~~2 XETA CORPORATION~~


SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

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XETA Technologies, Inc.
(Name of Registrant as Specified In Its Charter)

XETA Technologies, Inc.
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS ~~Notice is hereby given that~~

TO BE HELD APRIL 7, 2009

To the Shareholders of XETA Technologies, Inc.

The 2009 Annual Meeting of Shareholders of XETA ~~Corporation, doing business as XETA~~ Technologies, Inc. (the “Company”) will be held at ~~Tulsa Marriott Southern Hills~~the Company’s corporate headquarters located at ~~1902 East 71st~~1814 W. Tacoma Street, ~~Tulsa,~~Broken Arrow, Oklahoma, on April ~~11, 2000~~7, 2009 at ~~6:30 p.m.~~10:00 a.m., local time, for the following purposes: 1.

(1) To elect ~~eight (8)~~seven (7) members to the ~~Company's~~Company’s Board of Directors to serve until the next ~~Annual Meeting~~annual meeting of ~~shareholders and until their successors have been elected and qualified; 2.~~shareholders;

(2) To approve a stock option exchange program under which eligible Company employees will be offered the ~~adoption~~opportunity to exchange their eligible stock purchase options under the Company’s existing equity compensation plans for a smaller number of an amendment to the Amended and Restated Certificate of Incorporation to change the Company's name to "Xeta Technologies, Inc." 3. To approve the adoption of an amendment to the Amended and Restated Certificate of Incorporation to increase the authorized shares of Common Stock to 20,000,000 and to change the par value of the Common Stock to no par value. 4. To approve the adoption of the XETA Technologies 2000 Stock Option Plan. 5.new options at a lower exercise price;

(3) To ratify the selection of ~~Arthur Andersen~~HoganTaylor LLP as independent certified public accountants for the Company for the ~~2000~~2009 fiscal ~~year. 6.~~year; and

(4) To transact such other business as may properly come before the meeting or any adjournment ~~or adjournments thereof. The Board~~ of ~~Directors has fixed~~the meeting.

Only shareholders of record at the close of business on February ~~14, 2000, as~~24, 2009, the record date ~~for~~fixed by the ~~determination~~Board of ~~shareholders~~Directors, will be entitled to notice of and to vote at the Annual ~~Meeting~~Meeting.

Your vote is important. Whether or ~~any adjournment or adjournments thereof. Only shareholders of record~~not you expect to attend the meeting in person, we urge you to vote your shares at such time will be so entitled to vote. The Company's Proxy Statement is attached. IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE ANNUAL MEETING REGARDLESS OF THE NUMBER OF SHARES YOU HOLD. IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, your earliest convenience. PLEASE SIGN, DATE AND RETURN ~~THE ENCLOSED~~YOUR PROXY IN THE ~~ACCOMPANYING ENVELOPE.~~ENCLOSED ENVELOPE, OR VOTE BY INTERNET BY FOLLOWING THE ~~GIVING OF THIS~~INSTRUCTIONS ON YOUR PROXY ~~DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IN THE EVENT YOU ATTEND THE MEETING.~~ CARD. Submitting your proxy now will not prevent you from voting your shares at the meeting if you desire to do so, as your proxy is revocable at your option.

	By Order of the Board of Directors


	Robert B. Wagner
	Corporate Secretary
February 27, 2009

Important Notice Regarding the Availability of Proxy Materials

for the ~~Board of Directors Robert B. Wagner Secretary March 6, 2000~~ ~~3 XETA CORPORATION~~ Shareholder Meeting To Be Held April 7, 2009

Our Proxy Statement and Annual Report to shareholders for the fiscal year ended October 31, 2008 are available on our corporate website at www.xeta.com.

1814 ~~West~~W. Tacoma Street

Broken Arrow, Oklahoma 74012

PROXY STATEMENT ~~SOLICITATION OF PROXIES~~

This ~~Proxy Statement~~proxy statement is ~~being~~ furnished to the shareholders of XETA ~~Corporation, doing business as XETA~~ Technologies, ~~(the "Company"~~Inc. (“XETA” or the “Company” or “we” or “us”) by ~~its~~our Board of Directors to solicit proxies for use at ~~the~~our annual meeting of shareholders (the “Annual Meeting”). The Annual Meeting ~~of Shareholders to~~will be held on April ~~11, 2000,~~7, 2009, at Xeta’s home office located at 1814 W. Tacoma Street, Broken Arrow,, Oklahoma, at 10:00 a.m., local time.

This proxy statement and the accompanying proxy card will first be mailed to shareholders on March 17, 2009.

INFORMATION ON VOTING

Who Can Vote

Only shareholders of record at the ~~Tulsa Marriott Southern Hills located at 1902 East 71st Street, Tulsa, Oklahoma, at 6:30 p.m., local time, or at such other time and place to which~~close of business on February 24, 2009, the ~~Annual Meeting may be adjourned. The purpose of~~record date fixed by the ~~Annual Meeting is (i) to elect eight members to the Company's~~ Board of Directors, will be entitled to ~~serve for~~vote at the ~~ensuing year and until their successors are elected; (ii)~~Annual Meeting. Each record holder is entitled to ~~approve the adoption~~one vote per share of ~~an amendment~~Common Stock registered to the ~~Company's Amended and Restated Certificate~~holder on the record date. As of ~~Incorporation changing the Company's name; (iii) to approve the adoption of an amendment to the Company's Amended and Restated Certificate of Incorporation increasing the number of authorized~~February 24, 2009, there were [ ] shares of Common Stock and changing the par value of the Common Stock to no par value; (iv) to approve the adoption of the XETA Technologies 2000 Stock Option Plan; (v) to ratify the selection of Arthur Andersen LLP as the Company's independent certified public accountants for the fiscal year ending October 31, 2000; and (vi)outstanding.

How You Can Vote

You may vote in person at ~~the discretion of the proxy holders, to transact any other business that may properly come before~~ the Annual Meeting or ~~any adjournment thereof. You are urged to promptly complete and return the accompanying proxy card in the envelope provided, whether or not~~by proxy. We encourage you ~~intend to be present at the Annual Meeting. If you are present at the Annual Meeting and wish~~ to vote ~~your shares in person,~~by proxy even if you plan to attend the accompanying proxy will, at your request, be returned to you at the Annual Meeting. Any shareholder giving a proxy has the power to revoke it at any time before it is exercised by executing a subsequently dated proxy, submitting a notice of revocation to the Company, or attending the Annual Meeting and voting in person.meeting. Proxies properly executed and ~~returned~~received by us in time to be voted at the Annual Meeting will be voted in accordance with the specifications marked on the proxy card. ~~Proxies containing~~Signed proxies which are returned to us with no voting specifications marked will be voted ~~in favor of~~“FOR” the proposals described in this ~~Proxy Statement. It is expected that this Proxy Statement~~proxy statement and the accompanying form of proxy will first be mailed to shareholders on or about March 6, 2000. The cost of soliciting proxies will be borne by the Company. The Company will reimburse brokerage firms, banks and other nominees, custodians and fiduciaries for their reasonable expenses incurred in sending proxy materials to beneficial owners of shares and obtaining their instructions. The Company has retained American Securities Transfer & Trust, Inc. ("AST") to assist in the ~~distribution~~discretion of the ~~proxies~~persons named in the proxy on any other matter which may properly come before the meeting.

If you hold your shares in your own name as the stockholder of record, you may vote by mail or the internet. To vote by mail, complete, sign, and return the enclosed proxy ~~statements~~card in the envelope provided to: Proxy Services, c/o Computershare Investor Services, P.O. Box 43126, Providence, RI 02940. To vote using the internet, follow the voting instructions described on the proxy card. Shareholders who vote by internet do not need to return the proxy card.

If you hold your shares in a stock brokerage account or through another nominee such as a bank, your shares are held in what is known as “street name.” You are the beneficial owner of the shares but the broker or other nominee is considered to be the record holder for ~~an estimated fee~~purposes of ~~$725.00. Votes will be tabulated by AST. VOTING SECURITIES Only shareholders of record at~~voting the ~~close of business~~shares. As the beneficial owner, however, you have the right to direct your broker or other nominee on ~~February 14, 2000 (the record date) are entitled~~how to vote the shares in your account. To do so, follow the voting instructions on the form you receive from your broker or nominee. If you hold your shares in street name and you wish to vote in person at the Annual Meeting, ~~and~~you must obtain a legal proxy issued in your name from your broker or other nominee, giving you the right to vote the shares.

How You Can Change Your Vote

You may change your vote by revoking your proxy at any ~~adjournment thereof. As of that date there were 4,137,074 shares of Common Stock~~time before voting takes place at the Annual Meeting. You may revoke your proxy by notifying the Secretary of the Company ~~outstanding (excluding 509,394~~in writing, by submitting another proxy with a later date, or by notifying the Company and voting in person at the Annual Meeting. If you hold your shares ~~held~~ in ~~treasury). Shareholders are entitled~~street name, you must contact your broker or other nominee regarding how to ~~one vote per share~~revoke your proxy and change your vote.

Quorum

A quorum is necessary to conduct the business of ~~Common Stock registered in their name on~~ the ~~record date. A~~meeting. This means that holders of a majority of the outstanding shares ~~entitled to~~of common stock must be represented at the meeting, either in person or by proxy.

Votes Required for Approval

Under our bylaws, for all matters submitted at the Annual Meeting, including the election of directors, the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote thereon is necessary ~~to constitute a quorum at the Annual Meeting.~~ for approval.

How Votes are Counted

Abstentions and broker ~~non-votes~~“non-votes” are both counted as shares present in determining whether the quorum requirement is ~~satisfied~~satisfied. However, they receive different treatment for purposes of whether they are considered shares present and entitled to vote on a matter. A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner. Broker non-votes, therefore, are excluded from the number of shares present and entitled to vote on a matter and consequently do not count against the matter. Abstentions, on the other hand, are counted in the total number of votes present and entitled to vote on a matter and thus have the same effect as a vote against the matter.

PROPOSAL 1

ELECTION OF DIRECTORS

Nominees for Election as Directors

A Board of Directors consisting of seven members is proposed to be elected at the Annual Meeting. Members of the Board are elected for one-year terms. The nominees for election to the Board and the positions they currently hold with us are listed below, followed by their biographies. All of the nominees except Ozarslan A. Tangun currently serve as directors of the Company. Mr. Tangun is new to this year’s slate of directors and was recommended as a nominee by the following categories of persons: security holders, non-management directors, and our Chief Executive Officer. All of the nominees have indicated they are willing to serve, if elected. If any nominee should become unable to serve due to unforeseen circumstances, the person(s) designated as proxies will have full discretion to cast votes for another person recommended by the Board.

The Board of Directors unanimously recommends that shareholders vote “FOR” the election of the seven nominees listed below.

Name	Positions with Company	Age
Donald T. Duke	Chairman of the Board	59
S. Lee Crawley	Director	65
Richard R. Devenuti	Director	50
Greg D. Forrest	Chief Executive Officer and President	47
Dr. Robert D. Hisrich	Director	64
Ronald L. Siegenthaler	Director	66
Ozarslan A. Tangun	Shareholder (>5%); Advisor to the Board	37

Mr. Duke has been a director since 1991 and became our Board Chairman on July 1, 2007. Heis a consultant to the oil and gas industry and an independent investor. From 1980 until August 2002, Mr. Duke was in senior management in the oil and gas industry, including time as President and Chief Operating Officer of Hadson Petroleum (USA), Inc., a domestic oil and gas subsidiary of Hadson Corporation, where he was responsible for all phases of exploration and production, land, accounting, operations, product marketing and budgeting and planning.

Mr. Crawley has been a director since February 1, 2008. He has an extensive background in business and financial management, with an emphasis on business transactions and profit improvement. His professional experience includes functioning as CEO, CFO, and COO for several public and private companies, including Flint Engineering and Construction Company (CEO, 1992-1997) and Vantage Point Energy, a public exploration and production company (CEO, 1986-1992). He also serves as Chairman of Intellevue, a software technology company he invested in in 1998. Since May 2000 he has been the managing member of Corporate Finance Associates-Tulsa LLC, a mergers and acquisitions advisory firm. CFA-Tulsa is a senior shareholder in Corporate Finance Associates Worldwide, a national M&A firm which Mr. Crawley joined in May 2004. He serves as its Vice Chairman.

Mr. Devenuti was appointed to the Board on May 1, 2008. He is currently the Chief Operating Officer for EMC Corporation’s CMA division. Prior to joining EMC, Mr. Devenuti spent nearly 20 years at Microsoft, where he served in several senior executive positions. At the time of his retirement from Microsoft in 2007, he was Senior Vice President for Microsoft Services. He also served as Microsoft’s Chief Information Officer and Vice President of Worldwide Operations, among other positions, during his tenure there. Mr. Devenuti also serves on the Board of Directors for St. Jude Medical, Inc.

Mr. Forrest has been our Chief Executive Officer since June 7, 2007 and our President since July 2005. He also served as our Chief Operating Officer from July 2005 until he became CEO. He first joined XETA as a Director of Sales over our Seattle branch sales and service operations in August, 2004 upon our acquisition of Bluejack Systems, LLC, a company founded, owned, and operated by Mr. Forrest. Prior to founding Bluejack, Mr. Forrest founded and operated several other fast-growing companies in the communications, clothing and commercial interior industries, including Bluejack. He attended the University of Michigan.

Dr. Hisrich has been a director since 1987. He holds the Garvin Professor of Global Entrepreneurship and is Director of the Global Entrepreneurship Center at the Thunderbird School of Global Management in Glendale, Arizona. He is also a marketing and management consultant. Previously he occupied the A. Malachi Mixon III Chair in Entrepreneurial Studies and was Professor of Marketing and Policy Studies at the Weatherhead School of Management at Case Western Reserve University in Cleveland, Ohio. Prior to assuming such positions, he occupied the Boviard Chair of Entrepreneurial Studies and Private Enterprise and was Professor of Marketing at the College of Business Administration for the University of Tulsa. He has also held a number of other academic positions and served on several editorial boards, including the Editorial Board of the Journal of Small Business and Enterprise Development, of which he is currently a member. Dr. Hisrich is a member of the Board of Directors of Noteworthy Medical Systems, Inc. and NeoMed Technologies.

Mr. Siegenthaler has been a director since the Company’s inception in 1981. He served as the Company’s Executive Vice President from July 1990 until March 1999. Since 1974, he has been involved as partner, shareholder, officer, director, or sole proprietor in a number of business entities with significant involvement in fabrication and marketing of steel, steel products and other raw material, real estate, oil and gas, and telecommunications. He is also CEO of Myriad Technologies, Inc., through which he has managed his personal investment portfolio and promoted sales activities for his own private investments.

Mr. Tangun is the founder and managing member of Patara Capital Management, LP, an investment partnership founded in April, 2006. Prior to establishing Patara Capital, he was employed by Southwest Securities (NYSE SWS), the largest full service brokerage firm based in Texas, from 1995 to 2006. During that time, Mr. Tangun held the position of Director of Research for over six years. He also held the positions of Senior VP and Associate Director of Research. During his tenure at SWS, he chaired the mandatory review committee for new research ideas across the industries covered by SWS, including software, healthcare, telecom, energy, semiconductors, and consumer. Mr. Tangun received many honors and recognition during his career as a research analyst, including being ranked as the #1 analyst by The Wall Street Journal in the specialty retail sector in 2002. He has been regularly quoted in local and national media and has appeared on various television programs to provide commentary on the general stock market and economic conditions as well as specific companies. Mr. Tangun graduated from the University of Iowa with an MBA concentration in finance. He is a CFA charter holder.

CORPORATE GOVERNANCE

The Board reviews its governance practices on an ongoing basis in light of the Sarbanes-Oxley Act of 2002, the rules and regulations of the United States Securities and Exchange Commission (“SEC”), and the listing standards of the NASDAQ Stock Market (“NASDAQ”).

Director Independence

Our Board of Directors must have at least a majority of independent directors. Under the NASDAQ rules applicable to us, in order for a director to be deemed independent, the board must determine that the individual does not have a relationship, including any of those listed by NASDAQ that will preclude a finding of independence, that would interfere with the individual’s exercise of independent judgment in carrying out his or her responsibilities as a director. Applying this standard, the Board has determined that Messrs. Crawley, Devenuti, Duke, Hisrich, and Siegenthaler, all incumbent board members, and Mr. Tangun, a nominee for Board membership, are independent within the meaning of the NASDAQ standards for board service. In its deliberations on independence, the Board considered whether Mr. Siegenthaler’s stock ownership position, or the fact that his adult son is employed by the Company as a sales representative, would interfere with his ability to exercise independent judgment as a director. Mr. Forrest does not qualify as an independent director since he is an executive officer of the Company.

Board Meetings and Attendance

Our Board of Directors held four meetings during fiscal 2008, in addition to conducting business via written consents. Each director attended at least 75% of the aggregate number of board meetings and meetings held by all committees on which he then served during the fiscal year. The Company encourages its local directors to attend the annual meeting of shareholders. At last year’s annual meeting, all of the local, then incumbent directors were present, as well as Mr. Duke who resides in the Oklahoma City area.

Committees of the Board

There are three standing committees of the Board of Directors: the Audit Committee, the Compensation Committee, and the Nominating and Governance Committee. Each of these committees operates under a written charter approved by the Board. A copy of each committee’s charter is posted under Governance Documents in the Governance section on the Investor Relations page of our website at www.xeta.com. The Board has determined that all of the members of the three standing committees are independent according to NASDAQ’s independence standards for service on these committees, including in the case of the members of the Audit Committee, the stricter independence requirements imposed for audit committee membership.

Audit Committee

The current members of the Audit Committee are Mr. Crawley, its Chairman, Mr. Duke, Dr. Hisrich, and Mr. Ed Keller, who is currently on our Board but whose term will expire upon the election of directors at the Annual Meeting. The Board of Directors has determined that the Audit Committee has at least two members—Messrs. Crawley and Duke—who qualify as an “audit committee financial expert” as that term is defined by SEC rules. The Audit Committee met five times during the 2008 fiscal year.

The Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of the Company. In this regard, the Audit Committee is responsible for, among other things, selecting and retaining the Company’s independent public accountants; pre-approving the engagement of the independent accountants for all audit-related services and permissible, non-audit related services; reviewing in advance the scope and focus of the annual audit; and reviewing and discussing with management and the auditors the financial reports of the Company, the audited financial statements, the auditor’s report, the management letter, and the quality and adequacy of the Company’s internal controls. The Audit Committee is also responsible, in the absence of a separate finance committee of the Board, for assisting the Board in fulfilling its responsibility to oversee the financial affairs of the Company. In this regard, the Audit Committee will review and make recommendations to the Board about the financial affairs and policies of the Company.

Compensation Committee

The members of the Compensation Committee are Mr. Duke, its Chairman, Dr. Hisrich, and Mr. Keller. Mr. Siegenthaler participates as a non-voting member of the Committee. The Compensation Committee met three times during fiscal 2008.

The Compensation Committee oversees the Company’s compensation and benefits policies and programs and establishes and/or reviews the philosophy, objectives and goals of such policies and programs. The Committee’s primary responsibilities include: determining the compensation of the Company’s CEO, CFO and other executive officers, including awards to such persons under the Company’s cash-based incentive and long-term equity-based plans; reviewing and recommending compensation of directors to the Board; and administering the Company’s equity-based incentive plan. The process and procedures followed by the Compensation Committee in considering and determining executive compensation are described below under the heading “Compensation Discussion and Analysis.”

Nominating and Governance Committee

The members of the Nominating and Governance Committee are Mr. Keller, its Chairman, Mr. Duke and Mr. Siegenthaler. During the 2008 fiscal year, the Nominating and Governance Committee conducted its business via telephone, e-mail communications and informal discussions culminating in a meeting subsequent to fiscal year end at which the current slate of directors was nominated.

The Nominating and Governance Committee is responsible for identifying, recruiting, and evaluating qualified persons to serve on our Board of Directors and recommending such individuals to the Board for nomination for election as directors; evaluating director independence and the size and composition of the Board; reviewing and ratifying committee assignments recommended by the Board Chairman and submitting such recommendations to the Board for approval; considering director nominations by shareholders; reviewing related person transactions involving directors; overseeing corporate governance matters; and leading the process for succession planning.

Director Nomination Process. The Nominating and Governance Committee’s process to identify candidates for election to the Board involves requesting recommendations from members of the Board and individuals personally known to them, and from senior level executive officers. The process for evaluating candidates includes gathering and reviewing a candidate’s biographical and background information, and personal meetings with the candidate by members of the Nominating and Governance Committee and other Board members, if appropriate. While we have not established specific minimum qualifications for a position on our Board, nominees are selected on the basis of broad experience, wisdom, integrity, understanding of our business environment, the ability to make independent analytical inquiries and the need to maintain a majority of independent members on the Board. The Nominating and Governance Committee also considers any other qualities that a candidate may possess that could add to the overall quality, diversity and skill of the Board, as well as the candidate’s ability to devote adequate time to Board duties.

Shareholder Nominations. The Nominating and Governance Committee will consider board candidates proposed in good faith by a shareholder. Shareholders who wish to recommend a candidate to the Nominating and Governance Committee for consideration should submit the candidate’s name and biographical information to the Nominating and Governance Committee of the Board, c/o Donald T. Duke, Board Chairman, XETA Technologies, Inc., 1814 West Tacoma, Broken Arrow, OK 74012. The Nominating and Governance Committee will evaluate shareholder-recommended candidates in substantially the same manner that it evaluates candidates submitted by others. If the Board determines to nominate a candidate recommended by a shareholder, then the candidate’s name will be included in our proxy card for the next annual meeting of shareholders.

Shareholders may also be entitled to nominate director candidates directly, without any action or recommendation on the part of the Nominating and Governance Committee or the Board. For nominations to be considered at next year’s annual meeting, shareholders must follow the procedures set forth in a recent bylaw amendment adopted by the Board. Under these procedures, a shareholder must submit written notice of the shareholder’s nomination which must be received by us not later than 120 days prior to the anniversary date of the immediately preceding annual meeting of shareholders, so long as the date of the meeting is not changed by more than 30 days from the anniversary date of the previous year’s meeting. If the date of the meeting is changed by more than such 30 days, then the notice must be received no later than the 10th day following the date on which notice of the meeting is mailed

to shareholders or is announced publicly. The notice must include the following information: (1) a brief description of the candidate to be nominated; (2) the name and record address of the shareholder; (3) the class and number of shares beneficially owned by the shareholder; (4) a representation that the shareholder is a holder of record entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to make the nomination; and (5) a description of any arrangement or understanding between such shareholder and the person to be nominated by such shareholder. The notice should be addressed to: Corporate Secretary, XETA Technologies, Inc., 1814 W. Tacoma, Broken Arrow, OK 74012.

Code of Ethics

We have adopted a financial officer Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer, and any principal accounting officer, controller and other persons who perform similar functions for the Company. A copy of this Code of Ethics is posted under Governance Documents in the Governance section on the Investor Relations page of our website at www.xeta.com.

Communications with Directors

Shareholders who wish to communicate with the Board of Directors or an individual director may do so by sending their correspondence in writing to XETA Technologies, Inc., Attention Board of Directors (or individual named director) at 1814 West Tacoma Street, Broken Arrow, Oklahoma 74012. Any such communications will be delivered directly to the Board or named director.

COMPENSATION DISCUSSION AND ANAYLSIS

This Compensation Discussion and Analysis provides a narrative review of the objectives and elements of compensation paid to the Company’s executive officers named in the Summary Compensation Table below. For fiscal 2008, these named executive officers (“NEOs”) are:

· Greg Forrest, President and Chief Executive Officer

· Robert Wagner, Chief Financial Officer

Compensation of NEOs is established by the Company’s Compensation Committee (the “Committee). In addition to determining NEO compensation, the Committee oversees the Company’s compensation plans and policies and administers the Company’s equity compensation programs. A complete discussion of the Committee and its membership is included in the Corporate Governance section of this proxy statement.

General Compensation Philosophy

The focal point of the Committee’s compensation philosophy is to enhance long-term shareholder value. To do this, the Committee believes that performance-based compensation should include modest but competitive base salaries and benefitscoupled with significant “at risk” compensation opportunities. “At risk” compensation should include an annual incentive bonus program to reward near-term performance coupled with equity-based awards to reward long-term performance.

The Company designs its compensation programs to attract, motivate and retain quality managers who will improve long term shareholder value. Under the Company’s compensation programs, the higher an executive’s level of responsibility, the greater proportion of his compensation will be dependent upon the Company’s performance and the executive’s individual performance and contributions.

Compensation Process

In implementing and administering the Company’s compensation plans, the Committee employs an encompassing analytical approach. The Committee assesses, as described below, a variety of information, both objective and subjective in nature. The Committee believes that no formulas or objective measures can fully or adequately take into account the full range of considerations in assessing individual performance or setting compensation. The Committee’s deliberations therefore are inherently subjective in nature and are influenced by the experience and judgment of its members.

To carry out the Company’s compensation philosophy and to discharge its duties under its charter, the Committee holds a series of meetings after the close of each fiscal year. At these meetings, the Committee considers a range of information, including “hard” data relative to the Company’s financial and operating performance scorecard during the year as well as the performance and trading levels of the Company’s common stock. Additionally, the Company provides the Committee with historical compensation data on each NEO regarding previous salary levels, annual incentive awards, and previous equity awards including the current status of such awards. Other information includes reviews of the Company’s significant accomplishments during the year, the Committee’s view of the individual performance and contributions of each NEO, and Committee members’ individual and collective opinion(s) of the current compensation market for each NEO’s discipline.

The items included in the Company performance scorecard include various financial measurements including revenues, earnings, net operating margin, EBITDA and EBITDA margin, and returns on equity, assets, and invested capital. Operating measurements include gross profits, gross margins, sales contribution (defined as gross margin less sales expense as a percentage of revenues), operating expense as a percent of revenues, and revenue mix. The Committee places emphasis on those financial measurements which in its view are of most significance to shareholders, such as return on equity, net operating margins, and growth in revenues.

Additionally, at the Committee’s annual review the CEO makes recommendations for adjustments in base salaries, annual incentive compensation awards, and equity grants. These recommendations are based on data chosen by the CEO and may include competitive pay data gleaned from public company filings, research performed by a compensation consultant, and the CEO’s evaluation of each executive’s performance, including his own, against goals established for such executives at the beginning of each fiscal year.

The Committee considers all of this information together with its own evaluation of each NEO’s unique capabilities and their past and expected contribution toward the Company’s performance objectives. The Committee then processes such information through the subjective review and evaluation mentioned above, which it believes is of vital importance to balance the interests of all stakeholders in the process.

Overview of Elements of Executive Compensation

The key elements of NEO compensation are: base salaries, an annual incentive program, and long term equity compensation. Additionally, NEO’s may participate in the Company’s standard benefits programs on the same terms as all other employees. These benefit programs include health and welfare benefits, vacation and sick leave benefits, and a 401(k) retirement savings plan
(“401(k) Plan”). Under the Company’s 401(k) Plan, all employees have the opportunity, but are not ~~counted as votes cast~~required, to invest the Company’s matching contributions in XETA common stock.

The Company does not have employment, severance, or change-of-control agreements with either of its NEO’s.

Base Salary. The Company pays a base salary to each NEO. The Committee believes that base salaries should be competitive, but modest for each NEO’s area of responsibility. The Committee believes that setting modest base salaries, coupled with significant annual and long term incentive compensation opportunities (discussed below), provides a balanced and clear incentive for NEOs to pursue prudent initiatives designed to achieve superior long term performance.

Base pay is set at the commencement of employment and is reviewed annually for adjustment based on the Committee’s view of changes in market conditions and changes in the ~~tabulation~~NEO’s level of ~~votes~~responsibilities. Base pay is also reviewed for adjustment when an NEO assumes a different executive office or position with the Company during the fiscal year.

Annual Incentive Compensation. The Company pays an annual incentive bonus to NEOs based on Company profitability and the individual performance of each NEO. The annual incentive compensation component is an integral part of the Company’s overall compensation philosophy, particularly in relation to the interaction between the annual incentive bonus and base salary. The annual incentive bonus is intended to be a self-correcting tool that provides robust rewards in conjunction with expanding profit levels and correspondingly constricts executive compensation when profitability narrows.

The annual incentive bonus is paid from an aggregate bonus pool accrued during the year for NEOs and other key non-sales employees of the Company to tangibly recognize the leadership and sacrifice of many of its key employees.

At the beginning of fiscal 2008, the Committee set a target amount for the total bonus pool to be 10% of the Company’s annual pre-tax, pre-bonus profits. Additionally, the Committee set targets to award 50% of the total bonus pool for distribution among the Company’s NEO’s and non-sales executive directors and to pay between 33% and 50% of each such person’s annual incentive bonus in restricted stock awards. The Committee has the discretion to adjust actual awards under this bonus pool upward or downward based on a variety of factors including the size of the bonus pool and the NEO’s progress toward his targeted equity ownership (discussed below). On December 18, 2008, the Committee authorized a total bonus pool of $380,000. From this pool, the Committee awarded aggregate cash bonuses of $145,350 to the Company’s two NEO’s and two non-sales executive directors. Also from the pool, the Committee awarded restricted stock grants to the same four persons which represented 25% of each officer’s total bonus awards.

Long Term Equity Compensation. The Committee believes that the element of long term equity compensation should be sufficient to provide NEOs the potential for meaningful wealth creation through stock price appreciation. This opportunity serves to further motivate NEOs to enhance the value of the stock and more heavily aligns their interests with that of the shareholders. Additionally, the Committee believes that equity awards can be an effective retention tool and thus grants awards with multi-year vesting periods. In setting this portion of compensation, the Committee factors in the total number of outstanding equity awards and the expiration periods of each such award, in order to balance the Committee’s goal of promoting equity ownership by executives against the potential dilution which such awards can have upon current and future shareholders. The Committee has set a general target of maximum potential dilution of 15%, but has not set a restriction on exceeding that level if, in its judgment, conditions warrant.

As part of its comprehensive review of total officer compensation each year, the Committee considers annual grants of long term equity compensation in the form of stock options, restricted stock, or other forms of share-based compensation which are available in the Company’s 2004 Omnibus Stock Incentive Plan (the “2004 Omnibus Plan”) and 2000 Stock Option Plan (the “2000 Plan”).

At the beginning of fiscal 2008, the Committee set equity ownership targets as provided below for the positions of CEO and CFO and for all Executive Directors to promote alignment between the Company’s officers and its shareholders.

Title		Equity Target (shares)
CEO and President		250,000
CFO		125,000
Executive Directors		100,000

As part of its annual review of officer compensation, the Committee monitors each officer’s progress toward achieving these equity targets. Shares held in the Company’s 401(k) Plan count toward meeting the targets above. Because this is a new program for the Company, the Committee has not established timelines for achieving these targets.

Material Factors Affecting Executive Compensation in Fiscal 2007 and 2008

On December 15, 2008, the Committee met and concluded its annual compensation review. The Committee awarded cash incentive bonuses to Mr. Forrest and Mr. Wagner of $53,925 and $49,050, respectively and restricted stock awards of 9,986 and 9,083 shares, respectively, in recognition of the Company’s financial results for fiscal 2008. In fiscal 2008 the Company’s earnings increased 44% compared to the prior year, return on equity improved from 3.6% in fiscal 2007 to 4.9% in fiscal 2008 and net operating margin improved from 2.0% in fiscal 2007 to 2.4% in fiscal 2008. The cash and restricted stock awards in fiscal 2008 reflect both the Company’s pay-for-performance philosophy, in which the Company’s relatively modest base salaries are supplemented by relatively robust annual bonuses awarded as Company performance improves, and the Company’s commitment to align officer compensation with the long-term interests of shareholders. The restricted stock awards were made on December 15, 2008 and the cash bonuses were paid on January 9, 2009. The restricted stock awards vest in three equal installments on January 15, 2010, 2011, and

2012. Also on December 15, 2008, long-term equity incentive awards in the form of stock options were granted to Mr. Forrest and Mr. Wagner for 30,000 and 25,000 shares, respectively. In granting these options, the Committee weighed several factors including its goal to increase the weighting of total executive compensation toward long-term incentives, the impact of additional equity incentive awards of the Company’s operating results; the stockownership targets that have been established for NEO’s and executive directors; and the total number of stock options outstanding in relation to total shares outstanding. These options have a strike price of $1.77 per share, the fair market value of the Company’s stock on the date of grant. The options vest on June 15, 2011 (3.5 years after the date of grant) and have a term of 7 years from the date of grant.

Also as part of its annual compensation review, the Committee elected to not adjust Mr. Forrest’s or Mr. Wagner’s base salaries at this time. This determination was made after consideration of several factors including current and forecasted macro economic conditions, the Company’s recent cost containment measures which included targeted reduction in employee levels, the Committee’s view of executive base salaries in relation to the current market for similar positions, and continued increased weighting of executive compensation toward equity incentives.

COMPENSATION COMMITTEE REPORT

The following report of the Compensation Committee shall not be deemed to be “soliciting material” or to otherwise be considered “filed” with the SEC, nor shall such information be incorporated by reference into any ~~matter brought~~future filing under the Securities Act of 1933, as amended or the Exchange Act of 1934 except to the extent the Company specifically incorporates it by reference into such filing.

January 22, 2009

To the Board of Directors of XETA Technologies, Inc.

Given our role in providing guidance on compensation philosophy and the administration of that policy in making specific compensation decisions for the named executive officers, we participated in the preparation of the Compensation Discussion and Analysis and discussed the Compensation Discussion and Analysis with management. Based on the review and discussions, we recommend to the Board of Directors that the Compensation Discussion and Analysis be included in the proxy statement.

	The Compensation Committee
	Donald T. Duke, Chairman
	Robert D. Hisrich
	Edward F. Keller

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of the Compensation Committee of our Board is an officer or employee of the Company. Mr. Siegenthaler, a non-voting member of the Compensation Committee was formerly an executive vice president of the Company during the 1990’s.

No executive officer of the Company serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Compensation Committee.

EXECUTIVE OFFICERS

Our executive officers are as follows:

Name	Positions with Company	Age
Greg D. Forrest	Chief Executive Officer and President	47
Robert B. Wagner	Chief Financial Officer and Secretary	47

Mr. Forrest was appointed our Chief Executive Officer (“CEO”) on June 7, 2007. He has been our President since July 2005 and also served as our Chief Operating Officer from July 2005 until he became CEO. Previously he was Director of Sales over our Seattle branch sales and service operations. Mr. Forrest joined XETA in August 2004 upon our acquisition of Bluejack Systems, LLC, a company which he founded, owned and served as CEO. Prior to founding Bluejack, Mr. Forrest founded and operated several fast-growing companies in the communications, clothing and commercial interior industries. He attended the University of Washington.

Mr. Wagner has been our Chief Financial Officer since March 1989 and was our Chief Accounting Officer for nearly eleven years prior to that. He has served on our Board of Directors from March 1996 until April 2004. Mr. Wagner is a certified public accountant licensed in Oklahoma and received his Bachelor of Science degree in accounting from Oklahoma State University.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table presents information regarding compensation of each of the Company’s named executive officers for services rendered in fiscal 2008.

Chief Executive Officer and President	FY	Salary $	Bonus $	Stock Awards $	Option Awards $(1)	Non-Equity Incentive Plan Compensation $	All Other Compensation $(2)	Total $
Greg Forrest	2008	203,939	53,925	—	64,531	—	25,682	348,076
Chief Executive Officer and President	2007	189,388	50,000	—	32,213	—	22,301	293,902

Robert Wagner	2008	144,039	49,050	1,949	35,462	—	10,670	241,169
Chief Financial Officer	2007	125,019	50,000	—	17,146	—	5,887	198,052

(1)

The expense for options awards above were computed in accordance with Statement of Financial Accounting Standards No. 123R (“SFAS 123R”). The options represented in the table above were valued using the Black Scholes valuation method using the assumptions presented in the table below. The expected life of the option was based on the Company’s experience that NEO’s generally hold options until near their expiration date.

FY	Expected Life	Expected Volatility		Risk Free Rate of Return		Dividend Yield
2008	6 1/2	74.3697	%	4.725	%	0.0	%
2007	5 1/2	68.6571	%	3.550	%	0.0	%
2006	4 1/2	73.5095	%	4.570	%	0.0	%

(2)

The following table provides detail for the aggregate amount under “All Other Compensation” for each of the executive officers:

	FY	401(k) Matching Contributions	Unused Vacation Time Paid in Cash	Car Allowance	Other Perquisites		Total $
Mr. Forrest	2008	10,580	8,602	6,500	—		25,682
	2007	6,205	—	3,000	13,096	(a)	22,301

Mr. Wagner	2008	5,862	4,808	—	—		10,670
	2007	5,887	—	—	—		5,887

(a)

In fiscal 2007, the Company paid for landscaping valued at $10,230 at Mr. Forrest’s private residence to enable the Company to hold a series of customer marketing and investor relations events at his home during the PGA

championship. The value of the landscaping was based on the amount paid by the Company to the vendor. Subsequent to the PGA event, the Company purchased certain catering and entertaining supplies from Mr. Forrest for use by the Company at similar events in the future. The personal benefit received by Mr. Forrest from use of these items is included in this column and valued at 10% of the original cost paid to vendors for the supplies as evidenced by receipts. The last component of this column is an amount the Company reimbursed Mr. Forrest for professional services provided to him by his personal accountant.

Grants of Plan-Based Awards

The following table presents information regarding the incentive awards granted to the Company’s named executive officers during fiscal year 2008.

	Grant Date	Estimated Future Payouts Under Non-Equity and Equity Incentive Plan Awards	All Other Option Awards: Number of Shares of Stock (#)	Exercise Price of Option Awards ($/Sh)		Grant Date Fair Value of Option Awards (b)
Mr. Forrest	12/5/2007	(a)	20,000	$	4.14	$	49,500

Mr. Wagner	12/5/2007	(a)	10,000	$	4.14	$	24,750

(a)		The Company’s non-equity and equity incentive award plans are described under “Elements of Executive Compensation” in the Compensation Discussion and Analysis above. On December 5, 2007, the Compensation Committee granted cash bonuses to Mr. Forrest and Mr. Wagner of $50,000 each. These bonuses were paid on January 11, 2008.

(b)		The grant date fair value was calculated using the Black Scholes valuation method and employing the assumptions provided above as part of the “Summary Compensation Table”.

Outstanding Option Awards at Fiscal 2008 Year-End

The following table presents information regarding the outstanding equity awards held by each of the named executive officers as of October 31, 2008.

	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price ($)		Option Expiration Date
Mr. Forrest	—	40,000	(1)	$	2.95	10/19/2011
	—	40,000	(2)	$	3.25	07/05/2014
	—	20,000	(3)	$	4.14	12/05/2013

Mr. Wagner	12,000	—		$	18.13	04/16/2010
	25,000	—		$	3.63	10/31/2011
	—	20,000	(1)	$	2.95	10/19/2011
	—	25,000	(2)	$	3.25	07/05/2014
	—	10,000	(3)	$	4.14	12/05/2013

(1) These awards vest in one installment on October 19, 2009.

(2) These awards vest in one installment on January 5, 2011.

(3) These awards vest in one installment on December 5, 2010.

COMPENSATION OF DIRECTORS

We pay our non-employee directors an annual fee of $25,000 for their services. In addition, our Chairman of the Board is paid an additional $55,000 annually and committee chairmen are paid an additional $16,000 annually for each chairmanship. Presently Mr. Duke serves as chairman of the Compensation committee, but has waived the fee for this service. All fees are paid monthly. We also reimburse our non-local directors their reasonable travel expenses to attend Board and Committee meetings and the annual shareholder meeting.

It has also been the Company’s practice on occasion to grant stock options to its outside directors, typically upon their election or appointment to the Board. Options (noted in the table below) were granted during fiscal 2008 to Mr. Crawley and Mr. Devenuti upon their election to the Board.

The following table presents information regarding the compensation of non-executive directors during fiscal 2008.

	Fees Earned or Paid in Cash $	Option Awards ($) (1)		All Other Compensation ($)		Total $
Mr. Duke	80,000	27,966	(2)	—		107,966
Chairman of the Board
Chairman, Compensation Committee

Mr. Barber	12,500	—	(3)	—		12,500

Mr. Crawley	25,417	6,518	(4)	—		31,935
Chairman, Audit Committee

Mr. Devenuti	20,500	3,626	(5)	—		24,126

Dr. Hisrich	25,000	—	(6)	—		25,000
Member, Audit & Compensation Committees

Mr. Keller	41,000	6,055	(7)	—		47,055
Chairman, Nominating Committee
Member, Audit & Compensation Committees

Mr. Siegenthaler	25,000	—	(8)	25,000	(8)	50,000
Member, Nominating Committee

(1)		Total option-related expense recognized for financial reporting purposes for the fiscal year ended October 31, 2008 in accordance with Statement of Financial Accounting Standards No. 123R (“SFAS 123R”), assuming no forfeitures.

(2)		Upon his appointment as non-executive Chairman of the Board, Mr. Duke was awarded options for 25,000 shares of common stock with vesting in two equal installments on July 2, 2008 and 2009, respectively. Mr. Duke’s option was granted at the strike price of $3.25 per share, the market value of the stock at the time of grant and expires on July 5, 2014. The grant date fair value of this award calculated in accordance with FAS 123(R) was $2.24 per share. Mr. Duke holds options to purchase 30,000 shares of common stock as of October 31, 2008.

(3)		Mr. Barber resigned from the Board effective April 30, 2008. Mr. Barber holds options to purchase 13,000 shares of common stock as of October 31, 2008.

(4)		Mr. Crawley holds one option for 10,000 shares of common stock which was granted to him upon his appointment to the Board on February 1, 2008. The option vests on February 1, 2011 and has a strike price of $4.30, the market value of the stock at the time of grant and expires on February 1, 2014. The grant date fair value of this award calculated in accordance with FAS 123(R) was $2.61 per share.

(5)		Mr. Devenuti holds one option for 10,000 shares of common stock which was granted to him upon his appointment to the Board on May 1, 2008. The option vests on May 1, 2011 and has a strike price of $3.55, the market value of the stock at the time of grant and expires on May 1, 2014. The grant date fair value of this award calculated in accordance with FAS 123(R) was $2.61 per share.

(6)		Dr. Hisrich holds options to purchase 13,000 shares of common stock as of October 31, 2008.

(7)		Mr. Keller holds one option for 10,000 shares of common stock which was granted to him after his election to the Board at the annual meeting on April 3, 2007. The option vests on April 5, 2010 and has a strike price of $3.12, the market value of the stock at the time of grant and expires on April 5, 2012. The grant date fair value of this award calculated in accordance with FAS 123(R) was $1.81 per share.

(8)		Mr. Siegenthaler serves as a special liaison between the Board and the Company’s executive officers and management. Mr. Siegenthaler is responsible to the Board for engaging with management and employees on behalf of the Board as appropriate, in all areas of the Company’s operations. Mr. Siegenthaler receives an annual fee of $25,000, paid in monthly installments, to serve in this capacity. Mr. Siegenthaler holds options to purchase 13,000 shares of common stock as of October 31, 2008.

RELATED TRANSACTIONS

Ron Barber was a member of our Board of Directors during the 2008 fiscal year until his resignation from the Board on April 30, 2008. He is a principal shareholder in the law firm of Barber & Bartz, a Professional Corporation, which serves as outside general counsel to the Company. During the fiscal year ended October 31, 2008, the Company paid legal fees to Barber & Bartz in the approximate amount of $257,560. Mr. Barber was also paid $12,500 during the fiscal year for serving in his individual capacity as an advisor to the Audit Committee.

Related Transactions Policy. We have adopted a written policy for the approval or ratification of “related person transactions.” For purposes of our policy, related person transactions include any transaction, arrangement or relationship expected to exceed $120,000 in any calendar year which involves the Company and any officer, director, director nominee, or persons who own in excess of 5% of the Company’s stock, or any of their respective family members. The policy requires officers and directors to annually complete a Company questionnaire designed to elicit information about potential related person transactions. Under the Company’s Corporate Code of Conduct applicable to all officers and directors, such persons have a duty to disclose potential conflicts of interest to the Company’s Chief Executive or Chief Financial Officer or to the Board. When related person transactions or potential transactions are identified by these or any other method, they are referred for review to the Nominating and Governance Committee if the transaction involves a director, or to the Audit Committee in all other cases.

The policy requires the appropriate Committee to take into account the extent of the related person’s interest in the transaction; the benefits of the transaction to the Company; whether the terms of the transaction are no less favorable than could be obtained in arm’s-length dealings with an unrelated third party under similar circumstances; the aggregate value of the transaction; whether the transaction involves a conflict of interest; the impact the transaction could have on the independence of a director if it involves a director or an immediate family member of the director; as well as any other factors that the Committee deems appropriate to its review.

On-going related person transactions are subject to annual review under the policy. The policy also provides standing pre-approvals for the following transactions:

· compensation paid to an officer or director if approved by the Compensation Committee;

· grants of equity awards to any executive officer or director if made under the Company’s existing equity plans or future plans that receive shareholder approval;

· interests that arise solely from participation in a Company employee benefit plan that is maintained for the general benefit of all Company employees;

· interests that arise solely from stock ownership if all other owners benefit pro rata; and

· any transaction with another company if the related person’s only relationship with that company is as a non-officer employee, director or owner of less than 10% of that company.

PROPOSAL 2

APPROVAL OF STOCK OPTION EXCHANGE PROGRAM

Overview of Proposal

On January 22, 2009, our Board directed our Compensation Committee to develop an option exchange program that would re-invigorate our option program as a meaningful incentive and retention tool for executives and other key employees. On February 3, 2009 our Compensation Committee approved, subject to stockholder approval, the exchange of certain outstanding stock options held by current employees (“Eligible Employees”), including executive officers, for a smaller number of new options. The options included in the proposed program are those options that have an exercise price between $2.95 and $4.14 and are scheduled to expire in October, 2011 or later (the “Eligible Options”). Former employees and non-employee directors are not eligible to participate in the program. Participation in the program by Eligible Employees is voluntary.

The number of new stock options would be determined using exchange ratios designed to result in the new stock options having a fair value approximately equal to the stock options that are exchanged. The option exchange program would also be virtually expense neutral from an accounting perspective.

Stockholder approval of the option exchange program applies only to the stock option exchange program described in this proxy statement. If the Company were to implement a different stock option exchange program in the future, it would once again need to seek shareholder approval.

Reasons for the Exchange Program

Stock option grants are a critical component of our compensation philosophy, the focal point of which is to increase long-term shareholder value. We believe stock options help us achieve this objective in several important ways: by aligning the employees’ interests with those of our shareholders; by motivating employees’ performance toward our long term success; and, through the use of options with multi-year vesting periods, by encouraging our executives and employees who have received option grants to continue their employment with us.

Despite our improved financial performance during the past two fiscal years, our stock price has declined, primarily because of an overall stock market downturn and macro economic conditions. Presently, approximately 92% of our outstanding stock options are “underwater,” which includes 124,700 options (or 8.9% of the total options outstanding) held by current employees with exercise prices between $9.06 and $18.13. This means that the vast majority of our historically granted stock options have little or no perceived value to the employees who hold them and are therefore no longer effective as incentives to motivate and retain these employees.

Our Board of Directors believes that it is critical to our future success to revitalize the incentive value of our stock option program to retain employees and create in them a personal stake in the long term financial success of the Company. The Board believes that without the proper balance between the long term components of our compensation structure (i.e., equity awards) and its short term components (i.e., salary and bonus), key employees are not properly motivated to align their interests with those of the stockholders and work toward reward for their contributions based upon increases in share value. The Board also recognizes the competition in our industry to attract and recruit top talent. The Board believes that it has a responsibility to address these issues and to properly incentivize our key employees. Consequently, the Board has proposed the option exchange program described below.

Eligible Options

The Eligible Options are those options outstanding under our stock option plans that have an exercise price between $2.95 and $4.14. These options cover 388,400 shares and represent only 28% of the Company’s total outstanding stock options. The number of employees holding Eligible Options as of January 30, 2009 was 149. Of the total number of Eligible Options, 180,000 or 46% are held by our two executive officers.

As of January 30, 2009, there were a total of 1,402,800 outstanding stock options under our equity compensation plans. Ninety-two percent (92%) of these options are underwater. A large number of these options are held by current employees and some have exercise prices ranging from as high as $9.06 to $18.13. Nevertheless, options with exercise prices of $4.15 or greater are being excluded from the proposed exchange program because the Board of Directors determined the extent to which these options

are underwater, coupled with their relatively short remaining contractual lives of less than two and one-half years, results in their having negligible value in an option exchange.

Of the Eligible Options, 103,100 were granted under our 2000 Stock Option Plan and 285,000 were granted under our 2004 Omnibus Stock Incentive Plan. Both the 2000 Stock Option Plan and the 2004 Omnibus Stock Plans are qualified plans as that term is defined in the Internal Revenue Code.

Exchange Ratios

In working with our Compensation Committee to develop a stock option exchange program pursuant to the Board’s direction, Company management hired CBIZ Valuation Group LLC to provide a valuation analysis of the Eligible Options. This analysis was used to assist in the determination of the value of the options relative to the replacement options. The exchange ratios for the option exchange program—that is, how many current options a participating employee must surrender in order to receive one new option—were (and will be if the program is approved by the stockholders) determined using the Black Scholes option valuation model. This is the same valuation method we have used to value outstanding options for accounting purposes when expensing them.

The actual exchange ratio will be determined at the time the exchange program commences. Our intent is to establish exchange ratios that will result in the issuance of replacement options with a fair value equal to (or less than) the fair value of the stock options surrendered in the exchange program. The option exchange proposed will be cost neutral to the Company.

Under the proposed exchange program, Eligible Employees will be given the opportunity to exchange their stock options that have an exercise price between $2.95 and $4.14 and an expiration date of October 2011 or later, for new stock options to purchase a fewer number of shares. The ratio of old options surrendered to new options granted will vary depending upon the exercise price of the surrendered options, as illustrated in the table below. Assuming that 100% of Eligible Employees participate in the exchange program and applying the exchange ratios described below, options covering 388,100 shares would be surrendered and cancelled, while new options covering 227,117 shares would be issued, resulting in a net reduction of 160,983 shares subject to outstanding awards or approximately 11% of all outstanding options.

The table below reflects information on the Eligible Options and the exchange ratio as of January 30, 2009:

Strike Price		Options to be Exchanged	Fair Value of Option to be Surrendered		Fair Value of Option to be Issued		Exchange Rate	New Options Issued	Net Reduction in Overhang as of 1/30/2009
$	2.95	153,898	$	0.530	$	1.000	1.8868	81,566	5.2	%
$	3.25	56,446	$	0.750	$	1.000	1.3333	42,335	1.0	%
$	3.63	103,400	$	0.570	$	1.000	1.7544	58,938	3.2	%
$	4.14	60,000	$	0.580	$	1.000	1.7241	34,800	1.8	%

		373,744	Blended Exchange Rate				1.7173	217,639	11.1	%

Program Participation

Because the decision whether to participate in the stock option exchange program is completely voluntary, we are not able to predict who or how many Eligible Employees will elect to participate, how many stock options will be surrendered for exchange, or the number of new options that may be issued.

Implementing the Stock Option Exchange Program

If stockholders approve the option exchange program, the program may be commenced at any time within six (6) months following stockholder approval, as determined by the Compensation Committee. Even if the shareholders approve the stock option exchange program, the Board of Directors will retain the authority, in its sole discretion, to terminate or postpone the program at any time prior to the closing of the actual exchange offer to Eligible Employees (described below), or to exclude certain options or Eligible Employees from participating in the stock option exchange program due to tax, regulatory or accounting reasons or because their participation would be inadvisable or impractical.

Upon commencement of the option exchange program, Eligible Employees will be offered the opportunity to participate in the exchange under a Tender Offer Statement to be filed by us with the SEC and distributed to all Eligible Employees. Employees will be given at least twenty (20) business days in which to accept the offer of the new options in exchange for the surrender of their Eligible Options. The surrendered options will be cancelled on the first business day following this election period. The new options will be granted on the date of cancellation of the old options and will have an exercise price at least equal to the fair market value of our common stock on the date of grant of such new options. Surrendered options will be returned to their respective plans (either the 2000 Stock Option Plan or the 2004 Omnibus Stock Incentive Plan, as applicable) and will be available for future grant under such plans.

If on the date that the exchange program commences, the holder of Eligible Options is no longer an employee of the Company for any reason (including layoff, termination, voluntary resignation, death or disability), that person will not be entitled to participate in the program. An employee who elects to participate in the program and tenders his or her options for exchange must also continue to be employed with the Company on the date of the new grant in order to receive the new options.

A vote by an employee in favor of this proposal at the Annual Meeting does not constitute an election to participate in the exchange program.

Description of New Options Issued in Exchange

Exercise Price of New Options. All new options issued in the exchange program will be granted with an exercise price at least equal to the fair market value of our common stock on the date of grant of the new option.

Vesting of New Options. New options granted in the exchange program will vest beginning one year from the date of grant of the new option. This means that Eligible Employees who elect to participate in the exchange program must complete an additional year of service to the Company before their new options would be exercisable, regardless of whether the old options surrendered were partially or wholly vested. All new options granted under the exchange program will vest 50% at the end of the first year and 25% each at the end of the second and third years from the date of grant.

Term of New Options. Each of the new options will have an expiration date that is six years from the date of grant.

Other Conditions of New Options. The new options will be subject to the terms and conditions of either the Company’s 2000 Stock Option Plan or the 2004 Omnibus Stock Incentive Plan, depending upon the plan under which the new option is granted. New option grants calculated according to the exchange ratios will be rounded down to the nearest whole share on a grant-by-grant basis. New options will not be issued for fractional shares.

U.S. Federal Income Tax Consequences

The exchange of options pursuant to the exchange program should be treated as a non-taxable event for U.S. federal income tax purposes. No income should be recognized for U.S. federal income tax purposes by either the Company or participating employees upon the cancellation of surrendered options and the grant of new options in the exchange. All new options granted under the option exchange program will be qualified stock options for U.S. federal income tax purposes.

Accounting Impact

The intent of the program is that it will not result in the Company incurring any additional compensation expense. Based on this objective, the average fair value of each new stock option granted to employees in exchange for surrendered stock options, measured as of the date such awards are granted, will be “cost neutral” (other than immaterial incremental compensation expense that might result from fluctuations in our stock price after the exchange ratios have been set but before the ~~Meeting.~~ exchange actually occurs). The unamortized compensation expense from the surrendered options and incremental compensation expense, if any, associated with the new options granted under the exchange program will be recognized over the service period of the new options. If any portion of the new options granted is forfeited prior to the completion of the service condition due to termination of employment, the compensation cost for the forfeited portion of the award will not be recognized.

Potential Modification to Terms to Comply with Governmental Requirements

The terms of the option exchange program will be described in a Tender Offer Statement that we will file with the SEC. Although we do not anticipate that the SEC would require us to modify the terms materially, it is possible that we will need to alter the terms of the option exchange to comply with potential SEC comments.

Effect on Stockholders

The option exchange program is designed to provide renewed incentives and motivate Eligible Employees to continue to create stockholder value and reduce the number of shares currently subject to outstanding options, thereby avoiding the dilution in ownership that normally results from supplemental grants of new stock options. While we cannot predict which or how many employees will elect to participate in the exchange program, please see the “Exchange Ratios” section above for the approximate reduction of the number of shares underlying options outstanding assuming that 100% of Eligible Options are exchanged and replacement option grants are made in accordance with the exchange ratios set out above.

Required Vote

The affirmative vote of a majority of the shares ~~of the Company's Common Stock~~ represented and entitled to vote on this proposal at the Annual Meeting is required to approve the stock option exchange program.

Recommendation of the Board of Directors

Our Board of Directors has unanimously approved the stock option exchange program outlined above and recommends that you vote FOR Proposal 2.

PROPOSAL 3

INDEPENDENT PUBLIC ACCOUNTANTS

The Audit Committee has selected HoganTaylor, LLP (“HoganTaylor”), formerly known as Tullius Taylor Sartain & Sartain LLP (“TTSS”), as the independent public accountants to perform an integrated audit of our financial statements for the ~~election of directors (Proposal 1)~~fiscal year ending October 31, 2009. TTSS audited the Company’s financial statements for the fiscal year ended October 31, 2008 and ~~for approval of Proposal 4. Proposals 2~~2007.

TTSS became HoganTaylor on January 7, 2009, when TTSS, our independent registered public accounting firm, and ~~3 each require~~Hogan & Slovacek, P.C. merged their operations to become HoganTaylor, LLP. At that time the ~~affirmative vote of a majority~~respective employees, partners and shareholders of the ~~shares~~merged firms became employees and partners of HoganTaylor, which has continued the practices of each of the ~~Company's Common Stock entitled~~merged firms and has assumed the role as our independent registered public accounting firm. Representatives of HoganTaylor are expected to ~~notice of and to vote~~be present at the Annual ~~Meeting.~~ 4 Meeting with the opportunity to make a statement if they desire to do so and to respond to appropriate questions. While ratification of the Company’s selection of accountants by the Company’s shareholders is not required, in the event of a negative vote on such ratification, the Company’s Audit Committee will reconsider its selection. Even if the selection is ratified, the Audit Committee in its discretion may change the appointment at any time during the year if it determines that such change would be in the best interests of the Company and its shareholders.

The Board of Directors unanimously recommends that shareholders vote “FOR” the appointment of HoganTaylor LLP as the Company’s independent public accountants.

Audit Fees and Services

The following table sets forth the fees for professional services rendered during fiscal 2008 and fiscal 2007 by the Company’s registered public accounting firm, HoganTaylor (formerly known as Tullius Taylor Sartain & Sartain):

	Fiscal 2008		Fiscal 2007

Audit Fees(1)	$	89,000	$	87,000
Audit-Related Fees(2)	19,750		7,000
Tax Fees	—		—
All Other Fees	—		—

(1) Includes audit of our annual financial statements and review of our quarterly reports on Form 10-Q, as well as services that are normally provided by the Company’s independent registered public accounting firm in connection with statutory and regulatory filings or engagements and services that generally only the independent registered public accounting firm can reasonably provide, such as comfort letters, statutory audits, attest services, consents and assistance with and review of documents filed with the SEC.

(2) Relates to the audit of the Company’s 401(k) retirement plan and analysis of the FASB Interpretation No. 48 clarifying certain aspects of accounting for uncertain tax positions, including issues related to the disclosure, recognition and measurement of those tax positions.

The Audit Committee of the Board of Directors has established a written policy to pre-approve audit and non-audit related services to be provided by the Company’s independent auditor prior to engaging the auditor for such purposes. Pursuant to the policy, the Audit Committee will annually review the services and fees that the auditor may provide to the Company during the following 12 months. Following such review, the Committee will issue a statement to the Company’s Chief Financial Officer as to the general services and fees that the Committee has pre-approved. The pre-approval generally extends for a period of 12 months or such shorter period as may be specifically indicated by the Committee. All other services to be performed by the auditors that are not included in the Committee’s annual pre-approval statement must be submitted to the Committee in advance for specific approval.

REPORT OF AUDIT COMMITTEE

January 22, 2009

To the Board of Directors of XETA Technologies, Inc.:

The Audit Committee oversees XETA’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. We have reviewed and discussed with management and with the independent auditors the Company’s audited financial statements as of and for the year ended October 31, 2008.

We have discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended, by the Auditing Standards Board of the American Institute of Certified Public Accountants.

We have received and reviewed the written disclosures and the letter from the independent auditors required by

Independence Standard No. 1—Independence Discussions with Audit Committees—as amended, by the Independence Standards Board, and have discussed with the auditors the auditors’ independence.

Based on the reviews and discussions referred to above, we recommend to the Board of Directors that the financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended October 31, 2008.

The Audit Committee,

S. Lee Crawley, Chairman

Donald T. Duke

Robert D. Hisrich

Edward F. Keller

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information known to the Company as of ~~December 31, 1999~~February 9, 2009 regarding beneficial ownership of the ~~Company's~~Company’s Common Stock, par value ~~$.05~~$.001 per share, by (a) each person known by the Company to own more than five percent (5%) of the ~~Company's~~Company’s Common Stock, (b) each director and nominee for election as a director of the Company, (c) each executive officer named in the Summary Compensation Table, and (d) all directors and executive officers of the Company as a group.
AMOUNT AND NATURE NAME AND ADDRESS OF BENEFICIAL PERCENT OF OF BENEFICIAL OWNER(1) OWNERSHIP(2) CLASS ---------------------- ----------------- ---------- Jack R. Ingram 763,400 (3) 17.32 % Ronald L. Siegenthaler 625,514 13.81 % P.O. Box 571300, Tulsa, OK 74157 Mark A. Martin 150,000 3.63 % 891 Bolger Court, Fenton, MO 63026 Jon A. Wiese 105,000 2.48 % Donald E. Reigel 83,668 1.98 % 5350 Manhattan Circle, Suite 210, Boulder, CO 80303 Tom Luce 63,868 (4) 1.52 % Robert B. Wagner 58,968 (5) 1.41 % Ron B. Barber 52,736 1.27 % 525 S. Main Street, Suite 800, Tulsa, OK 74103 Robert D. Hisrich 25,800 (6) * 10900 Euclid Avenue, Cleveland, OH 44106 Donald T. Duke 25,000 * 1701 Morningstar, Edmond, OK 73034 Tom R. Crofford 15,666 (7) * All officers and directors as a group 1,994,288 38.79 % (12 persons)
~~- ------------------------------ *Less~~

	Amount and Nature
Name and Address	of Beneficial		Percent of
of Beneficial Owner(1)	Ownership(2)		Class

Directors, Director Nominees and Executive Officers

Ronald L. Siegenthaler
8716 S. Peoria
Tulsa, OK 74132	1,122,003	(3)	10.96	%

Ozarslan Tangun	552,351	(4)	5.4	%
5050 Quorum Drive, Suite 312
Dallas, TX 75254

Greg D. Forrest	117,584	(5)	1.15	%

Robert B. Wagner	79,004	(6)	*

Donald T. Duke
1505 Vandivort
Edmond, OK 73034	72,000		*

Robert D. Hisrich
15249 North 59th Ave.
Glendale, AZ 85306	56,550		*

S. Lee Crawley
2431 E. 51st St., Suite 600
Tulsa, OK 74105	20,985		*

Ed Keller
5314 S. Yale, Suite 205
Tulsa, OK 74135	11,600		0

Richard R. Devenuti
12819 SE 38th St., #335
Bellevue, WA 98006	0		0

All officers and directors as a group	1,479,726		14.34	%

(8 persons)

Others Known to Own 5%

William M. Sams
750 North St. Paul, Suite 1650
Dallas, TX 75201	570,000	(7)	5.56	%

Dimensional Fund Advisors LP
Palisades West, Building One
6300 Bee Cave Road
Austin, TX 78746	534,799	(8)	5.22	%

Deanna K. Ingram
7777 S. Jamestown
Tulsa, OK 74135	518,579	(9)	5.06	%

Jon A. Wiese
11509 S. Granite Ave.
Tulsa, OK 74137	580,000	(10)	5.66	%

*Less than one percent of the shares outstanding.

(1) Address is that of the ~~Company's~~Company’s principal office at 1814 W. Tacoma Street, Broken Arrow, Oklahoma 74012 unless otherwise indicated.

(2) Except as indicated in the footnotes to this table, the persons named in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to community property laws where applicable. The number of shares beneficially owned includes the number of shares of Common Stock that such persons ~~had~~presently have the right to acquire ~~within 60 days of December 31, 1999~~ pursuant to unexercised options under the ~~Company's~~Company’s stock option plans, as follows: ~~280,000 shares for Mr. Ingram; 400,000~~13,000 shares for Mr. Siegenthaler; ~~100,000 shares for Mr. Wiese; 83,668 shares for Mr. Reigel; 48,668 shares for Mr. Luce; 43,668~~37,000 shares for Mr. Wagner; ~~20,000~~13,000 shares for ~~Mr.~~Dr. Hisrich; ~~20,000~~29,500 shares for Mr. Duke; ~~8,668 shares for Mr. Crofford;~~ and ~~1,013,340~~92,500 shares for all directors and executive officers as a group ~~(12~~(8 persons).

(3) Includes ~~5,000~~129,000 shares held by Mr. ~~Ingram's wife.~~ Siegenthaler’s wife’s trust. All of the shares held directly by Mr. Siegenthaler are pledged.

(4) Held by Mr. Tangun through Patara Capital, LP, Patara Partners, LP and Patara Capital Management, LP, for each of which he is managing member. Mr. Tangun has shared investment and voting power over these shares.

(5) Includes ~~200~~100,000 shares held by Bluejack Systems LLC, a limited liability company owned by Mr. ~~Luce~~Forrest; and 7,598 shares, the equivalent number of shares held as ~~custodian~~units for ~~his minor child. 2~~ ~~5 (5)~~Mr. Forrest’s account by the Company’s 401(k) retirement plan, over which Mr. Forrest has shared investment power and no voting power.

(6) Includes ~~2,600~~4,400 shares held by Mr. Wagner as custodian for his minor ~~children. (6) Includes 1,800~~children, over which he has sole voting and investment power; and 7,521 shares, the equivalent number of shares held as units for Mr. Wagner’s account by ~~Dr. Hisrich~~the Company’s 401(k) retirement plan, over which Mr. Wagner has shared investment power and no voting power.

(7) Based on a Schedule 13G/A filed with the SEC on February 8, 2008.

(8) Based on a Schedule 13G/A filed with the SEC on February 9, 2009, which states: Dimensional Fund Advisors LP (“Dimensional”), an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as ~~custodian for his minor child. (7) Includes 1,525 shares~~investment manager to certain other commingled group trusts and separate accounts. These investment companies, trusts and accounts are the “Funds.” In its role as investment advisor or manager, Dimensional possesses investment and/or

voting power over the securities of the Issuer described in this schedule that are owned by ~~Mr. Crofford's adult son who attends college (Mr. Crofford~~the Funds, and may be deemed to be the beneficial owner of the shares of the Issuer held by the Funds. However, all securities reported in this schedule are owned by the Funds. Dimensional disclaims beneficial ownership as to these shares). PROPOSAL NO. 1 ELECTION OF DIRECTORS INFORMATION CONCERNING THE NOMINEES The Company's Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, both as further amended, provide that the Board of Directors shall consist of such ~~number of directors as is fixed from time to time by resolution of~~securities.

(9) Based on a Schedule 13G/A filed with the ~~Board of Directors. On February 1, 2000,~~SEC on October 10, 2007. Of the Board fixed the number of directors constituting the entire Board at eight, effective as of the date of the 2000 Annual Meeting. Members of the Board are elected for one year terms. The nominees for election to the Board of Directors are set forth below. All of the nominees have been recommended by the Board of Directors and all have indicated a willingness to serve if elected. If any nominee should become unavailable for election for any presently unforeseen reason, the persons designated as proxies will have full discretion to cast votes for another person designated by the Board. All but two of the nominees are currently directors of the Company.
NAME POSITIONS WITH COMPANY DIRECTOR SINCE ---- ---------------------- -------------- Ron B. Barber Director March, 1987 Donald T. Duke Director March, 1991 Dr. Robert D. Hisrich Director March, 1987 Jack R. Ingram Chairman of the Board and March, 1989 Chief Executive Officer Mark A. Martin Vice President of Commercial Sales - Ronald L. Siegenthaler Director September, 1981 Robert B. Wagner Vice President of Finance, March, 1996 Chief Financial Officer, Secretary and Director Jon A. Wiese President -
~~MR. BARBER, age 45, has been a director of the Company since March 1987. He has been engaged~~518,579 shares included in the ~~private practice~~report, Ms. Ingram reports sole power to vote and dispose of ~~law since October 1980 and is a shareholder in the law firm of Barber & Bartz, a Professional Corporation, in Tulsa, Oklahoma, which serves~~492,579 shares as counsel to the Company. Mr. Barber is also a Certified Public Accountant licensed in Oklahoma. He received his Bachelor of Science Degree in Business Administration (Accounting) from the University of Arkansas and his Juris Doctorate Degree from the University of Tulsa. MR. DUKE, age 50, has been a directortrustee of the Company since March 1991. He is President of Duke Energy Co. L.L.C., an oil and gas consulting and investment firm. Mr. Duke has been in senior management in the oil and gas industry since 1980, including time as President and Chief Operating Officer of Hadson Petroleum (USA), Inc., a domestic oil and gas subsidiary of Hadson Corporation, where he was responsible for all phases of exploration and 3 6 production, land, accounting, operations, product marketing and budgeting and planning. Mr. Duke has a Bachelor of Science Degree in Petroleum Engineering from the University of Oklahoma. DR. HISRICH, age 55, has been a director of the Company since March 1987. He occupies the A. Malachi Mixon III Chair in Entrepreneurial Studies and is Professor of Marketing and Policy Studies at the Weatherhead School of Management at Case Western Reserve University in Cleveland, Ohio. Prior to assuming such positions, he occupied the Boviard Chair of Entrepreneurial Studies and Private Enterprise and was Professor of Marketing at the College of Business Administration for the University of Tulsa. He is also a marketing and management consultant. He is a member of the Board of Directors of the Boviard Supply Company, Jameson Inn, Inc., and Noteworthy Medical Systems, Inc., a member of the Editorial Boards of the Journal of Venturing and the Journal of Small Business Management, and a member of the Board of Directors of Enterprise Development, Inc. Dr. Hisrich received his Bachelor of Arts Degree in English and Science from DePaul University and his Master of Business Administration Degree (Marketing) and Ph.D. in Business Administration (Marketing, Finance, and Quantitative Methods) from the University of Cincinnati. MR. INGRAM, age 56, has been the Company's Chief Executive Officer since July 1990 and also served as its President until August 2, 1999. He has been a director of the Company since March 1989. Mr. Ingram's business experience prior to joining the Company was concentrated in the oil and gas industry. Mr. Ingram holds a Bachelor of Science Degree in Petroleum Engineering from the University of Tulsa. MR. MARTIN, age 39, joined the Company in November 1999 in conjunction with the Company's acquisition of U. S. Technologies Systems, Inc. ("USTI"). He co-founded USTI in 1986 and continually served in different executive positions with USTI, including President, CEO and Chairman of the Board, until USTI was acquired by the Company. Mr. Martin holds a Bachelor of Science Degree in Business Administration from St. Louis University. MR. SIEGENTHALER, age 56, has been a director of the Company since its incorporation. He also served as the Company's Executive Vice President from July 1990 until March 1999. Since 1974, through SEDCO Investments, a partnership in which Mr. Siegenthaler is a partner, and as an individual, Mr. Siegenthaler has been involved as partner, shareholder, officer, director, or sole proprietor of a number of business entities with significant involvement in fabrication and marketing of steel, steel products and other raw material, real estate, oil and gas, and telecommunications. Mr. Siegenthaler received his Bachelor's Degree in Liberal Arts from Oklahoma State University. MR. WAGNER, age 38, joined the Company in July 1988 as Chief Accounting Officer. He became the Company's Vice President of Finance and Chief Financial Officer in March 1989, and a member of the Board of Directors in March 1996. Mr. Wagner is a Certified Public Accountant licensed in Oklahoma and received his Bachelor of Science Degree in Accounting from Oklahoma State University. MR. WIESE, age 43, joined the Company on August 2, 1999 as President. Prior to joining the Company, Mr. Wiese was employed by Lucent Technologies, Inc. since 1989 where he held various executive offices since 1990, including President and Corporate Officer of Lucent's International Division based in Brussels. From 1997 until taking the position with the Company, he served as Vice President and Corporate Officer at Lucent and was responsible for its USA sales and service division where he had full P&L responsibility and managed twelve Vice Presidents and 17,000 Lucent employees. His functional responsibilities in this division included marketing, sales, service, human resources, finance, information technology, and order and asset management. Mr. Wiese holds a Bachelor of Science degree in finance and a Master of Business Administration degree in marketing from Oklahoma State University. He is also a 1994 graduate of the Cultural Transformation Program at the London School of Business. None of the foregoing nominees has any family relationship to any other nominee. There are no arrangements or understandings between any of the named individuals and any other person or persons pursuant to which any of the named individuals are to be elected as directors. BOARD MEETINGS AND COMMITTEES The Board of Directors of the Company held three meetings during the fiscal year ended October 31, 1999. All other action taken by the Board of Directors was consented to in writing by a memorandum of action in lieu of a meeting, to which all incumbent directors subscribed. Directors meet their responsibilities not only by attending Board 4 7 and committee meetings but also through communication with members of management on matters affecting the Company. Each director attended all of the meetings held by the Board during fiscal 1999. The Board of Directors has an Audit Committee and Compensation Committee, both of which were established in April 1987. There is no nominating committee or committee performing the functions of a nominating committee. The Audit Committee consists of directors Ron B. Barber, Jack R. Ingram Revocable Trust, and ~~Donald T. Duke. This Committee advises the Board with respect to the engagement~~ of ~~independent public accountants~~26,000 shares in her individual capacity.

(10) Reflects options which are presently exercisable and ~~reviews the results of the annual audit, the adequacy of the Company's internal accounting procedures,~~will expire (if not exercised) as follows: 180,000 on 8/1/2009; 200,000 on 8/1/2010; and any transactions between the Company and its officers, directors or entities controlled by them. The Audit Committee did not meet independently of meetings of the Board of Directors during fiscal 1999. The Compensation Committee consists of directors Ron B. Barber, Robert D. Hisrich and Donald T. Duke. This Committee advises the Board with respect to the election or appointment of executive officers and makes recommendations to the Board concerning compensation of executive officers and awards to executive officers and others under employee incentive plans. The Compensation Committee met once independently of meetings of the Board of Directors during the 1999 fiscal year. DIRECTOR COMPENSATION The Company compensates its directors who are not officers of the Company $250.00 per meeting attended. The Company has also granted stock options to all of its outside directors. Generally, these options are for 10,000 shares, with a vesting period of one year and an exercise period of ten years. No other compensation was paid to directors for their services as such during the Company's 1999 fiscal year. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE ELECTION OF ALL OF THE NOMINEES LISTED ABOVE AS DIRECTORS OF THE COMPANY. PROPOSAL NO. 2 AMENDMENT TO CERTIFICATE OF INCORPORATION TO CHANGE NAME OF COMPANY The Board of Directors has adopted a resolution proposing that the Company's Amended and Restated Certificate of Incorporation be amended to change the name of the Company from "XETA Corporation" to "XETA Technologies, Inc." The Company began using the name "XETA Technologies"200,000 on 8/1/2011. Mr. Wiese is shown as a trade name (i.e., "doing business as") on February 1, 2000. The Board believes that the new name better reflects the Company's vision as a premier voice and data integrator and at the same time successfully integrates the Company's recent acquisition5% beneficial owner solely by reason of U. S. Technologies Systems, Inc. Following is the text of Article I of the Amended and Restated Certificate of Incorporation, as proposed to be further amended: The name of the Corporation shall be "XETA Technologies, Inc." THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 2. PROPOSAL NO. 3 AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED COMMON SHARES AND TO CHANGE THE COMMON SHARES TO NO PAR VALUE The Board of Directors has adopted resolutions proposing an amendment to the Company's Amended and Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock from 10,000,000 to 20,000,000 and to change the par value of the Common Stock from $.05 per share to no par value. 5 8 Following is the text of the first paragraph of Article VI of the Amended and Restated Certificate of Incorporation, as proposed to be further amended: The total number of shares which the Corporation shall have authority to issue shall consist of 20,500,000 shares, 20,000,000 shares of which shall be classified as Common Shares, no par value per share, and 500,000 shares of which shall be classified as Preferred Shares, $.10 par value per share. Increase in Authorized Shares. The Board of Directors believes that it is in the Company's best interest to increase the number of shares of Common Stock that the Company is authorized to issue in order to provide additional flexibility to effect stock splits or stock dividends, and to issue common stock for other corporate purposes as the need may arise, such as the making of acquisitions through the use of stock, the adopting of additional employee benefit plans, or the raising of equity capital. As of January 31, 2000, 4,137,074 shares of Common Stock were issued andthese outstanding ~~(excluding 509,394 treasury shares), and 1,358,772 shares were reserved for issuance pursuant to~~ options, previously granted under the Company's employee stock option plan and pursuant to individual agreements with certain officers and outside directors. Other than as required under outstanding options or as permitted under the XETA Technologies 2000 Stock Option Plan if approved by the shareholders at the Annual Meeting (see Proposal 4 below), the Board of Directors has no immediate plans, agreements or commitments to issue additional shares of common stock. Authorized but unissued shares of the Company's Common Stock may be issued at such times, for such purposes and for such consideration as the Board of Directors may determine to be appropriate without further authority from the Company's shareholders, except as otherwise required by applicable corporate law or stock exchange policies. The Company's Amended and Restated Certificate of Incorporation does not provide for preemptive rights with respect to Common Stock. Thus, should the Board of Directors elect to issue additional shares of Common Stock, existing shareholders would not have any preferential rights to purchase such shares. Although the Board of Directors has no present intention of doing so, the Company's authorized but unissued Common Stock and Preferred Stock could be issued in one or more transactions which would make more difficult or costly, and less likely, a takeover of the Company. The proposed amendment to the Company's Amended and Restated Certificate of Incorporation is not being recommended in response to any specific effort of which the Company is aware to obtain control of the Company, nor is the Board of Directors currently proposing to shareholders any anti-takeover measures. If the Board of Directors elects to issue additional shares of Common Stockhas direct knowledge. Except for any purpose other than a stock split or stock dividend, such issuance could have a dilutive effect on earnings per share, voting power and holdings of current shareholders. The proposed amendment would not affect the authorized Preferred Stock. The Company's 500,000 authorized but unissued shares of Preferred Stock having a par value of $.10 per share may be issued with such rights, preferences, and limitations as the Board of Directors may determine from time to time. No shares of Preferred Stock are currently issued and outstanding. Change to No Par Value. As a general rule, corporations may designate shares of common stock to be either with or without par value. The par value of a share of common stock is simply an amount fixed as the nominal value of the shareholder's interest in such shares of stock. Historically, par value was intended to represent the sum of money or value of property or services which was to have been contributed to the corporation in exchange for each share of the corporation's common stock. Par value was also originally intended to represent the consideration for which such shares of stock would be initially issued and sold. Today, par value has very little significance except for certain technical financial statement presentation issues (under accounting rules) and certain technical procedural matters (under state corporate law) applicable to companies which designate a stated par value. A change in the par value of the Company's Common Stock from the current value of $.05 per share to no par value would have no effect on the dollar amount of the Company's Total Shareholder's Equity, and would have no material effect on the Company's balance sheet. The primary reason for proposing Common Stock with no par value is to allow the Board of Directors to declare a stock split without the necessity of making a corresponding adjustment to the par value of the Common Stock, which requires an amendment to the Company's Certificate of Incorporation and consequently, the approval of the Company's shareholders. While the Board of Directors has complete authority under state corporate law and under the Company's Certificate of Incorporation and Bylaws to declare a stock split without further approval of the shareholders, an adjustment to par value requires shareholder approval. With no par stock, the need to adjust par 6 9 value in conjunction with a stock split would be eliminated and the Board would have the ability to effect a stock split when it believes prudent to do so, without the necessity of, or delay associated with, obtaining shareholder approval. Although the Company contemplates that circumstances might warrant the declaration of a stock split in the future, the Company currently has no plans for the declaration of a stock split. The Board of Directors has adopted the proposed amendment changing the Company's Common Stock to no par value Common Stock so that it is positioned to act timely with regard to stock splits in the future. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 3. PROPOSAL NO. 4 STOCK OPTION PLAN PROPOSAL At the Annual Meeting, the shareholders will be asked to consider and approve the adoption of the XETA Technologies 2000 Stock Option Plan (the "2000 Plan"), which the Board of Directors approved and adopted on January 5, 2000. The 2000 Plan is the successor plan to the XETA Corporation Employee Stock Option Plan dated April 18, 1988 (the "1988 Plan") which expired on April 18, 1998. The Board's approval of the 2000 Plan followed a review and evaluation of the 1988 Plan by the Compensation Committee of the Board. As of January 31, 2000,these outstanding options, for the purchase of 166,072 shares were outstanding under the 1988 Plan, and options for the purchase of 1,192,700 shares, which were granted outside of the 1988 Plan, were outstanding. REASONS FOR ADOPTION OF THE 2000 PLAN One of the primary purposes of the 2000 Plan is to advance the interests of the Company and its shareholders by aiding the Company in attracting and retaining qualified personnel. Another important purpose of the 2000 Plan is to support the achievement of the Company's business objectives by providing stock-based incentives which focus participants in the Plan on the Company's long-term objectives and link the participants' interests with the interests of the Company's shareholders. The 2000 Plan is also designed to respond to applicable tax laws, accounting rules and securities regulations. DESCRIPTION OF THE 2000 PLAN The following is a summary of certain provisions of the 2000 Plan and is qualified in its entirety by reference to the complete text of the 2000 Plan set forth in Appendix A to this Proxy Statement. The 2000 Plan is administered by a committee (the "Committee") which is appointed by the Board of Directors from those of its members who are "non-employees" of the Company as defined in Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act"). The Compensation Committee of the Board will generally serve as the Committee unless its members do not meet these qualification requirements. The Committee will have authority to appoint a subcommittee whose members qualify as "outside directors" under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and the regulations thereunder to administer awards under the 2000 Plan to the extent required to meet the requirements of Section 162(m) of the Code and regulations thereunder. Subject to the provisions of the 2000 Plan, the Committee has full authority to determine the persons to be granted options under the Plan and the number and purchase price of the shares represented by each option, the time or times at which the options may be exercised, and the terms and provisions of each option, which need not be uniform for all options. Key employees of the Company or its subsidiaries, as determined by the Committee, and non-employee directors of the Company or its subsidiaries are eligible to receive awards under the 2000 Plan. The 2000 Plan authorizes the Committee to grant, over a ten-year period, options to purchase up to a maximum of 300,000 shares of the Company's Common Stock, subject to adjustment as described below. If any option expires or is terminated prior to its exercise in full and prior to the termination of the 2000 Plan, the shares subject to such unexercised option shall again be available for the grant of new options under the 2000 Plan. Further, any shares used as full or partial payment by an optionee upon exercise of an option may subsequently be used by the Company to satisfy 7 10 other options granted under the 2000 Plan, subject to limitations on the total number of shares authorized to be issued under the 2000 Plan. The 2000 Plan provides that the purchase price per share may not be less than 100% of the fair market value of the Common Stock at the time of grant. The purchase price is to be paid in cash or in Common Stock of the Company held for at least six (6) months and with a market value equivalent to that of the shares being acquired or, in the discretion of the Committee, any combination of these. The Committee may grant an option that provides for the grant of a replacement option (known as a "reload option") if all or any portion of the exercise price of the original option is paid by delivery of shares of Common Stock. The reload option will (i) cover the number of shares of Common Stock surrendered to pay the exercise price of the original option; (ii) have an exercise price equal to 100% of the fair market value of such Stock on the date the reload option is granted; (iii) become exercisable no sooner than six (6) months after the date of grant of the reload option; and (iv) have an expiration date identical to the expiration date of the original option. The term of each option will not be more than ten (10) years from the date of grant. Options granted under the 2000 Plan may be exercised only after the completion of one year of continued employment by or service as an outside director with the Company or one of its subsidiaries following the date the option is granted and, except as described in the next sentence, only during the continuance of the Participant's employment with the Company or one of its subsidiaries. The 2000 Plan permits an outstanding option to be exercised after termination of employment only to the extent that the option was exercisable on the date of termination but in no event beyond the original term of the option (i) by the estate or rightful heir(s) of the optionee if the optionee's employment is terminated due to the optionee's death; (ii) within one year after the date of such termination if the termination is due to the optionee's Disability (as defined in the 2000 Plan); or (iii) within three months after the date of such termination if the termination was due to the optionee's Retirement (as defined in the 2000 Plan) or was for reasons other than death or Disability and other than "for cause" (as defined in the 2000 Plan). Upon termination of an optionee's employment "for cause," any unexercised options held by the optionee will be forfeited. Unless otherwise prescribed by the Committee when an option is granted, all options outstanding at the time of a "Change in Control" of the Company as defined in Section 9 of the 2000 Plan will become fully exercisable. The number of shares subject to options and the option prices will be appropriately adjusted in the event of changes in the outstanding Common Stock by reason of stock dividends, recapitalizations, mergers, consolidations, spin-offs, stock splits and combinations of shares, and the like. The Board of Directors may at any time terminate or modify the 2000 Plan, except that without further approval of the shareholders the Board may not make any changes to the Plan which would materially increase the number of shares that may be issued under the Plan, materially modify the eligibility requirements for participation in the Plan, or require shareholder approval under the Oklahoma General Corporation Act, the Exchange Act, or the Code. Options granted under the Plan may be in the form of "incentive stock options" which qualify as such under Section 422 of the Code or non-qualified stock options which do not meet the criteria for incentive stock options under Section 422. The tax treatment of stock options qualifying as incentive stock options may be more favorable to employees than that afforded to non-qualified stock options. Options granted under the 2000 Plan are, generally, transferable only by will or by the laws of descent and distribution, and may be exercised during the lifetime of the optionee only by the optionee or by his legal representative in the event of his Disability. In its sole discretion, however, the Committee may permit an optionee to make certain transfers of non-qualified stock options, provided that the transfers are to "family members" and are not for value, as defined in the General Instructions to Form S-8 under the Securities Act of 1933, as amended. FEDERAL INCOME TAX CONSEQUENCES The following discussion of tax considerations relates only to U.S. federal individual income tax matters and is based upon current income tax laws, regulations and rulings. The discussion is general in nature and does not take into account a number of considerations which may apply in light of an optionee's particular circumstances. Generally, upon the exercise of an incentive stock option, the optionee will recognize no income for U.S. federal income tax purposes. The difference between the exercise price of the incentive stock option and the fair market value of the stock at the time of purchase is, however, an item of tax preference which may require payment of an alternative minimum tax. On the sale of shares acquired by exercise of an incentive stock option (assuming 8 11 that the sale does not occur within two (2) years of the date of grant of the option or within one (1) year from the date of exercise), any gain will be taxed to the optionee as long-term capital gain. In contrast, upon the exercise of a non-qualified option, the optionee recognizes taxable income (subject to withholding) in an amount equal to the difference between the fair market value of the shares on the date of exercise and the exercise price. Upon any sale of such shares by the optionee, any difference between the sale price and the fair market value of the shares on the date of exercise of the non-qualified option will be treated generally as capital gain or loss. Under rules applicable to U.S. corporations, no deduction is usually available to the employer corporation upon the grant or exercise of an incentive stock option (although a deduction may be available if the employee sells the shares so acquired before the applicable holding period expires). By contrast, upon the exercise of a non-qualified stock option, the employer corporation is entitled to a deduction in an amount equal to the income recognized by the employee, subject to certain limitations imposed by the Code in the case of highly compensated employees. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 4. PROPOSAL NO. 5 INDEPENDENT PUBLIC ACCOUNTANTS The Board of Directors has selected Arthur Andersen LLP as the independent public accountants to audit the Company's financial statements for the fiscal year ending October 31, 2000. Representatives of Arthur Andersen LLP are expected to be present at the Annual Meeting with the opportunity to make a statement if they desire to do so and to respond to appropriate questions. While ratification of the Company's selection of accountants by the Company's shareholders is not required, in the event of a negative vote on such ratification, the Company's Board of Directors will reconsider its selection. Arthur Andersen LLP audited the Company's financial statements for the year ended October 31, 1999. 9 12 EXECUTIVE OFFICERS The executive officers and significant employees of the Company, their ages, positions held with the Company and length of time in such positions are set forth below. There are no family relationships between or among any of the named individuals. There are no arrangements or understandings between any of the named individuals and any other person or persons pursuant to which any of the named individuals are to be elected as officers.
~~NAME AND AGE POSITIONS WITH COMPANY OFFICER SINCE ------------ ---------------------- -------------~~ Jack R. Ingram Chairman of the Board and Chief July, 1990 Age 56 Executive Officer Jon A. Wiese President August, 1999 Age 43 Robert B. Wagner Vice President of Finance, March, 1989 Age 38 Chief Financial Officer, Secretary, Treasurer and Director Donald E. Reigel Vice President of Hospitality Sales June, 1995 Age 45 Mark A. Martin Vice President of Commercial Sales December, 1999 Age 39 Tom Crofford Vice President of Engineering January, 1988 Age 48 Thomas A. Luce Vice President of Service June, 1986 Age 43 Charles R. Rowland Vice President of Manufacturing January, 1984 Age 58
Brief descriptions of the business experience of Messrs. Ingram, Wiese, Martin and Wagner are set forth under the section of this Proxy Statement entitled "Election of Directors." MR. REIGEL joined the Company in June 1993 as PBX Product Sales Manager. He was promoted to Vice President of Marketing and Sales in June 1995, and became Vice President of Hospitality Sales in December, 1999. Prior to his employment with the Company, Mr. Reigel served as a national accounts sales manager for WilTel Communications Systems for approximately a year and a half. He has been active in the development of major national accounts in the telecommunications industry since 1987. Mr. Reigel received his Bachelor of Science Degree in Business from the University of Colorado. MR. CROFFORD joined the Company in October 1982 as a design engineer and has been its Vice President of Engineering since January 1988. Mr. Crofford has worked in the field of computer engineering since 1977. He is a member of the Institute of Electrical and Electronics Engineers. MR. LUCE joined the Company in November 1982 as Installment Director. He was later promoted to Director of Installation and Service and became Vice President of Service in June 1986. MR. ROWLAND joined the Company in December 1982 as Production Manager and was promoted to Vice President of Manufacturing in January 1984. Mr. Rowland has 23 years electronic manufacturing experience, including production testing, assembly line layout and production control management. 10 13 EXECUTIVE COMPENSATION AND RELATED INFORMATION COMPENSATION COMMITTEE REPORT The Compensation Committee is the focal point for senior management and the Board of Directors to address corporate compensation issues. The Committee's primary responsibility is to make recommendations to the Board regarding remuneration of executive officers and to evaluate the design and competitiveness of the Company's compensation plans. The Compensation Committee consists of two outside directors and the Company's independent general counsel. Compensation Philosophy. The heart of the Company's compensation philosophy is the enhancement of shareholder value. Consequently, the interests of shareholders and the need to be competitive in recruiting and retaining quality leaders and to motivate management to improve shareholder value drive the design of executive compensation programs. A primary component of the Company's compensation philosophy is to structure compensation programs so that a high percentage of remuneration is "at risk". Near term annual cash compensation reflects corporate performance and larger long-term incentives are tied directly to share value. Executive Compensation Program. Compensation for executive officers is comprised of base salary, competitive employee benefits, annual incentive compensation opportunity, and long term incentive compensation in the form of stock options. Under the Company's incentive compensation program, the higher an executive's level of responsibility, the greater the portion of his compensation that will be dependent on performance. The Compensation Committee reviews executive compensation levels with respect to corporate and individual performance, as well as competitive pay practices. To assist in this analysis, the Committee retained the services of Villareal and Associates Incorporated, a compensation-consulting firm. As part of its services, Villareal and Associates has provided executive compensation survey information on similar companies. These surveys indicated the Company's executive compensation program to be conservative but still in line with similarly successful, high growth companies. Base salaries for the Company's executive officers are conservative in relation to industry norms and, according to compensation survey information, are as much as 50% below market. These base salaries have changed little over the past several years. The balance of each executive's cash compensation comes in the form of incentive bonuses that represent a small percentage of Company profitability. The CEO, President, and Vice Presidents of Service, Finance and Engineering all receive a varying percentage of corporate net income. The Vice President of Sales and Marketing receives one quarter per cent of net sales and service revenues and three per cent of the year-over-year growth in these revenues, exclusive of any from new acquisitions. As a result, from 34% to 85% of these executives' 1999 cash compensation was at risk. As a long-term incentive, the Company grants options to purchase shares of Common Stock to executive officers and other key employees. These stock options have been awarded in two ways under plans approved by the Board of Directors. The first is under the shareholder approved qualified stock option plan, and the second is through special stock grants of non-qualified options. Under each plan, the shares are exercisable for a maximum of ten years and at the market price on the date of grant. Additionally, most stock grants are subject to a vesting period. 1999 CEO Compensation. The compensation package for the CEO, Mr. Jack Ingram, is consistent in material aspects with the program of other executive officers. The structure of the package was put in place at the time Mr. Ingram joined the Company as CEO in July 1990. When Mr. Ingram assumed CEO responsibilities, the Company was unprofitable and in poor financial condition. His base salary was set at a conservative level in 1990 and has not changed since that time. The cash incentive component of his compensation consists of two parts. The first is a quarterly bonus of 50% of Company net profits up to a maximum dollar amount per quarter. The second is an annual bonus of a specified percentage of Company net after tax profits. In August 1999 when Mr. Jon Wiese joined the Company as President, the Board of Directors adopted Mr. Ingram's recommendation to split these two cash incentive components equally between him and Mr. Wiese. The Board adopted a similar resolution at Mr. Ingram's request in FY 1997 when his 11 14 annual bonus as a percentage of net profits was reduced in order to provide for net profit sharing among the Vice Presidents of Finance, Engineering and Service. At the time of his employment, Mr. Ingram was granted an option to purchase 200,000 shares (400,000 shares post-split) of Common Stock at a price slightly above the market price. The option was a special non-qualified grant approved by the Board of Directors with a 10-year exercise period. At this time these options are fully vested. All shares are exercisable and Mr. Ingram has exercised a portion of the shares to date, which he currently holds. He has purchased the balance of his stock holdings in the Company on the open market. Conclusion. The Compensation Committee believes the Company's executive compensation program has been consistent with the philosophy outlined in this report and has been effective in achieving its objectives during FY 1999. The Committee hereby submits this report for inclusion in the Form 10-K annual report. THE COMPENSATION COMMITTEE Ron B. Barber Donald T. Duke Robert D. Hisrich COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The members of the Compensation Committee are those named above in the Compensation Committee Report. There are no "interlocks" (as defined by the rules of the Securities and Exchange Commission) with respect to any member of the Compensation Committee of the Board of Directors. No member of this Committee was at any time during the 1999 fiscal year an officer or employee of the Company. Mr. Barber served as Senior Vice President of the Company from August 17, 1987 to March 1991, and is a shareholder in the law firm of Barber & Bartz, a Professional Corporation, which serves as outside general counsel to the Company. No other member of the Committee is a former officer or employee of the Company. 12 15 SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION The following table sets forth information concerning the compensation of the Company's Chief Executive Officer and the next four most highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION LONG TERM COMPENSATION ------------------- ---------------------- (a) (b) (c) (d) (e) (g) (i) NAME AND COMMON STOCK ALL PRINCIPAL UNDERLYING OTHER POSITION YEAR SALARY BONUS OTHER OPTIONS (#) (1) COMPENSATION (2) - ------------ ---- -------- -------- -------- ----------------- ---------------- Jack R. Ingram 1999 $ 90,000 $320,679 $510,000 (3) - $ 6,400 Chief Executive 1998 90,000 277,419 487,500 (3) - 6,400 Officer 1997 90,000 206,482 - - - Donald E. Reigel 1999 75,000 354,475 93,158 (4) - 6,400 Vice President of 1998 75,000 200,603 63,618 (4) 13,000 6,400 Marketing and Sales 1997 75,000 159,591 46,901 (4) - 6,257 Tom R. Crofford 1999 89,977 47,589 - - 4,883 Vice President of 1998 88,500 33,917 268,000 (3) 13,000 4,633 Engineering 1997 88,461 23,783 33,750 (3) - 3,396 Thomas A. Luce 1999 89,650 47,589 - - 4,246 Vice President of 1998 86,285 33,917 228,375 (3) 13,000 3,587 Service 1997 82,686 23,783 79,625 (3) - 3,172 Robert B. Wagner 1999 83,500 47,589 - - 4,708 Vice President of 1998 77,600 33,917 129,375 (3) 13,000 3,226 Finance and Chief 1997 73,787 23,783 - - 2,829 Financial Officer
- ----------------------------- (1) Amounts shown reflect the 2-for-1 stock split effected in August 1999. (2) Represents the Company's contributions to the employee's account under the Company's 401(k) plan. (3) Represents the dollar value of the difference between the price paid for shares of the Company's common stock upon exercise of stock options and the market value of such stock on the date of exercise. (4) Represents sales commissions paid. STOCK OPTIONS No individual stock or stock appreciation rights were granted during the 1999 fiscal year to persons named in the Summary Compensation Table. 13 16 OPTION EXERCISES AND HOLDINGS The following table sets forth certain information regarding stock options exercised during the 1999 fiscal year by persons named in the Summary Compensation Table and the number and value of unexercised options held by such persons as of the fiscal year-end. The Company has not granted stock appreciation rights. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
(a) (b) (c) (d) (e) NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS OPTIONS AT FY-END (#) AT FY-END ($)(2) ---------------------------- ------------------------- SHARES ACQUIRED VALUE REALIZED NAME ON EXERCISE (#) $)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ----------------- ---------------- -------------- ----------- ------------- ----------- ------------ Jack R. Ingram 30,000 $510,000 280,000 0 $5,442,500 0 Donald E. Reigel -- -- 79,334 8,666 1,542,055 168,445 Tom R. Crofford -- -- 4,334 8,666 84,242 168,445 Thomas A. Luce -- -- 44,334 8,666 861,742 168,445 Robert B. Wagner -- -- 39,334 8,666 764,555 168,445
------------------------------------ (1) Value is based upon the difference between the fair market value of the securities underlying the options on the date of exercise and the exercise price. (2) Based upon the difference between the fair market value of the securities underlying the options at fiscal year-end ($19.4375 per share) and the exercise price. EMPLOYMENT AGREEMENTS Except as described below with regard to Mr. Reigel, the Company has no ~~employment agreements~~other information or ~~severance agreements with~~knowledge regarding Mr. Wiese’s security holdings, if any, ~~of the officers named~~ in the Summary Compensation Table, and the Company may terminate their employment at any time at the discretion of the Board of Directors. The Company entered into a compensation agreement with Mr. Reigel dated June 12, 1995. The agreement provided for a base salary of $75,000 per year; a commission equal to 0.25% of the Company's monthly net sales and service revenues; and an annual bonus based upon a percentage of the Company's growth in sales revenues. Under the current terms of Mr. Reigel's compensation agreement, as amended, his base salary (commencing December 1, 1999) is $100,000 and his annual bonus (commencing February 1, 2000) is equal to 12.5% of the increase in the Company's annual net sales revenues and annual service revenues over those for the previous year. If Mr. Reigel is terminated by the Company without "cause" as defined in the agreement, Mr. Reigel will be entitled to receive the annual bonus prorated to the date of termination. The agreement also imposes certain non-solicitation restrictions upon Mr. Reigel. 14 ~~17 RELATED TRANSACTIONS Mr. Barber is a shareholder in the law firm of Barber & Bartz, a Professional Corporation, which serves as outside general counsel to the~~ Company. During the fiscal year ended October 31, 1999, the Company paid or accrued legal fees to Barber & Bartz in the approximate amount of $207,000. The Company retains Mr. Siegenthaler as an outside marketing consultant for a monthly retainer of $8,500. During the fiscal year ended October 31, 1999, the Company paid Mr. Siegenthaler $102,000 for such consulting services.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company during its most recent fiscal year and Forms 5 and amendments thereto furnished to the Company with respect to its most recent fiscal year and written representations made to the Company by its directors and officers and by certain beneficial owners of more than ten percent of its Common Stock, the Company knows of no director, officer, or beneficial owner of more than ten percent of the Company's Common Stock who has failed to file on a timely basis reports of beneficial ownership of the Company's Common Stock as required by

Section 16(a) of the Securities Exchange Act of 1934 ~~as amended. STOCK PERFORMANCE GRAPH~~ requires our directors and executive officers and persons who hold more than ten percent (10%) of our stock, to report their initial ownership and any subsequent changes in ownership of our stock to the SEC. SEC regulations impose specific deadlines for filing these reports and we are required to disclose in this proxy statement any failure to comply with these regulations. Based on our review of these filings and the written representations of our directors, executive officers and 10% shareholders, we believe that during fiscal 2008, our directors, executive officers and 10% stockholders complied with all Section 16(a) filing requirements, with these exceptions: Two reports on Form 4, each reporting a single transaction for Ed Keller, were filed one day late; and one Form 4 transaction by Ron Siegenthaler was reported late on Form 5.

SHAREHOLDER PROPOSALS FOR 2009

The ~~graph depicted below shows~~deadline for submitting a shareholder proposal intended to be included in the ~~Company's stock price as an index assuming $100 invested on~~Company’s proxy statement and form of proxy for next year’s annual meeting is November ~~1, 1994, along~~17, 2009. Such proposals must comply with the ~~composite prices~~provisions of ~~companies listed in the SIC Code (Telephone, Telegraph Apparatus) Index and the NASDAQ Market Index. [GRAPH GOES HERE]~~
- ------------------------------------------------------------------------------------------------------------------------ October 31 1994 1995 1996 1997 1998 1999 - ----------------------------- ------------- --------------- -------------- --------------- -------------- -------------- XETA Corporation 100.00 337.50 375.00 950.00 887.50 1943.75 - ----------------------------- ------------- --------------- -------------- --------------- -------------- -------------- SIC Code Index 100.00 129.80 182.61 242.29 214.89 433.75 - ----------------------------- ------------- --------------- -------------- --------------- -------------- -------------- NASDAQ Market Index 100.00 118.62 139.30 182.56 206.42 340.72 - ----------------------------- ------------- --------------- -------------- --------------- -------------- --------------
~~Notwithstanding anything to the contrary set forth in any~~Rule 14a-8 of the ~~Company's previous filings under the~~ Securities ~~Act of 1933 or the Securities~~and Exchange Act of 1934, ~~that might incorporate future filings made~~as amended. A shareholder who wishes to present a proposal for consideration at next year’s annual meeting outside of the Company’s proxy materials must give us notice of the proposal no later than November 17, 2009 as required by our bylaws. Such notice must include (1) a brief description of the proposal and the reasons for making the proposal; (2) the name and record address of the shareholder; (3) the class and number of shares beneficially owned by the ~~Company under those statutes,~~shareholder; (4) a representation that the ~~preceding Compensation Committee~~shareholder is a holder of record entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to present such business; and (5) a description of any arrangement or understanding in connection with such business between the shareholder and any other person(s) (identifying them by name), and any material interest of the shareholder in such business.

All shareholder proposals must be received by us on or before the deadline in order to be considered timely and should be delivered or mailed to our Corporate Secretary at the address shown in the next section below.

ANNUAL REPORT ON FORM 10-K

We are mailing our 2008 annual report to shareholders (which includes our Annual Report on Executive Compensation and the Stock Performance Graph will not be incorporated by reference into any of those prior filings, nor will such report or graph be incorporated by reference into any future filings made by the Company under those statutes. FINANCIAL INFORMATION - INCORPORATED BY REFERENCE A copy of the Company's 1999 Annual Report, which includes the Company's Form 10-K ~~containing all financial statements as well as Management's Discussion and Analysis of Financial Condition and Results of Operations (the "MD&A"), is being provided to~~for the ~~stockholders along~~fiscal year ended October 31, 2008) with this Proxy Statement. In regard to Proposal 4 regarding the authorization of additional shares of Common Stock and the change to Common Stock with no par value, the Financial Statements appearing on pages F-1 to F-18 of theOur Form 10-K ~~including~~for the ~~selected quarterly financial data contained~~year ended October 31, 2008 is also available on our website at www.xeta.com. In addition, any person solicited by this Proxy Statement is entitled to request in ~~the notes thereto, the MD&A appearing on pages 12 through 17~~writing a copy of the Form 10-K and we will provide it without charge. Such requests should be submitted to the ~~Quantitative Disclosures About Market Risk appearing on page 17~~Corporate Secretary addressed as follows:

ATTN: Corporate Secretary

XETA Technologies, Inc.

1814 W. Tacoma Street

Broken Arrow, Oklahoma 74012

SOLICITATION EXPENSES

The cost of soliciting proxies will be borne by the ~~Form 10-K, are incorporated herein by reference. 15~~ 18 SHAREHOLDER PROPOSALS Under regulations of the Securities and Exchange Commission, shareholders are entitled to submit proposals on matters appropriate for shareholder action at subsequent annual meetingsCompany. Employees of the Company ~~in accordance with those regulations. In order~~may solicit proxies personally or by telephone without additional compensation. Upon request, we will reimburse the reasonable costs incurred by brokers, banks, or other nominees for mailing proxy materials and annual shareholder ~~proposals for~~reports to the ~~Company's next annual meeting to be eligible for consideration for inclusion in~~beneficial owners of the ~~proxy statement and proxy relating to such meeting,~~shares they ~~must be received by the Company no later than October 2, 2000. Such proposals should be directed to XETA Corporation, 1814 West Tacoma, Broken Arrow, Oklahoma 74012, Attention: President.~~ hold of record.

OTHER MATTERS

As of the date of this Proxy Statement, the Board of Directors knows of no matter other than those described herein that will be presented for consideration at the Annual Meeting. However, should any other matters properly come before the Annual Meeting or any adjournment thereof, it is the intention of the persons named in the accompanying ~~Proxy~~proxy to vote in accordance with their best ~~judgment~~judgment.

	By Order of the Board of Directors

	/s/ Robert B. Wagner

	Robert B. Wagner
	Secretary

Broken Arrow, Oklahoma

February 27, 2009

c/o Computershare
2 N. LaSalle Street
Chicago, IL 60602

VOTE BY INTERNET

Have your proxy card available when you access the website www.investorvote.com/xeta
and follow the simple instructions to record your vote.

VOTE BY MAIL

Please mark, sign and date your proxy card and return it in the interest of the Company. By Order of the Board of Directors Robert B. Wagner Secretary Broken Arrow, Oklahoma March 6, 2000 16 19 Appendix "A" XETA CORPORATION 2000 STOCK OPTION PLAN 1. PURPOSE. The purpose of the XETA Corporation 2000 Stock Option Plan (the "Plan"), is to promote the interests of XETA Corporation (the "Company")postage-paid envelope

provided or return it to: Proxy Services, c/o Computershare Investor Services, P.O. Box 43126, Providence, RI 02940.

Vote 24 hours a day, 7 days a week.
If you vote by ~~aiding the Company in attracting and retaining competent key employees and directors~~internet, do not mail your proxy card.

If voting by means of providing such persons with an opportunity to acquire or increase their proprietary interest in the Company, and by affording an incentive to selected key employees and directors to use their best efforts to assist the Company in achieving long-term corporate objectives. It is intended that certain options granted hereunder will qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended and that other options granted hereunder will not be incentive stock options but instead will be nonqualified stock options. 2. DEFINITIONS. Whenever used herein, the following terms shall have the meanings set forth below: (a) "Board" means the Board of Directors of the Company. (b) "Code" means the Internal Revenue Code of 1986, as amended. (c) "Committee" means a committee designated by the Board, which shall consist of two or more "non-employee directors" as defined in Rule 16b-3 under the Securities Exchange Act of 1934 as amended (the "1934 Act") or any successor Rule. The Compensation Committee of the Board may serve as the Committee, provided that it meets these requirements. In the event the Committee shall no longer meet the qualification requirements set forth above, the Board of Directors of the Company shall appoint a new committee to administer the Plan, whose members shall cause the committee to qualify under the transaction approval requirements of Rule 16b-3. The Committee shall have the authority to appoint a subcommittee whose members qualify as "outside" directors under Section 162(m) of the Code and the regulations thereunder, to administer awards under the Plan to the extent required to meet the requirements of Section 162(m) of the Code and the regulations thereunder. (d) "Company" means XETA Corporation. (e) "Disability" means a "permanent and total disability" which enables the Participant to be eligible for and receive a disability benefit under the Federal Social Security Act. (f) "Fair Market Value" means the closing price of the Stock as reported on the NASDAQ stock market for the applicable date, or if there were no sales on such date, on the last day preceding the applicable date on which there were sales. 20 (g) "Incentive Stock Option" means an Option granted under the Plan which constitutes and shall be treated as an "incentive stock option" as defined in Section 422 of the Code. (h) "Option" means a right or rights to purchase shares of Stock described in Section 6. (i) "Option Agreement" means the agreement between the Company and a Participant evidencing the grant of an Option and containing the terms and conditions, not inconsistent with the Plan, that are applicable to such Option. (j) "Participant" means an individual to whom an Option is granted. (k) "Plan" means the XETA Corporation 2000 Stock Option Plan, as amended from time to time. (l) "Retirement" means the voluntary termination of a Participant's employment with the Company or a Subsidiary after twenty (20) years of continuous service or after age 59 1/2. (m) "Stock" means the Common Stock of the Company. (n) "Subsidiary" means a subsidiary of the Company or an unincorporated organization controlled, directly or indirectly, by the Company. 3. ADMINISTRATION. The Plan shall be administered by the Committee, which shall act by vote or written consent of a majority of its members. The Committee shall have full power and authority to construe, interpret, and administer the Plan and may from time to time prescribe, amend and rescind rules and regulations for carrying outmail, this Plan as it may deem proper and in the best interests of the Company. Subject to the terms, provisions, and conditions of the Plan, the Committee shall have exclusive jurisdiction to (i) select the individuals to whom Options will be granted, (ii) determine the number of shares subject to each Option and the time or times when Options will be granted, (iii) determine the price of the shares subject to each Option, (iv) to determine the time when each Option may be exercised, (v) fix such other provisions of the Option Agreement as the Committee may deem necessary or desirable consistent with the terms of the Plan, and (vi) determine all other questions relating to the administration of the Plan. The interpretation of any provisions of the Plan by the Committee shall be final, conclusive, and binding upon all persons. Subject to compliance with applicable legal requirements, the full Board may exercise any of the authority conferred upon the Committee hereunder. In the event of any such exercise of authority by the Board, references in the Plan to the Committee shall be deemed to refer to the Board. 4. SHARES SUBJECT TO THE PLAN. (a) The total number of shares of Stock authorized to be issued under the Plan shall be 300,000, subject to adjustment in accordance with the provisions of Section 8. 2 21 (b) The shares to be delivered upon exercise of an Option shall be made available, at the discretion of the Board, from the authorized, unissued shares of the Company's Stock or from shares of Stock reacquired by the Company, including shares purchased in the open market. (c) In the event that any Option granted under the Plan expires, terminates, ceases to be exercisable or is surrendered without having been exercised in full, the shares subject to, but not delivered under, such Option shall again become available for issuance under the Plan unless the Plan has been terminated. If any Option is exercised by tendering shares of Stock, either actually or by attestation, to the Company as full or partial payment in connection with the exercise of an Option under this Plan, the shares of Stock so tendered may be used by the Company to satisfy any other Option under the Plan, provided that in no event may the number of shares of Stock issued under the Plan, net of the shares so tendered, exceed the total number of shares authorized to be issued under the Plan. (d) Shares of Stock issued under the Plan through the settlement, assumption or substitution of outstanding awards or through obligations to grant future awards as a condition of the Company acquiring another entity shall not reduce the maximum number of shares available for delivery under the Plan. (e) More than one Option may be granted to a Participant pursuant to the Plan. 5. ELIGIBILITY. Key employees of the Company and any of its Subsidiaries, including officers and directors who are salaried employees, and outside directors of the Company and any of its Subsidiaries, shall be eligible to receive Options. Key employees and directors to whom Options may be granted will be those selected by the Committee from time to time who, in the sole discretion of the Committee, have contributed in the past or who may be expected to contribute materially in the future to the successful performance of the Company or its Subsidiaries. 6. OPTION TERMS AND CONDITIONS. Each Option granted under the Plan shall be evidenced by an Option Agreement which shall contain such terms and conditions (which need not be uniform for all Participants) consistent with the Plan as the Committee shall determine; provided, however, that each Option shall satisfy the following requirements: (a) Exercise Price. The price at which shares of Stock may be purchased under an Option (the "Exercise Price") shall be specified in the Option Agreement and shall not be less than Fair Market Value of such shares on the date the Option is granted, subject, however, to the provisions of Section 8 hereof and further provided that in no event shall the Exercise Price be less than the par value of the Stock. (b) Exercise of Options. (i) The period during which an Option may be exercised shall not exceed ten (10) years from the date the Option is granted; provided, however, 3 22 that the Option may be sooner terminated in accordance with the provisions of Subsection (d) below. (ii) An Option may be exercised only after one year of continued employment by or service as an outside director with the Company or one of its Subsidiaries immediately following the date the Option is granted and, except as provided in Subsection (d) below, only during the continuance of the Participant's employment with the Company or one of its Subsidiaries. Subject to the foregoing limitations and the terms and conditions of the Option Agreement, each Option shall be exercisable in whole or in part in installments, at such time or times as the Committee may prescribe in the Option Agreement. (c) Payment. Full payment of the Exercise Price shall be made at the time of exercising the Option in whole or in part. The Exercise Price shall be payable (i) in cash or by an equivalent means acceptable to the Committee, (ii) by delivery (actually or by attestation) to the Company of shares of Stock owned by the Participant having a Fair Market Value on the date of exercise of the Option equal to the Exercise Price for the shares being purchased; except that any portion of the Exercise Price representing a fraction of a share shall in any event be paid in cash and no shares of the Stock which have been held by the Participant for less than six (6) months may be delivered in payment of the Exercise Price, or (iii) in the discretion of the Committee, by any combination of the above. The Committee may grant an Option that provides for the grant of a replacement Option if all or any portion of the Exercise Price of the original Option is paid by delivery of shares of Stock. The replacement Option shall (i) cover the number of shares of Stock surrendered to pay the Exercise Price of the original Option; (ii) have an Exercise Price equal to 100% of the Fair Market Value of such Stock on the date the replacement Option is granted; (iii) become exercisable no sooner than six (6) months after the date of grant of the replacement Option; and (iv) have an expiration date identical to the expiration date of the original Option. No certificates for shares purchased upon exercise of an Option shall be issued until full payment therefore has been made, and a Participant shall have none of the rights of a shareholder until such certificates are issued to him or her. (d) Termination of Employment. (i) Death. If a Participant's employment is terminated by death, the Option may be exercised by the Participant's estate or by the person or persons to whom the Participant's rights pass by will or by the laws of descent and distribution, subject to the same conditions upon exercise to which the Participant was subject prior to death. All Options which were not exercisable as of the date of death shall expire as of such date. (ii) Disability. If a Participant's employment with the Company or a Subsidiary is terminated by Disability, any Options held by the Participant may be exercised in accordance with and subject to the same conditions upon 4 ~~23 exercise to which the Participant was subject prior to such Disability; provided, however, that the Option~~proxy card must be exercised prior to the expiration date of the Option or within one year after the date of Disability, whichever is earlier. All Options which were not exercisable as of the date of Disability shall expire as of such date. (iii) Retirement. If a Participant's employment with the Company or a Subsidiary is terminated by reason of Retirement, any Options held by the Participant may be exercised in accordance withsigned and subject to the same conditions upon exercise to which the Options were subject prior to the Participant's Retirement; provided, however, that the Options must be exercised prior to the expiration date of the Options or within three (3) months after the date of Participant's Retirement, whichever is earlier. All Options which were not exercisable as of the date of Retirement shall expire as of such date. (iv) Other Termination. If a Participant's employment with the Company or a Subsidiary is terminated for any reason other than for death or Disabilitydated below.
Please fold and other than "for cause" as defined in subparagraph (v) below, any Options held by the Participant may be exercised in accordance with and subject to the same conditions upon exercise to which the Options were subject prior to the Participant's termination of employment; provided, however, that the Options must be exercised prior to the expiration date of the Options or within three (3) months after the date of such termination of employment, whichever is earlier. All Options which were not exercisable as of the date of such termination shall expire as of such date. In the case of a director who is not an employee of the Company or a Subsidiary, termination of employment shall mean the voluntary or involuntary cessation of Board service for any reason. (v) Termination For Cause. Notwithstanding any other provision in the Plan to the contrary, if the Participant's employment with the Company or a Subsidiary is terminated "for cause" (as defined below), any unexercised Options held by the Participant shall immediately be forfeited. Termination "for cause" shall mean termination by the Company because of: (x) the Participant's willful and continued failure to substantially perform his duties (other than any such failure resulting from the Participant's incapacity due to physical or mental impairment); (y) the willful conduct of the Participant which is demonstrably and materially injurious to the Company or a Subsidiary, monetarily or otherwise, or (z) the conviction of the Participant for a felony by a court of competent jurisdiction. (e) Special Incentive Stock Option Conditions. Notwithstanding anything in the Plan to the contrary, the following special conditions shall apply to Incentive Stock Options granted under the Plan: 5 ~~24 (i) if an Incentive Stock Option is granted to a Participant who,~~detach card at the time such Option is granted, owns stock that has more than 10 percent of the voting power of all classes of stock of the Company or of any Subsidiary, then (x) the Exercise Price of the Incentive Stock Option granted shall be not less than 110% of the Fair Market Value on the date of grant; and (y) the Incentive Stock Option shall not be exercisable after the expiration of five (5) years from the date such Option is granted; and (ii) Incentive Stock Options shall not be granted to any Participant, the effect of which would be to permit such Participant to first exercise options, in any calendar year, for the purchase of shares having a Fair Market Value, determined at the time the Option is granted, in excess of $100,000. Any Option purporting to constitute an Incentive Stock Option in excess of such limitation shall, to the extent of such excess, constitute a nonqualified stock option. (f) Other Terms and Conditions. Any Option granted hereunder shall contain such other and additional terms, not inconsistent with the terms of the Plan, which are deemed necessary or desirable by the Committee. Options may be granted that are subject to different terms, conditions and restrictions than other Options granted. Except as otherwise expressly provided in the Plan, the Committee may designate an Option, at the time of its grant, as an Incentive Stock Option or as a nonqualified stock option; provided, however, that an Option may be designated as an Incentive Stock Option only if the applicable Participant is an employee of the Company or a Subsidiary on the date of grant. 7. TRANSFERABILITY OF OPTIONS. An Option shall not be transferable except by will or the laws of descent and distribution upon the death of the Participant. Options shall be exercisable during the Participant's lifetime only by the Participant, or, in the event of the Participant's Disability, by his legal representative. Notwithstanding the foregoing, the Committee may, in its sole discretion, permit a Participant to transfer a non-qualified Option, to a "family member" as defined in the General Instructions to Form S-8 adopted by the Securities Exchange Commission under the Securities Act of 1933, as amended, provided that such transfer is not made for value as set forth in the General Instructions to Form S-8. Any such Option so transferred to the aforementioned persons shall be subject to the provisions of Section 6 concerning the exercisability during the Participant's employment or service as an outside director of the Company or any of its Subsidiaries. 8. CHANGES IN CAPITAL ADJUSTMENTS AFFECTING STOCK. In the event that there is any change in the capital structure of the Company through merger, consolidation, reorganization, recapitalization, spin-off or otherwise, or if there shall be any dividend on the Company's Stock, payable in such Stock, of if there shall be a Stock split or a combination of shares, then the number of shares reserved for Options (both in the aggregate and with respect to each Participant), and the number of shares subject to outstanding Options and the price per share of each such Option, shall be proportionately adjusted by the Committee as it deems 6 25 equitable, in its absolute discretion, to prevent dilution or enlargement of the rights of a Participant. The issuance of Stock for consideration and the issuance of Stock rights shall not be considered a change in the Company's capital structure. No adjustment provided for in this Section 8 shall require the issuance of any fractional share. To the extent deemed advisable by the Committee, the adjustments made to the Options will not (i) result in a modification to the incentive stock options as defined in Section 424 or other subsequent relevant Internal Revenue Code Sections and Treasury Regulations; or (ii) result in an earnings charge to the Company under generally accepted accounting principles. 9. CHANGE IN CONTROL. Unless the Committee shall otherwise expressly provide in the Option Agreement, upon the occurrence of a Change in Control of the Company (as defined herein), all Options then outstanding under the Plan shall become immediately fully exercisable by the Participant. A "Change in Control" shall be deemed to have occurred if: (a) Any person becomes the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of the Company representing 25 percent or more of the combined voting power of the Company's then outstanding common stock, unless through a transaction arranged by, or consummated with the prior approval of the Board; (b) During any period of two consecutive years, there shall cease to be a majority of the Board comprised as follows: individuals who at the beginning of such period constituted the Board and any new director(s) whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved; (c) The shareholders of the Company approve a merger or consolidation which would result in 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) less than fifty percent of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; (d) The shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of its assets; or (e) Two-thirds (2/3rd) of the Board deems any other event to constitute a change in control of the Company for purposes of this provision, or if, notwithstanding the occurrence of an event as described in subsections (a) through (d) of this Section 9, two-thirds (2/3rd) of the Board deems such event not to constitute a change in control for purposes of this provision. 7 26 10. AMENDMENT OR TERMINATION. The Board of Directors of the Company shall have the right, at any time, to amend or terminate the Plan in any respect which it may deem to be in the best interests of the Company; provided, however, no amendment to the Plan shall be made without the approval of the Company's shareholders if such amendment would: (i) materially increase the benefits accruing to Participants under the Plan; (ii) materially increase the number of securities that may be issued under the Plan; (iii) materially modify the requirements as to eligibility for participation in the Plan; or (iv) otherwise require shareholder approval under the Oklahoma General Corporation Act, Rule 16b-3 of the Securities Exchange Act of 1934, as amended from time to time, or Section 162(m) of the Code. 11. EFFECTIVE DATE AND APPROVAL. The Plan shall take effect upon its adoption by the Company's Board of Directors. The Plan shall be submitted to the Company's shareholders for approval at the annual meeting in 2000 or at any special meeting held within twelve (12) months after the Plan is adopted by the Board. Options may be granted under the Plan prior to, but conditional upon, shareholder approval. 12. DURATION OF PLAN. The Plan shall remain in effect for a period of ten (10) years from the date of its adoption by the Board, unless sooner terminated in accordance with Section 10. 13. MISCELLANEOUS. (a) The Plan and all Options granted pursuant to it are subject to all applicable laws, rules and regulations, including without limitation Federal Securities laws and tax laws. Notwithstanding any provisions of the Plan or any Option Agreement, the Participant shall not be entitled to exercise an Option nor shall the Company be obligated to issue any shares to a Participant if such exercise or issuance would constitute a violation of any provision of any such laws, rules or regulation. (b) The Committee may require each Participant acquiring Stock pursuant to the exercise of an Option to represent to and agree with the Company in writing that such Participant is acquiring the shares without a view to distribution thereof. No shares of Stock shall be issued pursuant to an Option until all applicable securities laws and other legal or regulatory requirements have been satisfied. The Committee may require the placing of stop-orders and restrictive legends on certificates for Stock, as it deems appropriate. (c) The proceeds received by the Company from the sale of Shares pursuant to Options may be used for general corporate purposes. (d) The Company may, as a condition to issuing Stock upon exercise of an Option, require the payment (through withholding from the Participant's salary or payment of cash by the Participant) of any federal, state or local taxes required by law to be withheld with respect to such. 8 27 (e) The adoption of the Plan does not preclude the adoption by appropriate means of any other incentive plan for employees and nothing herein shall be construed to limit the Company's right to grant options outside of the Plan for any proper and lawful purpose. (f) The fact that an employee has been granted an Option under the Plan shall not in any way affect or qualify the right of the employer to terminate the employee's employment at any time. (g) Members of the Committee shall be entitled to indemnification as directors of the Company, and to any limitation of liability and reimbursement as directors with respect to their services as members of the Committee. (h) The Participant is required to notify the Company of a disqualifying disposition of Company stock acquired through the exercise of incentive stock options as defined in Section 422 or other subsequent relevant Internal Revenue Code Sections and Treasury Regulations. 9 28 Appendix "B" XETA CORPORATION PROXY FOR ANNUAL MEETING OF SHAREHOLDERS APRIL 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS perforation before mailing.

XETA TECHNOLOGIES, INC.

This proxy is solicited on behalf of the Board of Directors for the
Annual Meeting of Shareholders to be held on Tuesday, April 7, 2009.

The undersigned hereby appoints ~~Jack R. Ingram~~Donald T. Duke and ~~Jon A. Wiese,~~Robert B. Wagner, or either of them, as proxies and attorneys for the undersigned (with full power to act alone and to designate substitutions), hereby revoking any prior Proxy, and hereby authorizes them to represent the undersigned and to vote as designated ~~below,~~on the reverse side, all the shares of Common Stock of ~~Common Stock of~~ XETA ~~Corporation~~Technologies, Inc. held of record by the undersigned on February ~~14, 2000~~24, 2009 at the Annual Meeting of Shareholders to be held on April ~~11, 2000,~~7, 2009, or any adjournment or postponement thereof.

~~1. ELECTION OF DIRECTORS: [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY~~

	Dated:		2009



	Signature


	Signature (if held jointly)
	NOTE: Signature(s) should follow exactly as name appears on your stock certificate. In case of joint ownership, each owner should sign. Executors, administrators, guardians, trustees, etc., should add their title as such and where more than one executor, etc. is named, a majority must sign. If signer is a corporation, please sign full corporate name by duly authorized officer.

~~RON B. BARBER, DONALD T. DUKE, ROBERT D. HISRICH, JACK R. INGRAM, MARK A. MARTIN, RONALD L. SIEGENTHALER, ROBERT B. WAGNER~~
PLEASE DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED ENVELOPE.

YOUR VOTE IS IMPORTANT
If you do not vote by internet, please sign and ~~JON A. WIESE (INSTRUCTION: To withhold authority~~date this proxy card and return it promptly in the enclosed postage-paid envelope, or otherwise to: Proxy Services, c/o Computershare Investor Services, P.O. Box 43126, Providence, RI 02940, so your shares will be represented at the Annual Meeting. If you vote by internet, it is not necessary to vote for any individual nominee, write that nominee's name on the space provided below.) - -------------------------------------------------------------------------------- 2. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE THE COMPANY'S NAME TO "XETA TECHNOLOGIES, INC." [ ] For [ ] Against [ ] Abstain 3. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK TO 20,000,000 AND TO CHANGE THE PAR VALUE OF THE COMMON STOCK TO NO PAR VALUE. [ ] For [ ] Against [ ] Abstain 4. PROPOSAL TO APPROVE THE ADOPTION OF THE XETA TECHNOLOGIES 2000 STOCK OPTION PLAN. [ ] For [ ] Against [ ] Abstain 5. PROPOSAL TO RATIFY THE SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE COMPANY FOR THE 2000 FISCAL YEAR. [ ] For [ ] Against [ ] Abstain 6. IN THEIR DISCRETION ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING. return this proxy card.
Please fold and detach card at perforation before mailing.
XETA TECHNOLOGIES, INC.
PROXY
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 five foregoing proposals. - --------------------------------- --------------------------------- (Signature) (Print Name) - --------------------------------- --------------------------------- (Signature) (Print Name) NOTE: Signature(s) should follow exactly as your name appears on your stock certificate. In case of joint ownership each owner should sign. Executors, administrators, guardians, trustees, etc. should add their title as such and where more than one executor, etc. is named, a majority must sign. If the signer is a corporation, please sign full corporate name by a duly authorized officer. Dated: ___________________________, 2000.

2.	APPROVAL OF STOCK OPTION EXCHANGE PROGRAM – The Board of Directors recommends a vote FOR this
	proposal.

3.	RATIFICATION OF ACCOUNTANTS – The Board of Directors recommends a vote FOR this proposal.

	To ratify the selection of HoganTaylor, LLP as the Company’s independent certified public accountants for the 2009 fiscal year.