Security Loan Process

Subject: Information Needed for Term Sheet --Securities Based Loan

The information needed for a Term Sheet follows:

1) Borrower's Name
2) # of shares available to be pledged -- name of security and symbol
3) Desired loan amount (may state amount or maximum amount possible)
4) Term of loan --3 years is our minimum -- most borrowers choose 3 or 5 years
5) The origination fee being charged. Please call to review your securities.

Dan Cassel is direct at 858-204-6209.
6) Is the borrower an affiliate? (A director, CEO,CFO, control person of the company). If so, we will provide list of questions to ensure compliance with Term Sheet.
7) Verification of ownership --usually a position page or copy of broker statement --this can come later if not readily available.

Process:
1) After we receive the above information we will issue a Term Sheet and Borrower information page within 24-36 hours.
2) Schedule a call with borrower to answer any questions -- I will be available and usually will have director of company on call.
Others to ask for: Chief of Analytics, President, Chief of Compliance.
3) Borrower signs Term Sheet and Borrower information page and returns to Equity firm.
4) Within 24 hours of receiving #3 the Loan and Pledge Agreement will be sent to the borrower by our top law firm.
5) Borrower signs agreements and returns to Law firm.
6) Chief of Compliance completes Transfer Form and sends to borrower for signature (fax or e mail is fine here).
7) The securities are transferred to equities firm /our custodial account.
8) The securities are valued by taking the closing market price on day of receipt plus the closing prices for subsequent 2 days. Average the 3 prices (strike price) x the number of shares x LTV = Loan Amount. Closing statement e mailed to borrower that night.
9) Loan is funded on a T + 3 or T + 5 basis depending on type of collateral (3 days or 5 days after shares hit our custodial account).
10) Entire process take about 10 days.

* Fixed rate interest only payments due on a quarterly basis
* No prepayment of the loan -- at loan maturity loan is paid back and identical number of pledged shares are returned to borrower.
*Borrower receives credit for all dividends and upside market appreciation -- transaction is a loan --not a constructive sale.