8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K/A

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  08/17/2006

American Technology Corporation

(Exact name of registrant as specified in its charter)

Commission File Number:  000-24248

Delaware	87-0361799
(State or other jurisdiction of	(IRS Employer
incorporation)	Identification No.)

15378 Avenue of Science, Ste 100,

San Diego, California 92128

(Address of principal executive offices, including zip code)

(858) 676-1112

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[  ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Information to be included in the report

Item 1.01.    Entry into a Material Definitive Agreement

On August 20, 2006, in connection with the appointment of Thomas R. Brown as our president and chief executive officer, as described in Item 5.02 below, the compensation committee recommended, and the board approved, a compensation package for Mr. Brown described in Item 5.02 below. We entered into an employment letter with Mr. Brown reflecting such terms dated August 23, 2006. A copy of such letter is attached hereto as Exhibit 99.2 and incorporated herein by reference.

Item 1.02.    Termination of a Material Definitive Agreement

On August 17, 2006, John R. Zavoli was terminated as our president and chief operating officer. In connection with such termination, Mr. Zavoli's employment arrangement with the company also terminated. Mr. Zavoli was employed under the terms of a letter agreement dated as of October 17, 2005. Mr. Zavoli's annual base salary at the time of termination was $250,000. Mr. Zavoli's letter agreement provided that his employment was at-will and no specified period or term of employment, but that in the event his employment is terminated for any reason other than cause (as defined in the agreement), or if he resigns for good reason (as defined in the agreement), he is 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 the company, and the continued effectivenes s of such release beyond any statutory revocation period. Based on Mr. Zavoli's term of service, Mr. Zavoli would be entitled to five months of compensation continuation in connection with termination without cause from our company, if he executes a general release. Mr. Zavoli has not executed such a release as of the date of this report.

Item 5.02.    Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

On August 17, 2006, John R. Zavoli was terminated as our president and chief operating officer. Mr. Zavoli continues to serve as a director.

On August 20, 2006, our board appointed Thomas R. Brown as our president and chief executive officer, with a term commencing September 5, 2006. Mr. Brown currently serves as an independent director on our board of directors, and served as a member of the compensation committee and the audit committee until his resignation from those committees on August 20, 2006. As a result of his appointment, Mr. Brown will no longer qualify as an independent director under applicable Nasdaq standards once his term of office commences. In order to maintain compliance with the rules of the Nasdaq Stock Market requiring us to have a board consisting a majority of independent directors, Mr. Brown will resign from the board effective upon commencing his term of office as president and chief executive officer, if such resignation is necessary to maintain compliance with Nasdaq rules. If Mr. Brown resigns from the board, we intend to reappoint him to the board as soon as we may do so and maintain compliance with the rules of the Nasdaq Stock Market.

As Chairman, Elwood G. Norris will continue to serve in his role as principal executive officer until September 5, 2006. After such date, Mr. Norris will continue to serve as Chairman, but his officer duties will shift from principal executive officer to a technical advisory role and spokesman for our company's technologies.

Mr. Brown, age 55, currently serves as President of BrownThompson Executive Search, a financial executive search firm, a position he has held since April 2005. He will no longer serve in such position upon commencement of employment with our company. From April 2001 to September 2004, Mr. Brown was Executive Vice President and Deputy President of the Information Technology division of Sony Electronics, where he was responsible for supply chain operations including Information Technology, Procurement, North American Manufa cturing Operations and Finance. He continued to consult with Sony Electronics on its ERP implementation from September 2004 to January 2005. 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 division. Mr. Brown is a director 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.

Our compensation committee has recommended, and the board has approved, a compensation package for Mr. Brown with a base salary of $250,000 per year. Mr. Brown will also receive on his start date a non-statutory stock option to purchase 200,000 shares of common stock under our 2005 Equity Incentive Plan. This option will have an exercise price per share equal to the closing price of our common stock on the start date as reported on the Nasdaq Capital Market. The option will have a five year life subject to continuing service to our company. The option will become exercisable, subject to continuing service to our company, with respect to 50,000 shares on the one-year anniversary of the date of grant; and thereafter, subject to continuing service, the option will become exercisable with respect to an additional 12,500 shares on each subsequent three-month anniversary of the date of grant, for a total of four years when the option is fully vested. 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 annual goals that will be established by the compensation committee. In the event that Mr. Brown'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 months salary for each two month period of service, or portion thereof, up to six months salary. He will also be entitled to continuation of his company-provided health and dental benefits for the same period.

We entered into an employment letter with Mr. Brown reflecting such terms dated August 23, 2006. A copy of such letter is attached hereto as Exhibit 99.2 and incorporated herein by reference.

Item 7.01.    Regulation FD Disclosure

On August 20, 2006, we issued a press release announcing the appointment of Thomas R. Brown as president and chief executive officer. A copy of the press release is attached as Exhibit 99.1 hereto and incorporated herein by reference.

The information in this Item 7.01 is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.

Item 8.01.    Other Events

On August 20, 2006, Admiral Raymond C. Smith was appointed to the audit committee to fill the vacancy left by Mr. Brown's resignation from the audit committee. The following directors now serve on the audit committee: David J. Carter, Daniel Hunter and Raymond C. Smith.

The following directors serve on the compensation committee following Mr. Brown's resignation from such committee: David J. Carter, Daniel Hunter and Raymond C. Smith.

The following directors continue to serve on the nominating and governance committee: David J. Carter and Raymond C. Smith.

Item 9.01.    Financial Statements and Exhibits

Exhibit No.                    

Description

99.1                    Press Release Dated August 20, 2006 (Previously filed)

99.2               Employment Letter Between American Technology Corporation and Thomas R. Brown Dated August 23, 2006. (Included herewith)

Signature(s)

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		American Technology Corporation
Date: August 25, 2006	By:	/s/    Steven D. Stringer
		Steven D. Stringer
		Chief Financial Officer

Exhibit Index

Exhibit No.	Description
EX-99.2	Brown Employment Letter

EX-99.2 2 rrd128556_15738.htm BROWN EMPLOYMENT LETTER

August 23, 2006

Mr. Thomas R. Brown

15378 Avenue of Science, Suite 100

San Diego, California 92128

Dear Tom,

American Technology Corporation ("Company") is very pleased to confirm our offer of employment. This offer is contingent upon satisfactory results of all reference, education, and background checks. Our offer is based on the following terms and conditions:

Title: President and Chief Executive Officer commencing on the start date.

Start Date: We have anticipated your start date as Tuesday, September 5, 2006.

Salary: Your base salary will be $250,000.00 per year, payable in accordance with the normal payroll practices of the Company. Your base salary will be reviewed by the Compensation Committee at the end of fiscal 2006, and any increase recommended by the Compensation Committee will be subject to approval by the Board of Directors.

Bonus: You 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 of Directors. The bonus will be based in part on your achievement of annual goals that will be established by the Compensation Committee with input from you. Any bonus so determined will be payable no later than the March 15^th first following the fiscal year for which such bonus was earned.

Stock Options: You will be granted a stock option under the Company's 2005 Equity Incentive Plan (the "Plan") to purchase 200,000 shares of common stock upon the later of your start date or September 5, 2006. This option will be in addition to the stock option granted to you on March 24, 2006. The option will have an exercise price equal to the fair market value of our common stock on the date of grant, determined in accordance with the Plan. The option will be exercisable for five (5) years after grant, subject to earlier termination upon termination of your continuous service. The option will vest over four (4) years, with one fourth (1/4) of the shares vesting twelve (12) months after the grant date, and the balance vesting in equal quarterly installments through and including the fourth anniversary of the grant date. The option will be a non-statutory stock option and will not qualify for incentive stock option (ISO) treatment under the Internal Revenue Code.

Severance: In the event your employment is terminated for any reason other than Cause (as defined on Exhibit A), or if you resign for Good Reason (as defined on Exhibit A), you will be entitled to severance in the form of post-termination salary continuation, payable pursuant to the same schedule, and in the same amounts, as your regular salary payments immediately preceding your date of termination for the number of months set forth below ("Salary Continuation"), conditioned on your execution of a general release of all known and unknown claims against the company, the continued effectiveness of such release beyond any statutory revocation period, and your resignation from the Board of Directors unless otherwise requested by the Board (collectively, the "Payment Conditions"). Such Salary Continuation, if payable, shall be paid for one (1) month for each two (2) month period of your employment or part thereof, up to a maximum of six (6) months of Salary Continuation. (For example, i f your employment were terminated without Cause after 4 months and 5 days of employment, you would be entitled to 3 months Salary Continuation.) Notwithstanding the foregoing, to the extent necessary to avoid adverse tax consequences pursuant to section 409A of the Internal Revenue Code of 1986, as amended, the Salary Continuation shall be paid in its entirety in a single lump sum six months after you become entitled to the Salary Continuation, subject to the Payment Conditions.

In addition, in the event your employment is terminated for any reason other than Cause, or if you resign for Good Reason, and if you elect to continue to participate in the Company's standard medical and dental benefits as provided under COBRA and/or Cal-COBRA, then to the extent that such benefits are provided pursuant to a plan described in Section 1.409A-1(a)(5) of the Proposed Treasury Regulations and any successor thereto ("Welfare Benefits"), the Company will continue to pay a portion of the cost thereof equal to the portion paid by the Company prior to termination of your employment for up to the number of months of Salary Continuation computed pursuant to the foregoing paragraph, if: (1) you provide written notice of such election to Company within the time prescribed in the "COBRA Notice"; (2) you pay the Company monthly an amount equal to your contribution for such benefits as was in effect at the date of termination of your employment, if any; and (3) you satisfy the Payment Conditions. The benefits set forth in this paragraph shall cease upon you becoming eligible for reasonably comparable medical and dental benefits through a successor employer.

Resignation from

the Board Committees

and from the Board: In order to ensure that the Company remains in compliance with the rules of the Nasdaq Stock Market concerning the composition of the board and certain board committees, by your execution of this letter, you are confirming your resignation from American Technology Corporation's Audit Committee and Compensation Committee as of August 20, 2006. By your execution of this letter, you are also tendering your resignation from the Board of Directors effective on your start date; provided that such resignation shall not be effective, and shall be null and void, if the Board would have a majority of independent directors, as defined by the rules of the Nasdaq Stock Market, on your start date without giving effect to your resignation. Following any such resignation from the Board, you agree to continue to consult with the Chairman concerning governance issues. You will be reappointed to the Board of Directors as soon as such appointment would not cause the Company to have less than a major ity of independent directors, as defined by the rules of the Nasdaq Stock Market. You will not however serve on the Audit Committee, the Compensation Committee or the Nominating and Governance Committee.

Unless otherwise requested by the Board, upon the termination of your employment for any reason, you shall be deemed to have immediately resigned from the Board, and you agree that your resignation shall be deemed effective and irrevocable (whether or not you have delivered a separate notice of resignation to the Board) concurrently with the date of termination of your employment. You understand and agree that this paragraph represents an effective resignation upon an effective date determined upon the happening of an event or events, pursuant to Section 141(b) of the Delaware General Corporation Law, and that this paragraph represents an ongoing effective resignation upon an effective date determined upon the happening of an event or events, notwithstanding any resignation and reappointment or reelection to the Board during the term of your employment.

Health Benefits: The Company offers a comprehensive benefits plan that includes medical, dental, vision, short-term disability, long-term disability and life insurances. The Company currently pays for 100% of all health benefit premiums, including dependents, and you can elect HMO or PPO medical coverage. You may pay for any qualified out-of-pocket expense on a pre-tax basis through a Section 125 plan. Benefits begin the first day of the month following your start date.

Paid Time

& Holidays: You will receive 15 days of accrued Paid Time Off (PTO) annually, for use for vacation or for personal time off. PTO hours are accrued per pay period. Any hours in excess of 200 will be paid out in the first pay period of December. In the event of short-term illness, you will be provided time to convalesce at home and will be paid your regular salary for this time. Sick time is not accrued but rather is taken as needed.

The Company offers nine (9) paid holidays each calendar year, subject to future change. You must be on active status the day before and the day after the holiday to receive holiday pay.

Retirement: A 401k package is available with multiple investment options and the company matches 25% of the employee's deferral up to 6% of your annual earnings. (Note: Some IRS limitations may apply.)

Arbitration: As a contingency of this offer, you will be required to sign the attached Mutual Agreement to Arbitrate ("Arbitration Agreement").

Due to the enactment of the Immigration Reform and Control Act of 1986, this offer is contingent on your ability to produce acceptable documentation verifying your eligibility to work in the United States. You will be required to present the necessary documents on the day you begin work at American Technology Corporation.

Additionally, as a condition of this offer and of your employment with American Technology Corp., you will be required to preserve the Company's proprietary and confidential information and you must comply with the Company's policies and procedures. Accordingly, you will be required to execute the Company's Non-Disclosure Agreement on your first date of employment.

If accepted, your employment will be at-will with no specified period or term of employment. This means that either you or the Company may terminate employment at anytime, with or without reason, subject only to the severance provisions above. The Company may also transfer, promote, demote or otherwise alter your position and/or status at any time and for any reason. An employment agreement for a specified period of time, which contradicts this at-will agreement, may be entered into only in writing, and only following the recommendation of the Compensation Committee and the approval by the Board of Directors of such an employment agreement.

If any compensation or other payments payable under this agreement are subject to Internal Revenue Code section 409A, then you acknowledge and agree, by signing this offer letter, that the Company shall adhere to the provisions of Internal Revenue Code section 409A and any Treasury Regulations or other guidance issued there under. You acknowledge that you have reviewed the provisions of this agreement with applicable legal and tax counsel to ensure compliance with Internal Revenue Code section 409A and that the Company shall not be responsible for any adverse tax consequences that you experience in connection with the terms of this offer of employment and the execution of this agreement.

Please acknowledge your acceptance of our offer by signing below and returning a copy of this letter to me.

If there are any questions, please do not hesitate to call me.

Sincerely,

/s/ Elwood G. Norris

Elwood G. Norris

Chairman of the Board

I understand and agree to the terms and conditions set forth in this letter. I further understand that any misrepresentations that I have made on my resume or director and officer questionnaire dated March 21, 2006 can result in termination. I acknowledge that no statement contradicting this letter, oral or written, has been made to me, that I am not relying on any statement or term not contained in this letter, and that no agreements exist which are contrary to the terms and conditions set forth in this letter.

Accepted by:/s/ Thomas R. Brown Date: 8/23/06

EXHIBIT A

CERTAIN DEFINITIONS

"Cause" means:

(i) any willful breach or habitual neglect of your material duties (other than due to a disability or death);

(ii) commission of a felony, fraud, financial impropriety, or other act of moral turpitude;

(iii) any knowing or deliberate violation of a requirement of the Sarbanes-Oxley Act of 2002 or other material provisions of the federal securities laws;

(iv) gross carelessness or misconduct regarding your employment with the Company; or

(v) failure to obey the lawful and reasonable direction of the Board or the Chairman of the Board, or breach of any fiduciary duty owed by you to the Company or its stockholders, in such a way that has a direct, substantial and adverse effect on the business, finances or reputation of the Company or its stockholders.

"Good Reason" means any of the following events and conditions shall have occurred without your express written consent:

(i) the assignment to you of any substantial and material duties inconsistent with your status or position with the Company, or any other action by the Company that results in a substantial diminution in such status or position; or

(ii) any material breach of this letter by the Company.

Notwithstanding the foregoing, if there exist (without regard to this and the next succeeding sentence) events or conditions that you believe constitute Good Reason, you must promptly notify the Chairman of the Board in writing of such events or conditions, in reasonable detail, including, where applicable and to the extent practicable, specific examples of acts, omissions, conduct, performance or other events or conditions which constitute Good Reason. The Company will have 30 days from the date such written notice is given to cure such events or conditions and, if cured, such events or conditions will not constitute Good Reason.

-----END PRIVACY-ENHANCED MESSAGE-----

EX-99.2

August 23, 2006

Mr. Thomas R. Brown

15378 Avenue of Science, Suite 100

San Diego, California 92128

Dear Tom,

American Technology Corporation ("Company") is very pleased to confirm our offer of employment. This offer is contingent upon satisfactory results of all reference, education, and background checks. Our offer is based on the following terms and conditions:

Title: President and Chief Executive Officer commencing on the start date.

Start Date: We have anticipated your start date as Tuesday, September 5, 2006.

Salary: Your base salary will be $250,000.00 per year, payable in accordance with the normal payroll practices of the Company. Your base salary will be reviewed by the Compensation Committee at the end of fiscal 2006, and any increase recommended by the Compensation Committee will be subject to approval by the Board of Directors.

Bonus: You 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 of Directors. The bonus will be based in part on your achievement of annual goals that will be established by the Compensation Committee with input from you. Any bonus so determined will be payable no later than the March 15^th first following the fiscal year for which such bonus was earned.

Stock Options: You will be granted a stock option under the Company's 2005 Equity Incentive Plan (the "Plan") to purchase 200,000 shares of common stock upon the later of your start date or September 5, 2006. This option will be in addition to the stock option granted to you on March 24, 2006. The option will have an exercise price equal to the fair market value of our common stock on the date of grant, determined in accordance with the Plan. The option will be exercisable for five (5) years after grant, subject to earlier termination upon termination of your continuous service. The option will vest over four (4) years, with one fourth (1/4) of the shares vesting twelve (12) months after the grant date, and the balance vesting in equal quarterly installments through and including the fourth anniversary of the grant date. The option will be a non-statutory stock option and will not qualify for incentive stock option (ISO) treatment under the Internal Revenue Code.

Severance: In the event your employment is terminated for any reason other than Cause (as defined on Exhibit A), or if you resign for Good Reason (as defined on Exhibit A), you will be entitled to severance in the form of post-termination salary continuation, payable pursuant to the same schedule, and in the same amounts, as your regular salary payments immediately preceding your date of termination for the number of months set forth below ("Salary Continuation"), conditioned on your execution of a general release of all known and unknown claims against the company, the continued effectiveness of such release beyond any statutory revocation period, and your resignation from the Board of Directors unless otherwise requested by the Board (collectively, the "Payment Conditions"). Such Salary Continuation, if payable, shall be paid for one (1) month for each two (2) month period of your employment or part thereof, up to a maximum of six (6) months of Salary Continuation. (For example, i f your employment were terminated without Cause after 4 months and 5 days of employment, you would be entitled to 3 months Salary Continuation.) Notwithstanding the foregoing, to the extent necessary to avoid adverse tax consequences pursuant to section 409A of the Internal Revenue Code of 1986, as amended, the Salary Continuation shall be paid in its entirety in a single lump sum six months after you become entitled to the Salary Continuation, subject to the Payment Conditions.

In addition, in the event your employment is terminated for any reason other than Cause, or if you resign for Good Reason, and if you elect to continue to participate in the Company's standard medical and dental benefits as provided under COBRA and/or Cal-COBRA, then to the extent that such benefits are provided pursuant to a plan described in Section 1.409A-1(a)(5) of the Proposed Treasury Regulations and any successor thereto ("Welfare Benefits"), the Company will continue to pay a portion of the cost thereof equal to the portion paid by the Company prior to termination of your employment for up to the number of months of Salary Continuation computed pursuant to the foregoing paragraph, if: (1) you provide written notice of such election to Company within the time prescribed in the "COBRA Notice"; (2) you pay the Company monthly an amount equal to your contribution for such benefits as was in effect at the date of termination of your employment, if any; and (3) you satisfy the Payment Conditions. The benefits set forth in this paragraph shall cease upon you becoming eligible for reasonably comparable medical and dental benefits through a successor employer.

Resignation from

the Board Committees

and from the Board: In order to ensure that the Company remains in compliance with the rules of the Nasdaq Stock Market concerning the composition of the board and certain board committees, by your execution of this letter, you are confirming your resignation from American Technology Corporation's Audit Committee and Compensation Committee as of August 20, 2006. By your execution of this letter, you are also tendering your resignation from the Board of Directors effective on your start date; provided that such resignation shall not be effective, and shall be null and void, if the Board would have a majority of independent directors, as defined by the rules of the Nasdaq Stock Market, on your start date without giving effect to your resignation. Following any such resignation from the Board, you agree to continue to consult with the Chairman concerning governance issues. You will be reappointed to the Board of Directors as soon as such appointment would not cause the Company to have less than a major ity of independent directors, as defined by the rules of the Nasdaq Stock Market. You will not however serve on the Audit Committee, the Compensation Committee or the Nominating and Governance Committee.

Unless otherwise requested by the Board, upon the termination of your employment for any reason, you shall be deemed to have immediately resigned from the Board, and you agree that your resignation shall be deemed effective and irrevocable (whether or not you have delivered a separate notice of resignation to the Board) concurrently with the date of termination of your employment. You understand and agree that this paragraph represents an effective resignation upon an effective date determined upon the happening of an event or events, pursuant to Section 141(b) of the Delaware General Corporation Law, and that this paragraph represents an ongoing effective resignation upon an effective date determined upon the happening of an event or events, notwithstanding any resignation and reappointment or reelection to the Board during the term of your employment.

Health Benefits: The Company offers a comprehensive benefits plan that includes medical, dental, vision, short-term disability, long-term disability and life insurances. The Company currently pays for 100% of all health benefit premiums, including dependents, and you can elect HMO or PPO medical coverage. You may pay for any qualified out-of-pocket expense on a pre-tax basis through a Section 125 plan. Benefits begin the first day of the month following your start date.

Paid Time

& Holidays: You will receive 15 days of accrued Paid Time Off (PTO) annually, for use for vacation or for personal time off. PTO hours are accrued per pay period. Any hours in excess of 200 will be paid out in the first pay period of December. In the event of short-term illness, you will be provided time to convalesce at home and will be paid your regular salary for this time. Sick time is not accrued but rather is taken as needed.

The Company offers nine (9) paid holidays each calendar year, subject to future change. You must be on active status the day before and the day after the holiday to receive holiday pay.

Retirement: A 401k package is available with multiple investment options and the company matches 25% of the employee's deferral up to 6% of your annual earnings. (Note: Some IRS limitations may apply.)

Arbitration: As a contingency of this offer, you will be required to sign the attached Mutual Agreement to Arbitrate ("Arbitration Agreement").

Due to the enactment of the Immigration Reform and Control Act of 1986, this offer is contingent on your ability to produce acceptable documentation verifying your eligibility to work in the United States. You will be required to present the necessary documents on the day you begin work at American Technology Corporation.

Additionally, as a condition of this offer and of your employment with American Technology Corp., you will be required to preserve the Company's proprietary and confidential information and you must comply with the Company's policies and procedures. Accordingly, you will be required to execute the Company's Non-Disclosure Agreement on your first date of employment.

If accepted, your employment will be at-will with no specified period or term of employment. This means that either you or the Company may terminate employment at anytime, with or without reason, subject only to the severance provisions above. The Company may also transfer, promote, demote or otherwise alter your position and/or status at any time and for any reason. An employment agreement for a specified period of time, which contradicts this at-will agreement, may be entered into only in writing, and only following the recommendation of the Compensation Committee and the approval by the Board of Directors of such an employment agreement.

If any compensation or other payments payable under this agreement are subject to Internal Revenue Code section 409A, then you acknowledge and agree, by signing this offer letter, that the Company shall adhere to the provisions of Internal Revenue Code section 409A and any Treasury Regulations or other guidance issued there under. You acknowledge that you have reviewed the provisions of this agreement with applicable legal and tax counsel to ensure compliance with Internal Revenue Code section 409A and that the Company shall not be responsible for any adverse tax consequences that you experience in connection with the terms of this offer of employment and the execution of this agreement.

Please acknowledge your acceptance of our offer by signing below and returning a copy of this letter to me.

If there are any questions, please do not hesitate to call me.

Sincerely,

/s/ Elwood G. Norris

Elwood G. Norris

Chairman of the Board

I understand and agree to the terms and conditions set forth in this letter. I further understand that any misrepresentations that I have made on my resume or director and officer questionnaire dated March 21, 2006 can result in termination. I acknowledge that no statement contradicting this letter, oral or written, has been made to me, that I am not relying on any statement or term not contained in this letter, and that no agreements exist which are contrary to the terms and conditions set forth in this letter.

Accepted by:/s/ Thomas R. Brown Date: 8/23/06

EXHIBIT A

CERTAIN DEFINITIONS

"Cause" means:

(i) any willful breach or habitual neglect of your material duties (other than due to a disability or death);

(ii) commission of a felony, fraud, financial impropriety, or other act of moral turpitude;

(iii) any knowing or deliberate violation of a requirement of the Sarbanes-Oxley Act of 2002 or other material provisions of the federal securities laws;

(iv) gross carelessness or misconduct regarding your employment with the Company; or

(v) failure to obey the lawful and reasonable direction of the Board or the Chairman of the Board, or breach of any fiduciary duty owed by you to the Company or its stockholders, in such a way that has a direct, substantial and adverse effect on the business, finances or reputation of the Company or its stockholders.

"Good Reason" means any of the following events and conditions shall have occurred without your express written consent:

(i) the assignment to you of any substantial and material duties inconsistent with your status or position with the Company, or any other action by the Company that results in a substantial diminution in such status or position; or

(ii) any material breach of this letter by the Company.

Notwithstanding the foregoing, if there exist (without regard to this and the next succeeding sentence) events or conditions that you believe constitute Good Reason, you must promptly notify the Chairman of the Board in writing of such events or conditions, in reasonable detail, including, where applicable and to the extent practicable, specific examples of acts, omissions, conduct, performance or other events or conditions which constitute Good Reason. The Company will have 30 days from the date such written notice is given to cure such events or conditions and, if cured, such events or conditions will not constitute Good Reason.