<SUBMISSION>
<ACCESSION-NUMBER>0000950144-08-003318
<TYPE>DEF 14A
<PUBLIC-DOCUMENT-COUNT>2
<PERIOD>20080529
<FILING-DATE>20080429
<DATE-OF-FILING-DATE-CHANGE>20080429
<EFFECTIVENESS-DATE>20080429
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>HEALTHSTREAM INC
<CIK>0001095565
<ASSIGNED-SIC>7370
<IRS-NUMBER>621443555
<STATE-OF-INCORPORATION>TN
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>DEF 14A
<ACT>34
<FILE-NUMBER>000-27701
<FILM-NUMBER>08785221
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>209 10TH AVE SOUTH STE 450
<CITY>NASHVILLE
<STATE>TN
<ZIP>37203
<PHONE>6153013100
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>209 10TH AVE SOUTH STE 450
<CITY>NASHVILLE
<STATE>TN
<ZIP>37203
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>g13028dedef14a.htm
<DESCRIPTION>HEALTHSTREAM, INC. FORM DEF 14A
<TEXT>
<HTML>
<HEAD>
<TITLE>HEALTHSTREAM, INC. FORM DEF 14A</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 14pt; margin-top: 6pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>SCHEDULE 14A</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 12pt">Proxy Statement Pursuant to Section&nbsp;14(a) of the Securities<BR>
Exchange Act of 1934 (Amendment No.&nbsp;&nbsp;)</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Filed by the Registrant <FONT face="wingdings" size="2">&#254;</FONT><BR>
Filed by a Party other than the Registrant <FONT face="wingdings" size="2">&#111;</FONT>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Check the appropriate box:

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#111;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD>Preliminary Proxy Statement</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#111;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD><B>Confidential, for Use of the Commission Only (as permitted by Rule&nbsp;14a-</B><B>6(e)(2)</B><B>)</B></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#254;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD>Definitive Proxy Statement</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#111;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD>Definitive Additional Materials</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#111;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD>Soliciting Material Pursuant to &#167;240.14a-12</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 6pt">&nbsp;</DIV>

<DIV align="center" style="font-size: 12pt"><B>HEALTHSTREAM, INC.</B></DIV>
<DIV align="center" style="font-size: 10pt"><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
(Name of Registrant as Specified In Its Charter)</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">&nbsp;</DIV>

<DIV align="center">
</DIV>
<DIV align="center" style="font-size: 10pt"><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Payment of Filing Fee (Check the appropriate box):

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#254;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD>No fee required.</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#111;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD>Fee computed on table below per Exchange Act Rules&nbsp;14a-6(i)(1) and 0-11.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(1)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Title of each class of securities to which transaction applies:</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(2)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Aggregate number of securities to which transaction applies:</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(3)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule&nbsp;0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined):</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(4)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Proposed maximum aggregate value of transaction:</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(5)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Total fee paid:</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#111;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD>Fee paid previously with preliminary materials.</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#111;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD>Check box if any part of the fee is offset as provided by Exchange Act Rule&nbsp;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.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(1)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Amount Previously Paid:</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(2)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Form, Schedule or Registration Statement No.:</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(3)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Filing Party:</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(4)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Date Filed:</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>HEALTHSTREAM, INC.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>209 10</B><SUP style="font-size: 85%; vertical-align: text-top"><B>TH </B></SUP><B>Avenue South, Suite&nbsp;450<BR>
Nashville, Tennessee 37203<BR>
(615)&nbsp;301-3100</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>NOTICE OF ANNUAL MEETING OF SHAREHOLDERS<BR>
To Be Held May&nbsp;29, 2008</B><BR>
<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dear Shareholder:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On Thursday, May&nbsp;29, 2008, HealthStream, Inc. will hold its 2008 annual meeting of
shareholders at 209 10<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Avenue South, Suite&nbsp;450, Nashville, Tennessee 37203. The
meeting will begin at 2:00 p.m., Central Daylight Time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We welcome shareholders that own our common stock at the close of business on April&nbsp;3, 2008 to
vote at this meeting. A list of our shareholders will be available at our principal executive
offices at 209 10<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Avenue South, Suite&nbsp;450, Nashville, Tennessee, during ordinary
business hours beginning two days after this notice of the annual meeting is first sent to
shareholders. At the meeting, we will consider the following proposals:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. to elect three (3)&nbsp;persons nominated by the board of directors as Class&nbsp;II directors
to hold office for a term of three (3)&nbsp;years and until their respective successors have been
duly elected and qualified;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. to ratify the appointment of Ernst and Young LLP as the Company&#146;s independent
registered public accounting firm for the fiscal year ending December&nbsp;31, 2008; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. to transact such other business as may properly come before the meeting or any
postponement or adjournment of the meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our 2007 Annual Report to Shareholders is being mailed to shareholders with this proxy
statement. The annual report is not part of the proxy solicitation materials. Cameras and
recording devices are not permitted at the meeting. &#147;Street name&#148; holders will need to bring a copy
of a brokerage statement reflecting stock ownership as of the record date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN, AND RETURN AS
PROMPTLY AS POSSIBLE THE ENCLOSED PROXY IN THE ACCOMPANYING REPLY ENVELOPE. SHAREHOLDERS WHO ATTEND
THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON EVEN IF YOU HAVE PREVIOUSLY SIGNED AND
RETURNED YOUR PROXY.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%">By Order of the Board of Directors,

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%"><IMG src="g13028deg1302810.gif" alt="(SIG)"><BR>
Robert A. Frist, Jr.<BR>
<I>Chief Executive Officer</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Nashville, Tennessee<BR>
April&nbsp;29, 2008

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>HEALTHSTREAM, INC.</B>
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>209 10<SUP style="font-size: 85%; vertical-align: text-top">TH</SUP> AVENUE SOUTH, SUITE 450<BR>
NASHVILLE, TENNESSEE 37203</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROXY STATEMENT</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ANNUAL MEETING OF SHAREHOLDERS<BR>
May&nbsp;29, 2008</B><BR>
<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><U>PAGE</U></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101"><B>INFORMATION ABOUT THE ANNUAL MEETING AND VOTING</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#102"><B>What is the Purpose of the Annual Meeting?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#103"><B>What are the Board of Directors&#146; Recommendations?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#104"><B>Who May Attend the Annual Meeting?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#105"><B>Who is Entitled to Vote at the Annual Meeting?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#106"><B>Who is Soliciting My Vote?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#107"><B>On What Matters May I Vote?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#108"><B>How Do I Vote?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#155"><B>Can I Vote by Telephone or the Internet?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#109"><B>How Will Voting on Any Other Business be Conducted?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#110"><B>What is a &#147;Quorum&#148;?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#111"><B>What Vote is Required to Approve Each Item?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#112"><B>What if I Abstain from Voting?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#113"><B>How do I Vote My Shares if They are Held in the Name Of My Broker (Street Name)?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#114"><B>What is the Effect of a Broker Non-Vote?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#115"><B>Who Will Count the Votes?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#116"><B>Where Can I Find the Voting Results?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#117"><B>When are Shareholder Proposals Due in Order to be Included in
Our Proxy Statement for the 2009 Annual Meeting?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#118"><B>When are Other Shareholder Proposals Due?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#119"><B>How Can I Obtain Additional Information About the Company?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#120"><B>Can I Communicate Directly with Members of the Company&#146;s Board of Directors?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#121"><B>Who Should I Contact if I Have Questions?</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#122"><B>CORPORATE GOVERNANCE</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#123"><B>Board of Directors Meetings and Committees</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#124"><B>Executive Sessions</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#125"><B>Independent Directors</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#126"><B>Independence, Financial Literacy and Designation of Financial Experts</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#127"><B>Skills Assessment and Board Evaluation Process</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#128"><B>Nominating Committee Process</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#129"><B>Limitations on Other Board Service</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#130"><B>Communication with the Board of Directors</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#131"><B>Certain Relationships and Related Transactions</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#132"><B>Compensation Committee Interlocks and Insider Participation</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><U>PAGE</U></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#133"><B>Code of Conduct</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#134"><B>Code of Ethics for Executive Officers and Directors</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#135"><B>Mandatory Holding Periods</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#136"><B>Succession Planning</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#137"><B>Board Member Orientation</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#138"><B>Strategic Planning</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#139"><B>AUDIT COMMITTEE REPORT FOR 2007</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#140"><B>ITEM ONE &#151; ELECTION OF DIRECTORS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#141"><B>ITEM TWO &#151; RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#142"><B>EXECUTIVE AND DIRECTOR COMPENSATION</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>18</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#143"><B>Compensation Discussion and Analysis</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>18</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#144"><B>Compensation Committee Report</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>22</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#145"><B>Summary Compensation Table</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#146"><B>Grants of Plan-Based Awards</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#147"><B>Outstanding Equity Awards at Fiscal Year End</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>24</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#148"><B>Options Exercised During 2007</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>25</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#149"><B>Equity Compensation Plan Information</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>25</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#150"><B>Potential Payments Upon Termination or Change-in-Control</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>25</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#151"><B>Director Compensation</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#152"><B>STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#153"><B>Section&nbsp;16(A) Beneficial Ownership Reporting Compliance</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#154"><B>GENERAL INFORMATION</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>30</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INFORMATION ABOUT THE ANNUAL MEETING AND VOTING</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>What is the Purpose of the Annual Meeting?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">At HealthStream&#146;s annual meeting, shareholders will act upon the election of three (3)&nbsp;persons
nominated by the board of directors as Class&nbsp;II directors, the ratification of Ernst and Young
LLP as our independent registered public accounting firm for the fiscal year ending December
31, 2008, and any other matters that may properly come before the meeting. In addition, our
management will respond to questions from shareholders.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>What are the Board of Directors&#146; Recommendations?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Our Board of Directors recommends that you vote:</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FOR the election of each of the nominees set forth in this proxy statement to serve
as directors on our Board of Directors; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FOR the ratification of the appointment of Ernst &#038; Young LLP.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">If you complete and properly sign the accompanying proxy card and return it but do not specify
your vote, the proxy will be voted in accordance with the recommendations of the Board of
Directors set forth above. Further, if any other matter properly comes before the Annual
Meeting or any adjournment or postponement thereof, the proxy holders will vote as recommended
by the Board of Directors, or, if no recommendation is given, in their own discretion.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>Who May Attend the Annual Meeting?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Shareholders of record on April&nbsp;3, 2008 may attend the meeting. &#147;Street name&#148; holders will need
to bring a copy of a brokerage statement reflecting their ownership of our common stock as of
the record date. Cameras and recording devices are not permitted at the meeting.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>Who is Entitled to Vote at the Annual Meeting?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">The Board of Directors has fixed the close of business on Thursday, April&nbsp;3, 2008 as the record
date. Shareholders of record of our common stock at the close of business on April&nbsp;3, 2008 may
vote at this meeting.</DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">As of the record date, there were 22,384,631 shares of our voting common stock outstanding.
These shares were held by 3,006 holders of record. Every shareholder is entitled to one vote
for each share of common stock the shareholder held of record on the record date.</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>Who is Soliciting My Vote?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">This proxy solicitation is being made and paid for by HealthStream. In addition, we have
retained ComputerShare, Georgeson Shareholder and Corporate Election Services to assist in the
solicitation. We will pay these entities an aggregate of approximately $1,800 plus
out-of-pocket expenses for their assistance. Our directors, officers and other employees not
specially employed for this purpose may also solicit proxies by personal interview, mail,
telephone or facsimile. They will not be paid additional remuneration for their efforts. We
will also request brokers and other fiduciaries to forward proxy solicitation material to the
beneficial owners of shares of the common stock that the brokers and fiduciaries hold of
record. We will reimburse them for their reasonable out-of-pocket expenses.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>On What Matters May I Vote?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">You may vote on the election of three (3)&nbsp;persons nominated by the board of directors as Class
II directors to our board of directors and the ratification of Ernst and Young LLP as our
independent registered public accounting firm for the fiscal year ending December&nbsp;31, 2008.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>How Do I Vote?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Your vote is important. Whether or not you plan to attend the meeting in person, we urge you
to submit your voting instructions to the proxy holders as soon as possible by completing,
signing, dating, and promptly returning the enclosed proxy card in the enclosed prepaid
envelope provided or by voting by telephone or Internet as described below. If you complete and
properly sign the accompanying proxy card and return it in the enclosed prepaid envelope, your shares will be voted as you direct. If you return your signed proxy card but do not mark the
boxes showing how you wish to vote, your shares will be voted FOR the proposals. You have the
right to revoke your proxy at any time before the meeting by:</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>notifying our Senior Vice President, General Counsel and Secretary, Kevin O&#146;Hara,
at 209 10<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Avenue South, Suite&nbsp;450, Nashville, TN 37203;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>voting in person; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>submitting a later-dated proxy card.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="155"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>Can I Vote by Telephone or the Internet?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Yes, if you are a registered shareholder you may vote by telephone or the Internet by following
the instructions included with your proxy card. The deadline for shareholders of record to
submit voting instructions by telephone or the Internet is 11:59&nbsp;p.m. Eastern Daylight Savings
Time on May&nbsp;28, 2008.</DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">If your shares are held by your broker, often referred to as in &#147;street name,&#148; you may submit
voting instructions by telephone or electronically through the Internet as instructed on your
proxy card. The deadline for &#147;street name&#146; holders to submit voting instructions by telephone
or the Internet is 11:59&nbsp;p.m., Eastern Daylight Savings Time, on May&nbsp;28, 2008.</DIV>


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<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>How Will Voting on Any Other Business be Conducted?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">We do not know of any business to be considered at the 2008 annual meeting other than the
election of three (3)&nbsp;Class&nbsp;II directors to our board of directors and the ratification of
Ernst and Young LLP as our independent registered public accounting firm for the fiscal year
ending December&nbsp;31, 2008. If any other business is presented at the annual meeting, your signed
proxy card gives authority to Robert A. Frist, Jr., our Chief Executive Officer, and Arthur E.
Newman, our Executive Vice President, or either of them, to vote on such matters at their
discretion.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>What is a &#147;Quorum&#148;?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">A &#147;quorum&#148; is a majority of the outstanding shares. They may be present at the meeting or
represented by proxy. There must be a quorum for business to be conducted at the meeting.
Proxies received but marked as abstentions and broker non-votes will be included in the
calculation of the number of shares considered to be present at the meeting.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>What Vote is Required to Approve Each Item?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Each of the director nominees must receive affirmative votes from a plurality of the shares
voting to be elected.</DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">The ratification of the appointment of Ernst &#038; Young LLP as the Company&#146;s independent
registered public accounting firm for the fiscal year ending December&nbsp;31, 2008 must receive
affirmative votes from a majority of the shares voting to be elected.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>What if I Abstain from Voting?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">If you attend the meeting or send in your signed proxy card but abstain from voting on the
proposal, you will be counted for purposes of determining whether a quorum exists. If you
abstain from voting on the election of directors or the ratification of the independent
registered public accounting firm, your abstention will have no effect on the outcome.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="113"></A>
</DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>How do I Vote My Shares if They are Held in the Name Of My Broker (Street Name)?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">If your shares are held by your broker, often referred to as in &#147;street name,&#148; you will receive
a form from your broker seeking instruction as to how your shares should be voted. The Nasdaq
Global Market (&#147;Nasdaq&#148;) rules provide that brokers and nominees may not exercise their voting
discretion on certain non-routine matters without receiving instructions from the beneficial
owner of the shares. Therefore, if you do not issue instructions to your broker, your broker is
not allowed to exercise his or her voting discretion on certain non-routine matters and will
return a proxy card with no vote (the &#147;non-vote&#148;) on the non-routine matter. In cases of a
broker non-vote, the vote is treated as a vote against the related matter. For the remainder
of issues, including election of directors and ratification of the independent registered
public accounting firm, absent receiving instructions from you, your broker will vote your shares at his or her discretion on your behalf.</DIV>


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<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>What is the Effect of a Broker Non-Vote?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">A broker non-vote is treated as a vote against certain non-routine matters. Because directors
are elected by a plurality of the votes cast by shareholders represented and entitled to vote
at the Annual Meeting, &#147;non-votes&#148; are not considered in the election and because the
independent registered public accounting firm is ratified by a majority of the votes cast by
shareholders represented and entitled to vote at the Annual Meeting, &#147;non-votes&#148; are not
considered in the ratification.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>Who Will Count the Votes?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">A representative of our transfer agent, ComputerShare, Atlanta, will count the votes and act as
inspector of elections.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>Where Can I Find the Voting Results?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">We will announce the voting results at the Annual Meeting. We also will report the voting
results in our Quarterly Report on Form 10-Q for the second quarter of fiscal year 2008, which
we expect to file with the Securities and Exchange Commission, or the SEC, in August&nbsp;2008.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>When are Shareholder Proposals Due in Order to be Included in Our Proxy Statement
for the 2009 Annual Meeting?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Any shareholder proposals to be considered for inclusion in next year&#146;s proxy statement must be
submitted in writing to Secretary, HealthStream, Inc., 209 10<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Avenue South, Suite
450, Nashville, Tennessee 37203, prior to the close of business on December&nbsp;30, 2008.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>When are Other Shareholder Proposals Due?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Our Bylaws contain an advance notice provision that requires that a shareholder&#146;s notice of a
proposal to be brought before an annual meeting must be timely. In order to be timely, the
notice must be addressed to our Secretary and delivered or mailed and received at our principal
executive offices not less than 120&nbsp;days prior to the first anniversary of the date this notice
of annual meeting was provided to shareholders.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>How Can I Obtain Additional Information About the Company?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">We will provide a copy of our Annual Report on Form 10-K for the year ended December&nbsp;31, 2007,
excluding certain of its exhibits, without charge to any shareholder who makes a written
request to Investor Relations Department, HealthStream, Inc., 209 10<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Avenue South,
Suite&nbsp;450, Nashville, Tennessee 37203 or an oral request by calling (615)&nbsp;301-3237. The
Company&#146;s Annual Report on Form 10-K and various other filings also may be accessed on the
World Wide Web at www.healthstream.com or www.sec.gov. A copy of our Annual Report on Form
10-K for the year ended December&nbsp;31, 2007, excluding certain of its exhibits, is being mailed
with this proxy statement.</DIV>



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<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>Can I Communicate Directly with Members of the Company&#146;s Board of Directors?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Yes, shareholders may communicate with any of the Company&#146;s directors by writing to them c/o
HealthStream, Inc., 209 10<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Avenue South, Suite&nbsp;450, Nashville, Tennessee 37203.
Shareholders may also communicate with our directors by sending an email to
boardofdirectors@healthstream.com. Shareholders may communicate with the chair of any board
committee by sending an email to auditchair@healthstream.com (Audit Committee),
nomgovchair@healthstream.com (Nominating and Corporate Governance Committee) or
compchair@healthstream.com (Compensation Committee), or with our outside directors as a group
by sending an email to outsidedirectors@healthstream.com. Our Compliance Officer, Kevin
O&#146;Hara, reviews all such correspondence and regularly forwards to the Board a summary of all
such correspondence and copies of all correspondence that, in the opinion of the Compliance
Officer, deals with the functions of the Board or committees thereof or that he otherwise
determines requires their attention. Concerns relating to accounting, financial reporting,
internal controls or auditing matters are immediately brought to the attention of the Company&#146;s
Audit Committee and handled in accordance with procedures established by the Audit Committee.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B>Who Should I Contact if I Have Questions?</B></DIV>


<DIV align="left" style="margin-left: 2%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">If you have any questions about the Annual Meeting or these proxy materials, please contact
Kevin O&#146;Hara, our Senior Vice President, General Counsel and Secretary, or Mollie Condra, our
Senior Director of Communications, Research and Investor Relations, at 209 10<SUP style="font-size: 85%; vertical-align: text-top">th</SUP>
Avenue South, Suite&nbsp;450, Nashville, Tennessee 37203, (615)&nbsp;301-3100. If you are a registered
shareholder and have any questions about your ownership of our common stock, please contact our
transfer agent, ComputerShare, at 250 Royall Street, Canton, Massachusetts 02021 and (800)
568-3476. If your shares are held in a brokerage account, please contact your broker.</DIV>


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<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CORPORATE GOVERNANCE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You can access our corporate charter, Bylaws, Corporate Governance Principles, current
committee charters, Code of Conduct, Code of Ethics for Executive Officers and Directors and other
corporate governance-related information on our website, www.healthstream.com (under the
&#147;Governance&#148; section of the Investor page), or by addressing a written request to HealthStream,
Inc., Attention: Secretary, 209 10<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Avenue South, Suite&nbsp;450, Nashville, Tennessee
37203.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that effective corporate governance is important to our long-term health and our
ability to create value for our shareholders. With leadership from our Nominating and Corporate
Governance Committee, our Board of Directors regularly evaluates regulatory developments and trends
in corporate governance to determine whether our policies and practices in this area should be
enhanced. The Nominating and Corporate Governance Committee also administers an annual skills
assessment process as well as an annual self and peer evaluation process for the Board. In
addition, our directors are encouraged to attend director education programs.
</DIV>
<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Board of Directors Meetings and Committees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business is managed under the direction of our Board of Directors. Our Board of Directors
is responsible for establishing our corporate policies and strategic objectives, reviewing our
overall performance and overseeing management&#146;s performance. The Board of Directors delegates the
conduct of the business to our senior management team. Directors have regular access to senior
management. They may also seek independent, outside advice. The Board of Directors considers all
major decisions. The Board of Directors holds regular quarterly meetings, an annual strategic
planning meeting, and meets on other occasions when required by special circumstances. The Board
operates pursuant to our Corporate Governance Principles, a copy of which may be accessed in the
governance section of our website at www.healthstream.com.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board currently consists of nine members, a portion of which are standing for election or
re-election and are identified, along with their biographical information, under &#147;Proposal I &#151;
Election of Directors.&#148; During 2007, our Board of Directors held nine meetings, the Audit
Committee held eleven meetings, the Compensation Committee held one meeting and the Nominating and
Corporate Governance Committee held five meetings. As a group, the Board members attended 95% of
their Board and committee meetings. Our Chairman and Chief Executive Officer, Robert A. Frist,
Jr., as well as Frank Gordon, Gerard M. Hayden Jr., Jeffrey L. McLaren, Dale Polley, and Linda
Rebrovick, attended last year&#146;s annual shareholder meeting. Our Board of Directors has adopted a
policy strongly encouraging all of our directors to attend the annual meeting of shareholders. No
director attended fewer than 75% of the 2007 meetings of the board of directors and its committees
on which such director served.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of our directors also devotes his or her time and attention to the Board of Directors&#146;
principal standing committees. The Board of Directors has established three standing committees so
that certain areas can be addressed in more depth than may be possible at a full board meeting. Ad
hoc task forces are also formed to consider acquisitions or other strategic issues. Each standing
committee has a written charter that has been approved by the committee and the Board and that is
reviewed at least annually. The committees, their primary functions and memberships are as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Audit Committee</U>. The Audit Committee&#146;s primary duties and responsibilities are
oversight of the integrity of HealthStream&#146;s financial reporting process; oversight of our system
of internal controls regarding finance, accounting and legal compliance; selecting and evaluating
the qualification, independence and performance of our independent registered public accounting
firm;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">monitoring compliance with the Company&#146;s Code of Ethics for Executive Officers and Directors
and Code of Conduct; monitoring the reporting hotline; and providing an avenue of communication
among the independent registered public accounting firm, management and the Board of Directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee operates pursuant to the terms of a Restated Audit Committee Charter,
which may be accessed in the governance section of our website at www.healthstream.com. During
2007, the members of the Audit Committee were Ronald Hinds, Dale Polley, Gerard M. Hayden Jr., and
Jeffrey L. McLaren. Mr.&nbsp;Hinds served as the Chairman of our Audit Committee until March&nbsp;2007, at
which time Mr.&nbsp;Polley assumed the role of Chairman. Mr.&nbsp;Hinds resigned from the Board and his
Committee responsibilities effective April&nbsp;2, 2007. Mr.&nbsp;Hayden resigned from the Board and his
Committee responsibilities effective April&nbsp;22, 2008, and was appointed as Chief Financial Officer
of the Company. Mr.&nbsp;Hayden was replaced on the Audit Committee by Michael Shmerling. Each of our
audit committee members is independent within the meaning of the listing standards of Nasdaq and
Rule&nbsp;10A-3 of the Securities Exchange Act. See &#147;Audit Committee Report for 2007.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Compensation Committee</U>. The Compensation Committee has the responsibility for
reviewing and approving the salaries, bonuses, and other compensation and benefits of our
executive officers; evaluating the performance of the CEO; establishing and reviewing board
compensation; reviewing and advising management regarding benefits and other terms and conditions
of compensation of management; reviewing the Compensation Discussion and Analysis section of this
Proxy statement; issuing the Compensation Committee report included in this Proxy statement; and
administering the Company&#146;s 2000 Stock Incentive Plan (the &#147;2000 Plan&#148;). The Compensation
Committee operates pursuant to the terms of a Compensation Committee Charter, a copy of which may
be accessed in the governance section of our website at www.healthstream.com. Members of the
Compensation Committee during 2007 included Thompson S. Dent, Frank Gordon and Michael Shmerling,
each of whom is independent within the meaning of the listing standards of Nasdaq. See
&#147;Compensation Committee Report for 2007.&#148; Mr.&nbsp;Shmerling ceased to serve on the Compensation
Committee on April&nbsp;22, 2008 due to his appointment to the Audit Committee. He was replaced by
Linda Rebrovick.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Nominating and Corporate Governance Committee</U>. The Nominating and Corporate
Governance Committee provides assistance to the Board of Directors in identifying and recommending
individuals qualified to serve as directors of the Company, reviews the composition of the Board
of Directors, reviews and recommends corporate governance policies for the Company and annually
evaluates the skills and performance of the Board of Directors. The Nominating and Corporate
Governance Committee operates pursuant to the terms of a Nominating and Corporate Governance
Committee Charter, a copy of which may be accessed in the governance section of our website at
www.healthstream.com. Members of the Nominating and Corporate Governance Committee during 2007
included Linda Rebrovick, James F. Daniell and William W. Stead, each of whom is independent
within the meaning of the listing standards of Nasdaq.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Chairman and Chief Executive Officer proposes the agenda for the board meetings and
presents the agenda to the Nominating and Corporate Governance Committee, which reviews the agenda
with our Chairman and may raise other matters to be included in the agenda or at the meetings.
All directors receive the agenda and supporting information in advance of the meetings. Directors
may raise other matters to be included in the agenda or at the meetings. Our Chairman and Chief
Executive Officer and other members of senior management make presentations to the board at the
meetings and a substantial portion of the meeting time is devoted to the Board of Directors&#146;
discussion of and questions regarding these presentations.
</DIV>

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<DIV align="left">
<A name="124"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Executive Sessions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The independent directors meet in executive session (i.e. with no members of management
present) periodically, in at least two regularly scheduled meetings each year. The Chair of the
Nominating and Corporate Governance Committee has been designated by the independent directors to
preside at these meetings.
</DIV>
<DIV align="left">
<A name="125"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Independent Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors has determined that James F. Daniell, Thompson S. Dent, Frank Gordon,
Jeffrey L. McLaren, Dale Polley, Linda Rebrovick, Michael Shmerling, and William W. Stead do not
have any relationship that, in the opinion of the Board, would interfere with the exercise of the
Board member&#146;s independent judgment in carrying out the responsibilities of a director and none of
such directors has any relationship with the Company which would cause him or her to fail to meet
the definition of &#147;independent&#148; under the listing standards of Nasdaq. All members of the standing
committees of the Board of Directors are considered independent consistent with these rules.
</DIV>
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<A name="126"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Independence, Financial Literacy and Designation of Financial Experts</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee of the Board of Directors has determined that all members of the Audit
Committee are financially literate under the current listing standards of Nasdaq. The Board also
determined that Dale Polley qualifies as an &#147;Audit Committee Financial Expert&#148; as defined by the
regulations of the SEC adopted pursuant to the Sarbanes-Oxley Act of 2002 and that Mr.&nbsp;Polley is
&#147;independent&#148; as that term is used in item 7(d)(3)(iv) of Schedule&nbsp;14A of the Securities Exchange
Act.
</DIV>
<DIV align="left">
<A name="127"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Skills Assessment and Board Evaluation Process</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Nominating and Corporate Governance Committee is responsible for assessing the Board&#146;s
skills, evaluating director performance and providing feedback to directors for performance
improvement. Further, the Nominating and Corporate Governance Committee annually assesses the
skills required of the board to support appropriate governance and corporate oversight. In
connection with these responsibilities, the Nominating and Corporate Governance Committee annually
conducts a board skills assessment as well as self and peer evaluations for the full board. The
board evaluation process includes self and peer reviews, suggestions for individual improvement,
year to year comparison and trend analysis for both individual board members and the board on a
composite basis. The Board annually reviews the results to improve effectiveness of the board as a
whole. The skills assessment and board evaluation processes are used to determine skill
requirements for new board member nominations, assessing committee assignments, reviewing the
qualifications of incumbent directors to determine whether to recommend them to the Board of
Directors as nominees for reelection and to support improvement of the effectiveness of the Board.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Nominating Committee Process</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Nominating and Corporate Governance Committee is responsible for identifying qualified
individuals to serve as members of the company&#146;s Board of Directors as well as reviewing the
qualifications and performance of incumbent directors to determine whether to recommend them to the
Board of Directors as nominees for reelection. In identifying candidates for membership on the
Board of Directors, the Nominating and Corporate Governance Committee shall take into account all
factors it considers appropriate, which may include (a)&nbsp;ensuring that the Board of Directors, as a
whole, is diverse and consists of individuals with various and relevant career experience, relevant
technical skills, industry knowledge and experience, financial expertise (including expertise that
could qualify a director as an &#147;audit committee financial expert,&#148; as that term is defined by the
rules of the Securities and Exchange Commission), and local or community ties and (b)&nbsp;minimum
individual qualifications, including strength of character, mature judgment, time availability,
familiarity with the Company&#146;s business and industry, independence of thought and an ability to
work collegially. The Nominating and Corporate Governance Committee also may consider the extent
to which the candidate would fill a present need on the Board of Directors. With respect to new
candidates for Board service, a full evaluation generally also includes a detailed background
check.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Nominating and Corporate Governance Committee will consider nominees for the Board of
Directors recommended by shareholders. Shareholders may propose nominees for consideration by the
Nominating and Corporate Governance Committee by submitting the names and supporting information
to: Secretary, HealthStream, Inc., 209 10<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Avenue South, Suite&nbsp;450, Nashville,
Tennessee 37203. Shareholder recommendations for nominees must include certain biographical and
other information, which may be found in the Company&#146;s Amended and Restated Bylaws, and the
proposed nominee&#146;s written consent to nomination. The recommendations must be delivered or mailed
and received at our principal executive offices not less than 120&nbsp;days prior to the first
anniversary of the date this notice of annual meeting was provided to shareholders (December&nbsp;30,
2008).
</DIV>
<DIV align="left">
<A name="129"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Limitations on Other Board Service</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Code of Conduct and Governance Principles provide that a member of the board may not serve
on more than two other public company boards without Board approval. Otherwise, we do not believe
that our directors should be categorically prohibited from serving on boards and/or board
committees of other organizations. Service on boards and/or committees of other organizations must
also be consistent with our conflict of interest policy, as set forth in our Code of Conduct and
Code of Ethics for Executive Officers and Directors, which, among other things, require a director
to provide notice to the Board of his or her acceptance of a nomination to serve on the board of
another public company.
</DIV>
<DIV align="left">
<A name="130"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Communication with the Board of Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders may communicate with any of the Company&#146;s directors by writing to them c/o
HealthStream, Inc., 209 10<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Avenue South, Suite&nbsp;450, Nashville, Tennessee 37203.
Shareholders may also communicate with our directors by sending an email to
boardofdirectors@healthstream.com. Shareholders may communicate with the chair of any board
committee by sending an email to auditchair@healthstream.com (Audit Committee),
nomgovchair@healthstream.com (Nominating and Corporate Governance Committee) or
compchair@healthstream.com (Compensation Committee), or with our outside directors as a group by
sending an email to outsidedirectors@healthstream.com. Our Compliance Officer, Kevin
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">O&#146;Hara, reviews all such correspondence and regularly forwards to the Board a summary of all
such correspondence and copies of all correspondence that, in the opinion of the Compliance
Officer, deals with the functions of the Board or committees thereof or that he otherwise
determines requires their attention. Concerns relating to accounting, financial reporting,
internal controls or auditing matters are immediately brought to the attention of the Company&#146;s
Audit Committee and handled in accordance with procedures established by the Audit Committee.
</DIV>

<DIV align="left">
<A name="131"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Certain Relationships and Related Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since the beginning of the last fiscal year, we are aware of no related party transactions
between us and any of our directors, executive officers, 5% shareholders or their family members
which may require disclosure under Item&nbsp;404 of Regulation&nbsp;S-K under the Securities Exchange Act of
1934.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to its written charter, the Audit Committee reviews and approves all related party
transactions involving our directors, executive officers, immediate family members, or other
entities by which any of the foregoing persons are employed (&#147;Related Party&#148;). In connection with
this review and approval, the Committee reviews the relevant information and facts available to it
regarding any transactions being considered or reviewed and takes into account factors such as the
Related Party&#146;s relationship to the Company and interest (direct or indirect) in the transaction,
the terms of the transaction and the benefits to the Company of the transaction.
</DIV>
<DIV align="left">
<A name="132"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compensation Committee Interlocks and Insider Participation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The members of the Compensation Committee are responsible for determining executive
compensation and stock option grants to executive officers. During 2007, the following directors
served on the Compensation Committee: Thompson S. Dent, Frank Gordon and Michael Shmerling. None
of these persons has at any time been an officer or employee of the Company or any of its
subsidiaries. In addition, there are no relationships among the Company&#146;s executive officers,
members of the Compensation Committee or entities whose executive serves on the Board of Directors
or the Compensation Committee that require disclosure under applicable SEC regulations.
</DIV>
<DIV align="left">
<A name="133"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Code of Conduct</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has established a Code of Conduct that applies to all directors and employees of
HealthStream, Inc. The purpose of the Code of Conduct is, among other things, to provide written
standards for our directors and employees that are reasonably designed to support high standards of
business and personal ethics in the discharge of their duties. A copy of the Code of Conduct may
be accessed in the governance section of our website at www.healthstream.com.
</DIV>
<DIV align="left">
<A name="134"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Code of Ethics for Executive Officers and Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has established a Code of Ethics that applies to all executive officers and
directors of HealthStream, Inc., including our principal executive officer, principal financial
officer, and principal accounting officer. The purpose of the Code of Ethics is, among other
things, to provide written standards that are reasonably designed to deter wrongdoing and to
promote: honest and ethical conduct, including ethical handling of actual or apparent conflicts of
interest; full, fair, accurate, timely, and understandable disclosure in reports and documents
filed with the SEC and other public communications by the Company; compliance with applicable
governmental laws, rules and regulations; prompt internal reporting of violations of the code; and
accountability for adherence
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">to the code. A copy of the Code of Ethics, as well as any amendments to or waivers from the Code
of Ethics, may be accessed in the governance section of our website at www.healthstream.com.
</DIV>

<DIV align="left">
<A name="135"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Mandatory Holding Periods</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock option grants to members of the Board are subject to a mandatory one year holding period
after option exercise.
</DIV>
<DIV align="left">
<A name="136"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Succession Planning</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Annually, during an executive session of our directors, our Board reviews the Company&#146;s
succession plan. In preparation for this session, the chairman of the Nominating and Corporate
Governance Committee reviews with our Chairman and CEO the Company&#146;s succession plan.
</DIV>
<DIV align="left">
<A name="137"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Board Member Orientation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon nomination by the Board of a new board member, management and the Nominating and
Corporate Governance Committee conduct an orientation session with the new board member. During
this session, the board member is provided with an overview of the Company&#146;s operations, its
organizational structure, its products and services, management&#146;s risk assessment, corporate
governance documents and guidelines, compliance and reporting requirements, as well as our annual
board calendar. Orientation is further customized to address anticipated committee assignments or
specific requests of our board members.
</DIV>
<DIV align="left">
<A name="138"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Strategic Planning</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors and executive team meet annually to review the Company&#146;s strategic
plan. During this session, discussions include a high level review of the Company&#146;s mission and
vision as well as the Company&#146;s strategic plan for the next three to five years.
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AUDIT COMMITTEE REPORT FOR 2007</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee of the Board of Directors is comprised of three directors who are
independent directors as defined under Nasdaq Rule&nbsp;4200(a)(15). The members of the Audit
Committee are considered independent because they satisfy the independence requirements for Board
members prescribed by the Nasdaq listing standards and Rule&nbsp;10A-3 of the Securities Exchange Act.
During 2007, the members of the Audit Committee were Ronald Hinds, Dale Polley, Gerard M. Hayden
Jr., and Jeffrey L. McLaren. Mr.&nbsp;Hinds served as the Chairman of our Audit Committee until March
2007, at which time Mr.&nbsp;Polley assumed the role of Chairman. Mr.&nbsp;Hinds resigned from the Board
and his Committee responsibilities effective April&nbsp;2, 2007. Mr.&nbsp;Hayden resigned from the Board and
his Committee responsibilities effective April&nbsp;22, 2008, and was appointed as the Company&#146;s Chief
Financial Officer. Mr.&nbsp;Hayden was replaced on the Audit Committee by Michael Shmerling.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with its written charter, the Audit Committee is charged with oversight of the
integrity of HealthStream&#146;s financial reporting process; our system of internal controls regarding
finance, accounting and legal compliance; and the qualification, independence and performance of
our independent registered accounting firm. Management has the primary responsibility for the
financial statements and the reporting process including the systems of internal controls. Among
other things, the Committee monitors preparation by our management of quarterly and annual
financial reports and interim earnings releases; reviews Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations prior to the filing of our periodic reports with the
SEC; supervises our relationship with our independent registered public accounting firm, including
making decisions with respect to appointment or removal, reviewing the scope of audit services,
approving audit and non-audit services and annually evaluating the independent registered public
accounting firm&#146;s independence; and oversees management&#146;s implementation and maintenance of
effective systems of internal accounting and disclosure controls, including review of our policies
relating to legal and regulatory compliance. In fulfilling its oversight responsibilities, the
Audit Committee reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the accounting principles,
the reasonableness of significant judgments, and the clarity of disclosures in the financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee reviewed with the independent registered public accounting firm, who is
responsible for expressing an opinion on the conformity of our audited financial statements with
generally accepted accounting principles, their judgments as to the quality, not just the
acceptability, of the Company&#146;s accounting principles and such other matters as are required to be
discussed with the committee by Statement on Auditing Standards No.&nbsp;61, as amended by Statement on
Auditing Standards No.&nbsp;90 (Communications with Audit Committees). In addition, the Audit
Committee has discussed with the independent registered public accounting firm their independence
from management and the Company, including matters in the written disclosures required by
Independence Standards Board Standard No.&nbsp;1, and considered the compatibility of non-audit
services with the independent registered public accounting firm&#146;s independence.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee discussed with the Company&#146;s independent registered public accounting
firm the overall scope and plans for their audit. The Audit Committee meets with the independent
registered public accounting firm, with and without management present, to discuss the results of
their examinations, their understanding of the Company&#146;s internal controls, and the overall
quality of the Company&#146;s financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In reliance on the reviews and discussions referred to above, the Audit Committee recommended
to the Board of Directors (and the Board approved) that the audited financial
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">statements be included in the Annual Report on Form 10-K for the year ended December&nbsp;31, 2007
for filing with the Securities and Exchange Commission.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee is governed by a restated charter. The Audit Committee held eleven
meetings during fiscal year 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Dale Polley, Audit Committee Chairman<BR>
Ronald Hinds, Audit Committee Chairman (through March&nbsp;2007)<BR>
Gerard M. Hayden, Jr. Audit Committee Member (through April&nbsp;2008)<BR>
Jeffrey L. McLaren, Audit Committee Member

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The foregoing report of the Audit Committee shall not be deemed incorporated by reference by any
general statement incorporating by reference the Proxy Statement into any filing under the
Securities Act of 1933 or the Securities Exchange Act, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise be deemed filed
under such acts.
</DIV>

<DIV align="left">
<A name="140"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ITEM ONE &#151; ELECTION OF DIRECTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors is divided into three classes (Class&nbsp;I, Class&nbsp;II and Class&nbsp;III). At
each annual meeting of shareholders, directors constituting one class are elected for a three-year
term. Directors who were elected by the Board of Directors to fill a vacancy in a class whose term
expires in a later year are elected for a term equal to the remaining term for their respective
class. The Fourth Amended and Restated Charter of the Company provides that each class shall
consist, as nearly as may be possible, of one-third of the total number of directors constituting
the entire Board of Directors. The current Board of Directors is comprised of nine members. Three
members of the Board of Directors will be elected as Class&nbsp;II directors at the Annual Meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors has nominated and recommends to the shareholders, Jeffrey L. McLaren,
Linda Rebrovick, and Michael Shmerling for election as Class&nbsp;II directors to serve until the annual
meeting of shareholders in 2011 and until such time as their respective successors are duly elected
and qualified. Mr.&nbsp;McLaren, Ms.&nbsp;Rebrovick, and Mr.&nbsp;Shmerling are currently Class&nbsp;II directors of
the Company having been previously elected by the shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any of the nominees should become unable to accept election, the persons named in the proxy
may vote for such other person or persons as may be designated by the Board of Directors.
Management has no reason to believe that any of the nominees named above will be unable to serve.
Certain information with respect to directors who are nominees for election at the Annual Meeting
and with respect to continuing directors who are not nominees for election at the Annual Meeting is
set forth on the following pages.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The directors shall be elected by a plurality of the votes cast in the election by the holders
of the common stock represented and entitled to vote at the Annual Meeting.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Director</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Principal Occupation/Directorships</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Since</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->



<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Director Nominees:<br>
Class&nbsp;II Directors<br>
(Terms Expire 2011)</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"></TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
Jeffrey L. McLaren
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">41</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Jeffrey L. McLaren has served
as chief executive officer of
Southern Genesis Inc., a
management consulting company
since October&nbsp;2002. During
2005 and 2006 he served as
chief executive officer of
Safer Sleep LLC, a health
care and technology company.
Mr.&nbsp;McLaren is one of our
co-founders, served as our
president from 1990 through
November&nbsp;2000 and as our
chief product officer from
1999 through November&nbsp;2000.
Mr.&nbsp;McLaren graduated from
Trinity University with a
Bachelor of Arts in both
business and philosophy.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1990</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Linda Rebrovick
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">52</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ms. Rebrovick is a principal
and officer at NMG Advisers,
Inc., a management consulting
company. She previously
served as vice president of
healthcare sales for Dell
Inc., a global systems and
services company, from May
2005 to August&nbsp;2007. Prior
to joining Dell, Ms.
Rebrovick was executive vice
president and chief marketing
officer of BearingPoint,
Inc., formerly KPMG
Consulting, Inc. from January
2001 to May&nbsp;2005. Ms.
Rebrovick was an executive
vice president of KPMG
Consulting&#146;s Health Care
Consulting division from
February&nbsp;2000 to January
2001. Ms.&nbsp;Rebrovick was a
national managing partner of
KPMG LLP&#146;s Health Care
Consulting division, served
on its board of directors and
was the chair of its board
process and evaluation
committee from 1997 to 2000.
Ms.&nbsp;Rebrovick received a
Bachelor of Science in
marketing from Auburn
University.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2001</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Michael Shmerling
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">52</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mr. Shmerling is Chairman of
the Choice Food Group, a
manufacturer and distributor
of food products throughout
the United States. Mr.
Shmerling has also served as
a senior advisor to Kroll&#146;s
Background Screening Group, a
Marsh &#038; McLennan Company
since August&nbsp;2005. From
August&nbsp;2004 through August
2005, Mr.&nbsp;Shmerling served as
Chairman of Kroll&#146;s
Background Screening Group.
From May&nbsp;2001 until July
2004, Mr.&nbsp;Shmerling served as
Executive Vice President of
Kroll, Inc., a risk
consulting company, as well
as serving on Kroll&#146;s Board
of Directors. Mr.&nbsp;Shmerling
co-founded Background America
Inc. (&#147;BAI&#148;), a risk
mitigation and corporate
compliance company, in 1995,
which was sold to The
Kroll-O&#146;Gara Company in June
1999. Mr.&nbsp;Shmerling serves
on the board of directors of
Capital Bank &#038; Trust Co., a
financial institution, as
well as several non-profit
organizations. Prior to
founding BAI, Mr.&nbsp;Shmerling
spent over 16&nbsp;years in public
accounting and the privatized
criminal justice industry.
Mr.&nbsp;Shmerling received a
Bachelor of Accountancy from
the University of Oklahoma.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2005</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->14<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Director</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Principal Occupation/Directorships</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Since</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Continuing<br>
Directors:<br></B>
Class&nbsp;III Directors<br>
(Terms Expire 2009)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"></TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
Robert A. Frist, Jr.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">41</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Robert A. Frist, Jr., one of our
co-founders, has served as our
chief executive officer and
chairman of the board of
directors since 1990. Mr.&nbsp;Frist
graduated with a Bachelor of
Science in business with
concentrations in finance,
economics and marketing from
Trinity University.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1990</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Frank Gordon
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mr. Gordon has served as managing
partner of Crofton Capital LLP, a
private equity fund since January
2004. From 1998 through 2004,
Mr.&nbsp;Gordon served as vice
president of development and
managed care of MediSphere Health
Partners, Inc., a health care
services company. Mr.&nbsp;Gordon
serves on the board of directors
of Sy.Med Development, Inc. a
healthcare provider credentialing
application and data management
company. Mr.&nbsp;Gordon earned a
Bachelor of Science from the
University of Texas in Austin and
a Masters in Business
Administration from Georgia State
University.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2002</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>



<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Class&nbsp;I Directors<br>
(Terms Expire 2010)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"></TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"></TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
James F. Daniell, M.D.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">64</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dr. Daniell has maintained a
private medical practice at
Centennial Medical Center in
Nashville since 1984. A founding
member of the Society for
Reproductive Surgeons, he served
as past president of the
International Society of
Gynecologic Endoscopy and the
Nashville OB/GYN Society. Dr.
Daniell is also a director of
Safer Sleep LLC, a health care
and technology company. Dr.
Daniell holds a Bachelor of
Science from David Lipscomb
University and an M.D. from the
University of Tennessee.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1995</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thompson S. Dent
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">58</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mr. Dent has served as president
and chief executive officer of
MedTel International Corporation,
an international diagnostic
imaging company based in
Nashville, TN, since June&nbsp;2004.
Mr.&nbsp;Dent is a co-founder of
PhyCor, Inc., a physician
practice and IPA management
company. Mr.&nbsp;Dent served as
chairman of the board and chief
executive officer from June&nbsp;2000
to February&nbsp;2002 at which time he
transitioned out of the company
and continued as its chairman
until August&nbsp;2002. Mr.&nbsp;Dent holds
a Masters in Healthcare
Administration from The George
Washington University and a
Bachelors degree in Business from
Mississippi State University.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1995</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Director</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Principal Occupation/Directorships</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Since</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dale Polley
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">58</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mr. Polley retired as a vice
chairman and member of the board
of directors of First American
Corporation and First American
National Bank in 2000. In the
nine years preceding these
positions, Mr.&nbsp;Polley served in
various executive management
positions at First American,
which included serving as its
president from 1997 to 1999. Mr.
Polley serves on the board of
directors of O&#146;Charley&#146;s Inc., a
restaurant company, and Pinnacle
Financial Partners, Inc., a
financial services firm, both
public companies headquartered in
Nashville, Tennessee, as well as
several non-profit organizations.
Mr.&nbsp;Polley served as a director
for the Federal Reserve Bank of
Atlanta, Nashville branch, from
1995 to 2001. Mr.&nbsp;Polley earned a
Bachelor of Business
Administration in accounting from
Memphis State University.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2006</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">William W. Stead, M.D.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">59</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dr. Stead has served as associate
vice chancellor for health
affairs and chief information
officer of Vanderbilt University
Medical Center since 1991. In
2007, he added responsibility for
strategy and transformation at
the medical center. He is a
founding fellow of the American
College of Medical Informatics
and the American Institute for
Engineering in Biology and
Medicine and a member of the
Institute of Medicine of the
National Academy of Sciences and
Computer Science and
Telecommunication Board of the
National Research Council. He
served as a presidential
appointee to the Systemic
Interoperability Commission. He
is past Chairman, Board of
Regents, National Library of
Medicine, and Past President of
the American College of Medical
Informatics. Dr.&nbsp;Stead earned a
Bachelor of Arts in chemistry and
an M.D. from Duke University.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1998</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE &#147;FOR&#148; EACH OF THE DIRECTOR NOMINEES.</B>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="141"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ITEM TWO &#151; RATIFICATION OF APPOINTMENT OF INDEPENDENT<BR>
REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee has appointed Ernst &#038; Young LLP as our independent registered public
accounting firm for the fiscal year ending December&nbsp;31, 2008. Services provided to the Company and
its subsidiaries by Ernst &#038; Young LLP in fiscal 2007 are described below under &#147;Audit and Non-Audit
Fees.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Representatives of Ernst &#038; Young LLP will be present at the Annual Meeting. They will have
the opportunity to make a statement if they desire to do so and we expect that they will be
available to respond to questions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ratification of the appointment of Ernst &#038; Young LLP requires the affirmative vote from a
majority of the votes cast by the holders of the shares of common stock voting in person or by
proxy at the Annual Meeting. If the Company&#146;s shareholders do not ratify the appointment of Ernst
&#038; Young LLP, the Audit Committee will reconsider the appointment and may affirm the appointment or
retain another independent accounting firm. Even if the appointment is ratified, the Audit
Committee may in the future replace Ernst &#038; Young LLP as our independent registered public
accounting firm if it is determined that it is in the Company&#146;s best interest to do so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE &#147;FOR&#148; THE
RATIFICATION OF THE APPOINTMENT OF ERNST &#038; YOUNG LLP AS THE INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2008.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Audit and Non-Audit Fees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Audit Fees</I>. Fees for audit services totaled $232,786 and $204,303 in 2007 and 2006,
respectively, including fees associated with the audit of our annual financial statements and the
reviews of our quarterly reports on Form 10-Q.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Audit-Related Fees</I>. Fees for audit-related services during 2007 and 2006 totaled $76,939 and
$166,400, respectively. Audit-related services principally include acquisition audit services
associated with the acquisition in March&nbsp;2007 of The Jackson Organization, Research Consultants,
Inc., consultation related to accounting and disclosure of transactions, and the annual audit of
the Company&#146;s employee benefit plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Tax Fees</I>. Fees for tax services totaled $38,937 and $55,740 during 2007 and 2006,
respectively. The tax fees relate to federal and state tax compliance matters, including the
utilization of our net operating losses as well as tax advice and planning.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>All Other Fees</I>. There were no other fees paid during 2007 and 2006 that were not included in
the captions above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All fees paid to Ernst &#038; Young LLP were approved by the Audit Committee pursuant to Regulation&nbsp;S-X,
Rule&nbsp;2-01(c)(7)(i).
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Pre-Approval of Audit and Non-Audit Fees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee pre-approves all audit and non-audit services provided by our independent
registered public auditing firm. In 2007 and 2006, the Audit Committee approved all audit and
non-audit fees disclosed above. The Audit Committee&#146;s pre-approval policy provides for
pre-approval by the Audit Committee of specifically defined audit and non-audit services. Unless
the specific service has been previously approved with respect to that year, the Audit Committee
must approve the permitted service before the independent registered public accounting firm is
engaged to perform it. The Audit Committee has delegated to the Chairman of the Audit Committee
the authority to approve permitted services provided that the Chairman reports any decisions to the
Audit Committee at its next scheduled meeting.
</DIV>
<DIV align="left">
<A name="142"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXECUTIVE AND DIRECTOR COMPENSATION</B>
</DIV>

<DIV align="left">
<A name="143"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compensation Discussion and Analysis</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Overview of Compensation Process.</U> The Compensation Committee of the Company&#146;s Board
of Directors (the &#147;Committee&#148;) is comprised solely of non-employee, outside, independent directors.
Messrs.&nbsp;Dent, Gordon, and Shmerling have each served as members of the Committee since the
beginning of the Company&#146;s last fiscal year, with Mr.&nbsp;Dent serving as the Committee&#146;s chair.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Committee is responsible for setting the compensation of the Company&#146;s executive officers,
overseeing the Board&#146;s evaluation of the performance of our chief executive officer and
administering the Company&#146;s equity-based and incentive plans, among other things. The Committee
undertakes these responsibilities pursuant to a written charter adopted by the Committee which is
reviewed at least annually by the Committee. The Compensation Committee Charter may be accessed on
our website in the governance section of our investor tab at www.healthstream.com.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Committee annually reviews executive compensation and the Company&#146;s compensation policies
to ensure that the Chief Executive Officer and the other executive officers are rewarded
appropriately for their contributions to the Company and that the overall compensation strategy
supports the objectives and values of our organization, as well as shareholder interests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Committee also solicits the views and recommendations of our Chief Executive Officer when
setting the base salaries of each member of the executive team, given his insight into internal pay
equity and positioning issues, as well as executive performance. At a Committee meeting typically
held during the first quarter of each year, the Chief Executive Officer summarizes his assessment
of the performance during the previous year of each member of the executive team, including his
recommendations on any compensation adjustments for members of the executive team. Following the
Chief Executive Officer&#146;s presentation and Committee discussion, the Committee discusses and
approves any compensation adjustments for each member of the executive team, based on competitive
considerations, the Chief Executive Officer&#146;s assessment of individual performance, the Company&#146;s
performance and the executive&#146;s current salary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The process is similar for determining the compensation adjustments for the Chief Executive
Officer, except that the Chief Executive Officer does not provide the Committee with a
recommendation. The Chief Executive Officer presents a self-assessment of his performance during
the year to the Committee, which then meets to discuss and approve any compensation adjustment,
based on its assessment of the Chief Executive Officer&#146;s performance, the Company&#146;s performance and
the Chief Executive Officer&#146;s current salary. Historically, Mr.&nbsp;Frist has elected to receive
annual cash compensation at levels below the average base compensation levels of chief executive
officers at comparable companies and below those recommended by the Committee.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Compensation Philosophy.</U> The fundamental objective of our executive compensation
policies is to attract and maintain executive leadership that will execute the Company&#146;s business
strategy, uphold the Company&#146;s mission, vision and values and deliver results and long-term value
to the Company&#146;s shareholders. Accordingly, the Committee seeks to develop and maintain a
compensation structure that will attract, retain and motivate highly qualified and high-performing
executives through compensation that is fair, balanced, aligned with shareholder interests, and
linked to overall financial performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is the Committee&#146;s goal to have a portion of each executive&#146;s compensation contingent upon
the Company&#146;s financial performance, provided a reasonable return is achieved consistent with
growth in earnings or similar financial metrics, as well as providing equity-based compensation
that encourages sustained long-term performance. The Committee&#146;s compensation philosophy for the
executive team emphasizes an overall analysis of the executive&#146;s performance for the year,
projected role and responsibilities, required impact on execution of the Company&#146;s strategy,
external pay practices, total cash and equity compensation and other factors the Committee deems
appropriate. Our philosophy also considers employee retention, vulnerability to recruitment by
other companies and the difficulty and costs associated with replacing executive talent. Based on
these objectives, the Committee has determined that our Company should provide its executives
compensation packages comprised of three primary elements: (i)&nbsp;base salary, which reflects
individual performance and is designed primarily to be competitive within the Company&#146;s market;
(ii)&nbsp;annual cash bonuses based on the financial performance of the Company, in accordance with the
goals established by the Committee; and (iii)&nbsp;long-term stock-based incentive awards which
strengthen the mutuality of interest between executive officers and our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The specific analysis regarding the components of total executive compensation for 2007 are
described below. The primary components of the 2007 program were cash compensation, consisting of
a base salary, and equity incentives, consisting of stock options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Base Salary</U>. We seek to provide base salaries for our executive officers that provide
a secure level of guaranteed cash compensation in accordance with their experience, professional
status and job responsibilities. Each year the Committee reviews and approves a revised annual
salary plan for executive officers, taking into account several factors, including prior year
salary, responsibilities, tenure, performance, salaries paid by similar companies for comparable
positions, and the Company&#146;s recent financial performance. Taking these factors into account, the
Committee approved base salaries for Named Executive Officers in the following amounts:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2007 Base</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2006 Base</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percentage</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name and Title</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Salary<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Salary<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Increase</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert A Frist, Jr., President and Chief
Executive Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">195,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">185,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Arthur E. Newman, Executive Vice
President and Chief Financial Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J. Edward Pearson, Senior Vice
President</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kevin O&#146;Hara, Senior Vice President,
General Counsel and Secretary<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">18.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Susan A. Brownie, Senior Vice
President, Chief Financial Officer,
and Secretary<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.8</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Effective February 1 of each year.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Mr.&nbsp;O&#146;Hara was promoted to Senior Vice President and General Counsel effective February
1, 2007.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Mrs.&nbsp;Brownie left the Company in August&nbsp;2007.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Cash Bonuses</U>. In addition to base salary, our cash bonus plan compensation provides
our executive officers with the potential for enhanced cash compensation based on the financial
performance of the Company. For the 2007 Cash Bonus Plan, the Committee established performance
objectives that would reward senior management for significant growth in earnings. The Committee
chose earnings growth as a measure because it believed that there is a strong relationship between
growth in earnings and growth in shareholder value. The plan was structured to provide bonus
payouts (as a percentage of base salary) for achieving certain net profit goals for 2007. The bonus
payouts were structured as follows: 1) 0.75&nbsp;percent for achieving the minimum threshold level of
net profit of $3.2&nbsp;million, 2) 1.75&nbsp;percent for achieving the target level of net profit of $3.5
million, and 3) 11.75&nbsp;percent for achieving the maximum level of net profit of $4.9&nbsp;million. Since
the Company did not achieve its minimum threshold net profit level for 2007, no cash bonuses were
awarded to our Named Executive Officers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Long-Term Stock-Based Incentive Compensation.</U> As described above, one of our key
compensation philosophies is that long-term stock-based incentive compensation should strengthen
and align the interests of our executive officers with our shareholders. The Committee believes
that the strategy of time-based vesting is in the best interest of shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity incentive awards are generally granted to our executive officers on an annual basis.
Award levels in 2007 were consistent with the objectives and approaches discussed above, and
consistent with the Company&#146;s retention, performance, and shareholder alignment objectives. The
Committee typically approves these awards at its first quarter Committee meeting. Awards are
granted on the date of the Committee meeting. The Committee may also approve additional equity
incentive awards in certain special circumstances, such as promotion of an executive officer to a
new position, new executive team members, or in recognition of special contributions or
achievements by an executive officer. During 2007, the following stock options for the purchase of
the Company&#146;s common stock were granted to our Named Executive Officers pursuant to the 2000 Plan:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Shares Subject to Time-Based</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Aggregate Grant Date</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name and Title</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Vesting Option Grant</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Price<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Fair Value</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert A Frist, Jr., President and Chief
Executive Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Arthur E. Newman, Executive Vice
President and Chief Financial Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J. Edward Pearson, Senior Vice
President</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kevin O&#146;Hara, Senior Vice President,
General Counsel and Secretary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Susan A. Brownie, Senior Vice
President, Chief Financial Officer,<br>
and Secretary<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The exercise price per share is equal to the fair market value of the common stock on
the date of the grant.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Mrs.&nbsp;Brownie left the Company in August&nbsp;2007 and forfeited those options granted in
2007.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The stock options are subject to the terms of the 2000 Plan and the individual grant award
agreements. The options vest annually, in four increments as of the first, second, third and
fourth anniversaries of the grant date, subject to acceleration as contemplated in the 2000 Plan.
Each of the options has an exercise price equal to the fair market value of our common stock at the
time of the grant, as determined by the closing price of our common stock on Nasdaq on the date of
the grant. The aggregate grant date fair value of each option award is computed in accordance with
Statement of Financial Accounting Standards No.&nbsp;123R, or FAS 123R.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Chief Executive Officer Compensation.</U> In establishing the compensation of Robert A.
Frist, Jr., the Company&#146;s Chief Executive Officer, the Compensation Committee utilized the same
compensation policies applicable to executive officers in general; however, Mr.&nbsp;Frist has elected
to receive annual cash compensation at levels below the average base compensation levels of chief
executive officers at comparable companies. Effective in 2007, Mr.&nbsp;Frist&#146;s annual base salary was
increased from $185,000 to $195,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Perquisites and Other Benefits.</U> The Company has paid commuting expenses (of $26,685)
to Nashville, Tennessee, to Arthur E. Newman, including tax gross up payments to Mr.&nbsp;Newman to
cover income tax associated with such payments. Our executive officers are also eligible for
benefits generally available to and on the same terms as the Company&#146;s employees including health
insurance, disability insurance, dental insurance, and life insurance. We reimburse our Chief
Executive Officer for life insurance coverage in an amount not to exceed $10,000. While the
Company maintains a 401(k) Plan, the Company has not provided any matching contributions under such
plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Employment Agreement, Severance and Change In Control Agreements.</U> We maintain an
employment agreement with Robert A. Frist, Jr., our chief executive officer, the term of which is
automatically extended for successive one year periods unless on or before a date that is 90&nbsp;days
prior to the expiration of the employment term either the Company or Mr.&nbsp;Frist shall have given
written notice to the other of its or his intention not to further extend the employment term, in
which case the employment agreement shall expire and terminate at the end of the extended
employment term. Mr.&nbsp;Frist is also entitled to participate in any bonus program or stock option
plan that is generally available to our officers or senior management. In addition, Mr.&nbsp;Frist is
eligible for reimbursement of life insurance coverage in an amount not to exceed $10,000 annually.
Under his employment agreement, Mr.&nbsp;Frist has agreed not to compete with us and not to solicit our
customers or employees for one year after his employment is terminated, with limited exceptions.
Mr.&nbsp;Frist is entitled to severance benefits if we terminate him without cause. He is also entitled
to severance benefits if he resigns for good reason after a change in control, if he resigns upon
the occurrence of a material change in the terms of his employment or if he resigns upon the
occurrence of a material breach of the agreement by the Company. If any such termination occurs,
Mr.&nbsp;Frist will be entitled to a severance benefit equal to 1.5 times the most recent recommended
salary by our Compensation Committee for him. In addition, if Mr.&nbsp;Frist terminates his employment
for good reason after the occurrence of a change in control, all options, shares and other benefits
will fully vest immediately.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the 2000 Plan, any outstanding stock options become fully exercisable and immediately
vested upon a change of control, as defined in the 2000 Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Compensation Decisions for 2008.</U> In April&nbsp;2008, the Committee reviewed the
performance and compensation of the executive team, discussed the hiring of a Chief Financial
Officer, and discussed the grant of equity-based rewards to executive officers. In addition, the
Committee provided management with its philosophy with regard to the 2008 Incremental Net Income
Incentive Plan, reflecting tiered bonuses as a percentage of base salary ranging from a minimum
payout of 4.2&nbsp;percent for exceeding the Company&#146;s budgeted net income for 2008, with incremental
payouts for net income performance above the minimum level, and a maximum payout of 35&nbsp;percent for
net income performance significantly higher than the minimum payout level. The Committee approved
the grant of stock options to management during the April&nbsp;2008 meeting.<U> </U>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below summarizes the current base salary levels and 2008 equity incentive grants for
the Named Executive Officers, in addition to Mr.&nbsp;Hayden and Mr.&nbsp;Doster, who we anticipate will be
Named Executive Officers in our 2009 proxy statement.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shares Subject to Time-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2008 Base</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Based Vesting</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name and Title</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Salary <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Option Grant <SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Price</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert A Frist, Jr., President and Chief
Executive Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">205,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Arthur E. Newman, Executive Vice
President and Chief Financial Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J. Edward Pearson, Senior Vice
President</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kevin O&#146;Hara, Senior Vice President,
General Counsel and Secretary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gerard M. Hayden, Jr., Senior Vice
President and Chief Financial Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">75,000</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jeffrey S. Doster, Senior Vice President
and Chief Technology Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">75,000</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Effective February 1 of each year, or upon date of hire, if applicable.<BR></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The exercise price per share is equal to the fair market value of the common stock on the
date of the grant.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Mr.&nbsp;Hayden and Mr.&nbsp;Doster will begin employment with the Company in May&nbsp;2008 and
will be granted stock options at that time. The options will have an exercise price equal
to the fair market value of our common stock on the date of grant.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Tax Deductibility of Compensation<B>.</B></U> Section 162(m) of the Internal Revenue Code (the
&#147;Code&#148;) generally disallows a corporate deduction for compensation over $1.0&nbsp;million paid to the
Company&#146;s CEO and any of the other four most highly compensated executive officers. The $1.0
million limitation applies to all types of compensation, including amounts realized upon the
exercise of stock options, unless the awards and plan under which the awards are made qualify as
&#147;performance based&#148; under the terms of the Code and related regulations. Based on applicable tax
regulations, any taxable compensation derived from the Company&#146;s cash bonus plan and from the
exercise of stock options granted pursuant to the 2000 Plan should qualify as &#147;performance based&#148;
compensation for purposes of Section&nbsp;162(m). None of the Company&#146;s executive officers received
compensation that exceeded the applicable deductibility limits in 2007.
</DIV>
<DIV align="left">
<A name="144"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compensation Committee Report</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis
set forth above with our management. Taking this review and discussion into account, the
undersigned Committee members recommended to the Board of Directors that the Board approve the
inclusion of the Compensation Discussion and Analysis in our Proxy Statement on Schedule&nbsp;14A for
filing with the SEC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Submitted by the Compensation Committee of the Board of Directors:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Thompson S. Dent, Compensation Committee Chairman<BR>
Frank Gordon, Compensation Committee Member<BR>
Michael Shmerling, Compensation Committee Member

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The foregoing report of the Compensation Committee shall not be deemed incorporated by reference by
any general statement incorporating by reference the Proxy Statement into any filing under the
Securities Act of 1933 or the Securities Exchange Act, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise be deemed filed
under such acts.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="145"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Summary Compensation Table</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information for fiscal year 2007, regarding the compensation
earned by the Chief Executive Officer and the other most highly compensated executive officers
based on salary and bonus earned during 2007 (&#147;Named Executive Officers&#148;).
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Option</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">All Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name and Principal Position</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Salary</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Bonus<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Awards<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Compensation<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert A. Frist, Jr.<br></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">194,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">40,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">260,366</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Chief Executive Officer, President</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">182,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">254,113</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Arthur E. Newman<br></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">289,729</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Executive Vice President and<br></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275,127</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Chief Financial Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J. Edward Pearson<br></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">278,685</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Senior Vice President</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154,976</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kevin P. O&#146;Hara<br>
Senior Vice President,<br></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210,584</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General Counsel and Secretary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,566</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Susan A. Brownie <SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP><br>
Senior Vice President,<br></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196,988</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Chief Financial Officer, and
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226,891</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Secretary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Bonuses listed for each fiscal year relate to payments within a fiscal year of amounts
related to the previous fiscal year.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Represents the proportionate amount of the total value of all option awards to named
executive officers recognized as an expense during 2007 for financial accounting purposes
under SFAS 123R, and for the purpose of this schedule, excludes the estimate of
forfeitures related to service-based vesting conditions. For significant assumptions with
regard to such valuation under SFAS 123R, see Note 11 &#151; Stock Based Compensation in the
Notes to Consolidated Financial Statements of our Annual Report on Form 10-K for the year
ended December&nbsp;31, 2007 filed with the Securities and Exchange Commission on March&nbsp;28,
2008.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Includes other compensation for the reimbursement of life insurance premiums for Mr.
Frist and reimbursement of expenses associated with commuting to Nashville, Tennessee as
well as related gross up tax payments for Mr.&nbsp;Newman.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Mrs.&nbsp;Brownie left the Company in August&nbsp;2007.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left">
<A name="146"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Grants of Plan-Based Awards</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides information related to options granted to the Named Executive
Officers during the 2007 fiscal year and the exercise price of the stock options. Grants are made
in accordance with the 2000 Plan, which includes grants made at fair market value on the date of
grant, vesting in four equal installments on the anniversary of the grant date, and eight year
terms. The aggregate grant date fair value of such annual option grants have ranged from one-fifth
to one-fourth of the Named Executive Officer&#146;s total compensation. We have not issued restricted
stock, stock appreciation rights or other equity-based awards to our executive officers. We have
not modified or repriced outstanding options.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">All Other Option</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Grant</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Estimated Future Payments Under Non-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Awards: Number</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Date Fair</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Equity Incentive Plan Awards <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">of Securities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">or Base</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Value of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Grant</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Underlying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Price of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Option</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Date</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Threshold</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Target</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Maximum</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Options</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Award</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Awards<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert A. Frist, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Arthur E. Newman</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/7/2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J. Edward Pearson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/7/2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kevin O&#146;Hara</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/7/2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Susan A. Brownie</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/7/2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Represents the target, threshold and maximum bonus levels that could have been earned under
the company&#146;s cash bonus plan for fiscal year 2007. The plan is described under &#147;Compensation
Discussion and Analysis &#151; Cash Bonuses.&#148; No cash bonuses were awarded under the plan.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Represents the aggregate fair value computed in accordance with SFAS 123R. For significant
assumptions with regard to such valuation under SFAS 123R, see Note 11 &#151; Stock Based
Compensation in the Notes to Consolidated Financial Statements of our Annual Report on Form
10-K for the year ended December&nbsp;31, 2007 filed with the Securities and Exchange Commission on
March&nbsp;28, 2008.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left">
<A name="147"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Outstanding Equity Awards at Fiscal Year End</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides information related to options outstanding held by the Named
Executive Officers at the end of fiscal year 2007. We have not issued stock appreciation rights or
warrants to our executive officers.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="39%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of Securities</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of Securities</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Underlying</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Underlying</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Option</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Option</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unexercised Options-</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unexercised Options-</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Expiration</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Exercisable</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Unexercisable</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Price<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Date<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert A. Frist, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2/19/2012</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2/25/2013</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Arthur E. Newman</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1/28/2008</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10/17/2008</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9/17/2009</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4/16/2011</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2/19/2012</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2/25/2013</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2/9/2014</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/7/2015</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J. Edward Pearson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6/14/2014</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/7/2015</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kevin P. O&#146;Hara</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/15/2010</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4/16/2011</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2/19/2012</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2/25/2013</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2/9/2014</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/7/2015</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The exercise price is the closing price of our common stock on Nasdaq on the date of grant.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Options generally vest ratably over four years and expire eight years from the date of grant.</TD>
</TR>



</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<DIV align="left">
<A name="148"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Options Exercised During 2007</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides information related to options exercised and values realized by
our Named Executive Officers under the Company&#146;s 2000 Plan during the 2007 fiscal year:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Value Realized</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Acquired on Exercise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">on Exercise <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Susan A. Brownie</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">63,529</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The value realized equals the difference between the option exercise price and the closing
price of the Company&#146;s stock on the date of exercise, multiplied by the number of shares to
which the exercise relates.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left">
<A name="149"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Equity Compensation Plan Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides information related to securities available and outstanding under
the Company&#146;s equity compensation plans as of the end of the 2007 fiscal year:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of securities</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of securities</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">remaining available for</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">to be issued upon</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">exercise price of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">future issuance under equity</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">exercise of outstanding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">outstanding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">compensation plans</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">options, warrants and</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">options, warrants</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(excluding securities</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Plan Category</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">rights</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">and rights</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">reflected in the first column)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation
plans approved by
security holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,538,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,905,437</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation
plans not approved
by security holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD style="border-top: 1px solid #000000"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,538,807</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>3.36</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,905,437</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="150"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Potential Payments Upon Termination or Change-in-Control</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2007, we maintained only one employment agreement, with Robert A. Frist,
Jr., our Chief Executive Officer. The term of the agreement automatically extends for successive
one year periods unless either party provides 90&nbsp;days advance notice of their intent not to further
extend the employment term, in which case the employment agreement shall expire and terminate at
the end of the extended employment term. Mr.&nbsp;Frist is entitled to severance benefits if we
terminate him without cause; if he resigns for good reason after a change-in-control; if he resigns
upon the occurrence of a material change in the terms of his employment; or if he resigns upon the
occurrence of a material breach of the agreement by the Company. If any such termination occurs,
Mr.&nbsp;Frist will be entitled to a severance benefit equal to 1.5 times the most recent recommended
salary by our Compensation Committee for him. In addition, if Mr.&nbsp;Frist terminates his employment
for good reason after the occurrence of a change-in-control, all options, shares and other benefits
will fully vest immediately. If Mr.&nbsp;Frist is terminated for cause, or because of his death,
disability, or voluntary resignation without good reason, he would not be entitled to any
compensation or benefits beyond his effective termination date, other than benefits provided
through statutory requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the terms of the 2000 Plan, any outstanding stock options will become fully vested and
exercisable upon a change-in-control. Further, the 2000 Plan also provides for cash payments based
on the difference between the change-in-control price per share of common stock and the per share
exercise price of each outstanding option, multiplied by the number of shares of common stock that
would be issued if such option were exercised upon a change-in-control. Under the terms of the 2000
Plan, the change-in-control price is to be based on the highest price paid per share for any
transaction
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">reported on Nasdaq at any time during the 60&nbsp;day period immediately preceding the occurrence of the
change-in-control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table shows the potential payments described above for our Named Executive Officers:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Termination</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">without cause,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">resignation for</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">good reason,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Involuntary</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">or resignation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">termination for</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">for good</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">cause or</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">reason after a</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">resignation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">change-in-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Change-in-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">without good</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Death or</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">control</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">control</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">reason</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Retirement</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">disability</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert A. Frist, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash severance<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">307,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accelerated vesting of stock option awards<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Arthur E. Newman</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accelerated vesting of stock option awards<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">433,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J. Edward Pearson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accelerated vesting of stock option awards<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kevin P. O&#146;Hara</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accelerated vesting of stock option awards<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on the employment agreement described above, based on Mr.&nbsp;Frist&#146;s salary as of December
31, 2007.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on the highest price paid for our stock reported on Nasdaq in the 60&nbsp;day period prior
to December&nbsp;31, 2007 of $3.50 per share, less the exercise price of any outstanding
in-the-money stock options, multiplied by the total of the respective outstanding in-the-money
stock options.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left">
<A name="151"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Director Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Cash Compensation of Directors.</U> We pay each member of the board, who is not an officer or
employee of the company, $1,000 for each board meeting personally attended or attended via
teleconference. In addition, we pay non-employee board members $500 for each board committee
meeting personally or telephonically attended and pay committee chairpersons $1,000 for each board
committee meeting attended. During 2007, we provided Ronald Hinds, our former Audit Committee
Chairman, with a payment of $5,000 for his services during the first quarter of 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Equity Compensation of Directors.</U> During 2007, we granted 6,000 options to each
non-employee director of the company. The options vested immediately and had an exercise price
equal to the fair market value of our common stock on the date of grant pursuant to the provisions
of the 2000 Plan as discussed below.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employee directors are not eligible for any compensation for service on the board or its
committees.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->26<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the compensation for the Company&#146;s non-employee directors during
2007.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fees Earned or Paid</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Option</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">in Cash ($) <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Awards ($) <SUP style="font-size: 85%; vertical-align: text-top">(2)(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total ($)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">James F. Daniell, M.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">23,140</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thompson S. Dent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,140</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Frank Gordon</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,640</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gerard M. Hayden, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,640</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ronald Hinds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jeffrey L. McLaren</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,640</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dale Polley</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,640</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Linda Rebrovick</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,140</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michael Shmerling</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,640</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">William W. Stead, M.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,640</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Due to timing of payments to non-employee directors, such amounts may not correspond to
actual cash paid during 2007.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Represents the total value of option awards to directors recognized as an expense
during 2007 for financial accounting purposes under SFAS 123R. Option awards granted to
directors during 2007 became fully vested upon the date of grant. For significant
assumptions with regard to such valuation under SFAS 123R, see Note 11 &#151; Stock Based
Compensation in the Notes to Consolidated Financial Statements of our Annual Report on Form
10-K for the year ended December&nbsp;31, 2007 filed with the Securities and Exchange Commission
on March&nbsp;28, 2008.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The aggregate number of option awards outstanding held by directors at fiscal year end
2007 was as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Option Awards</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Option Awards</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Outstanding</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">James F. Daniell, M.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Dale Polley</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thompson S. Dent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Linda Rebrovick</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Frank Gordon</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Michael Shmerling</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gerard M. Hayden, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">William W. Stead, M.D.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jeffrey L. McLaren</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="152"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information regarding the beneficial ownership of our common
stock as of March&nbsp;31, 2008 (unless otherwise noted), for:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>each person who is known by us to beneficially own more than
5% of the outstanding shares of our common stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>each of our directors and nominees;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>each of our Named Executive Officers; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all of our directors and executive officers as a group.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The percentages of shares outstanding provided in the table are based on 22,331,526 shares
outstanding as of March&nbsp;31, 2008. Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission and generally includes voting or investment power with
respect to securities. Unless otherwise indicated, each person or entity named in the table has
sole voting and investment power, or shares voting and investment power with his or her spouse,
with respect to all shares of stock listed as owned by that person. The number of shares shown does
not include the interest of certain persons in shares held by family members in their own right.
Shares issuable upon exercise of options that are exercisable within 60&nbsp;days of March&nbsp;31, 2008 are
considered outstanding for the purpose of calculating the percentage of outstanding shares of our
common stock held by the individual, but not for the purpose of calculating the percentage of
outstanding shares held by any other individual. The address of each of our directors and executive
officers listed below is c/o HealthStream, Inc., 209 10<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Avenue South, Suite&nbsp;450,
Nashville, Tennessee 37203.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Number of Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Percent</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert A. Frist, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5,641,940</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">25.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">T. Rowe Price Associates, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2,498,500</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Morgan Stanley Dean Witter &#038; Co.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,138,940</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jeffrey L. McLaren</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">306,555</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Arthur E. Newman</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">291,500</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Frank Gordon</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">263,436</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">James F. Daniell</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">85,948</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thompson S. Dent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">80,394</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(8)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michael Shmerling</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">77,906</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(9)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kevin P. O&#146;Hara</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">68,500</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(10)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Linda Rebrovick</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">56,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(11)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">William W. Stead</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">54,700</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(12)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J. Edward Pearson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">52,550</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(13)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dale Polley</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">14,750</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(14)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gerard M. Hayden, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">9,750</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(15)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Susan A. Brownie</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(16)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">All directors and executive officers as a group (14 persons)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">7,003,929</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">(17)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">31.4</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">* Less than one percent.
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Includes 92,000 shares issuable upon exercise of options.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>100 East Pratt Street, Baltimore, Maryland 21202-1009. Based upon information set
forth in Schedule&nbsp;13G filed with the SEC on February&nbsp;13, 2008 jointly by T. Rowe Price
Associates, Inc. (&#147;Price Associates&#148;) and T. Rowe Price New Horizons Fund, Inc. (&#147;New
Horizons&#148;), these shares are held by various individual and institutional investors for
which Price Associates and New Horizons serve as investment advisor with power to direct
investments and/or sole power to vote the shares. Price Associates and New Horizons
disclaim beneficial ownership of these shares except to the extent of their pecuniary
interest in those shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1221 Avenue of the Americas, 39<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Floor, New York, New York 10020.
Morgan Stanley Venture Partners III, L.P. owns 999,284 common shares. Morgan Stanley
Venture Investors III, L.P. owns 95,947 common shares. The Morgan Stanley Venture
Partners Entrepreneur Fund,</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->28<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="margin-left: 6%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">L.P. owns 43,709 common shares. The General Partner is the general partner of Morgan
Stanley Venture Partners III, L.P., Morgan Stanley Venture Investors III, L.P. and The
Morgan Stanley Venture Partners Entrepreneur Fund, L.P. (collectively, the &#147;Funds&#148;),
and, as such, has the power to vote or direct the vote and to dispose or direct the
disposition of all of the shares held by the Funds. Morgan Stanley Venture Capital
III, Inc. is the institutional managing member of the General Partner, and, as such, shares, together with the remaining managing members, the power to direct the actions
of the General Partner. Morgan Stanley Dean Witter &#038; Co., as the sole shareholder of
Morgan Stanley Venture Capital III, Inc., controls the actions of Morgan Stanley
Venture Capital III, Inc.</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Includes 36,000 shares issuable upon exercise of options.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Includes 258,500 shares issuable upon exercise of options.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(6)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>136,000 of these shares are held by Crofton Capital. Mr.&nbsp;Gordon disclaims
beneficial ownership of these shares except to the extent of his pecuniary interest in
those shares. 11,386 of these shares are held by The Joel Company. Mr.&nbsp;Gordon disclaims
beneficial ownership of these shares except to the extent of his pecuniary interest in
those shares. Also includes 36,000 shares issuable upon exercise of options.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(7)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Includes 46,000 shares issuable upon exercise of options.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(8)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Includes 51,000 shares issuable upon exercise of options.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(9)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Includes 6,000 shares issuable upon exercise of options.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(10)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Includes 68,500 shares issuable upon exercise of options.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(11)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Includes 36,000 shares issuable upon exercise of options.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(12)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Includes 51,000 shares issuable upon exercise of options.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(13)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Includes 39,750 shares issuable upon exercise of options.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(14)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Includes 9,750 shares issuable upon exercise of options.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(15)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Includes 9,750 shares issuable upon exercise of options.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(16)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Mrs.&nbsp;Brownie left the Company on August&nbsp;10, 2007 and as of such time she owned
58,132 shares of our common stock, including shares acquired through the exercise of
stock options. We do not have any information regarding her share ownership after August
10, 2007.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(17)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Includes 740,250 shares issuable upon exercise of options.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left">
<A name="153"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Section&nbsp;16(a) Beneficial Ownership Reporting Compliance</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that during the 2007 fiscal year, all SEC filings of directors, officers and
greater than ten-percent shareholders complied with the requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended, except as follows, (1)&nbsp;Susan A. Brownie who failed to
timely file one Form&nbsp;4 reporting grant of stock options, (2)&nbsp;Arthur E. Newman who failed to timely
file one Form&nbsp;4 reporting grant of stock options, (3)&nbsp;J. Edward Pearson who failed to timely file
one Form&nbsp;4 reporting grant of stock options, (4)&nbsp;Kevin P. O&#146;Hara who failed to timely file one Form
4 reporting grant of stock options, (5)&nbsp;Jeffrey L. McLaren who failed to timely file one Form&nbsp;4
reporting sale of stock, and (6)&nbsp;Michael Shmerling who failed to timely file two Form&nbsp;4s reporting
purchases of stock. This belief is based on our review of forms filed or written representations
that no forms were required.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->29<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="154"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GENERAL INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Important Notice Regarding Delivery of Shareholder Documents</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The rules of the Securities and Exchange Commission allow the Company to send a single copy of
the Proxy Statement and Annual Report to Shareholders to any household at which two or more
shareholders reside if the Company believes the shareholders are members of the same family, unless
the Company has received contrary instructions from a shareholder. This process, known as
&#147;householding,&#148; reduces the volume of duplicate information received at your household and helps
reduce the Company&#146;s expenses. The rule applies to the Company&#146;s annual reports and proxy
statements. Each shareholder in the household will continue to receive a separate proxy card.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If your shares are registered in your own name and you would like to receive your own set of
the Company&#146;s annual disclosure documents this year or in future years, or if you share an address
with another shareholder and together both of you would like to receive only a single set of the
Company&#146;s annual disclosure documents, please contact the Company&#146;s Secretary by calling (800)
845-1579 or writing to the Company at HealthStream, Inc., Investor Relations Department, 209
10<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Avenue South, Suite&nbsp;450, Nashville, Tennessee 37203. If a bank, broker or other
nominee holds your shares, please contact your bank, broker or other nominee directly. The Company
will deliver within 30&nbsp;days upon oral or written request a separate copy of the Proxy Statement or
Annual Report to Shareholders to a shareholder at a shared address to which a single copy of the
documents was delivered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Annual Report</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our 2007 Annual Report to Shareholders is being mailed to shareholders with this proxy
statement. The Annual Report is not part of the proxy solicitation materials.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Additional Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A copy of our Annual Report on Form 10-K for the year ended December&nbsp;31, 2007, excluding
certain of the exhibits thereto, may be obtained without charge by writing to HealthStream, Inc.,
Investor Relations Department, 209 10<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Avenue South, Suite&nbsp;450, Nashville, Tennessee
37203 or by making an oral request by calling (615)&nbsp;301-3237. We will furnish any exhibits to our
Annual Report on Form 10-K upon the payment of fees equal to our reasonable expenses in furnishing
such exhibits. The Company&#146;s Annual Report on Form 10-K and various other filings also may be
accessed in the governance section of our website at www.healthstream.com or www.sec.gov.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Nashville, Tennessee<BR>
April&nbsp;29, 2008

</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->30<!-- /Folio -->
</DIV>




<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>THIS PROXY IS SOLICITED ON BEHALF OF<BR>
THE BOARD OF DIRECTORS OF HEALTHSTREAM, INC.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned shareholder(s) of HealthStream, Inc., a Tennessee corporation, hereby
acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement, each
dated April&nbsp;29, 2008, and hereby appoints Robert A. Frist, Jr. and Arthur E. Newman, and each of
them, proxies and attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 2008 Annual Meeting of Shareholders of
HealthStream, Inc. to be held on Thursday, May&nbsp;29, 2008 at 2:00 p.m. Central Daylight Time, at 209
10<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Avenue, South, Suite&nbsp;450, Nashville, Tennessee 37203, and at any adjournment or
adjournments thereof, and to vote all shares of Common Stock which the undersigned would be
entitled to vote if then and there personally present, on the matters set forth below:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The Board of Directors recommends a vote &#147;FOR&#148; the election of each of the nominees for director
listed in Proposal 1 below and &#147;FOR&#148; Proposal 2 below.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(1)&nbsp;To elect Jeffrey L. McLaren, Linda Rebrovick, and Michael Shmerling for election as Class&nbsp;II
directors to the Board of Directors until the 2011 Annual Meeting of Shareholders and until their
respective successors are elected and qualified.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-family: Wingdings">&#111;</FONT> FOR all nominees listed below (except as indicated to the contrary below):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 6%; margin-top: 6pt">Jeffrey L. McLaren, Linda Rebrovick, and Michael Shmerling
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-family: Wingdings">&#111;</FONT> WITHHOLD authority to vote for all nominees
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee&#146;s name in
the space below:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><DIV align="left"><DIV style="font-size: 3pt; margin-top: 16pt; width: 30%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 3pt">(2)&nbsp;To ratify the appointment of Ernst &#038; Young LLP as the Company&#146;s independent registered public
accounting firm for the fiscal year ending December&nbsp;31, 2008.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><FONT style="font-family: Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FOR
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-family: Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">AGAINST
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-family: Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ABSTAIN</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(3)&nbsp;To vote in accordance with their best judgment with respect to any other matters which may
properly come before the meeting or any adjournment or adjournments thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Proxy, when properly executed, will be voted in accordance with the directions given by
the undersigned shareholder. <B>If no direction is made, it will be voted FOR the proposals set forth
herein and as the proxies deem advisable on such other matters as may come before the meeting.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dated:
__________  Signature: _____________________________________________
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 8pt">Dated:
__________  Signature: _____________________________________________
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(This Proxy should be marked, dated, and signed by the shareholder(s) exactly as his or her name
appears hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary
capacity should so indicate. If shares are held by joint tenants or as community property, both
should sign.)
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>




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