STAMP, Inc., One Blue Hill Plaza, 11Th Floor, Pearl River, New York 10965

STAMP, Inc., One Blue Hill Plaza, 11Th Floor, Pearl River, New York 10965

We strongly recommend that this edition be reviewed by Senior Management or Corporate Counsel

STAMP, Inc., One Blue Hill Plaza, 11th Floor, Pearl River, New York 10965

MEDALLION IMPRINTING EQUIPMENT

SECURITY

Advances in electronic verification procedures and imprinting technologies during the 1990’s paved the way for the development of more secure Medallion equipment with enhanced fraud resistant elements. In 2000, we introduced STAMP 2000 equipment which featured bar coded plates and ink pads with unique security ink. The intent was, and is, to minimize the risk of fraud emanating from the use of lost/stolen equipment and/or the creation of counterfeit imprints created by computer scanning and sophisticated printing devices.

Although the bar-coding aspect of STAMP 2000 has been highly successful, the security ink has been somewhat problematic. As you may recall, the original compound was a light green, almost neon color, designed to achieve a maximum read rate by scanners employed by Issuers and Transfer Agents. The estimated success rate approached 95%, but, unfortunately, the light colored ink proved difficult to reproduce. Operations areas at securities processing firms had difficulty copying, faxing and imaging the imprints. At our request, Hampton Technologies, LLC, the Medallion imprinting equipment manufacturer, developed a number of alternate ink versions that tested well in the laboratory, but never achieved field read rates that the industry considered acceptable. The result was an increased rate of transaction rejects. Throughout 2004, Hampton worked to develop a laser produced, dual ink pad capability. This new dual ink pad combined the original ink (95% read rate), shown in specific areas on the pad, with a dark reproducible ink that ensured that the name of the institution would be visible when imaged. The dual ink pad was placed in production almost a year ago and issuance of old pads ended at that time. When used properly, we are confident that the dual ink pads will address any remaining read rate issues.

In a related topic….at the present time, Guarantors are using four generations of Medallion ink, including the original STAMP 2000 pads issued

over five years ago. A recent spike in rejected transactions due to unreadable ink impressions has

caused STAMP, Inc. to undertake a further review of the ink verification process. This review has revealed that the old non-dual ink pads are becoming less readable with age. Our technical advisors tell us that varied environmental factors can reduce the effectiveness of the security ink…. pad dryness, caused by use and aging, being the major culprit. As a result we are urging Guarantors to change Medallion ink pads frequently and to replace all non-dual ink pads ASAP.

At an undetermined date in 2006, STAMP, Inc. will invalidate all non-dual ink pads. Guarantors will be prohibited from using these aging pads and Issuer Corporations and Transfer Agents will be requested to reject transactions bearing any invalidated imprints. Advance notice of the effective date will be provided to Guarantors.

IMPRINTING THE MEDALLION

In 2003, we issued the following recommendations to over 7,200 Guarantor contact people:

…….To keep read rates high and avoid the inconvenience and expense of rejected transactions, Guarantors should note the following:

  • Ensure that the document you are imprinting is on a flat surface.
  • Do not imprint over text: look for a clear white area, if possible.
  • Press firmly on the Medallion in a downward motion and release.

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  • Examine the imprint to ensure that it is crisp and clear. If an imprint is not readable to the naked eye, it will fail ink authentication.
  • When imprinting multiple documents in succession, ensure that the “refresh interval” between applications is sufficient.
  • When asked to guarantee a certificate, consider using a stock/bond power instead. A universal securities power is available as a courtesy for downloading to plain paper from

Also, Hampton Technologies has advised that the best reading results may be obtained by using White 60 Finch Opaq SMP paper. If you have the ability/option of re-ordering Powers of Attorney, Stock Powers, or other forms, please consider this type of paper. Ron Gallagher at Hampton Technologies () can provide additional background information on the relationship between the paper and the ink.

TRANSFER AGENT PRACTICES

In a letter to Transfer Agents dated 12/30/03, the following suggestions were made:

.………The dual ink pad should restore readability to our original 95% target. Transfer Agents are encouraged to continue to use commercially reasonable care and standards when rejecting imprints to ensure that investors are not inconvenienced unnecessarily. The lack of a positive read does not in and of itself indicate that the imprint is a counterfeit. It is imperative that Transfer Agents perform a careful examination of the imprints overt properties. In some cases, direct Guarantor contact may be prudent.

……….When authenticating Medallion imprints, each Transfer Agent must adopt a policy that fits its business objectives and risk tolerance. The STAMP 2000 equipment was designed as a tool to aid in the detection of unauthorized or counterfeit imprints; it

should not be used as the sole decision-making criterion.

STAMP, Inc., One Blue Hill Plaza, 11th Floor, Pearl River, New York 10965

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