<SEC-DOCUMENT>0000944075-11-000016.txt : 20110316
<SEC-HEADER>0000944075-11-000016.hdr.sgml : 20110316
<ACCEPTANCE-DATETIME>20110316160250
ACCESSION NUMBER:		0000944075-11-000016
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20110427
FILED AS OF DATE:		20110316
DATE AS OF CHANGE:		20110316
EFFECTIVENESS DATE:		20110316

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SOCKET MOBILE, 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:	000-25904
		FILM NUMBER:		11691892

	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

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	SOCKET COMMUNICATIONS INC
		DATE OF NAME CHANGE:	19950418
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>proxy-2011.htm
<DESCRIPTION>DEF 14A
<TEXT>
<HTML>
<HEAD>

</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<HR NOSHADE>
<P ALIGN="CENTER"><font face="Times New Roman, Times, serif"><br>
  <b>SOCKET MOBILE, INC.</b></font></P>
<P ALIGN="CENTER"><font face="Times New Roman, Times, serif" size="3"><b> NOTICE
  OF 2011 ANNUAL MEETING OF STOCKHOLDERS<br>
  To Be Held April 27, 2011 </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"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font><font face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif" size="3">You
  are cordially invited to attend the Annual Meeting of Stockholders of Socket
  Mobile, Inc., a Delaware corporation (the &quot;Company&quot;), to be held Wednesday,
  April 27, 2011 at 9:00 a.m., local time, at the Company's headquarters at 39700
  Eureka Drive, Newark, California 94560 for the following purposes:<br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif" size="3"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font><font face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif" size="3">(1)
  To elect seven directors to serve until their respective successors are elected;<br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif" size="3"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font><font face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif" size="3">(2)
  To ratify the appointment of Moss Adams LLP as independent public accountants
  of the Company for the fiscal year ending December 31, 2011.<br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif" size="3"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font><font face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif" size="3">(3)
  To transact such other business as may properly come before the meeting or any
  adjournment thereof.<br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif" size="3"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font><font face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif" size="3">The
  foregoing items of business are more fully described in the Proxy Statement
  accompanying this notice.<br>
  </font></P>
<P ALIGN="left"><font face="Times New Roman, Times, serif" size="3"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font><font face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif" size="3">Only
  stockholders of record at the close of business on February 28, 2011 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 following the instructions on your proxy ballot. 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" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="50%"><font size="3" face="Times New Roman, Times, serif">Sincerely,</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td width="48%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><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" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="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" face="Times New Roman, Times, serif"><br>
      <font size="3">Newark, California<br>
      March 11, 2011</font></font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><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"><b>YOUR VOTE IS IMPORTANT.<br>
  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></font></P>
<blockquote>&nbsp;</blockquote>
<P align="center">&nbsp;</P>
<hr NOSHADE>
<P align="center">&nbsp;</P>
<P align="center"><font face="Times New Roman, Times, serif"><b>SOCKET MOBILE,
  INC.</b></font></P>
<P align="center"> <font face="Times New Roman, Times, serif"><b>PROXY STATEMENT
  FOR<br>
  2011 ANNUAL MEETING OF STOCKHOLDERS</b><br>
  <b><br>
  INFORMATION CONCERNING SOLICITATION AND VOTING</b><br>
  </font></P>
<P align="left"><font face="Times New Roman, Times, serif"><b>GENERAL</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><font face="Times New Roman, Times, serif">The
  enclosed proxy is solicited on behalf of the Board of Directors of Socket Mobile,
  Inc. (the &quot;Company&quot;), for use at the 2011 Annual Meeting of Stockholders
  to be held Thursday April 27, 2011at 9:00 a.m., local time, or at any adjournment
  thereof, for the purposes set forth herein and in the accompanying Notice of
  2011 Annual Meeting of Stockholders. The 2011 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>
  </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><font face="Times New Roman, Times, serif">Notice
  of the availability of these proxy solicitation materials and our Annual Report
  on Form 10-K for the year ended December 31, 2010, including financial statements,
  were first mailed on or about March 21, 2011 to all stockholders entitled to
  vote at the 2011 Annual Meeting.<br>
  </font></P>
<P align="left"><b><font face="Times New Roman, Times, serif">IMPORTANT NOTICE
  REGARDING THE AVAILABILITY OF PROXY MATERIALS</font></b><font face="Times New Roman, Times, serif"><br>
  </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><font face="Times New Roman, Times, serif">The
  proxy materials are available at <u>http://www.socketmobile.com/2011-proxy-materials.html</u>.
  Stockholders may access the Notice of Annual Meeting and Proxy Statement, Annual
  Report on Form 10-K and Proxy Card at this site to read, download the documents,
  and/or request a printed copy. Printed copies may also be requested by telephone
  at 800-856-9390. Printed copies will be mailed within 3 business days of receipt
  of the request. <br>
  </font></P>
<P align="left"><b><font face="Times New Roman, Times, serif">RECORD DATE AND
  PRINCIPAL SHARE OWNERSHIP </font></b><font face="Times New Roman, Times, serif"><br>
  </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><font face="Times New Roman, Times, serif">Holders
  of record of our Common Stock at the close of business on February 28, 2011
  (the &quot;Record Date&quot;) are entitled to notice of and to vote at the 2011
  Annual Meeting. At the Record Date, 4,084,476 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>
  </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><font face="Times New Roman, Times, serif">The
  only persons known by the Company to beneficially own more than five percent
  of the Company's Common Stock as of the Record Date were Charlie Bass, the Chairman
  of the Company's Board of Directors, Kevin J. Mills, the President, Chief Executive
  Officer and a director of the Company, Hudson Bay Master Fund Ltd. which is
  managed by Hudson Bay Capital Management LP, Roy L. Rogers as trustee for the
  Rogers Family Trust UTD 01-21-81 and the Roy and Ruth Rogers Unitrust, UTD 09-28-89,
  Leviticus Partners, L.P. whose general partner is AMH Equity LLC and AboCom
  Systems Inc. Please see &quot;Security Ownership of Certain Beneficial Owners
  and Management&quot; for more information on these holdings. <br>
  </font></P>
<P align="left"><font face="Times New Roman, Times, serif"><b>REVOCABILITY OF
  PROXIES</b><br>
  </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><font face="Times New Roman, Times, serif">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 2011 Annual Meeting and voting in person. </font></P>
<p align="center"><font face="Times New Roman, Times, serif" size="3">1<br>
  </font></p>
<hr NOSHADE>
<P align="left"><b>V</b><font face="Times New Roman, Times, serif"><b>OTING AND
  SOLICITATION</b><br>
  </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><font face="Times New Roman, Times, serif">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 2011 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 seven candidates. However, no stockholder shall
  be entitled to cumulate votes for a candidate unless the candidate's name has
  been placed in nomination prior to the voting and the stockholder, or any other
  stockholder, has given notice at the meeting, prior to the voting, of the intention
  to cumulate votes. On all other matters, stockholders may not cumulate votes.<br>
  </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><font face="Times New Roman, Times, serif">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.<br>
  </font></P>
<P align="left"><b><font face="Times New Roman, Times, serif">QUORUM; VOTE REQUIRED;
  ABSTENTIONS; BROKER NON-VOTES</font></b><font face="Times New Roman, Times, serif"><br>
  </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><font face="Times New Roman, Times, serif">The
  presence at the 2011 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 &quot;FOR,&quot; &quot;AGAINST,&quot; &quot;WITHHOLD or &quot;ABSTAIN&quot;
  on a subject matter (the &quot;Votes Cast&quot;) are treated as being present
  at the meeting for purpose of establishing a quorum entitled to vote on the
  matter.<br>
  </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><font face="Times New Roman, Times, serif"><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 seven nominees
  receiving the highest number of votes will be elected to the Board of Directors.
  Votes withheld from any nominee are counted for purposes of determining the
  presence or absence of a quorum.<br>
  </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><font face="Times New Roman, Times, serif"><i>Proposal
  Two</i>. Ratification of the appointment of Moss Adams LLP as the Company's
  independent public accountants for the fiscal year ending December 31, 2011
  requires the affirmative vote of a majority of the Votes Cast on the matter
  at the 2011 Annual Meeting.<br>
  </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><font face="Times New Roman, Times, serif">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>
  </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><font face="Times New Roman, Times, serif">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.<br>
  </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><font face="Times New Roman, Times, serif">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 the election.</font></P>
<p align="center"><font face="Times New Roman, Times, serif" size="3">2<br>
  </font></p>
<hr NOSHADE>
<P align="left"><font face="Times New Roman, Times, serif"><b>DEADLINE FOR RECEIPT
  OF STOCKHOLDER PROPOSALS TO BE INCLUDED IN THE COMPANY'S PROXY MATERIALS</b><br>
  </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><font face="Times New Roman, Times, serif">The
  Company currently intends to hold its 2012 Annual Meeting of Stockholders in
  April 2012 and to mail proxy statements relating to such meeting in March 2012.
  Proposals of stockholders of the Company that are intended to be presented by
  such stockholders at the 2012 Annual Meeting must be received by the Company
  no later than November 21, 2012, 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 of any stockholder nomination to the board or proposal
  of business 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 is mailed or such public disclosure is 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) representations that the stockholder
  is a holder of record of stock of the Company entitled to vote at such meeting
  and, as applicable, that such stockholder intends to appear in person or by
  proxy at the meeting to nominate the person or persons specified in the notice
  or propose such business; (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.<br>
  </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><font face="Times New Roman, Times, serif">If
  a stockholder intends to submit a proposal at the 2012 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 31, 2012, or else the proxy
  holders will be allowed to use their discretionary authority to vote against
  the proposal when it is raised at the 2012 Annual Meeting.<br>
  </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><font face="Times New Roman, Times, serif">The
  attached proxy card grants the persons named as proxies discretionary authority
  to vote on any matter raised at the 2011 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 2011 Annual Meeting.</font></P>
<p align="center"><font face="Times New Roman, Times, serif" size="3">3<br>
  </font></p>
<hr NOSHADE>
<P align="center"><font face="Times New Roman, Times, serif"><br>
  <br>
  <b>PROPOSAL ONE <br>
  </b></font></P>
<P align="center"><b><font face="Times New Roman, Times, serif">ELECTION OF DIRECTORS</font></b><font face="Times New Roman, Times, serif"><br>
  </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><font face="Times New Roman, Times, serif">The
  proxy holders will vote to elect as directors the seven nominees named below,
  unless a proxy card is marked otherwise. The nominees consist of seven current
  directors. If a person other than a management nominee is nominated at the 2011
  Annual Meeting, the holders of the proxies may choose to cumulate their votes
  and allocate them among such nominees of management as the proxy holders shall
  determine in their discretion in order to elect as many nominees of management
  as possible. The seven candidates receiving the highest number of votes will
  be elected. In the event any nominee is unavailable for election, which is not
  currently anticipated, the proxy holders may vote in accordance with their judgment
  for the election of substitute nominees designated by the Board of Directors.
  <br>
  </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><font face="Times New Roman, Times, serif">All
  seven directors will be elected for one-year terms expiring at the 2012 Annual
  Meeting of Stockholders, subject to the election and qualification of their
  successors or their earlier death, resignation or removal. <br>
  </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><font face="Times New Roman, Times, serif">The
  following table sets forth information concerning the nominees for director.</font><font face="Times New Roman, Times, serif" size="3"><br>
  </font></P>
<div align="left"></div>
<TABLE WIDTH="99%" BORDER=0 CELLSPACING=0 CELLPADDING=0 align="center" height="175">
  <TR VALIGN="BOTTOM">
    <TH WIDTH="26%" ALIGN="LEFT" height="28">
      <div align="center"><font size="3" face="Times New Roman, Times, serif"><B>Name
        of Nominee<BR>
        </B></font> </div>
      <HR NOSHADE>
    </TH>
    <TH WIDTH="2%" height="28"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TH>
    <TH WIDTH="5%" ALIGN="CENTER" height="28"><font size="3" face="Times New Roman, Times, serif"><B>Age</B></font>
      <HR NOSHADE>
    </TH>
    <TH WIDTH="2%" height="28"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TH>
    <TH WIDTH="50%" ALIGN="CENTER" height="28"><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="28"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></TH>
    <TH WIDTH="13%" ALIGN="CENTER" height="28"><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">69</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">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">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">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">Charles
      C. Emery, Jr.(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">64</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">Director</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">2010</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">53</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">73</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(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">59</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">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">Peter
      Sealey (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">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">2002</font></div>
    </td>
  </tr>
</TABLE>
<div align="center"><font face="Times New Roman, Times, serif" size="3"><br>
  </font></div>
<table width="100%" border="0" cellspacing="0" cellpadding="0" align="center">
  <tr>
    <td>
      <hr NOSHADE align="LEFT" width="120">
      <font face="Times New Roman, Times, serif" size="2">(1) Member of the Audit
      Committee. <br>
      (2) Member of the Nominating Committee.<br>
      (3) Member of the Compensation Committee.</font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif" size="3"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>There
  are no family relationships among any of the directors or executive officers
  of the Company. </font></p>
<p> <i><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>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>
</p>
<p><i><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>Kevin
  J. Mills</i> was appointed the Company's President and Chief Executive Officer
  and a director of the Company in March 2000. He served as the Company's Chief
  Operating Officer from September 1998 to March 2000. Mr. Mills joined the Company
  in September 1993 as Vice President of Operations and has also served as our
  Vice President of Engineering. Prior to joining the Company, Mr. Mills worked
  from September 1987 to August 1993 at Logitech, Inc., a computer peripherals
  company, serving most recently as its Director of Operations. He holds a B.E.
  in Electronic Engineering with honors from the University of Limerick, Ireland.<br>
</p>
<p><i><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>Charles
  C. Emery, Jr</i>. has been a director of the Company since April 2010. Dr. Emery
  served until his retirement as Senior Vice President and Chief Information Officer
  for Horizon Blue Cross Blue Shield of New Jersey from 1996 through 2006. Since
  his retirement, Dr. Emery has been active with Arizona State University and
  the University of Maryland teaching graduate classes in healthcare information
  systems, strategic planning, and healthcare finance. He has over 35 years experience
  working within the health insurance and healthcare provider sectors. He is a
  fellow of the American College of Healthcare Executives and a fellow of the
  College of Healthcare Information Management Executives. Dr. Emery holds a doctorate
  in management systems from the Peter F. Drucker Graduate Management School at
  the Claremont Graduate University.<br>
</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">4<br>
  </font></p>
<hr NOSHADE>
<p><i><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>Micheal
  L. Gifford</i> is a co-founder of the Company and has been a director since
  its inception in March 1992, has served as the Company's Executive Vice President
  since October 1994 and is currently the Vice President of Marketing and Business
  Development. 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>
</p>
<p><i><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>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.<br>
</p>
<p><i><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>Thomas
  O. Miller</i> was appointed a director of the Company by the Board of Directors
  in February 2008. He is a Partner in The SAGE Group of Bellevue, Washington,
  a management consulting company that works with executives at small to midsize
  companies on business transformation and revitalization strategies for value-creating
  events. Mr. Miller and The SAGE Group also advise private equity firms who invest
  in wireless and mobility companies. Prior to The SAGE Group, 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. Mr. Miller
  previously served on the board of directors and the audit and compensation committees
  of InfoLogix, Inc., an enterprise mobility automation company serving the healthcare
  industry, from October 2006 until January 18, 2011 when it was purchased by
  Stanley Works. Mr. Miller holds a Bachelor of Business and a Master of Business
  Administration degree from Western Illinois University.<br>
</p>
<p><i><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>Peter
  Sealey</i> has been a director of the Company since June 2002. Dr. Sealey has
  served as Chief Executive Officer and founder of The Sausalito Group, Inc.,
  a management consulting firm, since its founding in July 1997. Dr. Sealey also
  serves as an Adjunct Professor of Marketing at the Peter F. Drucker Graduate
  Management School at the Claremont Graduate University in Claremont, California.
  He served as a member of the board of directors of Echometrix Inc., a leading
  developer of analytic applications for user-generated digital web content, from
  December 2008 through April 21, 2010 and was their non-executive chairman of
  the board from February 2009 through April 21, 2010. 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.</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">5<br>
  </font></p>
<hr NOSHADE>
<p><b>BOARD MEETINGS AND COMMITTEES<br>
  </b> </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
  Board of Directors has determined that all of the nominees, except Messrs. Mills
  and Gifford, satisfy the definition of &quot;independent director,&quot; 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 &quot;independent
  director,&quot; as established by Nasdaq listing standards. <br>
</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
  Board of Directors held a total of four regular meetings during fiscal 2010
  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 2010. 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. All directors attended the 2010 Annual Meeting
  of Stockholders. <br>
</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
  Audit Committee consists of Messrs. Bass (Chairman), Emery, and Malmed. As required
  by Nasdaq rules, the members of the Audit Committee each qualify as &quot;independent&quot;
  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 &quot;audit committee financial expert&quot; 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 liabilities that are greater than are generally
  imposed on him as a 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 liabilities of any other member of the Audit Committee
  or Board of Directors. <br>
</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
  Audit Committee met with management and the independent accountants six times
  by telephone during the year ended December 31, 2010 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, 2010, the Audit Committee met in
  January 2011 and again in February and March 2011 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 with the independent accountants
  the matters denoted as required communications by Statement of Auditing Standards
  61 (SAS 61). The meetings also included a discussion and review of auditor independence,
  the pre-approval of the independent accountants' fees for 2011, and a recommendation
  to the Board of Directors to approve the issuance of the financial statements
  for the year ended December 31, 2010. The report of the Audit Committee for
  the year ended December 31, 2010 is included in this Proxy Statement. The Audit
  Committee Charter is available on the Company's website at http://www.mkr-group.com/SCKT/board_committee.html.<br>
</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 consists of Messrs. Malmed (Chairman) and Bass. The Nominating
  Committee considers and recommends nominations for the Board of Directors and
  facilitates the self-assessment of Board performance by the independent directors.
  The Nominating Committee met twice in 2010, and twice in 2011, one time in January
  2011 and one time in February 2011 to consider nominees for director. The Nominating
  Committee determined that each of the seven current directors being nominated
  was willing and able to serve as a director for the ensuing year and recommended
  their nomination. In addition, the independent directors met four times during
  2010 and once in January 2011 following their regular board meetings to consider
  matters relating to board governance, oversight and effectiveness. For 2012,
  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 21, 2012 in order to be considered for inclusion
  in next year's proxy statement. The Nominating Committee Charter is available
  on the Corporate Governance section of the Company's website at http://www.mkr-group.com/SCKT/board_committee.html.
</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">6<br>
  </font></p>
<hr NOSHADE>
<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
  Compensation Committee, which consists of Messrs. Sealey (Chairman) and Miller,
  held six meetings during fiscal year 2010. 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 including its equity incentive plan. The report of the Compensation
  Committee for fiscal year 2010 is included in this Proxy Statement. The Compensation
  Committee Charter is available on the Corporate Governance section of the Company's
  website at <u>http://www.mkr-group.com/SCKT/board_committee.html</u>. <br>
</p>
<p><b>COMPENSATION OF DIRECTORS</b><br>
</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>Regular
  meetings of the Board of Directors are scheduled once per quarter. Directors
  who are not employees of the Company receive $4,000 per regular meeting of the
  Board of Directors that they attend. During 2010, regular meeting fees were
  waived by the Board to assist the Company in reducing expenses. 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,
  generally at the time of each election of the Board of Directors. Options are
  awarded for Board service, committee service and committee and Board leadership
  positions. On April 29, 2010, options that vest monthly over a one year period
  were awarded to the outside directors as shown in the chart below for the service
  period that commenced on April 29, 2010, at an exercise price of $3.16 per share,
  the fair market value of the Common Stock on the date of grant. In addition,
  all directors were entitled to participate in a stockholder approved stock option
  exchange on July 1, 2010 to exchange options granted prior to 2009 for new 10-year
  grants with vesting periods of two years at an exercise price of $3.04 per share.
  Options exchanged were as shown in the chart below.<font face="Times New Roman, Times, serif"><br>
  <br>
  </font></p>
<table width="47%" border="0" align="center" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <th width="46%" 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="7%" align="LEFT" height="32">&nbsp;</th>
    <th width="47%" align="LEFT" height="32">
      <div align="center"><font size="3" face="Times New Roman, Times, serif"><b>New
        Options Granted<br>
        in 2010<br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th width="47%" align="LEFT" height="32">
      <div align="center"><font size="3" face="Times New Roman, Times, serif"><b>Options
        Exchanged<br>
        in 2010<br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
  </tr>
  <tr>
    <td align="left" width="46%">
      <div align="left"><font size="3" face="Times New Roman, Times, serif">Charlie
        Bass</font></div>
    </td>
    <td width="7%">&nbsp;</td>
    <td width="47%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">10,000</font></div>
    </td>
    <td width="47%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">40,250</font></div>
    </td>
  </tr>
  <tr>
    <td align="left" width="46%">
      <div align="left"><font size="3" face="Times New Roman, Times, serif">Charles
        C. Emery, Jr</font></div>
    </td>
    <td width="7%">&nbsp;</td>
    <td width="47%">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp7</i></i></font><font size="3" face="Times New Roman, Times, serif">,000</font></div>
    </td>
    <td width="47%">
      <div align="center">-</div>
    </td>
  </tr>
  <tr>
    <td align="left" width="46%">
      <div align="left"><font size="3" face="Times New Roman, Times, serif">Leon
        Malmed</font></div>
    </td>
    <td width="7%">&nbsp;</td>
    <td width="47%">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif">8,000</font></div>
    </td>
    <td width="47%">
      <div align="center"><font face="Times New Roman, Times, serif"><i>&nbsp</i>&nbsp34</font><font size="3" face="Times New Roman, Times, serif">,250</font></div>
    </td>
  </tr>
  <tr>
    <td align="left" width="46%">
      <div align="left"><font size="3" face="Times New Roman, Times, serif">Thomas
        O. Miller</font></div>
    </td>
    <td width="7%">&nbsp;</td>
    <td width="47%">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif">5,000</font></div>
    </td>
    <td width="47%">
      <div align="center"><font face="Times New Roman, Times, serif"><i>&nbsp</i>&nbsp9</font><font size="3" face="Times New Roman, Times, serif">,000</font></div>
    </td>
  </tr>
  <tr>
    <td align="left" width="46%">
      <div align="left"><font size="3" face="Times New Roman, Times, serif">Peter
        Sealey</font></div>
    </td>
    <td width="7%">&nbsp;</td>
    <td width="47%">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif">6,000</font></div>
    </td>
    <td width="47%">
      <div align="center"><font face="Times New Roman, Times, serif"><i>&nbsp</i>&nbsp2</font><font size="3" face="Times New Roman, Times, serif">5,000</font></div>
    </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  </font><font face="Times New Roman, Times, serif"><b>VOTE REQUIRED AND RECOMMENDATION
  OF THE BOARD</b><br>
  <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>If a quorum
  is present at the Annual Meeting, the seven nominees receiving the highest number
  of votes will be elected to the Board of Directors. Votes withheld from any
  nominee are counted for purposes of determining the presence or absence of a
  quorum.<b><br>
  <br>
  THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE &quot;FOR&quot;
  ALL OF THE COMPANY'S NOMINEES FOR DIRECTORS.</b></font></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 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><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 face="Times New Roman, Times, serif">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, 2011, and recommends that stockholders vote for ratification of
  such appointment.<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><font face="Times New Roman, Times, serif">Moss
  Adams LLP has audited the Company's financial statements for each of the seven
  fiscal years ended December 31, 2010. Representatives of Moss Adams LLP are
  expected to be present at the 2011 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>
  </font></p>
<p><font face="Times New Roman, Times, serif"><b>FEES BILLED BY MOSS ADAMS LLP
  DURING FISCAL YEARS 2010 AND 2009</b><br>
  </font></p>
<p><i><font face="Times New Roman, Times, serif">Audit Fees:</font></i><font face="Times New Roman, Times, serif"><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><font face="Times New Roman, Times, serif">Audit
  fees billed to the Company by Moss Adams LLP for their audit of the Company's
  2010 and 2009 fiscal year financial statements and review of the Company's quarterly
  financial statements for fiscal 2010 and 2009 totaled $228,000 in both years.
  The Company was not deemed an accelerated filer for fiscal years 2010 and 2009,
  and an audit of the Company's internal controls at December 31, 2010 and 2009
  was not required.<br>
  </font></p>
<p><i><font face="Times New Roman, Times, serif">Audit-Related Fees:</font></i><font face="Times New Roman, Times, serif"><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><font face="Times New Roman, Times, serif">Audit-related
  fees billed to the Company by Moss Adams LLP during the Company's 2010 and 2009
  fiscal years totaled $15,900 and $9,500, respectively. Audit-related fees in
  both years related to the issuance of a consent related to the filing of a Form
  S-3 registration statement and the filing of a Form S-8 registration statement,
  and in 2010, work related to accounting advice.<br>
  </font></p>
<p><font face="Times New Roman, Times, serif"><i>Tax Fees:</i><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><font face="Times New Roman, Times, serif">Fees
  billed to the Company by Moss Adams LLP for tax services during the Company's
  2010 and 2009 fiscal years were $14,831 in 2010 and $18,200 in 2009. Tax fees
  are for preparation of the prior year's annual tax returns.<br>
  </font></p>
<p><i><font face="Times New Roman, Times, serif">All Other Fees:</font></i><font face="Times New Roman, Times, serif"><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><font face="Times New Roman, Times, serif">There
  were no other fees billed to the Company during the Company's 2010 and 2009
  fiscal years by Moss Adams LLP.<br>
  </font></p>
<p><font face="Times New Roman, Times, serif"><i>Approval Procedures:</i><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><font face="Times New Roman, Times, serif">The
  Audit Committee's policy is to pre-approve all audit and other permissible 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>
  </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><font face="Times New Roman, Times, serif">The
  Audit Committee has considered whether the provision of the services described
  in this section is compatible with maintaining Moss Adams LLP's independence
  and determined that it is. </font></p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">8<br>
  </font></p>
<hr NOSHADE>
<p><b><font face="Times New Roman, Times, serif">VOTE REQUIRED AND RECOMMENDATION
  OF THE BOARD</font></b><font face="Times New Roman, Times, serif"><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><font face="Times New Roman, Times, serif">Ratification
  of the appointment of Moss Adams LLP as the Company's independent public accountants
  for the fiscal year ending December 31, 2011 requires the affirmative vote of
  a majority of the Votes Cast on the matter at the 2011 Annual Meeting.<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><font face="Times New Roman, Times, serif">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>
  </font></p>
<p><font face="Times New Roman, Times, serif"><b>THE BOARD OF DIRECTORS UNANIMOUSLY
  RECOMMENDS THAT STOCKHOLDERS VOTE &quot;FOR&quot; THE RATIFICATION OF THE APPOINTMENT
  OF MOSS ADAMS LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL
  YEAR ENDING DECEMBER 31, 2011.</b></font></p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">9<br>
  </font></p>
<hr NOSHADE>
<p align="center"><b>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</b><br>
</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
  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 Summary
  Compensation 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 Mobile, Inc., 39700 Eureka Drive,
  Newark, California 94560. </p>
<table width="100%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th width="240" align="LEFT" height="70"><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" height="70">&nbsp;</th>
    <th width="110" align="CENTER" height="70">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Number
        of Shares of<br>
        Common Stock<br>
        Beneficially Owned</font></div>
      <hr NOSHADE>
    </th>
    <th width="9" align="CENTER" height="70">&nbsp;</th>
    <th width="110" align="CENTER" height="70">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Percentage
        of Shares of<br>
        Common Stock<br>
        Beneficially Owned (2)</font></div>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240" height="16"><font face="Times New Roman, Times, serif"><b><i>5%
      Stockholders</i></b></font></td>
    <td width="10" align="RIGHT" height="16">&nbsp;</td>
    <td width="107" align="RIGHT" height="16">
      <div align="center"></div>
    </td>
    <td width="9" align="RIGHT" height="16">&nbsp;</td>
    <td width="110" align="RIGHT" height="16">
      <div align="center"></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240">Hudson Bay Master Fund Ltd. (3) </td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT" height="16">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">666,666</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT" height="16">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif">14.0%</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font face="Times New Roman, Times, serif">Leviticus Partners,
      L.P. (4)</font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT" height="16">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">379,098</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT" height="16">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif">9.2%</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240">Roy L. Rogers (5)</td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">346,136</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif">8.4%
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240">AboCom Systems Inc. (6) </td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">282,485</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif">6.9%
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240">&nbsp;</td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">&nbsp;</td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font face="Times New Roman, Times, serif"><b><i>Directors
      and Executive Officers</i></b></font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">&nbsp;</td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240">Charlie Bass (7)</td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">268,318</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif">6.5%</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240">Kevin J. Mills (8)</td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">244,418</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif">5.9%</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="BOTTOM">
    <td width="240"><font size="3" face="Times New Roman, Times, serif">Micheal
      L. Gifford (9)</font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif">53,181</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif">1.3%</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 (10)</font></td>
    <td width="10" align="RIGHT" height="16">&nbsp;</td>
    <td width="107" align="RIGHT" height="16">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">43,174</font></div>
    </td>
    <td width="9" align="RIGHT" height="16">&nbsp;</td>
    <td width="110" align="RIGHT" height="16">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><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">Leonard
      L. Ott (11) </font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">33,562</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</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">Leon Malmed (12)</td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">28,844</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</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">Tim I. Miller (13)</td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">28,277</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</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">Lee A. Baillif (14) </td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">22,827</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</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">Peter Sealey (12)</td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">20,375</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</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">Thomas O. Miller (15)</td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">15,937</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</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">Charles C. Emery, Jr. (12)</td>
    <td width="10" align="RIGHT" height="15">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp
        </i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">7,000</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</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">All Directors
      and Executive Officers as a group (11 persons) (16)</font></td>
    <td width="10" align="RIGHT">&nbsp;</td>
    <td width="107" align="RIGHT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">765,913</font></div>
    </td>
    <td width="9" align="RIGHT">&nbsp;</td>
    <td width="110" align="RIGHT">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">17.4%</font></div>
    </td>
  </tr>
</table>
<table width="100%" border="0" cellspacing="0" cellpadding="0" align="center" height="284">
  <tr>
    <td>
      <hr NOSHADE align="LEFT" width="120">
      <p><font face="Times New Roman, Times, serif" size="2">*Less than 1%<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 4,084,431 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) Hudson Bay Master Fund Ltd. is managed by Hudson Bay Capital Management
        L.P. The address of both is 120 Broadway, Floor 40, New York, NY 10271-4099.
        Beneficial share ownership consists of convertible notes convertible into
        666,666 shares of common stock at the option of the holder. Notes, if
        not converted, mature on May 19, 2012. Not included in the table above
        are 500,000 shares subject to warrants that are exercisable for five years
        commencing May 20, 2011.<br>
        (4) AMH Equity LLC is the general partner of Leviticus Partners, L.P.
        The address of Leviticus Partners, L.P. is 60 East 42nd Street, Suite
        901, New York, NY 10165. Includes 16,666 shares subject to warrants exercisable
        within 60 days of February 28, 2011.<br>
        (5) Shares held by Roy L. Rogers as trustee for the Rogers Family Trust
        UTD 01-21-81 which holds 97,283 shares of Common Stock, and for the Roy
        and Ruth Rogers Unitrust, UTD 09-28-89 which holds 88,401 shares of Common
        Stock. Mr. Rogers'address is 3000 Sand Hill Road, Building 1, Suite 260,
        Menlo Park, CA 94025. Includes 28,000 shares subject to warrants exercisable
        within 60 days of February 28, 2011.<br>
        (6) AboCom Systems Inc. is a corporation organized under the laws of Taiwan
        with offices at 350 No. 77, Yu-Yih Road, Chu-Nan Chen, Miao-Lih Hsuan,
        Taiwan, R.O.C. and is a contract product supplier for the Company. <br>
        (7) Includes 35,094 shares of Common Stock subject to options exercisable
        within 60 days of February 28, 2011.<br>
        (8) Includes 55,049 shares of Common Stock subject to options exercisable
        within 60 days of February 28, 2011.<br>
        </font><font size="2" face="Times New Roman, Times, serif">(9) Includes
        33,295 shares of Common Stock subject to options exercisable within 60
        days of February 28, 2011.<br>
        (10) Includes 34,726 shares of Common Stock subject to options exercisable
        within 60 days of February 28, 2011.<br>
        (11) Includes 32,199 shares of Common Stock subject to options exercisable
        within 60 days of February 28, 2011.<br>
        (12) Consists of shares of Common Stock subject to options exercisable
        within 60 days of February 28, 2011.<br>
        (13) Includes 27,956 shares of Common Stock subject to options exercisable
        within 60 days of February 28, 2011.<br>
        (14) Includes 20,289 shares of Common Stock subject to options exercisable
        within 60 days of February 28, 2011.<br>
        (15) Includes 15,375 shares of Common Stock subject to options exercisable
        within 60 days of February 28, 2011.<br>
        (16) Includes 310,202 shares of Common Stock subject to options exercisable
        within 60 days of February 28, 2011. </font></p>
    </td>
  </tr>
</table>
<p align="center">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">10 </font></p>
<hr NOSHADE>
<p align="center">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif"><b>SECTION 16(a)
  BENEFICIAL OWNERSHIP REPORTING COMPLIANCE</b></font></p>
<p align="left"><font 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 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 2010 all of its
  executive officers and directors complied with their Section 16(a) filing requirements.
  <font size="3"><br>
  <br>
  </font></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> <br>
  &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp<i>&nbsp</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">50</div>
    </td>
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="62%"><font face="Times New Roman, Times, serif">President and Chief
      Executive Officer and Director</font></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">53</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" 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">68</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%" height="15">Leonard L. Ott</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 face="Times New Roman, Times, serif">52</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%">Tim I. Miller</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 face="Times New Roman, Times, serif">56</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 and Engineering</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="TOP">
    <td width="28%"><font size="3" face="Times New Roman, Times, serif">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">50</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>
</table>
<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>For
  information regarding Kevin J. Mills and Micheal L. Gifford, please see &quot;Proposal
  One - Election of Directors&quot; above. <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>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 (inactive), and holds
  an M.B.A. and a B.A. in Business Administration from the University of California
  at Berkeley.<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>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,
  a networking systems company, from March 1988 to November 1993. Mr. Ott holds
  a B.S. in Computer Science from the University of California at Berkeley.</font></p>
<p><font face="Times New Roman, Times, serif"><br>
  </font></p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">11<br>
  </font></p>
<hr NOSHADE>
<p><font size="3" face="Times New Roman, Times, serif"><i> &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&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
  and assumed the additional role of Vice President of Engineering on April 1,
  2009. Mr. Miller served as Vice President of Worldwide Operations as a consultant
  to the Company from January 2003 to March 2003. Mr. Miller was an independent
  consultant from June 1991 to December 1992. Prior to joining the Company, Mr.
  Miller was the Vice President of Worldwide Operations for Com21, a developer
  of broadband technology solutions, from August 1994 to May 2001. Mr. Miller
  holds a B.S. with an emphasis in Business Administration and Political Science
  from San Jose State University.<br>
  </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>Lee
  A. Baillif</i> has served as the Company's Controller since January 1, 1999
  and was promoted to Vice President and Controller on January 24, 2007. Prior
  to his appointment as Controller, Mr. Baillif was a member of the accounting
  staff from September 1994. He holds a B.S. in Business and Finance from San
  Francisco State University.</font><font face="Times New Roman, Times, serif"><font size="3">
  </font></font></p>
<p align="center">&nbsp; </p>
<p align="center"><font size="3" face="Times New Roman, Times, serif"><b><br>
  DIRECTOR COMPENSATION<br>
  </b></font></p>
<p><font face="Times New Roman, Times, serif"><b>Compensation of Non-Employee
  Directors</b></font></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>The
  following tables set forth the annual compensation paid to or accrued by the
  Company on behalf of the outside directors of the Company for the fiscal year
  ended December 31, 2010. </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">&nbsp;</th>
    <th width="12%" height="31">&nbsp;</th>
    <th width="12%" valign="bottom" align="CENTER" height="31">&nbsp;</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">Fees Earned or Paid in Cash ($)
      (1)
      <hr NOSHADE>
    </th>
    <th width="12%" align="CENTER" height="15"><font size="3" face="Times New Roman, Times, serif">Option
      Awards ($)(2) </font>
      <hr NOSHADE>
    </th>
    <th width="12%" align="CENTER" height="15"><font size="3" face="Times New Roman, Times, serif">Total
      ($) </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">$--</font></div>
    </td>
    <td height="14">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$57,320(3)
        </font></div>
    </td>
    <td height="14">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$57,320
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="0"><font size="3" face="Times New Roman, Times, serif">Charles
      C. Emery, Jr<br>
      </font></td>
    <td height="14">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$--</font></div>
    </td>
    <td height="0">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$15,120(4)
        </font></div>
    </td>
    <td height="0">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$15,120
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="0"><font size="3" face="Times New Roman, Times, serif">Leon Malmed<br>
      </font></td>
    <td height="14">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$--</font></div>
    </td>
    <td height="0">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$54,460(5)
        </font></div>
    </td>
    <td height="0">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$54,460</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="11">
      <p><font face="Times New Roman, Times, serif">Thomas O. Miller</font></p>
    </td>
    <td height="14">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$--</font></div>
    </td>
    <td height="11">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$14,825(6)
        </font></div>
    </td>
    <td height="11">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$14,825
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="bottom">
    <td height="2"><font size="3" face="Times New Roman, Times, serif">Peter Sealey<br>
      </font></td>
    <td height="14">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$--</font></div>
    </td>
    <td height="2">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i></i></i></font>$37,310(7)<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">$37,310
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td height="199" colspan="4">
      <hr NOSHADE align="LEFT" width="120">
      <p><font face="Times New Roman, Times, serif" size="2">(1) Directors are
        paid a fee for attendance at four regularly scheduled board meetings at
        the rate of $4,000 per meeting, totaling $16,000 per year. In 2010, each
        director agreed to forego all $16,000 in fees as a cost reduction measure.<br>
        (2) Amounts shown are not intended to reflect value actually received
        by the directors. Instead, the amounts shown are the total fair value
        of option awards granted in fiscal 2010 for financial statement reporting
        purposes, as determined pursuant to Financial Accounting Standards Board
        Accounting Standards Codification Topic 718, or ASC Topic 718 (formerly
        Statement of Financial Accounting Standards No. 123(R). These values are
        amortized as equity compensation expense over the vesting period of the
        grants.<br>
        (3) Mr. Bass was granted an option to purchase 10,000 shares on April
        29, 2010 with a grant date fair value of $16,700. Mr. Bass also exchanged
        40,250 previously granted options on July 1, 2010 in a stockholder approved
        exchange program. The exchanged options had a grant date fair value of
        $40,620. The aggregate equity awards held by Mr. Bass at December 31,
        2010 were options to purchase 60,250 shares of Common Stock. The grant
        date valuation for these awards at such date, determined pursuant to ASC
        Topic 718, was $78,920.<br>
        (4) Mr. Emery joined the Board in 2010 and was granted an option to purchase
        7,000 shares on April 29, 2010 with a grant date fair value of $15,120.
        <br>
        (5) Mr. Malmed was granted an option to purchase 8,000 shares on April
        29, 2010 with a grant date fair value of $17,280. Mr. Malmed also exchanged
        34,250 previously granted options on July 1, 2010 in a stockholder approved
        exchange program. The exchanged options had a grant date fair value of
        $37,180. The aggregate equity awards held by Mr. Malmed at December 31,
        2010 were options to purchase 50,250 shares of Common Stock. The valuation
        for these awards at such date, determined pursuant to ASC Topic 718, was
        $67,820.<br>
        (6) Mr. Miller was granted an option to purchase 5,000 shares on April
        29, 2010 with a grant fair value of $10,800. Mr. Miller also exchanged
        9,000 previously granted options on July 1, 2010 in a stockholder approved
        exchange program. The exchanged options had a grant date fair value of
        $4,025. The aggregate equity awards held by Mr. Miller at December 31,
        2010 were options to purchase 21,000 shares of Common Stock. The valuation
        for these awards at such date, determined pursuant to ASC Topic 718, was
        $26,515<br>
        </font><font face="Times New Roman, Times, serif" size="2">(7) Mr. Sealey
        was granted an option to purchase 6,000 shares on April 29, 2010 with
        a grant date fair value, computed in accordance with ASC Topic 718, of
        $12,960. Mr. Sealey also exchanged 25,000 previously granted options on
        July 1, 2010 in a stockholder approved exchange program. The exchanged
        options had a grant date fair value of $24,350. The aggregate equity awards
        held by Mr. Sealey at December 31, 2010 were options to purchase 36,000
        shares of Common Stock. The valuation for these awards at such date, determined
        pursuant to ASC Topic 718, was $45,660.</font></p>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">12<br>
  </font></p>
<hr NOSHADE>
<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>During
  2009, the Board met four times in person and four times by telephone, and all
  directors attended all meetings. </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
  outside directors are 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
  5,000 shares are awarded to each director for Board service. The director serving
  as the Board chairperson receives an option to purchase an additional 2,000
  shares. Directors serving as chairpersons of the Audit, Nominating and Compensation
  Committees each receive an option to purchase an additional 1,000 shares. Members
  serving on the Audit Committee and beginning in 2011, on the Compensation Committee,
  receive an option to purchase an additional 2,000 shares. As a result, on April
  29, 2010, the five outside directors as a group were granted options to purchase
  an aggregate of 36,000 shares and will be granted an aggregate of 40,000 shares
  on April 27, 2011 at the start of the new Board term. The options vest monthly
  over a one year period commencing on the date of grant. Options granted on April
  29, 2010 had an exercise price of $2.16 per share, which was the fair market
  value of the Common Stock on the date of grant. See also Proposal One - Compensation
  of Directors. </p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">13<br>
  </font></p>
<hr NOSHADE>
<p align="center"><font face="Times New Roman, Times, serif"><b><br>
  COMPENSATION DISCUSSION AND ANALYSIS</b></font></p>
<p><font face="Times New Roman, Times, serif"><b>OVERVIEW</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><font face="Times New Roman, Times, serif">The
  Compensation Committee of the Board of Directors establishes the general compensation
  policies of the Company as well as 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, retain, motivate
  and reward key people based on a pay-for-performance approach, targeted within
  ten percent of market median for similar sized companies in similar fields of
  business when target performance objectives are achieved, and can result in
  superior pay when superior performance objectives are achieved. Actual compensation
  can vary depending on each executive officer's position, responsibilities and
  overall experience. 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.<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><font face="Times New Roman, Times, serif">The
  Company, with the approval of the Compensation Committee, enacted a number of
  cost reduction steps in 2009 and 2010 involving compensation to reduce overall
  costs and expenses during a period of reduced revenue resulting from adverse
  economic conditions. These steps included a 27 percent reduction in the number
  of employees from 90 employees in Q4 2008 to 66 employees in Q1 2011, effective
  base salary reductions ranging from 20 percent for senior employees to 10 percent
  for other employees, a deferral of salary increases that had been approved in
  2008 for the Executive Officers of the Company, a suspension of annual employee
  salary reviews and increases, and a suspension of all variable compensation
  programs applicable to employees except sales commissions. Commencing with the
  first quarter of 2011, base salary reduction programs have been eliminated.
  Also commencing with the first quarter of 2011, a management incentive variable
  compensation program has been reinstated that is based upon attainment of revenue
  goals and achieving quarterly operating profitability with an improving financial
  outlook. Management and the Compensation Committee will closely monitor the
  Company's operating results and financial condition and intends to continue
  to phase out cost reduction program measures in 2011 consistent with meeting
  or exceeding the financial goals of the Company.<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><font face="Times New Roman, Times, serif">In
  addition, adverse economic conditions resulted in reductions in the market valuations
  of the Company. By 2010, stock options, which are a key element of compensation
  as described in this section, had become largely ineffective in their objectives
  of aligning employee and stockholder interests, in retaining employees and in
  rewarding employees for increases in stockholder value because lower market
  valuations resulted in the options granted prior to 2009 having little value
  because the exercise prices were much higher than the trading price of the Company's
  stock. In April 2010, the stockholders approved a one-time option exchange program
  that was completed on July 1, 2010 and enabled stock options previously granted
  to be exchanged for currently priced options with extended lives and vesting
  periods with the objective of restoring the effectiveness of the stock option
  program. <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><font face="Times New Roman, Times, serif">The
  discussions that follow reflect the goals and objectives of the Company's compensation
  policies and practices following the restoration of cost reduction measures
  as described in the second preceding paragraph.<br>
  </font></p>
<p><font face="Times New Roman, Times, serif"><b>COMPENSATION PHILOSOPHY AND OBJECTIVES</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><font face="Times New Roman, Times, serif">The
  Company's compensation policies, plans and programs are intended to achieve
  the following objectives:</font></p>
<ul>
  <ul>
    <ul>
      <li> attract, retain, motivate and reward talented executive officers and
        employees;<br>
        <br>
      </li>
      <li>provide executive officers and senior employees with performance-based
        cash bonus opportunities linked to achievement of financial objectives
        of revenue attainment and operating profitability; and<br>
        <br>
      </li>
      <li>align the financial interests of executive officers, directors and employees
        with those of stockholders by providing each through the stock option
        program with an equity stake in the Company.</li>
    </ul>
  </ul>
</ul>
<p align="center"><font face="Times New Roman, Times, serif" size="3">14<br>
  </font></p>
<hr NOSHADE>
<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's approach to executive and employee compensation is to set base compensation
  levels within ten percent of median levels consistent with the experience and
  performance of each individual compared to similar positions in smaller technology
  based companies, to set variable compensation targets tied to financial performance
  to motivate and reward positive performance of executive officers and senior
  employees for the achievement of the key financial objectives of revenue attainment
  and operating profitability, and to offer equity incentives through its stock
  option program to all employees commensurate with each employee's level of responsibility,
  experience and performance while maintaining acceptable levels of dilution.<br>
</p>
<p><b>ELEMENTS OF EXECUTIVE COMPENSATION</b><br>
</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
  three major components of the Company's executive officer compensation are:
  <br>
</p>
<blockquote>
  <blockquote>
    <p>(i) base salary;<br>
    </p>
    <p>(ii) variable performance based incentive awards; and <br>
    </p>
    <p>(iii) long-term, equity-based incentive awards. </p>
  </blockquote>
</blockquote>
<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
  components of the Company's rewards program, particularly the total direct compensation
  for executives and employees, are compared against other similar smaller technology
  public companies as set forth in the national compensation survey of Tech America,
  formerly the American Electronics Association. The compensation survey is used
  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.<br>
</p>
<p><i><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>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. Base salaries are generally targeted within ten percent of the median
  compensation levels for smaller public technology companies but may be set to
  higher or lower levels to recognize an employee's role, responsibilities, skills,
  experience and performance. <br>
</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
  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 Tech America survey for executive and employee
  positions in similarly sized companies, and the individual performance of each
  executive and employee. Certain elements of the base salary program were impacted
  in 2009 and 2010 by effective base salary reductions of twenty-percent for officers
  and higher paid employees and ten percent for other employees. These cost reduction
  measures were designed to offset lower revenues resulting from adverse economic
  conditions. Commencing in the first quarter of 2011, and based upon the current
  economic outlook as reflected in the 2011 Financial Plan (&quot;2011 Financial
  Plan&quot;) of the Company, base salary reduction programs have been eliminated.</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">15<br>
  </font></p>
<hr NOSHADE>
<p><i>Variable Performance Based Incentive Awards. </i><br>
</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>Variable
  incentive award programs were suspended in 2009 and 2010 as cost reduction measures
  due to lower revenues resulting from adverse economic conditions. Variable incentive
  awards are intended to motivate and reward executives and non-sales senior employees
  to meet or exceed financial performance goals of revenue attainment and operating
  profitability as established in a board-approved 2011 Financial Plan and have
  been reinstated for 2011 (see Appendix B). Measurements of revenue and operating
  profitability compared to the Financial Plan are made quarterly and annually.
  Each participating employee has a target variable payment award that would be
  earned if certain threshold levels of performance are met. Actual payments may
  exceed targets in the case of results exceeding the Plan. In 2011, variable
  performance earnings are only payable from a portion of operating profits as
  defined in the program. <br>
</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's ratio of variable compensation to total compensation is generally
  targeted to be within ten percent of median levels for similar executives in
  similar sized companies as reported in the salary survey of Tech America, and
  elevates the importance of reaching or exceeding financial goals as set in the
  Company's Financial Plan. Actual variable compensation payments as a percentage
  of variable compensation targets for the past three years are shown in the table
  below for the Named Executive Officers. </p>
<p><font face="Times New Roman, Times, serif"><b><br>
  </b><br>
  </font></p>
<div align="left">
  <table width="74%" border=0 cellspacing=0 cellpadding=0 align="center" height="297">
    <tr valign="BOTTOM">
      <th width="20%" 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="40%" align="CENTER" height="15"><font face="Times New Roman, Times, serif"><b>Position(s)</b>
        </font>
        <hr NOSHADE>
      </th>
      <th align="CENTER" height="15"><font face="Times New Roman, Times, serif"><b>2010</b>
        </font>
        <hr NOSHADE>
      </th>
      <th align="CENTER" height="15"><font face="Times New Roman, Times, serif"><b>2009</b>
        </font>
        <hr NOSHADE>
      </th>
      <th align="CENTER" height="15"><font face="Times New Roman, Times, serif"><b>2008</b>
        </font>
        <hr NOSHADE>
      </th>
    </tr>
    <tr bgcolor="#FFFFFF" valign="bottom">
      <td width="20%" valign="top"><font size="3" face="Times New Roman, Times, serif">Kevin
        J. Mills(1)</font></td>
      <td height="18" width="40%" valign="top">President and Chief Executive Officer
        and Director</td>
      <td height="18" valign="top" align="center"><font size="3" face="Times New Roman, Times, serif">Suspended
        </font></td>
      <td height="18" valign="top" align="center"><font size="3" face="Times New Roman, Times, serif">Suspended
        </font></td>
      <td height="18" valign="top" align="center"><font size="3" face="Times New Roman, Times, serif">85%
        </font></td>
    </tr>
    <tr bgcolor="#FFFFFF" valign="bottom">
      <td width="20%" valign="top"><font size="3" face="Times New Roman, Times, serif">Micheal
        L. Gifford(2)</font></td>
      <td height="18" width="40%" valign="top">Executive Vice President and Director</td>
      <td height="18" valign="top" align="center"><font size="3" face="Times New Roman, Times, serif">Suspended
        </font></td>
      <td height="18" valign="top" align="center"><font size="3" face="Times New Roman, Times, serif">Suspended
        </font></td>
      <td height="18" valign="top" align="center"><font size="3" face="Times New Roman, Times, serif">85%
        </font></td>
    </tr>
    <tr bgcolor="#FFFFFF" valign="bottom">
      <td width="20%" valign="top" height="17"><font size="3" face="Times New Roman, Times, serif">David
        W. Dunlap(3)<br>
        </font></td>
      <td height="17" width="40%" valign="top">
        <div align="left">Vice President of Finance and Administration, Chief
          Financial Officer and Secretary</div>
      </td>
      <td height="17" valign="top" align="center">
        <div align="center"><font size="3" face="Times New Roman, Times, serif">Suspended
          </font></div>
      </td>
      <td height="17" valign="top" align="center">
        <div align="center"><font size="3" face="Times New Roman, Times, serif">Suspended
          </font></div>
      </td>
      <td height="17" valign="top" align="center">
        <div align="center"><font size="3" face="Times New Roman, Times, serif">86%
          </font></div>
      </td>
    </tr>
    <tr bgcolor="#FFFFFF" valign="bottom">
      <td width="20%" valign="top" height="13">
        <p><font size="3" face="Times New Roman, Times, serif">Leonard L. Ott(4)
          </font></p>
      </td>
      <td align="RIGHT" height="13" width="40%" valign="top">
        <div align="left">Vice President and Chief Technical Officer</div>
      </td>
      <td align="center" height="13" valign="top">
        <div align="center"><font size="3" face="Times New Roman, Times, serif">Suspended
          </font></div>
      </td>
      <td align="center" height="13" valign="top">
        <div align="center"><font size="3" face="Times New Roman, Times, serif">Suspended
          </font></div>
      </td>
      <td align="center" height="13" valign="top">
        <div align="center"><font size="3" face="Times New Roman, Times, serif">81%
          </font></div>
      </td>
    </tr>
    <tr bgcolor="#FFFFFF" valign="bottom">
      <td width="20%" valign="top" height="16"><font size="3" face="Times New Roman, Times, serif">Tim
        I. Miller(5)<br>
        </font></td>
      <td height="16" width="40%" valign="top">
        <div align="left">Vice President of Worldwide Operations and Engineering</div>
      </td>
      <td height="16" valign="top" align="center">
        <div align="center"><font size="3" face="Times New Roman, Times, serif">Suspended
          </font></div>
      </td>
      <td height="16" valign="top" align="center">
        <div align="center"><font size="3" face="Times New Roman, Times, serif">Suspended
          </font></div>
      </td>
      <td height="16" valign="top" align="center">
        <div align="center"><font size="3" face="Times New Roman, Times, serif">80%
          </font></div>
      </td>
    </tr>
    <tr bgcolor="#FFFFFF" valign="bottom">
      <td valign="top" height="24" colspan="5">
        <hr NOSHADE align="LEFT" width="120">
        <font face="Times New Roman, Times, serif" size="2">(1) Variable financial
        incentive compensation target for Mr. Mills was set at $100,000 for each
        of the years 2008 through 2011.<br>
        (2) Variable financial incentive compensation target for Mr. Gifford was
        set at $50,000 for each of the years 2008 through 2011.<br>
        (3) Variable financial incentive compensation target for Mr. Dunlap was
        set at $50,000 for each of the years 2008 through 2011.<br>
        (4) Variable financial incentive compensation target for Mr. Ott was set
        at $35,000 for each of the years 2008 through 2011.<br>
        (5) Variable financial incentive compensation target for Mr. Miller was
        set at $35,000 for each of the years 2008 through 2011.</font></td>
    </tr>
  </table>
  <p align="left"><font face="Times New Roman, Times, serif"><i><i></i></i></font></p>
  <p align="left">&nbsp;</p>
  <p align="center"><font face="Times New Roman, Times, serif" size="3">16<br>
    </font></p>
  <hr NOSHADE>
  <p><i>Long-Term, Equity-Based Incentive Awards.</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><font face="Times New Roman, Times, serif">Long-Term
    Equity-Based Incentive Awards are provided through the stockholder approved
    2004 Equity Incentive Plan. Although the Equity Incentive Plan provides for
    a variety of equity incentive awards, to date the Compensation Committee has
    only awarded stock option grants from the Equity Incentive Plan. The goal
    of the Company's long-term, equity-based incentive awards is to align the
    financial interests of the executive officers and employees of the Company
    with those of stockholders and to provide each executive officer and employee
    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 and employees to remain
    employed with the Company. The Compensation Committee, in consultation with
    management, determines the size of each award according to individual levels
    of responsibility, 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 and
    sets a level that it considers appropriate to create a meaningful opportunity
    for equity participation. <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><font face="Times New Roman, Times, serif">In
    June 2004, the Company's stockholders approved the 2004 Equity Incentive Plan
    and initially transferred the remaining shares available for grant from the
    Company's 1995 Amended and Restated 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 least of (a)
    200,000 shares, (b) 4% 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 executives, employees and consultants
    of the Company based on recommendations from management regarding individual
    responsibilities and performance. The Board of Directors, in consultation
    with management, grants options annually to directors for service on the Board
    of Directors.<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><font face="Times New Roman, Times, serif">The
    Compensation Committee, in consultation with management, prepares an annual
    allocation plan dividing the 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 typically
    made on the first trading day of the month on or following the date of hire.
    Refresher grants are made annually, typically during the first quarter of
    the year on the first open trading day of the quarter, which is two days after
    the release of earnings for the prior year. Refresher grants typically vest
    monthly over 48 months, contingent upon 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
    of the Company's Common Stock appreciates during the option term. <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><font face="Times New Roman, Times, serif">The
    Compensation Committee believes that stock option grants are effective 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 and employees 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 potential
    for substantial cumulative compensation if stock prices increase, thus aligning
    their interests with those of stockholders. The Company believes stock options
    are effective long term 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>
    </font></p>
  <p><font face="Times New Roman, Times, serif"><b>EQUITY INCENTIVE GRANT POLICIES</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><font face="Times New Roman, Times, serif"><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 2010, the Compensation Committee met six times, and stock option grants
    were awarded at five of those meetings. <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><font face="Times New Roman, Times, serif"><i>Initial
    stock option grants. </i>The Compensation Committee awards initial stock option
    grants to each new employee of the Company on the first trading day of the
    month 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. 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 2010, 21,400 options were awarded
    to 5 new employees representing 14 percent of options, excluding exchanged
    options, granted during the year.</font></p>
  <p align="center"><font face="Times New Roman, Times, serif" size="3">17<br>
    </font></p>
  <hr NOSHADE>
  <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><font face="Times New Roman, Times, serif"><i>Refresher
    stock option grants.</i> The Compensation Committee awards refresher stock
    option grants annually based on the recommendations of management reflecting
    the responsibilities and performance of each employee and the employee's contributions
    in meeting the Company's goals and objectives. On June 1, 2010, the Compensation
    Committee awarded 98,000 options to 17 employees, representing 63 percent
    of options, excluding exchanged options, granted during the year. <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><font face="Times New Roman, Times, serif"><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 monthly
    over the ensuing year of service. Options are awarded equally to all directors
    for Board service. Additional options are awarded for Board and committee
    leadership positions and Committee service, as discussed under &quot;Director
    Compensation.&quot;. During 2010, the Company granted annual options to purchase
    a total of 36,000 shares to the 5 independent directors of the Company, representing
    23 percent of options, excluding exchanged options, granted during the year.<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><font face="Times New Roman, Times, serif"><i>One-time
    option exchange in 2010</i>. In April 2010, the stockholders approved a one-time
    option exchange program that was completed on July 1, 2010 and enabled stock
    options granted prior to 2009 to be exchanged for currently priced options
    with extended lives and vesting periods with the objective of restoring the
    effectiveness of the stock option program. See &quot;Compensation Discussion
    and Analysis - Overview&quot;. A total of 703,550 options granted in 2000
    through 2008 were exchanged for an equal number of new options at a grant
    price of $3.04, the closing market price on the date of grant, and with a
    vesting period of 24 to 39 months. <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><font face="Times New Roman, Times, serif"><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.<br>
    </font></p>
  <p><b><font face="Times New Roman, Times, serif">ACCOUNTING AND TAX IMPLICATIONS</font></b><font face="Times New Roman, Times, serif"><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><font face="Times New Roman, Times, serif"><i>Accounting
    for Stock Based Compensation.</i> On January 1, 2006, we adopted the provisions
    of Financial Accounting Standards Board Accounting Standards Codification
    (ASC) Topic 718, Stock Compensation (formerly FASB Statement 123R) for the
    fiscal years ended December 31, 2006 and beyond. Under ASC Topic 718, 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 was estimated using a Black-Scholes option pricing model.
    The Company adopted the modified prospective recognition method and implemented
    the provisions of ASC Topic 718 (formerly under FASB Statement 123R) beginning
    with the first quarter of 2006.<br>
    </font></p>
  <p><i><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 face="Times New Roman, Times, serif">Income
    taxes.</font></i><font face="Times New Roman, Times, serif"> 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. Although the 2004 Equity Incentive Plan
    also allows for the issuance of grants qualifying as &quot;performance-based
    compensation&quot; under Section 162(m) of the Internal Revenue Code, no grants
    deemed performance-based compensation grants have been awarded to the executive
    officers of the Company.</font></p>
  <p align="center"><font face="Times New Roman, Times, serif" size="3">18<br>
    </font></p>
  <hr NOSHADE>
  <p><font face="Times New Roman, Times, serif"><i>Compensation of the Chief Executive
    Officer</i><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><font face="Times New Roman, Times, serif">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 contracts and the absence
    of perquisites using the same processes discussed 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 Tech America for public companies,
    his responsibility and leadership in establishing and implementing the strategic
    direction of the Company, and the financial performance of the Company. <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><font face="Times New Roman, Times, serif">Mr.
    Mills, as Chief Executive Officer, was the highest paid executive in the Company
    during fiscal year 2010. His total base salary during the year was $156,385
    which included a 20% salary reduction as a cost reduction measure. He did
    not earn any variable compensation during 2010 as variable compensation programs
    were suspended during the year as a cost reduction measure. Mr. Mills' total
    compensation is below the median compensation for chief executive officers
    of public companies of similar size, as reported in the national compensation
    survey of Tech America. Mr. Mills also received refresher stock option grants
    of 10,000 shares on June 1, 2010 at the same time that refresher grants were
    awarded to employees of the Company. These options commenced vesting monthly
    over 48 months starting on June 1, 2010. Mr. Mills also exchanged 88,700 options
    on July 1, 2010 as part of a stockholder approved one-time exchange program
    (See &quot;Compensation Discussion and Analysis - Equity Incentive Grant Policies
    - One-time option exchange in 2010&quot;). 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. <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><font face="Times New Roman, Times, serif">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.</font></p>
  <p></p>
</div>
<div align="left">
  <p><font face="Times New Roman, Times, serif"><br>
    <br>
    </font></p>
  <p align="center"><font face="Times New Roman, Times, serif" size="3">19<br>
    </font></p>
  <hr NOSHADE>
  <p align="center"><font face="Times New Roman, Times, serif"><b><br>
    <br>
    SUMMARY COMPENSATION TABLE</b><font size="3"><br>
    <b>For Fiscal Year Ended December 31, 2010</b></font></font></p>
  <p align="left"><font size="3" face="Times New Roman, Times, serif">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbspThe
    following table provides fiscal 2010 compensation information and comparable
    information for the two preceding fiscal years for the Chief Executive Officer,
    Chief Financial Officer, and the three other executive officers of the Company
    who were the most highly compensated in fiscal year 2010 (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>(1)</font>
      <hr NOSHADE>
    </th>
    <th width="13%" align="CENTER" height="42"><font size="3" face="Times New Roman, Times, serif">Option
      Awards<br>
      ($)(2) </font>
      <hr NOSHADE>
    </th>
    <th width="13%" align="CENTER" height="42"><font size="3" face="Times New Roman, Times, serif">Non-Equity
      Incentive Plan Compensation ($)(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 (4)<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">2010<br>
        2009<br>
        2008</font></div>
    </td>
    <td align="RIGHT" height="17" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">$156,385<br>
        162,888<br>
        189,604</font></div>
    </td>
    <td align="RIGHT" height="17" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">$138,472<br>
        49,202<br>
        31,500</font></div>
    </td>
    <td align="RIGHT" height="17" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">$0<br>
        0<br>
        84,756</font></div>
    </td>
    <td align="RIGHT" height="17" width="18%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">$294,857
        <br>
        212,090 <br>
        305,860</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="36%" height="18">&nbsp;</td>
    <td align="RIGHT" height="18" width="7%">&nbsp;</td>
    <td align="RIGHT" height="18" width="13%">&nbsp;</td>
    <td align="RIGHT" height="18" width="13%">&nbsp;</td>
    <td align="RIGHT" height="18" width="13%">&nbsp;</td>
    <td align="RIGHT" height="18" width="18%">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="36%" height="18"><font size="2" face="Times New Roman, Times, serif">Micheal
      L. Gifford (5)<br>
      <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>Executive
      Vice President and Director <br>
      </font></td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2010<br>
        2009<br>
        2008</font></div>
    </td>
    <td align="RIGHT" height="17" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">144,712<br>
        152,115<br>
        175,000</font></div>
    </td>
    <td align="RIGHT" height="17" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">85,646<br>
        32,332<br>
        27,300</font></div>
    </td>
    <td align="RIGHT" height="15" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">0
        <br>
        0<br>
        42,473</font></div>
    </td>
    <td align="RIGHT" height="15" width="18%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">230,358<br>
        184,447<br>
        244,773</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="36%" height="15">&nbsp;</td>
    <td align="RIGHT" height="17" width="7%">&nbsp;</td>
    <td align="RIGHT" height="15" width="13%">&nbsp;</td>
    <td align="RIGHT" height="15" width="13%">&nbsp;</td>
    <td align="RIGHT" height="15" width="13%">&nbsp;</td>
    <td align="RIGHT" height="15" width="18%">&nbsp;</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 (6)<br>
        <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>Vice
        President of Finance and Administration,<br>
        </font><font size="2" face="Times New Roman, Times, serif"><i><i>&nbsp</i></i><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp</i></i>Chief
        Financial Officer and Secretary</font></p>
    </td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2010<br>
        2009<br>
        2008</font></div>
    </td>
    <td align="RIGHT" height="15" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">139,923<br>
        143,879<br>
        169,646</font></div>
    </td>
    <td align="RIGHT" height="15" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">77,935<br>
        32,051<br>
        25,200</font></div>
    </td>
    <td align="RIGHT" height="15" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">0<br>
        0<br>
        42,854</font></div>
    </td>
    <td align="RIGHT" height="15" width="18%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">217,858<br>
        175,930<br>
        237,700</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="36%" height="13">&nbsp;</td>
    <td align="RIGHT" height="13" width="7%">&nbsp;</td>
    <td align="RIGHT" height="13" width="13%">&nbsp;</td>
    <td align="RIGHT" height="13" width="13%">&nbsp;</td>
    <td align="RIGHT" height="13" width="13%" valign="top">&nbsp;</td>
    <td align="RIGHT" height="13" width="18%">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="36%" height="43">
      <p><font size="2" face="Times New Roman, Times, serif">Leonard L. Ott (7)
        <br>
        <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>Vice
        President and Chief Technical Officer</font></p>
    </td>
    <td align="RIGHT" height="43" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2010<br>
        2009<br>
        2008</font></div>
    </td>
    <td align="RIGHT" height="43" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">128,769
        <br>
        131,154<br>
        155,000</font></div>
    </td>
    <td align="RIGHT" height="43" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">86,005<br>
        32,051<br>
        21,000</font></div>
    </td>
    <td align="RIGHT" height="43" width="13%" valign="top">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">0<br>
        0<br>
        27,504</font></div>
    </td>
    <td align="RIGHT" height="43" width="18%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">214,774<br>
        163,205<br>
        203,504</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="36%" height="17">&nbsp;</td>
    <td align="RIGHT" height="17" width="7%">&nbsp;</td>
    <td align="RIGHT" height="17" width="13%">&nbsp;</td>
    <td align="RIGHT" height="17" width="13%">&nbsp;</td>
    <td align="RIGHT" height="17" width="13%">&nbsp;</td>
    <td align="RIGHT" height="17" width="18%">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="36%" height="17">
      <p><font size="2" face="Times New Roman, Times, serif">Tim I. Miller (8)
        <br>
        <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>Vice
        President of Worldwide Operations and Engineering</font></p>
    </td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2010<br>
        2009<br>
        2008</font></div>
    </td>
    <td align="RIGHT" height="30" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">119,904
        <br>
        131,184<br>
        154,677</font></div>
    </td>
    <td align="RIGHT" height="17" width="13%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">58,723<br>
        32,051<br>
        21,000</font></div>
    </td>
    <td align="RIGHT" height="15" width="13%">
      <div align="center">
        <p><font size="2" face="Times New Roman, Times, serif">0<br>
          0<br>
          28,143</font></p>
      </div>
    </td>
    <td align="RIGHT" height="43" width="18%">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">178,627<br>
        163,235<br>
        203,820</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td colspan="6" height="35">
      <hr NOSHADE align="LEFT" width="120">
      <font size="2" face="Times New Roman, Times, serif">(1) Represents base
      salary as described under <i>Compensation Summary and Analysis</i> - <i>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 total grant date valuations
      of stock option grants awarded during the year as determined pursuant to
      ASC Topic 718. The valuations are expensed for financial reporting purposes
      over the vesting period of the grant.<br>
      (3) Represents Variable Incentive Awards as described under <i>Compensation
      Summary and Analysis</i> - <i>Elements of Executive Compensation</i>. All
      variable compensation programs for executives were suspended in 2009 as
      an expense reduction measure.<br>
      (4) Mr. Mills' salary for 2009 included a temporary base salary reduction
      of 20% as an expense reduction measure. <br>
      (5) Mr. Gifford's salary for 2009 included a temporary base salary reduction
      of 20% as an expense reduction measure.<br>
      (6) Mr. Dunlap's salary for 2009 included a temporary base salary reduction
      of 20% as an expense reduction measure.<br>
      (7) Mr. Miller's salary for 2009 included a temporary base salary reduction
      of 20% as an expense reduction measure.<br>
      (8) Mr. Ott's salary for 2009 included a temporary base salary reduction
      of 20% as an expense reduction measure.</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">20</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, 2010 </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, 2010 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>.</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" face="Times New Roman, Times, serif">Grant<br>
      Date</font>s
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="59"><font size="3" face="Times New Roman, Times, serif">All
      Other Option Awards: Number of Securities Underlying Options (#) </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="59"><font size="3" face="Times New Roman, Times, serif">Exercise
      or Base Price of<br>
      Option Awards ($/share)</font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="59"><font size="3" face="Times New Roman, Times, serif">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">6/1/2010<br>
        </font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">7/1/2010
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">10,000<br>
        </font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif">88,700
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$2.74<br>
        $3.04</font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$18,900<br>
        </font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">119,572
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="18">&nbsp;</td>
    <td align="RIGHT" height="17" width="7%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="18"><font size="3" face="Times New Roman, Times, serif">Micheal
      L. Gifford</font></td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">6/1/2010<br>
        </font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">7/1/2010
        </font><font size="3" face="Times New Roman, Times, serif"> </font><font size="3" face="Times New Roman, Times, serif">
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        7,500<br>
        </font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i></i></font><font size="3" face="Times New Roman, Times, serif">59,650
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$2.74<br>
        $3.04</font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">14,175<br>
        </font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">71,471
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="19">&nbsp;</td>
    <td align="RIGHT" height="17" width="7%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="19"><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">6/1/2010<br>
        </font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">7/1/2010
        </font><font size="3" face="Times New Roman, Times, serif"> </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">7,500<br>
        </font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">54,500
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$2.74<br>
        $3.04</font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">14,175<br>
        </font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">63,760
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17">&nbsp;</td>
    <td align="RIGHT" height="17" width="7%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="17">
      <p><font size="3" face="Times New Roman, Times, serif">Leonard L. Ott </font></p>
    </td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">6/1/2010<br>
        </font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">7/1/2010
        </font><font size="3" face="Times New Roman, Times, serif"> </font><font size="3" face="Times New Roman, Times, serif">
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">7,500<br>
        </font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">54,600
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$2.74<br>
        $3.04</font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">
        14,175<br>
        </font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">71,830
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="20">&nbsp;</td>
    <td align="RIGHT" height="17" width="7%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
    <td align="RIGHT" height="17" width="16%">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="33%" height="20">
      <p><font size="3" face="Times New Roman, Times, serif">Tim I. Miller</font></p>
    </td>
    <td align="RIGHT" height="17" width="7%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">6/1/2010<br>
        </font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">7/1/2010
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">12,500<br>
        </font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">39,200
        </font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$2.74<br>
        $3.04</font></div>
    </td>
    <td align="RIGHT" height="17" width="16%">
      <div align="center"><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font>23,625<font size="3" face="Times New Roman, Times, serif"><br>
        </font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">35,098
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td colspan="6" height="70">
      <hr NOSHADE align="LEFT" width="120">
      <font size="2" face="Times New Roman, Times, serif"> (1) The value of option
      awards is based on the fair value as of the grant date of such award, determined
      pursuant to ASC Topic 718 (formerly Statement of Financial Accounting Standards
      No. 123R, which was $1.89 per share for the grant dated June 1, 2010 and
      $1.89 to $1.95 for the option exchange grant dated July 1, 2010 less the
      fair market value of the exchange options which ranged from zero to $1.47.
      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. </font></td>
  </tr>
</table>
<p align="left">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif"><b>OUTSTANDING EQUITY
  AWARDS<br>
  At Fiscal 2010 Year-End</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 set forth certain information concerning outstanding equity
  awards held by the Named Executive Officers at the end of the fiscal year ended
  December 31, 2010.</p>
<table width="87%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr valign="BOTTOM">
    <th align="LEFT" height="59" width="30%">&nbsp;</th>
    <th align="CENTER" height="59" colspan="5"> <font size="3" face="Times New Roman, Times, serif">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" face="Times New Roman, Times, serif">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="21%"><font size="3" face="Times New Roman, Times, serif">Number
      of Securities<br>
      Underlying Unexercised<br>
      Options - Unexercisable<br>
      (#)(1)(2) </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100" width="13%"><font size="3" face="Times New Roman, Times, serif">Option
      Exercise<br>
      Price per Share<br>
      ($)(3) </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" height="100" width="19%"><font size="3" face="Times New Roman, Times, serif">Option
      Expiration Date(4) </font>
      <hr NOSHADE>
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="25">Kevin J. Mills</td>
    <td align="RIGHT" height="25" width="16%">
      <div align="center">9,433</div>
    </td>
    <td align="RIGHT" height="25" width="1%">&nbsp;</td>
    <td align="RIGHT" height="25" width="21%">
      <div align="center">12,127</div>
    </td>
    <td align="RIGHT" height="25" width="13%">
      <div align="center">1.96</div>
    </td>
    <td align="RIGHT" height="25" width="19%">
      <div align="center">2/23/2019</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="29">&nbsp;</td>
    <td align="RIGHT" height="25" width="16%">
      <div align="center">8,625</div>
    </td>
    <td align="RIGHT" height="25" width="1%">&nbsp;</td>
    <td align="RIGHT" height="25" width="21%">
      <div align="center">--</div>
    </td>
    <td align="RIGHT" height="25" width="13%">
      <div align="center">3.45</div>
    </td>
    <td align="RIGHT" height="25" width="19%">
      <div align="center">6/1/2019</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="28">&nbsp;</td>
    <td align="RIGHT" height="28" width="16%">
      <div align="center">1,250</div>
    </td>
    <td align="RIGHT" height="28" width="1%">&nbsp;</td>
    <td align="RIGHT" height="28" width="21%">
      <div align="center">8,750</div>
    </td>
    <td align="RIGHT" height="28" width="13%">
      <div align="center">2.74</div>
    </td>
    <td align="RIGHT" height="28" width="19%">
      <div align="center">6/1/2020</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="29">&nbsp;</td>
    <td align="RIGHT" height="28" width="16%">
      <div align="center">18,089</div>
    </td>
    <td align="RIGHT" height="28" width="1%">&nbsp;</td>
    <td align="RIGHT" height="28" width="21%">
      <div align="center">70,611</div>
    </td>
    <td align="RIGHT" height="28" width="13%">
      <div align="center">3.04</div>
    </td>
    <td align="RIGHT" height="28" width="19%">
      <div align="center">7/1/2020</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="33">&nbsp;</td>
    <td align="RIGHT" height="33" width="16%">&nbsp;</td>
    <td align="RIGHT" height="33" width="1%">&nbsp;</td>
    <td align="RIGHT" height="33" width="21%">&nbsp;</td>
    <td align="RIGHT" height="33" width="13%">&nbsp;</td>
    <td align="RIGHT" height="33" width="19%">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="25">Micheal L. Gifford</td>
    <td align="RIGHT" height="25" width="16%">
      <div align="center">3,079</div>
    </td>
    <td align="RIGHT" height="25" width="1%">&nbsp;</td>
    <td align="RIGHT" height="25" width="21%">
      <div align="center">8,314</div>
    </td>
    <td align="RIGHT" height="25" width="13%">
      <div align="center">1.96</div>
    </td>
    <td align="RIGHT" height="25" width="19%">
      <div align="center">2/23/2019</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="29">&nbsp;</td>
    <td align="RIGHT" height="25" width="16%">
      <div align="center">5,313</div>
    </td>
    <td align="RIGHT" height="25" width="1%">&nbsp;</td>
    <td align="RIGHT" height="25" width="21%">
      <div align="center">--</div>
    </td>
    <td align="RIGHT" height="25" width="13%">
      <div align="center">3.45</div>
    </td>
    <td align="RIGHT" height="25" width="19%">
      <div align="center">6/1/2019</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="28">&nbsp;</td>
    <td align="RIGHT" height="28" width="16%">
      <div align="center">938</div>
    </td>
    <td align="RIGHT" height="28" width="1%">&nbsp;</td>
    <td align="RIGHT" height="28" width="21%">
      <div align="center">6,562</div>
    </td>
    <td align="RIGHT" height="28" width="13%">
      <div align="center">2.74</div>
    </td>
    <td align="RIGHT" height="28" width="19%">
      <div align="center">6/1/2020</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="29">&nbsp;</td>
    <td align="RIGHT" height="28" width="16%">
      <div align="center">12,089</div>
    </td>
    <td align="RIGHT" height="28" width="1%">&nbsp;</td>
    <td align="RIGHT" height="28" width="21%">
      <div align="center">47,561</div>
    </td>
    <td align="RIGHT" height="28" width="13%">
      <div align="center">3.04</div>
    </td>
    <td align="RIGHT" height="28" width="19%">
      <div align="center">7/1/2020</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="33">&nbsp;</td>
    <td align="RIGHT" height="33" width="16%">&nbsp;</td>
    <td align="RIGHT" height="33" width="1%">&nbsp;</td>
    <td align="RIGHT" height="33" width="21%">&nbsp;</td>
    <td align="RIGHT" height="33" width="13%">&nbsp;</td>
    <td align="RIGHT" height="33" width="19%">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="25">David W. Dunlap</td>
    <td align="RIGHT" height="25" width="16%">
      <div align="center">6,423</div>
    </td>
    <td align="RIGHT" height="25" width="1%">&nbsp;</td>
    <td align="RIGHT" height="25" width="21%">
      <div align="center">8,257</div>
    </td>
    <td align="RIGHT" height="25" width="13%">
      <div align="center">1.96</div>
    </td>
    <td align="RIGHT" height="25" width="19%">
      <div align="center">2/23/2019</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="29">&nbsp;</td>
    <td align="RIGHT" height="25" width="16%">
      <div align="center">5,250</div>
    </td>
    <td align="RIGHT" height="25" width="1%">&nbsp;</td>
    <td align="RIGHT" height="25" width="21%">
      <div align="center">--</div>
    </td>
    <td align="RIGHT" height="25" width="13%">
      <div align="center">3.45</div>
    </td>
    <td align="RIGHT" height="25" width="19%">
      <div align="center">6/1/2019</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="28">&nbsp;</td>
    <td align="RIGHT" height="28" width="16%">
      <div align="center">938</div>
    </td>
    <td align="RIGHT" height="28" width="1%">&nbsp;</td>
    <td align="RIGHT" height="28" width="21%">
      <div align="center">6,562</div>
    </td>
    <td align="RIGHT" height="28" width="13%">
      <div align="center">2.74</div>
    </td>
    <td align="RIGHT" height="28" width="19%">
      <div align="center">6/1/2020</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="29">&nbsp;</td>
    <td align="RIGHT" height="28" width="16%">
      <div align="center">11,042</div>
    </td>
    <td align="RIGHT" height="28" width="1%">&nbsp;</td>
    <td align="RIGHT" height="28" width="21%">
      <div align="center">43,458</div>
    </td>
    <td align="RIGHT" height="28" width="13%">
      <div align="center">3.04</div>
    </td>
    <td align="RIGHT" height="28" width="19%">
      <div align="center">7/1/2020</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="33">&nbsp;</td>
    <td align="RIGHT" height="33" width="16%">&nbsp;</td>
    <td align="RIGHT" height="33" width="1%">&nbsp;</td>
    <td align="RIGHT" height="33" width="21%">&nbsp;</td>
    <td align="RIGHT" height="33" width="13%">&nbsp;</td>
    <td align="RIGHT" height="33" width="19%">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="25">Leonard L. Ott</td>
    <td align="RIGHT" height="25" width="16%">
      <div align="center">5,206</div>
    </td>
    <td align="RIGHT" height="25" width="1%">&nbsp;</td>
    <td align="RIGHT" height="25" width="21%">
      <div align="center">6,694</div>
    </td>
    <td align="RIGHT" height="25" width="13%">
      <div align="center">1.96</div>
    </td>
    <td align="RIGHT" height="25" width="19%">
      <div align="center">2/23/2019</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="29">&nbsp;</td>
    <td align="RIGHT" height="25" width="16%">
      <div align="center">4,125</div>
    </td>
    <td align="RIGHT" height="25" width="1%">&nbsp;</td>
    <td align="RIGHT" height="25" width="21%">
      <div align="center">--</div>
    </td>
    <td align="RIGHT" height="25" width="13%">
      <div align="center">3.45</div>
    </td>
    <td align="RIGHT" height="25" width="19%">
      <div align="center">6/1/2019</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="28">&nbsp;</td>
    <td align="RIGHT" height="28" width="16%">
      <div align="center">938</div>
    </td>
    <td align="RIGHT" height="28" width="1%">&nbsp;</td>
    <td align="RIGHT" height="28" width="21%">
      <div align="center">6,562</div>
    </td>
    <td align="RIGHT" height="28" width="13%">
      <div align="center">2.74</div>
    </td>
    <td align="RIGHT" height="28" width="19%">
      <div align="center">6/1/2020</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="29">&nbsp;</td>
    <td align="RIGHT" height="28" width="16%">
      <div align="center">11,114</div>
    </td>
    <td align="RIGHT" height="28" width="1%">&nbsp;</td>
    <td align="RIGHT" height="28" width="21%">
      <div align="center">43,486</div>
    </td>
    <td align="RIGHT" height="28" width="13%">
      <div align="center">3.04</div>
    </td>
    <td align="RIGHT" height="28" width="19%">
      <div align="center">7/1/2020</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="33">&nbsp;</td>
    <td align="RIGHT" height="33" width="16%">&nbsp;</td>
    <td align="RIGHT" height="33" width="1%">&nbsp;</td>
    <td align="RIGHT" height="33" width="21%">&nbsp;</td>
    <td align="RIGHT" height="33" width="13%">&nbsp;</td>
    <td align="RIGHT" height="33" width="19%">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="25">Tim I. Miller</td>
    <td align="RIGHT" height="25" width="16%">
      <div align="center">5,425</div>
    </td>
    <td align="RIGHT" height="25" width="1%">&nbsp;</td>
    <td align="RIGHT" height="25" width="21%">
      <div align="center">6,975</div>
    </td>
    <td align="RIGHT" height="25" width="13%">
      <div align="center">1.96</div>
    </td>
    <td align="RIGHT" height="25" width="19%">
      <div align="center">2/23/2019</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="29">&nbsp;</td>
    <td align="RIGHT" height="25" width="16%">
      <div align="center">4,125</div>
    </td>
    <td align="RIGHT" height="25" width="1%">&nbsp;</td>
    <td align="RIGHT" height="25" width="21%">
      <div align="center">--</div>
    </td>
    <td align="RIGHT" height="25" width="13%">
      <div align="center">3.45</div>
    </td>
    <td align="RIGHT" height="25" width="19%">
      <div align="center">6/1/2019</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="28">&nbsp;</td>
    <td align="RIGHT" height="28" width="16%">
      <div align="center">1,563</div>
    </td>
    <td align="RIGHT" height="28" width="1%">&nbsp;</td>
    <td align="RIGHT" height="28" width="21%">
      <div align="center">10,937</div>
    </td>
    <td align="RIGHT" height="28" width="13%">
      <div align="center">2.74</div>
    </td>
    <td align="RIGHT" height="28" width="19%">
      <div align="center">6/1/2020</div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="30%" height="29">&nbsp;</td>
    <td align="RIGHT" height="28" width="16%">
      <div align="center">7,906</div>
    </td>
    <td align="RIGHT" height="28" width="1%">&nbsp;</td>
    <td align="RIGHT" height="28" width="21%">
      <div align="center">31,294</div>
    </td>
    <td align="RIGHT" height="28" width="13%">
      <div align="center">3.04</div>
    </td>
    <td align="RIGHT" height="28" width="19%">
      <div align="center">7/1/2020</div>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<table width="87%" border=0 cellspacing=0 cellpadding=0 align="center">
  <tr bgcolor="#FFFFFF" valign="top">
    <td colspan="6" height="46">
      <hr NOSHADE align="LEFT" width="120">
      <font size="2" face="Times New Roman, Times, serif">(1) Options were granted
      as described under Compensation Summary and Analysis - Elements of Executive
      Compensation - Long-Term, Equity-Based Incentive Awards and - Equity Incentive
      Grant Policies. The vesting period and vesting start date were established
      by the Compensation Committee. Shares unexercisable were not vested at December
      31, 2010.<br>
      (2) Grant dates and vesting period information for all grants not fully
      vested as of December 31, 2010 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">&nbsp;</td>
    <td width="5%" align="CENTER" height="19">&nbsp;</td>
    <td width="17%" align="CENTER" height="19">&nbsp;</td>
    <td width="5%" align="CENTER" height="19">&nbsp;</td>
    <td width="25%" align="CENTER" height="19">&nbsp;</td>
    <td width="5%" align="CENTER" height="19">&nbsp;</td>
    <td width="33%" align="CENTER" height="19">&nbsp;</td>
  </tr>
  <tr valign="BOTTOM">
    <th width="25%" align="LEFT" height="26" valign="bottom">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">Grant
        Date</font><font face="Times New Roman, Times, serif"><b><font size="3"><br>
        </font> </b></font></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"><font face="Times New Roman, Times, serif"><b><font size="3"><font size="2">Expiration
        Date </font><br>
        </font> </b></font></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"><font face="Times New Roman, Times, serif"><b><font size="3"><font size="2">Vesting
        Start Date </font><br>
        </font> </b></font></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"><font face="Times New Roman, Times, serif"><b><font size="3"><font size="2">Months
        to fully vest</font><br>
        </font> </b></font></div>
      <hr NOSHADE>
    </th>
  </tr>
  <tr valign="top">
    <td width="25%" bgcolor="#FFFFFF"><font size="2" face="Times New Roman, Times, serif">2/23/2009
      </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">2/23/2019
        </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">3/1/2009
        </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">6/1/2010
      </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">6/1/2020
        </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">6/1/2010
        </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">7/1/2010
      </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">7/1/2020
        </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">7/1/2010
        </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">24
        to 32</font></div>
    </td>
  </tr>
  <tr valign="top">
    <td colspan="10" height="52" bgcolor="#FFFFFF"> <font size="2" face="Times New Roman, Times, serif"><br>
      (3) Exercise prices are set at the closing price of the Company's Common
      Stock on the date of grant. <br>
      (4) Options expire ten years from the date of grant, provided that the executive
      continues employment with the Company. </font></td>
  </tr>
</table>
<font face="Times New Roman, Times, serif"><br>
</font>
<p align="center"><font face="Times New Roman, Times, serif" size="3">21<br>
  </font></p>
<hr NOSHADE>
<p align="center">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif"><b>OPTION EXERCISES
  AND STOCK VESTED</b><br>
  <b>For Fiscal Year Ended December 31, 2010</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>There
  were no options exercised by the Named Executive Officers during the year ended
  December 31, 2010. </p>
<p align="left">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif"><b>EQUITY COMPENSATION
  PLAN INFORMATION</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><font face="Times New Roman, Times, serif">The
  following table provides information as of December 31, 2010 about the Common
  Stock that may be issued under all equity compensation plans of the Company.<br>
  </font></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="3" face="Times New Roman, Times, serif"><b><br>
        </b></font> </div>
    </th>
    <th align="CENTER" width="17%"><font size="3" face="Times New Roman, Times, serif">Number
      of securities to be issued upon exercise of outstanding options </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" width="16%"><font size="3" face="Times New Roman, Times, serif">Weighted-average
      exercise price of outstanding options </font>
      <hr NOSHADE>
    </th>
    <th align="CENTER" width="21%"><font size="3" face="Times New Roman, Times, serif">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%">Equity compensation plans approved by security holders (1)</td>
    <td align="RIGHT" width="17%" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        </font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font 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serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif">1,192,790</font></div>
    </td>
    <td align="RIGHT" width="16%">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$2.88
        </font></div>
    </td>
    <td align="RIGHT" width="21%" style="border-bottom: 1px solid #000000">
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serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i></i></i></font><font face="Times New Roman, Times, serif"><i><i>&nbsp</i></i></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif"></font><font face="Times New Roman, Times, serif" size="3">170,243
        </font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td height="46" colspan="4">
      <hr NOSHADE align="LEFT" width="120">
      <font size="2" face="Times New Roman, Times, serif">(1) Consists of 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 least of (a) 200,000 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 152,079 shares became available for grant under the 2004 Equity Incentive
      Plan on January 1, 2011, in addition to those set forth in the table above.</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">22<br>
  </font></p>
<hr NOSHADE>
<p align="center"><font face="Times New Roman, Times, serif"><b><br>
  COMPENSATION COMMITTEE REPORT</b><font size="3"><br>
  <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font></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 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"><font face="Times New Roman, Times, serif">&nbsp&nbsp&nbsp&nbsp&nbsp<font size="3">
  </font></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 11, 2011</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, Chairman<br>
      Thomas O. Miller</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> </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 has one or more executive
  officers serving as a member of the Company's Board of Directors or Compensation
  Committee.<br>
  <br>
  </font></p>
<p align="center"><font face="Times New Roman, Times, serif"><b>POST EMPLOYMENT
  AND CHANGE-IN-CONTROL COMPENSATION</b></font></p>
<p align="left"><font face="Times New Roman, Times, serif"><b>Change of Control
  and Severance Agreements </b></font></p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>&nbsp&nbsp&nbspIn
  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 sole discretion.<br>
  </font></p>
<p align="left"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp</i></i>&nbsp&nbsp&nbspThe
  Company renewed separate employment agreements, effective as of January 1, 2009,
  with Messrs. Kevin J. Mills, Lee A. Baillif, David W. Dunlap, Micheal L. Gifford,
  Tim I. Miller, and Leonard L. Ott for a period of three years expiring December
  31, 2011. The agreements replaced agreements that expired on December 31, 2008.
  The agreements provide that if the Company terminates the executive's employment
  without cause, the Company will pay the executive: (i) three months' base salary
  plus one month's base salary for each two years of completed employment up to
  a maximum of 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 the continuation period for base salary;
  (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 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.</font></p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">23<br>
  </font></p>
<hr NOSHADE>
<p align="left">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="247" align="LEFT">
      <div align="center"><font size="3" face="Times New Roman, Times, serif"><b>Compensation
        and Benefits <br>
        </b></font> </div>
      <hr NOSHADE>
    </th>
    <th width="14"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></th>
    <th width="119" align="CENTER">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Voluntary
        Resignation </font></div>
      <hr NOSHADE align="center">
    </th>
    <th width="24">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></div>
    </th>
    <th width="148" align="CENTER">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">For
        Cause (1) </font></div>
      <hr NOSHADE align="center">
    </th>
    <th width="24">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></div>
    </th>
    <th width="148" align="CENTER">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">For
        Good Reason (2) </font></div>
      <hr NOSHADE align="center">
    </th>
    <th width="24" align="CENTER">
      <div align="center"></div>
    </th>
    <th width="148" align="CENTER">
      <div align="center"><font size="3" face="Times New Roman, Times, serif"><b>Involuntary
        Without Cause (2)</b></font> </div>
      <hr NOSHADE align="center">
    </th>
    <th width="24">
      <div align="center"></div>
    </th>
    <th width="148" align="CENTER">
      <div align="center"><font size="3" 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="24" align="CENTER">
      <div align="center"></div>
    </th>
    <th width="148" align="CENTER">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Due
        to Death or<br>
        Disability (2) </font></div>
      <hr NOSHADE align="center">
    </th>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif">Kevin
      J. Mills</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td height="0" width="24">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="0">&nbsp;</td>
    <td width="148" align="RIGHT" height="0">&nbsp;</td>
    <td width="24" height="0">&nbsp;</td>
    <td width="148" align="RIGHT" height="0">&nbsp;</td>
    <td width="24" align="RIGHT" height="0">&nbsp;</td>
    <td width="148" align="RIGHT" height="0">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Base
      Salary (3)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$95,000</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$95,000</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$95,000</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">$95,000</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Variable
      Incentive (4)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">22,500</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">22,500</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">22,500</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">22,500</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Stock
      Options (5)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>HealthCare
      Benefits (6)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        3,704</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        3,704</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        3,704</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        3,704</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Other
      Perquisites (7)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">&nbsp;</td>
    <td height="0" width="24">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td height="0" width="24">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif">Micheal
      L. Gifford</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">&nbsp;</td>
    <td height="0" width="24">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td height="0" width="24">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Base
      Salary (3)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">87,500</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">87,500</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">87,500</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">87,500</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Variable
      Incentive (4)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">11,250</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">11,250</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">11,250</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">11,250</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Stock
      Options (5)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>HealthCare
      Benefits (6)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        3,653</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        3,053</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        3,053</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        3,053</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Other
      Perquisites (7)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">&nbsp;</td>
    <td height="0" width="24">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td height="0" width="24">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif">David
      W. Dunlap</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">&nbsp;</td>
    <td height="0" width="24">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td height="0" width="24">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Base
      Salary (3)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">85,000</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">85,000</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">85,000</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">85,000</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Variable
      Incentive (4)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">11,250</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">11,250</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">11,250</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">11,250</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Stock
      Options (5)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>HealthCare
      Benefits (6)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        3,549</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        3,549</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        3,549</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        3,549</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Other
      Perquisites (7)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">&nbsp;</td>
    <td height="0" width="24">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td height="0" width="24">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0">Leonard L. Ott</td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">&nbsp;</td>
    <td height="0" width="24">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td height="0" width="24">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="148">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Base
      Salary (3)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">77,500</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">77,500</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">77,500</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">77,500</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Variable
      Incentive (4)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">7,875</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">7,875</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">7,875</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">7,875</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Stock
      Options (5)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>HealthCare
      Benefits (6)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        3,602</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        3,602</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        3,602</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        3,602</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Other
      Perquisites (7)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="18"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
    <td width="14" height="18">&nbsp;</td>
    <td align="RIGHT" height="18" width="119">&nbsp;</td>
    <td height="18" width="24">&nbsp;</td>
    <td align="RIGHT" height="18" width="148">&nbsp;</td>
    <td height="18" width="24">&nbsp;</td>
    <td align="RIGHT" height="18" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="18">&nbsp;</td>
    <td align="RIGHT" height="18" width="148">&nbsp;</td>
    <td width="24" height="18">&nbsp;</td>
    <td align="RIGHT" height="18" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="18">&nbsp;</td>
    <td align="RIGHT" height="18" width="148">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="18">Timothy I. Miller</td>
    <td width="14" height="18">&nbsp;</td>
    <td align="RIGHT" height="18" width="119">&nbsp;</td>
    <td height="18" width="24">&nbsp;</td>
    <td align="RIGHT" height="18" width="148">&nbsp;</td>
    <td height="18" width="24">&nbsp;</td>
    <td align="RIGHT" height="18" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="18">&nbsp;</td>
    <td align="RIGHT" height="18" width="148">&nbsp;</td>
    <td width="24" height="18">&nbsp;</td>
    <td align="RIGHT" height="18" width="148">&nbsp;</td>
    <td width="24" align="RIGHT" height="18">&nbsp;</td>
    <td align="RIGHT" height="18" width="148">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Base
      Salary (3)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">77,500</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">77,500</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">77,500</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">77,500</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Variable
      Incentive (4)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">7,875</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">7,875</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">7,875</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">7,875</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Stock
      Options (5)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>HealthCare
      Benefits (6)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        4,400</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        4,400</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        4,400</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">
        4,400</font></div>
    </td>
  </tr>
  <tr bgcolor="#FFFFFF" valign="top">
    <td width="247" height="0"><font size="3" face="Times New Roman, Times, serif"><i>&nbsp&nbsp&nbsp<i>&nbsp</i></i>Other
      Perquisites (7)</font></td>
    <td width="14" height="0">&nbsp;</td>
    <td align="RIGHT" height="0" width="119">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td height="0" width="24">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</font></div>
    </td>
    <td width="24" align="RIGHT" height="0">
      <div align="center"></div>
    </td>
    <td align="RIGHT" height="0" width="148">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">-</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" face="Times New Roman, Times, serif">(1) Cause is defined
      in each executive's employment agreement 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 agreement
      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 from the date of termination for three months plus
      one month for each two years of completed service up to a maximum of six
      months.<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 otherwise been entitled for the quarter
      of termination and 50% of such bonus entitlement for the following quarter.
      Amounts included in this table assume entitlements equal to 100% of the
      target variable compensation for quarterly results in effect for 2011. <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
      agreement. 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 the expiration of
      the base salary continuation period (see note 3) or securing other employment
      that includes such benefits.<br>
      (7) There are no perquisites in the compensation packages of any of the
      executive officers.</font></td>
  </tr>
</table>
<p align="left">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">24<br>
  </font></p>
<hr NOSHADE>
<p align="center"><font face="Times New Roman, Times, serif"><br>
  <b><br>
  LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS</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>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.<br>
</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. <br>
</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.<br>
</p>
<p align="center"><b>CORPORATE GOVERNANCE</b><br>
</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 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 the provisions of the Sarbanes-Oxley Act, the Dodd-Frank
  Act and pending legislation. As a result of review of these matters, as well
  as the emerging best practices of other companies, the Company has implemented
  the following:<br>
</p>
<ul>
  <li><i>Executive Compensation Authority; Compensation Committee</i><br>
    <br>
  </li>
  <li>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>
    <br>
  </li>
  <li>The Compensation Committee reviews and approves compensation programs 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. <br>
    <br>
  </li>
  <li>The charter of the Compensation Committee, attached as Appendix A, makes
    explicit: <br>
    <br>
    o the Committee's ability to retain independent consultants and experts as
    it sees fit, at Company expense;<br>
    <br>
    o the Compensation Committee's responsibilities to assess the risk associated
    with compensation programs</li>
</ul>
<p align="center"><font face="Times New Roman, Times, serif" size="3">25<br>
  </font></p>
<hr NOSHADE>
<p><i>Director Independence</i><br>
</p>
<ul>
  <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. Each Committee is tasked to establish goals, evaluate performance,
    review the adequacy of its Charter, and recommend changes to the Board of
    Directors.<br>
  </li>
</ul>
<p><i>Audit Committee</i><br>
</p>
<ul>
  <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 &quot;audit committee financial expert,&quot; as required by SEC regulations.<br>
    <br>
  </li>
  <li>The Audit Committee's charter formalizes and makes explicit the following:<br>
    <br>
    o The Audit Committee's ability to retain independent consultants and experts
    as it sees fit, at Company expense;<br>
    <br>
    o The Audit Committee's authority to appoint, review and assess the performance
    of the Company's independent auditors;<br>
    <br>
    o 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>
    o 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>
    o The Audit Committee's duty to maintain a formal complaint monitoring procedure
    (a &quot;whistleblower&quot; policy) to enable confidential and anonymous
    reporting to the Audit Committee; <br>
    <br>
    o The Audit Committee's authority over the independent auditors' rotation
    policy; and<br>
    <br>
    o The Audit Committee's responsibilities to oversee the Company's risk management
    policies and practices.</li>
</ul>
<p><i>Other Governance Matters</i><br>
</p>
<ul>
  <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, Audit and Nominating Committees 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>The Company has a policy that the Board of Directors reviews its own performance
    on an annual basis. <br>
    <br>
  </li>
  <li>The Company prohibits loans to its officers and directors.<br>
  </li>
</ul>
<p align="center"><font face="Times New Roman, Times, serif" size="3">26<br>
  </font></p>
<hr NOSHADE>
<p><i>Board Leadership</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
  Company is focused on its corporate governance practices and values independent
  board oversight as an essential component of strong corporate performance to
  enhance stockholder value. Our commitment to independent oversight is demonstrated
  by the fact that all of our directors, except for Messrs. Mills and Gifford,
  are independent. In addition, all of the members of our Board's committees are
  independent. Our Board of Directors acts independently of management and regularly
  holds independent director sessions without members of management present. In
  addition, the Company has a separate position of Chairman of the Board which
  is held by Mr. Bass, an independent director, who provides additional oversight
  to the management of the Company. Our Board believes that the current board
  leadership structure is best for the Company and its stockholders at this time
  as it allows the recommendations and decisions of the President and Chief Executive
  Officer, who views such recommendations and decisions from a management perspective,
  to be reviewed and discussed with the Chairman of the Board, who views such
  recommendations and decisions from the perspective of an independent director.<br>
</p>
<p><i>Risk Management</i><br>
</p>
<ul>
  <li>The Company has designated its Chief Financial and Administrative Officer
    as its Risk Management Officer with responsibility for identifying, assessing,
    monitoring and reporting risks that could potentially impact the business.<br>
    <br>
  </li>
  <li>The Company summarizes the primary risks associated with the business in
    its quarterly and annual reports on Forms 10-Q and 10-K, respectively.<br>
    <br>
  </li>
  <li>The Audit Committee has primary responsibility for Board oversight of risk
    management. The Audit Committee meets as necessary, at least quarterly, and
    matters involving risk are included in the Audit Committee's agenda. The Chairman
    of the Audit Committee who is also Chairman of the Board and the President
    and Chief Executive Officer conduct a call at least weekly to review Company
    operations and such discussions include a review of risk matters as appropriate.<br>
  </li>
</ul>
<p><i>Compensation Risk Considerations</i><br>
</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
  Compensation Committee has responsibility for oversight of risk management associated
  with compensation matters and risks relating to compensation policies and practices
  are considered at each meeting of the Committee. The Committee does not believe
  that the Company's compensation policies and practices promote risky behavior
  on the part of its employees as discussed below.<br>
</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
  Compensation Committee considers, in establishing and reviewing the employee
  compensation programs, whether the programs encourage unnecessary or excessive
  risk taking. The Company, after reviewing and discussing the compensation programs
  with the Compensation and Audit Committees of the Board, believes that the programs
  are balanced and do not motivate or encourage unnecessary or excessive risk
  taking. Base salaries are fixed in amount and thus do not encourage risk taking.
  While the performance-based awards focus on achievement of short-term or annual
  goals, and short-term goals may encourage the taking of short-term risks at
  the expense of long-term results, the Company's performance-based award programs
  represent a small percentage of employees' total compensation opportunities.
  The Company believes that the programs appropriately balance risk and the desire
  to focus employees on specific short-term goals important to the Company's success,
  and that they do not encourage unnecessary or excessive risk taking.<br>
</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">27<br>
  </font></p>
<hr NOSHADE>
<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>Compensation
  provided to employees in the form of long-term equity awards through stock option
  grants are important to help further align employees' interests with those of
  the Company's stockholders. The Company believes that these awards do not encourage
  unnecessary or excessive risk taking since the ultimate value of the awards
  is tied to the Company's stock price, and since awards are subject to long-term
  vesting schedules to help ensure that executives have significant value tied
  to long-term stock price performance.<br>
</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>More
  details on the Company's corporate governance initiatives, including copies
  of its Code of Business Conduct and Ethics and each of the Committee charters
  can be found in the &quot;Corporate Governance&quot; section of the Company's
  web site at http://www.mkr-group.com/SCKT/board_committee.html.<br>
</p>
<p><i>Policy for Director Recommendations and Nominations</i><br>
</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
  Board members, 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 who 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.<br>
</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 Mobile, Inc.<br>
      39700 Eureka Drive<br>
      Newark, CA 94560 <br>
      </font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif">The notice must include:</font></p>
<ul>
  <ul>
    <ul type="disc">
      <li><font face="Times New Roman, Times, serif">the candidate's name and
        home and business contact information;<br>
        <br>
        </font></li>
      <li><font face="Times New Roman, Times, serif">detailed biographical data
        and relevant qualifications;<br>
        <br>
        </font></li>
      <li><font face="Times New Roman, Times, serif">a signed letter from the
        candidate confirming his or her willingness to serve;<br>
        <br>
        </font></li>
      <li><font face="Times New Roman, Times, serif">information regarding any
        relationships between the candidate and the Company within the last three
        years; and<br>
        <br>
        </font></li>
      <li><font face="Times New Roman, Times, serif">evidence of the required
        ownership of Common Stock by the recommending stockholder(s).</font></li>
    </ul>
  </ul>
</ul>
<p><font face="Times New Roman, Times, serif"><br>
  <font size="3"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&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 on Page 2 in the section entitled
  "<i>Deadline for Receipt of Stockholder Proposals to be Included in the Company's
  Proxy Materials.</i>"</font></p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">28<br>
  </font></p>
<hr NOSHADE>
<p><font face="Times New Roman, Times, serif"> <font size="3"><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:</font></p>
<ul>
  <ul>
    <ul type="disc">
      <li><font face="Times New Roman, Times, serif">The current size and composition
        of the Board of Directors and the needs of the Board of Directors and
        its various committees.<br>
        <br>
        </font></li>
      <li><font face="Times New Roman, Times, serif">Such factors as judgment,
        independence, character and integrity, area of expertise, diversity of
        experience, length of service and potential conflicts of interest. The
        Nominating Committee recognizes that diversity in these areas brings value
        to the collective impact of the Board on the Company. The Company does
        not consider or make its recommendations based on race, gender, religion,
        age, sexual orientation or other matters the Committee deems not relevant
        to effective board service. <br>
        <br>
        </font></li>
      <li><font face="Times New Roman, Times, serif">Such other factors as the
        Nominating Committee may consider appropriate.</font><font face="Times New Roman, Times, serif">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp</font><font face="Times New Roman, Times, serif">
        <font size="3"><i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i></font></font></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>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><font face="Times New Roman, Times, serif">The highest personal and
        professional ethics and integrity.<br>
        <br>
        </font></li>
      <li><font face="Times New Roman, Times, serif">Proven achievement and competence
        in the nominee's field, and the ability to exercise sound business judgment.<br>
        <br>
        </font></li>
      <li><font face="Times New Roman, Times, serif">Skills complementary to those
        of the existing members of the Board of Directors.<br>
        <br>
        </font></li>
      <li><font face="Times New Roman, Times, serif">The ability to assist and
        support management and make significant contributions to the Company's
        success.<br>
        <br>
        </font></li>
      <li><font face="Times New Roman, Times, serif">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.</font></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><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
  Nominating Committee believes that the current nominees for director all meet
  the general criteria for board membership as described in this section. In addition,
  each nominee brings particular strengths to the Board. For example, all incumbent
  directors have a thorough knowledge and understanding of the Company. Mr. Bass
  also has extensive experience as a former chief executive officer or senior
  manager in ten companies over the past 35 years in the fields of networking,
  semiconductors and computing platforms. Mr. Miller has experience as the former
  President of Intermec, a public manufacturer of rugged bar code scanners and
  terminal solutions for the mobile computing marketplace, and has been Chairman
  of A.I.M., an international trade association representing Automatic Identification/Data
  Capture and mobility technology solution providers. He actively consults in
  these areas. Mr. Malmed has been a senior sales and marketing executive with
  technology based companies including SanDisk (memory products), Syquest, Maxtor
  and Quantum (electronic storage products). Mr. Sealey has well established credentials
  as a senior marketing executive and marketing consultant, and is a college professor
  of marketing. Messrs. Bass, Emery and Sealey hold doctorate degrees in their
  respective fields. Mr. Emery has a strong background working in the healthcare
  industry with an emphasis on healthcare management systems. Both Mr. Mills and
  Mr. Gifford have strong engineering backgrounds and a history of innovative
  leadership and understanding of the business mobility market. Mr. Mills has
  more than 17 years of experience with the Company, the last 11 years as President
  and Chief Executive Officer. Mr. Gifford co-founded the Company and has been
  a key part of its growth and development in serving the business mobility market
  since the Company's inception.</font></p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">29<br>
  </font></p>
<hr NOSHADE>
<p><font face="Times New Roman, Times, serif"><i>Stockholder Communications to
  Directors</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></font><font face="Times New Roman, Times, serif">Stockholders
  may communicate directly with the members of the Board of Directors by sending
  an email to socketboard@socketmobile.com. 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> </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><font face="Times New Roman, Times, serif">In
  January 2011, 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.<i><br>
  <br>
  Code of Business Conduct and Ethics</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></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.</p>
<p align="left">&nbsp;</p>
<p align="left">&nbsp;</p>
<p align="left">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">30<br>
  </font></p>
<hr NOSHADE>
<p>&nbsp;</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><br>
  <i>&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<i>&nbsp&nbsp&nbsp&nbsp&nbsp</i></i>The Board
  of Directors maintains an Audit Committee comprised of three of the Company's
  outside directors. The Audit Committee oversees the Company's financial processes
  on behalf of the Board of Directors, although management has the primary responsibility
  for preparing the financial statements and maintaining the Company's financial
  reporting process including the system of internal controls. In fulfilling its
  oversight responsibilities, the Audit Committee reviewed with management the
  audited financial statements in the Annual Report to the Securities and Exchange
  Commission on Form 10-K for the year ended December 31, 2010, including discussing
  the quality of the accounting principles, the reasonableness of significant
  judgments, including the identification and assessment of risks, 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>
  </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
  Audit Committee reviewed the 2010 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 applicable requirements
  of the Public Company Accounting Oversight Board regarding the independent accountants'
  communications with the audit committee concerning independence.<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
  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, 2010. In addition, a conference call
  among members of the Audit Committee, the auditors and management was held each
  quarter during fiscal 2010 to review the Company's quarterly financial reports
  prior to their issuance.<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>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, 2010. The Audit Committee
  also approved the appointment of Moss Adams LLP as the Company's independent
  auditors for the year ending December 31, 2011.<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
  foregoing report has been submitted by the undersigned in our capacity as members
  of the Audit Committee of the Board of Directors.</font><font size="3" face="Times New Roman, Times, serif"><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: </font><font size="2" face="Times New Roman, Times, serif"><font size="3">March
      11 </font></font><font size="3" face="Times New Roman, Times, serif">, 2011</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>
      charles C. Emery, Jr.<br>
      Leon Malmed</font></td>
  </tr>
</table>
<p align="center"><font size="3" face="Times New Roman, Times, serif"> <br>
  </font></p>
<p align="center">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">31<br>
  </font></p>
<hr NOSHADE>
<p align="center"><font face="Times New Roman, Times, serif"> </font></p>
<p align="center"><font face="Times New Roman, Times, serif"><b>OTHER MATTERS</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><font face="Times New Roman, Times, serif">The
  Company knows of no other matters to be submitted at the 2011 Annual Meeting
  of Stockholders. If any other matters properly come before the 2011 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.<br>
  <br>
  <br>
  </font></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: </font>March 11, 2011 </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">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">32<br>
  </font></p>
<hr NOSHADE>
<p align="center">&nbsp;</p>
<p align="center"><b>APPENDIX A</b><br>
  <br>
  <b>SOCKET MOBILE, INC.</b><br>
  <b><br>
  CHARTER FOR THE COMPENSATION COMMITTEE<br>
  OF THE BOARD OF DIRECTORS<br>
  As Revised February 2011</b></p>
<p align="left"><b><br>
  MEMBERSHIP AND ORGANIZATION</b><br>
</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
  Committee shall consist of no fewer than two members. The members of the Committee
  shall be independent of the Company and its affiliates, and shall otherwise
  be deemed &quot;Independent Directors&quot; under the following requirements
  or definitions:<br>
</p>
<ul>
  <li>Independence requirements of the listing standards of The Nasdaq National
    Market<br>
    <br>
  </li>
  <li> &quot;Non-employee director&quot; definition of Rule 16b-3 under Section
    16 of the Securities Exchange Act of 1934<br>
    <br>
  </li>
  <li>&quot;Outside director&quot; definition of Section 162(m) of the Internal
    Revenue Code of 1986<br>
  </li>
</ul>
<p align="left"><b>RESPONSIBILITIES AND AUTHORITY</b><br>
</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 delegated to the Committee the following authority:<br>
</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>At
  least annually review and approve the executive officer compensation programs
  in accordance with the guidelines provided below, and, when considered appropriate
  by the Committee, other key employees and consultants.<br>
</p>
<ul>
  <li>Approve all special prerequisites, special cash payments and other special
    compensation and benefit arrangements for the executive officers.<br>
    <br>
  </li>
  <li>Review trends in management compensation, oversee the development of new
    compensation plans, and, when necessary, approve the revision of executive
    plans.<br>
    <br>
  </li>
  <li>Set specific corporate objectives relevant to executive compensation, and
    review executive officer performance in light of these objectives.<br>
    <br>
  </li>
  <li>Review and approve employment agreements, severance arrangements, and applicable
    change in control agreements/provisions for the executive officers.<br>
    <br>
  </li>
  <li> Interpret the Company's equity incentive plans and benefits programs, provided
    that such plans may be amended only with the consent of the Board of Directors.<br>
    <br>
  </li>
  <li>Produce a report on executive compensation for inclusion in the Company's
    annual proxy statement.<br>
    <br>
  </li>
  <li>Review and recommend director compensation for approval by the Board of
    Directors.<br>
    <br>
  </li>
  <li>Annually review the performance of the Committee.<br>
    <br>
  </li>
  <li>Assess the adequacy of this Charter annually and recommend changes to the
    Board of Directors.</li>
</ul>
<p><b>EXECUTIVE OFFICER COMPENSATION PROGRAMS</b><br>
</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
  three major components of the executive officer compensation are: (i) base salary,
  (ii) variable incentive awards, and (iii) long-term equity-based incentive awards.
  The purpose of these programs is to attract, retain motivate and reward employees.
  The base salary, variable incentive and long term equity components are based
  on a pay-for-performance approach, targeted at market median for similar size
  companies in similar fields of business when target performance objectives are
  achieved. Actual compensation can vary depending on each executive officer's
  position, responsibilities and overall experience.<br>
</p>
<p><i><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>Base
  Salary</i>. The Committee establishes base salaries for executive officers,
  normally within ten percent of the median paid for comparable positions at other
  similarly sized companies as set forth in national and local compensation surveys.
  Base pay increases vary according to individual contributions to the Company's
  success and comparisons to similar positions within the Company and at other
  comparable companies.</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">33<br>
  </font></p>
<hr NOSHADE>
<p><i><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>Variable
  Incentive Awards</i>. To reinforce the importance of Company goals, the Committee
  believes that a substantial portion of the quarterly and annual compensation
  of each executive officer should be in the form of variable incentive pay. The
  variable incentive award set aside for each executive officer is determined
  in part on the basis of the Company's achievement of the quarterly and annual
  financial performance targets established at the beginning of the fiscal year
  and also on individual quarterly and annual objectives. The incentive plan requires
  a threshold level of Company performance that must be attained before any financial
  performance incentives are awarded. Once the threshold is reached, specific
  formulas are in place to calculate the actual incentive payment for each officer.
  A target is set for each executive officer based on targets for similar positions
  at comparable companies.<br>
</p>
<p><i><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>Long-Term,
  Equity-Based Incentive Awards</i>. The goal of the Company's long-term, equity-based
  incentive awards is to align the interests of executive officers with 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.
  The Committee determines the size of long-term, equity-based incentives according
  to each executive's position within the Company and sets a level it considers
  appropriate to create a meaningful opportunity for stock ownership. In addition,
  the Committee takes into account an individual's recent performance, his or
  her potential for future responsibility and promotion, comparable awards made
  to individuals in similar positions with comparable companies, and the number
  of unvested options held by each individual at the time of the new grant. The
  relative weight given to each of these factors varies among individuals at the
  Committee's discretion.<br>
</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>Generally,
  each option granted under the 2004 Equity Incentive Plan vests in periodic installments
  over a four-year period, contingent upon the executive officer's continued employment
  with the Company. Accordingly, the option will provide a return only if the
  officer remains with the Company and only if the market price appreciates over
  the option term.<br>
</p>
<p><b>COMPENSATION OF CHIEF EXECUTIVE OFFICER</b><br>
</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
  factors considered by the Committee in determining the compensation of the Chief
  Executive Officer, in addition to survey data, include the Company's operating
  and financial performance, as well as his or her leadership and establishment
  and implementation of strategic direction for the Company. The Committee considers
  stock options to be an important component of the Chief Executive Officer's
  compensation as a way to reward performance and motivate leadership for long
  term growth and profitability.<br>
</p>
<p><b>SUBCOMMITTEES AND ADVISORS</b><br>
</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
  Committee may delegate the above responsibilities to subcommittees when appropriate
  except the Compensation Committee shall recommend for approval for the full
  Board the Annual Incentive Awards Program. The Compensation Committee's responsibility
  will be to ensure and approve all quarterly and annual requests for payments
  in accordance with the terms of the approved plan. The Committee has the authority
  to retain consultants on behalf of the Company to assist in its evaluation of
  compensation. The Committee shall also have authority to obtain advice and assistance
  from legal counsel, accountants or other advisors, as required.<br>
</p>
<p><b>MEETINGS</b><br>
</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
  Committee shall elect its own chair and establish its own procedures. The Committee
  will meet regularly. Special meetings may be convened as required. The Committee
  will maintain written minutes of its meetings, which will be filed with the
  minutes of the meeting the Board of Directors. The Committee, or its Chair,
  shall report to the Board of Directors on the results of these meetings.</p>
<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="left">&nbsp;</p>
<p align="center"><b>APPENDIX B</b><br>
  <br>
  <b>SOCKET MOBILE, INC.</b><br>
  <b><br>
  FORM OF MANAGEMENT INCENTIVE VARIABLE COMPENSATION PLAN<br>
  Effective January 1, 2011</b></p>
<p align="left"><u>General</u></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>Socket
  Mobile, Inc. (&quot;Company&quot;) will make quarterly and annual incentive
  compensation payments to participating officers and other designated employees
  of the Company. Participation and payments are subject to the approval of the
  Compensation Committee of the Board of Directors.<br>
</p>
<p align="left"><u>Participants</u><br>
</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>All
  officers and designated employees shall be participants as approved by the Compensation
  Committee. This list may be amended from time to time by the Compensation Committee.<br>
</p>
<p align="left"><u>Quarterly target compensation</u><br>
</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
  Compensation Committee of the Board shall recommend for Board of Directors approval
  quarterly and annual target compensation target amounts for each participant.
  The allocation of the annual compensation targets shall be as follows: Q1: 15%;
  Q2: 15%; Q3: 15%; Q4: 15%; Annual 40%.<br>
</p>
<p align="left"><i><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>Example</i>:
  If an individual annual compensation target is $40,000, allocated target compensation
  amounts are: Q1: $6,000; Q2: $6,000; Q3: $6,000; Q4: $6,000 and the annual target
  is $16,000.<br>
</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>Target
  Compensation amounts for each period shall be divided into two components: 1)
  total revenue attainment (50%); and 2) earnings before interest, taxes, depreciation
  and amortization of assets (EBITDA) (50%). Attainment and related payouts shall
  be determined for each of these two components as described in this Plan. Payout
  shall be the sum of the attainment totals for the two components subject to
  the Pool Payout limitation.<br>
</p>
<p align="left"><b><u>Component earnings computation</u></b><br>
</p>
<p align="left"><b><i><font size="3" face="Times New Roman, Times, serif">&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp</font><u>Total
  Revenue attainment</u></i></b>: Actual Total Revenues shall be compared to Total
  Revenues in the Board of Directors approved financial plan (&quot;Plan&quot;)
  for each of the quarterly or annual measurement periods and Percentage Attainment
  calculated. To calculate total payouts, the annual compensation payout target
  is multiplied by the period allocation percentage (15% for a quarter or 40%
  for annual) x the component percentage applicable to the Revenue component (50%)
  x the percentage attainment factor as described in the following table:<br>
</p>
<table width="80%" border="0" cellspacing="0" align="center">
  <tr>
    <td width="35%"><u>Percentage Attainment</u></td>
    <td width="8%">&nbsp;</td>
    <td width="57%"><u>Factor</u></td>
  </tr>
  <tr>
    <td width="35%">Less than 80%</td>
    <td width="8%">&nbsp;</td>
    <td width="57%">Zero</td>
  </tr>
  <tr>
    <td width="35%">80% to 200%</td>
    <td width="8%">&nbsp;</td>
    <td width="57%">Same as percentage Attainment (.8 to 2.0)</td>
  </tr>
  <tr>
    <td width="35%">More than 200%</td>
    <td width="8%">&nbsp;</td>
    <td width="57%">2.0</td>
  </tr>
</table>
<p align="center"><font face="Times New Roman, Times, serif" size="3">35<br>
  </font></p>
<hr NOSHADE>
<blockquote>
  <blockquote>
    <p><b><i>Example #1</i></b> quarterly calculation (Amounts in thousands of
      $):<br>
    </p>
    <p><i>Percentage attainment: Actual revenue of $5,250 Vs. Plan of $5,000 =
      105.0% attainment <br>
      </i></p>
    <p><i>Revenue payout target: Annual pool target x Quarterly allocation x component
      factor<br>
      </i></p>
    <blockquote>
      <blockquote>
        <p><i>$400,000 x 15% x 50% = $30,000 </i></p>
      </blockquote>
    </blockquote>
    <p><i>Earned payout: Target payout x percentage attainment factor = earned
      payout<br>
      </i></p>
    <blockquote>
      <blockquote>
        <p><i>$30,000 x 105.0% = $31,500 </i></p>
      </blockquote>
    </blockquote>
    <p><i>Notes: earned payout is further subject to the payout limitation. Payouts
      are allocated proportionally to each individual's compensation target. <br>
      </i> </p>
    <p><b><i>Example #2</i></b><i> annual calculation (Amounts in thousands of
      $):</i><br>
    </p>
    <p><i>Percentage attainment: Actual revenue of $18,000 Vs. Plan of $20,000
      = 90.0% attainment<br>
      </i></p>
    <p><i>Revenue payout target: Annual pool target x Annual allocation x component
      factor<br>
      </i></p>
    <blockquote>
      <p><i>$400,000 x 40% x 50% = $80,000</i><i> </i></p>
    </blockquote>
    <p><i>Earned payout: Target payout x percentage attainment factor = earned
      payout<br>
      </i></p>
    <blockquote>
      <p><i>$80,000 x 90% = $72,000 </i></p>
    </blockquote>
    <p><i>Note: earned payout is further subject to the payout limitation. Payouts
      are allocated proportionally to each individual's compensation target. </i></p>
  </blockquote>
</blockquote>
<p><b><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><u>EBITDA
  attainment</u></b>: Earnings before interest, taxes, depreciation and amortization
  of assets per the annual financial Plan for each quarterly or annual measurement
  period shall be compared to actual EBITDA dollars and percentage attainment
  calculated. To calculate total payouts, the annual compensation payout target
  is multiplied by the period allocation percentage (15% for a quarter or 40%
  for annual) x the component percentage applicable to the EBITDA component (50%)
  x the percentage attainment factor as described in the following table:</p>
<table width="80%" border="0" cellspacing="0" align="center">
  <tr>
    <td width="35%"><u>Percentage Attainment</u></td>
    <td width="8%">&nbsp;</td>
    <td width="57%"><u>Factor</u></td>
  </tr>
  <tr>
    <td width="35%">Less than 80%</td>
    <td width="8%">&nbsp;</td>
    <td width="57%">Zero</td>
  </tr>
  <tr>
    <td width="35%">80% to 200%</td>
    <td width="8%">&nbsp;</td>
    <td width="57%">Same as percentage Attainment (.8 to 2.0)</td>
  </tr>
  <tr>
    <td width="35%">More than 200%</td>
    <td width="8%">&nbsp;</td>
    <td width="57%">2.0</td>
  </tr>
</table>
<blockquote>
  <blockquote>
    <p><b><br>
      <i>Example 1</i></b><i> quarterly measurement (amounts in thousands of $):
      <br>
      </i></p>
    <p><i>Percentage Attainment: Actual EBITDA of $450 Vs. Plan of $500 = 90%
      attainment<br>
      </i></p>
    <p><i>EBITDA target payout: Annual pool target x quarterly allocation % x
      component factor<br>
      </i></p>
    <p><i>$400,000 x 15% x 50% = $30,000<br>
      </i></p>
    <p><i>EBITDA earned payout: Target payout x percentage attainment factor<br>
      </i></p>
    <p><i>$30,000 x .9 = $27,000<br>
      </i></p>
    <p><i>Note: earned payout is further subject to the payout limitation. Payouts
      are allocated proportionally to each individual's compensation target. </i>
    </p>
  </blockquote>
</blockquote>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">36 </font></p>
<hr NOSHADE>
<blockquote>
  <blockquote>
    <p><i><b>Example 2</b> annual measurement (amounts in thousands of $):<br>
      </i></p>
    <p><i>Annual: Actual EBITDA of $1,000 Vs. Plan of $900 = 111.1% attainment<br>
      </i></p>
    <p><i>EBITDA target payout: Annual target x Annual allocation % x component
      factor<br>
      </i></p>
    <p><i>$400,000 x 40% x 50% = $80,000<br>
      </i></p>
    <p><i>EBITDA earned payout: Target payout x percentage attainment factor <br>
      </i></p>
    <p><i>$80,000 x .9 = $72,000<br>
      </i></p>
    <p><i>Note: earned payout is further subject to the payout limitation. Payouts
      are allocated proportionally to each individual's compensation target. </i><br>
    </p>
  </blockquote>
</blockquote>
<p><b><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></b><u><b>Pool
  Payout Limitation:</b></u><br>
</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>Total
  payouts in any measurement period may not exceed 50% of EBITDA. The Board of
  Directors may, in its sole discretion, adjust the pool payout limitation percentage
  if such changes are deemed to be in the best interests of the Company.<br>
</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><u>Adjustments
  to actual amounts used in the calculations</u>: The Board of Directors may,
  in its sole discretion, adjust actual Total Revenues or actual EBITDA used in
  the calculation to remove amounts that are deemed to be not in the ordinary
  course of business that should not be subject to performance measurements. <br>
</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><u>Timing
  of payouts</u>: Payouts will be made as soon as financial results have been
  determined and after approval by the Compensation Committee. Payouts should
  be made no later than 45 days after the end of interim quarters and 60 days
  after the end of the year. Q4 and annual payments should be based on audited
  numbers and payments made only after audited results have been finalized.<br>
</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><u>Disputes</u>:
  Any disputes shall be resolved by the Compensation Committee or by the Board
  of Directors, which shall have complete and final determination of all matters
  relating to this Plan.<br>
</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><u>Term
  and termination, Plan changes</u>: This Plan shall be effective commencing January
  1, 2011 and may be terminated or changed without notice by the Compensation
  Committee. <br>
</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><u>Eligibility
  in the event of employee termination</u>: Unless superceded by other termination
  arrangements, participants who terminate employment during a quarter shall be
  entitled to a pro rata share of the bonus entitlement calculated and paid after
  completion of the quarter. </p>
<p>&nbsp; </p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">37 </font></p>
<hr NOSHADE>
<p align="center"><b>APPENDIX A TO MANAGEMENT INCENTIVE VARIABLE COMPENSATION
  PLAN</b></p>
<p align="center"><b><br>
  PLAN PARTICIPANTS AND VARIABLE COMPENSATION TARGETS </b></p>
<table width="72%" border="1" cellspacing="0" align="center">
  <tr>
    <td width="20%">
      <div align="center">Name</div>
    </td>
    <td width="3%">&nbsp;</td>
    <td width="37%">
      <div align="center">Title</div>
    </td>
    <td width="2%">&nbsp;</td>
    <td width="38%">Target Amount</td>
  </tr>
  <tr>
    <td width="20%">&nbsp;</td>
    <td width="3%">&nbsp;</td>
    <td width="37%">
      <div align="center"></div>
    </td>
    <td width="2%">&nbsp;</td>
    <td width="38%">&nbsp;</td>
  </tr>
  <tr>
    <td width="20%">&nbsp;</td>
    <td width="3%">&nbsp;</td>
    <td width="37%">
      <div align="center">Totals</div>
    </td>
    <td width="2%">&nbsp;</td>
    <td width="38%">$</td>
  </tr>
</table>
<p></p>
<p align="center">&nbsp;</p>
<blockquote>
  <blockquote>
    <blockquote>
      <blockquote>
        <blockquote>
          <p>Allocation of annual target:</p>
        </blockquote>
      </blockquote>
    </blockquote>
  </blockquote>
</blockquote>
<div align="center">
  <table width="76%" border="0" cellspacing="0">
    <tr>
      <td width="29%">Measurement Period</td>
      <td width="3%">&nbsp;</td>
      <td width="25%">
        <div align="center">Percentage</div>
      </td>
      <td width="3%">
        <div align="center"></div>
      </td>
      <td width="40%">
        <div align="center">Totals</div>
      </td>
    </tr>
    <tr>
      <td width="29%" height="109">
        <div align="center">Q1 201x<br>
          Q2 201x<br>
          Q3 201x<br>
          Q4 201x<br>
          Annual<br>
        </div>
      </td>
      <td width="3%" height="109">&nbsp;</td>
      <td width="25%" height="109">
        <div align="center">15%<br>
          15%<br>
          15%<br>
          15%<br>
          <u>40%</u><br>
        </div>
      </td>
      <td width="3%" height="109">&nbsp;</td>
      <td width="40%" height="109">
        <div align="center">$<br>
          $<br>
          $<br>
          $<br>
          $</div>
      </td>
    </tr>
    <tr>
      <td width="29%">
        <div align="center">Total </div>
      </td>
      <td width="3%">
        <div align="center"></div>
      </td>
      <td width="25%">
        <div align="center"><u>100% </u></div>
      </td>
      <td width="3%">&nbsp;</td>
      <td width="40%">
        <div align="center">$</div>
      </td>
    </tr>
    <tr>
      <td width="29%">&nbsp;</td>
      <td width="3%">&nbsp;</td>
      <td width="25%">&nbsp;</td>
      <td width="3%">&nbsp;</td>
      <td width="40%">&nbsp;</td>
    </tr>
  </table>
</div>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">38</font></p>
<hr NOSHADE>
<p>&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 Mobile, Inc.</b></font></p>
<p align="center"><font face="Times New Roman, Times, serif" size="3"> <b>2011
  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>The
  undersigned stockholder of SOCKET MOBILE, INC., a Delaware corporation, hereby
  acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy
  Statement, each dated March 11, 2011, 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 2011 Annual Meeting of Stockholders of SOCKET
  MOBILE, INC. to be held on Wednesday, April 27, 2011 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:</font></p>
<table width="100%" border=0 cellspacing=0 cellpadding=0>
  <tr valign="TOP">
    <td width="2%"><font size="3" face="Times New Roman, Times, serif">1.</font></td>
    <td width="1%"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan=5><font size="3" face="Times New Roman, Times, serif">ELECTION
      OF SEVEN DIRECTORS.</font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="1%"><font size="3" face="Times New Roman, Times, serif"><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" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="1%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td colspan=5><font size="3" face="Times New Roman, Times, serif"><br>
      Nominees: Charlie Bass; Kevin J. Mills; Charles C. Emery, Jr.; Micheal L.
      Gifford; Leon Malmed; Thomas O. Miller; Peter Sealey</font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="1%"><font size="3" face="Times New Roman, Times, serif"><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" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="1%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td colspan=5><font size="3" face="Times New Roman, Times, serif"><br>
      Charlie Bass; Kevin J. Mills; Charles C. Emery, Jr.; Micheal L. Gifford;
      Leon Malmed; Thomas O. Miller; Peter Sealey</font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%" height="42"><font size="3" face="Times New Roman, Times, serif"><br>
      2.</font></td>
    <td width="1%" height="42"><font size="3" face="Times New Roman, Times, serif"><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, 2011.</font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%"><font size="3" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="1%"><font size="3" face="Times New Roman, Times, serif"><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">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="70"><font face="Times New Roman, Times, serif"><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 AND AS THE PROXIES DEEM
      ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.</b></font></td>
  </tr>
  <tr valign="TOP">
    <td width="2%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="1%"><font size="2" face="Times New Roman, Times, serif"><br>
      &nbsp;</font></td>
    <td width="27%"><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="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>
      <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="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>
      <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>,
      2011<br>
      Date </font></td>
  </tr>
  <tr valign="TOP">
    <td colspan="7" height="51"><font size="2" face="Times New Roman, Times, serif"><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>
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