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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0001140361-07-014079.txt : 20070713
<SEC-HEADER>0001140361-07-014079.hdr.sgml : 20070713
<ACCEPTANCE-DATETIME>20070713102752
ACCESSION NUMBER:		0001140361-07-014079
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20070823
FILED AS OF DATE:		20070713
DATE AS OF CHANGE:		20070713
EFFECTIVENESS DATE:		20070713

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			APA Enterprises, Inc.
		CENTRAL INDEX KEY:			0000796505
		STANDARD INDUSTRIAL CLASSIFICATION:	OPTICAL INSTRUMENTS & LENSES [3827]
		IRS NUMBER:				411347235
		STATE OF INCORPORATION:			MN
		FISCAL YEAR END:			0331

	FILING VALUES:
		FORM TYPE:		DEF 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-16106
		FILM NUMBER:		07977735

	BUSINESS ADDRESS:	
		STREET 1:		2950 NE 84TH LN
		CITY:			BLAINE
		STATE:			MN
		ZIP:			55449
		BUSINESS PHONE:		6127844995

	MAIL ADDRESS:	
		STREET 1:		2950 NE 84TH LN
		CITY:			BLAINE
		STATE:			MN
		ZIP:			55449

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	APA OPTICS INC /MN/
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>formdef14a.htm
<DESCRIPTION>APA ENTERPRISES DEF 14A 8-23-2007
<TEXT>
<html>

  <head>
    <title>formdef14a.htm</title>
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        STATES</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman;">SECURITIES
        AND EXCHANGE COMMISSION</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman;">Washington,
        DC 20549</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 18pt; FONT-FAMILY: Times New Roman;">SCHEDULE
        14A</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Proxy
        Statement Pursuant to Section 14(a) of the</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Securities
        Exchange Act of 1934 (Amendment No. )</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Filed
        by
        the Registrant </font><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Wingdings">x</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Filed
        by
        a Party other than the Registrant </font><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Wingdings">&#168;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Check
        the
        appropriate box:</font></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Wingdings"><font style="DISPLAY: inline;" face="Wingdings">o</font></font></div>
              </td>
              <td style="WIDTH: 180pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Preliminary
                  Proxy Statement</font></div>
              </td>
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Wingdings">&#168;</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Soliciting
                  Material Pursuant to</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Wingdings">&#168;</font></div>
              </td>
              <td style="WIDTH: 180pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Confidential,
                  For Use of the Commission Only (as permitted by Rule
                  14a-6(e)(2))</font></div>
              </td>
              <td style="WIDTH: 36pt">&#160;</td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">SS.240.14a-11(c)
                  or SS.240.14a-12</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td align="left" style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Wingdings">x</font></div>
              </td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Definitive
                  Proxy Statement</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td align="left" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Wingdings">&#168;</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Definitive
                  Additional Materials</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 24pt; FONT-FAMILY: Times New Roman;">APA
        ENTERPRISES, INC.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <hr style="COLOR: black" align="center" noshade size="1" width="60%">
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(Name
        of
        Registrant as Specified In Its Charter)</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">
        <div>
          <hr style="COLOR: black" align="center" noshade size="1" width="60%">
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(Name
        of
        Person(s) Filing Proxy Statement, if Other Than the Registrant)</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Payment
        of Filing Fee (Check the appropriate box):</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Wingdings">x</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">No
                  fee required.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Wingdings">&#168;</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Fee
                  computed on table below per Exchange Act Rules 14a-6(i)(4) and
                  0-11.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">1)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Title
                  of each class of securities to which transaction
                  applies:</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div>
          <hr style="COLOR: black" align="left" noshade size="1" width="100%">
        </div>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">2)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Aggregate
                  number of securities to which transaction
                  applies:</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div>
          <hr style="COLOR: black" align="left" noshade size="1" width="100%">
        </div>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">3)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Per
                  unit price or other underlying value of transaction computed pursuant
                  to
                  Exchange Act Rule 0-11 (set forth the amount on which the filing
                  fee is
                  calculated and state how it was
                  determined):</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div>
          <hr style="COLOR: black" align="left" noshade size="1" width="100%">
        </div>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">4)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Proposed
                  maximum aggregate value of
                  transaction:</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div>
          <hr style="COLOR: black" align="left" noshade size="1" width="100%">
        </div>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">5)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Total
                  fee paid:</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div>
          <hr style="COLOR: black" align="left" noshade size="1" width="100%">
        </div>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Wingdings">&#168;</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Fee
                  paid previously with preliminary
                  materials:</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>&#160;</div>
      <hr style="COLOR: black" align="left" noshade size="1" width="100%">
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Wingdings">&#168;</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Check
                  box if any part of the fee is offset as provided by Exchange Act
                  Rule
                  0-11(a)(2) and identify the filing for which the offsetting fee
                  was paid
                  previously. Identify the previous filing by registration statement
                  number,
                  or the form or schedule and the date of its
                  filing.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">1)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Amount
                  previously paid:</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <hr style="COLOR: black" align="left" noshade size="1" width="100%">
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">2)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Form,
                  Schedule or Registration Statement
                  No.:</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <hr style="COLOR: black" align="left" noshade size="1" width="100%">
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">3)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Filing
                  Party:</font></div>
              </td>
            </tr>

        </table>
      </div>
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      </div>
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              <td style="WIDTH: 36pt">&#160;</td>
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">4)</font></div>
              </td>
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Date
                  Filed:</font></div>
              </td>
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      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div>
        <hr style="MARGIN-TOP: -5px; COLOR: #000000" noshade size="1">
        <hr style="MARGIN-TOP: -13px; COLOR: #000000" noshade size="4">
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        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
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        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
          </div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        ENTERPRISES, INC.</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>2950
        N.E. 84</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><sup><strong>th</strong></sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>
        Lane</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Blaine,
        Minnesota 55449</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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        OF ANNUAL MEETING OF SHAREHOLDERS</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">TO
        OUR
        SHAREHOLDERS:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        2007
        Annual Meeting of the shareholders of APA Enterprises, Inc., a Minnesota
        corporation (the &#8220;Company&#8221;), will be held at APA Cables and Networks, Inc.
        ("APACN"), 5480 Nathan Lane, Suite 120, Plymouth MN 55442, on August 23,
        2007,
        at 3:30 p.m., Central Daylight Time, to consider and vote upon the following
        matters:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">1.</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Election
                  of six directors.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">2.</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Amendment
                  of the Bylaws of the Company to permit uncertificated
                  shares.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">3.</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Such
                  other business as my properly come before the meeting or any adjournment
                  or adjournments thereof.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">We
        have
        fixed the close of business on July 5, 2007, as the record date for the
        determination of shareholders entitled to notice of and to vote at the Annual
        Meeting. Our transfer books will not be closed.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Whether
        or not you expect to be present personally at the Annual Meeting, please
        complete, date, sign, and return the accompanying proxy in the enclosed,
        self-addressed envelope at your earliest convenience. This will insure your
        participation in the decisions to be made by the shareholders. We sincerely
        hope
        that all shareholders who can attend the Annual Meeting will do so.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div align="left">
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="justify" valign="top" width="46%">&#160;</td>
              <td align="justify" valign="top" width="4%">&#160;</td>
              <td align="justify" valign="top" width="50%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">BY
                  ORDER OF THE BOARD OF DIRECTORS</font></div>
              </td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="46%">&#160;</td>
              <td align="justify" valign="top" width="4%">&#160;</td>
              <td align="justify" valign="top" width="50%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="46%">&#160;</td>
              <td align="justify" valign="top" width="4%">&#160;</td>
              <td align="justify" valign="top" width="50%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Janna
                  R. Severance</font></div>
              </td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="46%">&#160;</td>
              <td align="justify" valign="top" width="4%">&#160;</td>
              <td align="justify" valign="top" width="50%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Secretary</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">July
        16,
        2007</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">2</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong><a name="toc">TAB</a>LE
        OF CONTENTS</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="95%">&#160;</td>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><strong>Page</strong></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="95%">&#160;</td>
              <td align="left" valign="top" width="5%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="95%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><a href="#1">SOLICITATION
                  AND REVOCATION OF PROXIES</a></font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">1</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="95%">&#160;</td>
              <td align="left" valign="top" width="5%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="95%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><a href="#2">VOTING
                  RIGHTS</a></font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="95%">&#160;</td>
              <td align="left" valign="top" width="5%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="95%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><a href="#3">OWNERSHIP
                  OF COMMON STOCK</a></font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="95%">&#160;</td>
              <td align="left" valign="top" width="5%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="95%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><a href="#4">PROPOSAL
                  1: ELECTION OF DIRECTORS</a></font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">4</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="95%">&#160;</td>
              <td align="left" valign="top" width="5%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="95%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><a href="#5">EXECUTIVE
                  COMPENSATION</a></font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">10</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="95%">&#160;</td>
              <td align="left" valign="top" width="5%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="95%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><a href="#6">COMPENSATION
                  DISCUSSION AND ANALYSIS</a></font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">13</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="95%">&#160;</td>
              <td align="left" valign="top" width="5%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="95%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><a href="#7">CERTAIN
                  RELATIONSHIPS AND TRANSACTIONS</a></font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">15</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="95%">&#160;</td>
              <td align="left" valign="top" width="5%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="95%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><a href="#8">SECTION
                  16(A) BENEFICIAL OWNERSHIP REPORTING
                  COMPLIANCE</a></font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">16</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="95%">&#160;</td>
              <td align="left" valign="top" width="5%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="95%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><a href="#9">PROPOSAL
                  2: UNCERTIFICATED SHARES</a></font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">15</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="95%">&#160;</td>
              <td align="left" valign="top" width="5%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="95%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><a href="#10">RELATIONSHIP
                  WITH INDEPENDENT PUBLIC
                  ACCOUNTANTS</a></font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">18</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="95%">&#160;</td>
              <td align="left" valign="top" width="5%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="95%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><a href="#11">OTHER
                  MATTERS</a></font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">19</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="95%">&#160;</td>
              <td align="left" valign="top" width="5%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="95%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><a href="#12">SHAREHOLDER
                  PROPOSALS FOR 2008 ANNUAL
                  MEETING</a></font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">19</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="95%">&#160;</td>
              <td align="left" valign="top" width="5%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="95%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><a href="#13">ADDITIONAL
                  INFORMATION</a></font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">19</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt;">-i-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman;"><em><a href="#toc">Table
            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>APA
        ENTERPRISES, INC.</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>2950
        N.E. 84</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><sup><strong>th</strong></sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>
        Lane</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Blaine,
        Minnesota 55449</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">
        <div>
          <hr style="COLOR: black" align="center" noshade size="1" width="20%">
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>PROXY
        STATEMENT</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>FOR
        ANNUAL MEETING OF SHAREHOLDERS</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>AUGUST
        23, 2007</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">
        <div>
          <hr style="COLOR: black" align="center" noshade size="1" width="20%">
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong><a name="1">SO</a>LICITATION
        AND REVOCATION OF PROXIES</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        accompanying proxy is solicited by the Board of Directors of APA Enterprises,
        Inc. (the &#8220;Company&#8221;) in connection with the 2007 Annual Meeting of the
        Shareholders of the Company, to be held on August 23, 2007, at 3:30 p.m.
        Minneapolis time, at the offices of APA Cables and Networks, Inc., a
        wholly-owned subsidiary of the Company, located at 5480 Nathan Lane, Suite
        120,
        Plymouth, MN 55442 and any adjournments thereof. This Proxy Statement is
        first
        being mailed to shareholders on or about July 16, 2007.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>How
        to Vote</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 18pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Symbol, serif">&#183;</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">By
                  signing and returning the enclosed proxy card, you will be giving
                  your
                  proxy to our Board of Directors and authorizing them to vote your
                  shares.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>How
        Your Proxy Will be Voted; Board Recommendations</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 18pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Symbol, serif">&#183;</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Unless
                  revoked, all properly executed proxies will be voted as specified.
                  Proxies
                  that are signed but that lack any specification will, subject to
                  the
                  following, be voted as follows, in accordance with the recommendations
                  of
                  the Board: FOR all nominees for director and FOR the amendment
                  to the
                  Bylaws to permit uncertificated shares. If any other matters properly
                  come
                  before the Annual Meeting, or if any of the persons named to serve
                  as
                  directors should decline or be unable to serve, the persons named
                  in the
                  Proxy will vote in accordance with their
                  discretion.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>How
        to Revoke Your Proxy</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 18pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Symbol, serif">&#183;</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">You
                  have the power to revoke your proxy at any time before the convening
                  of
                  the Annual Meeting. Revocations of proxy will be honored if received
                  by
                  us, at the Company, addressed to the attention of Cheryl Podzimek,
                  before
                  the meeting on August 23, 2007. In addition, on the day of the
                  meeting,
                  prior to the convening thereof, revocations may be delivered to
                  the
                  tellers who will be seated at the door of the meeting
                  room.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">1</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman;"><em><a href="#toc">Table
            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Abstentions</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 18pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Symbol, serif">&#183;</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">If
                  you abstain from voting as to any matter, your shares shall be
                  deemed
                  present at the meeting for purposes of determining a quorum and
                  for
                  purposes of calculating the vote with respect to such matter, but
                  shall
                  not be deemed to have been voted in favor of such matter. Abstentions,
                  therefore, as to any proposal will have the same effect as votes
                  against
                  such proposal.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Broker
        Non-Votes</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 18pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Symbol, serif">&#183;</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">If
                  a broker turns in a &#8220;non-vote&#8221; proxy, indicating a lack of voting
                  instruction 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 such non-vote proxy will be
                  considered
                  present at the meeting for purposes of determining a quorum but
                  will not
                  be considered to be represented at the meeting for purposes of
                  calculating
                  the vote required for approval of such
                  matter.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Cost
        of Solicitation</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 18pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Symbol, serif">&#183;</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">We
                  will pay all expenses in connection with the solicitation of proxies.
                  Proxies are being solicited primarily by mail, but officers, directors,
                  and other employees of the Company may also solicit proxies by
                  telephone,
                  telegraph, or personal calls. No extra compensation will be paid
                  by us for
                  such solicitation. We may reimburse brokers, banks, and other nominees
                  holding shares for others for the cost of forwarding proxy materials
                  to,
                  and obtaining proxies from, their
                  principals.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong><a name="2">VO</a>TING
        RIGHTS</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Only
        shareholders of record at the close of business on July 5, 2007, are entitled
        to
        notice of and to vote at the meeting or any adjournment thereof. As of that
        date, we had issued and outstanding 11,872,331 shares of common stock. Each
        holder of record of our common stock is entitled to one vote for each share
        registered in the shareholder&#8217;s name as of the record date. The Articles of
        Incorporation of the Company do not grant the shareholders the right to vote
        cumulatively for the election of directors. No shareholder will have appraisal
        rights or similar dissenter&#8217;s rights as a result of any matters expected to be
        voted on at the meeting.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        presence in person or by proxy of holders of a majority of the shares of
        common
        stock entitled to vote at the Annual Meeting will constitute a quorum for
        the
        transaction of business.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong><a name="3">OWN</a>ERSHIP
        OF COMMON STOCK</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        following table shows as of July 5, 2007, the stock ownership of (i) all
        persons
        known by us to be beneficial owners of more than five percent of our outstanding
        shares of common stock, (ii) each director and each nominee for election
        as a
        director, (iii) the Named Executive Officers (as defined below under the
        caption
&#8220;Executive Compensation&#8221;), and (iv) all current directors and executive officers
        as a group:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">2</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman;"><em><a href="#toc">Table
            of Contents</a></em></font></div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div align="left">
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="36%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Name
                  and Address of</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><u>Beneficial&#160;Owner</u></font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: 4px">&#160;</td>
              <td valign="top" width="30%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Number
                  of Shares</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><u>Beneficially
                  Owned</u></font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: 4px">&#160;</td>
              <td valign="top" width="30%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Percentage
                  of</font></div>
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                  Shares</u></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="36%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="36%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Anil
                  K. Jain</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2950
                  N.E. 84</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">
                  Lane</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Blaine,
                  Minnesota 55449</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">1,670,502
                  </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>(l)</sup></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">14.1</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="36%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="36%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Cheryl
                  Beranek Podzimek</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">5480
                  Nathan Lane</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Plymouth,
                  Minnesota 55442</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">21,100
                  </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>(2)</sup></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">*</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="36%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="36%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Bruce
                  G. Blackey</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2950
                  N.E. 84</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">
                  Lane</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Blaine,
                  Minnesota 55449</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-0-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">*</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="36%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="36%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Herman
                  Lee</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">20152
                  Highway 9N</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Borup,
                  Minnesota 56519</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">761,700</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">6.4</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="36%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="36%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">John
                  G. Reddan</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2950
                  N.E. 84</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">
                  Lane</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Blaine,
                  Minnesota 55449</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">26,000
                  </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>(3)</sup></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">*</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="36%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="36%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Ronald
                  G. Roth</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2950
                  N.E. 84</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">
                  Lane</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Blaine,
                  Minnesota 55449</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">349,800
                  </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>(3)</sup></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">3.0</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="36%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="36%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Stephen
                  L. Zuckerman, M.D.</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2950
                  N.E. 84</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">
                  Lane</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Blaine,
                  Minnesota 55449</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">38,000
                  </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>(3)</sup></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">*</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="36%">
                <div style="MARGIN-LEFT: 126pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="36%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Donald
                  R. Hayward</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2950
                  N.E. 84</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">
                  Lane</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Blaine,
                  Minnesota 55449</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-0-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">*</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="36%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="36%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">All
                  current directors and executive officers as a group
                  (6&#160;persons)</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2,105,402</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>
                  (4)</sup></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="30%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">17.7</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">*</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Less
                  than 1%.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(1)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Includes
                  5,250 shares held by Dr. Jain as custodian for minor relatives.
                  Dr. Jain
                  disclaims beneficial ownership of such
                  shares.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td align="left" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(2)</font></td>
              <td align="left">
                <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Includes
                  21,100 shares that may be acquired upon exercise of options that
                  are or
                  will become exercisable within sixty days of the record
                  date.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td align="left" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(3)</font></td>
              <td align="left">
                <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Includes
                  25,000 shares that may be acquired upon exercise of options that
                  are or
                  will become exercisable within sixty days of the record
                  date.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(4)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Includes
                  96,100 shares that may be acquired upon exercise of options that
                  are or
                  will become exercisable within sixty days of the record
                  date.</font></div>
              </td>
            </tr>

        </table>
      </div><br>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">3</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman;"><em><a href="#toc">Table
            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong><a name="4">PRO</a>POSAL
        1: ELECTION OF DIRECTORS</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Our
        Nominating Committee has named the individuals listed below for election
        as
        directors, each to serve until the next annual meeting of the shareholders
        and
        until his successor is elected and qualified or until his earlier resignation
        or
        removal. Four of the six nominees are currently directors. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Unless
        instructed not to vote for the election of directors or not to vote for any
        specific nominee, your proxy will be voted to elect the listed nominees.
        If any
        nominee withdraws as a candidate or is otherwise unavailable to stand for
        election at the meeting, the named proxies will vote for such other persons
        as
        they may determine, in their discretion. We do not anticipate that any candidate
        will withdraw.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        following information is provided with respect to the nominees for
        directors:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">
        <table cellpadding="0" cellspacing="0" width="80%">

            <tr>
              <td align="justify" valign="top" width="56%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><u>Name</u></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="20%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><u>Age</u></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="20%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><u>Director
                  Since</u></font></div>
              </td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="56%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="20%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="20%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="justify" valign="top" width="56%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Anil
                  K. Jain</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="20%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">61</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="20%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">1979</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="justify" valign="top" width="56%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Ronald
                  G. Roth</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="20%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">62</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="20%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2002</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="justify" valign="top" width="56%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Stephen
                  L. Zuckerman, M.D.</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="20%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">65</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="20%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2002</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="justify" valign="top" width="56%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">John
                  G. (Jack) Reddan</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="20%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">76</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="20%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2002</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="justify" valign="top" width="56%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Cheryl
                  Beranek Podzimek</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="20%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">44</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="20%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">New
                  nominee</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="justify" valign="top" width="56%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Donald
                  R. Hayward</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="20%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">49</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="20%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">New
                  nominee</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Dr.
        Anil
        K. Jain served as president of the Company from 1979 through June 2007, as
        Chairman of the Board from 1987 through June 2007, and as chief executive
        officer from 1988 through June 2007. He also served as chief financial officer
        and treasurer from 1979 through August 2000 and from 2003 through June 2007.
        Dr.
        Jain is a past director and former chairman of Minnesota Project Innovation,
        Inc., a nonprofit corporation.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Ronald
        G.
        Roth was elected Chairman of the Board of the Company in June 2007. Mr. Roth
        was
        Chairman of the Board and Chief Executive Officer of Waste Systems Corp.,
        a
        privately held waste hauling and disposal company, for 25 years prior to
        its
        sale to a national solid waste management company in 1995. From 1995 to 2001,
        he
        was Chairman of the Board of Access Cash International L.L.C., a North American
        provider of ATMs and related processing and financial services until its
        sale to
        a national payment and technology solutions company. Since 1990 he has been
        an
        owner of, and has served in various capacities, including director and officer,
        with Phillips Recycling Systems, a privately held regional recycling service
        provider in Minnesota. Mr. Roth graduated with a B.A. in Marketing from Michigan
        State University.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Dr.
        Stephen L. Zuckerman served as a director of the Company from January 1986
        through August 1991 and was reappointed to the Board in February 2002. Dr.
        Zuckerman practices internal medicine at Aspen Medical Group East Lake Street
        Clinic, and in addition, has been actively involved for many years with
        developing companies in the high tech area. He served as chairman of the
        board
        of ProtaTek International Inc., a biotechnology company manufacturing for
        the
        human and veterinary marketplace (1984 to 1987), as co-founder and chairman
        of
        the board of Hypertension Diagnostic Inc., also a biotechnology company that
        has
        developed a methodology for early detection of blood vessel disorders (1988
        to
        1991), and as a member of the board of Biosensor Inc. (1989 to 1991) and
        Micromedics Inc. (1986 to 1991 and February 2002 to present). From 1982 to
        1995
        Dr. Zuckerman was president of M-T Venture Capital Fund, Inc., a Minnesota
        corporation created to invest in early-stage biotechnology and medical
        technology companies. Since 1976, Dr. Zuckerman has consulted in the health
        care
        delivery field, focusing his efforts on the regionalization of health care
        services. He was the designer, founder and director of the University of
        Minnesota Hospitals&#8217; Outreach Program from 1976 to 1984. Besides his internal
        medicine practice, Dr. Zuckerman presently is chairman of the board of The
        Foundation for Rural Health Care, a nonprofit organization that owns and
        manages
        three rural nursing homes, and a member of the board of Micromedics, Inc.
        He is
        also president of M-T Venture Capital Fund II, Inc. and chairman of the board
        of
        The University Film Society, Minneapolis, Minnesota (2000 to
        present).</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">4</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman;"><em><a href="#toc">Table
            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">John
        G.
        (Jack) Reddan joined the Board of Directors in November 2002. Mr. Reddan,
        retired, has worked as a volunteer with the Presbytery of the Twin Cities
        Area
        (Presbyterian Church USA) in computer application, hardware and software
        support, and accounting and finance. From 1992 to 1994, immediately following
        his retirement for Unisys Corp., he worked as a volunteer with the Presbyterian
        Border Ministries in McAllen, Texas in multiple capacities, including accounting
        consulting, which he continued until 1999. His last position at Unisys (1986
        until retirement in 1991) was as Program Manager - Communication Systems,
        where
        he was responsible for budgets, procurement, and administration of hardware
        and
        software development. During his career with Unisys (then known as Sperry
        Univac) he served as General Manager of its division in Brazil (1970-1973)
        and
        as European regional manager for sales to the U.S. government and military
        in
        Frankfurt, Germany (1967-1969). </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Cheryl
        Beranek Podzimek joined APA in July 2003 as President of its subsidiary,
        APACN.
        In June 2007, she was named President and CEO of APA. Prior to 2003, Ms.
        Podzimek was President of Americable, which was acquired by APACN in June
        2003.
        She served as President of Americable from 2002 to 2003. From 2001 to 2002
        Ms.
        Podzimek was Chief Operating Officer of Americable. Previously, Ms. Podzimek
        held a variety of lead marketing positions with emerging high-growth technology
        companies. She served as Vice President of Marketing from 1996-2001 at
        Transition Networks, a manufacturer of network connectivity products, Director
        of Marketing from 1992 to 1996 at Tricord Systems, an early stage
        multi-processor based super server manufacturer, and Director of Marketing
        from
        1988 to 1992 at Digi International, a designer and manufacturer of connectivity
        products. Earlier in her career Ms. Podzimek held marketing positions for
        non-profit organizations, including the City of Fargo, the Metropolitan Planning
        Commission of Fargo/Moorhead and North Dakota State University.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Donald
        R.
        Hayward is currently President of Engel Diversified Industries (EDI), a
        privately held manufacturing company. Immediately prior to joining EDI, Mr.
        Hayward held the position of Director of Corporate Services at Minnesota
        Technology, Inc. (MTI) a publicly funded, private non-profit in support of
        Minnesota&#8217;s technology community. Prior to 1998, Mr. Hayward spent nearly 20
        years working in business administration, finance and manufacturing for LecTec,
        Pine Island &amp; Goodhue Elevator Associations, the Pillsbury Corporation as
        well as a private elementary school. Mr. Hayward is a graduate of the University
        of Wisconsin with a Bachelor of Science in Business Administration and
        Economics. </font></div><br>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">5</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman;"><em><a href="#toc">Table
            of Contents</a></em></font></div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><em>Board
        Meetings</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">.
        The
        Board of Directors held 8 meetings during fiscal 2007. All directors attended
        100% of the meetings of the Board of Directors and of each committee on which
        they served.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Committees</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        Company has an audit committee, a compensation committee, and a nominating
        committee, each of which is comprised of all non-employees (outside directors).
        The members of these committees during fiscal 2007 were as follows:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="32%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><u>Audit
                  Committee</u></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="32%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><u>Compensation
                  Committee</u></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="32%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><u>Nominating
                  Committee</u></font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="top" width="32%">&#160;</td>
              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="32%">&#160;</td>
              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="32%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Ronald
                  Roth</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Ronald
                  Roth, Chairman</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Ronald
                  Roth, Chairman</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Stephen
                  Zuckerman </font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Stephen
                  Zuckerman</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Stephen
                  Zuckerman</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Jack
                  Reddan, Chairman</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Jack
                  Reddan</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Jack
                  Reddan</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><em>Audit
        Committee</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">.
        The
        audit committee has sole authority to appoint, review and discharge our
        independent public accountants. The committee also reviews and approves in
        advance the services provided by the independent public accountants and reviews
        our internal accounting controls. The audit committee operates under a written
        charter adopted by the Board of Directors. All members of the Audit Committee
        are &#8220;independent&#8221; under the current NASDAQ stock market listing standards. The
        Board has identified John G. Reddan as the current member of our Audit Committee
        who meets the definition of an &#8220;Audit Committee Financial Expert&#8221; under rules of
        the Securities and Exchange Commission. During fiscal 2007, the Audit Committee
        held 5 meetings. See &#8220;RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS - Report
        of Audit Committee&#8221; below.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><em>Compensation
        Committee.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">
        The
        compensation committee develops general compensation policies and establishes
        compensation plans and specific compensation levels for executive officers.
        The
        compensation committee met once during fiscal 2007 to consider the compensation
        of the executive officers. See &#8220;EXECUTIVE COMPENSATION - Report of Compensation
        Committee&#8221; and "COMPENSATION DISCUSSION AND ANALYSIS".</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><em>Nominating
        Committee</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">.
        The
        nominating committee selects nominees for election as directors of the Company.
        In fiscal 2007, the nominating committee met once, at which time it selected
        nominees for election at the upcoming annual meeting. The nominating committee
        will consider qualified director nominees recommended by shareholders for
        election in 2008 and beyond. Our process for receiving and evaluating Board
        member nominations from our shareholders is described below under the caption
        &#8220;Nomination of Director Candidates.&#8221;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">6</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman;"><em><a href="#toc">Table
            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Compensation
        of Directors.</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        following table provides information on the compensation paid in fiscal 2007
        to
        each of our non-employee directors. Dr. Jain, who is employed by the Company,
        received no compensation for his Board activities.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div align="left">
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td valign="bottom" width="16%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Name</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="10%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Fees
                  Earned or Paid in Cash</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">($)</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="10%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Stock
                  Awards</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">($)</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="10%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Option
                  Awards</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">($)</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>(1)</sup></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="10%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Non-Equity
                  Incentive Plan Compensation</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">($)</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="10%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Change
                  in Pension Value and Nonqualified Deferred Compensation
                  Earnings</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="10%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">All
                  other Compensation</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">($)</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="10%" style="BORDER-BOTTOM: 4px">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Total</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">($)</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Ronald
                  G. Roth</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$5,000</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$2,307</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$7,307</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="16%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">John
                  G. Reddan</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$5,000</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$2,307</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$7,307</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="16%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Stephen
                  L. Zuckerman</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$5,000</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$2,307</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$7,307</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td align="left" style="WIDTH: 18pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(1)</font></td>
              <td align="left">
                <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">On
                  August 18, 2006 each board member was granted a six year option
                  to
                  purchase 5,000 shares of the Company&#8217;s Common Stock at an exercise price
                  of $1.28 per share with a one year vesting period. Represents the
                  amount
                  recognized for financial statement reporting purposes for the fiscal
                  year
                  ended March 31, 2007 in accordance with FAS 123(R). The assumptions
                  used
                  to determine the valuation of the awards are discussed in Management&#8217;s
                  Discussion and Analysis of Financial Condition and Results of Operations
                  and in Note N to our consolidated financial statements, each included
                  in
                  the Company&#8217;s Annual Report on Form 10-K filed with the Securities and
                  Exchange Commission on June 22, 2007. Each of the option awards,
                  computed
                  in accordance with FAS 123(R), is the same as the amount recognized
                  for
                  financial statement reporting purposes as reflected in this column.
                  The
                  full grant date fair value of all the awards to these directors,
                  computed
                  in accordance with FAS 123(R), is
                  $11,206.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">As
        of
        March 31, 2007, each non-employee director had 25,000 options
        outstanding</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Code
        of Ethics</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        Company has adopted a code of ethics applicable to its chief executive officer
        and senior financial officer. The code is available at no charge by request
        to
        the Company in writing, to the attention of the Comptroller. Additionally,
        the
        code is filed with the Securities and Exchange Commission as an exhibit to
        the
        Company&#8217;s Report on Form 10-KSB for the fiscal year ended March 31, 2004 and is
        available on our website (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><u>www.apaenterprises.com</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">).</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Nomination
        of Director Candidates</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Effective
        May 27, 2005, the Board of Directors appointed a standing nominating committee
        for selection of nominees for election to the Board of Directors. The
        committee&#8217;s charter is available on our website (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><u>www.apaenterprises.com</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">)
        or by
        request in writing to the Company (Attn: Chief Financial Officer).</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        nominating committee determines the required selection criteria and
        qualifications of director nominees based upon the needs of the Company at
        the
        time nominees are considered. In general, at a minimum, a candidate must
        possess
        the ability to apply good business judgment and must be in a position to
        properly exercise his or her duties of loyalty and care. In addition, the
        committee evaluates candidates based on financial literacy, knowledge of
        the
        Company&#8217;s industry or other background relevant to the Company&#8217;s needs, status
        as a shareholder in the Company, &#8220;independence&#8221; for purposes of compliance with
        the rules of the SEC and the Nasdaq Stock Market, and willingness, ability,
        and
        availability for service. Candidates will be preferred who hold an established
        executive level position in business, finance, law, education, research or
        government. When current Board members are considered for nomination for
        reelection, the nominating committee also takes into consideration their
        prior
        APA Board contributions, performance and meeting attendance
        records.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">7</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman;"><em><a href="#toc">Table
            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        nominating committee has not utilized the services of any third party search
        firm to assist in the identification or evaluation of Board member candidates.
        However, the committee may engage a third party to provide such services
        in the
        future, as it deems necessary or appropriate at the time in
        question.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        nominating committee will consider qualified candidates for possible nomination
        that are submitted by our shareholders. Shareholders who wish to make such
        a
        submission may do so by sending the following information to the nominating
        committee c/o APA Enterprises, Inc., Attn: Comptroller: (1) name of the
        candidate and a brief biographical sketch and resum&#233;; (2) contact information
        for the candidate and a document evidencing the candidate&#8217;s willingness to serve
        as a director if elected; (3) a signed statement as to the submitting
        shareholder&#8217;s current status as an owner and the number of shares currently
        held. Nominations are further subject to the requirements of Section 2.14-a
        of
        the Company&#8217;s Bylaws. Our Bylaws are available on our website (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><u>www.apaenterprises.com</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">)
        or by
        request in writing to the Company (Attn: Chief Financial Officer).</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">This
        information will be evaluated against the criteria established by the committee
        and the specific needs of the Company at that time. Based upon such preliminary
        assessment, candidate(s) who appear best suited to meet the needs of the
        Company
        may be invited to participate in a series of interviews, which are used as
        a
        further means of evaluating potential candidates. On the basis of information
        learned during this process, the committee will determine which nominee(s)
        to
        propose for election at the next annual meeting. The committee will use the
        same
        process for evaluating all nominees, regardless of the source of the
        nomination.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">No
        candidates for director nominations were submitted to the committee by any
        shareholders in connection with the 2007 Annual Meeting. Any shareholders
        desiring to present a nomination for consideration by the committee prior
        to our
        2008 annual meeting must do so at least 90 days prior to the one year
        anniversary of this year&#8217;s Annual Meeting (i.e. 90 days prior to August 23,
        2008), as required by Section 2.14-a of our Bylaws.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Shareholder
        Communication with the Board</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">We
        do not
        have a formal procedure for shareholder communication with our Board of
        Directors. In general, our officers are easily accessible by telephone or
        mail.
        Any matter intended for the Board, or for any individual member or members
        of
        the Board, should be directed to our Comptroller at the Company address with
        a
        request to forward the same to the intended recipient. All such communications
        will be forwarded unopened.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">8</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman;"><em><a href="#toc">Table
            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">We
        encourage all incumbent directors, as well as all nominees for election as
        director, to attend the annual meeting of shareholders. At the August 2006
        annual meeting all then nominated and incumbent directors were in
        attendance.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><u>Equity
        Compensation Plan Information</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">.
        The
        Company currently has three compensation plans: the 1993 Directors Plan,
        the
        1997 Stock Compensation Plan, and the 2007 Stock Compensation Plan, all of
        which
        have been approved by the shareholders of the Company. In addition, the Company
        has issued warrants to its directors and certain service providers. These
        awards
        have not been presented to or approved by the shareholders. The following
        table
        presents information as of March 31, 2007 about these plans and
        awards.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Plan
                  Category</font></div>
              </td>
              <td align="left" valign="top" width="2%">&#160;</td>
              <td align="left" valign="top" width="18%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">(a)</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Number
                  of securities to be issued upon exercise of outstanding options,
                  warrants
                  and rights</font></div>
              </td>
              <td align="left" valign="top" width="2%">&#160;</td>
              <td align="left" valign="top" width="21%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">(b)</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Weighted-average
                  exercise price of outstanding options, warrants and rights</font></div>
              </td>
              <td align="left" valign="top" width="2%">&#160;</td>
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">(c)</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Number
                  of securities remaining available for future issuance under equity
                  compensation plans (excluding securities reflected in column
                  (a))</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="middle" width="17%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Equity
                  compensation plans approved by shareholders</font></div>
              </td>
              <td align="left" valign="middle" width="2%">&#160;</td>
              <td valign="middle" width="18%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">233,150</font></div>
              </td>
              <td valign="middle" width="2%">&#160;</td>
              <td valign="middle" width="21%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$1.90</font></div>
              </td>
              <td valign="middle" width="2%">&#160;</td>
              <td valign="middle" width="17%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">716,850</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="middle" width="17%">&#160;</td>
              <td align="left" valign="middle" width="2%">&#160;</td>
              <td valign="middle" width="18%">&#160;</td>
              <td valign="middle" width="2%">&#160;</td>
              <td valign="middle" width="21%">&#160;</td>
              <td valign="middle" width="2%">&#160;</td>
              <td valign="middle" width="17%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="middle" width="17%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Equity
                  compensation plans not approved by shareholders </font></div>
              </td>
              <td align="left" valign="middle" width="2%">&#160;</td>
              <td valign="middle" width="18%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">350,000</font></div>
              </td>
              <td valign="middle" width="2%">&#160;</td>
              <td valign="middle" width="21%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$3.00</font></div>
              </td>
              <td valign="middle" width="2%">&#160;</td>
              <td valign="middle" width="17%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Not
                  applicable*</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="middle" width="17%">&#160;</td>
              <td align="left" valign="middle" width="2%">&#160;</td>
              <td valign="middle" width="18%">&#160;</td>
              <td valign="middle" width="2%">&#160;</td>
              <td valign="middle" width="21%">&#160;</td>
              <td valign="middle" width="2%">&#160;</td>
              <td valign="middle" width="17%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="middle" width="17%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Total</font></div>
              </td>
              <td align="left" valign="middle" width="2%">&#160;</td>
              <td valign="middle" width="18%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">583,150</font></div>
              </td>
              <td valign="middle" width="2%">&#160;</td>
              <td valign="middle" width="21%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$2.56</font></div>
              </td>
              <td valign="middle" width="2%">&#160;</td>
              <td valign="middle" width="17%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">716,850</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">*
        These
        securities are comprised solely of warrants that were not issued pursuant
        to any
        formal plan with an authorized number of securities available for
        issuance.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><u>Accounting
        Treatment</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">.
        In
        December 2004, the Financial Accounting Standards Board ("FASB") issued FASB
        Statement No. 123 (revised 2004), </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><em>Share-Based
        Payment</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">,
        which
        is a revision of FASB Statement No. 123, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><em>Accounting
        for Stock-Based Compensation</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">.
        Generally the approach in Statement 123(R) is similar to the approach described
        in Statement 123. However, Statement 123(R) requires all share-based payments
        to
        employees, including grants of employee stock options, to be recognized in
        the
        income statement based on their fair values. Pro forma disclosure will no
        longer
        be an alternative. The provisions in Statement 123(R) became effective for
        all
        stock options or other equity-based awards to employees or directors that
        vest
        or became exercisable in the Company's first quarter of fiscal 2007. The
        Company
        reported its first fiscal quarter of 2007 in accordance with the new standard.
        </font></div><br>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">9</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman;"><em><a href="#toc">Table
            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong><a name="5">EXE</a>CUTIVE
        COMPENSATION</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><em>Summary
        Compensation Table</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">.
        The
        following table sets forth certain information regarding compensation paid
        during fiscal year 2007 to our chief executive officer and our other executive
        officers whose total annual compensation in fiscal 2007 (based on salary
        and
        bonus) exceeded $100,000 (the &#8220;Named Executive Officers&#8221;).</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Name
                  and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Principal&#160;Positions</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Fiscal</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Year</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Salary</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Bonus</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Stock
                  </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Awards</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Option
                  </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Awards</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Non-equity
                  Incentive Plan </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Compensation</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Change
                  in Pension Value and Nonqualified Deferred Compensation </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Earnings</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">All
                  Other</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Compensation</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Total</font></div>
              </td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="10%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="justify" valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Anil
                  K. Jain</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2007</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$189,108</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$30,000</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>(1)</sup></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$9,469
                  </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>(2)</sup></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$228,577</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="justify" valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">President,
                  Chief Executive Officer, and Chief Fiancial Officer</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="MARGIN-LEFT: 45pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="justify" valign="top" width="10%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Cheryl
                  Beranek Podzimek,</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2007</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$119,848</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$37,850</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>(3)</sup></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$4,731
                  </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>(4)</sup></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$157,698</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="justify" valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">President,
                  APACN</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 45pt; TEXT-INDENT: -45pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(1)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Consists
                  of bonus awarded to Dr. Jain for fiscal year 2006
                  performance.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(2)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Consists
                  of taxable fringe benefits and Company contribution on Dr. Jain&#8217;s behalf
                  to 401(k) plan.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(3)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Consists
                  of bonus award to Ms. Podzimek in the amount of $22,850 related
                  to fiscal
                  year 2006 and $15,000 related to the first three quarters of fiscal
                  year
                  2007.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(4)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Consists
                  of Company contribution on Ms. Podzimek&#8217;s behalf to 401(k)
                  plan.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><em>Change
        of Control Arrangement</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">.
        We have
        an agreement with Anil K. Jain providing for certain benefits in the event
        of a
        change in control of the Company and in certain other circumstances. A &#8220;change
        in control&#8221; for purposes of the agreement includes a consolidation or merger of
        the Company in which the Company is not the continuing or surviving corporation,
        any sale, lease, exchange, or transfer of all or substantially all of the
        assets
        of the Company, approval by the shareholders of any plan or proposal for
        liquidation or dissolution of the Company, the acquisition by any person
        (as
        such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange
        Act
        of 1934, as amended) of beneficial ownership of 30% or more of the Company&#8217;s
        outstanding common stock, or a change in the board of directors of the Company
        during any period of two consecutive years such that individuals who at the
        beginning of such period constituted the entire Board of Directors cease
        for any
        reason to constitute a majority (with certain exceptions).</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">In
        June
        2007, Dr. Jain&#8217;s employment terminated without a change in control. Pursuant to
        the terms of the agreement, we will pay him an amount equal to twice his
        annual
        salary, as in effect as the date of termination, over a period of two years,
        payable in quarterly installments corresponding to our regular payroll
        dates.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">In
        addition, we have an agreement with Dr. Jain providing that upon the occurrence
        of a change in control, Dr. Jain will have the option to request the Company
        to
        purchase from him a number of shares of his common stock equal to up to 4%
        of
        the shares of common stock outstanding immediately prior to the change in
        control at a price per share equal to the highest per share price paid in
        connection with the change in control event or the highest price paid in
        the
        public market within the twelve months preceding Dr. Jain&#8217;s exercise of the
        option. This option is effective for a period of twelve months after the
        change
        in control.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">10</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman;"><em><a href="#toc">Table
            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">We
        have
        an agreement with Cheryl Beranek Podzimek providing for certain benefits
        in the
        event of a change in control (as defined in the agreement) of the Company.
        If,
        following a change in control, or if APA sells substantially of the assets
        of
        APACN (a &#8220;Subsidiary Sale&#8221;) and within six months after the change of control of
        APA or within six months after the closing of the Subsidiary Sale, Ms.
        Podzimek&#8217;s employment is involuntarily terminated for any reason other than
&#8220;cause&#8221; (as defined in the agreement) , or Ms Podzimek voluntarily terminates
        her employment for &#8220;good reason&#8221; (as defined in the agreement), she shall be
        entitled to payment of any bonus accrued at the time of termination and to
        continuation of her salary then in effect for up to twelve months.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Grants
        of Plan-Based Awards</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">There
        were no grants of Plan Based Awards in fiscal year 2007 to officers of the
        Company.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Outstanding
        Equity Awards at Fiscal Year-End</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">
        <table border="0" cellpadding="0" cellspacing="0" width="80%">

            <tr>
              <td align="justify" valign="top" width="25%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td width="2%">&#160;</td>
              <td colspan="9" valign="top" width="73%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Option
                  Awards</font></div>
              </td>
            </tr>
            <tr>
              <td align="justify" valign="bottom" width="25%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="13%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="13%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="13%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="bottom" width="13%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="bottom" width="25%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Name</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: black 2px solid">&#160;</td>
              <td valign="bottom" width="13%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">#
                  of Securities Underlying Unexercised Options
                  (#)Exercisable</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: black 2px solid">&#160;</td>
              <td valign="bottom" width="13%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">#
                  of Securities Underlying Unexercised Options (#)
                  Unexercisable</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: black 2px solid">&#160;</td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Equity
                  incentive Plan Awards: # of Securities underlying Unexercised Unearned
                  Options</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: black 2px solid">&#160;</td>
              <td valign="bottom" width="13%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Option
                  Exercise Price</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: black 2px solid">&#160;</td>
              <td valign="bottom" width="13%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Option
                  Expiration Date</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="25%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Anil
                  K. Jain</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>(1)</sup></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="25%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="25%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Cheryl
                  Beranek Podzimek</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">18,000</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">17,000</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$2.55</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">10/30/2009</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="25%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="25%">&#160;</td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">10,000</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">$1.30</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">8/18/2011</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 63pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(1)
        Anil
        K. Jain has no outstanding equity awards at fiscal year ended March 31,
        2007</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 63pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Option
        Exercises and Stock Vested</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">There
        were no options exercised or stock vested in fiscal year 2007 to officers
        of the
        Company.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Pension
        Benefits</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">There
        were no pension benefits in fiscal year 2007 to officers of the
        Company.</font></div><br>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">11</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman;"><em><a href="#toc">Table
            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Nonqualified
        Deferred Compensation</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">There
        was
        no non qualified deferred compensation in fiscal year 2007 to officers of
        the
        Company.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Report
        of the Compensation Committee</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        compensation committee oversees (i) the compensation of the Company's directors
        and principal officers, (ii) the Company's executive compensation policy
        and
        (iii) the Company's benefit programs.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        compensation committee has three members, none of whom has any relationship
        to
        the Company that interferes with the exercise of his independence from
        management and the Company, and each of whom qualifies as independent under
        the
        standards used by the Nasdaq Stock Market, where the Company's shares are
        listed.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        compensation committee has reviewed and discussed with management the
        Compensation Discussion and Analysis appearing elsewhere in this proxy
        statement. Based on such review and discussion with management, the compensation
        committee recommended to the Company's Board of Directors that the Compensation
        Discussion and Analysis be included in the Company's Proxy Statement on Schedule
        14A.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Ronald
                  G. Roth, Chairman</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">John
                  G. Reddan</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Stephen
                  L. Zuckerman, M.D.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Members
        of the Compensation Committee</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">12</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
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            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong><a name="6">COM</a>PENSATION
        DISCUSSION AND ANALYSIS</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Introduction</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        Company's executive compensation program is intended to promote operational
        success of the Company, based on financial measures. Through competitive
        performance-based, incentive compensation, we seek to motive our executive
        officers to deliver results that promote the goals of our shareholders,
        customers and employees.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Oversight
        of Executive Compensation </strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        compensation committee oversees the executive compensation program. During
        fiscal year 2007, the members of the committee were Ronald G. Roth, John
        G.
        Reddan, and Stephen L. Zuckerman. The committee's responsibilities for executive
        compensation are to establish and administer the compensation policies and
        programs of the Company, including the form and amounts of compensation paid
        to
        the members of the Company's Board of Directors and to the Company's executive
        officers. The committee has direct responsibility to: (1) review and approve
        corporate goals and objectives relevant to the compensation of the chief
        executive officer (CEO), evaluate the CEO's performance in light of those
        goals
        and objectives, and, either as a committee or together with the other
        independent directors, as directed by the Board, determine and approve the
        CEO's
        compensation level based on this evaluation; and (2) make determinations
        or
        recommendations with respect to non-CEO executive compensation,
        incentive-compensation plans and equity-based plans.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">In
        its
        oversight of the Company's executive compensation program, the committee
        requests recommendations from the CEO and other executive officers with respect
        to the corporate goals and objectives on which payouts of both annual and
        long-term incentive compensation are based and with respect to specific issues
        related to attracting, retaining or motivating individual executive officers.
        The CEO and executive officers also provide the committee with information
        on
        financial performance and budgets, forecasts and accruals. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        Committee is responsible, as part of setting the CEO's compensation, for
        conducting an annual review of the CEO's performance.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        committee has not utilized the services of any compensation
        consultant.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Executive
        Compensation Principles</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">APA's
        executive compensation philosophy is to use a combination of salary and
        performance-based incentive compensation, delivered through annual and long-term
        incentives, to align executive leadership's interest with those of the Company's
        shareholders and employees.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">13</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
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            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Basic
        principles which guide the committee are as follows:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 18pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Symbol, serif">&#183;</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Executive
                  compensation levels must be sufficiently competitive to attract
                  and retain
                  talented leaders. The Company uses the telecommunications industry
                  50</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">
                  percentile as the primary reference point for all elements of executive
                  compensation.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 18pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Symbol, serif">&#183;</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Executive
                  compensation should be substantially performance-based. Annual
                  and
                  long-term incentives should account for at least 33% of the Named
                  Executive Officers targeted annual
                  compensation.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 18pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Symbol, serif">&#183;</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Payouts
                  of annual and long-term incentives must be based on achievement
                  of
                  corporate and business unit goals that reinforce management's link
                  to
                  shareholders and employees. </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 18pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Symbol, serif">&#183;</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Equity-based
                  incentives are utilized to encourage executive leadership to have
                  a
                  significant stake in the Company's
                  business.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 36pt">&#160;</td>
              <td style="WIDTH: 18pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Symbol, serif">&#183;</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
                  components of an executive's compensation depends on his or her
                  scope of
                  responsibilities, experience, internal equity and the market for
                  executive
                  officers with similar skills and experience.
</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">In
        considering whether to change compensation materially, the Company considers
        changes in its business and the market for executive leadership. The Company
        did
        not make any material changes to executive compensation in 2007. Prior year
        compensation is one consideration in setting current year compensation, but
        it
        is not the primary driver in determining future compensation.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Base
        Salary</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        role
        of base salary is to provide a base level of monthly income that is competitive.
        As stated above, the Company's executive compensation strategy is generally
        to
        target the telecommunications industry 50</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">
        percentile as the primary reference point. The committee also considers the
        executive officer's individual performance, experience, financial results,
        internal equity, and changes in the marketplace in determining base
        salary.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Annual
        Incentives</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Annual
        incentives are intended to reward achievement of corporate and business unit
        operational goals.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">In
        April
        2006 the committee set annual incentive targets and related cash awards for
        2007
        for all Company officers. These target awards included 50% of salary for
        the CEO
        and 67% of salary for the President of APACN. Payouts of annual incentive
        awards
        were determined based on the level of achievement of corporate financial
        and
        operational goals and business unit operational goals previously approved
        by the
        committee and described below. In May 2007, the committee and Board reviewed
        performance against these goals. Due to the performance of APA Enterprises,
        no
        bonus was awarded to the CEO. Goals for the president of APACN were based
        on
        achievement of specified annual combined revenue and earnings before interest,
        tax, depreciation, and amortization expense (&#8220;EBITDA&#8221;) levels for APACN, with
        interpolation of actual results between levels based primarily on EBITDA.
        The
        board awarded the president of APACN a bonus of $25,800. In addition, during
        the
        fiscal year she received $5,000 for each of the first three quarters and
        no
        bonus for the fourth quarter of fiscal year 2007. These quarterly bonus payments
        were paid out based on achieving specified revenue and EBITDA levels for
        the
        quarter.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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        </div>
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            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Long-Term
        Incentives</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        role
        of long-term incentives is to align management's interests with the Company's
        long-term strategy and with shareholders. For 2007, long-term incentives
        consisted of grant of stock options under the Company's 2007 Stock Compensation
        Plan.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt;"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Cheryl
        Beranek Podzimek, CEO of the Company and President of APACN, currently has
        two
        stock options - one issued on October 30, 2003 for 35,000 shares at an exercise
        price of $2.55 per share and one issued on August 18, 2005 for 10,000 shares
        at
        an exercise price of $1.30 per share. Both options become exercisable in
        5
        installments, commencing on the first anniversary of the grant date, and
        expire
        on the sixth anniversary of the grant date. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Other
        Benefits</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><em>Severance
        Policies.</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">We
        have
        separation agreements in place with Anil K. Jain, former CEO of the Company,
        and
        Cheryl Beranek Podzimek, CEO of the Company and president of APACN, which
        includes clauses in the event of change in control or involuntary termination.
        In addition, we have a stock repurchase agreement and split dollar life
        insurance arrangement with Mr. Jain. See &#8220;EXECUTIVE COMPENSATION&#8221; and "CERTAIN
        RELATIONSHIPS AND TRANSACTIONS".</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Impact
        of Accounting Treatment on Executive Compensation</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        Company does not have a policy with respect to executive officers' forfeiting,
        adjusting, or recovering annual or long-term incentive awards upon restatement
        of earnings. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong><a name="7">CER</a>TAIN
        RELATIONSHIPS AND TRANSACTIONS</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><em>Lease
        for Company Facility.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">
        We have
        leased our principal executive office and manufacturing facility in Blaine,
        Minnesota since December 1, 1984 from Jain-Olsen Properties, a partnership
        consisting of Anil K. Jain and Kenneth A. Olsen (Mr. Olsen is a former officer
        of and director of the company). Certain terms of the lease are set forth
        in
        Note O of Notes to Financial Statements included in our 2007 Form 10-K, which
        is
        being distributed with this proxy statement. The lease expires on November
        30,
        2009 and provides options to extend through November 30, 2019. We made rent
        and
        tax payments under the lease of $166,127 and $160,206 to Jain-Olsen Properties
        during fiscal 2007 and 2006, respectively, and we are obligated to make payments
        in fiscal 2008 of $128,628 in rent, plus taxes. We believe the current lease
        terms and the proposed amended lease terms are at least as favorable to us
        as
        terms we could have negotiated with an unrelated third party.</font></div>
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            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
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            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><em>India
        Facility</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">.
        We
        currently retain Kul B. Jain as a director of our APA Optronics (India) Private
        Limited subsidiary that was established in fiscal 2005. Mr. Jain is a brother
        of
        Anil K. Jain, formerly President of APA Enterprises, Inc. Kul B. Jain is
        paid
        approximately $250 per month in this position. He is not an employee of APA
        Optronics (India) or APA Enterprises, Inc. On June 28, 2007 we sold all of
        our
        interest in our Indian subsidiary to an entity controlled by Anil K. Jain,
        our
        former President, on terms deemed by the independent directors to be fair
        and
        reasonable to the Company. In brief, the purchase price of $500,000 is payable
        over 5 years and is secured by pledges of stock and Dr. Jain&#8217;s payments under
        his separation agreement, as well as by a guarantee from Dr. Jain.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><em>Key
        Man Insurance</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">.
        We
        maintain key man insurance in the amount of $2,000,000 on the life of Anil
        K.
        Jain. Up to $500,000 of the proceeds is intended to be used to purchase shares
        of our common stock owned by the insured at the request of the personal
        representative of the insured&#8217;s estate. The per share price for the repurchase
        will be the fair market value of the common stock as of the date of the event
        triggering the repurchase.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><em>Split
        Dollar Insurance</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">.
        In
        November 1989, we adopted a split dollar life insurance plan (the &#8220;1989 Plan&#8221;)
        for the benefit of Anil K. Jain. Under the terms of the 1989 Plan, we pay
        the
        premiums on a $5 million insurance policy (the &#8220;Policy&#8221;) on the lives of Dr.
        Jain and his spouse. The Policy is a whole life, joint and survivor policy,
        on
        which all premiums are paid by us and income is imputed to Dr. Jain in an
        amount
        equal to the term rate for his insurance as established by the insurer. No
        premium payments have been made since January 1996. The Policy is owned by
        the
        Jain Children&#8217;s Irrevocable Trust dated November 28, 1989 (the &#8220;Trust&#8221;). The
        1989 Plan is designed so that we will recover all premium payments and advances
        made by us on account of the Policy held by the Trust. Our interest in the
        premium payments and advances is secured by a collateral assignment of the
        Policy. Upon the death of the last to die of Dr. Jain and his spouse, we
        will be
        reimbursed from the insurance proceeds paid to the Trust in an amount equal
        to
        the total premiums and advances made by us. In the event the trustee of the
        Trust surrenders the Policy for its cash surrender value at some date in
        the
        future, we will be reimbursed for the premiums paid on the Policy.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong><a name="8">SECT</a>ION
        16(a) BENEFICIAL OWNERSHIP REPORTING
        COMPLIANCE</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Based
        solely upon a review of Forms 3, 4 and 5 and amendments thereto furnished
        to the
        Company and any written representations that no Forms 5 were required, the
        Company believes that all reports required to be filed by its officers,
        directors, and greater than 10% beneficial shareholders under Section 16(a)
        of
        the Exchange Act were timely filed.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong><a name="9">PROP</a>OSAL
        2: UNCERTIFICATED SHARES</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        securities markets in the U.S. and around the world are rapidly moving toward
        a
        paperless environment in which securities transactions and ownership of
        securities are evidenced solely by electronic records. The Company's transfer
        agent, Wells Fargo Shareowner Services, has introduced the Direct Registration
        System ("DRS"), which eliminates paper stock certificates, and the Nasdaq
        Stock
        Market has adopted rule changes that require its listed companies to become
        DRS
        eligible not later than January 1, 2008. Currently, the Company's Bylaws
        require
        certificated shares, thus precluding the Company's participation in DRS.
        In
        order to permit such participation, the Board has adopted, and recommends
        that
        the shareholders approve, the restatement of Sections 5.02 and 5.05 of the
        Bylaws, as set forth below. If this proposal is approved by the shareholders,
        the Board of Directors may adopt a resolution, without further approval by
        shareholders, to the effect that any or all classes of the Company's stock
        will
        be uncertificated shares. Outstanding shares would not be decertificated
        until
        surrendered to the Company's transfer agent and registrar. The rights and
        obligations of the holders of certificated and uncertificated shares of the
        same
        class and series will be identical.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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        </div>
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            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 30pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt;"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Section
        5.02 Certificate And Uncertificated Shares. Shares of the capital stock of
        the
        Company may be certificated or uncertificated, as determined by the Board
        of
        Directors. If certificated, the certificates shall be in such form or forms
        as
        may be determined by the Board of Directors or those actually used in the
        event
        the Board fails to act. Certificates shall be signed by the Chief Executive
        Officer, a Vice President, the Chief Financial Officer or Treasurer, or the
        Secretary or an Assistant Secretary. If the Company shall be authorized to
        issue
        more than one class of stock or more than one series of any class, the
        designations, preferences, and relative, participating, optional, or other
        special rights of the various classes of stock or series thereof and the
        qualifications, limitations, or restrictions of such rights, together with
        a
        statement of the authority of the Board of Directors to determine the relative
        rights and preferences of subsequent classes or series, shall be set forth
        in
        full on the face or back of the certificate which the Company shall issue
        to
        represent such stock, or, in lieu thereof, such certificate shall contain
        a
        statement that the stock is, or may be, subject to certain rights, preferences,
        or restrictions and that a statement of the same will be furnished without
        charge by the Company upon request by a shareholder. Certificates representing
        the shares of the capital stock of the Company shall be in such form not
        inconsistent with law or the Articles of Incorporation or these Bylaws, as
        shall
        be determined by the Board of Directors. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 30pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 30pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt;"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Section
        5.05 Transfer Of Stock. The shares of stock of the corporation shall be
        transferable upon its books only by the record holder of such stock or by
        attorney lawfully constituted in writing, and, in the case of certificated
        shares, upon surrender to the Company of the old stock certificates, properly
        endorsed, to the person in charge of the stock and transfer books, by whom
        they
        shall be cancelled. A record shall be made of each transfer, and whenever
        a
        transfer shall be made for collateral security, and not absolutely, it shall
        be
        so expressed in the entry of the transfer. The Board of Directors may, by
        resolution duly adopted, establish conditions upon the transfer of shares
        of
        stock to be issued by the Company, and the purchasers of such shares shall
        be
        deemed to have accepted such conditions on transfer upon the receipt of the
        certificate representing such shares, provided that the restrictions shall
        be
        referred to on the certificates or the purchaser shall have otherwise been
        notified thereof.</font></div><br>
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        </div>
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            of Contents</a></em></font></div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong><a name="10">RELA</a>TIONSHIP
        WITH INDEPENDENT PUBLIC
        ACCOUNTANTS</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Report
        of Audit Committee</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        Audit
        Committee of the Board of Directors is comprised of three non-employee
        directors. All members are independent as defined under the rules of The
        NASDAQ
        Stock Market.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        Audit
        Committee held 4 meetings during fiscal 2007. The meetings were designed
        to
        facilitate and encourage communication between the Audit Committee and the
        Company&#8217;s independent public accountants, Grant Thornton LLP.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">During
        these meetings, the Audit Committee reviewed and discussed the quarterly
        and
        annual financial statements with management and Grant Thornton LLP.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        discussions with Grant Thornton LLP also included the matters required by
        Statement on Auditing Standards No. 61 (Communication with Audit Committees).
        Grant Thornton LLP also provided to the Audit Committee the written disclosures
        and the letter regarding their independence as required by the Independence
        Standards Board Standard No. 1. This information was discussed with Grant
        Thornton LLP.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Based
        on
        these discussions, the Audit Committee recommended to the Board of Directors
        that the audited financial statements for the fiscal year ended March 31,
        2007
        be included in the Company&#8217;s annual report on Form 10-K.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Ronald
                  G. Roth</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">John
                  G. Reddan</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Stephen
                  L. Zuckerman, M.D.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Members
        of the Audit Committee</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Independent
        Public Accountants&#8217; Fees</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        firm
        of Grant Thornton LLP, independent public accountants, audited our financial
        statements for the years ending March 31, 2007, 2006 and 2005. Our audit
        committee has appointed them to serve as our auditors for the fiscal year
        ending
        March 31, 2008. Representatives of Grant Thornton LLP are expected to attend
        the
        annual meeting to answer any questions and will have the opportunity to make
        a
        statement if they wish.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        following table presents fees for professional services rendered for the
        two
        most recent fiscal years.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div align="left">
        <table border="0" cellpadding="0" cellspacing="0" width="70%">

            <tr>
              <td align="left" valign="bottom" width="41%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff 2px solid">&#160;</td>
              <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2007</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff 2px solid">&#160;</td>
              <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2006</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff 2px solid">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="bottom" width="41%" style="BORDER-BOTTOM: #cceeff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Audit
                  fees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>(1)</sup></font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #cceeff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #cceeff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: times new roman;">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #cceeff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: times new roman;">95,836</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #cceeff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #cceeff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: times new roman;">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #cceeff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: times new roman;">78,630</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #cceeff">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="41%" style="BORDER-BOTTOM: white">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Audit-related
                  fees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>(2)</sup></font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: white">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: white">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: white">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: times new roman;">12,350</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: white">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: white">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: white">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: times new roman;">10,000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: white">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="bottom" width="41%" style="BORDER-BOTTOM: #cceeff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Tax
                  fees</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #cceeff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #cceeff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #cceeff">&#160;</td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #cceeff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #cceeff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #cceeff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #cceeff">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="41%" style="BORDER-BOTTOM: white">
                <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Tax
                  compliance</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: white">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: white">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: white">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: times new roman;">20,250</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: white">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: white">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: white">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: times new roman;">18,000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: white">&#160;</td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="bottom" width="41%" style="BORDER-BOTTOM: #cceeff solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Other
                  tax </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;"><sup>(3)</sup></font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #cceeff 2px solid">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: times new roman;">2,742</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #cceeff 2px solid">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: times new roman;">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #cceeff 2px solid">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="41%" style="BORDER-BOTTOM: white">&#160;</td>
              <td width="2%" style="BORDER-BOTTOM: white">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: white">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: times new roman;">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: white">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: times new roman;">122,495</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: white">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: white">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: times new roman;">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: white">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: times new roman;">106,630</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: white">&#160;</td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: -27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">18</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman;"><em><a href="#toc">Table
            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 18pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(1)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Audit
                  fees include fees billed for 2006, fees billed and expected to
                  be billed
                  for 2007 for professional services rendered for the audit of our
                  annual
                  financial statements, the review of our financial statements included
                  in
                  our reports on Form 10-Q, services in connection with registration
                  statements filed with the SEC, and accounting consultations necessary
                  for
                  the rendering of an opinion on our financial
                  statements.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 18pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(2)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Audit-related
                  services include due diligence, acquisition-related services and
                  audit
                  expenses of our 401(k) plan and adoption of our 2007 Stock Compensation
                  Plan</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25;">
              <td style="WIDTH: 18pt">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(3)</font></div>
              </td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Other
                  tax services include tax planning, state tax planning and other
                  tax
                  consultation.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Our
        Audit
        Committee must pre-approve all audit services, engagement fees and terms,
        and
        all permitted non-audit engagements, subject to the de minimus exceptions
        permitted pursuant to the Securities Exchange Act of 1934. Pursuant to its
        pre-approval policy, the Audit Committee has authorized management to engage
        Grant Thornton for tax planning and preparation and filing of the Company&#8217;s tax
        returns.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong><a name="11">OTH</a>ER
        MATTERS</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">We
        are
        not aware that any matter other than those described in the Notice of Meeting
        will be presented for action at the meeting. If, however, other matters do
        properly come before the meeting, it is the intention of Ms. Podzimek and
        Mr.
        Goettl (the persons named as proxies) to vote the proxied shares in accordance
        with their best judgment on such matters.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong><a name="12">SHAR</a>EHOLDER
        PROPOSALS FOR 2008 ANNUAL MEETING</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        Company&#8217;s 2008 Annual Meeting of Shareholders is expected to be held on or about
        August 21, 2008, and proxy materials in connection with that meeting are
        expected to be mailed on or about July 9, 2008. In order to be included in
        the
        Company&#8217;s proxy materials for the 2007 Annual Meeting, shareholder proposals
        prepared in accordance with the proxy rules must be received by the Company
        on
        or before March 15, 2008.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt;"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">In
        addition, pursuant to the Company&#8217;s Bylaws, a shareholder must give notice to
        the Company prior to May 25, 2008 of any nominations for director or any
        proposal which such shareholder intends to raise at the 2008 Annual Meeting.
        If
        the Company receives notice of such nomination or proposal on or after May
        25,
        2008, such nomination or proposal will not be considered at the annual
        meeting.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Additionally,
        if the Company receives notice of a shareholder proposal after June 2, 2008,
        it
        will be considered untimely pursuant to SEC Rules 14a-4 and 14a-5(e), and
        the
        persons named in the proxies solicited by the Board of Directors for the
        2008
        Annual Meeting may exercise discretionary voting power with respect to the
        proposal.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong><a name="13">ADD</a>ITIONAL
        INFORMATION</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">A
        copy of
        the Company&#8217;s Report to Shareholders for the fiscal year ended March 31, 2007,
        accompanies this Notice of Annual Meeting and Proxy Statement.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">19</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman;"><em><a href="#toc">Table
            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">THE
        COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K
        (EXCLUSIVE OF EXHIBITS) FOR THE FISCAL YEAR ENDED MARCH&#160;31, 2007, TO EACH
        PERSON WHO IS A SHAREHOLDER OF THE COMPANY, UPON RECEIPT OF A WRITTEN REQUEST
        FOR SUCH REPORT. SUCH REQUESTS SHOULD BE SENT TO:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">APA
        ENTERPRISES, INC.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Attention:
        Comptroller</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">2950
        N.E.
        84</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">
        Lane</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Blaine,
        Minnesota 55449</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div align="left">
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="justify" valign="top" width="46%">&#160;</td>
              <td align="justify" valign="top" width="4%">&#160;</td>
              <td align="justify" valign="top" width="50%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">By
                  Order of the Board of Directors</font></div>
              </td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="46%">&#160;</td>
              <td align="justify" valign="top" width="4%">&#160;</td>
              <td align="justify" valign="top" width="50%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="46%">&#160;</td>
              <td align="justify" valign="top" width="4%">&#160;</td>
              <td align="justify" valign="top" width="50%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Janna
                  R. Severance</font></div>
              </td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="46%">&#160;</td>
              <td align="justify" valign="top" width="4%">&#160;</td>
              <td align="justify" valign="top" width="50%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Secretary</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">July
        16,
        2007</font></div><br>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman;">20</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman;"><em><a href="#toc">Table
            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>APA
        ENTERPRISES, INC.</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>PROXY</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>ANNUAL
        MEETING OF SHAREHOLDERS - AUGUST 23, 2007</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>THIS
        PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        undersigned hereby appoints Cheryl Podzimek and Chris Goettl (Controller),
        or
        either of them, proxies or proxy, with full power of substitution, to vote
        all
        shares of common stock of APA Enterprises, Inc. (the &#8220;Company&#8221;) which the
        undersigned is entitled to vote at the 2007 Annual Meeting of Shareholders
        to be
        held at the offices of APA Cables and Networks, Inc., 5480 Nathan Lane, Suite
        120, Plymouth, MN 55442, August 23, 2007, at 3:30 p.m., Central Daylight
        Time,
        and at any adjournment thereof, as directed below with respect to the proposals
        set forth below, all as more fully described in the Proxy Statement, and
        upon
        any other matter that may properly come before the meeting or any adjournment
        thereof.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">1.<font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;&#160;&#160;</font>&#160;
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">ELECTION
        OF DIRECTORS:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">
        <table cellpadding="0" cellspacing="0" width="84%">

            <tr>
              <td align="left" valign="top" width="48%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">FOR
                  all nominees listed below (except as marked to the contrary
                  below)</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings;">o</font></div>
              </td>
              <td align="justify" valign="top" width="4%">&#160;</td>
              <td align="left" valign="top" width="48%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">WITHHOLD
                  AUTHORITY to vote for all nominees listed below </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings;">o</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Anil
        K.
        Jain, John G. Reddan, Ronald G. Roth, Stephen L. Zuckerman, Cheryl Beranek
        Podzimek, and Donald R. Hayward</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>(INSTRUCTION:
        To withhold authority for any individual nominee, write that nominee&#8217;s name in
        the space provided below.)</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">2.<font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">APPROVAL
        OF AN AMENDMENT TO THE BYLAWS OF THE COMPANY TO PERMIT UNCERTIFICATED
        SHARES.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">
        <table cellpadding="0" cellspacing="0" width="84%">

            <tr>
              <td align="justify" valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings;">o</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">
                  FOR</font></div>
              </td>
              <td align="justify" valign="top" width="2%">&#160;</td>
              <td align="justify" valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings;">o</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">
                  AGAINST</font></div>
              </td>
              <td align="justify" valign="top" width="2%">&#160;</td>
              <td align="justify" valign="top" width="32%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings;">o</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">
                  ABSTAIN</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">3.<font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">UPON
        SUCH
        OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">
        <table cellpadding="0" cellspacing="0" width="84%">

            <tr>
              <td align="justify" valign="top" width="48%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings;">o</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">GRANTED</font></div>
              </td>
              <td align="justify" valign="top" width="4%">&#160;</td>
              <td align="justify" valign="top" width="48%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings;">o</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">
                  WITHHELD </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
        power
        to vote granted by this Proxy may be exercised by Cheryl Podzimek and Chris
        Goettl, jointly or singly, or their substitute(s), who are present and acting
        at
        said Annual Meeting or any adjournment of said Annual Meeting. The undersigned
        hereby revokes any and all prior proxies given by the undersigned to vote
        at
        this Annual Meeting.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>THIS
        PROXY WILL BE VOTED IN ACCORDANCE WITH THE SHAREHOLDER&#8217;S INSTRUCTIONS. IF THE
        SHAREHOLDER EXECUTES THIS PROXY BUT DOES NOT PROVIDE INSTRUCTIONS, THIS PROXY
        WILL BE VOTED FOR THE ELECTION OF THE PROPOSED DIRECTORS, FOR THE AMENDMENT
        TO
        THE BYLAWS, AND IN THE DISCRETION OF THE PROXY HOLDER ON SUCH OTHER MATTERS
        AS
        MAY COME BEFORE THE MEETING.</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
          </div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman;"><em><a href="#toc">Table
            of Contents</a></em></font></div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">It
        is
        urgent that each shareholder complete, date, sign, and mail this Proxy as
        soon
        as possible. Your vote is important!</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div align="left">
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="justify" valign="top" width="46%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td width="4%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td align="justify" valign="bottom" width="8%" style="BORDER-BOTTOM: #ffffff 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Dated
                  and Signed</font></div>
              </td>
              <td align="justify" valign="top" width="36%" style="BORDER-BOTTOM: black 2px solid">&#160;&#160;
</td>
              <td align="justify" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">,</font></div>
              </td>
              <td align="justify" valign="bottom" width="4%" style="BORDER-BOTTOM: #ffffff 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">2007</font></div>
              </td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="46%">&#160;</td>
              <td width="4%">&#160;</td>
              <td align="justify" valign="top" width="8%">
                <div style="MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
              </td>
              <td align="justify" valign="top" width="36%">&#160;</td>
              <td align="justify" valign="top" width="2%">&#160;</td>
              <td align="justify" valign="top" width="4%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="46%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td width="4%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td align="justify" colspan="2" valign="top" width="44%" style="BORDER-BOTTOM: black 2px solid">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;&#160;
</div>
              </td>
              <td align="justify" valign="top" width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td align="justify" valign="top" width="4%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="46%">&#160;</td>
              <td width="4%">&#160;</td>
              <td align="justify" colspan="2" valign="top" width="44%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Signature
                  of Shareholder(s)</font></div>
              </td>
              <td align="justify" valign="top" width="2%">&#160;</td>
              <td align="justify" valign="top" width="4%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="46%">&#160;</td>
              <td width="4%">&#160;</td>
              <td align="justify" valign="top" width="8%">&#160;</td>
              <td align="justify" valign="top" width="36%">&#160;</td>
              <td align="justify" valign="top" width="2%">&#160;</td>
              <td align="justify" valign="top" width="4%">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="46%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td width="4%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td align="justify" colspan="2" valign="top" width="44%" style="BORDER-BOTTOM: black 2px solid">&#160;&#160;&#160;
</td>
              <td align="justify" valign="top" width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td align="justify" valign="top" width="4%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
            </tr>
            <tr>
              <td align="justify" valign="top" width="46%">&#160;</td>
              <td width="4%">&#160;</td>
              <td align="justify" colspan="2" valign="top" width="44%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman;">Signature
                  of Shareholder(s)</font></div>
              </td>
              <td align="justify" valign="top" width="2%">&#160;</td>
              <td align="justify" valign="top" width="4%">&#160;</td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Please
        sign as your name(s) appears above. When signing as attorney, executor,
        administrator, trustee, guardian, authorized officer of a corporation, or
        partner of a partnership, please provide the name of the entity on whose
        behalf
        you are signing and your title.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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