EQUITY RELATED POLICIES

Policies Specific to Regulation A Stock Sales

A sample violations questionnaire is shown in Exhibit 7.2 . Once an individual submits this
questionnaire, there should be an obligation to notify the company of any changes in the status
of any responses to it. A sample policy follows: Policy: If there is a material change to the
information initially submitted on the violations questionnaire, then the submitting party shall
promptly notify corporate counsel of the change.

Policy: If there is a material change to the information initially submitted on the violations
questionnaire, then the submitting party shall promptly notify corporate counsel of the change.

Policies Specific to Regulation D Stock Sales

A key part of Regulation D is that the sale of unregistered securities can only be to
accredited investors. The company must take reasonable steps to be assured that
a prospective investor is indeed an accredited investor. This process begins with
the following policy:

Policy: The Company shall not issue unregistered securities without first obtaining
a signed statement from each prospective investor, clearing stating that individual
or entity ’ s status as an accredited investor.

EQUITY - RELATED PROCEDURES

There are two procedures in this section, one describing the process fl ow for a
stock sale under the Regulation A exemption, and the other describing a sale
under the Regulation D exemption.
EXHIBIT 7.1

The procedure used to sell stock under the Regulation A exemption is shown in
Exhibit 7.1. It assumes that a company uses the “test the waters” option and also
elects to use subsequent marketing events. The core of the procedure
surrounding stock sales under the Regulation D exemption is the issuance of a
package of information to each prospective investor, and verification that it has
been completed prior to accepting funds from and issuing any security certificates
to the investor. The procedure showed in Exhibit 7.3 itemizes the process flow.

Please note that the investor qualification certificate shown in Exhibit 7.4is only a
portion of a full certificate, since it does not make reference to several additional
types of accredited investors that are not commonly found. Rule 501 of
Regulation D itemizes the full range of accredited investors.