How It Works: Rules

1. General Terms

1.1. These rules and any amendments from time to time hereto (the “Rules”) shall govern the participation by prospective purchasers of securities (the “Investor(s)”) in the OpenBook Internet electronic auction system (the “System” or “OpenBook”) operated by WR Hambrecht + Co. (“WRH+Co”). Each Investor by participating in OpenBook agrees to be bound by the Rules and procedures relating to OpenBook published on the www.openbook.com website or otherwise delivered to Investors, and to consent to the participation of other Investors in OpenBook.

1.2. WRH+Co has the exclusive right to amend the Rules and procedures from time to time and will post such amendments on OpenBook prior to their effectiveness. Investors who continue to participate in OpenBook will be bound by an amendment after the effective date set forth in the amendment.

1.3. The underwriters with respect to the particular auction, acting either directly or through their representatives (the “Underwriters”), have the right to cancel any auction if in their sole discretion events have occurred that would interfere, or have interfered, with the operation of such auction.

1.4. Each participating Investor will receive a password to access and participate in OpenBook. Each Investor shall be solely responsible for the confidentiality of such password and for all bids utilizing such password except to the extent such bids were made (a) by a third party which obtained the password other than from the Investor or (b) after the Investor has notified WRH+Co that the password should be disabled.

1.5. Each Investor consents and agrees to the recording of any telephone conversation between any Underwriter and such Investor.

2. The Issuer

2.1. An issuer of securities (“the Issuer”) and / or the Underwriters will select the following terms that will be announced on OpenBook prior to an auction: a minimum and maximum dollar amount of bonds to be issued; a reference Treasury security of approximately comparable maturity to bonds being issued (the “Benchmark Treasury”); a minimum differential (a “Spread”) over the Benchmark Treasury for which bids will be accepted (the “Minimum Spread over the Benchmark Treasury”); a maximum differential over the Benchmark Treasury for which bids will be accepted (the “Maximum Spread over the Benchmark Treasury”); a maximum rate for the Benchmark Treasury (a “Maximum Benchmark Treasury Rate”); a minimum dollar size for Limit Bids (the “Minimum Limit Bid Size”); a minimum dollar increment for Limit Bids (the “Minimum Limit Bid Increment”); a minimum dollar size for Market Bids (a “Minimum Market Bid Size”); a minimum dollar increment for Market Bids (the “Minimum Market Bid Increment”); a maximum dollar bid quantity (the “Maximum Bid Size”); a maximum Spread under a Public Bid that Investors can modify a Private Bid without canceling their Limit Bid (the “Protected Spread Range”); a maturity date for the issue; a coupon frequency for the issue; the time after which bids may be made in the auction (the “Auction Start”); the time after which no further bids may be made in the auction (the “Auction Close”); and the time when the Deal Size will be announced. An Issuer and / or the Underwriters may select any additional terms deemed relevant to an auction.

2.2. The Issuer and / or the Underwriters have the right, but not the obligation, to cancel an auction on OpenBook if the actual Treasury rate is greater than the Maximum Benchmark Treasury Rate.

2.3. The Issuer and / or the Underwriters will announce the exact dollar size of an issue (the “Deal Size”) at some pre-specified point during an auction.

3. Bidding

3.1. The Auction Start and Auction Close will be at times determined by the Issuer and / or the Underwriter. Investors may not place bids prior to the Auction Start or after the Auction Close.

3.2. Investors may enter a desired quantity of bonds in U.S. dollars and two Spreads over the Benchmark Treasury, in increments (expressed as a number of basis points) to be specified by the Underwriters before the Auction Start (collectively a “Limit Bid”).

3.2.1. When an Investor enters a Limit Bid, the first Spread component will be revealed to other Investors on OpenBook, but the identity of the Investor will remain anonymous (a “Public Bid”).

3.2.2. The second Spread component will not be revealed to other Investors until after the auction ends (the “Private Bid”). The Private Bid may not be less than the Public Bid by more than the Protected Spread Range.

3.2.3. The Public Bid will not be part of a firm offer on the part of the Investor and any such bid may be withdrawn, modified or revoked, effective upon receipt of such notice by the Underwriters through OpenBook at any time prior to the Auction Close. The Private Bid and quantity component of a Limit Bid will comprise a firm offer on the part of the Investor at the time of the Auction Close.

3.3. In addition to or in place of a Limit Bid, Investors may enter a desired quantity of bonds in dollars and a Spread equal to the Minimum Spread over the Benchmark Treasury (collectively a ³Market Bid²). The Spread component of a Market Bid, but not the identity of the Investor, will be revealed to other Investors on OpenBook. A Market Bid may be withdrawn, effective upon receipt of such notice by the Underwriters through OpenBook prior to the Auction Close, and will otherwise comprise a firm offer on the part of the Investor at the time of the Auction Close.

3.4. New Limit Bids and new Market Bids will be marked in one minute increments at the time a confirmation of a bid is received by OpenBook (the “Time Stamp”).

3.5. Investors may place only one Limit Bid and one Market Bid at any time.

3.6. The quantity component of a Limit Bid must be greater than or equal to the Minimum Limit Bid Size and in an increment evenly divisible by the Minimum Limit Bid Increment. The quantity component of a Market Bid must be greater than or equal to the Minimum Market Bid Size and in an increment evenly divisible by the Minimum Market Bid Increment.

3.7. When added together, the quantity components of a Limit Bid and a Market Bid must not exceed the lesser of an Investor’s purchase limit as set by the Underwriters or the Maximum Bid Size.

3.8. A Public Bid and a Private Bid must be greater than or equal to the Minimum Spread over the Benchmark Treasury and less than or equal to the Maximum Spread over the Benchmark Treasury.

4. Changing Bid Spreads

4.1. Investors may change a Private Bid at any time during the auction. An Investor’s Private Bid must be less than or equal to its current Public Bid.

4.2. If an Investor attempts to change a Private Bid to a value that is less than the Public Bid by more than the Protected Spread Range (a “Disqualified Private Bid”), OpenBook will automatically offer the Investor the opportunity to enter a new Limit Bid with the following values set by default but subject to change by the Investor: a quantity component equal to the quantity component of the previous Limit Bid and a Public Bid and Private Bid equal to the Disqualified Private Bid.

4.3. Investors cannot modify the Spread component of a Market Bid.

5. Changing Bid Quantities

5.1. Investors may change the quantity component of a Limit Bid or Market Bid at any time during an auction.

5.2. If an Investor attempts to change the quantity component of a Limit Bid to a value (the “Limit Bid Disqualified Quantity Component”) that is (1) less than the currently existing quantity component of that Limit Bid or (2) that is greater than 50% more than the first quantity component that the Investor entered for that Limit Bid, OpenBook will automatically offer the Investor the opportunity to enter a new Limit Bid with the following values set by default but subject to change by the Investor: a quantity component equal to the Limit Bid Disqualified Quantity Component and a Public Bid and Private Bid equal to the Public Bid and Private Bid components of the previous Limit Bid.

5.3. If an Investor attempts to change the quantity component of a Market Bid to a value (the “Market Bid Disqualified Quantity Component”) that is (1) less than the currently existing quantity component of that Market Bid or (2) that is greater than 50% more than the first quantity component that the Investor entered for that Market Bid, OpenBook will automatically offer the Investor the opportunity to enter a new Market Bid with the following values set by default but subject to change by the Investor: a quantity component equal to the Market Bid Disqualified Bid Quantity Component and a Spread component equal to the Minimum Spread over the Benchmark Treasury.

6. Award of Bonds

6.1. If the total quantity of bonds requested by all Limit and Market bids is less than the Deal Size, the Underwriters have the right, but not the obligation, to cancel the auction and reject all submitted bids. If the total quantity of bonds requested by all Limit and Market Bids is less than the Deal Size and the Underwriters decide not to cancel the auction, the Underwriters will place a Market Bid with a quantity component equal to the difference between the Deal Size and the total quantity of bonds requested by all Limit and Market Bids. The Underwriters may place such a bid after the Auction Close.

6.2. After the Auction Close, Limit and Market Bids will be arranged from the lowest to the highest Private Bid or Spread component of a Market Bid. Except as modified by Sections 6.3 through 6.5, Limit Bids and Market Bids will be accepted starting with the lowest Private Bid or the lowest Spread component of a Market Bid until the aggregate quantity of bonds requested by the accepted bids is greater than or equal to the Deal Size. The lowest Spread level that results in the total quantity of bonds requested being greater than or equal to the Deal Size is called the “Clearing Spread”.

6.3. All Limit Bids that have a Private Bid component or Market Bids that have a Spread component that equals the Clearing Spread will be arranged from earliest to latest Time Stamp. Except as modified by Sections 6.4 and 6.5, Limit Bids and Market Bids will be accepted starting with the earliest Time Stamp until the aggregate quantity of bonds requested by the accepted bids is greater than or equal to the Deal Size.

6.4. If all bids are Market and the aggregate dollar quantity of bonds requested by those bids exactly equals the Deal Size, bonds will be awarded at the mid-point between the Minimum Spread over the Benchmark Treasury and the Maximum Spread over the Benchmark Treasury. Except as modified by Section 6.5, if all bids are Market and the aggregate dollar quantity of bonds requested by those bids is greater than the Deal Size, bonds will be awarded at the Minimum Spread over the Benchmark Treasury.

6.5. If the aggregate dollar quantity of bonds requested by accepted bids is greater than the Deal Size, accepted bids with the latest time stamp and that have a Spread component equal to the Clearing Spread (“Marginal Bids”) will be awarded a partial quantity of bonds. If there is only one Marginal Bid, the Marginal Bid will be awarded a partial quantity of bonds equal to the amount of bonds requested by the Marginal Bid minus the difference between the total quantity of bonds requested by accepted bids and the Deal Size (the “Marginal Bid Quantity”). If there is more than one Marginal Bid, the Marginal Bid Quantity will be divided pro-rata among the Marginal Bids according to the dollar quantity of bonds requested by the Marginal Bids.

6.6. All Investors that have a Private Bid or Spread component of a Market Bid less than the Clearing Spread will be awarded bonds at the Clearing Spread.

6.7. The Underwriters reserve the right to reject, in whole or in part, without notice, a Limit or Market Bid which does not comply with the rules or if, in their sole discretion, such rejection is necessary or beneficial to facilitate the orderly completion of the auction.

6.8. A bid that is accepted by the Underwriters will constitute an irrevocable and binding contract to purchase by the Investor, on the terms that the bonds are sold, the number of securities accepted for purchase in the notice sent to the Investor following the Auction Close.

7. Pricing

7.1. Bond pricing occurs approximately 30 minutes after an auction terminates. The auction yield (the “Auction Yield”) is determined by adding the Clearing Spread to the Benchmark Treasury Rate at the time of pricing. The coupon rate on the bonds will be set at the Auction Yield rounded down to an increment determined by the Underwriters and the Issuer. The bond price, as set after the Auction Close to correspond to the Auction Yield and coupon rate, will be expressed as a percentage and will be rounded to three decimal places.

8. Settlement

8.1. The purchase of bonds through an OpenBook auction will be settled on the settlement date specified by the Underwriters and the Issuer. If the timely payment (i.e., on or before the settlement date) for bonds purchased in an auction is not received, the bonds awarded to the Investor through the auction will not be delivered to the Investor, but instead may be liquidated without prior notice, in the respective Underwriter’s sole discretion, and the Investor will be liable for resulting losses as of the settlement date (but will not have the benefit of any resulting profits).