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Subject: Stock Valuation
Date: Wed, 4 Apr 2007 23:21:47 -0700
Message-ID: <BB375AF679D4A34E9CA8DFA650E2B04E031DF713@onstor-exch02.onstor.net>
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Thread-Topic: Stock Valuation
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From: "Frank Laurencio" <frank.laurencio@onstor.com>
To: "org-All Employees" <org-all@onstor.com>

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All,

I though after the discussion at today's all-hands that it would be
helpful to summarize the implications to employees of the recent IRS
regulations issued under section 409A of the Internal Revenue Code.
PLEASE NOTE THAT ONSTOR CANNOT AND WILL NOT OFFER YOU PERSONAL TAX
ADVICE.  THE TAX IMPLICATIONS OF STOCK TRANSACTIONS VARY GREATLY AMONG
INDIVIDUALS AND YOU SHOULD CONSULT WITH A PROFESSIONAL TAX ADVISOR.

The practical effect of 409A on private (pre-IPO) companies is that it
imposes much more formal requirements on establishing the fair market
value of our stock.  Since private company stock is not traded on an
exchange where the open market sets the value of the company, private
companies need to look elsewhere to determine their value.  Prior to
409A, private company boards of directors would make a determination at
each board meeting of the company's fair value and stock options were
then granted with exercise price equal to that per-share fair value.
Most importantly, for employee tax purposes, the IRS did not question
those board-determined valuations.  In cases where the SEC or IRS might
question the valuation, there could be costs charged to the company, but
there was no impact on the employee.

409A changed that very significantly by saying that if the IRS later did
not agree with a board determination of stock valuation, there would be
tax penalties imposed on both the company AND the employees personally.
However, there is a "safe-harbor" under 409A.  If the company obtains an
objective appraisal of its value and the board relies on that outside
appraisal, the employee can rely on that appraisal safely and avoid the
tax penalty risk.  Accordingly, private companies have started to engage
outside appraisal firms to provide valuations for their boards to rely
on for setting exercise prices on stock options.  ONStor's first
valuation was completed in March 2006 and we expect to have the second
valuation done in the next 2-4 weeks.

During the time since our 2006 appraisal, our business has grown rapidly
and the public market has been very favorable to comparable companies,
notably Isilon which completed a very successful IPO.  As a result, the
board has held off on pricing the stock option grants submitted over the
last 4 months pending the completion of the current valuation.  All
grants will still vest effective from your hire date (in the case of a
new hire grant) or from the date the grant was submitted to the board
(in the case of an incremental grant).

The 409A valuations are valid as of a specific date - they are neither
retroactive nor prospective.  We currently anticipate refreshing the
valuations from the external appraisal firm every six months.  In
between those appraisal dates, the board will continue to approve stock
option grants and whether the price changes from the preceding valuation
will be a board decision. Because we do not give tax advice, we cannot
give you advice on how to complete the form 83b unless you exercise on
the same date you receive the grant.

There are many technical issues on tax covered in this mail and there
may also be more basic questions about stock options, valuation, etc.  I
am always happy to answer any questions you may have --- just remember
that I can't give advice on your personal tax situation.

Best regards,
Frank

Frank Laurencio
CFO
ONStor, Inc.
254 E. Hacienda Av.
Campbell, CA 95008
Direct:  408-963-2461
Cell:      408-476-4525


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<P DIR=3DLTR><SPAN LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT =
SIZE=3D2 FACE=3D"Arial">All</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial">,</FONT></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial">I =
though</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> =
<FONT SIZE=3D2 FACE=3D"Arial">after</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT SIZE=3D2 =
FACE=3D"Arial">t</FONT><FONT SIZE=3D2 FACE=3D"Arial">he</FONT> <FONT =
SIZE=3D2 FACE=3D"Arial">d</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial">iscussion at =
today</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial">&#8217;</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial">s all-han</FONT><FONT SIZE=3D2 =
FACE=3D"Arial">d</FONT><FONT SIZE=3D2 FACE=3D"Arial">s that it would be =
helpful</FONT> <FONT SIZE=3D2 FACE=3D"Arial">to summarize the =
implications to employees of the recent IRS regulations issued under =
section 409A of the Internal Revenue Code.</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial"></FONT> <FONT SIZE=3D2 FACE=3D"Arial">PLEASE NOTE THAT =
ONSTOR CANNOT AND WILL NOT OFFER YOU PERSONAL TAX =
ADVICE.</FONT>&nbsp;<FONT SIZE=3D2 FACE=3D"Arial"> T</FONT><FONT =
SIZE=3D2 FACE=3D"Arial">HE TAX IMPLICATIONS OF STOCK TRANSACTIONS VARY =
GREATLY AMONG INDIVIDUALS AND YOU SHOULD CONSULT WITH A =
PROFESSIO</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial">NAL TAX ADVISOR</FONT><FONT =
SIZE=3D2 FACE=3D"Arial">.</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial">T</FONT><FONT SIZE=3D2 FACE=3D"Arial">he</FONT> <FONT =
SIZE=3D2 FACE=3D"Arial">practical effect</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT SIZE=3D2 =
FACE=3D"Arial">of 409A</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"> <FONT SIZE=3D2 FACE=3D"Arial">on private (pre-IPO) =
com</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT =
SIZE=3D2 FACE=3D"Arial">panies is that it imposes much more formal =
requirements on establishing the fair market value of our =
stock.</FONT>&nbsp;<FONT SIZE=3D2 FACE=3D"Arial"> S</FONT><FONT SIZE=3D2 =
FACE=3D"Arial">ince private company stock is not traded on an exchange =
where the open market sets the value of the</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT SIZE=3D2 =
FACE=3D"Arial">company, private companies need to look elsewhere to =
determine their value.</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us">&nbsp;<FONT SIZE=3D2 FACE=3D"Arial"> P</FONT><FONT =
SIZE=3D2 FACE=3D"Arial">rior to 409A, private</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT SIZE=3D2 =
FACE=3D"Arial">company</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial"></FONT> <FONT SIZE=3D2 =
FACE=3D"Arial">boards of directors would make a determination at each =
board meeting of the company</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial">&#8217;</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial">s fair value and stock =
options were then granted with exercise price equal =
to</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT =
SIZE=3D2 FACE=3D"Arial">that per-share fair value.&nbsp;</FONT> <FONT =
SIZE=3D2 FACE=3D"Arial">Most importantly, for employee tax purposes, the =
IRS did not question those</FONT> <FONT SIZE=3D2 =
FACE=3D"Arial">board-determined valuations.</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us">&nbsp;<FONT SIZE=3D2 =
FACE=3D"Arial"> I</FONT><FONT SIZE=3D2 FACE=3D"Arial">n cases where the =
SEC or IRS might question the valuation, there could be costs charged to =
the company, but there was no impact on the employee.</FONT></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial">409A =
changed that very significantly by saying that if the IRS later did not =
agree with a board determination of stock valuation, there would be tax =
penalties imposed on both the company AND the employees =
personally.</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial">&nbsp;</FONT> <FONT =
SIZE=3D2 FACE=3D"Arial">However,</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT SIZE=3D2 =
FACE=3D"Arial">there</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial"></FONT> <FONT SIZE=3D2 =
FACE=3D"Arial">is a</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"> <FONT SIZE=3D2 FACE=3D"Arial">&#8220;</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial">safe-harbor</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial">&#8221;</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial"> under =
409A</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT =
SIZE=3D2 FACE=3D"Arial">.&nbsp; If the company obtains an =
objective</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> =
<FONT SIZE=3D2 FACE=3D"Arial">appraisal</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial"></FONT> <FONT SIZE=3D2 FACE=3D"Arial">of its value and =
the board relies on that outside appraisal, the employee can rely on =
that appraisal safely and avoid the tax penalty risk.</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial">&nbsp;</FONT> <FONT SIZE=3D2 =
FACE=3D"Arial">Accordingly</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial">, private companies have</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT SIZE=3D2 =
FACE=3D"Arial">started to engage</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT SIZE=3D2 =
FACE=3D"Arial">outsid</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial">e appraisal firms to =
provide</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> =
<FONT SIZE=3D2 FACE=3D"Arial">valu</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial">ations for their boards to rely on for setting exercise =
prices on stock options.&nbsp;</FONT> <FONT SIZE=3D2 =
FACE=3D"Arial">ONStor</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial">&#8217;</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial">s first valuation was completed in March 2006 and we =
expect to</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> =
<FONT SIZE=3D2 FACE=3D"Arial">have</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial"></FONT> <FONT SIZE=3D2 FACE=3D"Arial">the =
second</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> =
<FONT SIZE=3D2 FACE=3D"Arial">valuation</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial"></FONT> <FONT SIZE=3D2 FACE=3D"Arial">done in the next =
2-4 weeks.</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial">During =
the time since our 2006 appraisal,</FONT> <FONT SIZE=3D2 =
FACE=3D"Arial">o</FONT><FONT SIZE=3D2 FACE=3D"Arial">ur</FONT><FONT =
SIZE=3D2 FACE=3D"Arial"> business has grown rapidl</FONT><FONT SIZE=3D2 =
FACE=3D"Arial">y</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"> <FONT SIZE=3D2 FACE=3D"Arial">and the public market has =
been very favorable to comparable companies, notably =
Isilon</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> =
<FONT SIZE=3D2 FACE=3D"Arial">which</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial"></FONT> <FONT SIZE=3D2 FACE=3D"Arial">completed a very =
successful IPO.</FONT>&nbsp;<FONT SIZE=3D2 FACE=3D"Arial"> A</FONT><FONT =
SIZE=3D2 FACE=3D"Arial">s a result, the board has held off on</FONT> =
<FONT SIZE=3D2 FACE=3D"Arial">pricing the stock option grants submitted =
over the last 4 months pending the completion of the current =
valuation.</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial">&nbsp;</FONT> <FONT =
SIZE=3D2 FACE=3D"Arial">All grants will still vest effective from</FONT> =
<FONT SIZE=3D2 FACE=3D"Arial">your hire date (in the case of a new hire =
grant) or from</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"> <FONT SIZE=3D2 FACE=3D"Arial">the</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial"></FONT> <FONT SIZE=3D2 FACE=3D"Arial">date the grant was =
submitted to the board (in the case of an incremental =
grant).</FONT></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT =
SIZE=3D2 FACE=3D"Arial">The 409A valuations are valid as of a specific =
date</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> =
<FONT SIZE=3D2 FACE=3D"Arial">&#8211;</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial"> they</FONT> <FONT SIZE=3D2 FACE=3D"Arial">are neither =
retroactive nor prospective.</FONT>&nbsp;<FONT SIZE=3D2 =
FACE=3D"Arial"></FONT> <FONT SIZE=3D2 FACE=3D"Arial">W</FONT><FONT =
SIZE=3D2 FACE=3D"Arial">e currently anticipate refreshing the valuations =
from</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> =
<FONT SIZE=3D2 FACE=3D"Arial">the</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial"></FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"> <FONT SIZE=3D2 FACE=3D"Arial">external appraisal firm =
every six months.</FONT>&nbsp;<FONT SIZE=3D2 FACE=3D"Arial"> =
I</FONT><FONT SIZE=3D2 FACE=3D"Arial">n between those appraisal dates, =
the board will continue to approve stock option =
grants</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial"> and</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT SIZE=3D2 =
FACE=3D"Arial">whether</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial"></FONT> <FONT SIZE=3D2 =
FACE=3D"Arial">the price changes from</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT SIZE=3D2 =
FACE=3D"Arial">the</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial"></FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT SIZE=3D2 =
FACE=3D"Arial">preceding valuation will</FONT> <FONT SIZE=3D2 =
FACE=3D"Arial">be a board decision.</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT SIZE=3D2 =
FACE=3D"Arial">B</FONT><FONT SIZE=3D2 FACE=3D"Arial">e</FONT><FONT =
SIZE=3D2 FACE=3D"Arial">cause</FONT> <FONT SIZE=3D2 FACE=3D"Arial">we do =
not</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT =
SIZE=3D2 FACE=3D"Arial">give ta</FONT><FONT SIZE=3D2 =
FACE=3D"Arial">x</FONT><FONT SIZE=3D2 FACE=3D"Arial"></FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT SIZE=3D2 =
FACE=3D"Arial">advice</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial">,</FONT><FONT SIZE=3D2 =
FACE=3D"Arial"></FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"> <FONT SIZE=3D2 FACE=3D"Arial">we cannot give you advice =
on</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT =
SIZE=3D2 FACE=3D"Arial">how to complete</FONT> <FONT SIZE=3D2 =
FACE=3D"Arial">the form 83b unless you exercise on the same date you =
receive the grant.</FONT></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial">There =
are many technical issues on tax</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial"> covered in this mail and there may also be more =
basic</FONT><FONT SIZE=3D2 FACE=3D"Arial"></FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT SIZE=3D2 =
FACE=3D"Arial">questions</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial"></FONT> <FONT SIZE=3D2 =
FACE=3D"Arial">about stock options, valuation, etc.</FONT>&nbsp;<FONT =
SIZE=3D2 FACE=3D"Arial"></FONT> <FONT SIZE=3D2 =
FACE=3D"Arial">I</FONT><FONT SIZE=3D2 FACE=3D"Arial"> am always happy to =
answer any questions you may have</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> <FONT SIZE=3D2 =
FACE=3D"Arial">--- just remember that I can</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial">&#8217;</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial">t give advice on =
your</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"> =
<FONT SIZE=3D2 FACE=3D"Arial">personal</FONT></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial"></FONT> <FONT SIZE=3D2 FACE=3D"Arial">tax =
situation.</FONT></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Arial">Best =
regards,</FONT></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"><FONT SIZE=3D2 =
FACE=3D"Arial">Frank</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"></SPAN><A NAME=3D""><SPAN =
LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Times New Roman">Frank =
Laurencio</FONT></SPAN></A></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Times New =
Roman">CFO</FONT></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Times New =
Roman">ONStor, Inc.</FONT></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Times =
New Roman">254 E. Hacienda Av.</FONT></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Times New =
Roman">Campbell, CA 95008</FONT></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Times =
New Roman">Direct:&nbsp; 408-963-2461</FONT></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"><FONT SIZE=3D2 FACE=3D"Times New =
Roman">Cell:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; =
408-476-4525</FONT></SPAN><SPAN LANG=3D"en-us"></SPAN><SPAN =
LANG=3D"en-us"></SPAN><SPAN LANG=3D"en-us"></SPAN></P>

<P DIR=3DLTR><SPAN LANG=3D"en-us"></SPAN></P>

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