-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NlUVGJkWuHyatby0pWOcTIMiC44HMHXzwSVzfzIg4dSWtyG+3H5NA+cQMGbbD/ns 88peo8PeRoW/Cfkzsydbtg== 0000950124-05-005821.txt : 20051019 0000950124-05-005821.hdr.sgml : 20051019 20051019170335 ACCESSION NUMBER: 0000950124-05-005821 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20051013 ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20051019 DATE AS OF CHANGE: 20051019 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROFIELD GROUP INC CENTRAL INDEX KEY: 0000944947 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 930935149 STATE OF INCORPORATION: OR FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-26226 FILM NUMBER: 051145615 BUSINESS ADDRESS: STREET 1: 1631 NW THURMAN, SUITE 310 CITY: PORTLAND STATE: OR ZIP: 97209 BUSINESS PHONE: 5034193580 MAIL ADDRESS: STREET 1: 1631 NW THURMAN, SUITE 310 CITY: PORTLAND STATE: OR ZIP: 97209 FORMER COMPANY: FORMER CONFORMED NAME: MICROFIELD GRAPHICS INC /OR DATE OF NAME CHANGE: 19950504 8-K 1 v13568e8vk.htm FORM 8-K e8vk
 

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest reported) October 13, 2005
Microfield Group, Inc.
(Exact name of registrant as specified in its charter
         
Oregon   000-26226   93-0935149
         
(State or other jurisdiction   Commission   (IRS Employer
of incorporation)   file number   Identification No.)
     
1631 NW Thurman, Suite 200, Portland, OR   97209
     
(Address of principal executive offices)   (Zip Code)
Registrant’s telephone number, including area code (503) 419-3580
 
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 

 

ITEM 2.01 ACQUISITION OR DISPOSITION OF ASSETS.
Acquisition of Assets
     On October 13, 2005, Microfield Group, Inc., an Oregon corporation (“Microfield”), acquired, via merger, substantially all of the assets of EnergyConnect, Inc., a Nevada corporation (“ECI”). ECI merged with and into Microfield’s wholly owned subsidiary, ECI Acquisition Co. (“Merger Sub”), with the Merger Sub continuing as the surviving corporation and wholly owned subsidiary of Microfield. The name of the surviving entity is EnergyConnect, Inc., an Oregon corporation.
     As a result of the merger, Microfield issued 27,365,306 shares of its common stock and 19,695,432 common stock purchase warrants exercisable at $2.58 per share to ECI shareholders in exchange for all the outstanding shares of ECI. Microfield also granted options to purchase shares of common stock of Microfield at $0.32 per share to the ECI option holders in connection with the assumption of the ECI Employee Stock Option Plan.
     The securities issued in connection with the merger were not registered and were issued pursuant to the registration exemption provided by Rule 506 of Regulation D of the Securities Act of 1933, as amended (the “Securities Act”). The Merger Agreement provides that Microfield will use its reasonable best efforts to file a registration statement on Form S-8 (or any successor or other appropriate form) under the Securities Act with respect to Microfield’s 2004 Stock Incentive Plan prior to January 31, 2007.
     Additionally, on October 13, 2005, pursuant to the terms of the Merger Agreement, Rodney M. Boucher, the Chief Executive Officer and President of ECI, became the Chief Executive Officer and a director of Microfield, Gene Ameduri, the Vice President of ECI, became a director of Microfield. Robert J. Jesenik and Steven M. Wright resigned as directors of Microfield.
     Through ECI’s proprietary technology and services, commercial buildings and other electric energy consumers become integral participants in wholesale electric markets. Participants receive significant new revenue streams and lower costs – with minimal or no change in their local environment. The electric grid benefits through reduced costs, improved reliability and enhanced risk management.
     The description of this transaction is qualified in its entirety by reference to the Agreement and Plan of Merger dated October 11, 2005, which is attached hereto as Exhibit 2.1 and is incorporated in this Item 2.01 by reference.
Nature of Material Relationships
     Energy Fund II, LLC, an Oregon limited liability company, owned approximately 22% of the outstanding stock of ECI. Robert J. Jesenik, a Microfield director prior to the effectiveness of the merger, is CEO of Aequitas Capital Management, Inc., which is the managing member of Energy Fund II, LLC.

 

 

ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITY.
     The information provided in response to Item 2.01 is incorporated by reference into this Item 3.02.
ITEM 5.02. DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS.
     (b) Resignation of Directors.
     On October 13, 2005, pursuant to the terms of the Merger Agreement, Robert J. Jesenik and Steven M. Wright resigned as members of Microfield’s Board of Directors. The resignations of Mr. Jesenik and Mr. Wright were not the result of any disagreement with Microfield on any matter relating to Microfield’s operations, policies or practices.
     (c) Appointment of Principal Executive Officer.
     On October 12, 2005, Microfield announced the appointed of Rodney M. Boucher as its Chief Executive Officer, effective as of October 13, 2005. Mr. Boucher has signed a Confidentiality and Non-Solicitation Agreement, a form of which is attached hereto as Exhibit 99.1 and is incorporated by reference into this Item 5.02(c).
     The merger agreement provided that Mr. Boucher would be appointed as the CEO of Microfield. Other than the merger agreement, there was no other arrangement between Mr. Boucher and any other person pursuant to which he was selected as an officer. There are also no family relationships between Mr. Boucher and any other executive officers or directors of Microfield.
     Mr. Boucher has served as the President, Chief Executive Officer and Chairman of the Board of ECI since 1998 and has extensive knowledge of the electric power industry. Prior to founding ECI, Mr. Boucher served as a senior officer of major utility, power marketing, and independent power companies including PacifiCorp, Citizens, and Calpine.
     As part of the merger transaction, Microfield agreed to assume and restructure a $330,000 debt that was owed by ECI to Mr. Boucher for operating expenses advanced on ECI’s behalf by Mr. Boucher.
     (d) Election of New Directors.
     Effective October 13, 2005, the Board of Directors, pursuant to the terms of the Agreement and Plan of Merger, elected Rodney M. Boucher and Gene Ameduri to its Board of Directors.
     Other than the merger agreement, there was no other arrangement between Mr. Boucher or Mr. Ameduri and any other person pursuant to which either of them was selected as a director. As of the date of this filing, neither Mr. Boucher nor Mr. Ameduri has been appointed to any

 

 

committees of the Board of Directors, and the Board of Directors has not yet determined which, if any, committees Mr. Boucher and Mr. Ameduri will be appointed to in the immediate future.
     Mr. Ameduri has also signed a Confidentiality and Non-Solicitation Agreement, a form of which is attached hereto as Exhibit 99.1 and is incorporated by reference into this Item 5.02(d).
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
     (a) Financial Statements and Pro Forma Financial Information.
     The financial statements and pro forma financial information of Microfield will be filed with an amended Form 8-K as soon as they have been finalized.
     (b) Exhibits.
  2.1   Agreement and Plan of Merger.
 
  99.1   Form of Confidentiality and Non-Solicitation Agreement
 
  99.2   Form of Stock Purchase Warrant
SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
 
       
Date: October 19, 2005.
        
 
        
 
  Microfield Group, Inc.    
 
       
 
   /s/ A. Mark Walter     
 
       
 
  A. Mark Walter, President    

 

EX-2.1 2 v13568exv2w1.txt EXHIBIT 2.1 EXHIBIT 2.1 AGREEMENT AND PLAN OF MERGER BY AND AMONG MICROFIELD GROUP, INC. AND ECI ACQUISITION CO. AND ENERGYCONNECT, INC. DATED AS OF OCTOBER 11, 2005 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER is made as of October 11, 2005 by and among MICROFIELD GROUP, INC., an Oregon corporation ("Microfield"), ECI ACQUISITION CO., an Oregon corporation ("Merger Sub"), and ENERGYCONNECT, INC., a Nevada corporation ("ECI"). RECITALS A. The respective boards of directors of Microfield, Merger Sub and ECI have: (a) determined that the Merger of ECI with and into Merger Sub pursuant and subject to all of the terms and conditions of this Agreement is advisable, fair and in the best interests of Microfield, ECI and Merger Sub and their respective shareholders; and (b) approved the Merger, this Agreement and the transactions contemplated by this Agreement. B. The board of directors of Microfield has authorized the issuance of Microfield Common Stock pursuant to this Agreement. C. Microfield, ECI, and Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with the Merger. D. The parties intend that the structure of the Merger described in this Agreement be a tax-free reorganization within the meaning of Section 368(a) of the Code. NOW, THEREFORE, in consideration of the covenants, conditions and agreements set forth herein and for other good and valuable consideration, the sufficiency of which are acknowledged, the parties agree as follows: ARTICLE 1. DEFINITIONS When used in this Agreement, the following terms shall have the meanings specified: "AGREEMENT" means this Agreement and Plan of Merger, together with the attached Exhibits and Disclosure Schedules, as the same may be amended from time to time in accordance with the terms hereof. "ARTICLES OF MERGER" means Articles of Merger in a form approved for filing in accordance with the OBCA. "CLOSING" means the conference to be held at 10:00 a.m. on the Closing Date at the offices of Microfield, or such other time and place as the parties may mutually agree to in writing. -1- "CLOSING DATE" means October 13, 2005, or such other date as the parties may mutually agree in writing. "CODE" means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, as the same may be in effect from time to time. "DISCLOSURE SCHEDULES" means the Disclosure Schedules attached to this Agreement. "ECI" means EnergyConnect, Inc., a Nevada corporation. "ECI OPTIONS" means options to purchase shares of ECI Stock granted to employees of ECI pursuant to the terms of the Employee Stock Option Plan adopted by ECI that are outstanding immediately prior to the Effective Time. "ECI SHAREHOLDERS" means all the holders of record of ECI Stock immediately prior to the Effective Time. "ECI STOCK" means shares of Class A common stock, without par value, of ECI. "EFFECTIVE TIME" means the date and time when the Merger becomes effective pursuant to the OBCA. "ENFORCEABILITY EXCEPTIONS" means the limits with respect to the enforceability of any agreement imposed by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by principles of equity regarding the availability of remedies. "GOVERNMENTAL AUTHORITY" means any nation or government, any state or other political subdivision thereof or any entity, authority or body exercising executive, legislative, judicial or regulatory functions of or pertaining to government, including, without limitation, any governmental or regulatory authority, agency, department, board, commission or instrumentality, any court, tribunal or arbitrator and any self-regulatory organization. "KNOWLEDGE," with respect to a party, means the actual current knowledge of the existence or nonexistence of a fact or matter, after reasonable inquiry, by the executive officers or directors of Microfield or ECI, as applicable, taking into consideration the type of knowledge that the person would know by virtue of such person's position. "LAW" means any federal, state, local or other law, rule, regulation or governmental requirement of any kind, and the rules, regulations and orders promulgated thereunder by any regulatory agencies. "MATERIAL ADVERSE CHANGE" means any materially adverse change in the financial condition, properties, business or results of operations of a party that exceeds the sum of $250,000 or more, whether taken separately or together in the aggregate with other similar events, other than changes arising out of general economic conditions -2- unrelated to the business in which the party is engaged. When reference is made to Microfield in this context, such reference shall be deemed to refer to Microfield and its Subsidiaries taken as a whole. "MATERIAL ADVERSE EFFECT" means any event, condition or fact that is, or reasonably may be expected to be, materially adverse to the financial condition, properties, business, results of operations or prospects of a party that exceeds the sum of $250,000 or more, whether taken separately or together in the aggregate with other similar events, other than events, conditions or facts arising out of general economic conditions unrelated to the business in which the party is engaged. When reference is made to Microfield in this context, such reference shall be deemed to refer to Microfield and its Subsidiaries taken as a whole. "MATERIAL CONTRACTS" means any agreement or contract to which a party, or by which its properties or assets, is bound, which could reasonably be expected to result in a Material Adverse Change or have a Material Adverse Effect, including, but not limited, to: (a) all loan agreements, indentures, mortgages, pledges, conditional sale or title retention agreements, security agreements, guaranties, standby letters of credit, equipment leases or lease purchase agreements, each in an amount exceeding $50,000; and (b) all other contracts, agreements, commitments or other understandings or arrangements, but excluding contracts, agreements, commitments or other understandings or arrangements entered into in the ordinary course of business and involving individual payments or receipts by a party of less than $50,000 over the term of such contract, agreement, commitment or other understanding or arrangement. "MERGER" means the merger of ECI with and into Merger Sub pursuant to this Agreement, the OBCA, and the NGCL. "MERGER CONSIDERATION" means the aggregate number of shares of Microfield Common Stock and Microfield Warrants issuable to the ECI Shareholders pursuant to Section 2.7, subject to any rounding for fractional shares pursuant to Section 2.9(b). "MERGER SUB" means ECI Acquisition Co., an Oregon corporation and a wholly owned Subsidiary of Microfield. "MICROFIELD" means Microfield Group, Inc., an Oregon corporation. "MICROFIELD COMMON STOCK" means shares of common stock, no par value, of Microfield. "MICROFIELD WARRANT" means a warrant to purchase one share of Microfield Common Stock at a price equal to 110% of the average of the closing prices of Microfield Common Stock on the OTCBB on the five trading days immediately preceding the Closing Date, subject to the terms and conditions set forth in the Stock Purchase Warrant in the form attached as Exhibit A. "NGCL" means the Nevada General Corporation Law, as the same shall be in effect from time to time. -3- "OBCA" means the Oregon Business Corporation Act, as the same shall be in effect from time to time. "OPTION EXCHANGE RATIO" means 191,820 shares of Microfield Common Stock. "PERSON" means a natural person, corporation, trust, partnership, limited liability company, governmental entity, agency or branch or department thereof, or any other legal entity. "SUBSIDIARY" means any entity (a) at least a majority of the outstanding capital stock or ownership interest of which shall at the time be owned by Microfield or ECI, as applicable, directly or through one (1) or more entities that are themselves Subsidiaries or (b) with respect to which Microfield or ECI, as applicable, may elect a majority of the board of directors or similar governing body. "SURVIVING CORPORATION" means Merger Sub, which shall survive the Merger of ECI with and into Merger Sub. OTHER TERMS. The following terms shall have the meanings specified in the following noted sections of this Agreement:
TERM SECTION - ----------------- --------- Preferred Shares 4.2 Related Documents Article 7 Rule 144 2.10 Securities Act 2.10
ARTICLE 2. THE MERGER 2.1 THE MERGER. At the Effective Time and upon and subject to the terms and conditions of this Agreement, ECI will be merged with and into Merger Sub. Merger Sub shall be the Surviving Corporation in the Merger and shall continue to be governed by the Laws of the state of Oregon, and the separate existence of ECI shall cease. The Merger shall be pursuant to the provisions of, and shall be with the effects provided in, the OBCA and the NGCL. 2.2 EFFECTIVE TIME. Subject to the terms and conditions of this Agreement, on the Closing Date, Merger Sub and ECI will cause the Articles of Merger to be executed, delivered and filed as provided in the OBCA and the NGCL. The Merger shall become effective at the time specified in of the Articles of Merger filed with the Oregon Secretary of State, Corporation Division, and the Nevada Secretary of State. 2.3 ARTICLES OF INCORPORATION OF SURVIVING CORPORATION. The Articles of Incorporation of Merger Sub in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corporation until amended in accordance with the OBCA, except for Article I thereof which shall be amended to read as follows: -4- "The name of the Corporation is EnergyConnect, Inc., and its duration shall be perpetual." 2.4 BYLAWS OF SURVIVING CORPORATION. The Bylaws of Merger Sub in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation until amended in accordance with the OBCA. 2.5 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. The board of directors of the Surviving Corporation shall initially consist of five (5) director positions. The following directors are hereby elected and shall serve as the directors of the Surviving Corporation to hold office as provided in the Bylaws: William C. McCormick A. Mark Walter Michael Stansell Rodney M. Boucher Gene Ameduri The following officers shall be the officers of the Surviving Corporation, to hold office as provided in the Bylaws: Gene Ameduri President William C. McCormick Chairman of the Board Rodney M. Boucher Chief Executive Officer Michael Stansell Secretary 2.6 MERGER SUB STOCK. At and after the Effective Time, each share of Merger Sub common stock issued and outstanding immediately prior to the Closing Date shall remain an issued and outstanding share of common stock of the Surviving Corporation and shall not be affected by the Merger. 2.7 CONVERSION OF ECI STOCK. At the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub, ECI or Microfield, each share of ECI Stock issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive 141,058.27 validly issued, fully paid and nonassessable shares of Microfield Common Stock and 101,522.84 Microfield Warrants. The total number of Microfield Warrants to be issued to a given ECI Shareholder shall be rounded to the nearest whole share of Microfield Common Stock. No cash shall be paid in lieu of fractional shares. The ECI Shareholders will receive the following shares of Microfield Common Stock and Microfield Warrants:
TOTAL SHARES OF ECI STOCK MICROFIELD COMMON TOTAL ECI SHAREHOLDERS OWNED STOCK MICROFIELD WARRANTS - ------------------------- ------------ ------------------------ ------------------------ Rodney M. Boucher 60 shares of common stock 8,463,496 6,091,371
-5- Vince Cushing 40 shares of common stock 5,642,331 4,060,914 Gene Ameduri 38 shares of common stock 5,360,214 3,857,868 Energy Fund II LLC 44 shares of common stock 6,206,564 4,467,005 Mark Boucher 1 share of common stock 141,058 101,523 Boucher Heritage Holdings 2 shares of LLC common stock 282,117 203,046 Carey Halsted 2 shares of common stock 282,117 203,046 Alan Gartner 1 share of common stock 141,058 101,523 Wilfred A. Boucher 4 shares of common stock 564,233 406,091 Centerlogic, Inc. 2 shares of common stock 282,117 203,046 Microfield Group, Inc. 5 shares of common stock 0, see Section 2.8 below 0, see Section 2.8 below
2.8 CANCELLATION OF CERTAIN SHARES. Each share of ECI Common Stock held by Microfield immediately prior to the Effective Time will, by virtue of the Merger and without any action on the part of Microfield, cease to be outstanding, be canceled and retired without payment of any consideration therefor and cease to exist. 2.9 PROCEDURE FOR PAYMENT. (a) SURRENDER OF STOCK. From and after the Effective Time, the holders of record of ECI Stock, upon surrender to Microfield or its agent designated for such purpose of any letters of transmittal or other documents as may be reasonably requested by Microfield or its agent, shall be entitled to receive one or more certificates representing the number of shares of Microfield Common Stock and one or more stock purchase warrants in the form attached as Exhibit A evidencing Microfield Warrants, in each case, into which such ECI Stock shall have been converted pursuant to the provisions of Section 2.7. (b) NO FRACTIONAL SHARES. No certificates or scrip evidencing fractional shares of Microfield Common Stock shall be issued in the Merger, and such fractional share interests will not entitle the owner thereof to any rights as a shareholder of Microfield. The portion of the Merger Consideration to be issued to each holder of record of ECI Stock will be rounded to the nearest whole share. (c) NO FURTHER RIGHTS IN ECI STOCK. All shares of Microfield Common Stock and Microfield Warrants issued upon conversion of the ECI Stock in accordance with the terms of this Agreement shall be deemed to have been issued (and paid) in full satisfaction of all rights of the holders of record of ECI Stock pertaining to -6- the ECI Stock. Following the Effective Time, the holders of record of ECI Stock shall cease to have any rights with respect to such ECI Stock except as otherwise provided in this Agreement or by law. 2.10 UNREGISTERED SHARES. All ECI Shareholders have been informed by Microfield that the Microfield Common Stock and the Microfield Warrants (as well as the shares of Microfield Common Stock underlying such warrants) conveyed hereunder as Merger Consideration have not been registered under the Securities Act of 1933 (the "SECURITIES ACT"). All ECI Shareholders have also been informed that such Microfield Common Stock will bear the legend set forth in Section 2.11, and that such Microfield Common Stock must be held for the time required by Rule 144 promulgated under the Securities Act ("RULE 144"), unless (a) the sale of the Microfield Common Stock has been registered under the Securities Act, (b) a sale of the Microfield Common Stock is made in conformity with the provisions of Rule 144, or (c) in the opinion of counsel for an ECI shareholder, which opinion is reasonably acceptable to Microfield, some other exemption from registration is available with respect to any such sale, transfer or other disposition of such Microfield Common Stock. The Microfield Warrants will bear the legend set forth in the form attached as Exhibit A and will be subject to comparable restrictions on transfer as described above for the Microfield Common Stock. 2.11 STOCK CERTIFICATE LEGEND. Stock transfer instructions will be given to Microfield's transfer agent with respect to the Merger Consideration and there will be placed on the certificates for such shares, or any substitution therefor, the following legend: "The securities evidenced by this certificate have not been registered under the Securities Act of 1933 (the "Act") or any applicable state law, and no interest therein may be sold, distributed, assigned, offered, pledged or otherwise transferred unless (a) there is an effective registration statement under such Act and applicable state securities laws covering any such transaction involving these securities or (b) the Company receives an opinion of legal counsel for the holder of these securities (acceptable to legal counsel for the Company) to the effect that such transaction is exempt from registration or the Company otherwise satisfies itself that such transaction is exempt from registration." -7- 2.12 ECI OPTIONS. (a) NEW OPTIONS. At the Effective Time, by virtue of the Merger and without any action on the part of any holder of any ECI Option, each ECI Option, whether vested or unvested, exercisable or unexercisable, shall be deemed to constitute an option (a "New Option") to purchase, on the same terms and conditions as were applicable under the terms of the ECI Employee Stock Option Plan, a number of shares of Microfield Common Stock at an exercise price per share determined respectively as follows: (i) Number of Shares. The number of shares of Microfield Common Stock subject to a New Option shall be equal to the product of (I) the number of shares of ECI Stock purchasable upon exercise of the ECI Option and (II) the Option Exchange Ratio, the product being rounded down to the nearest whole share; and (ii) Exercise Price. The exercise price per share of Microfield Common Stock purchasable upon exercise of a New Option shall be equal to (I) the exercise price per share of ECI Stock under the ECI Option divided by (II) the Option Exchange Ratio, the quotient being rounded up to the nearest cent. With respect to any such ECI Options that are "incentive stock options" (as defined in Section 422(b) of the Code) the foregoing adjustments shall be effected in a manner consistent with Section 424(a) of the Code and the regulations promulgated thereunder. Prior to the Effective Time, ECI or its Board of Directors will take all action necessary on its part to give effect to the provisions of this Section 2.12(a) and shall take such other actions reasonably requested by Microfield to give effect to the foregoing. (b) RESERVATION AND REGISTRATION OF NEW OPTION SHARES. Prior to the Effective Time, Microfield shall take all corporate action necessary to reserve for future issuance a sufficient number of shares of Microfield Common Stock to provide for the satisfaction of its obligations, if any, with respect to the New Options. Prior to January 31, 2007, Microfield shall use its reasonable best efforts to file a registration statement on Form S-8 (or any successor or other appropriate form) under the Securities Act with respect to the Microfield Common Stock issuable upon exercise of the New Options and shall use its reasonable efforts to maintain the effectiveness of such registration statement and to comply with the disclosure requirements specified in Form S-8 for so long as such New Options remain outstanding. (c) NOTICE TO HOLDERS. As soon as practicable after the Effective Time, Microfield shall deliver to the holders of ECI Options appropriate notices setting forth such holders' rights pursuant to the New Options and that the agreements evidencing the grants of ECI Options shall continue in effect on the same terms and conditions (subject to the adjustments required by this Section 2.12 after giving effect to the Merger). The New Options shall be subject to the terms of the Microfield 2004 Stock Incentive Plan, including Section 13(d) thereof. -8- 2.13 AGREEMENT TO VOTE IN FAVOR OF MERGER. For purposes of this Section 2.13 only, the following ECI shareholders covenant and agree to vote in favor of or consent to the Merger, and the transactions contemplated herein: Rodney M. Boucher, Gene Ameduri, and Energy Fund II, LLC. ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF ECI ECI represents and warrants to Microfield and Merger Sub that, except as set forth in the Disclosure Schedules (whether or not in a correspondingly numbered section): 3.1 ORGANIZATION AND GOOD STANDING. ECI is a corporation duly organized and validly existing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Except as set forth in Section 3.1 of the Disclosure Schedules, ECI is duly qualified or licensed and in good standing to do business in each jurisdiction in which the character of the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing would not reasonably be expected to have a Material Adverse Effect on ECI. ECI has delivered to Microfield accurate and complete copies of its Articles of Incorporation and Bylaws, as currently in effect. 3.2 CAPITALIZATION. As of the Closing Date, the outstanding ECI Stock and the holders thereof will be as set forth in Section 3.2 of the Disclosure Schedules. As of the Closing Date, all issued and outstanding ECI Stock will be duly authorized, validly issued, fully paid and non-assessable. Except as disclosed in Section 3.2 of the Disclosure Schedules, there are no outstanding rights, subscriptions, warrants, puts, calls, unsatisfied preemptive rights, options or other agreements of any kind relating to any of the outstanding or unissued ECI Stock or any other security of ECI, and there is no authorized or outstanding security of any kind convertible into or exchangeable for any ECI Stock or other security. Except as disclosed in Section 3.2 of the Disclosure Schedules, there are no obligations, contingent or otherwise, of ECI to repurchase, redeem or otherwise acquire any ECI Stock or to provide funds to or otherwise make any investment (in the form of a loan, capital contribution or other similar investment) in any other entity. 3.3 INTELLECTUAL PROPERTY. ECI has filed U.S. Application Serial No. 11/107,222 titled "Enterprise Energy Automation" with the United States Patent and Trademark Office with a filing date of April 15, 2005. 3.4 CUSTOMERS. ECI's customers are as follows: (1) PJM Interconnection, L.L.P., and (2) Developers Diversified Realty Corporation. There have not been any changes in the business relationships of ECI with its aforementioned customers that would constitute a Material Adverse Effect on ECI, other than completion of contracted work in the normal course of business. -9- ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF MICROFIELD AND MERGER SUB Microfield and Merger Sub jointly and severally represent and warrant to ECI that, except as set forth in the Disclosure Schedules (whether or not in a correspondingly numbered section): 4.1 ORGANIZATION AND GOOD STANDING. Microfield and each of its Subsidiaries is a corporation duly organized and validly existing under the laws of the jurisdiction of its incorporation and is duly organized to do business in each domestic or foreign jurisdiction in which the failure to be so qualified is reasonably likely to have a Material Adverse Effect on it, and each such entity has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Microfield and Merger Sub have each delivered to ECI accurate and complete copies of its Articles of Incorporation and Bylaws, as currently in effect. 4.2 CAPITALIZATION. The authorized capital stock of Microfield consists of (a) 125,000,000 shares of Microfield Common Stock and (b) 10,000,000 shares of preferred stock (the "PREFERRED SHARES"). As of October 3, 2005, (i) 21,150,801 shares of Microfield Common Stock were issued and outstanding (ii) 6,642,865 shares of Series 2 Preferred Shares were issued and outstanding, (iii) 3,602.709 shares of Series 3 Preferred Shares were issued and outstanding, (iv) 4,392.105 shares of Series 4 Preferred Shares were issued and outstanding, (v) 3,176,825 shares of Microfield Common Stock were reserved for future issuance pursuant to outstanding options to purchase Microfield Common Stock, (vi) 7,734,363 shares of Microfield Common Stock are available for issuance pursuant to the 2004 Stock Incentive Plan, as amended; and (vii) 5,252,372 shares of Microfield Common Stock were reserved for future issuance upon exercise of warrants to purchase Microfield Common Stock. Microfield is currently engaged in a private placement offering in which it will issue up to 6,428,571 shares of Microfield Common Stock and stock purchase warrant agreements to purchase up to 3,214,285 shares of Microfield Common Stock with an exercise price of $0.90 per share. No other capital stock or rights to acquire such capital stock of Microfield are authorized, issued, or outstanding. The outstanding shares of Microfield capital stock are, and the shares of Microfield Common Stock to be issued to the holders of record of ECI Stock in the Merger will be, duly authorized, validly issued, fully paid and nonassessable, and not subject to preemptive rights. 4.3 SEC REPORTS. To the Knowledge of Microfield and Merger Sub, except as disclosed in Section 4.3 of the Disclosure Schedules, all registration statements, reports and proxy statements, including amendments thereto, filed by Microfield with the SEC since December 31, 2002, and prior to the date of this Agreement, as of the date filed (A) complied in all material respects as to form with the applicable requirements under the Securities Act and the Securities Exchange Act of 1934, as the case may be, and the rules and regulations of the SEC promulgated thereunder, and (B) did not contain any 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 the light of the circumstances under which they were made, not misleading. -10- ARTICLE 5. ADDITIONAL COVENANTS OF ECI ECI covenants and agrees as follows: 5.1 CONDUCT OF BUSINESS OF ECI. (a) Unless Microfield shall otherwise consent in writing (which consent, in the case of paragraphs (iv), (v), (ix), (xi), (xii), or (xiii) below, shall not be unreasonably withheld, delayed or conditioned) and except as expressly contemplated by this Agreement or in the Disclosure Schedules, during the period from the date of this Agreement to the Effective Time, (i) ECI shall conduct its business in the ordinary course and consistent with past practice, and ECI shall use its reasonable best efforts to preserve substantially intact its business organization, to keep available the services of its present officers and employees and to preserve the present commercial relationships of ECI with Persons with whom ECI does significant business and (ii) without limiting the generality of the foregoing, ECI will not: (i) Amend or propose to amend its Articles of Incorporation or Bylaws (or similar organizational documents); (ii) Authorize for issuance, issue, grant, sell, pledge, dispose of or propose to issue, grant, sell, pledge or dispose of any equity interests in ECI, or any options, warrants, commitments, subscriptions or rights of any kind to acquire or sell any equity interests in or other securities of ECI, including, but not limited to, any securities convertible into or exchangeable for equity interests in ECI; (iii) Split, combine or reclassify any of its Stock or declare, pay or set aside any dividend or other distribution (whether in cash, equity interests or property or any combination thereof) in respect of its Stock, or directly or indirectly redeem, purchase or otherwise acquire or offer to acquire any of its equity interests or other securities; (iv) Create or incur any indebtedness for borrowed money, issue any debt securities or make any loans or advances, in each instance in excess of $25,000, except in the ordinary course of business; (v) Sell, pledge, dispose of or encumber any assets of ECI, except in the ordinary course of business; (vi) Authorize any capital expenditures or purchases of fixed assets in excess of $25,000, except in the ordinary course of business; (vii) Assume, guarantee or endorse or otherwise as an accommodation become responsible for, the obligations of any Person; (viii) Voluntarily incur any liability or obligation (absolute, contingent or otherwise) in excess of $25,000, except in the ordinary course of business. -11- (ix) Increase in any manner the compensation of any of its officers or employees or enter into, establish, amend or terminate any employment, consulting, retention, change in control, collective bargaining, bonus or other incentive compensation, profit sharing, health or other welfare, stock option or other equity, pension, retirement, vacation, severance, deferred compensation or other compensation or benefit plan, policy, agreement, trust, fund or arrangement with, for or in respect of, any shareholder, officer, director, employee, consultant or affiliate other than, in any such case referred to above, as may be required by Law or as required pursuant to the terms of agreements in effect on the date of this Agreement; (x) Alter through merger, liquidation, reorganization, restructuring or in any other fashion the corporate structure or ownership of ECI; (xi) Except as may be required as a result of a change in Law, change any of the accounting principles or practices used by it; (xii) Make any tax election or settle or compromise any income tax liability; (xiii) Pay, discharge or satisfy any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or other), other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of liabilities reflected or reserved against in, or contemplated by, the ECI Financial Statements (or the notes thereto) or incurred by ECI in the ordinary course of business consistent with past practice; (xiv) Take, or agree in writing or otherwise to take, any of the foregoing actions or any action that would make any of the representations or warranties of ECI contained in this Agreement untrue or incorrect in any material respect at or prior to the Effective Time; or (xv) Acquire (by merger, consolidation, or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof. (b) ECI shall comply with all Laws applicable to it or any of its properties, assets or business and maintain in full force and effect all Permits necessary for such business, except in any such case for any failure so to comply or maintain that would not reasonably be expected to result in a Material Adverse Effect on ECI. 5.2 NOTIFICATION OF CERTAIN MATTERS. ECI shall give prompt notice to Microfield if any of the following occur after the date of this Agreement: (a) receipt of any notice or other communication in writing from any party alleging that the Consent of such party is or may be required in connection with the transactions contemplated by this Agreement; (b) receipt of any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement; (c) the occurrence of an event that would be reasonably likely (i) to have a Material Adverse Effect on ECI or (ii) to cause any condition set forth in Section 8.1 or 8.2 to be -12- unsatisfied; or (d) the commencement or, to the Knowledge of ECI, threat of any Litigation involving or affecting ECI, any of its respective properties or assets, or any employee, agent, director, officer or shareholder, in his or her capacity as such, of ECI which, if pending on the date hereof, would have been required to have been disclosed pursuant to this Agreement or which relates to the completion of the Merger. 5.3 ACCESS AND INFORMATION. Between the date of this Agreement and the Effective Time, and without intending by this Section 5.3 to limit any of the other obligations of the parties under this Agreement, ECI will give, and shall direct its accountants and legal counsel to give, Microfield and its authorized representatives (including, without limitation, its financial advisors, accountants and legal counsel), at reasonable times and without undue disruption to or interference with the normal conduct of the business and affairs of ECI, access as reasonably required in connection with the transactions provided for in this Agreement to all offices and other facilities and to all contracts, agreements, commitments, books and records of or pertaining to ECI and will furnish Microfield with such financial and operating data and other information with respect to the business and properties of ECI as Microfield may from time to time reasonably request in connection with such transactions. 5.4 SHAREHOLDER APPROVAL. As soon as practicable, ECI will take all steps necessary to duly call, give notice of, convene and hold a special meeting of Shareholders for the purpose of voting upon the Merger, this Agreement and the transactions contemplated hereby, or to obtain the unanimous written consent of the holders of record of ECI Stock approving this Agreement and the transactions contemplated hereby, in accordance with the requirements of the NGCL and ECI's Articles of Incorporation and Bylaws. 5.5 REASONABLE BEST EFFORTS. Subject to the terms and conditions herein provided, ECI agrees to use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to complete and make effective as promptly as practicable the transactions contemplated by this Agreement, including, but not limited to, obtaining all Consents from Governmental Authorities and other parties required for the completion of the Merger and the transactions contemplated thereby applicable to ECI, including without limitation all Consents required under any Material Contract. Upon the terms and subject to the conditions hereof, ECI agrees to use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary to satisfy the other conditions of the Closing set forth herein for which ECI is responsible. 5.6 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect, ECI shall not, and shall use reasonable best efforts to cause its affiliates not to, issue or cause the publication of any press release or any other announcement with respect to the Merger or the transactions contemplated hereby without the consent of Microfield, except where such release or announcement is required by applicable Law, in which case ECI, prior to making such announcement, will consult with Microfield regarding the same. -13- 5.7 COMPLIANCE. In completing the transactions contemplated hereby, ECI shall comply, in all material respects, with all applicable Laws. ARTICLE 6. ADDITIONAL COVENANTS OF MICROFIELD AND MERGER SUB Microfield and Merger Sub covenant and agree as follows: 6.1 CONDUCT OF BUSINESS OF MICROFIELD. (a) Unless ECI shall otherwise consent in writing (which consent, in the case of paragraphs (ii), (iii), (iv), (v), (ix), (x), (xii), or (xiii) below, shall not be unreasonably withheld, delayed or conditioned) and except as expressly contemplated by this Agreement or in the Disclosure Schedules, during the period from the date of this Agreement to the Effective Time, (i) Microfield shall conduct its business in the ordinary course and consistent with past practice, and Microfield shall use its reasonable best efforts to preserve substantially intact its business organization, to keep available the services of its present officers and employees and to preserve the present commercial relationships of Microfield with Persons with whom Microfield does significant business and (ii) without limiting the generality of the foregoing, Microfield will not: (i) Amend or propose to amend its Articles of Incorporation or Bylaws (or similar organizational documents); (ii) Authorize for issuance, issue, grant, sell, pledge, dispose of or propose to issue, grant, sell, pledge or dispose of any equity interests in Microfield, or any options, warrants, commitments, subscriptions or rights of any kind to acquire or sell any equity interests in or other securities of Microfield, including, but not limited to, any securities convertible into or exchangeable for equity interests in Microfield; (iii) Split, combine or reclassify any of its Stock or declare, pay or set aside any dividend or other distribution (whether in cash, equity interests or property or any combination thereof) in respect of its Stock, or directly or indirectly redeem, purchase or otherwise acquire or offer to acquire any of its equity interests or other securities; (iv) Create or incur any indebtedness for borrowed money, issue any debt securities or make any loans or advances, in each instance in excess of $25,000, except in the ordinary course of business; (v) Sell, pledge, dispose of or encumber any assets of Microfield, except in the ordinary course of business; (vi) Authorize any capital expenditures or purchases of fixed assets in excess of $50,000, except in the ordinary course of business; (vii) Assume, guarantee or endorse or otherwise as an accommodation become responsible for, the obligations of any Person; -14- (viii) Voluntarily incur any liability or obligation (absolute, contingent or otherwise) in excess of $50,000, except in the ordinary course of business; (ix) Increase in any manner the compensation of any of its officers or employees or enter into, establish, amend or terminate any employment, consulting, retention, change in control, collective bargaining, bonus or other incentive compensation, profit sharing, health or other welfare, stock option or other equity, pension, retirement, vacation, severance, deferred compensation or other compensation or benefit plan, policy, agreement, trust, fund or arrangement with, for or in respect of, any shareholder, officer, director, employee, consultant or affiliate other than, in any such case referred to above, as may be required by Law or as required pursuant to the terms of agreements in effect on the date of this Agreement; (x) Alter through merger, liquidation, reorganization, restructuring or in any other fashion the corporate structure or ownership of Microfield or its Subsidiaries; (xi) Except as may be required as a result of a change in Law, change any of the accounting principles or practices used by it; (xii) Make any tax election or settle or compromise any income tax liability; (xiii) Pay, discharge or satisfy any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or other), other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of liabilities reflected or reserved against in, or contemplated by, the Microfield Financial Statements (or the notes thereto) or incurred by Microfield in the ordinary course of business consistent with past practice; (xiv) Take, or agree in writing or otherwise to take, any of the foregoing actions or any action that would make any of the representations or warranties of Microfield or Merger Sub contained in this Agreement untrue or incorrect in any material respect at or prior to the Effective Time; or (xv) Acquire (by merger, consolidation, or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof. (b) Microfield and its Subsidiaries shall comply with all Laws applicable to them or any of their properties, assets or business and maintain in full force and effect all Permits necessary for such business, except in any such case for any failure so to comply or maintain that would not reasonably be expected to result in a Material Adverse Effect on Microfield. 6.2 NOTIFICATION OF CERTAIN MATTERS. Microfield shall give prompt notice to ECI if any of the following occur after the date of this Agreement: (a) receipt of any notice or other communication in writing from any party alleging that the Consent of -15- such party is or may be required in connection with the transactions contemplated by this Agreement; (b) receipt of any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement; (c) the occurrence of an event that would be reasonably likely (i) to have a Material Adverse Effect on Microfield or (ii) to cause any condition set forth in Section 8.1 or 8.3 to be unsatisfied; or (d) the commencement or, to Microfield's Knowledge, threat of any Litigation involving or affecting Microfield, or any of its respective properties or assets or any employee, agent, director or officer, in his or her capacity as such, of Microfield which, if pending on the date hereof, would have been required to have been disclosed pursuant to this Agreement or which relates to the completion of the Merger. 6.3 ACCESS AND INFORMATION. Between the date of this Agreement and the Effective Time, and without intending by this Section 6.3 to limit any of the other obligations of the parties under this Agreement, Microfield will give, and shall direct its accountants and legal counsel to give, ECI and the ECI Shareholders and their authorized representatives (including, without limitation, its financial advisors, accountants and legal counsel), at reasonable times and without undue disruption to or interference with the normal conduct of the business and affairs of Microfield, access as reasonably required in connection with the transactions provided for in this Agreement to all offices and other facilities and to all contracts, agreements, commitments, books and records of or pertaining to Microfield and will furnish ECI and the ECI Shareholders with such financial and operating data and other information with respect to the business and properties of Microfield as ECI or the ECI Shareholders may from time to time reasonably request in connection with such transactions. 6.4 REASONABLE BEST EFFORTS. Subject to the terms and conditions herein provided, Microfield and Merger Sub agree to use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to complete and make effective as promptly as practicable the transactions contemplated by this Agreement, including, but not limited to, obtaining all Consents from Governmental Authorities and other third parties required for the completion of the Merger and the transactions contemplated by this Agreement. Upon the terms and subject to the conditions hereof, Microfield and Merger Sub agree to use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary to satisfy the other conditions of the Closing set forth herein. 6.5 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect, Microfield and Merger Sub shall not, and shall use reasonable best efforts to cause their affiliates not to, issue or cause the publication of any press release or any other announcement with respect to the Merger or the transactions contemplated by this Agreement without the consent of ECI (such consent not to be unreasonably withheld or delayed), except where such release or announcement is required by applicable Law, in which case Microfield, prior to making such announcement, will consult with ECI regarding the same. -16- 6.6 COMPLIANCE. In completing the transactions contemplated by this Agreement, Microfield and Merger Sub shall comply, and cause their Subsidiaries to comply or to be in compliance, in all material respects, with all applicable Laws. ARTICLE 7. SURVIVAL All representations and warranties contained in this Agreement or in any exhibit, schedule, certificate or agreement delivered in accordance with this Agreement (collectively, the "RELATED DOCUMENTS"), will survive any investigation by or on behalf of any party, the execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby for a period ending on the Closing Date, after which such representations and warranties shall expire and be of no further force and effect except with respect to breaches asserted in writing prior to such expiration date. All other covenants and agreements of the parties to this Agreement shall survive the Closing Date until fully performed. ARTICLE 8. CONDITIONS PRECEDENT 8.1 MERGER CONDITIONS. The respective obligations of each party to effect the Merger shall be subject to the fulfillment or waiver at or prior to the Effective Time of the following conditions: (a) ECI SHAREHOLDER APPROVAL. The Merger, this Agreement and the transactions contemplated by this Agreement shall have been approved at or prior to the Effective Time by the required vote or written consent of the ECI shareholders in accordance with the NGCL and the Articles and Bylaws of ECI, and no ECI shareholder shall have properly and timely exercised dissenters' rights under the NGCL. (b) NO INJUNCTION OR ACTION. No order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been enacted, entered, promulgated or enforced by any court or other Governmental Authority that prohibits or prevents the completion of the Merger which has not been vacated, dismissed or withdrawn prior to the Effective Time. ECI and Microfield shall use all reasonable best efforts to have any of the foregoing vacated, dismissed or withdrawn by the Effective Time. 8.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MICROFIELD AND MERGER SUB. The obligations of Microfield and Merger Sub to be performed on the Closing Date shall be subject to the satisfaction prior to or at the Closing of the following express conditions precedent: (a) COMPLIANCE WITH AGREEMENT. ECI shall have performed and complied in all respects with all of its obligations under this Agreement that are to be performed or complied with by it prior to or on the Closing Date, except where the failure to perform or comply, individually or in the aggregate, would not or would not be reasonably likely to result in a Material Adverse Effect. (b) REPRESENTATIONS AND WARRANTIES OF ECI. The representations and warranties made by ECI in this Agreement shall be true and correct in all respects when made and as of the Closing Date with the same force and effect as though made on -17- the Closing Date, except where the effect of any breaches of the representations and warranties of ECI made in this Agreement, individually or in the aggregate, would not be reasonably likely to result in a Material Adverse Effect. (c) NO MATERIAL ADVERSE EFFECT. During the period from the date of this Agreement to the Closing Date there shall not have occurred, and be continuing on the Closing Date, any Material Adverse Effect on ECI. (d) CONFIDENTIALITY AND NONSOLICITATION AGREEMENTS. Rodney M. Boucher and Gene Ameduri shall each have executed a Confidentiality and Nonsolicitation Agreement in the form attached as Exhibit B. (e) CLOSING CERTIFICATES. ECI shall have delivered to Microfield (a) a certificate signed on behalf of ECI by the Chief Executive Officer of ECI, dated on the Closing Date, to the effect that, to such person's Knowledge, the conditions set forth in Sections 8.2 (a), (b), (c), and (d) have been satisfied; and (b) a secretary's certificate as to such ECI corporate matters in connection with the Merger as Microfield may reasonably request. (f) FINANCIAL STATEMENTS. ECI shall have delivered to Microfield the audited financial statements as of and for the years ended December 31, 2003 and 2004, and unaudited financial statements as of and for the eight months ended August 31, 2005. 8.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ECI. The obligations of ECI to be performed on the Closing Date shall be subject to the satisfaction prior to or at the Closing of the following express conditions precedent: (a) COMPLIANCE WITH AGREEMENT. Microfield and Merger Sub shall have performed and complied in all respects with all of their obligations under this Agreement which are to be performed or complied with by them prior to or on the Closing Date, except where the failure to perform or comply, individually or in the aggregate, would not or would not be reasonably likely to result in a Material Adverse Effect with respect to Microfield. (b) REPRESENTATIONS AND WARRANTIES OF MICROFIELD AND MERGER SUB. The representations and warranties made by Microfield and Merger Sub in this Agreement shall be true and correct in all respects when made and as of the Closing Date with the same force and effect as though such representations and warranties had been made on the Closing Date, except where the effect of any breaches of the representations and warranties of Microfield and/or Merger Sub made in this Agreement, individually or in the aggregate, would not or would not be reasonably likely to result in a Material Adverse Effect. (c) APPOINTMENT OF OFFICERS. The board of directors of Merger Sub shall have appointed the officers of the Surviving Corporation as set forth in Section 2.5 above, effective immediately after the Effective Time. -18- (d) MICROFIELD DIRECTORS AND OFFICERS. Rodney M. Boucher and Gene Ameduri shall have been appointed as directors of Microfield and Rodney M. Boucher shall have been appointed as Chief Executive Officer, in each case effective immediately after the Effective Time. Robert Jesenik and Steven Wright shall have submitted their written resignations as directors of Microfield, effective immediately after the Effective Time. (e) NO MATERIAL ADVERSE EFFECT. During the period from the date of this Agreement to the Closing Date, there shall not have occurred, and be continuing on the Closing Date, any Material Adverse Effect on Microfield. (f) CONSENTS. Microfield shall have obtained or timely filed all required Consents under all applicable state securities laws or Blue Sky laws necessary to issue the Merger Consideration. (g) FINANCIAL STATEMENTS OF CHRISTENSON ELECTRIC, INC. Microfield shall have filed audited and pro forma financial statements of Christenson Electric, Inc., with the SEC in compliance with the requirements of Form 8-K. (h) CLOSING CERTIFICATES. Microfield shall have delivered to ECI (i) a certificate signed on behalf of Microfield by the Chairman of the Board of Microfield, dated the Closing Date, to the effect that, to such officer's knowledge, the conditions set forth in Sections 8.3(a), (b), (c), (d), (e), (f), and (g) of this Agreement have been satisfied; and (ii) secretary's certificates of Microfield and Merger Sub as to such corporate matters in connection with the Merger as ECI may reasonably request. ARTICLE 9. TERMINATION AND ABANDONMENT 9.1 TERMINATION. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of the ECI shareholders described herein: (a) By mutual written consent of Microfield and ECI; (b) By either Microfield or ECI if (i) any Governmental Authority shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the completion of the transactions contemplated by this Agreement and such order, decree or ruling or other action shall have become final and nonappealable, or (ii) the ECI Shareholders do not approve the Merger; (c) By Microfield if: (i) ECI shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform is incapable of being cured or has not been cured within five (5) days after the giving of written notice thereof to ECI; -19- (ii) Any representation or warranty of ECI shall not have been true and correct when made (without for this purpose giving effect to qualifications of materiality contained in such representation and warranty), if such failure to be true and correct, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; (iii) Any representation or warranty of ECI shall cease to be true and correct as of the Closing Date (without for this purpose giving effect to qualifications of materiality contained in such representation and warranty) as if made on such date (other than representations and warranties made as of a specified date) other than as a result of a breach or failure to perform by Microfield of any of its covenants or agreements under this Agreement if such failure to be true and correct, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; provided, however, that such representation or warranty is incapable of being cured or has not been cured within five (5) days after the giving of written notice thereof to ECI; (iv) Since the date of this Agreement, ECI shall have suffered a Material Adverse Change. (d) By ECI if: (i) Microfield or Merger Sub shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform is incapable of being cured or has not been cured within five (5) days after the giving of written notice thereof to Microfield; (ii) Any representation or warranty of Microfield or Merger Sub shall not have been true and correct when made (without for this purpose giving effect to qualifications of materiality contained in such representation and warranty), if such failure to be true and correct, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; (iii) Any representation or warranty of Microfield or Merger Sub shall cease to be true and correct as of the Closing Date (without for this purpose giving effect to qualifications of materiality contained in such representation and warranty) as if made on such date (other than representations and warranties made as of a specified date) other than as a result of a breach or failure to perform by ECI of any of its covenants or agreements under this Agreement if such failure to be true and correct, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; provided, however, that such representation or warranty is incapable of being cured or has not been cured within five (5) days after the giving of written notice thereof to Microfield or Merger Sub; (iv) Since the date of this Agreement, Microfield shall have suffered a Material Adverse Change. -20- (e) By either Microfield or ECI if the Merger is not completed on or before December 31, 2005, provided that the right to terminate this Agreement pursuant to this Section 9.1(e) shall not be available to any party where failure to perform any of its obligations under this Agreement results in the failure of the Merger to be completed by such time. The party desiring to terminate this Agreement pursuant to the preceding paragraphs shall give written notice of such termination to the other party in accordance with Section 10.5 hereof. 9.2 EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article 9, this Agreement (other than Sections 9.2, 10.1, 10.2, 10.4, 10.5, 10.6, 10.7, 10.8, 10.9, 10.10, 10.11, 10.12, 10.14, and 10.15) shall become void and of no effect with no liability on the part of any party hereto (or of any of its directors, officers, members, employees, agents, legal or financial advisors or other representatives). If this Agreement is terminated as provided herein, each party shall use all reasonable best efforts to redeliver all documents, work papers and other material (including any copies thereof) of any other party relating to the transactions contemplated hereby, whether obtained before or after the execution hereof, to the party furnishing the same. ARTICLE 10. MISCELLANEOUS. 10.1 DUE DILIGENCE. Each party to this Agreement hereby represents and acknowledges that it was provided all requested due diligence materials and was given open access to the records of the applicable business entity and has entered into this Agreement on the basis of its own examination, personal knowledge, and opinion as to the value of the respective business entities. Each party further represents and acknowledges that it has not relied on any representations made by another party to this Agreement other than those specified in this Agreement. 10.2 CONFIDENTIALITY. (a) Unless (i) otherwise expressly provided in this Agreement, (ii) required by applicable Law, (iii) necessary to secure any required Consents as to which the other party has been advised or (iv) consented to in writing by Microfield and ECI, all information (whether oral or written) and documents furnished in connection herewith together with analyses, compilations, studies or other documents prepared by such party which contain or otherwise reflect such information shall be kept strictly confidential by Microfield, ECI, Merger Sub and their respective officers, directors, employees, agents, and the ECI Shareholders. Prior to any disclosure permitted pursuant to the preceding sentence, the party intending to make such disclosure shall consult with the other party regarding the nature and extent of the disclosure. Nothing contained herein shall preclude disclosures to the extent necessary to comply with obligations imposed by applicable Law. -21- (b) In the event the transactions contemplated by this Agreement are not completed, each party shall return to the other any documents furnished by the other and all copies thereof that any of them may have made and will hold in confidence any information obtained from the other party except to the extent (i) such party is required to disclose such information by Law or such disclosure is necessary or desirable in connection with the pursuit or defense of a claim, (ii) such information was known by such party prior to such disclosure (and provided that, except with respect to information referred to in the following clause (iii), such party shall have advised the other party of such knowledge upon or promptly after its receipt of such information) or was thereafter developed or obtained by such party independent of such disclosure, or (iii) such information is or becomes generally available to the public other than by breach of this Article 10 (or, to such party's Knowledge, breach of a confidentiality agreement with the other party). Prior to any disclosure of information pursuant to the exception in clause (i) of the preceding sentence, the party intending to disclose the same shall so notify the party which provided the same in order that such party may seek a protective order or other appropriate remedy should it choose to do so. 10.3 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified or supplemented only by a written agreement among ECI, Microfield and Merger Sub. 10.4 WAIVER OF COMPLIANCE; CONSENTS. Any failure of ECI on the one hand, or Microfield and Merger Sub on the other hand, to comply with any obligation, covenant, agreement or condition herein may be waived by Microfield (or Merger Sub, as the case may be) on the one hand, or ECI on the other hand, only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 10.4. 10.5 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, or on the next business day when sent by overnight courier or on the second succeeding business day when sent by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) IF TO ECI, TO: 5487 Vicenza Way San Jose, California 95138 Attn: Rodney M. Boucher Tel: (408) 532-7454 -22- WITH A COPY TO: Miller Nash LLP 111 SW Fifth Avenue, Suite 3400 Portland, OR 97204 Attn: Frank Cable Tel: (503) 205-2508 (b) IF TO MICROFIELD OR MERGER SUB, TO: Microfield Group, Inc. 1631 NW Thurman Street, Ste. 200 Portland, OR 97209 Attn: President Tel: (503) 419-3600 WITH A COPY TO: Dunn Carney Allen Higgins & Tongue LLP 851 SW 6th Avenue, Ste. 1500 Portland, OR 97204 Attn: Jonathan A. Bennett Tel: (503) 224-6440 10.6 BINDING EFFECT; ASSIGNMENT. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto prior to the Effective Time without the prior written consent of ECI, in the case of a proposed assignment by Microfield or Merger Sub, or by Microfield, in the case of a proposed assignment by ECI. 10.7 FEES AND EXPENSES. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs or expenses. 10.8 GOVERNING LAW. This Agreement shall be deemed to be made in, and in all respects shall be interpreted, construed and governed by and in accordance with the laws of, the state of Oregon. Each party consents to jurisdiction and venue in Multnomah County, Oregon. 10.9 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. -23- 10.10 INTERPRETATION. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. 10.11 ENTIRE AGREEMENT. This Agreement and the documents or instruments referred to herein including, but not limited to, the attached Exhibits and Disclosure Schedules, which Exhibits and Disclosure Schedules are incorporated herein by reference, embody the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants, or undertakings other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings among the parties with respect to such subject matter. 10.12 SEVERABILITY. In case any provision in this Agreement shall be held invalid, illegal or unenforceable in a jurisdiction, such provision shall be modified or deleted, as to the jurisdiction involved, only to the extent necessary to render the same valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby nor shall the validity, legality or enforceability of such provision be affected thereby in any other jurisdiction. 10.13 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, the parties further agree that each party shall be entitled to an injunction or restraining order to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other right or remedy to which such party may be entitled under this Agreement, at law or in equity. 10.14 THIRD PARTIES. Nothing contained in this Agreement or in any instrument or document executed by any party in connection with the transactions contemplated hereby shall create any rights in, or be deemed to have been executed for the benefit of, any Person that is not a party hereto or thereto or a successor or permitted assign of such a party. 10.15 DISCLOSURE SCHEDULES. Both Microfield and ECI acknowledge that the Disclosure Schedules (a) relate to certain matters concerning the disclosures required and transactions contemplated by this Agreement, (b) are qualified in their entirety by reference to specific provisions of this Agreement, and (c) are not intended to constitute and shall not be construed as indicating that any such matter is required to be disclosed, nor should such disclosure be construed as an admission that such information is material with respect to ECI or Microfield, as the case may be, except to the extent required by this Agreement. [SIGNATURES ON FOLLOWING PAGE] -24- IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first above written. ENERGYCONNECT, INC. MICROFIELD GROUP, INC. a Nevada corporation an Oregon corporation By: /s/ Rodney M. Boucher By: /s/ A. Mark Walter --------------------------------- ------------------------------------ Rodney M. Boucher, Chairman, A. Mark Walter, President CEO and President ECI ACQUISITION CO. an Oregon corporation By: /s/ A. Mark Walter ------------------------------------ A. Mark Walter, President FOR PURPOSES OF SECTION 2.13 ONLY: ENERGY FUND II, LLC By: Aequitas Capital Management, Inc., its Manager By: /s/ Robert J. Jesenik /s/ Rodney M. Boucher --------------------------------- ------------------------------------ Robert J. Jesenik, CEO Rodney M. Boucher /s/ Gene Ameduri --------------------------------- Gene Ameduri -25- EXHIBIT A FORM OF STOCK PURCHASE WARRANT [See attached] -1- EXHIBIT B FORM OF CONFIDENTIALITY AND NONSOLICITATION AGREEMENT LIST OF SCHEDULES SCHEDULE: CONTAINS: 3.1 Good Standing of ECI 3.2 ECI capitalization 4.3 Microfield SEC reports ARTICLE 1. DEFINITIONS.................................................. 1 ARTICLE 2. THE MERGER................................................... 4 2.1 The Merger...................................................... 4 2.2 Effective Time.................................................. 4 2.3 Articles of Incorporation of Surviving Corporation.............. 4 2.4 Bylaws of Surviving Corporation................................. 5 2.5 Directors and Officers of Surviving Corporation................. 5 2.6 Merger Sub Stock................................................ 5 2.7 Conversion of ECI Stock......................................... 5 2.9 Procedure for Payment........................................... 6 2.10 Unregistered Shares............................................. 6 2.11 Stock Certificate Legend........................................ 7 2.12 ECI Options..................................................... 7 2.13 Agreement to Vote in Favor of Merger........................... 8 ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF ECI........................ 8 3.1 Organization and Good Standing.................................. 8 3.2 Capitalization.................................................. 8 3.3 Intellectual Property........................................... 9 3.4 Customers....................................................... 9 ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF MICROFIELD AND MERGER SUB.. 9 4.1 Organization and Good Standing.................................. 9 4.2 Capitalization.................................................. 9 4.3 SEC Reports..................................................... 9 ARTICLE 5. ADDITIONAL COVENANTS OF ECI.................................. 10
TABLE OF CONTENTS (CONTINUED)
PAGE ---- 5.1 Conduct of Business of ECI...................................... 10 5.2 Notification of Certain Matters................................. 11 5.3 Access and Information.......................................... 12 5.4 Shareholder Approval............................................ 12 5.5 Reasonable Best Efforts......................................... 12 5.6 Public Announcements............................................ 12 5.7 Compliance...................................................... 13 ARTICLE 6. ADDITIONAL COVENANTS OF MICROFIELD AND MERGER SUB............ 13 6.1 Conduct of Business of Microfield............................... 13 6.2 Notification of Certain Matters................................. 15 6.3 Access and Information.......................................... 15 6.4 Reasonable Best Efforts......................................... 15 6.5 Public Announcements............................................ 15 6.6 Compliance...................................................... 16 ARTICLE 7. SURVIVAL..................................................... 16 ARTICLE 8. CONDITIONS PRECEDENT......................................... 16 8.1 Merger Conditions............................................... 16 8.2 Conditions Precedent to the Obligations of Microfield and Merger Sub.......................................................... 16 8.3 Conditions Precedent to the Obligations of ECI.................. 17 ARTICLE 9. TERMINATION AND ABANDONMENT.................................. 18 9.1 Termination..................................................... 18 9.2 Effect of Termination and Abandonment........................... 20 ARTICLE 10. MISCELLANEOUS................................................ 20 10.2 Confidentiality................................................. 20 10.3 Amendment and Modification...................................... 21 10.4 Waiver of Compliance; Consents.................................. 21 10.5 Notices......................................................... 21 10.6 Binding Effect; Assignment...................................... 22 10.7 Fees and Expenses............................................... 22 10.8 Governing Law................................................... 22
-2- TABLE OF CONTENTS (CONTINUED)
PAGE ---- 10.9 Counterparts.................................................... 23 10.10 Interpretation.................................................. 23 10.11 Entire Agreement................................................ 23 10.12 Severability.................................................... 23 10.13 Specific Performance............................................ 23 10.14 Third Parties................................................... 23 10.15 Disclosure Schedules............................................ 23
-3- EX-99.1 3 v13568exv99w1.txt EXHIBIT 99.1 EXHIBIT 99.1 CONFIDENTIALITY AND NONSOLICITATION AGREEMENT THIS CONFIDENTIALITY AND NONSOLICITATION AGREEMENT (this "Agreement") is executed and delivered effective as of _______________, 2005 (the "Effective Date"), by and among MICROFIELD GROUP, INC., an Oregon corporation ("Corporation"), and [ ]. RECITALS A. Corporation's primary business consists of the provision of electrical and data services and engaging in electric and related energy transactions (the "Business"). B. Simultaneously with the execution and delivery of this Agreement, the Corporation's subsidiary, ECI Acquisition Co., is merging with EnergyConnect Inc., a Nevada corporation ("ECI"), pursuant to that certain Merger Agreement between Corporation and ECI of even date herewith ("Merger Agreement"). C. [ ] is a founder, employee, and stockholder of ECI and has access to and is familiar with confidential information and the business methods of ECI. D. Immediately following the merger, [ ] will become an employee of Corporation and/or one or more of its subsidiaries and will have access to and will become acquainted with certain proprietary and confidential information of Corporation, and will continue to have access to and become acquainted with such confidential and proprietary information during [ ]'s time of employment. [ ] will also become acquainted with suppliers, customers, and employees of Corporation and affiliates of Corporation. E. Corporation will sustain great loss and damage if, during the term of this Agreement, for whatever reason, [ ] should violate the provisions of this Agreement. [ ] acknowledges that such a violation would cause irreparable harm to Corporation and that Corporation would be entitled, without limitation, to injunctive relief to remedy such violation. F. The execution and delivery of this Agreement by [ ] is a condition to Corporation's obligations to consummate the Merger Agreement and Corporation is unwilling to consummate the Merger Agreement unless [ ] executes and delivers this Agreement. AGREEMENT NOW THEREFORE, in consideration of the mutual promises, terms, and conditions set forth herein and other good and valuable consideration, received to the full satisfaction of each of them, the parties hereby agree as follows: 1. Agreement Not to Solicit Corporation's Customers. [ ] agrees that, during his employment with Corporation and for a period of two (2) years following voluntary termination of his employment with Corporation, he shall not directly or indirectly: 1 - CONFIDENTIALITY AND NONSOLICITATION AGREEMENT (a) solicit or encourage any current customer of Corporation, any affiliate of Corporation, or ECI to seek competing Business services from any person, firm, or business other than Corporation or any affiliate of Corporation; (b) disclose the identity of the customers of Corporation, any affiliate of Corporation, or ECI to any business competitor of Corporation, any affiliate of Corporation, or ECI. For the purposes of this Agreement, "affiliate" shall mean any person or entity that controls, is controlled by, or is under the common control of, Corporation. For the purposes of this Agreement, "customers" shall mean those commercial building and business operators for which the Corporation provides energy management services, but shall not include electric grid operators or major utilities which function in a capacity similar to a grid operator. 2. Agreement Not to Solicit Employees. [ ] agrees that at all times during his employment with Corporation or any affiliate of Corporation and for a period of two (2) years following his voluntary termination of employment with Corporation or any affiliate of Corporation, he will not, directly or indirectly, either for himself or for any other person or entity, call upon any employee, agent, or independent contractor of Corporation, any affiliate of Corporation, or ECI for the purpose or with the intent of enticing such person or entity away from or out of the employ of, or engagement with, Corporation, any affiliate of Corporation, or ECI. 3. Confidentiality. [ ] understands and acknowledges that Corporation's business records and information, including those previously belonging to ECI, are valuable and unique assets of its business, and are confidential in nature. Such confidential information includes, but is not limited to, lists of customers, pricing, business and marketing information, and other information which constitutes valuable, special, and unique assets of Corporation, affiliates of Corporation, and ECI. Other than in the ordinary scope of his employment with Corporation, [ ] shall not, either during the term of employment or at any time thereafter, disclose to any person or entity, any of Corporation's, Corporation's affiliates', or ECI's confidential information, directly or indirectly, or use any such information in any way. Such confidential information shall include written information, information stored on electronic media, and information retained in [ ]'s memory. [ ] further agrees that neither during the term of employment or thereafter shall any tangible form of such confidential information be removed from the offices of Corporation, any affiliate of Corporation, or ECI, and that any and all such information in tangible form which may be in the possession of [ ] upon any termination of his employment will be immediately returned to Corporation, any affiliate of Corporation, or ECI. The restrictions set forth in this Section 3 shall not apply to any information which (a) was in the public domain at the time of disclosure to [ ], or after disclosure to [ ] becomes part of the public knowledge or literature by acts other than those of [ ]; or (b) is information pertaining to the Corporation, but not to ECI, which was in the possession of or known to [ ] prior to receiving it from the Corporation; or (c) is disclosed to [ ] on an unrestricted basis by a source other than the Corporation, provided that [ ] is not aware that such disclosure by such source breaches a duty of confidentiality to the Corporation by which the source is bound; or 2 - CONFIDENTIALITY AND NONSOLICITATION AGREEMENT (d) is approved for release or use by written authorization of the Corporation. In addition, provided that [ ] shall have given to the Corporation prompt written notice of the request therefor, this Section 3 shall not preclude disclosure of confidential information which is mandated by the lawful requirement of a court or governmental agency. 4. Materiality. [ ] agrees that this Agreement is a material and substantial part of the Merger Agreement. 5. Injunctive Relief. Because Corporation will be deemed to sustain loss and damage as a result of any breach of the covenants in this Agreement by [ ] and because of the immediate and irreparable damage that will be deemed to be caused to Corporation, affiliates of Corporation, and ECI by such a breach for which neither would have an adequate remedy, since monetary damages alone may not be an adequate remedy, [ ] agrees that, in the event of a breach by [ ] of the covenants in this Agreement, such covenants may be enforced by one or more of Corporation, affiliates of Corporation, and ECI by, without limitation, injunctions and restraining orders. 6. Reasonableness of Covenants. It is agreed by the parties that the covenants in this Agreement impose a reasonable restraint on [ ] in light of the activities and Business on the date of this Agreement of Corporation. 7. Severability of Covenants. The covenants in this Agreement are severable and separate, and the unenforceability of any specific covenant shall not affect the enforceability of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time, or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and this Agreement shall thereby be reformed. 8. No Outside Representations. This Agreement is the final, complete, and exclusive statement and expression of the agreement among the parties hereto and their affiliates with relation to the subject matter of this Agreement, it being understood that there are no oral representations, understandings, or agreements covering the same subject matter of this Agreement. This Agreement supersedes, and cannot be varied, contradicted, or supplemented by evidence of any prior or contemporaneous discussions, correspondence, or oral or written agreements of any kind, except as set out in the Merger Agreement and the agreements executed in association therewith and in any future written amendments thereto by the parties hereto. 9. Binding Effect; Third Party Beneficiary. This Agreement, upon execution, shall be binding upon the parties, enforceable in accordance with its terms, and shall inure to the benefit of the parties hereto. This Agreement may be assigned only upon written consent of the parties hereto. 10. No Waiver; Remedies Cumulative. No waiver by the parties hereto of any default or breach of any term, condition, or covenant of this Agreement shall be deemed to be a waiver of any subsequent default or breach of the same or any other term, condition, or covenant contained herein. No right, remedy, or election given by any term of the Agreement shall be deemed 3 - CONFIDENTIALITY AND NONSOLICITATION AGREEMENT exclusive but each shall be cumulative with all other rights, remedies, and elections available at law or in equity. 11. Knowledge; Advice of Counsel. [ ] hereby represents and warrants that he has read and understands each of the provisions of this Agreement and that he has sought and obtained the advice of legal counsel before agreeing to be bound by the terms hereof. [ ] represents and warrants to Corporation that this Agreement is a valid and binding obligation of [ ], enforceable against him in accordance with its terms. [ ] acknowledges and agrees that Corporation would not have agreed to the Merger Agreement but for the execution, delivery, and performance by [ ] of this Agreement. 12. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the state of Oregon without giving effect to any choice or conflict of law provision or rule (whether of the state of Oregon or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the state of Oregon. Jurisdiction and venue for any legal proceeding shall be in a court of competent jurisdiction in Portland, Oregon. 13. Attorney Fees. The parties agree that, in the case of any dispute arising over the terms of this Agreement, the prevailing party shall be entitled to receive as a component of its recovery all of its reasonable costs and expenses of litigation (including, without limitation, attorney fees and expenses, and court costs). IN WITNESS WHEREOF, the parties have executed this Confidentiality and Nonsolicitation Agreement as of the day and year first above written. CORPORATION: MICROFIELD GROUP, INC., an Oregon corporation By:________________________________ Name:______________________________ Its:_______________________________ [ ]: ___________________________________ [ ] 4 - CONFIDENTIALITY AND NONSOLICITATION AGREEMENT EX-99.2 4 v13568exv99w2.txt EXHIBIT 99.2 EXHIBIT 99.2 THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE APPLICABLE SECURITIES UNDER SUCH ACT OR LAWS OR AN OPINION OF COUNSEL FOR THE HOLDER REASONABLY SATISFACTORY TO THE ISSUER STATING THAT SUCH REGISTRATION IS NOT REQUIRED. No. 2005-W-<> WARRANT TO PURCHASE <> SHARES OF COMMON STOCK STOCK PURCHASE WARRANT TO PURCHASE SHARES OF COMMON STOCK OF MICROFIELD GROUP, INC. For value received, Microfield Group, Inc., an Oregon corporation (the "Company"), grants to <> (the "Holder") the right, subject to the terms of this Warrant, to purchase at any time during the period commencing on the "Initial Exercise Date" (as defined below), and ending on the "Expiration Date" (as defined below), <> fully paid and nonassessable shares of Common Stock of the Company at the "Exercise Price" (as defined below). This Warrant may be exercised in whole or in part. The number of shares that may be purchased is subject to adjustment under the terms of this Warrant. Section 1. DEFINITIONS. As used in this Warrant, unless the context otherwise requires: "COMMON STOCK" means the Common Stock of the Company. "COMPANY" has the meaning specified in the introductory paragraph. "EXERCISE AMOUNT" means the number of Warrant Shares filled in on the attached Exercise Form delivered to the Company by the Holder in connection with exercise of all or a portion of this Warrant. "EXERCISE DATE" means any date on which this Warrant is exercised in the manner indicated in Sections 2.1 and 2.2. "EXERCISE PRICE" means $2.58 per share (adjusted as necessary in accordance with Section 7). "EXPIRATION DATE" means 12:00 midnight (Portland time) on October 13, 2010. "HOLDER" has the meaning specified in the introductory paragraph. "INITIAL EXERCISE DATE" means October 13, 2005. 1 "PERSON" means an individual, corporation, partnership, trust, joint venture or other form of business entity. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time, and all rules and regulations promulgated thereunder, or any act, rules or regulations which replace the Securities Act or any such rules and regulations. "WARRANT SHARES" means the shares of Common Stock issued or issuable upon exercise of this Warrant, adjusted as necessary in accordance with Section 7. Section 2. DURATION AND EXERCISE OF WARRANT. 2.1 EXERCISE PERIOD. Subject to the provisions hereof, this Warrant may be exercised at any time during the period commencing on the Initial Exercise Date and ending on the Expiration Date for the Warrant Shares. After the Expiration Date, this Warrant shall become void and all rights to purchase Warrant Shares hereunder shall thereupon cease. 2.2 METHODS OF EXERCISE. This Warrant may be exercised by the Holder, in whole or in part, by (i) surrendering this Warrant to the Secretary of the Company, (ii) payment of any applicable consideration, and (iii) executing and delivering to the Secretary of the Company the attached Exercise Form, which must select one of the following exercise methods, to be at the Holder's option: 2.2.1 EXERCISE FOR CASH. If the Holder elects to exercise the right to purchase Warrant Shares for cash, the Holder shall tender to the Company payment in full by cash, check, or wire transfer of the Exercise Price for the Exercise Amount. 2.2.2 SAME DAY SALE EXERCISE. In lieu of exercising this Warrant by payment of cash, when permitted by law and applicable regulations (including Nasdaq and NASD rules), the Holder may pay the Exercise Price through a "same day sale" commitment from the Holder and a broker-dealer that is a member of the National Association of Securities Dealers (an "NASD Dealer") whereby the Holder irrevocably elects to exercise the Warrant or portion thereof and to sell a portion of the Warrant Shares so purchased to pay the Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt of such Warrant Shares to forward the Exercise Price directly to the Company. 2.2.3 NET EXERCISE. The Holder may elect to receive, without the payment by the Holder of any additional consideration, shares of Common Stock equal to the value of this Warrant by the surrender of this Warrant to the Company with a written notice of exercise specifying reliance on this Section 2.2.3. Thereupon, the Company shall issue to the Holder such number of fully paid and nonassessable shares of Common Stock as is computed using the following formula: X = Y (A-B) ------- A where X = the number of shares to be issued to the Holder pursuant to this Section 2.3. 2 Y = the number of Warrant Shares underlying the Warrant the Holder elects to exercise pursuant to this Section 2.2.3. A = the average closing ask price for one share of Common Stock for the 10 trading days preceding the day the net exercise election is made pursuant to this Section 2.2.3. B = the Exercise Price in effect under this Warrant at the time the net exercise election is made pursuant to this Section 2.2.3. 2.3 CERTIFICATES. As soon as practicable after exercise of this Warrant (but in no event later than five business days), (a) certificates for Warrant Shares shall be delivered, at the Company's expense, to the Holder or the transferee thereof set forth in the attached Exercise Form and (b) a new Warrant of like tenor to purchase up to that number, if any, not previously purchased by the Holder (if this Warrant has not expired) shall be delivered, at the Company's expense, to the Holder. 2.4 EFFECTIVE DATE OF EXERCISE. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above. The person entitled to receive the Warrant Shares shall be treated for all purposes as the holder of record of such shares as of the close of business on the date the Holder is deemed to have exercised this Warrant. 2.5 SECURITIES ACT COMPLIANCE. Unless the Warrant Shares are no longer subject to Rule 144 under the Securities Act, the Company may place conspicuously upon each certificate representing the Warrant Shares a legend substantially in the following form, the terms of which are agreed to by the Holder: THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE LAW, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION INVOLVING THESE SECURITIES OR (B) THE COMPANY RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THESE SECURITIES (CONCURRED IN BY LEGAL COUNSEL FOR THE COMPANY) STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION OR (C) THE COMPANY OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION. 2.6 TAXES. The Company shall pay any tax and other governmental charges which may be payable in respect of the issuance of the Warrant Shares, provided, however, that in no case will the Company pay any taxes relating to income to the Holder resulting from the issuance or exercise of this Warrant. Section 3. WARRANT SHARES. 3 3.1 VALIDITY AND RESERVATION. The Company covenants that all Warrant Shares issued upon exercise of this Warrant will be validly issued, fully paid, nonassessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale (except encumbrances or restrictions arising under federal or state securities laws), and not subject to preemptive rights. The Company agrees that, as long as this Warrant may be exercised, the Company will have duly authorized and reserved for issuance upon exercise of this Warrant a sufficient number of shares of Common Stock or other shares of capital stock of the Company as are from time to time issuable upon exercise of this Warrant and from time to time will take all steps necessary to amend its Articles of Incorporation to provide sufficient reserves of Common Stock issuable upon exercise of this Warrant. Issuance of this Warrant shall constitute full authority to the Company's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for Common Stock upon the exercise of this Warrant. 3.2 LISTING OF WARRANT SHARES. The Company shall take all steps necessary to cause the Warrant Shares issuable upon exercise of this Warrant to be approved for listing on all securities exchanges or markets and all trading or quotation facilities, if any, on which the Common Stock is listed as soon as possible after the Initial Exercise Date and shall use commercially reasonable efforts to maintain such listings until the earlier of the Expiration Date or the date this Warrant is exercised in full. Section 4. FRACTIONAL SHARES. No fractional Warrant Shares shall be issued upon the exercise of this Warrant, and the number of Warrant Shares to be issued shall be rounded to the nearest whole number. Section 5. LIMITED RIGHTS OF WARRANT HOLDER. The Holder shall not, solely by virtue of being the Holder of this Warrant, have any of the rights of a shareholder of the Company, either at law or equity, until this Warrant shall have been exercised. Section 6. LOSS OF WARRANT. Upon receipt by the Company of satisfactory evidence of the loss, theft, destruction or mutilation of this Warrant and either (in the case of loss, theft or destruction) reasonable indemnification and a bond reasonably satisfactory to the Company if requested by the Company or (in the case of mutilation) the surrender of this Warrant for cancellation, the Company will execute and deliver to the Holder, without charge, a new warrant of like denomination. Section 7. CERTAIN ADJUSTMENTS. 7.1 ADJUSTMENT OF WARRANT SHARES. The number, class and Exercise Price per share of securities for which this Warrant may be exercised are subject to adjustment from time to time upon the happening of certain events as hereinafter provided: 4 (a) RECAPITALIZATION. If the outstanding shares of the Company's Common Stock are divided into a greater number of shares or if the Company shall effect a stock dividend, the number of shares of Common Stock purchasable upon the exercise of this Warrant shall be proportionately increased and the Exercise Price per share shall be proportionately reduced. Conversely, if the outstanding shares of Common Stock are combined into a smaller number of shares of Common Stock, the number of shares of Common Stock purchasable upon the exercise of this Warrant shall be proportionately reduced and the Exercise Price per share shall be proportionately increased. The increases and reductions provided for in this Section 7.1(a) shall be made with the intent and, as nearly as practicable, the effect that neither the percentage of the total equity of the Company obtainable on exercise of this Warrant nor the aggregate price payable for such percentage shall be affected by any event described in this Section 7.1(a). (b) MERGER OR REORGANIZATION, ETC. In the event of any change in the Common Stock through merger, consolidation, reclassification, reorganization, partial or complete liquidation or other change in the capital structure of the Company (not including the issuance of additional shares of capital stock other than by stock dividend or stock split), then, the Holder of this Warrant will have the right thereafter to receive upon the exercise of this Warrant the kind and amount of shares of stock or other securities or property to which it would have been entitled if, immediately before the merger, consolidation, reclassification, reorganization, recapitalization or other change in the capital structure, it had held the number of shares of Common Stock obtainable upon the exercise of this Warrant. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 7 with respect to the rights of the Holder after the merger, consolidation, reclassification, reorganization, recapitalization or other change to the end that the provisions of this Section 7 (including adjustment of the Exercise Price then in effect and the number of shares issuable upon exercise of this Warrant) shall be applicable after that event as nearly equivalent as may be practicable. (c) ADJUSTMENT FOR DIVIDENDS OR DISTRIBUTIONS OF STOCK OR OTHER SECURITIES OR PROPERTY. In case the Company shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution with respect to the Warrant Shares (or any shares of stock or other securities at the time issuable upon exercise of the Warrant) payable in (i) securities of the Company (other than as provided for in Section 7.1(a) or (b) above) or any other entity or (ii) assets (excluding cash dividends paid or payable solely out of retained earnings), then, in each such case, upon exercise of this Warrant at any time after the consummation, effective date or record date of such dividend or other distribution, the Holder shall receive, in addition to the Warrant Shares (or such other stock or securities) issuable on such exercise prior to such date, and without the payment of additional consideration therefor, the securities or such other assets of the Company to which such Holder would have been entitled upon such date if such Holder had exercised this Warrant on the Initial Exercise Date and had thereafter, during the period from the Initial Exercise Date to and including the date of such exercise, retained such shares and/or all other additional stock or securities available to it as aforesaid during such period giving effect to all adjustments called for by this Section 7. (d) OTHER IMPAIRMENTS. If any event shall occur as to which the provisions of Section 7.1(a)-(c) are not strictly applicable but are covered by the essential intent and 5 principles of such sections, then, in each such case, the Company will appoint a firm of independent certified public accountants of recognized national standing (but not the Company's regular auditors), which shall give their opinion upon the adjustment, if any, on a basis consistent with the essential intent and principles established in this Section 7.1, necessary to preserve the rights represented by this Warrant. Upon receipt of such opinion, the Company will promptly mail a copy thereof to the holder of this Warrant and shall make the adjustments described therein. 7.2 NOTICE OF ADJUSTMENT. Whenever an event occurs requiring any adjustment to be made pursuant to Section 7.1, the Company shall promptly file with its Secretary or an assistant secretary at its principal office and with its stock transfer agent, if any, a certificate of its President or Chief Financial Officer specifying such adjustment, setting forth in reasonable detail the acts requiring such adjustment, and stating such other facts as shall be necessary to show the manner and figures used to compute such adjustment. Such certificate shall be made available at all reasonable times for inspection by the Holder. Promptly (but in no event more than 30 days) after each such adjustment, the Company shall give a copy of such certificate by certified mail to the Holder. Section 8. MISCELLANEOUS. 8.1 BINDING EFFECT; ASSIGNMENT. This Warrant shall inure to the benefit of and be binding upon the Company and the Holder and their respective successors, heirs, legal representatives and permitted assigns. This Warrant and the Warrant Shares (collectively, "Securities") may only be disposed of 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 compliance with any applicable federal and state securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement, transfer may only be made with the prior written consent of the Company, which shall not be unreasonably withheld, and the Company may require the transferor to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred securities under the Securities Act; provided, however, that notwithstanding the foregoing, no consent of the Company shall be required for the assignment or transfer of rights hereunder by a Holder to the spouse, ancestors, lineal descendants or siblings of such assignor or transferor, provided the transferee(s) certify to the Company that each is an "accredited investor" within the meaning of Rule 501(a) under the Securities Act and that it is acquiring the Securities solely for investment purposes. The Company shall register the transfer of any portion of this Warrant, upon surrender of this Warrant with the Form of Assignment attached hereto duly completed and signed, to the Company's transfer agent or to the Company at the office specified in Section 8.2. Upon any such transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of a New Warrant by the transferee shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant. 6 This Warrant is exchangeable, upon the surrender hereof by the Holder to the office of the Company specified in Section 8.2, for one or more New Warrants evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder. Any such New Warrant will be dated the date of such exchange. 8.2 NOTICE. All notices required or permitted under this Warrant shall be given in writing and shall be deemed effectively given (a) upon personal delivery to the party to be notified, (b) three days after deposit with the United States Post Office, by registered or certified mail, postage prepaid and addressed to the party to be notified at the address for such party, (c) one day after deposit with a nationally recognized air courier service such as DHL or Federal Express, or (d) on the date of facsimile transmission, with confirmed transmission. If to the Company: Microfield Group, Inc. 1631 NW Thurman Suite 200 Portland, OR 97209 Attn: President Fax: (503) __________ With a copy to: Dunn Carney Allen Higgins & Tongue LLP 851 SW Sixth Avenue Suite 1500 Portland, OR 97204 Attn: Jon A. Bennett Fax: (503) 224-7324 If to the Holder: Name _________________________ _________________________ _________________________ Fax:_____________________ With a copy to: Name _________________________ _________________________ _________________________ 7 Fax:_____________________ or such other address as such party may designate by 10 days' advance written notice to the other party. 8.3 GOVERNING LAW. The validity, interpretation and performance of this warrant shall be governed by the laws of the state of Oregon, exclusive of conflicts of law rules. 8.4 IMPAIRMENT. The Company will not, by amendment of its Articles of Incorporation or Bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Warrant against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of stock issuable upon the exercise of this Warrant above the amount payable therefor upon such exercise and (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Warrant Shares upon exercise of this Warrant. 8.5 NOTICES OF RECORD DATE. After the Initial Exercise Date, in case: 8.5.1 the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of this Warrant) for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any securities or to receive any other right; or 8.5.2 of any consolidation or merger of the Company with or into another corporation, any capital reorganization of the Company, any reclassification of the capital stock of the Company, or any conveyance of all or substantially all of the assets of the Company; or 8.5.3 of any voluntary dissolution, liquidation or winding-up of the Company; or 8.5.4 of any redemption or conversion of all outstanding Common Stock; then, and in each such case, the Company will mail or cause to be mailed to the Holder of this Warrant a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, or (ii) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation, winding-up, redemption or conversion is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such stock or securities as at the time are receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be delivered at least thirty (30) days before the consummation of the applicable event. 8 8.6 NO INCONSISTENT AGREEMENTS. The Company will not on or after the date of this Warrant enter into any agreement with respect to its securities which is inconsistent with the rights granted to the Holder of this Warrant or otherwise conflicts with the provisions hereof. The rights granted to the Holder hereunder do not in any way conflict with the rights granted to holders of the Company's securities under any other agreements, except rights that have been waived. 8.7 SATURDAYS, SUNDAYS AND HOLIDAYS. If the Expiration Date falls on a Saturday, Sunday or legal holiday, the Expiration Date shall automatically be extended until 5:00 p.m. Pacific Time the next business day. 8.8 HEADINGS. The headings herein are for convenience only and shall not control or affect the meaning or construction of this Warrant. Dated as of: October ____, 2005. MICROFIELD GROUP, INC. By:____________________ A. Mark Walter President 9 EXERCISE FORM (To Be Executed by the Warrant Holder to Exercise the Warrant) To: MICROFIELD GROUP, INC. 1. The undersigned hereby irrevocably elects to exercise the right represented by Warrant No. 2005-W-___ to purchase _________ shares of Common Stock (the "Exercise Amount") provided for in the Warrant as follows [check one]: [ ] Exercise for Cash: Pursuant to Section 2.2.1 of the Warrant, the Holder hereby elects to exercise the Warrant for cash and tenders payment herewith (or has made a wire transfer) to the order of Microfield Group, Inc. in the amount of $____________ (the Exercise Amount times the Exercise Price). [ ] Same Day Sale Exercise: Pursuant to Section 2.2.2 of the Warrant, the Holder hereby elects to exercise the Warrant on a cashless basis. [ ] Net Exercise: Pursuant to Section 2.2.3 of the Warrant, the Holder hereby elects to exercise the Warrant on a net exercise basis. 2. The undersigned requests that certificates for such shares of Common Stock be issued and delivered as follows: Name:__________________________________ Address:_______________________________ Deliver to:____________________________ Address:_______________________________ If the number of shares of Common Stock to be issued upon this exercise is not all the shares that may be purchased pursuant to the Warrant, the undersigned requests that a new warrant evidencing the right to purchase the balance of such shares be registered in the name of, and be delivered to, the undersigned at the foregoing address. 3. In connection with the exercise of the Warrant, the undersigned hereby represents and warrants to you as follows: (a) Purchase Entirely for Own Account. The Common Stock will be acquired for investment for the undersigned's own account and not with a view to the resale or distribution of any part thereof, and the undersigned has no intention of selling, granting any participation in, or otherwise distributing the same. (b) Restricted Securities. The undersigned understands the Common Stock may not be sold, transferred, or otherwise disposed of without registration under the 1 Securities Act or an exemption therefrom and, in the absence of an effective registration statement covering the Common Stock or an available exemption from registration under the Securities Act, the Common Stock must be held indefinitely. (c) Investment Experience. The undersigned is experienced in evaluating and investing in companies in the development stage, can bear the economic risk of an investment in the Common Stock, and has enough knowledge and experience in financial and business matters to evaluate the merits and risks of the investment in the Common Stock. (d) Investor Qualifications. The undersigned is an Accredited Investor as defined in Rule 501 promulgated under the Securities Act or has such knowledge and experience in financial and business matters that he or it is capable of evaluating the merits and risks of investing in the Common Stock. (e) Opportunity to Review Documents and Ask Questions. The Company has made available to the undersigned all documents and information requested by the undersigned relating to an investment in the Company. In addition, the undersigned has had adequate opportunity to ask questions and to receive answers from the management of the Company covering the terms and conditions of the offering and the Company's business, management, and financial affairs. 4. The undersigned understands, agrees, and recognizes that: (a) No federal or state agency has made any finding or determination as to the fairness of the investment or any recommendation or endorsement of the Common Stock. (b) All certificates evidencing the Common Stock shall bear a legend substantially similar to the legend set forth in Section 2.5 of the Warrant regarding resale restrictions. 5. The undersigned is a resident of the state of ________________________. Dated:___________, ______. [HOLDER] By:________________________________ Name:______________________________ Title:_____________________________ Note: Signature must correspond with the name as written upon the face of the Warrant in every particular, without alteration or enlargement or any change whatsoever. 2 FORM OF ASSIGNMENT FOR VALUE RECEIVED, ______________________________________ hereby sells, assigns and transfers to the assignee set forth below all of the rights of the undersigned in and to the number of Warrant Shares (as defined in and evidenced by the foregoing Warrant) set opposite the name of such assignee below and in and to the foregoing Warrant with respect to said Warrant Shares: Name of Assignee Address Number of Shares If the total of said Warrant Shares shall not be all such shares which may be purchased pursuant to the foregoing Warrant, the undersigned requests that a new Warrant evidencing the right to purchase the balance of such shares be issued in the name of, and delivered to, the undersigned at the undersigned's address stated below. Dated:__________________________ Name of holder of Warrant:____________________________________________ (please print) Address:___________________________________________________________ Signature:__________________________________________________________ 1 -----END PRIVACY-ENHANCED MESSAGE-----