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<SEC-DOCUMENT>0000944075-07-000016.txt : 20070321
<SEC-HEADER>0000944075-07-000016.hdr.sgml : 20070321
<ACCEPTANCE-DATETIME>20070321170126
ACCESSION NUMBER:		0000944075-07-000016
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20070418
FILED AS OF DATE:		20070321
DATE AS OF CHANGE:		20070321
EFFECTIVENESS DATE:		20070321

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SOCKET COMMUNICATIONS INC
		CENTRAL INDEX KEY:			0000944075
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTRONIC COMPUTERS [3571]
		IRS NUMBER:				943155066
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		DEF 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-13810
		FILM NUMBER:		07709633

	BUSINESS ADDRESS:	
		STREET 1:		39700 EUREKA DRIVE
		CITY:			NEWARK
		STATE:			CA
		ZIP:			94560-4808
		BUSINESS PHONE:		5109333000

	MAIL ADDRESS:	
		STREET 1:		39700 EUREKA DRIVE
		CITY:			NEWARK
		STATE:			CA
		ZIP:			94560-4808
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>proxy-final032007.htm
<DESCRIPTION>PROXY
<TEXT>
<HTML>
<HEAD>

</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<font face="Times New Roman, Times, serif" size="3"><BR>
</font>
<P ALIGN="CENTER"><font size="3" face="Times New Roman, Times, serif"><b>UNITED
  STATES<br>
  SECURITIES AND EXCHANGE COMMISSION<br>
  WASHINGTON, D.C. 20549</b></font></P>
<P ALIGN="CENTER"><font size="3" face="Times New Roman, Times, serif"><B>SCHEDULE
  14A</B></font></P>
<P ALIGN="CENTER"><font size="3" face="Times New Roman, Times, serif"><B>Proxy
  Statement Pursuant to Section 14(a) of<BR>
  the Securities Exchange Act of 1934 </B></font></P>
<TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
  <TR VALIGN="TOP">
    <TD WIDTH="100%" COLSPAN=3 height="23"><font size="2" face="Times New Roman, Times, serif">Filed
      by the Registrant /x/ </font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="100%" COLSPAN=3><font size="2" face="Times New Roman, Times, serif">Filed
      by a Party other than the Registrant /&nbsp;/</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="100%" COLSPAN=3 height="22"><font size="2" face="Times New Roman, Times, serif">Check
      the appropriate box:</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">/ /</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%"><font size="2" face="Times New Roman, Times, serif">Preliminary
      Proxy Statement</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">/&nbsp;/</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%"><font size="2" face="Times New Roman, Times, serif">Confidential,
      for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">/x/</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%"><font size="2" face="Times New Roman, Times, serif">Definitive
      Proxy Statement</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">/&nbsp;/</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%"><font size="2" face="Times New Roman, Times, serif">Definitive
      Additional Materials</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">/&nbsp;/</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%"><font size="2" face="Times New Roman, Times, serif">Soliciting
      Material Pursuant to Section&nbsp;240.14a-11(c) or Section&nbsp;240.14a-12<BR>
      </font> </TD>
  </TR>
</TABLE>
<font face="Times New Roman, Times, serif" size="3"><!-- User-specified TAGGED TABLE -->
</font>
<TABLE WIDTH="83%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
  <TR VALIGN="TOP">
    <TD WIDTH="100%" COLSPAN=5 ALIGN="CENTER" height="37">&nbsp;</TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="100%" COLSPAN=5 ALIGN="CENTER" height="46">
      <hr NOSHADE>
      <FONT SIZE=2><B><font size="3" face="Times New Roman, Times, serif">SOCKET
      COMMUNICATIONS,&nbsp;INC.</font></B></FONT></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="100%" COLSPAN=5 ALIGN="CENTER" height="26"><font size="2" face="Times New Roman, Times, serif">(Name
      of Registrant as Specified in its Charter)</font>
      <hr NOSHADE>
    </TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH="90%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="100%" COLSPAN=5><font size="2" face="Times New Roman, Times, serif">Payment
      of Filing Fee (Check the appropriate box):</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">/x/</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%" COLSPAN=3><font size="2" face="Times New Roman, Times, serif">No
      fee required.</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%" height="31"><font size="2" face="Times New Roman, Times, serif">/&nbsp;/</font></TD>
    <TD WIDTH="2%" height="31"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%" COLSPAN=3 height="31"><font size="2" face="Times New Roman, Times, serif">Fee
      computed on table below per Exchange Act Rules 14a-6(i)(4) and&nbsp;0-11.</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">1)</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="2" face="Times New Roman, Times, serif">Title
      of each class of securities to which transaction applies:<BR>
      &nbsp;&nbsp;&nbsp;&nbsp;N/A</font>
      <HR NOSHADE>
    </TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">2)</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="2" face="Times New Roman, Times, serif">Aggregate
      number of securities to which transaction applies:<BR>
      &nbsp;&nbsp;&nbsp;&nbsp;N/A</font>
      <HR NOSHADE>
    </TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">3)</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="2" face="Times New Roman, Times, serif">Per unit
      price or other underlying value of transaction computed pursuant to Exchange
      Act Rule 0-11 (set forth the amount on which the filing fee is calculated
      and state how it was determined):<BR>
      &nbsp;&nbsp;&nbsp;&nbsp;N/A</font>
      <HR NOSHADE>
    </TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">4)</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="2" face="Times New Roman, Times, serif">Proposed
      maximum aggregate value of transaction:<BR>
      &nbsp;&nbsp;&nbsp;&nbsp;N/A</font>
      <HR NOSHADE>
    </TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">5)</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="2" face="Times New Roman, Times, serif">Total
      fee paid:<BR>
      &nbsp;&nbsp;&nbsp;&nbsp;N/A</font>
      <HR NOSHADE>
    </TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">/&nbsp;/</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%" COLSPAN=3><font size="2" face="Times New Roman, Times, serif">Fee
      paid previously with preliminary materials.</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%" height="54"><font size="2" face="Times New Roman, Times, serif">/&nbsp;/</font></TD>
    <TD WIDTH="2%" height="54"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%" COLSPAN=3 height="54"><font size="2" face="Times New Roman, Times, serif">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.</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%" height="16"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="2%" height="16">&nbsp;</TD>
    <TD WIDTH="3%" height="16"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="2%" height="16">&nbsp;</TD>
    <TD WIDTH="90%" height="16"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">1)</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="2" face="Times New Roman, Times, serif">Amount
      Previously Paid:<BR>
      &nbsp;&nbsp;&nbsp;&nbsp;N/A</font>
      <HR NOSHADE>
    </TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">2)</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="2" face="Times New Roman, Times, serif">Form,
      Schedule or Registration Statement No.:<BR>
      &nbsp;&nbsp;&nbsp;&nbsp;N/A</font>
      <HR NOSHADE>
    </TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">3)</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="2" face="Times New Roman, Times, serif">Filing
      Party:<BR>
      &nbsp;&nbsp;&nbsp;&nbsp;N/A</font>
      <HR NOSHADE>
    </TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH="3%"><font size="2" face="Times New Roman, Times, serif">4)</font></TD>
    <TD WIDTH="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="2" face="Times New Roman, Times, serif">Date Filed:<BR>
      &nbsp;&nbsp;&nbsp;&nbsp;N/A</font>
      <HR NOSHADE>
    </TD>
  </TR>
</TABLE>
<p>&nbsp;</p>
<p>&nbsp;</p>
<HR NOSHADE>
<P ALIGN="CENTER"><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  COMMUNICATIONS, INC.</b></font></P>
<P ALIGN="CENTER"><b>DBA SOCKET MOBILE, INC.</b></P>
<P ALIGN="CENTER"><font face="Times New Roman, Times, serif" size="3"><b> NOTICE
  OF 2007 ANNUAL MEETING OF STOCKHOLDERS<br>
  To Be Held April 18, 2007</b></font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif" size="3"><br>
  Dear Stockholders:<br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif" size="3"> &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>You
  are cordially invited to attend the Annual Meeting of Stockholders of Socket
  Communications, Inc., a Delaware corporation, DBA Socket Mobile, Inc. (the "Company"),
  to be held Wednesday, April 18, 2007 at 9:00 a.m., local time, at the Company's
  headquarters at 39700 Eureka Drive, Newark, California 94560 for the following
  purposes:<br>
  <br>
  <i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>(1)
  To elect seven directors to serve until their respective successors are elected.<br>
  <br>
  <i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>(2)
  To ratify the appointment of Moss Adams LLP as independent public accountants
  of the Company for the fiscal year ending December 31, 2007.<br>
  <br>
  <i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>(3)
  To transact such other business as may properly come before the meeting or any
  adjournment thereof.<br>
  <br>
  <i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  foregoing items of business are more fully described in the Proxy Statement
  accompanying this notice.</font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif" size="3"> &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>Only
  stockholders of record at the close of business on February 20, 2007 are entitled
  to notice of and to vote at the meeting. All stockholders are cordially invited
  to attend the meeting in person. However, to ensure your representation at the
  meeting, you are urged to mark, sign, date and return the enclosed Proxy as
  promptly as possible in the postage-prepaid envelope enclosed for that purpose.
  Any stockholder attending the meeting may vote in person even if he or she has
  returned a Proxy.</font></P>
<P ALIGN="left">&nbsp;</P>
<table width="100%" border=0 cellspacing=0 cellpadding=0>
  <tr valign="BOTTOM">
    <td width="48%"><font size=2>&nbsp;</font></td>
    <td width="2%"><font size=2>&nbsp;</font></td>
    <td width="50%"><font size="3" face="Times New Roman, Times, serif">Sincerely,</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td width="48%"><font size=2><br>
      &nbsp;</font></td>
    <td width="2%"><font size=2><br>
      &nbsp;</font></td>
    <td width="50%"><font size="3" face="Times New Roman, Times, serif"><br>
      Kevin J. Mills</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td width="48%"><font size=2>&nbsp;</font></td>
    <td width="2%"><font size=2>&nbsp;</font></td>
    <td width="50%"><font size="3" face="Times New Roman, Times, serif">President
      and Chief Executive Officer</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td width="48%"><font size=2><br>
      <font size="3" face="Times New Roman, Times, serif">Newark, California<br>
      March 16, 2007</font></font></td>
    <td width="2%"><font size=2><br>
      &nbsp;</font></td>
    <td width="50%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
  </tr>
</table>
<P>&nbsp;</P>
<P align="center"><font face="Times New Roman, Times, serif" size="3"><b>YOUR
  VOTE IS IMPORTANT. <br>
  </b></font><b>IN ORDER TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING,<br>
  YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY<br>
  AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE.</b></P>
<blockquote>
  <blockquote>&nbsp;</blockquote>
</blockquote>
<P align="center">&nbsp;</P>
<hr NOSHADE>
<P align="center">&nbsp;</P>
<P align="center"><b>SOCKET COMMUNICATIONS, INC. DBA SOCKET MOBILE, INC.</b></P>
<P align="center"> <b>PROXY STATEMENT FOR </b><br>
  <b>2007 ANNUAL MEETING OF STOCKHOLDERS</b><br>
  <br>
  <b>INFORMATION CONCERNING SOLICITATION AND VOTING</b><br>
</P>
<P align="left"><b>GENERAL</b></P>
<P align="left"> &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  enclosed proxy is solicited on behalf of the Board of Directors (the "Board")
  of Socket Communications, Inc., a Delaware corporation, DBA Socket Mobile, Inc.
  (the "Company"), for use at the 2007 Annual Meeting of Stockholders (the "2007
  Annual Meeting") to be held Wednesday April 18, 2007 at 9:00 a.m., local time,
  or at any adjournment thereof, for the purposes set forth herein and in the
  accompanying Notice of the 2007 Annual Meeting of the Stockholders. The 2007
  Annual Meeting will be held at the Company's headquarters at 39700 Eureka Drive,
  Newark, California 94560. The Company's telephone number at that location is
  (510) 933-3000.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>These
  proxy solicitation materials and our Annual Report on Form 10-K for the year
  ended December 31, 2006, including financial statements, were first mailed on
  or about March 20, 2007 to all stockholders entitled to vote at the 2007 Annual
  Meeting.<br>
  <br>
  <b>RECORD DATE AND PRINCIPAL SHARE OWNERSHIP</b><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>Holders
  of record of our Common Stock at the close of business on February 20, 2007
  (the "Record Date") are entitled to notice of and to vote at the 2007 Annual
  Meeting. At the Record Date, 31,882,365 shares of Common Stock were issued and
  outstanding. Each share of Common Stock is entitled to one vote. The Company
  has no other class of voting securities outstanding and entitled to be voted
  at the meeting. <br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  only person known by the Company to beneficially own more than five percent
  of the Company's Common Stock as of the Record Date was Charlie Bass, the Chairman
  of the Company's Board of Directors. Please see "Security Ownership of Certain
  Beneficial Owners and Management" for more information on Mr. Bass. </P>
<P align="left"><b> REVOCABILITY OF PROXIES</b><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>Any
  proxy given pursuant to this solicitation may be revoked by the person giving
  it at any time before its use by delivering to the Secretary of the Company
  a written notice of revocation or a duly executed proxy bearing a later date
  or by attending the 2007 Annual Meeting and voting in person. <br>
  <br>
</P>
<P align="left"><font face="Times New Roman, Times, serif" size="3"><b>VOTING
  AND SOLICITATION</b><br>
  </font></P>
<P>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>Generally
  each stockholder is entitled to one vote for each share of Common Stock held
  on all matters to be voted on by the stockholders. If, however, any stockholder
  at the 2007 Annual Meeting gives notice of his or her intention to cumulate
  votes with respect to the election of directors, then each stockholder voting
  for the election of directors (Proposal One) may cumulate such stockholder's
  votes and give one candidate a number of votes equal to the number of directors
  to be elected multiplied by the number of shares of Common Stock that such stockholder
  is entitled to vote, or may distribute such stockholder's votes on the same
  principle among as many candidates as the stockholder may select, provided that
  votes cannot be cast for more than seven candidates. However, no stockholder
  shall be entitled to cumulate votes for a candidate unless the candidate's name
  has been placed in nomination prior to the voting and the stockholder, or any
  other stockholder, has given notice at the meeting, prior to the voting, of
  the intention to cumulate votes. On all other matters, stockholders may not
  cumulate votes.<br>
  <br>
</P>
<p align="center"><font face="Times New Roman, Times, serif" size="3">1<br>
  </font></p>
<hr NOSHADE>
<P><br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>This
  solicitation of proxies is made by the Company, and all related costs will be
  borne by the Company. In addition, the Company may reimburse brokerage firms
  and other persons representing beneficial owners of stock for their expenses
  in forwarding solicitation material to such beneficial owners. Proxies may also
  be solicited by the Company's directors, officers and regular employees, without
  additional compensation, personally or by telephone, email or facsimile. The
  Company does not expect to engage the services of a professional proxy solicitation
  firm to aid in the solicitation of proxies from brokers, bank nominees and other
  institutional investors. The Company's costs for such services, if retained,
  are not expected to be material.<b><br>
  <br>
  QUORUM; ABSTENTIONS; BROKER NON-VOTES</b><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  presence at the 2007 Annual Meeting, either in person or by proxy, of the holders
  of a majority of votes entitled to be cast with respect to the outstanding shares
  of Common Stock shall constitute a quorum for the transaction of business. Shares
  that are voted "FOR," "AGAINST", "WITHHELD or "ABSTAIN" on a subject matter
  are treated as being present at the meeting for purpose of establishing a quorum
  entitled to vote on the matter (the "Votes Cast").</P>
<P> &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  Company also intends to count abstentions for purposes of determining both (i)
  the presence or absence of a quorum for the transaction of business and (ii)
  the total number of Votes Cast with respect to a proposal (other than the election
  of directors). Thus, abstentions will have the same effect as a vote against
  a proposal.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>Broker
  non-votes will be counted for purpose of determining the presence or absence
  of a quorum for the transaction of business, but will not be counted for purposes
  of determining the number of Votes Cast with respect to a particular proposal.
  Thus, a broker non-vote will not have any effect on the outcome of the voting
  on a proposal.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>A
  plurality of the votes duly cast is required for the election of directors.
  Thus, neither abstentions nor broker non-votes affect the election of directors,
  as only affirmative votes will affect the outcome of election.<br>
  <br>
  <b>DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS TO BE INCLUDED IN THE COMPANY'S
  PROXY MATERIALS</b><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<font face="Times New Roman, Times, serif" size="3"><i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  Company currently intends to hold its 2008 Annual Meeting of Stockholders in
  April 2008 and to mail proxy statements relating to such meeting in March 2008.
  Proposals of stockholders of the Company that are intended to be presented by
  such stockholders at the 2008 Annual Meeting must be received by the Company
  no later than November 16, 2007, and must otherwise be in compliance with applicable
  laws and regulations, in order to be considered for inclusion in the Company's
  proxy statement and proxy card relating to that meeting. </font></P>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>If
  a stockholder intends to submit a proposal at the 2008 Annual Meeting, but does
  not wish to have it included in the proxy statement and proxy for that meeting,
  the stockholder must do so no later than January 22, 2008. If the a stockholder
  fails to comply with the foregoing notice provision, the proxy holders will
  be allowed to use their discretionary authority to vote against the proposal
  when it is raised at the 2008 Annual Meeting.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  attached proxy card grants the persons named as proxies discretionary authority
  to vote on any matter raised at the 2007 Annual Meeting that is not included
  in this Proxy Statement. The Company has not been notified by any stockholder
  of his or her intent to present a stockholder proposal at the 2007 Annual Meeting.</p>
<P>&nbsp;</P>
<p align="center"><font face="Times New Roman, Times, serif" size="3">2<br>
  </font></p>
<hr NOSHADE>
<P align="center">&nbsp;</P>
<P align="center"><font face="Times New Roman, Times, serif" size="3"><b>PROPOSAL
  ONE</b></font></P>
<p align="center"><b><font face="Times New Roman, Times, serif" size="3">ELECTION
  OF DIRECTORS</font></b></p>
<div align="left">
  <p><font face="Times New Roman, Times, serif" size="3"> &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i></font><font face="Times New Roman, Times, serif" size="3">The
    proxy holders will vote to elect as directors the seven nominees named below,
    unless a proxy card is marked otherwise. The nominees consist of the seven
    current directors. If a person other than a management nominee is nominated
    at the 2007 Annual Meeting, the holders of the proxies may choose to cumulate
    their votes and allocate them among such nominees of management as the proxy
    holders shall determine in their discretion in order to elect as many nominees
    of management as possible. The seven candidates receiving the highest number
    of votes will be elected. In the event any nominee is unavailable for election,
    which is not currently anticipated, the proxy holders may vote in accordance
    with their judgment for the election of substitute nominees designated by
    the Board of Directors.<br>
    &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<br>
    &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>All
    seven directors will be elected for one-year terms expiring at the 2008 Annual
    Meeting of Stockholders, subject to the election and qualification of their
    successors or their earlier death, resignation or removal. <br>
    </font></p>
  <p><font face="Times New Roman, Times, serif" size="3">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
    following table sets forth information concerning the nominees for director.<br>
    <br>
    </font></p>
</div>
<TABLE WIDTH="99%" BORDER=0 CELLSPACING=0 CELLPADDING=0 align="center" height="175">
  <TR VALIGN="BOTTOM">
    <TH WIDTH="26%" ALIGN="LEFT" height="18"><font size="2" face="Times New Roman, Times, serif"><B>Name
      of Nominee<BR>
      </B></font>
      <HR NOSHADE>
    </TH>
    <TH WIDTH="2%" height="18"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TH>
    <TH WIDTH="5%" ALIGN="CENTER" height="18"><font size="2" face="Times New Roman, Times, serif"><B>Age</B></font>
      <HR NOSHADE>
    </TH>
    <TH WIDTH="2%" height="18"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TH>
    <TH WIDTH="50%" ALIGN="CENTER" height="18"><font size="2" face="Times New Roman, Times, serif"><B>Position(s)
      Held With the Company</B></font>
      <HR NOSHADE>
    </TH>
    <TH WIDTH="2%" height="18"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TH>
    <TH WIDTH="13%" ALIGN="CENTER" height="18"><font size="2" face="Times New Roman, Times, serif"><B>Director
      Since</B></font>
      <HR NOSHADE>
    </TH>
  </TR>
  <TR BGCOLOR="#CCEEFF" VALIGN="top">
    <TD WIDTH="26%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">Charlie
      Bass (1)(2)</font></TD>
    <TD WIDTH="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="5%" ALIGN="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">65</font></div>
    </TD>
    <TD WIDTH="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="50%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">Chairman
      of the Board</font></TD>
    <TD WIDTH="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="13%" ALIGN="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">1992</font></div>
    </TD>
  </TR>
  <tr bgcolor="#CCEEFF" valign="top">
    <td width="26%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">Micheal
      L. Gifford</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">49</font></div>
    </td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="50%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">Executive
      Vice President and Director</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="13%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">1992</font></div>
    </td>
  </tr>
  <tr bgcolor="#CCEEFF" valign="top">
    <td width="26%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">Leon
      Malmed (1)(2)</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">69</font></div>
    </td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="50%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">Director</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="13%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2000</font></div>
    </td>
  </tr>
  <tr bgcolor="#CCEEFF" valign="top">
    <td width="26%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">Kevin
      J. Mills</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">46</font></div>
    </td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="50%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">President,
      Chief Executive Officer and Director</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="13%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2000</font></div>
    </td>
  </tr>
  <tr bgcolor="#CCEEFF" valign="top">
    <td width="26%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">Gianluca
      Rattazzi (1)(2)</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">54</font></div>
    </td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="50%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">Director</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="13%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">1998</font></div>
    </td>
  </tr>
  <tr bgcolor="#CCEEFF" valign="top">
    <td width="26%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">Peter
      Sealey (2)(3)</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">66</font></div>
    </td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="50%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">Director</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="13%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2002</font></div>
    </td>
  </tr>
  <tr bgcolor="#CCEEFF" valign="top">
    <td width="26%" bgcolor="#FFFFFF" height="13"><font size="2" face="Times New Roman, Times, serif">Enzo
      Torresi (2)(3)</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="13"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%" align="RIGHT" bgcolor="#FFFFFF" height="13">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">62</font></div>
    </td>
    <td width="2%" bgcolor="#FFFFFF" height="13"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="50%" bgcolor="#FFFFFF" height="13"><font size="2" face="Times New Roman, Times, serif">Director</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="13"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="13%" align="RIGHT" bgcolor="#FFFFFF" height="13">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2000</font></div>
    </td>
  </tr>
</TABLE>
<div align="center"><font face="Times New Roman, Times, serif" size="3"><br>
  </font></div>
<table width="100%" border="0" cellspacing="0" cellpadding="0" align="center">
  <tr>
    <td>
      <hr NOSHADE align="LEFT" width="120">
      <font face="Times New Roman, Times, serif" size="2">(1) Member of the Audit
      Committee. <br>
      (2) Member of the Nominating Committee. <br>
      (3) Member of the Compensation Committee</font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif" size="3">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>There
  are no family relationships among any of the directors or executive officers
  of the Company.<br>
  </font></p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>Charlie
  Bass</i> co-founded the Company in March 1992 and has been the Chairman of the
  Board of Directors from such time to the present. Dr. Bass served as the Company's
  Chief Executive Officer from April 1997 to March 2000. Dr. Bass has served as
  the Trustee of The Bass Trust since September 1989. Dr. Bass holds a Ph.D. in
  electrical engineering from the University of Hawaii. <br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><font face="Times New Roman, Times, serif" size="3"><i>Micheal
  L. Gifford</i> has been a director of the Company since its inception in March
  1992, has served as the Company's Executive Vice President since October 1994
  and is currently the General Manager of the Company's Development Services Group.
  Mr. Gifford served as the Company's President from the Company's inception in
  March 1992 to September 1994 and as the Company's Chief Executive Officer from
  March 1992 to June 1994. From December 1986 to December 1991, Mr. Gifford served
  as a director and as Director of Sales and Marketing for Tidewater Associates,
  a computer consulting and computer product development company. Prior to working
  for Tidewater Associates, Mr. Gifford co-founded and was President of Gifford
  Computer Systems, a computer network integration company. Mr. Gifford holds
  a B.S. in Mechanical Engineering from the University of California at Berkeley.
  <br>
  </font><br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i>Leon
  Malmed</i> has been a director of the Company since June 2000. Mr. Malmed served
  as Senior Vice President of Worldwide Marketing and Sales of SanDisk Corporation,
  a manufacturer of flash memory products, from 1992 to his retirement in March
  2000. Prior to his tenure with SanDisk Corporation, Mr. Malmed was Executive
  Vice President of Worldwide Marketing and Sales for Syquest Corporation, a disk
  storage manufacturer, President of Iota, a Syquest subsidiary from 1990 to 1992,
  and Senior Vice President of Worldwide Sales, Marketing and Programs for Maxtor
  Corporation, a disk drive supplier, from 1984 to 1990. Mr. Malmed holds a B.S.
  in Mechanical Engineering from the University of Paris, and also has completed
  the AEA/UCLA Senior Executive Program at the University of California at Los
  Angeles and the AEA/Stanford Executive Institute Program for Management of High
  Technology Companies at Stanford Business School.</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">3<br>
  </font></p>
<hr NOSHADE>
<p><br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i><i></i><i></i>Kevin
  J. Mills</i> was appointed the Company's President and Chief Executive Officer
  and a director of the Company in March 2000. He served as the Company's Chief
  Operating Officer from September 1998 to March 2000. Mr. Mills joined the Company
  in September 1993 as Vice President of Operations and has also served as our
  Vice President of Engineering. Prior to joining the Company, Mr. Mills worked
  from September 1987 to August 1993 at Logitech, Inc., a computer peripherals
  company, serving most recently as its Director of Operations. He holds a B.E.
  in Electronic Engineering from the University of Limerick, Ireland.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>Gianluca
  Rattazzi</i> has been a director of the Company since June 1998. In 2000, Dr.
  Rattazzi co-founded BlueArc Corporation, a provider of network attached storage.
  He has served as its Chairman since inception and also served as its CEO from
  2002 through 2005. Prior to BlueArc, he co-founded Meridian Data, Inc., a provider
  of CD ROM networking software and systems, as Parallan in July 1988. He served
  as President and a director of Meridian Data since inception and was appointed
  Chief Executive Officer of Meridian Data, serving from 1995 until its sale to
  Quantum Corporation in September 1999. From 1985 to 1988, Dr. Rattazzi held
  various executive level positions at Virtual Microsystems, Inc., a networking
  company, most recently as its President. Dr. Rattazzi serves on the board of
  several private companies. Dr. Rattazzi holds an M.S. in Electrical Engineering
  and Computer Science from the University of California at Berkeley and a Ph.D.
  in Nuclear Chemistry from the University of Rome, Italy.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i>Peter
  Sealey</i> has been a director of the Company since June 2002. Dr. Sealey has
  served as Chief Executive Officer and founder of The Sausalito Group, Inc.,
  a management consulting firm, since its founding in July 1997. Dr. Sealey also
  served as an Adjunct Professor of Marketing at the Haas School of Business,
  University of California at Berkeley from 1996 to 2006 and serves on the board
  of MaxWorldwide Inc., a media holding company. From July 1969 to August 1993,
  Dr. Sealey served in various senior marketing positions with the Coca-Cola Company,
  including as its Senior Vice President, Global Marketing and Chief Marketing
  Officer from December 1989 to August 1993. Dr. Sealey holds a doctorate from
  the Peter F. Drucker Graduate Management School at the Claremont Graduate University.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><font face="Times New Roman, Times, serif" size="3"><i>Enzo
  Torresi</i> has been a director of the Company since June 2000. Dr. Torresi
  founded and has managed EuroFund Partners, a venture capital fund, since 1999.
  In 1997 and 1998, he was Chairman and Chief Executive Officer of ICAST Corporation,
  a software company specializing in broadcasting solutions for the Internet.
  During 1995 and 1996, he was Entrepreneur-In-Residence at Accel Partners, a
  venture capital fund. From November 1993 to 1994, he was Vice-Chairman of Power
  Computing Corporation, a PC manufacturer he co-founded. From 1989 to October
  1994, Dr. Torresi was President and Chief Executive Officer of NetFRAME Systems,
  Inc., a computer manufacturer that is now part of Micron Electronics, Inc. Dr.
  Torresi holds a Doctorate in Electronics Engineering from the Polytechnic Institute
  in Torino, Italy. </font></p>
<p align="left"><font face="Times New Roman, Times, serif" size="3"><b> BOARD
  MEETINGS AND COMMITTEES<br>
  </b> </font> </p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  Board of Directors has determined that all of the nominees, except Messrs. Mills
  and Gifford, satisfy the definition of "independent director," as established
  by Nasdaq listing standards. The Board of Directors has an Audit Committee,
  a Nominating Committee and a Compensation Committee. Each committee has adopted
  a written charter, all of which are available on the Company's web site at http://www.mkr-group.com/SCKT/board_committee.html.
  The Board of Directors has also determined that each member of the Audit Committee,
  the Nominating Committee and the Compensation Committee satisfies the definition
  of "independent director," as established by Nasdaq listing standards.</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">4<br>
  </font></p>
<hr NOSHADE>
<br>
<br>
&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>The Board
of Directors held a total of four regular meetings during fiscal 2006 and one
telephonic meeting. The Company strongly encourages members of the Board of Directors
to attend all meetings, including meetings of committees on which they serve,
as well as the annual meeting of stockholders. No director attended fewer than
75 percent of the meetings of the Board of Directors and the Board committees
on which he served. Messrs. Gifford, Malmed, Mills, Rattazzi, Sealey and Torresi
attended the 2006 Annual Meeting of Stockholders.<br>
<br>
&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><font face="Times New Roman, Times, serif" size="3">The
Audit Committee consists of Messrs. Bass, Malmed and Rattazzi. As required by
Nasdaq rules, the members of the Audit Committee each qualify as "independent"
under special standards established by the United States Securities and Exchange
Commission ("SEC") for members of audit committees. The Audit Committee also includes
one independent member, Dr. Bass, who has been determined by the Board of Directors
to meet the qualifications of an "audit committee financial expert" in accordance
with SEC rules. Stockholders should understand that this designation is a disclosure
required by the SEC relating to Dr. Bass' experience and understanding with respect
to certain accounting and auditing matters. This designation does not impose upon
Dr. Bass any duties, obligations or liability that are greater than are generally
imposed on him as member of the Audit Committee, and his designation as an audit
committee financial expert pursuant to this SEC requirement does not affect the
duties, obligations or liability of any other member of the Audit Committee or
Board of Directors. The Audit Committee met one time in person during the year
ended December 31, 2006 and held seven additional telephone meetings with management
and the independent auditors to review quarterly and annual financial information
and to discuss the results of quarterly review procedures performed by the independent
auditors before quarterly and annual financial reports were issued. The Audit
Committee is responsible for appointing, compensating and overseeing actions taken
by the Company's independent auditors and reviews the Company's internal financial
controls and financial statements. The Audit Committee met in December 2006 with
management and with the independent auditors to review the status and plan for
completion of the audit of the financial statements and internal controls for
the year ended December 31, 2006. In connection with the completion of the annual
audit of the Company's financial statements for the year ended December 31, 2006,
the Audit Committee met in February 2007 with management and with the independent
auditors to review the financial statements and the annual audit results, including
an assessment of internal controls and procedures, and discussed the matters with
the independent auditors denoted as required communications by Statement of Auditing
Standards 61 (SAS 61). The meeting included a review of internal accounting controls,
a discussion and review of auditor independence, a review with management and
discussion with the independent auditors of the annual financial statements, the
pre-approval of fees, and other matters included in required communications with
the independent auditors under SAS 61, and a recommendation to the Board of Directors
to approve the issuance of the financial statements for the year ended December
31, 2006. The report of the Audit Committee for the year ended December 31, 2006
is included in this Proxy Statement.<br>
</font>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  Nominating Committee consists of the Company's independent directors, Messrs.
  Bass, Malmed, Rattazzi, Sealey and Torresi. The Nominating Committee met separately
  without management or the management directors after each of the four regular
  board meetings held during 2006. The Nominating Committee considers and recommends
  nominations for the Board of Directors and facilitates the self-assessment of
  Board performance by the independent directors. For 2007, the Nominating Committee
  determined that each current director was willing and able to serve as a director
  for the ensuing year. The Nominating Committee, in a meeting held in January
  2007, recommended nomination of the current directors to serve for the ensuing
  year. For 2008, the Nominating Committee will consider nominees recommended
  by security holders. Such nominations should be made in writing to the Company,
  attention Corporate Secretary, no later than November 16, 2007 in order to be
  considered for inclusion in next year's proxy statement. The Nominating Committee
  Charter is available on the Company's website at http://www.mkr-group.com/SCKT/board_committee.html.</p>
<p align="left"> &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  Compensation Committee, which consists of Messrs. Torresi and Sealey, held eight
  telephonic meetings during fiscal year 2006. The Compensation Committee is responsible
  for determining salaries, incentives and other forms of compensation for directors
  and officers of the Company and administering the Company's incentive compensation
  and benefit plans. The report of the Compensation Committee for fiscal year
  2006 is included in this Proxy Statement. The Compensation Committee Charter
  is available on the Company's website at http://www.mkr-group.com/SCKT/board_committee.html.<br>
  <br>
</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">5<br>
  </font></p>
<hr NOSHADE>
<p align="left"> <b><br>
  COMPENSATION OF DIRECTORS</b> <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>Directors
  who are not employees of the Company received $3,000 per regular meeting of
  the Board of Directors that they attended in fiscal 2006 and will receive $3,000
  per regular meeting that they attend in fiscal 2007. These outside directors
  are also entitled to participate in the Company's 2004 Equity Incentive Plan.
  Grants of options to directors are made annually during the year of board service,
  commencing at each election of the Board of Directors. Options are awarded for
  board service, committee service and committee and board leadership positions.
  On April 19, 2006, options vesting monthly over a one year period were awarded
  to the outside directors for the service period that commenced on April 19,
  2006, at an exercise price of $1.20 per share, the fair market value of the
  Common Stock on the date of grant, as follows:</p>
<table width="100%" border="0" align="center" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <th width="40%" align="LEFT" height="32"><font size="2" face="Times New Roman, Times, serif"><b>Name<br>
      </b></font>
      <hr NOSHADE>
    </th>
    <th width="20%" align="LEFT" height="32">&nbsp;</th>
    <th width="40%" align="LEFT" height="32">
      <div align="center"><font size="2" face="Times New Roman, Times, serif"><b>Grant<br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
  </tr>
  <tr>
    <td align="left" width="40%">
      <div align="left"><font size="2">Charlie Bass</font></div>
    </td>
    <td width="20%">&nbsp;</td>
    <td width="40%">
      <div align="center"><font size="2">50,000</font></div>
    </td>
  </tr>
  <tr>
    <td align="left" width="40%">
      <div align="left"><font size="2">Leon Malmed</font></div>
    </td>
    <td width="20%">&nbsp;</td>
    <td width="40%">
      <div align="center"><font size="2">40,000</font></div>
    </td>
  </tr>
  <tr>
    <td align="left" width="40%">
      <div align="left"><font size="2">Gianluca Rattazzi</font></div>
    </td>
    <td width="20%">&nbsp;</td>
    <td width="40%">
      <div align="center"><font size="2">35,000</font></div>
    </td>
  </tr>
  <tr>
    <td align="left" width="40%">
      <div align="left"><font size="2">Peter Sealey</font></div>
    </td>
    <td width="20%">&nbsp;</td>
    <td width="40%">
      <div align="center"><font size="2">25,000</font></div>
    </td>
  </tr>
  <tr>
    <td align="left" width="40%">
      <div align="left"><font size="2">Enzo Torresi</font></div>
    </td>
    <td width="20%">&nbsp;</td>
    <td width="40%">
      <div align="center"><font size="2">30,000</font></div>
    </td>
  </tr>
</table>
<p><br>
  <br>
  <b>VOTE REQUIRED AND RECOMMENDATION OF THE BOARD</b> <br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>If
  a quorum is present, the seven nominees receiving the highest number of votes
  will be elected to the Board of Directors. Votes withheld from any nominee are
  counted for purposes of determining the presence or absence of a quorum.<br>
  <br>
  <b>THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
  ALL OF THE COMPANY'S NOMINEES FOR DIRECTORS.</b></p>
<p>&nbsp;</p>
<p><font face="Times New Roman, Times, serif" size="3"> <br>
  </font></p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">6<br>
  </font></p>
<hr NOSHADE>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3"><b>PROPOSAL
  TWO</b></font></p>
<p align="center"><font face="Times New Roman, Times, serif" size="3"><b>RATIFICATION
  OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS</b><br>
  </font></p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  Audit Committee has selected Moss Adams LLP, independent public accountants,
  to audit the financial statements and internal controls of the Company for the
  fiscal year ending December 31, 2007, and recommends that stockholders vote
  for ratification of such appointment.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>Moss
  Adams LLP has audited the Company's financial statements for the three fiscal
  years ended December 31, 2006, 2005 and 2004. Representatives of Moss Adams
  LLP are expected to be present at the 2007 Annual Meeting. The representative
  will have the opportunity to make a statement if they desire to do so, and are
  expected to be available to respond to appropriate questions.<br>
  <br>
  <b>FEES BILLED BY MOSS ADAMS LLP DURING FISCAL YEARS 2006 AND 2005</b><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>Audit
  Fees</i>: <br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>Audit
  fees billed to the Company by Moss Adams LLP for their audit of the Company's
  2006 and 2005 fiscal year financial statements and review of the Company's quarterly
  financial statements for fiscal 2006 and 2005 totaled $240,000 and $205,000,
  respectively. Audit fees billed to the Company by Moss Adams LLP for their audit
  of the Company's internal controls at December 31, 2005 totaled $95,000. The
  Company was not deemed an accelerated filer for fiscal 2006 and an audit of
  the Company's internal controls at December 31, 2006 was not required.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>Audit-Related
  Fees</i>: <br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>Audit-related
  fees billed to the Company by Moss Adams LLP during the Company's 2006 and 2005
  fiscal years totaled $11,500 and $14,470, respectively. Audit-related fees were
  primarily related to meetings with the Audit Committee, attendance at the annual
  stockholder meeting, the issuance of a consent related to the filing of a Form
  S-8 registration statement and accounting advice. </p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>Tax
  Fees</i>: <br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>Tax
  fees are for preparation of the prior year's annual tax returns and tax advice.
  Fees billed to the Company by Moss Adams LLP for tax services during the Company's
  2006 and 2005 fiscal years were $19,000 and $19,765, respectively.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>All
  Other Fees</i>: <br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>There
  were no other fees billed to the Company during the Company's 2006 and 2005
  fiscal years by Moss Adams LLP.</p>
<p align="left"><i> &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>Approval
  Procedures</i>: <br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  Audit Committee's policy is to pre-approve all audit and permissible non-audit
  services provided by the independent accountants. These services may include
  audit services, audit-related services, tax services and other services. Pre-approval
  is generally detailed as to the particular service or category of services and
  is generally subject to a specific budget. The independent accountants and management
  are required to report periodically to the Audit Committee regarding the extent
  of services provided by the independent auditors in accordance with this pre-approval
  process and the fees for the services performed through such date. The Audit
  Committee may also pre-approve particular services on a case-by-case basis.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  Audit Committee has considered whether the provision of the services covered
  in this section is compatible with maintaining Moss Adams LLP's independence.
  <b></b></p>
<p align="center"><font face="Times New Roman, Times, serif" size="3"><br>
  7 <br>
  </font></p>
<hr NOSHADE>
<br>
&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<b><br>
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD </b><br>
<br>
&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>Ratification
of the appointment of Moss Adams LLP as the Company's independent public accountants
for the fiscal year ending December 31, 2007 requires the affirmative vote of
a majority of the Votes Cast on the matter at the 2007 Annual Meeting.<br>
<br>
&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>Stockholder
ratification of the appointment of Moss Adams LLP as the Company's independent
public accountants is not required by the Company's by-laws or other applicable
legal requirement. However, the Audit Committee is submitting the appointment
of Moss Adams LLP to the stockholders for ratification as a matter of common corporate
practice. If the stockholders fail to ratify the appointment, the Audit Committee
will reconsider its selection. Even if the appointment is ratified, the Audit
Committee at its discretion may direct the appointment of a different independent
accounting firm at any time during the year, if it determines that such a change
would be in the best interests of the Company and its stockholders.<br>
<b><br>
<font face="Times New Roman, Times, serif" size="3">THE BOARD OF DIRECTORS RECOMMENDS
THAT STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF MOSS ADAMS
LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2007.</font></b><font face="Times New Roman, Times, serif" size="3"><br>
<br>
</font>
<p align="center"><font face="Times New Roman, Times, serif" size="3">8<br>
  </font></p>
<hr NOSHADE>
<br>
<p align="center"><b>OTHER INFORMATION</b></p>
<p align="center"><font face="Times New Roman, Times, serif" size="3"><b>SECURITY
  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</b><br>
  </font></p>
<p align="left"><font size="3" face="Times New Roman, Times, serif">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  following table sets forth, as of the Record Date, certain information with
  respect to the beneficial ownership of the Company's Common Stock, including
  on an as-exercised basis, options and warrants exercisable within 60 days of
  the Record Date, as to (i) each person known by the Company to own beneficially
  more than 5 percent of the outstanding shares of Common Stock; (ii) each director
  of the Company; (iii) each executive officer of the Company; and (iv) all directors
  and executive officers of the Company as a group. Except as set forth below,
  the address of record for each of the individuals listed in this table is: c/o
  Socket Communications, Inc. dba Socket Mobile, Inc., 39700 Eureka Drive, Newark,
  California 94560.<br>
  </font></p>
<table width="100%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th width="240" align="LEFT"><font size="2" face="Times New Roman, Times, serif"><b>Name
      of Beneficial Owner (1)<br>
      </b></font>
      <hr NOSHADE>
    </th>
    <th width="10" align="CENTER">&nbsp;</th>
    <th width="107" align="CENTER">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">Number
        of Shares of<br>
        Common Stock Beneficially Owned</font> </div>
      <hr NOSHADE>
    </th>
    <th width="9" align="CENTER">&nbsp;</th>
    <th width="110" align="CENTER">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">Percentage
        of<br>
        Shares of<br>
        Common Stock<br>
        Beneficially Owned (2)</font></div>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="2" face="Times New Roman, Times, serif">Charlie
      Bass(3)</font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">1,951,182</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">6.1%</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="2" face="Times New Roman, Times, serif">Kevin
      J. Mills(4)</font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">852,578</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2.6</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="2" face="Times New Roman, Times, serif">Robert
      J. Miller(5)</font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">722,108</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2.2</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="2" face="Times New Roman, Times, serif">Micheal
      L. Gifford(6)</font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">680,768</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2.1</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240" height="16"><font size="2" face="Times New Roman, Times, serif">David
      W. Dunlap(7)</font></td>
    <td width="10" align="RIGHT" height="16">&nbsp;</td>
    <td width="107" align="RIGHT" height="16">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">565,218</font></div>
    </td>
    <td width="9" align="RIGHT" height="16">&nbsp;</td>
    <td width="110" align="RIGHT" height="16">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">1.7</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="2" face="Times New Roman, Times, serif">Leonard
      L. Ott(8) </font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">438,348</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">1.4</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="2" face="Times New Roman, Times, serif">Enzo Torresi(9)</font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">309,641</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">1.0</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="2" face="Times New Roman, Times, serif">Peter
      K. Phillips (10)</font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">279,963</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="2" face="Times New Roman, Times, serif">Leon Malmed(11)</font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">272,500</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="2" face="Times New Roman, Times, serif">Gianluca
      Rattazzi(11)</font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">270,000</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="2" face="Times New Roman, Times, serif">Tim I.
      Miller(12)</font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">225,928</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="2" face="Times New Roman, Times, serif">Peter
      Sealey(11) </font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">200,000</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240" height="15"><font size="2" face="Times New Roman, Times, serif">Kevin
      T. Scheier(11)</font></td>
    <td width="10" align="RIGHT" height="15">&nbsp;</td>
    <td width="107" align="RIGHT" height="15">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">195,312</font></div>
    </td>
    <td width="9" align="RIGHT" height="15">&nbsp;</td>
    <td width="110" align="RIGHT" height="15">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="2" face="Times New Roman, Times, serif">Lee A.
      Baillif (13)</font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">206,837</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="2" face="Times New Roman, Times, serif">All Directors
      and Executive Officers as a group (14 persons)(14)</font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">7,170,383</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">22.2</font></div>
    </td>
  </tr>
</table>
<table width="100%" border="0" cellspacing="0" cellpadding="0" align="center" height="284">
  <tr>
    <td>
      <hr NOSHADE align="LEFT" width="120">
      <p><font face="Times New Roman, Times, serif" size="2"> *Less than 1%</font></p>
      <p><font face="Times New Roman, Times, serif" size="2"> (1) To the Company's
        knowledge, the persons named in the table have sole voting and investment
        power with respect to all shares of Common Stock shown as beneficially
        owned by them, subject to community property laws where applicable and
        the information contained in the footnotes to this table.<br>
        </font><font face="Times New Roman, Times, serif" size="2">(2) Percentage
        ownership is based on 31,882,365 shares of Common Stock outstanding, each
        of which is entitled to one vote, on the Record Date and any shares issuable
        pursuant to securities exercisable for shares of Common Stock by the person
        or group in question as of the Record Date or within 60 days thereafter.<br>
        (3) Includes 15,723 shares of Common Stock subject to warrants exercisable
        within 60 days of February 20, 2007, and 312,500 shares of Common Stock
        subject to options exercisable within 60 days of February 20, 2007<br>
        (4) Includes 747,480 shares of Common Stock subject to options exercisable
        within 60 days of February 20, 2007.<br>
        (5) Includes 440,063 shares of Common Stock subject to options exercisable
        within 60 days of February 20, 2007.<br>
        (6) Includes 436,894 shares of Common Stock subject to options exercisable
        within 60 days of February 20, 2007.<br>
        (7) Includes 522,251 shares of Common Stock subject to options exercisable
        within 60 days of February 20, 2007.<br>
        (8) Includes 423,938 shares of Common Stock subject to options exercisable
        within 60 days of February 20, 2007.<br>
        (9) Includes 10,641 shares of Common Stock subject to warrants exercisable
        within 60 days of February 20, 2007, and 251,250 shares of Common Stock
        subject to options exercisable within 60 days of February 20, 2007.<br>
        (10) Includes 268,688 shares of Common Stock subject to options exercisable
        within 60 days of February 20, 2007.<br>
        (11) Consists of shares of Common Stock subject to options exercisable
        within 60 days of February 20, 2007.<br>
        (12) Includes 221,375 shares of Common Stock subject to options exercisable
        within 60 days of February 20, 2007.<br>
        (13) Includes 180,250 shares of Common Stock subject to options exercisable
        within 60 days of February 20, 2007.<br>
        (14) Includes 26,364 shares of Common Stock subject to warrants exercisable
        within 60 days of February 20, 2007and 4,742,501 shares of Common Stock
        subject to options exercisable within 60 days of February 20, 2007.</font></p>
    </td>
  </tr>
</table>
<p align="center">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">9<br>
  </font></p>
<hr NOSHADE>
<p align="center"><b><br>
  <font face="Times New Roman, Times, serif" size="3">SECTION 16(a) BENEFICIAL
  OWNERSHIP REPORTING COMPLIANCE</font></b></p>
<p align="left"><br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><font size="3" face="Times New Roman, Times, serif">Section
  16(a) of the Securities and Exchange Act of 1934, as amended, requires the Company's
  executive officers, directors and persons who own more than ten percent of the
  Company's Common Stock to file reports of ownership and changes in ownership
  with the SEC and the National Association of Securities Dealers, Inc. Executive
  officers, directors and greater than 10 percent stockholders are required by
  SEC regulation to furnish the Company with copies of all Section 16(a) forms
  they file. Based solely on its review of the copies of such forms received by
  it, or written representations from certain reporting persons, the Company believes
  that during fiscal 2006, all filing requirements applicable to its executive
  officers and directors were complied with by such executive officers and directors.
  <br>
  <br>
  </font></p>
<p align="center"><font size="3" face="Times New Roman, Times, serif"><b>MANAGEMENT</b></font></p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>
  </font><font size="3" face="Times New Roman, Times, serif">The current executive
  officers of the Company are as follows: </font></p>
<table width="100%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th width="28%" align="LEFT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif"><b>Name
        of Officer<br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></th>
    <th width="6%" align="CENTER"><font size="2" face="Times New Roman, Times, serif"><b>Age</b></font>
      <hr NOSHADE>
    </th>
    <th width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></th>
    <th width="62%" align="CENTER"><font size="2" face="Times New Roman, Times, serif"><b>Position
      with the Company</b></font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%"><font size="2" face="Times New Roman, Times, serif">Kevin
      J. Mills</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">46</font></div>
    </td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%"><font size="2">President and Chief Executive Officer and Director</font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%"><font size="2" face="Times New Roman, Times, serif">David
      W. Dunlap</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">64</font></div>
    </td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%"><font size="2">Vice President of Finance and Administration,
      Chief Financial Officer and Secretary</font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%"><font size="2" face="Times New Roman, Times, serif">Micheal
      L. Gifford</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">48</font></div>
    </td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%"><font size="2">Executive Vice President and Director</font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%"><font size="2">Lee A. Baillif</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">46</font></div>
    </td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%"><font size="2">Vice President and Controller</font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%"><font size="2">Robert J. Miller</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT">
      <div align="center"><font size="2">56</font></div>
    </td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%"><font size="2">Vice President of Engineering</font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%"><font size="2">Tim I. Miller</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT">
      <div align="center"><font size="2">52</font></div>
    </td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%"><font size="2">Vice President of Worldwide Operations</font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%" height="15"><font size="2" face="Times New Roman, Times, serif">Leonard
      L. Ott</font></td>
    <td width="2%" height="15"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT" height="15">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">48</font></div>
    </td>
    <td width="2%" height="15"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%" height="15"><font size="2">Vice President and Chief Technical
      Officer</font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%" height="21"><font size="2" face="Times New Roman, Times, serif">Peter
      K. Phillips</font></td>
    <td width="2%" height="21"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT" height="21">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">47</font></div>
    </td>
    <td width="2%" height="21"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%" height="21"><font size="2">Vice President of Marketing</font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%" height="8"><font size="2" face="Times New Roman, Times, serif">Kevin
      T. Scheier</font></td>
    <td width="2%" height="8"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT" height="8">
      <div align="center"><font size="2">50</font></div>
    </td>
    <td width="2%" height="8"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%" height="8"><font size="2">Vice President Sales and Solutions,
      Americas</font></td>
  </tr>
</table>
<p><font size="3" face="Times New Roman, Times, serif"> &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>For
  information regarding Kevin J. Mills and Micheal L. Gifford, please see "Election
  of Directors" above. <br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i>David
  W. Dunlap</i> has served as the Company's Vice President of Finance and Administration,
  Secretary and Chief Financial Officer since February 1995 and served in the
  same role as a consultant from November 1994 to February 1995. Mr. Dunlap previously
  served as Vice President of Finance and Administration and Chief Financial Officer
  at several public and private companies, including Appian Technology Inc., a
  semiconductor company from September 1993 to February 1995, and Mountain Network
  Solutions, Inc., a computer peripherals manufacturing company, from March 1992
  to September 1993. He is a certified public accountant, and holds an M.B.A.
  and a B.A. in Business Administration from the University of California at Berkeley.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>Lee
  A. Baillif</i> has served as the Company's Controller since January 1, 1999
  and was promoted to Vice President and Controller on January 24, 2007. Prior
  to his appointment as Controller, Mr. Baillif was a member of the accounting
  staff from September 1994. He holds a B.S. in Business and Finance from San
  Francisco State University.</font></p>
<p><font size="3" face="Times New Roman, Times, serif"><i> </i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>Robert
  J. Miller</i> has served as the Company's Vice President of Engineering since
  October 2000. Prior to joining the Company, Mr. Miller served as Chief Technical
  Officer of 3rd Rail Engineering, an engineering design and services company
  that was acquired by the Company in October 2000. Prior to his employment with
  3rd Rail Engineering, Mr. Miller was an independent engineering design consultant
  from 1997 to June 1999. Mr. Miller also served in various capacities from 1991
  to 1997 with Synaptics, Inc., a computer components design and manufacturing
  company, including Director of Manufacturing Engineering and Director of Operations.
  At Synaptics, Mr. Miller was co-inventor of the Synaptics touch pad and was
  issued eight patents for his work. Mr. Miller holds a BS Engineering degree
  with honors from the California Institute of Technology.</font></p>
<br>
<p align="center"><font face="Times New Roman, Times, serif" size="3">10<br>
  </font></p>
<hr NOSHADE>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>Tim
  I. Miller</i> has served as the Company's Vice President of Worldwide Operations
  since March 2003, responsible for the Company's worldwide manufacturing operations.
  Mr. Miller served in the same role as a consultant from January 2003 to March
  2003. Mr. Miller was an independent consultant from June 1991 to December 1992.
  Prior to joining the Company, Mr. Miller was the Vice President of Worldwide
  Operations for Com21, a developer of broadband technology solutions, from August
  1994 to May 2001. Mr. Miller holds a B.S. with an emphasis in Business Administration
  and Political Science from San Jose State University.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>Leonard
  L. Ott</i> has served as the Company's Vice President and Chief Technical Officer
  since October 2000 and previously served as Vice President of Engineering from
  December 1998 to October 2000. Mr. Ott joined the Company in March 1994, serving
  in increasingly responsible engineering positions including Director of Software
  Development and Director of Engineering. Mr. Ott also worked as an engineering
  consultant to the Company, from November 1993 to March 1994. Prior to joining
  the Company, Mr. Ott served in various senior roles at Vision Network Systems
  from March 1988 to November 1993, a networking systems company. Mr. Ott is a
  board member of the CompactFlash Association, the body establishing standards
  for CompactFlash products, and a board member of the Secure Digital Association,
  the body establishing standards for Secure Digital products. He holds a B.S.
  in Computer Science from the University of California at Berkeley.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>Peter
  K. Phillips</i> has served as the Company's Vice President of Marketing since
  November 2002. Mr. Phillips joined the Company in August 1995, serving in the
  roles of Product Marketing Manager and then Director of Marketing prior to assuming
  his present position. Prior to joining the Company, Mr. Phillips held progressively
  responsible marketing positions for seven years at Logitech, Inc., a developer
  and manufacturer of personal computer peripheral products. Mr. Phillips holds
  a B.A. in Economics from Stanford University.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>Kevin
  T. Scheier</i> served as the Company's Vice President of Sales from January
  2003 to February 2007. Mr. Scheier's employment with the Company terminated
  on February 2, 2007.<br>
  <font size="3" face="Times New Roman, Times, serif"><br>
  </font></p>
<p align="center"><font size="3" face="Times New Roman, Times, serif">11<br>
  </font></p>
<hr NOSHADE>
<p align="center"><font size="3" face="Times New Roman, Times, serif"><b>DIRECTOR
  COMPENSATION<br>
  </b></font></p>
<p><b>Compensation of Non-Employee Directors</b></p>
<p> <font size="3" face="Times New Roman, Times, serif">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  following tables set forth the annual compensation paid or accrued by the Company
  to or on behalf of the outside directors of the Company for the fiscal year
  ended December 31, 2006. </font></p>
<p>&nbsp;</p>
<table width="87%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th width="33%" align="LEFT" height="54">&nbsp;</th>
    <th width="12%" align="LEFT" height="54">&nbsp;</th>
    <th width="12%">&nbsp;</th>
    <th width="12%" valign="bottom" align="CENTER" height="54">&nbsp;</th>
  </tr>
  <tr valign="BOTTOM">
    <th width="33%" align="LEFT" height="15">
      <div align="center"><font size="2" face="Times New Roman, Times, serif"><b>Name
        <br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th width="12%" align="CENTER" height="15"><font size="2">Fees Earned or Paid
      in Cash ($)</font>
      <hr NOSHADE>
    </th>
    <th width="12%" align="CENTER" height="15"><font size="2">Option Awards ($)(1)
      </font>
      <hr NOSHADE>
    </th>
    <th width="12%" align="CENTER" height="15"><font size="2">Total ($) </font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="14"><font size="2" face="Times New Roman, Times, serif">Charlie
      Bass <br>
      </font></td>
    <td height="14">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">12,000</font></div>
    </td>
    <td height="14">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">22,000(2)
        </font></div>
    </td>
    <td height="14">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">34,000
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="0"><font size="2" face="Times New Roman, Times, serif">Leon Malmed<br>
      </font></td>
    <td height="0">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">12,000
        </font></div>
    </td>
    <td height="0">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">17,600(3)
        </font></div>
    </td>
    <td height="0">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">29,600
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="11">
      <p><font size="2">Gianluca Rattazzi</font></p>
    </td>
    <td height="11">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">12,000
        </font></div>
    </td>
    <td height="11">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">15,400(4)
        </font></div>
    </td>
    <td height="11">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">27,400
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="2"><font size="2" face="Times New Roman, Times, serif">Peter Sealey<br>
      </font></td>
    <td height="2">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">12,000
        </font></div>
    </td>
    <td height="2">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">11,000(5)
        </font></div>
    </td>
    <td height="2">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">23,000
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="16">
      <p><font size="2" face="Times New Roman, Times, serif">Enzo Torresi </font></p>
    </td>
    <td height="16">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">12,000
        </font></div>
    </td>
    <td height="16">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">13,200(6)
        </font></div>
    </td>
    <td height="16">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">25,200
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td height="199" colspan="4">
      <hr NOSHADE align="LEFT" width="120">
      <font size="2">(1) Amounts shown do not reflect compensation actually received
      by the directors. Instead, the amounts shown are the compensation costs
      recognized for option awards vesting in fiscal 2006 for financial statement
      reporting purposes as determined pursuant to Statement of Financial Accounting
      Standards No. 123(R), or FAS 123R. <br>
      (2) Mr. Bass was granted 50,000 options on April 16, 2006 with grant date
      fair values, computed in accordance with FAS 123R of $33,000. The aggregate
      equity awards held by Mr. Bass at December 31, 2006 were options to purchase
      312,000 shares of Common Stock. <br>
      (3) Mr. Malmed was granted 40,000 options on April 19, 2006 with grant date
      fair values, computed in accordance with FAS 123R of $26,400. The aggregate
      equity awards held by Mr. Malmed at December 31, 2006 were options to purchase
      272,500 shares of Common Stock. <br>
      (4) Mr. Rattazzi was granted 35,000 options on April 19, 2006 with grant
      date fair values, computed in accordance with FAS 123R of $23,100. The aggregate
      equity awards held by Mr. Rattazzi at December 31, 2006 were options to
      purchase 270,000 shares of Common Stock. <br>
      (5) Mr. Sealey was granted 25,000 options on April 19, 2006 with grant date
      fair values, computed in accordance with FAS 123R of $16,500. The aggregate
      equity awards held by Mr. Sealey at December 31, 2006 were options to purchase
      200,000 shares of Common Stock. <br>
      (6) Mr. Torresi was granted 30,000 options on April 19, 2006 with grant
      date fair values, computed in accordance with FAS 123R of $19,800. The aggregate
      equity awards held by Mr. Torresi at December 31, 2006 were options to purchase
      251,250 shares of Common Stock. </font> </td>
  </tr>
</table>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>Each
  outside director receives meeting attendance fees of $3,000 for each meeting
  attended. During 2006, the Board met four times, and all directors attended.
  The Board also met once by telephone, and all directors were in attendance except
  Mr. Malmed who was excused due to a scheduling conflict. </p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  outside directors are also entitled to participate in the Company's 2004 Equity
  Incentive Plan. Grants of options to directors are made annually during the
  year of board service, commencing at each election of the Board of Directors.
  25,000 options were awarded to each director for Board and committee service.
  Directors serving as chairpersons of the nominating, audit and compensation
  committees received an additional 5,000 shares, the director serving as the
  Board chairperson received an additional 10,000 shares, and members serving
  on the audit committee received an additional 10,000 shares. On April 19, 2006,
  the outside directors were granted 180,000 options vesting monthly over a one
  year period for the service period that commenced on April 19, 2006, with an
  exercise price of $1.20 per share, which was the fair market value of the Common
  Stock on the date of grant. See also Proposal One - Compensation of Directors.
  Option awards are valued in accordance with the guidelines of Statement of Financial
  Accounting Standard No. 123(R).</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">12<br>
  </font></p>
<hr NOSHADE>
<p align="center"><b><br>
  Compensation Discussion and Analysis </b></p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>Overview</i></p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i></i>The
  Compensation Committee establishes the general compensation policies of the
  Company, and establishes the compensation plans and specific compensation levels
  for executive officers. The Company strives to ensure that its executive compensation
  programs enable the Company to attract and retain key people and motivate them
  to achieve or exceed key objectives of the Company by making individual compensation
  directly dependent on the Company's achievement of certain financial goals,
  such as revenue attainment and profitability. </p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i></i>As
  a result, we strive to provide a total compensation package that is fair, reasonable,
  and competitive with prevailing practices in our industry, allowing for above
  average total compensation when justified by business results and exceptional
  individual contribution.</p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i>Compensation
  Philosophy and Objectives</i></p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  Company's fiscal 2006 compensation policies, plans and programs intended to
  achieve the following objectives:&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i></i></p>
<ul>
  <ul>
    <ul type="disc">
      <li>attract, retain and motivate talented executive officers</li>
      <li>provide executive officers with cash bonus opportunities linked to achievement
        of business objectives and individual performance goals</li>
      <li>align the financial interests of executive officers with those of stockholders
        by providing executive officers with an equity stake in the Company </li>
    </ul>
  </ul>
</ul>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i></i><i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>Our
  approach to executive compensation is to be "middle of the road" for cash compensation
  and to offer equity incentives that maintain acceptable levels of dilution.</p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>Elements
  of Executive Compensation. </i></p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i>&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i><i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  three major components of the Company's executive officer compensation are:
</p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i>&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>(i)&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i>&nbsp&nbspbase
  salary,</p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i>&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>(ii)&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i>&nbspvariable
  incentive awards, and </p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i>&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i><i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>(iii)&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i>long-erm,
  equity-based incentive rewards.</p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i>The components,
  as well as the total direct compensation, of our rewards program for executives
  are benchmarked against similarly sized companies based on their revenue levels,
  number of employees and geographic locations as set forth in the national compensation
  survey of the American Electronics Association. All of our executive officers
  are also entitled to earn variable incentive awards and stock option grants
  as part of their compensation packages. As a result, we continue to remain focused
  on ensuring that our compensation program is optimized to motivate employees
  to improve the Company's results on a cost-effective basis.</p>
<p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i>Base
  Salary</i>. The Compensation Committee establishes a competitive base salary
  designed to recognize the skills and experience each individual brings to the
  Company and the performance contributions they make. Overall, total direct compensation
  levels for each position is targeted at the 50th Percentile of similar positions
  in the American Electronics Association surveys for employees participating
  in variable incentive award programs. Some variation in the competitive mean
  is allowed when, in the judgment of management and/or the Compensation Committee,
  as appropriate, the value of an individual's experience, performance and specific
  skill set justifies upward or downward variation. Base salary recognizes an
  employee's role, responsibilities, skills, experience and performance. </p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">13<br>
  </font></p>
<hr NOSHADE>
<p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i></i>The
  Compensation Committee determines both the amount and timing of base salary
  increases. Factors affecting the level of base pay increases each year include
  the overall financial performance of the Company, changes in the base salary
  compensation levels reported in the American Electronics Association surveys
  for executive positions in similarly sized companies, and the individual performance
  of each executive. The performance of each executive officer of the Company
  is formally evaluated by his or her supervisor at least one time per year. During
  2006, the base salary levels for executive officers were unchanged primarily
  due to the overall financial performance of the Company.</p>
<p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i>Variable
  Incentive Awards</i>. To reinforce the importance of meeting the Company's financial
  goals, and to reward significant individual contribution to that effort, the
  Company believes that a meaningful portion of the quarterly compensation of
  each executive officer should be in the form of variable incentive pay. </p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i>Variable
  incentive target awards are established by the Compensation Committee under
  the same criteria used for establishing base salaries, and base salary and variable
  incentive targets are considered together in establishing appropriate compensation
  levels for each executive officer. Each executive officer participates in a
  Management Variable Incentive Compensation Plan (the "Plan"), which is approved
  by the Compensation Committee, and performance is measured quarterly. The Plan
  measures four components:</p>
<ul>
  <ul>
    <ul type="disc">
      <li>Actual quarterly revenue compared to a Board-approved financial plan
        ("Financial Plan") &nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i></i><i>&nbsp</i><br>
        <br>
      </li>
      <li><i></i> Actual quarterly gross margins compared to the Financial Plan<br>
        <br>
      </li>
      <li> Actual expenses compared to the Financial Plan<br>
        <br>
      </li>
      <li>Achievement of quarterly management objectives</li>
    </ul>
  </ul>
</ul>
<div align="left">
  <p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i>The
    Financial Plan is approved each year by the Company's Board of Directors and
    actual results are measured against that Financial Plan. Management objectives
    are set quarterly by each executive officer's supervisor. Each component is
    weighted equally, and awards are paid based on the percentage attainment achieved
    of each component, respectively. Awards are capped at twice the target award
    levels for each financial component and executive officers earn zero for such
    component if attainment of such component is less than 80 percent. Variable
    incentive targets for executives during 2006 ranged from 16 percent to 36
    percent of total cash compensation, and averaged 24 percent among all executives
    in fiscal 2006.</p>
  <p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i><i>Long-Term,
    Equity-Based Incentive Awards</i></i>. The goal of the Company's long-term,
    equity-based incentive awards is to align the interests of executive officers
    with those of stockholders and to provide each executive officer with a significant
    incentive to manage the Company from the perspective of an owner with an equity
    stake in the business. All equity incentives are subject to vesting provisions
    to encourage executive officers to remain employed with the Company. Such
    awards to date have been in the form of stock option grants. The Compensation
    Committee determines the size of awards according to each executive officer's
    position at the Company and sets a level that it considers appropriate to
    create a meaningful opportunity for equity participation. In addition, the
    Compensation Committee, in consultation with management, takes into account
    an individual's recent performance, his or her potential for future responsibility
    and promotion, the number of unvested options held by each individual at the
    time of the new grant and the size of the available stock award pool. </p>
  <p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i></i>In
    June 2004, the Company's stockholders approved the 2004 Equity Incentive Plan
    and initially transferred shares available for grant from the Company's 1995
    stock plan which was scheduled to expire in 2005. The 2004 Equity Incentive
    Plan provides for an automatic increase each January 1st in the available
    stock award pool equal to the lesser of (a) 2,000,000 shares, (b) four percent
    of the outstanding shares on that date, or (c) a lesser amount as determined
    by the Board of Directors. Options are granted at the discretion of the Compensation
    Committee to all employees of the Company based on recommendations from management
    regarding employee responsibilities and performance. <br>
    <br>
  </p>
  <p align="center"><font face="Times New Roman, Times, serif" size="3">14<br>
    </font></p>
  <hr NOSHADE>
  <p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i></i>The
    Compensation Committee, in consultation with management, prepares an annual
    allocation plan dividing available stock in the grant pool among employee
    refresher grants, new employee grants, director grants and reserves. The timing,
    award criteria, and award procedures are discussed more fully under Equity
    Incentive Grant Policies in the next section. </p>
  <p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i></i>During
    fiscal year 2006, the Compensation Committee of the Board of Directors awarded
    stock option grants to Messrs. Mills, Gifford, Dunlap, Miller and Scheier
    and to three other executive officers of the Company under the Company's 2004
    Equity Incentive Plan. Each option allows the officer to acquire shares of
    the Company's Common Stock at the market price per share on the grant date
    over a specified period of time. Awards were made as refresher grants on February
    17, 2006. Refresher grants are made annually, typically during the first quarter
    of the year. The grants had a vesting start date of January 1, 2007 and vest
    monthly over 48 months, contingent upon the executive officer's continued
    employment with the Company. The grants expire ten years after the date of
    grant. Fully vested grants, or grants vesting over a shorter or longer term
    than four years, may be awarded at the discretion of the Compensation Committee.
    Each of the Named Executive Officer's options will provide a return only if
    the officer remains with the Company and only if the market price appreciates
    during the option term. &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i></i></p>
  <p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i></i><i>Equity
    Incentive Grant Policies.</i></p>
</div>
<div align="left">
  <p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i>General
    option grant practices</i>. All stock options grants are awarded by the Compensation
    Committee, or the full Board in the case of director stock option grants.
    All stock options are priced at the closing market price of the Company's
    common stock on the date of grant and the actions of the Compensation Committee
    are documented in minutes that are retained in the minute book of the Company.
    During 2006, the Compensation Committee met eight times during the year and
    stock option grants were awarded at seven of those meetings. </p>
  <p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i>Initial
    stock option grants</i>. The Company awards initial stock option grants to
    each new employee of the Company at the first meeting of the Compensation
    Committee following employment. The size of the grant is based on the responsibilities
    of each employee and as agreed to in the employee's employment offer. Grants
    for executive officers are approved by the Compensation Committee in advance
    of offers being made to the individual. Grants to rank and file employees
    are made by management within general guidelines reviewed and approved by
    the Compensation Committee and the actual grant requires the approval of the
    Compensation Committee at the time of grant. New employee grants during fiscal
    2006 were awarded to new employees generally within a few weeks of commencing
    employment. Beginning with the second quarter of 2007, new employee grants
    will be awarded by the Compensation Committee on the first business day of
    each month following an employee's date of initial employment. Initial grants
    generally vest 25% on the one year anniversary of employment and 1/48th per
    month thereafter for a total vesting period of 48 months. The delay in initial
    vesting for the first twelve months of employment provides an incentive for
    employee retention and insures that the employee is familiar with the Company
    and its goals and objectives prior to shares vesting.</p>
  <p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i>Refresher
    stock option grants</i>. The Compensation Committee awards refresher stock
    option grants annually, generally to all employees of the Company, based on
    the recommendations of management about the responsibilities and performance
    of each employee. Such refresher grants are typically made during the first
    quarter of the year during open trading windows as defined in the Company's
    Code of Business Conduct and Ethics including its Insider Trading Policy contained
    therein. Over the past several years, the executive officers of the Company
    have received approximately 50 percent of the total of refresher grants awarded
    because of the relative importance of their positions in achieving the Company's
    goals and objectives, managers and senior contributors have received approximately
    25 percent, while other employees have received the balance of 25 percent.
    Options to acquire 358,000 common shares were awarded to the eight executive
    officers of the Company in 2006 ranging from a low of 40,000 shares to a high
    of 55,000 shares. The Company awards grants to each of its employees in recognition
    of each employee's critical contribution to meeting the Company's goals and
    objectives. Refresher grants generally vest monthly over a 48 month period.</p>
  <p>&nbsp;</p>
  <p align="center"><font face="Times New Roman, Times, serif" size="3">15<br>
    </font></p>
  <hr NOSHADE>
  <i>&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i></i>
<p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i></i><i>Director
    stock option grants</i>. A portion of the compensation of the Company's outside
    directors is an annual stock option grant. Director grants are awarded by
    the full Board of Directors at the first regularly scheduled board meeting
    following the annual election of directors and vest over the ensuing year
    of service. Options are awarded equally to all directors for Board and committee
    service. Additional options are awarded for committee and Board leadership
    positions and audit committee service, as discussed on page 13 under "<i>Director
    Compensation</i>". </p>
  <p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i></i><i></i>Other
    Compensation</i>. </p>
  <p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i></i><i></i>Executive
    officers are entitled to participate in the same health and benefit programs
    and 401(K) program as are available to all employees of the Company and do
    not receive any perquisites from the Company.</p>
  <p><i>Accounting and Tax Implications</i></p>
  <p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i></i><i></i><i>Accounting
    for Stock-Based Compensation</i> On January 1, 2006, we adopted Financial
    Accounting Standard SFAS 123R, "Share-Based Payment," for the fiscal year
    ended December 31, 2006. Under SFAS 123R, the Company uses a binomial lattice
    valuation model to estimate fair value of stock option grants made on or after
    January 1, 2006. The binomial lattice model incorporates estimates for expected
    volatility, risk-free interest rates, employee exercise patterns and post-vesting
    employment termination behavior, and these estimates will affect the calculation
    of the fair value of the Company's stock option grants. The fair value of
    stock option grants outstanding prior to January 1, 2006 is estimated using
    the Black-Scholes option pricing model used under SFAS 123. The Company adopted
    the modified prospective recognition method and implemented the provisions
    of SFAS 123R beginning with the first quarter of 2006.</p>
  <p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i>Income taxes</i>.
    The Company has not provided any executive officer or director with a gross-up
    or other reimbursement for tax amounts the executive might pay pursuant to
    Section 280G or Section 409A of the Internal Revenue Code. The 2004 Equity
    Incentive Plan also allows for the issue of qualifying grants as "performance-based
    compensation" under Section 162(m) of the Internal Revenue Code. No grants
    deemed performance-based compensation grants have been awarded to the executive
    officers of the Company.</p>
  <p><i>Compensation of the Chief Executive Officer</i></p>
  <p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>The
    factors considered by the Company in determining the compensation of Mr. Mills,
    the Chief Executive Officer, are the same factors applied to the other executive
    officers of the Company as described under <i>Elements of Executive Compensation</i>,
    and he participates in the same compensation programs as do the other executive
    officers. Mr. Mills' compensation is based on survey data prepared by the
    American Electronics Association for companies of similar size and location,
    his responsibility and leadership in establishing and implementing the strategic
    direction of the Company, and the financial performance of the Company. Primarily
    due to the financial performance of the Company during fiscal year 2006, the
    Company did not increase the base salary or variable salary targets of any
    of its executive officers, including Mr. Mills. </p>
  <p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>Mr.
    Mills as Chief Executive Officer was the highest paid executive in the Company
    during fiscal year 2006. His total base salary during 2006 was $180,000, and
    his total target variable compensation was $100,000 for a total compensation
    target of $280,000. Mr. Mills earned 70% of his total target variable compensation
    during fiscal year 2006, due primarily to the Company underachieving its revenue
    and gross margin targets under the Management Variable Incentive Compensation
    Plan. Mr. Mills' total compensation is consistent with the average compensation
    for Chief Executive Officers of companies of similar size and location. </p>
  <p>&nbsp;</p>
  <p>&nbsp;</p>
  <p align="center"><font face="Times New Roman, Times, serif" size="3">16<br>
    </font></p>
  <hr NOSHADE>
  <p><br>
    <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>Mr. Mills
    also received an annual refresher stock option grant of 55,000 shares on February
    17, 2006 at the same time that refresher grants were awarded to all employees
    of the Company. This option commenced vesting on January 1, 2007 and will
    vest in equal monthly installments over a 48 month period. The reliance on
    stock option grants as a significant element of the Chief Executive Officer's
    compensation is intended to align his total compensation package with those
    of stockholders and to provide the Chief Executive Officer with a significant
    incentive to manage the Company from the perspective of an owner with an equity
    stake in the business, including attaining long-term growth and profitability.
  </p>
  <p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>The
    Chief Executive Officer is entitled to participate in the same health and
    benefit programs as are available to all employees of the Company. Mr. Mills
    does not receive any perquisites from the Company.</p>
  <p>&nbsp;</p>
  <p>&nbsp;</p>
  <p align="center"><font face="Times New Roman, Times, serif" size="3">17<br>
    </font></p>
  <hr NOSHADE>
  <p align="center"><b><br>
    SUMMARY COMPENSATION TABLE</b><font size="3" face="Times New Roman, Times, serif"><br>
    <b>For Fiscal Year Ended December 31, 2006</b></font></p>
  <p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>The
    following table provides fiscal 2006 compensation information for the Chief
    Executive Officer, Chief Financial Officer, and three other executive officers
    of the Company who were the most highly compensated in fiscal year 2006 (the
    "<b>Named Executive Officers</b>"). <br>
    <br>
    </font></p>
  </div>

<table width="87%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th width="33%" align="LEFT" height="43">
      <div align="center"><font size="2" face="Times New Roman, Times, serif"><b>Name
        and Principal Position<br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th width="7%" align="CENTER" height="43"><font size="2" face="Times New Roman, Times, serif"><b>Year</b></font>
      <hr NOSHADE>
    </th>
    <th width="16%" align="CENTER" height="43"><font size="2" face="Times New Roman, Times, serif"><b>Salary
      ($)</b></font><font size="2">(1)</font>
      <hr NOSHADE>
    </th>
    <th width="16%" align="CENTER" height="43"><font size="2">Option Awards ($)(3)
      </font>
      <hr NOSHADE>
    </th>
    <th width="16%" align="CENTER" height="43"><font size="2">Non-Equity Incentive
      Plan Compensation ($)(2)</font>
      <hr NOSHADE>
    </th>
    <th width="16%" align="CENTER" height="43"><font size="2" face="Times New Roman, Times, serif"><b>Total
      ($)</b></font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17"><font size="2" face="Times New Roman, Times, serif">Kevin
      J. Mills<br>
      President and Chief Executive Officer and Director</font></td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2006
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">180,000
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">72,227
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">69,974
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">322,201
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="15"><font size="2" face="Times New Roman, Times, serif">Micheal
      L. Gifford<br>
      Executive Vice President and Director</font></td>
    <td align="RIGHT" height="15" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2006
        </font></div>
    </td>
    <td align="RIGHT" height="15" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">165,000
        </font></div>
    </td>
    <td align="RIGHT" height="15" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">63,230
        </font></div>
    </td>
    <td align="RIGHT" height="15" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">31,963
        </font></div>
    </td>
    <td align="RIGHT" height="15" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">260,193
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="35">
      <p><font size="2" face="Times New Roman, Times, serif">David W. Dunlap<br>
        </font><font size="2">Vice President of Finance and Administration, Chief
        </font><font size="2" face="Times New Roman, Times, serif"><i></i><i></i><i></i><i></i></font><font size="2">Financial
        Officer and Secretary</font></p>
    </td>
    <td align="RIGHT" height="35" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2006
        </font></div>
    </td>
    <td align="RIGHT" height="35" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">
        160,000 </font></div>
    </td>
    <td align="RIGHT" height="35" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">60,674<br>
        </font></div>
    </td>
    <td align="RIGHT" height="35" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">34,906<br>
        </font></div>
    </td>
    <td align="RIGHT" height="35" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">255,580<br>
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="18"><font size="2" face="Times New Roman, Times, serif">Kevin
      T. Scheier<br>
      Vice President of Worldwide Sales (4)</font></td>
    <td height="18" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2006
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">135,000
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">62,693
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">49,163
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">246,856
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17">
      <p><font size="2" face="Times New Roman, Times, serif">Robert J. Miller<br>
        Vice President of Engineering </font></p>
    </td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2006<br>
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">160,000
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">50,673
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">32,873
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">243,546
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td colspan="6" height="35">
      <hr NOSHADE align="LEFT" width="120">
      <font size="2">(1) Represents base salary as described under <i>Compensation
      Summary and Analysis - Elements of Executive Compensation</i>.</font><br>
      <font size="2">(2) Represents Variable Incentive Awards as described under
      <i>Compensation Summary and Analysis - Elements of Executive Compensation</i>.<br>
      </font><font size="2" face="Times New Roman, Times, serif">(3) Amounts shown
      do not reflect compensation actually received by the executive officer.
      Instead, the amounts shown are the compensation costs recognized for option
      awards vesting during fiscal 2006 for financial statement reporting purposes
      as determined pursuant to Statement of Financial Accounting Standards No.
      123(R), or FAS 123R.<br>
      (4) Mr. Scheier's employment terminated on February 2, 2007.</font></td>
  </tr>
</table>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">18<br>
  </font></p>
<hr NOSHADE>
<p align="center"><font size="3" face="Times New Roman, Times, serif"><b>GRANTS
  OF PLAN-BASED AWARDS<br>
  For Fiscal Year Ended December 31, 2006 </b></font></p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>The
  following table shows for the fiscal year ended December 31, 2006 certain information
  regarding options granted to the Named Executive Officers. Options were granted
  as described under <i>Compensation Summary and Analysis - Elements of Executive
  Compensation - Long-Term, Equity-Based Incentive Awards</i> and - <i>Equity
  Incentive Grant Policies</i>.<br>
  <br>
</p>
<table width="87%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th align="LEFT" height="59">
      <div align="center"><font size="2" face="Times New Roman, Times, serif"><b>Name
        <br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="59"><font size="2">Grant<br>
      Date</font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="59"><font size="2">All Other Option Awards: Number
      of Securities Underlying Options (#) </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="59"><font size="2">Exercise or Base Price of Option
      Awards ($/share) </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="59"><font size="2">Grant Date Fair Value of Stock
      and Option Awards ($)(1) </font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17"><font size="2" face="Times New Roman, Times, serif">Kevin
      J. Mills </font></td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2/17/2006
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">55,000
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">1.17
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">35,200
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="19"><font size="2" face="Times New Roman, Times, serif">Micheal
      L. Gifford </font></td>
    <td align="RIGHT" height="19" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2/17/2006
        </font></div>
    </td>
    <td align="RIGHT" height="19" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">50,000
        </font></div>
    </td>
    <td align="RIGHT" height="19" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">1.17
        </font></div>
    </td>
    <td align="RIGHT" height="19" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">32,000
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17">
      <p><font size="2" face="Times New Roman, Times, serif">David W. Dunlap </font></p>
    </td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2/17/2006
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">48,000
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">1.17
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">30,720
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="18"><font size="2" face="Times New Roman, Times, serif">Kevin
      T. Scheier (2)</font></td>
    <td height="18" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2/17/2006
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">40,000
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">1.17
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">25,600</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="20">
      <p><font size="2" face="Times New Roman, Times, serif">Robert J. Miller
        </font></p>
    </td>
    <td align="RIGHT" height="20" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2/17/2006
        </font></div>
    </td>
    <td align="RIGHT" height="20" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">40,000
        </font></div>
    </td>
    <td align="RIGHT" height="20" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">1.17</font></div>
    </td>
    <td align="RIGHT" height="20" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">25,600
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td colspan="6" height="46">
      <hr NOSHADE align="LEFT" width="120">
      <font size="2">(1) The value of option awards is based on the fair value
      as of the grant date of such award determined pursuant to FAS 123R, which
      was $0.64 per share. The exercise price for all options granted to the Named
      Executive Officers is 100% of the fair market value of the shares based
      on the closing market price for the Company's stock on the grant date which
      was $1.17 per share. Regardless of whatever value is placed on a stock option
      on the grant date, the actual value of the option will depend on the market
      value of the Company's Common Stock at such date in the future when the
      option is exercised.<br>
      (2) Mr. Scheier's employment terminated on February 2, 2007. </font></td>
  </tr>
</table>
<p align="left">&nbsp;</p>
<p align="center"><b>OUTSTANDING EQUITY AWARDS AT FISCAL 2006 YEAR-END</b></p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>The
  following table set forth certain information concerning outstanding equity
  awards held by the Named Executive Officers at the end of the fiscal year ended
  December 31, 2006:</p>
<table width="87%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th align="LEFT" height="59">&nbsp;</th>
    <th align="CENTER" height="59" colspan="4"> <font size="2">Option Awards </font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr valign="BOTTOM">
    <th align="LEFT" height="100">
      <div align="center"><font size="2" face="Times New Roman, Times, serif"><b>Name
        <br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100"><font size="2">Number of Securities Underlying
      Unexercised Options Exercisable (#)(1) </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100"><font size="2">Number of Securities Underlying
      Unexercised Options Unexercisable (#)(1)(2) </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100"><font size="2">Option Exercise Price ($)(3)
      </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100"><font size="2">Option Expiration Date(4) </font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17"><font size="2" face="Times New Roman, Times, serif">Kevin
      J. Mills </font></td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">25,000
        <br>
        67,667 <br>
        300,000 <br>
        90,000 <br>
        67,000 <br>
        50,000 <br>
        41,250 <br>
        36,458 <br>
        53,750 <br>
        0 </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">0
        <br>
        0 <br>
        0 <br>
        0 <br>
        0 <br>
        0 <br>
        3,750<br>
        13,542 <br>
        46,250 <br>
        55,000 </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">0.69
        <br>
        0.56<br>
        3.38<br>
        1.06<br>
        1.29<br>
        0.76<br>
        0.73<br>
        3.20<br>
        1.50<br>
        1.17 </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">6/10/2008
        <br>
        6/16/2009 <br>
        12/20/2010 <br>
        9/27/2011 <br>
        4/3/2012<br>
        11/27/2012 <br>
        3/21/2013 <br>
        2/3/2014<br>
        1/28/2015 <br>
        2/17/2016 </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17">&nbsp;</td>
    <td align="RIGHT" height="17" width="7%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17"><font size="2" face="Times New Roman, Times, serif">Micheal
      L. Gifford </font></td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="2">8,333<br>
        39,967<br>
        100,000<br>
        75,000<br>
        50,000<br>
        34,000<br>
        32,083<br>
        34,635<br>
        48,375<br>
        0 </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2">0<br>
        0<br>
        0<br>
        0<br>
        0<br>
        0<br>
        2,917<br>
        12,865 <br>
        41,625 <br>
        50,000 </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2">0.69<br>
        0.56<br>
        3.38<br>
        1.06<br>
        1.29<br>
        0.76<br>
        0.73<br>
        3.20<br>
        1.50<br>
        1.17</font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2">6/10/2008<br>
        6/16/2009<br>
        12/20/2010<br>
        9/27/2011<br>
        4/3/2012<br>
        11/27/2012<br>
        3/21/2013<br>
        2/3/2014<br>
        1/28/2015<br>
        2/17/2016 </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17">&nbsp;</td>
    <td align="RIGHT" height="17" width="7%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17"><font size="2" face="Times New Roman, Times, serif">David
      W. Dunlap </font></td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">17,500
        <br>
        25,000 <br>
        131,250 <br>
        75,000 <br>
        65,000 <br>
        50,000 <br>
        34,000 <br>
        32,083 <br>
        32,813 <br>
        45,688 <br>
        0 </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">0
        <br>
        0 <br>
        0 <br>
        0 <br>
        0 <br>
        0 <br>
        0 <br>
        2,917<br>
        12,187 <br>
        39,313 <br>
        48,000 </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">0.46
        <br>
        0.69<br>
        0.56<br>
        3.38<br>
        1.06<br>
        1.29<br>
        0.76<br>
        0.73<br>
        3.20<br>
        1.50<br>
        1.17 </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">1/14/2008<br>
        6/10/2008<br>
        6/16/2009<br>
        12/20/2010 <br>
        9/27/2011<br>
        4/3/2012<br>
        11/27/2012 <br>
        3/21/2013 <br>
        2/3/2014<br>
        1/28/2015 <br>
        2/17/2016 </font></div>
    </td>
  </tr>
</table>
<br>
<p align="center"><font face="Times New Roman, Times, serif" size="3">19<br>
  </font></p>
<hr NOSHADE>
<p>&nbsp;</p><table width="87%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th align="LEFT" height="59">&nbsp;</th>
    <th align="CENTER" height="59" colspan="4"> <font size="2">Option Awards </font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr valign="BOTTOM">
    <th align="LEFT" height="100">
      <div align="center"><font size="2" face="Times New Roman, Times, serif"><b>Name
        <br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100"><font size="2">Number of Securities Underlying
      Unexercised Options Exercisable (#)(1) </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100"><font size="2">Number of Securities Underlying
      Unexercised Options Unexercisable (#)(1)(2) </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100"><font size="2">Option Exercise Price ($)(3)
      </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100"><font size="2">Option Expiration Date(4) </font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="94"><font size="2">Kevin T. Scheier(5)</font></td>
    <td align="RIGHT" height="94" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">86,896<br>
        20,917<br>
        29,167<br>
        40,313<br>
        10,000<br>
        0 </font></div>
    </td>
    <td align="RIGHT" height="94" width="16%">
      <div align="center"><font size="2">2,604<br>
        1,041<br>
        1,666<br>
        1,875<br>
        0<br>
        833</font> </div>
    </td>
    <td align="RIGHT" height="94" width="16%">
      <div align="center"><font size="2">0.70<br>
        0.73<br>
        3.20<br>
        1.50<br>
        1.13<br>
        1.17 </font></div>
    </td>
    <td align="RIGHT" height="94" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">8/15/2007
        <br>
        8/15/2007 <br>
        8/15/2007 <br>
        8/15/2007 <br>
        8/15/2007 <br>
        8/15/2007 </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17">&nbsp;</td>
    <td align="RIGHT" height="17" width="7%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="121"><font size="2" face="Times New Roman, Times, serif">Robert
      L Miller </font></td>
    <td align="RIGHT" height="121" width="7%">
      <div align="center"><font size="2">230,000<br>
        50,000<br>
        33,000<br>
        23,000<br>
        22,917<br>
        29,167<br>
        40,313<br>
        0 </font> </div>
    </td>
    <td align="RIGHT" height="121" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">0<br>
        0<br>
        0<br>
        0<br>
        2,083<br>
        10,833 <br>
        34,688 <br>
        40,000 </font></div>
    </td>
    <td align="RIGHT" height="121" width="16%">
      <div align="center"><font size="2">3.38<br>
        1.06<br>
        1.29<br>
        0.76<br>
        0.73<br>
        3.20<br>
        1.50<br>
        1.17 </font></div>
    </td>
    <td align="RIGHT" height="121" width="16%">
      <div align="center"><font size="2">12/20/2010 <br>
        9/27/2011 <br>
        4/3/2012<br>
        11/27/2012 <br>
        3/21/2013 <br>
        2/3/2014<br>
        1/28/2015 <br>
        2/17/2016 </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td colspan="6" height="46">
      <hr NOSHADE align="LEFT" width="120">
      <font size="2">(1) Options were granted as described under Compensation
      Summary and Analysis - Elements of Executive Compensation - Long-Term, Equity-Based
      Incentive Awards and - Equity Incentive Grant Policies. The vesting period
      and vesting start date were established by the Compensation Committee. Shares
      unexercisable were not vested as December 31, 2006.<br>
      (2) Grant dates and vesting period information for all grants not fully
      vested as of December 31, 2006 are as follows:</font></td>
  </tr>
</table>
<table width="87%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th width="31%" align="LEFT" height="19">
      <div align="left"><font size="2" face="Times New Roman, Times, serif"><b>Grant
        Date </b></font> </div>
    </th>
    <th width="27%" align="CENTER" height="19">
      <div align="left"><font size="2" face="Times New Roman, Times, serif"><b>Expiration
        Date </b></font> </div>
    </th>
    <th width="21%" align="CENTER" height="19">
      <div align="left"><font size="2" face="Times New Roman, Times, serif"><b>Expiration
        Date </b></font> </div>
    </th>
    <th width="21%" align="CENTER" height="19">
      <div align="left"><font size="2" face="Times New Roman, Times, serif"><b>Months
        to fully vest </b></font> </div>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="31%" height="16"><font size="2">3/21/2003</font></td>
    <td align="RIGHT" height="16" width="27%">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">3/21/2013
        </font></div>
    </td>
    <td align="RIGHT" height="16" width="21%">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">4/1/2003
        </font></div>
    </td>
    <td align="RIGHT" height="16" width="21%">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">48
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="31%"><font size="2" face="Times New Roman, Times, serif">2/3/2004
      </font></td>
    <td align="RIGHT" height="17" width="27%">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">2/3/2014
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="21%">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">1/1/2004
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="21%">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">48
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="31%" height="11">
      <p><font size="2">1/28/2005</font></p>
    </td>
    <td align="RIGHT" height="11" width="27%">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">1/28/2015
        </font></div>
    </td>
    <td align="RIGHT" height="11" width="21%">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">1/1/2006
        </font></div>
    </td>
    <td align="RIGHT" height="11" width="21%">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">48
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="31%"><font size="2" face="Times New Roman, Times, serif">2/17/2006
      </font></td>
    <td height="18" width="27%">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">2/17/2016
        </font></div>
    </td>
    <td height="18" width="21%">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">1/1/2007
        </font></div>
    </td>
    <td height="18" width="21%">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">48
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td colspan="7" height="46">
      <hr NOSHADE align="LEFT" width="120">
      <font size="2">(3) Exercise price is the closing price of the Company's
      Common Stock on the date of grant as reported on the Nasdaq Global Markets.
      <br>
      (4) Options expire ten years from the date of grant provided that the executive
      continues employment with the Company. <br>
      (5) Mr. Scheier's employment terminated on February 2, 2007, and in accordance
      with the terms of his Employment Agreement, his options stopped vesting
      on that date, and all vested and unexercised options will expire on August
      15, 2007. All options reported on this schedule for Mr. Scheier were fully
      vested as of his termination date. </font></td>
  </tr>
</table>
<br>
<br>
<p align="left">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">20<br>
  </font></p>
<hr NOSHADE>
<p align="center">&nbsp;</p>
<p align="center"><b>OPTION EXERCISES AND STOCK VESTED</b><br>
  <b>For Fiscal Year Ended December 31, 2006 </b></p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>The
  following tables show for the fiscal year ended December 31, 2006 certain information
  regarding options exercised by the Named Executive Officers: </p>
<table width="87%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th width="33%" align="LEFT" height="31">&nbsp;</th>
    <th colspan="2" align="CENTER" height="15"><font size="2">Option Awards</font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr valign="BOTTOM">
    <th width="33%" align="LEFT" height="15">
      <div align="center"><font size="2" face="Times New Roman, Times, serif"><b>Name
        <br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th width="12%" align="CENTER" height="15"><font size="2">Number of Shares<br>
      Acquired on Exercise (#) </font>
      <hr NOSHADE>
    </th>
    <th width="12%" align="CENTER" height="15"><font size="2">Value Realized on
      <br>
      Exercise ($)(1) </font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="14"><font size="2" face="Times New Roman, Times, serif">Kevin
      J. Mills <br>
      </font></td>
    <td height="14">
      <div align="center"><font face="Times New Roman, Times, serif">- </font></div>
    </td>
    <td height="14">
      <div align="center"><font face="Times New Roman, Times, serif">- </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="0"><font size="2" face="Times New Roman, Times, serif">Micheal
      L. Gifford<br>
      </font></td>
    <td height="0">
      <div align="center"><font face="Times New Roman, Times, serif">-</font><font size="2" face="Times New Roman, Times, serif">
        </font></div>
    </td>
    <td height="0">
      <div align="center"><font face="Times New Roman, Times, serif">-</font><font size="2" face="Times New Roman, Times, serif">
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="12">
      <p><font size="2">David W. Dunlap</font></p>
    </td>
    <td height="12">
      <div align="center"><font face="Times New Roman, Times, serif">-</font><font size="2" face="Times New Roman, Times, serif">
        </font></div>
    </td>
    <td height="12">
      <div align="center"><font face="Times New Roman, Times, serif">-</font><font size="2" face="Times New Roman, Times, serif">
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="2"><font size="2" face="Times New Roman, Times, serif">Kevin T.
      Scheier(2)<br>
      </font></td>
    <td height="2">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">30,500
        </font></div>
    </td>
    <td height="2">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">15,598
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="14">
      <p><font size="2">Robert L. Miller</font></p>
    </td>
    <td height="14">
      <div align="center"><font face="Times New Roman, Times, serif">-</font><font size="2" face="Times New Roman, Times, serif">
        </font></div>
    </td>
    <td height="14">
      <div align="center"><font face="Times New Roman, Times, serif">-</font><font size="2" face="Times New Roman, Times, serif">
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td height="75" colspan="3">
      <hr NOSHADE align="LEFT" width="120">
      <font size="2">(1) The value realized equals the difference between the
      option exercise price and the fair market value of the Company's Common
      Stock on the date of exercise, multiplied by the number of shares for which
      the option was exercised.</font><br>
      <font size="2">(2) Mr. Scheier's employment terminated on February 2, 2007.</font></td>
  </tr>
</table>
<p align="left">&nbsp;</p>
<p align="center"><b>Equity Compensation Plan Information</b></p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>The
  following table provides information as of December 31, 2006 about the Common
  Stock that may be issued under all equity compensation plans of the Company.</p>
<p align="left">&nbsp;</p>
<table width="87%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th align="LEFT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif"><b><br>
        </b></font> </div>
    </th>
    <th align="CENTER"><font size="2">Number of securities to be issued upon exercise
      of outstanding options </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER"><font size="2">Weighted-average exercise price of outstanding
      options </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER"><font size="2">Number of securities remaining available
      for future issuance under equity compensation plans</font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td width="33%"><font size="2" face="Times New Roman, Times, serif">Equity
      compensation plans approved by security holders (1) </font></td>
    <td align="RIGHT" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">7,765,812
        </font></div>
    </td>
    <td align="RIGHT" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">$1.63
        </font></div>
    </td>
    <td align="RIGHT" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">868,345
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td width="33%"><font size="2" face="Times New Roman, Times, serif">Equity
      compensation plans not approved by security holders (2)</font></td>
    <td align="RIGHT" width="7%">
      <div align="center"><font size="2">1,072,751 </font></div>
    </td>
    <td align="RIGHT" width="16%">
      <div align="center"><font size="2">$2.78 </font></div>
    </td>
    <td align="RIGHT" width="16%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font><font size="2">
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td width="33%"><font size="2" face="Times New Roman, Times, serif">Total
      </font></td>
    <td align="RIGHT" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">8,838,563
        </font></div>
    </td>
    <td align="RIGHT" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">$1.77
        </font></div>
    </td>
    <td align="RIGHT" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">868,345
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td height="46" colspan="4">
      <hr NOSHADE align="LEFT" width="120">
      <font size="2">(1) Includes the 1995 Stock Plan and its successor, the 2004
      Equity Incentive Plan. Pursuant to an affirmative vote by security holders
      in June 2004, an annual increase in the number of shares authorized under
      the 2004 Equity Incentive Plan is added on the first day of each fiscal
      year equal to the lesser of (a) 2,000,000 shares, (b) four percent of the
      outstanding shares on that date, or (c) a lesser amount as determined by
      the Board of Directors. A total of 1,274,051 shares became available for
      grant from the 2004 Equity Incentive Plan on January 1, 2007, in addition
      to those set forth in the table above.<br>
      (2) Consists of the 1999 Stock Plan.</font></td>
  </tr>
</table>
<p align="left">&nbsp;</p>
<p align="left">&nbsp;</p>
<p align="left">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">21<br>
  </font></p>
<hr NOSHADE>
<p align="center"><br>
  <b>Post Employment and Change-In-Control Compensation </b></p>
<p align="left"><b><br>
  Change of Control and Severance Agreements </b></p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>In
  February 1998, the Company adopted a bonus plan pursuant to which a bonus pool
  in the amount of up to 10 percent of any consideration payable by a buyer in
  any acquisition of the Company is to be allocated to the executive officers
  and such other employees as the Board of Directors determines in its discretion.</p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>In
  December 2005, the Company renewed separate employment agreements with Messrs.
  Kevin J. Mills, David W. Dunlap, Micheal L. Gifford, Robert J. Miller, Tim I.
  Miller, Leonard L. Ott, Peter K. Phillips and Kevin T. Scheier (each an "Executive").
  The agreements expire on December 31, 2008 and are expected to be renewed. The
  agreements set forth the base salaries for each Executive and provide that if
  the Company terminates the Executive's employment without cause, the Company
  will pay the Executive (i) six months' base salary regardless of whether he
  secures other employment during those six months, (ii) health insurance until
  the earlier of the date of the Executive's eligibility for the health insurance
  benefits provided by another employer or the expiration of six months, (iii)
  the full bonus amount to which he would have been entitled for the first quarter
  following termination and one-half of such bonus amount for the second quarter
  following termination, and (iv) certain other benefits including the ability
  to purchase at book value certain items of the Company's property purchased
  by the Company for the Executive's use, which may include a personal computer,
  a cellular phone and other similar items. The exercise period for vested stock
  options may also be extended up to a period not to exceed one year based on
  formulas in the employment agreements.</p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>Additionally,
  under the1999 Stock Plan and the 2004 Equity Incentive Plan (the "Stock Option
  Plans"), the rights of all optionees (including executive officers) to purchase
  stock immediately vest, upon a change of control of the Company, become immediately
  vested and be fully exercisable if such options are not assumed by the acquiring
  entity.</p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>Payments
  to be made to each of the Named Executive Officers following severance are estimated
  as follows:</p>
<p align="left">&nbsp;</p>
<table width="100%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th width="176" align="LEFT">
      <div align="center"><font size="2" face="Times New Roman, Times, serif"><b>Compensation
        and Benefits <br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></th>
    <th width="12%" align="CENTER">
      <div align="center"><font size="2">Voluntary Resignation </font></div>
      <hr NOSHADE align="center">
    </th>
    <th width="2%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></div>
    </th>
    <th width="12%" align="CENTER">
      <div align="center"><font size="2">For Cause (1) </font></div>
      <hr NOSHADE align="center">
    </th>
    <th width="2%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></div>
    </th>
    <th width="12%" align="CENTER">
      <div align="center"><font size="2">For Good Reason(1) </font></div>
      <hr NOSHADE align="center">
    </th>
    <th width="2%" align="CENTER">
      <div align="center"><font size="2"></font></div>
    </th>
    <th width="12%" align="CENTER">
      <div align="center"><font size="2" face="Times New Roman, Times, serif"><b>Involuntary
        Without Cause(1)</b></font> </div>
      <hr NOSHADE align="center">
    </th>
    <th width="2%">
      <div align="center"><font size="2"></font></div>
    </th>
    <th width="12%" align="CENTER">
      <div align="center"><font size="2" face="Times New Roman, Times, serif"><b>Involuntary
        or For Good Reason After Change-in- Control(1) </b></font> </div>
      <hr NOSHADE align="center">
    </th>
    <th width="2%" align="CENTER">
      <div align="center"><font size="2"></font></div>
    </th>
    <th width="12%" align="CENTER">
      <div align="center"><font size="2">Due to Death or Disability </font></div>
      <hr NOSHADE align="center">
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif">Kevin
      J. Mills</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">&nbsp;</td>
    <td height="0" width="2%">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td width="2%" align="RIGHT" height="0"><font size="2"></font></td>
    <td width="12%" align="RIGHT" height="0"><font size="2"></font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td width="12%" align="RIGHT" height="0"><font size="2"></font></td>
    <td width="2%" align="RIGHT" height="0"><font size="2"></font></td>
    <td width="12%" align="RIGHT" height="0"><font size="2"></font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2">Base
      Salary (2)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$90,000</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td width="12%" align="RIGHT" height="0">
      <div align="center"><font size="2">$90,000</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td width="12%" align="RIGHT" height="0">
      <div align="center"><font size="2">$90,000</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td width="12%" align="RIGHT" height="0">
      <div align="center"><font size="2">$90,000</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2">Variable
      Incentive(3)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$37,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td width="12%" align="RIGHT" height="0">
      <div align="center"><font size="2">$37,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td width="12%" align="RIGHT" height="0">
      <div align="center"><font size="2">$37,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td width="12%" align="RIGHT" height="0">
      <div align="center"><font size="2">$37,500</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2"></font><font size="2">Stock
      Options (4)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td width="12%" align="RIGHT" height="0">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td width="12%" align="RIGHT" height="0">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td width="12%" align="RIGHT" height="0">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2"></font><font size="2"></font><font size="2">HealthCare
      Benefits(5)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td width="12%" align="RIGHT" height="0">
      <div align="center"><font size="2">$3,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td width="12%" align="RIGHT" height="0">
      <div align="center"><font size="2">$3,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td width="12%" align="RIGHT" height="0">
      <div align="center"><font size="2">$3,500</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2"></font><font size="2"></font><font size="2"></font><font size="2">Other
      Perquisites (6)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td width="12%" align="RIGHT" height="0">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td width="12%" align="RIGHT" height="0">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td width="12%" align="RIGHT" height="0">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif">Micheal
      L. Gifford</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">&nbsp;</td>
    <td height="0" width="2%">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">&nbsp;</td>
    <td height="0" width="2%">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">&nbsp;</td>
    <td width="2%" align="RIGHT" height="0">&nbsp;</td>
    <td width="12%" align="RIGHT" height="0">&nbsp;</td>
    <td width="2%" height="0">&nbsp;</td>
    <td width="12%" align="RIGHT" height="0">&nbsp;</td>
    <td width="2%" align="RIGHT" height="0">&nbsp;</td>
    <td width="12%" align="RIGHT" height="0">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2">Base
      Salary (2)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$82,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$82,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$82,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$82,500</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2">Variable
      Incentive(3)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$18,750</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$18,750</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$18,750</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$18,750</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2"></font><font size="2">Stock
      Options (4)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2"></font><font size="2"></font><font size="2">HealthCare
      Benefits(5)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2"></font><font size="2"></font><font size="2"></font><font size="2">Other
      Perquisites (6)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif">David
      W. Dunlap</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">&nbsp;</td>
    <td height="0" width="2%">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">&nbsp;</td>
    <td height="0" width="2%">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">&nbsp;</td>
    <td width="2%" align="RIGHT" height="0">&nbsp;</td>
    <td width="12%" align="RIGHT" height="0">&nbsp;</td>
    <td width="2%" height="0">&nbsp;</td>
    <td width="12%" align="RIGHT" height="0">&nbsp;</td>
    <td width="2%" align="RIGHT" height="0">&nbsp;</td>
    <td width="12%" align="RIGHT" height="0">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2">Base
      Salary (2)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$80,000</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$80,000</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$80,000</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$80,000</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2">Variable
      Incentive(3)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$18,750</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$18,750</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$18,750</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$18,750</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2"></font><font size="2">Stock
      Options (4)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2"></font><font size="2"></font><font size="2">HealthCare
      Benefits(5)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2"></font><font size="2"></font><font size="2"></font><font size="2">Other
      Perquisites (6)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif">Kevin
      T. Scheier</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">&nbsp;</td>
    <td height="0" width="2%">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">&nbsp;</td>
    <td height="0" width="2%">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">&nbsp;</td>
    <td width="2%" align="RIGHT" height="0">&nbsp;</td>
    <td width="12%" align="RIGHT" height="0">&nbsp;</td>
    <td width="2%" height="0">&nbsp;</td>
    <td width="12%" align="RIGHT" height="0">&nbsp;</td>
    <td width="2%" align="RIGHT" height="0">&nbsp;</td>
    <td width="12%" align="RIGHT" height="0">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2">Base
      Salary (2)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$67,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$67,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$67,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$67,500</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2">Variable
      Incentive(3)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$24,375</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$24,375</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$24,375</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$24,375</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2"></font><font size="2">Stock
      Options (4)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2"></font><font size="2"></font><font size="2">HealthCare
      Benefits(5)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2"></font><font size="2"></font><font size="2"></font><font size="2">Other
      Perquisites (6)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="18"><font size="2" face="Times New Roman, Times, serif">Robert
      L. Miller</font></td>
    <td width="2%" height="18">&nbsp;</td>
    <td align="RIGHT" height="18" width="12%">&nbsp;</td>
    <td height="18" width="2%">&nbsp;</td>
    <td align="RIGHT" height="18" width="12%">&nbsp;</td>
    <td height="18" width="2%">&nbsp;</td>
    <td align="RIGHT" height="18" width="12%">&nbsp;</td>
    <td width="2%" align="RIGHT" height="18">&nbsp;</td>
    <td align="RIGHT" height="18" width="12%">&nbsp;</td>
    <td width="2%" height="18">&nbsp;</td>
    <td align="RIGHT" height="18" width="12%">&nbsp;</td>
    <td width="2%" align="RIGHT" height="18">&nbsp;</td>
    <td align="RIGHT" height="18" width="12%">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2">Base
      Salary (2)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$80,000</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$80,000</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$80,000</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$80,000</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2">Variable
      Incentive(3)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$18,750</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$18,750</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$18,750</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$18,750</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2"></font><font size="2">Stock
      Options (4)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2"></font><font size="2"></font><font size="2">HealthCare
      Benefits(5)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $3,500</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="0"><font size="2" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i></font><font size="2"></font><font size="2"></font><font size="2"></font><font size="2"></font><font size="2">Other
      Perquisites (6)</font></td>
    <td width="2%" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
  </tr>
</table>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>
      <hr NOSHADE align="LEFT" width="120">
      <font size="2">(1) Cause is defined in each Executive's employment contract
      as gross misconduct or fraud, misappropriation of the Company's proprietary
      information, or willful and continuing breach of duties following notice
      and a cure period. <br>
      (2) Base salary is continued for six months from the date of termination
      for reasons other than for cause or voluntary resignation. <br>
      (3) Except in the cases of termination for cause or voluntary resignation,
      scheduled bonuses are paid equal to 100% of entitlement in the quarter of
      termination and 50% of entitlement in the following quarter. <br>
      (4) Except in the cases of termination for cause or voluntary resignation,
      stock options vested as of the date of termination may be exercised for
      a period of up to one year based on formulas in the employment contract.
      In the event of a change in control where stock options are not assumed
      by an acquiring entity, all options granted and outstanding become vested
      and exercisable. In the event of termination for cause or voluntary resignation,
      stock options vested as of the date of termination may be exercised for
      a period of 90 days following the termination date. <br>
      (5) Except in the cases of termination for cause or voluntary resignation,
      healthcare benefits are continued up to the earlier of six months or the
      Executive securing other employment that includes benefits. <br>
      (6) There are no perquisites in the compensation packages of any of our
      executive officers. </font> </td>
  </tr>
</table>
<p align="left">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">22<br>
  </font></p>
<hr NOSHADE>
<p align="left"><br>
  <b>Limitation of Liability and Indemnification Matters </b></p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>Pursuant
  to the Delaware General Corporation Law, the Company has adopted provisions
  in its Amended and Restated Certificate of Incorporation that eliminate the
  personal liability of the directors to the Company or the stockholders for monetary
  damages for breach of the directors' fiduciary duties in certain circumstances.
  The Company's bylaws require the Company to indemnify the Company's directors
  and officers and authorize the Company to indemnify its employees and other
  agents, to the fullest extent permitted by law.</p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>The
  Company has entered into indemnification agreements with each of its current
  directors and officers that provide for indemnification to the fullest extent
  permitted by Delaware law, including circumstances in which indemnification
  and the advancement of expenses are discretionary under Delaware law. </p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>The
  Company believes that the limitation of liability provisions in its Amended
  and Restated Certificate of Incorporation and the indemnification agreements
  will enhance its ability to continue to attract and retain qualified individuals
  to serve as directors and officers. There is no pending litigation or proceeding
  involving a director, officer or employee to which the indemnification agreements
  would apply.</p>
<p align="center">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">23<br>
  </font></p>
<hr NOSHADE>
<p align="center"><br>
  <font size="3" face="Times New Roman, Times, serif"><b>CORPORATE GOVERNANCE</b><br>
  </font></p>
<p><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>The
  Company and its Board of Directors are committed to high standards of corporate
  governance as an important component in building and maintaining stockholder
  value. To this end, the Company regularly reviews its corporate governance policies
  and practices to ensure that its policies are consistent with such standards.
  The Company closely monitors guidance issued or proposed by the SEC, the PCAOB,
  listing standards of Nasdaq and provisions of the Sarbanes-Oxley Act. As a result
  of review of these matters, as well as the emerging best practices of other
  companies, the Company has implemented the following:</p>
<p><i>Executive Compensation Authority</i> </p>
<ul>
  <ul>
    <ul type="disc">
      <li>
        <p>The Compensation Committee of the Board of Directors approves all compensation
          plans and amounts for the executive officers of the Company following
          consultation with management;<br>
        </p>
        <ul>
        </ul>
      </li>
      <li> The Compensation Committee reviews and approves annual salary increases
        for all other employees of the Company upon the recommendation of management;<br>
        <br>
      </li>
      <li><font size="3" face="Times New Roman, Times, serif">The Compensation
        Committee approves all stock option grants upon the recommendation of
        management except director grants, which are approved by the full Board
        of Directors. </font></li>
    </ul>
  </ul>
</ul>
<p><font size="3" face="Times New Roman, Times, serif"><i>Director Independence</i></font></p>
<ul>
  <ul>
    <ul type="disc">
      <li>The Board of Directors has confirmed that a majority of the Company's
        directors are independent as defined by current SEC and Nasdaq regulations.<br>
      </li>
      <li>The Company's independent directors hold formal meetings convened separately
        from management and chaired by an independent director.<br>
        <br>
      </li>
      <li>The Audit, Compensation and Nominating Committees consist solely of
        independent directors.</li>
    </ul>
  </ul>
</ul>
<p><i>Audit Committee</i> </p>
<ul>
  <ul>
    <ul type="disc">
      <li>All Audit Committee members possess the required level of financial
        literacy.<br>
        <br>
      </li>
      <li>Mr. Bass, a member of the Audit Committee, possesses the qualifications
        of an "audit committee financial expert.&quot;<br>
        <br>
      </li>
      <li>The Audit Committee charter formalizes and makes explicit the following:
        &nbsp&nbsp&nbsp&nbsp <br>
        <br>
        <ul type="circle">
          <li>The Audit Committee's ability to retain independent consultants
            and experts as it sees fit, at Company expense;<br>
            <br>
          </li>
          <li>The Audit Committee's authority to appoint, review and assess the
            performance of the Company's independent auditors;<br>
            <br>
          </li>
          <li>The Audit Committee's ability to hold regular executive sessions
            with the Company's independent auditors, the Company's Chief Financial
            Officer and Controller, and other Company officers directly, as it
            considers appropriate;<br>
            <br>
          </li>
          <li>The requirement that the Audit Committee review and approve in advance
            non-audit services by the Company's independent auditors, as well
            as related party transactions;<br>
            <br>
          </li>
          <li>The Audit Committee's duty to maintain a formal complaint monitoring
            procedure ("whistleblower" policy) to enable confidential and anonymous
            reporting to the Audit Committee; and<br>
            <br>
          </li>
          <li>The Audit Committee's authority over the independent auditors' rotation
            policy.</li>
        </ul>
      </li>
    </ul>
  </ul>
  <p>&nbsp;</p>
</ul>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">24<br>
  </font></p>
<hr NOSHADE>
<p><br>
  <i>Other Governance Matters</i> </p>
<ul>
  <ul>
    <ul type="disc">
      <li>The Company has a formal Code of Business Conduct and Ethics that applies
        to all officers, directors and employees.<br>
        <br>
      </li>
      <li>The Company has a requirement that any waiver or amendment to the Code
        of Business Conduct and Ethics involving a director or officer be reviewed
        by the Nominating Committee and disclosed to the Company's stockholders.<br>
        <br>
      </li>
      <li>The Company has a Compensation Committee charter and Nominating Committee
        charter.<br>
        <br>
      </li>
      <li>The Company has an Insider Trading Policy, including control procedures
        to comply with current SEC and Nasdaq regulations.<br>
        <br>
      </li>
      <li><i></i><i></i>The Company has a policy that the Board of Directors review
        its own performance on an annual basis.<br>
        <br>
      </li>
      <li>The Company prohibits loans to its officers and directors.<br>
      </li>
    </ul>
  </ul>
</ul>
<p><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>More
  details on the Company's corporate governance initiatives, including copies
  of its Code of Business Conduct and Ethics and the committee charters can be
  found in the "Corporate Governance" section of the Company's web site at http://www.mkr-group.com/SCKT/board_committee.html.</p>
<p><i>Policy for Director Recommendations and Nominations</i></p>
<p><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>The
  Nominating Committee considers candidates for board membership suggested by
  the Board of Directors, management and the Company's stockholders. It is the
  policy of the Nominating Committee to consider recommendations for candidates
  to the Board of Directors from stockholders holding no less than five percent
  of the total outstanding shares of the Company. Stockholders must have held
  such Common Stock continuously for at least 12 months prior to the date of the
  submission of the recommendation. The Nominating Committee will consider persons
  recommended by the Company's stockholders in the same manner as nominees recommended
  by members of the Board of Directors or management. </p>
<p><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>A
  stockholder who desires to recommend a candidate for election to the Board of
  Directors should direct the recommendation in written correspondence by letter
  to the Company, addressed to:</p>
<p>&nbsp;</p>
<table width="100%" border=0 cellspacing=0 cellpadding=0>
  <tr valign="TOP">
    <td width="48%" height="41"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="70%" height="41"><font size="3" face="Times New Roman, Times, serif">Chairman
      of the Nominating Committee c/o Corporate Secretary<br>
      Socket Communications, Inc.<br>
      39700 Eureka Drive<br>
      Newark, CA 94560 <br>
      </font></td>
  </tr>
</table>
<p>The notice must include:</p>
<ul>
  <ul>
    <ul type="disc">
      <li><i></i><i></i>the candidate's name, home and business contact information;<br>
        <br>
      </li>
      <li>detailed biographical data and relevant qualifications;<br>
        <br>
      </li>
      <li>a signed letter from the candidate confirming his or her willingness
        to serve;<br>
        <br>
      </li>
      <li>information regarding any relationships between the candidate and the
        Company within the last three years; and<br>
        <br>
      </li>
      <li><i></i><i></i>evidence of the required ownership of Common Stock by
        the recommending stockholder.</li>
    </ul>
  </ul>
</ul>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp</p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">25<br>
  </font></p>
<hr NOSHADE>
<p><br>
  <font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>In
  addition, a stockholder may nominate a person directly for election to the Board
  of Directors at the annual meeting of the Company's stockholders, provided the
  stockholder complies with the requirements set forth in the Company's Bylaws
  and the rules and regulations of the SEC related to stockholder proposals. The
  process for properly submitting a stockholder proposal, including a proposal
  to nominate a person for election to the Board of Directors at an annual meeting,
  is described above in the section entitled "Deadline for Receipt of Stockholder
  Proposals to be Included in the Company's Proxy Materials."<br>
  <br>
  <font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>Where
  the Nominating Committee has either identified a prospective nominee or determines
  that an additional or replacement director is required, the Nominating Committee
  may take such measures that it considers appropriate in connection with its
  evaluation of a director candidate, including candidate interviews, inquiry
  of the person or persons making the recommendation or nomination, engagement
  of an outside search firm to gather additional information, or reliance on the
  knowledge of the members of the committee, the Board of Directors or management.
  In its evaluation of director candidates, including the members of the Board
  of Directors eligible for re-election, the Nominating Committee considers a
  number of factors, including the following:</p>
<ul>
  <ul>
    <ul type="disc">
      <li>The current size and composition of the Board of Directors and the needs
        of the Board of Directors and the respective committees of the Board of
        Directors.<br>
        <br>
      </li>
      <li>Such factors as judgment, independence, character and integrity, area
        of expertise, diversity of experience, length of service and potential
        conflicts of interest.<br>
        <br>
      </li>
      <li>Such other factors as the Nominating Committee may consider appropriate.</li>
    </ul>
  </ul>
</ul>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>The
  Nominating Committee has also specified the following minimum qualifications
  that it believes must be met by a nominee for a position on the Board of Directors:</p>
<ul>
  <ul>
    <ul type="disc">
      <li>The highest personal and professional ethics and integrity.<br>
        <br>
      </li>
      <li>Proven achievement and competence in the nominee's field and the ability
        to exercise sound business judgment.<br>
        <br>
      </li>
      <li>Skills that are complementary to those of the existing members of the
        Board of Directors.<br>
        <br>
      </li>
      <li>The ability to assist and support management and make significant contributions
        to the Company's success.<br>
        <br>
      </li>
      <li>An understanding of the fiduciary responsibilities that are required
        of a member of the Board of Directors and the commitment of time and energy
        necessary to carry out those responsibilities diligently.</li>
    </ul>
  </ul>
</ul>
<p><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>In
  connection with its evaluation, the Nominating Committee determines whether
  it will interview potential nominees. After completing the evaluation and interview,
  the Nominating Committee makes a recommendation to the full Board of Directors
  as to the persons who should be nominated to the board, and the Board of the
  Directors determines the nominees after considering the recommendation and report
  of the Nominating Committee.</p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">26<br>
  </font></p>
<hr NOSHADE>
<p>&nbsp;</p>
<p><i>Stockholder Communications to Directors</i></p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>Stockholders
  may communicate directly with the members of the Board of Directors by sending
  an email to board@socketmobile.com. The Company's Secretary monitors these communications
  and will ensure that summaries of all received messages are provided to the
  Board of Directors at its regularly scheduled meetings or directly to the Chairman
  of the Board if the matter is deemed to be urgent and to require the immediate
  attention of the Board. Where the nature of a communication warrants, Mr. Bass,
  Chairman of the Board, may decide to obtain the more immediate attention of
  the appropriate committee of the Board of Directors or a non-management director,
  or the Company's management or independent advisors, as appropriate. Mr. Bass
  will also determine whether any response to a stockholder communication is necessary
  or warranted and whether further action is required.<br>
  <br>
  <i>Director Independence</i> </p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>In
  January 2007, the Board of Directors undertook a review of the independence
  of its directors and considered whether any director had a material relationship
  with the Company or its management that could compromise his ability to exercise
  independent judgment in carrying out his responsibilities. As a result of this
  review, the Board of Directors affirmatively determined that all of the directors
  of the Company, with the exception of Mr. Mills, the Company's President and
  Chief Executive Officer, and Mr. Gifford, the Company's Executive Vice President,
  are independent of the Company and its management under the corporate governance
  standards of Nasdaq.<br>
  <i><br>
  Code of Business Conduct and Ethics</i> </p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>The
  Board of Directors has a Code of Business Conduct and Ethics that is applicable
  to all employees, officers and directors of the Company, including the Company's
  senior financial and executive officers. The Code of Business Conduct and Ethics
  is intended to deter wrongdoing and promote ethical conduct among the Company's
  directors, executive officers and employees. The Code of Business Conduct and
  Ethics is available on the Company's website at http://www.mkr-group.com/SCKT/board_committee.html.
  The Company will also post any amendments to or waivers from the Code of Business
  Conduct and Ethics on its website.</p>
<p align="left">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">27<br>
  </font></p>
<hr NOSHADE>
<p align="center"><font size="3" face="Times New Roman, Times, serif"><b>REPORT
  OF THE COMPENSATION COMMITTEE</b><br>
  <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font></p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>The
  Compensation Committee has reviewed and discussed the Compensation Discussion
  and Analysis with our management. </font></p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>Based
  on the Compensation Committee's review and discussion noted above, the Compensation
  Committee recommended to the Board of Directors that the Compensation Discussion
  and Analysis be included in this Proxy Statement on Schedule 14A.</p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp<font size="3" face="Times New Roman, Times, serif">
  </font></p>
<table width="100%" border=0 cellspacing=0 cellpadding=0>
  <tr valign="TOP">
    <td width="48%" height="41"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="2%" height="41"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="50%" height="41"><font size="3" face="Times New Roman, Times, serif"><br>
      COMPENSATION COMMITTEE<br>
      </font></td>
  </tr>
  <tr valign="TOP">
    <td width="48%" height="25"><font size="3" face="Times New Roman, Times, serif">Dated:
      March 16, 2007</font></td>
    <td width="2%" height="25"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="50%" height="25"><font size="3" face="Times New Roman, Times, serif">Enzo
      Torresi &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Peter Sealey</font></td>
  </tr>
</table>
<p><font size="3" face="Times New Roman, Times, serif"><br>
  </font></p>
<p align="center"><font size="3" face="Times New Roman, Times, serif"><b>COMPENSATION
  COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION</b><br>
  </font></p>
<p><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>None
  of the members of the Compensation Committee has ever been an officer or employee
  of the Company. No executive officer of the Company serves as a member of the
  board or compensation committee of any entity that had one or more executive
  officers serving as a member of the Company's Board of Directors or Compensation
  Committee.</font></p>
<p align="center"><font size="3" face="Times New Roman, Times, serif"><b>REPORT
  OF THE AUDIT COMMITTEE </b><br>
  </font></p>
<p><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>The
  Board of Directors maintains an Audit Committee comprised of three of the Company's
  outside directors. The Audit Committee oversees the Company's financial processes
  on behalf of the Board of Directors, although management has the primary responsibility
  for preparing the financial statements and maintaining the Company's financial
  reporting process including the system of internal controls. In fulfilling its
  oversight responsibilities, the Audit Committee reviewed with management the
  audited financial statements in the Annual Report to the Securities and Exchange
  Commission on Form 10-K for the year ended December 31, 2006, including discussing
  the quality of the accounting principles, the reasonableness of significant
  judgments and the clarity of disclosures in the financial statements. The Board
  has a written charter for the Audit Committee, a copy of which is posted on
  the Company's website at http://www.mkr-group.com/SCKT/board_committee.html.<br>
  <br>
  <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif">The
  Audit Committee reviewed the 2006 financial statements with the Company's independent
  auditors, who are responsible for expressing an opinion on the conformity of
  the financial statements with generally accepted accounting principles, as well
  as their judgment as to the quality, not just the acceptability, of the Company's
  accounting principles. The Audit Committee also discussed such other matters
  as the auditors are required to discuss with the Committee under generally accepted
  auditing standards, including Statement on Auditing Standards No. 61. In addition,
  the Audit Committee discussed with the independent auditors the auditors' independence
  from management and the Company, including the matters in the written disclosures
  and the letter from the independent auditors required by the Independence Standards
  Board, Standard No. 1.<br>
  <br>
  </font><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font>The
  Audit Committee also discussed with the Company's independent auditors the overall
  scope and results of their audits of the financial statements including their
  review of internal controls. The Audit Committee met periodically with the independent
  auditors, with and without management present, to discuss the results of their
  examination, their evaluation of the Company's internal controls, and the overall
  quality of the Company's financial reporting. The Audit Committee held two meetings
  with the auditors in regards to their audits of the annual financial statements
  for the year ended December 31, 2006. In addition, a conference call between
  members of the Audit Committee, the auditors and management was held each quarter
  during fiscal 2006 to review quarterly financial reports prior to their issue.</p>
<p align="center"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp</i></i>
  <br>
  <br>
  </font><font face="Times New Roman, Times, serif" size="3">28<br>
  </font></p>
<hr NOSHADE>
<p><font size="3" face="Times New Roman, Times, serif"><br>
  <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>In reliance
  on the reviews and discussions referred to above, the Audit Committee recommended
  to the Board of Directors, and the Board of Directors has approved, that the
  audited financial statements be included in the Company's Annual Report on Form
  10-K for the year ended December 31, 2006. The Audit Committee also approved
  the appointment of Moss Adams LLP as the Company's independent auditors for
  the year ending December 31, 2007.</font></p>
<p><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>The
  foregoing report has been submitted by the undersigned in our capacity as members
  of the Audit Committee of the Board of Directors.<br>
  </font></p>
<table width="100%" border=0 cellspacing=0 cellpadding=0>
  <tr valign="TOP">
    <td width="48%" height="52"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="2%" height="52"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="50%" height="52"><font size="3" face="Times New Roman, Times, serif"><br>
      AUDIT COMMITTEE<br>
      </font></td>
  </tr>
  <tr valign="TOP">
    <td width="48%"><font size="3" face="Times New Roman, Times, serif"><br>
      Dated: March 16, 2007</font></td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="50%"><font size="3" face="Times New Roman, Times, serif"><br>
      Charlie Bass<br>
      Leon Malmed<br>
      Gianluca Rattazzi</font></td>
  </tr>
</table>
<p align="center"><font size="3" face="Times New Roman, Times, serif"> <br>
  <b>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</b><br>
  </font></p>
<p><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>There
  were no transactions during the last fiscal year to which the Company has been
  a party, in which the amount involved exceeded $120,000 and in which any director,
  executive officer or beneficial holder of more than five percent of the Company's
  outstanding capital stock had or will have a direct or indirect material interest.
  </font></p>
<p><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>See
  also <i>Executive Compensation - Change of Control and Severance Agreements</i>.
  </font></p>
<p><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>Related
  party transactions, regardless of amount, to which the Company has been a party
  in which any director, executive officer or beneficial holder of more than five
  percent of the Company's outstanding capital stock would have a direct or indirect
  material interest requires the prior approval of the Audit Committee or, in
  the case of directors, the full Board of Directors. There were no related party
  transactions during fiscal year 2006.</p>
<p align="center"><b>OTHER MATTERS</b></p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>The
  Company knows of no other matters to be submitted at the 2007 Annual Meeting.
  If any other matters properly come before the 2007 Annual Meeting, it is the
  intention of the persons named in the enclosed form of proxy to vote the shares
  they represent as the Board of Directors may recommend. It is important that
  your shares be represented at the meeting, regardless of the number of shares
  that you hold. Please complete, date, execute and return, at your earliest convenience,
  the accompanying proxy card in the envelope that has been enclosed.</p>
<p align="left">&nbsp;</p>
<table width="100%" border=0 cellspacing=0 cellpadding=0>
  <tr valign="TOP">
    <td width="48%" height="52"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="2%" height="52"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="50%" height="52"><font size="3" face="Times New Roman, Times, serif"><br>
      THE BOARD OF DIRECTORS<br>
      </font></td>
  </tr>
  <tr valign="TOP">
    <td width="48%"><font size="3" face="Times New Roman, Times, serif"><br>
      Dated: March 16, 2007</font></td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="50%"><font size="3" face="Times New Roman, Times, serif"><br>
      </font></td>
  </tr>
</table>
<p align="left">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">29<br>
  </font></p>
<hr NOSHADE>
<p align="center">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3"> <b>This
  Proxy is solicited on behalf of the Board of Directors of Socket Communications,
  Inc.</b></font></p>
<p align="center"><font face="Times New Roman, Times, serif" size="3"> <b>2007
  ANNUAL MEETING OF STOCKHOLDERS</b><br>
  </font></p>
<p>The undersigned stockholder of SOCKET COMMUNICATIONS, INC., a Delaware corporation,
  DBA Socket Mobile, Inc., hereby acknowledges receipt of the Notice of Annual
  Meeting of Stockholders and Proxy Statement, each dated March 16, 2007, and
  hereby appoints Kevin J. Mills and David W. Dunlap, 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 2007 Annual
  Meeting of Stockholders of SOCKET COMMUNICATIONS, INC. to be held on Wednesday,
  April 18, 2007 at 9:00 a.m. local time, at the Company's headquarters at 39700
  Eureka Drive, Newark, California 94560, 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:</p>
<table width="100%" border=0 cellspacing=0 cellpadding=0>
  <tr valign="TOP">
    <td width="2%"><font size=2>1.</font></td>
    <td width="1%"><font size=2>&nbsp;</font></td>
    <td colspan=5><font size="2" face="Times New Roman, Times, serif">ELECTION
      OF SEVEN DIRECTORS.</font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%"><font size=2><br>
      &nbsp;</font></td>
    <td width="1%"><font size=2><br>
      &nbsp;</font></td>
    <td colspan=5><font size="2" face="Times New Roman, Times, serif"><br>
      /&nbsp;/&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>FOR</b> all nominees
      listed&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/&nbsp;/&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Withhold
      Authority to vote for ALL Nominees Listed</font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%"><font size=2><br>
      &nbsp;</font></td>
    <td width="1%"><font size=2><br>
      &nbsp;</font></td>
    <td colspan=5><font size="2" face="Times New Roman, Times, serif"><br>
      Nominees: Charlie Bass; Kevin J. Mills; Micheal L. Gifford; Gianluca Rattazzi;
      Leon Malmed; Enzo Torresi; Peter Sealey</font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%"><font size=2><br>
      &nbsp;</font></td>
    <td width="1%"><font size=2><br>
      &nbsp;</font></td>
    <td colspan=5 valign="bottom"><font face="Times New Roman, Times, serif" size="2"><b>If
      you wish to withhold authority to vote for any individual nominee, strike
      a line through that nominee's name in the list below:</b></font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%"><font size=2><br>
      &nbsp;</font></td>
    <td width="1%"><font size=2><br>
      &nbsp;</font></td>
    <td colspan=5><font size="2" face="Times New Roman, Times, serif"><br>
      Charlie Bass; Kevin J. Mills; Micheal L. Gifford; Gianluca Rattazzi; Leon
      Malmed; Enzo Torresi; Peter Sealey</font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%" height="42"><font size=2><br>
      2.</font></td>
    <td width="1%" height="42"><font size=2><br>
      &nbsp;</font></td>
    <td colspan=5 height="42"><font size="2" face="Times New Roman, Times, serif"><br>
      PROPOSAL TO RATIFY THE APPOINTMENT OF MOSS ADAMS LLP AS INDEPENDENT PUBLIC
      ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2007.
      </font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%"><font size=2><br>
      &nbsp;</font></td>
    <td width="1%"><font size=2><br>
      &nbsp;</font></td>
    <td width="27%"><font size="2" face="Times New Roman, Times, serif"><br>
      /&nbsp;/&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>FOR</b></font></td>
    <td width="1%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="32%"><font size="2" face="Times New Roman, Times, serif"><br>
      /&nbsp;/&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>AGAINST</b></font></td>
    <td width="1%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="36%"><font size="2" face="Times New Roman, Times, serif"><br>
      /&nbsp;/&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>ABSTAIN</b></font></td>
  </tr>
</table>
<table width="100%" border=0 cellspacing=0 cellpadding=0>
  <tr valign="TOP">
    <td colspan="7"><font size="2">In their discretion, the Proxies are entitled
      to vote upon such other matters as may properly come before the meeting
      or any adjournments thereof.</font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%" height="78"><font size=2><br>
      &nbsp;</font></td>
    <td width="2%" height="78"><font size=2><br>
      &nbsp;</font></td>
    <td width="96%" colspan=5 height="78"> <b><br>
      <font size="3" face="Times New Roman, Times, serif">THIS PROXY WILL BE VOTED
      AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED FOR
      THE ELECTION OF DIRECTORS, FOR THE RATIFICATION OF MOSS ADAMS LLP AS INDEPENDENT
      PUBLIC ACCOUNTANTS, AND AS THE PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS
      AS MAY PROPERLY COME BEFORE THE MEETING.</font></b></td>
  </tr>
  <tr valign="TOP">
    <td width="2%"><font size=2><br>
      &nbsp;</font></td>
    <td width="2%"><font size=2><br>
      &nbsp;</font></td>
    <td width="30%"><font size="2" face="Times New Roman, Times, serif"><br>
      <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><br>
      Signature</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="30%"><font size="2" face="Times New Roman, Times, serif"><br>
      <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><br>
      Signature</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="30%"><font size="2" face="Times New Roman, Times, serif"><br>
      Date: <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>,
      2007</font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%"><font size=2><br>
      &nbsp;</font></td>
    <td width="2%"><font size=2><br>
      &nbsp;</font></td>
    <td width="96%" colspan=5><font size="2">(This Proxy should be marked, dated
      and signed by the stockholder(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.)</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center">&nbsp;</p>
<hr NOSHADE>
<font face="Times New Roman, Times, serif" size="3"> </font>
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