<SEC-DOCUMENT>0000944075-12-000014.txt : 20120312
<SEC-HEADER>0000944075-12-000014.hdr.sgml : 20120310
<ACCEPTANCE-DATETIME>20120312132628
ACCESSION NUMBER:		0000944075-12-000014
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20120425
FILED AS OF DATE:		20120312
DATE AS OF CHANGE:		20120312
EFFECTIVENESS DATE:		20120312

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:		12683303

	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-2012.htm
<DESCRIPTION>DEF 14A
<TEXT>
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<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">SOCKET MOBILE, INC.</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">NOTICE OF 2012 ANNUAL MEETING OF
STOCKHOLDERS</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">To Be Held April 25, 2012</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">Dear Stockholders:</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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 25, 2012 at 9:00 a.m., local time, at the Company's headquarters at 39700 Eureka Drive, Newark, California
94560 for the following purposes:</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">(1)&#9;To elect
seven directors to serve until their respective successors are elected;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">(2) To ratify the
appointment of Moss Adams LLP as independent public accountants of the Company for the fiscal year ending December 31, 2012.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">(3)&#9;To transact
such other business as may properly come before the meeting or any adjournment thereof.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The foregoing items
of business are more fully described in the Proxy Statement accompanying this notice.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Only stockholders
of record at the close of business on February 27, 2012 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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 3.5in; text-align: justify">Sincerely,</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 3.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 3.5in; text-align: justify">Kevin J. Mills</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 3.5in; text-align: justify">President and Chief Executive Officer</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in">Newark, California</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in">March 9, 2012</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">YOUR VOTE IS IMPORTANT.</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">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, OR VOTE BY PHONE OR BY INTERNET WHERE AVAILABLE.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">SOCKET MOBILE, INC.</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">PROXY STATEMENT FOR</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">2012 ANNUAL MEETING OF STOCKHOLDERS</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">INFORMATION CONCERNING SOLICITATION
AND VOTING</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">GENERAL</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The enclosed proxy
is solicited on behalf of the Board of Directors of Socket Mobile, Inc. (the &quot;Company&quot;), for use at the 2012 Annual Meeting
of Stockholders to be held Wednesday April 25, 2012 at 9:00 a.m., local time, or at any adjournment thereof, for the purposes set
forth herein and in the accompanying Notice of 2012 Annual Meeting of Stockholders. The 2012 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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Notice of the availability
of these proxy solicitation materials and our Annual Report on Form 10-K for the year ended December 31, 2011, including financial
statements, were first mailed on or about March 16, 2012 to all stockholders entitled to vote at the 2012 Annual Meeting.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 9pt 0 0"><B>IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 9pt 0 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The proxy materials
are available at </FONT>http://www.socketmobile.com/2012-proxy-materials.html<FONT STYLE="font-family: Times New Roman, Times, Serif">
<B>.</B> 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
<B>800-856-9390</B>. Printed copies will be mailed within 3 business days of receipt of the request. </FONT></P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">RECORD DATE AND PRINCIPAL SHARE
OWNERSHIP</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Holders of record
of our Common Stock at the close of business on February 27, 2012 (the &quot;Record Date&quot;) are entitled to notice of and to
vote at the 2012 Annual Meeting. At the Record Date, 4,835,695 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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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&rsquo;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.</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">REVOCABILITY OF PROXIES</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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 2012 Annual Meeting
and voting in person.</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in"><B>VOTING AND SOLICITATION</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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 2012 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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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.</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">QUORUM; VOTE REQUIRED; ABSTENTIONS;
BROKER NON-VOTES</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The presence at
the 2012 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 &ldquo;ABSTAIN&rdquo; 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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="color: black"><I>Proposal&nbsp;One.</I>&nbsp;&nbsp;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. </FONT>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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="color: black"><I>Proposal&nbsp;Two.</I>&nbsp;&nbsp;Ratification
of the appointment of Moss Adams LLP as the </FONT>Company's<FONT STYLE="color: black"> independent public accountants for the
fiscal year ending December 31, 2012 requires the affirmative vote of a majority of the Votes Cast on the matter at the 2012 Annual
Meeting.</FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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.</P>

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<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">DEADLINE FOR RECEIPT OF STOCKHOLDER
PROPOSALS TO BE INCLUDED IN THE COMPANY'S PROXY MATERIALS</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The Company currently
intends to hold its 2013 Annual Meeting of Stockholders in April 2013 and to mail proxy statements relating to such meeting in
March 2013. Proposals of stockholders of the Company that are intended to be presented by such stockholders at the 2013 Annual
Meeting must be received by the Company no later than November 16, 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.
<FONT STYLE="color: black">In addition, stockholders must comply with the procedural requirements in the Company</FONT>'<FONT STYLE="color: black">s
bylaws. Under the Company</FONT>'<FONT STYLE="color: black">s bylaws, notice of any stockholder nomination to the board or proposal
of business must be delivered </FONT><FONT STYLE="font-size: 12pt">to</FONT> 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. <FONT STYLE="color: black">Stockholders can obtain a copy of the Company</FONT>'<FONT STYLE="color: black">s bylaws
from the Company upon request. The Company</FONT>'<FONT STYLE="color: black">s bylaws are also on file with the </FONT>Securities
and Exchange Commission<FONT STYLE="color: black">.</FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">If a stockholder
intends to submit a proposal at the 2013 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 25, 2013, or else the proxy holders will be allowed to use their
discretionary authority to vote against the proposal when it is raised at the 2013 Annual Meeting.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The attached proxy
card grants the persons named as proxies discretionary authority to vote on any matter raised at the 2012 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 2012 Annual Meeting.</P>

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<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">PROPOSAL ONE</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">ELECTION OF DIRECTORS</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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 2012 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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">All seven directors
will be elected for one-year terms expiring at the 2013 Annual Meeting of Stockholders, subject to the election and qualification
of their successors or their earlier death, resignation or removal. The following table sets forth information concerning the nominees
for director.</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR>
    <TD STYLE="width: 22%; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; border-bottom: Black 1pt solid"><B>Name of Nominee</B></TD>
    <TD STYLE="width: 7%">&nbsp;</TD>
    <TD STYLE="width: 5%; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; border-bottom: Black 1pt solid"><B>Age</B></TD>
    <TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 40%; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; border-bottom: Black 1pt solid"><B>Position(s) Currently Held With
    the Company</B></TD>
    <TD STYLE="width: 9%">&nbsp;</TD>
    <TD STYLE="width: 9%; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; border-bottom: Black 1pt solid"><B>Director Since</B></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">Charlie Bass (1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">70</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Chairman of the Board</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">1992</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Kevin J. Mills</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">51</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">President, Chief Executive Officer and Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">2000</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Charles C. Emery, Jr.(1)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">65</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">2010</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Micheal L. Gifford</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">54</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Executive Vice President and Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">1992</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Leon Malmed (1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">74</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">2000</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Thomas O. Miller (3)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">60</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">2008</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Peter Sealey (3)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">71</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">2002</TD></TR>
</TABLE>

<P STYLE="font: 11pt/85% Times New Roman, Times, Serif; margin: 0 0 2pt; text-indent: 1.5in; text-align: left">&nbsp;</P>

<P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: left; text-indent: -0.25in">(1) Member of
the Audit Committee.</P>

<P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0in">(2) Member of the Nominating
Committee.</P>

<P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0in">(3) Member of the Compensation
Committee.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">There are no family
relationships among any of the directors or executive officers of the Company.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><I>Charlie Bass</I>
co-founded the Company in March 1992 and has been the Chairman of the Board of Directors from such time to the present. Dr.&nbsp;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.&nbsp;Bass holds a Ph.D. in electrical engineering from the University of Hawaii.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><I>Kevin J. Mills</I>
was appointed the Company's President and Chief Executive Officer and a director of the Company in March 2000. He served as the
Company's Chief Operating Officer from September 1998 to March 2000. Mr.&nbsp;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.&nbsp;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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><I>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.</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><I>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.&nbsp;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.&nbsp;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.&nbsp;Gifford co-founded and was President of Gifford Computer Systems, a computer network integration company.
Mr.&nbsp;Gifford holds a B.S. in Mechanical Engineering from the University of California at Berkeley.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><I>Leon Malmed</I>
has been a director of the Company since June 2000. Mr.&nbsp;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.&nbsp;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.&nbsp;Malmed holds a B.S. in
Mechanical Engineering from the University of Paris, and also has completed the AEA/UCLA Senior Executive Program at the University
of California at Los Angeles and the AEA/Stanford Executive Institute Program for Management of High Technology Companies at Stanford
Business School.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><I>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 joining 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&rsquo;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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><I>Peter Sealey</I>
has been a director of the Company since June 2002. &nbsp;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. &nbsp;Dr. Sealey&nbsp;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. &nbsp;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>

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<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">BOARD MEETINGS AND COMMITTEES</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The Board of Directors
held a total of four regular meetings during fiscal 2011 and three telephone meetings. The independent directors met separately
without management or the management directors after each of the four regular Board meetings held during 2011. 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 except Messrs. Emery and Miller attended the 2011 Annual Meeting of Stockholders.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: left; text-indent: 0.5in">The Audit Committee
met with management and the independent accountants six times by telephone during the year ended December 31, 2011 to review quarterly
and annual financial information and to discuss the results of quarterly review and annual audit 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. The Audit Committee also oversees management&rsquo;s assessment and management of risks. Management and the
independent accountants participated in all meetings of the Audit Committee. Portions of each Audit Committee meeting were held
between the Audit Committee members and the independent accountants without the presence of management. The Committee reviewed
the financial statements and the annual audit results, including the independent accountants&rsquo; assessment of the Company&rsquo;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&rsquo; 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, 2011. The report of the Audit Committee for the year ended
December&nbsp;31, 2011 is included in this Proxy Statement. The Audit Committee Charter is available on the Company&rsquo;s website
at http://www.mkr-group.com/SCKT/board_committee.html.</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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 once
in 2011, and once in 2012 to date 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 2011 and once in January 2012 to date following their regular board
meetings to consider matters relating to board governance, oversight and effectiveness. For 2013, the Nominating Committee will
consider nominees recommended by security holders. Such nominations should be made in writing to the Company, attention Corporate
Secretary, no later than November 16, 2012 in order to be considered for inclusion in next year&rsquo;s proxy statement. The Nominating
Committee Charter is available on the Corporate Governance section of the Company&rsquo;s website at http://www.mkr-group.com/SCKT/board_committee.html.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The Compensation
Committee, which consists of Messrs. Sealey (Chairman) and Miller, held twelve meetings during fiscal year 2011. The Compensation
Committee is responsible for determining salaries, incentives and other forms of compensation for directors and officers of the
Company, approving the Company's incentive compensation and benefit plans including its equity incentive plan, and providing oversight
of all matters affecting compensation including overseeing management&rsquo;s assessment and management of compensation-related
risks. The report of the Compensation Committee for fiscal year 2011 is included in this Proxy Statement. The Compensation 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 STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in"><B>COMPENSATION OF
DIRECTORS</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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. Outside directors are also entitled to participate in the Company's 2004 Equity
Incentive Plan. Grants of options to directors are made annually as compensation for Board service, committee service and committee
and Board leadership positions, generally at the time of annual election of the Board of Directors. On April 27, 2011, 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 27, 2011, at an exercise price of $2.10 per share, the fair market value of the Common Stock on the date
of grant. On August 22, 2011, the Board granted a fully vested supplemental option to Charlie Bass for 10,000 shares at an exercise
price of $1.95 per share, the fair market value of the Common Stock on the date of grant, in recognition of his board service.
Options granted were as shown in the chart below.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 50%; font: 11pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify; border-bottom: Black 1pt solid">Name</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: center">New Options Granted <BR>in 2011</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 64%; text-align: justify; text-indent: 8.1pt">Charlie Bass</TD>
    <TD STYLE="width: 9%">&nbsp;</TD>
    <TD STYLE="width: 26%; text-align: center">20,000</TD><TD STYLE="width: 1%; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify; text-indent: -2.7pt; padding-left: 0.15in">Charles C. Emery, Jr.</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">7,000</TD><TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify; text-indent: 8.1pt">Leon Malmed</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">8,000</TD><TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify; text-indent: 8.1pt">Thomas O. Miller</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">7,000</TD><TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify; text-indent: 8.1pt">Peter Sealey</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">8,000</TD><TD STYLE="text-align: center">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify"><B>VOTE REQUIRED AND RECOMMENDATION
OF THE BOARD </B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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.</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS VOTE &quot;FOR&quot; ALL OF THE COMPANY'S NOMINEES FOR DIRECTORS.</P>

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<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">PROPOSAL TWO</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">RATIFICATION OF APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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, 2012, and recommends that stockholders vote for ratification of such appointment.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Moss Adams LLP has
audited the Company's financial statements for each of the eight fiscal years ended December 31, 2011. Representatives of Moss
Adams LLP are expected to be present at the 2012 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.</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">FEES BILLED BY MOSS ADAMS LLP DURING
FISCAL YEARS 2011 AND 2010</P>

<P STYLE="font: italic 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Audit Fees:</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Audit fees billed
to the Company by Moss Adams LLP for their audit of the Company's 2011 and 2010 fiscal year financial statements and review of
the Company's quarterly financial statements for fiscal 2011 and 2010 totaled $228,000 in each fiscal year. The Company was not
deemed an accelerated filer for fiscal years 2011 and 2010, and an audit of the Company's internal controls at December 31, 2011
and 2010 was not required.</P>

<P STYLE="font: italic 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Audit-Related
Fees:</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Audit-related fees
billed to the Company by Moss Adams LLP during the Company's 2011 and 2010 fiscal years totaled $10,900 and $15,900, respectively.
Audit-related fees in both years related to the issuance of consents related to the filing of a Form S-3 registration statement
and a Form S-8 registration statement in each of fiscal 2011 and 2010, as well as and work related to accounting advice.</P>

<P STYLE="font: italic 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Tax Fees:</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Fees billed to the
Company by Moss Adams LLP for tax services during the Company's 2011 and 2010 fiscal years were $11,088 in 2011 and $14,831 in
2010. Tax fees are for preparation of the prior year's annual tax returns.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><I>All Other Fees:</I></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">There were no other
fees billed to the Company during the Company's 2011 and 2010 fiscal years by Moss Adams LLP.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><I>Approval Procedures:</I></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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. All services performed by the independent accountants in fiscal 2011 and 2010 were
preapproved by the Audit Committee. 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.</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"></P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">VOTE REQUIRED AND RECOMMENDATION
OF THE BOARD</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Ratification of
the appointment of Moss Adams LLP as the Company's independent public accountants for the fiscal year ending December 31, 2012
requires the affirmative vote of a majority of the Votes Cast on the matter at the 2012 Annual Meeting.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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.</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">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 &#9;FOR THE FISCAL YEAR ENDING DECEMBER 31, 2012.</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 0; text-align: left">&nbsp;</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 6pt 0 0; text-align: center">SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 6pt 0 0; text-align: justify; text-indent: 0.5in">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>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 6pt 0 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 11pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 36%; padding-right: 5.4pt; padding-left: 5.4pt; border-bottom: Black 1pt solid">
        <P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center"><B>Name
        of Beneficial Owner (1)</B></P></TD>
    <TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 25%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; border-bottom: Black 1pt solid">
        <P STYLE="font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 3pt; text-align: center"><B>Number
        of Shares of Common Stock</B></P>
        <P STYLE="font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 3pt; text-align: center"><B>Beneficially Owned</B></P></TD>
    <TD STYLE="width: 9%">&nbsp;</TD>
    <TD STYLE="width: 22%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; border-bottom: Black 1pt solid">
        <P STYLE="font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 3pt; text-align: center"><B>Percentage
        of Shares of Common Stock Beneficially Owned (2)</B></P></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; font-style: italic; font-weight: bold; text-indent: -0.15in">5% Stockholders</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; text-indent: -0.15in">Hudson Bay Master Fund Ltd. (3)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">574,512</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">10.8%</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; text-indent: -0.15in">Leviticus Partners, L.P. (4)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">391,216</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">8.1%</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; text-indent: -0.15in">Roy L. Rogers (5)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">378,538</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">7.8%</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; text-indent: -0.15in">AboCom Systems Inc. (6)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">282,485</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">5.8%</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; font-style: italic; font-weight: bold; text-indent: -0.15in">Directors and Executive Officers</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; text-indent: -0.15in">Charlie Bass (7)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">308,443</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">6.3%</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; text-indent: -0.15in">Kevin J. Mills (8)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">285,816</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">5.8%</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; text-indent: -0.15in">David W. Dunlap (9)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">78,911</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;1.6%</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; text-indent: -0.15in">Micheal L. Gifford (10)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">75,173</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">1.5%</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; text-indent: -0.15in">Leonard L. Ott (11)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">68,024</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">1.4%</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; text-indent: -0.15in">Tim I. Miller (12)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">58,499</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">1.2%</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; text-indent: -0.15in">Leon Malmed (13)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">53,969</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">1.1%</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; text-indent: -0.15in">Lee A. Baillif (14)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">48,882</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">1.0%</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; text-indent: -0.15in">Peter Sealey (13)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">40,875</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">*</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; text-indent: -0.15in">Thomas O. Miller (15)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">27,437</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">*</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; text-indent: -0.15in">Charles C. Emery, Jr. (13)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">14,000</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">*</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; text-indent: -0.15in">All Directors and Executive Officers as a group (11 persons) (16)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;1,057,548</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">19.4%</TD></TR>
</TABLE>
<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in">__________________</P>

<P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in">*Less than
1%</P>




<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 9pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0">                                                                                                                                     <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>(1)</TD><TD STYLE="text-align: justify">To the Company&rsquo;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.</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD STYLE="text-align: justify">Percentage ownership is based on 4,835,695 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.</TD></TR>                                                                                                <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>(3)</TD><TD STYLE="text-align: justify">Hudson Bay Master Fund Ltd. is managed by Hudson Bay Capital Management L.P. The address of both is 777 Third
Avenue, 30<SUP>th</SUP> Floor, New York, NY 10017. Beneficial share ownership consists of 74,512 shares of Common Stock and 500,000
shares subject to warrants that are exercisable at $2.44 per share through May 20, 2016.</TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>(4)</TD><TD STYLE="text-align: justify">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 that are exercisable at $1.80
per share through May 26, 2014.</TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>(5)</TD><TD STYLE="text-align: justify">Shares held by Roy L. Rogers as trustee for the Rogers Family Trust UTD 01-21-81 which holds 266,887 shares
of Common Stock, and as trustee for the Roy and Ruth Rogers Unitrust, UTD 09-28-89 which holds 83,651 shares of Common Stock. Mr.
Rogers&rsquo;address is 3000 Sand Hill Road, Building 1, Suite 260, Menlo Park, CA 94025. Includes 28,000 shares subject to warrants
that are exercisable at $1.80 per share through May 26, 2014.</TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>(6)</TD><TD STYLE="text-align: justify">AboCom Systems Inc. is <FONT STYLE="font-family: Times New Roman, Times, Serif">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.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>(7)</TD><TD STYLE="text-align: justify">Includes 75,219 shares of Common Stock subject to options exercisable within 60 days of February 27, 2012.</TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>(8)</TD><TD STYLE="text-align: justify">Includes 111,402 shares of Common Stock subject to options exercisable within 60 days of February 27, 2012.</TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>(9)</TD><TD STYLE="text-align: justify">Includes 70,365 shares of Common Stock subject to options exercisable within 60 days of February 27, 2012.</TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>(10)</TD><TD STYLE="text-align: justify">Includes 64,323 shares of Common Stock subject to options exercisable within 60 days of February 27, 2012.</TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>(11)</TD><TD STYLE="text-align: justify">Includes 66,584 shares of Common Stock subject to options exercisable within 60 days of February 27, 2012.</TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>(12)</TD><TD STYLE="text-align: justify">Includes 58,044 shares of Common Stock subject to options exercisable within 60 days of February 27, 2012.</TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>(13)</TD><TD STYLE="text-align: justify">Consists of shares of Common Stock subject to options exercisable within 60 days of February 27, 2012.</TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>(14)</TD><TD STYLE="text-align: justify">Includes 43,743 shares of Common Stock subject to options exercisable within 60 days of February 27, 2012.</TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>(15)</TD><TD STYLE="text-align: justify">Includes 26,875 shares of Common Stock subject to options exercisable within 60 days of February 27, 2012.</TD></TR>
<TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>(16)</TD><TD STYLE="text-align: justify">Includes 625,399 shares of Common Stock subject to options exercisable within 60 days of February 27, 2012.</TD></TR>
</TABLE>

<P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"></P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center"></P>

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    <!-- Field: /Page -->
<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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 2011 all of its executive officers and directors complied with their Section 16(a) filing
requirements.</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">MANAGEMENT</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The current executive
officers of the Company are as follows:</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 11pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: left; vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Name of
        Officer</B></P></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><B>Age</B></P></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: left; vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Position
        with the Company</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 6pt; padding-right: 0.3in; padding-left: 9pt; text-align: left; text-justify: inter-ideograph; font-size: 10pt; text-indent: -9pt; vertical-align: bottom">Kevin J. Mills</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-top: 6pt; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph; font-size: 10pt; vertical-align: bottom">51</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-top: 6pt; padding-right: 5.4pt; padding-left: 5.4pt; text-align: left; text-justify: inter-ideograph; font-size: 10pt; vertical-align: bottom">President and Chief Executive Officer and Director</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 6pt; padding-right: 0.3in; padding-left: 9pt; text-align: left; text-justify: inter-ideograph; font-size: 10pt; text-indent: -9pt; vertical-align: bottom">Micheal L. Gifford</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-top: 6pt; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph; font-size: 10pt; vertical-align: bottom">54</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-top: 6pt; padding-right: 5.4pt; padding-left: 5.4pt; text-align: left; text-justify: inter-ideograph; font-size: 10pt; vertical-align: bottom">Executive Vice President and Director</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 6pt; padding-right: 0.3in; padding-left: 9pt; text-align: left; text-justify: inter-ideograph; font-size: 10pt; text-indent: -9pt; vertical-align: bottom">David W. Dunlap</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-top: 6pt; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph; font-size: 10pt; vertical-align: bottom">69</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-top: 6pt; padding-right: 5.4pt; padding-left: 5.4pt; text-align: left; text-justify: inter-ideograph; font-size: 10pt; vertical-align: bottom">Vice President of Finance and Administration, Chief Financial Officer and Secretary</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 6pt; padding-right: 0.3in; padding-left: 9pt; text-align: left; text-justify: inter-ideograph; font-size: 10pt; text-indent: -9pt; vertical-align: bottom">Tim I. Miller</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-top: 6pt; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph; font-size: 10pt; vertical-align: bottom">57</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-top: 6pt; padding-right: 5.4pt; padding-left: 5.4pt; text-align: left; text-justify: inter-ideograph; font-size: 10pt; vertical-align: bottom">Vice President of Worldwide Operations and Engineering</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 6pt; padding-right: 0.3in; padding-left: 9pt; text-align: left; text-justify: inter-ideograph; font-size: 10pt; text-indent: -9pt; vertical-align: bottom">Leonard L. Ott</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; text-align: center; vertical-align: bottom">53</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; text-align: left; vertical-align: bottom">Vice President and Chief Technical Officer</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 6pt; padding-right: 0.3in; padding-left: 9pt; text-align: left; text-justify: inter-ideograph; font-size: 10pt; text-indent: -9pt; vertical-align: bottom">Lee A. Baillif</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-top: 6pt; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph; font-size: 10pt; vertical-align: bottom">51</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-top: 6pt; padding-right: 5.4pt; padding-left: 5.4pt; text-align: left; text-justify: inter-ideograph; font-size: 10pt; vertical-align: bottom">Vice President and Controller</TD></TR>
</TABLE>
<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">For information
regarding Kevin J. Mills and Micheal L. Gifford, please see &quot;Proposal One - Election of Directors&quot; above.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><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.&nbsp;Dunlap previously served as Vice
President of Finance and Administration and Chief Financial Officer at several public and private companies. 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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><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. Mr.&nbsp;Miller holds a B.S. with an emphasis in Business Administration and Political
Science from San Jose State University.</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><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.&nbsp;Ott joined the Company in March 1994, serving in increasingly responsible
engineering positions including Director of Software Development and Director of Engineering. Mr.&nbsp;Ott also worked as an engineering
consultant to the Company, from November 1993 to March 1994. Mr.&nbsp;Ott holds a B.S. in Computer Science from the University
of California at Berkeley.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><I>Lee A. Baillif</I>
has served as the Company&rsquo;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.</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">DIRECTOR COMPENSATION</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: left">Compensation of Non-Employee Directors</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: left; text-indent: 0.5in"><FONT STYLE="font-weight: normal">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&nbsp;31, 2011. </FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 11pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: left; vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center; text-indent: 0in"><B>Name</B></P></TD>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 8pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 3pt; text-align: center"><B>Fees
        Earned or Paid in Cash ($) (1)</B></P></TD>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 8pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 3pt; text-align: center"><B>Option
        Awards ($)(2)</B></P></TD>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 8pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 3pt; text-align: center"><B>Total
        ($)</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 1.2in; padding-left: 8.65pt; text-align: left; text-justify: inter-ideograph; text-indent: -8.65pt; font-size: 9pt; vertical-align: bottom">Charlie Bass</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; text-justify: inter-ideograph; font-size: 9pt; vertical-align: bottom">&nbsp; $16,000</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; text-justify: inter-ideograph; font-size: 9pt; vertical-align: bottom">$21,900(3)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; text-justify: inter-ideograph; font-size: 9pt; vertical-align: bottom">$37,900</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 1.2in; padding-left: 8.65pt; text-align: left; text-justify: inter-ideograph; text-indent: -8.65pt; font-size: 9pt; vertical-align: bottom">Charles
    C. Emery, Jr.</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; text-justify: inter-ideograph; font-size: 9pt; vertical-align: bottom">&nbsp; $16,000</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; text-justify: inter-ideograph; font-size: 9pt; vertical-align: bottom">$&nbsp; 7,910(4)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; text-justify: inter-ideograph; font-size: 9pt; vertical-align: bottom">$23,910</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 1.2in; padding-left: 8.65pt; text-align: left; text-justify: inter-ideograph; text-indent: -8.65pt; font-size: 9pt; vertical-align: bottom">Leon Malmed</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; text-justify: inter-ideograph; font-size: 9pt; vertical-align: bottom">&nbsp; $16,000</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; text-justify: inter-ideograph; font-size: 9pt; vertical-align: bottom">$&nbsp; 9,040(5)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; text-justify: inter-ideograph; font-size: 9pt; vertical-align: bottom">$25,040</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 1.2in; padding-left: 8.65pt; text-align: left; text-justify: inter-ideograph; text-indent: -8.65pt; font-size: 9pt; vertical-align: bottom">Thomas O. Miller</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; text-justify: inter-ideograph; font-size: 9pt; vertical-align: bottom">&nbsp; $16,000</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; text-justify: inter-ideograph; font-size: 9pt; vertical-align: bottom">$ &nbsp;7,910(6)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; text-justify: inter-ideograph; font-size: 9pt; vertical-align: bottom">$23,910</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 1.2in; padding-left: 8.65pt; text-align: left; text-justify: inter-ideograph; text-indent: -8.65pt; font-size: 9pt; vertical-align: bottom">Peter Sealey</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; text-justify: inter-ideograph; font-size: 9pt; vertical-align: bottom">&nbsp; $16,000</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; text-justify: inter-ideograph; font-size: 9pt; vertical-align: bottom">$&nbsp; 9,040(7)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 0.05in; padding-left: 0.05in; text-align: center; text-justify: inter-ideograph; font-size: 9pt; vertical-align: bottom">$25,040</TD></TR>
</TABLE>
<P STYLE="font: 11pt/65% Times New Roman, Times, Serif; margin: 0 0 2pt; text-indent: 1.5in">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: left; text-indent: -18.7pt"><FONT STYLE="font-size: 9pt; font-weight: normal">(1)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">Directors are paid a fee for preparation and attendance at four regularly scheduled board meetings
at the rate of $4,000 per meeting attended, totaling $16,000 per year. The Board met by telephone an additional 3 times in fiscal
2011 without additional compensation. All directors attended all meetings.</FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: left; text-indent: -18.7pt"><FONT STYLE="font-size: 9pt; font-weight: normal">(2)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">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 2011 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.</FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: left; text-indent: -18.7pt"><FONT STYLE="font-size: 9pt; font-weight: normal">(3)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">Mr. Bass was granted an option to purchase 10,000 shares on April 27, 2011 with a grant date
fair value of $11,300. Mr. Bass was granted a supplemental option to purchase 10,000 shares on August 22, 2011 with a grant date
fair value of $10,600. </FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: left; text-indent: -18.7pt"><FONT STYLE="font-size: 9pt; font-weight: normal">(4)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">Mr. Emery was granted an option to purchase 7,000 shares on April 27, 2011 with a grant date
fair value of $7,910. </FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: left; text-indent: -18.7pt"><FONT STYLE="font-size: 9pt; font-weight: normal">(5)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">Mr. Malmed was granted an option to purchase 8,000 shares on April 27, 2011 with a grant date
fair value of $9,040. </FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -18.7pt"><FONT STYLE="font-size: 9pt">(6)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">Mr. Miller was granted an option to purchase 7,000 shares on April 27, 2011 with a grant fair
value of $7,910. </FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: left; text-indent: -18.7pt"><FONT STYLE="font-size: 9pt; font-weight: normal">(7)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">Mr. Sealey was granted an option to purchase 8,000 shares on April 27, 2011 with a grant date
fair value of $9,040. </FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: left; text-indent: 0.5in"><FONT STYLE="font-weight: normal">The
outside directors are entitled to participate in the Company's 2004 Equity Incentive Plan. Grants of options to directors for Board
and Committee service are made annually, commencing at the start of the Board term. The grants made on April 27, 2011 were determined
as follows: each Director was awarded an option to purchase 5,000 shares for participation in Board meetings. The director serving
as the Board chairperson received an option to purchase an additional 2,000 shares. Directors serving as chairpersons of the Audit,
Nominating and Compensation Committees each received an option to purchase an additional 1,000 shares. Members serving on the Audit
Committee and on the Compensation Committee each received an option to purchase an additional 2,000 shares. As a result, on April
27, 2011, the five outside directors as a group were granted options to purchase an aggregate of 40,000 shares. The options vest
monthly over a one year period commencing on the date of grant. Options granted on April 27, 2011 had an exercise price of $2.10
per share, which was the fair market value of the Common Stock on the date of grant. In addition, Mr. Bass was awarded a supplemental
grant of 10,000 fully vested shares on August 22, 2011 in recognition of his Board service. The supplemental option had an exercise
price of $1.95 per share, which was the fair market value of the Common Stock on the date of grant. See also Proposal One &ndash;
Compensation of Directors. </FONT></P>

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<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">COMPENSATION DISCUSSION AND ANALYSIS</P>

<P STYLE="font: italic 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify"><FONT STYLE="font-style: normal"><B>OVERVIEW</B></FONT><FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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 potentially resulting in superior pay when superior performance objectives are achieved. Within this framework,
actual compensation can vary depending on each executive officer&rsquo;s position, responsibilities and overall experience. Overall,
the Company strives to provide a total compensation package that is fair, reasonable and competitive with prevailing practices
in the Company's industry.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The Company, with
the approval of the Compensation Committee, enacted a number of cost reduction steps involving compensation starting in 2009 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 the fourth quarter of 2008 to 66 employees in the fourth
quarter of 2011, effective base salary reductions ranging from 20 percent for senior employees to 10 percent for other employees
effective during 2009 and 2010, a cancellation of salary increases that had been approved in 2008 for the executive officers of
the Company, a suspension of annual employee salary increases, and a suspension of all variable compensation programs applicable
to employees except sales commissions. Commencing with the first quarter of 2011, the base salary reduction programs were eliminated
resulting in payments commencing in 2011 of full base salaries. Also commencing with the first quarter of 2011, a management incentive
variable compensation program was reinstated for the senior executives of the Company that is based upon attainment of revenue
goals, achieving quarterly operating profitability relative to the Company&rsquo;s annual financial plan and for the President
and CEO, attaining increases in shareholder value as measured by the market capitalization of the Company.. Management and the
Compensation Committee will continue to closely monitor the Company&rsquo;s operating results, financial condition and shareholder
value and intend to continue to phase out cost reduction program measures in 2012 consistent with meeting or exceeding the financial
goals of the Company.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">In addition, adverse
economic conditions resulted in reductions in the market valuation 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. The lower market valuations caused
the options granted prior to 2009 to have little value because their exercise prices were much higher than the trading price of
the Company&rsquo;s stock during this period. In April 2010, the stockholders approved a one-time option exchange program with
the objective of restoring the effectiveness of the stock option program. The option exchange was completed on July 1, 2010 and
enabled employees to exchange previously granted stock options for options priced as of the exchange date and with new 10 year
terms, but with new vesting periods extending the vesting of exchanged options for a period of at least two additional years.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The discussions
that follow reflect the goals and objectives of the Company&rsquo;s compensation policies and practices.</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in"><B>COMPENSATION PHILOSOPHY
AND OBJECTIVES</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The Company's compensation
policies, plans and programs are intended to achieve the following objectives:</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: left; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: left; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>attract, retain, motivate and reward talented executive officers and employees;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: left; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>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</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-align: left; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">The Company's approach
to executive compensation is to set base compensation levels within ten percent of median levels reflecting the experience and
performance of each individual compared to similar positions in smaller technology based companies (although they may be set to
higher or lower levels to recognize a particular employee<I>'</I>s role, responsibilities, skills, experience and performance),
to set variable compensation targets tied to financial performance so as to motivate and reward positive performance of executive
officers in driving Company to achieve key financial objectives including revenue attainment, profitability and increases in shareholder
value, and to offer equity incentives through its stock option program to all executives commensurate with each executive&rsquo;s
level of responsibility, experience and performance while maintaining acceptable levels of dilution.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">The Company's approach
to employee compensation is to set base compensation levels within ten percent of median levels up to the 75<SUP>th</SUP> percentile
for very experienced high performing employees consistent with the experience and performance of each individual compared to similar
positions in smaller technology based companies, to set variable compensation targets for senior employees tied to financial performance
to motivate and reward positive performance including the achievement of key financial objectives of revenue attainment and profitability,
and to offer equity incentives through its stock option program to all employees commensurate with each employee&rsquo;s level
of responsibility, experience and performance while maintaining acceptable levels of dilution.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in"><B>ELEMENTS OF EXECUTIVE
COMPENSATION</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The three major
components of compensation for the Company's executive officers are:</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">(i) base salary;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">(ii) variable performance-based
cash incentive awards; and</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">(iii) long-term,
equity-based incentive awards.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The base salary
and variable performance-based incentive award components of the Company's compensation program are compared to other similar smaller
technology public companies 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 including Silicon Valley, which has many electronics firms
that compete for talent and offer a variety of employment alternatives.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><I>Base Salary</I>.
The Compensation Committee establishes a competitive base salary for each executive officer designed to recognize the skills and
experience the individual brings to the Company and the performance contributions he or she makes. Base salaries for executives
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 a particular executive&rsquo;s role, responsibilities, skills, experience and performance.</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The Compensation
Committee determines both the amount and timing of base salary increases for executive officers. 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 positions in similarly sized companies, and the individual performance
of each executive. Base salaries were last increased for Executives in January 2007. Base salaries were also impacted in 2009 and
2010 by base salary reductions of twenty-percent for executive officers. These reductions were designed to offset lower revenues
resulting from adverse economic conditions. Commencing in the first quarter of 2011, and based upon an improving economic outlook
as reflected in the 2011 Financial Plan of the Company, the base salary reduction programs were eliminated. Recent salary reviews
reflect that current base salaries for the Company&rsquo;s executives are below compensation targets derived from the Tech America
survey data. The Company therefore intends in 2012 to bring base salaries back in line with its compensation policies consistent
with meeting or exceeding its 2012 Financial Plan results.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in"><I>Variable Performance
Based Incentive Awards</I>.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in">&#9;Incentive awards
are intended to motivate and reward executives to meet or exceed financial performance goals of revenue attainment and operating
profitability measured both quarterly and annually. Variable incentive award programs except sales commissions were suspended in
2009 and 2010 for all executives as cost reduction measures due to lower revenues resulting from adverse economic conditions. In
January 2011, the Compensation Committee restored for executives the Management Incentive Variable Compensation Plan that was filed
as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2011. Each executive has a target variable payment
award that would be earned if the Company meets certain threshold levels of revenue and operating profits. No payments are earned
if the Company&rsquo;s results are below 80% of Plan targets and any payments that are earned can be paid only from a portion of
operating profits as defined in the program. Actual payments may exceed targets in the case the Company&rsquo;s results exceed
the Financial Plan.&#9;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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 STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><BR>
</P>

<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="text-align: left; vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center; text-indent: 0in; padding-left: 5.4pt; vertical-align: bottom">Named Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center; vertical-align: bottom">Position(s)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center; vertical-align: bottom">2011</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center; vertical-align: bottom">2010</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center; vertical-align: bottom">2009</TD></TR>

<TR>
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in; vertical-align: top">Kevin J. Mills(1)<BR></TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="text-align: left; text-indent: 0in; padding-left: 10pt; vertical-align: top">President and Chief Executive Officer and Director</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: top">12.8%</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: top">Suspended</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: top">Suspended</TD>
    <TD STYLE="text-align: center; vertical-align: top">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: left; text-indent: 0in; vertical-align: top">Micheal L. Gifford(2)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left; text-indent: 0in; padding-left: 10pt; vertical-align: top">Executive Vice President and Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: top">12.8%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: top">Suspended</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: top">Suspended</TD>
    <TD STYLE="text-align: center; vertical-align: top">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: left; vertical-align: top">David W. Dunlap(3)<BR></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left; text-indent: 0in; padding-left: 10pt; vertical-align: top">Vice President of Finance and Administration, Chief Financial Officer and Secretary</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: top">12.8%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: top">Suspended</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: top">Suspended</TD>
    <TD STYLE="text-align: center; vertical-align: top">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: left; text-indent: 0in; vertical-align: top">Tim I. Miller(4)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left; text-indent: 0in; padding-left: 10pt; vertical-align: top">Vice President of Worldwide Operations and Engineering</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: top">12.8%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: top">Suspended</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: top">Suspended</TD>
    <TD STYLE="text-align: center; vertical-align: top">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: left; text-indent: 0in; vertical-align: top">Leonard L. Ott(5)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left; text-indent: 0in; padding-left: 10pt; vertical-align: top">Vice President and Chief Technical Officer</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: top">12.8%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: top">Suspended</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: top">Suspended</TD>
    <TD STYLE="text-align: center; vertical-align: top">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in">(1)<FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>Variable financial incentive compensation target for Mr. Mills was set at $100,000 for each of the years 2009 through 2012.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 10pt">(2)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 10pt">Variable financial incentive compensation target for Mr. Gifford was set at $50,000 for each
of the years 2009 through 2012.</FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 10pt">(3)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 10pt">Variable financial incentive compensation target for Mr. Dunlap was set at $50,000 for each
of the years 2009 through 2011 and at $45,000 for 2012.</FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 10pt">(4)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 10pt">Variable financial incentive compensation target for Mr. Miller was set at $35,000 for each
of the years 2009 through 2011 and at $40,000 for 2012.</FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 10pt">(5)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 10pt">Variable financial incentive compensation target for Mr. Ott was set at $35,000 for each of
the years 2009 through 2011 and at $30,000 for 2012.</FONT></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in">__________________</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 11pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in"><I></I></P>

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<P STYLE="font: 11pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in"><I>Long-Term, Equity-Based
Incentive Awards. </I></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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 determines the size of each <FONT STYLE="font-family: Times New Roman, Times, Serif">award</FONT> based on the individual&rsquo;s
level of responsibility, recent performance, his or her potential for future responsibility and promotion, the number of unvested
options held by the individual at the time of the new grant, and the size of the available stock award pool to arrive at a level
that the Committee considers appropriate to create a meaningful opportunity for equity participation by the individual.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">As of December 31,
2011, there were 90,571 shares available for grant under the 2004 Equity Incentive Plan. In addition, the 2004 Equity Incentive
Plan provides for an automatic increase each January 1<SUP>st</SUP> 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.<FONT STYLE="font-size: 8pt"> </FONT>Options
are granted to executive officers, employees and consultants at the discretion of the Compensation Committee. The Board of Directors
itself, in consultation with management, grants options annually to directors for service on the Board of Directors.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The Compensation
Committee, in consultation with management, prepares an annual allocation plan dividing the available stock in the grant pool among
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. All stock options granted to executives and employees during 2011 vest over four
years. Stock options provide a return only if the individual remains with the Company and only if the market price of the Company&rsquo;s
Common Stock appreciates during the option term.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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&rsquo;s products
and the markets they address provide opportunities for growth that may result in share price appreciation.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in"><I>Other Compensation.
</I></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Executive officers
are entitled to participate in the same health and benefit programs and 401(k) program as are available to all employees of the
Company and do not receive any perquisites from the Company.</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"></P>

<P STYLE="font: italic 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify"><FONT STYLE="font-style: normal"><B>EQUITY
INCENTIVE GRANT POLICIES</B></FONT><FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><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&rsquo;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 2011, the Compensation Committee met twelve times, and stock option grants were awarded at eleven of those meetings.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><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&rsquo;s commencement of employment. The size of the grant is based on the responsibilities
of the employee and as agreed to in the employee&rsquo;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 1/48<SUP>th</SUP> 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
2011, options to purchase an aggregate of 61,800 shares were awarded to 11 new employees representing 20 percent of options granted
during the year.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><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&rsquo;s contributions in meeting the Company&rsquo;s
goals and objectives. On February 22, 2011, the Compensation Committee awarded options to purchase an aggregate of 193,650 shares
to 59 employees, representing 64 percent of options granted during the year.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><I>Director stock
option grants</I>. A portion of the compensation of the Company&rsquo;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 &ldquo;<I>Director Compensation.</I>&rdquo;. On April 27, 2011, the Company granted options to purchase an aggregate of 40,000
shares to the 5 independent directors of the Company, representing 13 percent of options granted during the year. In August 22,
2011, the Board granted a supplemental option to purchase 10,000 shares to Mr. Bass, representing 3 percent of options granted
during the year, in recognition of his service to the Board.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in"><B>ACCOUNTING AND
TAX IMPLICATIONS</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><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&rsquo;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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"><I>Income taxes.
</I>The Company has not provided any executive officer or director with a gross-up or other reimbursement for tax amounts the executive
might pay pursuant to Section 280G or Section 409A of the Internal Revenue Code. Although the 2004 Equity Incentive Plan also allows
for the issuance of grants qualifying as &ldquo;performance-based compensation&rdquo; under Section 162(m) of the Internal Revenue
Code, no grants deemed performance-based compensation grants have been awarded to the executive officers of the Company.</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in"><B>COMPENSATION OF
THE CHIEF EXECUTIVE OFFICER</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The Company&rsquo;s
Chief Executive Officer is compensated under the same programs applied to all of the Executive Officers of the Company as described
under <I>Elements of Executive Compensation</I>. His base compensation and variable salary targets are set at median levels for
CEO&rsquo;s of similar sized companies based on national compensation salary survey data from Tech America, a trade association
whose membership is oriented toward companies serving the electronics industry. During 2011, 50 percent of his variable salary
target was based on revenue attainment and 50 percent of his variable salary target was based on attainment of Earnings Before
Taxes, Depreciation and Amortization (EBITDA), a traditional non-GAAP measure of operating profitability, both measured in comparison
to the 2011 annual financial plan of the Company. Payments under the Management Incentive Variable Compensation Plan were further
limited by minimum performance thresholds set at 80 percent of financial plan amounts, and payments not to exceed 50 percent of
EBITDA profits for the measurement period. Mr. Mills along with the other executives of the Company earned 12.8 percent of his
variable target threshold in 2011. During 2012, Mr. Mills variable compensation earnings will be based on increases in shareholder
value as measured by the market capitalization of the Company. His compensation also includes stock option grant awards and medical
and dental insurance benefit programs applicable to all employees of the Company. The CEO&rsquo;s employment is subject to an employment
contract which provides for six months of base salary and continuation of medical benefits in the event of involuntary termination
of services other than for cause, and payment of his variable salary entitlements had he remained employed during this period in
the event of a change in control or involuntary termination. The CEO receives no perquisites.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Mr. Mills, as Chief
Executive Officer, was the highest paid executive in the Company during fiscal year 2011. His total base salary during the year
was $190,000, unchanged during the past three years. Reflecting improving economic conditions for the Company, Mr. Mills was paid
his full base salary in 2011, whereas his base salary in 2010 and 2009, along with the salaries of the other Executive Officers,
was reduced by approximately 20% each year as a cost reduction measure. In 2011, Mr. Mills&rsquo; variable salary target was set
at $100,000 of which 12.8 percent was earned. Mr. Mills did not earn any variable compensation during 2010 or 2009 as variable
compensation programs were suspended during those years as a cost reduction measure. Mr. Mills variable salary target for 2012
is $100,000. Mr. Mills also received an annual refresher stock option grant on February 22, 2011 of 19,920 shares, representing
6.5 percent of all shares granted during the year, at the same time that refresher grants were awarded to other executives and
employees of the Company. These options commenced vesting monthly over 48 months starting on March 1, 2011. He received an annual
refresher stock option grant on February 27, 2012 of 10,000 shares, at the same time that refresher grants were awarded to other
executives and employees of the Company, that commenced vesting over a four year period on March 1, 2012. The reliance on stock
option grants as a significant element of the Chief Executive Officer&rsquo;s compensation is intended to align his total compensation
package with the interests of stockholders and to provide the Chief Executive Officer with a significant incentive to manage the
Company from the perspective of an owner with an equity stake in the business, including attaining long-term growth and profitability.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center; text-indent: 0in"><FONT STYLE="text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center; text-indent: 0in"><FONT STYLE="text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center; text-indent: 0in"></P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center; text-indent: 0in"></P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin-top: 12pt; margin-bottom: 0; text-align: center"><B>SUMMARY COMPENSATION
TABLE<BR>
For Fiscal Year Ended December 31, 2011</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The following table
provides fiscal 2011 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 2011 (the &ldquo;<B>Named Executive Officers</B>&rdquo;).</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 36%; font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding-left: 2.9pt">Name and Principal Position</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 5%; border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Year</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 5%; border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Salary<BR> ($)(1)</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 5%; border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Option Awards ($)(2)</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 5%; border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Non-Equity Incentive Plan Compensation ($)(3)</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 5%; border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Total<BR> ($)</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="text-align: left; padding-left: 2.9pt">Kevin J. Mills (4)<BR> President and Chief ExecutiveOfficer and Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">2011<BR> 2010<BR> 2009</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$190,000<BR> 156,385<BR> 162,888</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$20,717<BR> 138,472<BR> 49,202</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$12,787<BR> 0<BR> 0</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$223,504<BR> 294,857<BR> 212,090</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="text-align: left; padding-left: 2.9pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="text-align: left; padding-left: 2.9pt">Micheal L. Gifford (5)<BR> Executive Vice President and Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">2011<BR> 2010<BR> 2009</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$175,000<BR> 144,712<BR> 152,115</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$13,073<BR> 85,646<BR> 32,332</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$6,394<BR> 0<BR> 0</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$194,467<BR> 230,358<BR> 184,447</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="text-align: left; padding-left: 2.9pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="text-align: left; padding-left: 2.9pt">David W. Dunlap (6)&#9;<BR> Vice President of Finance and Administration, Chief Financial Officer and Secretary</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">2011<BR> 2010<BR> 2009</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$170,000<BR> 139,923<BR> 143,879</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$14,622<BR> 77,935<BR> 32,051</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$6,394<BR> 0<BR> 0</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$191,016<BR> 217,858<BR> 175,930</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="text-align: left; padding-left: 2.9pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="text-align: left; padding-left: 2.9pt">Tim I. Miller (7)&#9;<BR> Vice President of Worldwide Operations and Engineering</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">2011<BR> 2010<BR> 2009</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$155,000<BR> 119,904<BR> 131,184</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$20,155<BR> 58,723<BR> 32,051</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$4,476<BR> 0<BR> 0</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$179,631<BR> 178,627<BR> 163,235</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="text-align: left; padding-left: 2.9pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="text-align: left; padding-left: 2.9pt">Leonard L. Ott (8)<BR> Vice President and Chief Technical Officer</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">2011<BR> 2010<BR> 2009</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$155,000<BR> 128,769<BR> 131,154</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$11,482<BR> 86,005<BR> 32,051</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$4,476<BR> 0<BR> 0</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">$170,957<BR> 214,774<BR> 163,205</TD></TR>
</TABLE>




<P STYLE="font: 11pt/65% Times New Roman, Times, Serif; margin: 0 0 2pt; text-indent: 1.5in">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">(1)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">Represents base salary as described under <I>Compensation Summary and Analysis &mdash; Elements
of Executive Compensation</I>.</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">(2)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">Represents Long-Term, Equity-Based Incentive Awards as described under Compensation Summary
and Analysis &mdash; 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. Annual
refresher options were granted by the Compensation Committee on February 22, 2011 at an exercise price of $1.82, the closing market
price on the date of grant as reported on the Nasdaq exchange. The options were valued at $1.04 per share pursuant to the binomial
lattice valuation model adopted under ASC Topic 718. Option awards in 2010 include the fair market value of options granted prior
to 2009 that were exchanged on July 1, 2010 for new grants with a two year vesting period under an exchange program approved by
the stockholders at the 2010 annual meeting of stockholders.</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">(3)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">Represents Variable Incentive Awards as described under <I>Compensation Summary and Analysis
&mdash; Elements of Executive Compensation</I>. All variable compensation programs for executives were suspended in 2010 and 2009
as an expense reduction. </FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">(4)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">Mr. Mills&rsquo; salary for 2010 and 2009 included a base salary reduction of 20% as an expense
reduction measure. The fair market value of option awards in 2010 included $119,572 for options exchanged.</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">(5)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">Mr. Gifford&rsquo;s salary for 2010 and 2009 included a base salary reduction of 20% as an
expense reduction measure. The fair market value of option awards in 2010 included $71,471 for options exchanged.</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">(6)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt"> Mr. Dunlap&rsquo;s salary for 2010 and 2009 included a base salary reduction of 20% as an
expense reduction measure. The fair market value of option awards in 2010 included $63,760 for options exchanged.</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">(7)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">Mr. Miller&rsquo;s salary for 2010 and 2009 included a base salary reduction of 20% as an expense
reduction measure. The fair market value of option awards in 2010 included $35,098 for options exchanged.</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">(8)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">Mr. Ott&rsquo;s salary for 2010 and 2009 included a base salary reduction of 20% as an expense
reduction measure. The fair market value of option awards in 2010 included $71,830 for options exchanged.</FONT></P>

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    <!-- Field: /Page -->

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>GRANTS OF PLAN-BASED AWARDS</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>For Fiscal Year Ended December 31, 2011</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The following table shows for the fiscal year
ended December 31, 2011 certain information regarding options granted to the Named Executive Officers. Options were granted as
described under <I>Compensation Summary and Analysis &mdash; Elements of Executive Compensation &mdash; Long-Term, Equity-Based
Incentive Awards</I> and <I>&mdash; Equity Incentive Grant Policies.</I></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 9pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; text-align: center">
    <TD STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid; text-align: center">Name</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid; text-align: center; vertical-align: bottom">Grant Dates</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">All Other Option Awards: Number of Securities Underlying Options (#)</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">Exercise or Base Price of Option Awards ($/share)</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">Grant Date Fair Value of Stock and Option Awards ($)(1)</TD>
    </TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left; padding-left: 2.9pt; width: 25%">Kevin J. Mills</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: bottom; width: 25%">2/22/2011</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="text-align: center; vertical-align: bottom">19,920</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: right; vertical-align: bottom">$</TD><TD STYLE="text-align: center; vertical-align: bottom">1.82</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="text-align: center; vertical-align: bottom">20,717</TD>
    </TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left; padding-left: 2.9pt">Micheal L. Gifford</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">2/22/2011</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: center; vertical-align: bottom">12,570</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">$</TD><TD STYLE="text-align: center; vertical-align: bottom">1.82</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: center; vertical-align: bottom">13,073</TD>
    </TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left; padding-left: 2.9pt">David W. Dunlap</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">2/22/2011</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: center; vertical-align: bottom">14,060</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">$</TD><TD STYLE="text-align: center; vertical-align: bottom">1.82</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: center; vertical-align: bottom">14,622</TD>
    </TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left; padding-left: 2.9pt">Tim I. Miller</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">2/22/2011</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: center; vertical-align: bottom">19,380</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">$</TD><TD STYLE="text-align: center; vertical-align: bottom">1.82</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: center; vertical-align: bottom">20,155</TD>
    </TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left; padding-left: 2.9pt">Leonard L. Ott</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">2/22/2011</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: center; vertical-align: bottom">11,040</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">$</TD><TD STYLE="text-align: center; vertical-align: bottom">1.82</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: center; vertical-align: bottom">11,482</TD>
    </TR>
</TABLE>


<P STYLE="font: 11pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 1.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">(1)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>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 $1.04 per share for the grant dated February 22,
2011. The exercise price for all options granted to the Named Executive Officers is equal to the closing market price for the Company&rsquo;s
Common Stock on the grant date as reported on the Nasdaq exchange. 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&rsquo;s Common Stock
at such date in the future when the option is exercised.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center"><B>OUTSTANDING EQUITY AWARDS</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>At Fiscal 2011 Year-End</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-indent: 0.5in"><FONT STYLE="color: windowtext">The following
table set forth certain information concerning outstanding equity awards held by </FONT>the Named Executive Officers<FONT STYLE="color: windowtext">
at the end of the fiscal year ended December 31, 2011.</FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-indent: 0.5in"><FONT STYLE="color: windowtext">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD ROWSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center; border-bottom: Black 0.5pt solid"><B>Name</B></P></TD>
    <TD COLSPAN="4" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; border-bottom: Black 0.5pt solid"><B>Option
        Awards</B></P></TD>
    </TR>
<TR>
    <TD STYLE="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center; border-bottom: Black 0.5pt solid"><B>Number
        of Securities Underlying Unexercised Options - Exercisable (#)(1)</B></P></TD>
    <TD STYLE="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center; border-bottom: Black 0.5pt solid"><B>Number
        of Securities Underlying Unexercised Options - Unexercisable (#)(1)(2)</B></P></TD>
    <TD STYLE="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center; border-bottom: Black 0.5pt solid"><B>Option
        Exercise Price ($)(3)</B></P></TD>
    <TD STYLE="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center; border-bottom: Black 0.5pt solid"><B>Option
        Expiration Date(4)</B></P></TD>
    <TD COLSPAN="2" STYLE="font: 11pt Times New Roman, Times, Serif; text-align: justify; text-justify: inter-ideograph; text-indent: 0.5in">&nbsp;</TD></TR>

<TR STYLE="vertical-align: top">
    <TD STYLE="width: 30%; padding-right: 0.15in; padding-left: 5.4pt; font-size: 9pt"><FONT STYLE="font-size: 10pt">Kevin J.
    Mills</FONT></TD>
    <TD STYLE="width: 18%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">14,823</FONT></TD>
    <TD STYLE="width: 20%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">6,737</FONT></TD>
    <TD STYLE="width: 14%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">1.96</FONT></TD>
    <TD STYLE="width: 18%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2/23/2019</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">8,625</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">3.45</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">6/1/2019</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">3,750</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">6,250</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;
    2.74</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">6/1/2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">61,501</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">27,199</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;
    3.04</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">7/1/2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; font-size: 9pt; text-indent: -0.15in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">3,735</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">16,185</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">1.82</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2/22/2021</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; font-size: 9pt; text-indent: -0.15in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.15in; padding-left: 5.4pt; font-size: 9pt"><FONT STYLE="font-size: 10pt">Micheal L. Gifford</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">1,849</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">4,619</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">1.96</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2/23/2019</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.15in; padding-left: 0.15in; font-size: 9pt; text-indent: -0.15in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">5,313</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">3.45</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">6/1/2019</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">951</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">4,687</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2.74</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">6/1/2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">41,101</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">18,549</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">3.04</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">7/1/2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2,357</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">10,213</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">1.82</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2/22/2021</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.15in; padding-left: 5.4pt; font-size: 9pt"><FONT STYLE="font-size: 10pt">David W. Dunlap</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">10,093</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">4,587</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">1.96</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2/23/2019</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">5,250</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">3.45</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">6/1/2019</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2,813</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">4,687</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2.74</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">6/1/2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">37,542</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">16,958</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">3.04</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">7/1/2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2,636</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">11,424</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">1.82</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2/22/2021</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.15in; padding-left: 5.4pt; font-size: 9pt"><FONT STYLE="font-size: 10pt">Tim I. Miller</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">8,525</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">3,875</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">1.96</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2/23/2019</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">4,125</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">3.45</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">6/1/2019</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">4,688</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">7,812</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2.74</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">6/1/2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">26,881</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">12,319</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">3.04</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">7/1/2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">3,634</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">15746</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">1.82</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2/22/2021</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.15in; padding-left: 5.4pt; font-size: 9pt"><FONT STYLE="font-size: 10pt">Leonard L. Ott&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">8,181</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">3,719</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">1.96</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2/23/2019</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">4,125</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">3.45</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">6/1/2019</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2,813</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">4,687</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2.74</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">6/1/2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">37,789</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">16,811</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">3.04</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">7/1/2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph; font-size: 9pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2,070</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">8,970</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">1.82</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph"><FONT STYLE="font-size: 10pt">2/22/2021</FONT></TD></TR>
</TABLE>


<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in">(1)<FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>Options were granted as described under Compensation Summary and Analysis &mdash; Elements of Executive Compensation &mdash;
Long-Term, Equity-Based Incentive Awards and &mdash; 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, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in">(2)<FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>Grant dates and vesting period information for all grants not fully vested as of December 31, 2011 are as follows:</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 9pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">Grant Date</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">Expiration Date</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">Vesting Start Date</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">Months to fully vest</TD>
    </TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; text-indent: 0in">2/23/2009</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in; padding-left: 10pt">2/23/2019</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in; padding-left: 20pt">3/1/2009</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">48</TD>
    </TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; text-indent: 0in">6/1/2010</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in; padding-left: 10pt">6/1/2020</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in; padding-left: 20pt">6/1/2010</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">48</TD>
    </TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; text-indent: 0in">7/1/2010</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in; padding-left: 10pt">7/1/2020</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in; padding-left: 20pt">7/1/2010</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">24 to 32</TD>
    </TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; text-indent: 0in">2/22/2011</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in; padding-left: 10pt">2/22/2021</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in; padding-left: 20pt">3/1/2011</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">48</TD>
    </TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">(3)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">Exercise prices are set at the closing price of the Company&rsquo;s Common Stock on the date
of grant. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">(4)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">Options expire ten years from the date of grant, provided that the executive continues employment
with the Company. </FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in"><B>OPTION EXERCISES AND STOCK
VESTED</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in"><B>For Fiscal Year Ended December
31, 2011<BR STYLE="mso-special-character: line-break">
<BR STYLE="mso-special-character: line-break">
</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in">The following tables show
for the fiscal year ended December&nbsp;31, 2011 certain information regarding options exercised by the Named Executive Officers:</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR>
    <TD ROWSPAN="2" STYLE="vertical-align: bottom; padding-right: 5.75pt; padding-left: 5.75pt; border-bottom: Black 1pt solid">
        <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center"><B>Name</B></P></TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="vertical-align: top; padding-right: 5.75pt; padding-left: 5.75pt; border-bottom: Black 1pt solid">
        <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Option Awards</B></P></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt; border-bottom: Black 1pt solid">
        <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center"><B>Number
        of Shares Acquired on Exercise<BR>
        (#)</B></P></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt; border-bottom: Black 1pt solid">
        <P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center"><B>Value
        Realized on Exercise<BR>
        ($)(1)</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 41%; padding-right: 0.15in; padding-left: 0.15in; font-size: 9pt; text-indent: -0.15in">Micheal L. Gifford</TD>
    <TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 21%; padding-right: 5.75pt; padding-left: 5.75pt; text-align: center; text-justify: inter-ideograph; font-size: 10pt; vertical-align: bottom">6,787</TD>
    <TD STYLE="width: 9%">&nbsp;</TD>
    <TD STYLE="width: 21%; padding-right: 5.75pt; padding-left: 5.75pt; text-align: center; text-justify: inter-ideograph; font-size: 10pt; vertical-align: bottom">$7,003</TD></TR>
</TABLE>
<P STYLE="font: 11pt/65% Times New Roman, Times, Serif; margin: 0 0 2pt; text-indent: 1.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">&nbsp;</FONT>__________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">(1)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The value realized equals the difference between the option exercise price and the fair market value of the Company&rsquo;s
Common Stock on the date of exercise, multiplied by the number of shares for which the option was exercised.</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">EQUITY COMPENSATION PLAN INFORMATION</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The following table
provides information as of December 31, 2011 about the Common Stock that may be issued under all equity compensation plans of the
Company.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 9pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; text-align: center">
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; border-bottom: Black 1pt solid">Number of securities to be issued upon exercise of outstanding options</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; border-bottom: Black 1pt solid">Weighted-average exercise price of outstanding options</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; border-bottom: Black 1pt solid">Number of securities remaining available for future issuance under equity compensation plans</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 53%; text-align: left; text-indent: -9pt; padding-left: 9pt">Equity compensation plans approved by security holders (1)</TD>
    <TD STYLE="width: 9%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; text-align: center; vertical-align: bottom">1,410,090</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: right; vertical-align: bottom">$</TD><TD STYLE="width: 11%; text-align: center; vertical-align: bottom">2.70</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; text-align: center; vertical-align: bottom">90,571</TD></TR>
</TABLE>

<P STYLE="font: 11pt/85% Times New Roman, Times, Serif; margin: 0 0 2pt; text-indent: 1.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">&nbsp;</FONT>__________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 9pt">(1)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">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 Compa<FONT STYLE="font-family: Times New Roman, Times, Serif">ny&rsquo;s
Common Stock </FONT>on that date, or (c) a lesser amount as determined by the Board of Directors. As a result, a total of 193,283
shares became available for grant under the 2004 Equity Incentive Plan on January 1, 2012, in addition to those set forth in the
table above.</FONT></P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">&nbsp;</P>

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<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">COMPENSATION COMMITTEE REPORT</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The Compensation
Committee has reviewed and discussed the Compensation Discussion and Analysis with management.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Based on the Compensation
Committee&rsquo;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 STYLE="font: 11pt Times New Roman, Times, Serif; margin-right: 0; margin-bottom: 0; text-align: justify; margin-left: 308pt">COMPENSATION COMMITTEE</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 3.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#9;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin-right: 0; margin-bottom: 0; text-align: justify; margin-left: 308pt">Peter Sealey, Chairman</P>
<P STYLE="font: 11pt Times New Roman, Times, Serif; margin-right: 0; margin-bottom: 0; text-align: justify; margin-left: 308pt">Thomas
O. Miller</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#9;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Dated: March 9, 2012</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in">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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center; text-indent: 0in"><B>POST EMPLOYMENT
AND CHANGE-IN-CONTROL COMPENSATION</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in"><B>Change of Control
and Severance Agreements</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">In February 1998,
the Company adopted a bonus plan pursuant to which a bonus pool in the amount of up to 10 percent of any consideration payable
by a buyer in any acquisition of the Company is to be allocated to the executive officers and such other employees as the Board
of Directors determines in its sole discretion.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The Company renewed
separate employment agreements, effective as of January 1, 2012, 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, 2014. The agreements replaced
agreements that expired on December 31, 2011. The agreements provide that if the Company terminates the executive's employment
without cause, the Company will pay the executive: (i)&nbsp;three months&rsquo; base salary plus one month&rsquo;s base salary
for each two years of completed employment up to a maximum of six months; (ii)&nbsp;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)&nbsp;for executives other than the CEO, 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)&nbsp;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. Commencing
in 2012, the CEO bonus amount is based upon increases in shareholder value as measured by the market capitalization of the Company
which may be paid in the event of involuntary termination or a change of control as defined in the employment agreement. The exercise
period for any of the executive&rsquo;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.</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in">Payments to be made
to each of the Named Executive Officers following severance are estimated as follows:</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 9pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 26%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center; border-bottom: Black 0.5pt solid"><B>Compensation
        and<BR>
        Benefits</B></P></TD>
    <TD STYLE="width: 12%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center; border-bottom: Black 0.5pt solid"><B>Voluntary<BR>
        Resignation</B></P></TD>
    <TD STYLE="width: 11%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center; border-bottom: Black 0.5pt solid"><B>For<BR>
        Cause (1)</B></P></TD>
    <TD STYLE="width: 12%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center; border-bottom: Black 0.5pt solid"><B>For<BR>
        Good<BR>
        Reason(2)</B></P></TD>
    <TD STYLE="width: 12%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center; border-bottom: Black 0.5pt solid"><B>Involuntary<BR>
        Without<BR>
        Cause(2)</B></P></TD>
    <TD STYLE="width: 15%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center; border-bottom: Black 0.5pt solid"><B>Involuntary<BR>
        or For Good<BR>
        Reason After<BR>
        Change-in-<BR>
        Control(2)</B></P></TD>
    <TD STYLE="width: 12%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 3pt; text-align: center; border-bottom: Black 0.5pt solid"><B>Due
        to<BR>
        Death or<BR>
        Disability(2)</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 12pt; padding-right: 0.15in; text-align: justify; text-indent: 0in">Kevin J. Mills</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Base Salary (3)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">$110,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">$110,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">$110,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">$110,000</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Variable Incentive (4)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">37,500</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">37,500</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">37,500</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">37,500</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Stock Options (5)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; HealthCare Benefits (6)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">4,081</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">4,081</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">4,081</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">4,081</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Other Perquisites (7)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 12pt; padding-right: 0.15in; text-align: justify; text-indent: 0in">Micheal L. Gifford</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Base Salary (3)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">95,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">95,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">95,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">95,000</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Variable Incentive (4)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">18,750</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">18,750</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">18,750</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">18,750</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Stock Options (5)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; HealthCare Benefits (6)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">4,020</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">4,020</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">4,020</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">4,020</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Other Perquisites (7)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 12pt; padding-right: 0.15in; text-align: justify; text-indent: 0in">David W. Dunlap</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Base Salary (3)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">95,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">95,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">95,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">95,000</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Variable Incentive (4)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">16,875</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">16,875</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">16,875</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">16,875</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Stock Options (5)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; HealthCare Benefits (6)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">3,913</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">3,913</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">3,913</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">3,913</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Other Perquisites (7)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 12pt; padding-right: 0.15in; text-align: justify; text-indent: 0in">Timothy I.&nbsp; Miller</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Base Salary (3)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">95,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">95,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">95,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">95,000</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Variable Incentive (4)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">15,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">15,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">15,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">15,000</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Stock Options (5)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; HealthCare Benefits (6)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">4,730</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">4,730</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">4,730</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">4,730</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Other Perquisites (7)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 12pt; padding-right: 0.15in; text-align: justify; text-indent: 0in">Leonard L. Ott</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Base Salary (3)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">90,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">90,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">90,000</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">90,000</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Variable Incentive (4)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">11,250</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">11,250</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">11,250</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">11,250</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Stock Options (5)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; HealthCare Benefits (6)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">3,955</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">3,955</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">3,955</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">3,955</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-justify: inter-ideograph">&nbsp;&nbsp;&nbsp;&nbsp; Other Perquisites (7)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-justify: inter-ideograph">--</TD></TR>
</TABLE>
<P STYLE="font: 11pt/85% Times New Roman, Times, Serif; margin: 0 0 2pt; text-indent: 1.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 9pt; text-transform: uppercase">(1)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">Cause is defined in each executive&rsquo;s employment agreement as gross misconduct or fraud,
misappropriation of the Company&rsquo;s proprietary information, or willful and continuing breach of duties following notice and
a cure period. </FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 9pt; text-transform: uppercase">(2)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">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.</FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 9pt; text-transform: uppercase">(3)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">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.
All named executive officers would be entitled to the maximum severance period of six months.</FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 9pt; text-transform: uppercase">(4)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">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 2012. </FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 9pt; text-transform: uppercase">(5)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">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&rsquo;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.</FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 9pt; text-transform: uppercase">(6)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">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.</FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-size: 9pt; text-transform: uppercase">(7)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font-size: 9pt">There are no perquisites in the compensation packages of any of the executive officers.</FONT></P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify; text-indent: -0.25in"></P>

<P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center; text-indent: 0in"><B>LIMITATION OF LIABILITY
AND INDEMNIFICATION MATTERS</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Pursuant to the
Delaware General Corporation Law, the Company has adop<FONT STYLE="font: 12pt Times New Roman, Times, Serif">ted provisions in
its </FONT>Certificate of Incorporation that eliminate the personal liability of directors to the Company or its stockholders for
monetary damages for breach of the directors' fiduciary duties in certain circumstances. In addition, the Company's bylaws require
the Company to indemnify the Company's directors and officers and authorize the Company to indemnify its employees and other agents
to the fullest extent permitted by law.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The Company has
entered into indemnification agreements with each of its current directors and officers that provide for indemnification and advancement
of expenses to the fullest extent permitted by Delaware law, including circumstances in which indemnification or the advancement
of expenses is discretionary under Delaware law.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The Company believes
that the limitation of liability and indemnification provisions in its Certificate of Incorporation and bylaws and the indemnification
agreements with its directors and officers enhance its ability to continue to attract and retain qualified individuals to serve
as directors and officers. There is no pending litigation or proceeding involving a director, officer or employee to which these
provisions or agreements would apply.</P>

<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">CORPORATE GOVERNANCE</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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:</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in"><I>Executive Compensation
Authority; Compensation Committee</I></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The Compensation Committee reviews and approves compensation programs for all other employees of the Company, upon the recommendation
of management.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The charter of the Compensation Committee makes explicit:</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 1in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Courier New, Courier, Monospace">o</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>the
Committee&rsquo;s ability to retain independent consultants and experts as it sees fit, at Company expense;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 1in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Courier New, Courier, Monospace">o</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>the
Compensation Committee&rsquo;s responsibilities to assess the risk associated with compensation program&nbsp;</P>





</UL>

<P STYLE="font: italic 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">Director Independence</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>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.</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The Company's independent directors hold formal meetings without the presence of management and chaired by an independent
director.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>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.</P>

<P STYLE="font: italic 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">Audit Committee</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>All Audit Committee members possess the required level of financial literacy, as required by SEC regulations.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>Mr. Bass, a member of the Audit Committee, possesses the qualifications of an &ldquo;audit committee financial expert,&rdquo;
as required by SEC regulations.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The Audit Committee&rsquo;s charter formalizes and makes explicit the following:</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 1in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Courier New, Courier, Monospace">o</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The Audit Committee's ability to retain independent consultants and experts as it sees fit, at Company expense;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 1in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Courier New, Courier, Monospace">o</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The Audit Committee's authority to appoint, review and assess the performance of the Company's independent auditors;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 1in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Courier New, Courier, Monospace">o</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The Audit Committee's ability to hold regular executive sessions with the Company's independent auditors and with the Company&rsquo;s
Chief Financial Officer, Controller and other Company officers directly, as it considers appropriate;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 1in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Courier New, Courier, Monospace">o</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>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;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 1in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Courier New, Courier, Monospace">o</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The Audit Committee's duty to maintain a formal complaint monitoring procedure (a &ldquo;whistleblower&rdquo; policy) to
enable confidential and anonymous reporting to the Audit Committee;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 1in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Courier New, Courier, Monospace">o</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The Audit Committee's authority over the independent auditors' rotation policy; and</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 1in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Courier New, Courier, Monospace">o</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The Audit Committee&rsquo;s responsibilities to oversee the Company&rsquo;s risk management policies and practices.</P>

<P STYLE="font: italic 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">Other Governance Matters</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The Company has a formal Code of Business Conduct and Ethics that applies to all officers, directors and employees.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>Each of the Compensation Committee, Audit and Nominating Committees has a written charter.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The Company has an Insider Trading Policy, including control procedures to comply with current SEC regulations and Nasdaq
rules.</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The Company has a policy that the Board of Directors reviews its own performance on an at least annual basis.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The Company prohibits loans to its officers and directors.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.25in; text-align: justify; text-indent: -0.25in"><I>Board
Leadership</I></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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&rsquo;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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.25in; text-align: justify; text-indent: -0.25in"><I>Risk
Management</I></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>The
Company summarizes the primary risks associated with the business in its quarterly and annual reports on Forms 10-Q and 10-K,
respectively.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT STYLE="font-size: 11pt">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&rsquo;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.&nbsp;</FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in"><I>Compensation Risk
Considerations</I></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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&rsquo;s
compensation policies and practices promote risky behavior on the part of its employees as discussed below.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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&rsquo;s performance-based award programs represent a small percentage of employees&rsquo; total compensation opportunities
and results are closely monitored at both management and board levels. The Company believes that the programs appropriately balance
risk and the desire to focus employees on specific short-term goals important to the Company&rsquo;s success, and that they do
not encourage unnecessary or excessive risk taking.</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Compensation provided
to employees in the form of long-term equity awards through stock option grants are important to help further align employees&rsquo;
interests with those of the Company&rsquo;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&rsquo;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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in">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.</P>

<P STYLE="font: italic 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">Policy for Director Recommendations
and Nominations</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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&rsquo;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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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 STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 1.5in; text-align: justify; text-indent: 0.5in">Chairman of
the Nominating Committee</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 1.5in; text-align: justify; text-indent: 0.5in">c/o Corporate
Secretary</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 1.5in; text-align: justify; text-indent: 0.5in">Socket Mobile,
Inc.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 2in; text-align: justify">39700 Eureka Drive</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 1.5in; text-align: justify; text-indent: 0.5in">Newark, CA 94560</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0in">The notice must include:</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>the candidate's name and home and business contact information;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 6pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>detailed biographical data and relevant qualifications;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 6pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>a signed letter from the candidate confirming his or her willingness to serve;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 6pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>information regarding any relationships between the candidate and the Company within the last three years; and</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 6pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>evidence of the required ownership of Common Stock by the recommending stockholder(s).</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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 &quot;<I>Deadline for Receipt of Stockholder Proposals to be Included in the Company's Proxy Materials</I>.&quot;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Where the Nominating
Committee has either identified a prospective nominee or determines that an additional or replacement director is required, the
Nominating Committee may take such measures that it considers appropriate in connection with its evaluation of a director candidate,
including candidate interviews, inquiry of the person or persons making the recommendation or nomination, engagement of an outside
search firm to gather additional information, or reliance on the knowledge of the members of the committee, the Board of Directors
or management. In its evaluation of director candidates, including the members of the Board of Directors eligible for re-election,
the Nominating Committee considers a number of factors, including the following:</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in"></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The current size and composition of the Board of Directors and the needs of the Board of Directors and its various committees.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>Such other factors as the Nominating Committee may consider appropriate.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The highest personal and professional ethics and integrity.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>Proven achievement and competence in the nominee's field, and the ability to exercise sound business judgment.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>Skills complementary to those of the existing members of the Board of Directors.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>The ability to assist and support management and make significant contributions to the Company's success.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&#183;</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>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.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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 STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: left; text-indent: 0.5in">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. Mr. Emery has a strong background working in the healthcare industry with an emphasis on healthcare management
systems. Messrs. Bass, Emery and Sealey hold doctorate degrees in their respective fields. 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 18 years of experience with the Company, the last 12 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&rsquo;s inception.</P>

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<P STYLE="font: italic 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">Stockholder Communications to
Directors</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">Stockholders may
communicate directly with the members of the Board of Directors by sending an email to <I>socketboard@socketmobile.com</I>.<B>
</B>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.</P>

<P STYLE="font: italic 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">Director Independence</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">In February 2012,
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.&nbsp;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.</P>

<P STYLE="font: italic 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify">Code of Business Conduct and
Ethics</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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 other 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>

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<P STYLE="font: bold 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">REPORT OF THE AUDIT COMMITTEE</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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, 2011, 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&rsquo;s website at http://www.mkr-group.com/SCKT/board_committee.html.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The Audit Committee
reviewed the 2011 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&rsquo; communications
with the audit committee concerning independence.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">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&rsquo;s annual financial statements for the year ended December 31, 2011. In addition, a conference call among members
of the Audit Committee, the auditors and management was held each quarter during fiscal 2011 to review the Company&rsquo;s quarterly
financial reports prior to their issuance.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: left; text-indent: 0.5in">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&rsquo;s audited financial statements be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2011. The Audit Committee also approved the appointment of Moss Adams LLP as the Company's independent
auditors for the year ending December 31, 2012.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: justify; text-indent: 0.5in">The foregoing report
has been submitted by the undersigned in our capacity as members of the Audit Committee of the Board of Directors.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin-right: 0; margin-bottom: 0; text-align: justify; margin-left: 308pt">AUDIT COMMITTEE</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 3.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin-right: 0; margin-bottom: 0; text-align: justify; margin-left: 308pt">Charlie Bass</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin-right: 0; margin-bottom: 0; text-align: justify; margin-left: 308pt">Charles C. Emery, Jr.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin-right: 0; margin-bottom: 0; text-align: justify; margin-left: 308pt">Leon Malmed</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Dated: March 9, 2012</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center; text-indent: 0in"><B>OTHER MATTERS</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: left; text-indent: 0in">The Company knows of
no other matters to be submitted at the 2012 Annual Meeting of Stockholders. If any other matters properly come before the 2012
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 or otherwise vote your shares via telephone or internet as available.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: left; text-indent: 0in"></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin-right: 0; margin-bottom: 0; text-align: justify; margin-left: 308pt">THE
BOARD OF DIRECTORS</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 3.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 0 3.5in; text-align: justify"></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Dated: March 9, 2012</P>



<P STYLE="margin: 0"></P>

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