2007 UPDATED LIST OF STATE SECURITIES LAW PROVISIONS THAT

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1 2007 UPDATED LIST OF STATE SECURITIES LAW PROVISIONS THAT (1) EXEMPT RULE 701 OFFERINGS FROM SECURITIES AND ISSUER-DEALER AND AGENT REGISTRATION REQUIREMENTS (2) POLICY STATEMENTS, NO-ACTION POSITIONS AND SIMILAR INTERPRETATIONS ON POINT ALABAMA NO NOTICE 7110, Alabama, (10), Exempt Securities Any investment contract issued in connection with an employee s stock purchase, savings, pension, profit-sharing or similar benefit plan. 7111, Alabama, (10), Exempt Transaction Any transaction pursuant to an offer to existing security holders of the issuer, including persons who at the times of the transaction are holders of convertible securities, nontransferable warrants or transferable warrants exercisable within not more than 90 days of their issuance, if (a) no commission or other remuneration is paid for soliciting any security holder in Alabama, or (b) notice is filed and not disallowed within next 5 full business days. Staff considers employees who have received grants of options to be existing security holders. B E & K, Inc., Ala. Corp. Com. No-Action Letter, 1993 WL (Dec. 13, 1993). 7102, Alabama, 8-6-2(3)(a), Definitions An issuer is excluded from the definition of brokerdealer. 7102, Alabama, 8-6-2(2), Definitions Agent does not include a person who represents an issuer or dealer in effecting a transaction in a security exempted by (i) section (10), (ii) effecting transactions exempted by , or (iii) effecting transactions with existing employees, partners or directors of the issuer if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in Alabama. 7574, Alabama, Policy Statement It has consistently been the position of the Alabama Commissioner s staff that the conditions of (10) will be met if the Plan qualifies for exemption pursuant to Rule 701 of the Securities and Exchange Commission and 3(b) of the Securities Act of Accordingly, if a plan qualifies under Rule 701 then grants can be made to non-employee directors, independent consultants and affiliate employees pursuant to the states employee plan exemption at Section (10). See Statement htm USA 2002 Pending Adoption. Reprinted With Permission From The Corporate Counsel 2007 E.P. Executive Press, Inc. Concord, CA

2 ALASKA NO RULE 701 EXEMPTION Alaska has not adopted a Rule 701 compliant exemption. 8134, Alaska (a)(5). ARIZONA NO NOTICE 9542, Arizona, R , Exempt offerings pursuant to compensatory arrangements A. Offers and sales of securities that satisfy the requirements and provisions of Rule 701 under the Securities Act of 1933 and this Section shall be added to the class of transactions exempt under the provisions of A.R.S (Exempt Transactions). Rule 701 is incorporated by reference and on file with the office of the Secretary of State. The incorporated material contains no later editions or amendments. B. Bad Boy Provisions apply. This Section provides an exemption from the registration requirements of the Arizona Securities Act for securities issued in compensatory circumstances. The Section is not available to any issuer for any transaction that, while in technical compliance with this Section, is part of a plan or scheme to circumvent this purpose. 9136, Arizona, , Exempt Transaction Transactional exemption obviates brokerdealer/agent registration. 9136, Arizona, A.14, IRC Qualified Plans. The sale or issuance of any investment contract or other security in connection with an employee s pension, profit sharing, stock purchaser, stock bonus, savings, thrift stock option or other similar employee benefit plan which meets the requirements for qualification under the United States Internal Revenue Code. Exemption covers both grant of options and issuance of stock upon exercise. See also no-action letter at 9693, In that no-action letter, the Division allowed a stock option plan providing for a combination of qualifying and non-qualifying options to be covered by the (a)(14) exemption See Acceptance Ins. Co. Inc., Ariz. Corp. Com. No-Action Letter, 1994 WL (Feb. 10, 1994) (refusing to identify if plan interests are separable security from underlying stock offered under plan where there was transaction exemption). 9511, Arizona, R ; Non-IRC Qualified Plans An offering of securities within or from this State which is exclusively to bona fide employees and/or existing security holders of the issuer or a subsidiary of such issuer, or if the issuer is a subsidiary, is exclusively to the bona fide employees and/or existing security holders of the issuer and/or its parent, is exempt, and added to the class of transactions exempt under A.R.S provided that: 1. The aggregate amount of the offering to be made within or from this state shall not exceed $500,000.00; and 2. No commission or remuneration of any kind, other than transfer agent s fees, shall be paid directly or indirectly by the issuer to any person in connection with the distribution or sale of such securities; and 3.A verified statement of the details and purposes of the offering and the financial condition of the issuer (Notice of Intention to Sell Securities Under A.A.C. R ) shall be filed with the Commission at least 10 days before the offering is made, and no material change in the details 2

3 of the offering shall be effected thereafter without the consent of the Commission; and 4.Any subscription contract calling for deferred payments shall be subject to the approval of the Commission; and 5.A consent to service (Form U-2) shall be filed. Notice filing must include statement of financial condition prepared in accordance with generally accepted accounting principles. Unaudited interim statements as of a date within 90 days of the date of the petition (Financial Information Required under R ) and $100 Filing fee under Section G. R (2), Dealer Registration A dealer or salesman shall not be required to register before engaging in transactions directed to existing securities holders, to employees of the issuer or to employees of the issuer or to employees of a wholly-owned subsidiary of the issuer if the subsidiary was not created to avoid the registration provisions of the Securities Act, and in which either of the following apply: ARKANSAS NO NOTICE 10,163, Arkansas, (a)(9), Exempt Security Any security as to which the commissioner by rule or order finds that registration is not necessary or appropriate in the public interest or for the protection of investors. 10,672, Arkansas, Administrative Order It is ordered pursuant to Section (a)(9), that the offer and sale of securities under a written compensatory benefit plan or contract that is exempt from registration under Rule 701 under the Securities Act of 1933 shall be exempted from Sections (Sale of unregistered nonexempt securities) and 502 (Filing of prospectus, sales literature, etc.) of the Arkansas Securities Act. 10,102, Arkansas, (3)(B), Definitions An issuer is excluded from the definition of broker-dealer. 10,102, Arkansas, (2)(B), Definitions Agent does not include an individual who represents an issuer in effecting transactions in a security exempted by (a)(1)-(4) or (8) and any other transactions in a security exempted by other clauses of which the commissioner may by rule or order prescribe; or (d) effecting transactions with existing employees, partners, or directors (but not consultants or advisors) of the issuer if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in Arkansas. CALIFORNIA NOTICE REQUIRED 11,133, California, 25102(o), Exempt Transaction An offer or sale of any security issued by a corporation or limited liability company pursuant to a purchase plan or agreement, or issued pursuant to an option plan or agreement, where the security at the time of issuance or grant is exempt from registration under the Securities Act of 1933, as amended, pursuant to Rule 701 adopted pursuant to that act (17 C.F.R ), the provisions of which are hereby incorporated by reference into this section; provided that (1) the terms of any stock purchase plan or agreement shall comply with Sections , , and of Title 10 of the California Code of Regulations, (2) the terms of any stock option plan or agreement shall comply with Sections , and of Title 10 of the California Code of Regulations, and (3) the issuer files a notice of transaction in accordance with rules adopted by 3

4 the commissioner within 30 days after the initial issuance of any security under that plan, accompanied by Form U-2 Consent to Service of Process and a filing fee as prescribed by subdivision (y) of Section ($200 plus 1/5 of 1% of the aggregate value of the securities proposed to be sold in California, up to a maximum aggregate fee of $2,500). However, the failure to file the notice within the time specified in this subdivision shall not affect the availability of this exemption. An issuer that fails to file the notice shall, within 15 business days after discovery of the failure to file the notice or after demand by the commissioner, whichever occurs first, file the notice and pay the commissioner a fee equal to the maximum aggregate fee payable had the transaction been qualified under Section Offers and sales exempt pursuant to this subdivision shall be deemed to be part of a single, discrete offering and are not subject to integration with any other offering or sale, whether qualified under Chapter 2 (commencing with Section 25110), or otherwise exempt, or not subject to qualification. 11,106, California, 25004, Definitions An issuer is excluded from the definition of brokerdealer. 11,104, California, 25003(b), Definitions Agent does not include an individual who only represents an issuer in effecting transactions under Section (transactions exempted from a registration requirement)... and (d) An officer or director of the issuer, or an individual occupying a similar status or performing similar functions, is an agent only if he otherwise comes within this definition and receives compensation specifically related to purchases or sales of securities. Amended eff. 7/9/2007, the regulations relating to compensation benefit plans. 11,892, California, Rule , Compensatory option plans Options granted to employees [including insurance agents who are employees for purposes of Rule 701(c) under the Securities Act of 1933, as amended (17 C.F.R (c)], officers, directors, general partners, trustees (where the issuer is a business trust), managers, advisors or consultants of the issuer, its parents, its majority-owned subsidiaries or majority-owned subsidiaries of the issuer's parents as part of a compensatory benefit plan shall be pursuant to a plan or agreement that provides for all of the following: (a) The total number of securities (which may be expressed as a specific number of securities or as a percentage of the total number of securities outstanding from time to time) which may be issued and the persons eligible to receive options to purchase these securities. (b) An exercise period of not more than 120 months from the date the option is granted. (c) The non-transferability of the options, provided that the plan or agreement may permit transfer by will, by the laws of descent and distribution to a revocable trust, or as permitted by Rule 701 of the Securities Act of 1933, as amended (17 C.F.R ). (d) The proportionate adjustment of the number of securities purchasable and the exercise price thereof under the option in the event of a stock split, reverse stock split, stock dividend, recapitalization, combination, reclassification or other distribution of the issuer's equity securities without the receipt of consideration by the issuer, of or on the issuer's class or series of securities underlying the option. (e) Unless employment is terminated for cause as defined by applicable law, the terms of the plan or option grant or a contract of employment, the right to exercise in the event of termination of employment, to the extent that the optionee is entitled to exercise on the date employment terminates, continues until the earlier of the option expiration date or: 4

5 (1) At least 6 months from the date of termination if termination was caused by death or disability. (2) At least 30 days from the date of termination if termination was caused by other than death or disability. (f) Options must be granted within 10 years from the date the plan or agreement is adopted or the date the plan or agreement is approved by the issuer's security holders, whichever is earlier. (g) The plan or agreement must be approved by a majority of the outstanding securities entitled to vote by the later of (1) within 12 months before or after the date the plan is adopted or the date the agreement is entered into or (2) prior to or within 12 months of the granting of any option or issuance of any security under the plan or agreement in this state. Any option granted to any person in this state that is exercised before security holder approval is obtained must be rescinded if security holder approval is not obtained in the manner described in the preceding sentence. Such securities shall not be counted in determining whether such approval is obtained. A foreign private issuer, as defined by Rule 3b-4 of the Securities Exchange Act of 1934, as amended (17 C.F.R b-4), shall not be required to comply with this subsection provided that the aggregate number of persons in this state granted options under all option plans and agreements and issued securities under all purchase and bonus plans and agreements does not exceed 35. (h) Compliance with Section of these rules regarding the information required to be received by security holders. 11,893, Rule , Compensatory purchase or bonus plans excluding option plans. Securities (other than options) distributed or sold to employees [including insurance agents who are employees for purposes of Rule 701(c) under the Securities Act of 1933, as amended (17 C.F.R ], officers, directors, general partners, trustees (where the issuer is a business trust), managers, advisors or consultants of the issuer, its parents, its majority-owned subsidiaries or majority-owned subsidiaries of the issuer s parents as part of a compensatory benefit plan shall be pursuant to a plan or agreement that provides for all of the following: (a) The total number of securities (which may be expressed as a specific number of securities or as a percentage of the total number of securities outstanding from time to time) which may be issued and the persons eligible to purchase securities under the plan or agreement. (b) The nontransferability of the rights of any eligible person to acquire securities under the plan or agreement, provided that the plan or agreement may permit transfer of the rights to purchase securities by will, by the laws of descent and distribution, to a revocable trust, or as permitted by Rule 701 of the Securities Act of 1933, as amended (17 C.F.R ). (c) The proportionate adjustment of the number of securities allocated to any eligible person under the plan or agreement in the event of a stock split, reverse stock split, stock dividend, recapitalization, combination, reclassification or other distribution of the issuer s equity securities without the receipt of consideration by the issuer, of or on the issuer s class of securities subject to the purchase right. (d) Securities must be issued within 10 years from the date the plan or agreement is adopted or the plan or agreement is approved by the issuer s security holders, whichever is earlier. (e) The plan or agreement must be approved by a majority of the outstanding securities entitled to vote by the later of (1) within 12 months before or after the plan is adopted or the date the agreement is entered into or (2) prior to the issuance of any security under the plan or agreement in this state. Any issuance of securities purchased before security holder approval is obtained must be rescinded if security holder approval is not obtained in the manner described in the preceding sentence. Such securities shall not be counted in determining whether such approval is obtained. A foreign private issuer, as defined by Rule 3b-4 of the Securities Exchange Act of 1934, as 5

6 amended (17 C.F.R b-4), shall not be required to comply with this subsection provided that the aggregate number of persons in this state granted options under all options plans and agreements and issued securities under all purchase and bonus plans and agreements does not exceed 35. (f) Compliance with Section of these rules regarding the information required to be received by security holders. 11,896, Rule , Limitation on number of securities. (a) The total number of securities issuable upon exercise of all outstanding options [exclusive of rights described in Section and warrants described in Sections and of these rules, and any purchase plan or agreement as described in Section of these rules (provided that the purchase plan or agreement provides that all securities will have a purchase price of 100% of the fair value (Section ) of the security either at the time the person is granted the right to purchase securities under the plan or agreement or at the time the purchase is consummated)] and the total number of securities called for under any bonus or similar plan or agreement shall not exceed a number of securities which is equal to 30% of the then outstanding securities of the issuer (convertible preferred or convertible senior common shares of stock will be counted on an as if converted basis), exclusive of securities subject to promotional waivers under Section , unless a percentage higher than 30% is approved by at least two-thirds of the outstanding securities entitled to vote. (b) The 30% limitation set forth in this Rule, or such other percentage limitation as may be approved pursuant to this Rule, shall be deemed satisfied if the plan or agreement provides that at no time shall the total number of securities issuable upon exercise of all outstanding options and the total number of securities provided for under any bonus or similar plan or agreement of the issuer exceed the applicable percentage as calculated in accordance with the conditions and the exclusions of this Rule, based on the securities of the issuer which are outstanding at the time the calculation is made. (c) This section shall not apply to any plan or agreement that complies with all conditions of Rule 701 of the Securities Act of 1933, as amended (17 C.F.R ); provided that for purposes of determining such compliance, any registered domestic partner shall be considered a family member as that term is defined in Rule ,897, Rule , Information to security holders. Plans or agreements pursuant to which securities are to be issued to employees, officers, directors, managers, advisors or consultants (including option, purchase and bonus plans) shall provide that the security holder(s) will receive financial statements at least annually. This section does not require the use of financial statements in accordance with Section of these rules. COLORADO NO NOTICE 13,111, Colorado, (1)(i), Exempt Securities Any security issued in connection with an employee s stock purchase, savings, pension, profit-sharing, or similar benefit plan. Includes Rule 701 plans and stock option plans, provided no commission is being paid. 13,113, , Colorado, Exempt Securities The securities commissioner may, by rule or order and subject to such terms and conditions as prescribed therein, from time to time, add any securities to the securities exempted in section , or any transaction to the transactions exempted in section , if the securities commissioner finds that the application of sections and to such securities or transactions is not necessary in the public interest and for the protection of investors. 6

7 Exemption Request, Colorado, M [No-Action Request ( )] A deferred compensation plan for sales agents of an insurance company was exempt from registration provided the plan was exempt under SEC Rule 701. All contributions to the plan were to be made in cash, and participants would not borrow against those contributions. 13,103, (2); Registration Exemption (Dealer) Excludes an issuer selling its own securities. 13,103, (14);, Registration Exemption (Sales Representative) Excludes an individual, other than a broker-dealer, effecting or attempting to effect purchases or sales of securities including the issuer s own securities, and primarily performs substantial duties for or on behalf of the issuer otherwise than in connection with transactions in the issuer s own securities and the individual s compensations is not based, in whole or in part, upon the amount of purchases or sales of the issuer s own securities effected for the issuer. A partner, officer, or director of a broker-dealer or issuer, or an individual performing a similar function, is a sales representative only if the individual otherwise comes within the definition. CONNECTICUT FORM U-2 REQUIRED 14,120, Connecticut, 36b-21(b)(16), Exempt Transaction Any transaction exempt under Rule 701, 17 CFR Section promulgated under Section 3(b) of the Securities Act of 1933 is exempt from sections 36b-16 and 36b-22 of the Connecticut Securities Law and Business Opportunity Investment Act. 14,133, Connecticut, 36b-33(g) A Form U-2 Consent to Service of Process and a cover letter indicating on which exemption the issuer is relying is required. There is no filing fee. 36b-3(5)(b), Connecticut, 14,102, Definitions An issuer is excluded from the definition of broker-dealer. 36b-3(1), Connecticut, 14,102, Definitions Agent does not include an individual who represents an issuer in... (b) effecting transactions exempted by subsection (b) of section 36(b)- 21, or (c) effecting transactions with existing employees, partners or directors of the issuer if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this state. DELAWARE NOTICE REQUIRED 15,109, Delaware, 7309(a)(11), Exempt Security Any investment contract issued after the effective date of this act in connection with an employee s stock purchase, savings, pension, profit-sharing, or similar benefit plan if the Commissioner is notified in writing 30 days before the inception of the plan (Notice filing requires submission of a copy of the plan.). Interpretive Ruling 9(11), 15,552 extends the above definition to include certificates of interest in or participation in any profit-sharing agreement that involve employees of the issuer. Notice of this exemption may be effected by notifying the Commissioner of the name of the plan. However, if confirmation of the exemption is requested, notice shall consist of a detailed 7

8 description of the plan or prospectus where available. 15,102, Delaware, 7302(a)(3), Definition - An issuer is excluded from the definition of brokerdealer. 15,102, Delaware, 7302(a)(2), Definition Agent does not include an individual who represents an issuer in effecting (i) a transaction in a security exempted by 7309(a)(11), or (ii) a transaction with existing employees, partners or directors of the issuer if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in Delaware. Re: BioMat Sciences, Inc Del. Sec. No-Act. LEXIS 13 May 24, 2001 (no action NOT granted for single non-employee consultant in state under option plan); Re: MD DataDirect Incorporated 2000 Del. Sec. No-Act. LEXIS 5 March 28, 2000 (no action granted for Rule 701 with one consultant); 2000 Del. Sec. No-Act. LEXIS 17, Re: Issuance of Stock Appreciation Rights by emedicine.com, Inc. (no action granted for Rule 701 with consultants). USA 2002 Pending Adoption. DISTRICT OF COLUMBIA NOTICE REQUIRED ANNUALLY 16,121, District of Columbia, [401](10), Exempt Securities A security issued in connection with: (A) A written compensatory benefit plan, including a stock purchase, savings, option, bonus, stock appreciation, profit-sharing, thrift, incentive, pension, or similar employees' benefit plan, and interests in such plans established by one or more of the issuers thereof or its parents or affiliates or controlled subsidiaries, for the participation of their employees, directors, general partners trustees if the issuer is a business trust, officers, or consultants or advisers of such issuers or their parents or controlled subsidiaries; provided, that bona fide services are rendered by consultants or advisers and the services are not in connection with the offer and sale of securities in a capital-raising transaction; or (B) A written contract relating to the compensation of such participating persons. (1) Notice Filing: The issuer shall file a written notice with the Commissioner at least twenty (20) days prior to the first offering of sale. The notice shall contain an affirmation that a commission or remuneration or soliciting any prospective buyer will not be paid except to a broker-dealer or issuer's agent registered in the District; an affirmation that all prospective buyers will receive, before any sale, a disclosure document containing the material terms of the proposed offering, and a filing fee of $ ,101, District of Columbia, (4)(B) [101], Definitions Broker-dealer does not include an issuer. 16,101, District of Columbia, [101](3)(A), Definitions An Agent does not include... (ii) an individual who represents an issuer in effecting transaction exempted by section 401(10)... or (v) an individual who represents an issuer in effecting transactions with existing employees, partners or directors of the issuer if no commission is paid for solicitation of a person in DC. 8

9 FLORIDA NO NOTICE 17,450G, Florida, Rule 3E , Exempt Transaction (1) Transactions involving the offer or sale of a security pursuant to a written compensatory benefit plan (or a written compensation contract), or similar plan established by the issuer, its parents, its majority-owned subsidiaries or majority-owned subsidiaries of the issuers parent, for the participation of their employees, directors, general partners, trustees, officers, or consultants and advisors, and their family members who acquire such securities from such persons through gifts or domestic relations orders, are exempt from the registration provisions of , F.S.(Registration of Securities), if: (a) The sale of the security meets all of the requirements of SEC Rule 701 (17 C.F.R ) as it existed on November 1, 2000; (b) The security if sold pursuant to a plan of a type exempt under section 3(a) of the Securities Act of 1933; or (c) The security is effectively registered under sections 6 to 8 of the Securities Act of 1933 and is offered and sold in compliance with the provisions of section 5 of the Securities Act of (2) For the purposes of this rule, the terms compensatory benefit plan and family member shall have the same meanings as defined in SEC Rule 701 as it existed on November 1, (3) The purpose of this rule is to provide an exemption from the registration requirements of Section , F.S. for securities issued in compensatory circumstances. This exemption is not available for plans for schemes to circumvent this purpose, such as to raise capital or to evade the registration provisions of Section , F.S. 17,450G, Florida, Rule 3E , Dealer and Associated Person Registration (4) Issuers and persons making offers and sales of securities that are exempt pursuant to Rule 3E are exempt from the registration requirements of Section (Registration of dealers, associated persons, investment advisers, and branch offices), F.S., provided that: (a) All sales of securities are made by a partner, officer, director, trustee of the issuers, or any person employed by the issuer who primarily performs substantial duties for, on behalf of the issuer, other than in connection with transactions in securities; and (b) No commission or compensation is paid to any person for the sale of the issuers securities unless such person is registered as a dealer in this state. For the purposes of this rule, regular compensation paid to employees of the issuer for the performance of duties not in connection with transactions in securities shall not be deemed compensation for the sale of the issuers securities. GEORGIA NO NOTICE 18,443, Georgia, Rule ( (16)), Exempt Transaction Limited compensatory 9

10 benefit plan exemption for transactions involving securities offered and sold in compliance with Rule 701 of the 1933 Act provided that the following conditions are met: (a) For purposes of this Rule, a compensatory benefit plan includes any purchase, savings, option, bonus, stock appreciation, profit-sharing, thrift, incentive, pension or similar plan. (b) Bad Boy provisions apply (i.e., neither issuer nor affiliates convicted or an order issued for a securities violation). Effective January 1, 2005, 701 exemption is self-executing. 18,102, Georgia, (a)(8), Definitions Dealer does not include any executive officer of an issuer or executive officer of an issuer offering or selling securities of such issuer unless he is paid a commission for the sale of such securities. Any remuneration paid which is directly related to the sale of securities is considered a commission. 18,102, Georgia, (a)(25), Definitions Salesperson does not include general partners or executive officers of an issuer unless they are paid a commission for the sale of securities. GUAM NO RULE 701 EXEMPTION Guam has not adopted a Rule 701 compliant exemption. See, 19,132, 46402(a)(11), Guam, Exempt Transaction Any investment contract issued in connection with an employees stock purchase, savings, pension, profit-sharing, or similar benefit plan if the Administrator is notified within 30 days before the inception of the plan (b)(3), Guam, Definitions Agent does not include an individual who represents an issuer in effecting transactions with existing employees, partners or directors of the issuer if no commission is paid for soliciting any person in Guam. HAWAII ADOPTED 202(21) OF USA 2002 effective 7/1/2008 NO NOTICE 20,106, Hawaii, 485-6(18), Exempt Transaction Any transaction that is exempt or would be exempt under rule 701, 17 Code of Federal Regulations section , promulgated under section 3(b) of the Securities Act of ,101, Hawaii, 485-1(3)(B), Definitions - An issuer is excluded from the definition of dealer (2)(B), Hawaii, 20,101, Definitions Salesperson does not include an individual who represents an issuer in effecting exempt transactions under 485-6; or (C) effecting transactions with existing employees, partners, or directors of the issuer if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this State. Effective 7/1/

11 -202, Exempt Transactions (21) Employees stock purchase, savings, option, profitsharing, pension, or similar employees benefit plan, including any securities, plan interests, and guarantees issued under a compensatory benefit plan or compensation contact, contained in a record, established by the issuer, its parents, its majority-owned subsidiaries, or the majorityowned subsidiaries of the issuer s parent for the participation of their employees including offers or sales of such securities to: (a) Directors; general partners; trustees, if the issuer is a business trust; officers; consultants; and advisers; (b) Family members who acquire such securities from those persons through gifts or domestic relations orders; (c) Former employees, directors, general partners, trustees, officers, consultants and advisers if those individuals were employed by or providing services to the issuer when the securities were offered; and (d) Insurance agents who are exclusive insurance agents of the issuer, or the issuer s subsidiaries or parents, or who derive more than fifty percent (50%) of their annual income from those organizations. -102, Definitions, and -401(b)(1)(A), Broker-dealer Exemptions, (2) An individual who represents a broker-dealer that is exempt under -401(b) or -401(d); (3) An individual who represents an issuer with respect to an offer or sale of the issuer s own securities or those of the issuer s parent company or any of the issuer s subsidiaries, and who is not compensated in connection with the individual s participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities; and (4) An individual who represents an issuer and who effects transactions in the issuer s securities exempted by -202, other than -202(11) and (14). IDAHO ADOPTED 202(21) OF USA 2002 effective 9/1/2004; Rules effective 3/24/ ,107, Idaho, (21), Exempt Transactions (21) Employees stock purchase, savings, option, profit-sharing, pension, or similar employees benefit plan, including any securities, plan interests, and guarantees issued under a compensatory benefit plan or compensation contract, contained in a record, established by the issuer, its parents, its majorityowned subsidiaries, or the majority-owned subsidiaries of the issuer s parent for the participation of their employees including offers or sales of such securities to: (a) Directors; general partners; trustees, if the issuer is a business trust; officers; consultants; and advisers; (b) Family members who acquire such securities from those persons through gifts or domestic relations orders; (c) Former employees, directors, general partners, trustees, officers, consultants and advisers if those individuals were employed by or provided services to the issuer when the securities were offered; and (d) Insurance agents who are exclusive insurance agents of the issuer, or the issuer s 11

12 subsidiaries or parents, or who derive more than fifty percent (50%) of their annual income from those organizations. 21,102, Idaho, (4)(b), Definitions Broker-dealer does not include an issuer. 21,119, Idaho, (b)(3), (4), Agent Registration - The following are exempt from agent registration: (3) An individual (executive officers) who represents an issuer with respect to an offer or sale of the issuer s own securities or those of the issuer s parent or any of the issuer s subsidiaries, and who is not compensated in connection with the individual s participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities; or (4) An individual who represents an issuer and who effects transaction in the issuer s securities exempted by section , Idaho Code, other than sections (11) and (14), Idaho Code. ILLINOIS NO NOTICE 22,122, Illinois, 3(N), Exempt Security Any security issued pursuant to (i) a written compensatory benefit plan (including without limitation, any purchase, savings, option, bonus, stock appreciation, profit-sharing, thrift, incentive, pension, or similar plan) and interests in such plans established by one or more of the issuers thereof or its parents or majority-owned subsidiaries for the participation of their employees, directors, general partners, trustees (where the issuer is a business trust), officers, or consultants or advisers of such issuers or its parents or majority-owned subsidiaries, provided that bona fide services are rendered by consultants or advisers and those services are not in connection with the offer and sale of securities in a capitalraising transaction or (ii) a written contract relating to the compensation of any such person. 22,123, Illinois, 5/4., Exempt transactions S. Any offer, sale or issuance of a security to any person who is, or who is reasonably believed by the person relying upon this subsection S to be, a director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer. For purposes of this subsection S, executive officer shall mean the president, any vice president in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy making function, or any other person who performs similar policy making functions for the issuer. Executive officers of subsidiaries may be deemed executive officers of the issuer if they perform such policy-making functions for the issuer. 22,109, Illinois, 2.7, Definitions Dealer includes only persons offering and selling, or otherwise dealing or trading in securities issued by another person. 22,111, Illinois, 2.9, Definitions Salesperson does not include an individual solely engaged in making offers or effecting sales of securities to employees of the issuer of such securities or to employees of the parent or any wholly owned subsidiary of such issuer, provided that such individual is an employee of such issuer, parent or subsidiary who has not been employed primarily to make such offers or sales and who receives no special compensation, directly or indirectly, for or on account of any such offer or sale. 12

13 The partners or officers of a dealer or issuer shall not be deemed to be salespersons within the meaning of this definition if they are not or have not been regularly engaged in securities offerings, purchasing or selling activities other than transactions for their own respective accounts. See 2000 WL , Illinois, No-Action Letter The staff will not recommend enforcement action to be taken if Illinois National Bancorp, Inc relies on the states employee benefit plan exemption under Section 3(N) and issues it securities pursuant to their Rule 701 exempt 401(k) Plan. However, the facts of this letter were limited only to employees. INDIANA NO NOTICE Indiana has now adopted a Rule 701 compliant exemption. 24,102, Indiana, , Exempt securities; (a) The following securities are exempted from the registration requirements of section 3 of this chapter: (7) Security issued in connection with an employee s stock purchase, savings, pension, profit-sharing, or similar benefit plan. 24,102, Indiana, (b), Exempt Transactions The offer or sale of securities of an issuer (i) to a person who is: (A) a director, an executive officer, a general partner, an administrator, or a person who performs similar functions for the issuer; (B) a director, executive officer, or general partner of a general partner of the issuer; or (C) any other natural person employed on a full-time basis by the issuer as an attorney or accountant if the person has been acting in this capacity for at least one (1) year immediately prior to the offer or sale; (ii) to an entity affiliated with the issuer; (iii) if the issuer is a corporation, to a person who is the owner of shares of the corporation or of an affiliated corporation representing and possessing ten percent (10%) or more of the total combined voting power of all classes of stock (of the corporation or affiliated corporation) issued and outstanding and who is entitled to vote; or (iv) If the issuer is a limited liability company, to a person who is the owner of an interest in the limited liability company representing and possessing at least ten percent (10%) of the total combined voting power of all classes of such interests (of the limited liability company or affiliated limited liability company) issued and outstanding. Effective July 1, ,130, Indiana, Chapter 2., Exemptions From Registration of Securities The following transactions are exempt from the requirements of IC through IC 23-13

14 and IC (21) Employees' stock purchase, savings, option, profit-sharing, pension, or similar employees' benefit plan, including any securities, plan interests, and guarantees issued under a compensatory benefit plan or compensation contract, contained in a record, established by the issuer, its parents, its majority-owned subsidiaries, or the majority-owned subsidiaries of the issuer's parent for the participation of their employees including offers or sales of such securities to: (A) directors; general partners; trustees, if the issuer is a business trust; officers; consultants; and advisers; (B) family members who acquire such securities from those persons through gifts or domestic relations orders; (C) former employees, directors, general partners, trustees, officers, consultants, and advisers if those individuals were employed by or were providing services to the issuer when the securities were offered; and (D) insurance agents who are exclusive insurance agents of the issuer, or the issuer's subsidiaries or parents, or who derive more than fifty percent (50%) of their annual income from those organizations. IOWA ADOPTED 202(21) OF USA 2002 effective 1/1/ ,112, Iowa, , Exempt Transactions EMPLOYEE BENEFIT PLANS. Employees stock purchase, savings, option, profit-sharing, pension, or similar employees benefit plan, including any securities, plan interests, and guarantees issued under a compensatory benefit plan or compensation contract, contained in a record, established by the issuer, its parents, its majority-owned subsidiaries of the issuer s parent for the participation of their employees including offers or sales of such securities to any of the following: a. Directors; general partners; trustees, if the issuer is a business trust; officers; consultants; and advisers. b. Family members who acquire such securities from those persons through gifts or domestic relations orders. c. Former employees, directors, general partners, trustees, officers, consultants, and advisers if those individuals were employed by or providing service to the issuer when the securities were offered. d. Insurance agents who are exclusive insurance agents of the issuer or the issuer s subsidiaries or parents, or who derive more than fifty percent of their annual income from those organizations. 25,102, Iowa, (4)(b), Definitions Broker-dealer does not include an issuer. 25,142, Iowa, (2)( c), (d), Agent Registration The following individuals are exempt from agent registration: c. An individual who represents an issuer with respect to an offer or sale of the issuer s own securities or those of the issuer s parent or any of the issuer s subsidiaries, and who is not compensated in connection with the individual s participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities; or d. An individual who represents an issuer and who effects transactions in the issuer s 14

15 securities exempted by section , other than section , subsection 11 or 14. KANSAS ADOPTED 202(21) OF USA 2002 effective 7/1/2005 NO NOTICE Effective 7/1/2005, 26,107 Kansas, 7(21), Exempt Transactions employees stock purchase, savings, option, profit-sharing, pension, or similar employees benefit plan, including any securities, plan interests, and guarantees issued under a compensatory benefit plan or compensation contract, contained in a record, established by the issuer, its parents, its majorityowned subsidiaries, or the majority-owned subsidiaries of the issuer s parent for the participation of their employees, including offers or sales of such securities to: (A) Directors; general partners; trustees, if the issuer is a business trust; officers; consultants; and advisors; (B) family members who acquire such securities from those persons through gifts or domestic relations orders; (C) former employees, directors, general partners, trustees, officers, consultants, and advisors if those individuals were employed by or, providing services to the issuer when the securities were offered; and (D) insurance agents who are exclusive insurance agents of the issuer, or the issuer s subsidiaries or parents, or who derive more than 50% of their annual income from those organizations. 26,102, Kansas, 2(4)(B), Definitions An issuer is excluded from the definition of brokerdealer. 26,119, Kansas, 19(b), Definitions Agent does not include an individual who represents an issuer only in transactions in securities exempted by ,607, Kansas, No-Action Letter The staff for the Office of the Kansas Securities Commissioner concludes that a proposed Rule 701 plan constitutes a similar benefit plan under K.S.A (j), and that the insurance agents of the issuers wholly owned subsidiary are employees for purposes of (j) when they meet the definition provided by the SEC under Rule 701. The securities issued pursuant to the Rule 701 plan are, therefore, exempt from registration under the Kansas Securities Act. See also 26,606, Kansas, No-Action Letter concluding that LLC unit option plan which follows the guidelines under Rule 701 is exempt from registration. KENTUCKY NO NOTICE 27,428, Kentucky, Rule 808KAR 10:300 (1) Offer or sale of a security by an issuer pursuant to a written compensatory benefit plan including, without limitation, a purchase, savings, option, bonus, stock appreciation, profit-sharing, thrift, incentive, pension or similar plan, or an interest in a plan, if the offer or sale qualifies for the registration exemption of 17 CFR (2) The exemption is permitted only to compensate employees and not to raise capital. (3) A filing with the department shall not be necessary to claim the exemption. Exemption extends to consultants and directors. 27,428, Kentucky, Rule 808KAR 10:300 Transactional exemption obviates Brokerdealer/Agent registration. 15

16 LOUISIANA NO RULE 701 EXEMPTION Louisiana has not adopted a Rule 701 compliant exemption. See, (9)(b) Transaction exemption for 28,139, 51:709(9); Any transaction involving the issuance of a security: (a) In connection with stock bonus or acquisition plan requiring payment of no consideration other than services. (b) In connection with an employee stock purchase plan as defined in Section 423 of the Internal Revenue Code of 1954, as now or hereafter amended, or a stock bonus plan, pension plan, profit-sharing plan, or retirement plan for employees or self-employed individuals qualified under Section 401 of the Internal Revenue Code of 1954, as now or hereafter amended, or individual retirement accounts qualified under Section 408 of the Internal Revenue Code of 1954, as now or hereafter amended; provided, however, the issuance of any such security representing an interest in a collective investment fund shall be exempt only if such security is issued pursuant to a plan established and administered by a bank organized under the laws of the United States or any bank or trust company organized and supervised under the laws of any state of the United States or sponsored by an investment company registered under the Investment Company Act of 1940, as now or hereafter amended, or sponsored by an insurance company licensed to do business in this state. (c) In connection with a stock option plan in which no person except an employee of the issuer or of an affiliate of such issuer may participate, if no consideration is paid for any options granted other than services. (d) In connection with the issuance of securities upon the exercise of options granted pursuant to such a stock option plan. Exemption covers both grant of options and issuance of stock upon exercise. MAINE ADOPTED 202(21) OF USA 2002 effective 12/31/2005 NO NOTICE 29,072, Maine, 10502(1)(L), Exempt Securities Any security issued in connection with an employee s stock purchase, pension, savings, option, profit-sharing or similar employees benefit plan. 29,037, Maine, , Exempt transactions 22. Employee benefit plans. An employees' stock purchase, savings, option, profit-sharing, pension or similar employees' benefit plan, including any securities, plan interests and guarantees issued under a compensatory benefit plan or compensation contract, contained in a record, established by the issuer, its parents, its majority-owned subsidiaries or the majorityowned subsidiaries of the issuer's parent for the participation of their employees including offers or sales of such securities to: A. Directors; general partners; trustees, if the issuer is a business trust; officers; and consultants and advisors, as permitted by 17 Code of Federal Regulations, (c)(1) 16

17 (2003); B. Family members who acquire such securities from those persons through gifts or domestic relations orders; C. Former employees, directors, general partners, trustees, officers and consultants and advisors, as permitted by 17 Code of Federal Regulations, (c)(1) (2003), if those individuals were employed by or providing services to the issuer when the securities were offered; and D. Insurance agents who are exclusive insurance agents of the issuer, or the issuer's subsidiaries or parents, or who derive more than 50% of their annual income from those organizations. 29,071, Maine, 10501(1)(B), Definitions An issuer is excluded from the definition of brokerdealer, except when effecting transactions other than with respect to its own securities. 29,042, Maine, 10302(2)(B), Definitions - Sales Representatives are exempt from registration if they are acting for an issuer effecting offers or sales of securities in transactions exempt by 10502(1)(L) (2)(C) - Representative must not be compensated in the transaction. 29,032, Maine, , Definitions 28. Security. Security means a note; stock; treasury stock; security future; bond; debenture; evidence of indebtedness; certificate of interest or participation in a profit-sharing agreement; collateral trust certificate; preorganization certificate or subscription; transferable share; investment contract; investment in a viatical or life settlement contract; voting trust certificate; certificate of deposit for a security; fractional undivided interest in oil, gas or other mineral rights; documents of title to or certificates of interest or participation in an oil, gas or other mineral title or lease or in payments out of production under any title, lease, right or royalty; put, call, straddle, option or privilege on a security, certificate of deposit or group or index of securities, including an interest therein or based on the value thereof; put, call, straddle, option or privilege entered into on a national securities exchange relating to foreign currency; or, in general, an interest or instrument commonly known as a security ; or a certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of or warrant or right to subscribe to or purchase any of the foregoing. A. Includes both a certificated and an uncertificated security; B. Does not include an insurance or endowment policy or annuity contract under which an insurance company promises to pay a fixed or variable sum of money either in a lump sum or periodically for life or other specified period; C. Does not include an interest in a contributory or noncontributory pension or welfare plan subject to the federal Employee Retirement Income Security Act of 1974; D. Includes as an investment contract an investment in a common enterprise with the expectation of profits to be derived primarily from the efforts of a person other than the investor. For purposes of this paragraph, common enterprise means an enterprise in which 17