THE TOTAL LOSS OF THE INVESTMENT.
SUBSCRIBER ACKNOWLEDGES THE RISKS
INHERENT IN AN INVESTMENT IN THE STOCK, INCLUDING THOSE SET FORTH IN THE SECTION
ENTITLED "RISK FACTORS" IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE
YEAR ENDED OCTOBER 31, 2006, AS WELL AS THOSE OTHER RISKS DESCRIBED IN OR
REFERRED TO IN THE REPORTS AND THE OTHER WRITTEN INFORMATION.
III.
RESTRICTIONS ON TRANSFER.
SUBSCRIBER ACKNOWLEDGES THAT THERE
ARE SUBSTANTIAL RESTRICTIONS ON THE TRANSFER OF THE STOCK AND WARRANTS UNDER THE
SECURITIES ACT OF 1933, (THE "ACT") AND APPLICABLE STATE SECURITIES LAWS (THE
"STATE LAWS") AND ACCORDINGLY, SUBSCRIBER MAY NOT LIQUIDATE AN INVESTMENT IN THE
STOCK FOR AN INDEFINITE PERIOD.
SUBSCRIBER ACKNOWLEDGES THAT NEITHER THE STOCK
BEING ISSUED NOR STOCK UNDERLYING THE WARRANTS HAS BEEN REGISTERED FOR SALE
UNDER THE ACT OR STATE LAWS.
SUBSCRIBER ACKNOWLEDGES AND AGREES THAT THE STOCK
MAY BE RESOLD ONLY PURSUANT TO REGISTRATION UNDER THE ACT AND THE STATE LAWS, OR
AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT
REQUIRED.
IV.
SUITABILITY.
SUBSCRIBER BELIEVES THAT AN INVESTMENT IN THE STOCK
IS SUITABLE FOR SUBSCRIBER BASED UPON SUBSCRIBER'S INVESTMENT OBJECTIVES AND
FINANCIAL NEEDS, AND SUBSCRIBER HAS ADEQUATE MEANS FOR PROVIDING FOR HIS CURRENT
FINANCIAL NEEDS AND PARTICULAR CONTINGENCIES AND HAS NO NEED FOR LIQUIDITY OF
INVESTMENT WITH RESPECT TO THE STOCK.
SUBSCRIBER HAS SUFFICIENT KNOWLEDGE AND
EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS TO ENABLE SUBSCRIBER TO EVALUATE
THE MERITS AND RISKS OF AN INVESTMENT IN THE STOCK AND TO MAKE AN INFORMED
INVESTMENT DECISION WITH RESPECT TO THE PURCHASE OF THE STOCK.
V.
NO GENERAL SOLICITATION.
THE OFFER TO SELL THE STOCK AND
WARRANTS WAS DIRECTLY COMMUNICATED TO SUBSCRIBER.
SUBSCRIBER HAS NOT RECEIVED
ANY GENERAL SOLICITATION OR GENERAL ADVERTISING (INCLUDING COMMUNICATIONS
PUBLISHED IN ANY NEWSPAPER, MAGAZINE OR OTHER BROADCAST) IN CONNECTION WITH HIS
PURCHASE OF THE STOCK.
VI.
RESIDENCE; ACCREDITED INVESTOR STATUS.
SUBSCRIBER IS A RESIDENT
OF THE STATE OF MINNESOTA.
SUBSCRIBER IS AN "ACCREDITED INVESTOR" AS THAT TERM
IS DEFINED BY RULE 501 UNDER THE ACT BY VIRTUE OF BEING A NATURAL PERSON WHOSE
INDIVIDUAL NET WORTH (ASSETS LESS LIABILITIES), OR JOINT NET WORTH WITH HIS
SPOUSE, EXCEEDS $1,000,000 OR A NATURAL PERSON WHOSE INDIVIDUAL INCOME WAS IN
EXCESS OF $200,000, OR WHOSE JOINT INCOME WITH HIS SPOUSE WAS IN EXCESS OF
$300,000, IN EACH OF THE TWO MOST RECENT YEARS, AND WHO HAS A REASONABLE
EXPECTATION OF REACHING THE SAME INCOME LEVEL FOR THE CURRENT YEAR.
MR.
PETERSON IS ALSO A DIRECTOR OF THE COMPANY.
B.
NO MARKET MANIPULATION.
SUBSCRIBER HAS NOT TAKEN, AND WILL NOT
TAKE, DIRECTLY OR INDIRECTLY, ANY ACTION DESIGNED TO, OR THAT MIGHT REASONABLY
BE EXPECTED TO, CAUSE OR RESULT IN STABILIZATION OR MANIPULATION OF THE PRICE OF
THE STOCK TO FACILITATE THE SALE OR RESALE OF THE STOCK OR AFFECT THE PRICE AT
WHICH THE STOCK MAY BE ISSUED.
2
C.
BROKERS OR FINDERS.
THE COMPANY HAS NOT, AND WILL NOT, INCUR,
DIRECTLY OR INDIRECTLY, AS A RESULT OF ANY ACTION TAKEN BY