<SUBMISSION>
<ACCESSION-NUMBER>0001206774-07-001060
<TYPE>DEF 14A
<PUBLIC-DOCUMENT-COUNT>3
<PERIOD>20070525
<FILING-DATE>20070419
<DATE-OF-FILING-DATE-CHANGE>20070419
<EFFECTIVENESS-DATE>20070419
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>TASER INTERNATIONAL INC
<CIK>0001069183
<ASSIGNED-SIC>3480
<IRS-NUMBER>860741227
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>DEF 14A
<ACT>34
<FILE-NUMBER>001-16391
<FILM-NUMBER>07775975
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>7860 EAST MCLAIN DR.
<STREET2>SUITE 2
<CITY>SCOTTSDALE
<STATE>AZ
<ZIP>85260
<PHONE>4809052000
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>7860 EAST MCLAIN DR.
<STREET2>SUITE 2
<CITY>SCOTTSDALE
<STATE>AZ
<ZIP>85260
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>taser_nps.htm
<DESCRIPTION>NOTICE OF PROXY STATEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
</HEAD>

<BODY bgColor=#ffffff><P align=center><B><FONT face=serif size=2>UNITED STATES SECURITIES AND EXCHANGE COMMISSION <BR>Washington, D.C. 20549 </FONT></B></P>

<P align=center><B><FONT face=serif size=2>SCHEDULE 14A <BR>(Rule 14-101) <BR></FONT></B><B><FONT face=serif size=2>INFORMATION REQUIRED IN THE PROXY STATEMENT </FONT></B></P>

<P align=center><B><FONT face=serif size=2>SCHEDULE 14A INFORMATION <BR></FONT></B><FONT face=serif size=2>Proxy Statement Pursuant to Section 14(a) of the <BR>Securities Exchange Act of 1934 <BR>(Amendment No. __) </FONT></P>

<P align=justify><FONT face=serif size=2>Filed by the Registrant [X] <BR></FONT><FONT face=serif size=2>Filed by a Party other than the Registrant [ &nbsp;] </FONT></P>

<TABLE cellSpacing=0 cellPadding=0 border=0>
<TR>
<TD noWrap align=left width="99%" colSpan=3><FONT size=2>Check the appropriate box:<FONT size=3>&nbsp;</FONT></FONT></TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%"><FONT face=serif size=2>[ &nbsp;]&nbsp;</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD vAlign=top noWrap align=left width="97%"><FONT face=serif size=2>Preliminary Proxy Statement<FONT size=3><FONT face=serif size=2>&nbsp;</FONT></FONT></FONT></TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%"><FONT face=serif><FONT size=2><B>[ &nbsp;]</B>&nbsp;</FONT></FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="97%"><FONT face=serif><FONT size=2><B>Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))</B>&nbsp;</FONT></FONT></TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%"><FONT face=serif size=2>[X]&nbsp;</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="97%"><FONT face=serif size=2>Definitive Proxy Statement&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%"><FONT face=serif size=2>[ &nbsp;]&nbsp;</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="97%"><FONT face=serif size=2>Definitive Additional Materials&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%"><FONT face=serif size=2>[ &nbsp;]&nbsp;</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="97%"><FONT face=serif size=2>Soliciting Material Pursuant to &#167;240.14a-12&nbsp;</FONT></TD></TR>
</TABLE>

<BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
<TD align=center width="10%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" align=center width="80%"><FONT face=serif size=2>TASER International, Inc.</FONT></TD>
<TD align=center width="10%">&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=center width="10%"></TD>
<TD align=center width="80%"><FONT face=serif size=2>(Name of Registrant as Specified In Its Charter)</FONT></TD>
<TD align=center width="10%"></TD></TR>
<TR>
<TD width="10%"></TD>
<TD width="80%">&nbsp; </TD>
<TD width="10%"></TD></TR>
<TR>
<TD width="10%"></TD>
<TD width="80%">&nbsp; </TD>
<TD width="10%"></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=center width="10%"></TD>
<TD style="BORDER-TOP: #000000 1pt solid" noWrap align=center width="80%"><FONT face=serif size=2>(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)</FONT></TD>
<TD noWrap align=center width="10%"></TD></TR>
</TABLE>

<BR><FONT face=serif size=2>Payment of Filing Fee (Check the appropriate box): </FONT>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%"><FONT face=serif size=2>[X]</FONT></TD>
<TD vAlign=top noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp;</TD>
<TD vAlign=top noWrap align=left width="98%" colSpan=4><FONT face=serif size=2>No fee required.</FONT></TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%"><FONT face=serif size=2>[ &nbsp;]</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="98%" colSpan=4><FONT face=serif size=2>Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.</FONT></TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%">&nbsp; </TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"><FONT size=2><FONT face=serif>(1</FONT>)</FONT></TD>
<TD vAlign=top noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD vAlign=top noWrap align=left width="96%" colSpan=2><FONT face=serif size=2>Title of each class of securities to which transaction applies:</FONT></TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=top noWrap align=left width="48%">&nbsp;</TD>
<TD vAlign=top noWrap align=left width="48%">&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%">&nbsp; </TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"><FONT face=serif size=2>(2)</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="96%" colSpan=2><FONT face=serif size=2>Aggregate number of securities to which transaction applies:</FONT></TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=top noWrap align=left width="48%">&nbsp;</TD>
<TD vAlign=top noWrap align=left width="48%">&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%">&nbsp; </TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"><FONT face=serif size=2>(3)</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="TEXT-ALIGN: justify" vAlign=top align=left width="96%" colSpan=2><FONT face=serif size=2>Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):</FONT></TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=top align=left width="48%">&nbsp;</TD>
<TD vAlign=top align=left width="48%">&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%">&nbsp; </TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"><FONT face=serif size=2>(4)</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="96%" colSpan=2><FONT face=serif size=2>Proposed maximum aggregate value of transaction:</FONT></TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=top noWrap align=left width="48%">&nbsp;</TD>
<TD vAlign=top noWrap align=left width="48%">&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%">&nbsp; </TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"><FONT face=serif size=2>(5)</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="96%" colSpan=2><FONT face=serif size=2>Total fee paid:</FONT></TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=top noWrap align=left width="48%">&nbsp;</TD>
<TD vAlign=top noWrap align=left width="48%">&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%"><FONT face=serif size=2>[ &nbsp;]</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="98%" colSpan=4><FONT face=serif size=2>Fee paid previously with preliminary materials.</FONT></TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%"><FONT face=serif size=2>[ &nbsp;]</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="TEXT-ALIGN: justify" vAlign=top align=left width="98%" colSpan=4><FONT face=serif size=2>Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.</FONT></TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%">&nbsp; </TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"><FONT face=serif size=2>(1)</FONT></TD>
<TD vAlign=top noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD vAlign=top noWrap align=left width="96%" colSpan=2><FONT face=serif size=2>Amount Previously Paid:</FONT></TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=top noWrap align=left width="48%">&nbsp;</TD>
<TD vAlign=top noWrap align=left width="48%">&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%">&nbsp; </TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"><FONT face=serif size=2>(2)</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="96%" colSpan=2><FONT face=serif size=2>Form, Schedule or Registration Statement No.:</FONT></TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=top noWrap align=left width="48%">&nbsp;</TD>
<TD vAlign=top noWrap align=left width="48%">&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%">&nbsp; </TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"><FONT face=serif size=2>(3)</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="96%" colSpan=2><FONT face=serif size=2>Filing Party:</FONT></TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=top noWrap align=left width="48%">&nbsp;</TD>
<TD vAlign=top noWrap align=left width="48%">&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%">&nbsp; </TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"><FONT face=serif size=2>(4)</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="96%" colSpan=2><FONT face=serif size=2>Date Filed:</FONT></TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=right width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=top noWrap align=left width="48%">&nbsp;</TD>
<TD vAlign=top noWrap align=left width="48%">&nbsp;</TD></TR>
</TABLE>

<BR>
<HR align=center width="100%" noShade SIZE=2>


<PAGE>

<P align=center><IMG src="taser_nps1x1x1.jpg" border=0> </P>

<P align=center><B><FONT face=serif size=4>TASER INTERNATIONAL, INC. <BR>17800 North 85</FONT></B><B><SUP><FONT face=serif size=3>th</FONT></SUP></B><B><FONT face=serif size=4> Street <BR>Scottsdale, Arizona 85255</FONT></B></P>

<P align=center><B><FONT size=4>___________</FONT></B></P>

<P align=center><B><FONT face=serif>NOTICE OF ANNUAL MEETING OF STOCKHOLDERS <BR>May 25, 2007<BR><FONT size=4>___________</FONT></FONT></B></P>

<P align=justify><FONT face=serif size=2>To Our Stockholders: </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The 2007 Annual Meeting of Stockholders (the &#147;Annual Meeting&#148;) of TASER International, Inc. (the &#147;Company&#148;) will be held at 10:00 a.m. (Arizona time) on Friday, May 25, 2007 at the Company&#146;s principal executive office building located at 17800 North 85<SUP>th</SUP> Street, Scottsdale, Arizona 85255 for the following purposes: </FONT></P>

<TABLE cellSpacing=0 cellPadding=0 border=0>
<TR>
<TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD vAlign=top noWrap><FONT face=serif size=2>1.</FONT></TD>
<TD noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD width="100%"><FONT face=serif size=2>Electing three Class A directors of the Company for a term of three years;</FONT></TD></TR>
<TR>
<TD noWrap></TD>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap></TD>
<TD vAlign=top noWrap><FONT face=serif size=2>2.</FONT></TD>
<TD noWrap></TD>
<TD width="100%"><FONT face=serif size=2>Ratifying the appointment of Grant Thornton LLP as the Company&#146;s independent registered public accounting firm for 2007;</FONT></TD></TR>
<TR>
<TD noWrap></TD>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap></TD>
<TD vAlign=top noWrap><FONT face=serif size=2>3.</FONT></TD>
<TD noWrap></TD>
<TD width="100%"><FONT face=serif size=2>Consideration of a stockholder proposal, if properly presented at the meeting, which is opposed by the Board of Directors; and</FONT></TD></TR>
<TR>
<TD noWrap></TD>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap></TD>
<TD vAlign=top noWrap><FONT face=serif size=2>4.</FONT></TD>
<TD noWrap></TD>
<TD width="100%"><FONT face=serif size=2>Transacting such other business as may properly come before the Annual Meeting or any continuation, postponement or adjournment thereof.</FONT></TD></TR>
</TABLE>


<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Only holders of the Company&#146;s Common Stock at the close of business on March 26, 2007 are entitled to notice of, and to vote at, the Annual Meeting and any adjournments or postponements thereof. Stockholders may vote in person or by proxy. A list of stockholders entitled to vote at the Annual Meeting will be available for examination by stockholders at the time and place of the Annual Meeting and during ordinary business hours, for a period of 10 days prior to the Annual Meeting, at the principal executive offices of the Company at the address listed above. </FONT></P>

<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
<TD align=left width="50%">&nbsp; </TD>
<TD align=left width="50%"><FONT face=serif size=2>By Order of the Board of Directors,</FONT></TD></TR>
<TR>
<TD width="100%" colSpan=2>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="50%">&nbsp; </TD>
<TD align=left width="50%"><FONT face=serif size=2>/s/ DOUGLAS E. KLINT</FONT></TD></TR>
<TR>
<TD width="100%" colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD align=left width="50%">&nbsp; </TD>
<TD align=left width="50%"><FONT face=serif size=2>Douglas E. Klint</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="50%">&nbsp; </TD>
<TD align=left width="50%"><FONT face=serif size=2>Corporate Secretary</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="50%"><FONT face=serif size=2>Scottsdale, Arizona</FONT></TD>
<TD align=left width="50%">&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD align=left width="50%"><FONT face=serif size=2>April 19, 2007</FONT></TD>
<TD align=left width="50%">&nbsp; </TD></TR>
</TABLE>

<BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR>
<TD style="BORDER-RIGHT: #000000 1.5pt solid; PADDING-RIGHT: 6pt; BORDER-TOP: #000000 1.5pt solid; PADDING-LEFT: 6pt; PADDING-BOTTOM: 6pt; BORDER-LEFT: #000000 1.5pt solid; PADDING-TOP: 6pt; BORDER-BOTTOM: #000000 1.5pt solid" width="100%">
<P align=justify><B><FONT face=serif size=2>YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.</FONT></B></P>
</TD></TR>
</TABLE>

<BR>
<HR align=center width="100%" noShade SIZE=2>


<PAGE>

<P align=center><B><FONT face=serif size=4>TASER INTERNATIONAL, INC. <BR>17800 North 85</FONT></B><B><SUP><FONT face=serif size=3>th</FONT></SUP></B><B><FONT face=serif size=4> Street <BR>Scottsdale, Arizona 85255 </FONT></B></P>

<P align=center><B><FONT face=serif>PROXY STATEMENT</FONT></B></P>

<P align=center><B><FONT face=serif size=2>2007 Annual Meeting of Stockholders<BR>______________</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>This Proxy Statement is furnished in connection with the TASER International, Inc. (the &#147;Company&#148;) 2007 Annual Meeting of Stockholders (the &#147;Annual Meeting&#148;) to be held at 10:00 a.m. (Arizona time) on Friday, May 25, 2007 at the Company&#146;s principal executive office located at 17800 North 85<SUP>th</SUP> Street, Scottsdale, Arizona 85255, and at any continuation, adjournment or postponement thereof. The Board of Directors of the Company is soliciting proxies. If proxies in the accompanying form are properly executed, dated and returned prior to the voting at the Annual Meeting, the shares of Common Stock represented thereby will be voted as instructed on the proxy. If no instructions are given on a properly executed and returned proxy, the shares of Common Stock represented thereby will be voted for election of the directors named in this Proxy Statement, for ratification of the appointment of the
independent registered public accounting firm, against the stockholder proposal if properly presented at the meeting, and in support of the recommendations of management on such other business as may properly come before the Annual Meeting or any adjournments, continuations or postponements thereof. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Any proxy may be revoked by a stockholder prior to its exercise upon (i) written notice to the Secretary of the Company, (ii) by delivering a duly executed proxy bearing a later date, or (iii) by the vote of a stockholder cast in person at the Annual Meeting. The cost of soliciting proxies will be borne by the Company. The Company may reimburse brokerage houses, banks and other custodians, nominees and fiduciaries for their reasonable expenses incurred in forwarding proxies and proxy material to their principals. In addition to solicitation by mail, proxies may be solicited personally by the Company&#146;s officers and employees, or by telephone, facsimile or electronic transmission or express mail. This Proxy Statement is first being mailed to stockholders on or about April 19, 2007. </FONT></P>

<P align=center><B><FONT face=serif size=2>VOTING</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Holders of record of the Company&#146;s Common Stock on March 26, 2007 will be entitled to vote at the Annual Meeting or any continuation, adjournment, or postponement thereof. As of the record date, there were 62,065,407 shares of Common Stock outstanding and entitled to vote. The presence in person or by proxy of persons holding a majority, or 31,032,704, of these shares will constitute a quorum for the transaction of business. Each share of Common Stock entitles the holder to one vote on each matter that may properly come before the Annual Meeting. Stockholders are not entitled to cumulative voting in the election of directors. Abstentions and with-held votes will be counted in determining whether a quorum is present for the Annual Meeting. If a stockholder holds shares through a nominee, such as a brokerage firm, and such nominee does not have discretionary voting power with respect to a proposal and has not received voting
instructions from the beneficial owner, a broker &#147;non-vote&#148; occurs. Broker non-votes are only counted in determining whether a quorum is present.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Directors are elected by a plurality of the votes of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the election of directors. Therefore, the three director-nominees receiving the highest number of votes will be elected. Abstentions and broker non-votes are not treated as votes cast and, therefore, will have no effect on the proposal to elect directors. The affirmative vote of a majority of the votes duly cast at the Annual Meeting is required to approve any other proposals. Abstentions and broker non-votes are not treated as votes cast and, therefore, will have no effect on any such proposal.</FONT></P>

<HR align=center width="100%" noShade SIZE=2>


<PAGE>

<P align=center><B><FONT face=serif size=2>PROPOSAL ONE: </FONT></B></P>

<P align=center><B><FONT face=serif size=2>ELECTION OF DIRECTORS</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Board of Directors is elected by and accountable to the stockholders. The Board of Directors is comprised of nine directors. The directors are divided into three classes comprised as follows: three directors each in Class A, Class B, and Class C. One class is elected each year for a three-year term. The three director nominees, who would serve a regular three-year term until the annual meeting of stockholders in 2010, or until their respective successors are elected and qualified, are: John S. Caldwell, Bruce R. Culver and Michael Garnreiter. As discussed above, the three nominees for director receiving the highest number of votes will be elected to the Board of Directors.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Unless marked otherwise, proxies received will be voted FOR the election of each of the nominees named below. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>If any nominee is unable or unwilling to serve as a director at the date of the Annual Meeting or any postponement or adjournment thereof, the proxies may be voted for a substitute nominee, designated by the proxy holders or by the present Board of Directors to fill such vacancy, or for the other nominees named without nomination of a substitute, or the number of directors may be reduced accordingly. The Board of Directors has no reason to believe that any of the nominees will be unwilling or unable to serve if elected a director. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face=serif size=2>The Board of Directors recommends a vote FOR the election of John S. Caldwell, Bruce R. Culver and Michael Garnreiter.</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> The following table sets forth certain information about each nominee for election to the Board of Directors and each continuing director.</FONT></P>

<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
<TD noWrap align=left width="45%" colSpan=2>&nbsp;</TD>
<TD noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=left width="1%">&nbsp;</TD>
<TD noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=left width="30%">&nbsp;</TD>
<TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="6%"><FONT face=serif size=1><FONT size=3></FONT><B>Director</B></FONT> </TD>
<TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="13%"><FONT face=serif size=1><FONT size=3></FONT><B>Expiration of</B></FONT> </TD></TR>
<TR vAlign=bottom>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><B><FONT face=serif color=#231f20 size=1>Name</FONT></B> </TD>
<TD noWrap align=left width="44%">&nbsp;</TD>
<TD noWrap align=center width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT face=serif color=#231f20 size=1><B>Age</B></FONT> </TD>
<TD noWrap align=center width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="30%"><FONT face=serif color=#231f20 size=1><FONT color=#000000 size=3>&nbsp;</FONT><B>Positions</B></FONT> </TD>
<TD noWrap align=center width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="6%"><FONT face=serif color=#231f20 size=1><B>Since</B></FONT> </TD>
<TD noWrap align=center width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="13%"><FONT face=serif color=#231f20 size=1><FONT color=#000000 size=3></FONT><B>Current Term</B></FONT> </TD></TR>
<TR vAlign=bottom>
<TD align=left width="45%" bgColor=#c0c0c0 colSpan=2><B><FONT face=serif size=2>Nominees for Election</FONT></B>&nbsp; </TD>
<TD align=left width="1%" bgColor=#c0c0c0></TD>
<TD align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
<TD align=left width="1%" bgColor=#c0c0c0></TD>
<TD align=left width="30%" bgColor=#c0c0c0>&nbsp; </TD>
<TD align=left width="1%" bgColor=#c0c0c0></TD>
<TD align=left width="6%" bgColor=#c0c0c0>&nbsp; </TD>
<TD align=left width="1%" bgColor=#c0c0c0></TD>
<TD align=left width="13%" bgColor=#c0c0c0>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD align=left width="45%" colSpan=2><I><FONT face=serif color=#231f20 size=2><U>Class A</U> </FONT></I><FONT size=2>(for three-year term)</FONT> </TD>
<TD align=left width="1%"></TD>
<TD align=left width="1%">&nbsp; </TD>
<TD align=left width="1%"></TD>
<TD align=left width="30%">&nbsp; </TD>
<TD align=left width="1%"></TD>
<TD align=left width="6%">&nbsp; </TD>
<TD align=left width="1%"></TD>
<TD align=left width="13%">&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD align=left width="45%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>John S. Caldwell(1)(2)(4)</FONT> </TD>
<TD align=center width="1%" bgColor=#c0c0c0></TD>
<TD align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>62</FONT> </TD>
<TD align=left width="1%" bgColor=#c0c0c0></TD>
<TD align=left width="30%" bgColor=#c0c0c0><FONT face=serif size=2>Director</FONT> </TD>
<TD align=center width="1%" bgColor=#c0c0c0></TD>
<TD align=center width="6%" bgColor=#c0c0c0><FONT face=serif size=2>2006</FONT> </TD>
<TD align=center width="1%" bgColor=#c0c0c0></TD>
<TD align=center width="13%" bgColor=#c0c0c0><FONT face=serif size=2>2007</FONT> </TD></TR>
<TR vAlign=bottom>
<TD align=left width="45%" colSpan=2><FONT face=serif size=2>Bruce R. Culver(1)(2)(3)</FONT> </TD>
<TD align=center width="1%"></TD>
<TD align=center width="1%"><FONT face=serif size=2>61</FONT> </TD>
<TD align=left width="1%"></TD>
<TD align=left width="30%"><FONT face=serif size=2>Director</FONT> </TD>
<TD align=center width="1%"></TD>
<TD align=center width="6%"><FONT face=serif size=2>1994</FONT> </TD>
<TD align=center width="1%"></TD>
<TD align=center width="13%"><FONT face=serif size=2>2007</FONT> </TD></TR>
<TR vAlign=bottom>
<TD align=left width="45%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Michael Garnreiter(1)((3)(4)</FONT>&nbsp; </TD>
<TD align=center width="1%" bgColor=#c0c0c0></TD>
<TD align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>55</FONT> </TD>
<TD align=left width="1%" bgColor=#c0c0c0></TD>
<TD align=left width="30%" bgColor=#c0c0c0><FONT face=serif size=2>Director</FONT> </TD>
<TD align=center width="1%" bgColor=#c0c0c0></TD>
<TD align=center width="6%" bgColor=#c0c0c0><FONT face=serif size=2>2006</FONT> </TD>
<TD align=center width="1%" bgColor=#c0c0c0></TD>
<TD align=center width="13%" bgColor=#c0c0c0><FONT face=serif size=2>2007</FONT> </TD></TR>
<TR vAlign=bottom>
<TD align=left width="45%" colSpan=2><B><FONT face=serif size=2>Directors Continuing in Office</FONT></B>&nbsp; </TD>
<TD align=left width="1%"></TD>
<TD align=left width="1%">&nbsp; </TD>
<TD align=left width="1%"></TD>
<TD align=left width="30%">&nbsp; </TD>
<TD align=left width="1%"></TD>
<TD align=left width="6%">&nbsp; </TD>
<TD align=left width="1%"></TD>
<TD align=left width="13%">&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD align=left width="45%" bgColor=#c0c0c0 colSpan=2><I><FONT face=serif color=#231f20 size=2><U>Class B</U></FONT></I> &nbsp;</TD>
<TD align=left width="1%" bgColor=#c0c0c0></TD>
<TD align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
<TD align=left width="1%" bgColor=#c0c0c0></TD>
<TD align=left width="30%" bgColor=#c0c0c0>&nbsp; </TD>
<TD align=left width="1%" bgColor=#c0c0c0></TD>
<TD align=left width="6%" bgColor=#c0c0c0>&nbsp; </TD>
<TD align=left width="1%" bgColor=#c0c0c0></TD>
<TD align=left width="13%" bgColor=#c0c0c0>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD align=left width="45%" colSpan=2><FONT face=serif size=2>Patrick W. Smith</FONT> </TD>
<TD align=center width="1%"></TD>
<TD align=center width="1%"><FONT face=serif size=2>36</FONT> </TD>
<TD align=left width="1%"></TD>
<TD align=left width="30%"><FONT face=serif size=2>Chief Executive Officer and Director</FONT> </TD>
<TD align=center width="1%"></TD>
<TD align=center width="6%"><FONT face=serif size=2>1993</FONT> </TD>
<TD align=center width="1%"></TD>
<TD align=center width="13%"><FONT face=serif size=2>2008</FONT> </TD></TR>
<TR vAlign=bottom>
<TD align=left width="45%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Mark W. Kroll</FONT> </TD>
<TD align=center width="1%" bgColor=#c0c0c0></TD>
<TD align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>55</FONT> </TD>
<TD align=left width="1%" bgColor=#c0c0c0></TD>
<TD align=left width="30%" bgColor=#c0c0c0><FONT face=serif size=2>Director</FONT> </TD>
<TD align=center width="1%" bgColor=#c0c0c0></TD>
<TD align=center width="6%" bgColor=#c0c0c0><FONT face=serif size=2>2003</FONT> </TD>
<TD align=center width="1%" bgColor=#c0c0c0></TD>
<TD align=center width="13%" bgColor=#c0c0c0><FONT face=serif size=2>2008</FONT> </TD></TR>
<TR vAlign=bottom>
<TD align=left width="45%" colSpan=2><FONT face=serif size=2>Judy Martz(1)(3)(4)</FONT> </TD>
<TD align=center width="1%"></TD>
<TD align=center width="1%"><FONT face=serif size=2>63</FONT> </TD>
<TD align=left width="1%"></TD>
<TD align=left width="30%"><FONT face=serif size=2>Director</FONT> </TD>
<TD align=center width="1%"></TD>
<TD align=center width="6%"><FONT face=serif size=2>2005</FONT> </TD>
<TD align=center width="1%"></TD>
<TD align=center width="13%"><FONT face=serif size=2>2008</FONT> </TD></TR>
<TR vAlign=bottom>
<TD align=left width="45%" bgColor=#c0c0c0 colSpan=2><I><FONT face=serif color=#231f20 size=2><U>Class C</U></FONT></I> &nbsp;</TD>
<TD align=left width="1%" bgColor=#c0c0c0></TD>
<TD align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
<TD align=left width="1%" bgColor=#c0c0c0></TD>
<TD align=left width="30%" bgColor=#c0c0c0>&nbsp; </TD>
<TD align=left width="1%" bgColor=#c0c0c0></TD>
<TD align=left width="6%" bgColor=#c0c0c0>&nbsp; </TD>
<TD align=left width="1%" bgColor=#c0c0c0></TD>
<TD align=left width="13%" bgColor=#c0c0c0>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD align=left width="45%" colSpan=2><FONT face=serif size=2>Thomas P. Smith</FONT> </TD>
<TD align=center width="1%"></TD>
<TD align=center width="1%"><FONT face=serif size=2>39</FONT> </TD>
<TD align=left width="1%"></TD>
<TD align=left width="30%"><FONT face=serif size=2>Chairman of the Board of Directors</FONT> </TD>
<TD align=center width="1%"></TD>
<TD align=center width="6%"><FONT face=serif size=2>1993</FONT> </TD>
<TD align=center width="1%"></TD>
<TD align=center width="13%"><FONT face=serif size=2>2009</FONT> </TD></TR>
<TR vAlign=bottom>
<TD align=left width="45%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Matthew R. McBrady(1)(2)(4)</FONT> </TD>
<TD align=center width="1%" bgColor=#c0c0c0></TD>
<TD align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>36</FONT> </TD>
<TD align=left width="1%" bgColor=#c0c0c0></TD>
<TD align=left width="30%" bgColor=#c0c0c0><FONT face=serif size=2>Director</FONT> </TD>
<TD align=center width="1%" bgColor=#c0c0c0></TD>
<TD align=center width="6%" bgColor=#c0c0c0><FONT face=serif size=2>2001</FONT> </TD>
<TD align=center width="1%" bgColor=#c0c0c0></TD>
<TD align=center width="13%" bgColor=#c0c0c0><FONT face=serif size=2>2009</FONT> </TD></TR>
<TR vAlign=bottom>
<TD align=left width="45%" colSpan=2><FONT face=serif size=2>Richard H. Carmona</FONT> </TD>
<TD align=center width="1%"></TD>
<TD align=center width="1%"><FONT face=serif size=2>57</FONT> </TD>
<TD align=left width="1%"></TD>
<TD align=left width="30%"><FONT face=serif size=2>Director</FONT> </TD>
<TD align=center width="1%"></TD>
<TD align=center width="6%"><FONT face=serif size=2>2007</FONT> </TD>
<TD align=center width="1%"></TD>
<TD align=center width="13%"><FONT face=serif size=2>2009</FONT> </TD></TR>
</TABLE>

____________________<BR><BR>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(1)</FONT></TD>
<TD noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD width="100%"><FONT face=serif size=2>Member of the Audit Committee.</FONT></TD></TR>
<TR>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(2)</FONT></TD>
<TD noWrap></TD>
<TD width="100%"><FONT face=serif size=2>Member of the Compensation Committee.</FONT></TD></TR>
<TR>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(3)</FONT></TD>
<TD noWrap></TD>
<TD width="100%"><FONT face=serif size=2>Member of the Nominating Committee.</FONT></TD></TR>
<TR>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(4)</FONT></TD>
<TD noWrap></TD>
<TD width="100%"><FONT face=serif size=2>Member of the Litigation Committee.</FONT></TD></TR>
</TABLE>


<P align=center><FONT face=serif size=2>2</FONT></P>

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<PAGE>

<P align=justify><B><FONT face=serif size=2>Directors</FONT></B></P>

<P align=justify><FONT face=serif color=#231f20 size=2><FONT color=#000000 size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><U>Nominees for Election at the Annual Meeting</U></I></FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>Lt. General (USA, Retired) John S. Caldwell</FONT></I><FONT face=serif size=2>. General Caldwell has served as a director of the Company since June 2006 and was first identified as a board candidate by a management director. General Caldwell is currently Executive Vice President, Defense Solutions, Perot Systems Government Services and has held that position since February 2007. General Caldwell was Senior Vice President, Defense Information Technology Solutions, QSS Group, Inc. from July 2004 through February 2007 at which time QSS Group Inc. was merged into Perot Systems Government Services. From November 2001 through January 2004, General Caldwell was a Lieutenant General in the United States Army and Military Deputy to the Assistant Secretary of the Army for Acquisition, Logistics and Technology. General Caldwell holds a Bachelor of Science degree from the US Military Academy at West Point, New York and a Master of Science
degree in mechanical engineering from the Georgia Institute of Technology. General Caldwell is a director of Puradyn Filter Technologies.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>Bruce R. Culver</FONT></I><FONT face=serif size=2>. Mr. Culver has served as a director of the Company since January 1994. Currently Mr. Culver is the CEO and Chairman of IdealHire, Inc. a recruitment software company he founded in 2001. In 1990, Mr. Culver co-founded and was Chairman of Professional Staff, p.l.c. (PSTF), in England, a human resource staffing company, and served on its Board of Directors until 2001. In March 1993, Mr. Culver acquired California Distribution, a company providing warehouse, transportation and distribution services. In 1985 Mr. Culver founded Lab Support, Inc., now called On Assignment, Inc. (ASGN) and served as its Chairman and a director until 1990. Mr. Culver also serves on the Board of Digital Map Products, Inc. From 1997 until 2001 Mr. Culver served on the Board of Pentawave, Inc., becoming its Chairman in October 2000. Mr. Culver holds B. Sc. and M.S. degrees in Chemistry from University of
South Dakota and Montana State University.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>Michael Garnreiter</FONT></I><FONT face=serif size=2>. Mr. Garnreiter has served as a director of the Company since June 2006 and was first identified as a board candidate by a management director. Mr. Garnreiter is currently President of Rising Sun Restaurant Group, L.L.C., a private restaurant operating company and has held that position since August 2006. From April 2002 through June 2006, Mr. Garnreiter was Executive Vice President, Treasurer, and Chief Financial Officer of the Main Street Restaurant Group. Mr. Garnreiter previously served as a general partner of the international accounting firm of Arthur Andersen from 1974 through March 2002. Mr. Garnreiter holds a Bachelor of Science degree in accounting from California State University at Long Beach and is a Certified Public Accountant. Mr. Garnreiter is a director of Knight Transportation Inc. and Amtech Systems.</FONT></P>

<P align=justify><FONT face=serif color=#231f20 size=2><FONT color=#000000 size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><U>Incumbent Directors Whose Terms of Office Continue After the Annual Meeting</U></I></FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>Vice Admiral Richard H. Carmona M.D., M.P.H., F.A.C.S</FONT></I><FONT face=serif size=2>. Dr. Carmona has served as a director of the Company since March 2007. Vice Admiral Richard H. Carmona was sworn in as the 17<SUP>th</SUP> Surgeon General of the United States on August 5, 2002 and held that position through July 30, 2006. Prior to being named United States Surgeon General, Dr. Carmona was the chairman of the State of Arizona Southern Regional Emergency Medical System, a professor of surgery, public health and family and community medicine at the University of Arizona, and the Pima County Sheriff&#146;s Department surgeon and deputy sheriff. He is currently employed as Vice Chairman of Canyon Ranch and CEO of Canyon Ranch Health in Tucson, Arizona and has held that position since October 1, 2006. Dr. Carmona attended Bronx Community College, of the City University of New York, where he earned his associate of arts degree.
Dr. Carmona holds a Bachelor of Science degree and medical degree from the University of California, San Francisco. He has also earned a masters degree of public health from the University of Arizona. Dr. Carmona is a director of Clorox.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>Mark W. Kroll Ph.D</FONT></I><FONT face=serif size=2>. Dr. Kroll has served as a director of the Company since January 2003. He recently retired (July 2005) from St. Jude Medical Inc., where he held various executive level positions since 1995, most recently as Senior Vice President and Chief Technology Officer, Cardiac Rhythm Management Division. Dr. Kroll holds a B.S. degree in Mathematics and a M.S. degree and a Ph.D. degree in Electrical Engineering from the University of Minnesota and a M.B.A. degree from the University of St. Thomas. Dr. Kroll is a director of Haemonetics (NYSE: HAE) and several private companies.</FONT></P>

<P align=center><FONT face=serif size=2>3</FONT></P>

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<PAGE>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>Judy Martz</FONT></I><FONT face=serif size=2>. Ms. Martz has served as a director of the Company since April 2005. From January 2001 through January 2004, Ms. Martz was Governor of the State of Montana and was Lieutenant Governor of the State of Montana from January 1996 through January 2000. From 1989 through 1995 Ms. Martz served as state representative for U.S. Senator Conrad Burns and campaigned with Governor Marc Racicot during part of 1995 and 1996. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>Matthew R. McBrady Ph.D. </FONT></I><FONT face=serif size=2>Dr. McBrady has served as a director of the Company since January 2001. From August 1998 through July 1999, Dr. McBrady served as a member of the staff of President Clinton&#146;s Council of Economic Advisers. Dr. McBrady taught corporate finance and economic courses at the University of Southern California during the summer terms of 1997 and 1998, at Harvard University from September 1996 through May 1997, at Harvard Business School during the spring term of 1998, and taught advanced corporate finance at the Wharton School of Business at the University of Pennsylvania from September 2002 through May 2003. From May 2003 through December 2006, Dr. McBrady taught business administration at the Darden Graduate School of Business Administration at the University of Virginia. Dr. McBrady recently joined the North American Private Equity group at Bain Capital, LLC where he
has worked since January 2007. Dr. McBrady holds a B.A. degree in Economics from Harvard University, a M.S. degree in International Economics from Oxford University (UK), and a Ph.D. degree in Business Economics from Harvard University.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2> Thomas P. Smith</FONT></I><FONT face=serif size=2>. Mr. Smith has served as a director of the Company since 1993. Mr. Smith has served as Chairman of the Board of Directors since October 2006 and as President of the Company from April 1994 through October 2006. He is a co-founder of the Company. Mr. Smith holds a B.S. degree in Ecology and Evolutionary Biology from the University of Arizona and a M.B.A. degree from Northern Arizona University.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>Patrick W. Smith</FONT></I><FONT face=serif size=2>. Mr. Smith has served as Chief Executive Officer and as a director of the Company since 1993. He is a co-founder of the Company. Mr. Smith holds a B.S. degree in Biology and Neurobiology from Harvard University, an M.B.A. degree from the University of Chicago, and a Masters Degree in International Finance from the University of Leuven in Leuven, Belgium.</FONT></P>

<P align=justify><B><FONT face=serif size=2>Executive Officers </FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>See above biographical information for Patrick W. Smith and Thomas P. Smith who are also executive officers of the Company.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>Kathleen C. Hanrahan</FONT></I><FONT face=serif size=2>. Ms. Hanrahan has served as the Company&#146;s President since October 2006 and as the Company&#146;s Chief Operating Officer from November 2003 to October 2006. Ms. Hanrahan first joined the Company in January 1996 as an internal controls consultant and served as its controller from March 1996 to November 2000 and also served as the Company&#146;s Chief Financial Officer from November 2000 through May 2004.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>Daniel M. Behrendt</FONT></I><FONT face=serif size=2>. Mr. Behrendt has served as Chief Financial Officer of the Company since April 2004. From 1998 through 2004, Mr. Behrendt served in a number of financial management positions for the Imperial Home D&#233;cor Group, including Director of Financial Planning and Analysis, Vice President and Corporate Controller and finally Senior Vice President and Chief Financial Officer. From 1995 to 1998, Mr. Behrendt served as the Manager of Business Planning and Analysis for Teledyne Fluid Systems, a division of Allegheny Teledyne. From 1991 to 1995, Mr. Behrendt served as Manager, Business Planning and Analysis for PCC Airfoils, Inc. Mr. Behrendt holds a B.S. degree in Accounting, cum laude, from Mount Union College and a M.B.A. degree from The Weatherhead School of Management at Case Western Reserve University.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Each officer serves at the discretion of our Board of Directors. No officer is subject to an agreement that requires the officer to serve the Company for a specified number of years although we have entered into employment related agreements with each of our officers. These agreements require notice of termination by the Company in certain situations that are described in further detail in this Proxy Statement under the heading &#147;Executive Compensation &#150; Employment Agreements and Other Arrangements.&#148;</FONT></P>

<P align=center><FONT face=serif size=2>4</FONT></P>

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<PAGE>

<P align=justify><B><FONT face=serif size=2>Meetings of the Board of Directors</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>During the year ended December 31, 2006, the Board of Directors held six meetings. Each director attended at least 75% of all Board and applicable Committee meetings during fiscal 2006.</FONT></P>

<P align=justify><B><FONT face=serif size=2>Committees of the Board of Directors</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Board of Directors maintains a standing Compensation Committee, Nominating Committee, Litigation Committee and Audit Committee. Messrs. Culver, Caldwell, and McBrady are the members of the Compensation Committee; Messrs. Culver, Garnreiter and Ms. Martz are the members of the Nominating Committee; Messrs. McBrady, Garnreiter, Caldwell, and Ms. Martz are the members of the Litigation Committee; and Messrs. McBrady, Garnreiter, Caldwell, Culver and Ms. Martz are the members of the Audit Committee.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Compensation Committee held two meetings during the year ended December 31, 2006. Among other matters, the Compensation Committee determines salaries, stock options and bonuses and considers employment agreements for appointed officers of the Company, and prepares reports on these matters; considers, reviews and grants options under the Company&#146;s compensation plans and administers the plans; and considers matters of director compensation, benefits and other forms of remuneration. The Report of the Compensation Committee for the year ended December 31, 2006 is included in this Proxy Statement.</FONT></P>

<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>See &#147;Compensation Discussion and Analysis&#148; for more information regarding the Compensation Committee. </FONT></P>

<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>The Nominating Committee held one meeting during the year ended December 31, 2006. The Nominating </FONT><FONT face=serif size=2>Committee is charged with, among other matters, identifying qualified candidates for nomination for election to the Board of Directors, obtaining the consent of the candidates to the nomination, and nominating such consenting candidates for election; and reviewing and making recommendations to the Board of Directors concerning the composition and size of the Board and its committees. The Nominating Committee will consider nominees recommended by stockholders provided such recommendations are made in accordance with procedures described in this Proxy Statement under &#147;Stockholder Proposals.&#148; When considering a potential director candidate, the Nominating Committee looks for demonstrated character, judgment, relevant business, functional and industry experience, and a high
degree of business, engineering, medical, or law enforcement acumen. The Nominating Committee&#146;s process for identifying and evaluating nominees typically involves a series of internal discussions, review of information concerning candidates and interviews with selected candidates. There are no differences in the manner in which the Nominating Committee evaluates nominees for director based on whether the nominee is recommended by a stockholder. The Company has not historically paid third parties to identify or assist in identifying or evaluating potential nominees.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Audit Committee held five meetings during the year ended December 31, 2006. Among other things, the function of the Audit Committee is to exercise sole authority with respect to the selection of the Company&#146;s independent registered public accounting firm and the terms of their engagement; review the policies and procedures of the Company and management with respect to maintaining the Company&#146;s books and records; review with the independent registered public accounting firm, upon the completion of their audit, the results of the auditing engagement and any other recommendations the independent registered public accounting firm may have with respect to the Company&#146;s financial, accounting or auditing systems; and review with the independent registered public accounting firm, upon the completion of their quarterly review of the Company&#146;s financial statements, the results of the quarterly review and any other
recommendations the independent registered public accounting firm may have in connection with their review. The report of the Audit Committee for the year ended December 31, 2006 is included in this Proxy Statement. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Litigation Committee held two meetings during the year ended December 31, 2006. The Litigation Committee was established in July 2006 for the purpose of reviewing, approving and ensuring that any settlement of pending litigation against the Company or its officers and directors is fair, reasonable and in the best interests of the Company&#146;s stockholders. No member of the Litigation Committee was a named party in any pending litigation. </FONT></P>

<P align=center><FONT face=serif size=2>5</FONT></P>

<HR align=center width="100%" noShade SIZE=2>


<PAGE>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Audit Committee, Nominating Committee and the Compensation Committee have each adopted charters that govern their respective authority, responsibilities and operation. The charters of the Audit Committee, Nominating Committee and the Compensation Committee are available on our Web site at </FONT><I><FONT face=serif size=2>www.taser.com</FONT></I><FONT face=serif size=2>. </FONT></P>

<P align=justify><B><FONT face=serif size=2>Audit Committee Financial Experts</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Dr. Matthew R. McBrady and Michael Garnreiter, independent directors of the Company, are audit committee financial experts within the meaning of that term under applicable rules promulgated by the SEC. Information about the past business and educational experience of Messrs. McBrady and Garnreiter is included in this Proxy Statement under the heading &#147;Proposal One: Election of Directors&#151;Directors. The Board has also determined that each current member of the Audit Committee is financially competent under the current listing standards of NASDAQ.</FONT></P>

<P align=justify><B><FONT face=serif size=2>Director Independence</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> As of the date of this Proxy Statement, based upon the information submitted by each of its directors, the Board has made a determination that a majority of our current board is independent as that term is defined by NASDAQ listing standards and Rule 10A-3(b)(1) under the Securities Exchange Act of 1934 (the &#147;Exchange Act&#148;). The following directors are currently deemed &#147;independent&#148; by the Board: John S. Caldwell, Bruce R. Culver, Michael Garnreiter, Judy Martz, Matthew R. McBrady and Richard H. Carmona. Each of these directors are also &#147;non-employee directors&#148; (within the meaning of Rule 16b-3 under the Exchange Act) and are &#147;outside directors&#148; within the meaning of Section 162(m) of the Code and Treasury Regulations Sections 1.162- 27(e)(3). As of the date of this Proxy Statement, all of our Board committees members have been determined to be independent directors and to also meet any
additional &#147;independence&#148; standards applicable to functioning in any committee in which such director serves, including the more stringent Audit Committee independence criteria.</FONT></P>

<P align=justify><B><FONT face=serif size=2>Stockholder Communications with Directors</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Stockholders may communicate with members of the Board of Directors by mail addressed to the Chairman, any other individual member of the Board, to the full Board, or to a particular committee of the Board. In each case, such correspondence should be sent to the Company&#146;s headquarters at 17800 North 85<SUP>th</SUP> Street, Scottsdale, AZ 85255. All stockholder communications will be forwarded to each individual member of the Board. </FONT></P>

<P align=justify><B><FONT face=serif size=2>Director Attendance at Annual Meetings of Stockholders</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Directors are encouraged by the Company to attend each annual meeting of stockholders if their schedules permit. All directors attended the 2006 annual meeting of stockholders and all of the directors are expected to be in attendance at the 2007 Annual Meeting.</FONT></P>

<P align=justify><B><FONT face=serif size=2>Shareholder Derivative Litigation </FONT></B></P>

<P align=justify><B><I><FONT face=serif size=2>&nbsp;&nbsp; Shareholder Derivative Litigation</FONT></I></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Beginning in January 2005, numerous shareholder derivative actions were filed against the Company&#146;s officers and directors. Such actions have been filed in the United States District Court for the District of Arizona, the Arizona Superior Court in Maricopa County, and the Delaware Chancery Court in New Castle County. The derivative actions pending in the Arizona Superior Court and the Delaware Chancery Court have been stayed pending resolution of the consolidated Arizona District Court action.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The plaintiffs in the Arizona District Court action filed a consolidated complaint on May 13, 2005. The Company and the individual defendants filed motions to dismiss the consolidated complaint on August 19, 2005. On March 17, 2006, the Court denied the motions to dismiss. Defendants answered the consolidated complaint on April 21, 2006. Discovery has commenced and no trial date has been set.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The derivative complaints generally allege that the individual defendants breached the fiduciary duties that they owe to the Company and its stockholders by reason of their positions as officers and/or directors of the Company. The complaints claim that such duties were breached by defendants&#146; disclosure of allegedly false </FONT></P>

<P align=center><FONT face=serif size=2>6</FONT></P>

<HR align=center width="100%" noShade SIZE=2>


<PAGE>

<P align=justify><FONT face=serif size=2>or misleading statements about the safety and effectiveness of Company products and the Company&#146;s financial results. The complaints also allege that the defendants breached their fiduciary duties by the use of non-public information regarding the safety of Company products and the Company&#146;s financial condition and future business prospects to commit insider trading of the Company&#146;s Common Stock. The derivative plaintiffs seek damages and restitutionary, equitable, injunctive and other relief.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>On December 8, 2006, the parties filed with the Arizona District Court a joint Stipulation of Settlement and related documents, which set forth the terms of settlement of the Arizona District Court action, the Arizona Superior Court action and the Delaware Chancery Court action. Settlement terms include, among other things, the Company&#146;s adoption of certain corporate governance provisions, settlement between the defendants and the Company&#146;s insurance carrier, and the Company&#146;s payment of plaintiffs&#146; attorneys&#146; fees in the amount of $1.75 million in Company Common Stock valued as set forth in the Stipulation. On December 13, 2006, the Arizona District Court entered an order, which among other things, approved preliminarily the Stipulation of Settlement, provided for notice of the Settlement, set forth for the submissions of objections to the Settlement, and set a final Settlement Hearing. On March 13, 2007
the Arizona District Court entered a final order approving the Stipulation of Settlement and dismissing with prejudice all derivative actions consolidated in District Court litigation. On March 20, 2007, the derivative lawsuits pending in the Arizona Superior Court and the Delaware Chancery Court were dismissed by the respective courts. </FONT></P>

<P align=justify><B><FONT face=serif size=2>Code of Ethics</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company has adopted a Code of Ethics which is applicable to all employees, directors and consultants of the Company. A copy of the Company&#146;s Code of Ethics is published and available on the Company&#146;s website at </FONT><I><FONT face=serif size=2>www.taser.com</FONT></I><FONT face=serif size=2>. The Company intends to disclose future amendments to provisions of the Code of Ethics, or waivers of such provisions granted to executive officers, on the Company&#146;s website within four business days following the date of such amendment or waiver, unless otherwise required by Nasdaq rules to disclose such event on Form 8-K.</FONT></P>

<P align=justify><B><FONT face=serif size=2>Family Relationships </FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Thomas P. Smith and Patrick W. Smith are brothers. No other family relationships exist among the Company&#146;s directors and executive officers. </FONT></P>

<P align=center><B><FONT face=serif size=2>COMPENSATION OF DIRECTORS</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Members of the Board of Directors who are officers of the Company are not separately compensated for serving on the Board of Directors. Directors who are not officers of the Company are paid $7,500 per quarter and are eligible to receive option grants under the 2004 Outside Directors Stock Option Plan. The chairman of the Audit Committee receives an additional $2,500 per quarter, and the chairman of the Board of Directors and the chairman of the Compensation Committee each receive an additional $1,250 per quarter. All directors are also reimbursed for expenses incurred in connection with attendance at meetings.</FONT></P>

<P align=center><FONT face=serif size=2>7</FONT></P>

<HR align=center width="100%" noShade SIZE=2>


<PAGE>

<P align=center><B><FONT face=serif size=2>DIRECTORS COMPENSATION TABLE</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The following table summarizes the compensation paid to non-employee directors for the fiscal year ended December 31, 2006.</FONT></P>

<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
<TD vAlign=middle align=left width="17%" colSpan=2>&nbsp; </TD>
<TD vAlign=middle align=center width="57%"></TD>
<TD vAlign=middle noWrap align=center width="5%"><B><FONT face=serif size=1>&nbsp;Fees Earned or </FONT></B></TD>
<TD vAlign=middle align=left width="2%"></TD>
<TD vAlign=middle align=left width="5%">&nbsp; </TD>
<TD vAlign=middle align=right width="2%"></TD>
<TD vAlign=middle noWrap align=center width="5%"><FONT face=serif size=1><B>&nbsp;All Other </B></FONT></TD>
<TD vAlign=middle align=left width="2%"></TD>
<TD vAlign=middle align=left width="5%">&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD vAlign=middle align=left width="17%" colSpan=2>&nbsp; </TD>
<TD vAlign=middle align=center width="57%"></TD>
<TD vAlign=middle noWrap align=center width="5%"><B><FONT face=serif size=1>&nbsp;Paid in Cash </FONT></B></TD>
<TD vAlign=middle align=center width="2%"></TD>
<TD vAlign=middle noWrap align=center width="5%"><FONT face=serif size=1><B>&nbsp;Option Awards (2) </B></FONT></TD>
<TD vAlign=middle align=center width="2%"></TD>
<TD vAlign=middle noWrap align=center width="5%"><FONT face=serif size=1><B>&nbsp;Compensation (3) </B></FONT></TD>
<TD vAlign=middle align=left width="2%"></TD>
<TD vAlign=middle noWrap align=center width="5%"><B><FONT face=serif size=1>&nbsp;Total </FONT></B></TD></TR>
<TR vAlign=bottom>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=middle noWrap align=left width="1%"><B><FONT face=serif color=#231f20 size=1>Name (1)</FONT></B></TD>
<TD vAlign=middle noWrap align=left width="16%">&nbsp;</TD>
<TD vAlign=middle align=center width="57%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=middle noWrap align=center width="5%"><B><FONT face=serif size=1>&nbsp;($) </FONT></B></TD>
<TD vAlign=middle noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=middle noWrap align=center width="5%"><FONT face=serif size=1><B>&nbsp;($) </B></FONT></TD>
<TD vAlign=middle align=center width="2%">&nbsp;&nbsp;&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=middle noWrap align=center width="5%"><FONT face=serif size=1><B>&nbsp;($) </B></FONT></TD>
<TD vAlign=middle noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=middle noWrap align=center width="5%"><FONT face=serif size=1><B>&nbsp;($) </B></FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="17%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Matthew R. McBrady</FONT>&nbsp; </TD>
<TD align=center width="57%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2>34,000</FONT>&nbsp; </TD>
<TD align=right width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>7,713&nbsp;&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;&nbsp;&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>41,713</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="17%" colSpan=2><FONT face=serif size=2>Bruce R. Culver</FONT>&nbsp; </TD>
<TD align=center width="57%"></TD>
<TD noWrap align=center width="5%"><FONT face=serif size=2>28,250</FONT>&nbsp; </TD>
<TD align=right width="2%"></TD>
<TD noWrap align=right width="5%"><FONT face=serif size=2>7,713&nbsp;&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%"></TD>
<TD noWrap align=right width="5%"><FONT face=serif size=2>&#151;&nbsp;&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%"></TD>
<TD noWrap align=right width="5%"><FONT face=serif size=2>35,963</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="17%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Judy Martz</FONT>&nbsp; </TD>
<TD align=center width="57%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2>24,500</FONT>&nbsp; </TD>
<TD align=right width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>136,325&nbsp;&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;&nbsp;&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>160,825</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="17%" colSpan=2><FONT face=serif size=2>Mark W. Kroll</FONT>&nbsp; </TD>
<TD align=center width="57%"></TD>
<TD noWrap align=center width="5%"><FONT face=serif size=2>23,750</FONT>&nbsp; </TD>
<TD align=right width="2%"></TD>
<TD noWrap align=right width="5%"><FONT face=serif size=2>4,891&nbsp;&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%"></TD>
<TD noWrap align=right width="5%"><FONT face=serif size=2>197,000&nbsp;&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%"></TD>
<TD noWrap align=right width="5%"><FONT face=serif size=2>225,641</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="17%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Michael Garnreiter (4)</FONT>&nbsp; </TD>
<TD align=center width="57%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2>15,000</FONT>&nbsp; </TD>
<TD align=right width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>11,777&nbsp;&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;&nbsp;&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>26,777</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="17%" colSpan=2><FONT face=serif size=2>John S. Caldwell (4)</FONT>&nbsp; </TD>
<TD align=center width="57%"></TD>
<TD noWrap align=center width="5%"><FONT face=serif size=2>15,000</FONT>&nbsp; </TD>
<TD align=right width="2%">&nbsp;</TD>
<TD noWrap align=right width="5%"><FONT face=serif size=2>11,777&nbsp;&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%"></TD>
<TD noWrap align=right width="5%"><FONT face=serif size=2>&#151;&nbsp;&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%"></TD>
<TD noWrap align=right width="5%"><FONT face=serif size=2>26,777</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="17%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Phillips W. Smith (5)</FONT>&nbsp; </TD>
<TD align=center width="57%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2>27,500</FONT>&nbsp; </TD>
<TD align=right width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>4,366&nbsp;&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;&nbsp;&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>31,866</FONT>&nbsp; </TD></TR>
</TABLE>

____________________<BR><BR>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(1)</FONT></TD>
<TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD width="100%">
<P align=justify><FONT face=serif size=2>Thomas P. Smith our Chairman of the Board and Patrick W. Smith our Chief Executive Officer, are not included in this table as they are employees of the Company and thus receive no additional compensation for their services as a director. Their compensation received as employees of the Company is shown in the Summary Compensation Table on page 17. Richard Carmona was appointed a director of the Company in March 2007 and he is not included in this table since he was not a director during 2006.</FONT></P>
</TD></TR>
<TR>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(2)</FONT></TD>
<TD vAlign=top noWrap></TD>
<TD width="100%">
<P align=justify><FONT face=serif size=2>Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2006 in accordance with SFAS 123(R) and thus includes amounts that were granted in and prior to 2006. Pursuant to SEC regulations, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Assumptions included in the calculation of this amount for the fiscal year ended December 31, 2006 are included in footnote 2p to our financial statements for the fiscal year ended December 31, 2006, included in our Annual Report on Form 10-K filed with the SEC.</FONT></P>
</TD></TR>
<TR>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(3)</FONT></TD>
<TD vAlign=top noWrap></TD>
<TD width="100%">
<P align=justify><FONT face=serif size=2>Other compensation for Dr. Kroll relates to fees for consultancy services provided. Dr. Kroll provides expert consulting services for the Company&#146;s litigation as well as engineering consulting services.</FONT></P>
</TD></TR>
<TR>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(4)</FONT></TD>
<TD vAlign=top noWrap></TD>
<TD width="100%">
<P align=justify><FONT face=serif size=2>Mr. Caldwell and Mr. Garnreiter joined the Board of Directors effective June 28, 2006 and June 29, 2006, respectively.</FONT></P>
</TD></TR>
<TR>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(5)</FONT></TD>
<TD vAlign=top noWrap></TD>
<TD width="100%">
<P align=justify><FONT face=serif size=2>Mr. Smith resigned from the Board of Directors effective October 23, 2006.</FONT></P>
</TD></TR>
</TABLE>


<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The following table shows the aggregate number of outstanding option awards for the Company&#146;s non-employee directors as of December 31, 2006 as well as option awards granted in 2006 and their grant date fair values.</FONT></P>

<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
<TD vAlign=middle align=left width="22%" colSpan=2>&nbsp; </TD>
<TD vAlign=middle align=left width="54%"></TD>
<TD vAlign=middle align=left width="4%">&nbsp; </TD>
<TD vAlign=middle align=center width="2%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=middle noWrap align=center width="18%" colSpan=5><FONT face=serif size=1><B>2</B></FONT><FONT face=serif color=#231f20 size=1><B>006 Option Awards</B></FONT></TD></TR>
<TR vAlign=bottom>
<TD vAlign=middle align=left width="22%" colSpan=2>&nbsp; </TD>
<TD vAlign=middle align=right width="54%"></TD>
<TD vAlign=middle noWrap align=center width="4%"><FONT face=serif size=1><B>&nbsp;Aggregate </B></FONT></TD>
<TD vAlign=middle align=left width="2%"></TD>
<TD vAlign=middle align=left width="4%">&nbsp; </TD>
<TD vAlign=middle align=left width="2%"></TD>
<TD vAlign=middle align=left width="5%">&nbsp; </TD>
<TD vAlign=middle align=center width="2%"></TD>
<TD vAlign=middle noWrap align=center width="5%"><FONT face=serif size=1><B>&nbsp;Grant Date </B></FONT></TD></TR>
<TR vAlign=bottom>
<TD vAlign=middle align=left width="22%" colSpan=2>&nbsp; </TD>
<TD vAlign=middle align=right width="54%"></TD>
<TD vAlign=middle noWrap align=center width="4%"><FONT face=serif size=1><B>&nbsp;Options </B></FONT></TD>
<TD vAlign=middle align=right width="2%"></TD>
<TD vAlign=middle noWrap align=center width="4%"><FONT face=serif size=1><B>&nbsp;Options</B></FONT></TD>
<TD vAlign=middle align=left width="2%"></TD>
<TD vAlign=middle align=left width="5%">&nbsp; </TD>
<TD vAlign=middle align=center width="2%"></TD>
<TD vAlign=middle noWrap align=center width="5%"><FONT face=serif size=1><B>&nbsp;Fair Value </B></FONT></TD></TR>
<TR vAlign=bottom>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=middle noWrap align=left width="1%"><B><FONT face=serif color=#231f20 size=1>Name</FONT></B></TD>
<TD vAlign=middle align=left width="21%">&nbsp;</TD>
<TD vAlign=middle align=center width="54%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=middle noWrap align=center width="4%"><FONT face=serif color=#231f20 size=1><B>&nbsp;Outstanding&nbsp; </B></FONT></TD>
<TD vAlign=middle noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=middle noWrap align=center width="4%"><FONT face=serif size=1><B>&nbsp;Granted (a) </B></FONT></TD>
<TD vAlign=middle noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=middle noWrap align=center width="5%"><FONT face=serif color=#231f20 size=1><B>&nbsp;Grant Date </B></FONT></TD>
<TD vAlign=middle noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=middle noWrap align=center width="5%"><FONT face=serif size=1><B>&nbsp;($) </B></FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="22%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Matthew R. McBrady</FONT>&nbsp; </TD>
<TD align=right width="54%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>169,843&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>4,175&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=center width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>5/24/2006</FONT>&nbsp; </TD>
<TD align=center width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>21,209</FONT>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="22%" colSpan=2><FONT face=serif size=2>Bruce R. Culver</FONT>&nbsp; </TD>
<TD align=right width="54%"></TD>
<TD noWrap align=right width="4%"><FONT face=serif size=2>166,509&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%"></TD>
<TD noWrap align=right width="4%"><FONT face=serif size=2>4,175&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=center width="2%"></TD>
<TD noWrap align=center width="5%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>5/24/2006</FONT>&nbsp; </TD>
<TD align=center width="2%"></TD>
<TD noWrap align=center width="5%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>21,209</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="22%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Judy Martz</FONT>&nbsp; </TD>
<TD align=right width="54%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>64,175&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>4,175&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=center width="2%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>5/24/2006</FONT>&nbsp; </TD>
<TD align=center width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>21,209</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="22%" colSpan=2><FONT face=serif size=2>Mark W. Kroll</FONT>&nbsp; </TD>
<TD align=right width="54%"></TD>
<TD noWrap align=right width="4%"><FONT face=serif size=2>154,841&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%"></TD>
<TD noWrap align=right width="4%"><FONT face=serif size=2>4,175&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=center width="2%"></TD>
<TD noWrap align=center width="5%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>5/24/2006</FONT>&nbsp; </TD>
<TD align=center width="2%"></TD>
<TD noWrap align=center width="5%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>21,209</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="22%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Michael Garnreiter</FONT>&nbsp; </TD>
<TD align=right width="54%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>19,305&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>19,305&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=center width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>6/29/2006</FONT>&nbsp; </TD>
<TD align=center width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>79,730</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="22%" colSpan=2><FONT face=serif size=2>John S. Caldwell</FONT>&nbsp; </TD>
<TD align=right width="54%"></TD>
<TD noWrap align=right width="4%"><FONT face=serif size=2>19,108&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%"></TD>
<TD noWrap align=right width="4%"><FONT face=serif size=2>19,108&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=center width="2%"></TD>
<TD noWrap align=center width="5%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>6/28/2006</FONT>&nbsp;</TD>
<TD align=center width="2%"></TD>
<TD noWrap align=center width="5%"><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>80,254</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="22%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Phillips W. Smith</FONT>&nbsp; </TD>
<TD align=right width="54%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>96,750&nbsp; </FONT>&nbsp; </TD>
<TD align=right width="2%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>4,175&nbsp;&nbsp; </FONT>&nbsp; </TD>
<TD align=center width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>5/24/2006</FONT>&nbsp;</TD>
<TD align=center width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>21,209</FONT>&nbsp; </TD></TR>
</TABLE>

____________________<BR><BR>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TR>
<TD vAlign=top noWrap><B><FONT face=serif size=2>(a)</FONT></B></TD>
<TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD width="100%">
<P align=justify><FONT face=serif size=2>Pursuant to the 2004 Outside Directors Stock Option Plan, new directors receive an initial grant of stock options equal to $150,000 in face value of the Company&#146;s Common Stock underlying the stock options. Subsequent annual options grants are equal to $40,000 in face value of the Company&#146;s common stock underlying the stock options. The strike price of both initial and subsequent grants is equal to the closing price as reported by NASDAQ on the day before the grant date. Annual option awards are granted on the date of the Company&#146;s Annual Stockholder Meeting.</FONT></P>
</TD></TR>
</TABLE>


<P align=center><FONT face=serif size=2>8</FONT></P>

<HR align=center width="100%" noShade SIZE=2>


<PAGE>

<P align=center><B><FONT face=serif size=2>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>It is the Company&#146;s policy that all related party transactions will be reviewed by its Board of Directors and the Audit Committee. It is the policy of the Company&#146;s Board of Directors that all proposed transactions by the Company with its directors, officers, five-percent stockholders and their affiliates be entered into or approved only if such transactions are on terms no less favorable to the Company than it could obtain from unaffiliated parties, are reasonably expected to benefit the Company and are approved by the Audit Committee. The Audit Committee is authorized to consult with independent legal counsel at the Company&#146;s expense in determining whether to approve any such transaction. </FONT></P>

<P align=justify><B><I><FONT face=serif size=2>&nbsp;&nbsp; Aircraft charter </FONT></I></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company reimbursed Thomas P. Smith for business use of his personal aircraft in 2006. For the year ended December 31, 2006, the Company incurred expenses of approximately $487,000 to Thomas P. Smith and Four Futures Corporation (&#147;Four Futures&#148;), which is wholly-owned by Thomas P. Smith, Chairman of the Board of Directors of the Company, and his family. At December 31, 2006, the Company had outstanding payables of approximately $36,000 to Thomas P. Smith, and no amounts due from Thomas P. Smith or Four Futures. The Company believes that the rates charged by Mr. Smith or Four Futures are equal to or below commercial rates the Company would pay to charter similar aircraft from independent charter companies.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Prior to 2006, the Company also chartered an aircraft for business travel from Thundervolt, LLC (&#147;Thundervolt&#148;), which is wholly owned by Patrick W. Smith, Chief Executive Officer of the Company, and Phillips W. Smith, former Chairman of the Company&#146;s Board of Directors. During January 2006, the Company ceased the charter of this aircraft.</FONT></P>

<P align=justify><B><I><FONT face=serif size=2>&nbsp;&nbsp; TASER Foundation</FONT></I></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>In November 2004, the Company established the TASER Foundation. The TASER Foundation is an Internal Revenue Code Section 501(c)(3) non-profit corporation and has been granted tax exempt status by the IRS. The TASER Foundation&#146;s mission is to honor the service and sacrifice of local and federal law enforcement officers in the United States and Canada lost in the line of duty by providing financial support to their families. Daniel M. Behrendt, an officer of the Company, serves on the Board of Directors of the TASER Foundation. Patrick W. Smith and Thomas P. Smith resigned from the Board of Directors of the TASER Foundation in January 2006. Over half of the initial $1 million endowment was contributed directly by the Company&#146;s employees. The Company bears all administrative costs of the TASER Foundation in order to ensure 100% of all donations are distributed to the families of fallen officers. For the year ended December
31, 2006, the Company incurred approximately $228,000 in such administrative costs. For the year ended December 31, 2006, the Company contributed $275,000 to the TASER Foundation.</FONT></P>

<P align=justify><B><I><FONT face=serif size=2>&nbsp;&nbsp; Consulting services </FONT></I></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Beginning in August 2005, the Company agreed to pay Mark Kroll, a member of the Board of Directors, a retainer of $8,000 per month to provide consulting services. The cumulative expense for the period ended December 31, 2006 was approximately $197,000. At December 31, 2006, the Company had accounts payable of approximately $24,000 related to these services. </FONT></P>

<P align=center><FONT face=serif size=2>9</FONT></P>

<HR align=center width="100%" noShade SIZE=2>


<PAGE>

<P align=center><B><FONT face=serif size=2>REPORT OF THE AUDIT COMMITTEE*</FONT></B></P>

<P align=justify><FONT face=serif size=2>Board of Directors <BR>TASER International, Inc. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>As further discussed below, the Audit Committee of the Board of Directors reviews the Company&#146;s financial reporting process on behalf of the Board. The Audit Committee has sole authority to retain, set compensation and retention terms for, terminate, oversee and evaluate the work of the Company&#146;s independent auditors. The independent auditors report directly to the Audit Committee. The Board has determined that each member of the Audit Committee meets the independence and financial literacy requirements set forth by the SEC and the NASDAQ, and that Dr. Mathew R. McBrady and Michael Garnreiter each qualify as audit committee financial experts (as defined by the SEC).</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Company&#146;s management is responsible for the Company&#146;s financial reporting process including its system of internal controls, and for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States. Grant Thornton LLP, the Company&#146;s independent registered public accounting firm, is responsible for expressing an opinion based on their audits of the consolidated financial statements. In accordance with its written charter, the Audit Committee assists the Board of Directors in its oversight of (i) the integrity of the Company&#146;s financial statements and the Company&#146;s financial reporting processes and systems of internal control, (ii) the qualifications, independence and performance of the Company&#146;s independent public accounting firm and the performance of the Company&#146;s internal audit function, (iii) the Company&#146;s compliance
with legal and regulatory requirements involving financial, accounting and internal control matters, (iv) investigations into complaints concerning financial matters and (v) risks that may have a significant impact on the Company&#146;s financial statements.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Further, the Audit Committee reviews reports prepared by management on various matters including critical accounting policies and issues, material written communications between the independent auditors and management, significant changes in the Company&#146;s selection or application of accounting principles and significant changes to internal control procedures. It is not the duty or responsibility of the Audit Committee to conduct auditing and accounting reviews or procedures.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>In discharging its oversight responsibilities with respect to the audit process, the Audit Committee (i) obtained from the independent public accounting firm a formal written statement describing all relationships between the independent public accounting firm and the Company that might bear on the independent public accounting firm&#146;s independence consistent with Independence Standards Board Standard No. 1, &#147;Independence Discussions with Audit Committees&#148;, (ii) discussed with the independent auditing firm any relationships that may impact its objectivity and independence, and (iii) considered whether the non-audit services provided to the Company by Grant Thornton LLP are compatible with maintaining their independence. The Audit Committee also discussed with the independent auditing firm their identification of audit risk, audit plans and audit scope, as well as all communications required by generally accepted
auditing standards, including those described in Statement on Auditing Standard No. 61, as amended, &#147;Communications with Audit Committees&#148;.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Audit Committee reviewed and discussed with management and its independent public auditors our annual audited financial statements and quarterly financial statements, including a review of the &#147;Managements&#146; Discussion and Analysis of Financial Condition and Results of Operations&#148; included in the Company&#146;s Form 10-K and 10-Q filings, as well as the Company&#146;s earnings press releases and information related thereto.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>During fiscal year 2006, the Audit Committee held five meetings. During these meetings, the Audit Committee met with representatives of the independent public accounting firm, both with management present and in private sessions without management present, to discuss the results of the financial statement audit and quarterly reviews and to solicit their evaluation of the Company&#146;s accounting principles, practices and judgments applied by management and the quality and adequacy of the Company&#146;s internal controls.</FONT></P>

<P align=justify><FONT face=serif>____________________</FONT></P>

<TABLE cellSpacing=0 cellPadding=0 border=0>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>*</FONT></TD>
<TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD width="100%">
<P align=justify><I><FONT face=serif size=2>The foregoing Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by express reference therein.</FONT></I></P>
</TD></TR>
<TR>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
</TABLE>


<P align=center><FONT face=serif size=2>10</FONT></P>

<HR align=center width="100%" noShade SIZE=2>


<PAGE>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>In performing the above described functions, the Audit Committee acts only in an oversight capacity and necessarily relies on the work and assurances of the Company&#146;s management and independent public accounting firm, which, in their report, express an opinion on the conformity of the Company&#146;s annual financial statements to accounting principle generally accepted in the United States.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Based upon the Audit Committee&#146;s discussion with the Company&#146;s management and Grant Thornton LLP and the Audit Committee&#146;s review of the representations of the Company&#146;s management and the report of the independent public accountants to the Audit Committee, the Audit Committee recommended to the Board that the audited financial statements be included in the Company&#146;s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 when filed with the SEC. The Audit Committee also approved, subject to stockholder ratification, the selection of Grant Thornton LLP as the Company&#146;s independent auditor for the fiscal year 2007.</FONT></P>

<P align=justify><FONT face=serif size=2>March 12, 2007</FONT></P>

<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
<TD align=left width="50%"></TD>
<TD align=left width="50%"><FONT face=serif size=2>THE AUDIT COMMITTEE:</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD align=left width="50%">&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="50%"></TD>
<TD align=left width="50%"><FONT face=serif size=2>Matthew R. McBrady, Chairman</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD align=left width="50%"></TD>
<TD align=left width="50%"><FONT face=serif size=2>Bruce R. Culver</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD align=left width="50%"></TD>
<TD align=left width="50%"><FONT face=serif size=2>Michael Garnreiter</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD align=left width="50%"></TD>
<TD align=left width="50%"><FONT face=serif size=2>John S. Caldwell</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD align=left width="50%"></TD>
<TD align=left width="50%"><FONT face=serif size=2>Judy Martz</FONT>&nbsp; </TD></TR>
</TABLE>

<BR>
<P align=center><FONT face=serif size=2>11</FONT></P>

<HR align=center width="100%" noShade SIZE=2>


<PAGE>

<P align=center><B><FONT face=serif size=2>EXECUTIVE COMPENSATION</FONT></B></P>

<P align=justify><B><FONT face=serif size=2>Compensation Discussion and Analysis</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The purpose of this Compensation Discussion and Analysis is to provide material information about our compensation objectives and policies and to explain and put into context the material elements of the disclosure which follows in this Proxy Statement with respect to the compensation of our named executive officers. We describe our named executive officers and how they were determined in the Summary Compensation Table of this Proxy Statement.</FONT></P>

<P align=justify><B><FONT face=serif size=2>Introduction and Objectives</FONT></B></P>

<P align=justify><B><I><FONT face=serif size=2>&nbsp;&nbsp; Processes and Procedures For Considering and Determining Executive Compensation</FONT></I></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Compensation Committee (the &#147;Committee&#148;) assists the Board in addressing matters relating to the fair and competitive compensation of our named executive officers and non-employee directors, together with matters relating to our other benefit plans. The Committee is composed of three independent directors, Bruce R. Culver, Dr. Mathew R. McBrady, and John S. Caldwell. </FONT></P>

<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>The Committee met two times in 2006. All Committee members were present for these meetings.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Two members of management, Chief Executive Officer, Patrick W. Smith, and Chief Financial Officer, Daniel M. Behrendt, attended portions of each meeting. The agenda for each meeting was determined by the Committee members prior to the meeting. The Committee receives and reviews materials in advance of each meeting. These materials include information that management believes will be helpful to the Committee as well as materials that the Committee requests. Depending on the agenda for the particular meeting, these materials may include:</FONT></P>

<TABLE border=0>
<TR>
<TD vAlign=top noWrap></TD>
<TD vAlign=top noWrap><FONT size=2><FONT face=Wingdings>o</FONT>&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD width="100%"><FONT size=2><FONT face=serif>Financial reports;<BR></FONT><BR></FONT></TD></TR>
<TR>
<TD vAlign=top noWrap><FONT size=2></FONT></TD>
<TD vAlign=top noWrap><FONT size=2><FONT face=Wingdings>o</FONT>&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD width="100%">
<P align=justify><FONT face=serif size=2>Reports on levels of achievement of corporate performance objectives;<BR><BR></FONT></P>
</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT size=2></FONT></TD>
<TD vAlign=top noWrap><FONT size=2><FONT face=Wingdings>o</FONT>&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD width="100%">
<P align=justify><FONT size=2><FONT face=serif>Tally sheets setting forth the total compensation of the named executive officers, including base salary,</FONT> <FONT face=serif>cash incentives, equity awards, perquisites and other compensation and any potential amounts payable</FONT> <FONT face=serif>to the executives pursuant to employment agreements, severance agreements and change of control</FONT> <FONT face=serif>provisions;<BR><BR></FONT></FONT></P>
</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT size=2></FONT></TD>
<TD vAlign=top noWrap><FONT size=2><FONT face=Wingdings>o</FONT>&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD width="100%">
<P align=justify><FONT size=2><FONT face=serif>Wealth accumulation summaries which show the executive officers&#146; total accumulated stock and option</FONT> <FONT face=serif>holdings; and<BR><BR></FONT></FONT></P>
</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
<TD vAlign=top noWrap><FONT size=2><FONT face=Wingdings>o</FONT>&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD width="100%">
<P align=justify><FONT size=2><FONT face=serif>Information regarding compensation paid by comparable companies identified in executive</FONT> <FONT face=serif>compensation surveys.</FONT></FONT></P>
</TD></TR>
</TABLE>


<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>The Committee&#146;s primarily responsibilities are to:</FONT></P>

<TABLE border=0>
<TR>
<TD vAlign=top noWrap><FONT size=2></FONT></TD>
<TD vAlign=top noWrap><FONT face=Wingdings><FONT size=2>o<FONT face="Times New Roman">&nbsp;&nbsp;&nbsp;</FONT></FONT></FONT></TD>
<TD width="100%">
<P align=justify><FONT size=2>Review and approve corporate goals and objectives relevant to the compensation of executive officers, evaluate the performance of the executive officers in light of these goals and objectives and determine and approve the compensation level of executive officers based on that evaluation.<BR><BR></FONT></P>
</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT size=2></FONT></TD>
<TD vAlign=top noWrap><FONT face=Wingdings><FONT size=2>o<FONT face="Times New Roman">&nbsp;&nbsp;&nbsp;</FONT></FONT></FONT></TD>
<TD width="100%">
<P align=justify><FONT size=2>Evaluate and establish the incentive components of the Chief Executive Officer&#146;s compensation and related bonus awards, taking into account our performance and relative stockholder return, the value of similar incentive awards to chief executive officers at comparable companies, the services rendered by the Chief Executive Officer and the awards given to the Chief Executive Officer in past years.<BR><BR></FONT></P>
</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT size=2></FONT></TD>
<TD vAlign=top noWrap><FONT face=Wingdings><FONT size=2>o<FONT face="Times New Roman">&nbsp;&nbsp;&nbsp;</FONT></FONT></FONT></TD>
<TD width="100%">
<P align=justify><FONT size=2>Review and approve the design of the compensation and benefit plans which pertain to Directors, the Chief Executive Officer and other senior executive officers who report directly to the Chief Executive Officer.<BR><BR></FONT></P>
</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
<TD vAlign=top noWrap><FONT face=Wingdings><FONT size=2>o<FONT face="Times New Roman">&nbsp;&nbsp;&nbsp;</FONT></FONT></FONT></TD>
<TD width="100%">
<P align=justify><FONT size=2>Administer equity based plans, including stock option plans.</FONT></P>
</TD></TR>
</TABLE>


<P align=center><FONT size=2>12</FONT>
<HR align=center width="100%" noShade SIZE=2>


<PAGE>
<BR>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD vAlign=top noWrap align=left width="1%"><FONT face=Wingdings size=2>o</FONT></TD>
<TD vAlign=top noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD style="TEXT-ALIGN: justify" vAlign=top align=left width="97%"><FONT face=serif size=2>Approve the material terms of all employment, severance and change-of-control agreements for executive officers.</FONT></TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"><FONT face=Wingdings>&nbsp; </FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top align=left width="97%">&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"><FONT face=Wingdings size=2>o</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="TEXT-ALIGN: justify" vAlign=top align=left width="97%"><FONT size=2>Recommend to the Board the compensation for Board members, such as retainer, committee Chairman fees, stock options and other similar items.</FONT></TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top align=left width="97%">&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"><FONT face=Wingdings size=2>o</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="TEXT-ALIGN: justify" vAlign=top align=left width="97%"><FONT size=2>Provide oversight regarding our welfare and other benefit plans, policies and arrangements.</FONT></TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top align=left width="97%">&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"><FONT face=Wingdings size=2>o</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="TEXT-ALIGN: justify" vAlign=top align=left width="97%"><FONT size=2>Prepare the compensation committee report on executive compensation to be included in our annual proxy statement and annual report on Form 10-K filed with the SEC.</FONT></TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top align=left width="97%">&nbsp; </TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"><FONT face=Wingdings size=2>o</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="TEXT-ALIGN: justify" vAlign=top align=left width="97%"><FONT size=2>Review and discuss with management the Compensation Discussion and Analysis and based on such review and discussion, recommend to the Board to include the Compensation Discussion and Analysis in the Annual Report on Form 10-K or in our Proxy Statement.</FONT></TD></TR>
</TABLE>

<BR>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Committee&#146;s Charter reflects these responsibilities, and the Committee and the Board periodically review and revise the Charter. The Charter is periodically reviewed and revised and was last revised on April 3, 2007. The full text of the Compensation Committee Charter is available on our website. </FONT></P>

<P align=justify><B><FONT face=serif size=2>Role of Management and Consultants in Determining Executive Compensation</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Our executive management supports the Committee in its work by preliminarily outlining compensation levels for named executive officers, administering our welfare and other benefit plans and providing data to the Committee for analysis. Annually, compensation is initially determined by the CEO for each executive (excluding the CEO), consisting of base salary, annual cash incentive bonus, and long-term incentive compensation, which is then provided to the Committee for review and approval. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Our Committee has discretionary authority under its charter to engage the services of outside consultants and advisors, as it deems necessary or appropriate in the discharge of its duties and responsibilities. The Committee has budgetary authority to authorize and pay for the services of outside consultants and the consultants report directly to the Committee. Consultants were not used in connection with compensation decisions in 2006 or to date for 2007. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Committee evaluates compensation data and plan design information from national surveys and other public companies, including companies we consider to be our peers, which we discuss in more detail below.</FONT></P>

<P align=justify><B><FONT face=serif size=2>Our Compensation Philosophy</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Committee is in place to address matters relating to the fair and competitive compensation of our named executive officers and non-employee directors, together with matters relating to our other benefit plans. The Committee, composed entirely of independent directors, is guided by three principal goals and objectives: (1) to allow us to attract and retain talent, our salaries should be in the range with the level of salaries paid to companies that are considered peers; (2) annual incentive bonuses should be directly related to our financial results produced during the year; and (3) long term compensation in the form of stock options should be directly linked to Company performance and enhancement of stockholder value.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Committee believes that executive compensation should be aligned with the values, objectives and financial performance of the Company. The Committee wants to motivate our officers and key employees to achieve the Company&#146;s goals of providing our stockholders with a competitive return on their investments, while at the same time producing high quality products. Our compensation program is designed to attract and retain highly qualified individuals who are capable of making significant contributions to our long-term success; promote a performance orientated environment that encourages Company and individual achievement; reward named executive officers for long-term strategic management and the enhancement of stockholder value.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Committee believes that compensation paid to named executive officers should be closely aligned with the performance of the Company on both a short-term and long-term basis, and that such compensation should assist us in attracting and retaining key executives critical to its long-term success. It is important that our compensation program be competitive to allow us to continue to attract and retain key employees.</FONT></P>

<P align=center><FONT face=serif size=2>13</FONT></P>

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<PAGE>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Any decision to materially increase compensation is based upon the factors listed above, taking into account all forms of compensation, as well as based upon individual achievement of performance goals. These goals include revenue and pretax earnings targets as well as specific management tasks. Decisions regarding the CEO&#146;s compensation are made by the Committee and reflect the same considerations used for the other named executive officers. The Committee then submits its decisions regarding compensation for the CEO to the other independent Directors of the Board for ratification. The compensation policy is consistent for each named executive officer. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Committee believes that the named executive officers&#146; total compensation programs should strengthen the relationship between pay and performance by emphasizing variable, at-risk compensation that is dependent upon the successful achievement of specified corporate performance goals. The Committee also believes that a significant amount of pay for named executive officers should be comprised of long-term, at-risk pay to align management interests with those of stockholders. Ultimately, we balance the foregoing purposes for compensation against our need to ensure that any total compensation package we offer should enhance our ability to attract, retain and develop exceptionally knowledgeable and experienced executives because our successful operation and management depends upon our management.</FONT></P>

<P align=justify><B><FONT face=serif size=2>Our Compensation Programs</FONT></B></P>

<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>The total compensation program for our named executive officers consists of the following elements:</FONT></P>

<P align=justify>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%">&nbsp; &nbsp;&nbsp;&nbsp; </TD>
<TD vAlign=top noWrap align=left width="1%"><FONT face=Wingdings size=2>o</FONT></TD>
<TD vAlign=top noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD style="TEXT-ALIGN: justify" vAlign=top align=left width="97%"><FONT face=serif size=2>Annual Salary</FONT></TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"><FONT face=Wingdings>&nbsp; </FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top align=left width="97%">&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"><FONT face=Wingdings size=2>o</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="TEXT-ALIGN: justify" vAlign=top align=left width="97%"><FONT size=2>Annual cash incentive bonus</FONT></TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top align=left width="97%">&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"><FONT face=Wingdings size=2>o</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="TEXT-ALIGN: justify" vAlign=top align=left width="97%"><FONT size=2>Long-term incentive compensation</FONT></TD></TR>
</TABLE>



<P><B><I><FONT face=serif size=2>&nbsp;&nbsp; Peer Group</FONT></I></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>To ensure our compensation programs are at proper levels, the Committee compares our compensation practices and levels of pay to an industry peer group as well as broader market pay practices. Companies in the peer group were selected based upon the following criteria:</FONT></P>

<P align=justify>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD vAlign=top noWrap align=left width="1%"><FONT face=Wingdings size=2>o</FONT></TD>
<TD vAlign=top noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD style="TEXT-ALIGN: justify" vAlign=top align=left width="97%"><FONT face=serif size=2>Similar size with executive positions similar in breadth, complexity and scope of responsibility;</FONT></TD></TR>
<TR vAlign=bottom>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"><FONT face=Wingdings>&nbsp; </FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top align=left width="97%">&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"><FONT face=Wingdings size=2>o</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="TEXT-ALIGN: justify" vAlign=top align=left width="97%"><FONT size=2>International operations;</FONT></TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top align=left width="97%">&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD vAlign=top noWrap align=left width="1%"><FONT face=Wingdings size=2>o</FONT></TD>
<TD vAlign=top noWrap align=left width="1%"></TD>
<TD style="TEXT-ALIGN: justify" vAlign=top align=left width="97%"><FONT size=2>Competitors for executive talent.</FONT></TD></TR>
</TABLE>


<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>For 2006, the peer group consisted of the following five companies: Armor Holdings, Inc., Ionatron, Inc., American Tech Ceramics Corporation, Brady Corporation, and SL Industries Inc. Management selected these companies and compiled compensation data from public filings based on similar industries or comparable size The results of this comparative analysis were discussed at the Committee&#146;s December 9, 2006 and February 19, 2007 meetings and were used to assist in determining the 2006 bonus and 2007 base compensation amounts for our executives. In addition to the market-based data, the Committee ensures compensation is aligned with our values, objectives and financial performance, as described above.</FONT></P>

<P align=justify><B><I><FONT face=serif size=2>&nbsp;&nbsp; Benchmarking</FONT></I></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Our compensation focuses heavily upon cash compensation. However, we also utilize various non-cash compensation programs, specifically stock options, within our compensation philosophy. To establish total compensation for our named executive officers, the Committee compares our named executive officers&#146; compensation against comparative company pay practices and also considers recommendations from the CEO regarding those executives reporting directly to him. Our management team provides the Committee historical and prospective breakdowns of the total compensation components for each executive officer. Based upon the analysis of the pay practices of comparable companies the Committee has identified as our peer group, our base salary compensation and long-term incentive compensation appear to be generally lower than most of those companies in our established peer group. It is the Committee&#146;s intent that our salaries, annual
cash incentive bonus awards and long-term incentive award values be targeted at a level approaching the median of competitive market pay practices.</FONT></P>

<P align=center><FONT face=serif size=2>14</FONT></P>

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<PAGE>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Committee is working to ensure that over time our compensation becomes more consistent with the Committee&#146;s intent in setting compensation in relation to our established peer group. In general, the Committee believes total compensation of our named executive officers should be at approximately the 50</FONT><FONT face=serif size=2><SUP>th</SUP></FONT><FONT face=serif size=2> to 75</FONT><FONT face=serif size=2><SUP>th</SUP></FONT><FONT face=serif size=2> percentile of our peer group. The Committee believes that targeting for this range will place in the median of competitive market pay practices and reflect our current compensation philosophy, which balances our &#147;pay for performance&#148; strategy against our desire to offer competitive compensation with respect to our industry peer group, thus allowing us to attract and retain management talent. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>At the Committee&#146;s meetings on December 9, 2006 and February 19, 2007, the Committee finalized the 2006 annual cash incentive bonus awards and determined the 2007 base salary compensation amounts for the named executive officers. At this meeting, the Committee reviewed wealth accumulation summaries and tally sheets for each named executive officer in determining appropriate compensation levels. The Committee intends to continue to review its current compensation programs annually in conjunction with its determination of the executive compensation for the coming year in order to bring our compensation in line with our compensation philosophy. We believe that effectiveness of the compensation programs is predicated upon continual review to ensure market compensation.</FONT></P>

<P align=justify><B><FONT face=serif size=2>Annual Salary</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The 2006 base salaries of our named executive officers are shown in the &#147;Salary&#148; column of the Summary Compensation Table in this Proxy Statement. Salaries for named executive officers are reviewed on an annual basis, as well as at the time of a promotion or other changes in responsibilities.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Base compensation is targeted around the median of compensation paid to executives with similar levels of experience based on salary surveys of similarly sized companies in comparable industries in order to ensure that we can attract and retain appropriate levels of executive talent. Individual executives may be paid higher or lower than this target pay positioning at the discretion of the Committee depending on facts such as tenure with the Company, results of personal, department and corporate performance, and the perceived detrimental effects to the Company that may result from such executive&#146;s departure. The base salaries of our executive officers were established by the Committee and approved by the Board of Directors after considering compensation salary trends, overall level of responsibilities, total performance and compensation levels for comparable positions in the market for executive talent based on salary surveys
and compensation data from peer group companies. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>As discussed above, our base salary compensation appears to be generally lower than competitive market pay data based upon our internal analysis of comparable companies and national salary surveys. The Committee has utilized this information, as well as suggestions from management, in determining annual salary increases.</FONT></P>

<P align=justify><B><FONT face=serif size=2>Annual Incentive Cash Bonuses</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The objective of the annual incentive cash bonus plan is to provide executives with a competitive total cash compensation opportunity relative to market practices while aligning rewards with short-term financial results which the Committee believes will help achieve our goals of providing our stockholders with a competitive return on their investments over the long term.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2> The 2006 Bonus Plan was approved by the Committee on January 13, 2006. Annual incentive awards are determined as a percentage of each named executive officer&#146;s base salary. Targeted bonuses for the Chairman, Chief Executive Officer, President and Chief Operating Officer and Chief Financial Officer were 35% of their base cash compensation. The actual payouts for the executives were derived by taking their targeted bonus divided by the total company targeted bonus times the bonus pool to calculate their portion of the bonus pool. Mr. P. Smith earned $47,089 in bonus in 2006, $19,171 of which was reallocated at the request of Mr. Smith back into the Company bonus pool for the benefit of other employees. Mr. T. Smith earned a total bonus of $47,089 in 2006. Ms. Hanrahan earned a total bonus of $45,733 of which $6,587 was reallocated at the request of Ms. Hanrahan back into the Company bonus pool for the benefit of other
employees. Mr. Behrendt earned a bonus of $45,203 in 2006. The Committee establishes the performance measures and other terms and conditions of awards for executive officers and has the authority to cancel or award an additional bonus amount at its discretion. The bonus plan is based on performance against the Board approved budget plan and uses pretax earnings as the metric. </FONT></P>

<P align=center><FONT face=serif size=2>15</FONT></P>

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<PAGE>

<P align=justify><B><FONT face=serif size=2>Long-Term Incentive Compensation</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Committee believes that equity-based compensation helps ensure that our executive officers have a continuing stake in our long-term success. As such, the Committee has implemented, with board and stockholder approval, the 2004 Stock Option Plan (the &#147;Plan&#148;).</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Plan provides for the opportunity to grant stock options to officers, other key employees to help align those individuals&#146; interests with those of stockholders, to motivate executives to make strategic long-term decisions, and to better enable us to attract and retain capable directors and executive personnel. </FONT></P>

<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>During 2006, no stock options were granted to executive officers. </FONT></P>

<P align=justify><B><FONT face=serif size=2>Employment Agreements and Other Arrangements </FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>In July 1998, the Company entered into employment agreements with Patrick W. Smith, Thomas P. Smith and Kathleen C. Hanrahan. The agreements were for an initial three-year term ending June 30, 2001, and were automatically renewed for a two-year term on such date and were automatically renewed for an additional two year term on June 30, 2003 and such agreements have continued to be automatically renewed every two years thereafter unless the Company gives the officer who is a party to each such agreement a one-year prior notice of termination, if the termination is without cause. In May 2004, the Company entered into an employment agreement with Daniel M. Behrendt pursuant to which he agreed to serve as its Chief Financial Officer. In January 2006, the Company kept Messrs. Patrick and Thomas Smith&#146;s annual base compensation at $230,000 without an increase and increased Ms. Hanrahan&#146;s annual base compensation to $220,320
which was subsequently increased to $230,000 in October 2006 upon her promotion to President. Mr. Behrendt&#146;s annual base compensation was increased to $220,320. The Company may terminate these agreements with or without cause. Should it terminate the agreements without cause, upon a change of control or upon the death or disability of the executive, the executive is entitled to severance compensation equal to 12 months of salary in the event of termination without cause, 24 months of salary in the event of a change of control and 18 months of salary in the event of death or disability. The table below reflects the amount of severance compensation that would be provided to each of the named executive officers of the Company assuming the termination of such executive&#146;s employment occurred on December 31, 2006.</FONT></P>

<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
<TD noWrap align=left width="87%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Involuntary</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="87%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;</TD>
<TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Voluntary</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>For Cause</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Not For Cause</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Change&nbsp;of</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><B><FONT size=1>Death or</FONT></B>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="87%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%">&nbsp;</TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Termination</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Termination</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Termination</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;</TD>
<TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Control on</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Disability</FONT></B> </FONT></TD></TR>
<TR vAlign=bottom>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><FONT size=+0><B><FONT face=serif color=#231f20 size=1>Name and Principal Position</FONT></B> </FONT></TD>
<TD noWrap align=left width="86%">&nbsp;</TD>
<TD noWrap align=left width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Salary</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>on 12/31/06</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>on 12/31/06</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>on 12/31/06</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>12/31/06</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif color=#231f20 size=1>on 12/31/06</FONT></B> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="87%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>Patrick W. Smith</FONT> </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$230,000</FONT> </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$&#151;</FONT> </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$&#151;</FONT> </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$230,000</FONT> </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2><FONT size=3>&nbsp; </FONT>$460,000</FONT>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$345,000</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="87%" colSpan=2><FONT size=+0><FONT face=serif size=2>Thomas P. Smith</FONT> </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>$230,000</FONT> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$&#151;</FONT> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$&#151;</FONT> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$230,000</FONT> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>$460,000</FONT>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>$345,000</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="87%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>Kathleen C. Hanrahan</FONT> </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$230,000</FONT> </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$&#151;</FONT> </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$&#151;</FONT> </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$230,000</FONT> </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$460,000</FONT>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$345,000</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="87%" colSpan=2><FONT size=+0><FONT face=serif size=2>Daniel M. Behrendt</FONT> </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>$220,320</FONT> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$&#151;</FONT> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$&#151;</FONT> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$220,320</FONT> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>$440,640</FONT>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>$330,480</FONT> </FONT></TD></TR>
</TABLE>

<BR>
<P align=justify><B><FONT face=serif size=2>Perquisites and Other Personal Benefits</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>We provide named executive officers with no perquisites or other benefits, except for Company 401(k) partial matching contributions and health care benefits that are available to all employees. The Committee periodically reviews the levels of perquisites and other benefits that could be provided to the named executive officers.</FONT></P>

<P align=justify><B><FONT face=serif size=2>Compensation Deductibility</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Section 162(m) of the Internal Revenue Code of 1986, as amended (the &#147;Code&#148;) imposes a limit on tax deductions for annual compensation in excess of $1 million paid to the named executive officers. This provision excludes certain forms of &#147;performance-based compensation,&#148; including stock options, from the compensation taken into account for purposes of that limit. The Committee believes that our Bonus Incentive Plan is &#147;performance-based&#148; within the meaning of that restriction. Nonetheless, the Committee believes that, it is desirable for executive compensation to be fully tax deductible. However, whenever in the Committee&#146;s judgment would be consistent with the objectives pursuant to which the particular compensation is paid, we will compensate our executive </FONT></P>

<P align=center><FONT face=serif size=2>16</FONT></P>

<HR align=center width="100%" noShade SIZE=2>


<PAGE>

<P align=justify><FONT face=serif size=2>officers fairly in accordance with our compensation philosophy, regardless of the anticipated tax treatment. The Committee will from time to time continue to assess the impact of Section 162(m) of the Code on its compensation practices and will determine what further action, if any, may be appropriate in the future.</FONT></P>

<P align=justify><B><FONT face=serif size=2>Cash and Non-Cash Compensation Paid To Certain Executive Officers </FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The following table sets forth information regarding compensation earned by, paid to or granted to the Company&#146;s named executive officers who are : (1) the two persons serving as our principal executive officer and principal financial officer during 2006; (2) the other officer who was serving as an executive officer at the end of 2006 other than the principal executive officer and the principal financial officer; and (3) one additional individual who would have been included except that the individual was not serving as an executive officer at the end of 2006, for all services rendered to the Company during 2006. The Company has no other executive officers. </FONT></P>

<P align=center><B><FONT face=serif size=2>Summary Compensation Table </FONT></B></P>

<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
<TD noWrap align=left width="86%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Non-Equity</FONT></B>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="86%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Incentive Plan</FONT></B>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="2%" colSpan=2><FONT size=+0>&nbsp; </FONT><FONT size=+0><B><FONT face=serif size=1>Option</FONT></B>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>All Other</FONT></B>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Total</FONT></B>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><FONT size=+0><B><FONT face=serif color=#231f20 size=1>Name and Principal Position</FONT></B> </FONT></TD>
<TD noWrap align=left width="85%">&nbsp;</TD>
<TD noWrap align=left width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Year</FONT></B>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Salary</FONT></B>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif color=#231f20 size=1>Compensation (1)</FONT></B>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="2%" colSpan=2><FONT size=+0><B><FONT face=serif color=#231f20 size=1>Awards (2)</FONT></B>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif color=#231f20 size=1>Compensation (3)</FONT></B>&nbsp; </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif color=#231f20 size=1>Compensation</FONT></B>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="86%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>Patrick W. Smith</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>2006</FONT> </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$230,000</FONT> </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$27,918</FONT> </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>2,661</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$ &#151;</FONT> </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$260,579</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="86%" bgColor=#c0c0c0 colSpan=2><FONT size=+0>&nbsp; &nbsp; &nbsp; &nbsp;<FONT face=serif size=2>Chief Executive Officer</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="86%" colSpan=2><FONT size=+0><FONT face=serif size=2>Thomas P. Smith (4)</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>2006</FONT> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>$230,000</FONT> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$47,089</FONT> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0><FONT face=serif size=2>$</FONT> </FONT></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>2,661</FONT> </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$ &#151;</FONT> </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;</TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$279,750</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="86%" colSpan=2><FONT size=+0>&nbsp; &nbsp; &nbsp; &nbsp;<FONT face=serif size=2>Chairman of the Board</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%">&nbsp;</TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%">&nbsp;</TD>
<TD noWrap align=left width="1%">&nbsp;</TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="86%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>Kathleen C. Hanrahan (5)</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>2006</FONT> </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$223,703</FONT> </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$39,146</FONT> </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>2,306</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$ &#151;</FONT> </FONT></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$265,155</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="86%" bgColor=#c0c0c0 colSpan=2><FONT size=+0>&nbsp; &nbsp; &nbsp; &nbsp;<FONT face=serif size=2>President</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="86%" colSpan=2><FONT size=+0><FONT face=serif size=2>Daniel M. Behrendt</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>2006</FONT> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>$220,320</FONT> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$45,203</FONT> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0><FONT face=serif size=2>$ </FONT></FONT></TD>
<TD noWrap align=right width="1%">&nbsp;<FONT size=2>127,386</FONT> </TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$ &#151;</FONT> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$392,909</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="86%" colSpan=2><FONT size=+0>&nbsp; &nbsp; &nbsp; &nbsp;<FONT face=serif size=2>Chief Financial Officer</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD></TR>
</TABLE>

____________________<BR>&nbsp;<BR>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 border=0>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(1)</FONT></TD>
<TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD width="100%"><FONT face=serif size=2>The 2006 Bonus Plan was approved by the Company&#146;s Compensation Committee. The bonus plan is based on profitability, with the Company allocating 5.88% of Pre-Tax Income before extraordinary item into the bonus pool. Targeted bonus for the Chairman, Chief Executive Officer, President, Chief Operating Officer and Chief Financial Officer were 35% of their base cash compensation. Every full time employee at TASER International was also eligible to receive part of the bonus pool. The actual payouts for the executives were derived by taking their targeted bonus divided by the total Company targeted bonus times the bonus pool to calculate their portion of the bonus pool. Patrick Smith was eligible for a $47,089 bonus in 2006, $19,171 of which was voluntarily reallocated at the request of Mr. Smith back into the Company bonus pool for the benefit of other employees. Thomas Smith earned a bonus of $47,089 in 2006. Ms. Hanrahan was eligible for a bonus of $45,733 in
2006 of which $6,587 was voluntarily reallocated at the request of Ms. Hanrahan back into the Company bonus pool for the benefit of other employees. Mr. Behrendt earned a bonus of $45,203 in 2006.</FONT></TD></TR>
<TR>
<TD width="100%" colSpan=3>&nbsp; </TD></TR>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(2)</FONT></TD>
<TD vAlign=top noWrap></TD>
<TD width="100%"><FONT face=serif size=2>The amounts reflect the dollar amount recognized for financial reporting purposes for the fiscal year ended December 31, 2006, in accordance with SFAS 123(R) and thus includes amounts that were granted in and prior to 2006. No stock options were granted in 2006. Pursuant to SEC regulations, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Assumptions included in the calculation of this amount for the fiscal year ended December 31, 2006 are included in footnote 2p to our financial statements for the fiscal year ended December 31, 2006, included in our Annual Report on Form 10-K filed with the SEC.</FONT></TD></TR>
<TR>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(3)</FONT></TD>
<TD vAlign=top noWrap></TD>
<TD width="100%"><FONT face=serif size=2>The executive officers received 401(k) matching contributions and health benefits, the value of which did not exceed $10,000 for any single officer.</FONT></TD></TR>
<TR>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(4)</FONT></TD>
<TD vAlign=top noWrap></TD>
<TD width="100%"><FONT face=serif size=2>Thomas P. Smith was appointed as Chairman of the Board effective October 23, 2006 and served as our President until this date. There was no change in salary commensurate with the change in title.</FONT></TD></TR>
<TR>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(5)</FONT></TD>
<TD vAlign=top noWrap></TD>
<TD width="100%"><FONT face=serif size=2>Kathleen C. Hanrahan was appointed as President effective October 23, 2006 and served as our Chief Operating Officer until this date. The amount shown under &#147;Salary&#148; reflects the prorated salary of $220,320 per annum as Chief Operating Officer and $230,000 per annum as President.</FONT></TD></TR>
</TABLE>


<P align=center><FONT face=serif size=2>17</FONT></P>

<HR align=center width="100%" noShade SIZE=2>


<PAGE>

<P align=center><B><FONT face=serif size=2>OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The following table includes certain information with respect to all options previously awarded to the executive officers named above as of December 31, 2006. There were no exercises of stock options by such executive officers above during the year ended December 31, 2006.</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="10%" colSpan=10><FONT size=+0><B><FONT face=serif size=1>Option Awa</FONT></B><B><FONT face=serif size=1>rds</FONT></B></FONT><FONT size=+0> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=center width="5%" colSpan=5><FONT size=+0><B><FONT face=serif size=1>Number of Securities</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="2%" colSpan=2><FONT size=+0><B><FONT face=serif size=1>Option</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=center width="5%" colSpan=5><FONT size=+0><B><FONT face=serif size=1>Underlying</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="2%" colSpan=2><FONT size=+0><B><FONT face=serif size=1>Exercise</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=5><FONT size=+0><B><FONT face=serif size=1>Unexerci</FONT></B><B><FONT face=serif color=#231f20 size=1>sed Options (</FONT></B><B><FONT face=serif size=1>a)</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="2%" colSpan=2><FONT size=+0><B><FONT face=serif size=1>Price</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Option</FONT></B> </FONT></TD></TR>
<TR vAlign=bottom>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><FONT size=+0><B><FONT face=serif color=#231f20 size=1>Name</FONT></B> </FONT></TD>
<TD noWrap align=left width="88%">&nbsp;</TD>
<TD noWrap align=left width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Exercisable</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="3%" colSpan=3><FONT size=+0><B><FONT face=serif size=1>Unexerci</FONT></B><B><FONT face=serif size=1>sable</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="2%" colSpan=2><FONT size=+0><B><FONT face=serif size=1>($)</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif color=#231f20 size=1>Expiration Date</FONT></B> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>Patrick W. Smith</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>504,000</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>1.47</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>05/29/07</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" bgColor=#c0c0c0 colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>32,000</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>0.36</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>03/04/08</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" bgColor=#c0c0c0 colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>24,000</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>2.40</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>10/01/08</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" bgColor=#c0c0c0 colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>270,000</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>7.22</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>01/06/09</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" bgColor=#c0c0c0 colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>6,068</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>18.77</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>10/01/14</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" bgColor=#c0c0c0 colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>74,100</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>8.81</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>04/20/15</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" colSpan=2><FONT size=+0><FONT face=serif size=2>Thomas P. Smith</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>504,000</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>1.33</FONT> </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>05/29/12</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>52,000</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>0.32</FONT> </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>03/04/13</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>24,000</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>2.40</FONT> </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>09/28/13</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>270,000</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>7.22</FONT> </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>01/04/14</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>6,068</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>18.77</FONT> </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>10/01/14</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>74,100</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>8.81</FONT> </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>04/20/15</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>Kathleen C. Hanrahan</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>32,500</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>0.55</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>01/01/11</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" bgColor=#c0c0c0 colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>97,070</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>1.33</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>05/29/12</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" bgColor=#c0c0c0 colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>115,262</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>0.32</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>03/04/13</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" bgColor=#c0c0c0 colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>56,776</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>7.22</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>01/04/14</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" bgColor=#c0c0c0 colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>5,518</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>18.77</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>10/01/14</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" bgColor=#c0c0c0 colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>50,800</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>8.81</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>04/20/15</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" colSpan=2><FONT size=+0><FONT face=serif size=2>Daniel M. Behrendt</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>46,668</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%">&nbsp;</TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>13,332 </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"><FONT size=+0><FONT face=serif size=2>(b) </FONT>&nbsp;</FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>17.12</FONT> </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>04/26/14</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>10,000</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%">&nbsp;</TD>
<TD noWrap align=left width="1%"><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>13.88</FONT> </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>08/30/14</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>5,518</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>18.77</FONT> </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>10/01/14</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="89%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>101,600</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>&#151; </FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0><FONT face=serif size=2>$</FONT>&nbsp; </FONT></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>8.81</FONT> </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>04/20/15</FONT> </FONT></TD></TR>
</TABLE>

</DIV>____________________<BR>&nbsp;<BR>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 border=0>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(a)</FONT></TD>
<TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD vAlign=top width="100%"><FONT face=serif size=2>All options reported in the exercisable column are fully vested as of December 31, 2006.</FONT></TD></TR>
<TR>
<TD vAlign=top width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(b)</FONT></TD>
<TD vAlign=top noWrap></TD>
<TD vAlign=top width="100%"><FONT face=serif size=2>These options vest ratably in 2007&nbsp;and become fully exercisable on January 1, 2008.</FONT></TD></TR>
</TABLE>


<P align=center><FONT face=serif size=2>18</FONT></P>

<HR align=center width="100%" noShade SIZE=2>


<PAGE>

<P align=center><B><FONT face=serif size=2>COMPENSATION COMMITTEE REPORT*<BR></FONT></B><B><FONT face=serif size=2>OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION </FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this Proxy statement. Based on these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company&#146;s Annual Report on Form 10-K.</FONT></P>

<DIV align=right>
<TABLE cellSpacing=0 cellPadding=0 width="50%" border=0>
<TR vAlign=bottom>
<TD noWrap align=left width="100%"><FONT face=serif size=2>THE COMPENSATION COMMITTEE:<BR>&nbsp;</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="100%"><FONT face=serif size=2>Bruce R. Culver, Chairman</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="100%"><FONT face=serif size=2>Mathew R. McBrady</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="100%"><FONT face=serif size=2>John S. Caldwell</FONT>&nbsp; </TD></TR>
</TABLE>

</DIV>____________________<BR>&nbsp;<BR>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 border=0>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>*</FONT></TD>
<TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD width="100%"><FONT face=serif size=2>The foregoing Compensation Committee Report on Executive Compensation will not be deemed to be incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or under the Exchange Act, except to the extent that the Company specifically incorporates this information by reference, and will not otherwise be deemed filed under such Acts.</FONT></TD></TR>
</TABLE>


<P align=center><B><FONT face=serif size=2>COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION </FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>No member of the Compensation Committee is, or was during or prior to fiscal 2006, an officer or employee of the Company or any of its subsidiaries. None of the Company&#146;s executive officers serves as a director or member of the compensation committee of another entity in a case where an executive officer of such other entity serves as a director or member of the Compensation Committee. </FONT></P>

<P align=center><B><FONT face=serif size=2>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL<BR>OWNERS AND MANAGEMENT</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The following table sets forth information, as of March 26, 2007, with respect to beneficial ownership of the Company&#146;s Common Stock (the only class of shares of outstanding voting securities of the Company) by each director or nominee for director, by each named executive officer, by all directors and officers as a group, and by each person who is known to the Company to be the beneficial owner of more than five percent of the Company&#146;s outstanding Common Stock. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>As of such date, there were 62,065,407 shares of Common Stock outstanding. The Company believes that, except as otherwise described below, each named beneficial owner has sole voting and investment power with respect to the shares listed.</FONT></P>

<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
<TD noWrap align=left width="93%" colSpan=2><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="3%" colSpan=3><FONT size=+0><B><FONT face=serif size=1>Amount and Nature of</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=center width="1%"><FONT size=+0>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><FONT size=+0><B><FONT face=serif color=#231f20 size=1>Name and Address of Beneficial Owner</FONT></B> </FONT></TD>
<TD noWrap align=left width="92%">&nbsp;</TD>
<TD noWrap align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="3%" colSpan=3><FONT size=+0><B><FONT face=serif size=1>Beneficial Ownership(1)</FONT></B> </FONT></TD>
<TD noWrap align=center width="1%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif color=#231f20 size=1>Percent of Class(2)</FONT></B> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="93%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>Bruce R. Culver</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>1,613,344</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>2.6%</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="93%" colSpan=2><FONT size=+0><FONT face=serif size=2>Patrick W. Smith</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>2,881,376</FONT> </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>4.6%</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="93%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>John S. Caldwell</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>4,777</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>*</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="93%" colSpan=2><FONT size=+0><FONT face=serif size=2>Michael Garnreiter</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>4,826</FONT> </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>*</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="93%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>Richard H. Carmona</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>&#151;</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=+0>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="93%" colSpan=2><FONT size=+0><FONT face=serif size=2>Thomas P. Smith</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>1,800,256</FONT> </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>2.9%</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="93%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>Judy Martz</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>46,392</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>*</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="93%" colSpan=2><FONT size=+0><FONT face=serif size=2>Matthew R. McBrady</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>167,060</FONT> </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>*</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="93%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>Mark W. Kroll</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>152,058</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>*</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="93%" colSpan=2><FONT size=+0><FONT face=serif size=2>Kathleen C. Hanrahan</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>357,926</FONT> </FONT></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>*</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="93%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>Daniel M. Behrendt</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>168,230</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>*</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="93%" colSpan=2><FONT size=+0>&nbsp;&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"><FONT size=+0>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>*</FONT> </FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="93%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>All directors and executive officers as a group (11 persons)</FONT>&nbsp; </FONT></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>7,196,245</FONT> </FONT></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>11.8% </FONT>&nbsp; </FONT></TD></TR>
</TABLE>

<BR>
<P align=center><FONT face=serif size=2>19</FONT></P>

<HR align=center width="100%" noShade SIZE=2>


<PAGE>
<BR>____________________<BR><BR>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR>
<TD vAlign=top noWrap><FONT size=2>*</FONT></TD>
<TD vAlign=top noWrap></TD>
<TD width="100%"><FONT size=2>less than 1%</FONT></TD></TR>
<TR>
<TD vAlign=top width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(1)</FONT></TD>
<TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD width="100%"><FONT face=serif size=2>The shares shown as beneficially owned include 163,726 shares for Bruce R. Culver, 910,168 shares for Patrick W. Smith, 4,777 shares for John S. Caldwell, 4,826 shares for Michael Garnreiter, 930,168 shares for Thomas P. Smith, 46,392 shares for Judy Martz, 167,060 shares for Matthew R. McBrady, 152,058 shares for Mark W. Kroll, 357,926 shares for Kathleen C. Hanrahan, 168,230 shares for Daniel M. Behrendt, and 2,905,331 shares for the group, which such persons and the group have the right to acquire by exercise of stock options or warrants within 60 days following March 26, 2007.</FONT></TD></TR>
<TR>
<TD width="100%" colSpan=3>&nbsp;</TD></TR>
<TR>
<TD vAlign=top noWrap><FONT face=serif size=2>(2)</FONT></TD>
<TD vAlign=top noWrap></TD>
<TD width="100%"><FONT face=serif size=2>Calculated based on number of outstanding shares as of March 26, 2007 which is 62,065,407 shares plus the total number of shares which the reporting person has the right to acquire within 60 days following March 26, 2007.</FONT></TD></TR>
</TABLE>


<P align=center><B><FONT face=serif size=2>SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE </FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Section 16(a) of the Securities Exchange Act of 1934 requires the Company&#146;s executive officers and directors, and persons who own more than 10 percent of a registered class of the Company&#146;s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Executive officers, directors and greater than 10 percent beneficial owners are required by SEC regulations to furnish the Company with copies of all forms they file pursuant to Section 16(a). Based solely on a review of the copies of such reports furnished to the Company and written representations from reporting persons that no other reports were required, to the Company&#146;s knowledge, such persons complied with all of the Section 16(a) filing requirements applicable to them in 2006.</FONT></P>

<P align=center><B><FONT face=serif size=2>PROPOSAL TWO:</FONT></B></P>

<P align=center><B><FONT face=serif size=2>RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED <BR>PUBLIC ACCOUNTING FIRM </FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Audit Committee has appointed Grant Thornton LLP, independent registered public accounting firm, to audit the financial statements of the Company for the year ending December 31, 2007. Grant Thornton LLP has acted as the independent registered public accounting firm for the Company since September 15, 2005. A representative of Grant Thornton LLP is expected to be present at the Annual Meeting, will have the opportunity to make a statement and will be available to respond to appropriate questions. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>On September 15, 2005, the Company dismissed Deloitte &amp; Touche LLP (&#147;D&amp;T&#148;) as the Company&#146;s independent registered public accounting firm. The decision to dismiss D&amp;T was approved by the Audit Committee of the Board of Directors of the Company. The reports of D&amp;T on the financial statements of the Company for the years ended December 31, 2004 and 2003 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle, but did include an explanatory paragraph for the effects of a restatement of the financial statements for the year ended December 31, 2004. During the years ended December 31, 2004 and 2003 and through September 15, 2005, there were no disagreements with D&amp;T on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of D&amp;T, would have caused D&amp;T to make reference thereto in its reports on the financial statements of the Company for such years. During the years ended December 31, 2004 and 2003 and through September 15, 2005, there were no reportable events (as defined in Item 304(a)(1)(v) of Regulation S-K), except as described herein. As previously reported in the Company&#146;s Form 10-KSB/A filed on May 23, 2005, the Company concluded that errors that led to the restatement of its financial statements for the year ended December 31, 2004 resulted from an inadequate control over the accounting for its stock option programs. The Company&#146;s independent registered public accounting firm communicated to the Company that, under standards established by the Public Company Accounting Oversight Board, this control deficiency constituted a &#147;material weakness&#148; in our internal control over financial reporting. The Company furnished a copy of the above disclosures to
D&amp;T and requested that D&amp;T furnish the Company </FONT></P>

<P align=center><FONT face=serif size=2>20</FONT></P>

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<PAGE>

<P align=justify><FONT face=serif size=2>with a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with the above disclosures. A copy of such letter is attached as Exhibit 16.1 to the Current Report on Form 8-K filed with the SEC on September 15, 2005. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>On September 15, 2005, the Company engaged Grant Thornton LLP as its new independent registered public accounting firm to audit the Company&#146;s financial statements for the year ending December 31, 2005 and to review the financial statements to be included in the Company&#146;s quarterly report on Form 10-Q for the quarter ending September 30, 2005. Prior to the engagement of Grant Thornton LLP, neither the Company nor anyone on behalf of the Company consulted with Grant Thornton LLP during the Company&#146;s two most recent fiscal years and through September 15, 2005, in any manner regarding either: (A) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company&#146;s financial statements; or (B) any matter that was the subject of either a disagreement or a reportable event (as defined in Item 304(a)(1)(iv) and (v),
respectively, of Regulation S-K).</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Stockholder ratification of the selection of Grant Thornton LLP as our independent registered public accounting firm is not required by our Bylaws or otherwise. Nonetheless, the Audit Committee is submitting the selection of Grant Thornton LLP to the stockholders for ratification as a matter of good corporate practice and because the Audit Committee values stockholders&#146; views on our independent auditors.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>If the stockholders fail to ratify the election, the Audit Committee will reconsider the appointment of Grant Thornton LLP. Even if the selection is ratified, the Audit Committee, in its discretion, may appoint a different independent registered public accounting firm at any time during the year if it determines that such an appointment would be in our best interest and the best interest of our stockholders.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>If the appointment is not approved by the stockholders, the adverse vote will be considered a direction to the Audit Committee to consider other auditors for next year. However, because of the difficulty in making any substitution of auditors so long after the beginning of the current year, the appointment in 2007 will stand, unless the Audit Committee finds other good reason for making a change.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Unless marked to the contrary, proxies received will be voted FOR ratification of the appointment of Grant Thornton LLP as the Company&#146;s independent registered public accounting firm for the year ending December 31, 2007. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face=serif size=2>The Board of Directors recommends a vote FOR ratification of the appointment of Grant Thornton LLP as the Company&#146;s independent registered public accounting firm for the 2007 year.</FONT></B></P>

<P align=justify><B><FONT face=serif size=2>Audit and Non-Audit Fees</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face=serif size=2>Audit and Non-Audit Fees. </FONT></B><FONT face=serif size=2>The following table presents fees for audit, tax and other professional services rendered by Grant Thornton LLP for the year ended December 31, 2006 and by Grant Thornton LLP, and Deloitte and Touche LLP, our former independent registered public accounting firm, for the year ended December 31, 2005.</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="70%" border=0>
<TR vAlign=bottom>
<TD noWrap align=left width="85%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="6%" colSpan=2><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><B>2006</B></FONT> </TD>
<TD noWrap align=left width="2%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="6%" colSpan=2>&nbsp;<B><FONT face=serif size=1>2005</FONT></B> </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="85%" bgColor=#c0c0c0><FONT face=serif size=2>Audit Fees</FONT>&nbsp; </TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT>&nbsp;</TD>
<TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>560,750</FONT> </TD>
<TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT>&nbsp;</TD>
<TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>616,029</FONT> </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="85%"><FONT face=serif size=2>Audit-Related Fees</FONT> </TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="5%"><FONT face=serif size=2>194,429</FONT> </TD>
<TD noWrap align=right width="2%">&nbsp;</TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=right width="5%"><FONT face=serif size=2>199,545</FONT> </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="85%" bgColor=#c0c0c0><FONT face=serif size=2>Tax Fees</FONT> </TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>35,008</FONT> </TD>
<TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
<TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
<TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>46,454</FONT> </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="85%"><FONT face=serif size=2>All Other Fees</FONT> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="5%"><FONT face=serif size=2>&#151;</FONT> </TD>
<TD noWrap align=right width="2%"></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=right width="5%"><FONT face=serif size=2>20,000</FONT> </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="85%" bgColor=#c0c0c0></TD>
<TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
<TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>790,187</FONT> </TD>
<TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
<TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
<TD style="BORDER-BOTTOM: #000000 2pt double" noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>882,028</FONT> </TD></TR>
</TABLE>

</DIV><BR>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>Audit Fees: </FONT></I><FONT face=serif size=2>Consists of fees billed for professional services rendered for the audit of TASER International Inc.&#146;s financial statements and services that are normally provided by Grant Thornton LLP in connection with statutory and regulatory filings or engagements.</FONT></P>

<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I>Audit-Related Fees: </I></FONT><FONT face=serif size=2>Consists of fees billed principally related to Sarbanes Oxley 404 services.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>Tax Fees: </FONT></I><FONT face=serif size=2>Consists of fees billed principally for services provided in connection with worldwide tax planning and compliance services, expatriate tax services, and assistance with tax audits and appeals.</FONT></P>

<P align=center><FONT face=serif size=2>21</FONT></P>

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<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face=serif size=2>Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditor. </FONT></B><FONT face=serif size=2>Consistent with SEC policies regarding auditor independence, the Audit Committee must pre-approve all audit and permissible non-audit services provided by our independent auditors. Our Non-Audit Services Pre-Approval Policy covers all services to be performed by our independent auditors. The policy contemplates a general pre-approval for all audit, audit-related, tax and all other services that are permissible, with a general pre-approval period of twelve months from the date of each pre-approval. Any other proposed services that are to be performed by our independent auditors, not covered by or exceeding the pre-approved levels or amounts, must be specifically approved in advance.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Prior to engagement, the Audit Committee pre-approves the following categories of services. These fees are budgeted, and the Audit Committee requires the independent auditors and management to report actual fees versus the budget periodically throughout the year, by category of service.</FONT></P>

<P align=justify>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR>
<TD width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
<TD vAlign=top width="1%"><FONT face=wingdings size=2>q</FONT></TD>
<TD width="1%">&nbsp;&nbsp;&nbsp;</TD>
<TD width="97%"><FONT size=2><B>Audit </B><FONT face=serif>services include the annual financial statement audit (including required quarterly reviews) and other work required to be performed by the independent auditors to be able to form an opinion on our Consolidated Financial Statements. Such work includes, but is not limited to, comfort letters, and services associated with SEC registration statements, periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings.</FONT></FONT></TD></TR>
<TR>
<TD width="100%" colSpan=4>&nbsp;</TD></TR>
<TR>
<TD width="1%"></TD>
<TD vAlign=top width="1%"><FONT face=Wingdings size=2>q</FONT></TD>
<TD width="1%"></TD>
<TD width="97%"><FONT size=2><B>Audit-related </B><FONT face=serif>services are for services that are reasonably related to the performance of the audit or review of our financial statements or that are traditionally performed by the independent auditor. Such services typically include but are not limited to, due diligence services pertaining to potential business acquisitions or dispositions, accounting consultations related to accounting, financial reporting or disclosure matters not classified as &#147;audit services,&#148; statutory audits or financial audits for subsidiaries or affiliates, and assistance with understanding and implementing new accounting and financial reporting guidance.</FONT></FONT></TD></TR>
<TR>
<TD width="100%" colSpan=4>&nbsp;</TD></TR>
<TR>
<TD width="1%"></TD>
<TD vAlign=top width="1%"><FONT face=Wingdings size=2>q</FONT></TD>
<TD width="1%"></TD>
<TD width="97%"><FONT size=2><B>Tax </B><FONT face=serif>services include all services performed by the independent auditors&#146; tax personnel, except those services specifically related to the financial statements, and includes fees in the area of tax compliance, tax planning and tax advice.</FONT></FONT></TD></TR>
</TABLE>


<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Audit Committee has considered and concluded that the provision by Grant Thornton LLP of non-audit services is compatible with Grant Thornton maintaining its independence. </FONT></P>

<P align=justify><B><FONT face=serif size=2>Audit Committee Pre-Approval Procedures for Independent Auditor-Provided Services </FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Audit Committee has the sole authority to engage the Company&#146;s outside auditing and tax preparation firms and must pre-approve all tax consulting and auditing arrangements and all non-audit services prior to the performance of any such service. In addition, any proposed engagement of the independent registered public accounting firm for services that are not pre-approved audit-related and tax consulting services as described above must also be pre-approved on a case-by-case basis by the Audit Committee or the Chairman of the Audit Committee, or, if the Chairman is unavailable, another member of the Audit Committee. The Company&#146;s Chief Financial Officer has the authority to engage the Company&#146;s outside auditing and tax preparation firms for amounts less than $5,000. All of the audit&#150;related fees, tax fees and all other fees in 2006 were approved by the Audit Committee. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Audit Committee of the Board of Directors has the sole authority to engage the Company&#146;s outside auditing and tax preparation firms and must pre-approve all tax consulting and auditing arrangements and all non-audit services prior to the performance of any such service. Approval for these services is evaluated during Audit Committee meetings.</FONT></P>

<P align=center><FONT face=serif size=2>22</FONT></P>

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<P align=center><B><FONT face=serif size=2>PROPOSAL THREE:</FONT></B></P>

<P align=center><B><FONT face=serif size=2>STOCKHOLDER PROPOSAL CONCERNING ANIMAL TESTING </FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>A stockholder of the Company has informed us that they intend to present the proposal set forth below at the Annual Meeting. If the stockholder&#146;s representative, who is qualified under Delaware law, is present at the Annual Meeting and properly submits the stockholder&#146;s proposal for a vote, then the stockholder proposal will be voted upon at the Annual Meeting. The affirmative vote by holders of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal is required for the stockholder proposal to pass.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>In accordance with the Federal securities laws, the stockholder proposal and supporting statement are presented below exactly as submitted by the stockholder and are quoted verbatim (including footnotes) and are in italics. The Company disclaims all responsibility for the content of the proposal and the supporting statement, including footnotes contained in the supporting statement. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The People for the Ethical Treatment of Animals, 501 Front St., Norfolk, VA 23510, which claims ownership of 435 shares of our Common Stock, has notified the Company that it intends to submit the following proposal at the Annual Meeting:</FONT></P>

<P align=center><B><I><FONT face=serif size=2>Resolution to Eliminate Testing Taser Products on Live Animals</FONT></I></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I><FONT face=serif size=2>RESOLVED</FONT></I></B><I><FONT face=serif size=2>, that the Board report to shareholders on the feasibility of i) enacting a policy aimed at eliminating the use of animals in product safety testing conducted by and for TASER and through Company funded safety studies, and ii) enacting and posting on the Company&#146;s Web site a corporate policy statement which commits to eliminating the use of animals in product safety testing both by the Company itself, by all independently retained laboratories, and by all Company-funded safety or medical studies.</FONT></I></P>

<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><B><I>Supporting Statement:</I></B></FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2><I><FONT face=serif>Our Company has funded at least seven &#147;independent medical studies,&#148; and in another five such studies &#147;TASER consultants or personnel attended data-gathering meetings associated with the research project to provide data and answer questions.&#148;<SUP>1</SUP> One such study developed and sponsored by TASER was published in the journal Pacing and Clinical Electrophysiology and is entitled &#147;Cardiac Safety of Neuromuscular Incapacitating Defensive Devices.&#148;<SUP>2</SUP> The study describes in detail how nine pigs were repeatedly subjected to TASER current and &#147;continuously monitored until sacrifice.&#148; Another TASER testing protocol involved dosing pigs with cocaine and subjecting them to TASER shocks. Other incidents include the use of the TASER on pigs in a TASER Vice President&#146;s home garage,<SUP>3</SUP> and a bull being subjected to an agonizing TASER shock as featured on TASER&#146;s
Web site.</FONT></I></FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>As CEO Rick Smith reported in late 2005, &#147;more than 80 studies, review articles, and review letters or TASER-type devices&#133;&#148; are in circulation. Those studies and reviews have addressed the issue of product safety of the TASER product line.</FONT></I></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>Moreover, subjecting pigs to TASER&#146;s electrical currents is scientifically unsound. As reported by Dr. John G. Webster, who conducted federally-funded experiments at the University of Madison-Wisconsin, &#147;[p]revious pig studies placed the dart on the intact chest wall and the heart was then separated from the dart by a fat and muscle layer which is not as thick in the human.&#148; </FONT></I></P>

<DIV align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I>Using sentient and intelligent animals such as pigs is redundant, cruel product testing or for use as a &#147;litigation defense strategy&#148;<SUP>4</SUP> implicates a wide array of social, ethical and public policy concerns. Good corporate stewardship demands that those concerns be addressed. We urge shareholders to support this Resolution.</I></FONT></DIV>____________________<BR><BR>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 border=0>
<TR>
<TD vAlign=top noWrap><I><FONT face=serif size=1>1</FONT></I></TD>
<TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD width="100%"><I><FONT face=serif size=2>Quote by TASER CEO Rick Smith in &#147;TASER Takes the Stage,&#148; The Motley Fool; (Oct. 6, 2005).</FONT></I></TD></TR>
<TR>
<TD vAlign=top noWrap><I><FONT face=serif size=1>2</FONT></I></TD>
<TD vAlign=top noWrap></TD>
<TD width="100%"><I><FONT face=serif size=2>PACE, Vol. 28, No. 1 (Jan. 2005).</FONT></I></TD></TR>
<TR>
<TD vAlign=top noWrap><I><FONT face=serif size=1>3</FONT></I></TD>
<TD vAlign=top noWrap></TD>
<TD width="100%"><I><FONT face=serif size=2>Deposition of Max Nerheim, Vice President of Research &amp; Development, taken on May 19, 2005 in the action captioned Samuel E. Powers v. TASER International; superior Court of Arizona; No. CV2003-013457.</FONT></I></TD></TR>
<TR>
<TD vAlign=top noWrap><I><FONT face=serif size=1>4</FONT></I></TD>
<TD vAlign=top noWrap></TD>
<TD width="100%"><I><FONT face=serif size=2>Quote by CEO Rick Smith reported in East Valley Tribune, &#147;Taser profit up; stock tumbles&#148;; (Jul. 27, 2006).</FONT></I></TD></TR>
</TABLE>


<P align=center><FONT face=serif size=2>23</FONT></P>

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<PAGE>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face=serif size=2>The Board of Directors recommends a vote AGAINST this stockholder proposal for the following reasons: </FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Our limited use of research animals is essential to understand the complex interactions among the body&#146;s organ systems and the physiological consequences of exposure to our products. We do this in an effort to ensure the safety of our products. We are firmly committed to ensuring that all animal research conducted using our product is performed in the most humane ways possible.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The limited amount of laboratory testing is performed for the Company by qualified veterinarians at external facilities and is necessary to ensure the health and safety of our products to the public. Animal research is used only when absolutely necessary, but it is one important component of the safety assurance process. The very limited number of tests using animals, which are performed for the Company, are conducted in facilities that meet or exceed the highest federal standards for the humane treatment of research animals.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Certain researchers are attempting, where feasible, to utilize the growing database of humans that have been subjected to a shock from one of our products, either voluntarily or in the field, to carry out studies. We encourage this type of study and favor reducing reliance on animals. However, in many respects this type of study is impractical. For example, because the individuals in the field that receive a shock from a police officer using one of our products often have varying levels of illegal drugs (e.g., cocaine) in their systems, it is imperative that we better understand the effects of our products on such individuals. To this end, it would be impossible to conduct a controlled study on humans receiving shocks while under the influence of illegal drugs. Moreover, when an individual receives a shock from the police in the field, it is the result of a tense, threatening or combative situation. Obviously, the police or other
researchers are not in a position to undertake a controlled medical-based study of the effects of the shock on the individual. Accordingly, the limited use of animals is necessary to ensure the safety of our products. Of course, in all recent studies using animals, the veterinarians anesthetized the animals completely throughout the process.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>We are committed to using the minimum number of animals necessary to assess the safety and efficacy of our products. In addition, non-animal studies are utilized whenever valid alternatives exist, and methods are tailored to minimize pain and distress to the animal. Although non-animal research methods contribute to the reduction of animal use, the need for animal studies still exists, and we believe that the need for animal studies will continue for the foreseeable future. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Board of Directors believes that adopting a formal corporate policy aimed at eradicating the use of laboratory animals is not only unwarranted but is counterintuitive to our goal of being a good corporate citizen and ensuring the safety of our products to humans. Moreover, it is an inefficient use of Company resources. We support animal welfare principles in spirit and, most importantly, in practice. Therefore, the Board of Directors recommends voting AGAINST this proposal.</FONT></P>

<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><B>The Board of Directors recommends a vote AGAINST this stockholder proposal.</B></FONT></P>

<P align=center><B><FONT face=serif size=2>FORWARD LOOKING STATEMENTS</FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>This Proxy Statement contains &#147;forward-looking statements&#148; as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management&#146;s current expectations and involve substantial risks and uncertainties, which may cause results to differ materially from those set forth in the statements. The forward-looking statements may include, but are not limited to, statements made in the CD&amp;A section of this Proxy Statement about our compensation structure and programs and our intentions with respect thereto. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements should be evaluated together with the many uncertainties that affect Taser&#146;s business, particularly those mentioned under the heading &#147;Risk Factors&#148; in Taser&#146;s Annual
Report on Form 10-K, and in the periodic reports that TASER files with the SEC on Form 10-Q and Form 8-K.</FONT></P>

<P align=center><FONT face=serif size=2>24</FONT></P>

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<PAGE>

<P align=center><B><FONT face=serif size=2>STOCKHOLDER PROPOSALS </FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>To be eligible for inclusion in the Company&#146;s proxy materials for the 2008 annual meeting of stockholders, a proposal intended to be presented by a stockholder for action at that meeting must, in addition to complying with the stockholder eligibility and other requirements of the SEC&#146;s rules governing such proposals, be received not later than December 17, 2007 by the Secretary of the Company at the Company&#146;s principal executive offices, 17800 North 85<SUP>th</SUP> Street, Scottsdale, Arizona 85255. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Stockholders may bring business before an annual meeting only if the stockholder proceeds in compliance with the rules and regulations of the Securities and Exchange Commission and the Company Bylaws, as amended. For business to be properly brought before the 2007 annual meeting of stockholders by a stockholder, notice of the proposed business must be given to the Secretary of the Company in writing no later than 60 days before the annual meeting of stockholders or (if later) ten days after the first public notice of the meeting is sent to stockholders.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The notice to the Company&#146;s Secretary must set forth as to each matter that the stockholder proposes to bring before the meeting: (a) the nature of the proposed business with reasonable particularity, including the exact text of any proposal to be presented for adoption, and the reasons for conducting that business at the annual meeting; (b) the stockholder&#146;s name and address as they appear on the records of the Company, business address and telephone number, residence address and telephone number, and the number of shares of Common Stock of the Company directly or beneficially owned by the stockholder; (c) any interest of the stockholder in the proposed business; (d) the name or names of each person nominated by the stockholder to be elected or re-elected as a director, if any; and (e) with respect to any such nominee, the nominee&#146;s name, business address and telephone number, residence address and telephone number,
the number of shares of Common Stock of the Company, if any, directly or beneficially owned by the nominee, all information relating to the nominee that is required to be disclosed in solicitations of proxies for elections of directors, or is otherwise required, under Regulation 14A of the Securities Exchange Act of 1934, as amended, or successor regulation, and a letter signed by the nominee stating the nominee&#146;s acceptance of the nomination, the nominee&#146;s intention to serve as a director if elected and consenting to being named as a nominee for director in any Proxy Statement relating to such election. </FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The presiding officer at any annual meeting shall determine whether any matter was properly brought before the meeting in accordance with the above provisions. If the presiding officer should determine that any matter has not been properly brought before the meeting, he or she will so declare at the meeting and any such matter will not be considered or acted upon.</FONT></P>

<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><B>Householding of Annual Meeting Materials</B></FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Some brokers and other nominee record holders may be participating in the practice of &#147;householding&#148; proxy statements and annual reports. This means that only one (1) copy of the Proxy Statement and annual report may have been sent to multiple stockholders in a stockholders household. The Company will promptly deliver a separate copy of either document to any stockholder who contacts the Company&#146;s investor relations department at (phone number and address), requesting such copies. If a stockholder is receiving multiple copies of the Proxy Statement and annual report at the stockholder&#146;s household and would like to receive a single copy of the proxy statement and annual report for a stockholder&#146;s household in the future, stockholders should contact their broker, other nominee record holder, or the Company&#146;s investor relations department to request mailing of a single copy of the proxy statement and
annual report.</FONT></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face=serif size=2>A copy of the Company&#146;s 2006 Annual Report on Form 10-K for the fiscal year ended December 31, 2006 is available to stockholders without charge upon request to: Investor Relations, TASER International, Inc., 17800 North 85<SUP>th</SUP> Street, Scottsdale, Arizona 85255. </FONT></B></P>

<P align=justify><FONT face=serif size=2>By Order of the Board of Directors,</FONT></P>

<P align=justify><FONT face=serif size=2>/s/ DOUGLAS E. KLINT</FONT></P>

<P align=justify><FONT face=serif size=2>Douglas E. Klint<BR></FONT><I><FONT face=serif size=2>Corporate Secretary </FONT></I></P>

<P align=justify><FONT face=serif size=2>April 19, 2007</FONT></P>

<P align=center><FONT face=serif size=2>25</FONT></P>

<HR align=center width="100%" noShade SIZE=2>


<PAGE>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<P align=center><IMG src="taser_nps4x7x1.jpg" border=0></P>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<HR align=center width="100%" noShade SIZE=2>


<PAGE>

<P align=center><B><FONT face=serif size=2>PROXY</FONT></B></P>

<P align=center><B><FONT face=serif size=2>TASER INTERNATIONAL, INC.</FONT></B></P>

<P align=center><B><FONT face=serif size=2>PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 25, 2007</FONT></B></P>

<P align=center><B><FONT face=serif size=2>Solicited on Behalf of the Board of Directors of the Company</FONT></B></P>

<P align=justify><FONT face=serif size=2>The undersigned hereby appoints Patrick W. Smith and Douglas E. Klint as proxies, each with full power of substitution, to vote all of the shares of Common Stock that the undersigned is entitled to vote at the 2007 Annual Meeting of Stockholders of TASER International, Inc. to be held on Friday May 25, 2007 beginning at 10:00 a.m. (Arizona time) and at any adjournments or postponements thereof on the matters set forth below:</FONT></P>

<P align=justify><B><FONT face=serif size=2>Board recommends a vote FOR:</FONT></B></P>

<TABLE cellSpacing=0 cellPadding=0 border=0>
<TR vAlign=bottom>
<TD noWrap align=left width="1%"><FONT face=serif size=2><B>1.</B></FONT></TD>
<TD noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp;</TD>
<TD noWrap align=left width="97%" colSpan=5><B><FONT face=serif size=2>TO ELECT THREE DIRECTORS:</FONT></B></TD></TR>
<TR>
<TD noWrap align=left width="99%" colSpan=7>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%">&nbsp;</TD>
<TD noWrap align=left width="97%" colSpan=5><FONT face=sans-serif size=1><FONT face=wingdings><FONT size=2><FONT face=sans-serif size=2><FONT face=wingdings>q</FONT></FONT></FONT></FONT></FONT> <B><FONT face=serif size=2>VOTE FOR</FONT></B> <FONT face=serif size=2>all nominees listed (except as marked to the contrary below).</FONT>&nbsp;</TD></TR>
<TR>
<TD noWrap align=left width="99%" colSpan=7>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%">&nbsp;</TD>
<TD align=left width="97%" colSpan=5><B><FONT face=serif size=2>Instruction: To withhold authority to vote for an individual nominee, strike a line through the nominee&#146;s name below.</FONT></B></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="99%" colSpan=7>&nbsp; <B><FONT face=serif size=2></FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%">&nbsp;</TD>
<TD noWrap align=left width="1%">&nbsp;</TD>
<TD noWrap align=left width="96%" colSpan=4><B><U><FONT face=serif size=2>Class A (three-year term)</FONT></U></B> &nbsp;</TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%">&nbsp;</TD>
<TD noWrap align=left width="1%">&nbsp;</TD>
<TD noWrap align=left width="96%" colSpan=4><B><FONT face=serif size=2>John S. Caldwell, Bruce R. Culver, and Michael Garnreiter</FONT></B></TD></TR>
<TR>
<TD noWrap align=left width="99%" colSpan=7>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%">&nbsp;</TD>
<TD noWrap align=left width="97%" colSpan=5><FONT face=Wingdings size=2>q</FONT> <B><FONT face=serif size=2>WITHHOLD AUTHORITY</FONT></B> <FONT face=serif size=2>to vote for all nominees listed.</FONT></TD></TR>
<TR>
<TD noWrap align=left width="99%" colSpan=7>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD style="PADDING-TOP: 2pt" vAlign=top noWrap align=left width="1%"><FONT face=serif size=2><B>2.</B></FONT></TD>
<TD vAlign=top noWrap align=left width="1%"><B><FONT face=serif size=2></FONT></B></TD>
<TD style="PADDING-LEFT: 18pt; TEXT-INDENT: -18pt; TEXT-ALIGN: justify" vAlign=top align=left width="97%" colSpan=5><B><FONT face=serif size=2>TO RATIFY APPOINTMENT OF GRANT THORNTON LLP</FONT></B> <FONT face=serif size=2>as the Company&#146;s independent registered public accounting firm for 2007.</FONT></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="99%" colSpan=7>&nbsp; <FONT face=serif size=2></FONT>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%">&nbsp;</TD>
<TD noWrap align=left width="1%"><FONT face=Wingdings size=2>q</FONT> <FONT face=serif size=2>FOR</FONT>&nbsp;</TD>
<TD noWrap align=right width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
<TD noWrap align=right width="1%"><FONT face=Wingdings size=2>q</FONT> <FONT face=serif size=2>AGAINST</FONT>&nbsp;</TD>
<TD noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
<TD noWrap align=left width="93%"><FONT face=Wingdings size=2>q</FONT> <FONT face=serif size=2>ABSTAIN</FONT>&nbsp;</TD></TR>
<TR>
<TD noWrap align=left width="99%" colSpan=7>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="99%" colSpan=7><B><FONT face=serif size=2>Board recommends a vote AGAINST:</FONT></B>&nbsp; &nbsp;</TD></TR>
<TR>
<TD noWrap align=left width="99%" colSpan=7>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="1%"><FONT face=serif size=2><B>3.</B></FONT></TD>
<TD noWrap align=left width="1%"></TD>
<TD align=left width="97%" colSpan=5><B><FONT face=serif size=2>STOCKHOLDER PROPOSAL - RESOLUTION TO ELIMINATE TESTING TASER PRODUCTS ON LIVE ANIMALS</FONT></B></TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="99%" colSpan=7>&nbsp; &nbsp;<B><FONT face=serif size=2></FONT></B>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="1%">&nbsp;</TD>
<TD noWrap align=left width="1%"><FONT face=Wingdings size=2>q</FONT> <FONT face=serif size=2>FOR</FONT>&nbsp;</TD>
<TD noWrap align=right width="1%"></TD>
<TD noWrap align=right width="1%"><FONT face=Wingdings size=2>q</FONT> <FONT face=serif size=2>AGAINST</FONT>&nbsp;</TD>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="93%"><FONT face=Wingdings size=2>q</FONT> <FONT face=serif size=2>ABSTAIN</FONT>&nbsp;</TD></TR>
<TR>
<TD noWrap align=left width="99%" colSpan=7>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="99%" colSpan=7><B><FONT face=serif size=2>(please sign on reverse side)</FONT></B>&nbsp; &nbsp;</TD></TR>
</TABLE>

<BR>
<P align=center><B><FONT face=wingdings size=2>&#159;</FONT> <FONT face=serif size=2>PLEASE VOTE, SIGN, AND RETURN THE ABOVE PROXY <FONT face=Wingdings>&#159;</FONT></FONT></B></P>

<P align=justify><FONT face=serif size=2>You are cordially invited to attend the 2007 Annual Meeting of Stockholders of TASER International, Inc., which will be held at 17800 North 85<SUP>th</SUP> Street, Scottsdale, Arizona 85255 beginning at 10:00 a.m. (Arizona time) on Friday, May 25, 2007.</FONT></P>

<P align=justify><FONT face=serif size=2>Whether or not you plan to attend this meeting, please sign, date, and return your proxy form above as soon as possible so that your shares can be voted at the meeting in accordance with your instructions. If you attend the meeting, you may revoke your proxy, if you wish, and vote personally. It is important that your stock be represented.</FONT></P>

<P align=left>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR>
<TD width="50%"></TD>
<TD align=left width="50%">
<P align=left><FONT face=serif size=2>Douglas E. Klint,</FONT> <I><FONT face=serif size=2>Corporate</FONT></I><FONT face=serif size=2></FONT> <I><FONT face=serif size=2>Secretary</FONT></I> <FONT face=serif size=2></FONT></P>
</TD></TR>
</TABLE>

<BR>
<HR align=center width="100%" noShade SIZE=2>


<PAGE>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face=serif size=2>THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED (1) &#147;</FONT></B><B><U><FONT face=serif size=2>FOR</FONT></U></B><B><FONT face=serif size=2>&#148; THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR, (2) &#147;</FONT></B><B><U><FONT face=serif size=2>FOR</FONT></U></B><B><FONT face=serif size=2>&#148; THE RATIFICATION OF THE SELECTION OF GRANT THORNTON LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY, AND (3) &#147;</FONT></B><B><U><FONT face=serif size=2>AGAINST</FONT></U></B><B><FONT face=serif size=2>&#148; THE STOCKHOLDER PROPOSAL IN PROPOSAL 3, MORE FULLY DESCRIBED IN THE NOTICE OF ANNUAL MEETING AND THE ACCOMPANYING PROXY STATEMENT, AND IN THE DISCRETION IN THE PROXIES ON OTHER MATTERS THAT MAY BE PROPERLY PRESENTED AT THE MEETING. IF ANY OF THE NAMED NOMINEES SHOULD BECOME UNAVAILABLE PRIOR TO THE ANNUAL MEETING THE PROXY
WILL BE VOTED FOR ANY SUBSTITUTE NOMINEE OR NOMINEES DESIGNATED BY THE BOARD OF DIRECTORS. </FONT></B></P>

<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Please date and sign exactly as your name or names appear below. If more than one name appears, all should sign. Persons signing as attorney, executor, administrator, trustee, guardian, corporate officer or in any other official or representative capacity, should also provide full title. If a partnership, please sign in full partnership name by authorized person </FONT></P>

<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
<TD noWrap align=left width="1%"><FONT face=serif size=2>Dated:&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="28%">&nbsp;</TD>
<TD noWrap align=left width="20%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="50%">&nbsp;</TD></TR>
<TR>
<TD noWrap align=left width="1%"></TD>
<TD noWrap align=left width="28%"></TD>
<TD noWrap align=left width="20%"></TD>
<TD noWrap align=left width="50%">&nbsp;</TD></TR>
<TR>
<TD noWrap align=left width="49%" colSpan=3></TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="50%">&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD noWrap align=left width="49%" colSpan=3>&nbsp; </TD>
<TD noWrap align=left width="50%"><FONT face=serif size=2>Signature or Signatures</FONT></TD></TR>
</TABLE>

<BR>
<P align=justify><FONT face=serif size=2>PLEASE SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED ENVELOPE </FONT></P>

<HR align=center width="100%" noShade SIZE=2>

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