Document:

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase
Agreement (this “Agreement”) is dated as of May 7, 2008, by and
among Microfield Group, Inc., an Oregon corporation (the “Company”),
and the purchasers identified on the signature pages hereto (each,
including its successors and assigns, a “Purchaser” and collectively the
“Purchasers”).

 

WHEREAS, subject to the terms
and conditions set forth in this Agreement and pursuant to Section 4(2) of
the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506
of Regulation D promulgated thereunder, the Company desires to issue and sell
to each Purchaser, and each Purchaser, severally and not jointly, desires to
purchase from the Company, securities of the Company as more fully described in
this Agreement.

 

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

 

ARTICLE I

 

DEFINITIONS

 

1.1            Definitions.  In addition to the terms defined elsewhere in
this Agreement the following terms have the meanings indicated in this Section 1.1:

 

“Action”
shall have the meaning ascribed to such term in Section 3.1(j).

 

 “Affiliate” means any Person that,
directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person, as such terms are used
in and construed under Rule 144 under the Securities Act.  With respect to a Purchaser, any investment
fund or managed account that is managed on a discretionary basis by the same
investment manager as such Purchaser will be deemed to be an Affiliate of such
Purchaser.

 

“Business
Day” means a day, other than a Saturday or Sunday, on which banks in
New York City are open for the general transaction of business.

 

“Closing”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

 

 “Closing Date” means the Trading Day
when all of the Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to (i) the
Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities have been satisfied or waived.

 

“Commission”
means the Securities and Exchange Commission.

 

 

“Common
Stock” means the common stock of the Company, no par value per share, and
any securities into which such common stock shall hereinafter have been
reclassified into.

 

“Company Counsel”
means Sichenzia Ross Friedman Ference LLP.

 

 “Disclosure Schedules” shall have the
meaning ascribed to such term in Section 3.1 hereof.

 

“Effective
Date” means the date that the initial Registration Statement filed by the
Company pursuant to the Registration Rights Agreement is first declared
effective by the Commission.

 

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

 

“GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).

 

 “Liens” means a lien, charge, security
interest, encumbrance, right of first refusal, preemptive right or other
restriction.

 

 “Material Adverse Effect” shall have
the meaning assigned to such term in Section 3.1(b).

 

“Material
Permits” shall have the meaning ascribed to such term in Section 3.1(m).

 

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

 

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

 

“Registration
Rights Agreement” means the Registration Rights Agreement, dated the date
hereof, among the Company and the Purchasers, in the form of Exhibit A
attached hereto.

 

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

 

 “Required Approvals” shall have the
meaning ascribed to such term in Section 3.1(e).

 

“Rule 144”
means Rule 144 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or

 

 

regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

 

“SEC
Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

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

 

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

 

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

 

“Short Sales” include, without
limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act, whether or not against the box, and all
types of direct and indirect stock pledges, forward sale contracts, options,
puts, calls, short sales, swaps, “put equivalent positions” (as defined in Rule 16a-1(h) under
the Exchange Act) and similar arrangements (including on a total return basis),
and sales and other transactions through non-US broker dealers or foreign
regulated brokers.

 

 “Subscription Amount” shall mean, as to each Purchaser, the amount to
be paid for the Shares and Warrants purchased hereunder as specified below such
Purchaser’s name on the signature page of this Agreement and next to the
heading “Subscription Amount”, in United States Dollars and in immediately
available funds.

 

“Subsidiary”
means any subsidiary of the Company as set forth on Schedule 3.1(a).

 

“Trading
Day” means a day on which the Common Stock is traded on a Trading Market.

 

“Trading
Market” means the following markets or exchanges on which the Common Stock
is listed or quoted for trading on the date in question: the Over-The-Counter
Bulletin Board, the Nasdaq Global Market, the American Stock Exchange, the New
York Stock Exchange or the Nasdaq Capital Market.

 

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

 

 “Warrants” means collectively the
Common Stock purchase warrants, in the form of Exhibit B delivered
to the Purchasers at the Closing in accordance with Section 2.2(a) hereof,
which Warrants shall be exercisable immediately and have a term of exercise
commencing on the date of issuance and ending three years after issuance.

 

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

 

 

ARTICLE II

PURCHASE
AND SALE

 

2.1           Closing.  On the Closing Date, upon the terms and
subject to the conditions set forth herein, concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company agrees to sell to
the Purchasers, and each Purchaser severally and not jointly with any other
purchaser agrees to purchase from the Company the number of shares of the
Company’s Common Stock and Warrants set forth on  such Purchaser’s signature page hereto
at the per share purchase price of $0.40 (“Purchase Price”). For every two (2) shares
of Common Stock purchased, each Purchaser will receive one (1) Warrant.  Each Purchaser shall deliver to the Company
via wire transfer of immediately available funds pursuant to the wire
instructions set forth in Section 2.2(b) an amount equal to their
Subscription Amount and upon Closing, the Company shall deliver to each
Purchaser their respective certificates evidencing the shares of Common Stock
and Warrants and the other items set forth in Section 2.2 issuable at the
Closing within three (3) Business Days of the Closing Date.  Upon satisfaction of the conditions set forth
in Section 2.2, the Closing shall occur at the offices of Company Counsel,
or such other location as the parties shall mutually agree.  There may be multiple Closings.

 

2.2                   Deliveries.

 

a)             On the Closing Date, the Company shall
deliver or cause to be delivered to each Purchaser the following:

 

(i)            this Agreement duly executed by the
Company;

 

(ii)           a certificate evidencing the number of
shares of Common Stock, registered in the name of such Purchaser (or its
nominee);

 

(iii)          a Warrant registered in the name of such
Purchaser (or its nominee) with an exercise price equal to $0.60, subject to
adjustment therein;

 

(iv)          the Registration Rights Agreement duly
executed by the Company; and

 

(v)           a certificate, dated the Closing Date, duly
executed by an officer of the Company to the effect that the conditions
specified in Sections 2.3(b)(i) and 2.3(b)(ii) have been satisfied
and stating the complete capitalization of the Company, including all issued
and outstanding common stock, preferred stock, warrants, options, convertible
debt and all other convertible securities and the terms on which such
securities may be converted.

 

b)            On the Closing Date, each Purchaser shall
deliver or cause to be delivered to the Company the following:

 

 

(i)            this Agreement duly executed by such
Purchaser;

 

(ii)           such Purchaser’s Subscription Amount by wire
transfer to

 

Citibank N.A.

55 Water St.

NY, NY 10041

ABA#: 021000089

FBO: Citigroup Global Markets Inc

ACCT#: 30604518

FBO: Microfield Group, Inc.

Further credit to: 240-94900-664

; and

 

(iii)          the Registration Rights Agreement duly
executed by such Purchaser.

 

2.3                   Closing
Conditions.

 

a)             The obligations of the Company hereunder
in connection with the Closing are subject to the following conditions being
met:

 

(i)            the accuracy in all material respects when
made and on the Closing Date of the representations and warranties of the
Purchasers contained herein;

 

(ii)           all obligations, covenants and agreements of
the Purchasers required to be performed at or prior to the Closing Date shall
have been performed; and

 

(iii)          the delivery by the Purchasers of the items
set forth in Section 2.2(b) of this Agreement.

 

b)            The respective obligations of the
Purchasers hereunder in connection with the Closing are subject to the
following conditions being met:

 

(i)            the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein;

 

(ii)           all
obligations, covenants and agreements of the Company required to be performed
at or prior to the Closing Date shall have been performed;

 

(iii)          the delivery by the Company of the items set forth in
Section 2.2(a) of this Agreement;

 

 

(iv)          there shall have been no Material Adverse Effect with
respect to the Company since the date hereof; and

 

(v)           From
the date hereof to the Closing Date, trading in the Common Stock shall not have
been suspended by the Commission (except for any suspension of trading of
limited duration agreed to by the Company, which suspension shall be terminated
prior to the Closing), and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg Financial Markets shall not have
been suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or on any Trading Market,
nor shall a banking moratorium have been declared either by the United States
or New York State authorities nor shall there have occurred any material
outbreak or escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material adverse change in,
any financial market which, in each case, in the reasonable judgment of each
Purchaser, makes it impracticable or inadvisable to purchase the Securities at
the Closing.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

3.1           Representations and
Warranties of the Company.  Except as
set forth under the corresponding section of the disclosure schedules delivered
to the Purchasers concurrently herewith (the “Disclosure Schedules”)
which Disclosure Schedules shall be deemed a part hereof, the Company hereby
makes the representations and warranties set forth below to each Purchaser.

 

(a)           Subsidiaries.  All of the direct and indirect Subsidiaries
of the Company are set forth on Schedule 3.1(a).  Except as set forth on Schedule 3.1(a),
the Company owns, directly or indirectly, all of the capital stock or other
equity interests of each Subsidiary free and clear of any Liens, and all the
issued and outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities.

 

(b)           Organization and
Qualification.  Each of the Company
and the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted.  Neither the
Company nor any Subsidiary is in violation or default of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. 
Each of the Company and the Subsidiaries is duly qualified to conduct
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature 

 

 

of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case
may be, could not have or reasonably be expected to result in (i) a
material adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or financial condition of the Company
and the Subsidiaries, taken as a whole, or (iii) a material adverse effect
on the Company’s ability to perform in any material respect on a timely basis
its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse Effect”) and no Proceeding has been instituted in
any such jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or qualification.

 

(c)           Authorization;
Enforcement.  The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to
carry out its obligations thereunder. 
The execution and delivery of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated thereby have
been duly authorized by all necessary action on the part of the Company and no
further action is required by the Company in connection therewith other than in
connection with the Required Approvals. 
Each Transaction Document has been (or upon delivery will have been)
duly executed by the Company and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally and (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies.

 

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

 

 

(e)           Filings, Consents
and Approvals.  The Company is not
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection with
the execution, delivery and performance by the Company of the Transaction
Documents, other than (i) filings required pursuant to Section 4.6, (ii) the
filing with the Commission of the Registration Statement, (iii) the notice
and/or application(s) to each applicable Trading Market for the issuance
and sale of the Common Stock and Warrants and the listing of the Shares and the
Warrant Shares for trading thereon in the time and manner required thereby, (iv) the
filing of Form D with the Commission and such filings as are required to
be made under applicable state securities laws and (vi) the approvals set
forth on Schedule 3.1(e) (collectively, the “Required Approvals”).

 

(f)            Issuance of the
Securities.  The Securities are duly
authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents.  The Company has reserved from its duly
authorized capital stock a number of shares of Common Stock for issuance of the
Warrant Shares.  The Company has not, and
to the knowledge of the Company, no Affiliate of the Company has sold, offered
for sale or solicited offers to buy or otherwise negotiated in respect of any
security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the Securities
to the Purchasers, or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading
Market.

 

(g)           Capitalization.  The capitalization of the Company is as
described in the Company’s most recent report filed with the Commission.  Except as set forth on Schedule 3.1(g), the
Company has not issued any capital stock since such filing other than pursuant
to the employee stock option plan.  No
Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents which shall not have been waived
prior to Closing.  Except as disclosed in
the Company’s SEC Reports issued pursuant to the Company’s stock incentive plan
or as a result of the purchase and sale of the Securities, there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or
rights convertible or exchangeable into shares of Common Stock.  Except as set forth on Schedule 3.1(g),
the issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities. All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, 

 

 

have been
issued in compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities, except as set forth on Schedule
3.1(g).  No further approval or
authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Shares and Warrants.

 

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

 

(i)            Material Changes.  Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in a
Material Adverse Effect, except as disclosed in Schedule 3.1(i), (ii) the
Company has not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or required to
be disclosed in filings made with the Commission, (iii) the Company has
not altered its method of accounting, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing
Company stock option plan or restricted stock plan.

 

 

(j)            Litigation.  Except as set forth in SEC Reports, there is
no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting
the Company, any Subsidiary or any of their respective properties before or by
any court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii) could,
if there were an unfavorable decision, have or reasonably be expected to result
in a Material Adverse Effect.  Neither
the Company nor any Subsidiary, nor any director or officer thereof, is or has
been the subject of any Action involving a claim of violation of or liability
under federal or state securities laws or a claim of breach of fiduciary
duty.  There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company.  The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.

 

(k)           Labor Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company which could reasonably be expected to result in a Material Adverse
Effect.

 

(l)            Compliance.  Except as set forth in the SEC Reports or on
Schedule 3.1(l), neither the Company nor any Subsidiary (i) is in material
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other material
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived),
(ii) is in violation of any order of any court, arbitrator or governmental
body, or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws applicable to its business except in
each case as could not have a Material Adverse Effect.

 

(m)          Regulatory Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not have or reasonably be expected to result in a
Material Adverse Effect (“Material Permits”), and neither the Company
nor any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.

 

(n)           Title to Assets.  Except as set forth on Schedule 3.1(n),
the Company and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them that is material to the business of the
Company and the Subsidiaries and good and marketable title in all personal
property owned by them that is material to the 

 

 

business of
the Company and the Subsidiaries, in each case free and clear of all Liens,
except for Liens as do not materially affect the value of such property and do
not materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties.  Any real property
and facilities held under lease by the Company and the Subsidiaries are held by
them under valid, subsisting and enforceable leases of which the Company and
the Subsidiaries are in compliance.

 

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

 

(p)           Insurance.  The Company and the Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged.  To the best of Company’s knowledge, such
insurance contracts and policies are accurate and complete.  Neither the Company nor any Subsidiary has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.

 

(q)           Transactions With
Affiliates and Employees.  Except as
set forth in the SEC Reports, none of the officers or directors of the Company
and, to the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $120,000 other than (i) for
payment of salary or consulting fees for services rendered, (ii) reimbursement
for expenses incurred on behalf of the Company and (iii) for other
employee benefits, including stock option agreements under any stock option
plan of the Company and restricted stock agreements under any restricted stock
plan of the Company.

 

 

(r)            Sarbanes-Oxley;
Internal Accounting Controls.  Except
as set forth in the SEC Reports, the Company is in material compliance with all
provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of
the Closing Date.  The Company and the Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

 

(s)           Certain Fees.  Except as disclosed in Schedule 3.1(s), no
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement.  The
Purchasers shall have no obligation with respect to any fees or with respect to
any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.

 

(t)            Private Placement.
Assuming the accuracy of the Purchasers representations and warranties set
forth in Section 3.2, no registration under the Securities Act is required
for the offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Trading Market.

 

(u)           Investment Company.
The Company is not, and is not an Affiliate of, and immediately after receipt
of payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended
(the “Investment Company Act”).  The
Company shall conduct its business in a manner so that it will not become
subject to the Investment Company Act.

 

(v)           Listing and
Maintenance Requirements.  The Company’s
Common Stock is registered pursuant to Section 15(d) of the Exchange
Act, and the Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification that
the Commission is contemplating terminating such registration.  Except as disclosed on Schedule 3.1(v), the
Company has not, in the 12 months preceding the date hereof, received notice
from any Trading Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market.

 

(w)          Disclosure.  The Company understands and confirms that the
Purchasers will rely on the foregoing representations and covenants in
effecting transactions in securities of the Company.  All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated hereby,
including the 

 

 

Disclosure
Schedules to this Agreement, furnished by or on behalf of the Company with
respect to the representations and warranties made herein are true and correct
with respect to such representations and warranties and do not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2 hereof.

 

(x)            No Integrated
Offering. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, neither the Company, nor any of its
affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the Securities Act or any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any
exchange or automated quotation system on which any of the securities of the
Company are listed or designated.

 

(y)           Tax Status.  Except for matters that would not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and each Subsidiary has filed all
necessary federal, state and foreign income and franchise tax returns and has
paid or accrued all taxes shown as due thereon, and the Company has no
knowledge of a tax deficiency which has been asserted or threatened against the
Company or any Subsidiary.

 

(z)            No General
Solicitation.  Neither the Company
nor any person acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general advertising.  The Company has offered the Securities for
sale only to the Purchasers and certain other “accredited investors” within the
meaning of Rule 501 under the Securities Act.

 

(aa)         Acknowledgment
Regarding Purchasers’ Purchase of Securities.  The Company acknowledges and agrees that each
of the Purchasers is acting solely in the capacity of an arm’s length purchaser
with respect to the Transaction Documents and the transactions contemplated
hereby.  The Company further acknowledges
that no Purchaser is acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by any Purchaser or any
of their respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Securities.  The Company
further represents to each Purchaser that the Company’s decision to enter into
this Agreement has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.  The
Company further understands and acknowledges that (a) one or more
Purchasers may engage in hedging activities at various times during the period
that the Securities are outstanding, including, without limitation, during the
periods that 

 

 

the value of the Warrant
Shares deliverable with respect to the Warrants are being determined and that
such hedging activities will be done in accordance with all applicable laws, rules and
regulations and (b) such hedging activities (if any) could reduce the
value of the existing stockholders’ equity interests in the Company at and
after the time that the hedging activities are being conducted.

 

3.2           Representations and
Warranties of the Purchasers.  Each
Purchaser hereby, for itself and for no other Purchaser, represents and
warrants as of the date hereof and as of the Closing Date to the Company as
follows:

 

(a)           Organization;
Authority.  If such Purchaser is an
entity, it is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization with full right, corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations thereunder. The execution, delivery and performance by such
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part of such
Purchaser.  Each Transaction Document to
which it is a party has been duly executed by such Purchaser, and when
delivered by such Purchaser in accordance with the terms hereof, will constitute
the valid and legally binding obligation of such Purchaser, enforceable against
it in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions
may be limited by applicable law.

 

(b)           Purchaser
Representation.  Such Purchaser
understands that the Securities are “restricted securities” and have not been
registered under the Securities Act or any applicable state securities law and
is acquiring the Securities as principal for its own account and not with a
view to or for distributing or reselling such Securities or any part thereof,
has no present intention of distributing any of such Securities and has no
arrangement or understanding with any other persons regarding the distribution
of such Securities (this representation and warranty not limiting such
Purchaser’s right to sell the Securities pursuant to the Registration Statement
or otherwise in compliance with applicable federal and state securities
laws).  Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business. Such Purchaser
does not have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities.

 

(c)           Purchaser Status.  At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on which it
exercises any Warrants, it will be either: (i) an “accredited investor” as
defined in Rule

501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a
“qualified institutional buyer” as defined in Rule

144A(a) under the Securities Act. 
Such Purchaser is not required to be registered as a broker-dealer under
Section 15 of the Exchange Act.

 

 

(d)           Experience of Such
Purchaser.  Such Purchaser, either
alone or together with its representatives, has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.

 

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

 

(f)            Certain Trading Activities.  Other than with respect to the transactions
contemplated herein, since the earlier to occur of (1) the time that such
Purchaser was first contacted by the Company or any other Person regarding this
investment in the Company and (2) the tenth (10th) day prior to the date
of this Agreement, neither the Purchaser nor any Affiliate of such Purchaser
which (x) had knowledge of the transactions contemplated hereby, (y) has
or shares discretion relating to such Purchaser’s investments or trading or
information concerning such Purchaser’s investments, including in respect of
the Securities, and (z) is subject to such Purchaser’s review or input
concerning such Affiliate’s investments or trading (collectively, “Trading Affiliates”) has directly
or indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Purchaser or Trading Affiliate, effected or agreed to
effect any transactions in the securities of the Company (including, without
limitation, any Short Sales involving the Company’s securities). 
Notwithstanding the foregoing, no Purchaser makes any representation, warranty
or covenant hereby that it will not engage in Short Sales in the securities of
the Company after the time that the transactions contemplated by this Agreement
are first publicly announced.

 

(g)           Material Non-Public Information.  Such Purchaser understands that any material
non-public information provided to such Purchaser pursuant to a confidentiality
agreement is preliminary and subject to change at any time prior to any public
announcement, if any.  Such Purchaser
acknowledges that there can be no assurance that the Company will consummate or
execute any transaction or agreement disclosed to such Purchaser and considered
by the Company to be material non-public information.  Such Purchaser hereby represents that it is
not entering into this Agreement solely on the basis of any material non-public
information provided to such Purchaser.

 

(h)           Company Affiliated Investors.  Such Purchaser acknowledges that certain
officers and directors of the Company may purchase Securities pursuant to this
Agreement.  In addition, certain
creditors of the Company may purchase Securities pursuant to this Agreement in
exchange for the extinguishment of certain debt of the Company held by such
creditors.

 

The Company acknowledges and
agrees that each Purchaser does not make or has not

 

 

made any representations or
warranties with respect to the transactions contemplated hereby other than
those specifically set forth in this Section 3.2.

 

ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES

 

4.1           Transfer
Restrictions.

 

(a)           The Securities may only
be disposed of in compliance with state and federal securities laws.  In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule 144, to
the Company or to an affiliate of a Purchaser or in connection with a pledge as
contemplated in Section 4.1(b), the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor and reasonably acceptable to the Company, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act.  As a condition
of transfer, any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights of a Purchaser under this Agreement
and the Registration Rights Agreement.

 

(b)           The Purchasers agree to
the imprinting, so long as is required by this Section 4.1(b), of a legend
on any of the Securities substantially in the following form:

 

[NEITHER] THESE SECURITIES
[NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [EXERCISABLE]] HAVE [NOT]
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
SUCH SECURITIES.

 

The Company acknowledges and
agrees that a Purchaser may from time to time pledge pursuant to a bona fide
margin agreement with a registered broker-dealer or grant a security interest
in some or all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under the Securities
Act and who agrees to be bound by the provisions of this Agreement and the
Registration Rights Agreement

 

 

and,
if required under the terms of such arrangement, such Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties.  Such a pledge or transfer would not be
subject to approval of the Company and no legal opinion of legal counsel of the
pledgee, secured party or pledgor shall be required in connection
therewith.  Further, no notice shall be
required of such pledge.  At the
appropriate Purchaser’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities,
including, if the Securities are subject to registration pursuant to the
Registration Rights Agreement, the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act
or other applicable provision of the Securities Act to appropriately amend the
list of selling stockholders thereunder.

 

(c)           Certificates evidencing
the Shares or Warrant Shares shall not contain any legend (including the legend
set forth in Section 4.1(b) hereof): (i) while a registration
statement (including the Registration Statement) covering the resale of such
security is effective under the Securities Act, or (ii) following any sale
of such Shares or Warrant Shares pursuant to Rule 144, or (iii) if
such Shares or Warrant Shares are eligible for sale under Rule 144(b)(1)(i),
or (iv) if such legend is not required under applicable requirements of
the Securities Act (including judicial interpretations and pronouncements
issued by the staff of the Commission). The Company shall cause its counsel to
issue a legal opinion to the Company’s transfer agent promptly after the
Effective Date if required by the Company’s transfer agent to effect the
removal of the legend hereunder. If all or any portion of a Warrant is
converted or exercised (as applicable) at a time when there is an effective
registration statement (including the Registration Statement) to cover the
resale of the Warrant Shares, or if such Warrant Shares may be sold under Rule 144(b)(1)(i) or
if such legend is not otherwise required under applicable requirements of the
Securities Act (including judicial interpretations thereof) then such Warrant
Shares shall be issued free of all legends. 
The Company agrees that following the Effective Date or at such time as
such legend is no longer required under this Section 4.1(c), it will, no
later than five Trading Days following the delivery by a Purchaser to the
Company or the Company’s transfer agent of a certificate representing Shares or
Warrant Shares, as applicable, issued with a restrictive legend (such third
Trading Day, the “Legend Removal Date”), deliver or cause to be
delivered to such Purchaser a certificate representing such shares that is free
from all restrictive and other legends. 
The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.

 

(d)           Each Purchaser, severally and not jointly
with the other Purchasers, agrees that the removal of the restrictive legend
from certificates representing Securities as set forth in this Section 4.1
is predicated upon the Company’s reliance that the Purchaser will sell any
Securities pursuant to either the registration requirements of the Securities
Act, including any applicable prospectus delivery requirements, or an exemption
therefrom.

 

4.2           Acknowledgment of Dilution.  The Company acknowledges that the issuance of
the Securities may result in dilution of the outstanding shares of Common
Stock, which dilution

 

 

may be substantial under
certain market conditions.  The Company
further acknowledges that its obligations under the Transaction Documents,
including without limitation its obligation to issue the Warrant Shares pursuant
to the Transaction Documents, are unconditional and absolute and not subject to
any right of set off, counterclaim, delay or reduction, regardless of the
effect of any such dilution or any claim the Company may have against any
Purchaser and regardless of the dilutive effect that such issuance may have on
the ownership of the other stockholders of the Company.

 

4.3           Furnishing of
Information.  Until the earliest of
the time that (i) no Purchaser owns Securities or (ii) the Securities
can be resold pursuant to Rule 144(b)(1)(i) under the Securities Act,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed
by the Company after the date hereof pursuant to the Exchange Act.  As long as any Purchaser owns Securities, if
the Company is not required to file reports pursuant to the Exchange Act, it
will prepare and furnish to the Purchasers and make publicly available in
accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities under Rule 144.  The Company further covenants that it will
take such further action as any holder of Securities may reasonably request,
all to the extent required from time to time to enable such Person to sell such
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144.

 

4.4           Integration.  The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities to the
Purchasers or that would be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of any Trading Market.

 

4.5           Exercise Procedures.  The form of Notice of Exercise included in
the Warrants set forth the totality of the procedures required of the
Purchasers in order to exercise the Warrants. 
No additional legal opinion or other information or instructions shall
be required of the Purchasers to exercise their Warrants.  The Company shall honor exercises of the
Warrants and shall deliver Warrant Shares in accordance with the terms,
conditions and time periods set forth in the Transaction Documents.

 

4.6           Securities Laws
Disclosure; Publicity.  The Company
and each Purchaser shall consult with each other in issuing any other press
releases with respect to the transactions contemplated hereby, and neither the
Company nor any Purchaser shall issue any such press release or otherwise make
any such public statement without the prior consent of the Company, with
respect to any press release of any Purchaser, or without the prior consent of
each Purchaser, with respect to any press release of the Company, which consent
shall not unreasonably be withheld, except if such disclosure is required by
law, in which case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication.

 

 

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

 

4.8           Reservation of Securities.   The Company shall maintain a reserve from
its duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents.

 

4.9           Equal Treatment of
Purchasers.  No consideration shall
be offered or paid to any person to amend or consent to a waiver or modification
of any provision of any of the Transaction Documents unless the same
consideration is also offered to all of the parties to the Transaction
Documents.  For clarification purposes,
this provision constitutes a separate right granted to each Purchaser by the
Company and negotiated separately by each Purchaser, and is intended to treat
for the Company the Purchasers as a class and shall not in any way be construed
as the Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.

 

4.10         Form D; Blue Sky
Filings. The Company agrees to timely file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof,
promptly upon request of any Purchaser. The Company shall take such action as
the Company shall reasonably determine is necessary in order to obtain an
exemption for, or to qualify the Securities for, sale to the Purchasers at the
Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of any Purchaser.

 

4.11         Transactions and Confidentiality After The
Date Hereof.  Each
Purchaser shall not, and shall cause its Trading Affiliates not to, engage,
directly or indirectly, in any transactions in the securities of the Company
(including, without limitation, any Short Sales) involving the Company’s
securities during the period from the date hereof until the earlier of such
time as (i) after the transactions contemplated by this Agreement are
first publicly announced or (ii) this Agreement is terminated in
full.  Notwithstanding the foregoing, in the case of a Purchaser or
Trading Affiliate that is a multi-managed investment vehicle whereby separate
portfolio managers manage separate portions of such Purchaser’s or Trading
Affiliate’s assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions of
such Purchaser’s or Trading Affiliate’s assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement.  Each Purchaser understands and acknowledges,
severally and not jointly with any other Purchaser, that the Commission
currently takes the position that covering a short position established prior
to effectiveness of a resale registration statement with securities included in
such registration statement would be a violation of Section 5 of the
Securities Act, as set forth in Item 65, Section 5 under Section A,
of the Manual of Publicly Available Telephone Interpretations, dated July 1997,
compiled by the Office of Chief Counsel, Division of

 

 

Corporation Finance.  Each Purchaser, severally and not jointly
with any other Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company, such
Purchaser will maintain the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms of this
transaction).

 

4.12         Indemnification of Purchasers. 
Subject to the provisions of this Section 4.12, the Company will
indemnify and hold the Purchasers and their directors, officers, stockholders,
members, partners, employees and agents (each, a “Purchaser Party”) harmless
from any and all losses, liabilities, obligations, claims, contingencies,
damages, costs and expenses, including all judgments, amounts paid in
settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against a Purchaser, or
any of them or their respective Affiliates, by any stockholder of the Company
who is not an Affiliate of such Purchaser, with respect to any of the
transactions contemplated by the Transaction Documents (unless such action is
based upon a breach of such Purchaser’s representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or malfeasance).  If any action shall be brought against any
Purchaser Party in respect of which indemnity may be sought pursuant to this
Agreement, such Purchaser Party shall promptly notify the Company in writing,
and the Company shall have the right to assume the defense thereof with counsel
of its own choosing.  Any Purchaser Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Purchaser Party except to the extent that (i) the
employment thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable
opinion of such separate counsel, a material conflict on any material issue
between the position of the Company and the position of such Purchaser
Party.  The Company will not be liable to
any Purchaser Party under this Agreement (i) for any settlement by a
Purchaser Party effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (ii) to the extent, but
only to the extent that a loss, claim, damage or liability is attributable to
any Purchaser Party’s breach of any of the representations, warranties,
covenants or agreements made by the Purchasers in this Agreement or in the
other Transaction Documents.

 

ARTICLE V

MISCELLANEOUS

 

5.1           Fees and Expenses.  Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the

 

 

negotiation, preparation,
execution, delivery and performance of this Agreement.  The Company shall pay all transfer agent
fees, stamp taxes and other taxes and duties levied in connection with the
issuance of any Securities.

 

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

 

5.3           Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earliest of (a) the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached
hereto prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the
next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto on a day that is not a Trading Day or
later than 5:30 p.m. (New York City time) on any Trading Day, (c) the
second Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (d) upon actual receipt by the
party to whom such notice is required to be given.  The address for such notices and
communications shall be as set forth on the signature pages attached
hereto.

 

5.4           Amendments; Waivers.  No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought.  No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.

 

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

 

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

 

5.7           No Third-Party Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of,

 

 

nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth in Section 4.9.

 

5.8           Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of
the transactions contemplated by this Agreement and any other Transaction
Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New
York.  Each party hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in the
City of New York, borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address
in effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by
law.  The parties hereby waive all rights
to a trial by jury.  If either party
shall commence an action or proceeding to enforce any provisions of the
Transaction Documents, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.

 

5.9           Survival.  The representations and warranties contained
herein shall survive the Closing and the delivery, exercise and/or conversion
of the Securities, as applicable for the applicable statue of limitations.  Each Purchaser shall be solely responsible
for its own representations, warranties, agreements, and covenants hereunder.

 

5.10         Execution.  This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. 
In the event that any signature is delivered by facsimile transmission
(or electronic transmission of PDF file), such signature shall create a valid
and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile (or
PDF file) signature page were an original thereof.

 

5.11         Severability.  If any provision of this Agreement is held to
be invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties

 

 

will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.

 

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

 

5.13         Remedies.  In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each
of the Purchasers and the Company will be entitled to specific performance
under the Transaction Documents.  The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.

 

5.14         Independent Nature of
Purchasers’ Obligations and Rights. 
The obligations of each Purchaser under any Transaction Document are
several and not joint with the obligations of any other Purchaser, and no
Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser under any Transaction Document.  Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document.  Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose.  Each Purchaser has been represented by its
own separate legal counsel in their review and negotiation of the Transaction
Documents.  The Company has elected to
provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do
so by the Purchasers.

 

[SIGNATURE PAGE FOLLOWS]

 

 

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

 

 

	
  MICROFIELD
  GROUP, INC.

  	
   

  
	
   

  	
   

  	
  Address for Notice:

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Microfield
  Group, Inc.

  
	
   

  	
  Title:

  	
  111 SW
  Columbia, Suite 480

  Portland, Oregon 97201

  
	
   

  	
   

  	
   

  
	
  With a copy to (which shall not constitute
  notice):

  	
   

  	
   

  
	
  Jeffrey J. Fessler, Esq.

  	
   

  	
   

  
	
  Sichenzia Ross Friedman Ference LLP

  	
   

  	
   

  
	
  1065 Avenue of the Americas

  	
   

  	
   

  
	
  New York, New York 10018

  	
   

  	
   

  
					

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER
FOLLOWS]

 

 

[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

 

	
  Name of Investing Entity:

  	
   

  
	
  Signature of Authorized Signatory of
  Investing Entity:

  	
   

  
	
  Name of Authorized Signatory:

  	
   

  
	
  Title of Authorized Signatory:

  	
   

  
	
  Email Address of Authorized Signatory:

  	
   

  
	
  Tax ID number of Investing Entity:

  	
   

  
						

 

Address for Notice of Investing Entity:

 

 

Address for Delivery of Securities for Investing Entity (if not same as
above):

 

 

Subscription Amount:

Shares of Common Stock:

Warrant Shares:

 

 

EXHIBIT
A

 

[Registration
Rights Agreement]

 

 

EXHIBIT
B

 

[Form of
Warrant]Exhibit 10.2

 

REGISTRATION
RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”)
is made and entered into as of May 7, 2008, by and among Microfield Group, Inc.,
an Oregon corporation (the “Company”), and the purchasers signatory
hereto (each such purchaser is a “Purchaser” and all such purchasers
are, collectively, the “Purchasers”).

 

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

 

The Company and the Purchasers hereby agree
as follows:

 

1.     Definitions

 

Capitalized terms
used and not otherwise defined herein that are defined in the Purchase
Agreement shall have the meanings given such terms in the Purchase Agreement.
As used in this Agreement, the following terms shall have the following
meanings:

 

“Advice”
shall have the meaning set forth in Section 7(c).

 

“Commission”
shall mean the Securities and Exchange Commission.

 

“Effectiveness
Date” means, with respect to the initial Registration Statement required to
be filed hereunder, 120 calendar days after the Closing Date and, with respect
to any additional Registration Statements which may be required pursuant to Section 3(c),
the 120th calendar day following the date on which the Company first
knows, or reasonably should have known, that such additional Registration
Statement is required hereunder; provided, however, in the event
the Company is notified by the Commission that one of the above Registration
Statements will not be reviewed or is no longer subject to further review and
comments, the Effectiveness Date as to such Registration Statement shall be the
fifth Trading Day following the date on which the Company is so notified if
such date precedes the dates required above.

 

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

 

“Event”
shall have the meaning set forth in Section 2(b).

 

“Event Date”
shall have the meaning set forth in Section 2(b).

 

“Filing
Date” means, with respect to the initial Registration Statement required
hereunder, the 60th calendar day following the Closing Date and,
with respect to any additional Registration Statements which may be required
pursuant to Section 3(c), the 60th day following the date on
which the Company first knows, or reasonably should have known that such
additional Registration Statement is required hereunder.

 

 

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

 

“Indemnified
Party” shall have the meaning set forth in Section 5(c) hereof.

 

“Indemnifying
Party” shall have the meaning set forth in Section 5(c) hereof.

 

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

 

“Plan of
Distribution” shall have the meaning set forth in Section 2(a) hereof.

 

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

 

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

 

“Registrable
Securities” means, as of the date in question, (i) the Shares, (ii) all
Warrant Shares, (iii) any securities issued or issuable upon any stock
split, dividend or other distribution recapitalization or similar event with
respect to the foregoing and (iv) any additional shares issuable in
connection with any anti-dilution provisions associated with the Warrants (in
each case, without giving effect to any limitations on exercise set forth in
the Warrants).

 

“Registration
Statement” means the registration statements required to be filed hereunder
and any additional registration statements contemplated by Section 3(c),
including (in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.

 

“Rule 415”
means Rule 415 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.

 

“Rule 424”
means Rule 424 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.

 

 

2. Shelf
Registration

 

(a)  On
or prior to each Filing Date, the Company shall prepare and file with the
Commission a “Shelf” Registration Statement covering the resale of 100% of the
Registrable Securities on such Filing Date for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement shall be
on Form S-1 (except if the Company is not then eligible to register for
resale the Registrable Securities on Form S-1, in which case such
registration shall be on another appropriate form in accordance herewith) and
shall contain (unless otherwise directed by the Holders) substantially the “Plan
of Distribution” attached hereto as Annex A. Subject to the terms of
this Agreement, the Company shall use its commercially reasonable efforts to
cause the Registration Statement to be declared effective under the Securities
Act as promptly as possible after the filing thereof, but in any event prior to
the applicable Effectiveness Date, and shall use its commercially reasonable
efforts to keep such Registration Statement continuously effective under the
Securities Act until the earliest of (i) the date when the Holder may sell
all Registrable Securities under Rule 144 or other rule promulgated
by the Commission without volume or other restrictions or limits, provided that
the Company has furnished the Holder with an opinion letter of legal counsel to
such effect  or (ii) the date the
Holders no longer own any of the Registrable Securities (the “Effectiveness
Period”). The Company shall immediately notify the Holders via facsimile or
e-mail of the effectiveness of the Registration Statement on the same day that
the Company receives notification of the effectiveness from the Commission.

 

(b) Provided
the following events are not caused by a failure of any Purchaser to fulfill
their obligations pursuant to

Section 3(a) of this Agreement if: (i) a Registration Statement is
not filed on or prior to its Filing Date, (ii) the Company fails to file
with the Commission a request for acceleration in accordance with Rule 461
promulgated under the Securities Act, within five Trading Days of the date that
the Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be “reviewed,” or not subject
to further review, (iii) a Registration Statement filed or required to be
filed hereunder is not declared effective by the Commission by its
Effectiveness Date,  (iv) after the
Effectiveness Date, the availability of the Registration and Prospectus is
suspended for more than an aggregate of 60 days in any 12-month period or (v) after
the date six months following the Closing Date, the Company fails to file with
the Commission any required reports under Section 6 hereof as a result of
which the Buyers are unable to sell Registrable Securities without restriction
under Rule 144 (or any successor thereto) (any such failure or breach
being referred to as an “Event”,
and for purposes of clause (i), (iii) or (v) the date on which such
Event occurs, or for purposes of clause (ii) the date on which such five
Trading Day period is exceeded being referred to as “Event Date”), then in addition to any other rights the
Holders may have hereunder or under applicable law, on each monthly anniversary
of each such Event Date (if the applicable Event shall not have been cured by
such date) until the applicable Event is cured, the Company shall pay to each
Holder an amount in cash, as partial liquidated damages and not as a penalty,
equal to 1.0% of the aggregate Purchase Price paid by such Holder pursuant to
the Purchase Agreement for any Registrable Securities then held by such Holder,
provided that partial liquidated damages shall not be paid with respect to those
Registrable Securities which cannot be registered under Rule 415 solely as
a result of action by the Commission. The partial liquidated damages pursuant
to the terms hereof shall apply on a daily pro-rata basis for any portion of a

 

 

month prior to the cure of an Event and shall not exceed an aggregate
of 12% of the aggregate Purchase Price paid by the Purchasers pursuant to this
Agreement.

 

3.     Registration Procedures

 

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

 

(a)           Not less than four (4) Trading Days
prior to the filing of each Registration Statement or any related Prospectus or
any amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall, (i) furnish to each Holder copies of all such documents proposed to
be filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders, and (ii) cause
its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to conduct a reasonable investigation
within the meaning of the Securities Act. The Company shall not file the
Registration Statement or any such Prospectus or any amendments or supplements
thereto to which the Holders of a majority of the Registrable Securities shall
reasonably object in good faith, provided that, the Company is notified of such
objection, including the substance of such objection, in writing no later than
two Trading Days after the Holders have been so furnished copies of such
documents. Each Holder, severally and not jointly agrees to furnish to the
Company a completed Questionnaire in the form attached to this Agreement as
Annex B (a “Selling Holder Questionnaire”) not less than ten Trading Days prior to the Filing Date.

 

(b)           (i) Prepare and file with the
Commission such amendments, including post-effective amendments, to a
Registration Statement and the Prospectus used in connection therewith as may
be necessary to keep a Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any
required Prospectus supplement (subject to the terms of this Agreement), and as
so supplemented or amended to be filed pursuant to Rule 424; (iii) respond
as promptly as reasonably possible to any comments received from the Commission
with respect to a Registration Statement or any amendment thereto; and (iv) comply
in all material respects with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all Registrable Securities
covered by a Registration Statement during the applicable period in accordance
(subject to the terms of this Agreement) with the intended methods of
disposition by the Holders thereof set forth in such Registration Statement as
so amended or in such Prospectus as so supplemented.

 

(c)           If during the Effectiveness Period, the
number of Registrable Securities at any time exceeds the number of shares of
Common Stock then registered in a Registration Statement, then the Company
shall file as soon as reasonably practicable but in any case prior to the
applicable Filing Date, an additional Registration Statement covering the
resale by the Holders of such additional Registrable Securities.

 

 

(d)           Notify the Holders of Registrable Securities
to be sold (which notice shall, pursuant to clauses (ii) through (vi) hereof,
be accompanied by an instruction to suspend the use of the Prospectus until the
requisite changes have been made) as promptly as reasonably possible (and, in
the case of (i)(A) below, not less than five Trading Days prior to such
filing) and (if requested by any such Person) confirm such notice in writing no
later than one Trading Day following the day (i)(A) when a Prospectus or
any Prospectus supplement or post-effective amendment to a Registration
Statement is proposed to be filed; (B) when the Commission notifies the
Company whether there will be a “review” of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement; and
(C) with respect to a Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any request by the
Commission or any other Federal or state governmental authority for amendments
or supplements to a Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission or any other federal
or state governmental authority of any stop order suspending the effectiveness
of a Registration Statement covering any or all of the Registrable Securities
or the initiation of any Proceedings for that purpose; (iv) of the receipt
by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of
any Proceeding for such purpose; (v) of the occurrence of any event or
passage of time that makes the financial statements included in a Registration
Statement ineligible for inclusion therein or any statement made in a
Registration Statement or Prospectus or any document incorporated or deemed to
be incorporated therein by reference untrue in any material respect or that
requires any revisions to a Registration Statement, Prospectus or other
documents so that, in the case of a Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; and (vi) the occurrence or existence of any
pending corporate development with respect to the Company that the Company
believes may be material and that, in the determination of the Company, makes
it not in the best interest of the Company to allow continued availability of
the Registration Statement or Prospectus; provided that any and all of such
information shall remain confidential to each Holder until such information
otherwise becomes public, unless disclosure by a Holder is required by law; provided,
further, notwithstanding each Holder’s agreement to keep such
information confidential, the Holders make no acknowledgement that any such
information is material, non-public information.

 

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

 

(f)            Furnish to each Holder, without charge, at
its request, at least one conformed copy of each such Registration Statement
and each amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by reference to the
extent requested by such Person, and all exhibits to the extent requested by
such Person

 

 

(including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.

 

(g)           Promptly deliver to each Holder, without
charge, as many copies of the Prospectus or Prospectuses (including each form
of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request in connection with resales by the Holder of Registrable
Securities. Subject to the terms of this Agreement, the Company hereby consents
to the use of such Prospectus and each amendment or supplement thereto by each
of the selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto, except after the giving on any notice pursuant to Section 3(d).

 

(h)           Prior to any resale of Registrable
Securities by a Holder, use its commercially reasonable efforts to register or
qualify or cooperate with the selling Holders in connection with the
registration or qualification (or exemption from the Registration or
qualification) of such Registrable Securities for the resale by the Holder
under the securities or Blue Sky laws of such jurisdictions within the United
States as any Holder reasonably requests in writing, to keep each registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things reasonably necessary to
enable the disposition in such jurisdictions of the Registrable Securities
covered by each Registration Statement; provided, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it is
not then so qualified, subject the Company to any material tax in any such
jurisdiction where it is not then so subject or file a general consent to
service of process in any such jurisdiction.

 

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

 

(j)            Upon the occurrence of any event
contemplated by this Section 3, as promptly as reasonably possible under
the circumstances taking into account the Company’s good faith assessment of
any adverse consequences to the Company and its stockholders of the premature
disclosure of such event, prepare a supplement or amendment, including a
post-effective amendment, to a Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither a Registration Statement nor such Prospectus will
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. If the
Company notifies the Holders in accordance with clauses (ii) through (v) of
Section 3(d) above to suspend the use of any Prospectus until the
requisite changes to such Prospectus have been made, then the Holders shall
suspend use of such Prospectus. The Company will use its commercially
reasonable efforts to ensure that the use of the Prospectus may be resumed as
promptly as is practicable. The Company shall be entitled to exercise its right
under this Section 3(j) to suspend the availability

 

 

of a Registration Statement and
Prospectus, for a period not to exceed aggregate 60 days (which need not be
consecutive days) in any 12 month period.

 

(k)           Comply with all applicable rules and
regulations of the Commission.

 

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

 

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

 

5. Indemnification

 

(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents and employees of each of them,
each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted

 

 

by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable
attorneys’ fees) and expenses (collectively, “Losses”), as incurred,
arising out of or relating to any untrue or alleged untrue statement of a
material fact contained in a Registration Statement, any Prospectus or any form
of prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (i) such
untrue statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
a Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto (it being understood that the Holder has
approved Annex A hereto for this purpose) or (ii) in the case of an
occurrence of an event of the type specified in Section 3(d)(ii)-(vi), the
use by such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective
and prior to the receipt by such Holder of the Advice contemplated in Section 7(c).
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding arising from or in connection with the transactions
contemplated by this Agreement of which the Company is aware.

 

(b) Indemnification by Holders. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and against
all Losses, as incurred, to the extent arising out of or based solely upon any
untrue or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading to the extent, but only to the extent, that (1) such untrue
statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein,
or to the extent that such information relates to such Holder or such Holder’s
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement (it being understood that the Holder has approved Annex
A hereto for this purpose), such Prospectus or such form of Prospectus or in
any amendment or supplement thereto or (2) in the case of an occurrence of
an event of the type specified in Section 3(d)(ii)-(vi), the use by such
Holder of an outdated or defective Prospectus after the Company has notified
such Holder in writing that the Prospectus is outdated or defective and prior
to the receipt by such Holder of the Advice contemplated in Section 7(c).
In no event shall the liability of any selling Holder hereunder be greater in
amount than the dollar amount of the net proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.

 

 

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

 

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

 

(d) Contribution. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates
to information supplied by, such Indemnifying Party or Indemnified Party, and
the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in this Agreement, any reasonable
attorneys’ or other

 

 

reasonable fees or expenses incurred by such party in connection with
any Proceeding to the extent such party would have been indemnified for such
fees or expenses if the indemnification provided for in this Section was
available to such party in accordance with its terms.

 

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

 

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

 

6.             Reports
Under Exchange Act. With a view to making available to the Holder the
benefits of Rule 144 promulgated under the Securities Act and any other rule or
regulation of the Commission that may at any time permit a Holder to sell
Registrable Shares of the Company to the public without registration, the
Company agrees to:

 

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

 

(b)   File with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act, the Exchange Act and the rules and regulations of the
Trading Market;

 

(c)   Furnish to any Holder, so long
as the Holder owns any Registrable Shares, forthwith on request, (i) a
written statement by the Company that it has complied with the reporting
requirements of  Rule 144, the
Securities Act and the Exchange 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 any Holder of any rule or regulation of the
Commission that permits the selling of any such securities without
registration; and

 

(d)   Undertake any additional
actions reasonably necessary to maintain the availability of the use of Rule 144
and any future rules adopted by the Commission permitting the resale of
the Registrable Securities.

 

7. Miscellaneous

 

(a)       Remedies. In the event of a breach by the
Company or by a Holder, of any of their obligations under this Agreement, each
other Holder or the Company, as the case may be, in addition to being entitled
to exercise all rights granted by law and under this Agreement,

 

 

including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of
any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.

 

(b)       Compliance.
Each Holder, severally and not jointly, covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.

 

(c)       Discontinued
Disposition. Each Holder, severally and not jointly, agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice from
the Company of the occurrence of any event of the kind described in Section 3(d),
such Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until such Holder’s receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement, or
until it is advised in writing (the “Advice”) by the Company that the
use of the applicable Prospectus may be resumed, and, in either case, has
received copies of any additional or supplemental filings that are incorporated
or deemed to be incorporated by reference in such Prospectus or Registration
Statement. The Company will use its commercially reasonable efforts to ensure
that the use of the Prospectus may be resumed as promptly as it practicable.

 

(d)       Amendments
and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and each Holder
of the then outstanding Registrable Securities. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of all of the Registrable Securities to which such waiver or consent
relates; provided, however, that the provisions of this sentence
may not be amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence.

 

(e)       Notices.
Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be delivered as set forth in the Purchase
Agreement.

 

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

 

(g)       No Inconsistent Agreements.
Neither the Company nor any of its subsidiaries has entered, as of the date
hereof, nor shall the Company or any of its subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its securities,
that would have

 

 

the effect of impairing the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof.

 

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

 

(i)        Governing
Law. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be determined in accordance with the provisions of the Purchase
Agreement.

 

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

 

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

 

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

 

(m)      Independent
Nature of Holders’ Obligations and Rights. The obligations of each
Holder hereunder are several and not joint with the obligations of any other
Holder hereunder, and no Holder shall be responsible in any way for the
performance of the obligations of any other Holder hereunder. Nothing contained
herein or in any other agreement or document delivered at any closing, and no
action taken by any Holder pursuant hereto or thereto, shall be deemed to
constitute the Holders as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Holders are in any way
acting in concert with respect to such obligations or the transactions
contemplated by this Agreement. Each Holder shall be entitled to protect and
enforce its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Holder to be joined as
an additional party in any proceeding for such purpose.

 

********************

 

 

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

 

	
   

  	
  MICROFIELD GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

[SIGNATURE PAGE OF HOLDERS
FOLLOWS]

 

 

[PURCHASER’S SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT]

 

	
  Name of Investing Entity:

  	
   

  	
   

  
	
  Signature of Authorized Signatory of
  Investing Entity:

  	
   

  	
   

  
	
  Name of Authorized Signatory:

  	
   

  	
   

  
	
  Title of Authorized Signatory:

  	
   

  	
   

  
								

 

 

ANNEX A

 

Plan of Distribution

 

The selling stockholders, which as used
herein includes donees, pledgees, transferees or other successors-in-interest
selling shares of common stock or interests in shares of common stock received
after the date of this prospectus from a selling stockholder as a gift, pledge,
partnership distribution or other transfer, may, from time to time, sell,
transfer or otherwise dispose of any or all of their shares of common stock or
interests in shares of common stock on any stock exchange, market or trading
facility on which the shares are traded or in private transactions. These
dispositions may be at fixed prices, at prevailing market prices at the time of
sale, at prices related to the prevailing market price, at varying prices
determined at the time of sale, or at negotiated prices.

 

The selling stockholders may use any one or
more of the following methods when disposing of shares or interests therein:

 

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

 

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

 

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

 

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

 

·
privately negotiated transactions;

 

·
short sales;

 

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

 

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

 

·
a combination of any such methods of sale; and

 

·
any other method permitted pursuant to applicable law.

 

The selling stockholders may, from time to
time, pledge or grant a security interest in some or all of the shares of
common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the
shares of common stock, from time to time, under this prospectus, or under an
amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act amending the list of selling stockholders to
include the pledgee, transferee or other successors in interest as

 

 

selling stockholders under this prospectus. The selling stockholders
also may transfer the shares of common stock in other circumstances, in which
case the transferees, pledgees or other successors in interest will be the
selling beneficial owners for purposes of this prospectus.

 

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

 

The aggregate proceeds to the selling stockholders
from the sale of the common stock offered by them will be the purchase price of
the common stock less discounts or commissions, if any. Each of the selling
stockholders reserves the right to accept and, together with their agents from
time to time, to reject, in whole or in part, any proposed purchase of common
stock to be made directly or through agents. We will not receive any of the
proceeds from this offering. Upon any exercise of the warrants by payment of
cash, however, we will receive the exercise price of the warrants.

 

The selling stockholders also may resell all
or a portion of the shares in open market transactions in reliance upon Rule 144
under the Securities Act of 1933, provided that they meet the criteria and
conform to the requirements of that rule.

 

The selling stockholders and any
underwriters, broker-dealers or agents that participate in the sale of the
common stock or interests therein may be “underwriters” within the meaning of Section 2(11)
of the Securities Act. Any discounts, commissions, concessions or profit they
earn on any resale of the shares may be underwriting discounts and commissions
under the Securities Act. Selling stockholders who are “underwriters” within
the meaning of Section 2(11) of the Securities Act will be subject to the
prospectus delivery requirements of the Securities Act.

 

To the extent required, the shares of our
common stock to be sold, the names of the selling stockholders, the respective
purchase prices and public offering prices, the names of any agents, dealer or
underwriter, any applicable commissions or discounts with respect to a
particular offer will be set forth in an accompanying prospectus supplement or,
if appropriate, a post-effective amendment to the registration statement that
includes this prospectus.

 

In order to comply with the securities laws of some
states, if applicable, the common stock may be sold in these jurisdictions only
through registered or licensed brokers or dealers. In addition, in some states
the common stock may not be sold unless it has been registered or qualified for
sale or an exemption from registration or qualification requirements is
available and is complied with.

 

 

We have advised the selling stockholders that the
anti-manipulation rules of Regulation M under the Exchange Act may apply
to sales of shares in the market and to the activities of the selling
stockholders and their affiliates. In addition, we will make copies of this
prospectus (as it may be supplemented or amended from time to time) available
to the selling stockholders for the purpose of satisfying the prospectus
delivery requirements of the Securities Act. The selling stockholders may
indemnify any broker-dealer that participates in transactions involving the
sale of the shares against certain liabilities, including liabilities arising
under the Securities Act.

 

We have agreed to indemnify the selling stockholders
against liabilities, including liabilities under the Securities Act and state
securities laws, relating to the registration of the shares offered by this
prospectus.

 

We have agreed with the selling stockholders to keep
the registration statement of which this prospectus constitutes a part
effective until the earlier (i) the date when the selling
stockholder may sell all securities registered under the registration statement
under Rule 144 without volume or other restrictions or limits or (ii) the
date the selling stockholders no longer own any of the securities registered
under the registration statement.

 

 

 

Annex B

 

MICROFIELD
GROUP, INC.

 

SELLING
STOCKHOLDERS’ QUESTIONNAIRE

 

The following information is requested from
you in connection with the preparation and filing by Microfield Group, Inc.
(the “Company”) of a Registration Statement on Form S-1 or other appropriate
form (the “Registration Statement”) with the Securities and Exchange Commission
(the “SEC”) covering the sale of shares of the Company’s common stock by
certain stockholders.

 

We would appreciate your answering all of the
questions included in this questionnaire, even though your answers may be in
the negative, so that the Company will have a record of your responses for use
in connection with the preparation of the Registration Statement.  It is requested that you give careful
attention to each question and that you complete this questionnaire personally.

 

In order to assist you in completing this
questionnaire, certain terms used herein are defined in the appendix which is
attached to this questionnaire.  Each of
such defined terms has been bolded and italicized
for identification.  The term “person,”
as used in this questionnaire, means any natural person, company, government or
political subdivision, agency or instrumentality of a government.

 

After you have completed the
following questionnaire, please send the completed questionnaire by facsimile
((212) 930-9725) or overnight courier as soon as possible to the attention of
Jeffrey Fessler at Sichenzia Ross Friedman Ference LLP, 61 Broadway, New York,
New York 10006

 

*********************

 

GENERAL
INFORMATION

 

1.             Please provide
your full name and address or the full name and address of the entity on whose
behalf you are completing this questionnaire. 
The address may be a business, mailing or residence address.

 

Name:

 

Address:

 

2.  Name the Control Person of
your organization:

 

 

SECURITIES
HOLDINGS

 

1.             Please fill in all blanks in the following questions
related to your beneficial ownership of the
Company’s common stock.  Generally, the
term “beneficial ownership” refers to any
direct or indirect interest in the securities which entitles you to any of the
rights or benefits of ownership, even though you may not be the holder of
record of the securities.  For example,
securities held in “street name” over which you exercise voting or investment
power would be considered beneficially owned
by you.  Other examples of indirect
ownership include ownership by a partnership in which you are a partner or by
an estate or trust of which you or any member of your immediate
family is a beneficiary. 
Ownership of securities held in the names of your spouse, minor children
or other relatives who live in the same household may be attributed to you.

 

If you have any reason to believe that any
interest in securities of the Company which you may have, however remote, is a
beneficial interest, please describe such interest.  For purposes of responding to this
questionnaire, it is preferable to err on the side of inclusion rather than
exclusion.  Where the SEC’s
interpretation of beneficial ownership would
require disclosure of you interest or possible interest in certain securities
of the Company, and you believe that you do not actually possess the attributes
of beneficial ownership, an appropriate
response is to disclose the interest and at the same time disclaim beneficial ownership of the
securities.

 

Please indicate the amount of common stock of
the Company or any of its subsidiaries which you beneficially
owned as of the date hereof.

 

For each holding:

 

·      State the nature of the holding (i.e.,
held in your own name, jointly, as a trustee or beneficiary of a trust, as a
custodian, as an executor, in discretionary accounts, by your spouse or minor
children, by a partnership of which you are a partner, etc.), and

 

·      State whether you are the beneficial
owner by reason of (i) sole voting power, (ii) shared
voting power, (iii) sole investment power, (iv) shared investment
power, (v) the right to acquire stock within 60 days of the end of the
calendar year, and/or (vi) the right to acquire stock with the purpose of
changing or influencing control.

 

·      Indicate in the Remarks column whether you have sole
or shared voting or investment power with respect to any such securities, and
in what capacity (i.e., individual, general
partner, trustee) you have such power or powers.

 

·      If you wish to disclaim beneficial
ownership of any shares listed, so indicate by writing the word “Disclaim”
in the Remarks column below; and you understand that such shares will be shown
separately from your beneficial holdings and an appropriate disclaimer set
forth.

 

 

·      If any of the shares listed are subject to any claim,
encumbrance, pledge or lien, so indicate in the Remarks column.

 

 

	
  Number
  of

  Shares

  	
   

  	
  Registered in

  the Name of

  	
   

  	
  Beneficially

  Owned by

  	
   

  	
  Remarks

  	
   

  	
  Shares Voted

  	
   

  	
  Shares to be Sold

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

2.             5% Stockholders

 

To the best of my knowledge, all persons
(including myself and my associates
and including corporations, partnerships, trusts, associations and other such
groups) who beneficially own more than 5%
of any class of the Company’s stock are described below:

 

	
  Name
  of

  Beneficial

  Owner

  	
   

  	
  Class of Shares

  Beneficially

  Owned

  	
   

  	
  Holder of

  Voting or

  Investment Power

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

NO
ADVERSE INTEREST

 

All interests I or my associates
have or will have that are adverse to the Company interests in any pending or
contemplated legal proceeding or government investigation to which the Company
is or will be a party (or to which its property may be subject) are described
below:

 

 

VOTING
ARRANGEMENT

 

All voting trusts or similar agreements or arrangements of which I have
knowledge under which more than 5% of the Company’s outstanding common stock,
on an as converted basis, is held or to be held are described below:

 

	
  Names
  and Addresses of Voting Trustees

  	
   

  	
  Voting Rights and Other Powers

  Under Trust, Agreement or Arrangement

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

CHANGE
IN CONTROL

 

All arrangements
of which I have knowledge, including any pledge by any person of securities of
the Company, the operations of which may at a subsequent date result in a
change in control of the Company, are
described below:

 

 

TRANSACTIONS
WITH THE COMPANY

 

1.             Information regarding all material
interests of yours or your associates in any actual or proposed transaction
during the last three fiscal years to which the Company was or is to be a party
and that are identified under “Securities Holdings” above) is provided
below.  Further, no such transaction
need be described if:

 

(a)           the amount involved (including all periodic
installments in the case of any lease or other agreement provided for periodic
payments or installments and including the value of all transactions in a
series of similar transactions) does not exceed $120,000;

 

(b)           the rates or charges involved in the transaction are
fixed by law or governmental authority or determined by competitive bids;

 

(c)           the services involved are as a bank depositary of
funds, transfer agent, registrar, trustee under a trust indenture or other
similar service;

 

(d)           my interest arises solely from my ownership of
securities of the Company and I received no extra or special benefit not shared
on a pro rata basis by all other holders of securities in the same class;

 

(e)           my interest in the corporation that is a party to
the transaction is solely as a director; or

 

(f)            my interest arose solely as an officer and/or
director of the Company (e.g., my compensation arrangement with the Company).

 

Description:

 

 

AFFILIATION
WITH ACCOUNTANTS OR ATTORNEYS

 

Described below is any interest, affiliation
or connection you have with the firm of Sichenzia Ross Friedman Ference LLP,
Russell Bedford Stefanou & Micharandani LLP or any other law firm or
accounting firm that has been retained by the Company during the last three
fiscal years or is proposed to be retained by the Company:

 

 

CONTRACTS
WITH THE COMPANY

 

Described below are all contracts with the
Company or in which the Company has a beneficial interest, or to which the
Company has succeeded by assumption or assignment, to which you or any of your associates is a party, which are to
be performed in whole or in part at or after the date of the proposed filing of
the Registration Statement, or which were made not more than two years prior
thereto:

 

 

FINRA-RELATED QUESTIONS

 

(1)           Are you (i) a “member” of the Financial
Industry Regulatory Authority  (“FINRA”),
(ii) an “affiliate” of a member of 
FINRA, (iii) a “person associated with a member” or “associated
person of a member” of FINRA or (iv) associated with an “underwriter or
related person” with respect to the proposed initial public offering for the
Company?

Yes         o            No           o

 

For the sole purpose of this Question: (i) 
FINRA defines a “member” as being either any broker or dealer admitted to
membership in FINRA or any officer or partner of such a member or the executive
representative of such member or the substitute for such representative; (ii) the
term “affiliate” means a person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is in common control
with the person specified.  Persons who
have acted or are acting on behalf or for the benefit of a person include, but
are not necessarily limited to, directors, officers, employees, agents, consultants
and sales representatives; (iii) FINRA defines a “person associated with a
member” or “associated person of a member” as being every sole proprietor,
partner, officer, director or branch manager of any member, or any natural
person occupying a similar status or performing similar functions, or any
natural person engaged in the investment banking or securities business who is
directly or indirectly controlling or controlled by such member (for example,
any employee), whether or not any such person is registered or exempt from
registration with FINRA; and (iv) the term “underwriter or related person”
includes, with respect to a proposed offering, underwriters, underwriters’
counsel, financial consultants and advisers, finders, members of the selling or
distribution group, and any and all other persons associated with or related to
any such persons.

 

If yes, kindly describe such relationship
(whether direct or indirect) and please respond to Questions (2) and (3) below;
if no, please proceed to Question (4).

 

(2)   Please set forth information
as to all purchases and acquisitions (including contracts for purchase or
acquisition) of securities of the Company by you, regardless of the time
acquired or the source from which derived:

 

	
  Seller
  or

  	
   

  	
  Amount and

  	
   

  	
  Price or Other

  	
   

  	
   

  
	
  Prospective Seller

  	
   

  	
  Nature
  of Securities

  	
   

  	
  Consideration

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

(3)   In connection with your
direct or indirect affiliation or association with a “member” of FINRA as set
forth above in Question (1), please furnish the identity of such FINRA member
and any information, if known, as to whether such FINRA member intends to
participate in any capacity in this proposed initial public offering, including
the details of such participation:

 

 

(4)     Please describe any
underwriting compensation and arrangement or any dealings known to you between
any “underwriter or related person”, “member” of FINRA, “affiliate” of a member
of FINRA, “person associated with a member”, or “associated person of a member”
of FINRA on the one hand and the Company or controlling shareholder thereof on
the other hand, other than information relating to the proposed initial public
offering of the Company:

 

(5)     Please set out below any
information, if known, as to whether any “member” of FINRA, any “underwriter or
related person”, “affiliate” or a member of FINRA, “person associated with a
member” or “associated person of a member” of FINRA may receive any portion of
the net offering:

 

 

I understand that material misstatements or
the omission of material facts in the Registration Statement may give rise to
civil and criminal liabilities to the Company, to each officer and director of
the Company signing the Registration Statement and other persons signing the
Registration Statement.  I will notify
you and the Company of any misstatement of a material fact in the Registration
Statement or any amendment thereto, and of the omission of any material fact
necessary to make the statements contained therein not misleading, as soon as
practicable after a copy of the Registration Statement or any such amendment
has been provided to me.

 

I confirm that the foregoing statements are correct, to the best of my
knowledge and belief.

 

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Typed or
  Printed Name)

  

 

 

DEFINITIONS

 

The term “arrangement” means any plan,
contract, authorization or understanding whether or not set forth in a formal
document.

 

The term “associate” as used throughout
this questionnaire, means (a) any corporation or organization (other than
the Company) of which I am an officer, director or partner or of which I am,
directly or indirectly, the beneficial owner of 5% or more of any class of
equity securities, (b) any trust or other estate in which I have a
substantial beneficial interest or as to which I serve as trustee or in a
similar capacity, (c) my spouse, (d) any relative of my spouse or any
relative of mine who has the same home as me or who is a director or officer or
key executive of the Company, (e) any partner, syndicate member or person
with whom I have agreed to act in concert with respect to the acquisition,
holding, voting or disposition of shares of the Company’s securities.

 

The term “beneficially owned” when used
in connection with the ownership of securities, means (a) any interest in
a security which entitles me to any of the rights or benefits of ownership even
though I may not be the owner of record or (b) securities owned by me
directly or indirectly, including those held by me for my own benefit
(regardless of how registered) and securities held by others for my benefit
(regardless of how registered), such as by custodians, brokers, nominees,
pledgees, etc., and including securities held by an estate or trust in which I
have an interest as legatee or beneficiary, securities owned by a partnership
of which I am a partner, securities held by a personal holding company of which
I am a stockholder, etc., and securities held in the name of my spouse, minor
children and any relative (sharing the same home).  A “beneficial owner” of a security includes
any person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares:

 

(a)           voting power
which includes the power to vote, or to direct the voting of, such security;
and/or

 

(b)           investment
power which includes the power to dispose, or to direct the disposition, of
such security.

 

The term “control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contract or otherwise.

 

The term “immediate family” means any
relationship by blood, marriage or adoption, not more remote than first cousin.

 

The term “material,” when used in this
questionnaire to qualify a requirement for the furnishing of information as to
any subject, limits the information required to those matters as to which an
average prudent investor ought reasonably to be informed before purchasing the
Common Stock of the Company.

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