Option/SAR Grants in Last Fiscal Year

The following table sets forth information concerning stock options granted to each of the executives named in the Summary Compensation Table for the fiscal year ending December 31, 2005:

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Aggregated Option/SAR Exercises and Year End Option/SAR Values in Last Fiscal Year

The following table sets forth the aggregate of options exercised in the year ended December 31, 2005 and the value of options held at December 31, 2005.

Option Exercises/Option Values

Long-Term Incentive PlansEquity Awards

As of December 31, 2005, the Company did not maintain any long term incentive plans.

Employee Contracts, Termination Agreements, Changes in Control

The Company currently does not have an employment agreement with any of the executive officers named in the Summary Compensation Table.

Other

401(k) Plan.Effective October 3, 1986, the Company adopted a Voluntary 401(k) Plan. All employees are eligible for the plan. Previously, employees who had worked for the Company for 18 months were currently eligible for a 34% match of their subsequent contributions; however, the match policy was suspended January 1, 2003. Benefits are determined annually. The lowest 66% of paid employees may contribute the lesser of 15% of their salary or the applicable maximum allowed by the Internal Revenue Code. The top 1/3 of employees cannot contribute a percentage greater than 15% of their compensation or 150% of the average contribution of the lowest 66% of paid employees to the applicable maximum allowed by the Internal Revenue Code. Employer contributions vest within three months and all contributions are held in individual employee accounts with an outside financial institution. Company shares have never been allowed to be invested in the 401(k) plan.

Stock Option Plan.To increase the officers, key employees and consultants interest in the Companyour company and to align their interests more closely with the interests of the Company’sour company’s shareholders, the Board of Directors adopted a stockan option plan called the “1996 Stock Option Plan” (the “Plan”) on May 28, 1996, as amended as of April 27, 2004 and March 2, 2005.2005. The Plan as originally adopted and as amended as of April 27, 2004 was subsequently ratified by a majority vote of the Company’sour company’s shareholders.

Under the Plan, the Companyour company has reserved an aggregate of 1,400,000 common shares for issuance pursuant to options granted under the Plan. Plan Options are either (1) options qualifying as incentive stock options or (2) options that do not qualify—non-qualified options. Any incentive option granted under the Plan must provide for an exercise price of not less than 100% of the fair market value of the underlying shares on the date of such

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grant. The exercise price of non-qualified options shall be determined by the Board of Directors or a committee of the CommitteeBoard but shall in no event be less than 75% of the fair market value of the underlying shares on the date of the grant. As of December 31, 2005,2007, there were 525,7009,000 incentive options and 215,000195,000 non-qualified options existing under the plan.Plan. All of the options were granted at or above fair market value as of the date of grant.

Outstanding Equity Awards at Fiscal Year-End Table

The following table sets forth the outstanding equity awards at December 31, 2007 for the Named Executive Officers in the Summary Compensation Table:

Overview of Executive Compensation

We do not have an employment agreement with any of the executive officers named in the Summary Compensation Table. With the exception of Mr. Swartz and Mr. Burrows noted below, employment may terminate at any time without severance. All are entitled to the standard benefits available to all employees and have executed our company’s nondisclosure and noncompete agreement, which all of our employees are obligated to sign, that provides that each employee will not compete with us during their employment and to always keep confidential our trade secrets and other confidential information.

Ronald Kaplan, now our President and Chief Operating Officer, receives an annual base salary of $160,000 plus the value of the use of an automobile and the payout of unused vacation. We do not have an employment contract with Mr. Kaplan.

Richard Malagodi our President and Chief Operating Officer from February, 2007 through January, 2008, received an annual base salary of $150,000.

In addition to the above named executive officers, we paid salary of $20,800 to Robert Burrows, who became our Chief Financial Officer in November, 2007. Under the terms of his employment agreement Mr. Burrows will receive an annual base salary of $180,000. In addition, Mr. Burrows is entitled to a bonus of $27,500 if we complete a business acquisition from now through November 5, 2008. Mr. Burrows will also be entitled to a bonus up to $62,500 based on our revenues during 2008. The bonus is $22,500 if our revenues exceed $7.5 million, $45,000 if our revenues exceed $8.5 million and $62,500 if our revenues exceed $9.5 million. However, if we complete a business acquisition between now and the end of 2008, Mr. Burrows will only receive the $62,500 bonus if our revenues for 2008 exceed $10 million. After 2008, Mr. Burrows will be entitled to an annual performance bonus of up to one-half of his base salary as determined by the board. In addition, Mr. Burrows received a restricted stock grant of 225,000 common shares, of which 31,250 shares vest each quarter during 2008 and 25,000 shares vest each quarter during 2009. Mr.��Burrows has the right to put back such number of shares each quarter to meet his federal income tax liability with respect to such restricted stock. Mr. Burrows and his family will be entitled to participate in our health, disability and other benefits. We will pay for the cost of Mr. Burrows’ and his family’s health and dental benefits.

Compensation of Directors

Directors who are full-time employees of our company receive no additional compensation for services rendered as members of our company’s Board or any committee thereof. Outside independent Directors of our company receive $1,500 per year, and our Audit Committee Chair receives $3,000 per year. Non-employee Directors receive meeting fees of $500 for each Board meeting attended in person, and $250 for each Board meeting attended telephonically. In addition, from time to time our company may grant incentive stock options with an exercise price greater than the market value of the underlying shares to the directors for services rendered while serving on the Board. In the past, outside directors have been granted 10,000 shares under the Stock Option Plan for each year of service on the Board at an exercise price above the market value of the shares as listed at the time of the grant.

As of February 1, 2008, outside independent Directors of our company receive $2,500 per year, and our Audit Committee Chair receives $4,000 per year. Non-employee Directors receive meeting fees of $500 for each Board meeting attended in person, and $250 for each Board meeting attended telephonically, they will also receive $250 for each committee meeting. Option grants will be awarded on June 30 of each fiscal year. Grants will be 15,000 for each director with an exercise price the greater of 10% above current market price or $1.50 per share.

Director Compensation Table

Employment Agreements

Neil Swartz, Chief Executive Officer

We have an employment agreement with Neil Swartz, our Chief Executive Officer and Chairperson of the Board. Pursuant to the employment agreement, dated August 25, 2008, Mr. Swartz commenced serving as our Chief Executive Officer effective September 2, 2008.

Pursuant to the terms of the Employment Agreement, Mr. Swartz will receive an annual base salary of $160,000. Mr. Swartz will be entitled to an increase of $30,000 in his annual salary if our company achieves net cash inflow of at least $750,000 per quarter for two consecutive quarters commencing with the quarter ending December 31, 2008. Mr. Swartz will be entitled to an increase of $30,000 in his annual salary if our company achieves actual or pro forma annual revenue of at least $12,000,000. Mr. Swartz will be entitled to an increase of $30,000 in his annual salary if our company achieves actual or pro forma annual net profits of at least $500,000. The Board’s compensation committee, or if no such committee exists, the Board may authorize bonuses for Mr. Swartz. Mr. Swartz’ salary shall be accrued but not paid to him unless and until our company receives $1,000,000 cash inflow from any combination of (i) the sale of equity or equity derivative securities and (ii) net cash flow from operations.

Mr. Swartz and his family will be entitled to participate in our company’s health, disability and other benefits. We will pay for the cost of Mr. Swartz’ and his family’s health and dental benefits. Mr. Swartz will also be entitled to participate in our company’s retirement plans provided to our employees generally and he will receive four weeks paid time off, in addition to holidays.

If Mr. Swartz is terminated for “cause” (as defined in his employment agreement) or he quits without “good reason” (as defined in his employment agreement), then we will pay him, in a lump sum, his accrued but unpaid compensation and benefits, including unused vacation time, but any other benefits under his employment agreement shall terminate. If Mr. Swartz is terminated without “cause” or he resigns for “good reason”, then we will pay him, in a lump sum, a cash amount equal to 1.5 times the amount of his base salary plus accrued and unpaid salary and reimbursable expenses, and we will maintain all life, health, accident, and disability plans for one year after the date of termination. Mr. Swartz will not, however, be entitled to severance if he is terminated prior to the end of December 31, 2009. In either case, Mr. Swartz will continue to be bound by the non-disclosure and non-solicitation provisions of our Nondisclosure, Restrictive Covenants and Proprietary Information and Inventions Agreement.

Mr. Swartz may terminate his employment agreement for “good reason” upon a change in control of our company and he is not offered the same or comparable position in the surviving company on substantially the same terms as in his employment agreement, or is offered such position but within 24 months after he accepts such position, his employment is terminated either without cause or for good reason.

If his employment is terminated as a result of his death or permanent disability, then Mr. Swartz or his heirs shall generally be entitled to his accrued but unpaid compensation and benefits, including unused vacation time.

Robert L. Burrows, Chief Financial Officer

We have an employment agreement with Robert L. Burrows, our Chief Financial Officer. Pursuant to the employment agreement, dated November 5, 2007, Mr. Burrows commenced serving as our Chief Financial Officer.

Pursuant to the terms of his employment agreement, Mr. Burrows will receive an annual base salary of $180,000. In addition, Mr. Burrows is entitled to a bonus of $27,500 if we complete a business acquisition from now through November 5, 2008. Mr. Burrows will also be entitled to a bonus up to $62,500 based on our revenues during 2008. The bonus is $22,500 if our revenues exceed $7.5 million, $45,000 if our revenues exceed $8.5 million and $62,500 if our revenues exceed $9.5 million. However, if we complete a business acquisition between now and the end of 2008, Mr. Burrows will only receive the $62,500 bonus if our revenues for 2008 exceed $10 million. After 2008, Mr. Burrows will be entitled to an annual performance bonus of up to one-half of his base salary as determined by the board.

In addition, Mr. Burrows received a restricted stock grant of 225,000 common shares, of which 31,250 shares vest each quarter during 2008 and 25,000 shares vest each quarter during 2009. Mr. Burrows has the right to put back such number of shares each quarter to meet his federal income tax liability with respect to such restricted stock.

Mr. Burrows and his family will be entitled to participate in our health, disability and other benefits. We will pay for the cost of Mr. Burrows’ and his family’s health and dental benefits. Mr. Burrows will also be entitled to participate in our retirement plans provided to our employees generally and he will receive four weeks paid time off, in addition to holidays.

If Mr. Burrows is terminated for “cause” (as defined in his employment agreement) or he quits without “good reason” (as defined in his employment agreement), then (i) we will pay him, in a lump sum, his accrued but unpaid compensation and benefits, including unused vacation time and earned bonus, but any other benefits under his employment agreement shall terminate; and (ii) all of the restricted shares that had not vested prior to such termination shall be forfeited back to our company. If Mr. Burrows is terminated without “cause” or he resigns for “good reason”, then (i) we will pay him, in a lump sum, a cash amount equal to 1.5 times the amount of his base salary plus the proportionate amount of his annual bonus, whether or not the conditions are satisfied plus accrued and unpaid salary and reimbursable expenses; (ii) all of the restricted shares shall vest immediately; and (iii) we will maintain all life, health, accident, and disability plans for one year after the date of termination. In either case, Mr. Burrows will continue to be bound by the non-disclosure and non-solicitation provisions of the Proprietary Information and Inventions Agreement.

Mr. Burrows may terminate the agreement for “good reason” upon a change in control of the company and he is not offered the same or comparable position in the surviving company on substantially the same terms as in his employment agreement, or is offered such position but within 24 months after he accepts such position, his employment is terminated either without cause or for good reason.

If his employment is terminated as a result of his death or permanent disability, then Mr. Burrows or his heirs shall generally be entitled to his accrued but unpaid compensation and benefits, including unused vacation time and earned bonus and all of his restricted shares shall vest immediately.

Other

401(k) Plan.Effective October 3, 1986 our company adopted a Voluntary 401(k) Plan. All employees are eligible for the plan. Previously, employees who had worked for our company for 18 months were currently eligible for a 34% match of their subsequent contributions; however, the match policy was suspended January 1, 2003. Employer contributions vest within three months and all contributions are held in individual employee accounts with an outside financial institution. Our company shares have never been allowed to be invested in the 401(k) plan.

Equity Compensation Plan Information

These securities described in this table were granted solely under the Company’sour company’s Amended and Restated 1996 Stock Option Plan. See “Stock Option Plan”“Equity Awards” above.

Code of Conduct

The Company has adopted a code of conduct that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. The text of the code is available upon request. Written requests should be addressed to John R. Oliver, Chief Financial Officer, Action Products International, Inc., 1101 North Keller Road, Orlando, Florida 32810, or telephone 407-481-8007.

SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERSOUR SECURITIES

Security Ownership of Certain Beneficial Owners

The following table sets forth information with respect to the number of common shares beneficially owned by (i)regarding each director of the Company, (ii) the executive officer named in the Summary Compensation Table, (iii) all directors and officers as a group and (iv) each shareholderperson known by the Companyus to be athe beneficial owner of more than 5% of the Company’sour common shares, excluding persons who are our executive officers, directors or director nominees, as of August 23, 2006. Except asSeptember 15, 2008. We have only one issued and outstanding class of capital stock, our common shares.

Beneficial ownership has been determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to the shares. Unless otherwise indicated, each of the shareholders listedpersons named in the table below hashave sole voting and investment power overwith respect to the number of shares indicated as beneficially owned by them.

Security Ownership of Management

The following table sets forth information regarding the beneficial ownership of our common shares as of September 15, 2008. The information in this table provides the ownership information for

Beneficial ownership has been determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to the shares. Unless otherwise indicated, the persons named in the table below have sole voting and investment power with respect to the number of shares indicated as beneficially owned by them. Unless otherwise indicated, the address of each beneficial owner is c/o Action Products International, Inc., 1101 North Keller Road, Suite F, Orlando, Florida 32810. As of August 23, 2006, there were issued and outstanding 5,227,100 common shares.

Table of Beneficial Ownership

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6(5)	Includes immediately exercisable options to purchase 30,00010,000 and 40,000 shares at $3.25$3.50 and $1.20 per share and excludesrespectively. Excludes currently unexercisable options to purchase 120,00015,000 shares at $3.25$1.80 per share.

7(6)	Includes immediately exercisable options to purchase 10,000 shares at $3.50$1.20 per share and exercisableshare. Excludes currently unexercisable options to purchase 10,00015,000 shares at $4.38$1.80 per share.

8(7)	Includes immediately exercisable options to purchase 225,000100,000 shares and exercisable warrants to purchase 3,397,3341,409,832 shares.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In March and April 2004, the Company issued notes payableDuring 2007 we paid $36,300 to Warren Kaplan and Judith Kaplan for a total of $645,000. The notes were for a two year term and provided for monthly interest payments of 6% on the outstanding principal balance and 129,000 warrants to purchase common stock at $4.50 per share. An accrual for loan fees of $178,100 was recorded to reflect the estimated value of the warrants. The warrants terminate in April 2009. As of June 30, 2004, the Company had paid the $645,000 principal balance in full. In May 2004, as consideration for the accelerated prepayment of the total loan principal, the Kaplans relinquished the 129,000 warrants issued to them.

During 2005 the Company paid $40,600 to Warren Kaplan and $77,200 in 2005$72,600 to Ronel Management Company, wholly owned by Warren Kaplan, former Chairperson of the Board, and Judith Kaplan, founder and former Board member, for consulting, financing and investment advisory services an of which are reflected in the compensation table for Mr. Warren Kaplan..

During 2004 the Company2006 we paid $41,900 to Warren Kaplan and $54,900$101,300 to Ronel Management Company, wholly ownedwholly-owned by Warren Kaplan, former Chairperson of the Board, and Judith Kaplan, founder and former Board member, for consulting, services which are reflected in the compensation table for Mr. Warren Kaplan.financing and investment advisory services.

PRINCIPAL ACCOUNTING FEES AND SERVICES

INDEPENDENT PUBLIC ACCOUNTANTSPrincipal Accounting Fees and Services

Moore Stephens Lovelace, P.A., acted as the principal accountants for the Companyour company for the fiscal year most recently completed. The Company expectsWe expect representatives of Moore Stephens Lovelace, P.A. to be present at the

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Meeting, to have an opportunity to make a statement if they desire to do so, and to be available to respond to appropriate questions. It is also expected that a Moore Stephens Lovelace P.A. representative will serve as the Inspector of Elections.

Principal Accountant Fees and Services

The CompanyWe paid the following fees to itsour auditor during 20052007 and 2004:2006:

Audit Committee’s Pre-approval Policy and Procedures

The Audit Committee of the Board of Directors has adopted policies and procedures for the pre-approval of audit and non-audit services for the purpose of maintaining the independence of the Company’sour company’s independent auditors. The CompanyWe may not engage itsour independent auditors to render any audit or non-audit service unless either the Audit Committee approves the service in advance or the engagement to render the service is entered into pursuant to the Audit Committee’s pre-approval policies and procedures. Pre-approval of audit services shall not be delegated to management, but may be delegated to one or more independent members of the Committee so long as that member or members report their decisions to the Committee at all regularly scheduled meetings. Pre-approval of non-audit services with an expected cost of less than $15,000 individually and in the aggregate may be delegated to management. During 2005,2007, no services were provided to the Companycompany by Moore Stephens Lovelace, P.A. or any other accounting firm other than in accordance with the pre-approval policies and procedures described above.

PROPOSALS TO THE SHAREHOLDERSSHAREHOLDER COMMUNICATIONS AND NOMINATIONS FOR DIRECTORS

PROPOSAL 1.

ELECTION OF DIRECTORS

Current NomineesShareholder Communications

The Board will give appropriate attention to written communications on issues that are submitted by shareholders and other interested parties, and will respond if and as appropriate. Absent unusual circumstances or as contemplated by committee charters, the Chairperson of the Nominating Committee will, with the assistance of our legal counsel, be primarily responsible for monitoring communications from shareholders and other interested parties and provide copies or summaries of such communications to the other directors as he or she considers appropriate.

Communications will be forwarded to all directors if they relate to substantive matters and include suggestions or comments that the Chairperson of the Nominating Committee considers to be important for the directors to know. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to personal grievances and matters as to which we tend to receive repetitive or duplicative communications.

Shareholders and other interested parties who wish to send communications on any topic to the Board should address such communications to Ann E. W. Stone, Chairperson of the Nominating Committee, c/o Action Products International, Inc., 1101 North Keller Rd. Suite E, Orlando, Florida 32810. If a shareholder wishes simply to propose a candidate for consideration as a nominee by the Board of Directors, is currently composed of four directors. Eachit should submit any pertinent information regarding the candidate to Action Products International, Inc., Attn: Secretary, 1101 North Keller Road, Suite E, Orlando, Florida 32810.

Nominations for Directors

If a shareholder wishes to nominate a candidate to be considered for election as a director is elected for a term of office to expire at the succeedingan annual meeting of shareholders ofusing the Company after their election and until their respective successors are elected and qualified. The terms of all directors are expiring atprocedures set forth Article XVII in our Bylaws, it must follow the Meeting and the Nomination Committee of the Board of Directors have nominated Ronald S. Kaplan, Scott Runkel, Ann E. W. Stone and Dr. Barry Render currently serving as directors of the Company since 1991, 2002, 2003 and 2006

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respectively, as nominees for re-election to the Board of Directors. If elected, the term of the Board of Directors’ nominees expires at the 2007 Annual Meeting and when their respective successors are duly elected and shall have qualified.

Should any nominee become unable or unwilling to accept a nomination or election, the Board of Directors will either select a substitute nominee or will reduce the size of the Board. If you have properly executed and returned a proxy and a substitute nominee is selected, the holders of the proxy will vote your shares FOR the election of the substitute nominee. The Board of Directors has no reason to believe that any nominee willprocedures described below. Such nominations must be unable or unwilling to serve if elected.

In accordance with the Company’s Bylaws, directors are elected by a plurality of the votes of the shares represented and entitled to vote at the meeting. That means the nominees will be elected if they receive more affirmative votes than any other nominees.

Continuing Directors

Assuming election of the nominees named above, the following is a list of the persons that will constitute the Company’s Board of Directors.

our secretary. To be considered for inclusion in next year’s proxy statement, shareholder proposalstimely, a shareholder’s notice must be delivered to or mailed and received at the Company’s principal executive officesby our secretary not later than the close of business on January 12, 2007. Forthe 60^th day prior to such meeting. Such shareholder’s notice shall set forth, as to each person whom the shareholder proposes to nominate for election as a director:

Such shareholder’s notice shall also set forth, as to such shareholder giving notice:

The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and if the chairman should so determine, the chairman shall so declare at the meeting, and the defective nomination shall be disregarded.

Nominating Procedures

We made no changes to the procedures by which shareholders may recommend nominees to our Board of Directors.

Appendix A

ACTION PRODUCTS INTERNATIONAL, INC.

2008 LONG-TERM EQUITY INCENTIVE PLAN

1.Purpose. This plan shall be known as theACTION PRODUCTS INTERNATIONAL, INC. 2008 LONG-TERM EQUITY INCENTIVE PLAN (the “Plan”). The purpose of the Plan shall be to promote the long-term growth and profitability ofACTION PRODUCTS INTERNATIONAL, INC.(the “Company”) and its Subsidiaries by (i) providing certain directors, officers and employees of, and certain other individuals who perform services for, the Company and its Subsidiaries with incentives to maximize stockholder value and otherwise contribute to the success of the Company and (ii) enabling the Company to attract, retain and reward the best available persons for positions of responsibility. Grants of incentive or non-qualified stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, deferred stock units, performance awards, or any combination of the foregoing may be made under the Plan.

2.Definitions.

a.“Board of Directors” and “Board” mean the board of directors of the Company.

b.“Cause” means the occurrence of one or more of the following events:

i.conviction of a felony or any crime or offense lesser than a felony involving the property of the Company or a Subsidiary; or

ii.conduct that has caused demonstrable and serious injury to the Company or a Subsidiary, monetary or otherwise; or

iii.willful refusal to perform or substantial disregard of duties properly assigned, as determined by the Company or a Subsidiary, as the case may be; or

iv.breach of duty of loyalty to the Company or a Subsidiary or any act of fraud or dishonesty with respect to the Company or a Subsidiary; or

v.as otherwise provided by the Committee.

c.“Change in Control” means the occurrence of one of the following events:

i.if any “person” or “group” as those terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successors thereto, other than an Exempt Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act or any successor thereto), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities; or

ii.during any period of two consecutive years, individuals who at next year’s annual meeting,the beginning of such period constitute the Board and any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election was previously so approved, cease for any reason to constitute a majority thereof; or

iii.consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation (A) which would result in all or a portion

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of the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) by which the corporate existence of the Company is not affected and following which the Company’s directors retain their positions with the Company (and constitute at least a majority of the Board); or

iv.consummation of a plan of complete liquidation of the Company or a sale or disposition by the Company of all or substantially all the Company’s assets, other than a sale to an Exempt Person; or

v.as otherwise provided by the Committee.

d.“Code” means the Internal Revenue Code of 1986, as amended.

e.“Committee” means the Compensation Committee of the Board, if any, which shall consist solely of two or more members of the Board, and each member of the Committee shall be (i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, unless administration of the Plan by “non-employee directors” is not then required in order for exemptions under Rule 16b-3 to apply to transactions under the Plan, (ii) an “outside director” within the meaning of Section 162(m) of the Code, unless administration of the Plan by “outside directors” is not then required in order to qualify for tax deductibility under Section 162(m) of the Code, and (iii) independent, as defined by the rules of the Nasdaq Stock Market or any national securities exchange on which any securities of the Company are listed for trading, and if not listed for trading, by the rules of the Nasdaq Stock Market.

f.“Common Stock” means the Common Stock, par value $0.001 per share, of the Company, and any other shares into which such stock may be changed by reason of a recapitalization, reorganization, merger, consolidation or any other change in the corporate structure or capital stock of the Company.

g.“Competition” is deemed to occur (i) if a person whose employment with the Company or its Subsidiaries has terminated obtains a position as a full-time or part-time employee of, as a member of the board of directors of, or as a consultant or advisor with or to, or acquires an ownership interest in excess of 5% of, a corporation, partnership, firm or other entity that engages in any of the businesses of the Company or any Subsidiary with which the person was involved in a management role at any time during his or her last five years of employment with or other service for the Company or any Subsidiaries, or (ii) as otherwise provided by the Committee.

h.“Disability” means, except as otherwise provided by the Committee, a disability that would entitle an eligible participant to payment of monthly disability payments under any Company disability plan or as otherwise determined by the Committee.

i.“Exchange Act” means the Securities Exchange Act of 1934, as amended.

j.“Exempt Person” means any employee benefit plan of the Company or any Subsidiary or a trustee or other administrator or fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary or any underwriter who temporarily acquires securities in an offering.

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k.“Family Member” has the meaning given to such term in General Instructions A.1(a)(5) to Form S-8 under the Securities Act of 1933, as amended, and any successor thereto.

l.“Fair Market Value” of a share of Common Stock of the Company means, as of the date in question, the officially-quoted closing selling price of the stock (or if no selling price is quoted, the bid price) on the principal securities exchange on which the Common Stock is then listed for trading (including for this purpose the Nasdaq Capital Market) (the “Market”) for the applicable trading day or, if the Common Stock is not then listed or quoted in the Market, the Fair Market Value shall be the fair value of the Common Stock determined in good faith by the Board.

m.“Incentive Stock Option” means an option conforming to the requirements of Section 422 of the Code and any successor thereto.

n.“Non-Employee Director” has the meaning given to such term in Rule 16b-3 under the Exchange Commission rules permitAct and any successor thereto.

o.“Non-qualified Stock Option” means any stock option other than an Incentive Stock Option.

p.“Other Company Securities” mean securities of the Company other than Common Stock, which may include, without limitation, unbundled stock units or components thereof, debentures, preferred stock, warrants and securities convertible into or exchangeable for Common Stock or other property.

q.“Retirement” means retirement as defined under any Company pension plan or retirement program or termination of one’s employment on retirement with the approval of the Committee.

r.“Subsidiary” means a corporation or other entity of which outstanding shares or ownership interests representing 50% or more of the combined voting power of such corporation or other entity entitled to elect the management to vote proxiesthereof, or such lesser percentage as may be approved by the Committee, are owned directly or indirectly by the Company.

3.Administration.

a.Committee. The Plan shall be administered by the Committee, if any; provided that the Board may, in its discretion, at any time and from time to time, resolve to administer the Plan, in which case the term “Committee” shall be deemed to mean the Board for all purposes herein. Subject to the provisions of the Plan, the Committee shall be authorized to (i) select persons to participate in the Plan, (ii) determine the form and substance of grants made under the Plan to each participant, and the conditions and restrictions, if (a)any, subject to which such grants will be made, (iii) certify that the conditions and restrictions applicable to any grant have been met, (iv) modify the terms of grants made under the Plan, (v) interpret the Plan and grants made thereunder, (vi) make any adjustments necessary or desirable in connection with grants made under the Plan to eligible participants located outside the United States and (vii) adopt, amend, or rescind such rules and regulations, and make such other determinations, for carrying out the Plan as it may deem appropriate. Decisions of the Committee on all matters relating to the Plan shall be in the Committee’s sole discretion and shall be conclusive and binding on all parties. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with applicable federal and state laws and rules and regulations promulgated pursuant thereto and the rules and regulations of the principal securities exchange on which the Common Stock is then listed for trading. No member of the Committee and no officer of the Company received noticeshall be liable for any action taken or omitted to be taken by such member, by

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any other member of the proposalCommittee or by any officer of the Company in connection with the performance of duties under the Plan, except for such person’s own willful misconduct or as expressly provided by statute.

b.Expenses. The expenses of the Plan shall be borne by the Company. The Plan shall not be required to establish any special or separate fund or make any other segregation of assets to assume the payment of any award under the Plan, and rights to the payment of such awards shall be no greater than the rights of the Company’s general creditors.

c.Discretion. Without limiting the generality of the provisions of Sections 3, 4, 6 or 18 or any other section of this Plan, the Committee may, at any time or from time to time, and on such terms and conditions (that are consistent with and not in contravention of the other provisions of this Plan) as the Committee may, in its sole discretion, determine, enter into agreements (or take other actions with respect to awards) for new awards containing terms (including exercise prices) more (or less) favorable than outstanding similar awards.

4.Shares Available for the Plan.

a.Number. Subject to adjustments as provided in Section 16 hereof, an aggregate of one million five hundred thousand (1,500,000) shares of Common Stock may be issued pursuant to the Plan (the “Shares”).

b.Shares Available. Such Shares may be in whole or in part authorized and unissued or held by the Company as treasury shares. If any grant under the Plan expires or terminates unexercised, becomes unexercisable or is forfeited as to any Shares, or is tendered or withheld as to any shares in payment of the exercise price of the grant or the taxes payable with respect to the exercise, then such unpurchased, forfeited, tendered or withheld Shares shall thereafter be available for further grants under the Plan.

5.Participation.

a.Eligible Persons. Participation in the Plan shall be limited to those directors (including Non-Employee Directors), officers (including non-employee officers) and employees of, and other individuals performing services for, the Company or its Subsidiaries selected by the Committee (including participants located outside the United States). Nothing in the Plan or in any grant thereunder shall confer any right on a participant to continue in the service or employ as a director or officer of or in the performance of services for the Company or a Subsidiary or shall interfere in any way with the right of the Company or a Subsidiary to terminate the employment or performance of services or to reduce the compensation or responsibilities of a participant at any time. By accepting any award under the Plan, each participant and each person claiming under or through him or her shall be conclusively deemed to have indicated his or her acceptance and ratification of, and consent to, any action taken under the Plan by the Company, the Board or the Committee.

b.Grant of Awards. Incentive Stock Options or Non-qualified Stock Options, SARs, restricted stock awards, restricted stock unit or deferred stock unit awards, performance awards, or any combination thereof, may be granted to such persons and for such number of Shares as the Committee shall determine (such individuals to whom grants are made being sometimes herein called “optionees” or “grantees,” as the case may be). Determinations made by the Committee under the Plan need not be uniform and may be made selectively among eligible individuals under the Plan, whether or not such individuals are similarly situated. A grant of any type made hereunder in any one year to an eligible participant shall neither guarantee nor preclude a further grant of that or any other type to such participant in that year or subsequent years.

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6.Incentive and Non-qualified Options. The Committee may from time to time grant to eligible participants Incentive Stock Options, Non-qualified Stock Options, or any combination thereof; provided that the Committee may grant Incentive Stock Options only to eligible employees of the Company or its subsidiaries (as defined for this purpose in Section 422(a)(2) of the Code or any successor thereto). The options granted shall take such form as the Committee shall determine, subject to the following terms and conditions. It is the Company’s intent that Non-qualified Stock Options granted under the Plan not be classified as Incentive Stock Options, that Non-qualified Stock Options not give rise to plan failure income inclusion under Section 409A(a)(1) of the Code, that Incentive Stock Options be consistent with and contain or be deemed to contain all provisions required under Section 422 of the Code and any successor thereto, and that any ambiguities in construction be interpreted in order to effectuate such intent. If an Incentive Stock Option granted under the Plan does not qualify as such for any reason, then to the extent of such non-qualification, the stock option represented thereby shall be regarded as a Non-qualified Stock Option duly granted under the Plan, provided that such stock option otherwise meets the Plan’s requirements for Non-qualified Stock Options.

a.Price. The price per Share deliverable upon the exercise of each option (“exercise price”) may not be less than 100% of the Fair Market Value of a share of Common Stock as of the date of grant of the option, and in the case of the grant of any Incentive Stock Option to an employee who, at the time of the grant, owns more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries, the exercise price may not be less than 110% of the Fair Market Value of a share of Common Stock as of the date of grant of the option, in each case unless otherwise permitted by Section 422 of the Code or any successor thereto.

b.Payment. Options may be exercised, in whole or in part, upon payment of the exercise price of the Shares to be acquired. Unless otherwise determined by the Committee, payment shall be made (i) in cash (including check, bank draft, money order or wire transfer of immediately available funds), (ii) by delivery of outstanding shares of Common Stock with a Fair Market Value on the date of exercise equal to the aggregate exercise price payable with respect to the options’ exercise, (iii) by simultaneous sale through a broker reasonably acceptable to the Committee of Shares acquired on exercise, as permitted under Regulation T of the Federal Reserve Board or (iv) by any combination of the foregoing. In the event a grantee elects to pay the exercise price payable with respect to an option pursuant to clause (ii) above, (A) only a whole number of share(s) of Common Stock (and not fractional shares of Common Stock) may be tendered in payment, (B) such grantee must present evidence acceptable to the Company that he or she has owned any such shares of Common Stock tendered in payment of the exercise price (and that such tendered shares of Common Stock have not been subject to any substantial risk of forfeiture) for at least six months prior to the date of exercise, and (C) Common Stock must be delivered to the Company. Delivery for this purpose may, at the election of the grantee, be made either by (1) physical delivery of the certificate(s) for all such shares of Common Stock tendered in payment of the price, accompanied by duly executed instruments of transfer in a form acceptable to the Company, or (2) direction to the grantee’s broker to transfer, by book entry, such shares of Common Stock from a brokerage account of the grantee to a brokerage account specified by the Company. When payment of the exercise price is made by delivery of Common Stock, the difference, if any, between the aggregate exercise price payable with respect to the option being exercised and the Fair Market Value of the shares of Common Stock tendered in payment (plus any applicable taxes) shall be paid in cash. No grantee may tender shares of Common Stock having a Fair Market Value exceeding the aggregate exercise price payable with respect to the option being exercised (plus any applicable taxes).

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c.Terms of Options. The term during which each option may be exercised shall be determined by the Committee, but if required by the Code and except as otherwise provided herein, no option shall be exercisable in whole or in part more than ten years from the date it is granted, and no Incentive Stock Option granted to an employee who at the time of the grant owns more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries shall be exercisable more than five years from the date it is granted. All rights to purchase Shares pursuant to an option shall, unless sooner terminated, expire at the date designated by the Committee. The Committee shall determine the date on which each option shall become exercisable and may provide that an option shall become exercisable in installments. The Shares constituting each installment may be purchased in whole or in part at any time after such installment becomes exercisable, subject to such minimum exercise requirements as may be designated by the Committee. Prior to the exercise of an option and delivery of the Shares represented thereby, the optionee shall have no rights as a stockholder with respect to any Shares covered by such outstanding option (including any dividend or voting rights).

d.Limitations on Grants. If required by the Code, the aggregate Fair Market Value (determined as of the grant date) of Shares for which an Incentive Stock Option is exercisable for the first time by any individual during any calendar year under all equity incentive plans of the Company and its Subsidiaries (as defined in Section 422 of the Code or any successor thereto) may not exceed $100,000.

e.Termination.

i.Death or Disability. If a participant ceases to be a director, officer or employee of, or to perform other services for, the Company or any Subsidiary due to death or Disability, all of the participant’s options and SARs shall become fully vested and exercisable and shall remain so for a period of 180 days from the date of such death or Disability, but in no event after the expiration date of the options and SARs; provided that the participant does not engage in Competition during such 180-day period unless he or she received written consent to do so from the Board or the Committee; provided further that the Board or Committee may extend such exercise period (and related non-competition period) in its discretion, but in no event may such extended exercise period extend beyond the expiration date of the options. Notwithstanding the foregoing, if the Disability giving rise to the termination of employment is not within the meaning of Section 22(e)(3) of the Code or any successor thereto, Incentive Stock Options not exercised by such participant within 90 days after the date of termination of employment will cease to qualify as Incentive Stock Options and will be treated as Non-qualified Stock Options under the Plan if required to be so treated under the Code.

ii.Retirement. If a participant ceases to be a director, officer or employee of, or to perform other services for, the Company or any Subsidiary upon the occurrence of his or her Retirement, (A) all of the participant’s options and SARs that were exercisable on the date of Retirement shall remain exercisable for, and shall otherwise terminate at the end of, a period of 90 days after the date of Retirement, but in no event after the expiration date of the options or SARs; provided that the participant does not engage in Competition during such 90 day period unless he or she receives written consent to do so from the Board or the Committee; provided further that the Board or Committee may extend such exercise period (and related non-competition period) in its discretion, but in no event may such extended exercise period extend beyond the expiration date of the options, and (B) all of the participant’s options and SARs that were not exercisable on the date of Retirement shall be forfeited immediately upon such Retirement; provided, however, that such options and SARs may become fully vested and exercisable in whole or in part in the discretion of the Committee. Notwithstanding the foregoing, Incentive Stock Options not exercised by such participant within 90 days after Retirement will cease to qualify as Incentive Stock Options and will be treated as Non-qualified Stock Options under the Plan if required to be so treated under the Code.

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iii.Discharge for Cause. If a participant ceases to be a director, officer or employee of, or to perform other services for, the Company or a Subsidiary due to Cause, all of the participant’s options and SARs shall expire and be forfeited immediately upon such cessation, whether or not then exercisable.

iv.Other Termination. Unless otherwise determined by the Committee, if a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company or a Subsidiary for any reason other than death, Disability, Retirement or Cause, (A) all of the participant’s options and SARs that were exercisable on the date of such cessation shall remain exercisable for, and shall otherwise terminate at the end of, a period of 30 days after the date of such cessation, but in no event after the expiration date of the options or SARs; provided that the participant does not engage in Competition during such 30-day period unless he or she receives written consent to do so from the Board or the Committee; provided further that the Board or Committee may extend such exercise period (and related non-competition period) in its discretion, but in no event may such extended exercise period extend beyond the expiration date of the options, and (B) all of the participant’s options and SARs that were not exercisable on the date of such cessation shall be forfeited immediately upon such cessation. Notwithstanding the foregoing, Incentive Stock Options not exercised within 90 days after termination will cease to qualify as an Incentive Stock Option and will be treated as a Non-qualified Stock Option under the Plan if required to be so treated under the Code.

v.Change in Control. If there is a Change in Control of the Company and a participant is terminated other than for Cause from being a director, officer or employee of, or from performing other services for, the Company or a Subsidiary within one year after such Change in Control, all of the participant’s options and SARs shall become fully vested and exercisable upon such termination and shall remain so for up to one year after the date of termination, but in no event after the expiration date of the options or SARs. In addition, the Committee shall have the authority to grant options and SARs that become fully vested and exercisable automatically upon a Change in Control, whether or not the grantee is subsequently terminated. Notwithstanding the foregoing, Incentive Stock Options not exercised within 90 days after a participant’s termination will cease to qualify as an Incentive Stock Option and will be treated as a Non-qualified Stock Option under the Plan if required to be so treated under the Code.

vi.Forfeiture. If a participant exercises any of his or her options and SARs and, within one year thereafter, either (i) is terminated from the Company or a Subsidiary for any of the reasons specified in the definition of “Cause” set forth in Section 2(b), or (ii) engages in Competition without having received written consent to do so from the Board or the Committee, then the participant may, in the discretion of the Committee, be required to pay the Company the gain represented by the difference between the aggregate selling price of the Shares acquired upon the exercise of options or SARs (or, if the Shares were not then sold, their aggregate Fair Market Value on the date of exercise) and the aggregate exercise price of the options or SARs exercised (the “Option Gain”), without regard to any subsequent increase or decrease in the Fair Market Value of the Common Stock. In addition, the Company may, in its discretion, deduct from any payment of any kind (including salary or bonus) otherwise due to any such participant an amount equal to the Option Gain.

vii.Grant of Reload Options. The Committee may provide (either at the time of grant or exercise of an option), in its discretion, for the grant to a grantee who exercises all or any portion of an option (“Exercised Options”) and who pays all or part of such exercise

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price with shares of Common Stock, of an additional option (a “Reload Option”) for a number of shares of Common Stock equal to the sum (the “Reload Number”) of the number of shares of Common Stock tendered for the Exercised Options plus, if so provided by the Committee, the number of shares of Common Stock, if any, tendered by the grantee in connection with the exercise of the Exercised Options to satisfy any federal, state or local tax withholding requirements. The terms of each Reload Option, including the date of its expiration and the terms and conditions of its exercisability and transferability, shall be the same as the terms of the Exercised Option to which it relates, except that (i) the grant date for each Reload Option shall be the date of exercise of the Exercised Option to which it relates and (ii) the exercise price for each Reload Option shall be the Fair Market Value of the Common Stock on the grant date of the Reload Option.

7.Stock Appreciation Rights.

a.The Committee shall have the authority to grant SARs under this Plan. SARs shall be subject to such terms and conditions as the Committee may specify; provided that the exercise price of an SAR may never be less than the Fair Market Value of the Shares subject to the SAR on the date the SAR is granted and no SAR may include any feature for the deferral of compensation other than the deferral of recognition of income until the exercise of the SAR.

b.Prior to the exercise of the SAR, the participant shall have no rights as a stockholder with respect to Shares covered by such outstanding SAR (including any dividend or voting rights).

c.Upon the exercise of an SAR, the participant shall be entitled to a distribution in an amount equal to (A) the difference between the Fair Market Value of a share of Common Stock on the date of exercise and the exercise price of the SAR multiplied by (B) the number of Shares as to which the SAR is exercised.

d.All SARs will be exercised automatically on the last day prior to the expiration date of the SAR so long as the Fair Market Value of a share of Common Stock on that date exceeds the exercise price of the SAR.

8.Restricted Stock.

a.The Committee may at any time and from time to time grant Shares of restricted stock under the Plan to such participants and in such amounts as it determines. Each grant of Shares of restricted stock shall specify the applicable restrictions on such Shares, the duration of such restrictions (which shall be at least six months except as otherwise determined by the Committee or provided in the third paragraph of this Section 8), and the time or times at which such restrictions shall lapse with respect to all or a specified number of Shares that are part of the grant.

b.The participant will be required to pay the Company the aggregate par value of any Shares of restricted stock (or such larger amount as the Board may determine to comply with the Florida Business Corporation Act as amended, or any successor thereto) within ten days of the date of grant, unless such Shares of restricted stock are treasury shares. Unless otherwise determined by the Committee, certificates representing Shares of restricted stock granted under the Plan will be held in escrow by the Company on the participant’s behalf during any period of restriction thereon and will bear an appropriate legend specifying the applicable restrictions thereon, and the participant will be required to execute a blank stock power therefor. Except as otherwise provided by the Committee, during such period of restriction the participant shall have all of the rights of a holder of Common Stock, including but not limited to the rights to receive

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dividends on terms and conditions specified by the Committee and to vote, and any stock or other securities received as a distribution with respect to such participant’s restricted stock shall be subject to the same restrictions as then in effect for the restricted stock.

c.Except as otherwise provided by the Committee, if a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company and its Subsidiaries due to death, Disability or Retirement during any period of restriction, all restrictions on Shares of restricted stock granted to such participant shall lapse. At such time as a participant ceases to be a director, officer or employee of, or otherwise performing services for, the Company or its Subsidiaries for any other reason, all Shares of restricted stock granted to such participant on which the restrictions have not lapsed shall be immediately forfeited to the Company.

d.If there is a Change in Control of the Company and a participant is terminated other than for Cause from being a director, officer or employee of, or from performing other services for, the Company or a subsidiary within one year after such Change in Control, all restrictions on Shares of restricted stock granted to such participant shall lapse. In addition, the Committee shall have the authority to grant shares of restricted stock with respect to which all restrictions shall lapse automatically upon a Change in Control, whether or not the grantee is subsequently terminated.

9.Restricted Stock Units; Deferred Stock Units

a.The Committee may at any time and from time to time grant restricted stock units under the Plan to such participants and in such amounts as it determines. Each grant of restricted stock units shall specify the applicable restrictions on such units, the duration of such restrictions (which shall be at least six months except as otherwise determined by the Committee or provided in the third paragraph of this Section 9), and the time or times at which such restrictions shall lapse with respect to all or a specified number of units that are part of the grant.

b.Each restricted stock unit shall be equivalent in value to one share of Common Stock and shall entitle the participant to receive from the Company at the end of the vesting period (the “Vesting Period”) applicable to such unit one Share, unless the participant elects in a timely fashion to defer the receipt of such Shares, as provided below. Restricted stock units may be granted without payment of cash or consideration to the Company; provided that participants shall be required to pay to the Company the aggregate par value of the Shares received from the Company within ten days of the issuance of such Shares unless such Shares are treasury shares.

c.Except as otherwise provided by the Committee, during the Vesting Period the participant shall not have any rights as a shareholder of the Company; provided that the participant shall have the right to receive accumulated dividends on terms and conditions specified by the Committee or distributions with respect to the corresponding number of shares of Common Stock underlying each restricted stock unit at the end of the Vesting Period, unless such restricted stock units are converted into deferred stock units, in which case such accumulated dividends or distributions shall be paid by the Company to the participant at such time as the deferred stock units are converted into Shares.

d.Except as otherwise provided by the Committee, if a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company or any Subsidiary due to death, Disability or Retirement during any Vesting Period, all restrictions on restricted stock units granted to such participant shall lapse and the participant shall then be entitled to receive payment in Shares with respect to the applicable restricted stock units. At such time as a participant ceases to be a director, officer or employee of, or otherwise performing services for, the Company or any Subsidiary for any other reason, all restricted stock units granted to such participant on which the restrictions have not lapsed shall be immediately forfeited to the Company.

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e.If there is a Change in Control of the Company and a participant is terminated other than for Cause from being a director, officer or employee of, or from performing other services for, the Company or any Subsidiary within one year after such Change in Control, all restrictions on restricted stock units granted to such participant shall lapse. In addition, the Committee shall have the authority to grant restricted stock units with respect to which all restrictions shall lapse automatically upon a Change in Control, whether or not the grantee is subsequently terminated.

f.If permitted by the Committee, a participant may elect by written notice to the Company, which notice must be made before the later of (i) the close of the tax year preceding the year in which the restricted stock units are granted or (ii) if consistent with Section 409A of the Code, 30 days of first becoming eligible to participate in the Plan (or, if earlier, the last day of the tax year in which the participant first becomes eligible to participate in the Plan) and on or prior to the date the restricted stock units are granted, to defer the receipt of all or a portion of the Shares due with respect to the vesting of such restricted stock units; provided that the Committee may impose such additional restrictions with respect to the time at which a participant may elect to defer receipt of Shares subject to the deferral election, and any other terms with respect to a grant of restricted stock units to the extent the Committee deems necessary to enable the participant to defer recognition of income with respect to such units until the Shares underlying such units are issued or distributed to the participant. Upon such deferral, the restricted stock units so deferred shall be converted into deferred stock units. Except as provided below, delivery of Shares with respect to deferred stock units shall be made at the end of the deferral period set forth in the participant’s deferral election notice (the “Deferral Period”). Deferral Periods shall be no less than one year after the vesting date of the applicable restricted stock units.

g.Except as otherwise provided by the Committee, during such Deferral Period the participant shall not have any rights as a shareholder of the Company; provided that, the participant shall have the right to receive accumulated dividends or distributions with respect to the corresponding number of shares of Common Stock underlying each deferred stock unit at the end of the Deferral Period when such deferred stock units are converted into Shares.

h.Except as otherwise provided by the Committee, if a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company or any Subsidiary upon his or her death prior to the end of the Deferral Period, the participant shall receive payment in Shares in respect of such participant’s deferred stock units which would have matured or been earned at the end of such Deferral Period as if the applicable Deferral Period had ended as of the date of such participant’s death.

i.Except as otherwise provided by the Committee, if a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company or any Subsidiary upon becoming disabled (as defined under Section 409A(a)(2)(C) of the Code) or Retirement or for any other reason except termination for Cause prior to the end of the Deferral Period, the participant shall receive payment in Shares in respect of such participant’s deferred stock units at the end of the applicable Deferral Period or on such accelerated basis as the Committee may determine, to the extent permitted by regulations issued under Section 409A(a)(3) of the Code.

j.Except as otherwise provided by the Committee, if a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company or any Subsidiary due to termination for Cause such participant shall immediately forfeit any deferred stock units which would have matured or been earned at the end of the applicable Deferral Period.

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k.Except as otherwise provided by the Committee, in the event of a Change in Control that also constitutes a “change in the ownership or effective control of” the Company, or a change in the ownership of a substantial portion of the Company’s assets (in each case as determined under regulations issued pursuant to Section 409A(a)(2)(A)(v) of the Code), a participant shall receive payment in Shares in respect of such participant’s deferred stock units which would have matured or been earned at the end of the applicable Deferral Period as if such Deferral Period had ended immediately prior to the Change in Control; provided, however, that if an event that constitutes a Change in Control hereunder does not constitute a “change in control” under Section 409A of the Code (or the regulations promulgated thereunder), no payments with respect to the deferred stock units shall be made under this paragraph to the extent such payments would constitute an impermissible acceleration under Section 409A of the Code.

10.Performance Awards

a.Performance awards may be granted to participants at any time and from time to time as determined by the Committee. The Committee shall have complete discretion in determining the size and composition of performance awards granted to a participant. The period over which performance is to be measured (a “performance cycle”) shall commence on the date specified by the Committee and shall end on the last day of a fiscal year specified by the Committee. A performance award shall be paid no later than the 15^th day of the third month following the completion of a performance cycle. Performance awards may include (i) specific dollar-value target awards, (ii) performance units, the value of each such unit being determined by the Committee at the time of issuance, and/or (iii) performance Shares, the value of each such Share being equal to the Fair Market Value of a share of Common Stock.

b.The value of each performance award may be fixed or it may be permitted to fluctuate based on a performance factor (e.g., return on equity) selected by the Committee.

c.The Committee shall establish performance goals and objectives for each performance cycle on the basis of such criteria and objectives as the Committee may select from time to time, including, without limitation, the performance of the participant, the Company, one or more of its Subsidiaries or divisions or any combination of the foregoing. During any performance cycle, the Committee shall have the authority to adjust the performance goals and objectives for such cycle for such reasons as it deems equitable.

d.The Committee shall determine the portion of each performance award that is earned by a participant on the basis of the Company’s performance over the performance cycle in relation to the performance goals for such cycle. The earned portion of a performance award may be paid out in Shares, cash, Other Company Securities, or any combination thereof, as the Committee may determine.

e.A participant must be a director, officer or employee of, or otherwise perform services for, the Company or its Subsidiaries at the end of the performance cycle in order to be entitled to payment of a performance award issued in respect of such cycle; provided, however, that except as otherwise determined by the Committee, if a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company and its Subsidiaries upon his or her death, Retirement, or Disability prior to the end of the performance cycle, the participant shall earn a proportionate portion of the performance award based upon the elapsed portion of the performance cycle and the Company’s performance over that portion of such cycle.

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f.In the event of a Change in Control, a participant shall earn no less than the portion of the performance award that the participant would have earned if the applicable performance cycle(s) had terminated as of the date of the Change in Control.

11.Withholding Taxes

a.Participant Election. Unless otherwise determined by the Committee, a participant may elect to deliver shares of Common Stock (or have the Company withhold shares acquired upon exercise of an option or SAR or deliverable upon grant or vesting of restricted stock, as the case may be) to satisfy, in whole or in part, the amount the Company is required to withhold for taxes in connection with the exercise of an option or SAR or the delivery of restricted stock upon grant or vesting, as the case may be. Such election must be made on or before the date the amount of tax to be withheld is determined. Once made, the election shall be irrevocable. The fair market value of the shares to be withheld or delivered will be the Fair Market Value as of the date the amount of tax to be withheld is determined. In the event a participant elects to deliver or have the Company withhold shares of Common Stock pursuant to this Section 11(a), such delivery or withholding must be made subject to the conditions and pursuant to the procedures set forth in Section 6(b) with respect to the delivery or withholding of Common Stock in payment of the exercise price of options.

b.Company Requirement. The Company may require, as a condition to any grant or exercise under the Plan or to the delivery of certificates for Shares issued hereunder, that the grantee make provision for the payment to the Company, either pursuant to Section 11(a) or this Section 11(b), of federal, state or local taxes of any kind required by law to be withheld with respect to any grant or delivery of Shares. The Company, to the extent permitted or required by law, shall have the right to deduct from any payment of any kind (including salary or bonus) otherwise due to a grantee, an amount equal to any federal, state or local taxes of any kind required by law to be withheld with respect to any grant or delivery of Shares under the Plan.

12.Written Agreement; Vesting. Unless the Committee determines otherwise, each participant to whom a grant is made under the Plan shall enter into a written agreement with the Company that shall contain such provisions, including without limitation vesting requirements, consistent with the provisions of the Plan, as may be approved by the Committee. Unless the Committee determines otherwise and except as otherwise provided in Sections 6, 7, 8, 9 and 10 in connection with a Change in Control or certain occurrences of termination, no grant under this Plan may be exercised, and no restrictions relating thereto may lapse, within six months of the date such grant is made.

13.Transferability. Unless the Committee determines otherwise, no award granted under the Plan shall be transferable by a participant other than by will or the laws of descent and distribution or to a participant’s Family Member by gift or a qualified domestic relations order as defined by the Code. Unless the Committee determines otherwise, an option or SAR may be exercised only by the optionee or grantee thereof; by his or her Family Member if such person has acquired the option or SAR by gift or qualified domestic relations order; by the executor or administrator of the estate of any of the foregoing or any person to whom the option or SAR is transferred by will or the laws of descent and distribution; or by the guardian or legal representative of any of the foregoing; provided that Incentive Stock Options may be exercised by any Family Member, guardian or legal representative only if permitted by the Code and any regulations thereunder. All provisions of this Plan shall in any event continue to apply to any award granted under the Plan and transferred as permitted by this Section 13, and any transferee of any such award shall be bound by all provisions of this Plan as and to the same extent as the applicable original grantee.

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14.Listing, Registration and Qualification. If the Committee determines that the listing, registration or qualification upon any securities exchange or under any law of Shares subject to any option, SAR, performance award, restricted stock unit, deferred stock unit or restricted stock grant is necessary or desirable as a condition of, or in connection with, the granting of same or the issue or purchase of Shares thereunder, no such option or SAR may be exercised in whole or in part, no such performance award may be paid out, and no Shares may be issued, unless such listing, registration or qualification is effected free of any conditions not acceptable to the Committee.

15.Transfer of Employee. The transfer of an employee from the Company to a Subsidiary, from a Subsidiary to the Company, or from one Subsidiary to another shall not be considered a termination of employment; nor shall it be considered a termination of employment if an employee is placed on military or sick leave or such other leave of absence which is considered by the Committee as continuing intact the employment relationship.

16.Adjustments.

a.In the event of a reorganization, recapitalization, stock split, stock dividend, combination of Shares, merger, consolidation, distribution of assets, or any other change in the corporate structure or shares of the Company, the Committee shall make such adjustment as it deems appropriate in the number and kind of Shares or other property available for issuance under the Plan (including, without limitation, the total number of Shares available for issuance under the Plan pursuant to Section 4), in the number and kind of options, SARs, Shares, restricted stock units, deferred stock units or other property covered by grants previously made under the Plan, and in the exercise price of outstanding options or SARS; provided, however, that the Committee shall not be required to make any adjustment that would (i) require the inclusion of any compensation deferred pursuant to provisions of the Plan (or an award thereunder) in a participant’s gross income pursuant to Section 409A of the Code and the regulations issued thereunder from time to time and/or (ii) cause any award made pursuant to the Plan to be treated as providing for the deferral of compensation pursuant to such Code section and regulations. Any such adjustment shall be final, conclusive and binding for all purposes of the Plan. In the event of any merger, consolidation or other reorganization in which the Company is not the surviving or continuing corporation or in which a Change in Control is to occur, all of the Company’s obligations regarding awards that were granted hereunder and that are outstanding on the date of such event shall, on such terms as may be approved by the Committee prior to such event, be (a) canceled in exchange for cash or other property (but, with respect to vested deferred stock units, only if such merger, consolidation, other reorganization, or Change in Control constitutes a “change in ownership or control” of the Company or a “change in the ownership of a substantial portion” of the Company’s assets, as determined pursuant to regulations issued under Section 409A(a)(2)(A)(v) of the Code) or (b) assumed by the surviving or continuing corporation.

b.Without limitation of the foregoing, in connection with any transaction of the type specified by clause (iii) of the definition of a Change in Control in Section 2(c), the Committee may, in its discretion, (i) cancel any or all outstanding options under the Plan in consideration for payment to the holders thereof of an amount equal to the portion of the consideration that would have been payable to such holders pursuant to such transaction if their options had been fully exercised immediately prior to such transaction, less the aggregate exercise price that would have been payable therefor, or (ii) if the amount that would have been payable to the option holders pursuant to such transaction if their options had been fully exercised immediately prior thereto would be equal to or less than the aggregate exercise price that would have been payable therefor, cancel any or all such options for no consideration or payment of any kind. Payment of any amount payable pursuant to the preceding sentence may be made in cash or, in the event that the consideration to be received in such transaction includes securities or other property, in cash and/or securities or other property in the Committee’s discretion.

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17.409A. Notwithstanding anything to the contrary contained herein, the Company shall not be responsible for, or required to reimburse or otherwise make any participant whole for, any tax imposed on any participant pursuant to Section 409A of the Code in respect of any grant under this Plan.

18.Amendment and Termination of the Plan

a.The Board of Directors or the Committee, without approval of the stockholders, may amend or terminate the Plan, except that no amendment shall become effective without prior approval of the stockholders of the Company if stockholder approval would be required by applicable law or regulations or by any listing requirement of the principal stock exchange on which the Common Stock is then listed.

b.Notwithstanding any other provisions of the Plan, and in addition to the powers of amendment set forth in this Section 17 and Section 18 hereof or otherwise, the provisions hereof and the provisions of any award made hereunder may be amended unilaterally by the Committee from time to time to the extent necessary (and only to the extent necessary) to prevent the implementation, application or existence (as the case may be) of any such provision from (i) requiring the inclusion of any compensation deferred pursuant to the provisions of the Plan (or an award thereunder) in a participant’s gross income pursuant to Section 409A of the Code, and the regulations issued thereunder from time to time and/or (ii) inadvertently causing any award hereunder to be treated as providing for the deferral of compensation pursuant to such Code section and regulations.

19.Amendment or Substitution of Awards under the Plan. The terms of any outstanding award under the Plan may be amended from time to time by the Committee in its discretion in any manner that it deems appropriate, including, but not limited to, acceleration of the date of exercise of any award and/or payments thereunder or of the date of lapse of restrictions on Shares (but only to the extent permitted by regulations issued under Section 409A(a)(3) of the Code); provided that, except as otherwise provided in Section 16, no such amendment shall adversely affect in a material manner any right of a participant under the award without his or her written consent, and provided further that the Committee shall not reduce the exercise price of any options or SARs awarded under the Plan without approval of the stockholders of the Company. The Committee may, in its discretion, permit holders of awards under the Plan to surrender outstanding awards in order to exercise or realize rights under other awards, or in exchange for the grant of new awards, or require holders of awards to surrender outstanding awards as a condition precedent to the grant of new awards under the Plan, but only if such surrender, exercise, realization, exchange, or grant (a) would not constitute a distribution of deferred compensation for purposes of Section 409A(a)(3) of the Code or (b) constitutes a distribution of deferred compensation that is permitted under regulations issued pursuant to Section 409A(a)(3) of the Code.

20.Commencement Date; Termination Date. The Plan commenced on October 2, 2008. If required by the Code, the Plan will also be subject to reapproval by the shareholders of the Company prior to the time required under the Code. Unless previously terminated upon the adoption of a resolution of the Board terminating the Plan, the Plan shall terminate at the close of business on March 31, 2007October 1, 2018.

21.Severability Whenever possible, each provision of the Plan shall be interpreted in such manner as to be effective and advises shareholders in next year’s proxy statement aboutvalid under applicable law, but if any provision of the naturePlan is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of the Plan.

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22.Governing LawThe Plan shall be governed by the mattercorporate laws of the State of Florida, without giving effect to any choice of law provisions that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction.

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Appendix B

Proposed Amendment to Amended and how management intendsRestated Articles of Incorporation

Article FOURTH (concerning capital structure) is hereby amended to read as follows:

FOURTH: The total number of shares which the Corporation shall have the authority to issue shall be 35 million (35,000,000) shares which shall be divided into two classes as follows: (a) 25,000,000 shares of common stock with a par value of one mil ($.001) per share; and (b) 10,000,000 shares of preferred stock, with a par value of one mil ($.001) per share, in such series and variations in the relative rights and preferences, if any, between such series as the Board of Directors shall determine.

A. COMMON STOCK. Subject to the preferential dividend rights applicable to shares of any series of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive such dividends as may be declared by the Board of Directors. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after distribution in full of the preferential amounts to be distributed to the holders of shares of the Preferred Stock, the holders of shares of the Common Stock shall be entitled to receive all of the remaining assets of the Corporation available for distribution to its shareholders, ratably in proportion to the number of shares of the Common Stock held by them. Each holder of record of the Common Stock shall have one vote for such share of Common Stock standing in such holder’s name on the books of the Corporation and entitled to vote.

B. PREFERRED STOCK. The Board of Directors may issue Preferred Stock, from time to time, in one or more series. Authority is hereby vested solely in the Board of Directors of the Corporation to provide, from time to time, for the issuance of Preferred Stock in one or more series and in connection therewith to determine without shareholder approval the number of shares to be included and such of the designations, powers, preferences, and relative rights and the qualifications, limitations, and restrictions of any such series, including, without limiting the generality of the foregoing any of the following provisions with respect to which the Board of Directors shall determine to make affirmative provision:

(1) The extent of the voting powers, full or limited, if any, of the shares of such series, provided that the holder of shares of such series (i) will not be entitled to more than one vote per share and (ii) will not be entitled to vote on suchany matter or (b) does not receive notice of the proposal priorseparately as a class, except (i) to the close of business on March 31, 2007. Article XVII ofextent provided by Florida law and (b) to the Company’s Bylaws provides that all shareholder proposals must contain certain information regardingextend specified in the shareholder, including the shareholder’s name and address, the names of any person nominated by the shareholder as a director, any arrangement between the shareholder and such nominee, and any other information regarding the matter of business proposed by the shareholder that would be required in a proxy statement filed under the proxy rules of the Securities and Exchange Commission.

Notices of intention to present proposals at the 2007 Annual Meeting should be addressed to John R. Oliver, Chief Financial Officer, Action Products International, Inc., 1101 North Keller Road, Suite E, Orlando, Florida 32810. The Company reserves the right to reject, rule out of order, or take other appropriate actionPreferred Stock Designation with respect to any proposal that does not comply with thesesuch series;

(2) The designation and other applicable requirements.

EXPENSES OF SOLICITATION

The costname of this solicitation of proxies will be borne by the Company, including expenses in connection with preparing, assembling and mailing the proxy solicitation materialssuch series and the chargesnumber of shares that shall constitute such series;

(3) The annual dividend rate or rates payable on shares of such series, the date or dates from which such dividends shall commence to accrue, and expensethe dividend payment dates for such dividends;

(4) Whether dividends on such series are to be cumulative or noncumulative, and the participating or other special rights, if any, with respect to the payment of brokerage housesdividends;

(5) Whether such series shall be subject to redemption and, other custodians, nomineesif so, the manner of redemption, the redemption price or prices and fiduciaries for forwarding solicitation materials to beneficial owners. In addition to solicitation by mail, proxiesthe terms and conditions on which shares of such series may be solicited personally or by telephone or telegraph by directors, officers or employees of the Company, who will receive no additional compensation for such services.

Shareholders are urged to specify their choices, date, sign and return the enclosed proxy in the enclosed postage-paid envelope whether or not they plan to attend the meeting. Shareholders present at the meeting may revoke their proxies and vote in person. Prompt response is helpful, and your cooperation will be appreciated.

Dated: August 23, 2006redeemed;

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(6) Whether such series shall have a sinking fund or other retirement provisions for the redemption or purchase of shares of such series, and, if so, the terms and amount of such sinking fund or other retirement provision and the extent to which the charges therefor are to have priority over the payment of dividends on or the making of sinking fund or other like retirement provisions for shares of any other series or over the payment of dividends on the Common Stock;

(7) The amounts payable on shares of such series on voluntary or involuntary dissolution, liquidation, or winding up of the affairs of the Corporation and extent to which such payment shall have priority over the payment of any amount on voluntary or involuntary dissolution, liquidation, or winding up of the affairs of the Corporation on shares of any other series or on the Common Stock;

(8) The terms and conditions, if any, on which shares of such series may be converted into, or exchanged for, shares of any other series or of Common Stock;

(9) The stated value, if any, for the shares of such series, the consideration for which shares of such series may be issued and amount of such consideration that shall be credited to the capital account; and

(10) Any other preferences and relative, participating, optional, or other special rights, and qualifications, limitations or restrictions thereof, or any other term or provision of shares of such series as the Board of Directors may deemed appropriate or desirable.

The Board of Directors is expressly authorized to vary the provisions relating to the foregoing matters between the various series of Preferred Stock.

All shares of Preferred Stock of any one series shall be identical in all respects with all other shares of such series, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be payable, and if cumulative, shall cumulate.

Shares of any series of Preferred Stock that shall be issued and thereafter acquired by the Corporation through purchase, redemption (whether through the operation of a sinking fund or otherwise), conversion, exchange, or otherwise, shall, upon appropriate filing and recording to the extent required by law, have the status of authorized and unissued shares of Preferred Stock and may be reissued as part of such series or as part of any other series of Preferred Stock. Unless otherwise provided in the resolution or resolutions of the Board of Directors providing for the issuance thereof, the number of authorized shares of stock of any series of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by resolution or resolutions of the Board of Directors and appropriate filing and recording to the extent required by law. In case the number of shares of any such series of Preferred Stock shall be decreased, the shares representing such decrease shall, unless otherwise provided in the resolution or resolutions of the Board of Directors providing for the issuance thereof, resume the status of authorized but unissued shares of Preferred Stock, undesignated as to series.

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ACTION PRODUCTS INTERNATIONAL, INC.

PROXY FOR ANNUAL MEETING OF SHAREHOLDERS

October 4, 2006November 11, 2008

The undersigned hereby constitutes and appoints Ann E. W. Stone, Director, the undersigned’s true and lawful attorney and proxy (with full power of substitution) (the “Proxy Agent”), to vote all of the shares of Action Products International, Inc. owned by the undersigned on August 23, 2006,September 15, 2008, at the Annual Meeting of Shareholders of Action Products International, Inc. to be held at theour offices of the Company located at 1101 North Keller Road, Suite E, Orlando, Florida 32810 on the4^th day, October, 2006,November 11, 2008, at 10:00 a.m., local time (including adjournments), with all powers that the undersigned would possess if personally present.

Proposal 1. Election of Directors

To elect fourfive directors as follows: Ann E. W. Stone,Neil Swartz, Ronald S. Kaplan, Scott Runkel, Ann E.W. Stone, and Dr. Barry RenderCecilia Sternberg for a one year term to expire at the 20072009 Annual Meeting.

The Board recommends a vote FOR each nominee

¨ FOR ALL Nominees

¨ WITHHOLD ALL Nominees

¨ FOR ALL EXCEPT:

(To withhold authority to vote for an individual

nominee, write that nominee’s name in the space

provided above.)

Proposal 2. Approval of Adoption of 2008 Long-Term Equity Incentive Plan

To approve the adoption of the 2008 Long-Term Equity Incentive Plan.

The Board recommends a vote FOR such approval

Proposal 3. Approval of Amendment to Amended and Restated Articles of Incorporation

To approve the amendment to the Amended and Restated Articles of Incorporation to increase the authorized Common Stock to 25,000,000 shares.

The Board recommends a vote FOR such approval

Should any other matter requiring a vote of the Shareholders arise, the above-named Proxy Agent is authorized to vote the shares represented by this Proxy as her judgment indicates is in the best interest of Action Products International, Inc.

This Proxy is solicited on behalf of the Board of Directors of Action Products International, Inc.This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned Shareholder. If no direction is made, this Proxy will be voted FOR the proposals described above.

IMPORTANT: Please date this Proxy and sign exactly as your name or names appear hereon. If shares are held jointly, both owners must sign. Executors, administrators, trustees, guardians and others signing in a representative capacity should give their full titles.

PLEASE RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.

Check this box if you plan to attend the Annual Meeting  [    ]¨

To Shareholders of Action Products International, Inc.:

Whether or not you are able to attend our 20062008 Annual Meeting of Shareholders, it is important that your shares be represented, no matter how many shares you own. Accordingly, please complete and sign the Proxy provided above and mail it in the enclosed postage paid envelope. We look forward to receiving your voted Proxy at your earliest convenience.