# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

# SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrantx

Filed by a Party other than the Registranto



Check the appropriate box:



|o |  | Preliminary Proxy Statement
|- |  | ---------------------------

|o |  | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
|- |  | -------------------------------------------------------------------------------

|x |  | Definitive Proxy Statement
|- |  | --------------------------

|o |  | Definitive Additional Materials
|- |  | -------------------------------

|o |  | Soliciting Material Pursuant to § 240.14a-12
|- |  | --------------------------------------------



IntriCon Corporation

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(Name of Registrant as Specified In Its Charter)



Not Applicable  (Name of Person(s) Filing Proxy Statement, if other than the Registrant)




Payment of Filing Fee (Check the appropriate box):

|x |  | No fee required
|- |  | ---------------

|o |  | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
|- |  | ------------------------------------------------------------------------



| | (1) |  | Title of each class of securities to which transaction applies:
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| | (2) |  | Aggregate number of securities to which transaction applies:
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| | (3) |  | 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):
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| | (4) |  | Proposed maximum aggregate value of transaction:
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| | (5) |  | Total fee paid:
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|o |  | Fee paid previously with preliminary materials.
|- |  | -----------------------------------------------

|o |  | 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.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | (2) |  | Form, Schedule or Registration Statement No.:
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| | (3) |  | Filing Party:
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| | (4) |  | Date Filed:
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# INTRICON CORPORATION

# 1260 Red Fox Road

# Arden Hills, Minnesota 55112

March 24, 2006

Dear Shareholder:

It is my great pleasure to
invite you to attend the 2005 Annual Meeting of Shareholders (the Annual Meeting). The Annual Meeting will be held on
Wednesday, April 26, 2006 at 11:00 a.m., local time, at our offices located at 1260 Red Fox Road, Arden Hills, Minnesota 55112.

At this years Annual
Meeting our shareholders will vote on the election of a director to hold office for a term of three years and until his successor
is duly elected and qualified and vote on the 2006 Equity Incentive Plan. The official notice of the Annual Meeting, together with
the proxy statement and proxy card, are enclosed.

The vote of every shareholder
is important. Therefore, whether or not you expect to attend the meeting in person, I urge you to sign and date the enclosed proxy
card and return it promptly in the envelope provided for that purpose. You also have the option of voting by telephone. If you
choose to vote by telephone you may call toll-free in the U.S. or Canada, 1-866-626-4508 on a touch-tone telephone. You also have
the option of voting over the internet. To do so, log on to www.votestock.com and follow the web site instructions. Once you have
cast your vote, be sure to click on Accept Vote.

Thank you for your continued
interest in IntriCon Corporation. I look forward to seeing you at the Annual Meeting.

Sincerely,



Mark S. Gorder
President and
Chief Executive Officer

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# INTRICON CORPORATION

# 1260 Red Fox Road

# Arden Hills, Minnesota 55112

# NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

The 2006 Annual Meeting of
Shareholders (the Annual Meeting) of IntriCon Corporation (the Corporation) will be held on Wednesday,
April 26, 2006 at the Corporations offices located at 1260 Red Fox Road, Arden Hills, Minnesota, 55112 at 11:00 a.m., local
time, for the following purposes:

(1)                 to
elect a director to hold office for a term of three years and until his successor is duly elected and qualified;

(2)                 to
approve the 2006 Equity Incentive Plan, as more fully described in the accompanying proxy statement; and

(3)                 to
transact such other business as may properly come before the Annual Meeting or any of its adjournments or postponements.

The Board of Directors has
fixed the close of business on March 17, 2006, as the record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting or any adjournment or postponement thereof. If the Annual Meeting is adjourned for one or more
periods aggregating at least 15 days because of the absence of a quorum, those shareholders entitled to vote who attend the
reconvened Annual Meeting, if less than a quorum as determined under applicable law, shall nevertheless constitute a quorum for
the purpose of acting upon any matter set forth in this Notice of Annual Meeting.

All shareholders are
cordially invited to attend the meeting, but whether or not you expect to attend the meeting in person, please mark, sign and date
the enclosed proxy card and return it promptly in the envelope provided in order that your shares may be voted. You also have the
option of voting by telephone. If you choose to vote by telephone you may call toll-free in the U.S. or Canada, 1-866-626-4508 on
a touch-tone telephone. You also have the option of voting over the internet. To do so, log on to www.votestock.com and follow the
web site instructions. Once you have cast your vote, be sure to click on Accept Vote. If you attend the meeting, you
may revoke your proxy and vote in person.

By Order of the Board of Directors



Michael J. McKenna
Chairman of the Board

March 24, 2006
    Arden Hills, Minnesota

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# INTRICON CORPORATION

# 1260 Red Fox Road

# Arden Hills, Minnesota 55112

# PROXY STATEMENT

The enclosed proxy is
solicited by the Board of Directors of the IntriCon Corporation (the Corporation) for use at the 2006 Annual Meeting
of Shareholders (the Annual Meeting) to be held on Wednesday, April 26, 2006 at the Corporations offices located
at 1260 Red Fox Road, Arden Hills, Minnesota 55112, at 11:00 a.m., local time, and any adjournment or postponement thereof. This
Proxy Statement and accompanying proxy card are first being mailed to shareholders on or about March 24, 2006.

The Board of Directors has
fixed the close of business on March 17, 2006, as the record date for determination of the shareholders entitled to notice of and
to vote at the Annual Meeting. As of March 17, 2006, there were 5,149,814 common shares, par value $1.00 per share (Common
Share), of the Corporation outstanding, each of which is entitled to one vote on all matters to be presented at the Annual
Meeting.

Proxies in the form enclosed,
if properly executed and received in time for voting, and not revoked, will be voted as directed on the proxies. If no directions
to the contrary are indicated, the persons named in the proxy will vote all of your Common Shares for the election of
the nominee for director and for the approval of the 2006 Equity Incentive Plan. With respect to any other matter that
properly comes before the meeting, the proxy holders will vote the proxies in their discretion in accordance with their best
judgment. Sending in a signed proxy will not affect a shareholders right to attend the Annual Meeting and vote in person
since the proxy is revocable. You also have the option of voting by telephone. If you choose to vote by telephone you may call
toll-free in the U.S. or Canada, 1-866-626-4508 on a touch-tone telephone. You also have the option of voting over the internet.
To do so, log on to www.votestock.com and follow the web site instructions. Once you have cast your vote, be sure to click on
Accept Vote. The deadline to vote telephonically or over internet is Tuesday, April 25, 2006, p.m., eastern standard
time.

Any shareholder who submits a
proxy may revoke it at any time before the proxy is voted at the Annual Meeting by delivering a later dated proxy or by giving
written notice to the Secretary of the Corporation or attending the Annual Meeting in person and so requesting. If you vote by
telephone or over the internet, you may change your vote telephonically or over the internet by following the procedures used to
submit your initial vote. The last vote received chronologically will supersede any prior votes. Attendance at the Annual Meeting
will not by itself revoke a previously granted proxy.

The presence, in person or
represented by proxy, of the holders of a majority of the outstanding Common Shares will constitute a quorum for the transaction
of business at the Annual Meeting. All Common Shares present in person or represented by proxy (including broker
non-votes) and entitled to vote at the Annual Meeting, no matter how they are voted or whether they abstain from voting,
will be counted in determining the presence of a quorum. If the Annual Meeting is adjourned because of the absence of a quorum,
those shareholders entitled to vote who attend the adjourned Annual Meeting, although constituting less than a quorum as provided
herein, shall nevertheless constitute a quorum for the purpose of electing a director.

If the Annual Meeting is
adjourned for one or more periods aggregating at least 15 days because of the absence of a quorum, those shareholders entitled to
vote who attend the reconvened Annual Meeting, if less than a quorum as determined under applicable law, shall nevertheless
constitute a quorum for the purpose of acting upon any matter set forth in the Notice of Annual Meeting.

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Each Common Share is entitled
to one vote on each matter that may be brought before the Annual Meeting. The election of a director will be determined by a
plurality vote and the nominee receiving the highest number of for votes will be elected. Approval of any other
proposal, including approval of the 2006 Equity Incentive Plan, will require the affirmative vote of a majority of the shares
entitled to vote and present in person or represented by proxy. Under the Pennsylvania Business Corporation Law, an abstention,
withholding of authority to vote or broker non-vote, will not have the same legal effect as an against vote and will
not be counted in determining whether the proposal has received the required shareholder vote.

The cost of this solicitation
will be borne by the Corporation. In addition to solicitation by mail, proxies may be solicited in person or by telephone,
telegraph or teletype by officers, directors or employees of the Corporation, without additional compensation. Upon request, the
Corporation will pay the reasonable expenses incurred by record holders of the Corporations Common Shares who are brokers,
dealers, banks or voting trustees, or their nominees, for mailing proxy materials and the annual report to shareholders to the
beneficial owners of the shares they hold of record.

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# PROPOSAL 1

# ELECTION OF DIRECTORS

The Board of Directors
currently consists of four members divided into three classes.

The Board of Directors, based
upon the recommendation of the Nominating and Corporate Governance Committee, has nominated Nicholas A. Giordano as Director and
for re-election at the Annual Meeting to serve until the 2009 annual meeting of shareholders and until his respective successor
has been duly elected and qualified. The nominee is a current director of the Corporation and has been previously elected as a
director by the Corporations shareholders. Mr. Giordano has indicated his willingness to continue serving as director. The
Board of Directors knows of no reason why the nominee would be unable to serve as director. If the nominee should for any reason
be unable to serve, then the proxies will be voted for the election of such substitute nominee as the Board of Directors may
designate, unless the Board of Directors reduces the number of directors on the board.

Assuming a quorum is present,
the nominee receiving the highest number of for votes will be elected. For such purposes, an abstention, the
withholding of authority to vote or broker non-vote will not be counted in determining whether the proposal has received the
required shareholder vote. The Board of Directors recommends that the shareholders vote for the election of Mr.
Giordano as a director for the ensuing term.

The following table sets
forth certain information concerning the nominees and the persons whose terms as directors will continue after the Annual Meeting,
including their ages and principal occupations during the past five years:

|Name, Age and Occupation                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | DirectorSince |  | TermExpires
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- |  | -----------
|Nicholas A. Giordano (63) has served as a business
consultant and investor since 1997. Mr. Giordano was Interim President of LaSalle University from July 1998 to June 1999.
From 1981 to 1997, Mr.  Giordano was President and Chief Executive Officer of the Philadelphia Stock Exchange.
Mr. Giordano serves as a trustee of W.T. Trust and Kalmar Pooled Investment Trust, mutual funds, and as a Director of
Independence Blue Cross of Philadelphia. |  | 2000          |  | 2006       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Robert N. Masucci (68) has served as the Chairman of the Board of
Montgomery Capital Advisors, Inc., a consulting company, since 1990 and, Chairman of the Board of Barclay Brand Ferdon, Inc., a
distribution company, since 1996. Prior to 1990, Mr. Masucci was President and Chief Executive Officer of Drexel Industries,
Inc., a forklift manufacturer.                                                                                              |  | 2002          |  | 2008       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Mark S. Gorder (59) has served as the President and Chief
Executive Officer of the Corporation since April 2001; President and Chief Operating Officer of the Corporation from December 2000
to April 2001; and Vice President of the Corporation from 1996 to December 2000. Mr. Gorder has been President and Chief
Executive Officer of Resistance Technology, Inc., a subsidiary of the Corporation, since 1983.                                       |  | 1996          |  | 2007       

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|Name, Age and Occupation                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | DirectorSince |  | TermExpires
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- |  | -----------
|Michael J.
McKenna (71) has served as Chairman of the Board of Directors of the Corporation since April 2001. In March 2001, Mr. McKenna
retired as the Vice Chairman and a Director of Crown Cork & Seal Company, Inc., a manufacturing company. From 1995 to 1998,
Mr. McKenna was the President and Chief Operating Officer and, prior to 1995, was the Executive Vice President and President
of the North American Division of Crown Cork & Seal Company, Inc. |  | 1998          |  | 2007       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Messrs. Giordano and Masucci are first cousins.                                                                                                                                                                                                                                                                                                                                                                                                                    

# Independence of the Board of Directors

The Board of Directors has
determined that the following directors, constituting a majority of the members of the Board, are independent as defined in the
corporate governance rules of the American Stock Exchange: Messrs. Giordano, Masucci and McKenna.

# Communication with the Board

Shareholders may communicate
with the Board of Directors, including any individual director, by sending a letter to the Board of Directors, c/o Corporate
Secretary, IntriCon Corporation, 1260 Red Fox Road, Arden Hills, Minnesota 55112. The Corporate Secretary has the authority to
disregard any inappropriate communications or to take other appropriate actions with respect to any such inappropriate
communications. If deemed an appropriate communication, the Corporate Secretary will submit your correspondence to the Chairman of
the Board or to any specific director to whom the correspondence is directed.

# Meetings of the Board and Committees

The Corporations Board
of Directors held 13 formal meetings and 16 telephonic meetings in 2005. During 2005, all directors of the Corporation attended at
least 75% of the total number of meetings of the Board of Directors of the Corporation and all committees of which they were
members.

# Attendance at Annual Meeting of Shareholders

The Board of Directors has
adopted a policy that all of the directors should attend the Annual Meeting of Shareholders, absent exceptional cause. Last year,
the 2005 Annual Meeting of Shareholders was held on May 4, 2005, adjourned to and reconvened on May 18, 2005. All of the directors
attended the 2005 Annual Meeting of Shareholders held on May 4, 2005 and Mr. McKenna attended the reconvened meeting on May 18,
2005.

# Director Compensation

In 2005, Mr. McKenna received
an annual retainer of $44,000 for services performed as Chairman of the Board. The other directors who were not officers of the
Corporation received an annual retainer of $24,000. Non-employee Directors were also entitled to $800 per Board or Committee
meeting attended on a particular day and $400 for each additional Board or Committee meeting attended on the same day, except for
meetings of the Nominating and Corporate Governance Committee, where no per meeting compensation is paid. Mr. Giordano received
$2,000 per meeting for his services as Chairman of the Audit Committee in lieu of the regular per meeting fee. In 2005, Mr.
Masucci received a one-time payment of $50,000 for his services on a special committee established by the Board to assist in the
sale of the Corporations burners and components business. Total fees paid for services in 2005 were $107,300, $43,200 and
$84,000 to Messrs. McKenna, Giordano and Masucci, respectively. Directors did from time to time decide to waive collecting fees on
telephonic Board and Committee meetings. Under the Corporations Non-Employee Directors Stock Option Plan, directors who are
not employees of the Corporation or any of its subsidiaries receive an automatic one-time grant of an option to acquire 5,000
Common Shares of the Corporation upon their initial election or appointment to the Board of Directors and are also eligible to

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receive discretionary grants. A copy of the form of stock option agreement is
filed as an exhibit to the Corporations Current Report on Form 8-K filed with the Securities and Exchange Commission on
October 3, 2005. In 2005, Messrs. Giordano, Masucci and McKenna were each granted options to purchase 10,000 common shares which
vest in three equal annual installments. As of December 31, 2005, options to purchase 222,500 Common Shares were granted and
outstanding under the Non-employee Directors Stock Option Plan. If the 2006 Equity Incentive Plan is approved by shareholders, no
further grants will be made under the Non-employee Directors Stock Option Plan.

Effective January 1, 2006,
each non-employee member of the Board will receive $1,000 for each Board meeting attended in person and $500 for each telephonic
meeting of the Board participated in, and $1,000 for each committee meeting attended and $500 participated in by telephone of
which such non-employee member of the Board is a member. In 2006, the Chairman of the Board will receive an annual retainer of
$49,000. Each non-employee member of the Board, other than the Chairman of the Board and the Chairman of the Audit Committee, will
receive an annual retainer of $24,000. The Chairman of the Audit Committee will receive an annual retainer of $34,000. Each of the
annual retainers will be paid on a quarterly basis. If approved by the shareholders, directors will be eligible to receive awards
pursuant to the 2006 Equity Incentive Plan.

# Committees of the Board

The Board of Directors of the
Corporation has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.

Audit
Committee.   The Board of Directors of the Corporation has appointed a standing Audit Committee consisting
of Messrs. Giordano (Chairman), Masucci, and McKenna. The Board of Directors has determined that each member of the Audit
Committee is independent, as defined in applicable American Stock Exchange corporate governance rules and SEC regulations. In
addition, the Board of Directors has determined that Mr. Giordano qualifies as an audit committee financial expert, as defined in
applicable SEC rules. The Audit Committee held 5 in-person meetings in 2005. In addition, the Audit Committee held 9 telephonic
meetings with the Corporations management and/or independent auditors.

The Audit Committee is
governed by a written charter approved by the Board of Directors, a copy of which can be found as Appendix A to the
Corporations definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission on April 1, 2005.
The principal duties of the Audit Committee are to monitor the integrity of the financial statements of the Corporation, the
compliance by the Corporation with legal and regulatory requirements and the independence and performance of the
Corporations independent auditors. The Audit Committee also approves all related party transactions and establishes
procedures for (i) the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal
accounting controls or auditing matters, and (ii) the confidential, anonymous submissions by the Corporations employees of
concerns regarding questionable accounting or auditing matters. In addition, the Committee selects the firm to be engaged as the
Corporations independent public accountants, and approves the engagement of the independent public accountants for all
non-audit activities permitted under the Sarbanes-Oxley Act of 2002. The report of the Audit Committee appears on page 27.

Compensation
Committee.   The Board of Directors of the Corporation has appointed a standing Compensation Committee
currently consisting of Messrs. McKenna (Chairman), Giordano, and Masucci. The Board of Directors has determined that each member
of the Compensation Committee is independent, as defined in applicable American Stock Exchange corporate governance rules. The
Compensation Committee reviews and makes recommendations to the Board of Directors concerning officer compensation and officer and
employee bonus programs and administers the Corporations 2001 Stock Option Plan, Amended and Restated 1994 Stock Option Plan
and Non-Employee Directors Stock Option Plan. If the 2006 Equity Incentive Plan is approved by shareholders, it will be
administered by the Committee. This Committee met 4 times in 2005. The report of the Compensation Committee is set forth beginning
on page 10.

Nominating
and Corporate Governance Committee.   The Board of Directors of the Corporation has appointed a standing
Nominating and Corporate Governance Committee currently consisting of Messrs. McKenna (Chairman), Giordano, and Masucci. The Board
of Directors has determined that each member of the Nominating

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and Corporate Governance Committee is independent, as defined in applicable
American Stock Exchange corporate governance rules. The Nominating and Corporate Governance Committee met 2 times in 2005.

The Nominating and Corporate
Governance Committee is governed by a written charter approved by the Board of Directors, a copy of which can be found as Appendix
A to the Corporations definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission on March
25, 2004. The principal duties of the Nominating and Corporate Governance Committee are to identify individuals qualified to
become members of the Board consistent with the criteria approved by the Committee, consider nominees made by shareholders in
accordance with the Corporations bylaws, select, or recommend to the Board, the director nominees for each annual
shareholders meeting, recommend to the Board directors to be appointed to each Committee of the Board, recommend to the Board
whether to increase or decrease the size of the Board, develop and recommend to the Board corporate governance principles and
oversee the evaluations of the Board and senior management.

# Director Nomination Process

Consideration
of Director Candidates Recommended or Nominated by Shareholders.   The Nominating and Corporate Governance
Committee will consider properly submitted shareholder recommendations for director candidates. A shareholder who wishes to
recommend a prospective director nominee should send a signed and dated letter to the Chairman of the Nominating and Corporate
Governance Committee, c/o Corporate Secretary, IntriCon Corporation, 1260 Red Fox Road, Arden Hills, Minnesota 55112. Under the
Corporations amended and restated bylaws, a shareholder who desires to nominate directors for election at the
Corporations shareholders meeting must comply with the procedures summarized below:

| |  |  | shareholder nominations for directors to be elected, which have
not been previously approved by the Nominating and Corporate Governance Committee, must be submitted to the Corporate Secretary
not later than the latest date by which shareholder proposals must be submitted to the Corporation for inclusion in the proxy
statement pursuant to SEC Rule 14a-8;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | shareholder nominations must be in writing and sent either by
personal delivery, nationally recognized express mail or U.S. mail, postage prepaid;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | each shareholder nomination must set forth the following:
| | - |  | ---------------------------------------------------------

| |  |  |  | the name and address of the shareholder making the nomination and
the person(s) nominated;
| |  | - |  | ------------------------------------------------------------------------------------------

| |  |  |  | a representation that the shareholder is a holder of record,
and/or a beneficial owner, of voting stock of the Corporation entitled to vote at the meeting and intends to appear in person or
by proxy at the meeting to vote for the person(s) nominated;
| |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | a description of all arrangements and understandings between the
shareholder and each nominee and any other person(s), naming such person(s), pursuant to which the nomination was submitted by the
shareholder;
| |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | such other information regarding the shareholder nominee as would
be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC had the nominee been nominated by the
Nominating and Corporate Governance Committee, including the principal occupation of each nominee; and
| |  | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | the consent of each nominee to serve as a director if so elected.
| |  | - |  | -----------------------------------------------------------------

The Nominating and Corporate
Governance Committee has the sole authority to select, or to recommend to the Board of Directors, the nominees to be considered
for election as a director. The officer presiding over the shareholders meeting, in such officers sole and absolute
discretion, may reject any nomination not made in accordance with the foregoing procedures.

The deadline for submitting
the letter recommending a prospective director nominee for the 2007 Annual Meeting of Shareholders is November 27, 2006.

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The Corporations
amended and restated bylaws are available, at no cost, at the SECs website, www.sec.gov, as Exhibit 3.2 to the
Corporations Annual Report on Form 10-K for the year ended December 31, 2005 or upon the shareholders written request
directed to the Corporate Secretary at the address given above.

Director
Qualifications.   Nominees for director must be at least 21 years old. Nominees for director will be
selected on the basis of outstanding achievement in their careers; broad experience; education; independence under applicable
American Stock Exchange and SEC rules; financial expertise; integrity; financial integrity; ability to make independent,
analytical inquiries; understanding of the business environment; and willingness to devote adequate time to Board and committee
duties. The proposed nominee should have sufficient time to devote their energy and attention to the diligent performance of the
directors duties, including attendance at Board and committee meetings and review of the Corporations financial
statements and reports, SEC filings and other materials. Finally, the proposed nominee should be free of conflicts of interest
that could prevent such nominee from acting in the best interest of shareholders.

Additional special criteria
apply to directors being considered to serve on a particular committee of the Board. For example, members of the Audit Committee
must meet additional standards of independence and have the ability to read and understand the Corporations financial
statements.

Identifying and
Evaluating Nominees for Director.   The Nominating and Corporate Governance Committee assesses the
appropriate size of the Board in accordance with the limits fixed by the Corporations charter and bylaws, whether any
vacancies on the Board are expected and what incumbent directors will stand for re-election at the next meeting of shareholders.
If vacancies are anticipated, or otherwise arise, the Nominating and Corporate Governance Committee considers candidates for
director suggested by members of the Nominating and Corporate Governance Committee and other Board members as well as management,
shareholders and other parties. The Nominating and Corporate Governance Committee also has the sole authority to retain a search
firm to identify and evaluate director candidates. Except for incumbent directors standing for re-election as described below,
there are no differences in the manner in which the Nominating and Corporate Governance Committee evaluates nominees for director,
based on whether the nominee is recommended by a shareholder or any other party.

In the case of an incumbent
director whose term of office expires, the Nominating and Corporate Governance Committee reviews such directors service to
the Corporation during the past term, including, but not limited to, the number of Board and committee meetings attended, as
applicable, quality of participation and whether the candidate continues to meet the general qualifications for a director
outlined above, including the directors independence, as well as any special qualifications required for membership on any
committees on which such director serves. When a member of the Nominating and Corporate Governance Committee is an incumbent
director eligible to stand for re-election, such director will not participate in that portion of the Nominating and Corporate
Governance Committee meeting at which such directors potential nomination for election as a director is discussed by the
Nominating and Corporate Governance Committee.

In the case of a new director
candidate, the Nominating and Corporate Governance Committee will evaluate whether the nominee is independent, as independence is
defined under applicable American Stock Exchange corporate governance rules, and whether the nominee meets the qualifications for
director outlined above as well as any special qualifications applicable to membership on any committee on which the nominee may
be appointed to serve if elected. In connection with such evaluation, the Nominating and Corporate Governance Committee determines
whether the committee should interview the nominee, and if warranted, one or more members of the Nominating and Corporate
Governance Committee interviews the nominee in person or by telephone.

Upon completing the
evaluation, and the interview in case of a new candidate, the Nominating and Corporate Governance Committee makes a decision as to
whether to nominate the director candidate for election at the shareholders meeting.

7

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# SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND CERTAIN OFFICERS

The following table sets
forth certain information as of March 17, 2006, concerning beneficial ownership of the Common Shares by (i) persons or groups of
persons shown by Securities and Exchange Commission records to own beneficially more than 5% of the Common Shares (ii) directors
and nominees, (iii) the executive officers named in the Summary Compensation Table included herein and (iv) all directors and
executive officers as a group.

|Name                                                                                                                   |  | Number ofShares BeneficiallyOwned(1) |  | Percentof Class
|---------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ |  | ---------------
|Dimensional Fund Advisors, Inc. (2)1299 Ocean Avenue, 11th FloorSanta Monica, CA 90401                                 |  | 319,800                              |  | 6.2%           
|                                                                                                                      
|Estate of Siggi B. Wilzig (4)c/o Herrick, Feinstein LLP2 Penn PlazaNewark, NJ 07105                                    |  | 336,575                              |  | 6.5%           
|                                                                                                                      
|Mario J. Gabelli (3)Gabelli Asset Management Inc.Gabelli Group Capital Partners, Inc.One Corporate CenterRye, NY 10580 |  | 414,000                              |  | 8.0%           
|                                                                                                                      
|The Trust Company of New Jersey (5)35 Journal SquareJersey City, NJ 07306                                              |  | 463,700                              |  | 9.0%           
|                                                                                                                      
|Mark S. GorderDirector, President and Chief Executive Officer (6)                                                      |  | 412,850                              |  | 7.9%           
|                                                                                                                      
|Michael J. McKennaChairman of the Board of Directors(7)                                                                |  | 73,766                               |  | 1.3%           
|                                                                                                                      
|Nicholas A. GiordanoDirector (8)                                                                                       |  | 61,866                               |  | 1.2%           
|                                                                                                                      
|Robert N. MasucciDirector (9)                                                                                          |  | 84,866                               |  | 1.6%           
|                                                                                                                      
|Chris CongerVice President, Engineering (10)                                                                           |  | 10,000                               |  | *              
|                                                                                                                      
|Michael GeraciVice President, Sales (11)                                                                               |  | 17,000                               |  | *              
|                                                                                                                      
|Dennis GonsiorVice President, Global Operations (12)                                                                   |  | 12,000                               |  | *              
|                                                                                                                      
|William J. KullbackVice President, Chief Financial Officer, Secretary, and Treasurer                                   |  | 5,000                                |  | *              
|                                                                                                                      
|All Directors and Executive Officers as a Group (8 persons) (13)                                                       |  | 677,348                              |  | 12.6%          

_________________
* Less than 1% .

8

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Footnotes for the Table of Beneficial Ownership of Common Shares

|(1) | Unless otherwise indicated, each person has sole
voting and investment power with respect to all such shares. The securities beneficially owned by a person are
determined in accordance with the definition of beneficial ownership set forth in the regulations of the Securities
and Exchange Commission. The information does not necessarily indicate beneficial ownership for any other purpose. The same Common
Shares may be beneficially owned by more than one person. Beneficial ownership, as set forth in the regulations of the Securities
and Exchange Commission, includes securities as to which the person has or shares voting or investment power. Common Shares
issuable upon the exercise or conversion of securities currently exercisable or convertible or exercisable or convertible within
60 days of March 17, 2006 are deemed outstanding for computing the share ownership and percentage ownership of the person holding
such securities, but are not deemed outstanding for computing the percentage of any other person. Beneficial ownership may be
disclaimed as to certain of the securities.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Based upon a Schedule 13G/A filed with the SEC on
February 6, 2006. According to the Schedule 13G/A, Dimensional Fund Advisors Inc. (Dimensional), is an investment
advisor that furnishes investment advice to four investment companies, and serves as investment manager to certain other
commingled group trusts and separate accounts. These investment companies, trusts and accounts are the Dimensional
Funds. In its role as investment advisor or manager, Dimensional possesses investment and/or voting power over the Common
Shares that are owned by the Dimensional Funds, and may be deemed to be the beneficial owner of the Common Shares held by the
Dimensional Funds. The Schedule 13G/A states that to Dimensionals knowledge, no one Dimensional Fund beneficially owns five
percent or more of the Common Shares. Dimensional disclaims beneficial ownership of all of the Common Shares.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Based upon a Schedule 13D filed with the SEC on
October 2, 2003.
|--- | ----------------------------------------------------------------

|(4) | Based upon a Schedule 13G/A filed with the SEC on
November 24, 2004. According to the Schedule 13G/A, 249,000 shares were reported as owned by GAMCO Investors, Inc.
(GAMCO) and 165,000 shares were reported as owned by Gabelli Advisors, Inc. (Advisors). The Schedule 13G/A
reports that: Mario J. Gabelli is the majority stockholder and Chairman of the Board of Directors and Chief Executive Officer of
Gabelli Group Capital Partners, Inc. (Gabelli Partners) and Gabelli Asset Management Inc. (GAM), and the
Chief Investment Officer for GAMCO, Advisors and GAM; Gabelli Partners is the majority shareholder of GAM; GAM is the sole
stockholder of GAMCO; GAM is also the majority stockholder of Gabelli Securities, Inc. (GSI) and the largest
shareholder of Advisers. According the Schedule 13G/A, each of Mr. Gabelli, GAM and Gabelli Partners is deemed to have beneficial
ownership of the Common Shares owned beneficially by GAMCO and Advisors.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Based upon a Schedule 13D/A filed with the SEC on
February 9, 2004.
|--- | -------------------------------------------------------------------

|(6) | Includes 85,000 shares which Mr. Gorder has the
right to acquire within 60 days of March 17, 2006 through the exercise of stock options. Does not include 10,000 Common Shares
owned by his daughter. Mr. Gorder, whose business address is 1260 Red Fox Road, Arden Hills, MN 55112, is also President and Chief
Executive Officer of Resistance Technology, Inc., a wholly owned subsidiary of the corporation.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes 44,166 shares which Mr. McKenna has the
right to acquire within 60 days of March 17, 2006 through the exercise of stock options.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

|(8) | Includes 36,666 shares which Mr. Giordano has the
right to acquire within 60 days of March 17, 2006 through the exercise of stock options.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Includes 36,666 shares which Mr. Masucci has the
right to acquire within 60 days of March 17, 2006 through the exercise of stock options.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

|(10) | Includes 6,500 shares which Mr. Conger has the right
to acquire within 60 days of March 17, 2006 through the exercise of stock options.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------

|(11) | Includes 14,000 shares which Mr. Geraci has the
right to acquire within 60 days of March 17, 2006 through the exercise of stock options.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------

|(12) | Includes 11,000 shares which Mr. Gonsior has the
right to acquire within 60 days of March 17, 2006 through the exercise of stock options.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------

|(13) | Includes 233,998 shares which directors and
executive offices have the right to acquire within 60 days of March 17, 2006 through the exercise of stock options.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

9

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# EXECUTIVE COMPENSATION AND CERTAIN TRANSACTIONS

# Compensation Committee Report

The Corporations
compensation program for executive officers, which is administered by the Compensation Committee of the Board of Directors, is
designed to align a significant portion of executive officer compensation with the Corporations business objectives and
performance.

The Corporations
executive officer compensation program consists of base salary, potential annual cash incentive compensation and long-term
incentive compensation in the form of stock options. Executive officers are also covered under medical, life insurance, and 401K
savings plans generally available to employees of the Corporation or the business unit managed by the executive officer. The
potential incentive compensation for executive officers is designed to achieve the Corporations objectives of attracting,
retaining, motivating and rewarding talented executives.

The Corporations
executive officers are Mark S. Gorder, William J. Kullback, Michael Geraci, Dennis Gonsior, and Chris Conger.

# Elements of Executive Compensation

Base
Salary.  Through its evaluation of executive officers performance and the Corporations performance,
the Compensation Committee determines the total base salary of Mark S. Gorder, the Corporations Chief Executive Officer, and
other executive officers. In each case, the Compensation Committee takes into account the results achieved by the executive, the
executives future potential, scope of responsibilities and experience, and competitive salary practices. In fiscal 2005,
Messrs. Gorders, Kullbacks, Geracis, Gonsiors, and Congers base salaries were $275,000, $175,000,
$135,000, $112,000 and $130,000, respectively. For fiscal 2006, Messrs. Gorders, Kullbacks, Geracis,
Gonsiors, and Congers base salaries are $300,000, $185,000, $150,000, $140,000, and $140,000, respectively. See
Compensation of Chief Executive Officer.

Annual
Cash Incentive Compensation.   The Compensation Committees philosophy is that a significant portion
of the total potential compensation of the Chief Executive Officer and other executive officers should depend upon the degree of
the Corporations or a business units financial success in a particular year.

In 2005, the Compensation
Committee recommended to the Board of Directors and the Board of Directors approved an incentive compensation program for 2005
that applied financial performance measures tailored to the desired contribution to the overall financial results of the
Corporation. The Compensation Committee approved bonuses for the executive officers if a certain earnings per share target was met
in fiscal year 2005 (calculated after giving effect to any bonuses accrued). If the earnings per share target was met, each
executive officer is eligible to receive a cash bonus in the amount of 10% of such executive officers current base salary
(pro rated in the event the executive officer has not been with the Corporation for the full fiscal year). For fiscal 2005, Mesrs.
Gorder, Kullback, Geraci, Gonsior and Conger were awarded a cash bonus of $27,500, $8,750, $13,500, $11,200 and $13,000,
respectively.

The Compensation Committee
also approved the 2006 Bonus Plan (the Bonus Plan), which is not set forth in a written agreement. Pursuant to the
Bonus Plan, each of the executive officers is eligible to receive a cash bonus based on the Corporation exceeding certain earnings
per share target amounts for the fiscal year 2006 (calculated after giving effect to any bonuses accrued under the Bonus Plan).
Depending upon the earnings per share target amount, Mr. Gorder is eligible to receive a bonus up to 100% of his base salary and
each of the other executive officers are eligible to receive a bonus up to 50% of their respective base salary.

Long-Term Incentive
Compensation in the Form of Stock Options.   The Corporations 2001 Stock Option Plan is its long-term
incentive plan for officers and key employees. This plan is designed to further align the interests of the Corporations
executive officers and its shareholders by creating a direct link between long-term executive compensation and long-term
shareholder value. Since all options are granted at fair market value at the time of grant, there is no built-in profit and thus
the value of the option is tied solely and directly to increases in

10

---

value of the Common Shares. Stock options are granted to the
Corporations executive officers from time to time, as deemed appropriate by the Compensation Committee, based on various
factors, including the executives ability to contribute to the Corporations long-term growth and profitability. In
2004, the Compensation Committee granted to Messrs. Gorder, Kullback, Conger, Geraci and Gonsior options to purchase 50,000,
50,000, 7,500, 25,000 and 25,000 Common Shares, respectively.

# Compensation of the Chief Executive Officer

The Compensation Committee
reviewed all components of Mr. Gorders compensation, including salary, bonus and long-term incentive compensation. Based on
its review, the Compensation Committee approved that the Corporation enter into a new employment agreement with Mr. Gorder
pursuant to which Mr. Gorders base salary will be set by the Board of Directors or Compensation Committee, but in no event
will the base salary be less than $275,000. This minimum base salary requirement is the same minimum that was contained in Mr.
Gorders previous employment agreement. The Compensation Committee set Mr. Gorders base salary for 2005 at $275,000 and
for 2006 at $300,000. The material terms of the employment agreement are described on pages 14 and 15 and the agreement itself is
filed as an exhibit to the Corporations Annual Report on Form 10-K for the year ended December 31, 2004. As previously
discussed, Mr. Gorder received a bonus of $27,500 for services rendered in 2005.

For 2006, Mr. Gorder is
eligible to receive a bonus up to 100% of his base salary pursuant to the Bonus Plan.

The Compensation Committee
also reviewed perquisites and other compensation paid to Mr. Gorder for fiscal 2005, and found these amounts to be reasonable.

THE COMPENSATION COMMITTEE
Michael J. McKenna, Chairman
Nicholas A. Giordano
Robert N. Masucci

11

---

# Summary Compensation Table

The following table sets
forth certain information concerning compensation paid or accrued by the Corporation and its subsidiaries for the years indicated
to the Corporations Chief Executive Officer and its four most highly compensated executive officers that made over $100,000
in annual compensation for the fiscal year ended December 31, 2005 (the Named Officers).

|Name and PrincipalPosition                                                                    |  | Year |      |  | Annual Compensation |   | Long TermCompensation Awards |     | All OtherCompensation ($)(2)
|--------------------------------------------------------------------------------------------- |  | ---- | ---- |  | ------------------- | - | ---------------------------- | --- | ----------------------------
|
|Mark S. Gorder                                                                                |  |      | 2005 |  |                     | $ | 279,535                      |     | $                           
|President and Chief Executive Officer                                                         |  |      | 2004 |  |                     |   | 265,784                      |     |                             
|                                                                                              |  |      | 2003 |  |                     |   | 265,539                      |     |                             
|                                                                                             
|Chris Conger                                                                                  |  |      | 2005 |  |                     | $ | 126,737                      |     | $                           
|Vice President, Engineering                                                                   |  |      | 2004 |  |                     |   | 105,495                      |     |                             
|                                                                                              |  |      | 2003 |  |                     |   | 99,425                       |     |                             
|                                                                                             
|Michael Geraci                                                                                |  |      | 2005 |  |                     | $ | 134,500                      |     | $                           
|Vice President, Sales                                                                         |  |      | 2004 |  |                     |   | 125,352                      |     |                             
|                                                                                              |  |      | 2003 |  |                     |   | 125,352                      |     |                             
|                                                                                             
|Dennis Gonsior                                                                                |  |      | 2005 |  |                     | $ | 112,164                      |     | $                           
|Vice President, Global Operations                                                             |  |      | 2004 |  |                     |   | 106,556                      |     |                             
|                                                                                              |  |      | 2003 |  |                     |   | 106,556                      |     |                             
|                                                                                             
|William J. Kullback     Chief Financial Officer, Vice President,     Treasurer, and Secretary |  |      | 2005 |  |                     | $ | 114,427                      | (5) | $                           

|_________________
|-----------------
|(1)              

|(2) | Represents the Corporations or a
subsidiarys contributions to the Named Officers account under retirement plans and group term life insurance. In 2005,
the Corporation made contributions of $6,300, $3,802, $4,035, $3,365 and $1,212 to the retirement plan accounts and $2,322, $363,
$393, $313 and $353 to the group term life insurance plans for the benefit of Messrs. Gorder, Conger, Geraci, Gonsior and
Kullback, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Mr. Gorder was granted an option to purchase
50,000 shares in 2003 which became exercisable upon the earlier of certain corporate goals in 2004 or seven years after the date
of the grant. Because the Corporation did not meet the goals established for 2004, the Compensation Committee and Mr. Gorder
agreed to cancel his 2003 options.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Mr. Geraci and Mr. Gonsior were granted
options to purchase 15,000 shares each in 2004 which became exercisable upon the earlier of certain corporate goals in 2004 or
seven years after the date of the grant. Because the Corporation did not meet the goals established for 2004, the Compensation
Committee and Mr. Geraci and Mr. Gonsior agreed to cancel their 2004 options.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Represents a partial year as Mr. Kullback began
his employment with the Company on April 25, 2005.
|--- | --------------------------------------------------------------------------------------------------

12

---

Options in 2005
        The following table sets forth certain information about stock option grants
by the Corporation to the Named Officers in fiscal 2005.

|Name                                                                               |  |  | Individual Grants |  | Potential RealizableValue at AssumedAnnual Rates of StockPrice Appreciationfor Option Term(3)
|---------------------------------------------------------------------------------- |  |  | ----------------- |  | ---------------------------------------------------------------------------------------------
|
|
|Mark S. GorderPresident and Chief Executive Officer                                |  |  | 50,000            |  |                                                                                              
|                                                                                  
|Chris CongerVice President, Engineering                                            |  |  | 7,500             |  |                                                                                              
|                                                                                  
|Michael GeraciVice President, Sales                                                |  |  | 25,000            |  |                                                                                              
|                                                                                  
|Dennis GonsiorVice President, Global Operations                                    |  |  | 25,000            |  |                                                                                              
|                                                                                  
|William J. KullbackChief Financial Officer, Vice President,Treasurer and Secretary |  |  | 50,000            |  |                                                                                              

|_________________
|-----------------
|(1)              

|(2) | During 2005, the Corporation granted options to
employees to purchase a total of 197,500 common shares under the 2001 Stock Option Plan.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(3) | These amounts represent hypothetical gains that
could be achieved for the respective options if exercised at the end of the option term. These gains are based on assumed rates of
stock appreciation of 5% and 10% compounded annually from the date the respective options were granted to their expiration date.
The rates of appreciation used in this table are prescribed by regulation of the Securities and Exchange Commission and are not
intended to forecast future appreciation of the market value of the Common Shares.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Aggregated Option Exercises in 2005 and 2005 Year-End Option Values

The following table sets
forth certain information concerning the number of options exercised in fiscal 2005 and the number of unexercised options and the
value of unexercised in-the-money options at the 2005 fiscal year end held by Named Officers.

|Name                |  |  | SharesAcquiredonExercise |  |  | ValueRealized |  |  | Number of SharesCovered by UnexercisedOptions at December 31, 2005 |  |  | Value of UnexercisedIn-the-Money Options atDecember 31, 2005 (1)
|------------------- |  |  | ------------------------ |  |  | ------------- |  |  | ------------------------------------------------------------------ |  |  | ----------------------------------------------------------------
|
|Mark S. Gorder      |  |  |                         |  |  |              |  |  | 80,000                                                             |  |  | 55,000                                                          
|Chris Conger        |  |  |                         |  |  |              |  |  | 6,500                                                              |  |  | 12,500                                                          
|Michael Geraci      |  |  |                         |  |  |              |  |  | 14,000                                                             |  |  | 25,000                                                          
|Dennis Gonsior      |  |  |                         |  |  |              |  |  | 11,000                                                             |  |  | 25,000                                                          
|William J. Kullback |  |  |                         |  |  |              |  |  |                                                                   |  |  | 50,000                                                          

|_________________
|-----------------
|(1)              

13

---

# Employment Agreements

Mark S.
Gorder.   On March 30, 2005, the Corporation entered into an employment agreement with Mr. Gorder, dated
as of December 4, 2004, whereby Mr. Gorder agreed to serve as the Corporations Chief Executive Officer and
President. The employment agreement will expire on April 30, 2006, unless further extended by Mr. Gorder and the Corporation.
Mr. Gorders base salary will be established from time to time by the Board of Directors or the Compensation Committee
of the Board of Directors of the Corporation. In no event will Mr. Gorders base salary be less than $275,000. The
Compensation Committee set Mr. Gorders base salary at $275,000 for fiscal 2005 and $300,000 for fiscal 2006.
Mr. Gorder is entitled to receive performance bonuses in accordance with the policies and plans of the Corporation in place
from time to time with respect to the payment of bonuses to executive officers. Mr. Gorder is also entitled to participate in
the Corporations employee benefit plans and benefit programs, including medical benefit programs, stock options under the
Corporations 2001 Stock Option Plan or any additional plans or programs, as may from time to time be provided by the
Corporation for its executive officers. Additionally, the Corporation maintains disability insurance for his benefit. Under the
employment agreement, the Corporation is required to reimburse Mr. Gorder for his country club membership fees and provide
him with an automobile for use in connection with the performance of his duties under the employment agreement and reimburse him
for all expenses reasonably incurred by him for the maintenance and operation, including fuel, of the automobile. The Corporation
reimbursed Mr. Gorder $2,500 for the cost of consulting with counsel in connection with the negotiation of the employment
agreement.

Upon termination of
Mr. Gorders employment due to a disability, Mr. Gorder is entitled to continue to receive medical benefits
coverage for him and his wife (if any) in accordance with the Corporations policies in effect from time to time through the
remainder of the then-current term of the employment agreement, and is entitled to benefits under the disability policy to the
extent provided therein. In the event of Mr. Gorders death during the term of the employment agreement, his wife (if
any) is entitled to continue to receive medical benefits coverage in accordance with the Corporations policies in effect
from time to time through the remainder of the then-current term of the employment agreement.

The Corporation may terminate
Mr. Gorders employment for Cause (as defined in the employment agreement). If Mr. Gorders employment is
terminated by the Corporation prior to the end of the term for any reason other than Cause (as defined in the employment
agreement) or the death or disability: (i) the Corporation must either (A) continue to pay Mr. Gorder his base salary or any
performance bonus accrued (based on not less than the previous years bonus and prorated to the end of the term) during the
remainder of the then-current term of the employment agreement, or (B) if Mr. Gorder requests in writing, pay him in a lump
sum upon such termination the present value of the payments that would have been made under clause (A), using a discount rate of 6
percent per year. Additionally, Mr. Gorder will be entitled to continue to receive medical benefits coverage in accordance
with the Corporations policies in effect from time to time through the remainder of the then-current term of the employment
agreement. To be entitled to any payments Mr. Gorder must execute and deliver to the Corporation an agreement releasing the
Corporation from all claims, undertaking to maintain confidentiality of the agreement and indemnify the Corporation if
Mr. Gorder breaches such agreement. If Mr. Gorders employment is terminated by the Corporation during the term of
the employment agreement for any reason other than for Cause (as defined in the employment agreement) or if he terminates his
employment during the term of the employment agreement under circumstances that would constitute an Involuntary Termination (as
defined in the Change-of-Control Agreement), then any stock options granted to him which have not been exercised prior to his
termination will accelerate and be exercisable in full.

If Mr. Gorder becomes
entitled to any payment by the terms of the Change-of-Control Agreement, he is not entitled to any additional payment under the
employment agreement (other than accrued and unpaid bonus, salary and benefits) unless otherwise provided for in the employment
agreement.

William
J. Kullback.   On April 25, 2005, the Corporation entered into an employment agreement with Mr. Kullback
whereby Mr. Kullback agreed to serve as the Corporations Chief Financial Officer, Treasurer and Secretary. The
employment agreement will expire on April 24, 2006, unless further extended by Mr. Kullback and the Corporation.
Mr. Kullbacks base salary will be established from time to time by the Board of Directors or the Compensation Committee
of the Board of Directors of the Corporation. In no event will Mr. Kullbacks base salary

14

---

be less than $175,000. The Compensation Committee set Mr. Kullbacks
base salary at $175,000 for fiscal 2005 and $185,000 for fiscal 2006. Mr. Kullback is entitled to receive performance bonuses
in accordance with the policies and plans of the Corporation in place from time to time with respect to the payment of bonuses to
executive officers. Mr. Kullback is also entitled to participate in the Corporations employee benefit plans and benefit
programs, including medical benefit programs, stock options under the Corporations 2001 Stock Option Plan or any additional
plans or programs, as may from time to time be provided by the Corporation for its executive officers. Additionally, the
Corporation maintains disability insurance for his benefit.

Upon termination of
Mr. Kullbacks employment due to a disability, Mr. Kullback is entitled to continue to receive medical benefits
coverage for him and his wife (if any) in accordance with the Corporations policies through the remainder of the
then-current term of the employment agreement, and is entitled to benefits under the disability policy to the extent provided
therein. In the event of Mr. Kullbacks death during the term of the employment agreement, his wife is entitled to
continue to receive medical benefits coverage in accordance with the Corporations policies through the remainder of the
then-current term of the employment agreement.

The Corporation may terminate
Mr. Kullbacks employment for Cause (as defined in the employment agreement). If Mr. Kullbacks employment is
terminated by the Corporation prior to the end of the term for any reason other than Cause or death or disability: (i) the
Corporation must either (A) continue to pay Mr. Kullback his base salary and any performance bonus accrued (based on not less
than the previous years bonus and prorated to the end of the term) during the remainder of the then-current term of the
employment agreement, or (B) if Mr. Kullback requests in writing, pay him in a lump sum upon such termination the present
value of the payments that would have been made under clause (A), using a discount rate of 6 percent per year. Additionally,
Mr. Kullback will be entitled to continue to receive medical benefits coverage in accordance with the Corporations
policies through the remainder of the then-current term of the employment agreement. To be entitled to any payments
Mr. Kullback must execute and deliver to the Corporation an agreement releasing the Corporation from all claims, undertaking
to maintain confidentiality of the agreement and indemnifying the Corporation if Mr. Kullback breaches such agreement. If
Mr. Kullbacks employment is terminated by the Corporation during the term of the employment agreement for any reason
other than for Cause or if he terminates his employment during the term of the employment agreement under circumstances that would
constitute an Involuntary Termination (as defined in the Change-of-Control Agreement described below), then any stock options
granted to him which have not been exercised prior to his termination will accelerate and be exercisable in full.

If Mr. Kullback becomes
entitled to any payment by the terms of the Change-of-Control Agreement, he is not entitled to any additional payment under the
employment agreement (other than accrued and unpaid bonus, salary and benefits) unless otherwise provided for in the employment
agreement.

# Change-of-Control Arrangements

On December 14, 2004 and
April 25, 2005 the Corporation entered into a change of control or asset sale agreement with Messrs. Gorder and Kullback,
respectively. The agreements call for payments of two years base salary and unpaid bonus, if any, to Messrs. Gorder and Kullback
should there be a change of control or asset sale as defined in the agreements and Messrs. Gorder or Kullback are not retained for
a period of at least one year following such change of control or asset sale. Under the agreements, all stock options granted to
Messrs. Gorder or Kullback would vest immediately and be exercisable in accordance with the terms of such stock options. The
Corporation also agreed that if it enters into an agreement to sell substantially all of its assets, it will obligate the buyer to
fulfill its obligations pursuant to the agreements. The agreements terminate, except to the extent that any obligation remains
unpaid, upon the earlier of termination of Messrs. Gorder or Kullbacks employment prior to a change of control or asset sale
for any reason or the termination of Messrs. Gorder or Kullback after a change of control or asset sale for any reason other than
by involuntary termination as defined in the agreements.

# 2001 Stock Option Plan

The Corporation has a 2001
Stock Option Plan that provides for the grant of incentive stock options (as defined in Section 422 of the Code) and non-qualified
stock options for officers and other key employees of the Corporation. A total of 1,000,000 shares of Common Stock are reserved
for issuance under the 2001 Stock Option Plan. Additionally, no individual will be able to receive options for more than 250,000
Common Shares under the

15

---

2001 Stock Option Plan. The Compensation Committee or a majority of the
independent directors of the Corporations Board of Directors may administer the 2001 Stock Option Plan.

The Compensation Committee
will generally administer the 2001 Stock Option Plan. The Compensation Committee selects the participants who will receive awards
and determines the terms and conditions of the awards, including the number of shares subject to the awards, the exercise or
purchase price, and the vesting and/or exercisability of the award. Stock options are generally subject to vesting, which means
the optionee earns the right to exercise an increasing number of the shares underlying the option over a specific period of time
only if he or she continues to provide services to the Corporation over that period. Non-qualified stock options granted under the
2001 Stock Option Plan must have a per share exercise price of at least the fair market value of the Common Shares on the date of
grant. Incentive stock options granted under the 2001 Stock Option Plan must have a per share exercise price of at least 100% of
the fair market value of the Common Shares on the date of grant, and not less than 110% of the fair market value in the case of
incentive stock options granted to an employee who holds more than 10% of the total voting power of all classes of the
Corporations stock or any parent or subsidiarys stock. Payment of the exercise price or purchase price with respect to
any award may be made in cash or other consideration as determined by the Compensation Committee. The term of an option cannot be
longer than 10 years from the date of grant or five years from the date of grant of an incentive stock option in the case of a
greater than 10% shareholder.

The Corporation no longer
issues option grants under the Amended and Restated 1994 Stock Option Plan.

As of December 31, 2005,
options to purchase 301,500 Common Shares were granted and outstanding under the 2001 Stock Option Plan, all of which are held by
employees. See Options in 2005 for options granted to Named Officers in 2005. If the 2006 Equity Incentive Plan
is approved, then no new options will be granted under the 2001 Stock Option Plan and the 2006 Equity Incentive Plan will replace
the 2001 Stock Option Plan.

# 2005 Bonus Plan

The Compensation Committee
approved bonuses for the executive officers if a certain earnings per share target was met in fiscal year 2005 (calculated after
giving effect to any bonuses accrued). If the earnings per share target was met, each executive officer is eligible to receive a
cash bonus in the amount of 10% of such executive officers current base salary (pro rated in the event the executive officer
has not been with the Corporation for the full fiscal year). For fiscal 2005, Mesrs. Gorder, Kullback, Geraci, Gonsior and Conger
were awarded a cash bonus of $27,500, $8,750, $13,500, $11,200 and $13,000, respectively.

# 2006 Bonus Plan

Pursuant to the Bonus Plan,
each of the executive officers is eligible to receive a cash bonus based on the Corporation exceeding certain earnings per share
target amounts for the fiscal year 2006 (calculated after giving effect to any bonuses accrued under the Bonus Plan). Depending
upon the earnings per share target amount, Mr. Gorder is eligible to receive a bonus up to 100% of his base salary and each
of the other executive officers are eligible to receive a bonus up to 50% of their respective base salary.

16

---

# PROPOSAL 2

# APPROVAL OF 2006 EQUITY INCENTIVE PLAN

In March 2006, the Board of
Directors, upon recommendation from the Compensation Committee, approved the 2006 Equity Incentive Plan (the Incentive
Plan), subject to shareholder approval. The Company is submitting the Incentive Plan to shareholders for approval in
accordance with the American Stock Exchange listing standards that require shareholder approval of most equity-based compensation
plans, including the Incentive Plan. The Incentive Plan is also being submitted for shareholder approval so that, among other
reasons, the requisite shareholder approval may be obtained to permit the issuance of incentive stock options under the Internal
Revenue Code and to permit the Corporation to deduct certain performance-based compensation under Section 162(m) of the Internal
Revenue Code. The Incentive Plan is described below.

The Incentive Plan will
replace, on a prospective basis, the Corporations Non-Employee Directors Stock Option Plan and 2001 Stock Option Plan. If
the Incentive Plan is approved by the Corporations shareholders, no new grants will be made from the Non-Employee Directors
Stock Option Plan and 2001 Stock Option Plan. See  Number of Shares Available for Issuance. Any awards
previously granted under the Non-Employee Directors Stock Option Plan and 2001 Stock Option Plan will continue to vest and/or be
exercisable in accordance with their original terms and conditions. If the Incentive Plan is not approved, the Corporation intends
to continue to issue options under the Non-Employee Directors Stock Option Plan and 2001 Stock Option Plan to the extent that
authorized shares are available.

# Description of the Incentive Plan

The following summary of the
Incentive Plan is qualified in its entirety by the specific language of the Incentive Plan, which is attached as Appendix A to
this proxy statement. Capitalized terms used but not defined herein have the meanings set forth in the Incentive Plan.

# General

The purposes of the Incentive
Plan are to attract and promote the long-term retention of key employees, directors and certain other persons who are in a
position to make significant contributions to the success of the Corporation, to reward these employees, directors and other
persons for their contributions, to provide additional incentive to such employees, directors and other persons to continue making
similar contributions and to further align the interests of these employees, directors and other persons with those of the
Corporations shareholders. To achieve these purposes, the Incentive Plan permits grants of incentive stock options
(ISOs), options not intended to qualify as incentive stock options (non-ISOs), stock appreciation rights
(SARs), restricted and unrestricted stock awards, restricted stock units, performance awards, supplemental cash awards
and combinations of the foregoing (collectively referred to as Awards). Awards of restricted and unrestricted stock,
restricted stock units and/or deferred stock may also be issued to participants in connection with management or employee purchase
programs. Shares issuable under Awards that terminate unexercised or otherwise terminate without an issuance of shares, shares
issuable under Awards that are payable in stock or cash but are paid in cash, shares issued but later forfeited and shares that,
at the election of the plan participant, are withheld by the Corporation to pay the exercise or purchase price of the Award or
applicable withholding taxes will be available for future Awards under the Incentive Plan.

The Incentive Plan is
intended to satisfy the requirements of Section 162(m) of the Internal Revenue Code (the Section 162(m) Limitations),
which limits the deductibility of certain compensation in excess of $1,000,000 per year paid by a publicly traded corporation to
Covered Employees. Covered Employees are determined at the end of the tax year, and are the Chief
Executive Officer plus the other four most highly compensated employees of the Corporation whose compensation is reported to
shareholders under applicable SEC rules and regulations.

Compensation paid to Covered
Employees will not be subject to the Section 162(m) Limitations if it is considered qualified performance-based
compensation. Under the regulations to Section 162(m), compensation related to Awards (other than supplemental cash awards)
is deemed to constitute qualified performance-based compensation if the Award meets the following conditions: (i) it is made
by a committee of the board of directors

17

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comprised solely of two or more outside directors; (ii) the plan under
which the Award is made sets forth the maximum number of shares with respect to Awards that may be granted to any individual
during a specified period; (iii) under the terms of the Award, the amount of compensation that an employee can receive is
based solely on an increase in the value of the Common Shares after the date of the grant or award; and (iv) the material
terms of plan are disclosed to and approved by shareholders. As described in more detail below, the terms of the Incentive Plan
are intended to satisfy the foregoing requirements with respect to Awards to Covered Employees.

# Administration

The Incentive Plan is
administered by the Compensation Committee (the Committee) of the Board of Directors, which has full and exclusive
power to administer and interpret the Incentive Plan, to grant Awards and to adopt such administrative rules, regulations,
procedures and guidelines governing the Incentive Plan and the Awards as it may deem necessary in its discretion, from time to
time. The Committee is comprised solely of outside directors of the Corporation who are intended to satisfy the requirements of
the Section 162(m) Limitations. The Committees authority will include the authority to: (i) determine the type of
Awards to be granted under the Incentive Plan; (ii) select Award recipients and determine the extent of their participation;
(iii) determine the method or formula for establishing the fair market value of the Common Shares for various purposes under
the Incentive Plan; and (iv) establish all other terms, conditions, restrictions and limitations applicable to Awards and the
Common Shares issued pursuant to Awards, including, but not limited to, those relating to a participants Retirement, death,
disability, leave of absence or termination of employment. The Committee may accelerate or defer the vesting or payment of Awards,
cancel or modify outstanding Awards, waive any conditions or restrictions imposed with respect to Awards or the Common Shares
issued pursuant to Awards and make any and all other interpretations and determinations which it deems necessary with respect to
the administration of the Incentive Plan, other than a reduction of the exercise price of an option after the grant date and
subject to the provisions of Section 162(m) of the Internal Revenue Code with respect to Covered Employees. The
Committees right to make any decision, interpretation or determination under the Incentive Plan shall be in its sole and
absolute discretion.

The Committee may, subject to
criteria, limitations and instructions as the Committee determines, delegate to an appropriate officer of the Corporation the
authority to determine the individual Participants and amount and nature of the Award to be issued to such Participants; provided,
that no Awards may be made pursuant to such delegation to a Participant who is subject to Section 16(b) of the Securities Exchange
Act of 1934, as amended.

# Eligibility

ISOs may be granted under the
Incentive Plan only to employees of the Corporation. All current and future employees of the Corporation, directors and other
persons who, in the opinion of the Committee, are in a position to make significant contributions to the success of the
Corporation, such as consultants and non-employee directors, are eligible to receive all other types of Awards under the Incentive
Plan.

# Number of Shares Available for Issuance

As of the Effective Date of
the Plan, no additional grants will be made under the Companys 2001 Stock Option Plan and Amended and Restated Non-Employee
Directors Stock Option Plan (collectively, the Old Plans). Any shares of Common Stock not subject to exercised
or outstanding grants under the Old Plans may be issued under this plan (the Old Plans Shares). Outstanding
grants under the Old Plans will continue to be governed by their terms under the Old Plans.

The aggregate number of
shares of Common Stock for which Awards may be granted under the Plan shall be 698,500 shares of Common Stock (which includes only
the Old Plans Shares); provided, however, that such share reserve shall be increased from time to time by a number of shares
equal to the number of shares of Common Stock that are issuable pursuant to option grants outstanding under the Old Plans as of
the Effective Date that but for the termination of the Old Plans as of the Effective Date, would otherwise have reverted to the
share reserve of the Old Plans pursuant to the terms thereof as a result of the expiration, termination, cancellation or
forfeiture of such options. As of the date of this proxy statement, 524,000 Common Shares are subject to outstanding options under
the Old Plans. According, if these options expire, such Common Shares will also be available for issuance under the Incentive
Plan.

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The maximum number of Common
Shares for which Stock Options may be granted to any person in any fiscal year and the maximum number Common Shares subject to
SARs granted to any person in any fiscal year will each be 25,000. The maximum number of Common Shares subject to other Awards
granted to any person in any fiscal year will be 25,000 shares. The foregoing provisions will be construed in a manner consistent
with Section 162(m).

# Adjustments

In the event of any stock
dividend, stock split, combination or exchange of equity securities, merger, consolidation, recapitalization, reorganization,
divestiture or other distribution (other than ordinary cash dividends) of assets to shareholders, or any other event affecting the
Common Shares that the Committee deems, in its sole discretion, to be similar circumstances, the Committee may make such
adjustments as it may deem appropriate, in its discretion, to:

| |  |  | the maximum number of shares available for issuance under the
Incentive Plan or to any one participant;
| | - |  | -------------------------------------------------------------------------------------------------------

| |  |  | the number or kind of shares of Common Shares covered by
outstanding Awards;
| | - |  | ----------------------------------------------------------------------------

| |  |  | the exercise price applicable to outstanding Awards;
| | - |  | ----------------------------------------------------

| |  |  | any measure of performance that relates to an Award in order to
reflect such change in the Common Shares; and/or
| | - |  | ----------------------------------------------------------------------------------------------------------------

| |  |  | any other affected terms of any equity-based Award.
| | - |  | ---------------------------------------------------

# Exercise Price

The Committee will determine
the exercise price applicable to each ISO, non-ISO and SAR, which will not be less than the fair market value of Corporation
Common Shares at the time of the grant, as described below. The Incentive Plan does not permit the repricing of options without
prior shareholder approval.

# Options

Recipients of stock options
under the Incentive Plan will have the right to purchase Common Shares at an exercise price, during a period of time and on such
other terms and conditions as are determined by the Committee. For ISOs, the recipient must be an employee, the exercise price
must be at least 100% (110% if issued to a greater than ten percent shareholder of the Corporation) of the fair market value of
the Corporations Common Shares on the date of grant and the term cannot exceed ten years (five years if issued to a greater
than ten percent shareholder of the Corporation) from date of grant. The maximum number of ISOs that may be granted under the
Incentive Plan is limited to 698,500 Common Shares. The exercise price of a non-ISO must be at least 100% of the fair market value
of Common Shares on the date of grant, except that such exercise price may be offset by forfeiture of an amount of cash
compensation equivalent to the reduction in the exercise price. An option exercise price may be paid in cash or by check, bank
draft or money order payable to the order of the Corporation, or if permitted by the Committee and subject to certain conditions,
by delivery of Common Shares that have been owned by the recipient for at least six months (unless the Committee expressly
approves a shorter period) and have a fair market value on the date of exercise at least equal to the exercise price, or an
unconditional and irrevocable undertaking by a broker to promptly deliver the necessary funds (including in connection with
so-called cashless exercise effected by such broker) or by a combination of such methods. The Committee may cancel
options (other than those granted in tandem with SARs) and cause the Corporation to pay to the recipient, in cash or Common Shares
(valued at the then fair market value of Common Shares), an amount equal to such fair market value minus the exercise price of the
option shares. The Committee may at any time accelerate the time at which all or any part of the option may be exercised.

# Stock Appreciation Rights

SARs may be granted under the
Incentive Plan either alone or in tandem with stock options. Generally, recipients of SARs are entitled to receive upon exercise,
cash or Common Shares (valued at the then fair market value of Common Shares; 110% of its fair market if issued to a greater than
ten percent shareholder of the

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Corporation) equal to such fair market value on the date of exercise minus
the fair market value on the date of grant of the shares subject to the SAR, although certain other measurements also may be used.
A SAR granted in tandem with a stock option is exercisable only if and to the extent that the option is exercised.

# Stock Awards

The Incentive Plan provides
for restricted and unrestricted stock awards, restricted stock units and deferred stock awards. Restricted and unrestricted stock
awards allow the recipient to acquire Common Shares for no consideration, nominal consideration or any higher price determined by
the Committee. In the case of restricted stock awards, the shares acquired are subject to a vesting schedule and other possible
conditions determined by the Committee. A restricted stock unit is an award denominated in restricted Common Shares, pursuant to a
formula determined by the Committee, which may be settled either in restricted Common Shares or in cash, in the discretion of the
Committee, subject to such other terms, conditions, restrictions and limitations determined by the Committee from time to time. A
deferred stock award entitles the recipient to receive Common Shares to be delivered in the future. Delivery of the Common Shares
will take place at such time or times, and on such terms and conditions, as the Committee may determine.

# Performance Awards

The Incentive Plan provides
for performance awards entitling the recipient to receive Awards without payment upon achieving certain performance goals
determined by the Committee. At the discretion of the Committee, any of the above-described Awards may be contingent on attainment
of performance goals which are based on certain pre-established criteria. Performance goals may involve overall corporate
performance, operating group or business unit performance, personal performance or any other category of performance determined by
the Committee.

# Supplemental Cash Awards

Under the Incentive Plan and
subject to applicable law, supplemental cash awards may be granted to recipients of Awards to help defray taxes due as a result of
the Awards. The terms and conditions of supplemental cash awards are determined by the Committee.

# Termination of Awards

Upon termination of a
recipients employment or other relationship with the Corporation due to death, Disability or Retirement , except as
otherwise determined by the Committee: (i) stock options and SARs will automatically become exercisable in full and will remain
exercisable for a period of one year in the event of death or disability, but not longer than the term of the stock option or SAR,
and for a period equal to the unexpired term of the stock option or SAR in the case of retirement; (ii) all restricted stock and
restricted stock units shall automatically become free of all restrictions and conditions; and (iii) any payment or benefit under
deferred stock awards, performance awards and supplemental grants shall be made by the Corporation. Retirement is defined in the
Incentive Plan as termination of employment with or service to the Corporation by a participant other than by reason of death or
permanent disability or termination for cause at a time when such participant has attained age 65 or greater; provided that such
participant has performed a minimum of five years of service for the Corporation.

Upon termination of a
recipients employment or other relationship with the Corporation for any reason other than death, Disability or Retirement,
except as otherwise determined by the Committee: (i) stock options and SARs will remain exercisable for a period of 90 days , but
not longer than the term of the stock option or SAR, to the extent that they were exercisable at the time of termination; (ii) all
restricted stock shall be transferred to the Corporation for purchase for the amount of cash paid for such stock, or forfeited to
the Corporation if no cash were paid; and (iii), any payment or benefit under restricted stock units, deferred stock awards,
performance awards and supplemental grants to which the recipient was not irrevocably entitled at the time of termination shall be
forfeited and such Awards cancelled as of the date of such termination.

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Deferral of Awards

In connection with the
adoption of the Incentive Plan, the Board of Directors intends to adopt a deferred compensation plan that will permit participants
in the Incentive Plan to defer receipt of Awards granted pursuant to the Incentive Plan. If deferred, the Awards would be paid at
a future date pursuant to the deferred compensation plan.

# Section 162(m) Limitations

If the Committee determines
at the time an Award that is intended to qualify as performance-based compensation for purposes of Section 162(m) of the Code is
granted to a recipient that such recipient is, or may be as of the end of the tax year for which the Corporation would claim a tax
deduction in connection with such Award, a covered employee, then the Committee may provide that the Award be subject
to the achievement of specified levels of one or more of the following performance goals, unless and until the Corporations
shareholders approve a change to such performance goals: operating income, net earnings, earnings before interest, taxes,
depreciation and amortization (EBITDA), earnings before interest and taxes (EBIT), net income, earnings per share, total
shareholder return, cash flow, return on assets, decrease in expenses, Common Share price, price-earnings multiple, comparisons to
market indices, sales growth, market share, the achievement of certain quantitatively and objectively determinable non-financial
performance measures including, but not limited to, growth strategies, strategic initiatives, corporate development and leadership
development, and any combination of the foregoing. The performance goals shall be determined and approved by the Committee within
the first 90 days of each fiscal year. Awards subject to such conditions may not be adjusted upward; however, the Committee shall
retain the discretion to adjust such Awards downward. Prior to the payment of any Award subject to these Section 162(m)
Limitations, the Committee shall certify in writing that the applicable performance goal was satisfied.

The Committee shall have the
discretion to impose such other restrictions on Awards as it may deem necessary or appropriate to ensure that such Awards qualify
as performance-based compensation for purposes of Section 162(m) of the Code. In the event that applicable tax/and or securities
laws change to permit the Committee the discretion to alter the governing performance goals without obtaining shareholder
approval, the Committee shall have the sole discretion to make such changes without obtaining shareholder approval. In addition,
in the event hat the Committee determines that it is advisable to grant Awards that shall not qualify as performance-based
compensation for purposes of Section 162(m) of the Code, the Committee may make such grants without satisfying the Section 162(m)
Limitations.

# Change in Control

The Incentive Plan generally
provides that, unless the Committee determines otherwise at the time of grant with respect to a particular Award, in the event of
a change in control (as defined below), (1) any options and SARs shall automatically become exercisable in full upon the
occurrence of such change of control, (2) any restricted stock shall automatically become free of all restrictions and conditions
upon the occurrence of such change of control, and (3) any conditions on restricted stock units, deferred stock awards performance
awards and supplemental grants which relate only to the passage of time and continued employment shall automatically terminate
upon the occurrence of such change of control.

A change in control means:
(i) the occurrence of an event that would, if known to the Corporations management, be required to be reported by the
Corporation as a change in control pursuant to the SECs Current Report on Form 8-K under to the Exchange Act; or
(ii) the acquisition or receipt, in any manner, by any person (as defined for purposes of the Exchange Act) or any group of
persons acting in concert, of direct or indirect beneficial ownership (as defined for purposes of the Exchange Act) of more than
50% of the Corporations combined voting securities ordinarily having the right to vote for the election of directors of the
Corporation; or (iii) a change in the constituency of the Board of Directors with the result that individuals (the
Incumbent Directors) who are members of the Board on the effective date of the Incentive Plan cease for any reason to
constitute at least a majority of the Board of Directors, provided that any individual who is elected to the Board after the
effective date of the Incentive Plan and whose nomination for election was unanimously approved by the Incumbent Directors shall
be considered an Incumbent Director beginning on the date of his or her election to the Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (as

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defined for purposes of the Exchange Act) with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the
Board of Directors; or (iv) the sale, exchange, liquidation or other disposition of all or more than 50% of the
Corporations business or assets; unless in any such case, at least a majority of the Incumbent Directors determine, prior to
the occurrence of such change in control, that no change in control has or will have occurred; or (v) the occurrence of a
reorganization, merger, consolidation or other corporate transaction involving the Corporation, in each case, with respect to
which the Corporations shareholders immediately prior to such transaction do not, immediately after such transaction, own
more than 50% of the combined voting securities ordinarily having the right to vote for the election of directors of the
Corporation or other corporation resulting from such transaction; or (vi) the approval by the Corporations shareholders of a
complete liquidation or dissolution of the Corporation; or (vii) any similar transaction, circumstance or event which the
Committee determines to constitute a change in control.

# Additional Cancellation Provisions

In any instance where the
rights of a recipient under an Award continue after termination of their relationship with the Corporation, all of such rights
shall terminate and be forfeited if, in the determination of the Committee, the recipient, at any time prior or subsequent to such
termination, breached or violated, in a material way, the terms of any agreement with the Corporation, including any employment
agreement, termination agreement, confidentiality agreement, non-solicitation agreement or non-competition agreement or engaged or
engages in conduct that would have permitted the Corporation to terminate the recipients employment for Cause if
the recipient was still an employee of the Corporation.

# Reduction of Payments to Participants

If any payment under the
Incentive Plan constitutes a parachute payment within the meaning of Section 280G of the Internal Revenue Code and is
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (the Excise Tax), then such payment
will be reduced, if on an after-tax basis (including the Excise Tax), such reduction would result in the recipient receiving a
greater amount of the payment.

# Summary of Federal Income Tax Consequences

The following is a brief
summary of the principal United States federal income tax consequences of transactions under the Incentive Plan, based on current
United States federal income tax laws. This summary is not intended to be exhaustive, does not constitute tax advice and, among
other things, does not describe state, local or foreign tax consequences.

Non-ISOs.   No
taxable income is realized by a participant upon the grant of a non-ISO. Upon the exercise of a non-ISO, the participant will
recognize ordinary income in an amount equal to the excess, if any, of the fair market value of the Common Shares exercised over
the aggregate non-ISO exercise price, even though that Common Share may be subject to a restriction on transferability or may be
subsequently forfeited, in limited circumstances. Income and payroll taxes are required to be withheld by the Corporation on the
amount of ordinary income resulting to the participant from the exercise of a non-ISO. Any ordinary income recognized by the
participant is generally deductible by the Corporation for federal income tax purposes, subject to the possible limitations on
deductibility of compensation paid to some executives under Section 162(m) of the Internal Revenue Code. The participants
tax basis in Common Shares acquired by exercise of a non-ISO will be equal to the exercise price plus the amount taxable as
ordinary income to the participant.

Upon a sale of the Common
Shares received by the participant upon exercise of the non-ISO, any gain or loss will generally be treated for federal income tax
purposes as long-term or short-term capital gain or loss, depending upon the holding period of that stock. The participants
holding period for shares acquired after the exercise of a non-ISO begins on the date of exercise of that option.

If the participant pays the
exercise price in full or in part by using shares of previously acquired Common Shares, the exercise will not affect the tax
treatment described above and no gain or loss generally will be recognized to the participant with respect to the previously
acquired shares. The shares received upon exercise

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which are equal in number to the previously acquired shares used will have
the same tax basis as the previously acquired shares surrendered to the Corporation, and will have a holding period for
determining capital gain or loss that includes the holding period of the shares used. The value of the remaining shares received
by the participant will be taxable to the participant as compensation, even though those shares may be subject to sale
restrictions. The remaining shares will have a tax basis equal to the fair market value recognized by the participant as ordinary
income and the holding period will commence on the exercise date. Shares used to pay applicable income and payroll taxes arising
from that exercise will generate taxable income or loss equal to the difference between the tax basis of those shares and the
amount of income and payroll taxes satisfied with those shares. The income or loss will be treated as long-term or short-term
capital gain or loss depending on the holding period of the shares used. Where the shares used to pay applicable income and
payroll taxes arising from that exercise generate a loss equal to the difference between the tax basis of those shares and the
amount of income and payroll taxes satisfied with those shares, that loss may not be currently recognizable if, within a period
beginning 30 days before the exercise date and ending 30 days after that date, the participant acquires or enters into a contract
or option to acquire additional Common Shares.

ISOs.   No
taxable income is realized by a participant upon the grant or exercise of an ISO. If Common Shares are issued to a participant
after the exercise of an ISO and if no disqualifying disposition of those shares is made by that participant within two years
after the date of grant or within one year after the receipt of those shares by that participant, then:

| |  |  | upon the sale of those shares, any amount realized in excess of
the option exercise price will be taxed to that participant as a long-term capital gain, and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the Corporation will not be allowed a deduction.
| | - |  | ------------------------------------------------

Additionally, the exercise of
an ISO will give rise to an item of tax preference that may result in alternative minimum tax liability for the participant.

If Common Shares acquired
upon the exercise of an ISO are disposed of prior to the expiration of either holding period described above, that disposition
would be a disqualifying disposition, and generally:

| |  |  | the participant will realize ordinary income in the year of
disposition in an amount equal to the excess, if any, of the fair market value of the shares on the date of exercise, or, if less,
the amount realized on the disposition of the shares, over the ISO exercise price, and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the Corporation will be entitled to deduct that amount.
| | - |  | -------------------------------------------------------

Any other gain realized by
the participant on that disposition will be taxed as short-term or long-term capital gain, and will not result in any deduction to
the Corporation. If a participant pays the exercise price in full or in part with previously acquired Common Shares, the exchange
will not affect the tax treatment of the exercise. Upon the exchange, no gain or loss generally will be recognized upon the
delivery of the previously acquired shares to the Corporation, and the shares issued in replacement of the shares used to pay the
exercise price will have the same basis and holding period for capital gain purposes as the previously acquired shares. A
participant, however, would not be able to utilize the holding period for the previously acquired shares for purposes of
satisfying the ISO statutory holding period requirements. Additional Common Shares will have a basis of zero and a holding period
that commences on the date the Common Shares are issued to the participant upon exercise of the ISO. If this exercise is effected
using Common Shares previously acquired through the exercise of an ISO, the exchange of the previously acquired shares may be a
disqualifying disposition of those Common Shares if the holding periods discussed above have not been met.

If an ISO is exercised at a
time when it no longer qualifies as an ISO, the option will be treated as a non-ISO. Subject to some exceptions for permanent
disability or death, an ISO generally will not be eligible for the federal income tax treatment described above if it is exercised
more than three months following a termination of employment (one year if termination is due to death or disability, as defined in
the Internal Revenue Code).

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Stock Appreciation
Rights.   Upon the exercise of a SAR, the participant will recognize ordinary income in an amount equal to the
cash received plus the fair market value of any Common Shares received from the exercise. The participants tax basis in the
Common Shares received in the exercise of the SAR will be equal to the ordinary income recognized with respect to the Common
Shares. The participants holding period for shares acquired on the exercise of a SAR begins on the exercise date. Income and
payroll taxes are required to be withheld on the amount of compensation attributable to the exercise of the SAR, whether the
income is paid in cash or shares. Upon the exercise of a SAR, the Corporation will generally be entitled to a deduction in the
amount of the ordinary income recognized by the participant.

Unrestricted and
Restricted Stock.   Upon the grant of an unrestricted stock award, the participant realizes ordinary income
equal to the fair market value on the date of grant minus the price paid for the shares awarded. A recipient of a restricted stock
award realizes ordinary income only as of and when the shares vest or are no longer subject to a substantial risk of forfeiture
(as defined in the Internal Revenue Code). The ordinary income realized on each vesting or transfer date equals the fair market
value on that date less any purchase price paid for the shares. A recipient of a restricted stock award may, however, choose or be
required by the terms of the award to elect under Section 83(b) of the Internal Revenue Code to have the ordinary income
associated with all of the restricted shares realized and measured on the date of grant. A recipient who makes such an election
and later forfeits restricted shares may not claim a loss for tax purposes. The Corporation will generally be entitled to a
deduction at the time and in the amount of the ordinary income recognized by the participant.

Restricted Stock
Units.   A recipient of a restricted stock unit award realizes ordinary income only as of and when the shares
vest or are no longer subject to a substantial risk of forfeiture (as defined in the Internal Revenue Code). The ordinary income
realized on each vesting or transfer date equals the fair market value on that date less the price paid for the shares. The
Corporation will generally be entitled to a deduction at the time and in the amount of the ordinary income recognized by the
participant.

Performance Awards and
Supplemental Grants.   The tax consequences of a performance award depend upon the nature of the underlying
award earned if and when the performance goals are achieved. The recipient of a supplemental cash award realizes ordinary income
equal to the amount received, and the Corporation will generally be entitled to a corresponding deduction.

Certain Limitations on
Deductibility of Executive Compensation. As discussed above, the Section 162(m) Limitations apply to all Awards granted under the
Incentive Plan, unless certain conditions are satisfied. Compensation under the Incentive Plan is intended to satisfy those
conditions and constitute qualified performance-based compensation.

# Amendment and Termination

The Incentive Plan may be
amended or terminated by the Committee at any time, without the approval of shareholders or participants, provided that no
amendment that would require shareholder approval under the applicable American Stock Exchange listing standards, applicable law
or the Internal Revenue Code, including but not limited to Section 162(m), may become effective without shareholder approval. No
Awards may be granted under the Incentive Plan from and after April 24, 2016, unless the Incentive Plan is otherwise terminated
prior to that date.

# New Plan Benefits

The Board of Directors
approved the Incentive Plan in March 2006, subject to shareholder approval. To date, no Awards have been made under the Incentive
Plan. No determinations have been made with respect to any other Awards under the Incentive Plan.

The closing price of Common
Shares on March 14, 2006 was $5.85 per share, as reported on the American Stock Exchange.

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The Board of Directors
recommends that the shareholders vote for approval of the 2006 Equity Incentive Plan.

# Equity Compensation Plans

The following table details
information regarding the Companys existing equity compensation plans as of December 31, 2005:

|Plan Category                                                  |  |  | (a)Number of securities tobe issued upon exerciseof outstanding options,warrants and rights |  |  | (b)Weighted-averageexercise price ofoutstanding options,warrants and rights |  |  | (c)Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflectedin column (a))
|-------------------------------------------------------------- |  |  | ------------------------------------------------------------------------------------------- |  |  | --------------------------------------------------------------------------- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------
|                                                               |  |  |                                                                                             |  |  |                                                                             |  |  |                                                                                                                                         
|Equity compensation plans approved by security holders         |  |  | 507,400                                                                                     |  |  | $  4.22                                                                     |  |  | 698,500                                                                                                                                 
|                                                              
|Equity compensation plans not approved by security holders (1) |  |  | 222,500                                                                                     |  |  | $  3.44                                                                     |  |  | 12,500                                                                                                                                  
|                                                               |  |  |                                                                                             |  |  |                                                                             |  | 
|                                                              
|Total                                                          |  |  | 729,900                                                                                     |  |  | $  3.98                                                                     |  |  | 711,000                                                                                                                                 

|_________________
|-----------------
|(1)              

25

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# COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the
Compensation Committee during 2005 were: Messrs. McKenna (Chairman), Giordano and Masucci. No person who served as a member of the
Compensation Committee during 2004 was a current or former officer or employee of the Corporation or any subsidiary or engaged in
certain transactions with Corporation or any subsidiary required to be disclosed by regulations of the SEC. Additionally, there
were no compensation committee interlocks during 2005, which generally means that no executive officer of the
Corporation served as a director or member of the compensation committee of another entity, which had an executive officer serving
as a director or member of the Compensation Committee of the Corporation.

# CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. Gorder is a general
partner (with a one-third interest) of Arden Partners I, L.L.P., a Minnesota limited liability partnership
(Arden) that owns and leases to the Corporations subsidiary, Resistance Technology, Inc. (RTI),
property under a lease entered into October, 1991, and amended and restated on November 1, 1996. The leased property is one of
RTIs two manufacturing facilities. In 2002, the lease was renewed with a term of October 31, 2011. Under the lease, RTI pays
Arden a base monthly rent of approximately $30,667. Mr. Gorder is the President and Chief Executive Officer of the
Corporation, as well as a director.

# STOCK PERFORMANCE GRAPH

The following graph shows the
cumulative total return for the last five years, calculated as of December 31 of each such year, for the Common Shares, the
Standard & Poors 500 Index and the American Stock Exchange Market Value Index. The graph assumes that the value of the
investment in each of the three was $100 at December 31, 2000 and that all dividends were reinvested.



26

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# SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the
Securities Exchange Act of 1934 requires the Corporations executive officers and directors and persons who own more than ten
percent of a registered class of the Corporations equity securities (collectively, the reporting persons) to
file reports of ownership and changes in ownership with the Securities and Exchange Commission and to furnish the Corporation with
copies of these reports.

Based on the
Corporations review of the copies of these reports received by it and written representations, if any, received from
reporting persons with respect to the filing of reports of Forms 3, 4 and 5, the Corporation believes that all filings
required to be made by the reporting persons for fiscal 2005 (unless otherwise noted) were made on a timely basis except: Messrs.
McKenna reported late on a Form 4 the sale of Common Shares and Messrs. Geraci and Gonsior reported late on a Form 4 the grant of
options to purchase Common Shares.

# AUDIT COMMITTEE REPORT

The Audit Committee has
prepared the following report on its activities with respect to the Corporations audited consolidated financial statements
for the year ended December 31, 2005, which is referred to herein as the Corporations audited consolidated financial
statements:

| |  |  | The Audit Committee has reviewed and discussed the audited
consolidated financial statements with management.
| | - |  | -------------------------------------------------------------------------------------------------------------

| |  |  | The Audit Committee has discussed with Virchow, Krause &
Company, LLP, the Corporations independent auditors, the matters required to be discussed by Statements on Auditing
Standards No. 61, which include, among other items, matters related to the conduct of the audit of the Corporations
consolidated financial statements.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The Audit Committee has received the written disclosures and the
letter from Virchow, Krause & Company, LLP required by Independence Standards Board Standard No. 1, and has discussed
with Virchow, Krause & Company, LLP its independence from the Corporation.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Based on the review and discussions referred to above, the Audit
Committee has recommended to the Board of Directors that the audited consolidated financial statements be included in the
Corporations Annual Report on Form 10-K for the year ended December 31, 2005, for filing with the Securities and
Exchange Commission.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

THE AUDIT COMMITTEE
Nicholas A. Giordano, Chairman
Robert N. Masucci
Michael J. McKenna

# INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

# Information Regarding the Corporations Independent Registered Public Accounting Firm

The Corporations
independent auditors for the fiscal year ended December 31, 2005 was Virchow, Krause & Company, LLP (Virchow
Krause). The Audit Committee of the Board of Directors is in the process of selecting the Corporations independent
auditor for the fiscal year ending December 31, 2006. Representatives of Virchow Krause are expected to be present at the Annual
Meeting and to be available to respond to questions from shareholders. The representatives will have the opportunity to make a
statement if he or she desires.

27

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Previous Independent Registered Public Accounting Firm

On August 23, 2005, the
Corporation dismissed KPMG LLP (KPMG) as its independent registered public accountants. The Corporations Audit
Committee made and approved the decision to change the independent registered public accountants. The reports of KPMG on the
Corporations financial statements for the past two fiscal years contained no adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting principle except that the reports for the past two
fiscal years included a separate paragraph which indicated that the Corporation restated its consolidated financial statements as
of and for the years ended December 31, 2004 and 2003. In connection with its audits for the two most recent fiscal years and
through August 23, 2005, there have been no disagreements with KPMG on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG,
would have caused them to make reference thereto in their report on the financial statements for such years. During the two most
recent fiscal years and through August 23, 2005, there have been no reportable events (as defined in Regulation S-K
Item 304(a)(1)(v)), except that on June 28, 2005, KPMG advised the Corporations audit committee of the following
matters involving internal controls that KPMG considered to be a material weakness:

During 2005, the Corporation
restated its consolidated financial statements for the years 2000 through 2004 to correct the accounting for certain research and
development expenditures that were erroneously capitalized to the balance sheet. The errors in accounting were mainly due to a
lack of knowledge of U.S. generally accepted accounting principles (U.S. GAAP) in the Corporations Singapore
location. In addition, a thorough review of the Corporations Singapore financial statements for compliance with U.S. GAAP
was not performed on a timely basis by the Corporations corporate personnel.

The subject matter of this
deficiency was discussed with the Chairman of the Audit Committee and representatives of the Corporations management on June
24, 2005, The methodology for accounting for the Corporations research and development expenses was corrected prior to the
end of the quarter ended June 30, 2005 and the Corporation initiated the policies and procedures described below:

| |  |  | The Corporation implemented education programs within the
Corporation to ensure that all finance and accounting employees are adequately trained and supervised in the application of US
GAAP.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The Corporation created stronger communication protocols and
relationships between the Corporations management and its finance and accounting personnel to ensure for proper accounting
analysis and treatment.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The Corporation added internal review controls to insure that
capitalized projects appearing on the balance sheet are reviewed and approved by management on a quarterly basis.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Corporation requested
that KPMG furnish it with a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with the
above statements. A copy of such letter, dated August 25, 2005, is filed as Exhibit 16.1 to the Corporations Current Report
on Form 8-K filed with the Securities and Exchange Commission on August 26, 2005.

New independent Registered Public Accounting Firm

Effective as of August 23,
2005, the Corporation engaged Virchow Krause as its new independent registered public accountants. The decision to engage Virchow
Krause was made and approved by the Audit Committee of the Board of Directors. During the two most recent fiscal years and through
August 23, 2005, the Corporation has not consulted with Virchow Krause regarding (A) either: the application of accounting
principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the
Corporations financial statements; or (ii) any matter that was either subject of a disagreement, as that term is
defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K, or
a reportable event, as that term is described in Item 304(a)(1)(v) of Regulation S-K.

28

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Independent Registered Public Accounting Fee Information

Fees for professional
services provided by Virchow Krause, the Corporations independent auditors, for the fiscal year ended December 31, 2005 and
KPMG, the Corporations independent auditors, for the fiscal year ended December 31, 2004 in each of the following categories
were:

|Services Rendered  |  |  | 2005 |        | 2004
|------------------ |  |  | ---- | ------ | ----
|Audit Fees         |  |  | $    | 31,350 |     
|Audit-Related Fees |  |  |      | 400    |     
|Tax Fees           |  |  |      |       |     
|All Other Fees     |  |  |      |       |     
|                   |  |  |      |       
|Total              |  |  | $    | 31,750 |     
|                   |  |  |      |       

Audit
Fees.   The aggregate fees billed by Virchow Krause for professional services rendered for the audit of the
Corporations 2005 annual financial statements and the review of the financial statements included in the Corporations
Form 10-Q for the third quarter of 2005 totaled $31,350. The aggregate fees billed by KPMG for similar services in 2004 totaled
$286,000.

Audit-Related
Fees.   The aggregate fees billed by Virchow Krause for assurance and related services that are reasonably
related to the performance of the audit or review of the Corporations financial statements in 2005 and that are not
disclosed in the paragraph captioned Audit Fees above, were $400. The aggregate fees billed by KPMG for similar
services in 2004 totaled $10,000.

Tax
Fees.   No fees were billed by Virchow Krause for professional services rendered for tax compliance, tax advice
and tax planning in 2005. The aggregate fees billed by KPMG for similar services in 2004 totaled $43,000.

All Other
Fees.   The Corporation made no other payments to its independent auditors with respect to the relevant
disclosure period.

# Pre-Approval Policy

The Audit Committee has
established pre-approval policies and procedures pursuant to which the Audit Committee approved the foregoing audit and
permissible non-audit services provided by Virchow, Krause & Company, LLP in 2005.

# Auditor Independence

The Audit Committee has
considered the nature of the above-listed services provided by Virchow, Krause & Company, LLP and determined that the
provision of the services are compatible with maintaining its independence.

29

---

# SHAREHOLDER PROPOSALS FOR 2007 ANNUAL MEETING

Under the Corporations
bylaws, shareholder proposals with respect to the 2007 Annual Meeting of Shareholders, including nominations for directors, which
have not been previously approved by the Board of Directors, must be submitted to the Secretary of the Corporation no later than
November 27, 2006. Any such proposals must be in writing and sent either by personal delivery, nationally recognized express mail
or United States mail, postage prepaid to Corporate Secretary, IntriCon Corporation, 1260 Red Fox Road, Arden Hills, Minnesota
55112. Each nomination or proposal must include the information required by the bylaws. All late or nonconforming nominations and
proposals may be rejected by the officer presiding at the meeting.

Please refer to
Nominating and Corporate Governance Committee beginning on page 6 for additional information with respect to the
procedures with respect to the nomination of directors.

Shareholder proposals for the
2007 Annual Meeting of Shareholders must be submitted to the Corporation by November 27, 2006 to receive consideration for
inclusion in the Corporations Proxy Statement relating to the 2007 annual meeting of shareholders. Any such proposal must
also comply with SEC proxy rules, including SEC Rule 14a-8, and any applicable requirements set forth in the bylaws.

In addition, shareholders are
notified that the deadline for providing the Corporation timely notice of any shareholder proposal to be submitted outside of the
Rule 14a-8 process for consideration at the Corporations 2007 Annual Meeting of Shareholders is November 27, 2006.
As to all such matters which the Corporation does not have notice on or prior to November 27, 2006, discretionary authority
shall be granted to the persons designated in the Corporations Proxy related to the 2007 annual meeting of shareholders to
vote on such proposal.

# ANNUAL REPORT TO SHAREHOLDERS AND FORM 10-K

A copy of the annual report
to shareholders of the Corporation, including consolidated financial statements, for 2005 is being delivered with the proxy
materials and is not to be regarded as proxy solicitation material.

EACH SHAREHOLDER CAN
OBTAIN A COPY OF THE CORPORATIONS ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES FOR THE
YEAR ENDED DECEMBER 31, 2005 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT CHARGE EXCEPT FOR EXHIBITS TO THE
REPORT, BY SENDING A WRITTEN REQUEST TO: INTRICON CORPORATION, 1260 RED FOX ROAD, ARDEN HILLS, MINNESOTA 55112, ATTN: WILLIAM J.
KULLBACK.

# OTHER MATTERS

The Corporation is not
presently aware of any matters (other than procedural matters) that will be brought before the Meeting which are not reflected in
the attached Notice of the Meeting. The enclosed proxy confers discretionary authority to vote with respect to any and all of the
following matters that may come before the Meeting: (i) matters which the Corporation did not receive notice by November 28, 2005
were to be presented at the Meeting; (ii) approval of the minutes of a prior meeting of shareholders, if such approval does not
amount to ratification of the action taken at the meeting; (iii) the election of any person to any office for which a bona fide
nominee named in this Proxy Statement is unable to serve or for good cause will not serve; (iv) any proposal omitted from this
Proxy Statement and the form of proxy pursuant to Rules 14a-8 or 14a-9 under the Securities Exchange Act of 1934; and (v) matters
incident to the conduct of the Meeting. In connection with such matters, the persons named in the enclosed proxy will vote in
accordance with their best judgment.

William J. Kullback
Chief Financial Officer, Secretary,
and Treasurer

30

---

# APPENDIX A

# INTRICON CORPORATION

# 2006 EQUITY INCENTIVE PLAN

1.    Purposes

The purposes of the IntriCon
Corporation 2006 Equity Incentive Plan (the Plan) are to (i) promote the long-term retention of employees of IntriCon
Corporation (IntriCon), and its current and future subsidiaries (collectively, the Company), directors of
IntriCon and other persons who are in a position to make significant contributions to the success of the Company; (ii) further
reward these employees, directors and other persons for their contributions to the Companys growth and expansion; (iii)
provide additional incentive to these employees, directors and other persons to continue to make similar contributions in the
future; and (iv) to further align the interests of these employees, directors and other persons with those of IntriCons
shareholders. These purposes will be achieved by granting to such employees and other persons, in accordance with the provisions
of this Plan, Options, Stock Appreciation Rights, Restricted Stock or Unrestricted Stock, Deferred Stock, Restricted Stock Units
or Performance Awards, for shares of IntriCons common stock, par value $1.00 per share (Common Stock), or
Supplemental Grants, or combinations thereof (collectively, Awards).

As of the Effective Date of
the Plan, no additional grants will be made under the Companys 2001 Stock Option Plan and Amended and Restated Non-Employee
Directors Stock Option Plan (collectively, the Old Plans). Any shares of Common Stock not subject to exercised
or outstanding grants under the Old Plans may be issued under this plan (the Old Plans Shares). Outstanding
grants under the Old Plans will continue to be governed by their terms under the Old Plans.

2.    Aggregate Number of Awards

2.1    Shares
Subject to the Plan and Maximum Awards.   The aggregate number of shares of Common Stock for which Awards may
be granted under the Plan shall be 698,500 shares of Common Stock (which includes the Old Plans Shares); provided, however,
that such share reserve shall be increased from time to time by a number of shares equal to the number of shares of Common Stock
that are issuable pursuant to option grants outstanding under the Old Plans as of the Effective Date that but for the termination
of the Old Plans as of the Effective Date, would otherwise have reverted to the share reserve of the Old Plans pursuant to the
terms thereof as a result of the expiration, termination, cancellation or forfeiture of such options. Such maximum numbers of
shares are subject to adjustment in accordance with Section 2.5. Treasury shares, reacquired shares (including shares of Common
Stock purchased in the open market) and unissued shares of Common Stock may be used for purposes of the Plan, at IntriCons
sole discretion. No fractional shares of Common Stock shall be delivered under the Plan.

2.2    Section 162(m)
Limits.   The maximum number of shares of Stock for which Stock Options may be granted to any person in any
fiscal year and the maximum number of shares of Stock subject to SARs granted to any person in any fiscal year will each be
25,000. The maximum number of shares subject to other Awards granted to any person in any fiscal year will be 25,000 shares.
The foregoing provisions will be construed in a manner consistent with Section 162(m).

2.3    Reversion
of Shares to the Share Reserve.   Shares of Common Stock that were issuable pursuant to an Award that has
terminated but with respect to which such Award had not been exercised, shares of Common Stock that are issued pursuant to an
Award but that are subsequently forfeited and shares of Common Stock that were issuable pursuant to an Award that was payable in
Common Stock or cash but that was satisfied in cash, shall be available for future Awards under the Plan and shall not count
toward the maximum number of shares of Common Stock that may be issued under the Plan as set forth in Section 2.1.

2.4    Shares
Used to Pay Exercise Price and Taxes.   If a Participant pays the exercise price of an Option by surrendering
previously owned shares of Common Stock, as may be permitted by the Compensation Committee

A-1

---

(Committee) of the Board of Directors (Board) of
IntriCon, and/or arranges to have the appropriate number of shares of Common Stock otherwise issuable upon exercise withheld by
the Company to cover the withholding tax liability associated with the Option exercise, the surrendered shares of Common Stock and
shares of Common Stock used to pay taxes shall not count towards the maximum number of shares of Common Stock that may be issued
under the Plan as set forth in Section 2.1. If a Participant, as permitted by the Committee, arranges to have an appropriate
number of shares of a Stock Award withheld by the Company to cover the withholding tax liability associated with such Stock Award,
the shares of Common Stock used to pay taxes shall not count towards the maximum number of shares of Common Stock that may be
issued under the Plan as set forth in Section 2.1.

2.5    Other
Items Not Included in Allocation.   The maximum number of shares of Common Stock that may be issued under the
Plan as set forth in Section 2.1 shall not be affected by (i) the payment in cash of dividends or dividend equivalents in
connection with outstanding Awards; (ii) the granting or payment of stock-denominated Awards which by their terms may be settled
only in cash; or (iii) Awards that are granted through the assumption of, or in substitution for, outstanding awards previously
granted to individuals who have become employees as a result of a merger, consolidation, or acquisition or other corporate
transaction involving the Company.

2.6    Adjustments.   In
the event of any stock dividend, stock split, combination or exchange of equity securities, merger, consolidation,
recapitalization, reorganization, divestiture or other distribution (other than ordinary cash dividends) of assets to
shareholders, or any other event affecting the Common Stock that the Committee deems, in its sole discretion, to be similar
circumstances, the Committee may make such adjustments as it may deem appropriate, in its discretion, to: (i) the maximum number
of shares of Common Stock that may be issued under the Plan as set forth in Section 2.1; (ii) the maximum number of shares of
Common Stock that may be granted to any single individual pursuant to Section 2.1; (iii) the number or kind of shares subject to
an Award; (iv) the Exercise Price applicable to an Award; (v) any measure of performance that relates to an Award in order to
reflect such change in the Common Stock; and/or (vi) any other affected terms of any equity-based Award. The Committee may also
make such adjustments to take into account material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or any other event, as the Committee may determine
in its sole discretion.

2.7    Par
Value.   Notwithstanding anything herein to the contrary, if a Participant is required by applicable law to pay
the par value of the Common Stock subject to an Award, such payment may be made in any form permitted by applicable law, including
services performed or contracted to be performed, in the sole discretion of the Committee.

3.    Participation

3.1    Eligible
Persons.   All current and future employees of the Company, including officers (Employees), all
directors of IntriCon (including directors who are Employees and directors who are not Employees) and all other persons who are
not Employees or directors who, in the opinion of the Committee, are in a position to make a significant contribution to the
success of the Company, shall be eligible to receive Awards under the Plan (each, a Participant). No eligible
Employee, director or other person shall have any right to receive an Award except as expressly provided in the Plan.

3.2    Considerations
to Participation.   The Participants who shall actually receive Awards under the Plan shall be determined by
the Committee in its sole discretion. In making such determinations, the Committee shall consider the positions and
responsibilities of eligible Employees and other persons, their past performance and contributions to the Companys growth
and expansion, the value of their services to the Company, the difficulty of finding qualified replacements, and such other
factors as the Committee deems pertinent in its sole discretion.

3.3    Cancellation
and Modification of Awards.   In the event of a change in a Participants duties and responsibilities, or
a transfer of the Participant to a different position, the Committee may cancel or modify any Award granted to such Participant or
adjust the number of shares of Common Stock subject thereto commensurate with the transfer or change in responsibility, as
determined by the Committee, in its discretion, provided that no such action shall violate the provisions of Section 5.1(b)(4),
and provided further that the Committee may not modify or cancel Awards exercisable at the time of such change in duties or
responsibilities or transfer or to which the Participant was irrevocably entitled at the time of such change or transfer.

A-2

---

4.    Administration

4.1    Power
and Authority.   The Committee shall have full and exclusive power to administer and interpret the Plan, to
grant Awards and to adopt such administrative rules, regulations, procedures and guidelines governing the Plan and the Awards as
it may deem necessary in its discretion, from time to time. The Committees authority shall include, but not be limited to,
the authority to: (i) determine the type of Awards to be granted under the Plan; (ii) select Award recipients and determine the
extent of their participation; (iii) determine the method or formula for establishing the fair market value of the Common Stock
for various purposes under the Plan; and (iv) establish all other terms, conditions, restrictions and limitations applicable to
Awards and the shares of Common Stock issued pursuant to Awards, including, but not limited to, those relating to a
Participants Retirement ( as defined in Section 6.1(e)), death, Disability, leave of absence or termination of employment.
The Committee may accelerate or defer the vesting or payment of Awards, cancel or modify outstanding Awards, waive any conditions
or restrictions imposed with respect to Awards or the Common Stock issued pursuant to Awards and make any and all other
interpretations and determinations which it deems necessary with respect to the administration of the Plan, subject to the
limitations contained in Section 5.1(b)(4) with respect to all Participants and subject to the provisions of Section 162(m) of the
Code with respect to covered employees as defined thereunder, except that the Committee may not, without the consent
of the holder of an Award or unless specifically authorized by the terms of the Plan or an Award, take any action under this
clause with respect to such Award if such action would adversely affect the rights of such holder. The Committees right to
make any decision, interpretation or determination under the Plan shall be in its sole and absolute discretion.

4.2    Administrators
of the Plan.   The Plan shall be administered by the Committee. The Committee may delegate all or any portion
of its authority hereunder to one or more subcommittees consisting of at least one Committee member (and references in this Plan
to the Committee shall thereafter be to the Committee or such subcommittees). The Committee shall be comprised of no
fewer than three members, each of whom must qualify as (i) an Independent Director within the meaning of Section 121
of the American Stock Exchange Company Guide or any future corresponding rule; (ii) a non-employee director within the
meaning of Rule 16b-3(b)(3) under the Securities Exchange Act of 1934, as amended (the 1934 Act), or any future
corresponding rule; and (iii) an outside director within the meaning of the regulations promulgated under Section
162(m) of the Code, or any future corresponding rule, provided that the failure of the Committee or of the Board for any reason to
be composed solely of Independent Directors, non-employee directors or outside directors shall not prevent an Award from being
considered granted under this Plan. Without limiting the generality of the foregoing, the Committee shall have the authority to
select a class of potential Award recipients and the extent of their participation and to delegate to an appropriate officer of
the Company the authority to determine the individual Participants and amount and nature of the Award to be issued to such
Participants, subject to such criteria, limitations and instructions as the Committee shall determine; provided, however, that no
Awards shall be made pursuant to such delegation to a Participant who is subject to Section 16(b) of the 1934 Act.

4.3    Administration
of the Plan.   The Committee may adopt such rules for the administration of the Plan as it deems necessary or
advisable, in its sole discretion. For all purposes of the Plan, a majority of the members of the Committee shall constitute a
quorum, and the vote of a majority of the members of the Committee (or written consent of all of the members) on a particular
matter shall constitute the act of the Committee on that matter. The Committee shall have the exclusive right to construe the Plan
and any Award, to settle all controversies regarding the Plan or any Award, to correct defects and omissions in the Plan and in
any Award, and to take such further actions as the Committee deems necessary or advisable, in its sole discretion, to carry out
the purpose and intent of the Plan. Such actions shall be final, binding and conclusive upon all parties concerned.

4.4    Liability;
Indemnification.   No member of the Committee shall be liable for any act or omission (whether or not
negligent) taken or omitted in good faith, or for the good faith exercise of any authority or discretion granted in the Plan to
the Committee, or for any act or omission of any other member of the Committee. The members of the Committee shall be entitled to
indemnification and reimbursement to the fullest extent provided in IntriCons articles of incorporation, bylaws and
applicable law. In the performance of its functions under the Plan, the Committee shall be entitled to rely upon information and
advice furnished by IntriCons officers, accountants, counsel and other parties the Committee deems necessary, and no member
of the Committee shall be liable for any action taken or not taken in reliance upon such advice.

A-3

---

4.5    Costs;
Liabilities.   All costs incurred in connection with the administration and operation of the Plan shall be paid
by the Company. Except for the express obligations of the Company under the Plan and under Awards granted in accordance with the
provisions of the Plan, the Company shall have no liability with respect to any Award, or to any Participant or any transferee of
shares of Common Stock from any Participant, including, but not limited to, any tax liabilities, capital losses, or other costs or
losses incurred by any Participant or any such transferee.

5.    Types of Awards

5.1    Options.

(a)    An
Option is an Award entitling the recipient on exercise thereof to purchase Common Stock at a specified exercise price. Both
incentive stock options, as defined in Section 422 of the Code (any Option intended to qualify as an incentive stock
option is hereinafter referred to as an ISO), and Options that are not incentive stock options (any such Option is
hereinafter referred to as a non-ISO), may be granted under the Plan. ISOs shall be awarded only to Employees. The
maximum amount of ISOs that may be awarded under the Incentive Plan will not exceed 698,500 shares of Common Stock.

(b)    The
exercise price of an Option shall be determined by the Committee subject to the following:

(1)    The
exercise price of an ISO shall not be less than 100% (110% in the case of an ISO granted to a ten percent or greater shareholder)
of the fair market value of the Common Stock subject to the ISO, determined as of the time the Option is granted. A ten percent
shareholder is any person who at the time of grant owns, directly or indirectly, or is deemed to own by reason of the attribution
rules of Section 424(d) of the Code, stock possessing more than 10% of the total combined voting power of all classes of stock of
the Company or of any of its subsidiaries.

(2)    The
exercise price of a non-ISO shall not be less than 100% of the fair market value of the Common Stock subject to the non-ISO,
determined as of the time the non-ISO is granted.

(3)    To
the extent required by applicable law, the exercise price paid for Common Stock which is part of an original issue of authorized
Common Stock shall not be less than the par value per share of the Common Stock.

(4)    In
no case may the Committee reduce the exercise price of an Option at any time after the time of grant, including by amendment or
cancellation and subsequent issuance, except in the case of an adjustment as set forth in Section 2.6(iv) or unless approved by
Shareholders.

(5)    Notwithstanding
(1) and (2) above, an Option (whether an ISO or non-ISO) may be granted with an exercise price determined according to the
provisions of Section 424(a) of the Code, if the grant of such Option is pursuant to a transaction described in Section 424(a) of
the Code.

(c)    The
period during which an Option may be exercised shall be determined by the Committee, except that the period during which an Option
may be exercised shall not exceed ten years (five years, in the case of an ISO granted to a ten percent shareholder) from the day
immediately preceding the date the Option was granted.

(d)    An
Option shall become exercisable at such time or times, and on such terms and conditions, as the Committee may determine. The
Committee may at any time accelerate the time at which all or any part of the Option may be exercised. Any exercise of an Option
must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by (i) any documents required
by the Committee and (ii) payment in full in accordance with Section 5.1(e) below for the number of shares for which the Option is
exercised.

(e)    Stock
purchased on exercise of an Option must be paid for as follows: (i) in cash or by check (acceptable to IntriCon in accordance with
guidelines established for this purpose), bank draft or money order payable to the order of IntriCon or (ii) if so permitted by
the instrument evidencing the Option (or in the case of an Option which is not an ISO, by the Board at or after grant of the
Option), (A) through the delivery of shares of Common Stock which have been outstanding for at least six months (unless the Board
expressly approves a shorter period) and which have a fair market value on the date of exercise at least equal to the exercise
price, or (B) by

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delivery of an unconditional and irrevocable undertaking by a broker to
deliver promptly to IntriCon sufficient funds to pay the exercise price (including in connection with a so-called cashless
exercise effected by such broker), or (C) by any combination of the permissible forms of payment.

(f)              In
the event a Participant tenders shares of Common Stock to pay the exercise price of an Option and/or arranges to have a
portion of the shares otherwise issuable upon exercise withheld or sold to pay the applicable withholding taxes, in no case
may the Committee grant reload or restoration options entitling the Participant to
purchase shares of Common Stock equal to the sum of the number of such shares tendered to pay the exercise price and the
number of shares used to pay the withholding taxes.

(g)              Any
Employee who disposes of shares acquired upon the exercise of an ISO either (i) within two years after the date of grant of such
ISO or (ii) within one year after the transfer of such shares to the Employee shall notify the Company of such disposition and of
the amount realized upon such disposition.

5.2    Stock Appreciation Rights.

(a)              A
Stock Appreciation Right (SAR) is an Award entitling the recipient on its exercise to receive an amount, in cash or
Common Stock or a combination thereof (such form to be determined by the Committee), determined in whole or in part by reference
to appreciation in Common Stock value. In general, a SAR entitles the Participant to receive, with respect to each share of Common
Stock as to which the SAR is exercised (110% of its fair market value in the case of grants to ten percent or greater
shareholders), the excess of the shares fair market value on the date of exercise over its fair market value on the date the
SAR was granted, except that if a SAR is granted retroactively in substitution for an Option, the fair market value established by
the Committee may be the fair market value at the time such Option was granted. Any such substitution of a SAR for an Option
granted to a covered employee under Section 162(m) of the Code may only be made in compliance with the provisions
thereof.

(b)              Notwithstanding
the above, the Committee may provide at the time of grant that the amount the recipient is entitled to receive shall be adjusted
upward or downward under rules established by the Committee to take into account the performance of the Common Stock in comparison
with the performance of other stocks or an index or indices of other stocks. The Committee may also grant SARs that provide that
following a Change in Control of the Company (as defined in Section 6.3(c)) the holder of such SAR shall be entitled to receive,
with respect to each share of Common Stock subject to the SAR, an amount equal to the excess of a specified value (which may
include an average of values) for a share of Common Stock during a period preceding such Change in Control over the fair market
value of a share of Common Stock on the date the SAR was granted.

(c)              SARs
may be granted in tandem with, or independently of, Options granted under the Plan. A SAR granted in tandem with an Option that is
not an ISO may be granted either at or after the time the Option is granted. A SAR granted in tandem with an ISO may be granted
only at the time the Option is granted.

(d)              When
SARs are granted in tandem with Options, the following rules shall apply:

(1)              The
SAR shall be exercisable only at such time or times, and to the extent, that the related Option is exercisable and shall be
exercisable in accordance with the procedure required for exercise of the related Option.

(2)              The
SAR shall terminate and no longer be exercisable upon the termination or exercise of the related Option, except that a SAR granted
with respect to less than the full number of shares covered by an Option shall not be reduced until the number of shares as to
which the related Option has been exercised or has terminated exceeds the number of shares not covered by the SAR.

(3)              The
Option shall terminate and no longer be exercisable upon the exercise of the related SAR.

(4)              The
SAR shall be transferable only with the related Option.

(5)              A
SAR granted in tandem with an ISO may be exercised only when the market price of the Stock subject to the Option exceeds the
exercise price of such option.

(e)              A
SAR not granted in tandem with an Option shall become exercisable at such time or times, and on such terms and conditions, as the
Committee may specify. The Committee may at any time accelerate the time at which all or any part of the SAR may be exercised. Any
exercise of an independent SAR must be in

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writing, signed by the proper person and delivered or mailed to IntriCon,
accompanied by any other documents required by the Committee.

5.3    Stock Awards.

(a)    Form
of Awards.   The Committee may grant Awards (Stock Awards) which are payable in shares of Common
Stock or denominated in units equivalent in value to shares of Common Stock or are otherwise based on or related to shares of
Common Stock, including, but not limited to, Awards of Unrestricted Stock, Restricted Stock, Deferred Stock and Restricted Stock
Units, subject to such terms, conditions, restrictions and limitations as the Committee may determine to be applicable to such
Stock Awards, in its discretion, from time to time. The Committee may consider the impact of the conditions, restrictions or
limitations applicable to a Stock Award, as well as the possibility of forfeiture or cancellation, in determining the fair market
value for purposes of determining the number of shares of Common Stock allocable to a Stock Award. Without limiting the generality
of the foregoing, the Committee may issue Stock Awards to Participants in connection with management or employee stock purchase
programs.

(b)    Unrestricted
Stock.   Shares of Common Stock may be used as payment for services rendered (including any compensation that
is intended to qualify as performance-based compensation for purposes of Section 162(m) of the Code), and unless otherwise
determined by the Committee, no minimum vesting period shall apply to such shares. Any shares of Common Stock used for such
payment shall be valued at the fair market value of such shares at the time of payment and shall be subject to such terms,
conditions, restrictions and limitations as shall be determined by the Committee at the time of payment.

(c)    Restricted
Stock.   A Restricted Stock Award entitles the recipient to acquire shares of Common Stock subject to the
restrictions described in Section 5.3(c)(3) (Restricted Stock) for no consideration, nominal consideration or any
higher price, all as determined by the Committee, subject to Section 2.7.

(1)              A
Participant who is granted a Restricted Stock Award shall have no rights with respect to such Award unless the Participant accepts
the Award by written instrument delivered or mailed to IntriCon accompanied by payment in full of the specified purchase price, if
any, of the shares covered by the Award. Payment may be by certified or bank check or other instrument acceptable to the
Committee.

(2)              A
Participant who receives Restricted Stock shall have all the rights of a shareholder with respect to such stock, including voting
and dividend rights, subject to the restrictions described in 5.3(c)(3) and any other conditions imposed by the Committee at the
time of grant. Unless the Committee otherwise determines, certificates evidencing shares of Restricted Stock shall remain in the
possession of the Company until such shares are free of all restrictions under the Plan.

(3)              Except
as otherwise specifically provided by the Plan or the Award, Restricted Stock may not be sold, assigned, exchanged, pledged,
gifted or otherwise disposed of, or transferred, and if a Participant suffers a Status Change (as defined in Section 6.1) for any
reason (other than by reason of death or Permanent Disability or Retirement), must be offered to IntriCon for purchase for the
amount of cash paid for such stock, or forfeited to the Company if no cash was paid. These restrictions shall lapse at such time
or times, and on such terms and conditions, as the Committee may determine. The Committee may at any time accelerate the time at
which the restrictions on all or any part of the shares shall lapse.

(4)              Any
Participant making, or required by an Award to make, an election under Section 83(b) of the Code with respect to Restricted Stock
shall deliver to IntriCon, within ten days of the filing of such election with the Internal Revenue Service, a copy of such
election.

(5)              The
Committee may, at the time any Award described in this Section 5 is granted, provide that any or all the Common Stock delivered
pursuant to the Award shall be Restricted Stock.

(6)              The
Committee may, in its sole discretion, approve the sale to any Participant of shares of Common Stock free of restrictions under
the Plan for a price which is not less than the par value of the Common Stock.

(d)    Deferred
Stock.   A Deferred Stock Award entitles the recipient to receive shares of Common Stock to be delivered in the
future. Delivery of the Common Stock shall take place at such time or times, and on such terms and conditions, as the Committee
may determine. The Committee may at any time accelerate the time at which delivery of all or any part of the Common Stock shall
take place. At the time any Award described in

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this Section 5 is granted, the Committee may provide that, at the time Common
Stock would otherwise be delivered pursuant to the Award, the Participant shall instead receive an instrument evidencing the
Participants right to future delivery of Deferred Stock. Awards of Deferred Stock represent only an unfunded, unsecured
promise to deliver shares in the future and do not give Participants any greater rights than those of an unsecured general
creditor of the Company.

(e)    Restricted
Stock Units.   A Restricted Stock Unit is an Award denominated in shares of Restricted Stock, pursuant to a
formula determined by the Committee, which may be settled either in shares of Restricted Stock or in cash, in the discretion of
the Committee, subject to such other terms, conditions, restrictions and limitations determined by the Committee from time to
time.

5.4    Supplemental Grants.   In
connection with any Award under this Section 5, the Committee may grant a supplemental cash award to the Participant (a
Supplemental Grant) not to exceed an amount equal to (i) the amount of any Federal, state and local income tax on
ordinary income for which the Participant may be liable with respect to the Award, determined by assuming taxation at the highest
marginal rate, plus (ii) an additional amount on a grossed-up basis intended to make the Participant whole on an after-tax basis
after discharging all the Participants income tax liabilities arising from all payments under this Section 5. Any payments
under this Section 5.4 shall be made at the time the Participant incurs Federal income tax liability with respect to the Award.

5.5    Performance
Awards.   A Performance Award entitles the recipient to receive, without payment, an Award or Awards described
in this Section 5 (such form to be determined by the Committee) following the attainment of such performance goals, during such
measurement period or periods, and on such other terms and conditions, all as the Committee may determine. Performance goals may
be related to personal performance, corporate performance, group or departmental performance or any such other category of
performance as the Committee may determine. The Committee shall have the authority to determine the performance goals, the period
or period during which performance is to be measured and all other terms and conditions applicable to the Award.

5.6    Section 162(m) Limitations.

(a)              If
the Committee determines at the time an Award that is intended to qualify as performance-based compensation for purposes of
Section 162(m) of the Code is granted to a Participant that such Participant is, or may be as of the end of the tax year for which
the Company would claim a tax deduction in connection with such Award, a covered employee, then this Section 5.6 is
applicable to such Award under such terms as the Committee shall determine.

(b)              If
an Award is subject to this Section 5.6, then any grant shall be subject to the achievement of specified levels of one or more of
the following performance goals, unless and until the Companys shareholders approve a change to such performance goals:
operating income, net earnings, earnings before interest, taxes, depreciation and amortization (EBITDA), earnings before interest
and taxes (EBIT), net income, earnings per share, total shareholder return, cash flow, return on assets, decrease in expenses,
Common Stock price, price-earnings multiple, comparisons to market indices, sales growth, market share, the achievement of certain
quantitatively and objectively determinable non-financial performance measures including, but not limited to, operational
measures, growth strategies, strategic initiatives, corporate development and leadership development, and any combination of the
foregoing. The performance goals shall be determined and approved by the Committee within the first 90 days of each fiscal year.
Awards subject to this Section 5.6 may not be adjusted upward. The Committee shall retain the discretion to adjust such Awards
downward. Prior to the payment of any Award subject to this Section 5.6, the Committee shall certify in writing that the
applicable performance goal was satisfied.

(c)              The
Committee shall have the discretion to impose such other restrictions on Awards subject to this Section 5.6 as it may deem
necessary or appropriate to ensure that such Awards qualify as performance-based compensation for purposes of Section 162(m) of
the Code. In the event that applicable tax/and or securities laws change to permit the Committee the discretion to alter the
governing performance goals without obtaining shareholder approval, the Committee shall have the sole discretion to make such
changes without obtaining shareholder approval. In addition, in the event that the Committee determines that it is advisable to
grant Awards, or modify existing Awards, that shall not qualify as performance-based compensation for purposes of Section 162(m)
of the Code, the Committee may make such grants and modifications without satisfying the requirements of Section 162(m) of the
Code.

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5.7    Section 409A of the Code.

(a)    Awards
under the Plan are intended either to be exempt from or to satisfy the requirements of the rules of Section 409A of the Code
and shall be construed accordingly. However, the Company shall not be liable to any Participant or other holder of an Award with
respect to any Award-related adverse tax consequences arising under Section 409A or other provision of the Code.

(b)              To
the extent that an Award under the Plan is intended to satisfy the requirements of Section 409A of the Code and a provision of the
Plan or an Award agreement contravenes any Treasury regulations or other guidance promulgated under Section 409A of the Code or
could cause an Award to be subject to the interest and additional tax under Section 409A of the Code, such provision of the Plan
or Award shall be modified to maintain, to the maximum extent practicable, the original intent of the applicable provision without
violating the provisions of Section 409A of the Code. Moreover, any discretionary authority that the Committee may have pursuant
to the Plan shall not be applicable to an Award that is subject to Section 409A of the Code to the extent such discretionary
authority will contravene Section 409A of the Code or the Treasury regulations or other guidance promulgated thereunder.

(c)              Notwithstanding
any provisions of this Plan or any Award granted hereunder to the contrary, no acceleration shall occur with respect to any Award
to the extent such acceleration would cause the Plan or an Award granted hereunder to fail to comply with Section 409A of the
Code.

(d)              Notwithstanding
any provisions of this Plan or any applicable Award agreement to the contrary, no payment shall be made with respect to any Award
granted under this Plan to a specified employee (as such term is defined for purposes of Section 409A of the Code)
prior to the six-month anniversary of the employees separation of service to the extent such six-month delay in payment is
required to comply with Section 409A of the Code.

6.    Events Affecting Outstanding Awards

6.1    Termination
of Service by Death or Permanent Disability or Retirement.   If a Participant who is an Employee or director
ceases to be an Employee or director, or if there is a termination of the consulting, service or other relationship in respect of
which a non-Employee Participant was granted an Award under the Plan (such termination of employment or other relationship
referred to as a Status Change) in any case by reason of death or Permanent Disability or Retirement, the following
rules shall apply, unless otherwise determined by the Committee:

(a)              All
Options and SARs held by the Participant at the time of such Status Change shall automatically become exercisable in full and
shall continue to be exercisable by the Participant or his or her heirs, executor, administrator or other legal representative for
a period of one year after the Participants Status Change by reason of death or Permanent Disability and for a period equal
to the unexpired term of the Option or SAR in the case of Retirement. After the expiration of such one-year period, all such
Options and SARs shall terminate. In no event, however, shall an Option or SAR remain exercisable beyond the latest date on which
it could have been exercised without regard to this Section 6.1.

(b)              All
Restricted Stock and Restricted Stock Units held by the Participant at the time of such Status Change shall automatically become
free of all restrictions and conditions.

(c)              The
Participant shall automatically be entitled to any payment or benefit under all Deferred Stock Awards, Performance Awards or
Supplemental Grants, held by the Participant at the time of such Status Change.

(d)              Disability or
Permanent Disability shall mean disability as defined in Section 22(e)(3) of the Internal Revenue Code or as otherwise
determined by the Committee.

(e)              Retirement means
termination of employment with or service to the Company by a Participant other than by reason of death or Permanent Disability or
termination for Cause at a time when such Participant has attained age 65 or greater; provided that such Participant has performed
a minimum of five Years of Service. For purposes of the Plan, Years of Service means each period of twelve consecutive
months (including any permitted leaves of absences) beginning on the Participants first day of employment with or service to
the Company and each anniversary thereof in which the Participant continues to be employed by or provide service to the Company.

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6.2    Termination
of Service Other Than by Death or Permanent Disability or Retirement.   Subject to the provisions of Section
6.4, if a Participant suffers a Status Change other than by reason of death or Permanent Disability (as determined by the
Committee) or Retirement, the following rules shall apply, unless otherwise determined by the Committee:

(a)              All
Options and SARs held by the Participant at the time of such Status Change, to the extent then exercisable, shall continue to be
exercisable by the Participant for a period of 90 days after the Participants Status Change. After the expiration of such
90-day period, all such Options and SARs shall terminate. In no event, however, shall an Option or SAR remain exercisable beyond
the latest date on which it could have been exercised without regard to this Section 6.2. All Options and SARs held by a
Participant at the time of such Status Change that are not then exercisable shall terminate upon such Status Change.

(b)              All
Restricted Stock held by the Participant at the time of such Status Change shall be transferred to the Company (and, in the event
the certificates representing such Restricted Stock are held by the Company, such Restricted Stock shall be so transferred without
any further action by the Participant) in accordance with Section 5.3(c) above.

(c)              Any
payment or benefit under a Restricted Stock Unit, Deferred Stock Award, Performance Award, or Supplemental Grant, to which the
Participant was not irrevocably entitled at the time of such Status Change shall be forfeited and the Award canceled as of the
date of such Status Change.

(d)              For
all purposes of this Section 6.2 and Section 6.3, the employment with the Company of a Participant who is an Employee shall not be
deemed to have been terminated if the Participant is transferred from IntriCon to a subsidiary of IntriCon, or vice versa, or from
one subsidiary of IntriCon to another and, in the sole discretion of the Committee, a Status Change shall not be deemed to have
occurred if, on the date that a Participants employment, directorship, consulting, service or other relationship with the
Company terminates, such Participant has an employment, directorship, consulting, service or other relationship with the Company
that, in the discretion of the Committee, would otherwise permit such Participant to receive an Award under this Plan.

(e)              Anything
in this Section to the contrary nothwithstanding, all Awards held by a Participant whose employment, directorship, consulting,
service or other relationship with the Company was terminated for Cause shall, in the discretion of the Committee,
terminate immediately as of the date of such Status Change. A termination by the Company of a Participants employment,
directorship, consulting, service or other relationship with the Company shall be for Cause if the Committee
determines that the Participant: (i) was guilty of fraud, gross negligence or willful misconduct in the performance of his or her
duties for the Company, (ii) willfully and continually failed to perform substantially the Participants duties with the
Company (other than any such failure resulting from incapacity due to Permanent Disability) after delivery of written demand for
substantial performance to the Participant by the Board, the Committee or the Chief Executive Officer that specifically identified
the manner in which the Board, the Committee or the Chief Executive Officer believed the Participant did not substantially perform
his or her duties, (iii) breached or violated, in a material respect, any agreement between the Participant and the Company or any
of the Companys codes of conduct or corporate policies, including policy statements regarding conflicts-of-interest, insider
trading or confidentiality, (iv) committed a material act of dishonesty or breach of trust, (v) acted in a manner that was
inimical or injurious, in a material respect, to the business or interests of the Company, or (vi) was convicted of, or plead
guilty or nolo contendere to, a felony or any other crime involving moral turpitude which subjects, or if generally known, would
subject, the Company to public ridicule or embarrassment.

6.3    Change in Control.

(a)              Notwithstanding
the provisions of Section 6.3(b), in the event of a Change in Control (as defined in Section 6.3(c)), the following rules shall
apply, unless otherwise expressly provided by the Committee in accordance with Section 6.3(d):

(1)              Each
outstanding Option and SAR shall automatically become exercisable in full upon the occurrence of such Change in Control. This
provision shall not prevent an Option or SAR from becoming exercisable sooner as to Common Stock or cash that would otherwise have
become available under such Option or SAR during such period.

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(2)              Each
outstanding share of Restricted Stock shall automatically become free of all restrictions and conditions upon the occurrence of
such Change in Control. This provision shall not prevent the earlier lapse of any restrictions or conditions on Restricted Stock
that would otherwise have lapsed during such period.

(3)              Conditions
on Restricted Stock Units, Deferred Stock Awards, Performance Awards and Supplemental Grants, which relate only to the passage of
time and continued employment shall automatically terminate upon the occurrence of such Change in Control. This provision shall
not prevent the earlier lapse of any conditions relating to the passage of time and continued employment that would otherwise have
lapsed during such period. Performance or other conditions (other than conditions relating only to the passage of time and
continued employment) shall continue to apply unless otherwise provided in the instrument evidencing the Awards or in any other
agreement between the Participant and the Company or unless otherwise agreed to by the Committee.

(b)              The
Committee may, in its discretion, at the time an Award is made hereunder or at any time prior to, coincident with or after the
time of a Change in Control: (i) require the purchase and sale of any Awards for an amount of cash equal to the amount which a
Participant could have obtained upon the exercise or realization of such rights had such Awards been currently exercisable; (ii)
make such adjustment to the Awards then outstanding as the Committee deems appropriate to reflect such Change in Control; (iii) if
applicable, provide that such Awards shall be cancelled upon the effectiveness of such Change of Control and converted into the
right to receive the same consideration as shareholders are receiving in such Change of Control (net of any exercise price and/or
purchase price payable by the Participant and/or Base Amount in the case of a SAR); and/or (iv) cause the Awards then outstanding
to be assumed, or their rights substituted therefor, by the surviving or acquiring corporation in such Change in Control. The
Committee may, in its discretion, include such further provisions and limitations in any Award Agreement as it may deem in the
best interests of the Company.

(c)              A
Change in Control means: (i) the occurrence of an event that would, if known to IntriCons management, be
required to be reported by IntriCon as a change in control under Form 8-K pursuant to the 1934 Act; or (ii) the acquisition or
receipt, in any manner, by any person (as defined for purposes of the 1934 Act) or any group of persons acting in concert, of
direct or indirect beneficial ownership (as defined for purposes of the 1934 Act) of more than 50% of the combined voting
securities ordinarily having the right to vote for the election of directors of IntriCon; or (iii) a change in the constituency of
the Board with the result that individuals (the Incumbent Directors) who are members of the Board on the Effective
Date (as defined in Section 13) cease for any reason to constitute at least a majority of the Board, provided that any individual
who is elected to the Board after the Effective Date and whose nomination for election was unanimously approved by the Incumbent
Directors shall be considered an Incumbent Director beginning on the date of his or her election to the Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election
contest (as defined for purposes of the 1934 Act) with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (iv) the sale, exchange,
liquidation or other disposition of all or more than 50% of IntriCons business or assets; unless in any such case, at least
a majority of the Incumbent Directors determine, prior to the occurrence of such Change in Control, that no Change in Control has
or will have occurred; or (v) the occurrence of a reorganization, merger, consolidation or other corporate transaction involving
IntriCon, in each case, with respect to which IntriCons shareholders immediately prior to such transaction do not,
immediately after such transaction, own more than 50% of the combined voting securities ordinarily having the right to vote for
the election of directors of IntriCon or other corporation resulting from such transaction; or (vi) the approval by
IntriCons shareholders of a complete liquidation or dissolution of IntriCon; or (vii) any similar transaction, circumstance
or event which the Committee determines to constitute a Change in Control.

(d)              The
provisions (or any of them) of Section 6.3(a) shall not apply to the extent expressly determined by at least 75% of the Incumbent
Directors at a duly convened meeting of the Board held before the occurrence of a Change in Control.

(e)              Any
good faith determination by the Committee as to whether a Change in Control within the meaning of this Section 6.3 has occurred
shall be conclusive and binding on the Participants.

(f)              Compliance
with Section 409A of the Code. In the case of an Award providing for the payment of deferred compensation subject to
Section 409A of the Code, any payment of such deferred compensation by reason of a Change in Control shall be made only if
the event constituting the Change in Control is an event described in subsection (a)(2)(A)(v) of Section 409A of the Code and
Treasury regulations or other

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guidance thereunder and shall be paid consistent with the requirements of
Section 409A. If any deferred compensation that would otherwise be payable by reason of a Change in Control cannot be paid by
reason of the immediately preceding sentence, it shall be paid as soon as practicable thereafter consistent with the requirements
of Section 409A of the Code, as determined by the Committee.

6.4    Special
Forfeiture Provisions Following a Termination of Employment.   Notwithstanding the provisions of Section 6.2,
in any instance where the rights of a Participant with respect to an Award extend beyond a Status Change other than by reason of
death, all of such rights shall terminate and be forfeited, if, in the determination of the Committee, the Participant, at any
time prior or subsequent to such Status Change (a) breaches or violates, in a material way, the terms of any agreement with the
Company, including any employment agreement, termination agreement, confidentiality agreement, non-solicitation agreement or
non-competition agreement or (b) engaged or engages in conduct that would have permitted the Company to terminate such
Participants employment for Cause (as defined in Section 6.2(e)) if such Participant was still an employee of
the Company.

7.    Grant and Acceptance of Awards

7.1    Evidence
of Approval.   The Committees approval of a grant of an Award under the Plan, including the names of
Participants and the size of the Award, including the number of shares of Common Stock subject to the Award, shall be reflected in
minutes of meetings held by the Committee or in written consents signed by members of the Committee. Once approved by the
Committee, each Award shall be evidenced by such written instrument, containing such terms as are required by the Plan and such
other terms, consistent with the provisions of the Plan, as may be approved from time to time by the Committee.

7.2    Award
Agreements.   Each instrument may be in the form of agreements to be executed by both the Participant and the
Company, or certificates, letters or similar instruments, which need not be executed by the Participant but acceptance of which
shall evidence agreement to the terms thereof. The grant of an Award shall not impose any obligation on the Participant to accept
the Award.

7.3    Conditions.   Except
as specifically provided by the Plan or the instrument evidencing an Award, a Participant shall not become a shareholder of
IntriCon until (i) the Participant makes any required payments in respect of the Common Stock issued or issuable pursuant to the
Award, (ii) the Participant furnishes IntriCon with any required agreements, certificates, letters or other instruments, and (iii)
the Participant actually receives the shares of Common Stock. Subject to any terms and conditions imposed by the Plan or the
instrument evidencing an Award, upon the occurrence of all of the conditions set forth in the immediately preceding sentence, a
Participant shall have all rights of a shareholder with respect to shares of Common Stock, including, but not limited to, the
right to vote such shares and to receive dividends and other distributions paid with respect to such shares. The Committee may,
upon such terms and conditions as it deems appropriate, provide that a Participant will receive a benefit in lieu of cash
dividends that would have been payable on any and all Common Stock subject to the Participants Award, had such Common Stock
been outstanding. Without limitation, the Board may provide for payment to the Participant of amounts representing such dividends,
either currently or in the future, or for the investment of such amounts on behalf of the Participant.

7.4    Payments
and Deferrals.   Payment of Awards may be in the form of cash, shares of Common Stock, other Awards, or
combinations thereof as the Committee shall determine, subject to such terms, conditions, restrictions and limitations as it may
impose. The Committee may postpone the exercise of Options or SARs, and may require or permit Participants to elect to defer the
receipt or issuance of shares of Common Stock pursuant to Awards or the settlement of Awards in cash under such rules and
procedures as it may establish, in its discretion, from time to time. The Committee may adopt deferred compensation plans to
permit a Participant to defer the time when such Award is recognized for income tax purposes. It also may provide for deferred
settlements of Awards including the payment or crediting of earnings on deferred amounts, or the payment or crediting of dividend
equivalents where the deferred amounts are denominated in common share equivalents. In addition, the Committee may stipulate in an
Award Agreement, either at the time of grant or by subsequent amendment, that a payment or portion of a payment of an Award be
delayed in the event that Section 162(m) of the Code (or any successor or similar provision of the Code) would disallow a tax
deduction by the Company for all or a portion of such payment. The period of any such delay in payment shall be until the payment,
or portion thereof, is tax deductible, or such earlier date as the Committee shall determine in its discretion.

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7.5    Removal
of Restrictions.   Notwithstanding any other provision of the Plan, the Company shall not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove any restriction from shares of Common Stock previously
delivered under the Plan (i) until all conditions to the Award have been satisfied or removed, (ii) until, in the opinion of
counsel to the Company, all applicable Federal and state laws and regulations have been complied with, (iii) if the outstanding
Common Stock is at the time listed on any stock exchange or included for quotation on an inter-dealer system, until the shares to
be delivered have been listed or included or authorized to be listed or included on such exchange or system upon official notice
of notice of issuance, (iv) if it might cause the Company to issue or sell more shares of Common Stock that the Company is then
legally entitled to issue or sell, and (v) until all other legal matters in connection with the issuance and delivery of such
shares have been approved by counsel to the Company. If the sale of Common Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of an Award, such representations or agreements as
counsel to the Company may consider appropriate to avoid violation of such Act and may require that the certificates evidencing
such Common Stock bear an appropriate legend restricting transfer. If an Award is exercised by the Participants legal
representative, the Company shall be under no obligation to deliver Common Stock pursuant to such exercise until the Company is
satisfied as to the authority of such representative.

8.    Tax Withholding

The Company shall withhold
from any cash payment made pursuant to an Award an amount sufficient to satisfy all Federal, state and local withholding tax
requirements (the withholding requirements). In the case of an Award pursuant to which Common Stock may be delivered,
the Committee shall have the right to require that the Participant or other appropriate person remit to the Company an amount
sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Committee with regard to such
requirements, prior to the delivery of any Common Stock. If and to the extent that such withholding is required, the Committee may
permit a Participant or such other person or entity to elect at such time and in such manner as the Committee may determine to
have the Company hold back from the shares of Common Stock to be delivered, or to deliver to the Company, Common Stock having a
value calculated to satisfy the withholding requirement. If at the time an ISO is exercised, the Committee determines that the
Company could be liable for withholding requirements with respect to a disposition of the Common Stock received upon exercise, the
Committee may require as a condition of exercise that the person exercising the ISO agree (i) to inform the Company promptly of
any disposition (within the meaning of Section 424(c) of the Code) of Common Stock received upon exercise, and (ii) to give such
security as the Committee deems adequate to meet the potential liability of the Company for the withholding requirements and to
augment such security from time to time in any amount reasonably deemed necessary by the Board to preserve the adequacy of such
security.

9.    Dividends and Dividend Equivalents

The Committee may provide
that Stock Awards shall earn dividends or dividend equivalents. Such dividends or dividend equivalents may be paid currently or
may be credited to an account maintained on the books of the Company. Any payment or crediting of dividends or dividend
equivalents will be subject to such terms, conditions, restrictions and limitations as the Committee may establish, from time to
time, including reinvestment in additional shares of Common Stock or common share equivalents. Unless the Committee determines
otherwise, any Employee subject to the reporting requirements of Section 16(a) of the 1934 Act may not participate in dividend
reinvestment programs established under the Plan. The Committee shall determine the Participants rights under the Plan with
respect to extraordinary dividends or distributions on the shares of Common Stock.

10.    Voting

The Committee shall determine
whether a Participant shall have the right to direct the vote of shares of Common Stock allocated to a Stock Award. If the
Committee determines that an Award shall carry voting rights, the shares allocated to such Award shall be voted by the
Companys Secretary, or such other person as the Committee may designate in accordance with instructions received from the
Participant (unless to do so would constitute a violation of fiduciary duties). Shares as to which no instructions are received
shall be voted by the Committee or its designee proportionately in accordance with instructions received from Participants in the
Plan (unless to do so would constitute a violation of fiduciary duties).

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11.    Unfunded Plan

Unless otherwise determined
by the Committee, the Plan shall be unfunded and shall not create (or be construed to create) a trust or a separate fund or funds.
The Plan shall not create any fiduciary relationship between the Company on behalf of any Participant or other person. To the
extent any Participant holds any rights by virtue of an Award granted under the Plan, such rights shall constitute general
unsecured liabilities of the Company and shall not confer upon any Participant any right, title, or interest in any assets of the
Company.

12.    Rights as Shareholder

Unless the Committee
determines otherwise, a Participant shall not have any rights as a shareholder with respect to shares of Common Stock covered by
an Award until the date the Participant becomes the holder of record with respect to such shares in accordance with Section 7.3.
No adjustment shall be made for dividends or other rights for which the record date is prior to such date, except as provided in
Section 9.

13.    Effective Date and Term of Plan

The effective date of this
Plan (the Effective Date) is April 26, 2006, the date on which the Plan was approved by the affirmative vote of the
holders of IntriCons Common Stock. No Award shall be granted more than ten years after the Effective Date.

14.    Effect, Amendment, Suspension and Termination

Unless otherwise determined
by the Committee, Awards received by Participants under the Plan shall not be deemed a part of a Participants regular,
recurring compensation for purposes of calculating payments or benefits under any Company benefit plan or severance program. No
Employee, director or other person shall have any claim or right to be granted an Award under the Plan. There shall be no
obligation of uniformity of treatment of Employees, directors or other persons under the Plan and the terms and conditions of
Awards and the Committees determinations and interpretations with respect thereto need not be the same with respect to each
Participant (whether or not such Participants are similarly situated). Neither adoption of the Plan nor the grant of Awards to a
Participant shall affect the Companys right to grant to such Participant awards that are not subject to the Plan, to issue
to such Participant Common Stock as a bonus or otherwise, or to adopt other plans or arrangements under which Common Stock may be
issued to Employees or other persons or entities. The Committee reserves the right, at any time and from time to time, to amend
the Plan in any way, or to suspend or terminate the Plan, effective as of the date specified by the Committee when it takes such
action, which date may be before or after the date the Committee takes such action; provided that any such action shall not affect
any Awards granted before the actual date on which such action is taken by the Committee; and further provided that the approval
of IntriCons shareholders shall be required whenever necessary for the Plan to continue to satisfy the conditions of Rule
16b-3 under the 1934 Act, Section 422 of the Code with respect to the award of ISOs (unless the Board determines that ISOs shall
no longer be granted under the Plan), any bylaw, rule or regulation of the market system or stock exchange on which
IntriCons Common Stock is then listed or admitted to trading, or any other applicable law, rule or regulation. Unless
terminated earlier by the Board, this Plan shall terminate on such date (which shall not be prior to April 26, 2016) as all Awards
under the Plan have been exercised or shall have terminated.

15.    Other Provisions

15.1    Future
Rights.   Nothing contained in the Plan or any Award shall confer upon any Employee or other Participant the
right to continue in the employ of, or to continue to provide service to, the Company or any affiliated person, or interfere in
any way with the right of the Company or any affiliated person to terminate the employment or service of any Employee or other
Participant for any reason.

15.2    Grant
Date.   Corporate action constituting an offer by IntriCon of Common Stock to any Participant under the terms
of an Award shall be deemed completed as of the date of grant of the Award, regardless of when the instrument, certificate, or
letter evidencing the Award is actually received or accepted by the Participant.

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15.3    Transferability.   None
of a Participants rights under any Award or under the Plan may be assigned or transferred in any manner other than by will
or under the laws of descent and distribution. The foregoing shall not, however, restrict a Participants rights with respect
to Unrestricted Stock or the outright transfer of cash, nor shall it restrict the ability of a Participants heirs, estate,
beneficiaries, or personal or legal representatives to enforce the terms of the Plan with respect to Awards granted to the
Participant. Notwithstanding the foregoing, at the discretion of the Committee, the terms of an Award may permit a Participant to
transfer such Award to one or more members of the Participants family or to trusts, family partnerships, or other entities
for the benefit of the Participant and/or members of the Participants family to the extent provided in such Award and
permitted under the terms for use of Form S-8 promulgated under the Securities Act of 1933, as amended.

15.4    Governing
Law.   The Plan, and all Awards granted hereunder, shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.

15.5    Interpretation.   The
headings of the Sections of the Plan are for convenience of reference only and shall not affect the interpretation of the Plan.
All pronouns and similar references in the Plan shall be construed to be of such number and gender as the context requires or
permits. When used in this Plan, the words including and include shall be deemed followed by the words
without limitation. Except as otherwise indicated, the term person as used in the Plan shall include
individuals, corporations, partnerships, trusts, estates, limited liability companies and partnerships and any other type of
entity.

15.6    Severability.   If
any provision of the Plan is determined to be unenforceable for any reason, then that provision shall be deemed to have been
deleted or modified to the extent necessary to make it enforceable, and the remaining provisions of the Plan shall be unaffected.

15.7    Notices.   All
notices with respect to the Plan shall be in writing and shall be hand delivered or sent by certified mail or reputable overnight
delivery service, expenses prepaid. Notices to the Company or the Committee shall be delivered or sent to IntriCons
headquarters to the attention of its Chief Financial Officer. Notices to any Participant or holder of shares of Common Stock
issued pursuant to an Award shall be sufficient if delivered or sent to such persons address as it appears in the regular
records of the Company or its transfer agent.

15.8    Prior
Services.   In any case that a Participant purchases Common Stock under an Award for a price equal to the par
value of the Common Stock, the Committee may determine, in its sole discretion, that such price has been satisfied by past
services rendered by the Participant.

15.9    Fair
Market Value.   For the purposes of the Plan and any Award granted hereunder, unless otherwise determined by
the Committee, the term fair market value of Common Stock on a specified date shall mean the last sale price for one
share of Common Stock on the last trading day on or before the specified date, as reported on the American Stock Exchange, or on
such other market system or stock exchange on which IntriCons Common Stock is then listed or admitted to trading, or, if the
foregoing does not apply, the market value determined by the Board.

15.10    Reduction
of Payments.   Unless otherwise agreed upon in writing by the Company and a Participant, in the event that any
payment, benefit or transfer under the Plan to or for the benefit of a Participant pursuant to a Change in Control from the
Company or otherwise (a Payment) would (i) constitute a parachute payment within the meaning of Section
280G of the Code, and (ii) but for this Section 15.10, be subject to the excise tax imposed by Section 4999 of the Code (the
Excise Tax), then such Payment shall be reduced to the Reduced Amount. The Reduced Amount shall be either
(x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the
largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable
federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal
rate), results in the Participants receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that
all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting
parachute payments is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the following
order unless the Participant elects in writing a different order (provided, however, that such election shall be subject to the
Companys approval if made on or after the date on which the event that triggers the Payment occurs): reduction of cash
payments; cancellation of accelerated vesting of Awards; and reduction of employee benefits. In the event that

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the acceleration of vesting of Award compensation is to be reduced, such
acceleration of vesting shall be cancelled in the reverse order of the date of grant of the Participants Awards unless the
Participant elects in writing a different order for cancellation.

15.11    Successors
and Assigns.   The Plan and any applicable Award Agreement entered into under the Plan shall be binding on all
successors and assigns of a Participant, including the estate of such Participant and the executor, administrator or trustee of
such estate, or any receiver or trustee in bankruptcy or representative of the Participants creditors.

A-15

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# INTRICON CORPORATION
ARDEN HILLS, MINNESOTA 55112

# This Proxy is Solicited on Behalf of the Board of Directors

The undersigned, revoking all prior proxies, hereby appoints MARK S. GORDER
and WILLIAM J. KULLBACK with full power of substitution, as proxies and hereby authorizes them to represent and to vote all the
Common Shares of IntriCon Corporation held of record by the undersigned on March 17, 2006, at the annual meeting of shareholders
to be held on April 26, 2006, or any postponement or adjournment thereof.

All proxy agents present and acting in person or by their substitutes (or, if
only one is present and acting, then that one) may exercise all of the powers conferred by this proxy. Discretionary authority
is conferred by this proxy with respect to certain matters, as described in IntriCon Corporations proxy statement.

|x | Please mark your votes as in this example.
|- | ------------------------------------------

|1. |  | To elect the following director nominee to hold office for three
years until his successor has been duly elected and qualified, as more fully described in the accompanying proxy statement.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 01-Nicholas A. Giordano
           o
FOR NOMINEE
           o
WITHHOLD AUTHORITY
| | --------------------------------------------------------------------------------

|2. |  | To
approve the 2006 Equity Incentive Plan, as more fully described in the accompanying proxy
statement.
|-- |  | -------------------------------------------------------------------------------------------------------

| | o
FOR
           o
AGAINST
           o
ABSTAIN
| | -----------------------------------------------

|3. |  | In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the annual meeting.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------

# PLEASE SEE REVERSE FOR PROXY VOTING IN INSTRUCTIONS

---

THE SHARES REPRESENTED BY THIS PROXY, DULY EXECUTED, WILL BE VOTED AS
INSTRUCTED ABOVE. IF INSTRUCTIONS ARE NOT GIVEN, THEY WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEE AND FOR THE APPROVAL
OF THE 2006 EQUITY INCENTIVE PLAN. WITH RESPECT TO SUCH OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY
ADJOURNMENTS OR POSTPONEMENTS THEREOF, SAID PROXY IS AUTHORIZED TO VOTE IN ACCORDANCE WITH ITS BEST JUDGMENT.

| | By signing this proxy, you hereby acknowledge receipt of the 2005
Annual Report to Shareholders, Notice of the Companys 2006 Annual Meeting of Shareholders and the Companys Proxy
Statement
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | ____________________________ Date ________, 2006
Signature
____________________________ Date ________, 2006
Signature (if joint account)
| | ----------------------------------------------------------------------------------------------------------------------------------------

| | NOTE: Please sign and date and return in the pre-paid envelope
provided. Your signature should appear exactly as your name appears in the space to the left. For joint accounts, any co-owner may
sign. When signing as attorney, executor, administrator, or fiduciary, please give your full title as such.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# YOUR VOTE IS IMPORTANT
VOTE TODAY IN ONE OF THREE WAYS:

|1. |  | VOTE BY TELEPHONE:   After you call the
phone number below, you will be asked to enter the control number at the bottom of the page. You will need to respond to only a
few simple prompts. Your vote will be confirmed and cast as directed.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Call toll-free in the U.S. or Canada at
1-866-626-4508 on a touch-tone telephone
| | --------------------------------------------------------------------------------

# OR

|2. |  | VOTE BY INTERNET:
Log-on to www.votestock.com
Enter your control number printed below
Vote your proxy by checking the appropriate boxes
Click on Accept Vote
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------

# OR

|3. |  | VOTE BY MAIL:   If you do not wish to vote
by telephone or over the internet, please complete, sign, date and return the above proxy card in the prepaid envelope provided.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# YOUR CONTROL NUMBER IS:

| |  | 
| |  | 

| | You may vote by telephone or Internet 24 hours a day, 7 days a week.
Your telephone or Internet vote authorizes the named proxies to vote in
the same manner as if you marked, signed and returned your proxy card. | 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

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