<SUBMISSION>
<ACCESSION-NUMBER>0001206774-07-002943
<TYPE>DEF 14A
<PUBLIC-DOCUMENT-COUNT>3
<PERIOD>20080128
<FILING-DATE>20071220
<DATE-OF-FILING-DATE-CHANGE>20071220
<EFFECTIVENESS-DATE>20071220
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>SURMODICS INC
<CIK>0000924717
<ASSIGNED-SIC>6794
<IRS-NUMBER>411356149
<STATE-OF-INCORPORATION>MN
<FISCAL-YEAR-END>0930
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>DEF 14A
<ACT>34
<FILE-NUMBER>000-23837
<FILM-NUMBER>071317803
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>9924 W 74TH ST
<CITY>EDEN PRAIRIE
<STATE>MN
<ZIP>55344
<PHONE>6128292700
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>9924 WEST 74TH ST
<CITY>EDEN PRAIRIE
<STATE>MN
<ZIP>55344
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>BSI CORP
<DATE-CHANGED>19970506
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>surmodics_def14a.htm
<DESCRIPTION>DEFINITIVE PROXY STATEMENT
<TEXT>

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<P align=center><FONT face=serif size=2>SCHEDULE 14A </FONT></P>
<P align=center><FONT face=serif size=2>(Rule 14a-101) </FONT><FONT face=serif></FONT></P>
<P align=center><FONT face=serif size=2>INFORMATION REQUIRED IN PROXY STATEMENT
</FONT><FONT face=serif></FONT></P>
<P align=center><FONT face=serif size=2>SCHEDULE 14A INFORMATION </FONT><FONT face=serif></FONT></P>
<P align=center><FONT face=serif size=2>Proxy Statement Pursuant to Section
14(a) of the<BR>Securities Exchange Act of 1934 (Amendment No. )</FONT></P>
<P align=left><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
[_]<BR></FONT><FONT face=serif size=2><BR>Check the appropriate
box:<BR></FONT><FONT face=serif size=2>[_]&nbsp; Preliminary Proxy
Statement&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [_] Soliciting Material Under
Rule<BR></FONT><FONT face=serif size=2>[_]&nbsp; Confidential, For Use of
the&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
14a-12 <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Commission Only (as permitted
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; by Rule 14a-6(e)(2))
<BR>[x]&nbsp;&nbsp;Definitive Proxy Statement <BR>[_]&nbsp; Definitive
Additional Materials</FONT></P>
<P align=center><FONT face=serif size=2><FONT face=serif size=2>SURMODICS,
INC.<BR></FONT>------------------------------------------------------------------------------------------------------------------------------------------------------</FONT>
</P>
<P align=center><FONT face=serif size=2>(Name of Registrant as Specified In Its
Charter)</FONT></P>
<P align=center><FONT face=serif size=2>------------------------------------------------------------------------------------------------------------------------------------------------------</FONT></P>
<P align=center><FONT face=serif size=2>(Name of Person(s) Filing Proxy
Statement, if Other Than the Registrant)</FONT></P>
<P align=justify><FONT face=serif size=2>Payment of Filing Fee (Check the
appropriate box):<BR></FONT><FONT face=serif size=2>[x]&nbsp; No fee
required.<BR></FONT><FONT face=serif size=2>[_] Fee computed on table below per
Exchange Act Rules 14a-6(i)(4) and 0-11.</FONT><FONT face=serif> </FONT></P>
<P align=justify><FONT face=serif size=2>1)&nbsp; Title of each class of
securities to which transaction applies:</FONT><FONT face=serif>
<BR>____________________________________________________________________________________<BR></FONT><FONT face=serif size=2>2)&nbsp; Aggregate number of securities to which transaction
applies:</FONT><FONT face=serif> <BR></FONT><FONT face=serif size=2>3)&nbsp; Per
unit price or other underlying value of transaction computed
pursuant</FONT><FONT face=serif> </FONT><FONT face=serif size=2>to Exchange Act
Rule 0-11 (set forth the <BR>&nbsp;&nbsp;&nbsp;&nbsp; amount on which the filing
fee&nbsp;is</FONT><FONT face=serif> </FONT><FONT face=serif size=2>calculated
and state how it was determined):</FONT><FONT face=serif> <BR></FONT><FONT face=serif size=2>4)&nbsp; Proposed maximum aggregate value of
transaction:</FONT><FONT face=serif>
<BR>____________________________________________________________________________________<BR></FONT><FONT face=serif size=2>5)&nbsp; Total fee paid:<BR></FONT><FONT face=serif size=2>[_]
Fee paid previously with preliminary materials:</FONT><FONT face=serif>
<BR></FONT><FONT face=serif size=2>[_] Check box if any part of the fee is
offset as provided by Exchange Act Rule</FONT><FONT face=serif> </FONT><FONT face=serif size=2>0-11(a)(2) and identify the filing for
which<BR>&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;the offsetting fee was paid </FONT><FONT face=serif size=2>previously. Identify the previous filing by registration
statement number,</FONT><FONT face=serif> </FONT><FONT face=serif size=2>or the
form or<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; schedule and the date of its
filing.</FONT><FONT face=serif>
<BR>____________________________________________________________________________________<BR></FONT><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1) Amount previously
paid:<BR><FONT size=3>____________________________________________________________________________________</FONT><BR></FONT><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2) Form, Schedule or
Registration Statement No.:</FONT><FONT face=serif>
<BR>____________________________________________________________________________________<BR></FONT><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3) Filing Party:<BR><FONT size=3>____________________________________________________________________________________</FONT><BR></FONT><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4) Date Filed:</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<DIV align=center><IMG src="logox1x1.jpg"></DIV>
<P align=center><B><FONT face=serif>SURMODICS,
INC.<BR>___________________<BR><BR></FONT></B><B><FONT face=serif size=2>NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS<BR><FONT size=3>___________________</FONT></FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Annual Meeting of Shareholders of SurModics, Inc. will be held on January 28,
2008, at 4:00 p.m. (Minneapolis time), at the Radisson Plaza Hotel, 35 South
Seventh Street, downtown Minneapolis, Minnesota (PLEASE NOTE LOCATION CHANGE),
for the following purposes:</FONT></P>
<TABLE style="TEXT-ALIGN: justify" 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>To set the number of directors at
      ten (10).</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>To elect Class III
      directors.</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>To consider and act upon such
      other matters as may properly come before the meeting or any adjournment
      or postponement of the meeting.</FONT></TD></TR></TABLE>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Only
shareholders of record at the close of business on December 7, 2007 are entitled
to notice of and to vote at the meeting or any adjournment of the
meeting.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Your vote
is important. We ask that you complete, sign, date and return the enclosed Proxy
in the envelope provided for your convenience. The prompt return of Proxies will
save the Company the expense of further requests for Proxies.</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="49%">&nbsp; </TD>
    <TD noWrap align=left width="50%"><FONT face=serif size=2>BY ORDER OF THE
      BOARD OF DIRECTORS</FONT>&nbsp; </TD></TR>
  <TR>
    <TD width="99%" colSpan=2>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="49%">&nbsp; </TD>
    <TD noWrap align=left width="50%"><IMG src="logox1x2.jpg"><FONT face=serif size=2><BR>Kendrick B. Melrose</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="49%">&nbsp; </TD>
    <TD noWrap align=left width="50%"><FONT face=serif size=2>Chairman of the
      Board</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="49%"><FONT face=serif size=2>Eden Prairie,
      Minnesota</FONT>&nbsp; </TD>
    <TD noWrap align=left width="50%">&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="49%"><FONT face=serif size=2>December 20,
      2007</FONT>&nbsp; </TD>
    <TD noWrap align=left width="50%">&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=center><B><FONT face=serif>SURMODICS, INC.</FONT></B></P>
<P align=center><B><FONT face=serif size=2>Annual Meeting of Shareholders
<BR>January 28, 2008<BR>______________________</FONT></B></P>
<P align=center><B><FONT face=serif size=2>PROXY
STATEMENT<BR>______________________</FONT></B></P>
<P align=center><B><FONT face=serif size=2>INTRODUCTION</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Your
Proxy is solicited by the Board of Directors of SurModics, Inc. (the &#147;Company&#148;)
for use at the Annual Meeting of Shareholders to be held on January 28, 2008
(the &#147;Annual Meeting&#148;), at the location and for the purposes set forth in the
notice of meeting, and at any adjournment or postponement of the
meeting.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The cost
of soliciting Proxies, including the preparation, assembly and mailing of the
Proxies and soliciting material, as well as the cost of forwarding this material
to beneficial owners of stock, will be borne by the Company. Directors, officers
and regular employees of the Company may, without compensation other than their
regular remuneration, solicit Proxies personally or by telephone.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Any
shareholder giving a Proxy may revoke it at any time prior to its use at the
meeting by giving written notice of the revocation to the Secretary of the
Company, or by filing a new written Proxy with an officer of the Company.
Personal attendance at the meeting is not, by itself, sufficient to revoke a
Proxy unless written notice of the revocation or a subsequent Proxy is delivered
to an officer before the revoked or superseded Proxy is used at the meeting.
Proxies not revoked will be voted in accordance with the choices specified by
shareholders by means of the ballot provided on the Proxy for that purpose.
Proxies that are signed but which lack any such specification will, subject to
the following, be voted in favor of the proposal set forth in the Notice of
Meeting and in favor of the slate of directors proposed by the Board of
Directors and listed in this document. If a shareholder abstains from voting as
to any matter, then the shares held by the shareholder shall be deemed present
at the meeting for purposes of determining a quorum and for purposes of
calculating the vote with respect to this matter, but shall not be deemed to
have been voted in favor of this matter. Abstentions, therefore, as to any
proposal will have the same effect as votes against the proposal. If a broker
returns a &#147;non-vote&#148; Proxy, indicating a lack of voting instructions by the
beneficial holder of the shares and a lack of discretionary authority on the
part of the broker to vote on a particular matter, then the shares covered by
the non-vote Proxy shall be deemed present at the meeting for purposes of
determining a quorum but shall not be deemed to be represented at the meeting
for purposes of calculating the vote required for approval of that
matter.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
mailing address of the principal executive office of the Company is 9924 West
74th Street, Eden Prairie, Minnesota 55344. The Company expects that this Proxy
Statement, the related Proxy and notice of meeting will first be mailed to
shareholders on or about December 20, 2007.</FONT></P>
<P align=center><B><FONT face=serif size=2>OUTSTANDING SHARES AND VOTING
RIGHTS</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Board
of Directors of the Company has fixed December 7, 2007, as the record date for
determining shareholders entitled to vote at the Annual Meeting. Persons who
were not shareholders on such date will not be allowed to vote at the Annual
Meeting. At the close of business on December 7, 2007, 18,271,054 shares of the
Company&#146;s common stock were issued and outstanding. Common stock is the only
outstanding class of capital stock of the Company entitled to vote at the
meeting. Each share of common stock is entitled to one vote on each matter to be
voted upon at the meeting. Holders of common stock are not entitled to
cumulative voting rights.</FONT></P>
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<PAGE>
<P align=center><B><FONT face=serif size=2>PRINCIPAL SHAREHOLDERS</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
following table provides information concerning persons known to the Company to
be the beneficial owners of more than 5% of the Company&#146;s outstanding common
stock as of December 7, 2007. Unless otherwise indicated, the shareholders
listed in the table have sole voting and investment power with respect to the
shares indicated.</FONT></P>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="80%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="2%">&nbsp;</TD>
    <TD noWrap align=center width="8%" colSpan=4><B><FONT face=serif size=1>Number of Shares</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="8%" colSpan=4><B><FONT face=serif size=1>Percent of</FONT></B> </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 and Address of
      Beneficial Owner</FONT></B> </TD>
    <TD noWrap align=left width="79%">&nbsp;</TD>
    <TD noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="8%" colSpan=4><B><FONT face=serif size=1>Beneficially Owned</FONT></B> </TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="8%" colSpan=4><FONT face=serif size=1><B>Class</B><FONT size=3>
      </FONT><B>(1)</B><FONT size=3> </FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="80%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Neuberger Berman, LLC</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>2,188,789</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;(2)</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT size=2>12.0</FONT>
    </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=2>%</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="80%" bgColor=#c0c0c0 colSpan=2>&nbsp;&nbsp;&nbsp;&nbsp; <FONT face=serif size=2>605 Third
      Avenue</FONT> </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></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></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="80%" bgColor=#c0c0c0 colSpan=2>&nbsp;&nbsp;&nbsp;&nbsp; <FONT face=serif size=2>New York, New
      York 10158</FONT> </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></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></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="80%" colSpan=2><FONT face=serif size=2>William Blair Capital Management LLC</FONT> </TD>
    <TD noWrap align=right width="2%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="5%"><FONT face=serif size=2>1,532,633</FONT>
    </TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;(2)</FONT>
    </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="5%"><FONT face=serif size=2>8.4</FONT> </TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>%</FONT> </TD>
    <TD noWrap align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="80%" colSpan=2>&nbsp;&nbsp;&nbsp;&nbsp; <FONT face=serif size=2>222 West Adams Street, 13th floor</FONT> </TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="80%" colSpan=2>&nbsp;&nbsp;&nbsp;&nbsp; <FONT face=serif size=2>Chicago, Illinois 60606</FONT> </TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="80%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Dale R. Olseth</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>1,406,280</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;(3)</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>7.7</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>%</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="80%" bgColor=#c0c0c0 colSpan=2>&nbsp;&nbsp;&nbsp;&nbsp; <FONT face=serif size=2>9924 West 74th
      Street</FONT> </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></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></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="80%" bgColor=#c0c0c0 colSpan=2>&nbsp;&nbsp;&nbsp;&nbsp; <FONT face=serif size=2>Eden Prairie,
      MN 55344</FONT> </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></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></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="80%" colSpan=2><FONT face=serif size=2>Mairs
      &amp; Power, Inc.</FONT> </TD>
    <TD noWrap align=right width="2%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="5%"><FONT face=serif size=2>1,043,363</FONT>
    </TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;(2)</FONT>
    </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="5%"><FONT face=serif size=2>5.7</FONT> </TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>%</FONT> </TD>
    <TD noWrap align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="80%" colSpan=2>&nbsp;&nbsp;&nbsp;&nbsp; <FONT face=serif size=2>332 Minnesota Street #W-1420</FONT> </TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="80%" colSpan=2>&nbsp;&nbsp;&nbsp;&nbsp; <FONT face=serif size=2>St. Paul, Minnesota 55101</FONT> </TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="80%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>David A. Koch</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>964,583</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;(4)</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>5.3</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>%</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="80%" bgColor=#c0c0c0 colSpan=2>&nbsp;&nbsp;&nbsp;&nbsp; <FONT face=serif size=2>9924 West 74th
      Street</FONT> </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></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></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="80%" bgColor=#c0c0c0 colSpan=2>&nbsp;&nbsp;&nbsp;&nbsp; <FONT face=serif size=2>Eden Prairie,
      MN 55344</FONT> </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></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></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="5%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR></TABLE></DIV>____________________<BR><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 noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD width="100%"><FONT face=serif size=2>In accordance with the
      requirements of the Securities and Exchange Commission, Percent of Class
      for a person or entity is calculated based on outstanding shares plus
      shares deemed beneficially owned by that person or entity by virtue of the
      right to acquire such shares as of December 7, 2007, or within sixty days
      of such date.</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>Based on a Schedule 13F filing
      for each such beneficial owner dated as of September 30,
2007.</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>Includes 5,000 shares held by Mr.
      Olseth&#146;s wife and 3,000 shares that may be acquired upon exercise of stock
      options that are exercisable as of December 7, 2007 or within 60 days of
      such date.</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>Includes 70,000 shares held by
      Mr. Koch&#146;s wife, 24,000 shares that may be acquired by Mr. Koch upon
      exercise of stock options that are exercisable as of December 7, 2007 or
      within 60 days of such date, 55,000 shares held by the Greycoach
      Foundation, over which Mr. Koch has shared voting power, 3,000 shares held
      by the Marilyn Langdon Trust, over which Mr. Koch has sole voting power,
      and 70,000 shares held by the Clarissa Gray Trust, over which Mr. Koch has
      shared voting power.</FONT></TD></TR></TABLE>
<P align=center><FONT face=serif size=2>2</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=center><B><FONT face=serif size=2>MANAGEMENT
SHAREHOLDINGS</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
following table sets forth the number of shares of common stock beneficially
owned as of December 7, 2007, by each executive officer of the Company named in
the Summary Compensation table, by each current director and nominee for
director of the Company and by all directors and executive officers (including
the named executive officers) as a group. Unless otherwise indicated, the
shareholders listed in the table have sole voting and investment power with
respect to the shares indicated.</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=left width="1%">&nbsp;</TD>
    <TD noWrap align=center width="5%" colSpan=4>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=3>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp;</TD>
    <TD noWrap align=center width="5%" colSpan=3><B><FONT face=serif size=1>Aggregate</FONT></B> </TD>
    <TD noWrap align=center width="1%">&nbsp;</TD>
    <TD noWrap align=center width="5%" colSpan=4>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=4>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=3>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=3><B><FONT face=serif size=1>Number of</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=4>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=4>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=3>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=3><B><FONT face=serif size=1>Common Shares</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=4>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=4><B><FONT face=serif size=1>Current</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=3><B><FONT face=serif size=1>Acquirable</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=3><B><FONT face=serif size=1>Beneficially</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=4><B><FONT face=serif size=1>Percent of</FONT></B> </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 of Beneficial
      Owner or Identity of Group</FONT></B> </TD>
    <TD noWrap align=left width="75%">&nbsp;</TD>
    <TD noWrap align=right width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=4><B><FONT face=serif size=1>Holdings</FONT></B> </TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=3><B><FONT face=serif size=1>within 60 days</FONT></B> </TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=3><B><FONT face=serif size=1>Owned</FONT></B> </TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=4><B><FONT face=serif size=1>Class (1)</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Dale R. Olseth</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=2>1,403,280</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;(2)</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>3,000</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>&nbsp;</TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>1,406,280</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;</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="2%" bgColor=#c0c0c0><FONT face=serif size=2>7.7</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>%</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" colSpan=2><FONT face=serif size=2>David
      A. Koch</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>940,583</FONT>
    </TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;(3)</FONT>
    </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>24,000</FONT>
</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>964,583</FONT>
    </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>5.3</FONT> </TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>%</FONT> </TD>
    <TD noWrap align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Kendrick B. Melrose</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="2%" bgColor=#c0c0c0><FONT face=serif size=2>263,940</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </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></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>26,000</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></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>289,940</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=2>1.6</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>%</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" colSpan=2><FONT face=serif size=2>Bruce
      J Barclay</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>87,585</FONT>
</TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>85,000</FONT>
</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>172,585</FONT>
    </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>*</FONT> </TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Philip D. Ankeny</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="2%" bgColor=#c0c0c0><FONT face=serif size=2>32,458</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;(4)</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></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>41,000</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></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>73,458</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=2>*</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" colSpan=2><FONT face=serif size=2>Charles W. Olson</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>29,579</FONT>
</TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;(5)</FONT>
    </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>28,600</FONT>
</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>58,179</FONT>
</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>*</FONT> </TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Paul A. Lopez</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="2%" bgColor=#c0c0c0><FONT face=serif size=2>35,974</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </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></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>20,000</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></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>55,794</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=2>*</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" colSpan=2><FONT face=serif size=2>John
      A. Meslow</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>28,000</FONT>
</TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>26,000</FONT>
</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>54,000</FONT>
</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>*</FONT> </TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Kenneth H. Keller, Ph.D.</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="2%" bgColor=#c0c0c0><FONT face=serif size=2>23,000</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&nbsp;(6)</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></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>21,000</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></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>44,000</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=2>*</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" colSpan=2><FONT face=serif size=2>Steven
      J. Keough</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>20,252</FONT>
</TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>13,000</FONT>
</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>33,252</FONT>
</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>*</FONT> </TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Gerald B. Fischer</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="2%" bgColor=#c0c0c0><FONT face=serif size=2>10,950</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </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></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>19,600</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></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>30,550</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=2>*</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" colSpan=2><FONT face=serif size=2>Jos&#233;
      H. Bedoya</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>19,400</FONT>
</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>19,400</FONT>
</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>*</FONT> </TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>John W. Benson</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="2%" bgColor=#c0c0c0><FONT face=serif size=2>3,600</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </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></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>15,600</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></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>19,200</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=2>*</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" colSpan=2><FONT face=serif size=2>Robert
      C. Buhrmaster</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>All executive officers and directors as a</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></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></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="76%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp; group (23 persons)</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="2%" bgColor=#c0c0c0><FONT face=serif size=2>2,876,201</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </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></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>327,200</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></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>3,203,221</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=2>17.2</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT face=serif size=2>%</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD></TR></TABLE>____________________<BR><BR>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 border=0>

  <TR vAlign=bottom>
    <TD vAlign=top align=justify width="1%"><FONT face=serif size=2>*</FONT></TD>
    <TD vAlign=top align=justify width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD vAlign=top align=justify width="97%"><FONT face=serif size=2>Less than
      1%</FONT></TD></TR>
  <TR>
    <TD vAlign=top align=justify width="1%">&nbsp;</TD>
    <TD vAlign=top align=justify width="1%"></TD>
    <TD vAlign=top align=justify width="97%"></TD></TR>
  <TR vAlign=bottom>
    <TD vAlign=top align=justify width="1%"><FONT face=serif size=2>(1)</FONT></TD>
    <TD vAlign=top align=justify width="1%"></TD>
    <TD vAlign=top align=justify width="97%"><FONT face=serif size=2>See
      footnote (1) to preceding table.</FONT></TD></TR>
  <TR>
    <TD vAlign=top align=justify width="1%">&nbsp;</TD>
    <TD vAlign=top align=justify width="1%"></TD>
    <TD vAlign=top align=justify width="97%"></TD></TR>
  <TR vAlign=bottom>
    <TD vAlign=top align=justify width="1%"><FONT face=serif size=2>(2)</FONT></TD>
    <TD vAlign=top align=justify width="1%"></TD>
    <TD vAlign=top align=justify width="97%"><FONT face=serif size=2>See
      footnote (2) to preceding table.</FONT></TD></TR>
  <TR>
    <TD vAlign=top align=justify width="1%">&nbsp;</TD>
    <TD vAlign=top align=justify width="1%"></TD>
    <TD vAlign=top align=justify width="97%"></TD></TR>
  <TR vAlign=bottom>
    <TD vAlign=top align=justify width="1%"><FONT face=serif size=2>(3)</FONT></TD>
    <TD vAlign=top align=justify width="1%">&nbsp; </TD>
    <TD vAlign=top align=justify width="97%"><FONT face=serif size=2>See
      footnote (3) to preceding table. Of these shares, 675,000 have been
      pledged as security.</FONT></TD></TR>
  <TR>
    <TD vAlign=top align=justify width="1%">&nbsp;</TD>
    <TD vAlign=top align=justify width="1%"></TD>
    <TD vAlign=top align=justify width="97%"></TD></TR>
  <TR vAlign=bottom>
    <TD vAlign=top align=justify width="1%"><FONT face=serif size=2>(4)</FONT></TD>
    <TD vAlign=top align=justify width="1%">&nbsp; </TD>
    <TD vAlign=top align=justify width="97%"><FONT face=serif size=2>Of these
      shares, 17,455 have been pledged as security.</FONT></TD></TR>
  <TR>
    <TD vAlign=top align=justify width="1%">&nbsp;</TD>
    <TD vAlign=top align=justify width="1%"></TD>
    <TD vAlign=top align=justify width="97%"></TD></TR>
  <TR vAlign=bottom>
    <TD vAlign=top align=justify width="1%"><FONT face=serif size=2>(5)</FONT></TD>
    <TD vAlign=top align=justify width="1%">&nbsp; </TD>
    <TD vAlign=top align=justify width="97%"><FONT face=serif size=2>Includes
      800 shares held in an IRA and 380 shares held by Mr. Olson&#146;s minor
      children, over which Mr. Olson has sole voting and investment
    power.</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD vAlign=top align=justify width="1%"></TD>
    <TD vAlign=top align=justify width="1%">&nbsp; </TD>
    <TD vAlign=top align=justify width="97%"><FONT face=serif size=2></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD vAlign=top align=justify width="1%"><FONT face=serif size=2>(6)</FONT></TD>
    <TD vAlign=top align=justify width="1%">&nbsp; </TD>
    <TD vAlign=top align=justify width="97%"><FONT face=serif size=2>Includes
      2,100 shares held by Dr. Keller as custodian for his minor daughter, over
      which Dr. Keller has sole voting and investment power, and includes 2,100
      shares held by Dr. Keller&#146;s wife as custodian for their son, over which
      Dr. Keller has shared voting and investment
power.</FONT></TD></TR></TABLE><BR>
<P align=center><FONT face=serif size=2>3</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=center><B><FONT face=serif size=2>ELECTION OF DIRECTORS <BR>(Proposals
#1 and #2) </FONT></B></P>
<P align=left><B><FONT face=serif size=2>General Information</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Bylaws of the Company provide that the number of directors, which shall not be
less than three, shall be determined by the shareholders. The Bylaws also
provide for the election of three classes of directors with terms staggered so
as to require the election of only one class of directors each year, and further
that each class be equal in number, as nearly as possible. Only directors who
are members of Class III will be elected at the Annual Meeting. The Class III
directors will be elected to a three-year term and, therefore, will hold office
until the Company&#146;s 2011 annual meeting of shareholders and until their
successors have been duly elected and qualified. The terms of Class I and II
directors continue until the 2009 and 2010 annual meetings,
respectively.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Under the
Board&#146;s recently adopted retirement policy, Dale R. Olseth and David A. Koch
will not stand for re-election at the Annual Meeting and will retire from the
Board at the meeting&#146;s conclusion. The Board has expressed its deep gratitude
and appreciation for the leadership, wealth of experience, and integrity with
which Messrs. Olseth and Koch served the Company. In recognition of his many
years of service to the Company, Mr. Olseth was designated Chairman Emeritus by
the Board. Under the new retirement policy, Kenneth H. Keller, Ph.D. would
normally have retired at the same time as Messrs. Olseth and Koch. However, at
the request of the Board, Dr. Keller has agreed to continue to serve on the
Board to help ensure an orderly transition of Board members.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Company&#146;s Corporate Governance and Nominating Committee and Board of Directors
have recommended that the number of directors be set at ten (10). As a result of
the vacancies created by the retirements of Messrs. Olseth and Koch and subject
to the election by the shareholders of the nominees set forth below, the number
of directors serving on the Board will be eight (8), and there will be two (2)
vacant board seats. These two vacant board seats will be allocated to Class III.
The Bylaws allow the Board to fill any such vacant board seats at its discretion
upon the identification of suitable director candidates. The Board has provided
for the vacant board seats because it feels the addition of two new directors to
the Board will expand the level of knowledge and expertise of the Board as a
whole, and allow the Board to more effectively serve the shareholders and the
Company. The Corporate Governance and Nominating Committee is actively
evaluating director candidates to serve on the Board. The Corporate Governance
and Nominating Committee also recommended and the Board of Directors selected
Robert C. Buhrmaster and Kenneth H. Keller, Ph.D., as the Board&#146;s nominees for
election and re-election, respectively, as Class III directors. A brief
biographical profile of both Mr. Buhrmaster and Dr. Keller is provided below.
Mr. Buhrmaster was recommended to the Corporate Governance and Nominating
Committee by a non-employee independent director.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Each
Proxy will be voted for each of such nominees unless the Proxy withholds a vote
for one or more nominees. If, prior to the meeting, it should become known that
any of the nominees will be unable to serve as a director after the meeting by
reason of death, incapacity or other unexpected occurrence, the Proxies will be
voted for such substitute nominee as is recommended or selected by the Corporate
Governance and Nominating Committee and the Board of Directors or,
alternatively, not voted for any nominee. The Board of Directors has no reason
to believe that any nominee will be unable to serve. Under applicable Minnesota
law, approval of the proposal to set the number of directors at ten (10)
requires the affirmative vote of the holders of a majority of the voting power
of the shares represented in person or by Proxy at the Annual Meeting with
authority to vote on such matter, but not less than the affirmative vote of
4,567,764 shares, and the election of each Class III director requires the
affirmative vote by a plurality of the voting power of the shares present and
entitled to vote on the election of directors at the Annual Meeting at which a
quorum is present. Proxies cannot be voted for a greater number of persons than
the number of persons the Board has nominated. Negative votes will not affect
the outcome of the election of directors.</FONT></P>
<P align=center><FONT face=serif size=2>4</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
following information is provided with respect to each director nominee as well
as each director whose term continues after the Annual Meeting:</FONT></P>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="95%" border=0>

  <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="29%">&nbsp;</TD>
    <TD noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><B><FONT face=serif size=1>Age</FONT></B> </TD>
    <TD noWrap align=center width="2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="64%"><B><FONT face=serif size=1>Position with Company</FONT></B>
  </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="30%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Kendrick B. Melrose</FONT>&nbsp; </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>67</FONT> </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="64%" bgColor=#c0c0c0><FONT face=serif size=2>Chairman</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="30%" colSpan=2><FONT face=serif size=2>Bruce
      J Barclay</FONT>&nbsp; </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=2>51</FONT> </TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="64%"><FONT face=serif size=2>Director,
      President and Chief Executive Officer</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="30%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Jos&#233; H. Bedoya (1)(3)</FONT>&nbsp; </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>51</FONT> </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="64%" bgColor=#c0c0c0><FONT face=serif size=2>Director</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="30%" colSpan=2><FONT face=serif size=2>John
      W. Benson (1)(3)</FONT>&nbsp; </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=2>63</FONT> </TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="64%"><FONT face=serif size=2>Director</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="30%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Robert C. Buhrmaster (2)</FONT>&nbsp; </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>60</FONT> </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="64%" bgColor=#c0c0c0><FONT face=serif size=2>Director Nominee</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="30%" colSpan=2><FONT face=serif size=2>Gerald
      B. Fischer (2)(3)</FONT>&nbsp; </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=2>64</FONT> </TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="64%"><FONT face=serif size=2>Director</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="30%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Kenneth H. Keller, Ph.D. (1)(2)(3)</FONT>&nbsp; </TD>
    <TD noWrap align=center width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>73</FONT> </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="64%" bgColor=#c0c0c0><FONT face=serif size=2>Director</FONT>&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="30%" colSpan=2><FONT face=serif size=2>John
      A. Meslow (1)(3)</FONT>&nbsp; </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=2>68</FONT> </TD>
    <TD noWrap align=left width="2%"></TD>
    <TD noWrap align=left width="64%"><FONT face=serif size=2>Director</FONT>&nbsp;
</TD></TR></TABLE></DIV>____________________<BR><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 noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD width="100%"><FONT face=serif size=2>Member of the Organization and
      Compensation Committee, of which Mr. Meslow is the Chairman.</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 Audit Committee, of
      which Mr. Fischer is the Chairman. If elected at the Annual Meeting, Mr.
      Buhrmaster is expected to be appointed to 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>(3)</FONT></TD>
    <TD noWrap></TD>
    <TD width="100%"><FONT face=serif size=2>Member of the Corporate
      Governance and Nominating Committee, of which Mr. Benson is the
      Chairman.</FONT></TD></TR></TABLE>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I><FONT face=serif size=2>Kendrick B. Melrose</FONT></I></B><FONT face=serif size=2> (Class II) has
been a director of the Company since 1988. He was elected Chairman of the Board
in August 2006. Mr. Melrose served as Chairman and Chief Executive of The Toro
Company from 1987 until his retirement in March 2005, as its Chief Executive
Officer from 1983 to 1987 and as its President from 1981 to 1983. Recently, Mr.
Melrose established a new company, Leading by Serving, LLC, and is an adjunct
professor at the Opus School of Business, University of St. Thomas.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I><FONT face=serif size=2>Bruce J Barclay</FONT></I></B><FONT face=serif size=2> (Class I) joined
the Company as its President and Chief Operating Officer in December 2003. He
became a director of the Company in July 2004 and Chief Executive Officer of the
Company in July 2005. Prior to joining SurModics, he served as President and
Chief Executive Officer of Vascular Architects, Inc., a medical device company
that develops, manufactures and sells products to treat peripheral vascular
disease, from 2000 to 2003. Prior to Vascular Architects, he served at Guidant
Corporation, most recently as an officer and Senior Vice President from 1998 to
2000. Previously, he was a Vice President of Guidant&#146;s Interventional Cardiology
division with responsibility for the law division, a new therapies technical
development team and business development, charged with the acquisition of new
products and technologies for the division. Mr. Barclay also has considerable
experience in the pharmaceutical area serving in several positions at Eli Lilly
and Company. He is also a registered patent attorney.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I><FONT face=serif size=2>John W. Benson</FONT></I></B><FONT face=serif size=2> (Class II) has been
a director since 2003. Mr. Benson retired from 3M Company in February 2003 where
he served in various capacities for 35 years. Prior to his retirement, he served
as Executive Vice President, Health Care Markets. Mr. Benson currently serves on
the Board of Regents at St. Olaf College.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I><FONT face=serif size=2>Jos&#233; H. Bedoya</FONT></I></B><FONT face=serif size=2> (Class I) has been
a director of the Company since 2002. Mr. Bedoya is President and Chief
Executive Officer of Otologics, LLC, a Colorado-based technology company he
founded in 1996 to develop implantable devices to assist the severely
hearing-impaired. From 1986 to 1996, Mr. Bedoya held a number of positions at
Storz Instrument Company, then a division of American Cyanamid and later a
division of American Home Products, including Director of Operations, Director
of Research and Director of Commercial Development. Prior to that, he served as
Vice President of Research and Development for Bausch &amp; Lomb&#146;s surgical
division.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I><FONT face=serif size=2>Robert C. Buhrmaster</FONT></I></B><FONT face=serif size=2> (Class III)
is a director nominee and will stand for election at the Annual Meeting. Mr.
Buhrmaster has been a private investor since 2004. Prior to that, he served as
the Chairman, President and Chief Executive Officer of Jostens, Inc. Prior to
joining Jostens, Mr. Buhrmaster spent 18 years at Corning, Inc., serving in
various roles, including senior vice president and general manager of several
businesses, corporate controller and director of strategic planning. Mr.
Buhrmaster is also a director of The Toro Company and Innovex, Inc.</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;<B><I><FONT face=serif size=2>Gerald B. Fischer</FONT></I></B><FONT face=serif size=2> (Class II) has
been a director of the Company since 2002. He is President and Chief Executive
Officer of the University of Minnesota Foundation, a position he has held since
1990. From 1985 to 1989, Mr. Fischer was with First Bank System, now U.S.
Bancorp, serving as Executive Vice President, Chief Financial Officer and
Treasurer. Previous to that he spent 18 years in various finance positions at
Ford Motor Company and its affiliates. </FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I><FONT face=serif size=2>Kenneth H. Keller,</FONT></I></B><FONT face=serif size=2>
</FONT><B><I><FONT face=serif size=2>Ph.D.</FONT></I></B><FONT face=serif size=2> (Class III) has been a director of the Company since 1997. Dr. Keller is
President Emeritus of the University of Minnesota. Since August 2006, he has
served as the Director of the Johns Hopkins School of Advanced International
Studies&#146; Bologna Center in Bologna, Italy. Previously, he was Professor of
Science and Technology Policy in the Humphrey Institute of Public Affairs at the
University of Minnesota as well as Professor of Chemical Engineering and
Materials Science. Dr. Keller joined the faculty of the University of Minnesota
in 1964, and through the years assumed increasing administrative
responsibilities. He was Academic Vice President from 1980 to 1985 and President
from 1985 to 1988. Dr. Keller was a Senior Fellow at the Council on Foreign
Relations from 1989 to 1996, serving as Senior Vice President of the Council
from 1993 to 1995.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I><FONT face=serif size=2>John A. Meslow</FONT></I></B><FONT face=serif size=2> (Class I) has been
a director of the Company since 2000. He served as Senior Vice President and
President &#150; Neurological Business of Medtronic, Inc. from 1985 until his
retirement in 2000.</FONT></P>
<P align=center><B><FONT face=serif size=2>DIRECTOR COMPENSATION DURING FISCAL
2007</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Director Compensation table below reflects all compensation awarded to, earned
by or paid to the Company&#146;s non-employee directors during fiscal 2007.
Compensation for Bruce J Barclay, our President and Chief Executive Officer, is
set forth below under the heading &#147;Executive Compensation and Other
Information.&#148;</FONT></P>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="70%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="4%" colSpan=2>&nbsp;<B><FONT face=serif size=1>Fees</FONT></B> </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="4%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="3%"></TD>
    <TD noWrap align=center width="2%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="4%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="3%">&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="70%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="4%" colSpan=2>&nbsp;<B><FONT face=serif size=1>Earned or</FONT></B> </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="4%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="4%" colSpan=2>&nbsp;<B><FONT face=serif size=1>Option</FONT></B> </TD>
    <TD noWrap align=center width="2%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="4%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="3%">&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="70%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="4%" colSpan=2>&nbsp;<B><FONT face=serif size=1>Paid in</FONT></B> </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="6%" colSpan=3><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><B>Stock</B></FONT>&nbsp;</TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="4%" colSpan=2>&nbsp;<B><FONT face=serif size=1>Awards</FONT></B> </TD>
    <TD noWrap align=center width="2%">&nbsp; </TD>
    <TD noWrap align=center width="6%" colSpan=3><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><B>All Other</B></FONT>&nbsp;</TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="3%">&nbsp; </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="69%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%" colSpan=2>&nbsp;<FONT size=1><FONT face=serif><FONT size=3><B><FONT size=1>Cash</FONT></B> </FONT><B>(1</B></FONT><B>)</B></FONT> </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="6%" colSpan=3><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><B>Awards
      (2)</B></FONT>&nbsp;</TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%" colSpan=2>&nbsp;<FONT size=1><FONT face=serif><B>(2)</B><B>(3</B></FONT><B>)</B></FONT>&nbsp;</TD>
    <TD noWrap align=center width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="6%" colSpan=3><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><B>Compensati</B></FONT><FONT face=serif size=1><B>on</B></FONT>&nbsp;</TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%" colSpan=2>&nbsp;<B><FONT face=serif size=1>Total</FONT></B>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="70%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Kendrick B. Melrose</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>100,000</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>123,177</FONT> </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>223,177</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="70%" colSpan=2><FONT face=serif size=2>Jos&#233;
      H. Bedoya</FONT> </TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>21,000</FONT>
</TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>107,574</FONT>
    </TD>
    <TD noWrap align=left width="2%">&nbsp; </TD>
    <TD noWrap align=left width="1%">&nbsp;</TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>128,574</FONT>
    </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="70%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>John W. Benson</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>21,333</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>122,704</FONT> </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;</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 face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>144,037</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="70%" colSpan=2><FONT face=serif size=2>Gerald
      B. Fischer</FONT> </TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>23,000</FONT>
</TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%">&nbsp;</TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=right width="1%">&nbsp;</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>106,679</FONT>
    </TD>
    <TD noWrap align=left width="2%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=right width="1%">&nbsp;</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>118,679</FONT>
    </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="70%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Kenneth H. Keller, Ph.D.</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>23,667</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>85,231</FONT> </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;</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 face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>108,898</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="70%" colSpan=2><FONT face=serif size=2>David
      A. Koch</FONT>&nbsp; </TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>23,500</FONT>
</TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>85,231</FONT></TD>
    <TD noWrap align=left width="2%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>108,731</FONT>
    </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="70%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>John A. Meslow</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>23,000</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>87,688</FONT> </TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;</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 face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>110,688</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="70%" colSpan=2><FONT face=serif size=2>Dale
      R. Olseth (4)</FONT> </TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>17,000</FONT>
</TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>157,658</FONT>
    </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>108,714</FONT>
    </TD>
    <TD noWrap align=left width="2%">&nbsp; </TD>
    <TD noWrap align=right width="1%">&nbsp;</TD>
    <TD noWrap align=right width="4%"><FONT face=serif size=2>$85,014</FONT>
    </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=2>368,386</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>(1)</FONT></TD>
    <TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD width="100%"><FONT face=serif size=2>The Fees Earned or Paid in Cash
      column represents the amount of annual retainer and annual cash stipend
      for Board and committee service. A description of the standard
      compensation arrangement provided to our non-employee directors is
      provided below. The amounts shown for fees earned for both Mr. Benson and
      Dr. Keller have been prorated to take into consideration the partial year
      of service by each of them as Chairman of the Corporate Governance and
      Nominating 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 vAlign=top noWrap></TD>
    <TD width="100%"><FONT face=serif size=2>Reflects the dollar amount
      recognized for stock awards and stock options held by each director for
      financial statement reporting purposes with respect to fiscal 2007 in
      accordance with SFAS 123R, but excludes any impact of assumed forfeiture
      rates. We refer you to Note 4 to our consolidated financial statements in
      our Annual Report on Form 10-K for fiscal 2007 for a general discussion of
      the assumptions made in calculating the dollar amount recognized for
      financial statement reporting purposes with respect to fiscal 2007 in
      accordance with SFAS 123R.</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 table reflects the forfeiture
      by Mr. Olseth of options to purchase 66,980 shares of the Company&#146;s common
      stock upon termination of his service as Executive Chairman of the board
      in August 2006 (of which all had been granted to Mr. Olseth in connection
      with his prior service as an executive officer). As of September 30, 2007,
      the aggregate number of stock options held by each of our directors named
      in the table above was as follows: Mr. Melrose, 34,000; Mr. Bedoya,
      25,000; Mr. Benson, 21,400; Mr. Fischer, 25,000; Dr. Keller, 26,000; Mr.
      Koch, 29,000; Mr. Meslow, 31,000; and Mr. Olseth,
  5,000.</FONT></TD></TR></TABLE>
<P align=center><FONT face=serif size=2>6</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE><BR>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 border=0>

  <TR>
    <TD vAlign=top noWrap><FONT face=serif size=2>(4)</FONT></TD>
    <TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD width="100%"><FONT face=serif size=2>The stock awards shown for Mr.
      Olseth were granted in consideration for his continued service as a member
      of the Company&#146;s Board of Directors following his retirement from the
      Company as Executive Chairman of the Board in August 2006. As of September
      30, 2007, Mr. Olseth held a restricted stock award for 15,000 shares, of
      which 5,000 shares vested on November 13, 2007 and of which an additional
      5,000 shares will vest on each of November 13, 2008 and 2009. The amounts
      in the All Other Compensation column reflect amounts paid by the Company
      on Mr. Olseth&#146;s behalf in connection with certain retirement benefits and
      other benefits provided to him following his retirement from the Company
      as follows: (a) during the period between August 1, 2006, and August 31,
      2007, the Company reimbursed Mr. Olseth for 100% of all reasonable and
      customary office expenses incurred by him for his personal and business
      use, including in connection with his service as a director to the
      Company; (b) during the period between September 1, 2007, and August 31,
      2008, the Company has agreed to reimburse Mr. Olseth for 50% of such
      reasonable and customary office expenses; and (c) during the period
      between August 1, 2006, and February 29, 2008, the Company has agreed to
      provide salary compensation and make available certain of its standard
      employee benefits to an administrative assistant to work with and support
      Mr. Olseth in his personal and business matters, including in connection
      with his service as a director to the Company.</FONT></TD></TR></TABLE>
<P align=justify><B><FONT face=serif size=2>Summary of Director
Compensation</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Company&#146;s Board Compensation Policy provides compensation to our directors for
their service on the Board in the form of annual retainers, fees for meeting
attendance, and stock options. With respect to retainers and fees, each
non-employee director (other than the Chairman) receives $10,000 as an annual
retainer and $1,000 for each Board meeting attended. The chairman of each Board
committee receives an additional $2,000 as an annual retainer. Further, each
committee member receives $500 for each committee meeting attended. The Chairman
receives an annual retainer of $100,000, but is not paid additional fees to
attend Board or committee meetings.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>With
respect to stock options, each non-employee director is granted an option under
the Amended and Restated 2003 Equity Incentive Plan (the &#147;2003 Plan&#148;) to
purchase 10,000 shares of Company common stock upon his or her first election to
the Board of Directors, and each non-employee director is granted annually
thereafter an option under such Plan to purchase 5,000 shares of Company common
stock. Similarly, the Chairman is granted annually an option under the 2003 Plan
to purchase 10,000 shares of Company common stock. The non-employee directors
currently hold nonqualified stock options to purchase an aggregate of 196,400
shares of common stock. All stock options granted to non-employee directors have
an exercise price equal to the fair market value of a share of common stock on
the date of grant and expire ten years after the date of grant. Twenty percent
(20%) of these stock options are immediately exercisable on the date of grant,
and continue to become exercisable in increments of 20% on each of the next four
anniversaries following the date of grant. In addition, all directors are
reimbursed for their reasonable travel-related expenses incurred in attending
meetings of the Board of Directors and committee meetings.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>To more
closely align their interests with those of shareholders generally, in January
2007, the Board of Directors approved equity ownership guidelines for all
non-employee directors. Under these guidelines, all non-employee directors are
encouraged to own shares of common stock equal in value to at least five times
each director&#146;s annual cash retainer. For purposes of these guidelines, &#147;stock
ownership&#148; is defined to include shares of common stock directly owned by the
non-employee director, excluding unexercised stock options, and&nbsp;stock with
restrictions that have not lapsed. Each director is expected to satisfy his
obligation related to equity ownership within five years of the later of
approval of the guidelines or joining the Board.</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>CORPORATE GOVERNANCE</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Company&#146;s business affairs are conducted under the direction of the Board of
Directors in accordance with the Minnesota Business Corporation Act and the
Company&#146;s Articles of Incorporation and Bylaws. Members of the Board of
Directors are informed of the Company&#146;s business through discussions with
management, by reviewing materials provided to them and by participating in
meetings of the Board of Directors and its committees. Certain corporate
governance practices that the Company follows are summarized below.</FONT></P>
<P align=justify><B><FONT face=serif size=2>Code of Ethics and Business
Conduct</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>We have
adopted the SurModics Code of Ethics and Business Conduct (the &#147;Code of
Conduct&#148;), a code of conduct that applies to our directors, officers and
employees. The Code of Conduct is publicly available on our website at
www.surmodics.com under the captions Investors/Corporate Governance. If we make
any substantive amendments to the Code of Conduct or grant any waiver, including
any implicit waiver from a provision of the Code of Conduct, to our directors or
executive officers, we will disclose the nature of such amendment or waiver on a
Current Report on Form 8-K.</FONT></P>
<P align=justify><B><FONT face=serif size=2>Related Person Transaction Approval
Policy </FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>In
November 2007, our Board of Directors adopted a written policy for related
person transactions, which sets forth our policies and procedures for the
review, approval or ratification of transactions subject to the policy with
related persons who are subject to the policy. Our policy applies to any
transaction, arrangement or relationship or any series of similar transactions,
arrangements or relationships in which we are a participant and a related person
has a direct or indirect interest. Our policy, however, exempts the
following:</FONT></P>
<UL style="TEXT-ALIGN: justify">
  <LI><FONT face=serif size=2>our payments of compensation to a related person
  for that person&#146;s service to us in the capacity or capacities</FONT> <FONT face=serif size=2>that give rise to the person&#146;s status as a &#147;related
  person&#148;;<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>transactions available to all of our shareholders
  on the same terms; and<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>transactions that, when aggregated with the amount
  of all other transactions between the related person</FONT> <FONT face=serif size=2>and our company, involve less than $120,000 in a fiscal
  year.</FONT></LI></UL>
<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>We consider the following persons to
be related persons under the policy:</FONT></P>
<UL style="TEXT-ALIGN: justify">
  <LI><FONT face=serif size=2>all of our officers and
  directors;<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>any nominee for director;<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>any immediate family member of any of our
  directors, nominees for director or executive officers; and<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>any holder of more than 5% of our common stock, or
  an immediate family member of any such holder.</FONT></LI></UL>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Audit
Committee of our Board of Directors must approve any related person transaction
subject to this policy before commencement of the related person transaction.
The Audit Committee will analyze the following factors, in addition to any other
factors the Audit Committee deems appropriate, in determining whether to approve
a related person transaction:</FONT></P>
<UL style="TEXT-ALIGN: justify">
  <LI><FONT face=serif size=2>whether the terms are fair to the
  Company;<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>whether the transaction is material to the
  Company;<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>the role the related person has played in
  arranging the related person transaction;<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>the structure of the related person transaction;
  and<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>the interests of all related persons in the
  related person transaction.</FONT></LI></UL>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Audit
Committee may, in its sole discretion, approve or deny any related person
transaction. Approval of a related person transaction may be conditioned upon
the Company and the related person taking any actions that the Audit Committee
deems appropriate.</FONT></P>
<P align=center><FONT face=serif size=2>8</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>If one of
our executive officers becomes aware of a related person transaction that has
not previously been approved under the policy:</FONT></P>
<UL style="TEXT-ALIGN: justify">
  <LI><FONT face=serif size=2>if the transaction is pending or ongoing, it will
  be submitted to the Audit Committee promptly and the committee will consider
  the transaction in light of the standards of approval listed above. Based on
  this evaluation, the committee will consider all options, including approval,
  ratification, amendment, denial or termination of the related person
  transaction; and<BR>&nbsp; </FONT>
  <LI><FONT face=serif size=2>if the transaction is completed, the committee
  will evaluate the transaction in accordance with the same</FONT> <FONT face=serif size=2>standards to determine whether rescission of the transaction
  is appropriate and feasible.</FONT></LI></UL>
<P align=justify><B><FONT face=serif size=2>Equity Ownership
Guidelines</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>In
January 2007, our Board of Directors approved equity ownership guidelines for
all our executive officers and non-employee directors. Under these guidelines,
(a) all non-employee directors are encouraged to own shares of common stock
equal in value to at least five times each director&#146;s annual cash retainer, (b)
our Chief Executive Officer, or CEO, is encouraged to own Company common stock
equal in value to at least five times his or her annual base salary, (c)
executive officers at the Senior Vice President level are encouraged to own
Company common stock equal in value to at least three times their annual base
salary, and (d) executive officers at the Vice President level or below are
encouraged to own Company common stock equal in value to at least two times
their annual base salary. For purposes of these guidelines, &#147;stock ownership&#148; is
defined to include shares of common stock directly owned by the non-employee
director or officer, excluding unexercised stock options, stock with
restrictions that have not lapsed, and performance shares that have not been
awarded. Each director or officer is expected to satisfy his or her obligation
related to equity ownership within five years of the later of approval of the
guidelines or joining the Board or, in the case of executive officers, his or
her appointment to the relevant position.</FONT></P>
<P align=justify><B><FONT face=serif size=2>Majority of Independent Directors;
Committees of Independent Directors</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Our Board
of Directors has determined that Messrs. Benson, Bedoya, Fischer, Keller,
Melrose and Meslow, constituting a majority of the Board of Directors, are
independent directors in accordance with rules of The Nasdaq Stock Market since
none of them are believed to have any relationships that, in the opinion of the
Board of Directors, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. We have determined that Mr.
Buhrmaster does not have any relationships that would cause him not to be an
independent director. Mr. Barclay is not considered independent under the
applicable rules of The Nasdaq Stock Market since he currently serves as an
executive officer of the Company.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Each
member of the Company&#146;s Audit Committee, Organization and Compensation Committee
and Corporate Governance and Nominating Committee has been determined, in the
opinion of the Board of Directors, to be independent in accordance with the
applicable rules of The Nasdaq Stock Market. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Committee and Board
Meetings</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Company&#146;s Board of Directors has three standing committees: the Audit Committee,
the Organization and Compensation Committee and the Corporate Governance and
Nominating Committee. During fiscal 2007, the Board of Directors held 7 meetings
and the standing committees had the number of meetings noted below. Each
incumbent director attended (in person or by telephone) 75% or more of the total
number of meetings of the Board and of the Committee(s) of which he was a member
in fiscal year 2007. Each of the standing committees of the Board of Directors
is governed by a charter. The Audit Committee Charter, the Organization and
Compensation Committee Charter and the Corporate Governance and Nominating
Committee Charter are publicly available on our website at www.surmodics.com
under the captions Investors/Corporate Governance.</FONT></P>
<P align=justify><B><I><FONT face=serif size=2>Audit
Committee</FONT></I></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Audit
Committee is responsible for reviewing the quality and integrity of the
Company&#146;s financial reports, the Company&#146;s compliance with legal and regulatory
requirements, the independence, qualifications and performance of the Company&#146;s
independent auditor, and the performance of the Company&#146;s internal audit
function and its accounting and reporting processes. The Audit Committee held 5
meetings during fiscal 2007.</FONT></P>
<P align=center><FONT face=serif size=2>9</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><I><FONT face=serif size=2>Organization and Compensation
Committee </FONT></I></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Organization and Compensation Committee is responsible for matters relating to
executive compensation programs, key employee compensation programs, director
compensation programs, corporate culture programs, organizational planning and
personnel changes at the executive level. The Organization and Compensation
Committee held 4 meetings during fiscal 2007.</FONT></P>
<P align=justify><B><I><FONT face=serif size=2>Corporate Governance and
Nominating Committee; Procedures and Policy </FONT></I></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Corporate Governance and Nominating Committee is responsible for identifying
individuals qualified to become Board members, recommending to the Board the
director nominees for election to the Board, recommending to the Board corporate
governance guidelines applicable to the Company, and leading the Board in its
annual review of the Board&#146;s performance. The Corporate Governance and
Nominating Committee held 3 meetings during fiscal 2007. The Corporate
Governance and Nominating Committee&#146;s nominating policy provides for the
consideration of candidates recommended by shareholders, directors, third
parties, search firms and others. In evaluating director nominees, the Corporate
Governance and Nominating Committee considers the following factors and
qualifications:</FONT></P>
<UL style="TEXT-ALIGN: justify">
  <LI><FONT face=serif size=2>the appropriate size and the diversity of the
  Company&#146;s Board of Directors;<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>the needs of the Board with respect to the
  particular talents and experience of its directors;<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>the knowledge, skills and experience of nominees,
  including experience in the industry in which the</FONT> <FONT face=serif size=2>Company operates, business, finance, management or public service, in
  light of prevailing business</FONT> <FONT face=serif size=2>conditions and the
  knowledge, skills and experience already possessed by other members of the
  Board;<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>familiarity with domestic and international
  business matters;<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>age, legal and regulatory requirements;<BR>&nbsp;
  </FONT>
  <LI><FONT face=serif size=2>experience with accounting rules and
  practices;<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>appreciation of the relationship of the Company&#146;s
  business to the changing needs of society; and<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>the desire to balance the considerable benefit of
  continuity with the periodic injection of the fresh</FONT> <FONT face=serif size=2>perspective provided by new members.</FONT></LI></UL>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Corporate Governance and Nominating Committee will consider the attributes of
the candidates and the needs of the Board and will review all candidates in the
same manner, regardless of the source of the recommendation. A shareholder who
wishes to recommend one or more directors must provide a written recommendation
to the Corporate Secretary at the address below. Notice of a recommendation must
include:</FONT></P>
<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>with respect to the
shareholder:</FONT></P>
<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>&#151;&nbsp;&nbsp;&nbsp;&nbsp; name,
address, the class and number of shares such shareholder owns; </FONT></P>
<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>with respect to the nominee:
</FONT></P>
<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>&#151;&nbsp;&nbsp;&nbsp;&nbsp; name, age,
business address, residence address; </FONT></P>
<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>&#151;&nbsp;&nbsp;&nbsp;&nbsp; current
principal occupation;</FONT></P>
<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>&#151;&nbsp;&nbsp;&nbsp;&nbsp; five-year
employment history with employer names and a description of the employer&#146;s
business; </FONT></P>
<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>&#151;&nbsp;&nbsp;&nbsp;&nbsp; the number
of shares beneficially owned by the nominee; </FONT></P>
<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>&#151;&nbsp;&nbsp;&nbsp;&nbsp; whether
such nominee can read and understand basic financial statements; and </FONT></P>
<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>&#151;&nbsp;&nbsp;&nbsp;&nbsp; membership
on other boards of directors, if any.</FONT></P>
<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>The
recommendation must be accompanied by a written consent of the nominee to stand
for election if nominated by the Board of Directors and to serve if elected by
the shareholders. The Company may require any nominee to furnish additional
information that may be needed to determine the eligibility of the nominee. Such
recommendation must be submitted to the Corporate Secretary no later than 120
days prior to the first anniversary of mailing of this proxy
statement.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Corporate Governance and Nominating Committee believes that candidates for
directors should have certain minimum qualifications, including being able to
read and understand basic financial statements, having familiarity with the
Company&#146;s business and industry, having high moral character and mature
judgment, being able to work collegially with others, and not currently serving
on more than four boards of directors of public companies. The Corporate
Governance and Nominating Committee may modify these minimum qualifications from
time to time.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>It is
also a policy of the Board that each director be required to retire from the
Board effective at the conclusion of the annual meeting following his or her
seventy-second birthday, unless special circumstances exist as determined by the
Board. The Board believes, however, that any such exceptions should be rare.
Moreover, it is the sense of the Board that every director should notify the
Chairman of his or her retirement, of any change in employer, and of any other
significant change in the director&#146;s principal professional occupation, and in
connection with any such change, offer to submit his or her resignation from the
Board for consideration by the Corporate Governance and Nominating Committee.
The Board, upon recommendation from the Corporate Governance and Nominating
Committee, then may consider the continued appropriateness of board membership
of such director under the new circumstances and the action, if any, to be taken
with respect to the offer to submit his or her resignation.</FONT></P>
<P align=justify><B><FONT face=serif size=2>Procedures for Shareholder
Communications to Directors</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Shareholders may communicate directly with the Board of Directors. All
communications should be directed to our Corporate Secretary at the address
below and should prominently indicate on the outside of the envelope that it is
intended for the Board of Directors or for non-management directors. If no
director is specified, the communication will be forwarded to the entire Board.
Shareholder communications to the Board should be sent to: </FONT></P>
<P align=center><FONT face=serif size=2>Corporate Secretary <BR>Attention: Board
of Directors <BR>SurModics, Inc.<BR></FONT><FONT face=serif size=2>9924 West
74th Street <BR>Eden Prairie, MN 55344-3523</FONT></P>
<P align=justify><B><FONT face=serif size=2>Director Attendance
Policy</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Directors&#146; attendance at our annual meetings of shareholders can provide
our shareholders with an opportunity to communicate with directors about issues
affecting the Company. Accordingly, all directors are expected and encouraged to
attend annual meetings of shareholders. All of the Company&#146;s directors attended
the last annual meeting of shareholders, which was held in January
2007.</FONT></P>
<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>COMPENSATION DISCUSSION AND
ANALYSIS</FONT></B></P>
<P align=justify><B><FONT face=serif size=2>Overview</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
following compensation discussion and analysis describes the material elements
of the compensation of our Chief Executive Officer, Chief Financial Officer, and
three other most highly compensated executive officers, whom we refer to as our
named executive officers, during fiscal 2007. The compensation of the named
executive officers is determined by the Organization and Compensation Committee
of the Board of Directors and is based on the same compensation philosophy and
objectives that apply to all of our executive officers. It is important to note
that while this discussion relates primarily to the compensation of our named
executive officers, we are committed to providing competitive and equitable
compensation programs for all of our employees, which may include many of the
elements discussed below.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>We
compete for executive management talent on a national level with other companies
in the drug delivery market, as well as companies within the medical device and
pharmaceutical markets. Competition for executive management talent in these
markets is intense. In addition, due to our strategic initiatives to expand and
diversify our business, our business prospects are highly dependent on our
ability to effectively recruit and retain experienced executive management
personnel. Accordingly, we have designed our executive compensation system to
provide competitive compensation and to emphasize the achievement of performance
objectives.</FONT></P>
<P align=justify><FONT face=serif size=2><B>Compensation Philosophy and
Objectives</B></FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Our
compensation policies are designed to enhance our financial performance, and
thus shareholder value, by aligning the financial interests of executive
officers and employees with those of shareholders. Our executive compensation
program is viewed in total, considering all of the elements of compensation.
Generally, we strive to set non-incentive-based elements of our compensation
program (i.e., base salaries) at levels that are conservative with respect to
comparable companies. We design incentive-based elements of our compensation
program so that if objectives are achieved and incentives are earned, total
compensation to our executive officers will be competitive with the total
compensation provided by comparable companies. This approach underscores our
pay-for-performance philosophy, which places a substantial portion of our
executive officers&#146; total compensation &#147;at risk,&#148; while providing compensation
opportunities that are comparable to the market levels. In addition, we believe
that equity compensation introduces longer-term elements into our compensation
programs and further aligns the interests of our executives with those of our
shareholders.</FONT></P>
<P align=justify><FONT face=serif size=2><B>Establishing Executive
Compensation</B></FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Consistent with the objectives and philosophies set forth above, the
Organization and Compensation Committee evaluates compensation of our executive
officers annually, by considering both the individual elements and the total
amount of potential compensation available under our compensation programs.
Additionally, the committee also considers a variety of additional factors when
establishing an individual executive&#146;s compensation, including:</FONT></P>
<UL style="FONT-SIZE: 10pt; TEXT-ALIGN: justify">
  <LI><FONT face=serif size=2>each executive&#146;s position within the company and
  his or her level of responsibility;<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>the skills and experience required by the
  executive&#146;s position;<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>the executive&#146;s individual background, experience
  and qualifications;<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>the competitive environment for similar executives
  having comparable experience, skills and</FONT> <FONT face=serif size=2>responsibilities;<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>the scope of the executive&#146;s responsibilities and
  ability to influence our performance; and<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>the executive&#146;s current and historical
  compensation levels, including a review of the mix of the various</FONT> <FONT face=serif size=2>elements of compensation previously provided to the
  executive (through the use of tally sheets).</FONT></LI></UL>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>In
addition to the factors listed above, the Organization and Compensation
Committee reviews and adjusts the compensation of our executive officers using
comparative market data. When establishing our fiscal 2007 compensation
programs, the committee reviewed competitive market data for executive officers
in similar positions at comparative companies using the third-party surveys
described below. In fiscal 2006, we retained Towers Perrin,</FONT></P>
<P align=center><FONT face=serif size=2>12</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>a highly regarded human resources and
compensation consulting firm, to advise us on how to compile and analyze
compensation data for comparison companies. Towers Perrin consulted with us on
potential sources for compensation data and appropriate compensation metrics to
evaluate. Ultimately, our human resources personnel were responsible for
compiling the data and performing the appropriate analyses. The comparative
surveys considered by the committee included:</FONT></P>
<UL style="FONT-SIZE: 10pt; TEXT-ALIGN: justify">
  <LI><FONT face=serif size=2><I>Radford, Biotechnology Compensation Survey</I>
  &#150; The Radford survey included over 300 public and private companies that
  operate primarily in the medical device, pharmaceutical, and biotech markets.
  We considered data only from those companies that had revenues during the
  survey period of between $40 and $200 million. The effective date of the
  Radford survey was May 2006.<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2><I>Top Five Data Services, MEDIC (Medical Device
  Industry Compensation) Executive Compensation Survey</I> &#150; The MEDIC survey
  included data from over 75 public and private companies that operate primarily
  in the medical device market. We considered data only from those companies who
  had revenues less than $500 million. The effective date of the MEDIC survey
  was July 2005.<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2><I>Watson Wyatt, ECS Industry Report on Top
  Management</I> &#150; The Watson Wyatt survey included data from over 2000 public
  and private manufacturing companies. We considered data only from those
  companies included in the survey that had revenue of less than $200 million.
  The effective date of the Watson Wyatt survey was April 2005.</FONT></LI></UL>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>To adjust
the survey data for the time difference between the periods covered by the
survey and the anticipated effective date of our fiscal 2007 compensation
program, we assumed an annualized base salary increase of 3.7%. The adjusted
base salary amount was then prorated to coincide with the effective date of our
fiscal 2007 program.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Although
the committee seeks to set executive compensation at levels believed to be
competitive within the ranges implied by the comparative surveys, the survey
data is only one factor in the committee&#146;s overall compensation decision-making
process, and is not used as a stand-alone benchmarking tool. Thus, where a
sufficient basis for comparison did not exist between the data included in the
comparative surveys and a given named executive officer, the committee
considered other factors to establish that executive&#146;s compensation. In this
regard, the committee felt that a sufficient basis for comparison did not exist
between the data included in the comparative surveys and Paul A. Lopez,
President of the Company&#146;s Ophthalmology business unit. As a result, the
committee established the compensation for Mr. Lopez relative to that of other
executive positions within our company by taking into consideration factors such
as his prior experiences, unique qualifications, scope of responsibilities,
geographic location, and ability to influence our performance as President of
our Ophthalmology business unit.</FONT></P>
<P align=justify><FONT face=serif size=2><B>Elements of Executive Compensation
for Fiscal 2007</B></FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
principal elements of our executive compensation program for fiscal 2007
consisted of cash elements and equity elements, both of which are described in
greater detail below. Additionally, our executive compensation program included
employment and change of control benefits for some of our executive officers,
and other benefits made generally available to our employees. The committee
sought to maintain an appropriate allocation between the various elements of
compensation, including cash and equity elements, when determining each
executive&#146;s compensation. However, the committee did not have firm targets for
the appropriate allocation between the various elements. Instead, the
committee&#146;s determinations were made consistent with our pay-for-performance
philosophy, which places a substantial portion of each executive&#146;s total
compensation &#147;at risk.&#148; In so doing, our executive officers will be compensated
either below or above comparative market levels depending on our
performance.</FONT></P>
<P align=justify><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face=serif size=2><I>Cash Elements of Compensation</I></FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Cash
elements of compensation include base salary and cash incentive compensation.
All of our cash compensation represents short-term compensation that is earned
within a single fiscal year and paid in that year or shortly
thereafter.</FONT></P>
<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I>Base Salary</I> &#151; Base salary is
the fixed cash component of annual compensation. Base salaries for our named
executive officers are reviewed annually by the Organization and Compensation
Committee prior to the start of each new fiscal year. The committee considers
adjustments to better align an executive&#146;s base salary with comparative market
base salaries, to provide merit-based increases based upon individual or company
performance, or to account</FONT></P>
<P align=center><FONT face=serif size=2>13</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>for changes in roles and
responsibilities. Consistent with our compensation philosophy and objectives,
the committee seeks to set base salaries at conservative levels relative to the
market for executives in similar positions at comparison companies included in
the comparative surveys. By &#147;conservative,&#148; we mean that we generally set base
salaries for our executive officers below the 50th percentile of base salary
levels for executives at the comparison companies.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
fiscal 2007 base salary for each of our named executive officers was below the
amount representing the 50th percentile of base salaries for executives at the
comparison companies, except for Mr. Lopez. Mr. Lopez&#146;s base salary was
established relative to the Company&#146;s other executive officers using the factors
noted above. The CEO presented recommendations for adjustments to base salaries
for all of our executive officers, excluding himself, to the committee at its
meeting in September 2006. The CEO&#146;s recommendations were based, in large part,
on performance feedback gathered during our annual performance review process
and included a review of the executive&#146;s contributions and performance during
the previous fiscal year relative to corporate and business objectives. The
CEO&#146;s recommendations also considered the executive&#146;s current salary relative to
the market and prior years&#146; salary adjustments. Salary adjustments for the CEO
were made by the committee based upon the Board&#146;s evaluation of his performance
considering financial and non-financial measures of our performance during the
previous fiscal year. </FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
following table shows the base salaries paid to our named executive officers
during fiscal 2007, as well as a comparison of the base salaries relative to the
50th percentile of base salary levels for executives at the comparison
companies.</FONT></P>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" 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></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>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" 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;&nbsp;&nbsp;&nbsp; </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>&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>Base Salary</FONT></B> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" 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>&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>50th</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>as a % of the</FONT></B> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" 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="3%" colSpan=3><FONT size=+0>&nbsp;&nbsp;</FONT>&nbsp;<B><FONT size=1>Base
      Sal<FONT face=serif color=#231f20>ary </FONT><FONT face=serif>Paid
      in</FONT></FONT></B>&nbsp;&nbsp;<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>%</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>Percentile</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>50th</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="89%">&nbsp;</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>2006</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>2007</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>Change</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>($) (1)</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>Percentile</FONT></B>
      </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>Bruce J Barclay</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>$325,000</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>$351,000</FONT> </FONT></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>8.0%</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>$373,194</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>94.1%</FONT> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" colSpan=2><FONT size=+0><FONT face=serif size=2>Philip D. Ankeny</FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$193,209</FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$216,394</FONT> </FONT></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>12.0%</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>$228,073</FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>94.9%</FONT> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>Steven J. Keough</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>$207,496</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>$215,796</FONT> </FONT></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>4.0%</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>$237,059</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>91.0%</FONT> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" colSpan=2><FONT size=+0><FONT face=serif size=2>Paul A. Lopez</FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$227,991</FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$250,790</FONT> </FONT></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>10.0%</FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>n/a</FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>n/a</FONT> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>Charles W. Olson (2)</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>$143,220</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>$186,186</FONT> </FONT></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>30.0%</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>$232,442</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>80.1%</FONT>
</FONT></TD></TR></TABLE></DIV>____________________<BR>&nbsp;<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 vAlign=top align=left width="100%">
      <P align=justify><FONT face=serif size=2>Represents the 50th percentile,
      or median, of base salaries paid to executives in similar positions at the
      comparison companies.</FONT></P></TD></TR>
  <TR>
    <TD vAlign=top 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 vAlign=top align=left width="100%">
      <P align=justify><FONT face=serif size=2>Mr. Olson&#146;s salary in fiscal 2006
      was well below the 50th percentile of comparable company data, and the
      increase in his base salary for fiscal 2007 represents the committee&#146;s
      desire to bring his base salary closer to, but not above, the 50th
      percentile of executives at&nbsp;the comparison companies, and also to
      reflect the increase in his responsibilities during fiscal 2006, during
      which time he assumed responsibility for all of our worldwide sales
      activities in addition to his role as Vice President and General Manager,
      Hydrophilic Technologies and Vice President of
  Sales.</FONT></P></TD></TR></TABLE>
<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I>Cash Incentive Compensation</I> &#151;
Cash incentive compensation (labeled as Non-Equity Incentive Plan Compensation
in the Summary Compensation Table below) is cash compensation that may be earned
in a year based on the achievement of pre-established performance objectives for
that year. The Organization and Compensation Committee considers the total
annual cash compensation available to our executive officers relative to market
levels when setting target cash incentive compensation. Consistent with our
compensation philosophy and objectives, the committee seeks to provide target
total annual cash compensation available to our executive officers at
competitive levels. By &#147;competitive,&#148; we mean that we generally seek to set
target cash incentive compensation at levels so that if the target cash
incentive compensation is earned, the executive officer&#146;s total cash
compensation for the fiscal year will be at or near the 50th percentile of total
annual cash compensation levels for executives at comparison
companies.</FONT></P>
<P align=center><FONT face=serif size=2>14</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>For
fiscal 2007, cash incentive compensation for all of our employees, including our
named executive officers, was provided through a bonus plan, which was approved
by the Organization and Compensation Committee prior to the start of the fiscal
year. Performance under the bonus plan was determined based upon the achievement
of (i) corporate performance objectives, and (ii) business performance
objectives. The corporate objectives under the bonus plan were specified levels
of growth in both revenue and earnings per share, in each case relative to our
fiscal 2006 results. The committee selected revenue and earnings per share
growth as the corporate objectives because it felt that those measures are
critical factors that determine shareholder value. The target for both revenue
and earnings per share growth under the fiscal 2007 bonus plan was a 17%
increase from fiscal 2006. The threshold under the fiscal 2007 bonus plan for
any cash incentive payments was 10% growth for both revenue and earnings per
share, and maximum cash incentive payments would be achieved under the bonus
plan for revenue and earnings per share growth of 25%, or more. The target
revenue and earnings per share growth under the fiscal 2007 bonus plan
corresponded to our fiscal 2007 operating plan. The threshold performance
conditions were subjectively determined by the committee at the level below
which the committee considered payment of incentive compensation to be
inappropriate. The maximum performance conditions were subjectively determined
by the committee as a superior level of performance at which full incentive
compensation would be appropriate. These levels may vary from year to year
depending on our corporate objectives or other conditions affecting our
business.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
business objectives under the bonus plan generally related to non-financial
measures of performance within a business unit or department, such as project
development milestones, licensing objectives, or product quality measures. To
protect competitively sensitive information, we do not disclose the business
objectives. The committee considers these objectives to be difficult to achieve,
but attainable. Furthermore, the committee believes the combination of these
corporate and business objectives, if achieved, would have the potential to
significantly enhance shareholder value. </FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Potential
incentive compensation available to our executive officers under the bonus plan
was weighted between achievement of the corporate and business objectives. In
particular, for all of our named executive officers, including our CEO, 75% of
the potential compensation under the bonus plan was based on achievement of the
corporate objectives while 25% was based on achievement of the relevant business
objectives. The committee believes that this weighting between corporate and
business objectives promotes a cohesive, performance-focused culture among our
executive team while appropriately rewarding achievement of business
objectives.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>For our
executive officers (excluding the CEO), payouts under the bonus plan, if any,
could range between a threshold amount of 10.7% and a maximum amount of 40.0% of
each such officer&#146;s base salary depending upon the achievement and magnitude of
the corporate objectives and the relevant business objectives. For our CEO,
payouts under the bonus plan could range between a threshold amount of 11.3% and
a maximum amount 53.3% of his base salary depending upon the achievement of the
corporate objectives and business objectives relevant to him. The potential
incentive compensation available to our CEO was higher relative to our other
executive officers because of the scope of his responsibilities, his ability to
influence our performance, and the committee&#146;s desire to place a more
substantial portion of his total compensation &#147;at risk.&#148; </FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Organization and Compensation Committee established a target level for incentive
compensation under the bonus plan consistent with our compensation philosophy
and objectives noted above. In particular, the committee set target incentive
compensation such that if the targeted levels for the corporate and business
objectives were achieved, the executive officer&#146;s total cash compensation for
the fiscal year would be at or near the 50th percentile of total annual cash
compensation levels for executives at the comparison companies. Accordingly, if
the targeted performance objectives were fully achieved, the target cash
incentive compensation available to our named executive officers (excluding the
CEO) would be 24.0% of each such officer&#146;s base salary. If the targeted
performance objectives for the CEO were fully achieved, the target incentive
compensation available to him would be 32.0% of his base salary. Similarly, the
committee set the maximum level of potential incentive compensation available
under the bonus plan such that if the maximum levels for the corporate and
business objectives were fully achieved, our executive officers&#146; total cash
compensation for the fiscal year would generally be above the 50th percentile of
total annual cash compensation levels for executives at the comparison
companies. As noted above, if the maximum performance objectives were fully
achieved, the maximum incentive compensation available to our executive officers
(excluding</FONT></P>
<P align=center><FONT face=serif size=2>15</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>the CEO) would be 40.0% of each such
officer&#146;s base salary. If the maximum performance objectives for the CEO under
the bonus plan were fully achieved, the maximum incentive compensation available
to him would be 53.3% of his base salary. The committee subjectively established
the maximum incentive compensation available under the bonus plan at levels it
considered, based on the business judgment of its members, appropriate to reward
our executive officers, including the CEO, for the achievement of performance
objectives resulting in superior financial performance for our company, which
would have the potential to significantly enhance shareholder value.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Prior to
its determination regarding the level of achievement of the corporate and
business objectives, in September 2007, the committee took action designed to
give our employees participating in the bonus plan, including the named
executive officers, special consideration for the collaborative research and
license agreement signed with Merck &amp; Co., Inc. during fiscal 2007. The
committee decided that in determining the level of incentive compensation under
the bonus plan, the full up-front license fee of $20 million that we received in
fiscal 2007 from Merck should be included in fiscal 2007 revenue and earnings
per share calculations, although our recognition of such revenue for financial
reporting purposes under generally accepted accounting principles will be
amortized over a multi-year period. The committee also decided that amortized
revenue associated with the up-front license fee received from Merck that is
recognized in future periods would be excluded from calculations for future cash
incentive plans. The actions taken by the committee significantly impacted the
measures used to determine achievement of the corporate objectives under the
bonus plan and under the performance share program discussed below. The
committee took this action, in part, because it felt that the signing of the
Merck license represented a significant strategic accomplishment for our
company. Further, while the entire amount of the fees collected from Merck was
not recognizable as revenue for financial reporting purposes under generally
accepted accounting principles during fiscal 2007, the committee recognized that
these amounts did significantly increase our cash flow for the same period.
Based on these factors, the committee determined, and continues to believe, that
our agreement with Merck has the potential to significantly enhance shareholder
value. Accordingly, the committee felt it was appropriate to include the full
amount of the Merck license fee in the bonus plan&#146;s revenue and earnings per
share calculations.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>At its
first regularly scheduled meeting after our results for fiscal 2007 were
released, the Organization and Compensation Committee determined the level of
achievement of the corporate and business objectives. To assist the committee
with its determination, the CEO reviewed our performance against the corporate
objectives. Based on the committee&#146;s review of our achievement of the corporate
objectives, including the amounts related to the Merck agreement as discussed
above, all of our named executives received the maximum amount of their
potential incentive compensation related to the corporate objectives. Further,
based on the recommendation of the CEO, the committee also approved achievement
of the business objectives such that our named executive officers received
between 90% and 100% of their potential incentive compensation related to their
respective business objectives. The following table sets forth the actual
payouts under the bonus plan, and the potential payouts under the bonus plan for
different levels of achievement of the corporate and business
objectives.</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" colSpan=2><FONT size=+0>&nbsp;
</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=center width="7%" colSpan=7><FONT size=+0><B><FONT face=serif size=1>Payouts Under the Bonus Plan</FONT></B></FONT><FONT size=+0> </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=center width="1%"></TD>
    <TD noWrap align=center width="7%" colSpan=7><FONT size=+0><B><FONT face=serif size=1>for Different Levels of Achievement</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=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="7%" colSpan=7><FONT size=+0><B><FONT face=serif size=1>of the Performance
      Objective</FONT></B><B><FONT face=serif size=1>s</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=center width="1%"></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>&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>Actual</FONT></B> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" colSpan=2><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>Less Than</FONT></B> </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%">&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>&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>Payouts</FONT></B> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" colSpan=2><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>Threshold</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>Threshold</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>Targeted</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>Maximum</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>Under the</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=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><FONT face=serif color=#231f20 size=1><FONT color=#000000 size=3>&nbsp; </FONT><B>Achievement</B></FONT>&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>Achievement</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><FONT face=serif color=#231f20 size=1><FONT color=#000000 size=3>&nbsp; </FONT><B>Achievemen</B></FONT><FONT face=serif size=1><B>t</B></FONT>&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><FONT face=serif color=#231f20 size=1><FONT color=#000000 size=3>&nbsp; </FONT><B>Achievement</B></FONT>&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><FONT face=serif color=#231f20 size=1><FONT color=#000000 size=3>&nbsp; </FONT><B>Bonus Plan</B></FONT>&nbsp;
    </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>Bruce J Barclay</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>$0</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>$39,768</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>$112,320</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>$187,188</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>$182,520</FONT> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" colSpan=2><FONT size=+0><FONT face=serif size=2>Philip D. Ankeny</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>$0</FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$23,089</FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$&nbsp;&nbsp;51,935</FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$&nbsp; 86,558</FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$&nbsp; 84,935</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>Steven J. Keough</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>$0</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>$23,025</FONT> </FONT></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$&nbsp; 51,791</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>$&nbsp; 86,318</FONT> </FONT></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$&nbsp; 86,318</FONT> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" colSpan=2><FONT size=+0><FONT face=serif size=2>Paul A. Lopez</FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$0</FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$26,759</FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$&nbsp; 60,190</FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$100,316</FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>$100,316</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>Charles W. Olson</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>$0</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>$19,866</FONT> </FONT></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$&nbsp; 44,685</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>$&nbsp; 74,474</FONT> </FONT></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=+0><FONT face=serif size=2>$&nbsp; 73,543</FONT> </FONT></TD></TR></TABLE><BR>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Total
cash compensation is determined by combining an executive&#146;s base salary with the
target level of incentive compensation available for that executive. As stated
above, the committee&#146;s philosophy is to provide total annual cash compensation
potential available to executive officers at competitive levels (i.e., at or
near the 50th percentile) if the </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>targeted performance objectives are
achieved. For fiscal 2007, the target amount of total cash compensation
available to each of our named executive officers was set below, or within five
percent above, the amount representing the 50th percentile of total cash
compensation listed for similar positions at the comparison companies, except
for Mr. Lopez. Mr. Lopez&#146;s target amount of total cash compensation was
established relative to our other executive officers using the factors noted
above.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
following table sets forth the target total cash compensation available and
actual total&nbsp;cash compensation paid to our named executive officers
compared with the 50th percentile of total cash compensation for executives at
the comparison companies.</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" 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 noWrap align=center width="1%"><FONT size=+0>&nbsp; </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 color=#231f20 size=1>Target Total Cash
      Compensation</FONT></B> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="3%" colSpan=3><FONT size=+0><B><FONT face=serif color=#231f20 size=1>Actual Total Cash
      Compensation</FONT></B> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" colSpan=2><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>50th</FONT></B>
      </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=1><FONT size=3>&nbsp;
      </FONT><B>Percentile</B></FONT>&nbsp; </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><B>As a % of the</B></FONT> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><B>As a % of the</B></FONT> </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=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>($) (1)</FONT></B> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><B>Value ($)</B></FONT>&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><FONT face=serif size=1><FONT size=3>&nbsp; </FONT><B>50th
      Percentile</B></FONT>&nbsp;&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><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><B>Value ($)</B></FONT>&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><FONT face=serif size=1><FONT size=3>&nbsp; </FONT><B>50th
      Percentile</B></FONT>&nbsp;&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" bgColor=#c0c0c0 colSpan=2><FONT size=+0><FONT face=serif size=2>Bruce J Barclay</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>$523,579</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>&nbsp;$463,320</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>88.5%</FONT> </FONT></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>&nbsp;$533,520</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>101.9%</FONT> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" colSpan=2><FONT size=+0><FONT face=serif size=2>Philip D.
      Ankeny</FONT> </FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;</TD>
    <TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>$284,001</FONT>
      </FONT></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>$268,329</FONT>
      </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>94.5%</FONT>
    </FONT></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>$301,329</FONT>
      </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>106.1%</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>Steven J. Keough</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>$262,001</FONT> </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>$267,587</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>102.1%</FONT>&nbsp; </FONT></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>$302,114</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>115.3%</FONT> </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="89%" colSpan=2><FONT size=+0><FONT face=serif size=2>Paul A.
      Lopez</FONT> </FONT></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2><FONT size=3>&nbsp;</FONT>n/a</FONT> </FONT></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>$310,980</FONT>
      </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>n/a</FONT>
    </FONT></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT size=+0><FONT face=serif size=2>$351,106</FONT>
      </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><FONT face=serif size=2>n/a</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>Charles W. Olson</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>$263,036</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>$230,871</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>87.8%<FONT size=3> </FONT></FONT></FONT></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>$259,729</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><FONT size=3>&nbsp;</FONT>98.7%</FONT></FONT></TD></TR></TABLE>____________________<BR>&nbsp;<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 vAlign=top align=left width="100%">
      <P align=justify><FONT face=serif size=2>Represents the 50th percentile,
      or median, of total compensation paid to executives in similar positions
      at the comparison companies.</FONT></P></TD></TR></TABLE>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>As with
cash incentive compensation (as shown in the previous table), the amount of
total target cash compensation to our named executive officers is directly
related to our performance. Thus, in years in which performance is at or below
target levels established for the corporate and business objectives, we expect
that the total cash compensation paid to our named executive officers will be
lower than the 50th percentile of total cash compensation paid to executives in
similar positions at the comparison companies. In years in which our performance
is at target levels established for the corporate and business objectives, we
expect that the total cash compensation paid to our named executive officers
will generally be at or near the 50th percentile of total cash compensation for
executives in similar positions at the comparison companies. In years in which
our performance is above target levels established for the corporate and
business objectives, we expect that the total cash compensation paid to our
named executive officers will generally be higher than the 50th percentile of
total cash compensation for executives in similar positions at the comparison
companies. In fiscal 2007, because the maximum performance objectives were
achieved, the total cash compensation actually paid to our named executive
officers generally exceeded the 50th percentile.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>We do not
have a policy regarding the adjustment or recovery of incentive compensation
awards or payments if the relevant performance measures upon which the awards
are based are restated or otherwise adjusted in a manner that would reduce the
size of an award or payments. If such an event were to occur, we would address
it based on the facts and circumstances of the event.</FONT></P>
<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I>Equity Elements of
Compensation</I></FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Equity
elements of compensation represent all forms of compensation that are paid in,
or based on the performance of, our stock. Historically, we have used stock
option grants, restricted stock awards and performance share awards as the
various forms of equity compensation available to our executive officers. Equity
compensation can represent short-term compensation, such as performance share
awards with a one-year performance period. Other forms of equity compensation
can provide long-term compensation, such as performance share awards with
multi-year performance periods, or stock options or restricted stock awards that
vest over multiple years. We use equity compensation to further align the
interests of our executive officers with those of our shareholders.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Organization and Compensation Committee varies the form of equity compensation
made available to our named executive officers from year to year based on its
assessment, with the advice of management, of the incentives provided by each
award, and the potential impact to our financial results. The committee also
considers the forms and amounts of outstanding equity awards held by our named
executive officers when determining whether to make equity compensation
available and in what form it should be made available in any given year.
However, the </FONT></P>
<P align=center><FONT face=serif size=2>17</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>committee does not have firm targets
for the mix of equity awards that our named executive officers should hold. The
committee also considers the financial accounting and tax treatment on our
company, and the tax treatment to our named executive officers, in determining
which forms of equity compensation to award. Also, while the Summary
Compensation Table below, in accordance with the regulations of the Securities
and Exchange Commission, includes in the Stock Awards and Option Awards columns
the expenses that we recognized under SFAS 123R for equity awards granted in
periods prior to fiscal 2007, when setting equity award grants for a fiscal
year, the committee considers only the present value of the equity
award.</FONT></P>
<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>Historically, we have granted, from
time to time, the following types of equity compensation awards:</FONT></P>
<P style="PADDING-LEFT: 15pt; TEXT-ALIGN: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>Stock Option Grants &#150; </FONT></I><FONT face=serif size=2>Stock
option grants are equity awards that allow the recipient to purchase shares of
our common stock at a fixed price over a period of time until the option
expires. Stock options typically are not exercisable when granted and become
exercisable, or vest, over a number of years. Historically, we have granted
stock options to executive officers as part of long-term compensation, to retain
executives over the vesting period of the options, and to align the interests of
our executive officers with those of our shareholders by creating a mechanism
for executive officers to realize the benefits of increases in our stock price.
</FONT></P>
<P style="PADDING-LEFT: 15pt; TEXT-ALIGN: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>Restricted Stock Awards &#150; </FONT></I><FONT face=serif size=2>Restricted stock awards are stock grants that, at the time of the grant,
are subject to a risk of forfeiture by the recipient if the recipient terminates
his or her employment with us prior to the time the risk of forfeiture lapses.
The risk of forfeiture for restricted stock awards generally lapses, or the
shares vest, over a number of years. We use restricted stock awards as part of
long-term compensation, to retain executives over the vesting period of the
shares, and to align the interests of our executive officers with those of our
shareholders by providing a compensation element that increases or decreases
with the performance of our stock. </FONT></P>
<P style="PADDING-LEFT: 15pt; TEXT-ALIGN: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT face=serif size=2>Performance Share Awards &#150; </FONT></I><FONT face=serif size=2>Under a performance share award, our executive officers are eligible for
a grant of shares of our common stock to the extent that certain predefined
performance objectives are achieved during the specified performance period. We
use performance share awards as either short-term or long-term compensation
depending on the duration of the performance period. These awards also assist us
in retaining executives over the performance period, and in aligning the
interests of our executive officers with those of our shareholders by providing
a compensation element that increases or decreases with the performance of our
stock. </FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>For
fiscal 2007, the Organization and Compensation Committee approved our officer
performance share program under which our executive officers were eligible to
receive performance share awards. Except as set forth below for Paul Lopez,
these performance share awards were the only form of equity compensation
available to our named executive officers in fiscal 2007. The committee selected
performance share awards, in part because it wished to rely more heavily on
performance components for equity compensation, which historically had featured
time-based vesting. Reliance on performance components further supports the
committee&#146;s pay-for-performance philosophy described above. The committee
concluded that outstanding time-based equity awards previously granted to our
named executive officers generally were sufficient to meet our long-term
compensation and retention objectives, and that it would be appropriate to shift
a portion of equity compensation from time-based vesting to performance-based
vesting.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Performance under the performance share program was determined using the
same corporate objectives as those used for the cash incentive compensation plan
discussed above, namely, revenue growth and earnings per share growth, in each
case relative to our fiscal 2006 results. Thus, the performance period relevant
for performance shares awarded under the program was one year (i.e., fiscal
2007). As with the bonus plan, the committee believed these objectives, if
achieved, would have the potential to significantly enhance shareholder
value.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Consistent with our compensation philosophy and objectives, the
Organization and Compensation Committee sought to provide target total
compensation, including cash and equity elements, available to our named
executive officers at competitive levels. By &#147;competitive,&#148; we mean that if the
target total cash and equity incentive compensation is earned by an executive
officer, that executive officer&#146;s total compensation for the fiscal year
generally would be at or above the 50th percentile of total annual compensation
levels for executives at the comparison companies.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
number of performance shares granted to each named executive officer (other than
the CEO) was approved by the committee upon consideration of the recommendations
of the CEO which were based, in large part, on our annual review process. These
recommendations considered each executive&#146;s contributions and performance during
the previous fiscal year relative to business and corporate objectives, and the
executive&#146;s total compensation relative to</FONT></P>
<P align=center><FONT face=serif size=2>18</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><FONT face=serif size=2>the market. The number of performance
shares granted to the CEO was determined by the committee based upon the Board&#146;s
evaluation of his performance considering financial and non-financial measures
of our performance during the previous fiscal year. The committee evaluated the
expected value of the performance share awards in the context of the total
amount of compensation available to an executive officer for fiscal 2007 under
all significant elements of our compensation program, including base salary,
cash incentive compensation and equity compensation.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>For our
named executive officers, including the CEO, the number of performance shares
that could potentially vest, if any, under the performance share program ranged
between 25.0% and 100.0% of the performance shares awarded to each such officer
depending upon the level of achievement (i.e., the magnitude and mix) of the
corporate objectives. As an important aspect of the program, the committee
established certain levels of the corporate objectives that, if achieved, would
result in the vesting of differing amounts of the performance shares awarded
under the program. For example, if the minimum levels for the corporate
objectives were not achieved, none of the performance shares awarded under the
program would vest. Similarly, if the maximum levels for the corporate
objectives were achieved, all of the performance shares awarded to our named
executive officers would vest. Shares that do not vest at the conclusion of the
performance period are forfeited.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Organization and Compensation Committee established a target percentage for the
vesting of performance shares under the program consistent with our compensation
philosophy and objectives noted above. In particular, the committee set the
target percentage for vesting such that if the targeted performance levels for
the corporate objectives were achieved, the executive officer&#146;s total
compensation, including cash and equity elements, would be at or above the 50th
percentile of total annual compensation levels for executives at the comparison
companies. Following this approach and using the methodology described above for
estimating the expected value of the awards, the committee determined that the
target vesting percentage (for all of our named executive officers, including
our CEO) of performance shares awarded under the program would be 85%. Thus, if
the targeted performance levels for the corporate objectives were fully achieved
as established under the program, 85% of the performance shares awarded to each
of our named executive officers under the program would vest. Similarly, the
committee set the maximum percentage for the vesting of performance shares under
the program such that if the maximum levels for the corporate objectives were
fully achieved and all of the performance shares awarded vested, the total
compensation paid to our named executive officers for the fiscal year would
generally be above the 50th percentile of total compensation levels for
executives at the comparison companies. The committee considered this potential
maximum total compensation to be appropriate because the level of performance
required to achieve full vesting of the performance shares under the program
would result in superior financial performance for our company, which would have
the potential to significantly enhance shareholder value. </FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
September 2007 action of the Organization and Compensation Committee regarding
the Merck agreement, as discussed above, also applied to the determination of
results for the vesting of performance shares. At its first regularly scheduled
meeting after our results for fiscal 2007 were released, the Organization and
Compensation Committee determined the level of achievement of the corporate
objectives and the corresponding vesting percentage of the performance shares
awarded under the performance share program. Based on the committee&#146;s
determination with respect to our achievement of the corporate objectives,
including the amounts related to the Merck agreement as discussed above, all of
the performance shares awarded to our named executive officers under the program
vested. </FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>As stated
above, the committee&#146;s philosophy is to provide target total annual compensation
available to executive officers at competitive levels. Considering both the
target base salary and the target incentive compensation, the target total
compensation available for fiscal 2007 to each of our named executive officers
was between 22% and 40% above the amounts representing the 50th percentile of
total compensation for executives at the comparison companies, except for Mr.
Lopez. Mr. Lopez&#146;s target total compensation was established relative to our
other executive officers using the factors noted above. The following table
illustrates the potential total compensation amounts (including the target
value) based upon different levels of achievement of the corporate and business
objectives. Each of these amounts is compared with the 50th percentile of total
compensation for executives in similar positions at the comparison
companies.</FONT></P>
<P align=center><FONT face=serif size=2>19</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE><BR>
<TABLE style="FONT-SIZE: 10pt; LINE-HEIGHT: 13.5pt" cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=center width="33%" colSpan=2></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="47%" colSpan=17>&nbsp;<B><FONT face=serif size=1>2007 Base Salary and Incentive Compensation Based on Level of
      Achievement of Performance</FONT></B></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="33%" colSpan=2></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="47%" colSpan=17><B><FONT face=serif size=1>Objectives (1)</FONT></B></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="11%" colSpan=4><B><FONT face=serif size=1>2007 Actual Salary and</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="33%" colSpan=2></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="11%" colSpan=3><B><FONT face=serif size=1>Less Than</FONT></B></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="11%" colSpan=4><B><FONT face=serif size=1>Stock Awards and Non-</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="33%" colSpan=2></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="11%" colSpan=3><B><FONT face=serif size=1>Threshold</FONT></B></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="11%" colSpan=3><B><FONT face=serif size=1>Threshold</FONT></B></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="11%" colSpan=4><B><FONT face=serif size=1>Targeted</FONT></B></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="11%" colSpan=4><B><FONT face=serif size=1>Maximum</FONT></B></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="11%" colSpan=4><B><FONT face=serif size=1>Equity Incentive Plan</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="33%" colSpan=2></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="11%" colSpan=3><B><FONT face=serif size=1>Achievement</FONT></B></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="11%" colSpan=3><B><FONT face=serif size=1>Achievement</FONT></B></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="11%" colSpan=4><B><FONT face=serif size=1>Achievement</FONT></B></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="11%" colSpan=4><B><FONT face=serif size=1>Achievement</FONT></B></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="11%" colSpan=4><B><FONT face=serif size=1>Compensation (2)</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="33%" colSpan=2></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><B><FONT face=serif size=1>50th</FONT></B></TD>
    <TD noWrap align=center width="1%"><B><FONT face=serif size=1></FONT></B></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><B><FONT face=serif size=1>% of
      50th</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="33%" colSpan=2></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><B><FONT face=serif size=1>Percentile</FONT></B></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><B><FONT face=serif size=1>% of
      50th</FONT></B></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><B><FONT face=serif size=1>% of
      50th</FONT></B></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><B><FONT face=serif size=1>% of
      50th</FONT></B></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><B><FONT face=serif size=1>% of
      50th</FONT></B></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><B><FONT face=serif size=1>Percentile</FONT></B></TD></TR>
  <TR>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="2%"><B><FONT size=1>Name</FONT></B></TD>
    <TD noWrap align=left width="31%">&nbsp;</TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><B><FONT size=1>($) (3)</FONT></B></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><B><FONT size=1>Value ($)</FONT></B></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><B><FONT size=1>Percentile</FONT></B></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><B><FONT size=1>Value ($)</FONT></B></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><B><FONT size=1>Percentile</FONT></B></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=2><B><FONT size=1>Value ($)</FONT></B></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><B><FONT size=1>Percentile</FONT></B></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=2><B><FONT size=1>Value ($)</FONT></B></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><B><FONT size=1>Percentile</FONT></B></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=2><B><FONT size=1>Value ($)</FONT></B></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><B><FONT size=1>(4)</FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="33%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=1>Bruce J Barclay</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>$985,722</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>$351,000</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>36%</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>$609,518</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>62%</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$</FONT></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=1>1,207,070</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>122%</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$</FONT></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=1>1,413,188</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>143%</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$</FONT></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=1>1,415,020</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>144%</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="33%" colSpan=2><FONT face=serif size=1>Philip
      D. Ankeny</FONT></TD>
    <TD align=right width="1%">&nbsp;</TD>
    <TD align=center width="5%"><FONT face=serif size=1>$425,220</FONT></TD>
    <TD align=right width="1%">&nbsp;</TD>
    <TD align=center width="5%"><FONT face=serif size=1>$216,394</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="5%"><FONT face=serif size=1>51%</FONT></TD>
    <TD align=right width="1%"><FONT face=serif size=1></FONT></TD>
    <TD align=center width="5%"><FONT face=serif size=1>$335,733</FONT></TD>
    <TD align=right width="1%">&nbsp;</TD>
    <TD align=center width="5%"><FONT face=serif size=1>79%</FONT></TD>
    <TD align=right width="1%"><FONT face=serif size=1></FONT></TD>
    <TD align=right width="1%"><FONT face=serif size=1>$</FONT></TD>
    <TD align=right width="4%"><FONT face=serif size=1>595,579</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=center width="5%"><FONT face=serif size=1>140%</FONT></TD>
    <TD align=right width="1%"><FONT face=serif size=1></FONT></TD>
    <TD align=right width="1%"><FONT face=serif size=1>$</FONT></TD>
    <TD align=right width="4%"><FONT face=serif size=1>687,952</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=center width="5%"><FONT face=serif size=1>162%</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"><FONT face=serif size=1>$</FONT></TD>
    <TD align=right width="4%"><FONT face=serif size=1>689,189</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=center width="5%"><FONT face=serif size=1>162%</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="33%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=1>Steven J. Keough</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>$379,006</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>$215,796</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>57%</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1></FONT></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>$308,821</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>81%</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1></FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$</FONT></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=1>505,587</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>133%</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1></FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$</FONT></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=1>582,114</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>154%</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$</FONT></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=1>584,194</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>154%</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="33%" colSpan=2><FONT face=serif size=1>Paul
      A. Lopez (5)</FONT></TD>
    <TD align=left width="1%"></TD>
    <TD align=center width="5%"><FONT face=serif size=1>n/a</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=center width="5%"><FONT face=serif size=1>$250,790</FONT></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="5%"><FONT face=serif size=1>n/a</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=center width="5%"><FONT face=serif size=1>$373,799</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=center width="5%"><FONT face=serif size=1>n/a</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"><FONT face=serif size=1>$</FONT></TD>
    <TD align=right width="4%"><FONT face=serif size=1>638,230</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=center width="5%"><FONT face=serif size=1>n/a</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"><FONT face=serif size=1>$</FONT></TD>
    <TD align=right width="4%"><FONT face=serif size=1>736,106</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=center width="5%"><FONT face=serif size=1>n/a</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"><FONT face=serif size=1>$</FONT></TD>
    <TD align=right width="4%"><FONT face=serif size=1>738,966</FONT></TD>
    <TD align=right width="1%"></TD>
    <TD align=center width="5%"><FONT face=serif size=1>n/a</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="33%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=1>Charles W. Olson</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>$420,082</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>$186,186</FONT></TD>
    <TD align=center width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>44%</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1></FONT></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>$302,302</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>72%</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1></FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$</FONT></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=1>558,121</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>133%</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1></FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$</FONT></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=1>645,660</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>154%</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$</FONT></TD>
    <TD align=right width="4%" bgColor=#c0c0c0><FONT face=serif size=1>647,589</FONT></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=1>154%</FONT></TD></TR></TABLE>____________________<BR>&nbsp;<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 align=left width="100%">
      <P align=justify><FONT face=serif size=2>Represents base salary, cash
      incentive payments and performance shares, valued at $35.00 per share (the
      approximate market value at the time the 2007 performance share program
      was adopted) at various levels of achievement of corporate objectives, and
      assuming achievement of all business objectives.</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 noWrap></TD>
    <TD align=left width="100%">
      <P align=justify><FONT face=serif size=2>Represents the sum of Salary SFAS
      123R Expense for Perform Shares under the performance share
      program&nbsp;and Non-Equity Incentive Plan Compensation from the Summary
      Compensation Table below. These amounts are different from the Maximum
      Achievement amounts because the performance shares are valued at $35.26
      per share in the Summary Compensation Table, in accordance with SFAS 123R,
      but are valued at $35.00 per share in the Maximum Achievement amount based
      on the approximate market value of the shares at the time the 2007
      performance share program was adopted. Additionally, the Maximum
      Achievement amounts assume 100% achievement of both the corporate and
      business objectives associated with the bonus plan. The actual levels of
      achievement associated with the business objectives were between 90% to
      100%.</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 noWrap></TD>
    <TD align=left width="100%">
      <P align=justify><FONT face=serif size=2>Represents the 50th percentile,
      or median, of total compensation paid to executives in similar positions
      at the comparison companies.</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 noWrap></TD>
    <TD align=left width="100%">
      <P align=justify><FONT face=serif size=2>Sufficient information was not
      known to allow us to determine the exact percentile rank for each
      officer&#146;s total compensation within the comparative market
    data.</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 noWrap></TD>
    <TD align=left width="100%">
      <P align=justify><FONT face=serif size=2>Does not include additional
      performance shares previously granted to Mr. Lopez and that vested as a
      result of performance objectives achieved in fiscal 2007 in connection
      with (i) certain financial objectives established specifically for the
      Company&#146;s ophthalmology business unit, and (ii) the signing of the
      Company&#146;s agreement with Merck. These equity awards are discussed in
      detail below under the heading &#147;Other Equity
  Compensation.&#148;</FONT></P></TD></TR></TABLE>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The table
above further illustrates our pay-for-performance philosophy. As is shown, the
total compensation for each of our named executive officers is heavily tied to
our overall performance. Thus, in years in which our performance is below target
levels established for the corporate and business objectives, we expect that the
total compensation paid to our named executive officers will also be lower than
the 50th percentile of total compensation paid to executives in similar
positions at the comparison companies. Conversely, in years in which our
performance is at or above target levels established for the corporate and
business objectives, we expect that the total compensation paid to our named
executive officers will generally be higher than the 50th percentile of total
compensation for executives in similar positions at the comparison companies.
This approach places a significant portion of each executive&#146;s total
compensation &#147;at risk,&#148; with upside and downside potential depending upon our
performance, and the achievement of specific performance objectives and
long-term equity value creation for our shareholders.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2><I>Other
Equity Compensation</I> &#151; In addition to the annual incentive compensation
awards discussed above, the committee may grant other equity awards as incentive
compensation to our employees, including our named executive officers, at any
time during a fiscal year. Such equity awards are typically granted on an
individual basis, taking into consideration factors such as the need to recruit
or retain experienced individuals, or to reward performance that has the
potential to result in long-term equity value creation for our shareholders.
Such awards further support our pay-for-performance philosophy discussed
above.</FONT></P>
<P align=center><FONT face=serif size=2>20</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 March
2006, Mr. Lopez was issued performance share awards which enable him to receive
shares of our common stock to the extent that predefined performance objectives
are achieved during the specified performance period. The committee felt that
the issuance of the performance share awards were appropriate as a means to
recruit and retain Mr. Lopez as an executive of our company, and further to
reward performance that has the potential to result in long-term equity value
creation for our shareholders. The table below summarizes the performance share
awards granted to Mr. Lopez, including the performance period and the number of
performance shares that may vest as a result of the attainment of each of the
corresponding non-financial objectives:</FONT></P>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="70%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><B><FONT face=serif size=1>Total</FONT></B> </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="87%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><B><FONT face=serif size=1>No.
      of</FONT></B> </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="87%"></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="5%"><B><FONT face=serif color=#231f20 size=1>Performance
      Period</FONT></B> </TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><B><FONT face=serif size=1>Shares (1)</FONT></B> </TD>
    <TD noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="87%"><B><FONT face=serif size=1>Description of Performance
      Objectives</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD vAlign=top align=left width="5%" bgColor=#c0c0c0><FONT face=serif size=2>Each fiscal year between 2006 and 2010 (2)</FONT></TD>
    <TD vAlign=top align=center width="1%" bgColor=#c0c0c0></TD>
    <TD vAlign=top align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2>10,000</FONT> </TD>
    <TD vAlign=top align=left width="1%" bgColor=#c0c0c0></TD>
    <TD vAlign=top align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Achievement of predetermined annual performance objectives for the
      ophthalmology business unit for each of our fiscal years between 2006 and
      2010. (3)</FONT></TD></TR>
  <TR>
    <TD vAlign=top align=left width="5%"></TD>
    <TD vAlign=top align=center width="1%"></TD>
    <TD vAlign=top align=center width="5%"></TD>
    <TD vAlign=top align=left width="1%"></TD>
    <TD vAlign=top align=left width="87%">&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD vAlign=top align=left width="5%" bgColor=#c0c0c0><FONT face=serif size=2>02/17/2006 -<BR>09/30/2010</FONT></TD>
    <TD vAlign=top align=center width="1%" bgColor=#c0c0c0></TD>
    <TD vAlign=top align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2>20,000</FONT> </TD>
    <TD vAlign=top align=left width="1%" bgColor=#c0c0c0></TD>
    <TD vAlign=top align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Entry into one or more (i) development programs, or (ii) license
      agreements with our ophthalmology customers for products involving our
      drug delivery technologies for ophthalmic applications.
  </FONT></TD></TR></TABLE></DIV>____________________<BR>&nbsp;<BR>
<TABLE cellSpacing=0 cellPadding=0 border=0>

  <TR>
    <TD vAlign=top noWrap><FONT face=serif size=2>(1)</FONT></TD>
    <TD noWrap></TD>
    <TD align=left width="100%">
      <P align=justify><FONT face=serif size=2>Represents the total number of
      shares Mr. Lopez is eligible to receive if the corresponding performance
      objectives are fully achieved.</FONT></P></TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD width="100%"></TD></TR>
  <TR>
    <TD vAlign=top noWrap><FONT face=serif size=2>(2)</FONT></TD>
    <TD noWrap></TD>
    <TD align=left width="100%">
      <P align=justify><FONT face=serif size=2>The number of shares that
      actually vest as a result of performance during each fiscal year will vary
      based upon the actual level of achievement of the performance objectives
      established for such award. For example, if 75% of the performance
      objectives in a given fiscal year are achieved, then only 75% of the
      maximum number of performance shares for the corresponding fiscal year
      will vest. The actual level of achievement of the performance objectives
      for each award for a given fiscal year is approved separately by the
      Organization and Compensation Committee considering the recommendations
      from the CEO. The total number of shares available during each of the
      fiscal years during the performance period is 2,000 shares. Any
      performance shares that do not vest during the performance period are
      forfeited.</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 noWrap></TD>
    <TD align=left width="100%">
      <P align=justify><FONT face=serif size=2>For purposes of this award, the
      performance objectives are established on an annual basis and are the same
      as the business objectives established for the ophthalmology business unit
      under the bonus program for the same fiscal
year.</FONT></P></TD></TR></TABLE>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Following
the conclusion of fiscal 2007, based on the recommendation of the CEO, the
Organization and Compensation Committee approved achievement of business
objectives such that 100% (i.e., 2,000 shares) of the performance shares awarded
to Mr. Lopez for fiscal 2007 performance vested. Similarly, during fiscal 2007,
we entered into multiple development programs and licensing arrangements with
our ophthalmology customers for products involving our drug delivery
technologies for ophthalmic applications such that all of the performance shares
shown in the table above related to the commercial objectives have vested (i.e.,
20,000 shares). Due to confidentiality obligations and for competitive reasons,
except for our arrangements with Merck, we have not publicly disclosed any
details concerning the development programs (i.e., the number of such programs,
the identity of our customers, or the details about the products being
developed) that we have ongoing with our ophthalmology customers. The value of
these performance shares that vested during fiscal 2007 was $800,140 (in
accordance with SFAS 123R)&nbsp;and is included in the Stock Awards column in
the Summary Compensation Table shown below.&nbsp;The committee felt that the
additional compensation resulting from these additional performance shares was
appropriate because of Mr. Lopez&#146;s unique qualifications, scope of
responsibilities, and ability to influence our performance as President of our
Ophthalmology business unit. Furthermore, the committee determined achievement
of the specific performance objectives for these awards would have the potential
to significantly enhance the long-term equity value of our
shareholders.</FONT></P>
<P align=center><FONT face=serif size=2>21</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
addition to the performance shares noted above, in September 2007, the
Organization and Compensation Committee approved the issuance of an additional
performance share award to Mr. Lopez which enables him to receive up to 12,000
additional shares of our common stock to the extent that predefined performance
objectives are achieved during the specified performance period. This additional
performance share award was issued to Mr. Lopez in lieu of other awards that may
be issued to our other executive officers in fiscal 2008, and potentially other
future fiscal years, to the extent that the performance objectives have not been
fully achieved. The performance objectives established for this performance
share award are the same as the commercial objectives noted above. The committee
felt that the issuance of this performance share award was appropriate as a
means to retain Mr. Lopez as an executive of our company, and further to reward
performance that has the potential to result in long-term equity value creation
for our shareholders. None of these performance shares have vested. The table
below summarizes the performance share awards granted to Mr. Lopez, including
the performance period and the number of performance shares that may vest as a
result of the attainment of each of the corresponding non-financial
objectives:</FONT></P>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="70%" border=0>

  <TR vAlign=bottom>
    <TD vAlign=top noWrap align=left width="5%"></TD>
    <TD vAlign=top noWrap align=center width="1%"></TD>
    <TD vAlign=top noWrap align=center width="5%"><B><FONT face=serif size=1>Total</FONT></B> </TD>
    <TD vAlign=top noWrap align=left width="1%"></TD>
    <TD vAlign=top noWrap align=left width="87%"></TD></TR>
  <TR vAlign=bottom>
    <TD vAlign=top noWrap align=left width="5%"></TD>
    <TD vAlign=top noWrap align=center width="1%"></TD>
    <TD vAlign=top noWrap align=center width="5%"><B><FONT face=serif size=1>No. of</FONT></B> </TD>
    <TD vAlign=top noWrap align=left width="1%"></TD>
    <TD vAlign=top noWrap align=left width="87%"></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=top noWrap align=left width="5%"><B><FONT face=serif color=#231f20 size=1>Performance
      Period</FONT></B> </TD>
    <TD vAlign=top noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=top noWrap align=center width="5%"><B><FONT face=serif size=1>Shares (1)</FONT></B> </TD>
    <TD vAlign=top noWrap align=left width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" vAlign=top noWrap align=left width="87%"><B><FONT face=serif size=1>Description of Performance
      Objectives</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD vAlign=top align=left width="5%" bgColor=#c0c0c0><FONT face=serif size=2>09/17/2007 -<BR>09/17/2012</FONT></TD>
    <TD vAlign=top align=left width="1%" bgColor=#c0c0c0></TD>
    <TD vAlign=top align=center width="5%" bgColor=#c0c0c0><FONT face=serif size=2>12,000</FONT> </TD>
    <TD vAlign=top align=left width="1%" bgColor=#c0c0c0></TD>
    <TD vAlign=top align=left width="87%" bgColor=#c0c0c0><FONT face=serif size=2>Entry into one or more (i) development programs, or (ii) license
      agreements with our ophthalmology customers for products involving our
      drug delivery technologies for ophthalmic
  applications.</FONT></TD></TR></TABLE></DIV>____________________<BR>&nbsp;<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 align=left width="100%">
      <P align=justify><FONT face=serif size=2>Represents the total number of
      shares Mr. Lopez is eligible to receive if the corresponding performance
      objectives are fully achieved.</FONT></P></TD></TR></TABLE>
<P align=justify><B><FONT face=serif size=2>Change of Control
Agreements</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>We
entered into change of control agreements with Bruce J Barclay, President and
Chief Executive Officer, and Philip D. Ankeny, Senior Vice President and Chief
Financial Officer, in April 2006, and with Paul A. Lopez, Vice President and
President, Ophthalmology Division, in November 2006. The Organization and
Compensation Committee of the Board of Directors feels that change of control
agreements are appropriate to induce particular executives to remain with our
company in the event of a proposed or anticipated change of control, or through
a change of control, to facilitate an orderly transition to new ownership. In
addition, the committee feels that change of control agreements assist us in
retaining executive officers by providing the executives with appropriate
economic security against changes in our ownership. Because our executive
officers would suffer economic hardship following a change of control only if
their employment with us is terminated by us, or by the executive officer for
good reason, following a change of control, we have selected such termination as
the trigger for change of control payments. The majority of the comparison
companies in the comparative surveys provide some form of change of control
benefits to at least some of their executive officers.</FONT></P>
<P align=justify><B><FONT face=serif size=2>Other Compensation </FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>We
provide medical and insurance benefits, which are generally available to all of
our employees, to the named executive officers. We also maintain a 401(k)
savings plan in which all qualified employees, including the named executive
officers, may participate. We provide matching contributions to the savings plan
for all participating employees, allowing such employees to earn up to an
additional 3% of their annual base salary. In addition, we maintain a Stock
Purchase Plan that permits qualified employees, including the named executive
officers, to purchase our stock at favorable prices. The amount of perquisites
allowed to the named executive officers, as determined in accordance with the
rules of the Securities and Exchange Commission, did not exceed 10% of salary in
fiscal 2007. We do not have a defined benefit retirement plan.</FONT></P>
<P align=center><FONT face=serif size=2>22</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=center><B><FONT face=serif size=2>ORGANIZATION AND COMPENSATION
COMMITTEE REPORT</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Organization and Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K
for the year ended September 30, 2007 with management. Based on the foregoing
reviews and discussions, the committee recommended to the Board, and the Board
has approved, that the Compensation Discussion and Analysis be included in the
proxy statement for the 2008 Annual Meeting of Stockholders to be held on
January 28, 2008.</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="50%" align=right border=0>

  <TR>
    <TD width="100%">
      <P align=justify><B><FONT face=serif size=2>Members of the Organization
      and<BR>Compensation Committee:<BR></FONT></B><FONT face=serif size=2>John
      A. Meslow, Chairman<BR>Jos&#233; H. Bedoya<BR>John W. Benson<BR>Kenneth H.
      Keller, Ph.D.<BR>David A. Koch</FONT></P></TD></TR></TABLE><BR clear=all><BR>
<P align=center><FONT face=serif size=2>23</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=center><B><FONT face=serif size=2>EXECUTIVE COMPENSATION AND OTHER
INFORMATION</FONT></B></P>
<P align=justify><B><FONT face=serif size=2>Summary of
Compensation</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
following table shows the compensation awarded to, earned by or paid to our
named executive officers during fiscal 2007. You should refer to Compensation
Discussion and Analysis above to understand the elements used in setting the
compensation for our named executive officers. </FONT></P>
<P align=center><B><FONT face=serif size=2>SUMMARY COMPENSATION
TABLE</FONT></B></P>
<TABLE cellSpacing=0 cellPadding=0 border=0>

  <TR vAlign=bottom>
    <TD noWrap align=right width="47%" colSpan=2></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="3%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="6%" colSpan=2><B><FONT face=serif size=1>Stock</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="10%" colSpan=4><B><FONT face=serif size=1>Non-Equity</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="3%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="3%"></TD>
    <TD noWrap align=center width="3%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=right width="47%" colSpan=2></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="3%"><B><FONT face=serif size=1>Fiscal</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="6%" colSpan=2><B><FONT face=serif size=1>Awards</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"><B><FONT face=serif size=1>Option</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="10%" colSpan=4><B><FONT face=serif size=1>Incentive Plan</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="10%" colSpan=4><B><FONT face=serif size=1>All Other</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="10%"><B><FONT face=serif color=#231f20 size=1>Name and Principal
      Position</FONT></B> </TD>
    <TD align=left width="37%">&nbsp;</TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="3%"><B><FONT face=serif size=1>Year</FONT></B> </TD>
    <TD noWrap align=center width="1%"></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>Salary</B><FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="6%" colSpan=2><FONT face=serif size=1><B>(1)</B><B>(2)</B></FONT> </TD>
    <TD noWrap align=center width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%"><B><FONT face=serif size=1>Awards (1)</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="10%" colSpan=4><B><FONT face=serif size=1>Compensation (3)</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="10%" colSpan=4><B><FONT face=serif size=1>Compensation (4)</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="6%" colSpan=2><B><FONT size=1></FONT></B><B><FONT face=serif size=1>Total
      (3)</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Bruce J Barclay,</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>2007</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>351,000</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>1,184,875</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$422,850</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD align=right width="3%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$<FONT size=3> </FONT></FONT></TD>
    <TD align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>182,520</FONT> </TD>
    <TD align=right width="3%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD align=right width="3%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>6,008</FONT> </TD>
    <TD align=right width="3%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>2,147,253</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0 colSpan=2>&nbsp; &nbsp;
      &nbsp; &nbsp;<FONT face=serif size=2>President and Chief</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0 colSpan=2>&nbsp; &nbsp;
      &nbsp; &nbsp;<FONT face=serif size=2>Executive Officer</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" colSpan=2><FONT face=serif size=2>Philip
      D. Ankeny,</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"><FONT face=serif size=2>2007</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%"><FONT face=serif size=2>216,394</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%"><FONT face=serif size=2>538,565</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$317,430</FONT> </TD>
    <TD align=right width="1%">&nbsp;</TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"><FONT face=serif size=2>$<FONT size=3>
      </FONT></FONT></TD>
    <TD align=right width="3%"><FONT face=serif size=2>84,935</FONT> </TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="3%"><FONT face=serif size=2>6,509</FONT> </TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%"><FONT face=serif size=2>1,163,833</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" colSpan=2>&nbsp; &nbsp; &nbsp;
      &nbsp;<FONT face=serif size=2>Senior Vice President and</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" colSpan=2>&nbsp; &nbsp; &nbsp;
      &nbsp;<FONT face=serif size=2>Chief Financial Officer</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Steven J. Keough,</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>2007</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>215,796</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>393,947</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$328,876</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$<FONT size=3> </FONT></FONT></TD>
    <TD align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>86,318</FONT> </TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>1,082</FONT> </TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>1,026,019</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0 colSpan=2>&nbsp; &nbsp;
      &nbsp; &nbsp;<FONT face=serif size=2>Senior Vice President and</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0 colSpan=2>&nbsp; &nbsp;
      &nbsp; &nbsp;<FONT face=serif size=2>General Manager, Orthopedics</FONT>
    </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0 colSpan=2>&nbsp; &nbsp;
      &nbsp; &nbsp;<FONT face=serif size=2>and Chief Intellectual
      Property</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0 colSpan=2>&nbsp; &nbsp;
      &nbsp; &nbsp;<FONT face=serif size=2>Counsel</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" colSpan=2><FONT face=serif size=2>Paul
      A. Lopez,</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"><FONT face=serif size=2>2007</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%"><FONT face=serif size=2>250,790</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%"><FONT face=serif size=2>1,264,140</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"><FONT face=serif size=2>$493,600</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"><FONT face=serif size=2>$<FONT size=3>
      </FONT></FONT></TD>
    <TD align=right width="3%"><FONT face=serif size=2>100,316</FONT> </TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="3%"><FONT face=serif size=2>5,654</FONT> </TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%"><FONT face=serif size=2>2,114,500</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" colSpan=2>&nbsp; &nbsp; &nbsp;
      &nbsp;<FONT face=serif size=2>Vice President, President,</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" colSpan=2>&nbsp; &nbsp; &nbsp;
      &nbsp;<FONT face=serif size=2>Ophthalmology Division</FONT> </TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="1%"></TD>
    <TD align=right width="5%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Charles W. Olson,</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>2007</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>186,186</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>508,675</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>$208,440</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$<FONT size=3> </FONT></FONT></TD>
    <TD align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>73,543</FONT> </TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=2>4,434</FONT> </TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>981,278</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0 colSpan=2>&nbsp; &nbsp;
      &nbsp; &nbsp;<FONT face=serif size=2>Vice President and General</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0 colSpan=2>&nbsp; &nbsp;
      &nbsp; &nbsp;<FONT face=serif size=2>Manager, Hydrophilic</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0 colSpan=2>&nbsp; &nbsp;
      &nbsp; &nbsp;<FONT face=serif size=2>Technologies &amp; Vice
      President</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="47%" bgColor=#c0c0c0 colSpan=2>&nbsp; &nbsp;
      &nbsp; &nbsp;<FONT face=serif size=2>of Sales</FONT> </TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="3%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="5%" bgColor=#c0c0c0></TD></TR></TABLE>____________________<BR>&nbsp;<BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR>
    <TD vAlign=top noWrap><FONT face=serif size=2>(1)</FONT></TD>
    <TD noWrap align=left></TD>
    <TD align=left width="100%">
      <P align=justify><FONT face=serif size=2>Reflects the dollar amount
      recognized for equity awards granted in prior years for each named
      executive officer for financial statement reporting purposes with respect
      to fiscal 2007 in accordance with SFAS 123R, but excludes any impact of
      assumed forfeiture rates. We refer you to Note 4 to our consolidated
      financial statements in our Annual Report on Form 10-K for fiscal 2007 for
      a discussion of the general assumptions made in calculating the dollar
      amount recognized for financial statement reporting purposes with respect
      to fiscal 2007 in accordance with SFAS 123R.</FONT></P></TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD noWrap align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD align=left width="100%"></TD></TR>
  <TR>
    <TD vAlign=top noWrap><FONT face=serif size=2>(2)</FONT></TD>
    <TD noWrap align=left></TD>
    <TD align=left width="100%">
      <P align=justify><FONT face=serif size=2>Stock Awards for each named
      executive officer consists of the expense recognized in our financial
      statements in fiscal 2007 under SFAS 123R for restricted stock grants made
      in prior years that vest over time, and for performance shares related to
      fiscal 2007 performance, as follows:</FONT></P></TD></TR></TABLE><BR>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=center width="75%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="10%" colSpan=4><B><FONT face=serif size=1>SFAS 123R</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="6%" colSpan=2><B><FONT face=serif size=1>SFAS 123R</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="75%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="10%" colSpan=4><B><FONT face=serif size=1>Expense for</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="6%" colSpan=2><B><FONT face=serif size=1>Expense for</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="75%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="10%" colSpan=4><B><FONT face=serif size=1>Restricted</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="6%" colSpan=2><B><FONT face=serif size=1>Performance</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="6%" colSpan=2><B><FONT face=serif size=1>Total Stock</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=center width="75%"></TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="10%" colSpan=4><B><FONT face=serif size=1>Stock</FONT></B> </TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="6%" colSpan=2><B><FONT face=serif size=1>Shares</FONT></B> </TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="6%" colSpan=2><B><FONT face=serif size=1>Awards</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>Bruce J
      Barclay</FONT> </TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="2%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>303,375</FONT> </TD>
    <TD align=left width="2%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>881,500</FONT> </TD>
    <TD align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>1,184,875</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%"><FONT face=serif size=2>Philip D. Ankeny</FONT>
    </TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="2%"></TD>
    <TD align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%"><FONT face=serif size=2>150,705</FONT> </TD>
    <TD align=left width="2%"></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%"><FONT face=serif size=2>387,860</FONT> </TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%"><FONT face=serif size=2>538,565</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>Steven
      J. Keough</FONT> </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="2%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>111,867</FONT> </TD>
    <TD align=left width="2%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>282,080</FONT> </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>393,947</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%"><FONT face=serif size=2>Paul A.
      Lopez</FONT>&nbsp; </TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="2%"></TD>
    <TD align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%"><FONT face=serif size=2>76,140</FONT> </TD>
    <TD align=left width="2%"></TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%"><FONT face=serif size=2>1,188,000</FONT> </TD>
    <TD align=left width="1%"></TD>
    <TD align=right width="1%"><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%"><FONT face=serif size=2>1,264,140</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="75%" bgColor=#c0c0c0><FONT face=serif size=2>Charles
      W. Olson</FONT> </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="2%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>120,815</FONT> </TD>
    <TD align=left width="2%" bgColor=#c0c0c0></TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>387,860</FONT> </TD>
    <TD align=left width="1%" bgColor=#c0c0c0></TD>
    <TD align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$</FONT> </TD>
    <TD align=right width="5%" bgColor=#c0c0c0><FONT face=serif size=2>508,675</FONT> </TD></TR></TABLE></DIV><BR>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 border=0>

  <TR>
    <TD vAlign=top noWrap><FONT face=serif size=2>(3)</FONT></TD>
    <TD noWrap></TD>
    <TD width="100%"><FONT face=serif size=2>Represents amounts earned under
      the 2007 cash incentive bonus plan, which is discussed in detail in
      Compensation Discussion and Analysis above.</FONT> </TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD width="100%"></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>Represents matching contributions
      to our 401(k) Plan.</FONT> </TD></TR></TABLE>
<P align=center><FONT face=serif size=2>24</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=center><B><FONT face=serif size=2>GRANTS OF PLAN-BASED AWARDS IN FISCAL
2007</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
following table sets forth certain information concerning grants of plan-based
awards to each of our named executive officers during fiscal 2007. You should
refer to the sections of Compensation Discussion and Analysis above relating to
the cash incentive bonus plan and the officer performance share program to
understand how plan-based awards are determined. </FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=justify width="29%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="9%">&nbsp; </TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="12%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="15%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="14%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="11%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=justify width="29%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="9%">&nbsp; </TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="12%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="15%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="14%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="11%"></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=justify width="29%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="9%">&nbsp; </TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="43%" colSpan=5><B><FONT face=serif size=1>Estimated Future Payouts</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="11%"><B><FONT face=serif size=1>Grant
      Date</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=justify width="29%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="9%">&nbsp; </TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="43%" colSpan=5><B><FONT face=serif size=1>Under Equity Incentive Plan</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="11%"><B><FONT face=serif size=1>Fair
      Value</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=justify width="29%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="9%">&nbsp; </TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="43%" colSpan=5><FONT size=+0><B><FONT face=serif size=1>Award</FONT></B><B><FONT face=serif size=1>s</FONT></B>&nbsp;</FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="11%"><B><FONT face=serif size=1>of
      Stock</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=justify width="29%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="9%">&nbsp; </TD>
    <TD noWrap align=center width="4%"></TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="12%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="15%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="14%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="11%"><B><FONT face=serif size=1>and
      Option</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=justify width="29%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="13%" colSpan=2><B><FONT face=serif size=1>Grant</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="2%"></TD>
    <TD noWrap align=center width="12%"><FONT size=1><B>Threshold</B></FONT><FONT size=3> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="15%"><FONT size=1><B>Target</B></FONT><FONT size=3> </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="14%"><B><FONT size=1>Maximum</FONT></B>&nbsp;</TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="11%"><B><FONT face=serif size=1>Awards</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=justify width="1%"><FONT size=+0><B><FONT face=serif color=#231f20 size=1>Name</FONT></B></FONT> </TD>
    <TD noWrap align=justify width="28%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="13%" colSpan=2><B><FONT face=serif size=1>Date</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="12%"><B><FONT face=serif size=1>(#)</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="15%"><B><FONT face=serif size=1>(#)</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="14%"><B><FONT face=serif size=1>(#)</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="11%"><FONT face=serif size=1><B>($)</B><FONT size=3>&nbsp;</FONT></FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=justify width="29%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Bruce J Barclay</FONT>&nbsp; </TD>
    <TD noWrap align=right width="9%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap width="4%" bgColor=#c0c0c0></TD>
    <TD noWrap align=justify width="2%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=center width="12%" bgColor=#c0c0c0>&nbsp;<FONT face=serif size=2>&#151;</FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=center width="15%" bgColor=#c0c0c0><FONT size=2><FONT face=serif>&#151;&nbsp;</FONT></FONT></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=center width="14%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;</FONT>&nbsp; </TD>
    <TD noWrap align=justify width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD noWrap align=center width="11%" bgColor=#c0c0c0><FONT size=2><FONT face=serif>&#151;</FONT>&nbsp;</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=justify width="29%" colSpan=2><FONT face=serif size=2>Philip D. Ankeny</FONT>&nbsp; </TD>
    <TD noWrap align=right width="9%"><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap width="4%"></TD>
    <TD noWrap align=justify width="2%"></TD>
    <TD noWrap align=center width="12%">&nbsp;<FONT face=serif size=2>&#151;</FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="15%"><FONT size=2><FONT face=serif>&#151;&nbsp;</FONT></FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="14%"><FONT face=serif size=2>&#151;</FONT>&nbsp;
    </TD>
    <TD noWrap align=justify width="1%"></TD>
    <TD noWrap align=center width="11%"><FONT face=serif size=2>&#151;&nbsp;</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=justify width="29%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Steven J. Keough</FONT>&nbsp; </TD>
    <TD noWrap align=right width="9%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap width="4%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=justify width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="12%" bgColor=#c0c0c0>&nbsp;<FONT face=serif size=2>&#151;</FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="15%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;&nbsp;</FONT></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="14%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;</FONT>&nbsp; </TD>
    <TD noWrap align=justify width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="11%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;&nbsp;</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=justify width="29%" colSpan=2><FONT face=serif size=2>Paul A. Lopez</FONT>&nbsp; </TD>
    <TD noWrap align=right width="9%"><FONT face=serif size=2>09/17/07</FONT>
    </TD>
    <TD noWrap width="4%"></TD>
    <TD noWrap align=justify width="2%"></TD>
    <TD noWrap align=center width="12%">&nbsp;<FONT face=serif size=2>&#151;</FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="15%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 12,000 (1)&nbsp;</FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="14%"><FONT face=serif size=2>&#151;</FONT>&nbsp;
    </TD>
    <TD noWrap align=justify width="1%"></TD>
    <TD noWrap align=center width="11%"><FONT face=serif size=2>$568,920&nbsp;</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=justify width="29%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Charles W. Olson</FONT>&nbsp; </TD>
    <TD noWrap align=right width="9%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap width="4%" bgColor=#c0c0c0></TD>
    <TD noWrap align=justify width="2%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="12%" bgColor=#c0c0c0>&nbsp;<FONT face=serif size=2>&#151;</FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="15%" bgColor=#c0c0c0><FONT size=2><FONT face=serif>&#151;&nbsp;</FONT></FONT></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="14%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;</FONT>&nbsp; </TD>
    <TD noWrap align=justify width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="11%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;&nbsp;</FONT></TD></TR></TABLE>____________________<BR>&nbsp;
<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>Represents performance share
      awards issued to Mr. Lopez on September 17, 2007 enabling him to receive
      up to 12,000 shares of our common stock to the extent that certain
      predefined performance objectives are achieved during the performance
      period, which ends on September 17, 2012. This award is discussed in
      detail in Compensation Discussion and Analysis
above.</FONT></TD></TR></TABLE><BR>
<P align=center><FONT face=serif size=2>25</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=center><B><FONT face=serif size=2>OUTSTANDING EQUITY AWARDS AT 2007
FISCAL YEAR-END</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The table
below reflects all outstanding equity awards made to each of the named executive
officers that are outstanding at the end of fiscal 2007. The market or payout
value of unearned shares, units or other rights that have not vested equals
$49.01, which was the closing price of the Company&#146;s common stock as listed on
The Nasdaq National Market on September 28, 2007. The market or payout value for
performance share plan awards presumes that all of the performance goals are
met.</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" colSpan=2>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="14%" colSpan=12><B><FONT face=serif size=1>Option Awards</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="16%" colSpan=12><B><FONT face=serif size=1>Stock Awards</FONT></B>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="7%" colSpan=5>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="8%" colSpan=5></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=4><B><FONT face=serif size=1>Equity Incentive Plan</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="7%" colSpan=5>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="8%" colSpan=5></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=4><B><FONT face=serif size=1>Awards: Unearned</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="7%" colSpan=5><B><FONT face=serif size=1>Number of Securities</FONT></B> </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="8%" colSpan=5></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=4><B><FONT face=serif size=1>Shares, Units or Other</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="7%" colSpan=5><B><FONT face=serif size=1>Underlying Unexercised</FONT></B> </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="8%" colSpan=5><B><FONT face=serif size=1>Shares or Units of Stock</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="5%" colSpan=4><B><FONT face=serif size=1>Rights That Have Not</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="7%" colSpan=5><B><FONT face=serif size=1>Options (#)</FONT></B> </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="8%" colSpan=5><B><FONT face=serif size=1>That Have Not Vested</FONT></B>&nbsp;
    </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=4><B><FONT face=serif size=1>Vested</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="2%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="3%" colSpan=2></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="2%" colSpan=2><B><FONT face=serif size=1>Option</FONT></B>&nbsp;</TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><B><FONT face=serif size=1>Option</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><B><FONT face=serif size=1>&nbsp;Award</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="3%" colSpan=2></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="4%" colSpan=2>&nbsp; &nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="3%" colSpan=2><B><FONT face=serif size=1>&nbsp;Market or</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%"><B><FONT face=serif size=1>Option</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="3%" colSpan=2><B><FONT face=serif size=1>&nbsp;Exercisable&nbsp;</FONT></B> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="3%" colSpan=2><FONT size=1><B>&nbsp;Unexercisable</B></FONT><FONT size=3>&nbsp;</FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;</TD>
    <TD noWrap align=center width="2%" colSpan=2><FONT size=1><B>Exercise</B></FONT><FONT size=3> </FONT></TD>
    <TD noWrap align=center width="1%">&nbsp;</TD>
    <TD noWrap align=center width="1%"><B><FONT size=1>&nbsp;Expiration</FONT></B>&nbsp;</TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><B><FONT face=serif size=1>Grant</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="3%" colSpan=2><B><FONT face=serif size=1>&nbsp;Number of</FONT></B> </TD>
    <TD noWrap align=center width="1%">&nbsp;</TD>
    <TD noWrap align=center width="4%" colSpan=2>&nbsp;<B><FONT face=serif size=1>Market</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1><B>&nbsp;Number</B><FONT size=3>&nbsp;</FONT><B> </B></FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="3%" colSpan=2><B><FONT size=1>&nbsp;Payout
      Value</FONT></B> </TD></TR>
  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=left width="1%"><B><FONT face=serif size=1>Name</FONT></B> </TD>
    <TD noWrap align=left width="68%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><B><FONT face=serif size=1>&nbsp;Grant Date</FONT></B>&nbsp;
</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=2><B><FONT face=serif size=1>(#)</FONT></B>&nbsp; </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=2><FONT face=serif size=1><B>(#)</B><B>(1)</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="2%" colSpan=2><B><FONT face=serif size=1>&nbsp;Price ($)</FONT></B>&nbsp;</TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><B><FONT face=serif size=1>Date</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><B><FONT face=serif size=1>Date</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="3%" colSpan=2><FONT face=serif size=1><B>(#)</B><B>(2)</B></FONT> </TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="4%" colSpan=2><B><FONT face=serif size=1>&nbsp;Value ($)</FONT></B>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT face=serif size=1><B>&nbsp;of</B><FONT size=3>
      </FONT><B>(#)(3)</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=2><FONT face=serif size=1><B>&nbsp;($)</B><B>(4)</B></FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=1>Bruce J Barclay</FONT> </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>12/01/03</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>&nbsp;&nbsp;&nbsp;&nbsp; 30,000</FONT> </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>20,000<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>21.00 </FONT>&nbsp;</TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>12/01/10</FONT> </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>12/01/03</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>&nbsp;&nbsp;&nbsp; 15,000</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=1>735,150</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>&#151;&nbsp; </FONT>&nbsp;</TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>&#151;</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1>01/31/05</FONT>
    </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>30,000</FONT>
</TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>45,000</FONT>
</TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=1>$</FONT> </TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=1>29.37
    </FONT>&nbsp;</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1>01/31/12</FONT>
    </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1>11/15/04</FONT>
    </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>25,000</FONT>
</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=1>$</FONT> </TD>
    <TD noWrap align=right width="3%"><FONT size=1>1,225,250</FONT> </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=1>&#151;&nbsp;
    </FONT>&nbsp;</TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>&#151;</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" bgColor=#c0c0c0 colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; &#151;</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>&nbsp;&nbsp;&nbsp; &nbsp; &#151;</FONT> </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>&#151;</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>&#151; </FONT>&nbsp;</TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#151;<FONT size=3>
      </FONT></FONT></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>03/21/06</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>5,000</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=1>245,050</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>&#151;&nbsp; </FONT>&nbsp;</TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>&#151;</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#151;<FONT size=3>
      </FONT></FONT></TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#151;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>&#151;</FONT> </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=1>&#151;
    </FONT>&nbsp;</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#151;<FONT size=3>
      </FONT></FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1>09/15/06</FONT>
    </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>&#151;</FONT> </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%">&nbsp; </TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=1>&#151;</FONT> </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=1>25,000&nbsp;
      </FONT>&nbsp;</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=1>$</FONT> </TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>1,225,250</FONT>
    </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=1>Philip D. Ankeny</FONT> </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>05/19/03</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>&nbsp; 8,000</FONT> </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>2,000</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>35.61 </FONT>&nbsp;</TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>05/19/10</FONT> </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>11/15/04</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>10,000</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=1>490,100</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>&#151;&nbsp; </FONT>&nbsp;</TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>&#151;</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1>01/26/04</FONT>
    </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>&nbsp;
      9,000</FONT> </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>6,000</FONT> </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=1>$</FONT> </TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=1>21.36
    </FONT>&nbsp;</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1>01/26/11</FONT>
    </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1>03/21/06</FONT>
    </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>5,000</FONT> </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=1>$<FONT size=3>
      </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=1>245,050</FONT>
    </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=1>&#151;&nbsp;
    </FONT>&nbsp;</TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>&#151;</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" bgColor=#c0c0c0 colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>01/31/05</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>24,000</FONT> </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>36,000</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>29.37 </FONT>&nbsp;</TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>01/31/12</FONT> </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>09/15/06</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
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    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
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    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>11,000&nbsp; </FONT>&nbsp;</TD>
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      J. Keough</FONT> </TD>
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</TD>
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    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>14,000</FONT>
</TD>
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      </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=1>245,050</FONT>
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    <TD noWrap align=right width="1%"><FONT face=serif size=1>&#151;&nbsp;
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    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>&#151;</FONT> </TD></TR>
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    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>31,800</FONT> </TD>
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    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$</FONT> </TD>
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    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>5,000</FONT> </TD>
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    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=1>245,050</FONT> </TD>
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    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>&#151;&nbsp; </FONT>&nbsp;</TD>
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    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
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    <TD noWrap align=right width="2%"><FONT face=serif size=1>&nbsp;2,400</FONT> </TD>
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    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>3,600</FONT> </TD>
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    <TD noWrap align=center width="1%"></TD>
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    <TD noWrap align=right width="2%"><FONT face=serif size=1>3,333</FONT> </TD>
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    <TD noWrap align=left width="1%"></TD>
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      </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=1>163,367</FONT>
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    <TD noWrap align=right width="1%"><FONT face=serif size=1>&#151;&nbsp;
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    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>&#151;</FONT> </TD></TR>
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    <TD noWrap align=left width="69%" bgColor=#c0c0c0 colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#151;<FONT size=3>
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    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>&#151;<FONT size=3> </FONT></FONT></TD>
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    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>&#151; </FONT>&nbsp;</TD>
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    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#151;<FONT size=3>
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    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>09/15/06</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="2%" bgColor=#c0c0c0></TD>
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    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="3%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>8,000&nbsp; </FONT>&nbsp;</TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>392,080</FONT> </TD></TR>
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    <TD noWrap align=left width="69%" colSpan=2><FONT face=serif size=1>Paul
      A. Lopez</FONT> </TD>
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    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>34,800</FONT>
</TD>
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    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>52,200</FONT>
</TD>
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    <TD noWrap align=right width="1%"><FONT face=serif size=1>$</FONT> </TD>
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    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1>07/25/05</FONT>
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    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>6,000</FONT> </TD>
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    <TD noWrap align=right width="1%"><FONT face=serif size=1>$<FONT size=3>
      </FONT></FONT></TD>
    <TD noWrap align=right width="3%"><FONT face=serif size=1>294,060</FONT>
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    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=1>&#151;&nbsp;
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    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>&#151;</FONT> </TD></TR>
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    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>&nbsp;5,200</FONT> </TD>
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    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>7,800</FONT> </TD>
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    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
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    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>38.07 </FONT>&nbsp;</TD>
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    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
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    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>8,000&nbsp; </FONT>&nbsp;</TD>
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    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>392,080</FONT> </TD></TR>
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    <TD noWrap align=left width="69%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#151;<FONT size=3>
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    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#151;<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>&#151;<FONT size=3>
      </FONT></FONT></TD>
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    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=1>&#151;
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    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#151;<FONT size=3>
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    <TD noWrap align=center width="1%"><FONT face=serif size=1>09/15/06</FONT>
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    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=1>&#151;</FONT> </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=left width="1%"></TD>
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    <TD noWrap align=left width="1%">&nbsp;</TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=1>11,000&nbsp;
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    <TD noWrap align=right width="1%"><FONT face=serif size=1>$</FONT> </TD>
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    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#151;</FONT><FONT size=3> </FONT></TD>
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    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#151;</FONT><FONT size=3> </FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></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=1>&#151;&nbsp;</FONT><FONT size=3>&nbsp;</FONT></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#151;<FONT size=3>
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    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT size=1>09/17/07</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT size=1>&#151;</FONT>
</TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT size=1>&#151;</FONT>
</TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=1>12,000&nbsp;&nbsp;</FONT>&nbsp;</TD>
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</TD>
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  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" bgColor=#ffffff colSpan=2><FONT face=serif size=1>Charles W. Olson</FONT> </TD>
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    <TD noWrap align=right width="1%" bgColor=#ffffff></TD>
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    <TD noWrap align=left width="1%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff><FONT face=serif size=1>200</FONT> </TD>
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    <TD noWrap align=center width="1%" bgColor=#ffffff><FONT face=serif size=1>11/15/04</FONT> </TD>
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    <TD noWrap align=right width="2%" bgColor=#ffffff><FONT face=serif size=1>5,000</FONT> </TD>
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    <TD noWrap align=left width="1%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="1%" bgColor=#ffffff><FONT face=serif size=1>$<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#ffffff><FONT face=serif size=1>245,050</FONT> </TD>
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    <TD noWrap align=right width="1%" bgColor=#ffffff><FONT face=serif size=1>&#151;&nbsp; </FONT>&nbsp;</TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff></TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff><FONT face=serif size=1>&#151;</FONT> </TD></TR>
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    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>24,000</FONT> </TD>
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    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>36,000</FONT> </TD>
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    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>29.37 </FONT>&nbsp;</TD>
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    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>01/31/12</FONT> </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=1>03/21/06</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>5,000</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>$<FONT size=3> </FONT></FONT></TD>
    <TD noWrap align=right width="3%" bgColor=#c0c0c0><FONT face=serif size=1>245,050</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=1>&#151;&nbsp; </FONT>&nbsp;</TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=1>&#151;</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="69%" bgColor=#ffffff colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%" bgColor=#ffffff><FONT face=serif size=1>05/17/04</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff><FONT face=serif size=1>&nbsp; 3,000</FONT> </TD>
    <TD noWrap align=center width="1%" bgColor=#ffffff></TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff><FONT face=serif size=1>2,000</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff></TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff>&nbsp; </TD>
    <TD noWrap align=right width="1%" bgColor=#ffffff><FONT face=serif size=1>$</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#ffffff><FONT face=serif size=1>21.82 </FONT>&nbsp;</TD>
    <TD noWrap align=right width="1%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="1%" bgColor=#ffffff><FONT face=serif size=1>05/17/11</FONT> </TD>
    <TD noWrap align=center width="1%" bgColor=#ffffff></TD>
    <TD noWrap align=center width="1%" bgColor=#ffffff><FONT face=serif size=1>09/15/06</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff><FONT face=serif size=1>&#151;</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff></TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="1%" bgColor=#ffffff>&nbsp; </TD>
    <TD noWrap align=right width="3%" bgColor=#ffffff><FONT face=serif size=1>&#151;</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="1%" bgColor=#ffffff><FONT face=serif size=1>11,000&nbsp; </FONT>&nbsp;</TD>
    <TD noWrap align=right width="1%" bgColor=#ffffff></TD>
    <TD noWrap align=right width="1%" bgColor=#ffffff><FONT face=serif size=1>$</FONT> </TD>
    <TD noWrap align=right width="2%" bgColor=#ffffff><FONT face=serif size=1>539,110</FONT>
</TD></TR></TABLE>____________________<BR>&nbsp;<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></TD>
    <TD width="100%"><FONT face=serif size=2>Options generally become
      exercisable with respect to 20% of the shares on each of the first five
      anniversaries following the grant date so that the entire option is fully
      vested five years after the grant date.</FONT></TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD width="100%"></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>Mr. Barclay has received the
      following restricted stock grants:</FONT>
      <UL style="MARGIN-LEFT: 17px">
        <LI><FONT face=serif size=2>a grant on December 1, 2003, of which 15,000
        shares will vest on December 1, 2008;<BR>&nbsp;</FONT>
        <LI><FONT face=serif size=2>a grant on November 15, 2004, of which
        25,000 shares will vest on November 15, 2009; and<BR>&nbsp;</FONT>
        <LI><FONT face=serif size=2>a grant on March 21, 2006, of which 2,500
        shares will vest on each of March 21, 2008 and 2009.</FONT> </LI></UL>
      <P align=justify><FONT face=serif size=2>Mr. Ankeny has received the
      following restricted stock grants:</FONT></P>
      <UL style="MARGIN-LEFT: 17px">
        <LI><FONT face=serif size=2>a grant on November 15, 2004, of which
        10,000 shares will vest on November 15, 2009; and<BR>&nbsp;</FONT>
        <LI><FONT face=serif size=2>a grant on March 21, 2006, of which 2,500
        shares will vest on each of March 21, 2008 and 2009.</FONT> </LI></UL>
      <P align=justify><FONT face=serif size=2>Mr. Keough has received the
      following restricted stock grants:</FONT></P>
      <UL style="MARGIN-LEFT: 17px">
        <LI><FONT face=serif size=2>a grant on January 26, 2004, of which 5,000
        shares will vest on January 26, 2009;<BR>&nbsp;</FONT>
        <LI><FONT face=serif size=2>a grant on November 15, 2004, of which 5,000
        shares will vest on November 15, 2009; and<BR>&nbsp;</FONT>
        <LI><FONT face=serif size=2>a grant on March 21, 2006, of which 1,667
        shares will vest on each of March 21, 2008 and 2009.</FONT>
  </LI></UL></TD></TR></TABLE>
<P align=center><FONT face=serif size=2>26</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE><BR>
<P align=justify><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mr. Lopez
has received the following restricted stock grants:</FONT></P>
<UL style="PADDING-LEFT: 8pt">
  <LI><FONT face=serif size=2>a grant on July 25, 2005, of which 2,000 shares
  will vest on each of July 25, 2008, 2009 and 2010.</FONT> </LI></UL>
<P align=justify><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mr. Olson
has received the following restricted stock grants:</FONT></P>
<UL style="PADDING-LEFT: 8pt">
  <LI><FONT face=serif size=2>a grant on November 15, 2004, of which 5,000
  shares will vest on November 15, 2009; and<BR>&nbsp;</FONT>
  <LI><FONT face=serif size=2>a grant on March 21, 2006, of which 2,500 shares
  will vest on each of March 21, 2008 and 2009.</FONT></LI></UL>
<TABLE style="TEXT-ALIGN: justify" cellSpacing=0 cellPadding=0 border=0>

  <TR>
    <TD vAlign=top noWrap><FONT face=serif size=2>(3)</FONT></TD>
    <TD vAlign=top noWrap></TD>
    <TD width="100%" colSpan=2><FONT face=serif size=2>On September 15, 2006,
      each of the named executive officers was issued a performance share award
      enabling each such officer to receive the specified number of shares of
      our common stock to the extent predefined performance objectives were
      achieved during fiscal 2007. These awards were issued in connection with
      our fiscal 2007 officer performance share program and were unearned as of
      the end of fiscal 2007. As discussed in Compensation Discussion and
      Analysis above, all of the performance shares awarded to our named
      executive officers under that program vested on November 12, 2007.
      Additionally, on March 21, 2006, Mr. Lopez was issued performance share
      awards enabling him to receive 10,000 shares of our common stock to the
      extent that predefined performance objectives are achieved during the
      specified performance period, which ends on September 30, 2010. Since
      issuance of that award, 200 shares have been forfeited, 1,800 shares of
      that award vested on November 13, 2006, and 2,000 shares of that award
      vested on November 12, 2007. On September 17, 2007 Mr. Lopez was issued
      performance share awards enabling him to receive 12,000 shares of our
      common stock to the extent that predefined performance objectives are
      achieved during the performance period, which ends on September 17,
      2012.</FONT></TD></TR>
  <TR>
    <TD noWrap>&nbsp;</TD>
    <TD noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD width="100%" colSpan=2>&nbsp; &nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap><FONT face=serif size=2>(4)</FONT></TD>
    <TD vAlign=top noWrap></TD>
    <TD width="100%" colSpan=2><FONT face=serif size=2>Based on a market value
      of $49.01, the closing price of the Company&#146;s common stock on September
      28, 2007, the last trading day in the Company&#146;s fiscal year
  2007.</FONT></TD></TR></TABLE>
<P align=center><B><FONT face=serif size=2>2007 OPTION EXERCISES AND STOCK
VESTED</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The table
below includes information related to options exercised by each of the named
executive officers during fiscal 2007. It also includes information related to
their restricted stock awards that have vested during fiscal 2007. The value
realized for such options and restricted stock awards is also provided. For
options, the value realized on exercise is equal to the difference between the
market price of the underlying shares at exercise and the exercise price of the
options. For stock awards, the value realized on vesting is equal to the market
price of the underlying shares at vesting.</FONT></P>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="75%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" colSpan=2>&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>Option
      </FONT></B><B><FONT face=serif color=#231f20 size=1>A</FONT></B><B><FONT face=serif size=1>wards</FONT></B>&nbsp; </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=4><FONT size=+0><B><FONT face=serif size=1>Stoc</FONT></B><B><FONT face=serif color=#231f20 size=1>k Awar</FONT></B><B><FONT face=serif size=1>ds</FONT></B>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>&nbsp;Number of</FONT></B>&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="3%" colSpan=2><FONT size=+0><B><FONT face=serif size=1>&nbsp;Number of</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>Value</FONT></B>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Shares</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>Value</FONT></B>&nbsp; </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="3%" colSpan=2><FONT size=+0><B><FONT face=serif size=1>Shares</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>&nbsp;Realized</FONT></B>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%"><FONT size=1><B>&nbsp;Acquired
      on</B><FONT size=3>&nbsp;</FONT><B> </B></FONT></TD>
    <TD noWrap align=center width="1%"><FONT size=+0>&nbsp;</FONT></TD>
    <TD noWrap align=center width="1%"><FONT size=+0><B><FONT size=1>Realized
      on</FONT></B>&nbsp; </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="3%" colSpan=2><FONT size=+0><B><FONT face=serif size=1>Acquired</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>on</FONT></B>&nbsp; </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>Exercise</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>Exercise</FONT></B>&nbsp; </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="3%" colSpan=2><FONT size=+0><B><FONT face=serif size=1>&nbsp;on Vesting</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>Vesting</FONT></B>&nbsp; </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="89%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>(#)</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>($)</FONT></B>&nbsp;
      </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="3%" colSpan=2><FONT size=+0><B><FONT face=serif size=1>(#)</FONT></B> &nbsp;
      </FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT size=+0><B><FONT face=serif size=1>($)</FONT></B>&nbsp;
      </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Bruce J Barclay</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;<FONT size=3>&nbsp;&nbsp; </FONT></FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=2>2,500</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=2>$&nbsp;
      <FONT face=serif>92,875</FONT></FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" colSpan=2><FONT face=serif size=2>Philip
      D. Ankeny</FONT> </TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>&#151;</FONT>&nbsp;&nbsp; </TD>
    <TD noWrap align=left width="1%">&nbsp;</TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>2,500</FONT> </TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT size=2>$&nbsp; <FONT face=serif>92,875</FONT></FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Steven J. Keough</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>31,600 </FONT>&nbsp;</TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$588,156</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=2>1,667</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=2>$&nbsp;
      <FONT face=serif>61,929</FONT></FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" colSpan=2><FONT face=serif size=2>Paul
      A. Lopez</FONT> </TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>20,000
    </FONT>&nbsp;</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>$206,032</FONT>
    </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="2%"><FONT face=serif size=2>&nbsp;&nbsp;&nbsp; 22,000</FONT> </TD>
    <TD noWrap align=left width="1%"><FONT face=serif size=2>&nbsp;(1)
    </FONT>&nbsp;</TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT size=2>$</FONT><FONT face=serif size=2>972,720</FONT> </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="90%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Charles W. Olson</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&#151; </FONT>&nbsp;</TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>&#151;</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="2%" bgColor=#c0c0c0><FONT face=serif size=2>2,500</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT size=2>$&nbsp;
      <FONT face=serif>92,875</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>(1)</FONT></TD>
    <TD vAlign=top noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD vAlign=top width="100%"><FONT face=serif size=2>The stock awards shown
      for Mr. Lopez includes performance shares awarded to Mr. Lopez in March
      2006 that vested during fiscal 2007 upon satisfaction of the performance
      objectives set forth in such award.</FONT></TD></TR></TABLE>
<P align=center><FONT face=serif size=2>27</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify><B><FONT face=serif size=2>Potential Payouts Upon Termination
or Change of Control</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Company entered into Change of Control Agreements with Bruce J Barclay,
President and Chief Executive Officer, and Philip D. Ankeny, Senior Vice
President and Chief Financial Officer, in April 2006 and with Paul A. Lopez,
Vice President and President, Ophthalmology Division, in November 2006. All of
the agreements were approved by the Organization and Compensation Committee of
the Board of Directors.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
agreements will be in effect for a term of three years unless a &#147;change of
control&#148; (as such term is defined in the agreements) occurs within such
three-year period, in which case the agreements will terminate twelve months
following the occurrence of such a change of control. Each agreement provides
that the Company may terminate the employment of the executive, for any reason
or no reason, at any time prior to the earlier of a change of control or the
third anniversary of the agreement without obligation for severance
benefits.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>If within
twelve months following the occurrence of a change of control, the executive&#146;s
employment with the Company is terminated either by the Company without cause or
by the executive for good reason, then the executive is entitled to receive a
severance payment equal to three times (in the case of Mr. Barclay), two times
(in the case of Mr. Ankeny) or one times (in the case of Mr. Lopez) the average
cash compensation paid to the executive during the three most recent taxable
years and to continue coverage under life, health, dental and disability benefit
plans for up to eighteen months. In addition, any unvested portions of the
executive&#146;s outstanding options or stock appreciation rights will immediately
vest and become exercisable, any remaining forfeiture provisions on his
outstanding restricted stock awards will immediately lapse, and a portion of the
shares subject to his outstanding performance awards (excluding those awards not
subject to the achievement of corporate or business unit objectives) will
immediately vest and become payable. If any change of control benefit payable to
the executive would constitute an excess parachute payment under Section 280G of
the Internal Revenue Code, the executive will receive a tax gross-up payment
sufficient to pay the initial excise tax applicable to such excess parachute
payment.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The table
below reflects estimated benefits for our named executive officers under
existing change of control agreements, assuming that the change of control
occurred on September 30, 2007.</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD noWrap align=left width="86%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="5%" colSpan=5><FONT face=serif size=1><STRONG>&nbsp;</STRONG><FONT size=3>&nbsp;</FONT><STRONG>Accelerated Vesting</STRONG><STRONG>
      </STRONG></FONT></TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><STRONG>Other</STRONG></FONT> </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><STRONG>Estimated</STRONG></FONT> </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="86%" colSpan=2>&nbsp; </TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><STRONG>Severance</STRONG></FONT>&nbsp;</TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><STRONG>Performance</STRONG></FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><STRONG>Stock</STRONG></FONT>&nbsp;</TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><STRONG>Stock</STRONG></FONT>&nbsp;</TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><STRONG>Benefits</STRONG></FONT> </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><STRONG>Tax Gross-</STRONG></FONT> </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"></TD>
    <TD noWrap align=center width="1%">&nbsp; </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="85%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT face=serif color=#231f20 size=1><FONT color=#000000 size=3>&nbsp;</FONT><STRONG>A</STRONG></FONT><FONT face=serif size=1><STRONG>mounts (1)</STRONG></FONT>&nbsp; </TD>
    <TD noWrap align=center width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><STRONG>Shares (2)</STRONG></FONT>&nbsp;</TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><STRONG>Options (3)</STRONG></FONT>&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><FONT color=#000000 size=3>&nbsp;</FONT><STRONG>A</STRONG></FONT><FONT face=serif size=1><STRONG>wards (4)</STRONG></FONT>&nbsp;</TD>
    <TD noWrap align=center width="1%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><STRONG>(5)</STRONG></FONT> </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="1%"><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><STRONG>Up</STRONG><FONT size=3>
      </FONT><B>(6)</B></FONT> </TD>
    <TD noWrap align=center width="1%">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" noWrap align=center width="2%" colSpan=2><FONT face=serif size=1><FONT size=3>&nbsp;</FONT><STRONG>Total</STRONG></FONT>&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="86%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Bruce J Barclay</FONT> </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$1,270,040</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT style="BACKGROUND-COLOR: #c0c0c0" size=3> </FONT>0</FONT></TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$1,444,000</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$2,205,450</FONT> </TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$12,198</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>$1,125,000</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=2><FONT style="BACKGROUND-COLOR: #c0c0c0" size=3>&nbsp;</FONT><STRONG>$</STRONG></FONT></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><B><FONT size=+0><FONT face=serif size=2>6,056,688</FONT> </FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="86%" colSpan=2><FONT face=serif size=2>Philip
      D. Ankeny</FONT> </TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=2>$&nbsp;&nbsp;
      495,396</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=3> </FONT>0</FONT></TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=2>$&nbsp;&nbsp;
      899,740</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=2>$735,150</FONT>
    </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=2>$12,279</FONT>
    </TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=2>$&nbsp;&nbsp;
      490,000</FONT> </TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"><FONT size=2><FONT size=3>&nbsp;</FONT><STRONG>$</STRONG></FONT></TD>
    <TD noWrap align=right width="1%"><B><FONT size=+0><FONT face=serif size=2>2,632,565</FONT> </FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="86%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Steven J. Keough</FONT> </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>n/a</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>n/a</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>n/a</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>n/a</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>n/a</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>n/a</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp;</TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=2><FONT style="BACKGROUND-COLOR: #c0c0c0" size=3>&nbsp;</FONT><STRONG>$</STRONG></FONT></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><B><FONT size=+0><FONT face=serif size=2>0</FONT> </FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="86%" colSpan=2><FONT face=serif size=2>Paul
      A. Lopez</FONT> </TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=2>$&nbsp;&nbsp;
      289,299</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=right width="1%"><FONT face=serif size=2>$&nbsp;&nbsp;&nbsp; 279,357</FONT> </TD>
    <TD noWrap align=left width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=2>$&nbsp;&nbsp;
      656,400</FONT> </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=2>$294,060</FONT>
    </TD>
    <TD noWrap align=right width="1%"></TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=2>$&nbsp;
      7,823</FONT> </TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=center width="1%"><FONT face=serif size=2>$&nbsp;&nbsp;&nbsp;310,000</FONT> </TD>
    <TD noWrap align=left width="1%">&nbsp; </TD>
    <TD noWrap align=left width="1%"><FONT size=2><FONT size=3>&nbsp;</FONT><STRONG>$</STRONG></FONT></TD>
    <TD noWrap align=right width="1%"><B><FONT size=+0><FONT face=serif size=2>1,836,939</FONT> </FONT></B></TD></TR>
  <TR vAlign=bottom>
    <TD noWrap align=left width="86%" bgColor=#c0c0c0 colSpan=2><FONT face=serif size=2>Charles W. Olson</FONT> </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>n/a</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>n/a</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>n/a</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>n/a</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0></TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>n/a</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=center width="1%" bgColor=#c0c0c0><FONT face=serif size=2>n/a</FONT> </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0>&nbsp; </TD>
    <TD noWrap align=left width="1%" bgColor=#c0c0c0><FONT size=2><FONT style="BACKGROUND-COLOR: #c0c0c0" size=3>&nbsp;</FONT><STRONG>$</STRONG></FONT></TD>
    <TD noWrap align=right width="1%" bgColor=#c0c0c0><B><FONT size=+0><FONT face=serif size=2>0</FONT>
</FONT></B></TD></TR></TABLE>____________________<BR>&nbsp;
<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></TD>
    <TD width="100%"><FONT face=serif size=2>This amount is equal to three
      times (in the case of Mr. Barclay), two times (in the case of Mr. Ankeny)
      or one times (in the case of Mr. Lopez) the average cash compensation paid
      to the executive during the three most recent taxable years. The average
      cash compensation means the executive&#146;s annual base salary and cash
      bonuses.</FONT></TD></TR>
  <TR>
    <TD noWrap>&nbsp;</TD>
    <TD noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD width="100%">&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>This amount represents the value
      of outstanding and unearned performance share awards, excluding those
      awards not subject to the achievement of corporate or business unit
      objectives.</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>This amount represents the market
      gain (intrinsic value) of unvested options as of September 30, 2007 at the
      closing price on that date of $49.01.</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>This amount represents the value
      of unvested restricted stock awards as of September 30, 2007 at the
      closing price on that date of $49.01.</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>This amount represents the
      estimated value of the continuation of coverage under life, health, dental
      and disability benefit plans for up to eighteen months.</FONT></TD></TR>
  <TR>
    <TD width="100%" colSpan=3>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap><FONT face=serif size=2>(6)</FONT></TD>
    <TD vAlign=top noWrap></TD>
    <TD width="100%"><FONT face=serif size=2>This amount represents the
      estimated 280(g) tax gross-up payment.</FONT></TD></TR></TABLE>
<P align=center><FONT face=serif size=2>28</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<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, directors and persons who own more than 10% of the Company&#146;s common
stock to file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of common stock and other equity
securities of the Company. Officers, directors and greater than 10% shareholders
(&#147;Insiders&#148;) are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>To the
Company&#146;s knowledge, based on a review of the copies of such reports furnished
to the Company,&nbsp;for the fiscal year ended September 30, 2007, all Section
16(a) filing requirements applicable to Insiders were complied with, except that
the Form 5 filed by Kendrick B. Melrose, reporting a gift of 17 shares on
December 22, 2006, was not filed on a timely basis. </FONT></P>
<P align=center><B><FONT face=serif size=2>AUDIT COMMITTEE REPORT</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The Board
of Directors maintains an Audit Committee comprised of three of the Company&#146;s
outside directors. The Board of Directors and the Audit Committee believe that
the Audit Committee&#146;s current member composition satisfies the rules of The
Nasdaq Stock Market that governs audit committee composition, including the
requirement that audit committee members all be &#147;independent directors&#148; as that
term is defined by the rules of The Nasdaq Stock Market. Additionally, the Board
of Directors has determined that Mr. Gerald B. Fischer qualifies as an &#147;audit
committee financial expert&#148; under federal securities laws. If elected at the
Annual Meeting, Mr. Buhrmaster is expected to be appointed to the Audit
Committee. Accordingly, and as a result of Mr. Koch&#146;s retirement from the Board,
the Audit Committee will consist of Mr. Fischer, Dr. Keller, and Mr.
Buhrmaster.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>In
accordance with the written charter adopted by the Board of Directors, the Audit
Committee assists the Board of Directors with fulfilling its oversight
responsibility regarding the quality and integrity of the accounting, auditing
and financial reporting practices of the Company. In discharging its oversight
responsibilities regarding the audit process, the Audit Committee:</FONT></P>
<TABLE style="TEXT-ALIGN: justify" 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 vAlign=top noWrap></TD>
    <TD vAlign=top width="100%"><FONT face=serif size=2>reviewed and discussed
      the audited financial statements with management;</FONT> </TD></TR>
  <TR>
    <TD noWrap></TD>
    <TD noWrap>&nbsp;</TD>
    <TD noWrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD vAlign=top width="100%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top noWrap><FONT face=serif size=2>(2)</FONT></TD>
    <TD vAlign=top noWrap></TD>
    <TD vAlign=top width="100%"><FONT face=serif size=2>discussed with the
      independent auditors the matters required to be discussed by Statement on
      Auditing Standards No. 61; and</FONT> </TD></TR>
  <TR>
    <TD noWrap></TD>
    <TD vAlign=top 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 vAlign=top noWrap></TD>
    <TD vAlign=top width="100%"><FONT face=serif size=2>reviewed the written
      disclosures and the letter from the independent auditors required by the
      Independence Standards Board&#146;s Standard No. 1, and discussed with the
      independent auditors any relationships that may impact their objectivity
      and independence.</FONT></TD></TR></TABLE>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Based
upon the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company&#146;s Annual Report on Form 10-K for the fiscal year ended
September 30, 2007, as filed with the Securities and Exchange
Commission.</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR>
    <TD width="50%"></TD>
    <TD width="50%"><FONT size=2><B>Members of the Audit
      Committee:</B></FONT><FONT size=3> </FONT></TD></TR>
  <TR>
    <TD width="50%"></TD>
    <TD width="50%"><FONT size=2>Gerald B. Fischer, Chairman&nbsp;</FONT><FONT size=3> </FONT></TD></TR>
  <TR>
    <TD width="50%"></TD>
    <TD width="50%"><FONT size=2>Kenneth H. Keller, Ph.D.&nbsp;</FONT><FONT size=3> </FONT></TD></TR>
  <TR>
    <TD width="50%"></TD>
    <TD width="50%"><FONT size=2>David A. Koch</FONT><FONT size=3>
  </FONT></TD></TR></TABLE>
<P align=center><FONT face=serif size=2>29</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=center><B><FONT face=serif size=2>INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Deloitte
&amp; Touche LLP has acted as the Company&#146;s independent auditors since at least
fiscal 2002, and it is expected that at an Audit Committee meeting to be held
prior to the Annual Meeting, such firm will be formally selected by the Audit
Committee to serve as the Company&#146;s independent auditors for the current fiscal
year ending September 30, 2008. Representatives of Deloitte &amp; Touche LLP are
expected to be present at the Annual Meeting, will be given an opportunity to
make a statement regarding financial and accounting matters of the Company if
they so desire, and will be available to respond to appropriate questions from
the Company&#146;s shareholders.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face=serif size=2>Audit
Fees.</FONT></B><FONT face=serif size=2> The aggregate fees billed by Deloitte
&amp; Touche LLP for professional services rendered in connection with the audit
of the Company&#146;s annual financial statements and reviews of the financial
statements included in the Company&#146;s Forms 10-Q for fiscal years 2007 and 2006
were $398,320, and $257,552, respectively.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face=serif size=2>Audit-Related Fees.</FONT></B><FONT face=serif size=2> The aggregate fees
billed by Deloitte &amp; Touche LLP for audit-related services rendered to the
Company during fiscal 2007 and 2006 were $130,930 and $17,840, respectively. The
fees in fiscal 2007 were associated with due diligence and accounting
consultations related to the Company&#146;s acquisitions of Brookwood
Pharmaceuticals, Inc. and BioFX Laboratories, Inc., as well as consultations
regarding the Company&#146;s collaborative research and license agreement with Merck
&amp; Co., Inc. The audit-related fees in fiscal 2006 were related to accounting
consultations only.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face=serif size=2>Tax
Fees.</FONT></B><FONT face=serif size=2> Deloitte &amp; Touche LLP did not bill
for tax-related services (tax compliance, tax planning, and tax advice) in
fiscal 2007 or 2006. </FONT></P>
<P align=justify><FONT face=serif size=2><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><B>All Other Fees.</B></FONT><FONT face=serif size=2> Deloitte &amp; Touche LLP did not bill any other fees in
fiscal 2007 or 2006.</FONT></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
Company&#146;s Audit Committee pre-approved all of the services described in each of
the items above. In addition, the Audit Committee considered whether provision
of the above non-audit services was compatible with maintaining Deloitte &amp;
Touche LLP&#146;s independence and determined that such services did not adversely
affect Deloitte &amp; Touche LLP&#146;s independence. </FONT></P>
<P align=justify><B><FONT face=serif size=2>Pre-Approval Policies and
Procedures</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Pursuant
to its written charter, the Audit Committee is required to pre-approve the audit
and non-audit services performed by the Company&#146;s independent auditors in order
to ensure that the provision of such services does not impair the auditor&#146;s
independence. A pre-approval policy was approved by the Audit Committee on
October 25, 2004. Unless a particular service has received general pre-approval
by the Audit Committee, each service provided must be specifically pre-approved.
Any proposed services exceeding pre-approved costs levels will require specific
pre-approval by the Audit Committee. In addition, the Audit Committee may
delegate pre-approval authority to the Chairman of the Audit Committee, who will
then report any pre-approval decisions to the Audit Committee at its next
scheduled meeting. </FONT></P>
<P align=center><B><FONT face=serif size=2>OTHER BUSINESS</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Neither
management nor the Board knows of any matters to be presented at the Annual
Meeting other than the matters described above. If any other matter properly
comes before the Annual Meeting, the appointees named in the Proxies will vote
the Proxies in accordance with their best judgment.</FONT></P>
<P align=center><B><FONT face=serif size=2>SHAREHOLDER PROPOSALS</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Any
appropriate proposal submitted by a shareholder of the Company and intended to
be presented at the 2009 annual meeting of shareholders must be received by the
Company by August 16, 2008, to be considered for inclusion in the Company&#146;s
Proxy Statement and related Proxy for the 2009 annual meeting.</FONT></P>
<P align=center><FONT face=serif size=2>30</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>Also, if
a shareholder proposal intended to be presented at the 2009 annual meeting, but
not included in the Company&#146;s Proxy Statement and Proxy, is received by the
Company after October 30, 2008, then the proxies named in the Company&#146;s Proxy
for the 2009 annual meeting will have discretionary authority to vote shares
represented by such Proxies on the shareholder proposal, if presented at the
meeting, without including information about the proposal in the Company&#146;s proxy
materials.</FONT></P>
<P align=center><B><FONT face=serif size=2>ANNUAL REPORT</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>A copy of
the Company&#146;s Annual Report to Shareholders, including its Annual Report on Form
10-K containing financial statements for the fiscal year ended September 30,
2007, accompanies this Notice of Meeting and Proxy Statement. No part of the
Annual Report, including any portion of the Annual Report on Form 10-K, is
incorporated herein and no part thereof is to be considered proxy soliciting
material.</FONT></P>
<P align=center><B><FONT face=serif size=2>EXHIBITS TO FORM 10-K</FONT></B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face=serif size=2>The
Company will furnish to each person whose Proxy is being solicited, upon written
request of any such person, a copy of any exhibit described in the exhibit list
accompanying the Form 10-K, upon the payment, in advance, of reasonable fees
related to the Company&#146;s furnishing such exhibit(s). Requests for copies of such
exhibit(s) should be directed to Mr. Philip D. Ankeny, Chief Financial Officer,
at the Company&#146;s principal address.</FONT></B></P>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR>
    <TD width="50%"></TD>
    <TD width="50%"><FONT size=2>BY ORDER OF THE BOARD OF
      DIRECTORS</FONT><FONT size=3>&nbsp;</FONT></TD></TR>
  <TR>
    <TD width="50%"></TD>
    <TD width="50%">&nbsp;</TD></TR>
  <TR>
    <TD width="50%"></TD>
    <TD width="50%"><IMG src="logox1x2.jpg"><FONT size=2><BR>Kendrick B.
      Melrose&nbsp;</FONT><FONT size=3>&nbsp;</FONT></TD></TR>
  <TR>
    <TD width="50%"></TD>
    <TD width="50%"><FONT size=2>Chairman of the Board</FONT><FONT size=3>&nbsp;</FONT></TD></TR></TABLE>
<P align=justify><FONT face=serif size=2>Dated: December 20, 2007 <BR>Eden
Prairie, Minnesota</FONT></P>
<P align=center><FONT face=serif size=2>31</FONT></P>
<HR align=center width="100%" noShade SIZE=2>
<PAGE><BR>
<DIV style="PADDING-LEFT: 30pt; FLOAT: left; WIDTH: 45%; POSITION: relative">
<P align=justify><B><I><FONT face=sans-serif size=2><FONT face=serif><BR>AMERICAN STOCK TRANSFER <BR>6201 15TH
AVENUE<BR></FONT></FONT></I></B><B><I><FONT face=sans-serif size=2><FONT face=serif>BROOKLYN, NY 11219</FONT></FONT></I></B></P></DIV>
<DIV style="PADDING-RIGHT: 30pt; FLOAT: right; WIDTH: 45%; POSITION: relative">
<P align=justify><B><FONT face=sans-serif size=1><FONT face=serif>VOTE BY
INTERNET - <B><U><FONT face=serif size=1>www.proxyvote.com</FONT></U></B><U><FONT face=sans-serif size=1><BR></FONT></U></FONT></FONT></B><FONT face=sans-serif size=1><FONT face=serif>Use the Internet to transmit your voting instructions and for
electronic delivery of information up until 11:59 P.M. Eastern Time the day
before the cut-off date or meeting date. Have your proxy card in hand when you
access the web site and follow the instructions to obtain your records and to
create an electronic voting instruction form.</FONT></FONT></P>
<P align=justify><B><FONT face=sans-serif size=1><FONT face=serif>ELECTRONIC
DELIVERY OF FUTURE SHAREHOLDER <BR>COMMUNICATIONS<BR></FONT></FONT></B><FONT face=sans-serif size=1><FONT face=serif>If you would like to reduce the costs
incurred by SurModics, Inc. in mailing proxy materials, you can consent to
receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery,
please follow the instructions above to vote using the Internet and, when
prompted, indicate that you agree to receive or access shareholder
communications electronically in future years.</FONT></FONT></P>
<P align=justify><B><FONT face=sans-serif size=1><FONT face=serif>VOTE BY PHONE
- 1-800-690-6903<BR></FONT></FONT></B><FONT face=sans-serif size=1><FONT face=serif>Use any touch-tone telephone to transmit your voting instructions up
until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date.
Have your proxy card in hand when you call and then follow the
instructions.</FONT></FONT></P>
<P align=justify><B><FONT face=sans-serif size=1><FONT face=serif>VOTE BY
MAIL<BR></FONT></FONT></B><FONT face=sans-serif size=1><FONT face=serif>Mark,
sign and date your proxy card and return it in the postage-paid envelope we have
provided or return it to SurModics, Inc., c/o Broadridge, 51 Mercedes Way,
Edgewood, NY
11717.</FONT></FONT></P></DIV><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD style="BORDER-BOTTOM: #000000 1.2pt dashed" align=left width="54%"><FONT face=sans-serif size=1><FONT face=serif>TO VOTE, MARK
      BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:</FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1.2pt dashed" align=left width="14%"><FONT face=sans-serif size=1><FONT face=serif>SRMDC1</FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1.2pt dashed" align=right width="31%"><FONT face=sans-serif size=1><FONT face=serif>KEEP THIS
      PORTION FOR YOUR RECORDS</FONT></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="68%" colSpan=2><FONT face=serif></FONT></TD>
    <TD align=right width="31%"><FONT face=sans-serif size=1><FONT face=serif>DETACH AND RETURN THIS PORTION ONLY</FONT></FONT></TD></TR>
  <TR>
    <TD align=center width="99%" colSpan=3><B><FONT face=serif size=1>THIS
      PROXY CARD IS VALID ONLY WHEN SIGNED AND
DATED.</FONT></B></TD></TR></TABLE><BR>
<DIV style="BORDER-RIGHT: black 3px solid; PADDING-RIGHT: 5px; BORDER-TOP: black 3px solid; PADDING-LEFT: 5px; PADDING-BOTTOM: 5px; BORDER-LEFT: black 3px solid; WIDTH: 100%; PADDING-TOP: 5px; BORDER-BOTTOM: black 3px solid" align=left>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD align=left width="1%"><FONT face=serif></FONT></TD>
    <TD align=left width="44%" colSpan=6>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT size=1>SURMODICS, INC.&nbsp;</FONT></B>&nbsp;<FONT face=serif>&nbsp;</FONT>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</TD>
    <TD align=left width="5%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="6%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="7%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="2%"></TD>
    <TD align=left width="20%" colSpan=2><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="4%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="5%" colSpan=2><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="4%" colSpan=2></TD>
    <TD align=left width="2%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="1%"></TD>
    <TD align=left width="44%" colSpan=6><FONT face=serif><FONT face=serif size=1><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><B>The
      Board of Directors
      recommends&nbsp;that<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      you vote <B>FOR each proposal below.</B></B></FONT></FONT></TD>
    <TD align=left width="5%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="6%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="7%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="2%"></TD>
    <TD align=left width="20%" colSpan=2><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="4%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="3%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD style="BORDER-TOP: #000000 2pt solid" align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-RIGHT: #000000 2pt solid; BORDER-TOP: #000000 2pt solid" align=left width="2%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="2%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="1%"></TD>
    <TD align=left width="44%" colSpan=6><FONT face=serif>&nbsp;</FONT>
    &nbsp;</TD>
    <TD vAlign=top align=center width="5%"><B><FONT face=sans-serif size=1><FONT face=serif>For</FONT></FONT></B></TD>
    <TD vAlign=top align=center width="6%"><B><FONT face=sans-serif size=1><FONT face=serif>Withhold</FONT></FONT></B></TD>
    <TD vAlign=top align=center width="7%"><B><FONT face=sans-serif size=1><FONT face=serif>For All</FONT></FONT></B></TD>
    <TD vAlign=top align=center width="2%">&nbsp;</TD>
    <TD vAlign=top align=left width="24%" colSpan=3 rowSpan=3>
      <P align=justify><FONT face=sans-serif size=1><FONT face=serif>To withhold
      authority to vote for any&nbsp;individual nominee(s), mark &#147;For All
      Except&#148;&nbsp; and write the number(s) of the nominee(s)&nbsp;on the line
      below.&nbsp;</FONT></FONT></P></TD>
    <TD align=left width="5%" colSpan=2><FONT face=serif>&nbsp;</FONT></TD>
    <TD style="BORDER-RIGHT: #ffffff 2pt solid" align=left width="2%">&nbsp;&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="2%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="1%"></TD>
    <TD vAlign=top align=left width="44%" colSpan=6><FONT face=serif><FONT size=1><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><B>Vote
      on Directors</B></FONT></FONT> <FONT face=serif>&nbsp;</FONT></TD>
    <TD vAlign=top align=center width="5%"><FONT face=serif><B><FONT face=serif size=1>All</FONT></B></FONT></TD>
    <TD vAlign=top align=center width="6%"><FONT face=serif><B><FONT face=serif size=1>All</FONT></B></FONT></TD>
    <TD vAlign=top align=center width="7%"><FONT face=serif><B><FONT size=1>Except</FONT></B></FONT></TD>
    <TD vAlign=top align=center width="2%">&nbsp;</TD>
    <TD align=left width="5%" colSpan=2><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="4%" colSpan=2></TD>
    <TD align=left width="2%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="1%"></TD>
    <TD vAlign=top align=left width="44%" colSpan=6><FONT face=serif><FONT size=1><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Elect Class III directors: 1 &#150; Kenneth H. Keller, Ph. D.<FONT size=3>&nbsp;</FONT></FONT></FONT><FONT face=serif>&nbsp;</FONT></TD>
    <TD vAlign=top align=center width="5%"><FONT face=serif></FONT></TD>
    <TD vAlign=top align=center width="6%"><FONT face=serif></FONT></TD>
    <TD vAlign=top align=center width="7%"><B><FONT face=sans-serif size=1><FONT face=serif>&nbsp;</FONT></FONT></B></TD>
    <TD vAlign=top align=center width="2%"></TD>
    <TD align=left width="5%" colSpan=2><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="4%" colSpan=2></TD>
    <TD align=left width="2%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="1%"></TD>
    <TD vAlign=top align=left width="44%" colSpan=6><FONT face=serif><FONT face=serif size=1><FONT size=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=1>2 &#150;&nbsp;Robert C. Buhrmaster</FONT><FONT size=3>&nbsp;</FONT></FONT></FONT><FONT face=serif>&nbsp;</FONT></TD>
    <TD vAlign=bottom align=center width="5%"><FONT face=serif>&nbsp;</FONT><FONT face=Wingdings>o</FONT></TD>
    <TD vAlign=bottom align=center width="6%"><FONT face=serif><FONT face=Wingdings>o</FONT></FONT></TD>
    <TD vAlign=bottom align=center width="7%"><FONT face=serif><FONT face=Wingdings>o</FONT></FONT></TD>
    <TD align=center width="2%"></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="20%" colSpan=2><FONT face=sans-serif size=1><FONT face=serif>&nbsp;</FONT></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="4%"><FONT face=serif>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="5%" colSpan=2><FONT face=serif>&nbsp; </FONT></TD>
    <TD align=left width="4%" colSpan=2></TD>
    <TD align=left width="2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD></TR>
  <TR>
    <TD align=left width="1%"></TD>
    <TD vAlign=top align=left width="44%" colSpan=6><FONT size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD vAlign=bottom align=center width="5%"></TD>
    <TD vAlign=bottom align=center width="6%"></TD>
    <TD vAlign=bottom align=center width="7%"></TD>
    <TD align=center width="2%"></TD>
    <TD align=left width="20%" colSpan=2></TD>
    <TD align=left width="4%"></TD>
    <TD align=left width="5%" colSpan=2></TD>
    <TD align=left width="4%" colSpan=2></TD>
    <TD align=left width="2%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="1%"></TD>
    <TD align=left width="44%" colSpan=6><FONT face=serif><B><FONT face=serif size=1>Vote on Proposal</FONT></B>&nbsp;</FONT> <FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="5%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="6%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="7%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="2%"></TD>
    <TD align=left width="20%" colSpan=2><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=center width="4%"><B><FONT size=1>For</FONT></B></TD>
    <TD align=center width="5%" colSpan=2><B><FONT size=1>Against&nbsp;&nbsp;
      </FONT></B></TD>
    <TD align=center width="4%" colSpan=2><B><FONT size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Abstain</FONT></B></TD>
    <TD align=left width="2%"></TD></TR>
  <TR>
    <TD width="1%"></TD>
    <TD width="93%" colSpan=15><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=center width="4%" colSpan=2>&nbsp;</TD>
    <TD width="2%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="1%"></TD>
    <TD align=left width="44%" colSpan=6><FONT face=serif><FONT face=serif size=1>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Set the number of directors
      at&nbsp;ten (10).</FONT>&nbsp;</FONT> <FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="5%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="6%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="7%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="2%"></TD>
    <TD align=left width="20%" colSpan=2><FONT face=Wingdings></FONT></TD>
    <TD align=center width="4%"><FONT face=Wingdings>o</FONT></TD>
    <TD align=center width="5%" colSpan=2><FONT face=sans-serif><FONT face=serif><FONT face=Wingdings>o </FONT></FONT></FONT></TD>
    <TD align=center width="4%" colSpan=2><FONT face=Wingdings>o</FONT></TD>
    <TD align=right width="2%"></TD></TR>
  <TR>
    <TD width="1%"></TD>
    <TD width="93%" colSpan=15>&nbsp;</TD>
    <TD width="4%" colSpan=2></TD>
    <TD width="2%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="1%"></TD>
    <TD vAlign=top align=left width="84%" colSpan=12>
      <P align=justify><FONT size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; This Proxy
      also authorizes the Proxies to vote in their discretion upon such other
      business as may properly come before the Annual Meeting or any adjournment
      thereof.</FONT></P></TD>
    <TD align=left width="4%">&nbsp;</TD>
    <TD align=left width="5%" colSpan=2>&nbsp;</TD>
    <TD align=left width="4%" colSpan=2></TD>
    <TD align=left width="2%"></TD></TR>
  <TR>
    <TD width="1%"></TD>
    <TD width="93%" colSpan=15>&nbsp;</TD>
    <TD width="4%" colSpan=2></TD>
    <TD width="2%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="1%"></TD>
    <TD vAlign=top align=left width="84%" colSpan=12>
      <P align=justify><FONT size=1>PLEASE DATE AND SIGN BELOW exactly as name
      appears at the right indicating, where appropriate, official position or
      representative capacity. For stock held in joint tenancy, each joint
      tenant should sign.</FONT></P></TD>
    <TD align=left width="4%">&nbsp;</TD>
    <TD align=left width="5%" colSpan=2>&nbsp;</TD>
    <TD align=left width="4%" colSpan=2></TD>
    <TD align=left width="2%"></TD></TR>
  <TR>
    <TD width="1%"></TD>
    <TD width="93%" colSpan=15>&nbsp;</TD>
    <TD width="4%" colSpan=2></TD>
    <TD width="2%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="1%"></TD>
    <TD vAlign=top align=left width="40%" colSpan=4><FONT size=1>For address
      changes, please check this box and write them on the back where
      indicated.</FONT></TD>
    <TD vAlign=top align=left width="2%">&nbsp;</TD>
    <TD vAlign=top align=left width="2%">&nbsp;</TD>
    <TD vAlign=top align=left width="5%"><FONT face=Wingdings>o&nbsp;<B><FONT face=sans-serif><FONT face=serif></FONT></FONT></B></FONT></TD>
    <TD align=left width="6%"><FONT face=serif></FONT></TD>
    <TD align=left width="7%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="2%"></TD>
    <TD align=left width="20%" colSpan=2><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="4%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="5%" colSpan=2><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="4%" colSpan=2></TD>
    <TD align=left width="2%"></TD></TR>
  <TR>
    <TD width="1%"></TD>
    <TD width="93%" colSpan=15><FONT face=serif>&nbsp;</FONT></TD>
    <TD width="4%" colSpan=2></TD>
    <TD width="2%"></TD></TR>
  <TR vAlign=bottom>
    <TD align=left width="1%"></TD>
    <TD vAlign=top align=left width="36%" colSpan=2>
      <P align=justify>&nbsp;</P></TD>
    <TD vAlign=top align=left width="2%">&nbsp;</TD>
    <TD vAlign=bottom noWrap align=right width="4%" colSpan=2><FONT face=Wingdings></FONT></TD>
    <TD vAlign=bottom noWrap align=center width="7%" colSpan=2><FONT face=serif><FONT face=Wingdings></FONT></FONT></TD>
    <TD align=left width="6%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="7%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="2%"></TD>
    <TD align=left width="20%" colSpan=2><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="4%"><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="5%" colSpan=2><FONT face=serif>&nbsp;</FONT></TD>
    <TD align=left width="4%" colSpan=2></TD>
    <TD align=left width="2%"></TD></TR>
  <TR>
    <TD align=left width="1%">&nbsp;</TD>
    <TD vAlign=top align=left width="36%" colSpan=2>&nbsp;</TD>
    <TD vAlign=top align=left width="2%"></TD>
    <TD vAlign=bottom noWrap align=right width="4%" colSpan=2></TD>
    <TD vAlign=bottom noWrap align=center width="7%" colSpan=2></TD>
    <TD align=left width="6%"></TD>
    <TD align=left width="7%"></TD>
    <TD align=left width="2%"></TD>
    <TD align=left width="20%" colSpan=2></TD>
    <TD align=left width="4%"></TD>
    <TD align=left width="5%" colSpan=2></TD>
    <TD align=left width="4%" colSpan=2></TD>
    <TD align=left width="2%"></TD></TR>
  <TR>
    <TD align=left width="1%"></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-TOP: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 2pt solid" vAlign=top align=left width="27%">&nbsp;</TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-TOP: #000000 1pt solid; BORDER-BOTTOM: #000000 2pt solid" vAlign=top align=left width="9%"><BR>&nbsp;</TD>
    <TD style="BORDER-RIGHT: #ffffff 1pt solid; BORDER-TOP: #ffffff 1pt solid; BORDER-BOTTOM: #ffffff 2pt solid" vAlign=top align=left width="2%">&nbsp; </TD>
    <TD vAlign=bottom align=right width="4%" colSpan=2></TD>
    <TD vAlign=bottom align=right width="2%"></TD>
    <TD align=left width="5%"></TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-TOP: #000000 1pt solid; BORDER-LEFT: #000000 1pt solid; BORDER-BOTTOM: #000000 2pt solid" align=left width="31%" colSpan=4>&nbsp;</TD>
    <TD style="BORDER-RIGHT: #000000 1pt solid; BORDER-TOP: #000000 1pt solid; BORDER-BOTTOM: #000000 2pt solid" align=left width="8%" colSpan=2>&nbsp; &nbsp;</TD>
    <TD align=left width="5%" colSpan=2></TD>
    <TD align=left width="4%" colSpan=2></TD>
    <TD align=left width="2%"></TD></TR>
  <TR>
    <TD align=left width="1%"></TD>
    <TD vAlign=top align=left width="27%"><FONT size=1>Signature&nbsp;[PLEASE
      SIGN WITHIN BOX]&nbsp;</FONT></TD>
    <TD vAlign=top align=left width="9%"><FONT size=1>Date</FONT></TD>
    <TD vAlign=top align=left width="2%">&nbsp;</TD>
    <TD vAlign=bottom align=right width="4%" colSpan=2></TD>
    <TD vAlign=bottom align=right width="2%"></TD>
    <TD align=left width="5%"></TD>
    <TD vAlign=top align=left width="31%" colSpan=4><FONT size=1>Signature
      (Joint Owners)</FONT></TD>
    <TD vAlign=top align=left width="4%"><FONT size=1>Date</FONT></TD>
    <TD align=left width="4%"><FONT size=1></FONT></TD>
    <TD align=left width="5%" colSpan=2></TD>
    <TD align=left width="4%" colSpan=2></TD>
    <TD align=left width="2%"></TD></TR></TABLE></DIV><BR>
<HR align=center width="100%" noShade SIZE=2>
<PAGE><BR>
<DIV style="WIDTH: 100%; HEIGHT: 50%">
<P>&nbsp;</P></DIV>
<HR style="BORDER-RIGHT: black 2px dashed; BORDER-TOP: black 2px dashed; BORDER-LEFT: black 2px dashed; BORDER-BOTTOM: black 2px dashed" noShade SIZE=1>
<BR>
<DIV style="BORDER-RIGHT: black 2px solid; PADDING-RIGHT: 5px; BORDER-TOP: black 2px solid; PADDING-LEFT: 5px; PADDING-BOTTOM: 5px; BORDER-LEFT: black 2px solid; WIDTH: 100%; PADDING-TOP: 5px; BORDER-BOTTOM: black 2px solid">
<P align=center><B><FONT face=serif size=4><BR>SURMODICS, INC.</FONT></B></P>
<P align=center><B><FONT face=serif size=2>PROXY FOR ANNUAL MEETING OF
SHAREHOLDERS</FONT></B></P>
<P align=center><B><FONT face=serif size=2>To Be Held On</FONT></B></P>
<P align=center><B><FONT face=serif size=2>January 28, 2008</FONT></B></P>
<P align=center><FONT face=serif size=2>THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS.</FONT></P>
<P style="PADDING-RIGHT: 15pt; PADDING-LEFT: 15pt" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>The
undersigned hereby appoints BRUCE J BARCLAY and PHILIP D. ANKENY, and each of
them, with full power of substitution, as Proxies to represent and vote, as
designated on the reverse side, all shares of Common Stock of SurModics, Inc.
registered in the name of the undersigned at the Annual Meeting of Shareholders
of the Company to be held at the Radisson Plaza Hotel, 35 South Seventh Street,
Minneapolis, Minnesota,&nbsp;(PLEASE NOTE LOCATION CHANGE)&nbsp;at 4:00 p.m.
(Minneapolis time) on January 28, 2008, and at any adjournment thereof, and the
undersigned hereby revokes all Proxies previously given with respect to the
meeting.</FONT></P>
<P style="PADDING-RIGHT: 15pt; PADDING-LEFT: 15pt" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=serif size=2>THIS PROXY
WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN FOR A
PARTICULAR PROPOSAL THIS PROXY WILL BE VOTED &#147;FOR&#148; SUCH PROPOSAL.</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="90%" align=center border=0>

  <TR>
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