurance policy lapse or terminate
or reduce any levels of coverage thereunder from levels existing as of the date
hereof.

         8.5.     FURTHER ASSURANCES

         Upon Purchaser's request, the Company shall take, at its own expense,
such further actions and execute such additional instruments, certificates and
agreements as shall be reasonably required to effect the transactions
contemplated by the Transaction Documents.

                                    PAGE 15
<PAGE>

9.       GENERAL PROVISIONS

         9.1.     SURVIVAL OF WARRANTIES

         The warranties and representations contained in this Agreement shall
survive the execution and delivery of this Agreement and the Closing for a
period of two years from Closing. The covenants contained in this Agreement
shall survive the execution and delivery of this Agreement for so long as the
Company has obligations outstanding under the Note, except for the covenants
contained in Sections 8.1 and 8.2, which shall survive for a period of two years
from Closing.

         9.2.     NOTICES

         Unless otherwise provided, any notice under this Agreement shall be
given in writing and shall be deemed effectively given: (a) upon personal
delivery to the party to be notified; (b) upon confirmation of receipt by fax by
the party to be notified; (c) one business day after deposit with a reputable
overnight courier, prepaid for overnight delivery and addressed as set forth in
(d); or (d) three days after deposit with the United States Post Office, postage
prepaid, registered or certified with return receipt requested and addressed to
the party to be notified at the address designated for such party in the
Registration Rights Agreement.

         9.3.     AMENDMENTS AND WAIVERS

         Any term of this Agreement may be amended and the observance of any
term may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the Company and
the holder of the Note and the holders of a majority of the aggregate then
outstanding Warrant Shares, if any. Any amendment or waiver effected in
accordance with this section shall be binding on each holder of any securities
purchased under this Agreement at the time outstanding (including securities
into which such securities are convertible), each future holder of any such
securities, and the Company.

         9.4.     GOVERNING LAW

         This Agreement shall be governed by and construed in accordance with
the laws of the State of Oregon, as such laws are applied to contracts made and
to be wholly performed in Oregon by persons domiciled in Oregon.

         9.5.     EXPENSES

         The Company agrees, whether or not the transactions contemplated hereby
are consummated, to pay, and hold the Investor and the holders of the Securities
harmless from liability for the payment of:

                  (a) the fees and expenses of Investor's counsel arising in
         connection with the negotiation and execution of this Agreement and the
         other Transaction Documents and the consummation of the transactions
         contemplated hereby and

                                    PAGE 16
<PAGE>

         thereby (which fees and expenses shall be paid by check delivered to
         such counsel at the Closing);

                  (b) the fees and expenses incurred in respect of the
         enforcement of the rights granted under this Agreement and the other
         Transaction Documents; and

                  (c) if (i) the Investor or other holder of Securities desires
         to sell or otherwise transfer any or all of the Securities held by it,
         (ii) a legal opinion is required prior to effecting such transfer and
         (iii) counsel for the Company declines to render such legal opinion to
         the Investor or such holder (without cost or expense to the Investor or
         such holder), the fees and expenses of counsel for the Investor or such
         holder in rendering such opinion.

         9.6.     SUCCESSORS AND ASSIGNS

         This Agreement shall be timely upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Neither
Company nor Purchaser may assign its right or obligations under this Agreement
without the prior written consent of the other party, which shall not be
unreasonably withheld, provided, however, that Company and Purchaser may,
without consent of the other party, assign its rights or obligations under this
Agreement to any person or entity that controls, is controlled by or is under
common control with such assignor. Notwithstanding the foregoing, Purchaser's
rights to assign its rights or obligations under the Note and the Warrants are
as set forth therein.

         9.7.     SEVERABILITY

         If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement, and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.

         9.8.     ENTIRE AGREEMENT AND COUNTERPARTS

         This Agreement and the other documents delivered at the Closing
constitute the entire agreement between the parties regarding their subject
matter and supersede all prior agreements. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original and all of
which, taken together, shall constitute one and the same instrument.

                            [SIGNATURE PAGE FOLLOWS]

                                    PAGE 17
<PAGE>

         IN WITNESS WHEREOF, each of the parties has caused this Note and
Warrant Purchase Agreement to be duly executed and delivered by its duly
authorized representative as of the date first above written.

<TABLE>
<CAPTION>

<S>                                         <C>

MICROFIELD GRAPHICS, INC.                   JMW CAPITAL PARTNERS, INC.

By:  ___________________________            By:  __________________________

Name:  John B. Conroy                       Name:  _______________________

Title:  Chief Executive Officer             Title:  ________________________

</TABLE>

                    [NOTE PURCHASE AGREEMENT SIGNATURE PAGE]

                                    PAGE 18
<PAGE>

                                   SCHEDULE A

                              CERTAIN DEFINED TERMS

         CAPITAL LEASE -- means, at any time, a lease with respect to which the
lessee is required to recognize, for accounting purposes, the acquisition of an
asset and the incurrence of a liability at such time.

         DEBT -- means, at any time, with respect to any Person, without
duplication:

                  (a) its liabilities for borrowed money (whether or not
         evidenced by a Security);

                  (b) any liabilities for borrowed money secured by any Lien
         existing on Property owned by such Person (whether or not such Person
         is personally liable in respect thereof);

                  (c) any obligations in respect of any Capital Lease of such
         Person;

                  (d) all obligations of such Person in respect of banker's
         acceptances, other acceptances, letters of credit and other instruments
         serving a similar function issued or accepted by banks and other
         financial institutions for the account of such Person (whether or not
         incurred in connection with the borrowing of money);

                  (e) Swaps of such Person; and

                  (f) any Guaranty of such Person of any obligation or liability
         of another Person of a type described in any of clause (a) through
         clause (e), inclusive, of this definition.

         As used in this definition,

                  SWAPS -- means, with respect to any Person, payment
         obligations with respect to interest rate swaps, currency swaps and
         similar obligations obligating such Person to make payments, whether
         periodically or upon the happening of a contingency. For the purposes
         of this Agreement, the amount of the obligation under any Swap shall be
         the amount determined in respect thereof as of the end of the then most
         recently ended fiscal quarter of such Person, based on the assumption
         that such Swap had terminated at the end of such fiscal quarter, and in
         making such determination, if any agreement relating to such Swap
         provides for the netting of amounts payable by and to such Person
         thereunder or if any such agreement provides for the simultaneous
         payment of amounts by and to such Person, then in each such case, the
         amount of such obligation shall be the net amount so determined.

                                     PAGE 1
<PAGE>

         DEFAULT -- means an event or condition the occurrence of which would,
with the lapse of time or the giving of notice or both, become an Event of
Default.

         EVENT OF DEFAULT has the meaning ascribed thereto in the Note.

         GUARANTY -- means with respect to any Person (for the purposes of this
definition, the "GUARANTOR") any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection)
of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend
or other obligation of any other Person (the "PRIMARY OBLIGOR") in any manner,
whether directly or indirectly, including, without limitation, obligations
incurred through an agreement, contingent or otherwise, by the Guarantor:

                  (a) to purchase such indebtedness or obligation or any
         Property constituting security therefor;

                  (b) to advance or supply funds:

                  (i)      for the purchase or payment of such indebtedness,
                           dividend or obligation; or

                  (ii)     to maintain working capital or other balance sheet
                           condition or any income statement condition of the
                           Primary Obligor or otherwise to advance or make
                           available funds for the purchase or payment of such
                           indebtedness, dividend or obligation;

                  (c) to lease Property or to purchase securities or other
         Property or services primarily for the purpose of assuring the owner of
         such indebtedness or obligation of the ability of the Primary Obligor
         to make payment of the indebtedness or obligation; or

                  (d) otherwise to assure the owner of the indebtedness or
         obligation of the Primary Obligor against loss in respect thereof.

For purposes of computing the amount of any Guaranty in connection with any
computation of indebtedness or other liability, it shall be assumed that the
amount of the Guaranty is the amount of the direct obligation then due or
outstanding.

         LIEN -- means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property (for purposes of
this definition, the "Owner"), whether such interest is based on the common law,
statute or contract, and includes but is not limited to:

                  (a) the security interest lien arising from a mortgage,
         encumbrance, pledge, conditional sale or trust receipt or a lease,
         consignment or bailment for security purposes, and the filing of any
         financing statement under the Uniform

                                     PAGE 2
<PAGE>

         Commercial Code of any jurisdiction, or an agreement to give any of the
         foregoing;

                  (b) reservations, exceptions, encroachments, easements,
         rights-of-way, covenants, conditions, restrictions, leases and other
         title exceptions and encumbrances affecting real Property;

                  (c) stockholder agreements, voting trust agreements, buy-back
         agreements and all similar arrangements affecting the Owner's rights in
         stock owned by the Owner; and

                  (d) any interest in any Property held by the Owner evidenced
         by a conditional sale agreement, Capital Lease or other arrangement
         pursuant to which title to such Property has been retained by or vested
         in some other Person for security purposes.

The term "Lien" does not include negative pledge clauses in loan agreements and
equal and ratable security clauses in loan agreements or any Lien created
pursuant to the terms of the Transaction Documents.

         PERSON -- means an individual, partnership, corporation, limited
liability company, trust, joint venture, unincorporated organization, or a
government or agency or political subdivision thereof.

         PROPERTY -- means any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.

         QUALIFIED REVOLVING FACILITY DEBT -- means Debt of the Company:

                  (a) in respect of loans, advances, letters of credit,
         acceptances and other similar credit facilities provided to the Company
         by any commercial bank or similar financial institution; and

                  (b) all of the proceeds of which are used by the Company and
         any of the Subsidiaries for their working capital purposes or to repay
         previously existing Qualified Revolving Facility Debt,

PROVIDED that the agreements and instruments governing such Debt do not
restrict, in any manner, the ability of the Company to make any payments on the
Note.

         SUBSIDIARY -- means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which fifty percent (50%) or more of the total Voting Stock is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of the Company.

                                     PAGE 3

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