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 Registrant x                     Filed by a Party other than the Registrant ¨

Check the appropriate box:

ENTRUST, 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):

Entrust, Inc.

One Hanover Park, 16633 Dallas Parkway, Suite 800, Addison, Texas 75001

March 27, 2007

Dear Stockholder,

You are invited to attend the 2007 Annual Meeting to be held on Friday, May 4, 2007 at 10:00 a.m., local time, at the Westin Galleria, 13340 Dallas Parkway, Dallas TX 75240.

The annual meeting will begin with discussion and voting on the matters set forth in the accompanying notice of annual meeting and proxy statement and discussion on other business matters properly brought before the meeting. Following the meeting I will be available to answer any questions about our operations.

Whether or not you plan to attend, you can be sure your shares are represented at the meeting by promptly voting and submitting your proxy by completing, signing, dating and returning your proxy form in the enclosed envelope.

Cordially,

F. William Conner

President, Chief Executive Officer and Chairman of the Board of Directors

ENTRUST, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON FRIDAY, MAY 4, 2007

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Entrust, Inc., a Maryland corporation (the “Company”), will be held on Friday, May 4, 2007 at 10:00 a.m., local time, at the Westin Galleria, 13340 Dallas Parkway, Dallas TX 75240 (the “Meeting”) for the purpose of considering and voting upon the following matters:

The Board of Directors has no knowledge of any other business to be transacted at the Meeting.

Holders of record of the Company’s Common Stock at the close of business on March 7, 2007 are entitled to notice of and to vote at the Meeting and at any adjournments or postponements thereof. A list of the Company’s stockholders is open for examination to any stockholder at the principal executive offices of the Company, One Hanover Park, Suite 800, 16633 Dallas Parkway, Addison, Texas 75001 and will be available at the Meeting.

A copy of the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, which contains consolidated financial statements and other information of interest to stockholders, accompanies this Notice and the enclosed Proxy Statement.

By Order of the Board of Directors,

James D. Kendry, Secretary

March 27, 2007

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING ENVELOPE. NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.

ENTRUST, INC.

One Hanover Park, Suite 800

16633 Dallas Parkway

Addison, Texas 75001

PROXY STATEMENT

For the Annual Meeting of Stockholders

To Be Held on Friday, May 4, 2007

This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of Entrust, Inc., a Maryland corporation (the “Company”), of proxies for use at the Annual Meeting of Stockholders to be held on Friday, May 4, 2007 at 10:00 a.m., local time, at the Westin Galleria, 13340 Dallas Parkway, Dallas TX 75240 and at any adjournments or postponements thereof (the “Meeting”).

All proxies will be voted in accordance with the instructions of the stockholder. If no choice is specified, the proxies will be voted in favor of the election of the nominees for Director named below and the ratification of Grant Thornton as the Company’s independent auditors for the year ending December 31, 2007. Any proxy may be revoked by a stockholder at any time before its exercise by delivery of a written revocation to the Secretary of the Company. Attendance at the Meeting will not itself be deemed to revoke a proxy unless the stockholder gives affirmative notice at the Meeting that the stockholder intends to revoke the proxy and vote in person.

The Board of Directors has fixed March 7, 2007 as the record date (the “Record Date”) for determining holders of the Company’s Common Stock, $.01 par value per share (the “Common Stock”), who are entitled to vote at the Meeting. At the close of business on the Record Date, there were 60,394,788 shares of Common Stock outstanding, each of which is entitled to one vote for each matter to be voted on at the Meeting, held by 627 stockholders of record. Because many of these shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these holders of record.

If you hold shares in “street name” (that is, through a bank, broker or other nominee) and would like to attend the Meeting and vote in person, you will need to bring an account statement or other acceptable evidence of ownership of Common Stock as of the close of business on March 7, 2007, the Record Date. Alternatively, in order to vote, you may contact the person in whose name your shares are registered, obtain a proxy from that person and bring it to the Meeting.

The Notice of Meeting, this Proxy Statement, the enclosed Proxy Card and the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 are first being sent or given to stockholders on or about March 27, 2007. The Company will, upon written request of any stockholder and the payment of an appropriate processing fee, furnish copies of the exhibits to its Annual Report on Form 10-K. Please address all such requests to the Company, Attention of David Rockvam, Director, Investor Relations, Entrust, Inc., One Hanover Park, Suite 800, 16633 Dallas Parkway, Addison, Texas 75001. All of these documents are also available through the investor relations section of the Company’s website at http://www.entrust.com.

Quorum Requirements

The holders of a majority of the outstanding shares of Common Stock on March 7, 2007 present in person or represented by proxy and entitled to vote will constitute a quorum for the transaction of business at the Meeting. Abstentions and broker non-votes are treated as “present” for quorum purposes.

Voting Requirements

Election of Directors. You may vote “for” or “withhold” with respect to any or all Director nominees. The election of Directors requires a plurality of the votes cast “for” the election of Directors; accordingly the

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directorships to be filled at the Meeting will be filled by the nominees receiving the highest number of votes “for.” Votes that are “withheld” will be excluded entirely from the vote and will have no effect on the outcome of the vote.

Ratification of the Appointment of Independent Auditors. You may vote “for,” “against” or “abstain” with respect to the ratification of the appointment of our independent auditors. The affirmative vote of a majority of the votes cast “for” or “against” the matter by stockholders entitled to vote at the Meeting must be voted “for” the ratification to ratify the appointment of our independent auditors. Because an abstention is not treated as a vote “for” or “against,” it will have no effect on the outcome of the vote for this proposal.

Broker Non-Votes. Shares held in “street name” by brokers or nominees who indicate on their proxies that they do not have discretionary authority to vote such shares as to a particular matter will not be counted as votes in favor of such matter, and will also not be counted as votes cast or shares voting on such matter. Accordingly, “broker non-votes” will have no effect on the voting on a matter that requires the affirmative vote of a certain percentage of the votes cast or shares voting on matter.

Expenses and Solicitation

The Company will bear the costs of soliciting proxies. In addition to solicitations by mail, the Company’s Directors, officers and regular employees may, without additional remuneration, solicit proxies by telephone, facsimile and personal interviews. The Company will also request brokerage houses, custodians, nominees and fiduciaries to forward copies of the proxy material to those persons for whom they hold shares and request instructions for voting the proxies. The Company will reimburse such brokerage houses and other persons for their reasonable expenses in connection with this distribution. In addition, the Company has engaged W.F. Doring & Co. to assist in the solicitation of proxies, and has agreed to pay W.F. Doring & Co. a fee of approximately $4,500, plus reasonable expenses.

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PROPOSAL 1—ELECTION OF DIRECTORS

Directors and Nominees for Directors

The Company has a classified Board of Directors currently consisting of two Class I Directors, three Class II Directors, and two Class III Directors. The Class III, Class I, and Class II Directors will serve until the annual meeting of stockholders to be held in 2007, 2008, and 2009 respectively, and until their respective successors are duly elected and qualified. At each annual meeting of stockholders, Directors are elected for a full term of three years to succeed those Directors whose terms are expiring.

The persons named in the enclosed proxy will vote to elect, as Class III Directors, Terdema Ussery II and Michael P. Ressner, both of whom currently serve on the Company’s Board of Directors, unless the proxy is marked otherwise. Each Class III Director will be elected to hold office until the 2010 annual meeting of stockholders and until his successor is elected and qualified. Each of the nominees has indicated his willingness to serve, if elected; however, if either nominee should be unable to serve, the person acting under the proxy may vote the proxy for a substitute nominee. The Board of Directors has no reason to believe that any nominee will be unable to serve if elected. If any nominee is unable to serve, the shares represented by all valid proxies will be voted for the election of such other person as the Board of Directors may nominate.

For each member of the Board of Directors whose term of office as a Director continues after the Meeting, including those who are nominees for election as Class III Directors, there follows information given by each concerning his principal occupation and business experience for at least the past five years, the names of other publicly held companies of which he serves as a Director and his age and length of service as a Director of the Company. There are no family relationships among any of the Directors, nominees for Directors and executive officers of the Company. The Company encourages Directors to attend the annual meetings of stockholders. One of our six Directors who were serving at the time attended last year’s annual meeting of stockholders held on May 5, 2006.

Nominees for Directors With Terms Expiring in 2010 (Class III Directors)

Michael P. Ressner, age 58, has been a Director of the Company since May 1999. From January 2001 to December 2002, Mr. Ressner served as Vice President, Nortel Networks. Prior to that time, he served as Vice President of Finance of Nortel Networks’ Enterprise Solutions group from February 1999 to January 2001. From May 1994 to January 1999, Mr. Ressner served as Vice President of Finance for the Carrier Solutions business unit of Nortel Networks. Prior to these assignments, he held a number of senior finance management posts within various business units of Nortel Networks. Mr. Ressner currently serves on the Board of Directors of Magellan Health Services, Tekelec, Arsenal Digital Solutions (a private company) and Exide Technologies.

Terdema Ussery II, age 47, has served on the Board of Directors since December 2006. Since 1996, he has served as the Dallas Mavericks president and CEO and was a catalyst in the organization’s resurgence, including participation in the design and construction of the American Airlines Center, increased corporate sponsorship, ticket sales, television revenues and community outreach. Since 2001, he has also served as the CEO for HDNet and spearheaded the launch of the network, the nation’s first all-high-definition television network and negotiated the channel’s first content and distribution agreements. Prior to these two positions he served as president of Nike Sports Management. Prior to his post at Nike, he also served as general counsel and commissioner of the Continental Basketball Association (CBA). He is a graduate of Princeton, has a master’s degree from Harvard and a law degree from Cal-Berkeley, where he served as Executive Editor of the California Law Review.

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Directors’ Recommendation:

The Board of Directors unanimously recommends a vote FOR the election of Messrs. Ressner and Ussery to the Board of Directors.

Directors Whose Terms Expire in 2008 (Class I Directors)

Butler C. Derrick, Jr., age 69, has been a Director of the Company since May 1999. Since February 2004 Mr. Derrick has been a managing partner of Nelson, Mullins, Riley and Scarborough LLP. From August 1998 to February 2004, Mr. Derrick was a Partner at the law firm of Powell, Goldstein, Frazer & Murphy LLP, Washington, D.C. From January 1995 to July 1998, Mr. Derrick was a Partner at the law firm of Williams & Jensen, Washington, D.C. Mr. Derrick served in Congress as a United States Representative from South Carolina from January 1975 to January 1995. While in Congress, Mr. Derrick held numerous posts, including Deputy Majority Whip and Vice Chairman of the House Rules Committee.

Jerry C. Jones, age 51, has served on our Board of Directors since December 2003. He serves as Acxiom Corporation’s Business Development and Legal Leader. At Acxiom, he is responsible for the Legal Team, leads the strategy and execution of mergers and alliances, and assists in other strategic initiatives. Mr. Jones came to Acxiom in March 1999 from the Rose Law Firm in Little Rock, Arkansas, where for 19 years he specialized in problem solving and business litigation. He is a 1980 graduate of the University of Arkansas School of Law and holds a bachelor’s degree in public administration from the University of Arkansas.

Michael E. McGrath, age 57, has served on the Board of Directors since February 2007. Mr. McGrath currently holds the title of president and chief executive officer at Dallas-based i2 and serves on the company’s board of directors. In 1976, Mr. McGrath co-founded Pittiglio Rabin Todd & McGrath (PRTM) and served as its president and CEO until his retirement in July 2004. During the last decade, PRTM grew to be one of the larger and most successful management consulting firms in the world. Mr. McGrath is recognized as an expert in product development and product strategy. Mr. McGrath holds a bachelor’s degree in computer science and management science from Boston College and a master’s degree in business administration from Harvard Business School. He was previously a certified public accountant, but is not currently.

Directors Whose Terms Expire in 2009 (Class II Directors)

F. William Conner, age 48, has served as the Company’s President and Chief Executive Officer (CEO) since April 2001 and as Chairman of the Board from October 1998 to May 2000 and from January 2002 to the present. He has been on the board of directors since July 1997. He has been credited with leading the corporate turnaround of the Company. He has been highlighted in such publications as The Wall Street Journal, Washington Post and the Financial Times as a knowledge leader in the fight against cyber crime and identity theft. Mr. Conner has been a leader in the effort to elevate information security to a corporate governance issue and fashion a public-private partnership to protect America’s critical infrastructure. He launched and co-chaired the Business Software Alliance Information Security Governance Task Force, which released a security management framework in April 2003. He also co-chaired the National Cyber Security Partnership’s Corporate Governance Task Force, which released its information security governance framework in April 2004. He has been recognized as one of the Federal Computer Week’s Federal 100—the top executives from government, industry and academia who had the greatest impact on the government information systems community in 2003. In 2003, Mr. Conner received the Corporate CEO Award as part of the annual Tech Titans Award program.

From November 1999 to April 2001, Mr. Conner served as President, Enterprise Networks and eBusiness Solutions of Nortel Networks, a global Internet and communications company, where he led the turnaround of the Enterprise business while redefining and delivering ebusiness applications. From September 1998 to October 1999, he served as the first Chief Marketing Officer of Nortel Networks, leading the effort to reposition the company as a global leader in building the high-performance Internet and was recognized as “Marketer of the

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Year” in High Tech for 2000. From 1992 to September 1998, Mr. Conner held a number of key executive leadership positions at Nortel Networks, including President of its first data business, that lead to the acquisition of Bay Networks, Executive Vice President of Nortel Networks’ Enterprise Networks Business and a variety of other key leadership positions in sales and marketing.

Mr. Conner graduated from Princeton University with a bachelor’s degree in Mechanical Engineering. He also earned a master’s degree in Business Administration from the Wharton School of the University of Pennsylvania.

Douglas Schloss, age 48, has served on the Board of Directors of the Company since July 2001. Since January 1994, he has been the President and Chief Executive Officer of Rexford Management, Inc., a firm that manages an investment partnership specializing in transaction arbitrage. He is currently the Chairman of the Board of Directors of SCO Family of Services, a New York City based social services agency which is one of the ten largest social services agencies in the United States and the largest in New York City. He is also on the Board of Directors at St. Paul’s School in Concord, New Hampshire. He has also served as Chief Executive Officer and Chairman of Marcus Schloss & Co., Inc., a registered broker-dealer and formerly a New York Stock Exchange specialist firm, since March 1993. Prior to these positions, Mr. Schloss managed the equity trading desk and arbitrage investment portfolio of Marcus Schloss & Co. He is a graduate of Princeton University with a degree in Electrical Engineering and Computer Science. He also earned a master’s degree in Business Administration from Harvard Business School.

Ray Washburne, age 46, has served on our Board of Directors since June 2006. Since 1990, he has been the Chairman and CEO of Charter Holdings. He also serves on the Board of Directors for the M Crowd Restaurant Group, a company he co-founded in 1991. In addition, he is also on the advisory board for Colonial Bank-Texas. He is a member at the Dallas Citizens Council, the Dallas Assembly, the Texas Lyceum, and the Young Presidents’ Organization. He is a graduate of Southern Methodist University and serves on the school’s 21st Century Council. He is also an adjunct professor at the University’s Cox School of Business.

For information relating to shares of Common Stock owned by each of the Directors and nominees for Directors, see “Security Ownership of Certain Beneficial Owners and Management” below.

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BOARD AND COMMITTEE MEETINGS

The Board of Directors of the Company met eight times (including by teleconference) during 2006. Each of our incumbent Directors attended at least 75% of the meetings of the Board of Directors and of the committees on which they served during 2006, in each case, which were held during the period for which he was a Director.

The Board of Directors has four standing committees: the Compensation Committee, the Audit Committee, the Nominations and Corporate Governance Committee and the Executive Committee. The Board of Directors has determined that aside from Mr. Conner all the members of our Board of Directors are “independent” within the meaning of the rules of the NASDAQ Stock Market (“NASDAQ”). Moreover, the Board of Directors has determined, upon the recommendation of the Nominations and Corporate Governance Committee, that each member of the Audit Committee of our Board of Directors is also “independent” within the meaning of the rules of the U.S. Securities and Exchange Commission (the “SEC”) and NASDAQ. The Board of Directors considered the criteria listed in Appendix A to this proxy statement to assist it in making the determination of Director independence, none of which applied to any member of the Board of Directors except for Mr. Conner, who is not independent because he is President and CEO.

Each of the Company’s Compensation, Audit, and Nominations and Corporate Governance Committees is comprised solely of independent Directors. In 2004, the Board of Directors appointed Mr. Douglas Schloss as lead independent Director in order to coordinate the activities of the independent Directors and to perform certain other advisory functions.

The charters for the Company’s Compensation, Audit, and Nominations and Corporate Governance Committees, together with the Company’s Code of Business Conduct, Policy Regarding Selection of Directors and Policy Regarding Communications with the Board of Directors, are available on the investor relations section of the Company’s website at http://www.entrust.com. The Board of Directors regularly reviews corporate governance developments and modifies these policies and charters as warranted. Any modifications are reflected on the Company’s website at the address indicated above.

The Compensation Committee has the authority and responsibility to establish the compensation of, and compensation policies applicable to, the Company’s executive officers and administers and grants stock options and other stock-based awards pursuant to the Company’s stock plans. The Compensation Committee held seven meetings during 2006. The current members of the Compensation Committee are Messrs. Jones (Chair) and Washburne.

The Audit Committee members are currently Messrs. Schloss (Chair), Ressner and Ussery. The Audit Committee held nine meetings during 2006. The primary functions of the Audit Committee include:

The Board of Directors has determined that Mr. Schloss is an “audit committee financial expert” within the meaning of the rules of the SEC.

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The Nominations and Corporate Governance Committee currently consists of Messrs. Derrick (Chair) and Schloss. The Nominations and Corporate Governance Committee held three meetings during 2006. The primary duties of the Nominations and Corporate Governance Committee include:

The Nominations and Corporate Governance Committee and the Board of Directors have adopted a Policy Regarding Selection of Directors. In identifying and recommending to the Board of Directors qualified candidates for Board of Directors membership, the Nominations and Corporate Governance Committee focuses primarily on the following criteria: judgment, character, expertise, skills and knowledge useful to the oversight of the Company’s business; diversity of viewpoints, backgrounds, experiences, and other demographics; business or other relevant experience; and the extent to which the interplay of the candidate’s expertise, skills, knowledge and experience with that of other Board of Directors members will build a Board of Directors that is effective and responsive to the needs of the Company. The Nominations and Corporate Governance Committee does not set specific, minimum qualifications that candidates must meet in order for the Nominations and Corporate Governance Committee to recommend them to the Board of Directors, but rather believes that each candidate should be evaluated based on his or her individual merits. The Nominations and Corporate Governance Committee gives appropriate consideration to candidates for Board of Directors membership nominated by stockholders in accordance with the Company’s by-laws, and will evaluate such candidates in the same manner as other candidates identified to the Nominations and Corporate Governance Committee. The Nominations and Corporate Governance Committee may use outside consultants to assist in identifying candidates.

Stockholders wishing to propose Director candidates for consideration by the Company may do so by writing to the Secretary of the Company and providing information specified in the Company’s by-laws, including the candidate’s name, address and principal occupation. The Company’s by-laws set forth further requirements for stockholders wishing to nominate Director candidates for consideration by stockholders including, among other things, that a stockholder must give written notice of an intent to make such a nomination complying with the by-laws of the Company to the Secretary of the Company not less than 60 days nor more than 90 days prior to the stockholders’ meeting; provided that, if less than 70 days’ notice or prior disclosure of the date of the meeting is given or made, the Company must receive notice from the stockholder not later than the 10th day following the date on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever occurs first.

The Board of Directors has also adopted a Policy Regarding Communications with the Board of Directors. Stockholders of the Company and others who have concerns about the conduct of the Company or any of its Directors, officers or employees, including with respect to the Company’s accounting controls or auditing matters, may communicate these concerns, in a confidential or anonymous manner, to James D. Kendry, Vice President and Chief Governance Officer of the Company. Mr. Kendry will communicate concerns regarding accounting, internal controls and other auditing issues to the Chairperson of the Audit Committee. Mr. Kendry will communicate other concerns, depending on the nature of the matter, to the Chairperson of the Nominations and Corporate Governance Committee. If it is unclear whether a communication involves accounting, internal accounting control or other auditing issues or if it involves accounting, internal accounting controls or other auditing issues and other matters, Mr. Kendry will direct such communication to the Chairperson of the Audit Committee, with a note to that effect. Mr. Kendry may be contacted at Entrust, Inc., 16633 Dallas Parkway, Suite 800, Addison, TX 75001 or via email at jay.kendry@entrust.com.

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The Company has policies and procedures for the review, approval or ratification of related-party transactions. Under the Company’s Code of Business Conduct, potential related-party transactions are to be identified by employees, management and/or Directors and referred to the Chief Governance Officer. This would include transactions where the employee, Director or executive officer or his/her relative owns more than: (i) one percent of any class of outstanding securities of a publicly traded company; or (ii) five percent interest in any business entity that is not publicly traded. A significant financial interest is also deemed to exist if the individual’s income from the business entity constitutes more than five percent of the person’s total income in any given year. If a significant financial interest is determined to exist, the Company will determine whether the transaction is solely in the best interests of the Company and based on sound business judgment; provided, however if the transaction involves an executive officer, Director or one of their family members such matter will be approved of by the Directors on the Board of Directors or the Audit Committee. Also, if the transaction involves an independent Director, the Board of Directors will consider whether there is any potential impact of the transaction to such Director’s independence. These procedures were followed by the Company in 2006.

The Executive Committee currently consists of Messrs. Conner (Chair), Derrick, Jones and Schloss. The Executive Committee held no meetings during 2006. The Executive Committee comprises the Chairman of the Board of Directors and the Chairs of the other committees of the Board of Directors and provides assistance to the Board of Directors in fulfilling its responsibility to the Company and its stockholders, particularly with respect to matters requiring immediate attention. The Executive Committee has the authority to exercise all the powers of the Board of Directors, except as prohibited by law or the Company’s charter or by-laws and except for the power to fill vacancies on the Board of Directors.

Compensation Committee Interlocks and Insider Participation

The current members of the Company’s Compensation Committee are Messrs. Jones (Chair) and Washburne. During 2006, no executive officer of the Company served as a Director or member of the compensation committee (or other committee serving an equivalent function) of any other entity, one of whose executive officers served as a Director or member of the Compensation Committee of the Company. Prior to becoming an executive officer of the Company, Mr. Pinder resigned from the Board Of Directors including the Compensation Committee on October 29, 2006.

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COMPENSATION OF EXECUTIVE OFFICERS

Compensation Discussion and Analysis

Overview of Compensation Program

The Compensation Committee of the Board of Directors has responsibility for establishing and implementing the Company’s compensation philosophy and implementing the framework and policies that give it effect. Generally, the types of compensation and benefits provided to named executive officers are similar to those provided to other officers. For the purposes of this disclosure, the named executive officers (or “NEOs”) consist of:

Compensation Philosophy and Goals

The Company’s guiding compensation philosophy is to provide employees with a total compensation package, comprised of both salary and benefits that recognizes and rewards performance and productivity while maintaining a competitive market position and internal equity.

The Compensation Committee’s goals with respect to executive compensation are:

To meet these goals, the Compensation Committee has adopted a mix among the compensation elements of base pay, variable pay, equity incentives and benefits.

Role of Executive Officers in Compensation Decisions

The Compensation Committee, after consultation with the Board of Directors, makes all material compensation decisions for the NEOs, including the setting of compensation levels and equity awards to all officers of the Company. The CEO makes decisions regarding the non-equity compensation of other officers in consultation with the Compensation Committee.

The Board of Directors, with the Chief Executive Officer, reviews annually the performance of each officer, including the NEOs (other than the Chief Executive Officer, whose performance is reviewed by the independent Directors). The performance ratings that result from these reviews are provided to the Compensation Committee. The Compensation Committee uses the results of these performance reviews in conjunction with other data as the basis for periodic adjustments to executive compensation levels or awards of cash bonuses or equity.

Setting Executive Compensation

The Compensation Committee has structured the Company’s compensation to align with the above mentioned goals. Base pay and benefits are set primarily to enable the Company to attract and retain productive

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employees, including NEOs. Variable pay is used primarily to align NEO compensation with the Company’s short term business and performance objectives, which may be expressed in terms of revenue targets, earning targets, strategic initiatives and overall financial performance. Equity incentive awards are used primarily to achieve retention of key employees and to a motivate executives, including NEOs, to create long term shareholder value. In addition, beginning in 2006, the Company has issued equity incentive awards to the CEO and one executive officer (Andrew Pinder) in the form of stock options and stock units which vest based on meeting performance objectives such as revenue targets or increases to the fair market value of the Company’s Common Stock price within periods ranging from six month to two years from the date of the grant. In 2007 the Company extended its issuance of performance stock units to all executive officers including the NEOs.

The Compensation Committee reviews information from a number of sources to determine the appropriate level and mix of executive compensation including:

The Company subscribes to a number of compensation surveys. The primary one that the Compensation Committee uses for setting the compensation for US-based NEOs is the Radford Executive survey which surveys over 700 companies in the technology and life sciences industries. The Compensation Committee reviews a subset of the survey data with a focus on similarly situated companies of comparable revenue. For NEOs located outside the USA, the primary survey used by Compensation Committee is the Radford International survey.

The Compensation Committee has retained an expert executive compensation consultant firm called Compensia (“Compensation Consultant”) to:

The Compensation Consultant provides the Compensation Committee with relevant market data and alternatives to consider when making compensation decisions pertaining to the Chief Executive Officer and on the recommendations being made by the Company’s management for NEOs other than the CEO. The Compensation Consultant compares each element of total CEO compensation against a peer group of publicly-traded software companies (collectively, the “Compensation Peer Group”). The Compensation Peer Group, which is periodically reviewed and updated by the Compensation Committee, consists of companies against which the Compensation Committee believes the Company competes for talent and for investors. The companies that comprised the Compensation Peer Group for 2006 were:

For comparison purposes, the Company’s annual revenues have historically been slightly below the median annual revenues of the Compensation Peer Group.

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In general, the Company targets its allocation between cash and non-cash and short-term and long-term incentive compensation with a view to the allocation by similarly situated companies with revenue comparable to those of the Company. Actual cash and equity incentive awards are set as a result of the performance of the Company or the individual, depending on the type of award, compared to established goals.

2006 Executive Compensation Components

For the fiscal year ended December 31, 2006, the principal components of compensation for NEOs were:

Base Pay

The Company provides NEOs and other employees with base salary to compensate them for services rendered during the fiscal year. Generally, when establishing the base pay level for an NEO, other than the CEO, the Compensation Committee considers the base pay of executive officers in similar positions of companies of comparable revenue and capitalization within the software industry and adjusts for: (a) the scope of the NEOs responsibilities compared to the scope of those of executive officers in similar positions of companies of comparable size and capitalization, (b) the competitive demand for the NEO by other companies, (c) length of time in the role, and (d) an individual’s longer term performance at the Company. The Compensation Committee generally sets base pay for NEOs other than the CEO in the range of the 40^th percentile to the 75^th percentile of base paid to similarly situated executives of the companies in the relevant comparison group, with the majority of NEOs in the 50^th to 75^th percentile range.

When establishing the base pay level for an NEO, the Compensation Committee believes that the Company competes with many larger companies for CEO-level talent. Accordingly, as a result, the Compensation Committee generally sets compensation for the CEO, including base pay, at the 75^th to 90^th percentile paid to similarly situated CEOs of companies of comparable revenue and capitalization within the software industry. The Compensation Committee also takes into consideration the provisions of existing employment agreements with the CEO, which, for example, set the CEO’s base pay at $500,000.

Base pay is reviewed periodically after the Company’s performance review process and when new market data becomes available as well as upon a promotion or other change in job responsibility.

Variable Pay

The Company uses variable pay primarily to reward NEOs for achieving their compensation with the Company’s short term business objectives and performance. The Company has two forms of variable pay for its NEOs. One form is for our sales executives who receive a non-equity incentive plan referred to below as the Company’s “2006 Sales Compensation Plan”. The other form is our annual bonus plans for our non-sales NEOs and provides for awards for meeting specified Company wide objectives, in an amount that is discretionary to the Company.

Generally, when establishing the potential variable pay available to NEOs, the Compensation Committee considers the variable pay potential of executive officers in similar positions of companies of comparable revenue and capitalization within the software industry and the recommendations of Compensia. Actual variable pay awards are set based on Company performance against short term objectives and an individual’s performance. These variable pay potentials range from 45% to 50% of base salary for non-sales NEOs other than

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the CEO and up to approximately 100% of base pay salary for the Chief Executive Officer. For sales NEOs these variable pay potentials range from approximately 70% to 85% of base salary.

For sales NEOs, the payment of variable pay is dependent upon a number of factors including:

There is no upper limit on the commissions that could be payable to the sales NEO since these depend on sales for commissionable product revenue and support bookings, which at the time the plan was entered into were unknown. However, the Company generally expects actual commissions paid to pursuant these non-equity incentive plans to be within 80% to 110% of the target for each sales NEO.

Actual variable pay for a non-sales NEO is determined by taking his or her target variable pay and adjusting for Company performance and individual performance. Company performance is judged by the criteria set forth in the relevant annual plan. For example, in 2006 Company performance was judged against growth in software license revenue. Individual performance is judged for NOEs other than CEO by the Compensation Committee based on recommendation from the Chief Executive Officer. When considering performance of an individual NEO, the CEO looks to the performance of the functions reporting to the NEO and the NEOs effectiveness in enabling the Company to achieve its goals. Individual performance of the Chief Executive Officer is judged by the independent directors. The Board of Directors looks at the Company performance including revenue growth, earnings growth, the achievement of strategic initiatives and overall financial management when assessing the individual performance of the CEO.

In 2005, the Compensation Committee adopted the 2005 Entrust Deferred Incentive and Retention Bonus Plan (the “2005 Bonus Plan”). The 2005 Bonus Plan gave the Compensation Committee a pool from which to award cash compensation to the non-sales NEOs upon the Company meeting certain license revenue growth targets during the 2005 calendar year. The Compensation Committee made awards under the 2005 Bonus Plan with vesting and payment deferred to eight equal amounts payable after the end of eight consecutive quarters with limited exceptions, in order for a payment under the 2005 Bonus Plan to vest, the NEO must be employed by the Company on the date that the portion of the award is payable. If, at any time prior to a date on which any portion of the NEO’s award remains unpaid, the (i) NEO’s employment is terminated by the Company for cause; or (ii) the NEO terminates his or her employment without good reason, then the NEO will forfeit the entire remaining portion of the award. The 2005 Bonus Plan governs all cash incentive awards to non-sales NEOs for performance during the 2005 calendar year, even if not paid until 2008, including the additional discretionary lump-sum bonus paid in January 2006 to the CEO for meeting quarterly revenue targets despite the departure of the Company’s Senior Vice President, Global Sales midway through 2005.

Also in 2005, the Company adopted the Entrust Non-Deferred Performance Bonus Plan (“2006 Bonus Plan”). The 2006 Bonus Plan gave the Compensation Committee a pool from which to award cash compensation to the non-sales NEOs upon the Company meeting certain license revenue growth targets during the 2006 calendar year. Upon completion of 2006, the Compensation Committee assessed the performance of the Company as attained in the 2006 Bonus Plan by comparing the actual licensed revenue growth for the first and second halves of 2006 as well as the full year of 2006 to the pre-determined minimum and target levels. Payment of awards under the 2006 Bonus Plan were made to NEOs in the first quarter of 2007.

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The Company is currently preparing a discretionary bonus plan for 2007 (the “2007 Bonus Plan”). The 2007 Bonus Plan will be similar in design to the 2006 Bonus Plan, except that the bonus pool available determined by licensed revenue growth will vary with earnings. If earnings are lower than planned, the bonus pool available for awards will be reduced. If earnings are higher than planned, the bonus pool available for awards will be increased. Also there will be an earnings threshold, which if not met, will result in no bonus pool being available under the 2007 Bonus Plan. In addition, the bonus pool under the 2007 Bonus Plan may consist of cash and restricted stock units.

Equity Incentives

Equity incentive awards are used primarily to achieve retention of key employees and to a motivate executives to create long term shareholder value.

The Company’s practices regarding equity incentives are in transition. Historically, the Company’s equity awards to NEOs were in the form of stock options and the Company established the level of award for an NEO with retention as the primary goal and based the award level on those of executive officers in similar positions of companies of comparable revenue and capitalization within the software industry. Recently, the Company has focused not only on its need to retain and motivate key employees, but also on its desire to reduce the overhang of stock options issued in previous years, which could be dilutive to existing shareholders, and the need to control the expense of its stock incentive plans. Accordingly from 2003 to 2005 the Company reduced its gross stock option grant rate, which has contributed to a low net grant rate under the Company’s stock-based incentive plans for the period of time comprising calendar years 2003 through 2005. As a result, annual stock option grants to NEOs by the Compensation Committee were significantly reduced. In addition, in 2005 the Company increased its focus on the reduction of the expense of its equity award programs. Accordingly, the Company made use of restricted stock unit grants and capped stock appreciation right (“SAR”) grants to NEOs in 2006 which are less expensive to the Company. These instruments are also less dilutive than traditional stock options. The Company’s SAR grants limit the maximum appreciation for each SAR at four times its exercise price. The Company took additional steps to reduce the expense of its employee equity-based incentive program including issuing equity grants with a seven year term instead of the prior 10 year term.

In 2006, the Company’s equity incentive awards were used primarily to achieve retention of key employees and to a motivate executives to create long term shareholder value important limiting factors in setting the level of the equity incentive element of compensation were the Company’s existing stock option overhang and the Company’s goal of containing the expense of stock option plans. The Compensation Committee made equity grants to the NEOs in the beginning of the year. Midyear the Company reviewed the retentive value of its programs and benefits including its equity grants, severance and change in control agreements. The Company concluded that the retentive value of the unvested equity granted to NEOs other than the CEO was low, but the change in control arrangement provided to some executives were above market. The Compensation Committee agreed to better align compensation between motivating NEOs to transform the Company into the identity management space and motivating NEOs to assist in any change of control. Accordingly, the Compensation Committee awarded additional equity awards to certain NEOs in return, in part, for NEOs agreeing to reduced change of control entitlements. The CEO was awarded additional equity with no change to his change of control entitlement. In making the transition to equity grants from change in control cash payments the Compensation Committee considered the taxation of change in control benefits under Internal Revenue Code Section 280G and decided to remove 280G tax goss-up protection for NEO’s other than the CEO for future compensation awards to those NEOs.

The Compensation Committee awarded the 2007 annual equity grants to NEOs on February 9, 2007. The level of grants for the NEOs other than the CEO was set at the low end of range proposed by the Compensation Consultant in light of the substantial grant made in 2006. Moreover, the Compensation Committee decided to split the equity grant for the NEOs, other than CEO, between stock options and restricted stock units (which we refer to as performance stock units) which vest on specified increases in the share price of the Company’s

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Common stock within one and two year periods. Mr. Morcos received an equity grant bigger than that of other non-CEO NEOs in recognition of his strong sales performance in 2006. Mr. Simzer received a larger performance stock unit grant than other non-CEO NEOs to reward him, in part, for moving from Ottawa to work in the Company’s Addison, Texas office. With respect to the CEO, the Committee determined that the CEO had earned an additional equity grant for his performance in 2006 and provided him a grant consisting wholly of performance stock units. All such performance stock units granted to the NEOs on February 9, 2007 vest as to 50% of the first day on which the closing price of the Company’s Common Stock is at least $4.90 per share for at least 30 out of 60 consecutive trading days, including the day of vesting, by February 9, 2008. If such milestone is not met, such portion of such award will be forfeited. The remaining 50% will vest the first day of which the closing price of the Company’s Common Stock is at least $5.75 per share for at least 30 out of 60 consecutive trading days, including the day of vesting, by February 9, 2009. If such milestone is not met, such portion of such award will be forfeited.

An initial equity grant is provided to an NEO upon hire based on market data provided to the Company relating to initial grants to individuals occupying similar positions at comparably situated companies, and the negotiated requirements of the NEO. Newly hired or promoted executives, other than executive officers, receive their award of stock options on the day of their hire or promotion or they day their initial grant is approved by the Compensation Committee, whichever is later. In October 2006, upon Mr. Pinders’s hire as Senior Vice President, EMEA & Global Government Sales Strategy, the Committee awarded Mr. Pinder options to purchase 300,000 shares of the Company’s Common Stock. In addition, Mr, Pinder was awarded options to purchase another 300,000 shares of the Company’s Common Stock with vesting based on meeting certain revenue targets for global government sales in 2007 and 2008 (which we sometimes refer to as performance stock options). As Mr. Pinder was prior to his employment a director of the Company and his employment contract was concluded after the end of the third quarter but before quarterly results had been publicly report, the strike price for Mr. Pinder’s equity awards was set two days after public disclosure of the third quarter results which was after his initial employment date.

Annual equity award levels are determined based on market data and vary among participants based on their positions within the Company. Generally, when establishing long term incentive awards for executive officers, the Compensation Committee considers the awards to executive officers in similar positions of software companies of comparable size and the recommendations of the Compensation Consultant. Annual option grants to all executives, including the CEO, are generally exercisable as to one-fourth of the underlying shares on the first anniversary of the grant date, and as to one-thirty-sixth of the remaining underlying shares on the monthly anniversary of the date of grant for the subsequent 36 months. Restricted shares are generally exercisable as to one-fourth of the underlying shares on the first anniversary of the grant date, and one-fourth the following three anniversaries of the grant date.

Options are awarded at the Nasdaq’s closing price of the Company’s Common Stock on the date of the grant with two exceptions: (1) when the date of the award is during the Company’s blackout period commencing on the fifteenth day of the last month of each fiscal quarter until the beginning of the third business day after the public release of earnings for such quarter (“Blackout Period”), in which case the grant date will be the last trading day in the Blackout Period; and (2) when the date of award is on a day that the Nasdaq is closed, in which case the grant date will remain unchanged but the price will be the closing price on the date that the Nasdaq was last open. The Compensation Committee has not granted options with an exercise price that is less than the closing price of the Company’s Common Stock on the grant date, nor has it granted options which are priced on a date other than the grant date, with two exceptions: (i) options awarded to Mr. Pinder in October 2007 during the Blackout Period were granted on the last trading day of the Blackout Period; and (ii) options awarded to Mr. McGrath on a date in February 2007 when the Nasdaq was closed were granted on such holiday but at the closing price on the date that the Nasdaq was last open. Prior to the exercise of an option or SAR, the holder has no rights as a stockholder with respect to the shares subject to such option, including voting rights and the right to receive dividends or dividend equivalents.

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We do not allow NEOs to hedge the economic risk of ownership of the Company shares.

Benefits

The Company provides NEOs with benefits that the Company and the Compensation Committee believe are reasonable and consistent with its overall compensation program to better enable the Company to attract and retain superior employees for key positions. The Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to NEOs.

The key benefits available to NEOS at the Company comprise:

All employees in the United States are eligible to participate in the Entrust 401(k) retirement saving plan (“Savings Plan”). The Savings Plan is a tax-qualified retirement savings plan pursuant to which all U.S. based associates, including the NEOs, are able to contribute the lesser of up to 25% of their annual salary or the limit prescribed by the Internal Revenue Service to the Savings Plan on a before-tax basis. The Company will match 75% of the first 6% of pay that is contributed to the Savings Plan. All contributions to the Savings Plan as well as any matching contributions are fully-vested upon contribution. The Company participates in tax-qualified savings plans in Canada, the United Kingdom and Germany where other NEOs or former NEOs reside.

The Company has entered into severance agreements with certain key employees, including all NEOs. These agreements are designed:

The terms of each severance agreement, other than the change of control provisions, reflect the severance practices in the jurisdiction where the NEO resides at the time the agreement was negotiated for the NEO.

In 2003 the Compensation Committee structured a change in control program with multiple goals:

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The Compensation Committee used the services of outside counsel and expert executive compensation consultants to prepare severance and change in control agreements for the Chief Executive Officer and selected NEOs. The Compensation Committee requested that change in control payments contemplated in the agreements be above average but within reasonable limits because of the multiple goals for the agreements. The CEO’s change in control agreement was unique because of the additional retention goal. The change in control for the CFO included enhanced severance on change of control that was not included in the agreement for the Chief Marketing Officer because it was believed that the Chief Marketing Officer would have substantial severance benefit by operation of Canadian common law.

Recent Fiscal Year Compensation

Mr. Conner became the Company’s President and Chief Executive Officer in April 2001 with an annualized base salary of $500,000 which was established in his employment agreement entered into at that time. Pursuant to that agreement, Mr. Conner is eligible for an annual performance bonus in the target amount of 100% of base salary at the end of each calendar year in which he remains employed. He is entitled to four weeks of paid vacation per calendar year. Mr. Conner is entitled to participate in any retirement, retirement savings, group insurance, hospitalization, medical, dental, health, accident, disability or similar plan or program of the Company. Subject to the entitlements described in the Section below entitled “Potential Payments on Termination or Change in Control—Mr. Conner”, Mr. Conner’s employment is terminable at will.

Mr. Wagner became the Company’s Senior Vice President and CFO in April 2003. Mr. Wagner’s annual bonus potential is up to 50% of base salary at 100% achievement of individual management objectives and Company revenue targets, subject to review by the Compensation Committee of the Board of Directors. His annual bonus potential is not a target. The quantum of award is entirely at the discretion of the company until the time of award. In addition, Mr. Wagner is entitled to four weeks of paid vacation per calendar year. Mr. Wagner is entitled to participate in any retirement, retirement savings, group insurance, hospitalization, medical, dental, health, accident, disability or similar plan or program of the Company. Subject to the severance entitlements described in the Section below entitled “Potential Payments on Termination or Change in Control—Mr. Wagner”, Mr. Wagner’s employment is terminable at will.

Mr. Simzer became Senior Vice President of Marketing in August 2003. In 2006, Mr. Simzer’s employment was transferred directly to the Company from Entrust Limited, the Company’s wholly owned Canadian subsidiary, in connection with Mr. Simzer’s relocation to the United States from Canada. His annual bonus potential is up to 50% of base salary at 100% achievement of individual management objectives and Company revenue targets, subject to review by the Compensation Committee of the Board of Directors. This annual bonus potential is not a target. The quantum of award is entirely at the discretion of the Company until the time of award. In addition, Mr. Simzer is entitled to four weeks of paid vacation per calendar year. Mr. Simzer is entitled to participate in any retirement, retirement savings, group insurance, hospitalization, medical, dental, health, accident, disability or similar plan or program of the Company. Subject to the severance entitlements described in the Section below entitled “Potential Payments on Termination or Change in Control—Mr. Simzer”, Mr. Simzer’s employment is terminable at will.

Mr. Bello became Vice President of US Federal Sales in August 2, 2004 and became an executive officer in February 2006. Mr. Bellow has an annual bonus potential of 45% of his base salary at 100% achievement of individual management objectives and revenue targets, subject to review by the Compensation Committee of the Board of Directors of the Company. His annual bonus potential is up to 45% of base salary at 100% achievement of individual management objectives and Company revenue targets, subject to review by the Compensation Committee of the Board of Directors. This annual bonus potential is not a target. The quantum of award is entirely at the discretion of the company until the time of award. In addition, Mr. Bello is entitled to four weeks of paid vacation per calendar year. Mr. Bello is entitled to participate in any retirement, retirement savings, group insurance, hospitalization, medical, dental, health, accident, disability or similar plan or program of the Company. Subject to the severance entitlements described in the Section below entitled “Potential Payments on Termination or Change in Control—Mr. Bello”, Mr. Bello’s employment is terminable at will.

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Entrust Limited entered into an employment agreement with Mr. Morcos in May 2005, who on that day was appointed as Senior Vice President, Sales of the Company. Mr. Morcos’ annual base salary as set out in his employment agreement is $250,000 CDN. He is also eligible for annual sales incentive payments of $180,000 CDN at 100% achievement of objectives and revenue targets that are annually set by the Company’s Compensation Committee. In addition, Mr. Morcos is entitled to four weeks of paid vacation per calendar year. Mr. Morcos is entitled to participate in any retirement, retirement savings, group insurance, hospitalization, medical, dental, health, accident, disability or similar plan or program of the Company. Subject to the severance entitlements described in the Section below entitled “Potential Payments on Termination or Change in Control—Mr. Morcos”, Mr. Morcos’s employment is terminable at the discretion of the Company.

Mr. Ydema was appointed as Senior Vice President, Sales for Europe, Middle East and Asia (“EMEA”) pursuant to an executive agreement with Mr. Ydema dated October 2005. Mr. Ydema resigned his position on March 1, 2007. Mr. Ydema’s annual base salary was €175,000, and he was eligible for an annual sales incentive payments of €150,000 at 100% achievement of objectives and revenue targets that are annually set by the Company’s Compensation Committee. In addition, Mr. Ydema was entitled to six weeks of paid vacation per calendar year. Subject to the notice entitlements described in the Section below entitled “Potential Payments on Termination or Change in Control—Mr. Ydema”, Mr. Ydema’s position was terminable at the discretion of the Company.

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The following two tables below summarize the total compensation paid to or earned by each of the NEOs for the fiscal year ended December 31, 2006.

Summary Compensation Table

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Grants of Plan Based Awards

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In each of Mr. Morcos’s and Mr. Ydema’s 2006 Sales Compensation Plan, the payment of sales commissions are dependent upon whether certain thresholds for the global and regional recognized revenue of the Company is less than certain thresholds. If these thresholds were not met, then the officer would not be entitled to any commissions on account of commissionable product revenue and support bookings in the applicable period. However, these thresholds were set by the Compensation Committee at levels such that they would be met except in unusually adverse situations. If these thresholds were met, the commissions in respect of sales for commissionable product revenue and support bookings would be payable. The thresholds have been met for each period that the sales compensation plans have been in place. Accelerators would also be applied once the commissionable product revenue and support bookings exceed certain sales objectives for each individual that were established based on the number of sales personnel assigned to a specific territory for which Mr. Morcos or Mr. Ydema were responsible in 2006, and each such sales person’s respective territorial quotas (which in turn are based upon the expected revenue levels that are achievable in the territory assigned to such sales person). There was no upper limit on the commissions that could be payable to Mr. Morcos or Mr. Ydema since these depend on sales for commissionable product revenue and support bookings, which at the time the plan was entered into were unknown. However, the Company generally expects actual commissions paid to pursuant to these non-equity incentive plans to be within 80% to 110% of each person’s target commission rate, which for Mr. Morcos was $180,000 CDN at 100% achievement and for Mr. Ydema was €150,000 at 100% achievement.

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Outstanding Equity Awards at Fiscal Year-End

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In the table above, there are references to four plans—“1996”, “1999”, “2006” and “Special”. On a respective basis, these correspond to the following:

In respect of the 1996 Plan, the 1999 Plan and the 2006 Plan, on March 15, 2006, the Board of Directors adopted resolutions, subject to stockholder approval, to approve entry into the Entrust, Inc. 2006 Stock Incentive Plan. The 2006 Plan was approved by the stockholders of the Company on May 5, 2006 and so the 1996 Plan, the enCommerce, Inc. 1997 Stock Option Plan, as amended and restated, and the 1999 Plan, as amended (collectively the “Prior Plans”), were all terminated and no further grants were permitted under the Prior Plans to the extent that termination of the Prior Plans will not affect awards that are outstanding under the Prior Plans.

In respect of the Special Plan, in April 2001, as an inducement essential to Mr. Conner’s entering into an employment agreement with the Company as its President and CEO, the Board of Directors approved the grant of an option to Mr. Conner for 2,000,000 shares of Common Stock at an exercise price of $6.87 per share. The Board of Directors is required to make appropriate adjustments in connection with the option to reflect any stock split, stock dividend, recapitalization, spin-off or other similar event. Unless earlier terminated, those options will expire on April 22, 2011.

The following table sets out the option awards that were exercised and the stock awards that vested for each of the Named Executive Offers during 2006:

Option Exercises and Stock Vested

In the table above, the 27,800 options exercised by Mr. Wagner had an expiry date of December 31, 2006. No other options were exercised by the NEOs.

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Pension Benefits

The Company has no pension plans that provide for payments or other benefits at, following, or in connection with retirement.

Non-Qualified Deferred Compensation

The Company has no defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.

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Potential Payments on Termination or Change in Control

The tables below reflect the amount of compensation to each of the NEOs of the Company in the event of termination of such executive’s employment. For Mr. Conner and Mr. Wagner, the amount of compensation payable to each is shown upon voluntary termination not within 12 months following a change in control, voluntary termination within 12 months following a change in control, involuntary not for cause termination, voluntary termination for good reason, for cause termination, involuntary termination in contemplation of a change in control, involuntary termination within three years following a change in control, or death/disability. These events are shown because they distinct events within the context of the employment arrangements for Mr. Conner and Mr. Wagner. The tables for Mr. Simzer, Mr. Bello, Mr. Morcos and Mr. Ydema are of differing formats due to the unique arrangements in place for each.

Also, in the tables below the amounts shown assume that such termination was effective as of December 31, 2006 based on the fair market value of the Company’s Common Stock equal to $4.27 (subject to footnotes 3 and 2 under the summary tables for Mr. Wagner and Mr. Simzer respectively), and thus includes amounts earned through such time and are estimates of the amounts which would be paid out to the executives upon their termination. The actual amounts to be paid out can only be determined at the time of such executive’s separation from the Company.

Mr. Conner:

The following table shows the potential payments upon the amount of compensation payable to Mr. Conner, the Company’s President and CEO, upon voluntary termination not within 12 months following a change in control, voluntary termination within 12 months following a change in control, involuntary not for cause termination, voluntary termination for good reason, for cause termination, involuntary termination in contemplation of a change in control, involuntary termination within three years following a change in control, or death/disability.