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<SEC-DOCUMENT>0000944075-08-000017.txt : 20080307
<SEC-HEADER>0000944075-08-000017.hdr.sgml : 20080307
<ACCEPTANCE-DATETIME>20080307161334
ACCESSION NUMBER:		0000944075-08-000017
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20080423
FILED AS OF DATE:		20080307
DATE AS OF CHANGE:		20080307
EFFECTIVENESS DATE:		20080307

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:		08674406

	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.htm
<DESCRIPTION>DEFINITIVE PROXY STATEMENT
<TEXT>
<HTML>
<HEAD>

</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<font face="Times New Roman, Times, serif" size="3"><BR>
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<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="3" face="Times New Roman, Times, serif">Filed
      by the Registrant /x/ </font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="100%" COLSPAN=3><font size="3" 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="3" face="Times New Roman, Times, serif">Check
      the appropriate box:</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <td width="3%"><font size="3" face="Times New Roman, Times, serif">/ /</font></td>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%"><font size="3" face="Times New Roman, Times, serif">Preliminary
      Proxy Statement</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><font size="3" face="Times New Roman, Times, serif">/&nbsp;/</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%"><font size="3" 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="3" face="Times New Roman, Times, serif">/x/</font></td>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%"><font size="3" face="Times New Roman, Times, serif">Definitive
      Proxy Statement</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><font size="3" face="Times New Roman, Times, serif">/&nbsp;/</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%"><font size="3" face="Times New Roman, Times, serif">Definitive
      Additional Materials</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><font size="3" face="Times New Roman, Times, serif">/&nbsp;/</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%"><font size="3" 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="3" 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="3">&nbsp;</font></TD>
    <TD WIDTH="2%"><font size="3">&nbsp;</font></TD>
    <TD WIDTH="3%"><font size="3">&nbsp;</font></TD>
    <TD WIDTH="2%"><font size="3">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="3">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="100%" COLSPAN=5><font size="3" 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="3" face="Times New Roman, Times, serif">/x/</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%" COLSPAN=3><font size="3" face="Times New Roman, Times, serif">No
      fee required.</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%" height="31"><font size="3" face="Times New Roman, Times, serif">/&nbsp;/</font></TD>
    <TD WIDTH="2%" height="31"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%" COLSPAN=3 height="31"><font size="3" 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="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="3%"><font size="3" face="Times New Roman, Times, serif">1)</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="3" 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="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="3%"><font size="3" face="Times New Roman, Times, serif">2)</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="3" 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="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="3%"><font size="3" face="Times New Roman, Times, serif">3)</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="3" 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="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="3%"><font size="3" face="Times New Roman, Times, serif">4)</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="3" 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="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="3%"><font size="3" face="Times New Roman, Times, serif">5)</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="3" 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="3" face="Times New Roman, Times, serif">/&nbsp;/</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%" COLSPAN=3><font size="3" 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="3" face="Times New Roman, Times, serif">/&nbsp;/</font></TD>
    <TD WIDTH="2%" height="54"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="95%" COLSPAN=3 height="54"><font size="3" 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="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="2%" height="16"><font size="3"></font></TD>
    <TD WIDTH="3%" height="16"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="2%" height="16"><font size="3"></font></TD>
    <TD WIDTH="90%" height="16"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD WIDTH="3%"><font size="3">&nbsp;</font></TD>
    <TD WIDTH="2%"><font size="3">&nbsp;</font></TD>
    <TD WIDTH="3%"><font size="3" face="Times New Roman, Times, serif">1)</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="3" 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="3">&nbsp;</font></TD>
    <TD WIDTH="2%"><font size="3">&nbsp;</font></TD>
    <TD WIDTH="3%"><font size="3" face="Times New Roman, Times, serif">2)</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="3" 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="3">&nbsp;</font></TD>
    <TD WIDTH="2%"><font size="3">&nbsp;</font></TD>
    <TD WIDTH="3%"><font size="3" face="Times New Roman, Times, serif">3)</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="3" 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="3">&nbsp;</font></TD>
    <TD WIDTH="2%"><font size="3">&nbsp;</font></TD>
    <TD WIDTH="3%"><font size="3" face="Times New Roman, Times, serif">4)</font></TD>
    <TD WIDTH="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="90%"><font size="3" 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 2008 ANNUAL MEETING OF STOCKHOLDERS<br>
  </b></font><font face="Times New Roman, Times, serif" size="3"><b>To Be Held
  April 23, 2008 </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>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 23, 2008 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 eight 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, 2008.<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 approve a proposal to amend the Company's Certificate of Incorporation to
  effect a corporate name change.</font></P>
<p><font face="Times New Roman, Times, serif" size="3"> <i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>(4)
  To approve a proposal to amend the Company's Certificate of Incorporation, should
  the Board of Directors in its discretion determine to do so, to effect a reverse
  stock split of the Company's Common Stock at a ratio within the range from one-for-five
  to one-for-ten, together with a corresponding reduction in the number of authorized
  shares of the Company's Common Stock and capital stock, at any time prior to
  December 31, 2008.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i><i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>(5)
  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 25, 2008 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 6, 2008</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>&nbsp;</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<br>
  2008 ANNUAL MEETING OF STOCKHOLDERS</b><br>
  <b><br>
  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 of Socket Communications,
  Inc., a Delaware corporation, DBA Socket Mobile, Inc. (the "Company"), for use
  at the 2008 Annual Meeting of Stockholders to be held Wednesday April 23, 2008
  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 2008 Annual Meeting of Stockholders.
  The 2008 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, 2007, including financial statements, were first mailed on
  or about March 12, 2008 to all stockholders entitled to vote at the 2008 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 25, 2008
  (the "Record Date") are entitled to notice of and to vote at the 2008 Annual
  Meeting. At the Record Date, 32,015,975 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 Dr. Bass's holdings.
</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 2008 Annual Meeting and voting in person. <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 2008 Annual Meeting gives notice of his or her intention to cumulate
  votes with respect to the election of directors (Proposal One), then each stockholder
  may cumulate such stockholder's votes for the election of directors 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 eight 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>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 may 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.</P>
<P><b> QUORUM; VOTE REQUIRED; ABSTENTIONS; BROKER NON-VOTES</b></P>
<P> &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  presence at the 2008 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," "WITHHOLD or "ABSTAIN" on a subject matter
  (the "Votes Cast") are treated as being present at the meeting for purpose of
  establishing a quorum entitled to vote on the matter.</P>
<P> &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i>Proposal
  One</i>. Directors are elected by a plurality of the votes of the shares present
  in person or represented by proxy at the meeting and entitled to vote on the
  election of directors. If a quorum is present at the meeting, the eight 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>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i>Proposal Two</i>.
  Ratification of appointment of Moss Adams LLP as the Company's independent public
  accountants for the fiscal year ending December 31, 2008 requires the affirmative
  vote of a majority of the Votes Cast on the matter at the 2008 Annual Meeting.<br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp<br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbspProposal Three</i></i></i></i>.
  Approval of the amendment to the Company's Certificate of Incorporation to effect
  the corporate name change requires the affirmative vote of a majority of all
  outstanding shares of the Company's Common Stock entitled to vote as of the
  Record Date.<br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp<br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i></i>Proposal
  Four</i>. Approval of the amendment to the Company's Certificate of Incorporation
  to effect a reverse stock split at a ratio within the range from one-for-five
  to one-for-ten, together with a corresponding reduction in the number of authorized
  shares of the Company's Common Stock and capital stock, requires the affirmative
  vote of a majority of all outstanding shares of the Company's Common Stock entitled
  to vote as of the Record Date.</P>
<P>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</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 purpose
  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 Proposal 2, which requires the affirmative vote of a majority of the Votes
  Cast, but will have the same effect as a vote against Proposals 3 and 4, which
  requires the affirmative vote of a majority of all outstanding shares entitled
  to vote.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</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.</P>
<P>&nbsp;</P>
<p align="center"><font face="Times New Roman, Times, serif" size="3">2<br>
  </font></p>
<hr NOSHADE>
<P><b> <br>
  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 2009 Annual Meeting of Stockholders in
  April 2009 and to mail proxy statements relating to such meeting in March 2009.
  Proposals of stockholders of the Company that are intended to be presented by
  such stockholders at the 2009 Annual Meeting must be received by the Company
  no later than November 12, 2008, 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. In addition, stockholders
  must comply with the procedural requirements in the Company's bylaws. Under
  the Company's bylaws, notice must be delivered to or mailed and received by
  the Secretary of the Company not less than ninety (90) days prior to the meeting;
  provided, however, that in the event that less than one-hundred (100) days notice
  or prior public disclosure of the date of the meeting is given or made to stockholders,
  notice by the stockholder to be timely must be so received not later than the
  close of business on the tenth day following the day on which such notice of
  the date of the meeting was mailed or such public disclosure was made. To be
  in proper form, a stockholder's notice to the Secretary shall set forth: (i)
  the name and address of the stockholder who intends to make the nominations
  or propose the business and, as the case may be, of the person or persons to
  be nominated or of the business to be proposed; (ii) a representation that the
  stockholder is a holder of record of stock of the corporation entitled to vote
  at such meeting and, if applicable, intends to appear in person or by proxy
  at the meeting to nominate the person or persons specified in the notice; (iii)
  if applicable, a description of all arrangements or understandings between the
  stockholder and each nominee and any other person or persons (naming such person
  or persons) pursuant to which the nomination or nominations are to be made by
  the stockholder; (iv) such other information regarding each nominee or each
  matter of business to be proposed by such stockholder as would be required to
  be included in a proxy statement filed pursuant to the proxy rules of the Securities
  and Exchange Commission had the nominee been nominated, or intended to be nominated,
  or the matter been proposed, or intended to be proposed by the board of directors;
  and (v) if applicable, the consent of each nominee to serve as director of the
  Company if so elected. The chairman of the meeting shall refuse to acknowledge
  the nomination of any person or the proposal of any business not made in compliance
  with the foregoing procedure. Stockholders can obtain a copy of the Company's
  bylaws from the Company upon request. The Company's bylaws are also on file
  with the Securities and Exchange Commission.</font></P>
<p align="left">&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></font>If
  a stockholder intends to submit a proposal at the 2009 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, 2009. 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 2009 Annual Meeting.<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></font>The
  attached proxy card grants the persons named as proxies discretionary authority
  to vote on any matter raised at the 2008 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 2008 Annual Meeting.<br>
  <br>
</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">3<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 eight nominees named below,
    unless a proxy card is marked otherwise. The nominees consist of the eight
    current directors. If a person other than a management nominee is nominated
    at the 2008 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 eight 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
    eight directors will be elected for one-year terms expiring at the 2009 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>
    </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="3" face="Times New Roman, Times, serif"><B>Name
      of Nominee<BR>
      </B></font>
      <HR NOSHADE>
    </TH>
    <TH WIDTH="2%" height="18"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TH>
    <TH WIDTH="5%" ALIGN="CENTER" height="18"><font size="3" face="Times New Roman, Times, serif"><B>Age</B></font>
      <HR NOSHADE>
    </TH>
    <TH WIDTH="2%" height="18"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TH>
    <TH WIDTH="50%" ALIGN="CENTER" height="18"><font size="3" face="Times New Roman, Times, serif"><B>Position(s)
      Currently Held With the Company</B></font>
      <HR NOSHADE>
    </TH>
    <TH WIDTH="2%" height="18"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TH>
    <TH WIDTH="13%" ALIGN="CENTER" height="18"><font size="3" 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="3" face="Times New Roman, Times, serif">Charlie
      Bass (1)(2)</font></TD>
    <TD WIDTH="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="5%" ALIGN="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">66</font></div>
    </TD>
    <TD WIDTH="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="50%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">Chairman
      of the Board</font></TD>
    <TD WIDTH="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="13%" ALIGN="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="3" 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="3" face="Times New Roman, Times, serif">Micheal
      L. Gifford</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">50</font></div>
    </td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="50%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">Executive
      Vice President and Director</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="13%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="3" 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="3" face="Times New Roman, Times, serif">Leon
      Malmed (1)(2)</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">70</font></div>
    </td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="50%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">Director</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="13%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="3" 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="3" face="Times New Roman, Times, serif">Thomas
      O. Miller(1)</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">56</font></div>
    </td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="50%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">Director,
      Chairman of the Technology Advisory Board</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="13%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2008</font></div>
    </td>
  </tr>
  <tr bgcolor="#CCEEFF" valign="top">
    <td width="26%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">Kevin
      J. Mills</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">47</font></div>
    </td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="50%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">President,
      Chief Executive Officer and Director</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="13%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="3" 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="3" face="Times New Roman, Times, serif">Gianluca
      Rattazzi (1)(2)</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">55</font></div>
    </td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="50%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">Director</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="13%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="3" 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="3" face="Times New Roman, Times, serif">Peter
      Sealey (2)(3)</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">67</font></div>
    </td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="50%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">Director</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="6"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="13%" align="RIGHT" bgcolor="#FFFFFF" height="6">
      <div align="center"><font size="3" 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="3" face="Times New Roman, Times, serif">Enzo
      Torresi (2)(3)</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="13"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%" align="RIGHT" bgcolor="#FFFFFF" height="13">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">63</font></div>
    </td>
    <td width="2%" bgcolor="#FFFFFF" height="13"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="50%" bgcolor="#FFFFFF" height="13"><font size="3" face="Times New Roman, Times, serif">Director</font></td>
    <td width="2%" bgcolor="#FFFFFF" height="13"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="13%" align="RIGHT" bgcolor="#FFFFFF" height="13">
      <div align="center"><font size="3" 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. Mr. Miller's appointment was effective on February 17, 2008.<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. </font></p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</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 April 1988. 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>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 OEM Business Unit (formerly
  Development Services). 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>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</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,
  and 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>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">4<br>
  </font></p>
<hr NOSHADE>
<p><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i>Thomas O. Miller</i>
  was appointed a director of the Company by the Board of Directors on February
  17, 2008. Since August 2006 he has been affiliated with Stinsights, Inc., an
  international management consulting company focused on business strategy and
  market research. Mr. Miller has also been engaged in an advisory capacity by
  private equity firms who invest in wireless and mobility companies. Prior to
  Stinsights, Mr. Miller was a member of the executive team at Intermec Corporation,
  a leader in the automated data collection, wireless and mobile computing industries,
  serving as its President from 2004 to 2005. He was also Vice President of Corporate
  Development until July 2006 with Intermec's parent company UNOVA. Prior to his
  appointment as President of Intermec, he was Executive Vice President, Global
  Sales and Marketing from 2001 to 2003, and Senior Vice President, Americas and
  System and Solutions from 1999 through 2001. Mr. Miller was Chairman of the
  Automatic Industry and Mobility Association from 2003 to March 2006 and was
  recognized for his contributions to the industry with induction into the AIDC100
  organization in 2004. He has been a member of the board of directors of InfoLogix,
  Inc., an enterprise mobility automation company serving the healthcare industry,
  since October 2006. Mr. Miller has been a member of the Company's Technology
  Advisory Board, currently as its Chairman, since 2006. Mr. Miller holds a Bachelor
  of Business and a Master of Business Administration degree from Western Illinois
  University.<i></i><i><i></i><i></i></i></p>
<p><i> &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbspKevin J. Mills</i></i></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
  with honors from the University of Limerick, Ireland.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i>Gianluca Rattazzi</i>
  has been a director of the Company since June 1998. He has been President and
  CEO of MaxiScale, Inc., a private software development company, since January
  2007. He also has served as Chairman of Envivio, Inc., a provider of video delivery
  systems, since August 2007. In 2000, Dr. Rattazzi co-founded BlueArc Corporation,
  a provider of network attached storage. He served as its Chairman from its inception
  through March 2007 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, under the name Parallan in July 1988. He served as President
  and a director of Meridian Data from inception and was appointed Chief Executive
  Officer 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 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>&nbspPeter Sealey</i></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 serves as
  an Adjunct Professor of Marketing at the Peter F. Drucker Graduate Management
  School at the Claremont Graduate University in Claremont, California and serves
  on the board of directors of MaxWorldwide Inc., a media holding company. He
  previously served as an Adjunct Professor of Marketing at the Haas School of
  Business, University of California at Berkeley from 1996 to 2006. 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>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. From 1997
  to 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.<br>
  <br>
  <font face="Times New Roman, Times, serif" size="3"><b> </b></font></p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">5<br>
  </font></p>
<hr NOSHADE>
<p><br>
  <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>&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 2007 and two
  telephone meetings. The independent directors met separately without management
  or the management directors after each of the four regular Board meetings held
  during 2007. 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 2007 Annual Meeting of Stockholders. <br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  Audit Committee consists of Messrs. Bass, Malmed, Rattazzi and Miller. Mr. Miller
  was appointed to the Audit Committee on February 17, 2008. As required by Nasdaq
  rules, the members of the Audit Committee each qualify as "independent" under
  the standards established by the United States Securities and Exchange Commission
  for members of audit committees. The Audit Committee also includes one 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 Securities and Exchange
  Commission rules. Stockholders should understand that this designation is a
  disclosure required by the Securities and Exchange Commission 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.
</p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>The Audit
  Committee met with management and the independent accountants four times by
  telephone during the year ended December 31, 2007 to review quarterly and annual
  financial information and to discuss the results of quarterly review procedures
  performed by the independent accountants 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 accountants, and reviews
  the Company's internal financial controls and financial statements. In connection
  with the completion of the annual audit of the Company's financial statements
  for the year ended December 31, 2007, the Audit Committee met in February 2008
  and again in early March 2008 with management and with the independent accountants,
  reviewed the financial statements and the annual audit results, including the
  independent accountants' assessment of the Company's internal controls and procedures,
  and discussed the matters with the independent accountants denoted as required
  communications by Statement of Auditing Standards 61 (SAS 61). The meetings
  also included a review of internal accounting controls, a discussion and review
  of auditor independence, the pre-approval of the independent accountants' fees,
  and a recommendation to the Board of Directors to approve the issuance of the
  financial statements for the year ended December 31, 2007. The report of the
  Audit Committee for the year ended December 31, 2007 is included in this Proxy
  Statement. </p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">6<br>
  </font></p>
<hr NOSHADE>
<p><br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>The
  Nominating Committee consists of Messrs. Bass, Malmed, Rattazzi, Sealey and
  Torresi. The Nominating Committee considers and recommends nominations for the
  Board of Directors and facilitates the self-assessment of Board performance
  by the independent directors. In January 2008, 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 2008, recommended
  nomination of the current directors to serve for the ensuing year and the nomination
  of Thomas O. Miller to be appointed as a director effective upon approval by
  the Board of Directors of an increase in the size of the Board from seven to
  eight members, completed on February 17, 2008. For 2009, 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 12, 2008 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 ten
  meetings during fiscal year 2007. 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
  2007 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>
  <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 2007 and will receive $3,000
  per regular meeting that they attend in fiscal 2008. 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 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 18,
  2007, options that vest monthly over a one year period were awarded to the outside
  directors for the service period that commenced on April 18, 2007, at an exercise
  price of $0.92 per share, the fair market value of the Common Stock on the date
  of grant, in the following amounts: <br>
  <br>
</p>
<table width="40%" border="0" align="center" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <th width="40%" align="LEFT" height="32">
      <div align="left"><font size="3" face="Times New Roman, Times, serif"><b>Name<br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th width="20%" align="LEFT" height="32">&nbsp;</th>
    <th width="20%" align="LEFT" height="32">
      <div align="center"><font size="3" 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="3">Charlie Bass</font></div>
    </td>
    <td width="20%">&nbsp;</td>
    <td width="20%">
      <div align="center"><font size="3">50,000</font></div>
    </td>
  </tr>
  <tr>
    <td align="left" width="40%">
      <div align="left"><font size="3">Leon Malmed</font></div>
    </td>
    <td width="20%">&nbsp;</td>
    <td width="20%">
      <div align="center"><font size="3">40,000</font></div>
    </td>
  </tr>
  <tr>
    <td align="left" width="40%">
      <div align="left"><font size="3">Gianluca Rattazzi</font></div>
    </td>
    <td width="20%">&nbsp;</td>
    <td width="20%">
      <div align="center"><font size="3">35,000</font></div>
    </td>
  </tr>
  <tr>
    <td align="left" width="40%">
      <div align="left"><font size="3">Peter Sealey</font></div>
    </td>
    <td width="20%">&nbsp;</td>
    <td width="20%">
      <div align="center"><font size="3">25,000</font></div>
    </td>
  </tr>
  <tr>
    <td align="left" width="40%">
      <div align="left"><font size="3">Enzo Torresi</font></div>
    </td>
    <td width="20%">&nbsp;</td>
    <td width="20%">
      <div align="center"><font size="3">30,000</font></div>
    </td>
  </tr>
</table>
<p><br>
  <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>If a quorum
  is present at the meeting, the eight 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>
  <b><br>
  THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" ALL
  OF THE COMPANY'S NOMINEES FOR DIRECTORS.</b></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">7<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 of the Company for the fiscal year ending
  December 31, 2008, 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>Moss Adams
  LLP has audited the Company's financial statements for each of the four fiscal
  years ended December 31, 2007, 2006, 2005 and 2004. Representatives of Moss
  Adams LLP are expected to be present at the 2008 Annual Meeting. The representatives
  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 2007 AND 2006</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
  2007 and 2006 fiscal year financial statements and review of the Company's quarterly
  financial statements for fiscal 2007 and 2006 totaled $238,000 and $240,000,
  respectively. The Company was not deemed an accelerated filer for fiscal years
  2007 and 2006, and an audit of the Company's internal controls at December 31,
  2007 and 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 2007 and 2006
  fiscal years totaled $10,555 and $11,500, 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>Fees
  billed to the Company by Moss Adams LLP for tax services during the Company's
  2007 and 2006 fiscal years were $20,000 and $19,000, respectively. Tax fees
  are for preparation of the prior year's annual tax returns and tax advice.<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 2007 and 2006
  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 accountants 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
  and determined that it is. </p>
<p align="center"><font face="Times New Roman, Times, serif" size="3"><br>
  8 <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, 2008 requires the affirmative vote of
a majority of the Votes Cast on the matter at the 2008 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 bylaws 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>
</b><font face="Times New Roman, Times, serif" size="3"><b>THE BOARD OF DIRECTORS
UNANIMOUSLY 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, 2008.</b><br>
<br>
</font>
<p align="center"><font face="Times New Roman, Times, serif" size="3">9<br>
  </font></p>
<hr NOSHADE>
<br>
<p align="center"><b>PROPOSAL THREE</b></p>
<p align="center"><b>APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF</b></p>
<p align="center"><b>INCORPORATION TO EFFECT A CORPORATE NAME CHANGE </b></p>
<p align="left"><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>On January
  24, 2008, the Board of Directors approved an amendment to the Company's Certificate
  of Incorporation, subject to stockholder approval, to effect a corporate name
  change from "Socket Communications, Inc." to "Socket Mobile, Inc." If approved
  by the stockholders, the name change will be effective upon the filing of a
  Certificate of Amendment with the Delaware Secretary of State.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>The management
  of the Company and the Board of Directors believe that the new name of the Company
  will better communicate to the public, including the Company's customers, business
  partners and investors, the current business of the Company as a mobility solutions
  provider. At the beginning of 2007 the Company announced that it intended to
  change its business strategy from being a mobile peripherals company to a mobile
  systems company. The Company has determined that the new name will better reflect
  the Company's business purpose following this change in strategy.</p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>The
  change of the name of the Company will not affect in any way the validity of
  currently outstanding stock certificates or the trading of the Company's securities.
  The Common Stock of the Company will continue to trade on the NASDAQ Global
  Market under the symbol "SCKT."</p>
<p align="left"><b>VOTE REQUIRED; RECOMMENDATION&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp</i></b><i>&nbsp<i>&nbsp</i></i></p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>The
  affirmative vote of a majority of all outstanding shares of the Company's Common
  Stock entitled to vote as of the Record Date will be required to approve the
  amendment to the Certificate of Incorporation to effect the corporate name change.
  Abstentions and broker non-votes will have the same effect as negative votes.</p>
<p align="left"><font face="Times New Roman, Times, serif" size="3"><b>THE BOARD
  OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE PROPOSAL
  TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO EFFECT THE CORPORATE
  NAME CHANGE.</b><br>
  <br>
  <br>
  </font> </p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">10<br>
  </font></p>
<hr NOSHADE>
<p align="center">&nbsp;</p>
<p align="center"><b>PROPOSAL FOUR</b></p>
<p align="center"><b>APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF<br>
  INCORPORATION TO EFFECT A REVERSE STOCK SPLIT </b></p>
<p align="left"> <b>GENERAL</b><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>The Board
  of Directors has unanimously approved seeking stockholder approval of an amendment
  to the Company's Certificate of Incorporation to effect a reverse stock split
  of the Common Stock, together with a corresponding reduction in the number of
  authorized shares of Common Stock and capital stock in a ratio in the range
  of one-for-five to one-for-ten. If the stockholders approve the proposal, the
  Board of Directors will have the authority, in its sole discretion, to proceed
  with the reverse stock split and to determine the exact split ratio within the
  foregoing ranges at any time before December 31, 2008. If the Board of Directors
  determines to proceed, the reverse split will be effective upon the filing of
  a Certificate of Amendment with the Delaware Secretary of State. </p>
<p align="left"><b>BACKGROUND</b><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>The Board
  of Directors has unanimously adopted a resolution seeking stockholder approval
  to amend the Certificate of Incorporation to effect a reverse stock split of
  the Common Stock, together with a corresponding reduction in the number of authorized
  shares of Common Stock and capital stock. If the reverse stock split is approved
  by the stockholders, the Board of Directors may subsequently implement the reverse
  stock split based upon any ratio in the range from one-for-five to one-for-ten,
  with the exact ratio to be established within this range by the Board of Directors
  in its sole discretion at the time it elects to effect the split. Approval of
  the reverse stock split by the stockholders would give the Board of Directors
  authority to implement the reverse stock split at any time prior to December
  31, 2008. In addition, notwithstanding approval of this proposal by the stockholders,
  the Board of Directors may in its sole discretion determine not to implement,
  and to abandon, the reverse stock split without further action by the stockholders.
</p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>If
  the stockholders approve the reverse stock split proposal and the Board of Directors
  decides to implement it, the Company will file a Certificate of Amendment with
  the Secretary of State of the State of Delaware to amend the existing Certificate
  of Incorporation to effect a reverse split of the Common Stock then issued and
  outstanding at the specific ratio determined by the Board of Directors and a
  corresponding reduction in the number of authorized shares of the Common Stock
  and capital stock. Except for any changes as a result of the treatment of fractional
  shares, each holder of the Common Stock will hold the same percentage of Common
  Stock outstanding immediately after the reverse stock split as such stockholder
  held immediately prior to the split.</p>
<p align="left"><b>PURPOSE OF THE REVERSE STOCK SPLIT</b></p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>The
  purpose of authorizing the reverse stock split is to maximize the flexibility
  of the Board of Directors in addressing market-related issues affecting the
  capitalization of the Company. The Board of Directors believes that stockholder
  approval of an exchange ratio range (rather than an exact exchange ratio) provides
  the Board of Directors with maximum flexibility to achieve the purposes of the
  reverse stock split. If the stockholders approve the reverse stock split proposal,
  the reverse stock split would be implemented, if at all, only upon a determination
  by the Board of Directors that the split is in the best interests of the Company
  and the stockholders at that time.</p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><font face="Times New Roman, Times, serif" size="3"><br>
  </font> </p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">11<br>
  </font></p>
<hr NOSHADE>
<p>&nbsp;</p>
<p align="left">The Board of Directors believes a reverse stock split may have
  the following beneficial effects:</p>
<table width="80%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th align="LEFT" height="400" width="30" valign="top">
      <div align="right">
        <ul>
          <li></li>
        </ul>
      </div>
    </th>
    <td align="CENTER" height="400" colspan="4" valign="top">
      <div align="left">
        <p>The Company's Common Stock is currently quoted on The NASDAQ Global
          Market Exchange under the symbol "SCKT." On December 11, 2007, the Company
          received a deficiency letter from the Listing Qualifications Department
          of The Nasdaq Stock Market indicating that the Company had failed to
          comply with the minimum bid price requirement of $1.00 per share over
          the previous 30 consecutive business days as required by Marketplace
          Rule 4450(a)(5). The reverse stock split is being proposed to give the
          Board of Directors the flexibility to maintain the eligibility of the
          Common Stock for listing on The NASDAQ Global Market Exchange should
          the market price for the Common Stock remain below $1.00 per share for
          an extended period. </p>
        <p>The Company can regain compliance, if, at any time before June 9, 2008,
          the bid price of the Common Stock closes at $1.00 per share or more
          for a minimum of 10 consecutive business days. In the interim period,
          the Company's Common Stock continues to trade on the NASDAQ Global Market
          Exchange. If compliance with the Marketplace Rule 4450(a) cannot be
          demonstrated by June 9, 2008, the Company would expect the staff of
          the NASDAQ Global Market Listing Qualifications department to deliver
          a written notification that the Company's securities will be delisted
          from the NASDAQ Global Market Exchange. If the Company receives a delisting
          notice, the Company may appeal the staff's determination to delist its
          securities to a Listing Qualifications Panel. Alternatively, the Company
          may apply to transfer its securities to The NASDAQ Capital Market, if
          the Company satisfies the requirements for initial inclusion in that
          market set forth in Marketplace Rule 4310(c), other than the minimum
          bid price requirement. If the Company meets the initial listing criteria
          and its application is approved, the Staff will notify the Company that
          it has been granted an additional 180-calendar day compliance period
          in order to regain compliance with the minimum bid price requirement
          while on The NASDAQ Capital Market. </p>
        <p>The delisting of the Company's Common Stock from the NASDAQ Global
          Market Exchange, or subsequently from the NASDAQ Capital Market, would
          significantly and adversely affect the trading in and liquidity of the
          Common Stock. Reverse splits are viewed by The Nasdaq Stock Market as
          an acceptable way for companies to gain compliance with the minimum
          $1.00 per share requirement. Accordingly, the Board of Directors has
          concluded that reducing the number of outstanding shares of the Common
          Stock might be desirable in order to attempt to support a higher stock
          price per share than that based on the Company's current market capitalization.&nbsp<br>
          &nbsp
        </p>
      </div>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <th align="LEFT" height="98" width="30" valign="top">
      <div align="right">
        <ul>
          <li></li>
        </ul>
      </div>
    </th>
    <td align="CENTER" height="98" colspan="4" valign="top">
      <div align="left">
        <p>A higher stock price, which the Company would expect as a result of
          the reverse stock split, could increase the interest of the financial
          community in the Common Stock and broaden the pool of investors that
          may consider investing in the Common Stock, potentially increasing the
          trading volume and liquidity of the Common Stock. As a matter of policy,
          many institutional investors are prohibited from purchasing stocks below
          certain minimum price levels. For the same reason, brokers often discourage
          their customers from purchasing such stocks. To the extent that the
          price per share of the Common Stock remains at a higher per share price
          as a result of the reverse stock split, some of these concerns may be
          ameliorated.<br>&nbsp
        </p>
      </div>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <th align="LEFT" height="46" width="30" valign="top">
      <div align="right">
        <ul>
          <li></li>
        </ul>
      </div>
    </th>
    <td align="CENTER" height="46" colspan="4" valign="top">
      <div align="left">A higher stock price may help us attract and retain employees
        and other service providers. Some potential employees and service providers
        may be less likely to work for a company with a low stock price, regardless
        of the size of the company's market capitalization. If the reverse stock
        split successfully increases the per share price of the Common Stock,
        this increase may enhance the ability to attract and retain employees
        and service providers. </div>
    </td>
  </tr>
</table>
<div align="left"></div>
<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">12<br>
  </font></p>
<hr NOSHADE>
<p><b><br>
  EFFECTS OF THE REVERSE STOCK SPLIT</b></p>
<p><i><b>Corporate Matters</b></i></p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>If approved
  and effected, the reverse stock split would have the following effects: </p>
<table width="80%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th align="LEFT" height="40" width="30" valign="top">
      <div align="right">
        <ul>
          <li></li>
        </ul>
      </div>
    </th>
    <td align="CENTER" height="0" colspan="4" valign="bottom">
      <div align="left">
        <p>Depending on the exact reverse stock split ratio selected by the Board
          of Directors, between five and ten shares of Common Stock owned by each
          stockholder before the reverse stock split will become one share of
          Common Stock.<br>
          &nbsp </p>
      </div>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <th align="LEFT" height="63" width="30" valign="top">
      <div align="right">
        <ul>
          <li></li>
        </ul>
      </div>
    </th>
    <td align="CENTER" height="63" colspan="4" valign="top">
      <div align="left">Based on the reverse stock split ratio selected by the
        Board of Directors, proportionate adjustments will be made to the per
        share exercise price and the number of shares issuable upon the exercise
        of all outstanding options and warrants, which will result in approximately
        the same aggregate price being required to be paid upon exercise of such
        options or warrants as immediately preceding the reverse stock split.<br>&nbsp
      </div>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <th align="LEFT" height="55" width="30" valign="top">
      <div align="right">
        <ul>
          <li></li>
        </ul>
      </div>
    </th>
    <td align="CENTER" height="55" colspan="4" valign="top">
      <div align="left">With respect to the Company's existing equity incentive
        plans, the number of shares reserved for issuance under the plans, the
        number of shares by which the share reserve may increase annually, and
        the number of shares for which awards may be granted to any one individual
        will be reduced proportionately based on the reverse stock split ratio
        selected by the Board of Directors. In addition, the number of shares
        issuable upon the exercise of all outstanding options and the exercise
        price for such options will be adjusted based on the reverse stock split
        ratio. </div>
    </td>
  </tr>
</table>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>If approved
  and implemented, the reverse stock split will be effected simultaneously for
  all of the Common Stock and the ratio will be the same for all of the Common
  Stock. The reverse stock split will affect all of the Company's stockholders
  uniformly. The reverse stock split will not change the terms of the Common Stock.
  The Common Stock will have the same voting rights and rights to dividends and
  distributions as before the reverse stock split and will be identical in all
  other respects after the reverse stock split. No stockholder's percentage ownership
  of the Common Stock will be altered, except for the effect of the cash payment
  of fractional shares.</p>
<p><b><i>Number of Stockholders; Exchange Act Registration</i></b></p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>The Common
  Stock is currently registered under Section 12(b) of the Securities Exchange
  Act of 1934, and as a result, the Company is subject to the periodic reporting
  and other requirements of the Securities Exchange Act. Depending on the reverse
  stock split ratio selected by the Board of Directors, certain holders of the
  Common Stock may no longer hold any whole shares of the Common Stock. These
  holders, to whom the Company will pay a cash amount in lieu of issuing fractional
  shares, will cease to be stockholders of the Company. Notwithstanding the fact
  that the total number of record holders of the Common Stock would be reduced
  by a reverse stock split, the purpose of the proposed stock split is not to
  reduce the number of record holders. The reverse stock split is not part of
  a contemplated "going private" transaction under Rule 13e-3 of the Securities
  Exchange Act, and the Company will continue to be subject to the periodic reporting
  requirements of the Securities Exchange Act.</p>
<p><font face="Times New Roman, Times, serif" size="3"> </font> </p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">13<br>
  </font></p>
<hr NOSHADE>
<p align="left"><b><i><br>
  Authorized Shares</i></b><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>If
  the reverse stock split is implemented, the Board of Directors will reduce proportionately
  the number of shares of Common Stock of the Company authorized under the Company's
  Certificate of Incorporation. The number of shares of Preferred Stock authorized
  under the Certificate of Incorporation would not be reduced and will remain
  at 3,000,000 shares.</p>
<p><b>RISKS ASSOCIATED WITH THE REVERSE STOCK SPLIT</b></p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>If the
  reverse stock split is approved by the stockholders and the Board of Directors
  determines to implement it, the Company and its stockholders may be subject
  to the following risks: </p>
<table width="80%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th align="LEFT" height="81" width="30" valign="top">
      <div align="right">
        <ul>
          <li></li>
        </ul>
      </div>
    </th>
    <td align="CENTER" height="81" colspan="4" valign="top">
      <div align="left">
        <p>While the Board of Directors believes that the Common Stock would trade
          at higher prices after the consummation of the reverse stock split,
          there can be no assurance that the increase in the trading price will
          occur or, if it does occur, that it will equal or exceed the price that
          is the product of the market price per share of the Common Stock prior
          to the reverse stock split times the selected reverse stock split ratio.
          In some cases, the total market capitalization of a company following
          a reverse stock split is lower, and may be substantially lower, than
          the total market capitalization before the reverse stock split.<br>&nbsp
        </p>
        </div>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <th align="LEFT" height="82" width="30" valign="top">
      <div align="right">
        <ul>
          <li></li>
        </ul>
      </div>
    </th>
    <td align="CENTER" height="82" colspan="4" valign="top">
      <div align="left">The fewer number of shares that will be available to trade
        after the reverse stock split might cause the trading market of the Common
        Stock to become less liquid, which could have an adverse effect on the
        price of the Common Stock. The liquidity of the Common Stock may also
        be adversely affected by the increase in the number of stockholders who
        own "odd lots," which consist of blocks of fewer than 100 shares. Stockholders
        who hold odd lots may be required to pay higher brokerage commissions
        when they sell their shares and may have greater difficulty in making
        sales.<br> &nbsp</div>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <th align="LEFT" height="67" width="30" valign="top">
      <div align="right">
        <ul>
          <li></li>
        </ul>
      </div>
    </th>
    <td align="CENTER" height="67" colspan="4" valign="top">
      <div align="left">The Company cannot offer any assurance that the Common
        Stock will continue to meet The NASDAQ Global Market Exchange continued
        listing requirements following the reverse stock split. Even if the Company
        regains compliance with the minimum bid price rule, the Company must maintain
        compliance, and the Company must also continue to satisfy other Nasdaq
        maintenance standards to remain on The NASDAQ Global Market Exchange.
        In order for the Common Stock to continue to be quoted on The NASDAQ Global
        Market Exchange, it must also satisfy various listing maintenance standards
        established by Nasdaq, such as (i) having at least 750,000 shares publicly
        held by persons other than officers, directors and beneficial owners of
        greater than 10% of the total outstanding shares, (ii) a market value
        of publicly held shares of at least $5 million, (iii) at least 400 stockholders
        who own at least 100 shares, and (iv) stockholder's equity of at least
        $10 million. &nbsp</div>
    </td>
  </tr>
</table>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>The market
  price of the Common Stock will also be based on the Company's business and results
  of operations, which are unrelated to the number of shares of the Common Stock
  outstanding. The Company's business and results of operations are subject to
  the risks and uncertainties described from time-to-time in the Company's periodic
  reports filed with the Securities and Exchange Commission.<br>
  <br>
  <font face="Times New Roman, Times, serif" size="3"> </font> </p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">14<br>
  </font></p>
<hr NOSHADE>
<p align="left"><b><br>
  EFFECTIVE DATE OF THE REVERSE STOCK SPLIT </b><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>If this
  reverse stock split is approved by the stockholders, it will become effective
  at such time as the Company files a Certificate of Amendment to the Certificate
  of Incorporation with the Delaware Secretary of State (or at such later time
  as may be set forth in the Certificate of Amendment), which may take place at
  any time on or before December 31, 2008. Before the Company files the Certificate
  of Amendment, the Board of Directors must determine a final reverse stock split
  ratio. Even if the reverse stock split is approved by the stockholders, the
  Board of Directors has discretion to decline to carry out the reverse stock
  split, if it determines that it is no longer in the best interests of the Company
  and the stockholders.</p>
<p align="left"><b>EXCHANGE OF STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL SHARES</b><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>If the
  reverse stock split is approved by the stockholders and the Board of Directors
  determines to proceed with it, the reverse split of shares of the Common Stock
  will occur at the effective time of the Certificate of Amendment without any
  further action on the part of the stockholders and without regard to the date
  that any stockholder physically surrenders the stockholder's certificates representing
  pre-split shares of Common Stock for certificates representing post-split shares.
  Each certificate representing pre-split shares of Common Stock will, until surrendered
  and exchanged as described below, be deemed cancelled and, for all corporate
  purposes, will be deemed to represent only the number of post-split shares of
  Common Stock and the right to receive the amount of cash for any fractional
  shares as a result of the reverse stock split. However, a stockholder will not
  be entitled to receive any dividends or other distributions payable by us after
  the Certificate of Amendment is effective until that stockholder surrenders
  and exchanges the stockholder's certificates. If there are any dividends or
  distributions prior to such surrender, they will be withheld, accumulate and
  be paid to each stockholder, without interest, once that stockholder surrenders
  his, her or its certificates.</p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>As
  soon as practicable after the effective date of the Certificate of Amendment,
  the Company's transfer agent, American Stock Transfer & Trust Company, will
  mail transmittal forms to each holder of record of certificates formerly representing
  shares of Common Stock that will be used in forwarding certificates for surrender
  and exchange for certificates representing the number of shares of Common Stock
  the holder is entitled to receive as a consequence of the reverse stock split.
  The transmittal form will be accompanied by instructions specifying other details
  of the exchange.</p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>After
  receipt of a transmittal form, each holder should surrender the certificates
  formerly representing shares of Common Stock and will receive in exchange therefor
  certificates representing the number of shares of Common Stock to which the
  holder is entitled. No stockholder will be required to pay a transfer or other
  fee to exchange his, her or its certificates. Stockholders should not send in
  certificates until they receive a transmittal form from the transfer agent.
  In connection with the reverse stock split, the Common Stock will change its
  current CUSIP number. This new CUSIP number will appear on any new stock certificates
  issued representing shares of the post-split Common Stock.</p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>In
  the event that the aggregate number of shares of post-split Common Stock issuable
  to any stockholder includes a fraction, the Company will pay that stockholder,
  in lieu of issuing fractional shares, a cash amount (without interest) equal
  to the fair market value of such fraction of a share which would otherwise result
  from the reverse stock split, based upon the average of the closing bid prices
  of the Common Stock as reported on The NASDAQ Global Market or other principal
  market of the Common Stock during each of the five trading days immediately
  preceding the effective date of the Certificate of Amendment. This cash payment
  represents merely a mechanical rounding off of the fractions, and is not a separately
  bargained-for consideration. Similarly, no fractional shares will be issued
  on the exercise of any outstanding warrants and options following the reverse
  stock split, except as otherwise expressly specified in the documents governing
  such warrants and options.<br>
  <font face="Times New Roman, Times, serif" size="3"><br>
  </font> </p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">15<br>
  </font></p>
<hr NOSHADE>
<p align="left"><b><br>
  EFFECT ON REGISTERED "BOOK-ENTRY" HOLDERS OF COMMON STOCK </b><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>Registered
  holders of the Common Stock may hold some or all of their shares electronically
  in book-entry form under the direct registration system for securities. These
  stockholders do not have stock certificates evidencing their ownership of the
  Common Stock. They are, however, provided with a statement reflecting the number
  of shares registered in their accounts.</p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>If
  a stockholder holds registered shares in book-entry form, such stockholder does
  not need to take any action to receive its post-reverse stock split shares or
  its cash payment in lieu of any fractional share interest, if applicable. If
  the stockholder is entitled to post-reverse stock split shares, a transaction
  statement will automatically be sent to its address of record indicating the
  number of shares it holds following the reverse stock split.</p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>If
  a stockholder holding registered shares is entitled to a payment in lieu of
  any fractional share interest, a check will be mailed to it at its registered
  address as soon as practicable after the effective date of the Certificate of
  Amendment. By signing and cashing this check, the stockholder will warrant that
  it owned the shares for which it received a cash payment.</p>
<p align="left"><b>FEDERAL INCOME TAX CONSEQUENCES </b><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>The following
  is a summary of certain material United States federal income tax consequences
  of the reverse stock split to the Company's stockholders, does not purport to
  be a complete discussion of all of the possible federal income tax consequences
  of the reverse stock split and is included for general information only. Further,
  it does not address any state, local or foreign income or other tax consequences.
  Also, it does not address the tax consequences to stockholders that are subject
  to special tax rules, such as banks, insurance companies, regulated investment
  companies, personal holding companies, foreign entities, nonresident alien individuals,
  broker-dealers and tax-exempt entities. Other stockholders may also be subject
  to special tax rules, including but not limited to: stockholders who received
  Common Stock as compensation for services or pursuant to the exercise of an
  employee stock option, or stockholders who have held, or will hold, stock as
  part of a straddle, hedging, or conversion transaction for federal income tax
  purposes. This summary also assumes you are a United States holder (defined
  below) who has held, and will hold, shares of Common Stock as a "capital asset,"
  as defined in the Internal Revenue Code of 1986, as amended (i.e., generally,
  property held for investment). Finally, the following discussion does not address
  the tax consequences of transactions occurring prior to or after the reverse
  stock split (whether or not such transactions are in connection with the reverse
  stock split) including, without limitation, the exercise of options or rights
  to purchase Common Stock in anticipation of the reverse stock split.</p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>The
  tax treatment of a stockholder may vary depending upon the particular facts
  and circumstances of such stockholder. You should consult with your own tax
  advisor with respect to the tax consequences of the reverse stock split. As
  used herein, the term United States holder means a stockholder that is, for
  federal income tax purposes: a citizen or resident of the United States; a corporation
  or other entity taxed as a corporation created or organized in or under the
  laws of the United States or any state, including the District of Columbia;
  an estate the income of which is subject to federal income tax regardless of
  its source; or a trust that (i) is subject to the primary supervision of a U.S.
  court and the control of one of more U.S. persons or (ii) has a valid election
  in effect under applicable U.S. Treasury regulations to be treated as a U.S.
  person. </p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>The
  following discussion is based on the Code, applicable Treasury Regulations,
  judicial authority and administrative rulings and practice, all as of the date
  hereof. The Internal Revenue Service could adopt a contrary position. In addition,
  future legislative, judicial or administrative changes or interpretations could
  adversely affect the accuracy of the statements and conclusions set forth herein.
  Any such changes or interpretations could be applied retroactively and could
  affect the tax consequences described herein. No ruling from the Internal Revenue
  Service or opinion of counsel has been obtained in connection with the reverse
  stock split.</p>
<p align="left"><b> </b><font face="Times New Roman, Times, serif" size="3"><br>
  </font> </p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">16<br>
  </font></p>
<hr NOSHADE>
<p align="left"><br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>Other than
  the cash payments for fractional shares discussed below, no gain or loss should
  be recognized by a stockholder upon such stockholder's exchange of pre-reverse
  stock split shares of Common Stock for post-reverse stock split shares of Common
  Stock pursuant to the reverse stock split. The aggregate tax basis of the post-reverse
  stock split shares received in the reverse stock split (including any fraction
  of a post-reverse stock split share deemed to have been received) will be the
  same as the stockholder's aggregate tax basis in the pre-reverse stock split
  shares exchanged therefor. The stockholder's holding period for the post-reverse
  stock split shares will include the period during which the stockholder held
  the pre-reverse stock split shares surrendered in the reverse stock split.</p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>In
  general, stockholders who receive cash in exchange for their fractional share
  interests in the post-reverse stock split shares as a result of the reverse
  stock split will recognize gain or loss based on their adjusted basis in the
  fractional share interests repurchased. The receipt of cash instead of a fractional
  share of Common Stock by a United States holder of Common Stock will result
  in a taxable gain or loss to such holder for federal income tax purposes based
  upon the difference between the amount of cash received by such holder and the
  adjusted tax basis in the fractional shares as set forth above. The gain or
  loss will constitute a capital gain or loss and will constitute long-term capital
  gain or loss if the holder's holding period is greater than one year as of the
  effective date.</p>
<p align="left"><i>Information Reporting and Backup Withholding </i><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>You may
  be subject to information reporting with respect to any cash received in exchange
  for a fractional share of Common Stock in the reverse stock split. Holders who
  are subject to information reporting and who do not provide appropriate information
  when requested may also be subject to backup withholding at a rate of 28%. Any
  amount withheld under such rules is not an additional tax and may be refunded
  or credited against your United States federal income tax liability, provided
  that the required information is properly furnished in a timely manner to the
  Internal Revenue Service.</p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>THE
  PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL INCOME
  TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT AND DOES NOT PURPORT TO BE A COMPLETE
  ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT THERETO. YOU SHOULD
  CONSULT YOUR OWN TAX ADVISORS AS TO THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN,
  AND OTHER TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT, IN LIGHT OF YOUR SPECIFIC
  CIRCUMSTANCES.</p>
<p align="left"><b>ACCOUNTING EFFECTS OF THE REVERSE STOCK SPLIT </b></p>
<p align="left">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbspFollowing
  the effective date of the reverse stock split, the par value of the Common Stock
  and Preferred Stock will remain at $0.001 per share. As a result of the reverse
  stock split, however, at its effective time, the aggregate par value of all
  issued and outstanding shares of the Common Stock, and therefore the stated
  capital associated with the Common Stock, will be reduced, and the additional
  paid-in capital (capital paid in excess of the par value) will be increased
  in a corresponding amount for statutory and accounting purposes. All share and
  per share information in the Company's financial statements will be restated
  to reflect the reverse stock split for all periods presented in the future filings
  after the effective date of the Certificate of Amendment with the Securities
  and Exchange Commission and The NASDAQ Global Market. Total stockholders' equity,
  however, will remain unchanged.<font face="Times New Roman, Times, serif" size="3"><br>
  </font></p>
<p><b>NO APPRAISAL RIGHTS</b></p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>Under
  the Delaware General Corporation Law, stockholders are not entitled to appraisal
  rights with respect to a reverse stock split, and the Company will not independently
  provide its stockholders with any such right.</p>
<p align="left">&nbsp; </p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">17<br>
  </font></p>
<hr NOSHADE>
<p><br>
  <b>Required Vote&nbsp&nbsp&nbsp&nbsp</b>&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i></p>
<p align="left"><i></i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>The
  affirmative vote of a majority of the outstanding shares of Common Stock entitled
  to vote as of the Record Date will be required to approve this proposal.<br>
  <b><br>
  THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND
  THE COMPANY'S CERTIFICATE OF INCORPORATION, SHOULD THE BOARD OF DIRECTORS IN
  ITS DISCRETION DETERMINE TO DO SO, TO EFFECT A REVERSE STOCK SPLIT OF THE COMPANY'S
  COMMON STOCK AT A RATIO WITHIN THE RANGE FROM ONE-FOR-FIVE TO ONE-FOR-TEN, TOGETHER
  WITH A CORRESPONDING REDUCTION IN THE NUMBER OF AUTHORIZED SHARES OF COMMON
  STOCK AND CAPITAL STOCK, AT ANY TIME PRIOR TO DECEMBER 31, 2008.</b></p>
<p align="left">&nbsp;</p>
<p align="left">&nbsp;</p>
<p align="left">&nbsp;</p>
<p align="left">&nbsp;</p>
<p align="left">&nbsp;</p>
<p align="left">&nbsp;</p>
<p align="left">&nbsp;</p>
<p align="left">&nbsp;</p>
<p align="left">&nbsp;</p>
<p align="left"><font face="Times New Roman, Times, serif" size="3"><br>
  </font> </p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">18<br>
  </font></p>
<hr NOSHADE>
<p align="center">&nbsp;</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 named in the table;
  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="3" face="Times New Roman, Times, serif"><b>Name
      of Beneficial Owner (1)<br>
      </b></font>
      <hr NOSHADE>
    </th>
    <th width="10" align="CENTER"><font size="3"></font></th>
    <th width="107" align="CENTER">
      <div align="center"><font size="3" 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"><font size="3"></font></th>
    <th width="110" align="CENTER">
      <div align="center"><font size="3" 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="3" face="Times New Roman, Times, serif">Charlie
      Bass(3)</font></td>
    <td width="10" align="RIGHT"><font size="3"></font></td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2,025,459</font></div>
    </td>
    <td width="9" align="RIGHT"><font size="3"></font></td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">6.3%</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="3" face="Times New Roman, Times, serif">Kevin
      J. Mills(4)</font></td>
    <td width="10" align="RIGHT"><font size="3"></font></td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">907,161</font></div>
    </td>
    <td width="9" align="RIGHT"><font size="3"></font></td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2.8</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="3" face="Times New Roman, Times, serif">Micheal
      L. Gifford(5)</font></td>
    <td width="10" align="RIGHT"><font size="3"></font></td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">730,570</font></div>
    </td>
    <td width="9" align="RIGHT"><font size="3"></font></td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2.2</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240" height="16"><font size="3" face="Times New Roman, Times, serif">David
      W. Dunlap(6)</font></td>
    <td width="10" align="RIGHT" height="16"><font size="3"></font></td>
    <td width="107" align="RIGHT" height="16">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">612,655</font></div>
    </td>
    <td width="9" align="RIGHT" height="16"><font size="3"></font></td>
    <td width="110" align="RIGHT" height="16">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1.9</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="3" face="Times New Roman, Times, serif">Leonard
      L. Ott(7) </font></td>
    <td width="10" align="RIGHT"><font size="3"></font></td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">477,618</font></div>
    </td>
    <td width="9" align="RIGHT"><font size="3"></font></td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1.5</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="3" face="Times New Roman, Times, serif">Enzo Torresi(8)</font></td>
    <td width="10" align="RIGHT"><font size="3"></font></td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">329,000</font></div>
    </td>
    <td width="9" align="RIGHT"><font size="3"></font></td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1.0</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="3" face="Times New Roman, Times, serif">Leon Malmed(9)</font></td>
    <td width="10" align="RIGHT"><font size="3"></font></td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">312,500</font></div>
    </td>
    <td width="9" align="RIGHT"><font size="3"></font></td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1.0</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="3" face="Times New Roman, Times, serif">Gianluca
      Rattazzi(9)</font></td>
    <td width="10" align="RIGHT"><font size="3"></font></td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">305,000</font></div>
    </td>
    <td width="9" align="RIGHT"><font size="3"></font></td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="3" face="Times New Roman, Times, serif">Tim I.
      Miller(10)</font></td>
    <td width="10" align="RIGHT"><font size="3"></font></td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">267,803</font></div>
    </td>
    <td width="9" align="RIGHT"><font size="3"></font></td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="3" face="Times New Roman, Times, serif">Lee A.
      Baillif (11)</font></td>
    <td width="10" align="RIGHT"><font size="3"></font></td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">236,858</font></div>
    </td>
    <td width="9" align="RIGHT"><font size="3"></font></td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="3" face="Times New Roman, Times, serif">Peter
      Sealey(9) </font></td>
    <td width="10" align="RIGHT"><font size="3"></font></td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">225,000</font></div>
    </td>
    <td width="9" align="RIGHT"><font size="3"></font></td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="3" face="Times New Roman, Times, serif">Robert
      C. Zink(9)</font></td>
    <td width="10" align="RIGHT"><font size="3"></font></td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">76,042</font></div>
    </td>
    <td width="9" align="RIGHT"><font size="3"></font></td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240" height="15"><font size="3" face="Times New Roman, Times, serif">Thomas
      O. Miller(12)</font></td>
    <td width="10" align="RIGHT" height="15"><font size="3"></font></td>
    <td width="107" align="RIGHT" height="15">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">60,620</font></div>
    </td>
    <td width="9" align="RIGHT" height="15"><font size="3"></font></td>
    <td width="110" align="RIGHT" height="15">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240" height="15"><font size="3" face="Times New Roman, Times, serif">Thomas
      L. Noggle(9)</font></td>
    <td width="10" align="RIGHT" height="15"><font size="3"></font></td>
    <td width="107" align="RIGHT" height="15">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">521</font></div>
    </td>
    <td width="9" align="RIGHT" height="15"><font size="3"></font></td>
    <td width="110" align="RIGHT" height="15">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">*</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="3" face="Times New Roman, Times, serif">All Directors
      and Executive Officers as a group (14 persons)(13)</font></td>
    <td width="10" align="RIGHT"><font size="3"></font></td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">6,566,807</font></div>
    </td>
    <td width="9" align="RIGHT"><font size="3"></font></td>
    <td width="110" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">20.2%</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">
      <font face="Times New Roman, Times, serif" size="2">*Less than 1%<br>
      (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>
      (2) Percentage ownership is based on 32,015,975 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 362,500 shares of Common Stock subject to options exercisable
      within 60 days of February 25, 2008.<br>
      (4) Includes 802,063 shares of Common Stock subject to options exercisable
      within 60 days of February 25, 2008.<br>
      (5) Includes 486,696 shares of Common Stock subject to options exercisable
      within 60 days of February 25, 2008.<br>
      (6) Includes 552,188 shares of Common Stock subject to options exercisable
      within 60 days of February 25, 2008.<br>
      (7) Includes 463,208 shares of Common Stock subject to options exercisable
      within 60 days of February 25, 2008.<br>
      (8) Includes 281,250 shares of Common Stock subject to options exercisable
      within 60 days of February 25, 2008.<br>
      (9) Consists of shares of Common Stock subject to options exercisable within
      60 days of February 25, 2008.<br>
      (10) Includes 263,250 shares of Common Stock subject to options exercisable
      within 60 days of February 25, 2008.<br>
      (11) Includes 210,271 shares of Common Stock subject to options exercisable
      within 60 days of February 25, 2008.<br>
      (12) Includes 55,000 shares of Common Stock subject to options exercisable
      within 60 days of February 25, 2008.<br>
      (13) Includes 4,395,489 shares of Common Stock subject to options exercisable
      within 60 days of February 25, 2008.</font></td>
  </tr>
</table>
<p align="center">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">19 </font></p>
<hr NOSHADE>
<p align="center"><b><br>
  SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE</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. We prepare Section 16(a) forms on behalf of our executive officers
  and directors based on the information provided by them. Based solely on review
  of this information, the Company believes that during fiscal 2007 all filing
  requirements applicable to its executive officers and directors were complied
  with except that, due to delays in the filing of Form 3, the Form 4 reporting
  the initial stock option grant for Robert C. Zink was filed two days late on
  April 6, 2007, and due to an administrative error, the initial stock option
  grant for Thomas L. Noggle made on November 1, 2007 was not reported until February
  20, 2008.<br>
  <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"><b> <br>
  </b></font><font size="3" face="Times New Roman, Times, serif"> <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i><i></i>
  </font>The current executive officers of the Company are as follows: </p>
<table width="100%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th width="28%" align="LEFT">
      <div align="left"><font size="3" face="Times New Roman, Times, serif"><b>Name
        of Officer<br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th width="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></th>
    <th width="6%" align="CENTER"><font size="3" face="Times New Roman, Times, serif"><b>Age</b></font>
      <hr NOSHADE>
    </th>
    <th width="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></th>
    <th width="62%" align="CENTER"><font size="3" 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="3" face="Times New Roman, Times, serif">Kevin
      J. Mills</font></td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">47</font></div>
    </td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%">President and Chief Executive Officer and Director</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%"><font size="3" face="Times New Roman, Times, serif">David
      W. Dunlap</font></td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">65</font></div>
    </td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%">Vice President of Finance and Administration, Chief Financial
      Officer and Secretary</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%"><font size="3" face="Times New Roman, Times, serif">Micheal
      L. Gifford</font></td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">50</font></div>
    </td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%">Executive Vice President and Director</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%"><font size="3">Lee A. Baillif</font></td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">47</font></div>
    </td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%">Vice President and Controller</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%"><font size="3">Tim I. Miller</font></td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT">
      <div align="center"><font size="3">53</font></div>
    </td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%">Vice President of Worldwide Operations</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%"><font size="3">Thomas L. Noggle</font></td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT">
      <div align="center"><font size="3">59</font></div>
    </td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%">Vice President of Engineering</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%" height="15"><font size="3" face="Times New Roman, Times, serif">Leonard
      L. Ott</font></td>
    <td width="2%" height="15"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT" height="15">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">48</font></div>
    </td>
    <td width="2%" height="15"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%" height="15">Vice President and Chief Technical Officer</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%" height="8"><font size="3" face="Times New Roman, Times, serif">Robert
      C. Zink</font></td>
    <td width="2%" height="8"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="6%" align="RIGHT" height="8">
      <div align="center"><font size="3">50</font></div>
    </td>
    <td width="2%" height="8"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%" height="8">Sr. Vice President of Worldwide Sales and Marketing</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>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>&nbspLee A. Baillif</i></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>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.</font></p>
<p><br>
</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">20<br>
  </font></p>
<hr NOSHADE>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i>Thomas L.
  Noggle</i> commenced employment as the Company's Vice President of Engineering
  on November 1, 2007. Mr. Noggle served as the Director of Hardware Engineering
  for Logitech, Inc. from November 1994 to February 1998 and previously served
  as a design engineering manager for Logitech. From February 1998 to October
  2007, Mr. Noggle served as an independent engineering consultant offering technical
  product management, product design and product development services to a number
  of private companies designing and developing new and advanced electronic products
  with an emphasis on chip design and imaging devices. From September 1999 through
  February 2001 he was President and CEO of Viznetix, an engineering management
  consulting company founded by Mr. Noggle. Most projects during this consulting
  period were of short duration of a few months, and included private companies
  such as Endpoints, Inc. (imaging) and Nanochip, Inc. (ASIC design). Mr. Noggle
  has received various patents and awards for products that he has developed,
  including a U.S. patent assigned to Logitech for manipulating area imaging devices
  and a Technical Academy Award for work completed as a senior design engineer
  at Lucasfilm, Ltd. Mr. Noggle holds a B.S. in Electrical Engineering and Computer
  Sciences from the University of Illinois.<br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</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 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>Robert C. Zink</i>
  commenced employment as the Company's Senior Vice President of Worldwide Sales
  and Marketing on April 2, 2007. Mr. Zink previously served in increasingly responsible
  executive sales positions with Intermec Technologies from 1997 through March
  2007 and with Norand Corporation from 1979 to 1997 prior to its acquisition
  by Intermec. Recent sales positions held by Mr. Zink with Intermec include Vice
  President U.S. Enterprise Sales from April 2006 through March 2007, Vice President
  Eastern U.S. Sales from 2001 through March 2006 and Vice President U.S. Sales
  System & Solutions in 2000 and 2001. Mr. Zink holds a Bachelors degree in Business
  Administration from the University of Iowa.</p>
<p><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">21<br>
  </font></p>
<hr NOSHADE>
<p align="center"><font size="3" face="Times New Roman, Times, serif"><b><br>
  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, 2007.</font></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 width="12%" align="LEFT" height="31"><font size="3"></font></th>
    <th width="12%" height="31"><font size="3"></font></th>
    <th width="12%" valign="bottom" align="CENTER" height="31"><font size="3"></font></th>
  </tr>
  <tr valign="BOTTOM">
    <th width="33%" align="LEFT" height="15">
      <div align="left"><font size="3" face="Times New Roman, Times, serif"><b>Name
        <br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th width="12%" align="CENTER" height="15"><font size="3">Fees Earned or Paid
      in Cash ($)</font>
      <hr NOSHADE>
    </th>
    <th width="12%" align="CENTER" height="15"><font size="3">Option Awards ($)(1)
      </font>
      <hr NOSHADE>
    </th>
    <th width="12%" align="CENTER" height="15"><font size="3">Total ($) </font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="14"><font size="3" face="Times New Roman, Times, serif">Charlie
      Bass <br>
      </font></td>
    <td height="14">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$12,000</font></div>
    </td>
    <td height="14">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$35,584(2)
        </font></div>
    </td>
    <td height="14">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$47,584
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="0"><font size="3" face="Times New Roman, Times, serif">Leon Malmed<br>
      </font></td>
    <td height="14">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$12,000</font></div>
    </td>
    <td height="0">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$28,984(3)
        </font></div>
    </td>
    <td height="0">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$40,984
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="11">
      <p><font size="3">Gianluca Rattazzi</font></p>
    </td>
    <td height="14">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$12,000</font></div>
    </td>
    <td height="11">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$25,684(4)
        </font></div>
    </td>
    <td height="11">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$37,684
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="2"><font size="3" face="Times New Roman, Times, serif">Peter Sealey<br>
      </font></td>
    <td height="14">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$12,000</font></div>
    </td>
    <td height="2">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$19,084(5)
        </font></div>
    </td>
    <td height="2">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$31,084
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="16">
      <p><font size="3" face="Times New Roman, Times, serif">Enzo Torresi </font></p>
    </td>
    <td height="14">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$12,000</font></div>
    </td>
    <td height="16">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$22,384(6)
        </font></div>
    </td>
    <td height="16">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$34,384
        </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 2007 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 an option to purchase 50,000 shares on April 18,
      2007 with a grant date fair value, computed in accordance with FAS 123R,
      of $26,500. The aggregate equity awards held by Mr. Bass at December 31,
      2007 were options to purchase 362,500 shares of Common Stock. The valuation
      for these awards at such date, determined pursuant to FAS 123R, was $440,550.<br>
      (3) Mr. Malmed was granted an option to purchase 40,000 shares on April
      18, 2007 with a grant date fair value, computed in accordance with FAS 123R,
      of $21,200. The aggregate equity awards held by Mr. Malmed at December 31,
      2007 were options to purchase 312,500 shares of Common Stock. The valuation
      for these awards at such date, determined pursuant to FAS 123R, was $406,850.<br>
      (4) Mr. Rattazzi was granted an option to purchase 35,000 shares on April
      18, 2007 with a grant date fair value, computed in accordance with FAS 123R,
      of $18,550. The aggregate equity awards held by Mr. Rattazzi at December
      31, 2007 were options to purchase 305,000 shares of Common Stock. The valuation
      for these awards at such date, determined pursuant to FAS 123R, was $401,021.<br>
      (5) Mr. Sealey was granted an option to purchase 25,000 shares on April
      18, 2007 with a grant date fair value, computed in accordance with FAS 123R,
      of $13,250. The aggregate equity awards held by Mr. Sealey at December 31,
      2007 were options to purchase 225,000 shares of Common Stock. The valuation
      for these awards at such date, determined pursuant to FAS 123R, was $218,750.<br>
      (6) Mr. Torresi was granted an option to purchase 30,000 shares on April
      18, 2007 with a grant date fair value, computed in accordance with FAS 123R,
      of $15,900. The aggregate equity awards held by Mr. Torresi at December
      31, 2007 were options to purchase 281,250 shares of Common Stock. The valuation
      for these awards at such date, determined pursuant to FAS 123R, was $388,175.</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<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 in person. During 2007, the Board met four times in person and two
  times by telephone, and all directors attended.</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.
  Options to purchase 25,000 shares are awarded to each director for Board and
  committee service. Directors serving as chairpersons of the nominating, audit
  and compensation committees receive an additional 5,000 shares, the director
  serving as the Board chairperson receives an additional 10,000 shares, and members
  serving on the audit committee receive an additional 10,000 shares. As a result,
  on April 18, 2007, the outside directors as a group were granted options to
  purchase an aggregate of 180,000 shares. These options vest monthly over a one
  year period commencing April 18, 2007, and have an exercise price of $0.92 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 align="center"><font face="Times New Roman, Times, serif" size="3">22<br>
  </font></p>
<hr NOSHADE>
<p align="center"><b><br>
  COMPENSATION DISCUSSION AND ANALYSIS</b></p>
<p><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 of the Board of Directors establishes the general compensation
  policies of the Company and the compensation plans and specific compensation
  levels for executive officers. The Committee strives to ensure that the Company's
  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, the Company strives to provide a total compensation package that is
  fair, reasonable and competitive with prevailing practices in the Company's
  industry, allowing for above average total compensation when justified by business
  results and exceptional individual contribution.</p>
<p><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 2007 and 2008 compensation policies, plans and programs are
  intended to achieve the following objectives:</p>
<ul>
  <ul>
    <ul type="disc">
      <li>attract, retain and motivate talented executive officers;<br>
        <br>
      </li>
      <li>provide executive officers with cash bonus opportunities linked to achievement
        of business objectives and individual performance goals; and<br>
        <br>
      </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>The
  Company's 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><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-term,
  equity-based incentive awards.</p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbspAnalysis: The Compensation
  Committee believes that setting cash salary targets at median levels meets the
  objective of providing competitive compensation when considered in combination
  with variable incentive awards and long term incentive stock option grants.
  Variable incentive awards provide for above average compensation for superior
  performance as they allow participants to exceed financial compensation targets
  when Company results exceed financial targets. Participants also have the risk
  of realizing below average compensation for Company failure to achieve target
  financial results. Long-term incentive stock option grants are intended to incentivize
  the participant to performance levels that increase the value of the Company's
  Common Stock above the fair market value at the date of grant.&nbsp&nbsp&nbsp&nbsp&nbsp</i>&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></p>
<p><i></i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i>The components
  of the Company's rewards program, as well as the total direct compensation for
  executives, are compared against other public companies as set forth as summary
  data in the national compensation survey of the American Electronics Association.
  All of the Company's executive officers are also entitled to earn variable incentive
  awards and stock option grants as part of their compensation packages. The Company
  focuses on optimizing its compensation program to motivate employees to improve
  the Company's results on a cost-effective basis.</p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">23<br>
  </font></p>
<hr NOSHADE>
<p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp<br>
  </i></i><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i>Analysis:
  The national compensation survey of the American Electronics Association was
  chosen to benchmark the Company's executive and employee salaries, as it is
  a broad-based compensation survey with an emphasis on companies in the electronics
  industry and provides information on base salary and variable incentive awards
  based on size of companies and geographic location. Offering competitive salary
  packages to employees is an essential element of attracting and retaining key
  employees in the San Francisco Bay Area, which has many electronics firms that
  compete for talent and offer employment alternatives.</i></p>
<p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i>Base Salary</i>.
  The Compensation Committee establishes a competitive base salary for each executive
  officer designed to recognize the skills and experience the individual brings
  to the Company and the performance contributions he or she makes. Overall, the
  total direct compensation level for each position is targeted at the median
  percentile of similar positions in the American Electronics Association surveys
  for employees participating in variable incentive award programs. Some variation
  from the competitive mean is allowed when, in the judgment of management and/or
  the Compensation Committee, as appropriate, the value of the 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. Currently, the base salaries of the Named Executive Officers, except
  for Mr. Zink, are below the median percentile, reflecting decisions by the Compensation
  Committee in past years, and supported by management, to limit salary increases
  based on the financial condition of the Company. Mr. Zink joined the Company
  in April 2007 and his base compensation levels were set at about the 75th percentile,
  consistent with his compensation levels at his previous employer.</p>
<p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbspThe Compensation Committee
  determines both the amount and timing of base salary increases. Factors affecting
  the level of base salary 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. In July 2007, the base salary levels for the four continuing
  named executive officers were increased retroactive to the beginning of the
  year by $10,000 for Messrs. Mills, Gifford and Dunlap and $15,000 for Mr. Miller,
  representing an average increase in base salary of 7%. The increase covered
  the period since the previous increase in July 2005 and was primarily a cost
  of living adjustment, except that the base salary increase for Mr. Miller that
  included a merit increase reflecting his assumption of increased levels of responsibility.</p>
<p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i>Analysis:
  In 2006, the Company embarked on a major product development program to develop
  and market its own mobile handheld computer, thus increasing the size of the
  markets it serves and reducing dependencies on other handheld computer manufacturers
  whose computers are used in conjunction with the Company's peripheral data collection
  and peripheral products. The mobile handheld computer development program, along
  with other expense increases, has increased operating losses and put pressure
  on cash resources, as revenue growth has been below the rate of expense increases
  over the past three years. As a result, and with the concurrence of the Company's
  management team, the Compensation Committee has been judicious about increasing
  salaries until the Company is able to improve its bottom line results.</i></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. 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, which is approved by the Compensation
  Committee, and performance is measured quarterly. The Compensation Plan measures
  four components:</p>
<ul>
  <ul>
    <ul type="disc">
      <li>Actual quarterly Company revenue compared to a Board-approved financial
        plan ("Financial Plan");<br>
        <br>
      </li>
      <li><i></i> Actual quarterly Company gross margins compared to the Financial
        Plan;<br>
        <br>
      </li>
      <li> Actual Company expenses compared to the Financial Plan; and<br>
        <br>
      </li>
      <li>Achievement of individual quarterly management objectives. </li>
    </ul>
  </ul>
</ul>
<div align="left">
  <p>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></p>
  <p align="center"><font face="Times New Roman, Times, serif" size="3">24<br>
    </font></p>
  <hr NOSHADE>
  <p align="center">&nbsp; </p>
  <p> <i><i></i></i><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i></i>The
    Financial Plan is approved each year by the 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 for
    each component. Awards are capped at twice the target award levels for each
    financial component, and executive officers earn zero for a financial component
    if attainment of that component is less than 80 percent. Variable incentive
    targets for executives during 2007 were unchanged and ranged from 9 percent
    to 35 percent of total cash compensation, averaging 24 percent for all executives
    in fiscal 2007. The Compensation Committee believes that setting variable
    incentive targets at these levels provides compensation incentives that are
    meaningful in recognizing successful performance without causing severe financial
    hardships should the variable targets not be reached.</p>
  <p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i>Analysis:
    The Company's ratios of variable compensation to total compensation are generally
    at or above median levels for similar executives, as reported in the salary
    survey of the American Electronics Association, and elevate the importance
    of reaching or exceeding financial goals as set in the Company's annual Financial
    Plan. The Financial Plan has historically been aggressive compared to actual
    attainment in forecasting revenue growth, the level of product margins, and
    the management of operating expenses. As a result, although the Company's
    management has performed well relative to achieving operating expense and
    working capital targets, it has also underperformed in achieving revenue results
    relative to the annual Financial Plan by underestimating the time required
    to develop products and bring them to market and by failing to adequately
    estimate the impact on revenue of delays in product availability by third
    parties, including handheld computer manufacturers whose products work with
    the Company's peripheral data collection and connectivity products and third
    party software vendors supplying mobile business applications. The Management
    Variable Incentive Compensation Plan, described above, has three quantitative
    components that measure actual revenue, gross margins and expense (all elements
    of profitability) against targets set in the annual Financial Plan and one
    component, management objectives, that is both quantitative and qualitative.
    As all components carry equal weight, and because gross margins generally
    follow revenue (if the latter is missed, so is the former), revenue shortfalls
    in combination with a financial cliff at 80% of Plan have historically caused
    Socket's executives to be compensated below variable target levels as provided
    for in the Plan. On the upside, the variable quantitative profitability-based
    portions of the awards (revenue, gross margins and expense) can result in
    an individual earning up to 200% of the individual's target, providing strong
    financial incentives to meet or exceed Financial Plan objectives.</i></p>
  <p><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i></i>Actual
    variable compensation payments as a percentage of variable compensation targets
    during 2007 and 2006 are shown in the table below for the Named Executive
    Officers. The shortfalls were due primarily to achievement of revenue and
    margin totals below Financial Plan levels.<br>
    <br>
  </p>
  <table width="74%" border=0 cellspacing=0 cellpadding=0 align="center" height="297">
    <tr valign="BOTTOM">
      <th width="33%" align="LEFT" height="15">
        <div align="left"><font size="3" face="Times New Roman, Times, serif"><b>Named
          Executive Officer <br>
          </b></font> </div>
        <hr NOSHADE>
      </th>
      <th width="12%" align="CENTER" height="15"><b>Position(s)</b>
        <hr NOSHADE>
      </th>
      <th width="12%" align="CENTER" height="15"><b>2007</b>
        <hr NOSHADE>
      </th>
      <th width="12%" align="CENTER" height="15"><b>2006</b>
        <hr NOSHADE>
      </th>
    </tr>
    <tr bgcolor="#FFFFFF" valign="bottom">
      <td width="23%" valign="top"><font size="3" face="Times New Roman, Times, serif">Kevin
        J. Mills</font></td>
      <td height="18" width="46%" valign="top"><font size="3" face="Times New Roman, Times, serif">President
        and Chief Executive Officer and Director</font></td>
      <td height="18" width="17%" valign="top" align="center"><font size="3" face="Times New Roman, Times, serif">81%
        </font></td>
      <td align="center" height="35" width="14%" valign="top"><font size="3" face="Times New Roman, Times, serif">70%
        </font></td>
    </tr>
    <tr bgcolor="#FFFFFF" valign="bottom">
      <td width="23%" valign="top"><font size="3" face="Times New Roman, Times, serif">Micheal
        L. Gifford</font></td>
      <td height="18" width="46%" valign="top"><font size="3" face="Times New Roman, Times, serif">Executive
        Vice President and Director</font></td>
      <td height="18" width="17%" valign="top" align="center"><font size="3" face="Times New Roman, Times, serif">82%
        </font></td>
      <td align="center" height="35" width="14%" valign="top"><font size="3" face="Times New Roman, Times, serif">64%
        </font></td>
    </tr>
    <tr bgcolor="#FFFFFF" valign="bottom">
      <td width="23%" valign="top"><font size="3" face="Times New Roman, Times, serif">Robert
        C. Zink (1)<br>
        </font></td>
      <td height="18" width="46%" valign="top">
        <div align="left"><font size="3" face="Times New Roman, Times, serif">Sr.
          Vice President Worldwide Sales and Marketing</font></div>
      </td>
      <td height="18" width="17%" valign="top" align="center">
        <div align="center"><font size="3" face="Times New Roman, Times, serif">100%
          </font></div>
      </td>
      <td align="center" height="35" width="14%" valign="top">
        <div align="center"><font size="3" face="Times New Roman, Times, serif">
          - </font></div>
      </td>
    </tr>
    <tr bgcolor="#FFFFFF" valign="bottom">
      <td width="23%" valign="top" height="39"><font size="3" face="Times New Roman, Times, serif">David
        W. Dunlap<br>
        </font></td>
      <td height="39" width="46%" valign="top">
        <div align="left"><font size="3">Vice President of Finance and Administration,
          Chief Financial Officer and Secretary</font></div>
      </td>
      <td height="39" width="17%" valign="top" align="center">
        <div align="center"><font size="3" face="Times New Roman, Times, serif">82%
          </font></div>
      </td>
      <td align="center" height="39" width="14%" valign="top">
        <div align="center"><font size="3" face="Times New Roman, Times, serif">
          70% </font></div>
      </td>
    </tr>
    <tr bgcolor="#FFFFFF" valign="bottom">
      <td width="23%" valign="top">
        <p><font size="3" face="Times New Roman, Times, serif">Timothy I. Miller
          </font></p>
      </td>
      <td align="RIGHT" height="35" width="46%" valign="top">
        <div align="left"><font size="3" face="Times New Roman, Times, serif">Vice
          President of Worldwide Operations</font></div>
      </td>
      <td align="center" height="35" width="17%" valign="top">
        <div align="center"><font size="3" face="Times New Roman, Times, serif">81%
          </font></div>
      </td>
      <td align="center" height="35" width="14%" valign="top">
        <div align="center"><font size="3" face="Times New Roman, Times, serif">
          68% </font></div>
      </td>
    </tr>
    <tr bgcolor="#FFFFFF" valign="bottom">
      <td colspan="4" valign="top" height="60">
        <hr NOSHADE align="LEFT" width="120">
        <font size="2">Note 1: Mr. Zink commenced employment on April 2, 2007
        and his variable target attainment was guaranteed for 2007 as part of
        his employment offer.<font face="Times New Roman, Times, serif"> </font></font><font size="3" face="Times New Roman, Times, serif">
        </font>
        <div align="center"><font size="3" face="Times New Roman, Times, serif">
          </font></div>
      </td>
    </tr>
  </table>

  <p align="center"><font face="Times New Roman, Times, serif" size="3">25<br>
    </font></p>
  <hr NOSHADE>
  <p>&nbsp;</p>
  <p><i><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</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 the 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 each award 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 employees of the Company based on recommendations from management
    regarding employee responsibilities and performance.</p>
  <p align="left"><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. New employee grants are made
    at or shortly after the date of hire. Refresher grants in 2007 were made on
    February 26, 2007. Refresher grants are made annually, typically during the
    first quarter of the year on the first open trading day of the quarter two
    days after the release of earnings. The 2007 refresher grants had a vesting
    start date of March 1, 2007 and vest monthly over 48 months, contingent upon
    the continued employment with the Company. All 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. Stock options provide a return only if the individual remains with
    the Company and only if the market price appreciates during the option term.
  </p>
  <p align="left"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i>Analysis:
    The Compensation Committee believes that stock option grants are the Company's
    most effective differentiator in attracting and retaining key employees, and
    the Company provides initial grants to all new employees and annual refresher
    grants to all continuing employees with a weighting reflecting the level of
    responsibility and performance of the employee. Many of the senior executives
    have been employed by the Company more than ten years and have amassed a number
    of annual stock option grants (grants expire 10 years after the date of grant)
    with substantial potential for wealth accumulation if stock prices increase,
    fully aligned with the interests of stockholders. The Company believes stock
    options are effective executive incentives because of the expectations of
    the management team that the Company's products and the markets they address
    provide opportunities for growth that may result in share price appreciation.<br>
    <br>
    <br>
    </i></p>
</div>
<div align="left">
  <p align="center"><font face="Times New Roman, Times, serif" size="3">26<br>
    </font></p>
  <hr NOSHADE>
  <p>&nbsp;</p>
  <div align="left">
    <p><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 by 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 2007, the Compensation Committee met
      ten times during the year, and stock option grants were awarded at nine
      of those meetings.</p>
  </div>
  <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 the individual's commencement of employment. The size
    of the grant is based on the responsibilities of the 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.
    During 2007, initial stock option grants were made to Messrs. Zink and Noggle,
    who became executive officers during the year. Grants to rank-and-file employees
    are made 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. 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 ensures
    that the employee is familiar with the Company and its goals and objectives
    prior to options vesting. During 2007, the Company granted options to purchase
    a total of 977,900 shares to 18 new employees, representing 51 percent of
    all stock options granted during the year.</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. The Company awards refresher options to each of its employees
    in recognition of the employee's contribution to meeting the Company's goals
    and objectives. 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 the Insider Trading Policy contained
    therein. Over the past several years, the executive officers of the Company
    have received from 40 percent to 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, and managers and senior contributors have
    received approximately 25 to 30 percent, while other employees have received
    the balance of 25 to 30 percent. Options to acquire 303,000 shares were awarded
    to the eight executive officers of the Company in 2007, ranging from a low
    of 20,000 shares to a high of 55,000 shares. Refresher grants generally vest
    monthly over a 48 month period. During 2007, the Company granted options to
    purchase a total of 977,900 shares to 69 employees, representing 38 percent
    of all stock options granted during the year. In addition, the Company granted
    options to purchase 45,000 shares to the members of the Company's Technical
    Advisory Board as their sole compensation for serving on the Board, representing
    2 percent of all stock options granted during the year.</p>
  <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 in the form of an annual stock option grant. Director grants
    are granted 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 22 under "Director Compensation." During 2007, the Company granted options
    to purchase a total of 180,000 shares to the 5 independent directors of the
    Company, representing 9 percent of all stock options granted during the year.</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>. 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>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></p>
  <p align="center"><font face="Times New Roman, Times, serif" size="3">27<br>
    </font></p>
  <hr NOSHADE>
  <p><br>
    <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 years
    ended December 31, 2006, 2007, and beyond. Under Financial Accounting Standard
    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. These estimates 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 Financial Accounting Standard SFAS 123R. The Company adopted
    the modified prospective recognition method and implemented the provisions
    of Financial Accounting Standard SFAS 123R beginning with the first quarter
    of 2006.<br>
    <br>
    <i> &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i><i></i></i><i></i><i></i><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 issuance of grants qualifying
    as "performance-based compensation" under Section 162(m) of the Internal Revenue
    Code; however, 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
    Company has historically compensated all of its executives including its Chief
    Executive Officer under the same programs including cash compensation, stock
    option grant awards, benefit programs, employment contract and the absence
    of perquisites using the same processes as defined elsewhere within this Compensation
    Discussion and Analysis. 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
    Elements of Executive Compensation, and he participates in the same compensation
    programs as the other executive officers. Mr. Mills' total target compensation
    is based on survey data prepared by the American Electronics Association for
    public companies, his responsibility and leadership in establishing and implementing
    the strategic direction of the Company, and the financial performance of the
    Company. In 2007, Mr. Mills received a base salary increase of $10,000 or
    5.6 percent of his previous base salary. The increase was intended to be primarily
    a cost of living increase covering the period since his last salary increase
    in July 2005. 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 2007. His total base salary during 2007 was $190,000, and
    his total target variable compensation was $100,000 for a total compensation
    target of $290,000. Mr. Mills earned 81% of his total target variable compensation
    during fiscal year 2007, due primarily to the Company underachieving its revenue
    and gross margin targets under the Management Variable Incentive Compensation
    Plan in which all executive officers participate. Mr. Mills' total compensation
    is consistent with the median compensation for chief executive officers of
    public companies, as reported in the national compensation survey of the American
    Electronics Association.</p>
  <p><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 26, 2007 at the same time that refresher grants were awarded to
    all employees of the Company. This option commenced vesting on March 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 the
    interests 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 align="center"><font face="Times New Roman, Times, serif" size="3">28<br>
    </font></p>
  <hr NOSHADE>
  <p align="center"><b><br>
    <br>
    SUMMARY COMPENSATION TABLE</b><font size="3" face="Times New Roman, Times, serif"><br>
    <b>For Fiscal Year Ended December 31, 2007</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 2007 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 2007 (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="36%" align="LEFT" height="42">
      <div align="center"><font size="3" face="Times New Roman, Times, serif"><b>Name
        and Principal Position<br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th width="7%" align="CENTER" height="42"><font size="3" face="Times New Roman, Times, serif"><b>Year</b></font>
      <hr NOSHADE>
    </th>
    <th width="13%" align="CENTER" height="42"><font size="3" face="Times New Roman, Times, serif"><b>Salary<br>
      ($)</b></font><font size="3">(1)</font>
      <hr NOSHADE>
    </th>
    <th width="13%" align="CENTER" height="42"><font size="3">Option Awards<br>
      ($)(2) </font>
      <hr NOSHADE>
    </th>
    <th width="13%" align="CENTER" height="42"><font size="3">Non-Equity Incentive
      Plan Compensation ($)(3)</font>
      <hr NOSHADE>
    </th>
    <th width="18%" align="CENTER" height="42"><font size="3" face="Times New Roman, Times, serif"><b>Total<br>
      ($)</b></font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="36%" height="17"><font size="2" face="Times New Roman, Times, serif">Kevin
      J. Mills<br>
      <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>President
      and Chief Executive Officer and <br>
      <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>Director</font></td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2007
        <br>
        2006 </font></div>
    </td>
    <td align="RIGHT" height="17" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">$190,000<br>
        180,000</font></div>
    </td>
    <td align="RIGHT" height="17" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">$68,844<br>
        72,227</font></div>
    </td>
    <td align="RIGHT" height="17" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">$80,588<br>
        69,974</font></div>
    </td>
    <td align="RIGHT" height="17" width="18%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">$339,432<br>
        322,201</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="36%" height="15"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td align="RIGHT" height="17" width="7%"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td align="RIGHT" height="15" width="13%"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td align="RIGHT" height="15" width="13%"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td align="RIGHT" height="15" width="13%"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td align="RIGHT" height="15" width="18%"><font size="2" face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="36%" height="15"><font size="2" face="Times New Roman, Times, serif">Micheal
      L. Gifford<br>
      <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>Executive
      Vice President and Director</font></td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2007
        <br>
        2006 </font></div>
    </td>
    <td align="RIGHT" height="15" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">175,000<br>
        165,000</font></div>
    </td>
    <td align="RIGHT" height="15" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">63,547<br>
        63,230</font></div>
    </td>
    <td align="RIGHT" height="15" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">40,768<br>
        31,963</font></div>
    </td>
    <td align="RIGHT" height="15" width="18%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">279,315<br>
        260,193</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="36%" height="18"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td align="RIGHT" height="17" width="7%"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td height="18" width="13%"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td height="18" width="13%"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td height="18" width="13%"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td height="18" width="18%"><font size="2" face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="36%" height="18"><font size="2" face="Times New Roman, Times, serif">Robert
      C. Zink (4)<br>
      <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>Sr.
      Vice President Worldwide Sales and <br>
      <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>Marketing</font></td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2007
        </font></div>
    </td>
    <td height="18" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">
        131,250</font></div>
    </td>
    <td height="18" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">
        29,813</font></div>
    </td>
    <td height="18" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">118,250
        </font></div>
    </td>
    <td height="18" width="18%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">279,313</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="36%" height="13"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td align="RIGHT" height="13" width="7%"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td align="RIGHT" height="13" width="13%"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td align="RIGHT" height="13" width="13%"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td align="RIGHT" height="13" width="13%" valign="top"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td align="RIGHT" height="13" width="18%"><font size="2" face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="36%" height="30">
      <p><font size="2" face="Times New Roman, Times, serif">David W. Dunlap<br>
        <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>Vice
        President of Finance and Administration, <br>
        <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>Chief
        Financial Officer and Secretary</font></p>
    </td>
    <td align="RIGHT" height="30" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2007
        <br>
        2006 </font></div>
    </td>
    <td align="RIGHT" height="30" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">
        170,000<br>
        160,000</font></div>
    </td>
    <td align="RIGHT" height="30" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">60,411<br>
        60,674</font></div>
    </td>
    <td align="RIGHT" height="30" width="13%" valign="top">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">40,962<br>
        34,906</font></div>
    </td>
    <td align="RIGHT" height="30" width="18%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">271,373<br>
        255,580</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="36%" height="17"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td align="RIGHT" height="17" width="7%"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td align="RIGHT" height="17" width="13%"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td align="RIGHT" height="17" width="13%"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td align="RIGHT" height="17" width="13%"><font size="2" face="Times New Roman, Times, serif"></font></td>
    <td align="RIGHT" height="17" width="18%"><font size="2" face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="36%" height="17">
      <p><font size="2" face="Times New Roman, Times, serif">Timothy I. Miller<br>
        <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>Vice
        President of Worldwide Operations</font></p>
    </td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2007
        <br>
        2006 </font></div>
    </td>
    <td align="RIGHT" height="17" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">155,000<br>
        140,000</font></div>
    </td>
    <td align="RIGHT" height="17" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">59,800<br>
        63,318</font></div>
    </td>
    <td align="RIGHT" height="17" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">28,273<br>
        23,710</font></div>
    </td>
    <td align="RIGHT" height="17" width="18%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">243,073<br>
        227,028</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>.<br>
      (2) Represents Long-term, Equity-Based Incentive Awards as described under
      Compensation Summary and Analysis - Elements of Executive Compensation.
      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 2007 for financial statement reporting
      purposes, as determined pursuant to Statement of Financial Accounting Standards
      No. 123(R).<br>
      </font><font size="2" face="Times New Roman, Times, serif">(3) Represents
      Variable Incentive Awards as described under <i>Compensation Summary and
      Analysis - Elements of Executive Compensation</i>.<br>
      (4) Mr. Zink's employment commenced on April 2, 2007. His non-equity incentive
      plan compensation includes $66,250 to defray moving, relocation and other
      costs associated with commencement of his employment.</font></td>
  </tr>
</table>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">29 </font></p>
<hr NOSHADE>
<p align="center">&nbsp;</p>
<p align="center"><font size="3" face="Times New Roman, Times, serif"><b>GRANTS
  OF PLAN-BASED AWARDS<br>
  For Fiscal Year Ended December 31, 2007 </b></font></p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font>The
  following table shows for the fiscal year ended December 31, 2007 certain information
  regarding options granted to the Named Executive Officers. Options were granted
  as described under <i>Compensation Summary and Analysis</i> - <i>Elements of
  Executive Compensation</i> - <i>Long-Term, Equity-Based Incentive Awards</i>
  and - <i>Equity Incentive Grant Policies</i>.<br>
</p>
<table width="87%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th align="LEFT" height="59">
      <div align="center"><font size="3" face="Times New Roman, Times, serif"><b>Name
        <br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="59"><font size="3">Grant<br>
      Date</font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="59"><font size="3">All Other Option Awards: Number
      of Securities Underlying Options (#) </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="59"><font size="3">Exercise or Base Price of<br>
      Option Awards ($/share)</font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="59"><font size="3">Grant Date Fair Value of <br>
      Stock and Option Awards<br>
      ($)(1) </font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17"><font size="3" face="Times New Roman, Times, serif">Kevin
      J. Mills </font></td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2/26/2007
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">55,000
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$1.00
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$31,350
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="19"><font size="3" face="Times New Roman, Times, serif">Micheal
      L. Gifford </font></td>
    <td align="RIGHT" height="19" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2/26/2007
        </font></div>
    </td>
    <td align="RIGHT" height="19" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">50,000
        </font></div>
    </td>
    <td align="RIGHT" height="19" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1.00
        </font></div>
    </td>
    <td align="RIGHT" height="19" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">28,500
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="18"><font size="3" face="Times New Roman, Times, serif">Robert
      C. Zink (2)</font></td>
    <td height="18" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">4/2/2007
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">300,000
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">0.93
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">159,000</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17">
      <p><font size="3" face="Times New Roman, Times, serif">David W. Dunlap </font></p>
    </td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2/26/2007
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">48,000
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1.00
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">27,360
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="20">
      <p><font size="3" face="Times New Roman, Times, serif">Timothy I. Miller
        </font></p>
    </td>
    <td align="RIGHT" height="20" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2/26/2007
        </font></div>
    </td>
    <td align="RIGHT" height="20" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">40,000
        </font></div>
    </td>
    <td height="18" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">1.00
        </font></div>
    </td>
    <td align="RIGHT" height="20" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">22,800
        </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 Statement of
      Financial Accounting Standards No. 123(R), which was $0.57 per share for
      grants awarded on February 26, 2007 and $0.53 for the grant awarded on April
      2, 2007. 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 Common Stock on the grant date. Regardless
      of whatever value is placed on a stock option on the grant date, the actual
      value of the option to the recipient 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. Zink's employment commenced on April 2, 2007.</font></td>
  </tr>
</table>
<p align="left">&nbsp;</p>
<p align="center"><b>OUTSTANDING EQUITY AWARDS<br>
  At Fiscal 2007 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, 2007:</p>
<table width="87%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th align="LEFT" height="59" width="30%"><font size="3"></font></th>
    <th align="CENTER" height="59" colspan="5"> <font size="3">Option Awards </font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr valign="BOTTOM">
    <th align="LEFT" height="100" width="30%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif"><b>Name
        <br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100" width="16%"><font size="3">Number of Securities
      Underlying Unexercised Options Exercisable (#)(1) </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100" width="1%">&nbsp;</th>
    <th align="CENTER" height="100" width="18%"><font size="3">Number of Securities
      Underlying Unexercised Options Unexercisable (#)(1)(2) </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100" width="14%"><font size="3">Option Exercise
      Price<br>
      ($)(3) </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100" width="21%"><font size="3">Option Expiration
      Date(4) </font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="17"><font size="3" face="Times New Roman, Times, serif">Kevin
      J. Mills </font></td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">25,000<br>
        67,667<br>
        300,000<br>
        90,000<br>
        67,000<br>
        50,000<br>
        45,000<br>
        48,958<br>
        68,750<br>
        12,604<br>
        10,313</font></div>
    </td>
    <td align="RIGHT" height="17" width="1%">&nbsp;</td>
    <td align="RIGHT" height="17" width="18%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">0<br>
        0<br>
        0<br>
        0<br>
        0<br>
        0<br>
        0<br>
        1,042<br>
        31,250<br>
        42,396<br>
        44,688</font></div>
    </td>
    <td align="RIGHT" height="17" width="14%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$0.69<br>
        0.56<br>
        3.375<br>
        1.06<br>
        1.29<br>
        0.76<br>
        0.73<br>
        3.20<br>
        1.50<br>
        1.17<br>
        1.00</font></div>
    </td>
    <td align="RIGHT" height="17" width="21%">
      <div align="center"><font size="3" 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<br>
        2/26/2017</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="17"><font size="3"></font></td>
    <td align="RIGHT" height="17" width="16%"><font size="3"></font></td>
    <td align="RIGHT" height="17" width="1%">&nbsp;</td>
    <td align="RIGHT" height="17" width="18%"><font size="3"></font></td>
    <td align="RIGHT" height="17" width="14%"><font size="3"></font></td>
    <td align="RIGHT" height="17" width="21%"><font size="3"></font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="17"><font size="3" face="Times New Roman, Times, serif">Micheal
      L. Gifford </font></td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3">8,333<br>
        39,967<br>
        100,000<br>
        75,000<br>
        50,000<br>
        34,000<br>
        35,000<br>
        46,510<br>
        61,875<br>
        11,458<br>
        9,375 </font></div>
    </td>
    <td align="RIGHT" height="17" width="1%">&nbsp;</td>
    <td align="RIGHT" height="17" width="18%">
      <div align="center"><font size="3">0<br>
        0<br>
        0<br>
        0<br>
        0<br>
        0<br>
        0<br>
        990<br>
        28,125<br>
        38,542<br>
        40,625</font></div>
    </td>
    <td align="RIGHT" height="17" width="14%">
      <div align="center"><font size="3">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<br>
        1.00</font></div>
    </td>
    <td align="RIGHT" height="17" width="21%">
      <div align="center"><font size="3">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<br>
        2/26/2017</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="17"><font size="3"></font></td>
    <td align="RIGHT" height="17" width="16%"><font size="3"></font></td>
    <td align="RIGHT" height="17" width="1%">&nbsp;</td>
    <td align="RIGHT" height="17" width="18%"><font size="3"></font></td>
    <td align="RIGHT" height="17" width="14%"><font size="3"></font></td>
    <td align="RIGHT" height="17" width="21%"><font size="3"></font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p><br>
</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">30<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"><font size="3"></font></th>
    <th align="CENTER" height="59" colspan="4"> <font size="3">Option Awards </font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr valign="BOTTOM">
    <th align="LEFT" height="100">
      <div align="center"><font size="3" face="Times New Roman, Times, serif"><b>Name
        <br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100"><font size="3">Number of Securities Underlying
      Unexercised Options Exercisable (#)(1) </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100"><font size="3">Number of Securities Underlying
      Unexercised Options Unexercisable (#)(1)(2) </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100"><font size="3">Option Exercise Price<br>
      ($)(3) </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100"><font size="3">Option Expiration Date(4) </font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="28"><font size="3" face="Times New Roman, Times, serif">Robert
      C. Zink (5)</font></td>
    <td align="RIGHT" height="28" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        - </font></div>
    </td>
    <td align="RIGHT" height="28" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">300,000</font></div>
    </td>
    <td align="RIGHT" height="28" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$0.93
        </font></div>
    </td>
    <td align="RIGHT" height="28" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">4/2/2017
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17"><font size="3"></font></td>
    <td align="RIGHT" height="17" width="7%"><font size="3"></font></td>
    <td align="RIGHT" height="17" width="16%"><font size="3"></font></td>
    <td align="RIGHT" height="17" width="16%"><font size="3"></font></td>
    <td align="RIGHT" height="17" width="16%"><font size="3"></font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17"><font size="3" face="Times New Roman, Times, serif">David
      W. Dunlap </font></td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="3" 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>
        35,000<br>
        44,063<br>
        58,438<br>
        11,000<br>
        9,000</font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">0<br>
        0<br>
        0<br>
        0<br>
        0<br>
        0<br>
        0<br>
        0<br>
        937<br>
        26,563<br>
        37,000<br>
        39,000</font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" 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<br>
        1.00</font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" 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<br>
        2/26/2017</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17"><font size="3"></font></td>
    <td align="RIGHT" height="17" width="7%"><font size="3"></font></td>
    <td align="RIGHT" height="17" width="16%"><font size="3"></font></td>
    <td align="RIGHT" height="17" width="16%"><font size="3"></font></td>
    <td align="RIGHT" height="17" width="16%"><font size="3"></font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="101"><font size="3" face="Times New Roman, Times, serif">Timothy
      I. Miller </font></td>
    <td align="RIGHT" height="101" width="7%">
      <div align="center"><font size="3">142,000<br>
        39,167<br>
        51,563<br>
        10,313<br>
        7,500 </font> </div>
    </td>
    <td align="RIGHT" height="101" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">0<br>
        833<br>
        23,438<br>
        34,688<br>
        32,500</font></div>
    </td>
    <td align="RIGHT" height="101" width="16%">
      <div align="center"><font size="3">0.73<br>
        3.20<br>
        1.50<br>
        1.17<br>
        1.00</font></div>
    </td>
    <td align="RIGHT" height="101" width="16%">
      <div align="center"><font size="3">3/21/2013<br>
        2/3/2014<br>
        1/28/2015<br>
        2/17/2016<br>
        2/26/2017</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 <i>Compensation
      Summary and Analysis</i> - <i>Elements of Executive Compensation</i> - <i>Long-term,
      Equity-Based Incentive Awards</i> and - <i>Equity Incentive Grant Policies</i>.
      The vesting period and vesting start date were established by the Compensation
      Committee. Shares unexercisable were not vested as December 31, 2007.<br>
      (2) Grant dates and vesting period information for all grants not fully
      vested as of December 31, 2007 are as follows:</font></td>
  </tr>
</table>
<table width="87%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <td width="25%" align="LEFT" height="19"><font size="2"></font></td>
    <td width="5%" align="CENTER" height="19">&nbsp;</td>
    <td width="17%" align="CENTER" height="19"><font size="2"></font></td>
    <td width="5%" align="CENTER" height="19">&nbsp;</td>
    <td width="25%" align="CENTER" height="19"><font size="2"></font></td>
    <td width="5%" align="CENTER" height="19">&nbsp;</td>
    <td width="33%" align="CENTER" height="19"><font size="2"></font></td>
  </tr>
  <tr valign="BOTTOM">
    <th width="25%" align="LEFT" height="26" valign="bottom">
      <div align="left"><font size="2">Grant Date</font><b><font size="3" face="Times New Roman, Times, serif"><br>
        </font> </b></div>
      <hr NOSHADE>
    </th>
    <th width="5%" align="LEFT" height="26" valign="bottom">&nbsp;</th>
    <th width="17%" align="LEFT" height="26" valign="bottom">
      <div align="left"><b><font size="3" face="Times New Roman, Times, serif"><font size="2">Expiration
        Date </font><br>
        </font> </b></div>
      <hr NOSHADE>
    </th>
    <th width="5%" align="LEFT" height="26" valign="bottom">&nbsp;</th>
    <th width="25%" align="LEFT" height="26" valign="bottom">
      <div align="left"><b><font size="3" face="Times New Roman, Times, serif"><font size="2">Vesting
        Start Date </font><br>
        </font> </b></div>
      <hr NOSHADE>
    </th>
    <th width="5%" align="LEFT" height="26" valign="bottom">&nbsp;</th>
    <th width="33%" align="LEFT" height="26" valign="bottom">
      <div align="left"><b><font size="3" face="Times New Roman, Times, serif"><font size="2">Months
        to fully vest</font><br>
        </font> </b></div>
      <hr NOSHADE>
    </th>
  </tr>
  <tr valign="top">
    <td width="25%" height="16" bgcolor="#FFFFFF"><font size="2">2/3/2004</font></td>
    <td align="RIGHT" height="16" width="5%">&nbsp;</td>
    <td align="RIGHT" height="16" width="17%" bgcolor="#FFFFFF">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">2/3/2014
        </font></div>
    </td>
    <td align="RIGHT" height="16" width="5%" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="RIGHT" height="16" width="25%" bgcolor="#FFFFFF">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">1/1/2004
        </font></div>
    </td>
    <td align="RIGHT" height="16" width="5%" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="RIGHT" height="16" width="33%" bgcolor="#FFFFFF">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">48
        </font></div>
    </td>
  </tr>
  <tr valign="top">
    <td width="25%" bgcolor="#FFFFFF"><font size="2" face="Times New Roman, Times, serif">1/28/2005
      </font></td>
    <td align="RIGHT" height="17" width="5%">&nbsp;</td>
    <td align="RIGHT" height="17" width="17%" bgcolor="#FFFFFF">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">1/28/2015
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="5%" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="RIGHT" height="17" width="25%" bgcolor="#FFFFFF">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">1/1/2006
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="5%" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="RIGHT" height="17" width="33%" bgcolor="#FFFFFF">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">48
        </font></div>
    </td>
  </tr>
  <tr valign="top">
    <td width="25%" height="11" bgcolor="#FFFFFF">
      <p><font size="2">2/17/2006</font></p>
    </td>
    <td align="RIGHT" height="11" width="5%">&nbsp;</td>
    <td align="RIGHT" height="11" width="17%" bgcolor="#FFFFFF">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">2/17/2016
        </font></div>
    </td>
    <td align="RIGHT" height="11" width="5%" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="RIGHT" height="11" width="25%" bgcolor="#FFFFFF">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">1/1/2007</font></div>
    </td>
    <td align="RIGHT" height="11" width="5%" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="RIGHT" height="11" width="33%" bgcolor="#FFFFFF">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">48
        </font></div>
    </td>
  </tr>
  <tr valign="top">
    <td width="25%" bgcolor="#FFFFFF"><font size="2" face="Times New Roman, Times, serif">2/26/2007
      </font></td>
    <td height="18" width="5%">&nbsp;</td>
    <td height="18" width="17%" bgcolor="#FFFFFF">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">2/26/2017
        </font></div>
    </td>
    <td height="18" width="5%" bgcolor="#FFFFFF">&nbsp;</td>
    <td height="18" width="25%" bgcolor="#FFFFFF">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">3/1/2007
        </font></div>
    </td>
    <td height="18" width="5%" bgcolor="#FFFFFF">&nbsp;</td>
    <td height="18" width="33%" bgcolor="#FFFFFF">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">48
        </font></div>
    </td>
  </tr>
  <tr valign="top">
    <td width="25%" bgcolor="#FFFFFF"><font size="2" face="Times New Roman, Times, serif">4/2/2007
      </font></td>
    <td height="18" width="5%">&nbsp;</td>
    <td height="18" width="17%" bgcolor="#FFFFFF">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">4/2/2017
        </font></div>
    </td>
    <td height="18" width="5%" bgcolor="#FFFFFF">&nbsp;</td>
    <td height="18" width="25%" bgcolor="#FFFFFF">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">4/2/2007
        </font></div>
    </td>
    <td height="18" width="5%" bgcolor="#FFFFFF">&nbsp;</td>
    <td height="18" width="33%" bgcolor="#FFFFFF">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">48
        </font></div>
    </td>
  </tr>
  <tr valign="top">
    <td colspan="10" height="52" bgcolor="#FFFFFF"> <font size="2"><br>
      (3) Exercise prices are set at the closing price of the Company's Common
      Stock on the date of grant, as reported on the NASDAQ Global Market. <br>
      (4) Options expire ten years from the date of grant, provided that the executive
      continues employment with the Company. <br>
      (5) Mr. Zink commenced employment on April 2, 2007.</font></td>
  </tr>
</table>
<br>
<br>
<p align="left">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">31<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, 2007</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, 2007 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"><font size="3"></font></th>
    <th colspan="2" align="CENTER" height="15"><font size="3">Option Awards</font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr valign="BOTTOM">
    <th width="33%" align="LEFT" height="15">
      <div align="center"><font size="3" face="Times New Roman, Times, serif"><b>Name
        <br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th width="12%" align="CENTER" height="15"><font size="3">Number of Shares<br>
      Acquired on Exercise <br>
      (#) </font>
      <hr NOSHADE>
    </th>
    <th width="12%" align="CENTER" height="15"><font size="3">Value Realized on
      <br>
      Exercise<br>
      ($)(1) </font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="14"><font size="3" 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" size="3">-
        </font></div>
    </td>
    <td height="14">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="0"><font size="3" 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" size="3">-
        </font></div>
    </td>
    <td height="0">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="2"><font size="3" face="Times New Roman, Times, serif">Robert
      C. Zink<br>
      </font></td>
    <td height="2">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">-
        </font></div>
    </td>
    <td height="2">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">-
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="12">
      <p><font size="3">David W. Dunlap</font></p>
    </td>
    <td height="12">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-
        </font></div>
    </td>
    <td height="12">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="14">
      <p><font size="3">Timothy I. Miller</font></p>
    </td>
    <td height="14">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-
        </font></div>
    </td>
    <td height="14">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td height="61" 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></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, 2007 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" width="46%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif"><b><br>
        </b></font> </div>
    </th>
    <th align="CENTER" width="17%"><font size="2">Number of securities to be issued
      upon exercise of outstanding options </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" width="16%"><font size="2">Weighted-average<br>
      exercise price of<br>
      outstanding options </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" width="21%"><font size="2">Number of securities<br>
      remaining available for<br>
      future issuance under<br>
      equity compensation plans</font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td width="46%"><font size="2" face="Times New Roman, Times, serif">Equity
      compensation plans approved by security holders (1) </font></td>
    <td align="RIGHT" width="17%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">8,922,490
        </font></div>
    </td>
    <td align="RIGHT" width="16%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">$1.49
        </font></div>
    </td>
    <td align="RIGHT" width="21%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">839,721
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td width="46%"><font size="2" face="Times New Roman, Times, serif">Equity
      compensation plans not approved by security holders (2)</font></td>
    <td align="RIGHT" width="17%">
      <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="21%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font><font size="2">
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td width="46%"><font size="2" face="Times New Roman, Times, serif">Total
      </font></td>
    <td align="RIGHT" width="17%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">9,995,241
        </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="21%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">839,721
        </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
      total outstanding shares of the Company's Common Stock on that date, or
      (c) a lesser amount as determined by the Board of Directors. As a result,
      a total of 1,279,584 shares became available for grant under the 2004 Equity
      Incentive Plan on January 1, 2008, 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="center"><font face="Times New Roman, Times, serif" size="3">32<br>
  </font></p>
<hr NOSHADE>
<p align="center"><b><br>
  <font size="3" face="Times New Roman, Times, serif">REPORT OF THE COMPENSATION
  COMMITTEE</font></b><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></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 6, 2008</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">Peter
      Sealey <br>
      Enzo Torresi</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>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">33<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, and Leonard L. Ott. Similar agreements were made with Messrs. Robert
  C. Zink and Thomas L. Noggle when they commenced employment during 2007. The
  agreements expire on December 31, 2008 and are expected to be renewed at that
  time. 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 any of the
  executive's vested stock options may also be extended up to a period not to
  exceed one year based on formulas in the employment agreements. Additionally,
  under the 1999 Stock Plan and the 2004 Equity Incentive Plan, the rights of
  all optionees, including executive officers, to exercise all their outstanding
  options become fully vested and immediately exercisable upon a change of control
  of the Company, unless the options are 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>
<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(2) </font></div>
      <hr NOSHADE align="center">
    </th>
    <th width="2%" align="CENTER">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </th>
    <th width="12%" align="CENTER">
      <div align="center"><font size="2" face="Times New Roman, Times, serif"><b>Involuntary
        Without Cause(2)</b></font> </div>
      <hr NOSHADE align="center">
    </th>
    <th width="2%">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></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<br>
        Change-in-Control(2) </b></font> </div>
      <hr NOSHADE align="center">
    </th>
    <th width="2%" align="CENTER">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </th>
    <th width="12%" align="CENTER">
      <div align="center"><font size="2">Due to Death or<br>
        Disability(2) </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"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="3"><font size="2"></font></font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td height="0" width="2%"><font size="2"></font></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 (3)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$95,000</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$95,000</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$95,000</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$95,000</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">Variable
      Incentive(4)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$37,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></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 size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <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">Stock
      Options (5)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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">HealthCare
      Benefits(6)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</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">Other
      Perquisites (7)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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">&nbsp</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td height="0" width="2%"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td height="0" width="2%"><font size="2"></font></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 align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td width="2%" height="0"><font size="2"></font></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 align="RIGHT" height="0" width="12%"><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">Micheal
      L. Gifford</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td height="0" width="2%"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td height="0" width="2%"><font size="2"></font></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 align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td width="2%" height="0"><font size="2"></font></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 align="RIGHT" height="0" width="12%"><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 (3)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$87,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$87,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$87,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$87,500</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">Variable
      Incentive(4)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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">Stock
      Options (5)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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">HealthCare
      Benefits(6)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</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">Other
      Perquisites (7)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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">&nbsp</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td height="0" width="2%"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td height="0" width="2%"><font size="2"></font></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 align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td width="2%" height="0"><font size="2"></font></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 align="RIGHT" height="0" width="12%"><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">Robert
      C. Zink</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td height="0" width="2%"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td height="0" width="2%"><font size="2"></font></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 align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td width="2%" height="0"><font size="2"></font></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 align="RIGHT" height="0" width="12%"><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 (3)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$87,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$87,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$87,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$87,500</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">Variable
      Incentive(4)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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">Stock
      Options (5)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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">HealthCare
      Benefits(6)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</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">Other
      Perquisites (7)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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">&nbsp</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td height="0" width="2%"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td height="0" width="2%"><font size="2"></font></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 align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td width="2%" height="0"><font size="2"></font></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 align="RIGHT" height="0" width="12%"><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">David
      W. Dunlap</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td height="0" width="2%"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td height="0" width="2%"><font size="2"></font></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 align="RIGHT" height="0" width="12%"><font size="2"></font></td>
    <td width="2%" height="0"><font size="2"></font></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 align="RIGHT" height="0" width="12%"><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 (3)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$85,000</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$85,000</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$85,000</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$85,000</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">Variable
      Incentive(4)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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">Stock
      Options (5)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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">HealthCare
      Benefits(6)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</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">Other
      Perquisites (7)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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">&nbsp</font></td>
    <td width="2%" height="18"><font size="2"></font></td>
    <td align="RIGHT" height="18" width="12%"><font size="2"></font></td>
    <td height="18" width="2%"><font size="2"></font></td>
    <td align="RIGHT" height="18" width="12%"><font size="2"></font></td>
    <td height="18" width="2%"><font size="2"></font></td>
    <td align="RIGHT" height="18" width="12%"><font size="2"></font></td>
    <td width="2%" align="RIGHT" height="18"><font size="2"></font></td>
    <td align="RIGHT" height="18" width="12%"><font size="2"></font></td>
    <td width="2%" height="18"><font size="2"></font></td>
    <td align="RIGHT" height="18" width="12%"><font size="2"></font></td>
    <td width="2%" align="RIGHT" height="18"><font size="2"></font></td>
    <td align="RIGHT" height="18" width="12%"><font size="2"></font></td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="176" height="18"><font size="2" face="Times New Roman, Times, serif">Timothy
      I. Miller</font></td>
    <td width="2%" height="18"><font size="2"></font></td>
    <td align="RIGHT" height="18" width="12%"><font size="2"></font></td>
    <td height="18" width="2%"><font size="2"></font></td>
    <td align="RIGHT" height="18" width="12%"><font size="2"></font></td>
    <td height="18" width="2%"><font size="2"></font></td>
    <td align="RIGHT" height="18" width="12%"><font size="2"></font></td>
    <td width="2%" align="RIGHT" height="18"><font size="2"></font></td>
    <td align="RIGHT" height="18" width="12%"><font size="2"></font></td>
    <td width="2%" height="18"><font size="2"></font></td>
    <td align="RIGHT" height="18" width="12%"><font size="2"></font></td>
    <td width="2%" align="RIGHT" height="18"><font size="2"></font></td>
    <td align="RIGHT" height="18" width="12%"><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 (3)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$77,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$77,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$77,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$77,500</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">Variable
      Incentive(4)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$13,125</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$13,125</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$13,125</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2">$13,125</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">Stock
      Options (5)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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">HealthCare
      Benefits(6)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</font></div>
    </td>
    <td width="2%" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</font></div>
    </td>
    <td width="2%" align="RIGHT" height="0">
      <div align="center"><font size="2"><font size="3"><font size="2"></font></font></font></div>
    </td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font size="2"> $2,500</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">Other
      Perquisites (7)</font></td>
    <td width="2%" height="0"><font size="2"></font></td>
    <td align="RIGHT" height="0" width="12%">
      <div align="center"><font face="Times New Roman, Times, serif" size="2">-</font></div>
    </td>
    <td height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 height="0" width="2%">
      <div align="center"><font size="3"><font size="2"></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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 size="3"><font size="2"></font></font></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 height="175">
      <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) All reasons for termination except voluntary resignation or termination
      by the Company for cause are covered under the terms of the Employment Contract
      as either resignation by the executive for good reason or involuntary termination
      by the Company without cause.<br>
      (3) Except in the case of voluntary resignation or termination for cause,
      base salary is continued for six months from the date of termination.f entitlement
      in the quarter of termination and 50% of entitlement in the following quarter.
      <br>
      (4) Except in the cases of voluntary resignation or termination for cause,
      scheduled variable incentive payments are paid which equal 100% of the bonus
      to which the executive would have been entitled for the quarter of termination
      and 50% of such bonus for the following quarter. <br>
      (5) Except in the cases of voluntary resignation or termination for cause,
      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 executive's employment
      contract. In the event of a change in control where stock options are not
      assumed by the acquiring entity, all options granted and outstanding become
      vested and fully 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>
      (6) Except in the cases of voluntary resignation or termination for cause,
      healthcare benefits are continued up to the earlier of six months or the
      executive securing other employment that includes such benefits.<br>
      (7) 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">34<br>
  </font></p>
<hr NOSHADE>
<p align="center"><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 Certificate of Incorporation that eliminate the personal liability of
  directors to the Company or its stockholders for monetary damages for breach
  of the directors' fiduciary duties in certain circumstances. In addition, 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 and advancement of expenses
  to the fullest extent permitted by Delaware law, including circumstances in
  which indemnification or the advancement of expenses is 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 and indemnification provisions
  in its Certificate of Incorporation and bylaws and the indemnification agreements
  with its directors and officers 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 these provisions or agreements would apply.</p>
<p align="center">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">35<br>
  </font></p>
<hr NOSHADE>
<p align="left"><br>
</p>
<p align="center"> <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 Securities Exchange
  Commission or the Public Company Accounting Oversight Board, the listing standards
  of the Nasdaq Stock Market and the 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>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. </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 regulations and Nasdaq
        rules.<br>
        <br>
      </li>
      <li>The Company's independent directors hold formal meetings without the
        presence of 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, as required by SEC regulations.<br>
        <br>
      </li>
      <li>Mr. Bass, a member of the Audit Committee, possesses the qualifications
        of an "audit committee financial expert," as required by SEC regulations.<br>
        <br>
      </li>
      <li>The Audit Committee's charter formalizes and makes explicit the following:<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 and with the Company's Chief
            Financial Officer, 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 (a "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">36<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>Each of the Compensation Committee and Nominating Committee has a written
        charter.<br>
        <br>
      </li>
      <li>The Company has an Insider Trading Policy, including control procedures
        to comply with current SEC regulations and Nasdaq rules.<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.</li>
    </ul>
  </ul>
</ul>
<p><font size="3" face="Times New Roman, Times, serif"></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's Common Stock. Stockholders
  must have held such shares 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<br>
      c/o Corporate Secretary<br>
      Socket Communications, Inc. dba Socket Mobile, 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">37<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 Securities and Exchange Commission 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
  "<i>Deadline for Receipt of Stockholder Proposals to be Included in the Company's
  Proxy Materials</i>."<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 its various committees.<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 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 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, 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">38<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 <i>board@socketmobile.com</i>. The Company's Secretary monitors
  these communications and ensures 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
  also determines 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 2008, 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 the Nasdaq Stock Market.<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, executive 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.<br>
  <br>
</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 at least 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, 2007, including
  discussing the quality of the accounting principles, the reasonableness of significant
  judgments and the clarity of disclosures in the financial statements. The Audit
  Committee has a written charter, 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 2007 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.</font></p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">39<br>
  </font></p>
<hr NOSHADE>
<p><font size="3" face="Times New Roman, Times, serif"><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 audit 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 regard to their audit of the Company's annual financial
  statements for the year ended December 31, 2007. In addition, a conference call
  among members of the Audit Committee, the auditors and management was held each
  quarter during fiscal 2007 to review the Company's quarterly financial reports
  prior to their issuance.<br>
  <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 concurred, that the
  Company's audited financial statements be included in the Company's Annual Report
  on Form 10-K for the year ended December 31, 2007. The Audit Committee also
  approved the appointment of Moss Adams LLP as the Company's independent auditors
  for the year ending December 31, 2008.</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 6, 2008</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 was 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,
  however, <i>Executive Compensation</i> - <i>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
  and in which any director, executive officer or beneficial holder of more than
  five percent of the Company's outstanding capital stock has or would have a
  direct or indirect material interest require the prior approval of the Audit
  Committee or, in the case of an interest of a director, the full Board of Directors.
  There were no such related party transactions during fiscal year 2007.<br>
  <br>
</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 2008 Annual Meeting
  of Stockholders. If any other matters properly come before the 2008 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>
<table width="100%" border=0 cellspacing=0 cellpadding=0>
  <tr valign="TOP">
    <td width="48%"><font size="3" face="Times New Roman, Times, serif"><br>
      Dated: March 6, 2008</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>
      THE BOARD OF DIRECTORS </font></td>
  </tr>
</table>
<p align="left">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">40<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>2008
  ANNUAL MEETING OF STOCKHOLDERS </b></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
  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 6, 2008, 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 2008 Annual Meeting of Stockholders of SOCKET
  COMMUNICATIONS, INC. to be held on Wednesday, April 23, 2008 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="3">1.</font></td>
    <td width="1%"><font size="3">&nbsp;</font></td>
    <td colspan=5><font size="3" face="Times New Roman, Times, serif">ELECTION
      OF EIGHT DIRECTORS.</font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%"><font size="3"><br>
      &nbsp;</font></td>
    <td width="1%"><font size="3"><br>
      &nbsp;</font></td>
    <td colspan=5><font size="3" 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="3"><br>
      &nbsp;</font></td>
    <td width="1%"><font size="3"><br>
      &nbsp;</font></td>
    <td colspan=5><font size="3" face="Times New Roman, Times, serif"><br>
      Nominees: Charlie Bass; Kevin J. Mills; Micheal L. Gifford; Leon Malmed;
      Thomas O. Miller; Gianluca Rattazzi; Peter Sealey; Enzo Torresi</font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%"><font size="3"><br>
      &nbsp;</font></td>
    <td width="1%"><font size="3"><br>
      &nbsp;</font></td>
    <td colspan=5 valign="bottom"><font face="Times New Roman, Times, serif" size="3"><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="3"><br>
      &nbsp;</font></td>
    <td width="1%"><font size="3"><br>
      &nbsp;</font></td>
    <td colspan=5><font size="3" face="Times New Roman, Times, serif"><br>
      Charlie Bass; Kevin J. Mills; Micheal L. Gifford; Leon Malmed; Thomas O.
      Miller; Gianluca Rattazzi; Peter Sealey; Enzo Torresi</font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%" height="42"><font size="3"><br>
      2.</font></td>
    <td width="1%" height="42"><font size="3"><br>
      &nbsp;</font></td>
    <td colspan=5 height="42"><font size="3" 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, 2008.
      </font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%"><font size="3"><br>
      &nbsp;</font></td>
    <td width="1%"><font size="3"><br>
      &nbsp;</font></td>
    <td width="27%"><font size="3" 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="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="32%"><font size="3" 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="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="36%"><font size="3" face="Times New Roman, Times, serif"><br>
      /&nbsp;/&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>ABSTAIN</b></font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%" height="42"><font size="3"><br>
      3.</font></td>
    <td width="1%" height="42"><font size="3"><br>
      &nbsp;</font></td>
    <td colspan=5 height="42"><font size="3" face="Times New Roman, Times, serif"><br>
      PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO EFFECT A
      CORPORATE NAME CHANGE.</font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%"><font size="3"><br>
      &nbsp;</font></td>
    <td width="1%"><font size="3"><br>
      &nbsp;</font></td>
    <td width="27%"><font size="3" 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="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="32%"><font size="3" 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="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="36%"><font size="3" face="Times New Roman, Times, serif"><br>
      /&nbsp;/&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>ABSTAIN</b></font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%" height="42"><font size="3"><br>
      4.</font></td>
    <td width="1%" height="42"><font size="3"><br>
      &nbsp;</font></td>
    <td colspan=5 height="42"><font size="3" face="Times New Roman, Times, serif"><br>
      PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION, SHOULD THE
      BOARD OF DIRECTORS IN ITS DISCRETION DETERMINE TO DO SO, TO EFFECT A REVERSE
      STOCK SPLIT OF THE COMPANY'S COMMON STOCK AT A RATIO WITHIN THE RANGE FROM
      ONE-FOR-FIVE TO ONE-FOR-TEN, TOGETHER WITH A CORRESPONDING REDUCTION IN
      THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK AND CAPITAL
      STOCK, AT ANY TIME PRIOR TO DECEMBER 31, 2008.</font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%"><font size="3"><br>
      &nbsp;</font></td>
    <td width="1%"><font size="3"><br>
      &nbsp;</font></td>
    <td width="27%"><font size="3" 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="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="32%"><font size="3" 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="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="36%"><font size="3" 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">&nbsp;</td>
  </tr>
  <tr valign="TOP">
    <td colspan="7">In their discretion, the Proxies are entitled to vote upon
      such other matters as may properly come before the meeting or any adjournments
      thereof.</td>
  </tr>
  <tr valign="TOP">
    <td colspan="7" height="132"><br>
      <b> 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, FOR THE AMENDMENT OF
      THE CERTIFICATE OF INCORPORATION TO EFFECT THE CORPORATE NAME CHANGE, FOR
      THE AMENDMENT OF THE CERTIFICATE OF INCORPORATION, SHOULD THE BOARD OF DIRECTORS
      IN ITS DISCRETION DETERMINE TO DO SO, TO EFFECT A REVERSE STOCK SPLIT OF
      THE COMPANY'S COMMON STOCK AT A RATIO WITHIN THE RANGE FROM ONE-FOR-FIVE
      TO ONE-FOR-TEN, TOGETHER WITH A CORRESPONDING REDUCTION IN THE NUMBER OF
      AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK AND CAPITAL STOCK, AT ANY
      TIME PRIOR TO DECEMBER 31, 2008, AND AS THE PROXIES DEEM ADVISABLE ON SUCH
      OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.</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="3" 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="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="30%"><font size="3" 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="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="30%"><font size="3" 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>,
      2008</font></td>
  </tr>
  <tr valign="TOP">
    <td colspan="7" height="51"><font size=2><br>
      </font>(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.)</td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center">&nbsp;</p>
<hr NOSHADE>
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