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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0001019687-07-000743.txt : 20070316
<SEC-HEADER>0001019687-07-000743.hdr.sgml : 20070316
<ACCEPTANCE-DATETIME>20070316131255
ACCESSION NUMBER:		0001019687-07-000743
CONFORMED SUBMISSION TYPE:	PRE 14A
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20070509
FILED AS OF DATE:		20070316
DATE AS OF CHANGE:		20070316

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AMERICAN TECHNOLOGY CORP /DE/
		CENTRAL INDEX KEY:			0000924383
		STANDARD INDUSTRIAL CLASSIFICATION:	HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651]
		IRS NUMBER:				870361799
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0930

	FILING VALUES:
		FORM TYPE:		PRE 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-24248
		FILM NUMBER:		07699060

	BUSINESS ADDRESS:	
		STREET 1:		13114 EVENING CREEK DRIVE SOUTH
		CITY:			SAN DIEGO
		STATE:			CA
		ZIP:			92128
		BUSINESS PHONE:		6196792114

	MAIL ADDRESS:	
		STREET 1:		13114 EVENING CREEK DRIVE SOUTH
		CITY:			SAN DIEGO
		STATE:			CA
		ZIP:			92128
</SEC-HEADER>
<DOCUMENT>
<TYPE>PRE 14A
<SEQUENCE>1
<FILENAME>atc_pre14a-050907.htm
<DESCRIPTION>AMERICAN TECHNOLOGY CORPORATION
<TEXT>
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      AMERICAN TECHNOLOGY CORPORATION
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      14A INFORMATION</strong></font></div>
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      Statement Pursuant to Section 14(a) of the Securities Exchange Act of
      1934</font></div>
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              <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 style="DISPLAY: inline; FONT-FAMILY: Wingdings">x</font></font></div>
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      the
      appropriate box:</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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          <tr>
            <td align="left" valign="top" width="5%"><font style="FONT-FAMILY: Wingdings" size="2">x</font></td>
            <td align="left" valign="top" width="95%">
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                Proxy Statement</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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            <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">Confidential,
                for Use of the Commission only (as permitted by Rule
                14a-6(e)(2))</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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            <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">Definitive
                Proxy Statement</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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          <tr>
            <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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#168;</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
            <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">Definitive
                Additional Materials</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>
            <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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#168;</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
            <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">Soliciting
                Material Pursuant to &#167; 240.14a-11(c) or &#167; 240.14a-12</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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      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td valign="top" width="80%" style="border-bottom: black thin solid;">
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                Technology Corporation</strong></font></div>
            </td>
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    <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="justify">&#160;</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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      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td valign="top" width="80%" style="border-bottom: black thin solid;">&#160;</td>
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          <tr>
            <td valign="top" width="80%">
              <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>
            </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="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">&#160;</div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="5%"><font style="FONT-FAMILY: Wingdings" size="2">x</font></td>
            <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">No
                fee required.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
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          <tr>
            <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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#168;</font></div>
            </td>
            <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">Fee
                computed on table below per Exchange Act Rules 14a-6(i)(4) and
                0-11.</font></div>
            </td>
          </tr>

      </table>
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    <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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </font></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">Title
                of each class of securities to which transaction
                applies:</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 cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="80%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>

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

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </font></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">Aggregate
                number of securities to which transaction
                applies:</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 cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="80%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>

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

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </font></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">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 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="80%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>

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

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </font></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">Proposed
                maximum aggregate value of
                transaction:</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 cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="80%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>

      </table>
    </div>
    <div>
    </div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </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">
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        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div>&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </font></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">Total
                fee paid:</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 cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="80%" style="border-bottom: black thin solid;">&#160;</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 align="left">
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#168;</font></div>
            </td>
            <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">Fee
                paid previously with preliminary materials.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr>
            <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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#168;</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
            <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="justify"><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 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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </font></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">Amount
                Previously Paid:</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 cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="80%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>

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

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></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">Form,
                Schedule or Registration Statement
                No.:</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 cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="80%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>

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

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></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">Filing
                Party:</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 cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="80%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>

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

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </font></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">Date
                Filed:</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 cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="80%" style="border-bottom: black thin solid;">&#160;</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 id="PGBRK" style="MARGIN-LEFT: 0pt; 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">
        </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><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>AMERICAN
      TECHNOLOGY CORPORATION</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">15378
      Avenue of Science, Suite 100 </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">San
      Diego, California 92128</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">(858)
      676-1112</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>NOTICE
      OF ANNUAL MEETING OF STOCKHOLDERS</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>TO
      BE HELD ON </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>MAY
      9, 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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">TO
      THE
      STOCKHOLDERS OF AMERICAN TECHNOLOGY 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"><strong>Notice
      Is Hereby Given</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      that the
      Annual Meeting of Stockholders of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>American
      Technology Corporation</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      a
      Delaware corporation (the "Company"), will be held on Wednesday, May 9, 2007
      at
      2:00 p.m. local time, at our principal offices located at 15378 Avenue of
      Science, Suite 100, San Diego, California 92128.</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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </font></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">To
                elect directors to serve for the ensuing year and until their successors
                are elected;</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 cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </font></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">To
                ratify the selection of Swenson Advisors, LLP as the independent
                registered public accounting firm of the Company for its fiscal year
                ending September&#160;30, 2007;</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 cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </font></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">To
                approve amendments to the Company's 2005 Equity Incentive
                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 cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></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">To
                approve certain terms of the Company's financing that occurred in
                August
                2006; and</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 cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </font></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">To
                transact such other business as may properly come before the meeting
                or
                any adjournment or postponement
                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">The
      foregoing items of business are more fully described in the Proxy Statement
      accompanying this Notice.</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"><strong>I
      strongly encourage you to sign up for electronic delivery of our future annual
      reports and proxy materials in order to conserve natural resources and help
      us
      save costs in producing and distributing these materials. </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
      more
      information, please see "Electronic Delivery of Proxy Materials and Annual
      Reports" on page 2 of the Proxy Statement.</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
      Board
      of Directors has fixed the close of business on March 20, 2007, as the record
      date for the determination of stockholders entitled to notice of and to vote
      at
      this Annual Meeting and at any adjournment or postponement 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 align="center">
      <table bgcolor="white" cellpadding="0" cellspacing="0" width="100%">

          <tr bgcolor="white">
            <td width="50%">&#160;</td>
            <td width="50%">
              <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">By
                Order of the Board of Directors</font></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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>/s/
                Elwood G. Norris</u></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">Elwood
                G. Norris</font></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">Chairman
                of the Board</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
    </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">San
      Diego, California</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font size="2">March
      30, 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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ALL
      STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
      OR
      NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
      THE
      ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION
      AT
      THE MEETING. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON
      IF
      YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD
      OF
      RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING,
      YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR
      NAME.</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; 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">
        </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>
    <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"><strong>AMERICAN
      TECHNOLOGY CORPORATION</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">15378
      Avenue of Science, Suite 100, San Diego, California 92128</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">(858)
      676-1112</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>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 STOCKHOLDERS</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">To
      be
      held May 9, 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="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>INFORMATION
      CONCERNING SOLICITATION AND VOTING</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>General</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
      enclosed proxy is solicited to the holders of common stock on behalf of the
      Board of Directors of American Technology Corporation, a&#160;Delaware
      corporation, for use at the Annual Meeting of Stockholders to be held on May
      9,
      2007, at 2:00 p.m. local time (the "Annual Meeting"), or at any adjournment
      or
      postponement thereof, for the purposes set forth herein and in the accompanying
      Notice of Annual Meeting. The Annual Meeting will be held at our principal
      offices located at 15378 Avenue of Science, Suite 100, San Diego, California
      92128. We intend to mail or electronically deliver this proxy statement, the
      accompanying proxy card and Notice of Annual Meeting on or about March
      30</font><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">
      2007 to
      all stockholders entitled to vote 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: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>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 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
      will
      bear the entire cost of solicitation of proxies, including preparation,
      assembly, printing and mailing of this proxy statement, the proxy and any
      additional information furnished to stockholders. Copies of solicitation
      materials will be furnished to banks, brokerage houses, fiduciaries and
      custodians holding in their names shares of common stock beneficially owned
      by
      others to forward to such beneficial owners. We may reimburse persons
      representing beneficial owners of common stock for their costs of forwarding
      solicitation materials to such beneficial owners. Original solicitation of
      proxies by mail may be supplemented by telephone, telegram or personal
      solicitation by directors, officers or other regular employees of our company.
      No additional compensation will be paid to directors, officers or other regular
      employees for such services.</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>Voting
      Rights and Outstanding Shares</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
      have
      designated a record date of March 20, 2007 for the Annual Meeting. Only
      stockholders of record at the close of business on the record date will be
      entitled to notice of and to vote at the Annual Meeting. At the close of
      business on the record date we had outstanding and entitled to vote
      [___________] shares of common stock.</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">Except
      as
      provided below, on all matters to be voted upon at the Annual Meeting, each
      holder of record of common stock on the record date will be entitled to one
      vote
      for each share held. With respect to the election of directors, stockholders
      may
      exercise cumulative voting rights, i.e., each stockholder entitled to vote
      for
      the election of directors may cast a total number of votes equal to the number
      of directors to be elected multiplied by the number of such stockholders shares
      (on an as-converted basis) and may cast such total of votes for one or more
      candidates in such proportions as such stockholder chooses. However, no
      stockholder will be entitled to cumulate votes unless the candidate's name
      has
      been placed in nomination prior to the voting and at least one stockholder
      has
      given notice at the meeting, prior to the voting, of his or her intention to
      cumulate votes. Unless the proxyholders are otherwise instructed, stockholders,
      by means of the accompanying proxy, will grant the proxyholders discretionary
      authority to cumulate votes.</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">All
      votes
      will be tabulated by the inspector of election appointed for the meeting, who
      will separately tabulate affirmative and negative votes, abstentions and broker
      non-votes. Abstentions will be counted towards the tabulation of votes cast
      on
      proposals presented to the stockholders for the purposes of determining the
      presence of a quorum and will have the same effect as negative votes. Broker
      non-votes are counted towards a quorum, but are not counted for any purpose
      in
      determining whether a matter has been approved. If you sign your proxy card
      or
      broker voting instruction card with no instructions, your shares will be voted
      in accordance with the recommendations of the Board.</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; 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: ">-1-</font></div>
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      <div id="HDR">
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        </div>
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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 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>Revocability
      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">Any
      person giving a proxy pursuant to this solicitation has the power to revoke
      it
      at any time before it is voted. It may be revoked by filing with the Chairman
      of
      the Board at our principal offices, 15378 Avenue of Science, Suite 100, San
      Diego, California 92128, a written notice of revocation or a duly executed
      proxy
      bearing a later date, or it may be revoked by attending the meeting and voting
      in person. Attendance at the meeting will not, by itself, revoke a
      proxy.</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>Stockholder
      Proposals</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
      deadline for submitting a stockholder proposal for inclusion in our proxy
      statement and form of proxy for our 2008 annual meeting of stockholders pursuant
      to Rule 14a-8 of the Securities and Exchange Commission is </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">December
      1</font><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">
      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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      bylaws also establish an advance notice procedure with respect to certain
      stockholder proposals and director nominations. If a stockholder wishes to
      have
      a stockholder proposal considered at our next annual meeting, the stockholder
      must give timely notice of the proposal in writing to the Secretary of our
      company. To be timely, a stockholder's notice of the proposal must be delivered
      to, or mailed and received at our executive offices not earlier than February
      9,
      2008 and not later than March 10, 2008; provided, however, that in the event
      that no annual meeting was held in the previous year or the date of the annual
      meeting has been changed by more than 30 days from the anniversary of the
      scheduled date of this year's Annual Meeting, notice by the stockholder to
      be
      timely must be so received not earlier than the close of business on the 90th
      day prior to such annual meeting and not later than the close of business on
      the
      later of the 60th day prior to such annual meeting or, in the event we first
      make public announcement of the date of such annual meeting fewer than 70 days
      prior to the date of such annual meeting, the close of business on the 10th
      day
      following the day on which we first make public announcement of the date of
      such
      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">A
      stockholder's notice to the Secretary must set forth as to each matter the
      stockholder proposes to bring before the annual meeting: (i)&#160;a brief
      description of the business desired to be brought before the annual meeting
      and
      the reasons for conducting such business at the annual meeting, (ii)&#160;the
      name and address, as they appear on our books, of the stockholder proposing
      such
      business, (iii)&#160;the class and number of shares which are beneficially owned
      by the stockholder, (iv)&#160;any material interest of the stockholder in such
      business and (v)&#160;any other information that is required to be provided by
      the stockholder pursuant to Regulation&#160;14A under the Exchange Act, in his
      or her capacity as a proponent to a stockholder 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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Electronic
      Delivery of Proxy Materials and Annual Reports</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">If
      you
      are a stockholder of record, you may request and consent to electronic delivery
      of our future proxy materials and annual reports by following the instructions
      on your proxy card. If your shares are held in street name, please contact
      your
      broker, bank or other nominee and ask about the availability of electronic
      delivery. If you select electronic delivery, we will discontinue mailing the
      proxy materials and annual reports to you beginning next year, and you will
      be
      sent an e-mail message notifying you of the Internet address or addresses where
      you may access the proxy materials and annual report. Your consent to electronic
      delivery will remain in effect until you revoke it.</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>PROPOSAL
      ONE</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>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">There
      are
      five nominees for Board positions. Each director to be elected will hold office
      until the next annual meeting of stockholders and until his or her successor
      is
      elected and has qualified, or until such director's earlier death, resignation
      or removal. Each nominee listed below is currently a director of our company.
      Four of the directors were elected by the stockholders at our 2006 annual
      meeting. One of the directors, Laura M. Clague, was elected to our Board in
      February 2007, based on the recommendation of our Nominating and Governance
      Committee following a recommendation by our Chief Executive Officer. We
      encourage our Board members to attend our annual meetings of stockholders.
      All
      four nominees who were members of our the Board at the time of the 2006 annual
      meeting of stockholders attended the 2006 annual meeting of
      stockholders.</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; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-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>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#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">Shares
      represented by executed proxies will be voted, if authority to do so is not
      withheld, for the election of the five nominees named below, subject to the
      discretionary power to cumulate votes. In the event that any nominee should
      be
      unavailable for election as a result of an unexpected occurrence, such shares
      will be voted for the election of such substitute nominee as management may
      propose. Each person nominated for election has agreed to serve if elected
      and
      management has no reason to believe that any nominee will be unable to
      serve.</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
      five
      candidates receiving the highest number of affirmative votes cast at the meeting
      will be elected 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: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Our
      Board of Directors Recommends a vote IN FAVOR of each named
      nominee</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>Nominees</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</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
      names
      of the nominees and certain information about them are set forth
      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 align="left">
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="20%">
              <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>Name</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</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="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Age</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
            <td align="left" valign="top" width="40%">
              <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>Position
                and Offices</strong></font></div>
            </td>
            <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="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Director
                Since</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="20%">
              <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">Elwood
                G. Norris</font></div>
            </td>
            <td valign="top" width="5%">
              <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">68</font></div>
            </td>
            <td align="left" valign="top" width="40%">
              <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">Chairman
                and Director</font></div>
            </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">1980</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="20%">
              <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">Thomas
                R. Brown</font></div>
            </td>
            <td valign="top" width="5%">
              <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">56</font></div>
            </td>
            <td align="left" valign="top" width="40%">
              <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">Director,
                President, Chief Executive Officer, Secretary and Interim Chief Financial
                Officer</font></div>
            </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">2006</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="20%">
              <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">Daniel
                Hunter</font></div>
            </td>
            <td valign="top" width="5%">
              <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">57</font></div>
            </td>
            <td align="left" valign="top" width="40%">
              <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">Director</font></div>
            </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">2001</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="20%">
              <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">Raymond
                C. Smith</font></div>
            </td>
            <td valign="top" width="5%">
              <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">63</font></div>
            </td>
            <td align="left" valign="top" width="40%">
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            </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">2006</font></div>
            </td>
          </tr>
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              <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">Laura
                M. Clague</font></div>
            </td>
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              <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">48</font></div>
            </td>
            <td align="left" valign="top" width="40%">
              <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">Director</font></div>
            </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">2007</font></div>
            </td>
          </tr>

      </table>
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    <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"><strong><em>Elwood
      G. Norris</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      age 68,
      has been a director of our company since August 1980. Mr. Norris served as
      Chief
      Executive Officer from October 2000 until February 2003. He currently serves
      as
      Chairman of the Board, an executive position, in which he serves in a technical
      advisory role to our company and acts as a spokesman for our products. He served
      as President from August 1980 to February 1994. Mr. Norris managed our research
      and development activities as Chief Technology Officer through December 2000.
      From 1988 to November 1999, he was a director and Chairman of e.Digital
      Corporation, a public company engaged in electronic product development,
      distribution and sales. During that period, he also held various other executive
      officer positions at e.Digital. From August 1989 to October 1999, he served
      as
      director and held various executive officer positions with Patriot Scientific
      Corporation, a public company engaged in the development of microprocessor
      technology and in patent licensing. He is an inventor with 47 U.S. patents,
      primarily in the fields of electrical and acoustical engineering. He is the
      inventor of our HyperSonic Sound and other technologies. In April 2005, he
      was
      named as the 2005 recipient of the $500,000 Lemelson-MIT Prize for his many
      inventions including HyperSonic Sound.</font></div>
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    <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"><strong><em>Thomas
      R. Brown</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      age 56,
      was appointed to our Board of Directors on March 24, 2006 and was appointed
      as
      President and Chief Executive Officer in August 2006 and Interim Chief Financial
      Officer in September 2006. Mr. Brown temporarily resigned from the Board on
      September 5, 2006 upon the commencement of his term as President and Chief
      Executive Officer in order for us to maintain compliance with the rules of
      the
      NASDAQ Stock Market requiring us to have a majority of independent directors.
      Mr. Brown was reappointed to the Board on September 22, 2006. Mr. Brown served
      as President of BrownThompson Executive Search, a financial executive search
      firm, from April 2005 to August 2006. Mr. Brown was employed by Sony
      Electronics, Inc. from February 1988 to September 2004. From April 2001 to
      September 2004, Mr. Brown was Executive Vice President and Deputy President
      of
      the Engineering and Manufacturing division of Sony Electronics, Inc., where
      he
      was responsible for supply chain operations including Information Technology,
      Procurement, Customer Service, North American Manufacturing Operations and
      Finance. From April 2000 to September 2004, Mr. Brown was concurrently the
      Executive Vice President and President of Information Technology Division for
      Sony Electronics, where he was responsible for establishing the North American
      personal computer manufacturing division. Mr. Brown is a member of the board
      of
      directors of Mad Catz Interactive (AMEX/TSX: MCZ), a provider of video game
      accessories. Mr. Brown obtained a B.A. in Economics from Rutgers University
      in
      1973. Mr. Brown is also a certified public accountant.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#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"><strong><em>Daniel
      Hunter, </em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">age
      57,
      has been a director of our company since May 2001. Mr. Hunter has been a
      licensed certified public accountant for the past twenty-five years. He obtained
      his accounting degree from the University of Utah in 1975. For the past twenty
      years, Mr. Hunter has operated his own law offices specializing in business
      and
      tax law. He obtained his Juris Doctor degree from the University of Seattle
      in
      1978.</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"><strong><em>Raymond
      C. Smith</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      age 63,
      has been a director of our company since March 15, 2006. Admiral Smith served
      31
      years in the U.S. Navy SEALS until his retirement in 2001. He held various
      leadership positions, most recently Director of Assessment of the Office of
      the
      Chief of Naval Operations, where he directed capability assessment for the
      U.S.
      Navy. During his service with the Navy SEALS, Admiral Smith held positions
      based
      in San Diego, California, Tampa, Florida and Newport, Rhode Island. From 2001
      to
      2002, Admiral Smith was Chief Operating Officer of Cathedral of Our Lady of
      Angels in a Los Angeles, where he supervised all business activities within
      the
      Cathedral complex. From 2003 to 2005, Admiral Smith was President of Seraphim
      Realty Foundation, a Los Angeles charitable organization dedicated to assisting
      charities with donated real estate as a means of increasing their endowments.
      Admiral Smith is a director of EP Global Communications, Inc. (OTCBB: EPGL),
      publisher of Exceptional Parent magazine and provider of other services for
      families of people with disabilities and special health care needs. Admiral
      Smith obtained a B.S. in Engineering from the U.S. Naval Academy in 1967 and
      an
      M.S. in Oceanography from the Naval Postgraduate School in 1974.</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"><strong><em>Laura
      M. Clague</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      age 48,
      was appointed to our Board of Directors in February 2007. Ms. Clague is the
      executive director and corporate controller of Amylin Pharmaceuticals, Inc.,
      a
      biopharmaceutical company, where she has served since 2003. From 1988 to 1999,
      Ms. Clague was the director of finance and accounting operations, controller
      and
      accounting manager at Sony Electronics, Inc. From 1985 to 1988, Ms. Clague
      served as internal audit supervisor at Cubic Corporation. From 1982 to 1985,
      Ms.
      Clague held various audit positions at KPMG, the last of which was audit
      supervisor. Ms. Clague is a certified public accountant, and has a B.S. in
      Business Administration from Menlo College.</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>BOARD
      AND COMMITTEE MATTERS AND CORPORATE GOVERNANCE 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: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a name="rom19423_10"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Corporate
      Governance</strong></font></a></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
      maintain a corporate governance page on our website which includes key
      information about our corporate governance initiatives, including our Code
      of
      Business Conduct and Ethics, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">our
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Charters
      for the committees of the Board of Directors,</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and
      our</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Whistleblower Protection Policy. The corporate governance page can be found
      at
      www.atcsd.com, by clicking on "Investors," and then on "Corporate
      Governance."</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
      policies and practices reflect corporate governance initiatives that are
      designed to be compliant with the listing requirements of The NASDAQ Stock
      Market and the corporate governance requirements of the Sarbanes-Oxley Act
      of
      2002, including: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font size="2"><br></font>
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            <tr>
              <td valign="top" width="10%">
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              </td>
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                <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">A
                  majority of our Board members are independent of our company and
                  our
                  management;</font></div>
              </td>
            </tr>
            <tr>
              <td valign="top" width="10%">&#160;</td>
              <td align="left" valign="top" width="90%">&#160;</td>
            </tr>
            <tr>
              <td valign="top" width="10%">
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                  members of our standing Board committees&#8212;the Audit Committee, the
                  Compensation Committee, and the Nominating and Governance Committee&#8212;are
                  independent;</font></div>
              </td>
            </tr>
            <tr>
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            </tr>
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                <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
                  independent members of our Board of Directors meet regularly without
                  the
                  presence of management;</font></div>
              </td>
            </tr>
            <tr>
              <td valign="top" width="10%">&#160;</td>
              <td align="left" valign="top" width="90%">&#160;</td>
            </tr>
            <tr>
              <td valign="top" width="10%">
                <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
              </td>
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                <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
                  have a clear code of business conduct and ethics that applies to
                  our
                  principal executive officers, our directors and all of our employees,
                  and
                  is monitored by our Audit
                  Committee;</font></div>
              </td>
            </tr>

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      <div>&#160;</div>
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            <hr style="COLOR: black" noshade size="2">
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            <tr>
              <td valign="top" width="10%">
                <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
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                <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
                  charters of the board committees clearly establish their respective
                  roles
                  and responsibilities; and</font></div>
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            </tr>
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                  have a hotline available to all employees, and our Audit Committee
                  has
                  procedures in place for the anonymous submission of employee complaints
                  on
                  accounting, internal accounting controls, or auditing matters.
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    <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>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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      Board
      of Directors currently consists of five directors: Elwood G. Norris (Chairman),
      Thomas R. Brown, Daniel Hunter, Raymond C. Smith, and Laura M. Clague. During
      the fiscal year ended September 30, 2006 our Board of Directors held
      16</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">meetings
      and acted by unanimous written consent 3 times. All directors attended at least
      75% of the aggregate of the total number of the meetings of the Board of
      Directors and the total number of meetings held by all committees of the Board
      of Directors on which he served (in each case during the period in which he
      served), except for Admiral Smith.</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>Independence
      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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      required under the NASDAQ Stock Market listing standards, a majority of the
      members of a listed company's board of directors must qualify as "independent,"
      as affirmatively determined by the board 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="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">After
      review of all relevant transactions or relationships between each director,
      or
      any of his family members, and us, our senior management and our independent
      registered public accounting firm, our Board of Directors has affirmatively
      determined that Mr. Hunter, Admiral Smith and Ms. Clague are independent
      directors within the meaning of the applicable NASDAQ listing
      standards.</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>Executive
      Sessions</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">As
      required under NASDAQ listing standards, during the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">calendar
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">year
      ended December 31, 2006, our independent directors met at least twice in
      regularly scheduled executive sessions at which only independent directors
      were
      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 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>Stockholder
      Communications with 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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      adopted a formal process by which stockholders may communicate with our Board
      of
      Directors. The Board recommends that stockholders initiate any communications
      with the Board in writing and send them in care of the investor relations
      department by mail to our principal offices, 15378 Avenue of Science, Suite
      100,
      San Diego, CA 92128. This centralized process will assist the Board in reviewing
      and responding to stockholder communications in an appropriate manner. The
      name
      of any specific intended Board recipient should be noted in the communication.
      The Board has instructed the investor relations department to forward such
      correspondence only to the intended recipients; however, the Board has also
      instructed the investor relations department, prior to forwarding any
      correspondence, to review such correspondence and, in its discretion, not to
      forward certain items if they are deemed of a personal, illegal, commercial,
      offensive or frivolous nature or otherwise inappropriate for the Board's
      consideration. In such cases, that correspondence will be forwarded to the
      company's Secretary for review and possible response. This information is also
      contained on our website at www.atcsd.com.</font></div>
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      Regarding the Board of Directors Committees</strong></font></div>
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      the fiscal year ended September 30, 2006, the Board had three standing
      committees: the Audit Committee, the Compensation Committee and the Nominating
      and Governance Committee. The current charters for the Audit Committee, the
      Compensation Committee and the Nominating and Governance Committee are included
      as Annexes 1, 2 and 3. The charters have been adopted, and in some cases amended
      and restated to, among other things, reflect changes to the NASDAQ listing
      standards and SEC rules adopted to implement provisions of the Sarbanes-Oxley
      Act of 2002. The charters can also be found on our website at
      www.atcsd.com.</font></div>
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      Committee</em></font></a></div>
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      Board
      of Directors has a separately designated standing Audit Committee established
      in
      accordance with Section&#160;3(a)(58) of the Securities Exchange Act of 1934.
      The Audit Committee oversees our corporate accounting and financial reporting
      processes. Among other functions, the Audit Committee:</font></div>
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                  <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">evaluates
                    the performance of and assesses the qualifications of the independent
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                    whether to retain or terminate the existing independent registered
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                  with senior management and the independent registered public accounting
                  firm regarding the adequacy and effectiveness of financial reporting;
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                <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">reviews
                  and approves the retention of the independent registered public
                  accounting
                  firm to perform any proposed permissible non-audit
                  services;</font></div>
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                <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">resolves
                  any disagreements between management and the independent registered
                  public
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                <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">considers
                  the effectiveness of our company's internal control system, including
                  information technology security and control;</font></div>
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                  the scope of the independent registered public accounting firm's
                  review of
                  internal control over financial reporting, and obtains reports
                  on
                  significant findings and recommendations, together with management's
                  responses;</font></div>
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                <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">monitors
                  the rotation of partners of the independent registered public accounting
                  firm on our audit engagement team as required by law;</font></div>
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                <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">oversees
                  procedures, as required under applicable law, for the receipt,
                  retention
                  and treatment of complaints received by us regarding accounting,
                  internal
                  accounting controls or auditing matters and the confidential and
                  anonymous
                  submission by employees of concerns regarding questionable accounting
                  or
                  auditing matters;</font></div>
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                <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">reviews
                  the procedures for communicating the code of business conduct and
                  ethics
                  to our company personnel, and for monitoring compliance
                  therewith;</font></div>
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                  annually the Audit Committee's written charter and the committee's
                  performance and reports the same to the Board;</font></div>
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                <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">reviews
                  the financial </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">statements
                  to be included in our Annual Report on Form&#160;10-K as well as interim
                  financial reports;</font></div>
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                <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">discusses
                  with management and the independent registered public accounting
                  firm the
                  results of the annual audit and the results in our quarterly financial
                  statements; and</font></div>
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                  and approves all related party transactions on an ongoing
                  basis.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font size="2">The
      Audit Committee has the authority to retain
      special legal, accounting or other advisors or consultants as it deems necessary
      or appropriate to carry out its duties. The Audit Committee is composed of
      Ms.
      Clague (Chair) and Mr. Hunter and Admiral Smith. At the beginning of fiscal
      2006, Daniel Hunter, Richard M. Wagner and David J. Carter were members of
      the
      Audit Committee, and Mr. Hunter served as Chair. In March 2006, the size of
      the
      Audit Committee was increased to four directors, and Thomas R. Brown joined
      the
      Audit Committee as an independent director and became its Chair. Mr. Wagner
      retired from the Board at the May 2006 annual meeting of stockholders, and
      the
      size of the Audit Committee was then reduced to three directors. Mr. Brown
      resigned from the Audit Committee in August 2006 upon the Board's appointment
      of
      him as President and Chief Executive Officer for a term commencing September
      5,
      2006, and the vacancy on the Audit Committee was filled by Admiral Smith. Mr.
      Carter resigned from the Board and all standing committees in February 2007,
      and
      Ms. Clague was appointed to the Audit Committee to fill the vacancy created
      by
      his resignation. Ms. Clague was also appointed as Chair of the Audit Committee.
      The Audit Committee met 13 times<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">and
      acted
      by unanimous written consent 1 time during fiscal 2006.</font></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font size="2">The
      Board of Directors annually reviews the NASDAQ
      listing standards definition of independence for audit committee members and
      has
      determined that all members of our Audit Committee are independent (as
      independence is currently defined in Rule&#160;4350(d)(2)(A) of the NASDAQ
      listing standards). Our Board of Directors has determined that each member
      of
      the Audit Committee is able to read and understand fundamental financial
      statements, including our company's balance sheet, income statement and cash
      flow statement. Our Board of Directors has also determined that Mr. Hunter
      and
      Ms. Clague each qualify as an "audit committee financial expert," as defined
      in
      applicable SEC rules. In making such determinations, the Board made a
      qualitative assessment of Mr. Hunter's, and Ms. Clague's level of knowledge
      and
      experience based on a number of factors, including each individual's formal
      education and experience. See "Report 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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Compensation
      Committee</em></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 assists in the implementation of, and provides
      recommendations with respect to, our general and specific compensation policies
      and practices for our company's executives. The Compensation Committee also
      administers our 2002 Stock Option Plan and our </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2005
      Equity Incentive Plan. Among other functions, the Compensation
      Committee:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br>
      <div align="left">
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                    <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">reviews
                      and approves the performance goals and objectives for executive
                      officers,
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                    the CEO's performances in light of those goals and objectives
                    and
                    recommends to the Board the CEO's compensation
                    levels;</font></div>
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                      to the Board the compensation of executive officers other than
                      the
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                    on executive compensation for inclusion in our company's proxy
                    statements;</font></div>
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                  <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">reviews
                    annually the Board compensation and makes related recommendations
                    to the
                    Board; and</font></div>
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                    annually the Compensation Committee's written charter and the
                    committee's
                    performance and reports the same to the Board.</font></div>
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      Compensation Committee has the authority to retain special legal or other
      advisors or consultants as it deems necessary or appropriate to carry out its
      duties. The Compensation Committee is composed of Mr. Hunter (Chair), Admiral
      Smith, and Ms. Clague. At the beginning of fiscal 2006, Richard M. Wagner,
      Mr.
      Hunter and David J. Carter were members of the Compensation Committee, and
      Mr.
      Wagner served as Chair. In March 2006, the size of the Compensation Committee
      was increased to four directors, and Admiral Smith joined the Compensation
      Committee as an independent director. Later in March 2006, the size of the
      Compensation Committee was increased to five directors, and Thomas R. Brown
      joined the Compensation Committee as an independent director. Mr. Wagner retired
      from the Board at the May 2006 annual meeting of stockholders, and the size
      of
      the Compensation Committee was then reduced to four directors, and Mr. Hunter
      became Chair of the Compensation Committee. Mr. Brown resigned from the
      Compensation Committee in August 2006 upon the Board's appointment of him as
      President and Chief Executive Officer for a term commencing September 5, 2006,
      and the size of the Compensation Committee was reduced to three directors.
      Mr.
      Carter resigned from the Board and all standing committees in February 2007,
      and
      Ms. Clague was appointed to the Compensation Committee to fill the vacancy
      created by his resignation. The Compensation Committee held 12
      meetings</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and
      acted by unanimous written consent 3 times </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">during
      fiscal 2006. See "Report of the Compensation Committee."</font></div>
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    <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">Each
      member of the Compensation Committee is independent (as independence is
      currently defined in Rule&#160;4200(a)(15) of the NASDAQ listing standards), an
      "outside director" as defined in Section 162(m) of the Internal Revenue Code
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      a "non-employee director" as defined in Rule 16b-3 under the Securities Exchange
      Act of 1934.</font></div>
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    <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
      Board
      of Directors established a Nominating and Governance Committee in April 2004.
      The Nominating and Governance Committee identifies and recommends to the Board
      individuals qualified to become Board members, reviews and advises the Board
      with respect to corporate governance principals and policies, and oversees
      the
      annual evaluation of the Board's effectiveness. Among other functions, the
      Nominating and Governance Committee:</font></div>
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                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <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">identifies,
                        reviews and evaluates candidates to serve on our Board of
                        Directors;</font></div>
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                  </div>
                </div>
              </td>
            </tr>
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              <td valign="top" width="10%">&#160;</td>
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              </td>
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                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <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">makes
                      recommendations to the Board regarding the membership of the
                      committees of
                      our Board;</font></div>
                  </div>
                </div>
              </td>
            </tr>
            <tr>
              <td valign="top" width="10%">&#160;</td>
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              </td>
            </tr>
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <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">reviews
                        annually the Nominating and Governance Committee's written
                        charter and the
                        committee's performance;</font></div>
                    </div>
                  </div>
                </div>
              </td>
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              <td align="left" valign="top" width="90%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <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">oversees
                      an annual self-evaluation of our Board;</font></div>
                  </div>
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                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <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">reviews
                      with the Board the requisite skills and criteria for new Board
                      members and
                      the composition of the Board as a whole;</font></div>
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              <td align="left" valign="top" width="90%">&#160;</td>
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                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <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">oversees
                      a policy for considering shareholder nominees for directors
                      and develops
                      the procedures that must be followed by shareholders in submitting
                      recommendations;</font></div>
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              <td align="left" valign="top" width="90%">&#160;</td>
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            <tr>
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                <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">evaluates
                  director candidates recommended by the shareholders using the criteria
                  and
                  the principles for director selection;</font></div>
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              <td align="left" valign="top" width="90%">&#160;</td>
            </tr>
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                <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">oversees
                  a procedure for shareholders to communicate with the
                  Board;</font></div>
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              <td align="left" valign="top" width="90%">&#160;</td>
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                <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">considers
                  conflicts of interest of Board members and senior management, and,
                  to the
                  extent a conflict constitutes a related party transaction, refers
                  the
                  approval of such matter to the Audit Committee;</font></div>
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            <tr>
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                <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">oversees
                  director orientation, continuing education programs, director retirement
                  policies and resignation of directors from the Board;
                  and</font></div>
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              <td align="left" valign="top" width="90%">&#160;</td>
            </tr>
            <tr>
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                <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
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                <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">is
                  responsible for corporate governance principles for our company.
                  </font></div>
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            <tr>
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              </td>
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        </table>
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      Nominating and Governance Committee has the authority to retain special legal
      or
      other advisors or consultants as it deems necessary or appropriate to carry
      out
      its duties. The Nominating and Governance Committee is currently composed of
      Mr.
      Hunter and Admiral Smith. At the beginning of fiscal 2006, David J. Carter,
      Mr.
      Hunter and Richard M. Wagner were members of the Compensation Committee, and
      Mr.
      Carter served as Chair. In March 2006, the size of the Nominating and Governance
      Committee was increased to four directors, and Admiral Smith joined the
      Nominating and Governance Committee as an independent director. Mr. Wagner
      retired from the Board at the May 2006 annual meeting of stockholders, and
      the
      size of the Nominating and Governance Committee was then reduced to two
      directors, with Mr. Carter and Admiral Smith remaining members. Mr. Carter
      resigned from the Board and all standing committees in February 2007. Mr. Hunter
      was appointed to the Nominating and Governance Committee as Chair to fill the
      vacancy created by Mr. Carter's resignation in March 2007. The Nominating and
      Governance Committee held 10 meetings</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">and
      acted
      by unanimous written consent 1 time </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">during
      fiscal 2006.</font>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-8-</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#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">All
      members of the Nominating and Governance Committee are independent (as
      independence is currently defined in Rule&#160;4200(a)(15) of the NASDAQ listing
      standards). </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>Consideration
      of Director Nominees</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"><em>Director
      Qualifications</em></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 and Governance Committee believes that new candidates for director
      should have certain minimum qualifications, including having the knowledge,
      capabilities, experience and contacts that complement those currently existing
      within our company; ability and qualifications to provide our management with
      an
      expanded opportunity to explore ideas, concepts and creative approaches to
      existing and future issues, and to guide management through the challenges
      and
      complexities of building a quality company; ability to meet contemporary public
      company board standards with respect to general governance; stewardship, depth
      of review, independence, financial certification, personal integrity and
      responsibility to stockholders; genuine desire and availability to participate
      actively in the development of our future; and an orientation toward maximizing
      stockholder value in realistic time frames. The Committee also intends to
      consider for new Board members such factors as ability to contribute
      strategically through relevant industry background and experience, on either
      the
      vendor or the end user side; strong current industry contacts; ability and
      willingness to introduce and open doors to executives of potential customers
      and
      partners; current employment as the CEO of an acoustic products, media,
      advertising, military or government supply company larger than our company;
      independence from our company and current board members; and a recognizable
      name
      that would add credibility and value to our company and its stockholders. The
      Committee may modify these qualifications from time to time.</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"><em>Evaluating
      Nominees for Director</em></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 and Governance Committee reviews candidates for director nominees
      in
      the context of the current composition of our Board, our operating requirements
      and the long-term interests of stockholders. In conducting this assessment,
      the
      Committee currently considers, among other factors, diversity, age, skills,
      and
      such other factors as it deems appropriate given the current needs of the Board
      and our company, to maintain a balance of knowledge, experience and capability.
      In the case of incumbent directors whose terms of office are set to expire,
      the
      Nominating and Governance Committee reviews such directors' overall service
      to
      our company during their term, including the number of meetings attended, level
      of participation, quality of performance, and any other relationships and
      transactions that might impair such directors' independence. In the case of
      new
      director candidates, the Committee also determines whether the nominee must
      be
      independent, which determination is based upon applicable NASDAQ listing
      standards, applicable SEC rules and regulations and the advice of counsel,
      if
      necessary. The Committee then uses its network of contacts to compile a list
      of
      potential candidates, but may also engage, if it deems appropriate, a
      professional search firm. The Committee conducts any appropriate and necessary
      inquiries into the backgrounds and qualifications of possible candidates after
      considering the function and needs of our Board of Directors. The Committee
      meets to discuss and consider such candidates' qualifications and then selects
      a
      nominee for recommendation to our Board of Directors by majority vote. To date,
      neither the Nominating and Governance Committee nor any predecessor to the
      Committee has paid a fee to any third party to assist in the process of
      identifying or evaluating director candidates. To date, neither the Nominating
      and Governance Committee nor any predecessor to the Committee has rejected
      a
      timely director nominee from a stockholder or group of stockholders that
      beneficially owned, in the aggregate, more than 5% of our voting
      stock.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</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"><em>Stockholder
      Nominations</em></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
      Committee applies the same guidelines (described above) to stockholder nominees
      as applied to nominees from other sources. Any stockholder who wishes to
      recommend for the Nominating and Governance Committee's consideration a
      prospective nominee to serve on the Board of Directors may do so by giving
      the
      candidate's name and qualifications in writing to our Chairman of the Board
      at
      the following address: 15378 Avenue of Science, Suite 100, San Diego, California
      92128.</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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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-9-</font></div>
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    <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"><strong>Code
      Of Business Conduct And 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">We
      have
      adopted a "Code of Business Conduct and Ethics," a code of ethics that applies
      to all employees, including our executive officers. A copy of the Code of
      Business Conduct and Ethics is posted on our Internet site at www.atcsd.com.
      In
      the event we make any amendments to, or grant any waivers of, a provision of
      the
      Code of Business Conduct and Ethics that applies to the principal executive
      officer, principal financial officer, or principal accounting officer that
      requires disclosure under applicable SEC rules, we intend to disclose such
      amendment or waiver and the reasons therefor on a Form 8-K or on our next
      periodic report.</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>PROPOSAL
      T</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>WO</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>RATIFICATION
      OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM</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 has selected Swenson Advisors, LLP as our independent registered
      public accounting firm for the fiscal year ending September&#160;30, 2007.
      Swenson Advisors, LLP has served as our independent registered public accounting
      firm since July 2005 and audited our financial statements for the fiscal year
      ended September 30, 2006. A representative of</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Swenson
      Advisors, LLP is expected to be present at the Annual Meeting, will have the
      opportunity to make a statement if he or she desires to do so, and is expected
      to be available to respond to appropriate questions. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Stockholder
      ratification of the selection of Swenson Advisors, LLP is not required by our
      bylaws or otherwise. However, we are submitting the selection of Swenson
      Advisors, LLP to the stockholders for ratification as a matter of good corporate
      practice. If the stockholders fail to ratify the selection, the Audit Committee
      will consider whether or not to retain that firm. Even if the selection is
      ratified, the Audit Committee in its discretion may direct the appointment
      of a
      different independent registered public accounting firm at any time during
      the
      year if it determines that such a change would be in the best interest of our
      company and our stockholders.</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
      affirmative vote of a majority of the votes cast at the meeting, either in
      person or by proxy, is required to ratify the selection of Swenson Advisors,
      LLP. Abstentions will be counted toward the tabulation of votes cast on
      proposals presented to the stockholders for the purpose of determining a quorum
      and will have the same effect as negative votes. Broker non-votes are counted
      towards a quorum, but are not counted for any purpose in determining whether
      this matter has been approved.</font></div>
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    <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 presents fees billed by Swenson Advisors, LLP for professional
      services rendered for the fiscal years ended September&#160;30, 2006 and
      2005.</font></div>
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            </td>
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            <td width="2%" style="border-bottom: medium none;">&#160;</td>
            <td colspan="2" valign="bottom" width="12%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" colspan="2" valign="bottom" width="12%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">
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            <td align="left" valign="bottom" width="2%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="11%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
          </tr>
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            <td align="left" valign="bottom" width="71%" style="border-bottom: #cceeff;">
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                Related Fees (2)</font></div>
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            <td width="2%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">
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            <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;">
              <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">&#8212;
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
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            <td align="left" valign="bottom" width="71%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="11%">&#160;</td>
            <td align="left" valign="bottom" width="2%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="11%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
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            <td align="left" valign="bottom" width="71%" style="border-bottom: #cceeff;">
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            </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;">
              <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">&#8212;
                </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;">&#160;</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">&#8212;
                </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="71%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="11%">&#160;</td>
            <td align="left" valign="bottom" width="2%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="11%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="71%" 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">All
                Other Fees (4)</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;">
              <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">&#8212;
                </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;">&#160;</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">&#8212;
                </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="71%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="11%">&#160;</td>
            <td align="left" valign="bottom" width="2%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="11%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="71%" 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">Total</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">$</font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">591,430</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</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">430,500</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</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>
        <hr style="COLOR: black" align="left" noshade size="1" width="10%">
      </div>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="4%">
              <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">(1)</font></div>
            </td>
            <td align="left" valign="top" width="74%">
              <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">Audit
                Fees include fees and expenses for professional services rendered
                in
                connection with the audit of our financial statements for those years,
                reviews of the financial statements included in each of our quarterly
                reports on Form 10-Q during those years and services that are normally
                provided by the independent registered public accounting firm in
                connection with statutory and regulatory filings or engagements.
                Audit
                fees also included the audit of management's report on the effectiveness
                of our company's internal control over financial reporting, as required
                by
                Section 404 of the Sarbanes-Oxley Act of 2002.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">
              <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">(2)</font></div>
            </td>
            <td align="left" valign="top" width="74%">
              <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">Audit
                Related Fees consist of fees billed for assurance related services
                that
                are reasonably related to the performance of the audit or review
                of our
                financial statements and are not reported under "Audit Fees." Included
                in
                Audit Related Fees are fees and expenses related to reviews of
                registration statements and SEC filings other than Forms 10-K and
                10-Q.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">
              <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">(3)</font></div>
            </td>
            <td align="left" valign="top" width="74%">
              <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">Tax
                Fees include the aggregate fees paid by us during the fiscal year
                indicated for professional services for tax compliance, tax advice
                and tax
                planning. No such fees were billed by Swenson Advisors for fiscal
                2006 or
                2005.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">
              <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">(4)</font></div>
            </td>
            <td align="left" valign="top" width="74%">
              <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">All
                Other Fees consist of fees for products and services other than the
                services reported above. No such fees were billed by Swenson Advisors
                for
                fiscal 2006 or 2005.</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 id="PGBRK" style="MARGIN-LEFT: 0pt; 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: ">-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="right">
        </div>
      </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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Audit
      Committee Pre-Approval Policies and Procedures</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">All
      audit
      and non-audit services are pre-approved by the Audit Committee, which considers,
      among other things, the possible effect of the performance of such services
      on
      the registered public accounting firm's independence. The Audit Committee
      pre-approves the annual engagement of the principal independent registered
      public accounting firm, including the performance of the annual audit and
      quarterly reviews for the subsequent fiscal year, and pre-approves specific
      engagements for tax services performed by such firm. The Audit Committee has
      also established pre-approval policies and procedures for certain enumerated
      audit and audit related services performed pursuant to the annual engagement
      agreement, including such firm's attendance at and participation at board and
      committee meetings; services of such firm associated with SEC registration
      statements, periodic reports and other documents filed with the SEC or other
      documents issued in connection with securities offerings, such as comfort
      letters and consents; such firm's assistance in responding to any SEC comments
      letters; and consultations with such firm as to the accounting or disclosure
      treatment of transactions or events and/or the actual or potential impact of
      final or proposed rules, standards or interpretations by the SEC, Public Company
      Accounting Oversight Board (PCAOB), Financial Accounting Standards Board (FASB),
      or other regulatory or standard-setting bodies. The Audit Committee is informed
      of each service performed pursuant to its pre-approval policies and
      procedures.</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 has considered the role of Swenson Advisors, LLP in providing services
      to us for the fiscal year ended September 30, 2006 and has concluded that such
      services are compatible with such firm's independence.</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>Our
      Board of Directors recommends a vote IN FAVOR of Proposal
      Two</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>ADDITIONAL
      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: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Management</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">Set
      forth
      below is information regarding our executive officers. All executive officers
      serve at the pleasure of the Board 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>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" 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"><strong>Name</strong></font></div>
            </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"><strong>Age</strong></font></div>
            </td>
            <td align="left" valign="top" width="53%">
              <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>Position</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" 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">Elwood
                G. Norris*</font></div>
            </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">67</font></div>
            </td>
            <td align="left" valign="top" width="53%">
              <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">Chairman
                of the Board</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" 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">Thomas
                R. Brown*</font></div>
            </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">56</font></div>
            </td>
            <td align="left" valign="top" width="53%">
              <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,
                Chief Executive Officer, Secretary and Interim Financial
                Officer</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" 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">Karen
                Jordan</font></div>
            </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">36</font></div>
            </td>
            <td align="left" valign="top" width="53%">
              <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">Chief
                Accounting Officer</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" 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">James
                Croft, III</font></div>
            </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">53</font></div>
            </td>
            <td align="left" valign="top" width="53%">
              <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">Senior
                Vice President, Research and
                Development</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">&#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">*
      Biographical information about Elwood G. Norris and Thomas R. Brown is set
      forth
      under Proposal One above.</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"><strong><em>Karen
      Jordan</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      age 36,
      joined our company in November 2005 as Director of Finance, and in December
      2005
      was appointed as Chief Accounting Officer. From July 2003 to November 2005,
      Ms.
      Jordan was a self-employed bankruptcy executive, managing the Estates of LCS
      Management, Inc. and LCS West, Inc. From January 2001 to July 2003, Ms. Jordan
      was Corporate Controller with LifeCare Solutions, Inc., a provider of integrated
      home healthcare products and services. From June 1996 to January 2001, Ms.
      Jordan held various positions with Quidel Corporation, a developer and
      manufacturer of diagnostic tests for detection of a variety of medical
      conditions and illnesses. At the time Ms. Jordan left Quidel Corporation, she
      held the position of Assistant Controller. Ms. Jordan is a Fellow Chartered
      Accountant in Ireland. Ms. Jordan received her Associate Chartered Accountant
      license from the Institute of Chartered Accountants in Ireland in
      1993.</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; 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: ">-11-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#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"><strong><em>James
      Croft, III</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      age 53,
      joined our company in October 1997 as Vice President of Engineering. In December
      2000, he was appointed Chief Technology Officer. As part of our March 2003
      reorganization, Mr. Croft was appointed Senior Vice President of Research and
      Development. In August 2005, he was appointed as Chief Technology Officer and
      Vice President of Development. From October 1992 to October 1997 he was an
      executive with Carver Corporation, then a publicly traded high-end audio
      supplier. He was appointed Vice President of Marketing and Product Development
      for Carver Corporation in March 1993 and Vice President Research and Development
      in February 1995. From 1990 through October 1992 Mr. Croft held various
      positions at Dahlquist, Inc., a loudspeaker manufacturer, including Vice
      President of Research and Development. Mr. Croft is also a member of the board
      of directors of Definitive Audio, Inc., a Seattle audio specialty retailer
      that
      he co-founded in 1975 and managed until 1985.</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>SECURITY
      OWNERSHIP OF CERTAIN</strong></font></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>BENEFICIAL
      OWNERS AND MANAGEMENT</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
      following table sets forth certain information regarding the ownership of our
      common stock as of February 16, 2007 by: (i) each director; (ii) each of the
      named executive officers reflected in the Summary Compensation Table; (iii)
      all
      our executive officers and directors as a group; and (iv) all those known by
      us
      to be beneficial owners of more than five percent of our common stock.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" colspan="4" valign="bottom" width="25%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Title
                of Class</strong></font></div>
            </td>
            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" colspan="4" valign="bottom" width="26%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Name
                and Address of</strong></font></div>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Beneficial
                Owner</strong></font></div>
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            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="right" colspan="3" valign="top" width="15%" style="border-bottom: black thin 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"><strong>Amount
                &amp; Nature of</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>Beneficial
                Ownership (1)</strong></font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="3" valign="bottom" width="11%" style="border-bottom: black thin 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"><strong>Percent</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>of
                Class (1)</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" colspan="4" 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">Common
                Stock</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">
              <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">Elwood
                G. Norris</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">15378
                Avenue of Science Ste. 100</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">San
                Diego, California 92128</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">
              <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">4,048,015
                </font></div>
            </td>
            <td valign="top" width="2%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font size="2">(2)</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">
              <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><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3</font></div>
            </td>
            <td valign="top" width="1%"><font size="2">%</font>&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" colspan="4" valign="top" width="25%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">&#160;</td>
            <td valign="top" width="2%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">&#160;</td>
            <td valign="top" width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" colspan="4" 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">Common
                Stock</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">
              <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">Thomas
                R. Brown</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">15378
                Avenue of Science Ste. 100</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">San
                Diego, California 92128</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">
              <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">105,834
                </font></div>
            </td>
            <td valign="top" width="2%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font size="2">(3)</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">
              <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">*</font></div>
            </td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" colspan="4" valign="top" width="25%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">&#160;</td>
            <td valign="top" width="2%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">&#160;</td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" colspan="4" 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">Common
                Stock</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">
              <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">Austin
                W. Marxe and David M. Greehouse</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">527
                Madison Avenue, Ste. 2600</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">New
                York, NY 10022</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">
              <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">4,825,920
                </font></div>
            </td>
            <td valign="top" width="2%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font size="2">(4)</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">
              <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">15.4</font></div>
            </td>
            <td valign="top" width="1%"><font size="2">%</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" colspan="4" valign="top" width="25%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">&#160;</td>
            <td valign="top" width="2%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">&#160;</td>
            <td valign="top" width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" colspan="4" 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">Common
                Stock</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">
              <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">Laura
                M. Clague</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">15378
                Avenue of Science Ste. 100</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">San
                Diego, California</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">92128</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">
              <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">&#8212;&#160;&#160;</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">
              <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">&#8212;</font></div>
            </td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" colspan="4" valign="top" width="25%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">&#160;</td>
            <td width="2%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">&#160;</td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" colspan="4" 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">Common
                Stock</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">
              <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">Daniel
                Hunter</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">15378
                Avenue of Science Ste. 100</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">San
                Diego, California 92128</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">
              <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">157,875
                </font></div>
            </td>
            <td valign="top" width="2%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font size="2">(5)</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">
              <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">*</font></div>
            </td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" colspan="4" valign="top" width="25%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">&#160;</td>
            <td valign="top" width="2%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">&#160;</td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" colspan="4" 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">Common
                Stock</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">
              <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">Raymond
                C. Smith</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">15378
                Avenue of Science Ste. 100</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">San
                Diego, California 92128</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">
              <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">30,500</font></div>
            </td>
            <td valign="top" width="2%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font size="2">(6)</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">
              <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">*</font></div>
            </td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" colspan="4" valign="top" width="25%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">&#160;</td>
            <td valign="top" width="2%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">&#160;</td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" colspan="4" 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">Common
                Stock</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">
              <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">James
                Croft, III</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">15378
                Avenue of Science Ste. 100</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">San
                Diego, California 92128</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">
              <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">129,009</font></div>
            </td>
            <td valign="top" width="2%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font size="2">(7)</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">
              <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">*</font></div>
            </td>
            <td width="1%">&#160;</td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; 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: ">-12-</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>
    <div>&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" colspan="4" valign="bottom" width="25%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Title
                of Class</strong></font></div>
            </td>
            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Name
                and Address of</strong></font></div>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Beneficial
                Owner</strong></font></div>
            </td>
            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="right" colspan="3" valign="top" width="15%" style="border-bottom: black thin 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"><strong>Amount
                &amp; Nature of</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>Beneficial
                Ownership (1)</strong></font></div>
            </td>
            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="right" colspan="3" valign="top" width="11%" style="border-bottom: black thin 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"><strong>Percent</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>of
                Class (1)</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" colspan="4" 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">Common
                Stock</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">
              <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">Karen
                Jordan</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">15378
                Avenue of Science Ste. 100</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">San
                Diego, California 92128</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">
              <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">26,042
                </font></div>
            </td>
            <td valign="top" width="2%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font size="2">(6)</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">
              <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">*</font></div>
            </td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" colspan="4" valign="top" width="25%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">&#160;</td>
            <td valign="top" width="2%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">&#160;</td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" colspan="4" 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">Common
                Stock</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">
              <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">Kalani
                Jones</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">15378
                Avenue of Science Ste. 100</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">San
                Diego, California 92128</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">
                <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">&#8212;
                  </font></div>
              </div>
            </td>
            <td valign="top" width="2%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font size="2">(8)</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">
              <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">&#8212;</font></div>
            </td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" colspan="4" valign="top" width="25%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">&#160;</td>
            <td valign="top" width="2%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">&#160;</td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" colspan="4" 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">Common
                Stock</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">
              <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
                R. Zavoli</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">15378
                Avenue of Science Ste. 100</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">San
                Diego, California 92128</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">
                <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">&#8212;
                  </font></div>
              </div>
            </td>
            <td valign="top" width="2%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font size="2">(8)</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">
              <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">&#8212;</font></div>
            </td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" colspan="4" valign="top" width="25%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">&#160;</td>
            <td valign="top" width="2%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">&#160;</td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" colspan="4" 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">Common
                Stock</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">
              <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
                Gray</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">15378
                Avenue of Science Ste. 100</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">San
                Diego, California 92128</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">
              <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">&#8212;</font></div>
            </td>
            <td valign="top" width="2%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font size="2">(8)</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">
              <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">&#8212;</font></div>
            </td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" colspan="4" valign="top" width="25%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">&#160;</td>
            <td valign="top" width="2%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">&#160;</td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" colspan="4" 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">Common
                Stock</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">
              <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">Alan
                J. Ballard</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">15378
                Avenue of Science Ste. 100</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">San
                Diego, California 92128</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">
              <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">&#8212;</font></div>
            </td>
            <td valign="top" width="2%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font size="2">(8)</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">
              <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">&#8212;</font></div>
            </td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" colspan="4" valign="top" width="25%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">&#160;</td>
            <td valign="top" width="2%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">&#160;</td>
            <td width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" colspan="4" 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">All
                directors&#160;&amp; executive officers</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">as
                a group (7 persons)</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" colspan="4" valign="top" width="26%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="13%">
              <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">4,497,275</font></div>
            </td>
            <td valign="top" width="2%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font size="2">(9)</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" colspan="2" valign="top" width="10%">
              <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">14.7</font></div>
            </td>
            <td valign="top" width="1%"><font size="2">%</font></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="left">
      <div>
        <hr style="COLOR: black" align="left" noshade size="1" width="10%">
      </div>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="3%">
              <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">*</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Less
                than 1%. </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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>See
      below for footnote disclosure.</em></font></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="3%">
              <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">(1)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Beneficial
                ownership is determined in accordance with the rules of the SEC and
                generally includes voting or investment power with respect to securities.
                Except as otherwise indicated below, this table is based on information
                supplied by officers, directors and principal stockholders. The inclusion
                in this table of such shares does not constitute an admission that
                the
                named stockholder is a direct or indirect beneficial owner of, or
                receives
                the economic benefit of, such shares. Percentage of class is based
                on
                30,093,227 shares of common stock outstanding on February 16, 2007.
                Except
                as otherwise stated below, each of the named persons has sole voting
                and
                investment power with respect to the shares shown (subject to community
                property laws).</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(2)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Includes
                3,825,515 shares held by a family trust for which Mr. Norris serves
                as
                trustee, 37,500 shares issuable upon exercise of a warrant held by
                such
                trust, and 185,000 shares issuable upon the exercise of outstanding
                stock
                options within 60 days of February 16, 2007.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(3)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Includes
                95,834 issuable upon exercise of outstanding stock options within
                60 days
                of February 16, 2007.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(4)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Beneficial
                joint ownership by Mr. Marxe and Mr. Greenhouse is based solely on
                information as of December 31, 2006 as set forth in Schedule 13G/A
                filed
                on February 14, 2007. Consists of 3,586,163 shares and 1,179,117
                warrants
                to purchase 1,239,757 shares held by the following entities: 1,574,806
                shares and 537,319 warrants to purchase 565,196 shares owned by Special
                Situations Fund III QP, L.P., 137,082 shares and 46,872 warrants
                to
                purchase 49,315 shares owned by Special Situations Fund III, L.P.,
                550,640
                shares and 177,871 warrants to purchase 190,605 shares owned by Special
                Situations Private Equity Fund, L.P., 183,435 shares and 57,729 warrants
                to purchase 60,155 shares owned by Special Situations Technology
                Fund,
                L.P., and 1,140,200 shares and 359,326 warrants to purchase 374,486
                shares
                owned by Special Situations Technology Fund II, L.P. MGP Advisors
                Limited
                Partnership, or MGP, is the general partner of the Special Situations
                Fund
                III, L.P. and the Special Situations Fund III QP, L.P. and AWM Investment
                Company, Inc., or AWM, is the general partner of MGP. SST Advisers,
                L.L.C., or SSTA, is the general partner of the Special Situations
                Technology Fund, L.P. and Special Situations Technology Fund II,
                L.P. MG
                Advisers, L.L.C., or MG, is the general partner of the Special Situations
                Private Equity Fund, L.P. AWM is the investment adviser to Special
                Situations Fund III QP, L.P., Special Situations Technology Fund,
                L.P.,
                Special Situations Technology Fund II, L.P. and Special Situations
                Private
                Equity Fund, L.P. Austin W. Marxe and David M. Greenhouse are the
                principal owners of MGP, AWM, SSTA and MG, and are principally responsible
                for the selection, acquisition, voting and disposition of the portfolio
                securities by each investment adviser on behalf of its fund. Both
                Messrs.
                Marxe and Greenhouse share voting and dispositive power with respect
                to
                shares held by these stockholders.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(5)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Includes
                62,000 shares held by spouse, 6,000 shares held by Profit Sharing
                Trust
                and 89,875 shares issuable upon the exercise of outstanding stock
                options
                within 60 days of February 16, 2007.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(6)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Consists
                of shares issuable upon exercise of outstanding stock options within
                60
                days of February 16, 2007.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(7)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Includes
                124,959 shares issuable upon the exercise of outstanding stock options
                within 60 days of February 16, 2007.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(8)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">We
                have no information on ownership by these former executive
                officers.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(9)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Includes
                522,210 shares issuable upon exercise of outstanding stock options
                within
                60 days of February 16, 2007 and 37,500 shares issuable upon exercise
                of
                warrants.</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 id="PGBRK" style="MARGIN-LEFT: 0pt; 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: ">-13-</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>
    <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: 10pt; FONT-FAMILY: Times New Roman"><strong>SECTION
      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">Section
      16(a) of the Exchange Act requires our officers, directors and persons who
      own
      more than 10% of any class of our securities registered under Section 12(g)
      of
      the Exchange Act to file reports of ownership and changes in ownership with
      the
      SEC. Officers, directors and greater than 10% stockholders are required by
      SEC
      regulations to furnish us with copies of all Section 16(a) forms they
      file.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#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 on a review of copies of such reports furnished to us and written
      representations that no other reports were required during the fiscal year
      ended
      September 30, 2006, we believe that all persons subject to the reporting
      requirements pursuant to Section 16(a) filed the required reports on a timely
      basis with the SEC except that Mr. Norris reported a September 20, 2006 exercise
      of a warrant on</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Form 4
      late on October 3, 2006</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="center"><a name="page_du1125_1_28"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>EXECUTIVE
      COMPENSATION</strong></font></a></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>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">In
      June
      2005, upon recommendation of the Compensation Committee, our Board of Directors
      approved a director compensation plan. Under the plan, each of our non-employee
      directors was paid a fee of $1,000 per month, payable quarterly in arrears.
      No
      additional amounts were payable for committee participation.</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 awarded options to Admiral Smith, Mr. Brown and Ms.
      Clague upon joining the Board of Directors as non-employee directors in March
      2006, March 2006 and February 2007. Each option was granted under our 2005
      Equity Incentive Plan, is exercisable for 50,000 shares of our common stock,
      has
      an exercise price equal to the closing price of our common stock reported on
      the
      date of grant, has a five year term and vests quarterly over four years, subject
      to continued service and other conditions. The exercise price for Admiral
      Smith&#8217;s option is $3.32 per share, for Mr. Brown&#8217;s option is $3.65 per share,
      and for Ms. Clague's option is $4.42 per share.</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
      February 2007, the Compensation Committee recommended to the Board, and the
      Board approved, one-time awards of $5,000 to be made to Mr. Hunter, Admiral
      Smith and David J. Carter in recognition of their service during management
      changes and the voluntary review of our historical stock option and stock
      grants.</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
      February 2007, the Compensation Committee awarded to incumbent directors Mr.
      Hunter and Admiral Smith non-statutory options under our 2005 Equity Incentive
      Plan exercisable for 54,000 shares of our common stock, with an exercise price
      equal to the closing price of our common stock on the date of grant (which
      was
      $4.37). Such options were vested as to one third of the shares upon grant,
      and
      quarterly thereafter through the second anniversary of the date of grant,
      subject to continuing service to our 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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Summary
      Compensation Table</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</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">Set
      forth
      below is information concerning the compensation of each person who served
      as
      our Principal Executive Officer and our two other most highly compensated
      executive officers, other than those who served as Principal Executive Officers,
      that were serving at September 30, 2006 (representing all of our executive
      officers serving at that date who earned over $100,000 in salary and bonus
      for
      the fiscal year ending on that date and who did not serve as Principal Executive
      Officer), and two additional individuals that served as executive officers
      during the fiscal year ended September 30, 2006 but were no longer serving
      at
      September 30, 2006. We refer to each of such persons as a "named executive
      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 id="PGBRK" style="MARGIN-LEFT: 0pt; 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: ">-14-</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>
    <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: 10pt; FONT-FAMILY: Times New Roman"><strong>Summary
      Compensation Table</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 cellpadding="0" cellspacing="0" id="ftable" width="100%">

          <tr>
            <td align="left" valign="bottom" width="32%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" colspan="8" valign="bottom" width="32%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: black thin 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"><strong>Long
                Term</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>Compensation</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: #ffffff thin solid;">
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="32%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" colspan="8" valign="bottom" width="32%" style="border-bottom: black thin 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"><strong>Annual
                Compensation</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: black thin 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"><strong>Awards</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: #ffffff thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="32%" style="border-bottom: black thin 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"><strong>Name
                and Principal Position</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: black thin 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"><strong>Fiscal</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>Year</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
            <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: black thin 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"><strong>Salary</strong>&#160;</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: black thin 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"><strong>Bonus</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: black thin 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"><strong>Other
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: black thin 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"><strong>Securities</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>Underlying</strong></font></div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
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            <td align="left" valign="top" width="32%" 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">Elwood
                G. Norris,</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">Chairman</font></div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2006</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2005</font></div>
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            <td align="left" valign="bottom" width="1%" 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">$</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              <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>
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            <td align="right" valign="bottom" width="9%" 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">203,846</font></div>
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              <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">200,000</font></div>
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            <td align="left" valign="bottom" width="1%" 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="9%" 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">&#8212;</font></div>
              <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">&#8212;</font></div>
              <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">&#8212;</font></div>
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            <td align="left" valign="bottom" width="1%" 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="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
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            <td align="left" valign="bottom" width="1%" 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="9%" 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">100,000</font></div>
              <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">70,000</font></div>
              <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">&#8212;</font></div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;"><font size="2">$</font></td>
            <td align="right" valign="bottom" width="9%" 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">&#8212;</font></div>
              <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">&#8212;</font></div>
              <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">1,385(1<font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></font></div>
            </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">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="32%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="top" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="top" width="1%">&#160;</td>
            <td align="right" valign="top" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="top" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="top" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="top" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="top" width="1%">&#160;</td>
            <td align="right" valign="top" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="32%" 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">Thomas
                R. Brown (2)</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">President,
                Chief Executive Officer</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">and
                Interim Financial Officer</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="top" width="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2006</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="top" 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="top" width="9%" 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">22,070</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="top" width="9%" 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">&#8212;</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="top" width="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="top" width="9%" 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">250,000</font></div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="top" 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="top" width="9%" 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">58,500(2<font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></font></div>
            </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">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="32%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="top" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="32%" 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">John
                R. Zavoli (3)</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">Former
                President and</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">Chief
                Operating Officer</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="top" width="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2006</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="top" 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="top" width="9%" 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">206,468</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="top" width="9%" 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">&#8212;</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="top" width="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="top" width="9%" style="border-bottom: #cceeff;">
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              <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>
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            <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">&#160;</div>
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            <td align="left" valign="bottom" width="32%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="top" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
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              <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">Kalani
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            <td align="right" valign="bottom" width="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2006</font></div>
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            <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>
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            <td align="right" valign="bottom" width="9%" style="border-bottom: #cceeff;">
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            <td align="left" valign="bottom" width="1%" 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="9%" 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">&#8212;</font></div>
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            <td align="left" valign="bottom" width="1%" 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="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
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            <td align="left" valign="bottom" width="1%" 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="9%" 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">&#8212;</font></div>
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            <td align="left" valign="bottom" width="1%" 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>
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            <td align="right" valign="bottom" width="9%" 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">87,293(4)</font></div>
              <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">&#8212;</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="32%" 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">Chief
                Operating Officer</font></div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2004</font></div>
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            <td align="left" valign="bottom" width="1%" 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">$</font></div>
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            <td align="right" valign="bottom" width="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">179,808</font></div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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            <td align="right" valign="bottom" width="9%" 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">50,000<font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(5)</font></font></div>
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            <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">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
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            <td align="left" valign="bottom" width="1%" 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="9%" 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">125,000</font></div>
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            <td align="left" valign="bottom" width="1%" 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>
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            <td align="right" valign="bottom" width="9%" 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">1,636(1<font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></font></div>
            </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">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="32%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="32%" 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">James
                Croft, III</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">Senior
                Vice President,</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">Research
                and Development</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2006</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2005</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2004</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" 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>
              <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">$</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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            <td align="right" valign="bottom" width="9%" 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">168,173</font></div>
              <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">201,383</font></div>
              <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">126,690</font></div>
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            <td align="left" valign="bottom" width="1%" 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="9%" 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">&#8212;</font></div>
              <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">&#8212;</font></div>
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            </td>
            <td align="left" valign="bottom" width="1%" 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="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" 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="9%" style="border-bottom: #cceeff;">
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              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&#160;</div>
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            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
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            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
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              <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">Karen
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              <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">$</font></div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: #cceeff;">
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              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&#160;</div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: #cceeff;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%" 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="9%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" 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="9%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" 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="9%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" 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="9%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" 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="9%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
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          <tr bgcolor="white">
            <td align="left" valign="bottom" width="32%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
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          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="32%" 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">Bruce
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="top" width="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2006</font></div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="top" 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">$</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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            <td align="right" valign="top" width="9%" style="border-bottom: #cceeff;">
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="top" width="9%" 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">&#8212;</font></div>
              <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">&#8212;</font></div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="top" width="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="top" width="9%" 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">&#8212;</font></div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="top" 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>
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            <td align="right" valign="top" width="9%" 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">92,213(7<font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></font></div>
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            <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">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="32%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="32%" 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">Alan
                J. Ballard (8)</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">Former
                Vice President - </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">Government
                and Military Group</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="top" width="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2006</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="top" 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="top" width="9%" 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">169,573</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="top" width="9%" 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">&#8212;</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="top" width="9%" style="border-bottom: #cceeff;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="right" valign="top" width="9%" 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">&#8212;</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
            <td align="left" valign="top" 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="top" width="9%" 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">91,346(8<font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></font></div>
            </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">&#160;</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="left">
      <div>
        <hr style="COLOR: black" align="left" noshade size="1" width="10%">
      </div>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="3%">
              <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">(1)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Represents
                matching 401(k) contributions. </font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(2)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Salary
                includes $3,000 of director fees for the period prior to being appointed
                as an executive officer. All other compensation includes $58,500
                paid to
                BrownThompson Executive Search, an executive search firm controlled
                by Mr.
                Brown, for services provided prior to Mr. Brown&#8217;s appointment to the
                board.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(3)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Mr.
                Zavoli&#8217;s employment with our company terminated August 17, 2006. Salary
                includes $2,000 of post-employment director fees. All other compensation
                includes severance of $125,000, post-employment medical payments
                of $7,648
                and matching 401(k) contributions of $1,953. See &#8220;Employment Arrangements&#8221;
                below for more information.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(4)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Mr.
                Jones resigned from our company effective October 17, 2005. All other
                compensation includes severance of $82,500, post-employment medical
                payments of $4,666 and matching 401(k) contributions of $127. See
                &#8220;Employment Arrangements&#8221; below for more information.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(5)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Represents
                bonus for fiscal 2004 paid in fiscal 2005.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(6)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Includes
                royalty payments of $4,080, $18,895 and $16,246 for fiscal 2006,
                2005 and
                2004 respectively. Balance represents matching 401(k)
                contributions.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(7)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Mr.
                Gray&#8217;s employment with our company terminated September 19, 2006. Sales
                commissions of $31,796 are included with salary. All other compensation
                includes severance of $90,000 and matching 401(k) contributions of
                $2,213.
                See &#8220;Employment Arrangements&#8221; below for more
                information.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(8)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Mr.
                Ballard&#8217;s employment with our company terminated May 16, 2006. Sales
                commissions of $58,562 are included with salary. All other compensation
                includes severance of $90,000 and matching 401(k) contributions of
                $1,346.</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 id="PGBRK" style="MARGIN-LEFT: 0pt; 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: ">-15-</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>
    <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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
      named
      executive officer received any form of non-cash compensation from us in the
      fiscal years ended September 30, 2006, 2005, or 2004, or currently receives
      any
      such compensation, in excess of 10% of the total amount of annual salary and
      bonus reported for the named executive officer above. No named executive officer
      received a restricted stock award, a stock appreciation right or a long-term
      incentive plan payout in the fiscal years ended September 30, 2006, 2005, or
      2004.</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>OPTION
      GRANTS</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 further information on grants of stock options in fiscal
      2006 to the named executive officers reflected in the Summary Compensation
      Table.</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>Option
      Grants for Fiscal Year Ended September 30, 200</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>6</strong></font></div>
    <div align="center">
      <table bgcolor="white" cellpadding="0" cellspacing="0" width="100%">

          <tr bgcolor="white">
            <td colspan="10" valign="bottom" width="70%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">
                <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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Individual
                  Grants</strong></font></div>
              </div>
            </td>
            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td colspan="5" valign="bottom" width="19%" style="border-bottom: black thin 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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Potential
                Realizable</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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Value
                at Assumed</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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Annual
                Rates of</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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Stock
                Price</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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Appreciation
                for</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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Option
                Term (3)</strong></font>&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="25%" style="border-bottom: black thin 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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Name</strong></font></div>
            </td>
            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td width="10%" style="border-bottom: black thin 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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Number&#160;of&#160;Shares</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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>of
                Common Stock</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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Underlying&#160;Options</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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Granted&#160;(1)</strong></font></div>
            </td>
            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td width="10%" style="border-bottom: black thin 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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Percent&#160;of&#160;Total</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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Options&#160;Granted</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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>to
                Employees in</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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Fiscal
                Year</strong></font></div>
            </td>
            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td colspan="2" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Exercise</strong></font></div>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Price</strong></font></div>
            </td>
            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td valign="bottom" width="10%" style="border-bottom: black thin 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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Expiration</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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Date</strong></font></div>
            </td>
            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td colspan="2" valign="bottom" width="9%" style="border-bottom: black thin 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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>5%</strong></font></div>
            </td>
            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td colspan="2" valign="bottom" width="9%" style="border-bottom: black thin 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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>10%</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td 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">Elwood
                G. Norris</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td width="10%">
              <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">100,000</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td width="10%">
              <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">7.4<font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%</font></font></div>
            </td>
            <td width="1%">&#160;</td>
            <td width="1%"><font size="2">$</font></td>
            <td width="10%">
              <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">4.29</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td width="10%">
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                R. Brown</font></div>
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            <td width="1%">&#160;</td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.33</font></div>
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            <td width="10%">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">184,004</font></div>
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            <td width="10%">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.77</font></div>
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            <td 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">11/21/2010</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">39,539</font></div>
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            <td width="8%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">87,364</font></div>
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            <td 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">John
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            <td width="1%">&#160;</td>
            <td width="10%">
              <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">100,000</font></div>
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            <td width="1%">&#160;</td>
            <td width="10%">
              <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">7.4<font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%</font></font></div>
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            <td width="1%">&#160;</td>
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            <td width="10%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.78</font></div>
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            <td width="1%">&#160;</td>
            <td 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">11/01/2009</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">132,063</font></div>
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            <td width="1%">&#160;</td>
            <td width="1%"><font size="2">$</font></td>
            <td width="8%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">291,824</font></div>
            </td>
          </tr>

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    </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">
      <div align="left">
        <div>
          <hr style="COLOR: black" align="left" noshade size="1" width="10%">
        </div>
      </div>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="3%">
              <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">(1)</font></div>
            </td>
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                options granted under our 2005 Equity Incentive Plan and were granted
                at
                an exercise price equal to the fair market value on the date of grant,
                except the option to Mr. Norris, which was granted at an exercise
                price
                equal to 110% of the fair market value on the date of grant. Options
                vest
                as to 1/4 of the shares on the first anniversary of the date of grant
                and
                as to 1/16</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                the shares each quarter thereafter, subject to continuing service
                to our
                company.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(2)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Mr.
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                the shares subject to such grant vested.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(3)</font></div>
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            <td align="left" valign="top" width="75%">
              <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">Potential
                gains are net of exercise price, but before taxes associated with
                exercise. These amounts represent certain assumed rates of appreciation
                only, in accordance with the SEC&#8217;s rules. Actual gains, if any, on stock
                option exercises are dependent on the future performance of the common
                stock, overall market conditions and the option holder&#8217;s continued
                employment through the vesting period. The amounts reflected in this
                table
                may not necessarily be achieved.</font></div>
            </td>
          </tr>

      </table>
    </div>
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    <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>Stock
      Option Exercises and Holdings </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 the information on each exercise of options during fiscal
      2006 and unexercised options and the value of options held at September 30,
      2006
      by each of the named executive officers reflected in the Summary Compensation
      Table.</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>Aggregate
      Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
</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 cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="bottom" width="23%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="right" valign="bottom" width="8%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="right" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="right" valign="bottom" width="8%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="right" colspan="3" valign="bottom" width="18%" style="border-bottom: black thin solid;">
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              <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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Stock&#160;Underlying&#160;Unexercised</strong></font></div>
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            <td align="right" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="right" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td colspan="6" width="19%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><strong><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Value&#160;of&#160;Unexercised&#160;In-The-</strong></font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Money&#160;Options&#160;at</strong></font></strong></font></div>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><strong><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Fiscal&#160;Year&#160;End
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            </td>
          </tr>
          <tr>
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            <td align="right" valign="bottom" width="8%" style="border-bottom: black thin 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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Shares</strong></font></div>
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            </td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Value&#160;Realize</strong></font></div>
            </td>
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            <td align="right" valign="bottom" width="8%" style="border-bottom: black thin 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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Exercisable</strong></font></div>
            </td>
            <td align="right" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="right" valign="bottom" width="9%" style="border-bottom: black thin 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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Unexercisable</strong></font></div>
            </td>
            <td align="right" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="right" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Exercisable</strong></font></div>
            </td>
            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td colspan="2" valign="bottom" width="10%" style="border-bottom: black thin solid;">
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            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="23%">
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                G. Norris</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <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: 8pt; FONT-FAMILY: Times New Roman, serif">&#160;&#160;</font></div>
            </td>
            <td align="right" valign="bottom" width="8%">
              <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">50,000</font></div>
            </td>
            <td align="right" valign="bottom" width="1%">
              <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: 8pt; FONT-FAMILY: Times New Roman, serif">&#160;&#160;</font></div>
            </td>
            <td width="1%"><font size="2">$</font></td>
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            <td align="right" valign="bottom" width="9%">
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            <td align="right" valign="bottom" width="1%">&#160;</td>
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            <td align="right" valign="bottom" width="6%">
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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            <td align="right" valign="bottom" width="8%">
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            <td align="left" valign="top" width="1%">
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            <td align="left" valign="top" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <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">5,625</font></div>
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            <td align="left" valign="top" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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            <td align="left" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
                <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">53,440</font></div>
              </div>
            </td>
            <td align="left" valign="top" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td width="1%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">
              <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">&#8212;</font></div>
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            <td align="left" valign="top" width="23%">
              <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>Karen
                Jordan</strong></font></div>
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            <td align="left" valign="bottom" width="1%">
              <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: 8pt; FONT-FAMILY: Times New Roman, serif">&#160;&#160;</font></div>
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            <td align="right" valign="bottom" width="8%">
              <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">&#8212;&#160;&#160;</font></div>
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            <td align="right" valign="bottom" width="1%">
              <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: 8pt; FONT-FAMILY: Times New Roman, serif">&#160;&#160;</font></div>
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            <td width="1%">&#160;</td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">
                <div style="DISPLAY: block; MARGIN-LEFT: 45pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</font></div>
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            </td>
            <td width="1%">&#160;</td>
            <td align="right" valign="bottom" width="8%">
              <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">&#8212;</font></div>
            </td>
            <td align="right" valign="bottom" width="1%">
              <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: 8pt; FONT-FAMILY: Times New Roman, serif">&#160;&#160;</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <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">30,000</font></div>
            </td>
            <td align="right" valign="bottom" width="1%">
              <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: 8pt; FONT-FAMILY: Times New Roman, serif">&#160;&#160;</font></div>
            </td>
            <td align="right" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td width="1%">&#160;</td>
            <td align="right" valign="bottom" width="6%">
              <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">&#8212;</font></div>
            </td>
            <td align="right" valign="bottom" width="1%">
              <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: 8pt; FONT-FAMILY: Times New Roman, serif">&#160;&#160;</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td width="1%">&#160;</td>
            <td align="right" valign="bottom" width="9%">
              <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">&#8212;</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>
        <hr style="COLOR: black" align="left" noshade size="1" width="10%">
      </div>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="3%">
              <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">(1)</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <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">Based
                on the closing price reported on the NASDAQ Capital Market on
                September&#160;29, 2006 of $3.82 per share.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(2)</font></div>
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                on the closing price reported on the NASDAQ Capital Market on the
                date of
                exercise.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="3%">
              <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">(3)</font></div>
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                on the closing price reported on the NASDAQ Capital Market on the
                date of
                exercise. The option and the shares acquired upon exercise are subject
                to
                a domestic relations order. Mr. Croft disclaims beneficial ownership
                of
                the shares acquired upon exercise of the option except to the extent
                of
                his pecuniary interest therein.</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">We
      do not
      have any stock appreciation rights plans in effect and we have no long-term
      incentive plans, as those terms are defined in SEC regulations. During the
      fiscal year ended September 30, 2006, we did not adjust or amend the exercise
      price of stock options awarded to the named executive officers. We have no
      defined benefit or actuarial plans covering any named executive
      officer.</font></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; 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: ">-16-</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>
    <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: 10pt; FONT-FAMILY: Times New Roman"><strong>EMPLOYMENT
      ARRANGEMENTS</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
      entered into the following employment arrangements with each of the named
      executive officers reflected in the Summary Compensation Table, and each of
      our
      current executive officers.</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">Mr.
      Elwood G. Norris - Effective September 1, 1997, we entered into a three year
      employment contract with Mr. Norris, for his services as Chief Technology
      Officer. The three-year term expired on August 31, 2000, but the agreement
      remains in effect until one party gives thirty days advance notice of
      termination to the other. Mr. Norris now serves as Chairman under the term
      of
      this agreement. The agreement, as amended by the Compensation Committee,
      provides for a base salary of $16,667 per month. The agreement provides that
      Mr.
      Norris will participate in bonus, benefit and other incentives at the discretion
      of the Board of Directors. Mr. Norris has agreed not to disclose trade secrets
      and has agreed to assign certain inventions to us during employment. We also
      provide Mr. Norris with an automobile, the lease payments for which are
      currently $720 per month. We are also obligated to pay Mr. Norris certain
      royalties. See "Certain Transactions" 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">Mr.
      Thomas R. Brown - Effective August 23, 2006 we entered into a letter agreement
      with Mr. Brown pursuant to which he was appointed as our president and chief
      executive officer commencing September 5, 2006. Mr. Brown was also appointed
      as
      interim chief financial officer on September 19, 2006. The terms of Mr. Brown&#8217;s
      employment did not change in connection with his appointment as interim chief
      financial officer. Mr. Brown was a director of our company and was a member
      of
      the audit and compensation committees from March 24, 2006 until he resigned
      in
      connection with entering into the letter agreement to facilitate our company&#8217;s
      compliance with NASDAQ corporate governance requirements. He was reappointed
      to
      the board on September 22, 2006. The letter agreement provides for a base salary
      of $250,000 per year. In connection with his employment, Mr. Brown received
      a
      non-statutory stock option to purchase 200,000 shares of common stock under
      our
      2005 Equity Incentive Plan with an exercise price $3.33 per share, the closing
      price of our common stock on the start date as reported on the NASDAQ Capital
      Market. Mr. Brown will be eligible for an annual bonus with respect to fiscal
      years beginning fiscal 2007 as recommended by the compensation committee and
      approved by the board. The bonus will be based in part on his achievement of
      detailed annual goals that will be established by the compensation committee.
      Mr. Brown&#8217;s bonus for fiscal 2007 will be based upon the bonus plan described
      below under the heading "Executive Officer and Employee Incentive Plan". In
      the
      event that Mr. Brown&#8217;s employment is terminated for any reason other than cause,
      or if he resigns for good reason, he will be entitled to severance equal to
      one
      month&#8217;s salary for each two month period of service, or portion thereof, up to
      six months&#8217; salary. He will also be entitled to continuation of his
      company-provided health and dental benefits for the same period.</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">Mr.
      John
      R. Zavoli - On October 17, 2005, we entered into a letter agreement with Mr.
      Zavoli, pursuant to which Mr. Zavoli was appointed as our president and chief
      operating officer, commencing November 1, 2005. Mr. Zavoli was a director of
      our
      company, and was a member of the audit and compensation committees until he
      resigned the committee appointments in connection with entering into the letter
      agreement. The letter agreement provided for an annual base salary of $250,000
      and eligibility for an annual bonus, as recommended by the compensation
      committee and approved by the board of directors. In addition, Mr. Zavoli
      received an option to purchase 100,000 shares of our common stock on November
      1,
      2005. Mr. Zavoli&#8217;s employment was not for a specified period or term of
      employment and was terminable at-will by us or by Mr. Zavoli for any reason,
      with or without notice. On August 17, 2006, Mr. Zavoli&#8217;s employment arrangement
      with our company terminated. Mr. Zavoli&#8217;s annual base salary at the time of
      termination was $250,000 and he was entitled to severance in the form of
      post-termination salary continuation and payment by our company of the premiums
      for extension of benefits under COBRA for a number of months based on his number
      of months of service, conditioned on his execution of a general release of
      all
      known and unknown claims against our company, and the continued effectiveness
      of
      such release beyond any statutory revocation period. On September 22, 2006
      Mr.
      Zavoli resigned from his position as a member of our board of directors and
      entered into a separation and release agreement with our company providing:
      (a)
      payments of $125,000, representing six months of base salary, and (b) payment
      of
      health benefit premiums on Mr. Zavoli&#8217;s behalf for a period not to extend beyond
      February 28, 2007 estimated at $6,210. In addition, the separation and release
      agreement contained Mr. Zavoli&#8217;s general release of all claims against our
      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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Kalani Jones - We entered into a letter agreement dated as of August 28, 2003,
      as amended on October 20, 2003, under which Mr. Jones was employed as our Senior
      Vice President of Operations. Mr. Jones was later promoted to President and
      Chief Operating Officer. The letter agreement provided for an annual base salary
      of $140,000, a 30% annual performance bonus to be determined by the Compensation
      Committee and the Board of Directors, and the grant of an option to purchase
      75,000 shares of our common stock, which option vested quarterly over a two
      year
      period beginning six months after the date of employment. Mr. Jones subsequently
      received additional option grants. Mr. Jones&#8217;s employment was terminable at-will
      by us or Mr. Jones for any reason, with or without notice. On October 17, 2005,
      Mr. Jones&#8217;s employment arrangement with our company terminated. Mr. Jones annual
      base salary at the time of resignation was $220,000, and he was entitled to
      an
      annual performance bonus of up to 50% of his base salary, as determined by
      the
      Compensation Committee. On October 20, 2005, we entered into a separation and
      release agreement with Mr. Jones. The agreement provided for our one-time
      payment of $82,500 to Mr. Jones and our payment of health benefit premiums
      on
      Mr. Jones&#8217;s behalf for a period not to extend beyond February 28, 2006 which
      totaled $4,666. We also agreed to extend until February 15, 2006 the period
      of
      time for which the vested portion of stock options held by Mr. Jones could
      be
      exercised; however no options were exercised. In addition, the separation and
      release agreement contained Mr. Jones&#8217;s general release of all claims against
      our 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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      James
      Croft, III - On August 17, 2005, our Board of Directors approved the appointment
      of Mr. Croft as our Chief Technology Officer and Vice President of Advanced
      Development. Mr. Croft has served as our Vice President of Research and
      Development since February 28, 2000, and, prior to that, as our Vice President
      of Engineering from September 15, 1997. Mr. Croft is employed pursuant to the
      terms of an employment agreement dated February 28, 2000, which terms have
      been
      orally modified. Under the terms as modified, Mr. Croft&#8217;s annual salary is
      $165,000, and he participates in bonus, benefit and other incentives at the
      discretion of the Compensation Committee. We presently exclusively license
      two
      pre-employment inventions from Mr. Croft through March 2008. We are not
      currently marketing products using these inventions, and we are not currently
      paying royalties to Mr. Croft for these inventions. We plan to negotiate further
      revisions to our agreement with Mr. Croft, including our right to continue
      the
      license beyond March 2008. The initial term of the employment agreement dated
      February 28, 2000 has expired, and as a result, either we or Mr. Croft may
      terminate his employment for any reason upon thirty days advance
      notice.</font></div>
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          <hr style="COLOR: black" noshade size="2">
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        </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#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">Ms.
      Karen
      Jordan - On December 16, 2005, our Board of Directors approved the appointment
      of Ms. Jordan as our Chief Accounting Officer. Ms. Jordan entered into a letter
      agreement with our company dated October 26, 2005, and joined our company in
      November 2005, as director of finance. Ms. Jordan&#8217;s annual salary is $140,000
      and she participates in bonus, benefit and other incentives at the discretion
      of
      the Compensation Committee. Ms Jordan&#8217;s employment is not for a specified period
      or term of employment and is terminable at-will by us or by Ms. Jordan for
      any
      reason, with or without notice.</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">Mr.
      Bruce
      Gray - We entered into a letter agreement with Mr. Gray, under which Mr. Gray
      was employed as our Vice President of Sales and Marketing for our Commercial
      Group effective March 21, 2005. The letter agreement provided for an initial
      annual base salary of $200,000 and an annual sales commission, payable on a
      quarterly basis, based on revenues and billings. In September 2005, the
      compensation committee approved the commission plan called for by Mr. Gray&#8217;s
      employment agreement. The commission plan governed the payment of Mr. Gray&#8217;s
      annual sales bonus for the twelve-month period beginning April 1, 2005, and
      entitled Mr. Gray to commissions payable based on invoiced net sales of the
      commercial group on a quarterly basis, calculated as a percentage of quarterly
      revenue targets for our commercial group. The plan provided for a target
      commission for the twelve-month period of $100,000, but commissions could exceed
      such amount if the commercial group&#8217;s invoiced net sales exceeded our revenue
      plan. This plan was modified by us effective for the second quarter of fiscal
      2006 to revise the quarterly revenue targets and the commission formula to
      be
      based on direct sales by Mr. Gray on personal revenue targets plus an override
      based on revenue targets for the group supervised by Mr. Gray. The portion
      payable as override was payable only if revenue targets were achieved, and
      was
      capped at 50% of Mr. Gray&#8217;s base salary. The revised plan provided for an
      aggregate target commission of approximately $66,000 for the last three quarters
      of fiscal 2006, but commissions could exceed such amount if Mr. Gray&#8217;s direct
      sales or group sales exceeded revenue targets. In connection with entry into
      the
      revised plan, Mr. Gray&#8217;s base salary was adjusted to $180,000 per year effective
      March 16, 2006. Mr. Gray&#8217;s employment was terminable at-will by us or by Mr.
      Gray for any reason, with or without notice. On September 19, 2006 Mr. Gray&#8217;s
      employment arrangement with our company was terminated. On October 4, 2006,
      we
      entered into a separation and release agreement with Mr. Gray. The agreement
      provided for our one-time payment to Mr. Gray of $90,000 and Mr. Gray&#8217;s general
      release of all claims against our 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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Alan
      J. Ballard - On November 17, 2005, our board of directors approved the
      appointment of Mr. Ballard as our Vice President, Government and Military
      Division. Mr. Ballard joined our company in January 2004 and has held various
      positions in our Government Group. Mr. Ballard&#8217;s employment was terminable
      at-will by us or Mr. Ballard for any reason, with or without notice. On May
      16,
      2006 Mr. Ballard&#8217;s employment arrangement with our company terminated. Mr.
      Ballard&#8217;s annual salary at the time of termination was $145,000, and he was
      entitled to participate in bonus, benefit and other incentives at the discretion
      of the Compensation Committee. On October 18, 2006 we entered into a release
      and
      settlement agreement with Mr. Ballard and paid $90,000 for severance and
      non-wage damages and in consideration of Mr. Ballard&#8217;s general release of claims
      against us.</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>EXECUTIVE
      OFFICER AND EMPLOYEE INCENTIVE PLAN</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">In
      September 2006, the Compensation Committee recommended, and the Board approved,
      an incentive plan for fiscal year 2007, that is designed to motivate plan
      participants to achieve our financial objectives and to reward such participants
      for their achievements when those objectives are met. Under the incentive plan,
      target bonus amounts vary based on a percentage of the participant&#8217;s base
      salary, and the amount of bonus actually paid to a participant will be based
      on
      the achievement by our company of positive income from operations (including
      the
      cost of the incentive plan).</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">All
      of
      our employees except sales personnel, including our executive officers, will
      be
      entitled to participate in the incentive plan. The target bonuses for our
      participating executive officers will be 50% of base salary. Participants will
      be entitled to a bonus of two times the target bonus in the event income from
      operations exceeds $1 million for fiscal year 2007, including the cost of the
      incentive plan.</font></div>
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    <div id="PGBRK" style="MARGIN-LEFT: 0pt; 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: ">-18-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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      </div>
      <div id="HDR">
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    <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: 10pt; FONT-FAMILY: Times New Roman"><strong>COMPENSATION
      COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION</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">Messrs.
      Carter, Hunter, Wagner, Brown and Admiral Smith served on the Compensation
      Committee during fiscal 2006. At the beginning of fiscal 2006, Messrs. Wagner,
      Hunter and Carter were members of the Compensation Committee, and Mr. Wagner
      served as Chair. In March 2006, the size of the Compensation Committee was
      increased to four directors, and Admiral Smith joined the Compensation Committee
      as an independent director. Later in March 2006, the size of the Compensation
      Committee was increased to five directors, and Mr. Brown joined the Compensation
      Committee as an independent director. Mr. Wagner retired from the Board at
      the
      May 2006 annual meeting of stockholders, and the size of the Compensation
      Committee was then reduced to four directors, and Mr. Hunter became Chair.
      Mr.
      Brown resigned from the Compensation Committee in August 2006 upon the Board's
      appointment of him as President and Chief Executive Officer for a term
      commencing September 5, 2006, and the size of the Compensation Committee was
      reduced to three directors. Mr. Carter resigned from the Board and all standing
      committees in February 2007, and Ms. Clague was appointed to the Compensation
      Committee to fill the vacancy created by his resignation. The Compensation
      Committee currently consists of Mr. Hunter (Chair), Admiral Smith and Ms.
      Clague.</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
      executive officer of our company (1) served as a member of the compensation
      committee (or other board committee performing equivalent functions or, in
      the
      absence of any such committee, the entire board of directors) of another entity,
      one of whose executive officers served on our company&#8217;s Compensation Committee,
      (2) served as a director of another entity, one of whose executive officers
      served on our company&#8217;s Compensation Committee, or (3) served as a member of the
      compensation committee (or other board committee performing equivalent functions
      or, in the absence of any such committee, the entire board of directors) of
      another entity, one of whose executive officers served as a director of our
      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>EQUITY
      COMPENSATION PLAN 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">At
      September 30, 2006, we had two equity incentive plans under which equity
      securities are or have been authorized for issuance to our employees,
      consultants or directors: the 2005 Equity Incentive Plan and the 2002 Stock
      Option Plan. These plans have been approved by our stockholders. The reserve
      under the 2005 Equity Incentive Plan includes any prior plans that expire or
      become unexercisable. In addition, from time to time we issue to employees,
      directors and service providers special stock options, inducement grants and
      warrants to purchase common shares, and these grants have not been approved
      by
      stockholders. The following table sets forth information as of September 30,
      2006:</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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              <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: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>Plan
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;<font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number
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                options,</strong></font></div>
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                of outstanding</strong></font></div>
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                compensation plans</strong></font></div>
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                securities</strong></font></div>
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                in column (a))</strong></font></div>
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            <td width="2%" style="border-bottom: medium none;">&#160;</td>
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              <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)</strong></font></div>
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              <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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              <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>(c)</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="30%" style="border-bottom: medium none;">&#160;</td>
            <td width="2%" style="border-bottom: medium none;">&#160;</td>
            <td colspan="2" valign="bottom" width="12%" style="border-bottom: medium none;">&#160;&#160;</td>
            <td width="1%">&#160;</td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: medium none;">&#160;</td>
            <td colspan="2" valign="bottom" width="12%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: medium none;">&#160;</td>
            <td colspan="2" valign="bottom" width="12%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="30%" 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">Equity
                compensation plans approved by security holders</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;">
              <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">1,388,323</font></div>
            </td>
            <td width="1%">&#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;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&#160;</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" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$4.34</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;">&#160;</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" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">1,520,916</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="30%" 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">Equity
                compensation plans not approved by security holders</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">258,250</font></div>
            </td>
            <td valign="middle" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 8pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman, serif"><sup>(1)</sup></font></div>
            </td>
            <td align="left" valign="middle" width="2%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&#160;</div>
            </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">&#160;</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" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$6.26</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" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</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="30%" 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">Total</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;">
              <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">1,646,573</font></div>
            </td>
            <td width="1%">&#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;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&#160;</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" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$4.64</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;">&#160;</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" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">1,520,916</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #cceeff;">&#160;</td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1)&#160;&#160;&#160;&#160;&#160;
                </font></div>
            </td>
            <td align="left" colspan="8" valign="top" width="39%">
              <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">Includes
                (i) 108,250 shares of common stock subject to inducement stock options
                granted to certain non-executive officer employees from time to time,
                which options have a weighted-average exercise price of $9.33 per
                share, a
                five year term and generally vest 25% on the first anniversary of
                the
                grant date and then 1/16 each quarter thereafter, subject to continued
                service and other conditions, (ii) 50,000 shares subject to a warrant
                granted on February 28, 2003, to a financial advisor for consulting
                services rendered with an exercise price of $3.63 and an expiration
                date
                of April 4, 2008, and (iii) 100,000 shares subject to a warrant granted
                on
                September 30, 2002, to another financial advisor for consulting services
                rendered with an exercise price of $4.25 and an expiration date of
                September 30, 2007.</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; 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: ">-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="right">
        </div>
      </div>
    </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: 10pt; FONT-FAMILY: Times New Roman"><strong>REPORT
      OF THE COMPENSATION COMMITTEE 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">&#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>Introductory
      Note</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:
      The
      following report is not deemed to be incorporated by reference by any general
      statement incorporating by reference this proxy statement into any filing under
      the Securities Act of 1933 or under the Exchange Act, except to the extent
      that
      we specifically incorporate this information by reference, and shall not
      otherwise be deemed soliciting material or filed under such laws.</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>Committee
      Meetings, Processes and Policies</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
      Compensation Committee of the Board of Directors operates under the authority
      of
      a Compensation Committee Charter, a copy of which is attached as Appendix 2
      to
      this proxy statement. The primary philosophy of the committee regarding
      compensation is to offer packages which reward each of the members of senior
      management proportionately to each person's individual performance and to our
      company's overall financial performance and growth during the previous fiscal
      year.</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
      committee met 12 times and acted by unanimous written consent 3 times during
      fiscal 2006, and discussed in detail the company's compensation philosophy
      and
      practices for employees at all levels. Compensation for employees ranked below
      Vice President was recommended by their supervisors to the President, who then
      reported his determinations to the committee. The committee reviews and
      recommends for approval by the board all compensation for employees ranked
      Vice
      President and above.</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
      determining initial compensation for new executive hires or persons promoted
      to
      executive positions, and in reviewing existing executive officers annually,
      the
      committee reviews all components of executive officer compensation, including
      salary, bonus, and stock options held. It is the committee's policy to review
      the dollar value to the executive and cost to the company of all perquisites
      and
      other personal benefits, and all severance and change of control scenarios.
      Unvested stock options currently held by our executive officers generally
      provide that if employment is terminated without cause within 24 months after
      a
      change in control, such stock options will be considered fully vested upon
      such
      termination, and, for options granted under our 2002 Stock Option Plan, the
      option will remain exercisable for six months after such service terminates.
      Since these provisions apply generally to all stock options, the committee
      has
      not placed special value on this right when determining executive compensation.
      In connection with all compensation reviews for executive officers, the
      committee reviews a tally sheet setting forth all the above components, to
      the
      extent applicable. The committee did not take into account accumulated (realized
      and unrealized) stock option gains in its compensation decisions during fiscal
      2006, but commenced doing so in November 2006.</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>Base
      salary.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Base
      salaries for executive officers are reviewed on an annual basis. The committee
      has historically believed that base salaries should be set in the lower quartile
      of the Radford Executive Survey, which we used in fiscal years prior to 2006
      to
      set executive salaries. The decision to use the lower quartile reflected in
      part
      that the company's revenues were lower than the revenue ranges of the companies
      in the Radford survey reports, and that the company has not been profitable.
      The
      committee has placed greater emphasis on incentive and stock option compensation
      for its executive officers, creating a deeper link between pay and individual
      and company performance. During fiscal 2006 base salaries for new executive
      officers were negotiated by John Zavoli, the Company's former President and
      Chief Operating Officer, and then presented to the committee for approval.
      The
      committee did not increase salaries for existing executive officers during
      fiscal 2006 as a result of the company's financial performance during fiscal
      2006. The committee does however remain open to revisiting the levels of base
      salaries paid to executives at such time as the company become
      profitable.</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>Bonus
      compensation.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      All of
      our executive officers are considered for bonus compensation. During fiscal
      2005, we had arrangements with certain of our executive officers providing
      that
      they would be considered for discretionary bonuses at a certain percentage
      of
      their base salaries. None of such arrangements were in existence during fiscal
      2006, and we did not have a formal bonus plan in effect for fiscal 2006. In
      March 2006, the committee recommended and the board approved payment of
      discretionary bonuses of $7,500 to each of two executive officers. These bonuses
      were recommended by Mr. Zavoli in connection with performance during the first
      quarter of fiscal 2006. No further interim discretionary bonuses were paid
      during fiscal 2006, and in light of the company's financial performance for
      the
      full fiscal year, the company's new President and Chief Executive Officer,
      Thomas R. Brown, recommended, and the committee concurred, that no executive
      officers would be considered for year-end discretionary bonuses.</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; 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: ">-20-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
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        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#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">Executive
      officers in charge of revenue producing business segments also participated
      in
      commission arrangements during fiscal 2006. In September 2005, the committee
      approved a commission plan for our former Vice President, Commercial Products
      Group, pursuant to the terms of his employment letter. The commission plan
      governed the payment of that executive's annual sales bonus for the twelve-month
      period beginning April 1, 2005, and entitled such executive to commissions
      payable based on invoiced net sales on a quarterly basis, calculated as a
      percentage of quarterly revenue targets for our commercial products group.
      The
      plan provided for a target commission for the twelve-month period of $100,000,
      but commissions could exceed such amount if our invoiced net sales exceeded
      our
      revenue plan. This plan was modified by the committee effective January 1,
      2006
      to revise the quarterly revenue targets and the commission formula. See
      "Employment Arrangements - Mr. Bruce Gray" above. The committee adopted a
      commission arrangement for our Government Group during fiscal 2005, but did
      not
      establish commission rates for fiscal 2006 or any future years. One of the
      discretionary bonuses of $7,500 discussed above was awarded to the former Vice
      President, Government and Military Division, in lieu of the Government Group
      commission plan.</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
      September 2006, following a recommendation by Mr. Brown, the committee
      recommended, and the board approved, an incentive plan for fiscal year 2007
      that
      is designed to motivate plan participants to achieve our financial objectives
      and to reward such participants for their achievements when those objectives
      are
      met. Under the incentive plan, target bonus amounts vary based on a percentage
      of the participant&#8217;s base salary, and the amount of bonus actually paid to a
      participant will be based on the achievement by our company of positive income
      from operations (including the cost of the incentive plan). All of our employees
      except sales personnel, including our executive officers, participate in the
      incentive plan. The target bonuses for our participating executive officers
      are
      50% of base salary. Participants are entitled to a bonus of two times the target
      bonus in the event income from operations exceeds $1 million for fiscal year
      2007, including the cost of the incentive plan.</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">While
      the
      committee's overall compensation philosophy remains to reward each of the
      members of senior management proportionately to each person's individual
      performance and to our company's overall financial performance and growth during
      the previous fiscal year, the committee approved this incentive plan mindful
      that it rewards employees based solely on the company's performance as a whole,
      as measured solely by achievement of positive income from operations. The
      committee believes that this plan is simpler to understand than a plan with
      individual targets, and motivates our reduced-size organization to work together
      to achieve what is considered to be the company's first priority at this time
      -
      the reversal of losses from operations. The committee noted in approving this
      plan that the plan would have to pay for itself - no employees would receive
      incentive bonuses unless there was sufficient income from operations to offset
      the cost of those bonuses.</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>Long-term
      incentives.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Our
      long-term incentive program has consisted of a stock option program pursuant
      to
      which our executive officers are periodically granted stock options. Our stock
      option programs are designed to provide such persons with significant
      compensation based on our overall performance as reflected in the stock price,
      to create a valuable retention device through standard two to five year vesting
      schedules and to help align employees' and stockholders' interests. Options
      granted during fiscal 2006 were non-statutory stock options, and generally
      had a
      five year term, subject to continuing service, and generally vested as to one
      fourth of the shares on the first anniversary of the grant date, and quarterly
      thereafter through the fourth anniversary of the date of grant. Stock options
      are typically granted at the time of hire to new employees, at the time of
      promotion to certain employees and periodically to a broad group of existing
      key
      employees and executive officers.</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">As
      indicated above, the company's bonus plan is designed to reward company
      performance rather than individual performance. The committee continues to
      reward individual contributions through periodic grants of stock options, the
      most recent of were made in February 2007 based in part on reviews of individual
      performance during fiscal 2006. These grants were delayed during the pendency
      of
      a "blackout period" under the company's insider trading policy which was in
      effect from mid-August 2006 until February 2007, as a result of the company's
      voluntary review of historical stock option and stock grants. The non-statutory
      options issued in February 2007 to a broad group of key employees were issued
      with a revised vesting schedule, designed to reward more near-term performance.
      Such options were vested as to one third of the shares upon grant, and quarterly
      thereafter through the second anniversary of the date of grant.</font></div>
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    <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>Pricing
      of stock options.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      It has
      been the committee's policy to set the exercise price of stock options at the
      then fair market value of our common stock, or higher. As a result of the review
      by the Audit Committee of the company's historical stock option and stock grants
      conducted from November 2006 through January 2007, it was determined that there
      existed flaws in the company&#8217;s option approval and pricing processes,
      particularly relating to management&#8217;s practices during fiscal 2002 and 2003 of
      awarding grants prior to soliciting the approval of the board or this committee,
      and the related use of unanimous written consents to approve grants with a
      date
&#8220;as of&#8221; the date management determined to grant the options, which consents were
      sometimes circulated after the date of determination. The Audit Committee did
      not encounter any evidence that would indicate intentional wrongful behaviors
      with respect to the misapplied option measurement dates. All of the deficiencies
      observed were, in the Audit Committee&#8217;s view, attributable to vacillating levels
      of effectiveness in the company&#8217;s accounting and documentary control procedures,
      high turnover of executive leadership, a lack of understanding by company
      personnel charged with administration of the company&#8217;s stock option plans of the
      often complex accounting and tax rules related to stock options, the company&#8217;s
      use of spreadsheets rather than more robust stock option software (which
      software was first used in 2004, but was not fully implemented until March
      2005), and insufficient attention by management to the directives of this
      committee with respect to stock option grant practices. </font></div>
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    <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">While
      the
      Audit Committee concluded that incorrect measurement dates or fair market value
      pricing formulas resulted in approximately 100 grants determined to have
      unrecorded intrinsic value, the Audit Committee did not find evidence
      demonstrating that stock options were &#8220;back-dated&#8221; to coincide with low stock
      prices. Rather, most of the stock options that required adjustment, required
      such adjustment because the original grant date was determined in the review
      to
      have not had sufficient finality to support a measurement date, based on
      standards articulated by the SEC Office of the Chief Accountant, or the company
      had determined the exercise price based on the closing price on the day of
      grant, rather than the day prior to grant, as called for under the company&#8217;s
      1997 Stock Option Plan and 2002 Stock Option Plan. No option grants were
      determined to have been mispriced after December 2003.</font></div>
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    <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 reported that the problems that led to the measurement date errors
      had
      been addressed by the beginning of calendar year 2004, but nonetheless, the
      committee implemented further refinements to the company&#8217;s stock option grant
      procedures in January 2007. For more discussion of the historical review of
      stock option and stock grant practices, please see the Explanatory Note to
      the
      company's Form 10-K filed on January 8, 2007 for the 2006 fiscal
      year.</font></div>
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    <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</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      A
      number of our executive officers terminated employment during fiscal 2006.
      In
      the absence of contractual provisions providing for the severance payments
      to be
      made to such officers, we generally offered each of the former employees
      severance equal to one month&#8217;s salary for each two month period of service, or
      portion thereof, up to six months&#8217; salary, in exchange for a general release of
      all claims. Each of our executive officers who terminated employment during
      fiscal 2006 accepted an offer of severance on substantially those
      terms.</font></div>
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    <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>Principal
      Executive Officer 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">During
      fiscal 2006, our company had four persons who performed the duties of principal
      executive officer. Elwood G. Norris, our Chairman, served in a capacity as
      co-principal executive officer until September 2006, when he assumed a technical
      advisory and spokesperson role to our company. Kalani Jones, our former
      President and Chief Operating Officer, served as co-principal executive officer
      until his resignation in October 2005. Mr. John Zavoli assumed the position
      of
      President and Chief Operating Officer, and co-principal executive officer,
      in
      November 2005, until the termination of his employment in August 2006. Thomas
      R.
      Brown assumed the position of President and Chief Executive Officer, and sole
      principal executive officer, in September 2006. The committee had responsibility
      for determining the compensation of all of Mr. Norris, Mr. Jones, Mr. Zavoli
      and
      Mr. Brown.</font></div>
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    <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">
      <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>Elwood
        G. Norris.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        Mr.
        Elwood G. Norris currently serves as Chairman of the Board, an executive
        position. Prior to his appointment as Chief Executive Officer in September
        2000,
        which position Mr. Norris resigned in February 2003, Mr. Norris had been
        employed by us as Chief Technology Officer pursuant to a three-year employment
        agreement dated September 1, 1997. The three-year term expired on August
        31,
        2000, but the agreement remains in effect until one party gives thirty days
        advance notice of termination to the other. </font>Mr. Norris now serves as
        Chairman under the term of this agreement. The agreement, as amended by the
        committee, provides for a base salary of $16,667 per month. The agreement
        provides that Mr. Norris will participate in bonus, benefit and other incentives
        at the discretion of the Board of Directors. We also provide Mr. Norris with
        an
        automobile, the lease payments for which are currently approximately $720
        per
        month. Mr. Norris has agreed not to disclose trade secrets and has agreed
        to
        assign certain inventions to us during employment. We are also obligated
        to pay
        Mr. Norris certain royalties. See "Certain Transactions" below. Mr. Norris
        received a non-statutory option to purchase 100,000 shares in May 2006, which
        option was in recognition of Mr. Norris' performance during fiscal 2005,
        and was
        priced at $4.29, which was 110% of the closing price on the date of grant.
        This
        option vests as to 25% of the shares on the first anniversary of the grant
        date,
        and quarterly thereafter through the fourth anniversary of the date of grant,
        subject to Mr. Norris' continuing service to the company.</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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      light
      of the transition of Mr. Norris to a technical advisory and spokesperson role
      at
      the end of fiscal 2006, the committee did not formally review Mr. Norris's
      performance for fiscal 2006, and did not award Mr. Norris a bonus for fiscal
      2006. No adjustments have been made to Mr. Norris' salary for fiscal 2007.
      The
      committee noted that Mr. Norris offered leadership during two transitions of
      senior management, and that he continued during fiscal 2006 to raise the profile
      of our company and our products through national press coverage. The committee
      did determine to grant Mr. Norris a non-statutory option exercisable for 150,000
      shares in February 2007, which option was priced at $4.81, which was 110% of
      the
      closing price on the date of grant, and vested as to one third of the shares
      upon grant, and quarterly thereafter through the second anniversary of the
      date
      of grant, subject to Mr. Norris' continuing service to the company.</font></div>
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    <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>Kalani
      Jones</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Mr.&#160;Kalani Jones joined our company in August 2003 as Senior Vice
      President, Operations. Mr.&#160;Jones was promoted to President and Chief
      Operating Officer in April 2004, f</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ollowing
      Mr.&#160;Jones&#8217; performance review for fiscal 2004, his base salary was
      increased to $220,000 per year. Such salary was slightly below the
      25</font><font style="DISPLAY: inline; FONT-SIZE: 6pt; FONT-FAMILY: Times New Roman, serif"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      percentile for the comparable position as reported in the Radford Executive
      Survey.</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">Mr.&#160;Jones&#8217;s
      employment was terminable at-will by us or Mr.&#160;Jones for any reason, with
      or without notice. In October 2005, Mr.&#160;Jones&#8217;s employment with our company
      terminated. We entered into a separation and release agreement with
      Mr.&#160;Jones. The agreement provided for our one-time payment of $82,500 to
      Mr.&#160;Jones and our payment of health benefit premiums on Mr.&#160;Jones&#8217;s
      behalf for a period not to extend beyond February&#160;28, 2006. We also agreed
      to extend until February&#160;15, 2006 the period of time for which the vested
      portion of stock options held by Mr.&#160;Jones could be exercised. As a result
      of Mr.&#160;Jones&#8217; resignation, the committee did not review Mr.&#160;Jones&#8217;
performance for fiscal 2006.</font></div>
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    <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>John
      R. Zavoli.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      In
      October 2005, the committee recommended to the board for approval a letter
      agreement with Mr. Zavoli, pursuant to which Mr. Zavoli was appointed as our
      President and Chief Operating Officer, commencing November 1, 2005. Mr. Zavoli
      was previously a director of our company, and was a member of this committee
      from June 2005 until he resigned his committee appointments in connection with
      entering into the letter agreement. The committee informally authorized Mr.
      Norris to negotiate Mr. Zavoli's compensation with Mr. Zavoli, and the
      recommendation of Mr. Norris was approved by the committee (without Mr. Zavoli
      present) with a recommendation to the full board for approval. The level of
      compensation and other terms of the employment agreement were determined in
      arms' length negotiations between Mr. Norris and Mr. Zavoli, and the committee
      did not rely upon benchmark data in approving the level of Mr. Zavoli's
      compensation. The letter agreement provided for an annual base salary of
      $250,000 and eligibility for an annual bonus, as recommended by this committee
      and approved by the board of directors. In addition, Mr. Zavoli received a
      non-statutory option to purchase 100,000 shares of our common stock on his
      start
      date of November 1, 2005. Mr. Zavoli&#8217;s employment was not for a specified period
      or term of employment and was terminable at-will by us or by Mr. Zavoli for
      any
      reason, with or without notice. In August 2006, Mr. Zavolis employment
      arrangement with the company terminated. Mr. Zavoli&#8217;s annual base salary at the
      time of termination was $250,000 and he was entitled to severance in the form
      of
      post-termination salary continuation and payment by our company of the premiums
      for extension of benefits under COBRA for a number of months based on his number
      of months of service, conditioned on his execution of a general release of
      all
      known and unknown claims against our company, and the continued effectiveness
      of
      such release beyond any statutory revocation period. In September 2006, Mr.
      Zavoli resigned from his position as a member of our board of directors and
      entered into a separation and release agreement with our company providing:
      (a)
      payments of $125,000, representing six months of base salary, and (b) payment
      of
      health benefit premiums on Mr. Zavoli&#8217;s behalf for a period not to extend beyond
      February 28, 2007 estimated at $6,210. In addition, the separation and release
      agreement contained Mr. Zavoli&#8217;s general release of all claims against our
      company. As a result of the termination of Mr. Zavoli&#8217;s employment arrangement,
      the committee did not review Mr. Zavoli's performance for fiscal
      2006.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#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>Thomas
      R. Brown. </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      August
      2006, the committee recommended to the board for approval a letter agreement
      to
      be entered into with Mr. Brown pursuant to which he was appointed as our
      President and Chief Executive Officer commencing September 5, 2006. Mr. Brown
      was also appointed as Interim Chief Financial Officer on September 19, 2006.
      The
      terms of Mr. Brown&#8217;s employment did not change in connection with his
      appointment as Interim Chief Financial Officer. The committee informally
      authorized Mr. Norris to negotiate Mr. Brown's compensation with Mr. Brown,
      and
      the recommendation of Mr. Norris was approved by the committee (without Mr.
      Brown present) with a recommendation to the full board for approval. The level
      of compensation and other terms of the employment agreement were determined
      in
      arms' length negotiations between Mr. Norris and Mr. Brown, and the committee
      did not rely upon benchmark data in approving the level of Mr. Brown's
      compensation. The letter agreement provides for a base salary of $250,000 per
      year. This amount was the same amount previously payable to Mr. Zavoli. In
      connection with his employment, Mr. Brown received a non-statutory option to
      purchase 200,000 shares of common stock under our 2005 Equity Incentive Plan
      with an exercise price $3.33 per share, the closing price of our common stock
      on
      the start date as reported on the Nasdaq Capital Market. Mr. Brown is eligible
      for an annual bonus with respect to fiscal years beginning fiscal 2007 as
      recommended by the committee and approved by the board, to be based in part
      on
      his achievement of detailed annual goals established by the committee. Mr.
      Brown's bonus for fiscal 2007 will be based upon the bonus plan described above
      under "Long-term incentives." In the event that Mr. Brown&#8217;s employment is
      terminated for any reason other than cause, or if he resigns for good reason,
      he
      will be entitled to severance equal to one month&#8217;s salary for each two month
      period of service, or portion thereof, up to six months&#8217; salary. He will also be
      entitled to continuation of his company-provided health and dental benefits
      for
      the same period.</font></div>
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    <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>The
      Committee&#8217;s Conclusion </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
      committee has determined that the aggregate compensation of the executive
      officers during fiscal 2006, including the compensation to persons who served
      as
      principal executive officer during fiscal 2006, was reasonable and not
      excessive.</font></div>
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    <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>Section
      162(m) of the Internal Revenue Code</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">Under
      Section 162(m) of the Internal Revenue Code, compensation payments in excess
      of
      $1 million to each person who served as Chief Executive Officer at the end
      of a
      taxable year, and to each of the other most highly compensated executive
      officers whose compensation must be disclosed in SEC filings, are subject to
      a
      limitation of $1 million on the amount we may deduct as an ordinary business
      expense. Certain performance-based compensation is not subject to the limitation
      on deductibility. The total taxable compensation to each employee subject to
      Section 162(m) during the taxable year ended September 30, 2006 was below $1
      million.</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
      granted stock options to persons subject to Section 162(m) in a manner designed
      to qualify such stock options as performance-based compensation. However, from
      June 2004 to April 2005, we issued non-qualified stock options not approved
      by
      stockholders to certain persons, none of whom are currently executive officers
      subject to Section 162(m), but certain of whom could in the future become
      subject to Section 162(m), in each case as an inducement material to employment.
      In addition, as described above under "Pricing of stock options," approximately
      100 historical option grants were determined to have been priced with an
      exercise price below the fair market value on the accounting measurement date.
      To the extent that any of these options are exercised by persons who are subject
      to Section 162(m) on the date of exercise, the amount of the deduction that
      we
      would otherwise be entitled to may be limited to the extent the ordinary income
      recognized by the subject employee upon such exercise, together with all other
      compensation in a given taxable year, exceeds $1 million. The committee has
      to
      date qualified as performance-based compensation all stock option grants under
      the 2005 Equity Incentive Plan, and intends to continue to do so. However,
      the
      committee may in its discretion make other awards to existing or potential
      future employees subject to Section 162(m) which do not qualify as
      performance-based compensation.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#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
      committee believes that any application of Section 162(m) to limit deductibility
      of executive compensation is unlikely to have a material effect on our financial
      condition or results of operations, as a result of the company's net operating
      loss carry-forwards, which were approximately $54,473,000 at September 30,
      2006,
      and which expire through 2027. However, certain amounts of these carry-forwards
      are subject to significant limitations under the Internal Revenue Code of 1986,
      as amended, and the committee notes that a valuation allowance has been provided
      in our financial statements to offset the net deferred tax asset associated
      with
      such loss carry-forwards, as management has determined that it is more likely
      than not that the deferred tax asset will not be realized.</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: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Daniel
      Hunter (Chairman)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Raymond
      C. Smith</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Laura
      M.
      Clague (Ms. Clague was not a member of the Compensation Committee during fiscal
      2006)</font></div>
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    <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>REPORT
      OF THE 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: 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>Introductory
      Note:</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following report is not deemed to be incorporated by reference by any general
      statement incorporating by reference this Proxy Statement into any filing under
      the Securities Act or under the Exchange Act, except to the extent that we
      specifically incorporate this information by reference, and shall not otherwise
      be deemed soliciting material or filed under such acts. </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 is the report of the Audit Committee with respect to our audited
      financial statements for the fiscal year ended September&#160;30, 2006.
</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 has reviewed and discussed the audited financial statements of
      American Technology Corporation with management. The Audit Committee has
      discussed with Swenson Advisors, LLP, our independent registered public
      accounting firm, the matters required to be discussed by Statement of Auditing
      Standards No. 61, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Communication
      with Audit Committees</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      which
      includes, among other items, matters related to the conduct of the audit of
      our
      financial statements. The Audit Committee has also received written disclosures
      and the letter from Swenson Advisors, LLP required by Independence Standards
      Board Standard No. 1, which relates to the accounting firm's independence from
      our company, and has discussed with Swenson Advisors, LLP its independence
      from
      our 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: 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 acts pursuant to the Audit Committee Charter adopted by the Board
      of
      Directors. The Audit Committee Charter was amended and restated in April 2004.
      Each of the members of the Audit Committee qualifies as an independent director
      under the current listing standards of the NASDAQ Stock Market. The Charter
      of
      the Audit Committee is attached as Annex 1 to this proxy statement.
</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
      the review and discussions referred to above, the Audit Committee recommended
      to
      the Board of Directors that audited financial statements be included in our
      company's Annual Report on Form 10-K for the fiscal year ended
      September&#160;30, 2006.</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">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: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Daniel
      Hunter (Chairman)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Raymond
      Smith</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Laura
      M.
      Clague (Ms. Clague was not a member of the Audit Committee during fiscal
      2006)</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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    <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>COMPANY
      STOCK PRICE PERFORMANCE</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>Introductory
      Note</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:
      The
      stock price performance graph below is required by the SEC and will not deemed
      to be incorporated by reference by any general statement incorporating by
      reference this Proxy Statement into any filing under the Securities Act, or
      under the Exchange Act, except to the extent that we specifically incorporate
      this information by reference, and shall not otherwise be deemed soliciting
      material or filed under such laws.</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 graph compares the five-year cumulative total return on our common
      stock to the total returns of 1) NASDAQ Stock Market and 2) NASDAQ Stock -
      Electronic &amp; Electrical Equipment &amp; Components, excluding Computer
      Equipment. This comparison assumes in each case that $100 was invested on
      September&#160;30, 2001 and all dividends were reinvested. Our fiscal year ends
      on September 30.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><img src="graph.jpg" alt=""></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">&#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>CERTAIN
      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">Under
      the
      terms of an Assignment of Technology Agreement dated March 2, 1993 and an
      Addendum Agreement dated December 2, 1996 we are obligated to pay Elwood G.
      Norris, our Chairman, a 2% royalty on net sales from certain of our
      technologies, of which only HSS is a current offering of our company. The
      royalty obligation continues until at least March 1, 2007, and for any longer
      period during which we sell products or license technologies subject to any
      patent assigned to us by Mr. Norris. No royalties were paid or recorded under
      this agreement in the fiscal years ended September 30, 2006, 2005 or 2004,
      as
      these royalties were immaterial and were waived by Mr. Norris. We may owe
      royalties in future periods based on actual sales or technology
      revenues.</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">Mark
      Norris, the son of Elwood G. Norris, is a full-time non-executive employee
      of
      our company. In his role as a Mechanical Engineer, Mark Norris was paid $103,336
      in salary for the fiscal year ended September 30, 2006. No other family member
      of any executive officer, director or 5% stockholder received compensation
      of
      more than $60,000 during the year ended September 30, 2006.</font></div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#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">On
      August
      7, 2006, we closed an institutional financing and issued 4,870,512 shares of
      our
      common stock at a purchase price of $1.95 per share and warrants exercisable
      for
      an aggregate of 1,948,205 shares of common stock at an exercise price of $2.67
      per share. The warrants are exercisable from February 7, 2007 until August
      6,
      2010. Institutional investors included Special Situations Fund III QP, L.P.,
      Special Situations Fund III L.P., Special Situations Private Equity Fund, L.P.,
      Special Situations Technology Fund, L.P., and Special Situations Technology
      Fund
      II, L.P., collectively purchasing an aggregate of 2,051,282 shares and warrants
      exercisable for an aggregate of 820,542 shares. Based on a Schedule 13G filing
      on February 14, 2006, Austin W. Marxe and David M. Greenhouse beneficially
      owned
      more than five percent of our outstanding common stock prior to the financing
      and are controlling principals of the general partners and investment advisors
      of the Special Situation Funds. See Note 3 to the ownership table in "Security
      Ownership of Certain Beneficial Owners and Management" above for additional
      information and more current joint ownership information of Mr. Marxe and Mr.
      Greenhouse through the Special Situation Funds.</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
      August 2006 financing triggered certain anti-dilution provisions of prior
      warrants including warrants to purchase an aggregate of 179,302 shares held
      by
      certain of the Special Situations funds. The exercise price of the warrants
      held
      by the Special Situation Funds was adjusted from $6.36 to $5.44 and the shares
      issuable upon exercise of the warrants increased from 179,302 to 209,620 as
      a
      result of the anti-dilution adjustment. The warrant expiration date is unchanged
      at July 18, 2009.</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
      connection with the August institutional financing described above,
      anti-dilution provisions also triggered adjusting the exercise price of 617,500
      warrants expiring September 30, 2006 from $2.00 per share to $1.95 per share.
      However, the repricing of these warrants did not apply to the warrant for
      125,000 shares held by a family trust of Mr. Norris, our Chairman, as a result
      of a waiver executed by the trust. This warrant was granted in 2001 in
      connection with a private placement and was exercised on September 20, 2006
      for
      cash by Mr. Norris&#8217; family trust.</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>PROPOSAL
      THREE</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>APPROVAL
      OF AMENDMENTS TO THE COMPANY'S 2005 EQUITY INCENTIVE PLAN</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">In
      March
      2007, the Compensation Committee approved amendments to our 2005 Equity
      Incentive Plan, which we refer to as the 2005 Plan, in the form attached hereto
      as Annex 4, certain provisions of which are subject to stockholder approval.
      Stockholders are being asked to approve an increase the maximum plan reserve
      to
      5,062,501 shares, which includes the original maximum plus reserve of 3,312,501
      shares, plus 1,750,000 new shares, and to increase the limit of the number
      of
      shares that may be granted to one awardee within any calendar year under the
      2005 Plan to 1,000,000 shares. Currently, the per awardee limit is 250,000
      shares within any calendar year, except that in connection with his or her
      initial service, an awardee may be granted awards covering up to an additional
      500,000 shares. The proposed 1,000,000 shares limit would apply to initial
      service and to continuing service.</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
      affirmative vote of a majority of the votes cast at the meeting, either in
      person or by proxy, is required to approve the amendments to the 2005 Plan.
      Abstentions will be counted toward the tabulation of votes cast on this proposal
      for the purpose of determining a quorum and will have the same effect as
      negative votes. Broker non-votes are counted towards a quorum, but are not
      counted for any purpose in determining whether this proposal has been
      approved.</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
      have
      qualified this plan under the California Corporate Securities Law of 1986.
      In
      reviewing qualification applications, the California Commissioner of
      Corporations will consider regulations which require that an employee, director
      and consultant option or purchase plan be approved by stockholders holding
      a
      majority of the outstanding shares entitled to vote. For such purposes, both
      abstentions and broker non-votes have the same effect as negative votes.
      Accordingly, while we will deem the amendments to 2005 Plan approved by the
      stockholders if the number votes cast in favor exceeds the number of votes
      cast
      against, as set forth in the prior paragraph, we may not be able to qualify
      the
      additional shares reserved under the 2005 Plan pursuant to these amendments
      under the California Corporate Securities Law of 1986 without the higher
      threshold for approval discussed above. If we do not obtain the affirmative
      vote
      of stockholders holding a majority of shares entitled to vote, and if the
      California Commissioner of Corporations will not deviate from its guidelines
      when we apply for qualification, we will be able to issue additional securities
      under the 2005 Plan only pursuant to an available exemption from qualification
      requirements.</font></div>
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    <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: 10pt; FONT-FAMILY: Times New Roman"><strong>Our
      Board of Directors Recommends a vote IN FAVOR of Proposal
      Three</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
      essential features of the 2005 Plan are outlined below:</font></div>
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    <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"><em>General</em></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
      Board
      of Directors approved the 2005 Plan on January 27, 2005 and ratified certain
      technical changes to the 2005 Plan on March 22, 2005. The 2005 Plan became
      effective on April 28, 2005, the effective date of stockholder approval of
      the
      plan at our annual meeting of stockholders, and was subsequently amended on
      August 5, 2005. These amendments did not require stockholder approval. Certain
      amendments made in March 2007 also do not require stockholder approval, and
      are
      presently effective.</font></div>
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    <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"><em>Background
      and Purpose of the 2005 Plan</em></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
      purpose of the 2005 Plan is to encourage ownership in our company by key
      personnel, whose long-term service is considered essential to our continued
      progress, thereby linking these employees directly to stockholder interests
      through increased stock ownership. </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">As
      of
      March 12, 2007, no shares had been issued under the 2005 Plan, and options
      to
      purchase approximately 1,692,700 shares at exercise prices ranging from $2.60
      to
      5.57 per share were outstanding. Excluding the increase of 1,750,000 shares
      for
      which stockholder approval is being sought pursuant to this Proposal Three
      approximately 705,478 shares were available for future grant under the 2005
      Plan. </font></div>
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    <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"><em>Eligible
      Participants</em></font></div>
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    <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">Awards
      under the 2005 Plan may be granted to any of our employees, directors, or
      consultants or those of our affiliates. As of March 12, 2007, there were
      approximately&#160;42 full-time employees, 3 non-employee directors, and&#160;2
      consultants who would be eligible to participate. An incentive stock option
      may
      be granted under the 2005 Plan only to a person who, at the time of the grant,
      is an employee of us or a related 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: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Number
      of Shares of Common Stock Available Under the 2005 Plan</em></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
      initial reserve for the 2005 Plan was a maximum of 3,312,501 shares, which
      maximum included a total of 1,500,000 new shares of our common stock, plus
      up to
      1,812,501 shares that were, upon Board approval of the 2005 Plan, available
      under our 2002 Stock Option Plan, which we refer to as the 2002 Plan, or were
      subject to then outstanding options under the 2002 Plan or the 1997 Stock Option
      Plan, which we refer to as the 1997 Plan. These older plan shares were included
      in the maximum reserve because the 2002 Plan was terminated with respect to
      the
      availability of future option grants after approval of the 2005 Plan by the
      stockholders, and the 2002 Plan included in its reserve shares that were subject
      to outstanding options under the 1997 Plan. The actual reserve under the 2005
      Plan currently consists of the 1,500,000 new shares, shares of our common stock
      available for issuance under the 2002 Plan as of the original date of approval
      of the 2005 Plan by the stockholders, and shares of our common stock that are
      issuable upon exercise of options granted pursuant to the 1997 Plan or the
      2002
      Plan that expire or become unexercisable for any reason without having been
      exercised in full after approval by the stockholders of the 2005 Plan. The
      reserve under the 2005 Plan is reduced by options under the 1997 Plan, the
      2002
      Plan or the 2005 Plan, outstanding which are exercised after the original date
      of approval of the 2005 Plan by the stockholders. The effect of establishing
      a
      pool of this nature was to merge into the 2005 Plan any shares available or
      which would otherwise in the future become available under the 2002 Plan.
</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">As
      of
      March 12, 2007, no options are outstanding under the 1997 Plan, options for
      501,061 shares are outstanding under the 2002 Plan, and options for 1,692,700
      shares are outstanding under the 2005 Plan. A total of 705,478 shares are
      currently available for grant under the 2005 Plan. Assuming no further
      expirations or cancellations of options under the 2002 Plan or the 2005 Plan,
      the number of shares available for grant under the 2005 Plan would increase
      to
      2,455,478 if the stockholders approve the amendments to the 2005 Plan. If
      currently outstanding options granted under the 1997 Plan, the 2002 Plan or
      the
      2005 Plan expire or otherwise become unexercisable, the number of shares
      available for grant under the 2005 Plan will increase on a share for share
      basis. Such shares underlying such outstanding options are therefore included
      in
      the maximum plan reserve.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#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">Also,
      in
      the event of any change in the outstanding common stock from any stock split,
      stock dividend, reorganization, or other change in our capital structure, the
      number of shares available under the 2005 Plan, the per awardee and incentive
      stock option limitations, the number, kind, and class of shares covered by
      each
      outstanding award, the price per share (but not the total price) subject to
      each
      outstanding award, and any other affected terms of outstanding awards, will
      be
      proportionally adjusted to prevent dilution or enlargement of rights under
      the
      2005 Plan.</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
      maximum aggregate number of shares that may be issued under the 2005 Plan
      through the exercise of incentive stock options is presently 3,312,501, and
      if
      the stockholders approve the amendments to the 2005 Plan, this number will
      increase to 5,062,501.</font></div>
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    <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"><em>Administration
      of the Plan</em></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
      2005
      Plan is administered by the Compensation Committee, which we refer to in this
      section as the Committee. In the case of awards intended to qualify as
&#8220;performance-based compensation&#8221; within the meaning of Section 162(m) of the
      Internal Revenue Code of 1986, which we refer to as the Code, the Committee
      will
      consist of two or more &#8220;outside directors&#8221; within the meaning of Section 162(m)
      of the Code. Subject to the limitations in the 2005 Plan, the administrator
      has
      the power to determine the terms of the awards, including the exercise price,
      the number of shares subject to each award, the exercisability of the awards
      and
      the form of consideration payable upon exercise. The administrator also has
      the
      power to implement an award transfer program, whereby awards may be transferred
      to a financial institution or other person or entity selected by the
      administrator, and an exchange program whereby outstanding awards are
      surrendered or cancelled in exchange for awards of the same type (which may
      have
      lower exercise prices and different terms). Except to the extent prohibited
      by
      any applicable law, the Committee may delegate to one or more individuals the
      day-to-day administration of the 2005 Plan.</font></div>
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    <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>Award
      Types</strong></font></div>
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    <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"><em>Options</em></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
      stock
      option is the right to purchase shares of our common stock at a fixed exercise
      price for a fixed period of time. The exercise price of options granted under
      the 2005 Plan must be at least equal to the fair market value of our common
      stock on the date of grant. In addition the exercise price for any incentive
      stock option granted to any employee owning more than 10% of our common stock
      may not be less than 110% of the fair market value of our common stock on the
      date of grant. So long as the issuance and sale of securities under the 2005
      Plan requires qualification under the California Corporate Securities Law of
      1968, the exercise price of stock options must conform to the regulations
      promulgated by the California Commissioner of Corporations related to employee,
      director and consultant option plans, as in effect on the date of grant. These
      regulations presently require that the exercise price be no less than 100%
      (or
      110% in the case of a person who owns securities of the company possessing
      more
      than 10% of the total combined voting power of all classes of stock of the
      company or any related company) of the fair market value of a share of common
      stock on the date of grant. These regulations are proposed to be amended to
      remove such restriction, and upon such amendment, such restriction would no
      longer apply to new grants under the 2005 Plan. However, the requirement that
      the exercise price of options granted under the 2005 Plan must be at least
      equal
      to the fair market value of our common stock on the date of grant will continue
      to apply regardless of the California regulations.</font></div>
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    <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
      the administrator determines to use another method, the fair market value of
      our
      common stock on the date of grant will be determined as the closing price for
      our common stock on the date the option is granted (or if no sales are reported
      that day, the last preceding day on which a sale occurred), using a reporting
      source selected by the administrator. As of March [__], 2007, the closing price
      on the NASDAQ Capital Market for our common stock was $[___] per share. The
      administrator determines the acceptable form of consideration for exercising
      an
      option, including the method of payment, either through the terms of the option
      agreement or at the time of exercise of an option.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#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">An
      option
      granted under the 2005 Plan generally cannot be exercised until it becomes
      vested. The administrator establishes the vesting schedule of each option at
      the
      time of grant and the option will expire at the times established by the
      administrator. After termination of service by one of our employees, directors,
      or consultants, he or she may exercise his or her option for the period of
      time
      stated in the option agreement, to the extent the option is vested on the date
      of termination. If termination is due to death or disability, the option
      generally will remain exercisable for 12 months following such termination.
      In
      all other cases, the option generally will remain exercisable for thirty days,
      but such period of time will be extended if the expiration date of the option
      would otherwise fall during a "blackout period" applicable to the awardee under
      our company's insider trading policy. However, an option may never be exercised
      later than the expiration of its term. The term of any stock option may not
      exceed ten years, except that with respect to any participant who owns 10%
      or
      more of the voting power of all classes of our outstanding capital stock, the
      term for incentive stock options must not exceed five years. So long as the
      issuance and sale of securities under the 2005 Plan requires qualification
      under
      the California Corporate Securities Law of 1968, the vesting and exercisability
      of stock options must conform to the regulations promulgated by the California
      Commissioner of Corporations related to employee, director and consultant option
      plans, as in effect on the date of grant. These regulations presently require
      that vesting of an option awarded to anyone other than an executive officer,
      director or consultant must vest at a rate of at least 20% per year. These
      regulations also presently require a minimum post termination exercise period
      of
      six months in the event of death or disability, or thirty days in other
      circumstances (but not later than the expiration of the term of the option).
      These regulations are proposed to be amended to remove such restrictions, and
      upon such amendment, such restrictions would no longer apply to new grants
      under
      the 2005 Plan.</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"><em>Stock
      Awards</em></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">Stock
      awards are awards or issuances of shares of our common stock that vest in
      accordance with terms and conditions established by the administrator. Stock
      awards include stock units, which are bookkeeping entries representing an amount
      equivalent to the fair market value of a share of common stock, payable in
      cash,
      property or other shares of stock. The administrator may determine the number
      of
      shares to be granted and impose whatever conditions to vesting it determines
      to
      be appropriate, including performance criteria and level of achievement versus
      the criteria that the administrator determines. The criteria may be based on
      financial performance, personal performance evaluations, and completion of
      service by the participant. Unless the administrator determines otherwise shares
      that do not vest typically will be subject to forfeiture or to our right of
      repurchase, which we may exercise upon the voluntary or involuntary termination
      of the awardee&#8217;s service with us for any reason, including death or
      disability.</font></div>
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    <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
      the
      case of stock awards intended to qualify as &#8220;performance-based compensation&#8221;
within the meaning of Section 162(m) of the Code, the measures established
      by
      the administrator must be qualifying performance criteria. Qualifying
      performance criteria include any of the following performance criteria,
      individually or in combination:</font></div>
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            <td width="2%">&#160;</td>
            <td width="30%">&#160;</td>
            <td width="10%">&#160;</td>
            <td width="2%">&#160;</td>
            <td width="30%">&#160;</td>
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              <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">earnings
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                before taxes, and net earnings)</font></div>
            </td>
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            <td width="2%">&#160;</td>
            <td width="30%">&#160;</td>
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                or net income</font></div>
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          <tr bgcolor="white">
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            <td width="30%">&#160;</td>
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    <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">Qualifying
      performance criteria may be applied either to us as a whole or to a business
      unit, affiliate or business segment, individually or in any combination.
      Qualifying performance criteria may be measured either annually or cumulatively
      over a period of years, and may be measured on an absolute basis or relative
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      comparison group, in each case as specified by the administrator in writing
      in
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    <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">So
      long
      as the issuance and sale of securities under the 2005 Plan requires
      qualification under the California Corporate Securities Law of 1968, the
      purchase price, vesting and our terms of repurchase must conform to the
      regulations promulgated by the California Commissioner of Corporations related
      to employee, director and consultant purchase plans, as in effect on the date
      of
      grant. These regulations presently require that the purchase price for
      restricted shares must be not be less than 85% (or 100% in the case of a person
      who owns on the date of grant of such restricted stock, securities of the
      company possessing more than 10% of the total combined voting power of all
      classes of stock of the company or any related company) of the fair market
      value
      of a share of common stock on the date of grant of such restricted stock. These
      regulations also require that restricted stock awarded to anyone other than
      an
      executive officer, director or consultant must vest at a rate of at least 20%
      per year, and we must exercise our right to repurchase unvested shares for
      either cash or cancellation of purchase money indebtedness for such unvested
      shares, and within ninety days of termination of service. These regulations
      are
      proposed to be amended to remove such restrictions, and upon such amendment,
      such restrictions would no longer apply to new grants under the 2005
      Plan.</font></div>
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      stock
      appreciation right is the right to receive the appreciation in the fair market
      value of our common stock in an amount equal to the difference between (a)
      the
      fair market value of a share of our common stock on the date of exercise, and
      (b) the exercise price. This amount will be paid in shares of our common stock
      with equivalent value. The exercise price must be at least equal to the fair
      market value of our common stock on the date of grant. Subject to these
      limitations the administrator determines the exercise price, term, vesting
      schedule, and other terms and conditions of stock appreciation rights; however,
      stock appreciation rights terminate under the same rules that apply to stock
      options.</font></div>
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    <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"><em>Cash
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    <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">Cash
      awards are awards that confer upon the participant the opportunity to earn
      future cash payments tied to the level of achievement with respect to one or
      more performance criteria established by the administrator for a performance
      period. The administrator will establish the performance criteria and level
      of
      achievement versus these criteria, which will determine the target and the
      minimum and maximum amount payable under a cash award. In the case of cash
      awards intended to qualify as &#8220;performance-based compensation&#8221; within the
      meaning of Section 162(m) of the Code, the maximum amount payable under the
      2005
      Plan to any participant in a fiscal year may not exceed $1,000,000. The criteria
      may be based on financial performance and/or personal performance evaluations.
      In the case of cash awards intended to qualify as &#8220;performance-based
      compensation&#8221; within the meaning of Section 162(m) of the Code, the measures
      established by the administrator must be specified in writing.</font></div>
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    <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>Miscellaneous</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"><em>Transferability
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      transfer of awards other than by beneficiary designation, will, by the laws
      of
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      Rule&#160;701. </font></div>
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        <div id="GLFTR" style="WIDTH: 100%" align="left">
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    </div>
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    <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"><em>Adjustments
      upon Merger of Change in Control</em></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
      2005
      Plan provides that in the event of a merger with or into another corporation
      or
      our &#8220;change in control,&#8221; including the sale of all or substantially all of our
      assets, and certain other events, our board or the Committee may, in its
      discretion, provide for the assumption or substitution of, or adjustment to,
      each outstanding award, accelerate the vesting of options and stock appreciation
      rights, and terminate any restrictions on stock awards or cash awards or provide
      for the cancellation of awards in exchange for a cash payment to the
      participant. </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"><em>Amendment
      and Termination of the 2005 Plan</em></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
      administrator may amend the 2005 Plan or may terminate it at any time, but
      any
      amendment is subject to the approval of our stockholders in the manner and
      to
      the extent required by applicable law, rules, or regulations. However, no action
      by the administrator or our stockholders may alter or impair any option or
      other
      type of award under the 2005 Plan, unless mutually agreed otherwise between
      the
      holder of the award and the administrator. The 2005 Plan will continue in effect
      for a term of ten years beginning on the original date of approval of the 2005
      Plan by the stockholders, unless terminated earlier in accordance with the
      provisions of the 2005 Plan.</font></div>
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    <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>Certain
      Federal Income Tax 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">The
      following is a general summary as of this date of the federal income tax
      consequences to us and to U.S. participants for awards granted under the 2005
      Plan. The federal tax laws may change and the federal, state, and local tax
      consequences for any participant will depend upon his or her individual
      circumstances. Tax consequences for any particular individual may be different.
      This summary does not purport to be complete, and does not discuss non-U.S.,
      state or local tax consequences, federal and state estate, inheritance and
      gift
      taxes, or further guidance that may be issued by the Department of Treasury
      under Section 409A of the Code.</font></div>
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    <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"><em>Incentive
      Stock Options</em></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">For
      federal income tax purposes, the grant of an incentive stock option results
      in
      no federal income tax consequences to the holder or to our company. If such
      person retains the common stock for a period of at least two years after the
      option is granted and one year after the option is exercised, any gain upon
      the
      subsequent sale of the common stock will be taxed as a long-term capital gain.
      Our company is not entitled to any deduction under these circumstances. A
      participant who disposes of shares acquired by exercise of an incentive stock
      option prior to the expiration of two years after the option is granted or
      one
      year after the option is exercised (referred to as a "disqualifying
      disposition") will realize ordinary income as of the exercise date equal to
      the
      difference between the exercise price and fair market value of the share on
      the
      exercise date. In the year of the disqualifying disposition, we are entitled
      to
      a deduction equal to the amount of ordinary income recognized by the holder.
      Any
      additional gain or loss recognized by the holder upon any later disposition
      of
      the shares would be capital gain or loss. </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
      "spread" under an incentive stock option - i.e., the difference between the
      fair
      market value of the shares at exercise and the exercise price - is classified
      as
      an item of adjustment in the year of exercise for purposes of the alternative
      minimum tax. If the holder's alternative minimum tax liability exceeds such
      holder's regular income tax liability, the holder will owe the larger amount.
      In
      order to avoid the application of alternative minimum tax with respect to
      incentive stock options, the holder must sell the shares within the same
      calendar year in which the incentive stock options were exercised. However,
      such
      a sale of shares within the same year of exercise will constitute a
      disqualifying disposition, as described above.</font></div>
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    <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
      the
      event an incentive stock option is amended, such option may be considered
      deferred compensation and subject to the rules of new Section 409A of the Code,
      which governs the timing permitted for payment of deferred amounts. Section
      409A
      imposes sanctions for options that are governed by, but fail to comply with,
      Section 409A, including accelerated income inclusion, a 20% penalty and an
      interest penalty. In addition, the amendment of an incentive stock option may
      convert the option from an incentive stock option to a nonstatutory stock
      option.</font></div>
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    <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"><em>Nonstatutory
      Stock Options</em></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
      participant who receives a nonstatutory stock option with an exercise price
      equal to or greater than the fair market value of the stock on the grant date
      generally will not realize taxable income on the grant of such option, but
      will
      realize ordinary income at the time of exercise of the option equal to the
      difference between the option exercise price and the fair market value of the
      shares on the date of exercise. Any additional gain or loss recognized upon
      any
      later disposition of shares would be capital gain or loss. Any taxable income
      recognized in connection with an option exercise by an employee or former
      employee of our company is subject to tax withholding by us.</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
      the
      event a nonstatutory stock option is amended, such option may be considered
      deferred compensation and subject to the rules of new Section 409A of the Code,
      which governs the timing permitted for payment of deferred amounts. Section
      409A
      imposes sanctions for options that are governed by, but fail to comply with,
      Section 409A, including accelerated income inclusion, a 20% penalty and an
      interest penalty.</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"><em>Stock
      Awards</em></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">Stock
      awards will generally be taxed in the same manner as nonstatutory stock options.
      However, a restricted stock award is subject to a &#8220;substantial risk of
      forfeiture&#8221; within the meaning of Section 83 of the Code to the extent the award
      will be forfeited in the event that the participant ceases to provide services
      to us. As a result of this substantial risk of forfeiture, the participant
      will
      not recognize ordinary income at the time of award. Instead, the participant
      will recognize ordinary income on the dates when the stock is no longer subject
      to a substantial risk of forfeiture, or when the stock becomes transferable,
      if
      earlier. The participant&#8217;s ordinary income is measured as the difference between
      the amount paid for the stock, if any, and the fair market value of the stock
      on
      the date the stock is no longer subject to forfeiture. We are entitled to an
      income tax deduction in the amount of the ordinary income recognized by the
      participant, subject to possible limitations imposed by Section 162(m) of the
      Code. </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
      participant may accelerate his or her recognition of ordinary income, if any,
      and begin his or her capital gains holding period by timely filing (i.e., within
      thirty days of the award) an election pursuant to Section 83(b) of the Code.
      In
      such event, the ordinary income recognized, if any, is measured as the
      difference between the amount paid for the stock, if any, and the fair market
      value of the stock on the date of award, and the capital gain holding period
      commences on such date. The ordinary income recognized by an employee or former
      employee will be subject to tax withholding by us. If the stock award consists
      of stock units, no taxable income is reportable when stock units are granted
      to
      a participant or upon vesting. Upon settlement, the participant will recognize
      ordinary income in an amount equal to the value of the payment received pursuant
      to the stock units. </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"><em>Stock
      Appreciation Rights</em></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
      taxable income is reportable when a stock appreciation right with an exercise
      price equal to or greater than the fair market value of the stock on the date
      of
      grant which is exercisable only for stock is granted to a participant or upon
      vesting. Upon exercise, the participant will recognize ordinary income in an
      amount equal to the fair market value of any shares received. We will be
      entitled to a tax deduction to the extent and in the year that ordinary income
      is recognized by the participating individual. Any additional gain or loss
      recognized by the participant upon any later disposition of the shares would
      be
      capital gain or loss. </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
      stock
      appreciation right can be considered non-qualified deferred compensation and
      subject to the new Section 409A of the Code, which governs the timing permitted
      for payment of deferred amounts. Section 409A imposes sanctions for stock
      appreciation rights that are governed by, but fail to comply with, Section
      409A,
      including accelerated income inclusion, a 20% penalty and an interest
      penalty.</font></div>
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    <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"><em>Dividend
      Equivalents</em></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">Recipients
      of stock-based awards that earn dividends or dividend equivalents will recognize
      taxable ordinary income on any dividend payments received with respect to
      unvested and/or unexercised shares subject to such awards, which income is
      subject to withholding for federal income and employment tax purposes. We are
      entitled to an income tax deduction in the amount of the income recognized
      by a
      participant, subject to possible limitations imposed by Section 162(m) of the
      Code.</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"><em>Cash
      Awards</em></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">Upon
      receipt of cash, the recipient will have taxable ordinary income, in the year
      of
      receipt, equal to the cash received. Any cash received will be subject to tax
      withholding by us, and we will be entitled to a tax deduction at that
      time.</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"><em>Tax
      Effect for Us</em></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
      limited by Section 162(m) of the Code, we generally will be entitled to a tax
      deduction in connection with an award under the 2005 Plan in an amount equal
      to
      the ordinary income realized by a participant at the time the participant
      recognizes such income (for example, upon the exercise of a stock
      option).</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"><em>Section
      162(m) Limits</em></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">Section
      162(m) of the Code places a limit of $1,000,000 on the amount of compensation
      that we may deduct in any one year with respect to each of our five most highly
      paid executive officers. Certain performance-based compensation approved by
      stockholders is not subject to the deduction limit. The 2005 Plan is qualified
      such that awards under the Plan may constitute performance-based compensation
      not subject to Section 162(m) of the Code. One of the requirements for equity
      compensation plans is that there must be a limit to the number of shares granted
      to any one individual under the plan. Accordingly, the 2005 Plan currently
      provides that the maximum number of shares for which awards may be made to
      any
      awardee in any calendar year is 250,000, except that in connection with his
      or
      her initial service, an awardee may be granted awards covering up to an
      additional 500,000 shares. Stockholders are being asked to approve an increase
      in the per person limit to a maximum of 1,000,000 shares in any calendar year.
      The maximum amount payable pursuant to that portion of a cash award granted
      under the 2005 Plan for any fiscal year to any employee that is intended to
      satisfy the requirements for &#8220;performance-based compensation&#8221; under Section
      162(m) of the Code may not exceed $1,000,000.</font></div>
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    <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"><em>Section
      409A of the Code</em></font></div>
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    <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
      2005
      Plan provides that it is the intent of our company that all awards granted
      under
      the 2005 Plan will not cause an imposition of additional taxes provided by
      Section 409A of the Code, and that the 2005 Plan should be administered so
      that
      such taxes are not imposed. </font></div>
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    <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"><em>New
      Plan Benefits</em></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">Because
      the administrator has discretion to make awards under the 2005 Plan, it is
      not
      presently possible to determine the benefits or amounts that will be received
      by
      the executive officers, directors or other participants if the stockholders
      approve this Proposal Three. Therefore, we have not included a table reflecting
      such benefits 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 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
      February 2007, Mr. Brown received an option to purchase 250,000 shares of common
      stock under the 2005 Plan, and Mr. Norris received an option to purchase 150,000
      shares of common stock under the 2005 Plan. Under the present terms of the
      2005
      Plan, Mr. Brown may not receive any additional awards during calendar year
      2007,
      and any additional awards to Mr. Norris during calendar year 2007 would be
      limited to a total of 100,000 shares. If the stockholders approve this Proposal
      Three, the per awardee limits applicable to Mr. Brown, Mr. Norris and each
      other
      current participant in the 2005 Plan will increase to 1,000,000 shares from
      the
      present 250,000 shares, and accordingly, Mr. Brown, Mr. Norris and other
      participants may become eligible to receive awards during fiscal 2007 they
      would
      not otherwise be eligible to receive. We have no current plans, proposals or
      arrangements to grant any new awards under the 2005 Plan.</font></div>
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    <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>PROPOSAL
      FOUR</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>APPROVAL
      OF CERTAIN TERMS OF THE SECURITIES PURCHASE AGREEMENT</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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Overview</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">In
      August
      2006, we sold 4,870,512 shares of our common stock at a purchase price of $1.95
      per share to a limited number of institutional investors. In connection with
      this financing, we issued a warrant to each investor, with each warrant
      containing a provision which provides for the adjustment of the exercise price
      of the warrant under specified circumstances, which we refer to as the reset
      provision. We agreed to seek stockholder approval of the reset provision, as
      more fully described 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">The
      affirmative vote of a majority of the votes cast the meeting, either in person
      or by proxy, is required to approve 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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Summary
      of the Financing</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>This
      summary of the financing is intended to provide you with basic information
      concerning the transaction. However, it is not a substitute for reviewing the
      Securities Purchase Agreement, the Registration Rights Agreement, and Form
      of
      Warrant, which we collectively refer to as the financing documents. You should
      read this summary in conjunction with the financing documents, which were
      attached as exhibits to our Form 8-K filed with the SEC on August 8, 2006.
      The
      financing documents are available on the company's website at </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">www.atcsd.com</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>,
      by
      clicking on "Investors" and then "SEC Filings." Copies of any of the financing
      documents are also available to stockholders at no charge upon request.
      Stockholders should address requests for documents to the Secretary of our
      company at the address listed on the first page of this Proxy
      Statement.</em></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
      financing was conducted pursuant to the terms of a Securities Purchase Agreement
      dated August 4, 2006. The financing closed on August 7, 2006. We received gross
      proceeds from this financing of approximately $9.5 million. The net proceeds
      of
      the financing after payment of a 5% placement fee and transaction expenses
      has
      been and will be used for general working capital purposes, including marketing,
      sales and deliveries of proprietary directed sound products.</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
      connection with this financing, we issued a warrant to each investor. The
      warrants are exercisable for an aggregate of 1,948,204 shares of common stock
      at
      an exercise price of $2.67 per share. These warrants are exercisable from
      February 7, 2007 until August 6, 2010.</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>Approval
      of the Reset Provision</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
      warrants contain a reset provision which would adjust the exercise price, and
      in
      inverse proportion adjust the number of shares subject to the warrant, in the
      event we pay or effect stock dividends or splits, or in the event we sell shares
      of our common stock at a purchase price, or options or warrants to purchase
      shares of our common stock having an exercise price, less than the exercise
      price of the warrants.</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">Absent
      stockholder approval of this proposal, the exercise price may not be reduced
      to
      a price less than the last closing bid price of our common stock reported on
      the
      NASDAQ Capital Market immediately preceding entry into the Securities Purchase
      Agreements, or $2.20 per share.</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
      Securities Purchase Agreement requires us to seek approval of our stockholders
      for the reset provisions at this meeting. Upon approval, the limitation on
      the
      reduction of the exercise price in the warrants will cease to
      apply.</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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      connection with the financing, our chairman Elwood G. Norris entered into a
      voting agreement agreeing to vote all of his shares of our common stock in
      favor
      of this proposal.</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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    </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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Reasons
      for Stockholder Approval</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
      common stock is traded and quoted on the NASDAQ Capital Market and is therefore
      subject to the NASDAQ Marketplace Rules. NASDAQ Marketplace Rule 4350 sets
      forth
      certain corporate governance standards for issuers whose securities are listed
      on the NASDAQ Capital Market. NASDAQ Marketplace Rule 4350(i)(1)(D) requires
      stockholder approval prior to our sale or issuance or potential issuance of
      common stock (or securities convertible into our common stock) equal to 20%
      or
      more of our common stock or 20% or more of the voting power outstanding before
      the issuance if the sale price of the securities is less than the greater of
      the
      book or market value of the securities.</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
      sold
      4,870,512 shares in the financing, or 19.89%, of the total outstanding shares
      of
      common stock on the date of the Securities Purchase Agreement. As discussed
      above, we also issued warrants to purchase an additional 1,948,208 shares.
      Because the warrants cannot, absent stockholder approval of the reset
      provisions, have an exercise price less than $2.20 per share, and are not
      exercisable for a period of six months following the closing date, the number
      of
      shares purchasable upon exercise of the warrants was not integrated into the
      financing for purposes of determining whether the financing required advance
      stockholder approval under NASDAQ Marketplace Rules.</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">However,
      the reset provisions in the warrants could operate to reduce the exercise price
      to less than $2.20 per share, which would cause the warrants to be integrated
      with the sale of common stock, and thereby result in the possible issuance
      of
      20% or more of our stock at a price less than the greater of book or market
      value of the securities, which would in turn violate the NASDAQ Marketplace
      Rules absent stockholder approval. Because of this possibility, the warrants
      contain a provision which sets a minimum exercise price, as described above.
      Due
      to that minimum exercise price provision, we were not obligated under the NASDAQ
      Marketplace Rules to obtain our stockholders&#8217; approval prior to consummating the
      financing.</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
      Securities Purchase Agreement requires us to seek stockholder approval under
      Rule 4350(i) at our Annual Meeting. Under applicable NASDAQ rules, votes on
      shares issued in connection with the financing, whether cast in person or by
      proxy, will not be entitled to vote and will not be counted for purposes of
      this
      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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
      the
      reasons described above, the Board of Directors believes it is in the best
      interest of the company to ask for your approval 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">You
      should note that, in the event that our stockholders do not approve this
      proposal, under no circumstances would we reduce the exercise price of the
      warrants below $2.20 per share. However, if the stockholders do not approve
      this
      proposal, the investors in the financing may take the position that we failed
      to
      use commercially reasonable efforts to obtain such approval, as required in
      the
      Securities Purchase Agreement. In addition, if the stockholders do not approve
      this proposal, it could impair our ability to raise capital in private
      transactions in the future. Our company has historically relied upon such
      private financing transactions to sustain its operations.</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>Our
      Board of Directors recommends a vote IN FAVOR of Proposal
      Four</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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    <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>OTHER
      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">The
      Board
      of Directors knows of no other matters that will be presented for consideration
      at the Annual Meeting. If any other matters are properly brought before the
      meeting, it is the intention of the persons named in the accompanying proxy
      to
      vote on such matters in accordance with their best judgment.</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">Any
      stockholder or stockholder's representative who, because of a disability, may
      need special assistance or accommodation to allow him or her to participate
      at
      the Annual Meeting may request reasonable assistance or accommodation from
      us by
      contacting the Secretary at American Technology Corporation, 15378 Avenue of
      Science, Suite 100, San Diego, California 92128 or at (858) 676-1112. To provide
      us sufficient time to arrange for reasonable assistance or accommodation, please
      submit all requests by April 23, 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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Whether
      you intend to be present at the Annual Meeting or not, we urge you to return
      your signed proxy card promptly.</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="center">
      <table bgcolor="white" cellpadding="0" cellspacing="0" width="100%">

          <tr bgcolor="white">
            <td width="50%">&#160;</td>
            <td width="50%">
              <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">By
                Order of the Board 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="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>/s/
                Elwood G.
                Norris&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</u></font></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">Elwood
                G. Norris</font></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">Chairman
                of the Board</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
    </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">March
      30,
      200</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7</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
      our Annual Report to the Securities and Exchange Commission on Form&#160;10-K
      for the fiscal year ended September&#160;30, 2006 has been mailed with this
      proxy statement. We amended portions of our Form 10-K on January 29, 2007.
      The
      amended information is contained in this proxy statement. Each of the Form
      10-K
      amendments and exhibits to the Form 10-K are available without charge upon
      written request to the Secretary at American Technology Corporation, 15378
      Avenue of Science, Suite 100, San Diego, California 92128.</font></div>
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    <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">ANNEX
      1</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">AMERICAN
      TECHNOLOGY CORPORATION</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">BOARD
      OF
      DIRECTORS</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">AUDIT
      COMMITTEE CHARTER</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">(Approved
      April 7, 2004)</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>Organization</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">There
      shall be a committee of the Board of Directors of American Technology
      Corporation (the "Company") to be known as the Audit Committee (the
      "Committee"). The Board of Directors shall appoint the members of the Committee,
      which will be composed of at least three directors. The Committee shall be
      composed entirely of directors that are independent, as defined by the
      applicable rules and regulations of the Securities and Exchange Commission
      and
      Nasdaq, and are free of any relationship that, in the opinion of the Board
      of
      Directors, would interfere with their exercise of independent judgment. All
      Committee members must satisfy the financial literacy requirements of the
      applicable rules and regulations of Nasdaq, and at least one member shall have
      past employment experience in finance or accounting, or other comparable
      experience or background which results in the member's financial sophistication.
      In addition, at least one member of the Committee may be designated as the
      "audit committee financial expert," as defined by applicable legislation and
      regulation of the Securities and Exchange Commission.</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>Statement
      of Policy</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
      primary purposes of the Committee are to assist the Board of Directors in
      fulfilling its oversight responsibilities for:</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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      <div align="left">
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            <tr>
              <td valign="top" width="10%">
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              <td align="left" valign="top" width="90%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                  <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
                    accounting and financial reporting processes of the Company and
                    the audits
                    of the financial statements of the Company;</font></div>
                </div>
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            </tr>
            <tr>
              <td valign="top" width="10%">&#160;</td>
              <td align="left" valign="top" width="90%">&#160;</td>
            </tr>
            <tr>
              <td valign="top" width="10%">
                <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
              </td>
              <td align="left" valign="top" width="90%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                  <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
                    Company's compliance with legal and regulatory
                    requirements;</font></div>
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            </tr>
            <tr>
              <td valign="top" width="10%">&#160;</td>
              <td align="left" valign="top" width="90%">&#160;</td>
            </tr>
            <tr>
              <td valign="top" width="10%">
                <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
              </td>
              <td align="left" valign="top" width="90%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                  <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
                    independent auditors' qualifications and independence;
                    and</font></div>
                </div>
              </td>
            </tr>
            <tr>
              <td valign="top" width="10%">&#160;</td>
              <td align="left" valign="top" width="90%">&#160;</td>
            </tr>
            <tr>
              <td valign="top" width="10%">
                <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
              </td>
              <td align="left" valign="top" width="90%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                  <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
                    performance of the Company's independent
                    auditors.</font></div>
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      <div>&#160;</div>
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    <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">Except
      as
      otherwise required by applicable law, regulations or listing standards, all
      major decisions are considered by the Board of Directors as a
      whole.</font></div>
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    <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>Authority</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">The
      Committee has authority to conduct or authorize investigations into any matters
      within its scope of responsibility. It is empowered to:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <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">
        <div align="left">
          <table cellpadding="0" cellspacing="0" width="100%">

              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <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">Appoint,
                        compensate, and oversee the work of any public accounting
                        firm employed by
                        the Company.</font></div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <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">Resolve
                        any disagreements between management and the independent
                        auditors
                        regarding financial reporting.</font></div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
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                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
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                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <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">Pre-approve
                        all auditing and non-audit services by the Company's independent
                        auditors.</font></div>
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                </td>
              </tr>
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                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <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">Retain
                        independent counsel, accountants, or others at the expense
                        of the Company
                        to advise the Committee or assist in the conduct of an
                        investigation.</font></div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
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                  <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">Seek
                    any information it requires from employees&#8212;all of whom are directed to
                    cooperate with the Committee's requests&#8212;or external
                    parties.</font></div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <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">Meet
                    with Company officers, independent auditors, or outside counsel,
                    as
                    necessary.</font></div>
                </td>
              </tr>

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        <div>&#160;</div>
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    <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"><strong>Responsibilities</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
      Committee will carry out the following responsibilities:</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>Financial
      Statements</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <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">
        <div align="left">
          <table cellpadding="0" cellspacing="0" width="100%">

              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <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">Review
                          significant accounting and reporting issues, including
                          complex or unusual
                          transactions and highly judgmental areas, recent professional
                          and
                          regulatory pronouncements, off-balance sheet structures,
                          and understand
                          their impact on the financial
                          statements.</font></div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <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">Review
                          with management and the independent auditors the results
                          of the audit,
                          including any difficulties
                          encountered.</font></div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <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">Review
                          the annual financial statements and confirm they are complete
                          and
                          consistent with information known to Committee members,
                          and reflect
                          appropriate accounting principles.</font></div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <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">Review
                          other sections of the annual report and related regulatory
                          filings,
                          including the disclosures made in the Management Discussion
                          and Analysis,
                          before release and consider the accuracy and completeness
                          of the
                          information.</font></div>
                      </div>
                    </div>
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                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <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">Understand
                      how management develops interim financial information, and
                      the nature and
                      extent of independent auditor involvement.</font></div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <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">Review
                      interim financial reports with management and the independent
                      auditors
                      before filing with regulators, including the disclosures made
                      in the
                      Management Discussion and Analysis, and consider whether they
                      are complete
                      and consistent with the information known to Committee
                      members.</font></div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <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">Review
                    disclosures made to the Committee by the Company's CEO and CFO
                    during
                    their certification process for the annual report and interim
                    reports
                    about any significant deficiencies in the design or operation
                    of internal
                    controls or material weaknesses therein and any fraud involving
                    management
                    or other employees who have significant disagreements with
                    management.</font></div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <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">Review
                    with outside counsel any legal matter that could have a significant
                    impact
                    on the Company's financial
                    statements.</font></div>
                </td>
              </tr>

          </table>
        </div>
        <div>&#160;</div>
      </div>
    </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>Internal
      Control</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <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">
        <div align="left">
          <table cellpadding="0" cellspacing="0" width="100%">

              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <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">Consider
                            the effectiveness of the Company's internal control system,
                            including
                            information technology security and
                            control.</font></div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <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">Understand
                            the scope of the independent auditors' review of internal
                            control over
                            financial reporting, and obtain reports on significant
                            findings and
                            recommendations, together with management's
                            responses.</font></div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
              </tr>

          </table>
        </div>
      </div>
    </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
      Audit</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <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">
        <div align="left">
          <table cellpadding="0" cellspacing="0" width="100%">

              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <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">Review
                              the independent auditors' proposed audit scope and
                              approach, including
                              coordination of audit effort with
                              management.</font></div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
              </tr>

          </table>
        </div>
      </div>
    </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; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
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      </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>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <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">
        <div align="left">
          <table cellpadding="0" cellspacing="0" width="100%">

              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <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">Review
                            the performance of the independent auditors, and exercise
                            final approval
                            on the appointment or discharge of the
                            auditors.</font></div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <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">Review
                            and confirm the independence of the independent auditors
                            by obtaining
                            statements from the auditors on relationships between
                            the auditors and the
                            Company, including non-audit services, and discussing
                            the relationships
                            with the auditors.</font></div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <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">On
                            a regular basis, meet separately with the independent
                            auditors to discuss
                            any matters that the Committee or auditors believe should
                            be discussed
                            privately.</font></div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
              </tr>

          </table>
        </div>
      </div>
    </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>Compliance</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <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">
        <div align="left">
          <table cellpadding="0" cellspacing="0" width="100%">

              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <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">Review
                              the effectiveness of the system for monitoring compliance
                              with laws and
                              regulations and the results of management's investigation
                              and follow-up
                              (including disciplinary action) of any instances of
                              noncompliance.</font></div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <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">Review
                              the findings of any examinations by regulatory agencies,
                              and any auditor
                              observations.</font></div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <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">Obtain
                              from the independent auditors assurance that Section
                              10A(b) of the
                              Securities Exchange Act of 1934 has not been
                              implicated.</font></div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <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">Review
                    the process for communicating the code of ethics to Company personnel,
                    and
                    for monitoring compliance therewith.</font></div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
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                <td align="left" valign="top" width="90%">
                  <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">Establish
                    procedures for the receipt, retention and treatment of complaints
                    received
                    by the Company regarding accounting, internal accounting controls
                    or
                    auditing matters, and the confidential, anonymous submission
                    by employees
                    of concerns regarding questionable accounting or auditing
                    matters.</font></div>
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              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
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                <td align="left" valign="top" width="90%">
                  <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">Obtain
                    regular updates from management and Company legal counsel regarding
                    compliance matters.</font></div>
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              <tr>
                <td valign="top" width="10%">&#160;</td>
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    <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>Reporting
      Responsibilities</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <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">
        <div align="left">
          <table cellpadding="0" cellspacing="0" width="100%">

              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <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">Regularly
                                report to the Board of Directors about Committee
                                activities, issues, and
                                related
                                recommendations.</font></div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <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">Provide
                                an open avenue of communication between the independent
                                auditors and the
                                Board of Directors.</font></div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <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">Report
                                annually to the shareholders, describing the Committee's
                                composition,
                                responsibilities and how they were discharged, including
                                approval of
                                non-audit services.</font></div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <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">Review
                      any other reports the Company issues that relate to Committee
                      responsibilities, including having discussion with management
                      regarding
                      the Company's earnings press releases, including the use of
                      "pro forma" or
                      "adjusted" non-GAAP information, as well as other financial
                      information
                      and earnings guidance provided to analysts and rating agencies.
                      This
                      review may be general (i.e., the types of information to be
                      disclosed and
                      the type of presentations to be made), and unless otherwise
                      provided in a
                      Company policy, the Committee does not need to discuss each
                      release in
                      advance.</font></div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
              </tr>

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          Responsibilities</strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <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">
        <div align="left">
          <table cellpadding="0" cellspacing="0" width="100%">

              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                <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">Perform
                                  other activities related to this charter as requested
                                  by the Board of
                                  Directors.</font></div>
                              </div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
              </tr>

          </table>
        </div>
        <div align="left">&#160;</div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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          </div>
          <div id="HDR">
            <div id="GLHDR" style="WIDTH: 100%" align="right">
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          </div>
        </div>
        <div align="left">&#160;</div>
        <div align="left">
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
            <div align="left">
              <table cellpadding="0" cellspacing="0" width="100%">

                  <tr>
                    <td valign="top" width="10%">
                      <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                    </td>
                    <td align="left" valign="top" width="90%">
                      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                    <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">Review
                                      all related party transactions (as that term
                                      is defined in SEC Regulation
                                      S-K, Item 404) on an ongoing basis. All such
                                      transactions must be approved
                                      by the
                                      Committee.</font></div>
                                  </div>
                                </div>
                              </div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </td>
                  </tr>
                  <tr>
                    <td valign="top" width="10%">&#160;</td>
                    <td align="left" valign="top" width="90%">&#160;</td>
                  </tr>
                  <tr>
                    <td valign="top" width="10%">
                      <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                    </td>
                    <td align="left" valign="top" width="90%">
                      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                    <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">Institute
                                      and oversee special investigations as
                                      needed.</font></div>
                                  </div>
                                </div>
                              </div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </td>
                  </tr>
                  <tr>
                    <td valign="top" width="10%">&#160;</td>
                    <td align="left" valign="top" width="90%">&#160;</td>
                  </tr>
                  <tr>
                    <td valign="top" width="10%">
                      <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                    </td>
                    <td align="left" valign="top" width="90%">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                    <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">With
                                      the assistance of legal counsel, review and
                                      assess the adequacy of this
                                      charter annually, and present a report to the
                                      Board at the Board's annual
                                      organizational meeting of the results of the
                                      Committee's assessment,
                                      including any recommendations for changes to
                                      this
                                      charter.</font></div>
                                  </div>
                                </div>
                              </div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </td>
                  </tr>
                  <tr>
                    <td valign="top" width="10%">&#160;</td>
                    <td align="left" valign="top" width="90%">&#160;</td>
                  </tr>
                  <tr>
                    <td valign="top" width="10%">
                      <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                    </td>
                    <td align="left" valign="top" width="90%">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <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">Confirm
                            annually that all responsibilities outlined in this charter
                            have been
                            carried out.</font></div>
                        </div>
                      </div>
                    </td>
                  </tr>
                  <tr>
                    <td valign="top" width="10%">&#160;</td>
                    <td align="left" valign="top" width="90%">&#160;</td>
                  </tr>
                  <tr>
                    <td valign="top" width="10%">
                      <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                    </td>
                    <td align="left" valign="top" width="90%">
                      <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">Evaluate
                        the Committee's and individual members' performance on a
                        regular basis,
                        and annually provide to the Board for its evaluation a report
                        concerning
                        the performance of the Committee.</font></div>
                    </td>
                  </tr>
                  <tr>
                    <td valign="top" width="10%">&#160;</td>
                  </tr>

              </table>
            </div>
          </div>
        </div>
      </div>
    </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>Meetings
      and Voting</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
      Committee will meet at least four times a year, with authority to convene
      additional meetings, as circumstances require. The affirmative vote of a
      majority of the members present at a meeting at which a quorum is present shall
      constitute action of the Committee. The Committee will invite members of
      management, auditors or others to attend meetings and provide pertinent
      information, as necessary. It will hold private meetings with auditors (see
      above) and executive sessions. Meeting agendas will be prepared and provided
      in
      advance to members, along with appropriate briefing materials. Minutes will
      be
      prepared. </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>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: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Members
      of the Committee shall receive compensation for attending Committee meetings
      as
      defined and approved by the Board 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="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>Limitation
      of Committee's Role</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">While
      the
      Committee has the responsibilities and powers set forth in this charter, it
      is
      not the duty of the Committee to plan or conduct audits or to determine that
      the
      Company's financial statements and disclosures are complete and accurate and
      are
      in accordance with generally accepted accounting principles and applicable
      rules
      and regulations. These are the responsibilities of management and the
      independent auditors.</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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      <div>&#160;</div>
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    <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">ANNEX
      2</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"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AMERICAN
      TECHNOLOGY CORPORATION</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">BOARD
      OF
      DIRECTORS</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
      COMMITTEE CHARTER</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">(Approved
      January 27, 2005)</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>Organization</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">There
      shall be a committee of the Board of Directors of American Technology
      Corporation (the "Company") to be known as the Compensation Committee (the
      "Committee"). The Committee shall be composed entirely of directors who
      are:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <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">
        <div align="left">
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              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <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">"independent,"
                              as defined by the applicable rules and regulations
                              of the Securities and
                              Exchange Commission and Nasdaq, and are free of any
                              relationship that, in
                              the opinion of the Board of Directors, would interfere
                              with their exercise
                              of independent judgment;</font></div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <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">"non-employee
                              directors," as that term is defined in Rule 16b-3 promulgated
                              under the
                              Securities Exchange Act of 1934, as amended;
                              and</font></div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <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">"outside
                              directors," as that term is defined in Section 162(m)
                              of the Internal
                              Revenue Code of 1986, as
                              amended.</font></div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
              </tr>

          </table>
        </div>
      </div>
    </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">Unless
      the Board elects a Chair of the Committee, the Committee shall elect a Chair
      by
      majority vote.</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>Statement
      of Policy</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">The
      primary purposes of the Committee are to:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <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">
        <div align="left">
          <table cellpadding="0" cellspacing="0" width="100%">

              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <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">Provide
                                assistance to the Board of Directors in fulfilling
                                its responsibilities to
                                the shareholders, potential shareholders, and the
                                investment community
                                relating to compensation of the Company's
                                executives.</font></div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <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">Administer
                                the Company's equity compensation
                                plans.</font></div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <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">Report
                                on executive compensation for inclusion in the Company's
                                proxy statement,
                                in accordance with applicable rules and
                                regulations.</font></div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
              </tr>

          </table>
        </div>
      </div>
    </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">Except
      as
      otherwise required by applicable law, regulations or listing standards, all
      major decisions are considered by the Board of Directors as a
      whole.</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>Responsibilities</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
      Committee shall have the following responsibilities. To the extent the Company
      has co-principal executive officers, all references to the CEO in this charter
      shall include all co-principal executive officers, regardless of
      title.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <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">
        <div align="left">
          <table cellpadding="0" cellspacing="0" width="100%">

              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                <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
                                  Committee shall review and approve performance
                                  goals and objectives for
                                  executive officers, including the
                                  CEO.</font></div>
                              </div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                <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
                                  Committee shall evaluate the CEO's performance
                                  in light of those goals and
                                  objectives, and recommend to the Board the CEO's
                                  compensation level based
                                  on this evaluation. The CEO may not participate
                                  in deliberations
                                  concerning his or her own compensation
                                  level.</font></div>
                              </div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
              </tr>

          </table>
        </div>
      </div>
    </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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        <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">
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                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                <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">In
                                  determining the long-term incentive component of
                                  CEO compensation, the
                                  Committee should consider the Company's performance
                                  and relative
                                  shareholder return, the value of similar incentive
                                  awards to CEOs at
                                  comparable companies, and the awards given to the
                                  CEO in past years, and
                                  other factors it considers relevant.
                                  </font></div>
                              </div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </td>
                </tr>
                <tr>
                  <td valign="top" width="10%">&#160;</td>
                  <td align="left" valign="top" width="90%">&#160;</td>
                </tr>
                <tr>
                  <td valign="top" width="10%">
                    <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                  </td>
                  <td align="left" valign="top" width="90%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                <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
                                  Committee shall recommend to the Board the compensation
                                  of executive
                                  officers other than the CEO. The CEO may be present
                                  at such deliberations,
                                  but may not vote.</font></div>
                              </div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </td>
                </tr>
                <tr>
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                  <td align="left" valign="top" width="90%">&#160;</td>
                </tr>
                <tr>
                  <td valign="top" width="10%">
                    <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                  </td>
                  <td align="left" valign="top" width="90%">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                <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
                                  Committee shall review and approve incentive-compensation
                                  plans and
                                  equity-based plans for all of the Company's executive
                                  officers, and make
                                  recommendations to the Board for their approval
                                  as
                                  applicable.</font></div>
                              </div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </td>
                </tr>
                <tr>
                  <td valign="top" width="10%">&#160;</td>
                  <td align="left" valign="top" width="90%">&#160;</td>
                </tr>
                <tr>
                  <td valign="top" width="10%">
                    <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                  </td>
                  <td align="left" valign="top" width="90%">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <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
                        Committee shall administer and make grants under the Company's
                        incentive-compensation plans and equity-based plans to the
                        extent such
                        function is delegated to the Committee by the Board with
                        respect to each
                        such plan.</font></div>
                    </div>
                  </td>
                </tr>
                <tr>
                  <td valign="top" width="10%">&#160;</td>
                  <td align="left" valign="top" width="90%">&#160;</td>
                </tr>
                <tr>
                  <td valign="top" width="10%">
                    <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                  </td>
                  <td align="left" valign="top" width="90%">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <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
                        Committee shall develop and implement a long-term strategy
                        of employee
                        compensation and the types of stock and other compensation
                        plans to be
                        used by the Company and the shares and amounts reserved
                        thereunder.</font></div>
                    </div>
                  </td>
                </tr>
                <tr>
                  <td valign="top" width="10%">&#160;</td>
                  <td align="left" valign="top" width="90%">&#160;</td>
                </tr>
                <tr>
                  <td valign="top" width="10%">
                    <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                  </td>
                  <td align="left" valign="top" width="90%">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <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
                        Committee shall address any other compensation matters as
                        from time to
                        time directed by the Board.</font></div>
                    </div>
                  </td>
                </tr>
                <tr>
                  <td valign="top" width="10%">&#160;</td>
                  <td align="left" valign="top" width="90%">&#160;</td>
                </tr>
                <tr>
                  <td valign="top" width="10%">
                    <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                  </td>
                  <td align="left" valign="top" width="90%">
                    <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
                      Committee shall report on executive compensation as required
                      by applicable
                      laws and regulations for inclusion in the Company's proxy statement
                      or
                      other SEC filings, discussing among other things: </font></div>
                  </td>
                </tr>
                <tr>
                  <td valign="top" width="10%">&#160;</td>
                  <td align="left" valign="top" width="90%">&#160;</td>
                </tr>
                <tr>
                  <td valign="top" width="10%">&#160;</td>
                  <td align="left" valign="top" width="90%">
                    <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font>The
                          criteria on which compensation paid to the CEO for the
                          last completed
                          fiscal year is based.</div>
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt">&#160;</div>
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt">
                          <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="FONT-FAMILY: Symbol">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font>The
                            relationship of such compensation to the Company's performance.
                            </font></div>
                          <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
                          <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <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 style="FONT-FAMILY: Symbol">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font>The
                              Committee's executive compensation policies applicable
                              to executive
                              officers.</font></div>
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <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 style="FONT-FAMILY: Symbol">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font>Whether
                                the
                                Company's allowable deduction for compensation to
                                the Company's executive
                                officers could be limited pursuant to</font></div>
                              <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Section
                                162(m) of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Internal
                                Revenue Code.</font></div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </td>
                </tr>
                <tr>
                  <td valign="top" width="10%">&#160;</td>
                  <td align="left" valign="top" width="90%">&#160;</td>
                </tr>
                <tr>
                  <td valign="top" width="10%">
                    <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                  </td>
                  <td align="left" valign="top" width="90%">
                    <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
                      Committee shall annually review Board compensation and make
                      related
                      recommendations to the Board.</font></div>
                  </td>
                </tr>
                <tr>
                  <td valign="top" width="10%">&#160;</td>
                  <td align="left" valign="top" width="90%">&#160;</td>
                </tr>
                <tr>
                  <td valign="top" width="10%">
                    <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                  </td>
                  <td align="left" valign="top" width="90%">
                    <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
                      Committee shall annually provide to the Board for its evaluation
                      a report
                      concerning the performance of the Committee.</font></div>
                  </td>
                </tr>
                <tr>
                  <td valign="top" width="10%">&#160;</td>
                  <td align="left" valign="top" width="90%">&#160;</td>
                </tr>
                <tr>
                  <td valign="top" width="10%">
                    <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                  </td>
                  <td align="left" valign="top" width="90%">
                    <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
                      Committee shall, with the assistance of legal counsel, review
                      and assess
                      the adequacy of this charter annually, and present a report
                      to the Board
                      at the Board's annual organizational meeting of the results
                      of its
                      assessment, including any recommendations for changes to this
                      charter.</font></div>
                  </td>
                </tr>
                <tr>
                  <td valign="top" width="10%">&#160;</td>
                  <td align="left" valign="top" width="90%">&#160;</td>
                </tr>
                <tr>
                  <td valign="top" width="10%">
                    <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                  </td>
                  <td align="left" valign="top" width="90%">
                    <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
                      Committee shall regularly address the issues of appointment
                      and removal of
                      members of the Committee, qualification of Committee members,
                      and
                      Committee structure and operation, and shall make recommendations
                      to the
                      Board concerning any proposed changes to Committee membership,
                      structure,
                      or authority.</font></div>
                  </td>
                </tr>
                <tr>
                  <td valign="top" width="10%">&#160;</td>
                </tr>

            </table>
          </div>
        </div>
      </div>
    </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; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <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"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-2-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
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      <div id="HDR">
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    <div>&#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>Meetings
      and Voting</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
      Committee shall meet as often as necessary, but at least once annually. The
      affirmative vote of a majority of the members present at a meeting at which
      a
      quorum is present shall constitute action of the 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>Authority
      to Engage Independent Counsel and Advisors; Access</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">In
      the
      process of discharging its duties, if a compensation consultant is needed to
      assist in the evaluation of director, CEO or senior executive compensation,
      the
      Committee shall have authority to retain and terminate the consulting firm,
      including authority to approve the firm's fees (which shall be paid by the
      Company) and other retention terms. The Committee shall also have the right
      to
      engage and determine funding for independent counsel and other advisors at
      the
      expense of the Company. The Committee may seek any information it requires
      from
      employees of the Company, all of whom shall be directed to cooperate with the
      Committee's requests, and from external parties.</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>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: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Members
      of the Committee shall receive compensation for attending Committee meetings
      as
      defined and approved by the Board 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 id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <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">-3-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
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      <div id="HDR">
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    <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">ANNEX
      3</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">AMERICAN
      TECHNOLOGY CORPORATION</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">BOARD
      OF
      DIRECTORS</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">NOMINATING
      AND GOVERNANCE COMMITTEE CHARTER </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">(Approved
      March 15, 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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Organization</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">There
      shall be a committee of the Board of Directors of American Technology
      Corporation (the "Company") to be known as the Nominating and Governance
      Committee (the "Committee"). The Board of Directors shall appoint the members
      of
      the Committee, which will be composed of at least two directors. The Committee
      shall be composed entirely of directors that are independent, as defined by
      the
      applicable rules and regulations of the Securities and Exchange Commission
      and
      Nasdaq, and are free of any relationship that, in the opinion of the Board
      of
      Directors, would interfere with their exercise of independent judgment. Unless
      the Board elects a Chair of the Committee, the Committee shall elect a Chair
      by
      majority vote.</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>Statement
      of Policy</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">The
      primary purposes of the Committee are to:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <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">
        <div align="left">
          <table cellpadding="0" cellspacing="0" width="100%">

              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <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">Identify
                                individuals qualified to become Board
                                members.</font></div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <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">Recommend
                                the persons to be nominated by the Board for election
                                as directors at the
                                annual meeting of
                                stockholders.</font></div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <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">Regularly
                                review and advise the Board with respect to corporate
                                governance
                                principles and policies applicable to the
                                Company.</font></div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <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">Oversee
                    the annual evaluation of the Board's effectiveness.</font></div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
              </tr>

          </table>
        </div>
      </div>
    </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">Except
      as
      otherwise required by applicable law, regulations or listing standards, all
      major decisions are considered by the Board of Directors as a
      whole.</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>Responsibilities</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">The
      Committee shall have the following responsibilities:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <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">
        <div align="left">
          <table cellpadding="0" cellspacing="0" width="100%">

              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                <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
                                  Committee shall, with the assistance of legal counsel,
                                  review and assess
                                  the adequacy of this charter annually, and present
                                  a report to the Board
                                  at the Board's annual organizational meeting of
                                  the results of its
                                  assessment, including any recommendations for changes
                                  to this charter.
                                  </font></div>
                              </div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                <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
                                  Committee shall regularly address the issues of
                                  appointment and removal of
                                  members of the Committee, qualification of Committee
                                  members, and
                                  Committee structure and operation, and shall make
                                  recommendations to the
                                  Board concerning any proposed changes to Committee
                                  membership, structure,
                                  or authority.</font></div>
                              </div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="90%">&#160;</td>
              </tr>
              <tr>
                <td valign="top" width="10%">
                  <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                </td>
                <td align="left" valign="top" width="90%">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                <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">Except
                                  where the Company is legally required by contract
                                  or otherwise to provide
                                  third parties with the ability to nominate directors,
                                  the Committee shall
                                  have sole responsibility and authority for selecting
                                  the persons to be
                                  nominated by the Board for election as directors
                                  at the annual meeting of
                                  stockholders, and the sole responsibility for recommending
                                  the persons to
                                  be nominated by the Board to fill any vacancies
                                  on the Board that the
                                  Board has authority to fill.
                                  </font></div>
                              </div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="10%">&#160;</td>
              </tr>

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

                <tr>
                  <td valign="top" width="10%">
                    <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                  </td>
                  <td align="left" valign="top" width="90%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                    <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
                                      Committee shall use the criteria and the principles
                                      set forth in the
                                      Company's Board Guidelines on Significant Corporate
                                      Governance Issues (the
                                      "Governance Guidelines") to guide its director
                                      selection process. The
                                      Committee shall, from time to time as it deems
                                      appropriate, review and
                                      reassess the adequacy of the Governance Guidelines,
                                      with assistance of
                                      legal counsel, and recommend any proposed changes
                                      to the Board for
                                      approval.
                                      </font></div>
                                  </div>
                                </div>
                              </div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </td>
                </tr>
                <tr>
                  <td valign="top" width="10%">&#160;</td>
                  <td align="left" valign="top" width="90%">&#160;</td>
                </tr>
                <tr>
                  <td valign="top" width="10%">
                    <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                  </td>
                  <td align="left" valign="top" width="90%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                    <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
                                      Committee shall conduct background checks on
                                      all director nominees and
                                      shall have the sole authority to retain and
                                      terminate any search firm to
                                      be used to identify director nominees, including
                                      sole authority to approve
                                      the search firm's fees and other retention
                                      terms. The Committee is
                                      empowered, without further action by the Board,
                                      to cause the Company to
                                      pay the compensation of any search firm engaged
                                      by the
                                      Committee.</font></div>
                                  </div>
                                </div>
                              </div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </td>
                </tr>
                <tr>
                  <td valign="top" width="10%">&#160;</td>
                  <td align="left" valign="top" width="90%">&#160;</td>
                </tr>
                <tr>
                  <td valign="top" width="10%">
                    <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font></div>
                  </td>
                  <td align="left" valign="top" width="90%">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                            <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                                    <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
                                      Committee shall establish and oversee a policy
                                      for considering shareholder
                                      nominees for directors, and shall develop the
                                      procedures that must be
                                      followed by shareholders in submitting recommendations.
                                      </font></div>
                                  </div>
                                </div>
                              </div>
                            </div>
                          </div>
                        </div>
                      </div>
                    </div>
                  </td>
                </tr>
                <tr>
                  <td valign="top" width="10%">&#160;</td>
                  <td align="left" valign="top" width="90%">&#160;</td>
                </tr>
                <tr>
                  <td valign="top" width="10%">
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                      shareholders using the criteria and the principles for director
                      selection
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                      the directors
                      to be appointed to each committee. The Committee shall also
                      monitor and
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                      Committee shall establish and oversee a procedure for shareholders
                      to
                      communicate with the Board. </font></div>
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                      Committee shall be responsible for overseeing an annual self-evaluation
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                      the Board to determine whether it is functioning effectively.
                      The
                      Committee shall determine the nature of the evaluation, supervise
                      the
                      conduct of the evaluation and prepare an assessment of the
                      Board's
                      performance, to be discussed with the Board. The Committee
                      shall also
                      evaluate its own performance as a committee on an annual basis
                      and report
                      same to the Board. The Committee shall be responsible for reviewing
                      with
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                      for new
                      Board members as well as the composition of the Board as a
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                      Committee shall consider questions of conflict of interest
                      of board
                      members and senior management, and, to the extent a conflict
                      constitutes a
                      related party transaction (as that term is defined in SEC Regulation
                      S-K,
                      Item 404), refer the approval of such matter to the Audit Committee
                      of the
                      Board of Directors.</font></div>
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                      Committee shall oversee director orientation and continuing
                      education
                      programs, and shall also oversee director retirement policies
                      and
                      resignation of directors from the Board.</font></div>
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    <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
      Nominating and Governance Committee shall meet as often as necessary, but at
      least once annually. The affirmative vote of a majority of the members present
      at a meeting at which a quorum is present shall constitute action of the
      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>Authority
      to Engage Independent Counsel and Advisors</strong></font></div>
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    <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
      Committee shall have the right to engage and determine funding for independent
      counsel and other advisors at the expense of the Company.</font></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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>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: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Members
      of the Committee shall receive compensation for attending Committee meetings
      as
      defined and approved by the Board of Directors.</font></div>
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    <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">ANNEX
      4</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">AMERICAN
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    <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">2005
      EQUITY INCENTIVE PLAN</font></div>
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      AMENDED MARCH 15, 2007)</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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    <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>2005
      EQUITY INCENTIVE PLAN</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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            <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"><strong><u>Purpose
                of the Plan</u></strong>. The purpose of this Plan is to encourage
                ownership in the Company by key personnel whose long-term service
                is
                considered essential to the Company's continued progress and, thereby,
                encourage recipients to act in the stockholders' interest and share
                in the
                Company's success.</font></div>
            </td>
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              <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"><strong><u>Definitions</u></strong>.
                As used herein, the following definitions shall
                apply:</font></div>
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    <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">"Administrator"
      shall mean the Board, any Committees or such delegates as shall be administering
      the Plan in accordance with Section 4 of the Plan. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Affiliate"
      shall mean any entity that is directly or indirectly controlled by the Company
      or any entity in which the Company has a significant ownership interest as
      determined by the Administrator. </font></div>
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    <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">"Applicable
      Laws" shall mean the requirements relating to the administration of stock plans
      under federal and state laws, any stock exchange or quotation system on which
      the Company has listed or submitted for quotation the Common Stock to the extent
      provided under the terms of the Company's agreement with such exchange or
      quotation system and, with respect to Awards subject to the laws of any foreign
      jurisdiction where Awards are, or will be, granted under the Plan, the laws
      of
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    <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">"Award"
      shall mean, individually or collectively, a grant under the Plan of Options,
      Stock Awards, SARs, or Cash Awards.</font></div>
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    <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">"Awardee"
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    <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">"Award
      Agreement" shall mean an Option Agreement, Stock Award Agreement, SAR Award
      Agreement, and/or Cash Award Agreement, which may be in written or electronic
      format, in such form and with such terms as may be specified by the
      Administrator, evidencing the terms and conditions of an individual Award.
      Each
      Award Agreement is subject to the terms and conditions of the Plan.</font></div>
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      Transfer Program" shall mean any program instituted by the Administrator which
      would permit Participants the opportunity to transfer any outstanding Awards
      to
      a financial institution or other person or entity selected by the
      Administrator.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Board"
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    <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">"Cash
      Award" shall mean a bonus opportunity awarded under Section 13 pursuant to
      which
      a Participant may become entitled to receive an amount based on the satisfaction
      of such performance criteria as are specified in the agreement or other
      documents evidencing the Award (the "Cash Award Agreement"). </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Change
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      otherwise: </font></div>
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      merger or consolidation in which the Company shall not be the surviving entity
      (or survives only as a subsidiary of another entity whose stockholders did
      not
      own all or substantially all of the Common Stock in substantially the same
      proportions as immediately prior to such transaction);</font></div>
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      entity (other than a wholly-owned subsidiary);</font></div>
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      acquisition of beneficial ownership of a controlling interest (including,
      without limitation, power to vote) in the outstanding shares of Common Stock
      by
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    <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">Notwithstanding
      the foregoing, the term "Change in Control" shall not include any under written
      public offering of Shares registered under the Securities Act of 1933, as
      amended.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Code"
      shall mean the Internal Revenue Code of 1986, as amended.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Committee"
      shall mean a committee of Directors appointed by the Board in accordance with
      Section 4 of the Plan.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Common
      Stock" shall mean the common stock of the Company.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Company"
      shall mean American Technology Corporation, a Delaware corporation, or its
      successor.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Consultant"
      shall mean any person engaged by the Company or any Affiliate to render services
      to such entity as an advisor or consultant.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Conversion
      Award" has the meaning set forth in Section 4(b)(xii) of the Plan.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Director"
      shall mean a member of the Board.</font></div>
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    <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">"Dividend
      Equivalent" shall mean a credit, made at the discretion of the Administrator,
      to
      the account of a Participant in an amount equal to the cash dividends paid
      on
      one Share for each Share represented by an Award held by such
      Participant.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Employee"
      shall mean a regular, active employee of the Company or any Affiliate, including
      an Officer and/or Director. Within the limitations of Applicable Law, the
      Administrator shall have the discretion to determine the effect upon an Award
      and upon an individual's status as an Employee in the case of (i) any individual
      who is classified by the Company or its Affiliate as leased from or otherwise
      employed by a third party or as intermittent or temporary, even if any such
      classification is changed retroactively as a result of an audit, litigation
      or
      otherwise, (ii) any leave of absence approved by the Company or an Affiliate,
      (iii) any transfer between locations of employment with the Company or an
      Affiliate or between the Company and any Affiliate or between any Affiliates,
      (iv) any change in the Awardee's status from an employee to a Consultant or
      Director, and (v) at the request of the Company or an Affiliate an employee
      becomes employed by any partnership, joint venture or corporation not meeting
      the requirements of an Affiliate in which the Company or an Affiliate is a
      party.</font></div>
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    <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">"Exchange
      Act" shall mean the Securities Exchange Act of 1934, as amended.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Exchange
      Program" shall mean a program under which (i) outstanding Awards are surrendered
      or cancelled in exchange for Awards of the same type (which may have lower
      exercise prices and different terms), Awards of a different type, and/or cash,
      and/or (ii) the exercise price of an outstanding Award is reduced. The terms
      and
      conditions of any Exchange Program will be determined by the Administrator
      in
      its sole discretion.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Fair
      Market Value" shall mean, unless the Administrator determines otherwise, as
      of
      any date, the closing price for such Common Stock as of such date (or if no
      sales were reported on such date, the closing price on the last preceding day
      for which a sale was reported), as reported in such source as the Administrator
      shall determine.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Grant
      Date" shall mean the date upon which an Award is granted to an Awardee pursuant
      to this Plan.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Incentive
      Stock Option" shall mean an Option intended to qualify as an incentive stock
      option within the meaning of Section 422 of the Code and the regulations
      promulgated thereunder.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Nonstatutory
      Stock Option" shall mean an Option not intended to qualify as an Incentive
      Stock
      Option.</font></div>
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        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Officer"
      shall mean a person who is an officer of the Company within the meaning of
      Section 16 of the Exchange Act and the rules and regulations promulgated
      thereunder.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Option"
      shall mean a right granted under Section 8 of the Plan to purchase a certain
      number of Shares at such exercise price, at such times, and on such other terms
      and conditions as are specified in the agreement or other documents evidencing
      the Award (the "Option Agreement"). Both Options intended to qualify as
      Incentive Stock Options and Nonstatutory Stock Options may be granted under
      the
      Plan.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Participant"
      shall mean the Awardee or any person (including any estate) to whom an Award
      has
      been assigned or transferred as permitted hereunder.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Plan"
      shall mean this American Technology Corporation 2005 Equity Incentive Plan,
      as
      amended from time to time.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Prior
      Plan" shall mean the Company's 2002 Stock Option Plan authorizing up to
      2,350,000 Shares for issuance pursuant to stock options.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Qualifying
      Performance Criteria" shall have the meaning set forth in Section 14(b) of
      the
      Plan.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Related
      Corporation" shall mean any parent or subsidiary (as defined in Sections 424(e)
      and (f) of the Code) of the Company.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Rule
      701" shall mean Rule 701 promulgated under the Securities Act of 1933, as
      amended.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Service
      Provider" shall mean an Employee, Director, or Consultant.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Share"
      shall mean a share of the Common Stock, as adjusted in accordance with Section
      15 of the Plan.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Stock
      Award" shall mean an award or issuance of Shares or Stock Units made under
      Section 11 of the Plan, the grant, issuance, retention, vesting and/or
      transferability of which is subject during specified periods of time to such
      conditions (including continued service or performance conditions) and terms
      as
      are expressed in the agreement or other documents evidencing the Award (the
      "Stock Award Agreement").</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Stock
      Appreciation Right" or "SAR" shall mean an Award, granted alone or in connection
      with an Option, that pursuant to Section 12 of the Plan is designated as a
      SAR.
      The terms of the SAR are expressed in the agreement or other documents
      evidencing the Award (the "SAR Agreement").</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Stock
      Unit" shall mean a bookkeeping entry representing an amount equivalent to the
      fair market value of one Share, payable in cash, property or Shares. Stock
      Units
      represent an unfunded and unsecured obligation of the Company, except as
      otherwise provided for by the Administrator. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"10%
      Stockholder" shall mean the owner of stock (as determined under Section 424(d)
      of the Code) possessing more than 10% of the total combined voting power of
      all
      classes of stock of the Company (or any Related Corporation).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Termination
      of Service" shall mean ceasing to be a Service Provider. However, for Incentive
      Stock Option purposes, Termination of Service will occur when the Awardee ceases
      to be an employee (as determined in accordance with Section 3401(c) of the
      Code
      and the regulations promulgated thereunder) of the Company or one of its Related
      Corporations. The Administrator shall determine whether any corporate
      transaction, such as a sale or spin-off of a division or business unit, or
      a
      joint venture, shall be deemed to result in a Termination of Service.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">"Total
      and Permanent Disability" shall have the meaning set forth in Section 22(e)(3)
      of the Code. </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; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
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        <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>
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    </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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>3.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Stock
                Subject to the Plan</u></strong>.</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="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)<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"><u>Aggregate
      Limits</u></font></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      number of Shares reserved for issuance under the Plan through Awards is a
      maximum of 5,062,501 Shares. Such reserve shall consist of (A) the number of
      Shares available for issuance, as of the effective date of the Plan, under
      the
      Prior Plan; plus (B) those Shares that are issuable upon exercise of (x) options
      granted pursuant to the Prior Plan, or (y) "Prior Plan Options" as such term
      is
      defined in the Prior Plan, in either case which expire or become unexercisable
      for any reason without having been exercised in full after the effective date
      of
      the Plan; plus (C) an additional increase of 1,500,000 Shares to be approved
      by
      the Company's shareholders on the effective date of the Plan; plus (D) an
      additional increase of 1,750,000 Shares to be approved by the Company&#8217;s
      stockholders at the 2007 Annual Meeting of Stockholders. Notwithstanding the
      foregoing, the maximum aggregate number of Shares that may be issued under
      the
      Plan through Incentive Stock Options is 5,062,501. The limitations of this
      Section 3(a)(i) shall be subject to the adjustments provided for in Section
      15
      of the Plan.</font></div>
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    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Upon
      payment in Shares pursuant to the exercise of an Award, the number of Shares
      available for issuance under the Plan shall be reduced only by the number of
      Shares actually issued in such payment. If any outstanding Award expires or
      is
      terminated or canceled without having been exercised or settled in full, or
      if
      Shares acquired pursuant to an Award subject to forfeiture or repurchase are
      forfeited or repurchased by the Company, the Shares allocable to the terminated
      portion of such Award or such forfeited or repurchased Shares shall again be
      available to grant under the Plan. Notwithstanding the foregoing, the aggregate
      number of shares of Common Stock that may be issued under the Plan upon the
      exercise of Incentive Stock Options shall not be increased for restricted Shares
      that are forfeited or repurchased. Notwithstanding anything in the Plan, or
      any
      Award Agreement to the contrary, Shares attributable to Awards transferred
      under
      any Award Transfer Program shall not be again available for grant under the
      Plan. The Shares subject to the Plan may be either Shares reacquired by the
      Company, including Shares purchased in the open market, or authorized but
      unissued Shares.</font></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
      this Section 3(a) to the contrary, at no time shall the total number of Shares
      issuable upon exercise of all outstanding Options and the total number of Shares
      provided for under any other options, warrants, stock bonus or similar plan
      of
      the Company exceed 30% of the total outstanding Shares as calculated in
      accordance with the conditions and exclusions of Section 260.140.45 of Title
      10
      of the California Code of Regulations, based on the Shares which are outstanding
      at the time the calculation is made. This Section 3(a)(iii) of the Plan shall
      apply only so long as the issuance and sale of securities under this Plan
      require qualification under the California Corporate Securities Law of
      1968.</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: 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">(b)<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"><u>Code
      Section 162(m) Limit</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Subject
      to the provisions of Section 15 of the Plan, the aggregate number of Shares
      subject to Awards granted under this Plan during any calendar year to any one
      Awardee shall not exceed 1,000,000. Notwithstanding anything to the contrary
      in
      the Plan, the limitation set forth in this Section 3(b) shall be subject to
      adjustment under Section 15 of the Plan only to the extent that such adjustment
      will not affect the status of any Award intended to qualify as "performance
      based compensation" under Code Section 162(m). </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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>4.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Administration
                of the Plan</u></strong>.</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="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)<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"><u>Procedure</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Multiple
      Administrative Bodies</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Plan shall be administered by the Board, a Committee and/or their delegates.
      </font></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      162</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      To the
      extent that the Administrator determines it to be desirable to qualify Awards
      granted hereunder as "performance-based compensation" within the meaning of
      Section 162(m) of the Code, Awards to "covered employees" within the meaning
      of
      Section 162(m) of the Code or Employees that the Committee determines may be
      "covered employees" in the future shall be made by a Committee of two or more
      "outside directors" within the meaning of Section 162(m) of the Code.
</font></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
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        <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="right">
        </div>
      </div>
    </div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Rule
      16b-3</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      To the
      extent desirable to qualify transactions hereunder as exempt under Rule 16b-3
      promulgated under the Exchange Act ("Rule 16b-3"), Awards to Officers and
      Directors shall be made in such a manner to satisfy the requirement for
      exemption under Rule 16b-3. </font></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iv)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Other
      Administration</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Board or a Committee may delegate to an authorized Officer or Officers of the
      Company the power to approve Awards to persons eligible to receive Awards under
      the Plan who are not (A) subject to Section 16 of the Exchange Act or (B) at
      the
      time of such approval, "covered employees" under Section 162(m) of the Code.
      </font></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(v)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Delegation
      of Authority for the Day-to-Day Administration of the Plan</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Except
      to the extent prohibited by Applicable Law, the Administrator may delegate
      to
      one or more individuals the day-to-day administration of the Plan and any of
      the
      functions assigned to it in this Plan. Such delegation may be revoked at any
      time. </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: 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">(b)<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"><u>Powers
      of the Administrator</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Subject
      to the provisions of the Plan and, in the case of a Committee or delegates
      acting as the Administrator, subject to the specific duties delegated to such
      Committee or delegates, the Administrator shall have the authority, in its
      discretion:</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: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      select
      the Service Providers of the Company or its Affiliates to whom Awards are to
      be
      granted hereunder; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      determine the number of shares of Common Stock to be covered by each Award
      granted hereunder; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      determine the type of Award to be granted to the selected Service Provider;
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iv)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      approve the forms of Award Agreements for use under the Plan; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(v)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      determine the terms and conditions, not inconsistent with the terms of the
      Plan,
      of any Award granted hereunder. Such terms and conditions include, but are
      not
      limited to, the exercise and/or purchase price, the time or times when an Award
      may be exercised (which may or may not be based on performance criteria), the
      vesting schedule, any vesting and/or exercisability, acceleration or waiver
      of
      forfeiture restrictions, the acceptable forms of consideration, the term, and
      any restriction or limitation regarding any Award or the Shares relating
      thereto, based in each case on such factors as the Administrator, in its sole
      discretion, shall determine and may be established at the time an Award is
      granted or thereafter; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(vi)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      correct administrative errors; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(vii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      construe and interpret the terms of the Plan (including sub-plans and Plan
      addenda) and Awards granted pursuant to the Plan; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(viii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      adopt
      rules and procedures relating to the operation and administration of the Plan
      to
      accommodate the specific requirements of local laws and procedures. Without
      limiting the generality of the foregoing, the Administrator is specifically
      authorized (A) to adopt the rules and procedures regarding the conversion of
      local currency, withholding procedures and handling of stock certificates which
      vary with local requirements and (B) to adopt sub-plans and Plan addenda as
      the
      Administrator deems desirable, to accommodate foreign laws, regulations and
      practice; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ix)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      prescribe, amend and rescind rules and regulations relating to the Plan,
      including rules and regulations relating to sub-plans and Plan addenda;
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
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        <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="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(x)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      modify
      or amend each Award, including, but not limited to, the acceleration of vesting
      and/or exercisability, provided, however, that any such amendment is subject
      to
      Section 16 of the Plan and may not materially impair any outstanding Award
      unless agreed to in writing by the Participant; provided, however, that an
      amendment or modification that may cause an Incentive Stock Option to become
      a
      Nonstatutory Stock Option shall not be treated as materially impairing the
      rights of the Participant;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(xi)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      allow
      Participants to satisfy withholding tax amounts by electing to have the Company
      withhold from the Shares to be issued pursuant to an Award that number of Shares
      having a Fair Market Value equal to the amount required to be withheld. The
      Fair
      Market Value of the Shares to be withheld shall be determined in such manner
      and
      on such date that the Administrator shall determine or, in the absence of
      provision otherwise, on the date that the amount of tax to be withheld is to
      be
      determined. All elections by a Participant to have Shares withheld for this
      purpose shall be made in such form and under such conditions as the
      Administrator may provide; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(xii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      authorize conversion or substitution under the Plan of any or all stock options,
      stock appreciation rights or other stock awards held by service providers of
      an
      entity acquired by the Company (the "Conversion Awards"). Any conversion or
      substitution shall be effective as of the close of the merger or acquisition.
      The Conversion Awards may be Nonstatutory Stock Options or Incentive Stock
      Options, as determined by the Administrator, with respect to options granted
      by
      the acquired entity. Unless otherwise determined by the Administrator at the
      time of conversion or substitution, all Conversion Awards shall have the same
      terms and conditions as Awards generally granted by the Company under the Plan;
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(xiii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      authorize any person to execute on behalf of the Company any instrument required
      to effect the grant of an Award previously granted by the Administrator;
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(xiv)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      implement an Award Transfer Program;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(xv)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      determine whether Awards will be settled in Shares, cash or in any combination
      thereof;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(xvi)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      determine whether Awards will be adjusted for Dividend Equivalents;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(xvii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      establish a program whereby Service Providers designated by the Administrator
      can reduce compensation otherwise payable in cash in exchange for Awards under
      the Plan;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(xviii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      impose
      such restrictions, conditions or limitations as it determines appropriate as
      to
      the timing and manner of any resales by a Participant or other subsequent
      transfers by the Participant of any Shares issued as a result of or under an
      Award, including, without limitation, (A) restrictions under an insider trading
      policy and (B) restrictions as to the use of a specified brokerage firm for
      such
      resales or other transfers; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(xix)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      provide, either at the time an Award is granted or by subsequent action, that
      an
      Award shall contain as a term thereof, a right, either in tandem with the other
      rights under the Award or as an alternative thereto, of the Participant to
      receive, without payment to the Company, a number of Shares, cash or a
      combination thereof, the amount of which is determined by reference to the
      value
      of the Award;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(xx)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      institute an Exchange Program; and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(xxi)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      make
      all other determinations deemed necessary or advisable for administering the
      Plan and any Award granted hereunder.</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; 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">-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="right">
        </div>
      </div>
    </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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      express grant in the Plan of any specific power to the Administrator shall
      not
      be construed as limiting any power or authority of the Administrator; provided
      that the Administrator may not exercise any right or power reserved to the
      Board.</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: 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">(c)<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"><u>Effect
      of Administrator's Decision</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      All
      decisions, determinations and interpretations by the Administrator regarding
      the
      Plan, any rules and regulations under the Plan and the terms and conditions
      of
      any Award granted hereunder, shall be final and binding on all Participants.
      The
      Administrator shall consider such factors as it deems relevant, in its sole
      and
      absolute discretion, to making such decisions, determinations and
      interpretations, including, without limitation, the recommendations or advice
      of
      any officer or other employee of the Company and such attorneys, consultants
      and
      accountants as it may select.</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: 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">(d)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Deferral
      of Award Program</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Administrator may establish one or more programs under the Plan to permit
      selected Awardees the opportunity to elect to defer receipt of consideration
      upon exercise of an Award, satisfaction of performance criteria, or other event
      that absent the election would entitle the Awardee to payment or receipt of
      Shares or other consideration under an Award. The Administrator may establish
      the election procedures, the timing of such elections, the mechanisms for
      payments of, and accrual of interest or other earnings, if any, on amounts,
      Shares or other consideration so deferred, and such other terms, conditions,
      rules and procedures that the Administrator deems advisable for the
      administration of any such deferral program. </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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>5.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Eligibility</u></strong>.
                Awards may be granted to Service Providers of the Company or any
                of its
                Affiliates</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 cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>6.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Term
                of Plan</u></strong>. The Plan shall become effective on the effective
                date of its approval by stockholders of the Company. It shall continue
                in
                effect for a term of ten years from the date the Plan is approved
                by
                stockholders of the Company unless terminated earlier under Section
                16 of
                the 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 cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>7.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Term
                of Award</u></strong>. The term of each Award shall be determined by the
                Administrator and stated in the Award Agreement. In the case of an
                Option,
                the term shall be ten years from the Grant Date or such shorter term
                as
                may be provided in the Award
                Agreement.</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 cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>8.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Options</u></strong>.
                The Administrator may grant an Option or provide for the grant of
                an
                Option, either from time to time in the discretion of the Administrator
                or
                automatically upon the occurrence of specified events, including,
                without
                limitation, the achievement of performance goals, the satisfaction
                of an
                event or condition within the control of the Awardee or within the
                control
                of others.</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="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)<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"><u>Option
      Agreement</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Each
      Option Agreement shall contain provisions regarding (i) the number of Shares
      that may be issued upon exercise of the Option, (ii) the type of Option, (iii)
      the exercise price of the Shares and the means of payment for the Shares, (iv)
      the term of the Option, (v) such terms and conditions on the vesting and/or
      exercisability of an Option as may be determined from time to time by the
      Administrator, (vi) restrictions on the transfer of the Option and forfeiture
      provisions, and (vii) such further terms and conditions, in each case not
      inconsistent with this Plan, as may be determined from time to time by the
      Administrator. </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: 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">(b)<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"><u>Exercise
      Price</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The per
      share exercise price for the Shares to be issued pursuant to exercise of an
      Option shall be determined by the Administrator, subject to the following:
      </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: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      case of an Incentive Stock Option, the per Share exercise price shall be no
      less
      than 100% of the Fair Market Value per Share on the Grant Date. Notwithstanding
      the foregoing, if any Employee to whom an Incentive Stock Option is granted
      is a
      10% Stockholder, then the exercise price shall not be less than 110% of the
      Fair
      Market Value of a share of Common Stock on the Grant Date.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      case of a Nonstatutory Stock Option, the per Share exercise price shall be
      no
      less than 100% of the Fair Market Value per Share on the Grant Date. The per
      Share exercise price may also vary according to a predetermined formula;
      provided, that the exercise price never falls below 100% of the Fair Market
      Value per Share on the Grant Date. In the case of a Nonstatutory Stock Option
      intended to qualify as "performance-based compensation" within the meaning
      of
      Section 162(m) of the Code, the per Share exercise price shall be no less than
      100% of the Fair Market Value per Share on the Grant Date.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; 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">-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="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
      the foregoing, so long as the issuance and sale of securities under this Plan
      require qualification under the California Corporate Securities Law of 1968,
      the
      per Share exercise price of an Option shall be determined by the Administrator
      but shall comply with the requirements of Section 260.140.41 of Title 10 of
      the
      California Code of Regulations as in effect on the date of grant of the
      Option.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iv)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
      the foregoing, at the Administrator's discretion, Conversion Awards may be
      granted in substitution and/or conversion of options of an acquired entity,
      with
      a per Share exercise price of less than 100% of the Fair Market Value per Share
      on the date of such substitution and/or conversion. The terms of the Conversion
      Awards shall be determined by the Administrator in accordance with the rules
      provided for in Code Section 424(a).</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: 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">(c)<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"><u>Vesting
      Period and Exercise Dates</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Options
      granted under this Plan shall vest and/or be exercisable at such time and in
      such installments during the period prior to the expiration of the Option's
      term
      as determined by the Administrator. The Administrator shall have the right
      to
      make the timing of the ability to exercise any Option granted under this Plan
      subject to continued service, the passage of time and/or such performance
      requirements as deemed appropriate by the Administrator. At any time after
      the
      grant of an Option, the Administrator may reduce or eliminate any restrictions
      surrounding any Participant's right to exercise all or part of the Option.
      Notwithstanding the foregoing, so long as the issuance and sale of securities
      under this Plan require qualification under the California Corporate Securities
      Law of 1968, an Option awarded to anyone other than an Officer, Director or
      Consultant of the Company shall vest in accordance with the requirements of
      Section 260.140.41 of Title 10 of the California Code of Regulations as in
      effect on the date of grant of the Option.</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: 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">(d)<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"><u>Form
      of Consideration</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Administrator shall determine the acceptable form of consideration for
      exercising an Option, including the method of payment, either through the terms
      of the Option Agreement or at the time of exercise of an Option. Acceptable
      forms of consideration may include: </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: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">cash;
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">check
      or
      wire transfer; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">subject
      to any conditions or limitations established by the Administrator, other Shares
      which (A) in the case of Shares acquired upon the exercise of an Option, have
      been owned by the Participant for more than six months (or such other period
      of
      time, as required by the applicable accounting requirements) on the date of
      surrender or attestation and (B) have a Fair Market Value on the date of
      surrender or attestation equal to the aggregate exercise price of the Shares
      as
      to which said Option shall be exercised;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iv)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">consideration
      received by the Company under a broker-assisted sale and remittance program
      acceptable to the Administrator; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(v)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">such
      other consideration and method of payment for the issuance of Shares to the
      extent permitted by Applicable Laws; or </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(vi)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">any
      combination of the foregoing methods of payment. </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: 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">(e)<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"><u>Buyout
      Provisions</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Administrator may at any time offer to buy out for a payment in Shares an Option
      previously granted based on such terms and conditions as the Administrator
      shall
      establish and communicate to the Participant at the time that such offer is
      made.</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; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </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="right">
        </div>
      </div>
    </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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>9.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Incentive
                Stock Option
                Limitations</u></strong>.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25">&#160;</div>
    <div style="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)<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"><u>Eligibility</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Only
      employees (as determined in accordance with Section 3401(c) of the Code and
      the
      regulations promulgated thereunder) of the Company or any of its Related
      Corporations may be granted Incentive Stock Options. </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: 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">(b)<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"><u>$100,000
      Limitation</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Notwithstanding the designation "Incentive Stock Option" in an Option Agreement,
      if and to the extent that the aggregate Fair Market Value of the Shares with
      respect to which Incentive Stock Options are exercisable for the first time
      by
      the Awardee during any calendar year (under all plans of the Company and any
      of
      its Related Corporations) exceeds $100,000, such Options shall be treated as
      Nonstatutory Stock Options. An Incentive Stock Option is considered to be first
      exercisable during a calendar year if the Incentive Stock Option will become
      exercisable at any time during the year, assuming that any condition on the
      Awardee's ability to exercise the Incentive Stock Option related to the
      performance of services is satisfied. If the Awardee's ability to exercise
      the
      Incentive Stock Option in the year is subject to an acceleration provision,
      then
      the Incentive Stock Option is considered first exercisable in the calendar
      year
      in which the acceleration provision is triggered. For purposes of this Section
      9(b), Incentive Stock Options shall be taken into account in the order in which
      they were granted. However, because an acceleration provision is not taken
      into
      account prior to its triggering, an Incentive Stock Option that becomes
      exercisable for the first time during a calendar year by operation of such
      provision does not affect the application of the $100,000 limitation with
      respect to any Incentive Stock Option (or portion thereof) exercised prior
      to
      such acceleration. The Fair Market Value of the Shares shall be determined
      as of
      the Grant Date. </font></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="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">(c)<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"><u>Leave
      of Absence</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      For
      purposes of Incentive Stock Options, no leave of absence may exceed three
      months, unless reemployment upon expiration of such leave is provided by statute
      or contract. If reemployment upon expiration of a leave of absence approved
      by
      the Company or a Related Corporation is not so provided by statute or contract,
      an Awardee's employment with the Company shall be deemed terminated on the
      first
      day immediately following such three month period of leave for Incentive Stock
      Option purposes and any Incentive Stock Option granted to the Awardee shall
      cease to be treated as an Incentive Stock Option upon the expiration of the
      three month period following the date the employment relationship is deemed
      terminated. </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: 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">(d)<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"><u>Transferability</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Option Agreement must provide that an Incentive Stock Option cannot be
      transferable by the Awardee otherwise than by will or the laws of descent and
      distribution, and, during the lifetime of such Awardee, must not be exercisable
      by any other person. Notwithstanding the foregoing, the Administrator, in its
      sole discretion, may allow the Awardee to transfer his or her Incentive Stock
      Option to a trust where under Section 671 of the Code and other Applicable
      Law,
      the Awardee is considered the sole beneficial owner of the Option while it
      is
      held in the trust. If the terms of an Incentive Stock Option are amended to
      permit transferability, the Option will be treated for tax purposes as a
      Nonstatutory Stock Option.</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: 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">(e)<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"><u>Exercise
      Price</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The per
      Share exercise price of an Incentive Stock Option shall be determined by the
      Administrator in accordance with Section 8(b)(i) of the Plan. </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: 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">(f)<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"><u>10%
      Stockholder</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      If any
      Employee to whom an Incentive Stock Option is granted is a 10% Stockholder,
      then
      the Option term shall not exceed five years measured from the date of grant
      of
      such Option.</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: 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">(g)<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"><u>Other
      Terms</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Option
      Agreements evidencing Incentive Stock Options shall contain such other terms
      and
      conditions as may be necessary to qualify, to the extent determined desirable
      by
      the Administrator, with the applicable provisions of Section 422 of the Code.
      </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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>10.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Exercise
                of Option</u></strong>.</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="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)<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"><u>Procedure
      for Exercise; Rights as a Stockholder</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: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      Option granted hereunder shall be exercisable according to the terms of the
      Plan
      and at such times and under such conditions as determined by the Administrator
      and set forth in the respective Award Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
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        <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="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">An
      Option
      shall be deemed exercised when the Company receives (A) written or electronic
      notice of exercise (in accordance with the Award Agreement) from the person
      entitled to exercise the Option; (B) full payment for the Shares with respect
      to
      which the related Option is exercised; and (C) with respect to Nonstatutory
      Stock Options, payment of all applicable withholding taxes. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Shares
      issued upon exercise of an Option shall be issued in the name of the Participant
      or, if requested by the Participant, in the name of the Participant and his
      or
      her spouse. Unless provided otherwise by the Administrator or pursuant to this
      Plan, until the Shares are issued (as evidenced by the appropriate entry on
      the
      books of the Company or of a duly authorized transfer agent of the Company),
      no
      right to vote or receive dividends or any other rights as a stockholder shall
      exist with respect to the Shares subject to an Option, notwithstanding the
      exercise of the Option. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iv)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company shall issue (or cause to be issued) such Shares as soon as
      administratively practicable after the Option is exercised. An Option may not
      be
      exercised for a fraction of a Share. </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: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)<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"><u>Effect
      of Termination of Service on Options</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: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Generally</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Unless
      otherwise provided for by the Administrator, if a Participant ceases to be
      a
      Service Provider, other than upon the Participant's death or Total and Permanent
      Disability, the Participant may exercise his or her Option within such period
      of
      time as is specified in the Award Agreement to the extent that the Option is
      vested on the date of termination (but in no event later than the expiration
      of
      the term of such Option as set forth in the Award Agreement). Notwithstanding
      the foregoing, so long as the issuance and sale of securities under this Plan
      require qualification under the California Corporate Securities Law of 1968,
      upon Participant's Termination of Service, other than due to death, Total and
      Permanent Disability, or cause, the Participant may exercise his or her Option
      (i) at any time on or prior to the date determined by the Administrator, which
      date shall be in compliance with the requirements set forth in Section
      260.140.41 of Title 10 of the California Code of Regulations as in effect on
      the
      date of grant of the Option, and (ii) only to the extent that the Participant
      was entitled to exercise such Option on the termination date. In the absence
      of
      a specified time in the Award Agreement, the vested portion of the Option will
      remain exercisable for three months following the Participant's termination.
      Unless otherwise provided by the Administrator, if on the date of termination
      the Participant is not vested as to his or her entire Option, the Shares covered
      by the unvested portion of the Option will revert to the Plan. If after
      termination the Participant does not exercise his or her Option within the
      time
      specified by the Administrator, the Option will terminate, and the Shares
      covered by such Option will revert to the Plan.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Disability
      of Awardee</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Unless
      otherwise provided for by the Administrator, if a Participant ceases to be
      a
      Service Provider as a result of the Participant's Total and Permanent
      Disability, the Participant may exercise his or her Option within such period
      of
      time as is specified in the Award Agreement to the extent the Option is vested
      on the date of termination (but in no event later than the expiration of the
      term of such Option as set forth in the Award Agreement). Notwithstanding the
      foregoing, so long as the issuance and sale of securities under this Plan
      require qualification under the California Corporate Securities Law of 1968,
      in
      the event of Participant's Termination of Service due to his or her Total and
      Permanent Disability, the Participant may exercise his or her Option (i) at
      any
      time on or prior to the date determined by the Administrator, which date shall
      be in accordance with Section 260.140.41 of Title 10 of the California Code
      of
      Regulations as in effect on the date of grant of the Option (but which date
      determined by the Administrator shall in no event be later than the expiration
      date of the term of his or her Option), and (ii) only to the extent that the
      Participant was entitled to exercise such Option on the termination date. In
      the
      absence of a specified time in the Award Agreement, the Option will remain
      exercisable for twelve months following the Participant's termination. Unless
      otherwise provided by the Administrator, if at the time of disability the
      Participant is not vested as to his or her entire Option, the Shares covered
      by
      the unvested portion of the Option will immediately revert to the Plan on the
      date of the Participant's disability. If the Option is not so exercised within
      the time specified herein, the Option will terminate, and the Shares covered
      by
      such Option will revert to the Plan.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
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        </div>
      </div>
    </div>
    <div>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Death
      of Awardee</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Unless
      otherwise provided for by the Administrator, if a Participant dies while a
      Service Provider, the Option may be exercised following the Participant's death
      within such period of time as is specified in the Award Agreement to the extent
      that the Option is vested on the date of death (but in no event may the Option
      be exercised later than the expiration of the term of such Option as set forth
      in the Award Agreement), by the Participant's designated beneficiary, provided
      such beneficiary has been designated prior to Participant's death in a form
      acceptable to the Administrator. Notwithstanding the foregoing, so long as
      the
      issuance and sale of securities under this Plan require qualification under
      the
      California Corporate Securities Law of 1968, in the event that the Participant
      dies prior to a Termination of Service, the Participant's Option may be
      exercised by the Participant's designated beneficiary (i) at any time on or
      prior to the date determined by the Administrator, which date shall be in
      accordance with Section 260.140.41 of Title 10 of the California Code of
      Regulations as in effect on the date of grant of the Option (but which date
      determined by the Administrator shall in no event be later than the expiration
      date of the term of his or her Option), and (ii) only to the extent that the
      Participant was entitled to exercise the Option at the date of death. If no
      such
      beneficiary has been designated by the Participant, then such Option may be
      exercised by the personal representative of the Participant's estate or by
      the
      person(s) to whom the Option is transferred pursuant to the Participant's will
      or in accordance with the laws of descent and distribution. In the absence
      of a
      specified time in the Award Agreement, the Option will remain exercisable for
      twelve months following Participant's death. Unless otherwise provided by the
      Administrator, if at the time of death Participant is not vested as to his
      or
      her entire Option, the Shares covered by the unvested portion of the Option
      will
      immediately revert to the Plan on the date of the Participant's death. If the
      Option is not so exercised within the time specified herein, the Option will
      terminate, and the Shares covered by such Option will revert to the
      Plan.</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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>11.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Stock
                Awards</u></strong>.</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="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)<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"><u>Stock
      Award Agreement</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Each
      Stock Award Agreement shall contain provisions regarding (i) the number of
      Shares subject to such Stock Award or a formula for determining such number,
      (ii) the purchase price of the Shares, if any, and the means of payment for
      the
      Shares, (iii) the performance criteria, if any, and level of achievement versus
      these criteria that shall determine the number of Shares granted, issued,
      retained and/or vested, (iv) such terms and conditions on the grant, issuance,
      vesting and/or forfeiture of the Shares as may be determined from time to time
      by the Administrator, (v) restrictions on the transferability of the Stock
      Award
      and (vi) such further terms and conditions in each case not inconsistent with
      this Plan as may be determined from time to time by the
      Administrator.</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">Notwithstanding
      the foregoing, so long as the issuance and sale of securities under this Plan
      require qualification under the California Corporate Securities Law of 1968,
      the
      purchase price for restricted Shares shall be determined by the Administrator
      and in accordance with Section 260.140.42 of Title 10 of the California Code
      of
      Regulations as in effect on the date of grant of the Award.</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: 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">(b)<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"><u>Restrictions
      and Performance Criteria</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      grant, issuance, retention and/or vesting of each Stock Award may be subject
      to
      such performance criteria and level of achievement versus these criteria as
      the
      Administrator shall determine, which criteria may be based on financial
      performance, personal performance evaluations and/or completion of service
      by
      the Awardee. Notwithstanding the foregoing, so long as the issuance and sale
      of
      securities under this Plan require qualification under the California Corporate
      Securities Law of 1968, restricted stock awarded to anyone other than an
      Officer, Director or Consultant of the Company shall vest in accordance with
      Section 260.140.42 of Title 10 of the California Code of Regulations as in
      effect on the date of grant of the Award.</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">Notwithstanding
      anything to the contrary herein, the performance criteria for any Stock Award
      that is intended to satisfy the requirements for "performance-based
      compensation" under Section 162(m) of the Code shall be established by the
      Administrator based on one or more Qualifying Performance Criteria selected
      by
      the Administrator and specified in writing. </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; 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">-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="right">
        </div>
      </div>
    </div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="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">(c)<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"><u>Forfeiture</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Unless
      otherwise provided for by the Administrator, upon the Awardee's Termination
      of
      Service, the Stock Award and the Shares subject thereto shall be forfeited,
      provided that to the extent that the Participant purchased any Shares, the
      Company shall have a right to repurchase the unvested Shares at the original
      price paid by the Participant, provided that for so long as the issuance and
      sale of securities under this Plan require qualification under the California
      Corporate Securities Law of 1968, the Company must exercise such right to
      repurchase in accordance with the conditions set forth in Sections 260.140.42
      and 260.140.8 of Title 10 of the California Code of Regulations as in effect
      on
      the date of grant of the Award.</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: 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">(d)<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"><u>Rights
      as a Stockholder</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Unless
      otherwise provided by the Administrator, the Participant shall have the rights
      equivalent to those of a stockholder and shall be a stockholder only after
      Shares are issued (as evidenced by the appropriate entry on the books of the
      Company or of a duly authorized transfer agent of the Company) to the
      Participant. Unless otherwise provided by the Administrator, a Participant
      holding Stock Units shall be entitled to receive dividend payments as if he
      or
      she was an actual stockholder.</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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>12.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Stock
                Appreciation Rights</u></strong>. Subject to the terms and conditions of
                the Plan, a SAR may be granted to a Service Provider at any time
                and from
                time to time as determined by the Administrator in its sole
                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="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)<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"><u>Number
      of SARs</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Administrator shall have complete discretion to determine the number of SARs
      granted to any Service Provider. </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: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)<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"><u>Exercise
      Price and Other Terms</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The per
      SAR exercise price shall be no less than 100% of the Fair Market Value per
      Share
      on the Grant Date. The Administrator, subject to the provisions of the Plan,
      shall have complete discretion to determine the other terms and conditions
      of
      SARs granted under the Plan.</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: 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">(c)<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"><u>Exercise
      of SARs</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      SARs
      shall be exercisable on such terms and conditions as the Administrator, in
      its
      sole discretion, shall determine. </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: 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">(d)<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"><u>AR
      Agreement</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Each
      SAR grant shall be evidenced by a SAR Agreement that will specify the exercise
      price, the term of the SAR, the conditions of exercise, and such other terms
      and
      conditions as the Administrator, in its sole discretion, shall determine.
</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: 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">(e)<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"><u>Expiration
      of SARs</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      A SAR
      granted under the Plan shall expire upon the date determined by the
      Administrator, in its sole discretion, and set forth in the SAR Agreement.
      Notwithstanding the foregoing, the rules of Section 10(b) will also apply to
      SARs. </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: 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">(f)<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"><u>Payment
      of SAR Amount</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Upon
      exercise of a SAR, the Participant shall be entitled to receive a payment from
      the Company in an amount equal to the difference between the Fair Market Value
      of a Share on the date of exercise over the exercise price of the SAR. This
      amount shall be paid in Shares of equivalent value.</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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>13.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Cash
                Awards</u></strong>. Each Cash Award will confer upon the Participant the
                opportunity to earn a future payment tied to the level of achievement
                with
                respect to one or more performance criteria established for a performance
                period.</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="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)<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"><u>Cash
      Award</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Each
      Cash Award shall contain provisions regarding (i) the performance goal(s) and
      maximum amount payable to the Participant as a Cash Award, (ii) the performance
      criteria and level of achievement versus these criteria which shall determine
      the amount of such payment, (iii) the period as to which performance shall
      be
      measured for establishing the amount of any payment, (iv) the timing of any
      payment earned by virtue of performance, (v) restrictions on the alienation
      or
      transfer of the Cash Award prior to actual payment, (vi) forfeiture provisions,
      and (vii) such further terms and conditions, in each case not inconsistent
      with
      the Plan, as may be determined from time to time by the Administrator. The
      maximum amount payable as a Cash Award that is settled for cash may be a
      multiple of the target amount payable, but the maximum amount payable pursuant
      to that portion of a Cash Award granted under this Plan for any fiscal year
      to
      any Awardee that is intended to satisfy the requirements for "performance based
      compensation" under Section 162(m) of the Code shall not exceed
      $1,000,000.</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; 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">-12-</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>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="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">(b)<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"><u>Performance
      Criteria</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Administrator shall establish the performance criteria and level of achievement
      versus these criteria which shall determine the target and the minimum and
      maximum amount payable under a Cash Award, which criteria may be based on
      financial performance and/or personal performance evaluations. The Administrator
      may specify the percentage of the target Cash Award that is intended to satisfy
      the requirements for "performance-based compensation" under Section 162(m)
      of
      the Code. Notwithstanding anything to the contrary herein, the performance
      criteria for any portion of a Cash Award that is intended to satisfy the
      requirements for "performance-based compensation" under Section 162(m) of the
      Code shall be a measure established by the Administrator based on one or more
      Qualifying Performance Criteria selected by the Administrator and specified
      in
      writing. </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: 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">(c)<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"><u>Timing
      and Form of Payment</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Administrator shall determine the timing of payment of any Cash Award. The
      Administrator may specify the form of payment of Cash Awards, which may be
      cash
      or other property, or may provide for an Awardee to have the option for his
      or
      her Cash Award, or such portion thereof as the Administrator may specify, to
      be
      paid in whole or in part in cash or other property. </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: 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">(d)<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"><u>Termination
      of Service</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Administrator shall have the discretion to determine the effect of a Termination
      of Service on any Cash Award due to (i) disability, (ii) retirement, (iii)
      death, (iv) participation in a voluntary severance program, or (v) participation
      in a work force restructuring. </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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>14.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Other
                Provisions Applicable to
                Awards</u></strong>.</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="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)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;<u>N</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>on-Transferability
      of Awards</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      An
      Award may be exercised, during the lifetime of the Participant, only by the
      Participant, and may not be sold, pledged, assigned, hypothecated, transferred,
      or disposed of in any manner other than by will, by the laws of descent and
      distribution, to a revocable trust or as permitted by Rule 701; provided that
      so
      long as the issuance and sale of securities under this Plan does not require
      qualification under the California Corporate Securities Law of 1968, the
      Administrator may in each case determine otherwise. If the Administrator makes
      an Award transferable, either at the time of grant or thereafter, such Award
      shall contain such additional terms and conditions as the Administrator deems
      appropriate, and any transferee shall be deemed to be bound by such terms upon
      acceptance of such transfer.</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: 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">(b)<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"><u>Qualifying
      Performance Criteria</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      For
      purposes of this Plan, the term "Qualifying Performance Criteria" shall mean
      any
      one or more of the following performance criteria, either individually,
      alternatively or in any combination, applied to either the Company as a whole
      or
      to a business unit, Affiliate or business segment, either individually,
      alternatively or in any combination, and measured either annually or
      cumulatively over a period of years, on an absolute basis or relative to a
      pre-established target, to previous years' results or to a designated comparison
      group, in each case as specified by the Committee in the Award: (i) cash flow;
      (ii) earnings (including gross margin, earnings before interest and taxes,
      earnings before taxes, and net earnings); (iii) earnings per share; (iv) growth
      in earnings or earnings per share; (v) stock price; (vi) return on equity or
      average stockholders' equity; (vii) total stockholder return; (viii) return
      on
      capital; (ix) return on assets or net assets; (x) return on investment; (xi)
      revenue; (xii) income or net income; (xiii) operating income or net operating
      income; (xiv) operating profit or net operating profit; (xv) operating margin;
      (xvi) return on operating revenue; (xvii) market share; (xviii) contract awards
      or backlog; (xix) overhead or other expense reduction; (xx) growth in
      stockholder value relative to the moving average of the S&amp;P 500 Index or a
      peer group index; (xxi) credit rating; (xxii) strategic plan development and
      implementation; (xxiii) improvement in workforce diversity, (xxiv) EBITDA,
      and
      (xxv) any other similar criteria. The Committee may appropriately adjust any
      evaluation of performance under a Qualifying Performance Criteria to exclude
      any
      of the following events that occurs during a performance period: (A) asset
      write-downs; (B) litigation or claim judgments or settlements; (C) the effect
      of
      changes in tax law, accounting principles or other such laws or provisions
      affecting reported results; (D) accruals for reorganization and restructuring
      programs; and (E) any extraordinary non-recurring items as described in
      Accounting Principles Board Opinion No. 30 and/or in management's discussion
      and
      analysis of financial condition and results of operations appearing in the
      Company's annual report to stockholders for the applicable year.</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: 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">(c)<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"><u>Certification</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Prior
      to the payment of any compensation under an Award intended to qualify as
      "performance-based compensation" under Section 162(m) of the Code, the Committee
      shall certify the extent to which any Qualifying Performance Criteria and any
      other material terms under such Award have been satisfied (other than in cases
      where such relate solely to the increase in the value of the Common Stock).
      </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; 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">-13-</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>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="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">(d)<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"><u>Discretionary
      Adjustments Pursuant to Section 162(m)</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Notwithstanding satisfaction of any completion of any Qualifying Performance
      Criteria, to the extent specified at the time of grant of an Award to "covered
      employees" within the meaning of Section 162(m) of the Code, the number of
      Shares, Options or other benefits granted, issued, retained and/or vested under
      an Award on account of satisfaction of such Qualifying Performance Criteria
      may
      be reduced by the Committee on the basis of such further considerations as
      the
      Committee in its sole discretion shall determine.</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: 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">(e)<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"><u>Section
      409A</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Notwithstanding anything in the Plan to the contrary, it is the intent of the
      Company that all Awards granted under this Plan shall not cause an imposition
      of
      the additional taxes provided for in Section 409A(a)(1)(B) of the
      Code.</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: 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">(f)<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"><u>Financial
      Information</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      For so
      long as the issuance and sale of securities under this Plan require
      qualification under the California Corporate Securities Law of 1968, and to
      the
      extent required by Section 260.140.46 of Title 10 of the California Code of
      Regulations, the Company shall at least annually provide financial statements
      to
      Participants.</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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>15.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Adjustments
                upon Changes in Capitalization, Dissolution, Merger or Asset
                Sale</u></strong>.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25">&#160;</div>
    <div style="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)<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"><u>Changes
      in Capitalization</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Subject
      to any required action by the stockholders of the Company, (i) the number and
      kind of Shares covered by each outstanding Award, and the number and kind of
      shares of Common Stock which have been authorized for issuance under the Plan
      but as to which no Awards have yet been granted or which have been returned
      to
      the Plan upon cancellation or expiration of an Award, (ii) the price per Share
      subject to each such outstanding Award, and (iii) the Share limitation set
      forth
      in Section 3 of the Plan, shall be proportionately adjusted for any increase
      or
      decrease in the number or kind of issued shares resulting from a stock split,
      reverse stock split, stock dividend, combination or reclassification of the
      Common Stock, or any other increase or decrease in the number of issued shares
      of Common Stock effected without receipt of consideration by the Company;
      provided, however, that conversion of any convertible securities of the Company
      shall not be deemed to have been "effected without receipt of consideration."
      Such adjustment shall be made by the Administrator, whose determination in
      that
      respect shall be final, binding and conclusive. Except as expressly provided
      herein, no issuance by the Company of shares of stock of any class, or
      securities convertible into shares of stock of any class, shall affect, and
      no
      adjustment by reason thereof shall be made with respect to, the number or price
      of shares of Common Stock subject to an Award. </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: 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">(b)<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"><u>Dissolution
      or Liquidation</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      In the
      event of the proposed dissolution or liquidation of the Company, the
      Administrator shall notify each Participant as soon as practicable prior to
      the
      effective date of such proposed transaction. The Administrator in its discretion
      may provide for an Option to be fully vested and exercisable until ten days
      prior to such transaction. In addition, the Administrator may provide that
      any
      restrictions on any Award shall lapse prior to the transaction, provided the
      proposed dissolution or liquidation takes place at the time and in the manner
      contemplated. To the extent it has not been previously exercised, an Award
      will
      terminate immediately prior to the consummation of such proposed transaction.
      </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: 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">(c)<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"><u>Change
      in Control</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      In the
      event there is a Change in Control of the Company, as determined by the Board
      or
      a Committee, the Board or Committee may, in its discretion, (i) provide for
      the
      assumption or substitution of, or adjustment to, each outstanding Award; (ii)
      accelerate the vesting of Options and SARs and terminate any restrictions on
      Stock Awards or Cash Awards; and (iii) provide for the cancellation of Awards
      for a cash payment to the Participant. </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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>16.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Amendment
                and Termination of the
                Plan</u></strong>.</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="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)<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"><u>Amendment
      and Termination</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Administrator may amend, alter or discontinue the Plan or any Award Agreement,
      but any such amendment shall be subject to approval of the stockholders of
      the
      Company in the manner and to the extent required by Applicable Law.
</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; 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">-14-</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>
    <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: 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">(b)<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"><u>Effect
      of Amendment or Termination</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      No
      amendment, suspension or termination of the Plan shall impair the rights of
      any
      Award, unless mutually agreed otherwise between the Participant and the
      Administrator, which agreement must be in writing and signed by the Participant
      and the Company. Termination of the Plan shall not affect the Administrator's
      ability to exercise the powers granted to it hereunder with respect to Awards
      granted under the Plan prior to the date of such termination. </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: 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">(c)<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"><u>Effect
      of the Plan on Other Arrangements</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Neither
      the adoption of the Plan by the Board or a Committee nor the submission of
      the
      Plan to the stockholders of the Company for approval shall be construed as
      creating any limitations on the power of the Board or any Committee to adopt
      such other incentive arrangements as it or they may deem desirable, including,
      without limitation, the granting of restricted stock or stock options otherwise
      than under the Plan, and such arrangements may be either generally applicable
      or
      applicable only in specific cases. </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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>17.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Designation
                of Beneficiary</u></strong>.</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: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">An
      Awardee may file a written designation of a beneficiary who is to receive the
      Awardee's rights pursuant to Awardee's Award or the Awardee may include his
      or
      her Awards in an omnibus beneficiary designation for all benefits under the
      Plan. To the extent that Awardee has completed a designation of beneficiary
      such
      beneficiary designation shall remain in effect with respect to any Award
      hereunder until changed by the Awardee to the extent enforceable under
      Applicable Law. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Such
      designation of beneficiary may be changed by the Awardee at any time by written
      notice. In the event of the death of an Awardee and in the absence of a
      beneficiary validly designated under the Plan who is living at the time of
      such
      Awardee's death, the Company shall allow the executor or administrator of the
      estate of the Awardee to exercise the Award, or if no such executor or
      administrator has been appointed (to the knowledge of the Company), the Company,
      in its discretion, may allow the spouse or one or more dependents or relatives
      of the Awardee to exercise the Award to the extent permissible under Applicable
      Law. </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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>18.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>No
                Right to Awards or to Service</u></strong>. No person shall have any claim
                or right to be granted an Award and the grant of any Award shall
                not be
                construed as giving an Awardee the right to continue in the service
                of the
                Company or its Affiliates. Further, the Company and its Affiliates
                expressly reserve the right, at any time, to dismiss any Service
                Provider
                or Awardee at any time without liability or any claim under the Plan,
                except as provided herein or in any Award Agreement entered into
                hereunder.</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 cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>19.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Legal
                Compliance</u></strong>. Shares shall not be issued pursuant to the
                exercise of an Award unless the exercise of such Award and the issuance
                and delivery of such Shares shall comply with Applicable Laws and
                shall be
                further subject to the approval of counsel for the Company with respect
                to
                such compliance. Notwithstanding anything in the Plan to the contrary,
                it
                is the intent of the Company that the Plan shall be administered
                so that
                the additional taxes provided for in Section 409A(a)(1)(B) of the
                Code are
                not imposed.</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 cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>20.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Inability
                to Obtain Authority</u></strong>. To the extent the Company is unable to
                or the Administrator deems that it is not feasible to obtain authority
                from any regulatory body having jurisdiction, which authority is
                deemed by
                the Company's counsel to be necessary to the lawful issuance and
                sale of
                any Shares hereunder, the Company shall be relieved of any liability
                with
                respect to the failure to issue or sell such Shares as to which such
                requisite authority shall not have been
                obtained.</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 cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>21.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Reservation
                of Shares</u></strong>. The Company, during the term of this Plan, will at
                all times reserve and keep available such number of Shares as shall
                be
                sufficient to satisfy the requirements of the
                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 cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>22.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Notice</u></strong>.
                Any written notice to the Company required by any provisions of this
                Plan
                shall be addressed to the Secretary of the Company and shall be effective
                when received.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; 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">-15-</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>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt">
      <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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="line-height: 1.25;">
              <td align="right" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>23.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
                </strong></font></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"><strong><u>Governing
                  Law; Interpretation of Plan and
                  Awards</u></strong>.</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>
    <div style="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)<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">This
      Plan
      and all determinations made and actions taken pursuant hereto shall be governed
      by the substantive laws, but not the choice of law rules, of the state of
      Delaware.</font></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="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">(b)<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">In
      the
      event that any provision of the Plan or any Award granted under the Plan is
      declared to be illegal, invalid or otherwise unenforceable by a court of
      competent jurisdiction, such provision shall be reformed, if possible, to the
      extent necessary to render it legal, valid and enforceable, or otherwise
      deleted, and the remainder of the terms of the Plan and/or Award shall not
      be
      affected except to the extent necessary to reform or delete such illegal,
      invalid or unenforceable provision. </font></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="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">(c)<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">The
      headings preceding the text of the sections hereof are inserted solely for
      convenience of reference, and shall not constitute a part of the Plan, nor
      shall
      they affect its meaning, construction or effect.</font></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="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">(d)<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">The
      terms
      of the Plan and any Award shall inure to the benefit of and be binding upon
      the
      parties hereto and their respective permitted heirs, beneficiaries, successors
      and assigns.</font></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="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">(e)<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">All
      questions arising under the Plan or under any Award shall be decided by the
      Administrator in its total and absolute discretion. In the event the Participant
      believes that a decision by the Administrator with respect to such person was
      arbitrary or capricious, the Participant may request arbitration with respect
      to
      such decision. The review by the arbitrator shall be limited to determining
      whether the Administrator's decision was arbitrary or capricious. This
      arbitration shall be the sole and exclusive review permitted of the
      Administrator's decision, and the Awardee shall as a condition to the receipt
      of
      an Award be deemed to explicitly waive any right to judicial
      review.</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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>24.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Limitation
                on Liability</u></strong>. The Company and any Affiliate which is in
                existence or hereafter comes into existence shall not be liable to
                a
                Participant, an Employee, an Awardee or any other persons as
                to:</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="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)<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"><u>The
      Non-Issuance of Shares</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      non-issuance or sale of Shares as to which the Company has been unable to obtain
      from any regulatory body having jurisdiction the authority deemed by the
      Company's counsel to be necessary to the lawful issuance and sale of any shares
      hereunder; and </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: 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">(b)<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"><u>Tax
      Consequences</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Any tax
      consequence expected, but not realized, by any Participant, Employee, Awardee
      or
      other person due to the receipt, exercise or settlement of any Option or other
      Award granted hereunder. </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" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>25.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </strong></font></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"><strong><u>Unfunded
                Plan</u></strong>. Insofar as it provides for Awards, the Plan shall
                be
                unfunded. Although bookkeeping accounts may be established with respect
                to
                Awardees who are granted Stock Awards under this Plan, any such accounts
                will be used merely as a bookkeeping convenience. The Company shall
                not be
                required to segregate any assets which may at any time be represented
                by
                Awards, nor shall this Plan be construed as providing for such
                segregation, nor shall the Company nor the Administrator be deemed
                to be a
                trustee of stock or cash to be awarded under the Plan. Any liability
                of
                the Company to any Participant with respect to an Award shall be
                based
                solely upon any contractual obligations which may be created by the
                Plan;
                no such obligation of the Company shall be deemed to be secured by
                any
                pledge or other encumbrance on any property of the Company. Neither
                the
                Company nor the Administrator shall be required to give any security
                or
                bond for the performance of any obligation which may be created by
                this
                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: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; 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: 10pt; FONT-FAMILY: Times New Roman">-16-</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">AMERICAN
      TECHNOLOGY 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: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">THIS
      PROXY RELATES TO AN ANNUAL MEETING OF THE STOCKHOLDERS TO BE HELD</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">MAY
      9,
      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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      undersigned hereby appoints ELWOOD G. NORRIS, THOMAS R. BROWN, and KAREN JORDAN
      or any of them, with full power of substitution, as attorneys and proxies to
      vote all shares of Common Stock of American Technology Corporation which the
      undersigned is entitled to vote at the Annual Meeting of Stockholders of
      AMERICAN TECHNOLOGY CORPORATION (the "Company") to be held at 2:00 p.m. (local
      time) at the Company's principal offices located at 15378 Avenue of Science,
      San
      Diego, California 92128 on May 9, 2007 and any postponements, continuations
      and
      adjournments thereof, with all powers which the undersigned would possess if
      personally present, upon and in respect of the following matters and in
      accordance with the following instructions, with discretionary authority as
      to
      any and all other matters that 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="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">Unless
      a
      contrary direction is indicated, this Proxy will be voted for all nominees
      listed in Proposal One, for Proposals Two, Three and Four, as more specifically
      described in the Proxy Statement. If specific instructions are indicated, this
      Proxy will be voted in accordance therewith.</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">The
      Board
      of Directors recommends a vote </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>FOR</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      nominees for director listed 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: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Proposal
      One</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
      elect
      directors to serve for the ensuing year and until their successors are elected.
      </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 width="5%">&#160;</td>
            <td align="left" valign="top" width="3%">
              <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: Wingdings"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
            <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">FOR
                all nominees listed below (except as marked to the contrary
                below).</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
            <td align="left" valign="top" width="5%">&#160;</td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings" size="2">o</font></td>
            <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">WITHHOLD
                AUTHORITY to vote for all nominees listed below.</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>

      </table>
    </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">Nominees:</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 49.5pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Elwood
      G.
      Norris, Thomas R. Brown, Daniel Hunter, Raymond C. Smith and Laura M.
      Clague</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">To
      withhold authority to vote for any nominee(s) write such nominee(s)' name(s)
      below:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div>&#160;</div>
      <div>
        <hr style="COLOR: black" align="left" noshade size="1" width="100%">
      </div><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">The
      Board
      of Directors recommends a vote </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>FOR</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Proposals Two, Three and Four</font></div>
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      proxy has been solicited by or for the benefit of the Board of Directors of
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      to that effect, signed and dated by me, which must be actually received by
      the
      Company prior to commencement of the Annual Meeting.</font></div>
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            <tr>
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                <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="justify">&#160;</div>
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              <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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    <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">(Please
      date and sign exactly as name or names appear on your stock certificate(s).
      When
      signing as attorney, executor, administrator, trustee or guardian, please give
      full title as such. If a corporation, please sign in full the corporate name
      by
      President or other authorized officer. If a partnership, please sign in the
      partnership name by authorized person. IF THE STOCK IS HELD JOINTLY, BOTH OWNERS
      MUST SIGN.)</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 style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mail
      or
      Deliver this Proxy to:</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">AMERICAN
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      to Electronic Delivery of Proxy Materials and Annual
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    <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">If
      you
      are a stockholder of record and you agree to access our proxy materials and
      annual reports electronically in the future, please mark this box. [
&#160;]</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">If
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      conducted by us: ___________________________</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">If
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      and
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(```````__]D_
`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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