UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.)

Filed by the Registrantx                            Filed by a Party other than the Registrant¨

Check the appropriate box:

RADIANT SYSTEMS, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

August 22, 2008April 24, 2009

Dear Shareholder:

This year’s annual meeting of shareholders of Radiant Systems, Inc. will be holding a special meeting of shareholdersheld on Wednesday, October 1, 2008June 3, 2009 at 10:00 a.m., local time, at Radiant’s headquarters located at 3925 Brookside Parkway, Alpharetta, Georgia 30022. You are cordially invited to attend.

The notice of specialannual meeting and a proxy statement, which describe the formal business to be conducted at the specialannual meeting, follow this letter.

Whether or not you attend the specialannual meeting, it is important that your shares be represented and voted at the specialannual meeting. Therefore, I urge you to promptly vote and submit your proxy by phone, via the Internet or by signing, dating and returning the enclosed proxy card. If you decide to attend the specialannual meeting, you will be able to vote in person even if you have previously submitted your proxy. Regardless of the number of shares you own, your careful consideration of, and vote on, the matters before our shareholders are important.

We look forward to seeing you at the specialannual meeting.

Very truly yours,

John Heyman

Chief Executive Officer

RADIANT SYSTEMS, INC.

3925 Brookside Parkway

Alpharetta, Georgia 30022

NOTICE OF SPECIALANNUAL MEETING OF SHAREHOLDERS

TO BE HELD OCTOBER 1, 2008JUNE 3, 2009

The specialannual meeting of shareholders of Radiant Systems, Inc. will be held on Wednesday, October 1, 2008June 3, 2009 at 10:00 a.m., local time, at our headquarters located at 3925 Brookside Parkway, Alpharetta, Georgia 30022, for the following purposes:

Only shareholders of record at the close of business on August 12, 2008April 14, 2009 will be entitled to notice of, and to vote at, the specialannual meeting or any adjournments or postponements of the specialannual meeting.

Shareholders are cordially invited to attend the specialannual meeting of shareholders. Whether or not you expect to attend the meeting in person, we urge you to vote your shares via the toll-free number or over the Internet. If you received a copy of the proxy by mail, you may sign, date and return the proxy in the envelope provided. If you attend the specialannual meeting, you may, if you wish, withdraw your proxy and vote in person.

By Order of the Board of Directors,

John Heyman

Chief Executive Officer

Alpharetta, Georgia

August 22, 2008April 24, 2009

PLEASE COMPLETE THE PROXY PROMPTLY SO THAT YOUR VOTE MAY BE RECORDED AT THE MEETING IF YOU DO NOT ATTEND PERSONALLY.

RADIANT SYSTEMS, INC.

3925 Brookside Parkway

Alpharetta, Georgia 30022

SPECIALANNUAL MEETING OF SHAREHOLDERS

TO BE HELD

OCTOBER 1, 2008JUNE 3, 2009

PROXY STATEMENT

Unless the context indicates otherwise, all references in this proxy statement to “we,” “us” and “our” refer to Radiant Systems, Inc. and its subsidiaries.

This proxy statement is furnished in connection with the solicitation of proxies by the board of directors of Radiant Systems, Inc. for its specialannual meeting of shareholders to be held on October 1, 2008,June 3, 2009, and any adjournments or postponements of such specialannual meeting, at the time and place and for the purposes set forth in the preceding notice of the specialannual meeting. The expense of this solicitation will be paid by us. In addition, our officers and regular employees, at no additional cost, may assist in soliciting proxies by telephone. In accordance with rules and regulations recently adopted by the Securities and Exchange Commission, instead of mailing a printed copy of our proxy materials to each shareholder of record, we are now furnishing proxy materials to our shareholders on the Internet. If you have received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials other than as described below. Instead, the Notice of Internet Availability of Proxy Materials will instruct you as to how you may access and review all of the important information contained in the proxy materials. If you received a Notice of Internet Availability of Proxy Materials by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice of Internet Availability of Proxy Materials. The Notice of Internet Availability of Proxy Materials is first being sent to shareholders on or about August 22, 2008.April 24, 2009. The proxy statement and the accompanying proxy are first being made available to shareholders on or about August 22, 2008.April 24, 2009. The address of our principal executive offices is 3925 Brookside Parkway, Alpharetta, Georgia 30022.

Our board of directors has designated Alon Goren and John H. Heyman, and each or either of them, as proxies to vote the shares of our common stock solicited on behalf of our board of directors. Any proxy given pursuant to this solicitation may be revoked by any shareholder who attends the specialannual meeting and gives oral notice of his election to vote in person, without compliance with any other formalities. In addition, any proxy given pursuant to this solicitation may be revoked prior to the specialannual meeting by delivering to our Corporate Secretary an instrument revoking it or a duly executed proxy for the same shares bearing a later date. Proxies that are returned properly executed and not revoked will be voted in accordance with the shareholder’s directions specified in such proxy. If no instructions are given, proxies will be voted for the amendment toelection of the Class I directors nominated by our Amended and Restated 2005 Long-Term Incentive Plan.board of directors. Abstentions and broker non-votes will not be counted as votes either in favor of or against the matter with respect to which the abstention or broker non-vote relates, but will be counted as present for the purpose of determining the presence of a quorum for the transaction of business. If a quorum is present, under applicable state law and our bylaws, abstentions and broker non-votes will have no effect on the outcome of the voting for any matters described in this proxy statement. A majority of our outstanding shares of common stock will constitute a quorum for the transaction of business at the specialannual meeting.

The record of shareholders entitled to notice of, and to vote at, the specialannual meeting was taken on August 12, 2008.April 14, 2009. On that date, we had outstanding and entitled to vote 32,383,54532,911,604 shares of common stock. Each outstanding share of common stock entitled to vote is entitled to one vote upon each matter submitted to a vote at any meeting of shareholders. The amendment to our Amended and Restated 2005 Long-Term Incentive Plan willAll elections shall be approved ifdetermined by a quorum exists and a majorityplurality of the total votes cast on the proposal are voted in favor of it.cast.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of our common stock as of August 12, 2008April 14, 2009 by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, each of our directors, each of our director nominees, each of our named executive officers, and all of our directors and executive officers as a group.

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PROPOSAL

APPROVALELECTION OF AMENDMENT TO AMENDED AND RESTATED 2005 LONG-TERM INCENTIVE PLANDIRECTORS

On July 14, 2008, ourOur board of directors adopted, subject to shareholder approval, an amendment toconsists of seven directors, divided into three classes, with the members of each class serving for staggered three-year terms. The terms of the two Class I directors, William A. Clement, Jr. and Alon Goren, will expire at the annual meeting, and each of these directors has been nominated for reelection for a term expiring at our Amended and Restated 2005 Long-Term Incentive Plan, referred to in this proxy statement as the 2005 Plan, to increase to 4,500,000 the number2012 annual meeting of shares of our common stock that may be issued under the 2005 Plan. The amendment to the 2005 Plan will become effective upon shareholder approval.shareholders.Our board of directors recommends that you vote “for” the amendment to the 2005 Plan attached hereto as Appendix A.election of these nominees.

AmendmentEach of the nominees has consented to being named in this proxy statement and Restatementto serve as one of 2005 Plan

On July 14, 2008,our directors if elected. In the event that any director nominee withdraws or for any reason is not able to serve as a director, the proxy will be voted for such other person as may be designated by our board of directors, adopted amendmentsbut in no event will the proxy be voted for more than two nominees. The affirmative vote of a plurality of all votes cast at the meeting is required for the election of the two director nominees standing for election. We have no reason to and restated the 2005 Plan. believe that any director nominee will not serve if elected.

The following amendments were approved and became effective upon board of director approval:

Types of Awards Under the 2005 Plan

The 2005 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, performance units and phantom stock.

Shares Subject to the 2005 Plan

The 2005 Plan currently provides that the maximum number of shares of our common stock available for awards is 2,500,000. The maximum number of shares of common stock with respect to which stock options and stock appreciation rights may be granted in any calendar year to any participant under the 2005 Plan is 250,000. Pursuant to section 9.2 of the 2005 Plan, our board of directors recommends thatas Class I directors to succeed themselves for a term of three years, expiring at the number2012 annual meeting of shares that may be issued be increased from 2,500,000 to 4,500,000. The proposed increase in the number of authorized shares would ensure uninterrupted continuationshareholders, and until their successors are elected and qualified:

William A. Clement, Jr., age 66, was elected President and CEO of the 2005 Plan. On August 1,Atlanta Life Financial Group, Inc. in June 2008. Founded in 1905, Atlanta Life Financial Group, Inc. is a privately-held financial services company. Mr. Clement served as the Chairman and CEO of DOBBS, RAM & Company from 1988 to 2008, and now serves as its non-Executive Chairman of the closing priceBoard of Directors. Appointed by President Carter, Mr. Clement served as the Associate Administrator of the U.S. Small Business Administration in Washington, D.C. during the Carter Administration. Mr. Clement has served as the Vice President and Senior Loan Officer of the Citizens Trust Bank, Atlanta, Georgia. Mr. Clement received his BA from Morehouse College and his MBA from the Wharton Business School at the University of Pennsylvania. Mr. Clement has served as one of our common stock was $9.08 per share.

Administrationdirectors since April 2005. He is a board member of TRX, Inc. and a former board member of the 2005 PlanNational Cooperative Bank, Washington, D.C.

The 2005 Plan is administered by the compensation committeeAlon Goren, age 43, has served as Co-Chairman of our board of directors. Subjectdirectors and as our Chief Technology Officer since our inception in 1985. Mr. Goren became sole Chairman of our board of directors in January 2004. Mr. Goren has a B.S. in Computer Systems Engineering from Rensselaer Polytechnic Institute.

Each of the following persons is a member of the board of directors who is not standing for election to the provisionsboard of directors this year and whose term will continue after the 2005 Plan,2009 annual meeting of shareholders.

Class II Directors, serving for a term expiring at the 2010 annual meeting of shareholders:

James S. Balloun, age 70, retired as Chairman and Chief Executive Officer of Acuity Brands, Inc. on September 1, 2004, having served in those positions since November 2001. He is the former Chairman, President and Chief Executive Officer of National Service Industries, where he led the company for five years prior to the spin-off of Acuity Brands, Inc. in November 2001. Acuity Brands was a $2 billion manufacturer of lighting fixtures and cleaning chemicals. Mr. Balloun served as a Director of McKinsey & Company, Inc. from 1976 until 1996. Mr. Balloun received an M.B.A. from Harvard Business School in 1965. He also holds a B.S. degree in industrial engineering from Iowa State University, 1960. Mr. Balloun has been one of our compensation committeedirectors since April 1997. Mr. Balloun is a director of Unisen, Inc. and Enzymatic Deinking Technologies.

John H. Heyman, age 47, has the authorityserved as our Chief Executive Officer since January 2002 and as one of our directors since June 1996. Mr. Heyman served as our Chief Financial Officer from September 1995 to determine, among other things, the individualsJanuary 2003 and as our Executive Vice President from September 1995 to whom awards shall be grantedDecember 2001. Mr. Heyman served as Vice President and Chief Financial Officer of Phoenix Communications, Inc., a commercial printer, from March 1991 to determine exercise prices, vesting requirements, the termAugust 1995. From 1989 to 1991, Mr. Heyman served as Vice President—Acquisitions of and the numberForsch Corporation, a diversified manufacturing company. From 1983 to 1987, Mr. Heyman served in a variety of shares covered by each award, and the form of the award to be granted.capacities with Arthur Andersen LLP, where he worked

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Persons Eligible to Participateprimarily with middle market companies and technology firms. Mr. Heyman received an MBA from Harvard Business School and a BBA degree in accounting from the 2005 Plan

Awards may be granted to our directors and employees and toUniversity of Georgia. He is the directors and employeesbrother of our subsidiaries. Only our employees, however, are eligible to receive incentive stock options. In making awards to participants, our compensation committee takes into account the duties of the respective participants and such other factors as our compensation committee deems relevant in connection with accomplishing the purposes of the 2005 Plan. Although allAndrew S. Heyman, one of our executive and non-executive officers, employees and directors are eligible for awards under the 2005 Plan, it is not possible at this time to predict the benefits and amounts that will actually be received by all individual participants or groups of participants in the future.officers.

Incentive AwardsDonna A. Lee, age 54, retired as Chief Marketing Officer, Business Markets of BellSouth Corp. in January 2007, having served in that position since December 2000, where she was responsible for marketing, product management, strategic pricing, sales operation and information technology for business markets. Ms. Lee began her career with AT&T Inc. in June 1976 and held a variety of engineering, operations and sales/marketing assignments until being named a company officer in 1993. Ms. Lee holds an M.B.A. from Georgia State University and a B.S. in mathematics from Mary Washington College, and has completed the Advancement Management Program at Harvard University. Ms. Lee has been one of our directors since March 2007.

All Awards. Each award granted underClass III Directors, serving for a term expiring at the 2005 Plan will be represented by an agreement2011 annual meeting of shareholders:

J. Alexander Douglas, Jr., age 47, has served as President of Coca-Cola North America – The Coca-Cola Company since September 2006 and is a member of its Executive Committee. Mr. Douglas was, from January 2003 until September 2006, the Chief Customer & Commercial Officer and a Senior Vice President of The Coca-Cola Company. He joined the Coca-Cola Company in January 1988 as district sales manager in Coca-Cola Fountain, USA and held a variety of positions with increasing responsibility. In 1994, he was named Vice President for CCE Sales & Marketing Group, and in 1998 his responsibilities expanded to include the entire North American Field Sales & Marketing Groups. Mr. Douglas graduated from the University of Virginia in 1983 and began his career at The Procter & Gamble Company where he worked in a form approved byvariety of sales and sales management positions. Mr. Douglas has been one of our compensation committee. The award agreement will be subject to and will incorporate the terms and conditions required under the 2005 Plan ordirectors since August 2001.

Michael Z. Kay, age 69, served as required by our compensation committee for the formChairman of the award grantedBoard of Magnatrax Corporation, a supplier of engineered products for construction industries, from September 2001 to 2004, and such other termsis now retired. From September 1991 to September 2001, Mr. Kay served as President and conditionsChief Executive Officer of LSG Sky Chefs, the world’s largest in-flight catering alliance. Mr. Kay served as our compensation committee may specify.

Stock Options. The 2005 Plan authorizes our compensation committeeExecutive Vice President and Management Consultant of Charter Medical Corporation from May 1990 to grant optionsMay 1991. From 1964 to purchase shares of common stock to our eligible employees1991, Mr. Kay held management positions within the hotel and non-employee directorshospitality industry with several organizations, including Portman Hotel Company, Omni International Hotels, Ltd., and to eligible employees and non-employee directorsAmericana Hotels, Inc. Mr. Kay has been one of our subsidiaries, and to grant incentive stock options to purchase shares of common stock to our eligible employees.

The exercise price of stock options granted under the 2005 Plan will be determined by our compensation committee, but may not be less than the fair market value (as defined in the 2005 Plan) per share of our common stock on the date of the grant of the option (or, in the case of certain incentive stock options as described below, 110% of fair market value).

Stock options may be exercised in whole or in part by the option holder, but in no event later than seven years from the date of the grant. Any incentive stock option granted under the 2005 Plan to a participant who owns directly or indirectly (under applicable ownership attribution rules) more than 10% of the total combined voting power of all classes of our stock or the stock of any of our subsidiaries may not be purchased at a price less than 110% of the market price on the day the option is granted, and no such option may be exercised more than five years from the date of grant. Upon payment, we will deliver stock certificates for such shares to the participant.

The purchase price for the shares may be paid in cash, shares of our common stock owned by the participant for more than six months, by withholding shares of common stock issuable upon exercise of the stock option, by offsetting compensation due or accrued for services rendered, by a same-day sale commitment, by a margin commitment, by a combination of the above or by another method acceptable to our compensation committee, in each case, as determined by our compensation committee and set forth in the applicable award agreement.

Stock options granted under the 2005 Plan are exercisable during the lifetime of the participant only by the participant. All stock options granted under the 2005 Plan are non-transferable except by will or under the laws of descent and distribution.

In the event of a change in control (as defined in the 2005 Plan), all stock options outstanding under the 2005 Plan and not previously exercisable will become fully exercisable.

Stock Appreciation Rights. Upon exercise of a stock appreciation right, a participant will be entitled to receive an amount in cash or shares of common stock or a combination thereof equal in value to the excess of the fair market value of one share of common stock on the date of exercise over the fair market value of one share of common stock on the date of grant (as set forth in the applicable award agreement), multiplied by the number of shares in respect of which the stock appreciation right is exercised. Any shares of stock reserved but not required for such exercise will be cancelled and will not be added back into the total shares available for awards under the 2005 Plan.directors since April 2002.

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InCORPORATE GOVERNANCE AND BOARD MATTERS

Meetings of the eventBoard of a change in control (as defined inDirectors

Our board of directors held four meetings during the 2005 Plan), all stock appreciation rights outstanding under the 2005 Plan and not previously exercisable and vested will become fully exercisable and vested.

Performance Units. In granting performance units, our compensation committee will determine a performance period of onefiscal year ended December 31, 2008. Each director attended at least 75% or more years and will determine the performance objectives for grants of performance units. Performance objectives may vary from participant to participant and between groups of participants and may be based upon such criteria or combination of factors as our compensation committee may deem appropriate and which are set forth in the 2005 Plan. Performance units may be paid in cash or shares of common stock or a combination thereof.

At the beginning of a performance period, our compensation committee will determine for each participant eligible for performance units the amount of the award (which may be fixed or may vary in accordance with the applicable performance goals) that will be paid as an award if the relevant measureaggregate number of performance for the performance period is met.

In the event of a change in control (as defined in the 2005 Plan), all rights to receive any performance units will become fully vested.

Restricted Stock. Restricted stock granted under the 2005 Plan will be subject to a restriction period (after which restrictions shall lapse) commencing on the date of grant of the award and ending on such date or upon the achievement of such performance or other criteria as our compensation committee shall determine.

Except as otherwise provided in the 2005 Plan, no shares of restricted stock may be sold, exchanged, transferred, pledged or otherwise disposed of during the restriction period. Our compensation committee may require certificates for restricted stock delivered under the 2005 Plan to bemeetings held in custody by a bank or other institution or by us until the restriction period expires or the restrictions thereon otherwise lapse. In addition, our compensation committee may require the recipient to deliver a stock power of attorney endorsed in blank relating to the restricted stock as a condition of receipt of restricted stock. If the participant ceases to be employed by or to provide services to us before the end of the restriction period, the restricted stock may be forfeited.

In the event of a change in control (as defined in the 2005 Plan), the restriction period applicable to any restricted stock granted under the 2005 Plan will end, and all shares of restricted stock will become fully vested.

Phantom Stock. For each share of phantom stock awarded under the 2005 Plan, a participant is entitled to receive an amount in cash and/or shares of common stock equal in value to the fair market value of one share of common stock at the applicable date or upon the occurrence of an applicable event as specified in the award agreement.

Amendment and Termination of the 2005 Plan

With respect to any shares of common stock at the time not subject to an award, our board of directors mayand the committees on which he or she served, except as follows: J. Alexander Douglas, Jr. attended fewer than 75% of the compensation committee meetings. We do not have a policy regarding attendance of directors at any time terminate, modify or amend the 2005 Plan in any respect, provided always that no such termination, modification or amendment shall terminate any outstanding award previously granted under the 2005 Plan (unless the company is liquidated or dissolved) and that no modification or amendment shall be made absent the approvalannual meetings; however, two members of our shareholders to: (1) increase the total numberboard of shares which may be issued or delivered under the 2005 Plan; (2) make any change in the classdirectors attended our 2008 annual meeting of individuals eligible to receive awards; (3) extend the period set forth in the 2005 Plan during which awards may be granted; or (4) make any changes that require shareholder approval under the rules and regulations of any securities exchange on which our common stock is traded. shareholders.

Board Independence

Our board of directors may also suspend the granting of awards pursuant to the 2005 Plan at any timehas determined that James S. Balloun, J. Alexander Douglas, Jr., Michael Z. Kay, William Clement, Jr. and may terminate the 2005 Plan at any time; provided, however, no such suspension or termination shall modify or amend any award granted before such suspension or termination unless the affected participant consents in writing to such modification or amendment or the company is dissolved or liquidated. Except in connection with a corporate transaction involving the company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the terms of outstanding awards may not be amended to reduce the exercise price of outstanding options or stock appreciation rights or cancel outstanding options or stock appreciation rights in exchange for cash, other awards or options or stock appreciation rights with an exercise price that is less than the exercise price of the original options or stock appreciation rights without stockholder approval.

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Federal Income Tax Consequences

Incentive Stock Options. All incentive stock options granted or to be grantedDonna A. Lee qualify as independent directors under the 2005 Plan are intendedrules applicable to be incentive stock options as defined in Section 422 of the Internal Revenue Code of 1986, as amended andcompanies listed on The NASDAQ Stock Market, referred to in this proxy statement as NASDAQ.

Shareholder Communications with the Code.Board of Directors

Under the provisionsOur board of Section 422directors has implemented a process for shareholders to send communications to our board of directors, and to specific individual directors. Any shareholder desiring to communicate with our board of directors, or with specific individual directors, may do so by writing to our Corporate Secretary at 3925 Brookside Parkway, Alpharetta, Georgia 30022. Our Corporate Secretary will promptly forward all such sealed communications to our board of directors or such individual directors, as applicable.

Committees of the Code, neitherBoard of Directors

Our board of directors has three standing committees – the holderaudit committee, the compensation committee, and the nominating and corporate governance committee. Each of our committees operates pursuant to a written charter which, as in effect from time to time, may be found on our website at www.radiantsystems.com. Each of the committees is composed solely of independent directors, consistent with the independence standards defined by the SEC and NASDAQ. Each committee has the right to retain its own legal and other advisors.

Audit Committee

Our audit committee presently consists of William A. Clement, Jr., as Chairman, Michael Z. Kay and Donna A. Lee. Our audit committee has been assigned the principal function of reviewing our internal and external financial reporting, reviewing the scope of the independent audit, and considering comments by the auditors regarding internal controls and accounting procedures and management’s response to these comments. Our audit committee held five meetings during 2008. Our board of directors has determined that William A. Clement, Jr. and Michael Z. Kay qualify as “audit committee financial experts,” as defined in the applicable rules of the SEC.

Compensation Committee

Our compensation committee presently consists of Michael Z. Kay, as Chairman, James S. Balloun and J. Alexander Douglas, Jr. Our compensation committee has been assigned the functions of approving and monitoring the remuneration arrangements for senior management, and administering and granting awards under our equity incentive plans. Our compensation committee held four meetings during 2008. Our compensation committee is responsible for reviewing salary recommendations for our executives and then approving such recommendations with any modifications it deems appropriate. The independent members of our board of directors are then responsible for approving such salary recommendations with any modifications they deem appropriate. The annual salary recommendations for our named executive officers are made by our Vice President of Human Resources. Our compensation committee also has the sole authority to retain and terminate any compensation consultant used to assist in the development and/or analysis of our compensation program and to approve such consultant’s fees and other retention terms. See “Compensation Discussion and Analysis,” the “Compensation Committee Report,” and our compensation committee charter available on our website atwww.radiantsystems.com for further information with respect to our compensation committee.

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Nominating and Corporate Governance Committee

Our nominating and corporate governance committee presently consists of James S. Balloun, as Chairman, J. Alexander Douglas, Jr. and William A. Clement, Jr. Our nominating and corporate governance committee held no formal meetings during 2008, but they frequently conferred on an incentive stock option norinformal basis for the issuerpurpose of identifying and evaluating potential candidates. The nominating and corporate governance committee nominated the individuals who are standing for election at the 2009 annual meeting at a meeting of our board of directors held on March 25, 2009. The responsibilities of the committee are to establish qualification standards for director nominees, to assist our board of directors in identifying individuals qualified to become members of our board of directors and to nominate individuals for election to our board of directors.

Our nominating and corporate governance committee evaluates and considers desired board of director member skills and attributes in identifying director candidates, including applicable legal and regulatory definitions of independence, as well as considerations including diversity, personal integrity and judgment, age, skills, experience, prominence in their profession, concern for the interest of the shareholders, the number of other public companies for which the person serves as a director and the availability of the person’s time and commitment to us, and our current state, all in the context of the needs of our board of directors at that point in time. The committee applies the same standards in considering director candidates recommended by the shareholders as it applies to other candidates. See “Shareholder Nominations” for information with regard to the consideration of any director candidates recommended by security holders.

Compensation Committee Interlocks and Insider Participation

Our compensation committee presently consists of James S. Balloun, J. Alexander Douglas, Jr. and Michael Z. Kay, as Chairman. None of the members of our compensation committee served as our officer or employee or as an officer or employee of any of our subsidiaries during 2008. There were no material transactions between us and any of the members of our compensation committee during 2008.

Shareholder Nominations

Any shareholder entitled to vote for the election of directors may nominate a person or persons for election as a director only if written notice of such option will recognize income, gain, deductionshareholder’s intention to make any such nomination is given either by personal delivery or loss uponmailed by the grant or exerciseUnited States mail, postage prepaid, certified and return receipt requested, to our Corporate Secretary not later than the later of an incentive stock option. An optionee will be taxed only when(i) the common stock acquired upon exerciseclose of his or her incentive stock option is sold or otherwise disposedbusiness on the seventh calendar day following the date on which notice of in a taxable transaction. If at the timemeeting of such sale or disposition the optionee has held the sharesshareholders for the required holding period (two years fromelection of directors is first given to shareholders (any such notice of meeting of shareholders shall not be given earlier than the record date for the option was grantedmeeting of shareholders), and one year from(ii) a date that is 90 days prior to the date of such meeting of shareholders. Each such notice shall set forth: (a) the transfername and address of the sharesshareholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the shareholder is a holder of record of our stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the shareholder and each nominee, and any other person or persons (naming such person or persons), pursuant to which the nomination or nominations are to be made by the shareholder; (d) such other information regarding each nominee proposed by such shareholder as would have been required to be included in a proxy statement filed pursuant to the optionee), the optionee will recognize long-term capital gain or loss, as the case may be, based upon the difference between his or her exercise price and the net proceedsproxy rules of the sale. However,SEC had each nominee been nominated, or intended to be nominated, by our board of directors; and (e) the consent of each nominee to serve as one of our directors if so elected.

Code of Ethics

We have adopted a code of ethics, which applies to our principal executive officer, principal financial officer and controller. This code of ethics is publicly available on our website at www.radiantsystems.com or upon request by writing to Radiant Systems, Inc., Attn: Investor Relations Director, 3925 Brookside Parkway, Alpharetta, Georgia 30022. If we make substantial amendments to the optionee disposescode of ethics or grant any waiver, including an implicit waiver, we will disclose the shares before the endnature of such holding period, the optionee will recognize ordinary incomeamendment or waiver on such disposition in an amount generally equal to the lesser of: (1) gain on the saleour website or other disposition; or (2) the amount by which the fair market value of the shares on the date of exercise exceeded the option exercise price, with any excess gain being capital gain, long-term or short-term, depending on whether or not the shares had previously been held for more than one year on the date of sale or other taxable disposition.

The foregoing discussion and the reference to capital gain or loss treatment assume that the option shares are a capital asset in the hands of the optionee. A sale or other disposition which results in the recognition of ordinary income to the optionee will also result in a corresponding income tax deduction for us.

The 2005 Plan permits an optionee to pay allcurrent report on Form 8-K within four business days of such amendment or part of the purchase price for shares acquired pursuant to exercise of an incentive stock option by transferring to us other shares of our common stock owned by the optionee, and Section 422 of the Code provides that an option will continue to be treated as an incentive stock option if it is exercised in such manner. Accordingly, except as noted below with respect to certain “statutory option stock,” an optionee who exercises an incentive stock option in whole or in part in such manner will not recognize any gain or loss upon such exercise. The optionee’s basis in the number of new shares so acquired that is equal to the number of shares surrendered will be equal to the optionee’s cost basis in the shares surrendered. The optionee’s basis in the additional number of new shares received will be zero plus, in the case of payment of the purchase price in a combination of cash and surrendered shares, the amount of any cash paid.

Section 424(c)(3) of the Code provides that if “statutory option stock” is transferred in connection with the exercise of an incentive stock option, and if the holding period requirements under Section 422(a)(1) of the Code are not met with respect to such statutory option stock before such transfer, then ordinary income will be recognized as a result of the transfer of statutory option stock. The optionee’s basis in the number of new shares so acquired that is equal to the number of shares surrendered will be equal to the optionee’s cost basis in the shares surrendered plus the amount of ordinary income recognized. The optionee’s basis in the additional number of new shares received will be zero plus, in the case of payment of the purchase price in a combination of cash and surrendered shares, the amount of any cash paid. However, the incentive stock option stock acquired through the exchange of statutory option stock will still qualify for favorable tax treatment under Section 422 of the Code.

In general, an option granted under the 2005 Plan which is designated as an incentive stock option will be taxed as described above. However, in some circumstances an option which is designated as an incentive stock option will be treated as a non-qualified stock option and the holder taxed accordingly. For example, a change in the terms of an option which gives the employee additional benefits may be treated as the grant of a new option. Unless all the criteria for treatment as an incentive stock option are met on the date the “new option” is considered granted (such as the requirement that the exercise price of the option be not less than the fair market value of the stock as of the date of the grant), the option will be treated and taxed as a non-qualified stock option. In addition, the aggregate fair market value (determined at the time the option was granted) of the shares with respect to which incentive stock options granted under the 2005 Plan are exercisable for the first time by an optionee during any calendar year may not exceed $100,000. Any excess over such amount will be deemed to be related to and part of a non-qualified stock option.waiver.

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Non-Qualified Stock Options. All options granted under the 2005 Plan that do not qualify as incentive stock options are non-qualified stock options not entitled to special tax treatment under Section 42216(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Code. A participantExchange Act requires our directors, executive officers and persons who own more than 10% of our outstanding common stock to file with the SEC reports of changes in the 2005 Plan will recognize taxable income upon the grant of a non-qualified stock option only if such option has a readily ascertainable fair market value as of the date of the grant. However, under the applicable Treasury Regulations, the non-qualified stock options issued under the 2005 Plan will not have a readily ascertainable fair market value unless, at the time such options are granted, similar options of the company are actively traded on an established market. We will not have any such actively traded options in the foreseeable future.

Upon the exercise of a non-qualified option not having a readily ascertainable fair market value, the optionee recognizes ordinary income in an amount equal to the excess of the fair market value of the shares on the date of exercise over the option exercise price for those shares. We will not be entitled to an income tax deduction with respect to the grant of a non-qualified stock option or the sale of stock acquired pursuant to such grant. We generally will be permitted a deduction equal to the amount of ordinary income the optionee is required to recognize as a result of the exercise of a non-qualified stock option.

The 2005 Plan permits our compensation committee to allow an optionee to pay all or part of the purchase price for shares acquired pursuant to an exercise of a non-statutory option by transferring to us other sharesownership of our common stock ownedheld by such persons. Executive officers, directors and greater than 10% shareholders are also required to furnish us with copies of all forms they file under this regulation. To our knowledge, based solely on a review of the optionee. If an optionee exchanges previously acquired common stockcopies of such reports furnished to us and representations that no other reports were required, during the fiscal year ended December 31, 2008, our executive officers, directors and greater than 10% shareholders complied with all Section 16(a) filing requirements applicable to them.

Although it is not our obligation to make filings pursuant to the exercise of a non-qualified stock option, the Internal Revenue Service has ruled that the optionee will not be taxed on the unrealized appreciationSection 16 of the shares surrenderedExchange Act, we have adopted a policy requiring all Section 16 reporting persons to report to our Chief Executive Officer prior to engaging in any transactions in our common stock.

Agreements with Employees

All of our domestic employees, including executive officers, are required to sign a confidentiality and non-solicitation agreement with us restricting the exchange. In other words,ability of the optionee is not taxed on the difference betweenemployee to compete with us during his or her cost basisemployment, restricting solicitation of customers and employees following employment with us, and providing for the old sharesownership and their fair market value onassignment of intellectual property rights to us. Each agreement has an indefinite term, but the date of the exchange, even though the previously acquired shares are valued at the current market price for purposes of paying all or part of the option price. Thus, the optionee’s basis in the number of new shares so acquired that is equal to the number of shares surrendered will be equal to the optionee’s cost basis in the shares surrendered. The optionee’s basis in the additional number of new shares received will be equal to the amount of ordinary compensation income recognized as the result of the exercise of the option plus, in the case of payment of the purchase price in a combination of cash and surrendered shares, the amount of any cash paid.

Stock Appreciation Rights, Performance Units and Phantom Stock. On the exercise of a stock appreciation right or upon the receipt of cash or common stock with respect to a performance unit or a share of phantom stock, the participant will recognize taxable ordinary income in an amount equal to the sum of the cash and the fair market value of the stock (determined as of the date of exercise of the stock appreciation right or the date of receipt of cash or common stock with respect to the performance unit or phantom stock, whichever is applicable), if any, received. A 2005 Plan participant will not recognize a loss on the termination of an unexercised stock appreciation right, performance unit or share of phantom stock received under the 2005 Plan.

Restricted Stock. Generally, and except as noted below, the grant of restricted stock is not taxable at the time of the grant. Instead, at the time restricted stock vests or becomes transferable free of a substantial risk of forfeiture, a participant will recognize ordinary income equal to (1) the excess of the fair market value of such restricted stock on the date the shares vest or become transferrable over (2) the price, if any, paid for such restricted stock. An employee may however, elect to recognize income as of the date of grant of the restricted stock, in an amount equal to (1) the excess of the fair market value of the restricted stock on the date of grant over (2) the price, ifterminate employment with us at any paid for the restricted stock. If such an election is made, no additional income will be recognized at the time the stock vests or becomes transferable. In the event of a subsequent forfeiture of the shares, an employee making such an election may be able to recognize a capital loss with respect to the amount, if any, paid for such restricted stock, but only to the extent such amount exceeds the amount realized by such employee on such forfeiture. The employee will not be able to recognize a loss for tax purposes with respect to the excess of fair market value over the purchase price which was previously included in income. Dividends paid on the shares of restricted stock before they vest will be taxed to the participant either as additional compensation or, if the participant has made the election described above, as dividend income.

In most cases, the basis in shares acquired upon exercise of a non-qualified option or stock appreciation right, upon an award of restricted stock or upon payment with respect to shares of phantom stock will be equal to the fair market value of the shares on the employee’s income recognition date, and the holding period for determining gains and losses on a subsequent disposition of such shares will begin on such date.time.

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As a general rule, we will be entitled to a deduction for federal income tax purposesEXECUTIVE OFFICERS

Our executive officers are as follows:

Executive officers are appointed by our board of directors and hold office at the samepleasure of our board of directors. Executive officers devote their full time and in the same amount that an employee recognizes ordinary income from awards granted under the 2005 Plan (including the recognitionto our affairs. See “Election of ordinary income as the result of a holder of stock obtained through exercise of an incentive stock option disposing of such stock prior to the expiration of the required holding period), to the extent such income is considered reasonable compensation under the Code and generally provided that we comply with the reporting requirements applicable to the ordinary income recognized by the employee. We will not, however, be entitled to a deductionDirectors” for information with respect to paymentsAlon Goren and John H. Heyman.

Mark E. Haidet has served as our Chief Financial Officer since January 2003. Since joining us in 1997, Mr. Haidet has held the following key leadership positions: Global Solutions Director – Petroleum and Convenience Store Division, Vice President and Managing Director of Global Solutions – Petroleum and Convenience Store Division, Vice President and Managing Director – Hospitality Division, and Vice President of Finance. Prior to employees that are contingent uponjoining us, Mr. Haidet served as a changemanagement consultant with Andersen Business Consulting, focusing on finance re-engineering and corporate performance management from December 1992 to June 1997. Previously, Mr. Haidet was a certified public accountant with Arthur Andersen’s financial audit practice. He received a B.S. in accounting from Miami University, Ohio.

Andrew S. Heyman has served as our Chief Operating Officer since 2003. Since joining us in 1996, Mr. Heyman has held the following key leadership positions: President – Hospitality Division, Executive Vice President & President of control if such payments are deemed to constitute “excess parachute payments” pursuant to Section 280GRadiant Systems, Inc., Vice President – Convenience Store Division, and Managing Director of the CodeRadiant Solutions Group. Mr. Heyman served as a senior manager with Accenture, formerly Andersen Consulting, from 1987 to December 1995. He holds a M.S. degree in computer information systems from Georgia State University and do not qualify as reasonable compensation pursuant to that Section. In addition, such payment will subject the recipient to a 20% excise tax. We also may not be entitled to a deduction with respect to payments to certain employees to the extent that the total remuneration of such employee is found to be excessive under Section 162(m) of the Code.

General. The 2005 Plan is not qualified under Section 401(a) of the Code and is not subject to the provisions of the Employee Retirement Income Security Act of 1974.

The preceding discussion is based upon federal tax laws and regulationsB.B.A. in effect on the date of this document, which are subject to change, and upon an interpretation of the statutory provisions of the Code, its legislative history and related income tax regulations. Furthermore, the foregoing is only a general discussion of the federal income tax consequences of the Plan and does not purport to be a complete description of all federal income tax aspects of the Plan. Plan participants may also be subject to state and local taxes in connection with the grant or exercise of options, stock appreciation rights, performance units, restricted stock, phantom stock, or any combination thereof granted under the Plan and the sale or other disposition of shares acquired upon exercise of the options or otherwise received pursuant to the Plan. Individuals receiving a grant of options, stock appreciation rights, performance units, restricted stock, phantom stock, or any combination thereof should consult with their personal tax advisor regarding federal, state and local consequences to them of participating in the Plan.

Impact of Section 409A of the Internal Revenue Code

The tax consequences described above under “Federal Income Tax Consequences” may be impacted by the Congress’ adoption of Section 409A of the Code, which became effective January 1, 2005 and generally applies to (1) all awards granted after December 31, 2004, and (2) the portion of any awards granted prior to January 1, 2005 which had not yet vested as of December 31, 2004. If an award violates Section 409A of the Code, the affected participant’s award and all similar awards of the affected participant made under our other similar plans or arrangements, plus related earnings on such awards, for that year and all preceding years, will be includible in the participant’s gross income to the extent the amounts are not subject to a substantial risk of forfeiture. In addition, the participant will be charged interest (generallyfinance from the date thatUniversity of Georgia. He is the award vests) at the Internal Revenue Service underpayment rate plus one percent, plus an additional tax equal to 20%brother of the compensation that is required to be included in gross income. Plans are required to be administered in good faith with Section 409A of the Code until December 31, 2008 and thereafter amended to comply with Section 409A of the Code by December 31, 2008. Therefore, the discussion above does not specifically address the potential impact of Section 409A of the Code on the various awards.

The terms of the 2005 Plan are intended to comply with the requirements of Section 409A of the Code. However, the statutory language of Section 409A of the Code is somewhat ambiguous, and the proper application of certain of its provisions is currently unclear despite the issuance of final regulations by the Treasury. The Treasury has indicated that it intends to issue additional guidance in the future to further clarify the application of Section 409A of the Code. We intend to amend the 2005 Plan, if and as necessary, to conform its provisions to the requirements of Section 409A of the Code as clarified in such additional guidance.John H. Heyman.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Philosophy and Structure of Executive Compensation Program

We have developed a compensation philosophy that provides a structure for our compensation program. We believe that our compensation program should motivate and reward our named executive officers for achieving performance objectives, and provide our named executive officers with competitive compensation relative to companies of our size and in our industry. Through the use of base salary and short-term cash incentives to promote short-term profitability, and long-term equity incentives to promote long-term objectives, our compensation program ensures that the interests of our named executive officers and our shareholders are effectively aligned. Our compensation program is designed to achieve the following objectives:

Determining Named Executive Officer Compensation

A number of individuals and entities contribute to the process of reviewing and determining the compensation of our named executive officers:

Elements of Executive Compensation

We implement our compensation philosophy by providing what we believe to be the proper combination of the following three elements of compensation to our named executive officers: base salary, short-term cash incentives and long-term equity incentives. We believe that the appropriate level of compensation is a combination of what is competitive in the market for the position and what is appropriate for the individual employee. We consider a variety of factors in determining the appropriate compensation for each of our named executive officers, including total responsibility and the scope of the position held by the individual, overall experience and qualifications for the position, length of service with us, length of service in the industry, years in the current position with us, our financial and non-financial performance over the relevant period of time, and additional activities performed by the named executive officer, other than identified responsibilities, which have an impact on our business.

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In evaluating all elements of compensation, we also use two sources of market data – a national industry executive compensation survey and a peer review based on proxy data (for our Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer) to determine what is competitive in the market. For compensation paid in 2006, the following peer group was used: JDA Software Group, Inc., MICROS Systems, Inc., PAR Technology Corporation, Internet Security Systems, Inc., Manhattan Associates, Inc., S1 Corporation, KRONOS, Inc., MicroStrategy, Inc., and MRO Software, Inc. For compensation paid in 2007, Epicor Software Corporation and Verifone Holdings were added to the 2006 peer group. ForBeginning with compensation to be paid in 2008, we have added a number of companies to our peer group in order to replace some former peers that have beenwere acquired and to create a larger sample size. Peers were primarily chosen if they are technology companies with similar revenues; however, some companies were used because they are direct competitors, even if their revenues are significantly larger. In these cases, we balanced the peer group with companies whose revenues were significantly smaller than ours. The complete 2008 and 2009 peer list includes JDA Software Group, Inc., MICROS Systems, Inc., PAR Technology Corp., Manhattan Associates, Inc., S1 Corporation, MicroStrategy, Inc., Epicor Software Corporation, Verifone Holdings, Inc., Agilysys, Inc., Ariba, Inc., Kenexa Corporation, Informatica Corporation, i2 Technologies, The Ultimate Software Group, Wild River Systems, SPSS, Inc., MSC Software Corporation, Progress Software Corporation and QAD, Inc.

In considering the relative weight that each element of compensation should have within the total compensation paid to our named executive officers, we have determined that the level of risk should increase with the level of responsibility. For our Chief Executive Officer and Chief Operating Officer, we target approximately 25% of total compensation willto be in the form of base salary, 20% in the form of short-term cash incentives and 55% in the form of long-term equity incentives. For our Chief Financial Officer and Chief Technology Officer, we target approximately 40% of total compensation willto be in the form of base salary, 25% in the form of short-term cash incentives and 35% in the form of long-term equity incentives.

Cash Compensation

Base Salary

Our base salaries are designed to attract and retain high-performing executives. The base salary recommendations for our named executive officers are based on benchmark data from similar size companies in our industry and in our peer group, a review of the officers’ total compensation packages, and an assessment of their past performance and expected future performance. For comparisons to the marketplace, we compare our salaries with the 50^th and 75^th percentile. We believe that this is appropriate given our relatively strong financial performance overin the past few years. The base salaries of our named executive officers are reviewed annually in conjunction with our performance review cycle, which typically occurs during the first quarter of each fiscal year. The primary factor used in determining annual salary adjustments is the officer’s performance; however, the officer’s position in our pay range is also considered. TheFor 2009, the base salaries of our named executive officers will remain at the 2008 levels, which were approved by the independent members of our board of directors approved the following base salaries for 2008:directors: John H. Heyman - $475,000;Heyman—$475,000; Alon Goren - $300,000;Goren—$300,000; Andrew S. Heyman - $360,000;Heyman—$360,000; and Mark E. Haidet - $285,000.Haidet—$285,000. Our decision not to increase the base salaries of our named executive officers is aligned with our decision to manage our business conservatively in light of the declining global economic and market conditions.

Short-Term Cash Incentives

Our short-term cash incentive plans, or STIPs, are designed to give intensity, focus and discipline to the achievement of specific financial and operating results by basing additional compensation on achieving these results. They also serve to attract, retain and motivate senior management personnel and offer a compelling reward structure for our named executive officers. Additionally, we believe that our STIPs provide heightened flexibility to our compensation program, and achieve our objective of differentiating top performers by rewarding them with superior rewards for superior results. For comparisons to the marketplace, we compare our short-term cash incentives with the 50^th and 75^th percentile.

Our STIPs for our named executive officers are based on the officer’s achievement of certain performance levels, which are primarily tied to measures of company or industry group operating income. Our STIPs are designed with two performance levels:

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the expected performance level, which we refer to as “Budget,” and the aspirational performance level, which we refer to as “Target.” Budget represents the expected level of achievement and Target represents a higher,

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more challenging level of achievement. In order for the full potential bonus to be earned, Target must be achieved. Certain portions of the full potential bonus are paid in a proportionate fashion between Budget and Target. For example, if the actual performance level achieved is halfway between Budget and Target, the officer would receive 50% of that portion of the full potential bonus.

Although the basic short-term incentive plan design remainedOur STIPs for our named executive officers, other than Alon Goren, for 2009 will remain the same between 2006 and 2007, a few changes were made toas the named executive officers’ STIPs. Our compensation committee recommended and our board of directors approved an increase in the bonus potentials of our Chief Executive Officer and Chief Technology Officer. In the case of our Chief Executive Officer, the increase was consistent with market data that reflected a bonus potential of 100% of base salary to be common in the 50^th percentile. Our compensation committee also wanted to create a compensation structure with more pay at risk. For our Chief Technology Officer, the bonus potential was increased in recognition of his performance and contributions to our success.Additionally, the STIPs of our Chief Executive Officer, Chief Technology Officer and Chief Financial Officer were changed to annual payouts exclusively, which was more consistent with market practices. Our Chief Operating Officer’s STIP was changed to reflect his increased responsibility for all of our industry groups. Additionally, our Chief Financial Officer’s STIP was changed to add other operational objectives as defined by the Chief Executive Officer and to remove an additional bonus that was paid if Target was exceeded.2008 plans. Below are the terms of the STIPs for our named executive officers for the 2007 fiscal year:

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Although the basic short-term incentive plan design remained the same between 2007 and 2008, a few changes were made to the named executive officers’ STIPs. Our compensation committee recommended and our board of directors approved a change in the bonus potentials of our Chief Technology Officer and Chief Financial Officer to 70% of base salary. This change is being made to drive more consistency across the executive team by making the potential bonus for our Chief Technology Officer and Chief Financial Officer consistent with the bonus potential for our Industry Presidents. Additionally, our Chief Operating Officer’s STIP has been changed to be based on operating income, to be paid annually and to remove the additional bonus. The purpose of these changes was to drive consistency and alignment across the executive team and to recognize the influence that our Chief Operating Officer has over expenses within our central groups. Below are the terms of the STIPs for our named executive officers for the 20082009 fiscal year:

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In its discretion, our compensation committee may recommend that our named executive officers receive discretionary bonuses.bonuses under our STIPs. These discretionary bonuses are designed to reward our named executive officers

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for above average performance, and are approved by the independent members of our board of directors. Discretionary awards were made to our Chief Executive Officer and Chief Technology Officer for 2006 performance, but no discretionary awards were made for 2007 performance.or 2008 performance under our STIPs.

The Budgets are aligned with our 12-month operating plan and designed with the expectation that they will likely be achieved by our named executive officers. For the fiscal years ended December 31, 2007 and 2006, each of our named executive officers achieved their Budget. For the fiscal year ended December 31, 2008, none of our named executive officers achieved their Budget, and therefore, no payments were made to such officers for 2008.

The Targets are designed to be more difficult for our named executive officers to achieve and in order for the full incentive bonus to be earned, the Target must be achieved. For the fiscal years ended December 31, 2008, 2007 and 2006, none of our named executive officers achieved their Target.

All members of senior management, approximately 7886 individuals, are eligible to participate in our STIPs. All STIPs are reviewed annually during the first quarter of each fiscal year to ensure that the plans are aligned with our overall financial and operational objectives. In general, the awards are calculated and processed after year-end earnings are released and internal financial reports are published. Discretion cannot be, and has not been, exercised to award payments when relevant quarterly and annual expected performance levels are not achieved by our named executive officers. IfExcept as specified in our Senior Executive Change in Control Severance Plan, if a named executive officer’s employment is terminated, all future awards under the STIP are terminated. See “Executive Compensation – Senior Executive Change in Control Severance Plan” for a discussion of the terms of such plan. Our STIPs are “self-funding,” which means that all of the operating income performance levels include the cost of any short-term incentive awards. For additional information on our STIPs, see the “Grants of Plan-Based Awards Table” and the “Narrative Discussion of Summary Compensation Table and Grants of Plan-Based Awards Table.”

Discretionary Cash Bonus in Fiscal Year 2009 for 2008 Performance

In recognition of the significant progress that our named executive officers made towards our three-year strategic plan during the fiscal year ended December 31, 2008, which includes the acquisition of five businesses that we believe will significantly contribute to our performance in the future, and because the value of the equity awarded with the long-term incentive plan was significantly below the 50^th percentile, the independent members of our board of directors awarded discretionary cash bonuses to our named executive officers. The amounts paid were intended to partially close that gap to the 50^th percentile. John H. Heyman received $408,000, Alon Goren received $63,000, Andrew S. Heyman received $270,000 and Mark E. Haidet received $105,000.

Equity Compensation

Our long-term equity incentive plan is designed to motivate and reward our senior management team for increasing our shareholder value. Generally, we believe that providing our named executive officers with the opportunity to acquire significant stakes in our growth and prosperity through the grants of equity, while maintaining other elements of our compensation programs at conservative levels, will enable us to attract and retain executives with the outstanding management abilities and entrepreneurial spirit that are essential to our ongoing success. Furthermore, we believe this approach to compensation motivates our named executive officers to perform to their full potential and to continue to expand their contributions to us. We believe that dependence on equity for a significant portion of a named executive officer’s compensation more closely aligns such officer’s interests with those of our shareholders, since the ultimate value of such compensation is linked directly to stock price. Our long-term equity incentive plan is aligned with our three-year business strategy, which we believe provides necessary balance to our STIPs, which are aligned with our 12-month operating plan. We have determined that our long-term equity incentive awards should generally be between the 50^th and 75^th percentile of the comparative market.

Awards under our Amended and Restated 2005 Long-Term Incentive Plan, referred to in this proxy statement as the 2005 Plan, may consist of restricted stock, performance units, stock appreciation rights, incentive stock options, non-qualified stock options, phantom stock or any combination of the foregoing. We believe that the various awards available under the 2005 Plan give us greater flexibility to respond to market-competitive changes in equity compensation practices.

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Historically, we have utilized non-qualified stock options as our primary equity award under the 2005 Plan; however, we annually consider the use of other equity awards that may provide a more efficient way to deliver the same value with less expense and less dilution. In the fall of 2007, we decided that forbeginning with the long-term equity compensation to be paid in the 2008 fiscal year, we would utilize restricted stock in addition to non-qualified stock options. There were several reasons for this change, including that the use of restricted stock:

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However, we also feel that it is important that our named executive officers be rewarded for increasing the value of our common stock and, for this reason, we designed our long-term equity incentive plan such that the named executive officers receive a greater percentage of their awards as non-qualified stock options as compared to other members of our senior management team. ForIn fiscal year 2008, for each of our named executive officers, 75% of the award value will bewas granted in the form of non-qualified stock options and 25% of the award value will bewas granted in the form of restricted stock. We believe that this reflects the greater ability of our named executive officers to impact our overall performance, and holds them accountable and rewards them for increasing the value of our common stock for our shareholders. The number of shares that correspondscorresponded to the total award value for each named executive officer will bewas based on the average closing price of our common stock for the five business days prior to and including the date of grant. In fiscal year 2009, for each of our named executive officers, 50% of the award value was granted in the form of non-qualified stock options and 50% of the award was granted in the form of restricted stock. In order to slightly offset the number of stock options that the named executive officers hold that are currently underwater, we revised the percentage allocation of the equity award. In addition, by relying more heavily on restricted stock, we are able to use the current shares that we have available for issuance in a more conservative fashion. Although our long-term equity incentive awards are generally between the 50^th and 75^th percentile of the comparative market, the awards in fiscal year 2009 were significantly below the 50^th percentile and the awards were significantly below the awards granted in fiscal year 2008. See “Determining Equity Value for 2009” below for further information.

The 2005 Plan currently authorizes the issuance of up to 2,500,0004,500,000 shares of our common stock and the maximum that may be granted to any one employee in any calendar year is 250,000 shares. For additional information on the 2005 Plan, and information regarding the proposal to increase the authorized shares issuable under the 2005 Plan to 4,500,000, see “Proposal – Approval of Amendment to Amended and Restated 2005 Long-Term Incentive Plan” and “Stock Option Plans – Amended and Restated 2005 Long-Term Incentive Plan.” All employees are eligible to participate in our long-term equity incentive plan, although at this point, we are only utilizing the 2005 Plan to compensate members of our senior management team. Awards to our named executive officers are typically granted annually for the prior year’s performance in conjunction with our performance review cycle. StockHistorically, stock option awards vesthave vested annually in three equal increments beginning 12 months from the date of grant, expireexpired five years from the date of grant and havehad an exercise price equal to the fair market value on the date of grant. The restricted stockBeginning with the awards to be granted in fiscal year 20082009, stock option awards will expire seven years from the date of grant. The vesting schedule and determination of the exercise price will remain the same. The restricted stock awards vest 100% on the third anniversary of the date of grant.

During the 2006 fiscal year, our compensation committee determined awards for our Chief Executive Officer and Chief Technology Officer, and our Chief Executive Officer determined awards for our other named executive officers pursuant to delegated authority in April of 2006. During the 2007, 2008 and 20082009 fiscal years, our compensation committee recommended, and the independent members of our board of directors approved, awards for all of our named executive officers in March of 2007, 2008 and 2008,2009, respectively.

Determining Equity Value for 2006 and 2007

Grants of long-term incentive awards are generally based upon the level of the named executive officer’s position with us and an evaluation of the named executive officer’s performance during the prior fiscal year against our three-year strategic plan objectives. To determine a guideline for the potential number of options awarded to our named executive officers in the 2006 and 2007 fiscal years, we utilized the “targeted value” approach, which directly tied the number of options granted to the expected value of our stock. First, we looked at market data to determine a guideline dollar value

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for the equity awards. For example, if companies in the 50^th to 75^th percentile were awarding options worth $10,000, our guideline dollar value for awards was $10,000. Second, we determined the targeted value per share, which is the amount per share by which we expected our stock price to increase over the next three years. The guideline dollar value was then divided by the targeted value per share to determine a guideline for the potential number of options to be awarded. Therefore, if the targeted value per share was $10, the guideline number of options to be issued was 1,000. For the awards granted in April of 2006, the guideline number of options was determined in the last quarter of 2005 and the targeted value per share was proposed by our Chief Financial Officer and approved by our Chief Executive Officer. For the awards granted in March of 2007, the guideline number of options was determined in the last quarter of 2006 and our compensation committee reviewed and approved the targeted value per share that was determined by our Chief Executive Officer and Chief Financial Officer.

To determine whether or not a named executive officer actually received the guideline number of options, we reviewed whether or not the named executive officer achieved certain strategic goals that were set at the beginning of the prior fiscal year. The list of strategic goals is unique for each named executive officer, but typically contains goals related to improving margins, developing strategies, integrating products and strengthening business units. The determination of whether or not such goals had been successfully achieved was a subjective determination made by either our compensation committee, for the Chief Executive Officer and Chief Technology Officer, or by our Chief Executive Officer, for the other named executive officers pursuant to delegated authority. As applicable, our compensation

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committee and Chief Executive Officer also had discretion in determining the number of options that were received and were not restricted by the guideline number of options calculated using the “targeted value” approach. None of the named executive officers had knowledge of their own guideline number of options, but the officers were aware that their equity compensation was based on their achievement of their strategic goals. Each of the named executive officers may receive less than a guideline number of options based on his performance against strategic goals. For the 2006 fiscal year, one of our named executive officers received a grant higher than the guideline number of options, two of our named executive officers received a grant equal to the guideline number of options and one of our named executive officers received a grant less than the guideline number of options. For the 2007 fiscal year, three of our named executive officers received grants higher than the guideline number of options and one of our named executive officers received a grant equal to the guideline number of options.

OurFor fiscal years 2006, 2007 and 2008, our annual awards of stock options havehad a five-year term. We believebelieved that this shorter term increasesincreased accountability for our named executive officers to deliver shareholder value by limiting the amount of time the named executive officer hashad to receive actual value from the grant. The declining global market conditions have highlighted a negative consequence of granting options with shorter terms. The shorter term has reduced the retention value of our option awards because, with the extreme decrease in the market price of our stock, it is less likely that the stock options granted to our named executive officers will achieve significant value prior to expiration. As a consequence, for the fiscal year 2009 annual awards of stock options, the term has been increased to seven years, which is the maximum term under the 2005 Plan.

Determining Equity Value for 2008

During the 2008 fiscal year, the total desired value of equity, or guideline, paid to each named executive officer was determined through the use of market data from a national industry survey and a study of our peer group. To establish a guideline for our named executive officers, we have reviewed the 50^th and 75^th percentile data. In determining the number of shares of stock and number of stock options needed to deliver the total desired value of equity, we used the face value for restricted stock and the net present value for non-qualified stock options. Face value was determined based on the average closing price of our common stock for the five business days prior to and including the grant date. This value was divided into the guideline restricted stock value to determine the number of shares. Using an average price over the course of five days is intended to account for any volatility in the price of our common stock. This same average price was used as the starting point for calculating the net present value for the non-qualified stock options. Net present value is a common valuation method and is one of the methodologies used for valuing stock options by the national industry survey that we utilize to help us determine the compensation for our named executive officers. The net present value methodology used in the survey attempts to predict the future spread of an option and discounts it back to present day dollars in order to arrive at a grant date value. In order to achieve this, several assumptions are made by the survey provider to facilitate comparisons across companies, which include the following:

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Using these assumptions, a net present value per share was calculated. This per share value was divided into the guideline to be granted as non-qualified stock options to determine the number of shares to grant. The exercise price was the closing price on the date of grant. The use of the net present value to calculate the number of shares is a change we have implemented for the 2008 fiscal year. Prior to this, we used a targeted value. We decided to begin using net present value instead of targeted value because we believe net present value provides an objective way to estimate the value of an award and facilitates comparisons to market data to determine competitive award levels. Additionally, the targeted value approach overvalued our shares relative to the growth assumptions used in the national industry survey, which resulted in less competitive awards for our named executive officers. As in the past, the named executive officer may receive more or less than the guideline award based on the achievement of strategic objectives. For the 2008 fiscal year, one of our named executive officers received a guideline award, and three received an award below the guideline. In March of 2008, the independent members of our board of directors awarded stock options and shares of restricted common stock to each of our named executive officers under the 2005 Plan as follows: John H. Heyman received 166,174 stock options and 26,634 shares of restricted stock; Alon Goren received 29,081 stock options and 4,661 shares of restricted stock; Andrew S. Heyman received 110,783 options and 17,756 shares of restricted stock; and Mark E. Haidet received 41,544 options and 6,658 shares of restricted stock. The stock options vest annually in three equal increments beginning in March of 2009 and expire in March of 2013, and the shares of restricted stock fully vest in March of 2011.

Determining Equity Value for 2009

During the 2009 fiscal year, we utilized market data to determine the guideline award for our named executive officers. Although we reviewed both 50^th and 75^th percentile data, we determined that, given the current global economic and market conditions and the number of shares we have available for issuance, the awards in the 2009 fiscal year would be significantly below the 50^th percentile. We continue to rely on the net present value calculation to determine the number of shares that corresponds to the equity award value, but have chosen to rely on a six-month average stock price rather than a five-day average stock price given the extraordinary market conditions. Using this value enables us to provide our named executive officers with an award that is motivational in nature, while also utilizing an appropriate number of our available shares.

We determined specific equity awards based on the named executive officer’s performance against strategic goals. The determination of whether or not such goals had been successfully achieved was a subjective determination made by our compensation committee. Although the global economic recession resulted in lower short-term financial results during fiscal year 2008 than expected, a number of strategic goals were met, including the acquisition of five businesses that we believe will significantly contribute to our performance in the future. Since each of our named executive officers achieved a portion of their strategic goals, the independent members of our board of directors determined that each of them qualified for an equity award. All of our named executive officers received a grant that was below the guideline for their position and below the 50^th percentile of the comparative market.

In March of 2009, the independent members of our board of directors awarded stock options and shares of restricted common stock to each of our named executive officers under the 2005 Plan as follows: John H. Heyman received 127,500 stock options and 61,200 shares of restricted stock; Alon Goren received 19,688 stock options and 9,450 shares of restricted stock; Andrew S. Heyman received 84,375 options and 40,500 shares of restricted stock; and Mark E. Haidet received 32,813 options and 15,750 shares of restricted stock. The stock options vest annually in three equal increments beginning in March of 2010 and expire in March of 2016, and the shares of restricted stock fully vest in March of 2012.

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Extension of Term of Options

In October of 2004, we granted options, under the 1995 Long-Term Incentive Plan, referred to in this proxy statement as the 1995 Plan, to senior management to kick-off our three-year strategic plan. Under the terms of the grants, all of the options vest in full after five years, although the vesting may be accelerated based on the achievement of stock price milestones. The price milestones are achieved when our common stock trades for 20 consecutive days at the milestone price or higher based on the daily high trading price. The first price milestone was achieved in March of 2005, the second price milestone was achieved in December of 2005, and the third price milestone has not been achieved. Given the current market conditions, we do not anticipate that the third price milestone will be achieved prior to the vesting date in October of 2009.

Although the 1995 Plan permitted a ten-year expiration term, the options were granted with a six-year term and are scheduled to expire in October of 2010. On March 3, 2009, the independent members of our board of directors approved the extension of the term of these options by four years to October of 2014. Our board of directors has determined that it is reasonable and in our best interest to extend the term of these options based on the following:

Our board of directors extended the terms of approximately 700,000 options. Of the 700,000 options, the named executives officers held the following number of options: John H. Heyman – 150,000; Alon Goren – 50,000; Andrew S. Heyman – 90,000; and Mark E. Haidet – 20,748. The exercise price of the options is $4.66 per share.

Senior Executive Change in Control Severance Plan

On May 29, 2008, our board of directors adopted the Senior Executive Change in Control Severance Plan, referred to in this proxy statement as the Severance Plan. The purpose of the Severance Plan is to assure us of the continued dedication, loyalty and service of, and the availability of objective advice and counsel from, our senior executives in the event of a change in control. We believe that the Severance Plan is necessary to maintain stability among our senior executives, and that the terms of the Severance Plan are reasonable based on our review of similar provisions for similar companies. See “Executive Compensation – Senior Executive Change in Control Severance Plan” for a discussion of the terms of the Severance Plan.

Equity Ownership Guidelines

On March 24, 2008, our board of directors approved equity ownership guidelines for our named executive officers, which are as follows: Chief Executive Officer – 5 times base salary; Chief Technology Officer – 4 times base salary; Chief Operating Officer – 3 times base salary; and Chief Financial Officer – 1 times base salary. Unvested shares of restricted stock are counted towards the achievement of these guidelines; while options are not counted until exercised. Our named executive officers will have five years to meet the approved equity ownership guidelines. After the five year grace period, if holdings of any named executive officer fall below the requirements, such named executive officer will not be permitted to sell our shares until the guidelines are met. In its discretion, our board of directors may revise the equity ownership guidelines or delay the imposition of the penalty for any named executive officer who does not meet the equity ownership guidelines.

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Deductibility of Executive Compensation

As part of its role, our compensation committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, as amended, which provides that we may not deduct compensation of more than $1,000,000 that is paid to certain individuals. Qualifying performance-based compensation will not be subject to the deduction limitation if certain requirements are met. We believe that compensation paid under our incentive plans is generally fully deductible for federal income tax purposes. However, in certain circumstances, our compensation committee may approve compensation that will not meet these requirements in order to ensure competitive levels of total compensation for our named executive officers.

Accounting for Stock-Based Compensation

Beginning January 1, 2006, we began accounting for stock-based payments in accordance with the requirements of SFAS No.123R. Historically, we utilized non-qualified stock options as our primary equity award under our equity incentive plan; however, beginning with the 2008 fiscal year, we will also now utilize restricted stock.

Compensation Committee Interlocks and Insider Participation

Our compensation committee presently consists of James S. Balloun, J. Alexander Douglas, Jr. and Michael Z. Kay, as Chairman. None of the members of our compensation committee served as our officer or employee or as an officer or employee of any of our subsidiaries during 2007. There were no material transactions between us and any of the members of our compensation committee during 2007.

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Summary Compensation Table for Fiscal Years 2006, 2007 and 20072008

The following table provides certain information for the fiscal years ended December 31, 2006, 2007 and 20072008 concerning compensation earned for services rendered in all capacities by our principal executive officer, principal financial officer and our two other executive officers during the fiscal years ended December 31, 2006, 2007 and 2007.2008.