Fill and Sign the Workiva Inc Sec Filing Proxy Statement Seeking Alpha Form

PROXY STATEMENT General Information This Proxy Statement is furnished to the holders of Common Stock ("Common Stock") of Electronic Associates, Inc. (the "Company" or "EAI") in connection with the solicitation of proxies for use at a Special Meeting of Shareholders to be held on June 28, 1994 and at any adjournment thereof (the "Special Meeting"), pursuant to the accompanying Notice of Special Meeting of Shareholders. A form of Proxy for use at the meeting is also enclosed . This Proxy Statement and the enclosed Proxy are first being mailed to shareholders on or about June 7, 1994 in connection with this solicitation. The principal offices of the Company are located at 185 Monmouth Parkway, West Long Branch, New Jersey. The Special Meeting has been called by the Board of Directors of the Company for the purpose of voting on (i) a proposed private placement of securities of EAI, including the issuance and sale by the Company of up to 2,500,000 units, each consisting of one share of EAI Common Stock and one warrant to purchase one share of EAI Common Stock; and (ii) the Company's 1994 Equity Incentive Plan (the "Equity Incentive Plan" or the "Plan"). The issuance and sale of the units are referred to herein as the "Transaction". At the close of business on June 6, 1994, the record date for the meeting, there were outstanding and entitled to vote 4,373,081 shares of Common Stock. The owners of Common Stock have all voting rights with respect to matters to come before the meeting. Each share of Common Stock is entitled to one vote. The holders of a majority of the outstanding shares of Common Stock present, in person or by Proxy and entitled to vote, will constitute a quorum at the Special Meeting. Approval of the Transaction requires the affirmative vote of a majority of the votes cast by the holders of Common Stock entitled to vote on the proposed Transaction. Approval of the proposal to adopt the Equity Incentive Plan requires the affirmative vote of a majority of the votes cast by the holders of Common Stock entitled to vote on the proposed plan, provided that, pursuant to the New York Stock Exchange Rules, the total number of votes cast represents at least 50% of the outstanding shares of Common Stock. All votes will be tabulated by a representative of the American Stock Transfer & Trust Company, who %k ill serve as the inspector of election at the Special Meeting and who will separately tabulate affirmative votes, negative votes, abstentions and broker non-votes. Under New Jersey law, any Proxy submitted and containing an abstention or broker non-vote will not be counted as a vote cast on any matter to which it relates, except that, solely for purposes of determining whether the proposal to adopt the Equity Incentive Plan has been approved by the Company's shareholders in compliance with the voting standards of Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), any Proxy containing an abstention with respect to the proposal to adopt the Equity Incentive Plan and any shares present at the meeting that are voted as an abstention on such proposal will be counted toward the tabulation of the votes cast on such proposal, which will have the same effect as a negative vote. Abstentions and broker non-votes will be counted for purposes of determining whether a quorum is present at the meeting. Votes with respect to the proposed Equity Incentive Plan will be tabulated to comply with the voting standards of Rule 16b-3 of the Exchange Act, which are more difficult to satisfy than the voting standard under New Jersey law. If the voting standard required to comply with Section 16b(3) of the Exchange Act is not met, but the voting standard under New Jersey law has been satisfied, the Equity Incentive Plan shall be deemed approved by the Company's shareholders and effective as of May 17, 1994. Presently, the Company does not believe that the Equity Incentive Plan will qualify for the exemption from Section l6b of the Exchange Act afforded by Section 16b(3) thereof.All properly executed proxies received in time for the meeting will be voted as specified. Anyone giving a Proxy may revoke it at any time prior to the voting thereof by signing, dating and delivering a subsequent Proxy or written notice to the Secretary of the Company or by attending the meeting and filing written notice of revocation with the Secretary prior to any vote. All shares represented by executed and unrevoked proxies will be voted in accordance with the specifications therein. Proxies submitted without specification will be voted FOR the Transaction and FOR the proposal to adopt the Equity Incentive Plan. Management is not aware at the date hereof of an), matters to be presented at the Special Meeting other than the matters described herein above, but, if any other matter is properly presented, the persons named in the Proxy will vote thereon according to their best judgment. The cost of the solicitation of proxies will be borne by the Company. In addition to the use of the mails, proxies may be solicited personally, or by telephone or telegraph, by certain of the Company's directors, officers and a group of management employees who will not receive any extra compensation for such solicitations other than out-of-pocket expenses, and by the American Stock Transfer & Trust Company which has been engaged to assist the Company in the solicitation of proxies. The cost of solicitation (excluding customary out-of-pocket expenses) is included in the monthly fees of approximately $800 paid by the Company to the American Stock Transfer & Trust Company for services as transfer agent for the Company's Common Stock. Principal Shareholders The following table sets forth information as of June 6, 1994 as to persons and entities that have reported to the Securities and Exchange Commission and have advised the Company that they are beneficial owners of more than 5% of the Company's outstanding Common Stock. The percentage figures set forth below do not give effect to the Transaction. Unless otherwise indicated, each individual has sole voting and investment power over such shares. Name and Address Amount and Nature of Percent of Class of Beneficial Owner Beneficial Ownership Class Common Laura Huberfeld 1,058,826 shares (l) 20.8% 420 West End Avenue New York, NY 10024 Common Naomi Bodner 1,058,826 shares (l) 20.8% 16 Grosser Lane Monsey, NY 10952 Common Charles A. Milo 1,268,250 shares (2) 24.3% Electronic Associates, Inc. 185 Monmouth Parkway West Long Branch, NJ 07764-9989 Common Loretta W. Milo 1,268,250 shares (3) 24.3% 10701 Avenida Hacienda East Tucson, AZ 85748 (1) Includes Class A Warrants to purchase 352,942 shares of Common Stock and Class B Warrants to purchase 352,942 shares of Common Stock, all of which arc exercisable immediately. (2) Includes 429,166 shares of Common Stock, Class A Warrants to purchase 398,042 shares of Common Stock and Class B Warrants to purchase 398,042 shares of Common Stock, all of which are exercisable immediately. The 429,166 shares, Class A Warrants and Class B Warrants are held by Mr. Milo and his wife, Loretta W. Milo, as joint tenants. Also includes currently exercisable options to purchase 43,000 shares of Common Stock granted to Mr. Milo. Mr. and Mrs. Milo share voting and dispositive power with respect to shares they hold as joint tenants. - (3) Includes 429,166 shares of Common Stock, Class A Warrants to purchase 398,042 shares of Common Stock and Class B Warrants to purchase 398,042 shares of Common Stock, all of which are exercisable immediately. The 429,166 shares, Class A Warrants and Class B Warrants are held by Loretta W. Milo and her husband, Charles A. Milo, as joint tenants. Also includes currently exercisable options to purchase 43,000 shares of Common Stock granted to Mr. Milo. Mr. and Mrs. Milo share voting and dispositive power with respect to shares they hold as joint tenants. Security Ownership of Management The following table sets forth information as of June 6, 1994 with respect to the beneficial ownership (as defined in Rule 13d-3 of the Exchange Act) of Common Stock by the directors and by all directors and executive officers as a group. The percentage figures set forth below do not give effect to the Transaction. Unless otherwise indicated, each individual has sole voting and investment power with respect to the shares beneficially owned by him. Name and Amount and Address of Nature of Percent Beneficial Owner Position Beneficial Ownership of Class Charles A. Milo President, CEO 1,268,250 (1) 24.3%(1) Electronic Associates and Director 185 Monmouth Parkway West Long Branch, NJ Bruce P. Murray Chairman of 18,000 (2) (3) (4) Electronic Associates the Board 185 Monmouth Parkway West Long Branch, NJ G.Corson Ellis Director 38,150 (3) (5) (6) (4) Electronic Associates 185 Monmouth Parkway West Long Branch, NJ Irwin L. Gross Director 156,000 (6) (7) 3.4% Electronic Associates 185 Monmouth Parkway West Long Branch, NJ Jules M. Seshens Director 15,000 (6) (4) Electronic Associates 185 Monmouth Parkway West Long Branch, NJ Seth Joseph Antine Director 34,646 (6) (8) (4) Electronic Associates 185 Monmouth Parkway West Long Branch, NJ All directors and executive 1,532,046 (2) (3) (5) 28.1% Officers as a group (7 persons) (6 ) (7) (8) (9) (1) Includes 429,166 shares of Common Stock held by Mr. Milo and his spouse as joint tenants and accordingly they share voting and dispositive power with respect to such shares. Also includes currently exercisable Class A Warrants to purchase 398,042 shares of Common Stock and Class B Warrants to purchase 398,042 shares of Common Stock held by Mr. and Mrs. Milo as joint tenants and currently exercisable options to purchase 43,000 shares of Common Stock held by Mr. Milo does not include options to purchase 396,000 shares of Common Stock granted to Mr. Milo pursuant to the Company's 1972 Stock Option Plan, 342,000 of which were granted in 1994. See "Summary Compensation Table." (2) Represents options to purchase 18,000 shares of Common Stock granted pursuant to the Company's 1994 Stock Option Plan for Non-Employee Directors (the "Directors Plan"). See "Compensation of Directors." (3) Does not include options to purchase 200,000 shares granted pursuant to the Company's 1994 Equity Incentive Plan, subject to shareholder approval and listing of the shares underlying the options on the New York Stock Exchange. See "Proposal 2." (4) Represents less than 1% of the outstanding shares of Common Stock. (5) Includes currently exercisable options to purchase 3,000 shares granted pursuant to the Company's 1991 Stock Option Plan for Non-Employee Directors. Does not include option shares, which are not currently exercisable. Also includes 3,400 shares held by Mr. Ellis' wife, as to which shares he disclaims beneficial ownership. (6) Includes options to purchase 15,000 shares of Common Stock granted pursuant to the Directors Plan. See "Compensation of Directors." (7) Includes warrants to purchase an aggregate of 131,000 shares of Common Stock issued by the Company to Mr. Gross, in connection with his retention as a consultant to the Company in March 1994 does not include warrants to purchase an aggregate of 131,000 shares issued by the Company to Mr. Gross in connection with his retention as a consultant, which are not currently exercisable. Also does not include options to purchase 1,000,000 shares of Common Stock granted pursuant to the Company's 1994 Equity Incentive Plan, subject to shareholder approval and the listing of the shares underlying the options on the New York Stock Exchange. See "Proposal 2." (8) Includes 2,000 shares owned by Mr. Antine and his wife, as joint tenants, and accordingly they share voting and dispositive power with respect to such shares. Also includes 5,882 shares of Common Stock and Class A Warrants to purchase 5,882 shares of Common Stock and Class B Warrants to purchase 5,882 shares of Common Stock acquired from the Company in a private offering completed in February 1994. See "Description of Securities - Prior Private Placement." (9) 2,000 of such shares are held by one executive officer and his spouse as joint tenants, and accordingly they share voting and dispositive power with respect to such shares.Options granted pursuant to the Company's 1994 Stock Option Plan for Non-Employee Directors, warrants to purchase an aggregate of 131,000 shares of the Company's Common Stock granted to Mr. Gross and Class A Warrants to purchase 398,042 shares of Common Stock and Class B Warrants to purchase 398,042 shares of Common Stock issued to Charles A. Milo and Loretta W. Milo, which are presented in the above table, are immediately exercisable, subject to the listing of the shares or underlying shares on the New York Stock Exchange. For additional information with regard to options granted to officers and directors of the Company, see "Description of Securities - Other Warrants Outstanding," "Description of Securities -Prior Private Placement," "Proposal 2 - Equity Incentive Plan," "Option/SAR Grants in Last Fiscal Year," "Compensation of Executive Officers" and "Compensation of Directors." THE TRANSACTION Background of the Transaction As a result of lower than planned sales which have adversely impacted the Company's borrowing capacity under its asset based credit facility and continued operating losses, the Company requires additional working capital to support its operations. In February 1994, the Company completed a private offering of its securities, the gross proceeds of which were $1,020,000. These proceeds, after the deduction of offering expenses, were used for immediate working capital requirements. The Company will require additional working capital to support its future operations and growth, including approximately $1.0 Million, which may be required during the second quarter of fiscal year 1994. See "Description of Securities - Prior Private Placement." The Proposed Transaction In an attempt to raise additional capital, the Company has engaged a placement agent, which has counseled the Company with regard to the structure and terms of a proposed private placement of securities of the Company. The terms and conditions of the private placement (the "Private Placement") are substantially as follows: Securities to be offered. Units consisting of one (1) share of restricted Common Stock of the Company and one (1) Class C Warrant to purchase one (1) share of Common Stock of the Company at a warrant exercise price of $4.60 per share until June 30, 1998 (the "Units"). The Class C Warrants are subject to redemption, in whole or in part, by the Company at the redemption price of $.05 per Class C Warrant provided that the last reported sale price of the Common Stock on the New York Stock Exchange (or any substitute primary market in which the Common Stock is traded) is at least $6.00 per share for the ten (10) consecutive trading days ending on the fifth (5th) trading day prior to the date of the Company's notice of redemption. Terms of Offering. The Units will be sold at an offering price of $2.75 per Unit. A minimum of 350,000 Units and a maximum of 2,500,000 Units are proposed to be offered. The minimum purchase is 18,000 Units ($49,500), however, the Company reserves the fight to accept a minimum purchase of 10,000 Units ($27,500). The offering will be made solely to specify purchasers who meet certain suitability requirements. The Units will be offered on a "best efforts, minimum-maximum" basis. If at least 350,000 Units (the "Minimum Sale Amount") are not subscribed for by July 25, 1994 (which period may be extended for an additional period of up to 30 days by agreement of the Company and the Placement Agent) (the "Minimum Offering Period") all proceeds will be refunded to the subscribers. Until the Minimum Sale Amount has been reached, all proceeds from the sale of the Units will be held by a bank in escrow. If the Minimum Sale Amount is achieved prior to the expiration of the Minimum Offering Period, a closing shall be promptly held for the Units sold as of such time (the "Closing"). At the Closing the proceeds will be released from escrow and received by the Company, and the certificates for the Common Stock and Class C Warrants comprising the Units will be issued to the purchasers thereof. After the sale of the Minimum Sale Amount and prior to the sale of 530,000 Units, the Company will receive proceeds from the sale of the Units, and the certificates for the Common Stock and Class C Warrants comprising the Units will be issued to the purchasers thereof. The Units remaining after the Minimum Sale Amount is achieved will be offered on a best efforts basis until all of the Units are sold, or September 23, 1994, whichever shall occur first. After a total of 530,000 Units have been subscribed for or sold, proceeds from all additional subscriptions will be held by a bank in escrow until such time as the Transaction has been approved by the Company's shareholders in order to comply with the New York Stock Exchange rules requiring shareholder approval of certain transactions involving, among other things, the issuance of 20% or more of the number of shares of Common Stock outstanding prior to any such transaction. See "The Transaction - New York Stock Exchange Shareholder Approval Requirement." If the Company’s shareholders approve the Transaction, the proceeds will be released from escrow and received by the Company, and the certificates for the Common Stock and Class C Warrants comprising the Units will be issued to the purchasers thereof who have not received such certificates. If the Company’s shareholders do not approve the Transaction, all funds held in escrow representing payment for subscriptions in excess of 530,000 Units shall be returned, without interest, to the subscribers thereof. Placement . The Units will be offered by Neidiger/Tucker/ Bruner, Inc., Denver, Colorado (the "Placement Agent"). The Placement Agent is registered as a broker-dealer with the Securities and Exchange Commission, a member of the National Association of Securities Dealers, Inc. and licensed as a broker-dealer in the states in which the Units-will be offered. Subject to the sale of the minimum 350,000 Units, the Company has agreed to pay the Placement Agent a sales commission of 10% and a nonaccountable expense allowance of 2% of the aggregate gross proceeds of the sale of the Units in the proposed offering. The Company has paid the Placement Agent $25,000 against the Placement Agent's expense allowance in connection with the offering of the Units. In addition, subject to the sale of the minimum number of Units, the Company has agreed to issue to the Placement Agent a warrant to purchase one (I) Unit (each a "Unit Warrant") for each ten (10) Units sold. Each Unit Warrant will be comprised of one (1) share of the Company's Common Stock and one Class C Warrant. The Unit Warrants will be exercisable for five (5) years from the date of issuance and shall have an exercise price of $3.025 (110% of the Unit price in the offering). Registration Rights . Within six (6) months of the termination of the proposed offering, the Company shall register the shares of Common Stock sold in the offering, the shares of Common Stock underlying the Class C Warrants and the Class C Warrants as well as the Placement Agent Unit Warrants and the securities underlying the Placement Agent Unit Warrants. The shares of Common Stock comprising a portion of the Units and Unit Warrants are collectively referred to herein as the "Shares." The shares of Common Stock underlying the Class C Warrants comprising a portion of the Units and Unit Warrants are collectively referred to herein as the "Underlying Shares."Additionally, holders of 1,200,000 shares of Common Stock and a total of 2,400,000 shares of Common Stock underlying the Class A Warrants and Class B Warrants issued in a prior private offering are entitled to the registration of such securities under the Securities Act of 1933, as amended (the "1933 Act"). Charles A Milo and Loretta W. Milo are also entitled to piggyback rights to register, under the 1933 Act, the 398,042 shares of Common Stock and a total of 796,084 shares of Common Stock underlying Class A Warrants and Class B Warrants issued upon the conversion of certain Company indebtedness to them. The registration, which may commence at any time, and the sale of such shares, would result in a substantial increase in the number of publicly traded shares of Common Stock. The effect, if any, of public sales or the availability of such shares for sale at prevailing market prices cannot be predicted. Sales of substantial amounts of shares in the public market would adversely impact prevailing market prices. See "Description of Securities - Prior Private Placement." Use of Proceeds from the Transaction The Company anticipates that the net proceeds of the proposed Transaction will be used for (1) working capital and general corporate purposes; (2) expenses, estimated to be approximately $150,000, associated with the proposed offering; and (3) if at least $5,000,000 in net proceeds is received, reduction of certain indebtedness of the Company. In addition, the net proceeds may be used in connection with the possible acquisition by the Company of complimentary businesses and in the expansion of its productive capacity. The Company currently has no agreement or understanding regarding any acquisition and there can be no assurance that any acquisition will be made. Pending such uses, the Company will invest the net proceeds of the proposed Transaction in short-term, investment grade, interest bearing securities. Effect Upon Existing Security Holders The Transaction could result in a substantial increase in the number of shares of Common Stock outstanding. As a result, the voting power and percentage ownership interest in the Company of each of the Company's current shareholders would be immediately diluted upon the consummation of the Transaction. New York Stock Exchange Shareholder Approval Requirement The rules of the New York Stock Exchange ("NYSE") provide that shareholder approval must be obtained prior to the issuance of securities and the listing of such securities on the New York Stock Exchange when common stock or securities convertible into or exercisable for common stock are to be issued in any transaction or series of related transactions, other than a public offering for cash, (i) if the common stock has or will have upon issuance voting power equal to or in excess of 20% of the voting power outstanding before the issuance of such stock or securities convertible into or exercisable for common stock, or (ii) -the number of shares of common stock to be issued is or will be equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the stock. The issuance of more than 546,000 Units in the Transaction requires shareholder approval pursuant to the New York Stock Exchange Rules. The Company expects to offer 530,000 Units prior to obtaining shareholder approval and will not sell more than 546,000 Units in the Transaction unless such approval is obtained. Board of Directors Recommendation; Reasons For the TransactionBased primarily on its consideration of the factors referred to below, the Board believes that the consummation of the proposed Transaction is in the best interest of the Company and its shareholders. Among the factors considered by the Board in approving the Transaction was the Board's view that the proceeds of the Transaction are necessary to support the Company's near term working capital requirements and growth over the longer term. In addition, the Board believes that the proceeds of the Transaction may provide funds for possible future acquisitions of other businesses and for corporate expansion purposes. See "The Transaction - Use of Proceeds from the Transaction." The Board determined that the economic terms of the proposed Transaction would be of great benefit to the Company and its shareholders and that the Transaction is fair to the Company's shareholders from a financial point of view. In reaching its determination, the Board considered the purchase price to be paid for the Units and its relationship to recent trading prices of the Common Stock as well as the fact that the Units and the securities comprising the Units will not be freely transferable upon issuance. The Board of Directors has established a Committee of the Board (the "Special Committee") to review and approve the final terms of the Transaction and to make such modifications in such terms, if any, which in its judgment, are required to complete the Transaction, including, without limitation, the number of Units offered and sold and the offer and sale price thereof. Neither the Board nor the Special Committee currently contemplates any change in the terms of the Transaction; however, a vote to approve the Transaction includes the authorization of the Board or the Special Committee to make such modifications in the terms of the Transaction, which, in its judgment, are required to consummate the Transaction. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE TRANSACTION AND RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS VOTE FOR THE TRANSACTION . CAPITALIZATION The following table presents the capitalization of the Company as of March 31, 1994, and as adjusted to give effect to the sale and issuance of the Units to be offered in the Transaction. As of March 31, 1994(In thousands) As As Adjusted Adjusted Assuming Assuming Minimum Maximum 350,000 2,500,000 Actual Units Units Current portion of long-term debt $ 3,358 $ 3,358 $ 3,358 Long-term debt, less current portion 1,547 1,547 997 Shareholder's Equity: Preferred Stock - - - Common Stock 4,078 4,428 6,578 Additional paid-in capital 4,418 4,765 7,818 Accumulated Deficit since January 1988 (8,275) (8,275) (8,275) Treasury Stock, at cost (471) (471) (471) Total Shareholders' Equity (Deficit) (250) (447) 5,650 Total Capitalization $ 4,655 $ 5,352 $10,005 PRICE RANGE OF COMMON STOCK Eal's Common Stock is traded on the NYSE under the symbol EA. The quarterly Common Stock prices for 1993 and 1992 are as follows: Ist Quarter 2nd Quarter 3rd Quarter 4th Quarter High Low High Low High Low High Low 1993 1 7/8 1 1/8 1 5/8 1 3/8 1 ½ 1 1 3/8 1 1992 4 1/8 2 ½ 3 3/4 3 3 5/8 2 3/4 3 ½ 1 1/4 The Common Stock prices for the first four months of 1994 are as follows: High Low January 3 1 1/8 February 3 7/8 2 3/8 March 3 5/8 3 1/8 April 4 ½ 3 1/4 On May 31, 1994, the reported last sale price of the Company's Common Stock was $5. DESCRIPTION OF SECURITIES Units Each Unit proposed to be issued and sold in the Transaction consists of one (1) share of Common Stock and one (1) Class C Warrant. Common Stock Holders of Common Stock are entitled to one vote per share on all matters to be voted on by the shareholders and to receive such dividends as may be declared by the Board of Directors out of funds legally available therefor. In the event of a liquidation, dissolution or winding up of the Company, holders of Common Stock have the right to a ratable portion of the assets remaining after payment of liabilities and liquidation preferences of any outstanding shares of Preferred Stock. Holders of Common Stock do not have cumulative voting, preemptive, redemption or conversion rights. All outstanding shares of Common Stock are, and the shares to be sold in the proposed Transaction will be, fully paid and nonassessable. Class C WarrantsEach Class C Warrant entitles the holder thereof to purchase one (1) share of Common Stock, at $4.60 per share until 5:00 p.m. New York City time on June 30, 1998. The Class C Warrants are subject to redemption, in whole or in part, by the Company at the redemption price of $.05 per Class C Warrant (the "Redemption Price") provided that the last reported sales price of the Common Stock on the NYSE (or any substitute primary market in which the Common Stock is traded) is at least $6.00 per share for the ten (10) consecutive trading days ending on the fifth (5th) trading day prior to the date of the Company's notice of redemption. The Company shall give all registered holders of Class C Warrants 30 days' prior written notice of a redemption of the Class C Warrants. If a Class C Warrant has been called for redemption and has not been exercised prior to the redemption date, such Class C Warrant shall be redeemed for the Redemption Price. In the event that the outstanding shares of Common Stock are at any time increased or decreased or changed into or exchanged for a different number or kind of share or other security of the Company or of another corporation through reorganization, merger, consolidation, liquidation, recapitalization, stock split, combination of shares or stock dividends payable with respect to such Common Stock, appropriate adjustments in the number and kind of such securities then subject to the Class C Warrants shall be made effective as of the date of such occurrence so that the position of the holder of a Class C Warrant upon exercise of a Class C Warrant will be the same as it would have been had he owned immediately prior to the occurrence of such events the Common Stock subject to the Class C Warrant. Registration Rights Within six (6) months of the termination of the proposed Transaction, the Company is obliged to prepare and file a registration statement under the 1933 Act covering the Shares, the Underlying Shares, the Class C Warrants and the Placement Agent Warrants and to qualify or register the Shares, the Underlying Shares, the Class C Warrants and the Placement Agent Warrants under the applicable securities laws of those states in which the Units were initially sold. The expenses associated with such registration, other than the expenses of any holder's counsel and any underwriter's discounts and commissions, shall be borne by the Company. The Company is obliged to use its best efforts to keep such registration statement effective for a period of at least eighteen (18) months. Additionally, holders of 1,200,000 shares of Common Stock and a total of 2,400,000 shares of Common Stock underlying the Class A Warrants and Class B Warrants issued in a prior private offering are entitled to the registration of such securities under the 1933 Act. Charles A. Milo and Loretta W. Milo are also entitled to register 398,042 Shares of Common Stock and 796,084 Shares of Common Stock underlying Class A Warrants and Class B Warrants issued upon the conversion of certain Company indebtedness to them. The registration, which may commence at any time, and sale of such shares, would result in a substantial increase in the number of publicly traded shares of Common Stock. The effect, if any, of public sales or the availability of such shares for sale at prevailing market prices cannot be predicted. Sales of substantial amounts of shares in the public market would adversely impact prevailing market prices. See "Description of Securities - Prior Private Placement." Restrictions on Transferability The Shares, Class C Warrants, Unit Warrants and Underlying Shares may not be sold or transferred unless such securities are duly registered under the 1933 Act and registered or qualified in every applicable state, or unless the holder shall have received the favorable opinion of counsel to the holder, which opinion and counsel shall be satisfactory to counsel to the Company, to the effect that such sale or other transfer may be made in the absence of registration under the 1933 Act and registration or qualification in every applicable state. The certificates representing the Shares, Class C Warrants, Unit Warrants and Underlying Shares will be legended to reflect these restrictions, and stop transfer instructions will apply. Prior Private Placement On February 4, 1994, the Company closed the sale of 1,200,000 units of securities to a limited number of investors in a private placement (the "Prior Private Placement"). The Prior Private Placement resulted in gross proceeds to the Company of $1,020,000 or $0.85 per unit. In the Prior Private Placement, each unit consisted of one share of the Company's Common Stock, one Class A Warrant entitling the holder to purchase one share of the Company's Common Stock at $1.00 per share (each a "Class A Warrant") and one Class B Warrant entitling the holder to purchase one share of the Company's Common Stock at $1.75 per share (each a "Class B Warrant"). The Class A Warrants and Class B Warrants each have a term of four years expiring January 1998. The Class A Warrants may expire earlier as to 82% of the shares covered thereby if the Company satisfies certain financial performance objectives. In addition, the Class A Warrants may not be transferred separately from the Common Stock until after December 31, 1994. Purchasers of the units have been granted certain demand and piggyback rights to have the shares and shares issuable upon exercise of the warrants registered under the 1933 Act. In connection with the Prior Private Placement, certain indebtedness ("Indebtedness") of the Company to Charles A. Milo and Milo Technologies, Inc., a corporation, controlled by Mr. Milo and his wife, Loretta W. Milo, in the initial principal amount of $400,000, plus interest, became automatically convertible into units of securities upon request of the holders of 300,000 units of securities issued in the Prior Private Placement. Upon the request by a holder of more than 300,000 of such units, the Indebtedness was converted at the rate of SO.85 per unit into 398,042 units. The 398,042 shares of Common Stock and a total of 796,084 shares of Common Stock underlying the Class A Warrants and Class B Warrants, which comprise the units, are entitled to be registered under the 1933 Act pursuant to piggyback registration fights granted in respect of such Common Stock and underlying Common Stock. Preferred Stock Purchase Rights Pursuant to a Shareholder Rights Plan, there is one preferred stock purchase fight for each outstanding share of Common Stock. Under certain conditions, each right may be exercised to purchase one I /100th share of Series A Junior Participating Preferred Stock at an exercise price of $11.00, subject to adjustment. The rights may only be exercised commencing ten (10) days after a public announcement that a party acquired or obtained the right to acquire fifteen (15%) percent or more of the Company's Common Stock (except in a transaction directly with the Company which the Board of Directors determines is in the best interest of the shareholders) or ten (10) days after commencement of a tender or exchange offer the consummation of which would result in ownership by a party of fifteen (15%) percent or more of the Company's Common Stock. The rights, which do not have voting fights, expire in 1998 and may be redeemed by the Company at the price of S.01 per fight at any time prior to their expiration or the acquisition of fifteen (15%) percent of the Company's Common Stock. In the event that a party acquires fifteen (15%) percent or more of the Company's Common Stock, in a transaction not approved by the Board of Directors, each other holder of a right shall have the fight to receive that number of shares of Common Stock (or, in certain circumstances, Common Stock equivalent) of the Company, which would have a value of twice the exercise price of the right, and in addition, the Board of Directors, at its option, may exchange each right (other than fights held by the acquiring party) for one (1) share of Common Stock (or Common Stock equivalent). In the event that the Company is acquired in a merger or other business combination after the fights have become exercisable, each holder of a fight shall have the right to purchase, at the exercise price, that number of shares of Common Stock of the acquiring Company which would have a value of twice the exercise price of the fight. The Plan will not become effective if eighty (80%) percent or more of the Company's Common Stock is acquired in an all cash tender offer meeting certain conditions. Preferred Stock Shares of Preferred Stock may be issued from time to time at the discretion of the Board of Directors without shareholder approval. The Board of Directors is authorized to issue these shares in different classes and series and, with respect to each class or series, to determine the dividend rate, the redemption provisions, conversion provisions, liquidation preference and other fights and privileges not in conflict with the Company's Certificate of Incorporation, as amended. No shares of Preferred Stock are outstanding and the Company has no immediate plans to issue any Preferred Stock. In addition, the Board of Directors, without shareholder approval, can issue shares of Preferred Stock with voting and conversion fights, which could adversely affect the voting power and other rights of the holders of Common Stock. Other Warrants Outstanding The Company has issued the following warrants to purchase Common Stock: (1) the Class A Warrants; (2) Class B Warrants; (3) a warrant to the landlord of the Company's West Long Branch, New Jersey facility to purchase up to 130,000 shares of Common Stock at a price of $1.50 per share at any time during the period from August 4, 1995 through August 4, 1998; (4) 300,000 warrants each to purchase one share of Common Stock at a price of $6.00 per share issued to certain public utility companies which expire on December 31, 1997; (5) a warrant issued to an investment banking firm to purchase up to 50,000 shares of Common Stock at the price of $1.00 per share through January 6, 1998; (6) a warrant issued to the same investment banking firm as in (5) above, to purchase up to 50,000 shares of Common Stock at the price of $1.00 per share through January 6, 1998, provided 'that all of the Class A Warrants have been exercised; (7) a warrant to Irwin L. Gross to purchase 262,000 shares of Common Stock at a price of $2.77 per share under certain conditions, subject to listing on the New York Stock Exchange (See "Security Ownership of Management"); and (8) a warrant to convert fees payable in the amount of $150,000 to a lender into 150,000 shares of Common Stock.ANTI-TAKEOVER MATTERS The Company was incorporated in New Jersey and is governed by the New Jersey Business Corporation Act (the "NJBCA"). The NJBCA provides that in determining whether a proposal or offer to acquire a corporation is in the best interest of the corporation, the corporation's Board of Directors may, in addition to considering the effects of any action on shareholders, consider any of the following: (a) the effects of the proposed action on the corporation's employees, suppliers, creditors and customers, (b) the effects on the community in which the corporation operates and (c) the long-term as well as short-term interests of the corporation and its shareholders, including the possibility that these interests may best be served by the continued independence of the corporation. The statute further provides that it, based on these factors, the Board of Directors determines that any such offer is not in the best interest of the corporation; the corporation may reject the offer. These provisions may make it more difficult for a shareholder to challenge a decision of the Board with respect to any such offer, and may facilitate the Board's rejection of an offer to acquire the corporation. The Company is subject to the New Jersey Shareholders Protection Act (the "Protection Act"), which restricts certain business combinations with 10% shareholders. Generally, the Protection Act prohibits a publicly held New Jersey corporation, with its principal executive office and significant business operations in New Jersey, from engaging in any business combination (defined generally as any merger, consolidation, sale, lease, exchange, mortgage or pledge, or any stock transfer, securities reclassification, liquidation or dissolution excluding certain transactions involving assets or securities which have a market value below that specified in the Protection Act) with an "Interested Shareholder" (defined generally as any person or affiliate who is the beneficial owner of 10% or more of the voting power of the outstanding stock (other than shareholders who owned 10% of the corporation's Common Stock prior to the corporation's initial public offering)) for a period of five years from the date the Interested Shareholder became an Interested Shareholder , unless such transaction is approved by the Board of Directors prior to the date the shareholder became an Interested Shareholder. In addition, the Protection Act prohibits any business combination, at any time, with an Interested Shareholder other than a transaction that (i) is approved by the Board of Directors for the applicable corporation prior to the date the Interested Shareholder became an Interested Shareholder-, or (ii) is approved by the affirmative vote of the holders of two-thirds of the voting stock not beneficially owned by the Interested Shareholder at a meeting called for that purpose; or (iii) satisfies certain stringent pric e and terms criteria. In some circumstances, certain shareholders may consider the provisions of the NJBCA described above and the Protection Act to have disadvantageous effects. Tender offers or other non-open market acquisitions of stock are frequently made at prices above the prevailing market price of a corporation's stock. In addition, acquisitions of stock by persons attempting to acquire control through market purchases may cause the market price of the stock to reach levels that are higher than would otherwise be the case. These provisions in the New Jersey statutes may discourage any or all of such acquisitions, particularly those of less than all of a corporation's shares, and may thereby deprive certain holders of the corporation's shares of an opportunity to sell their stock at a temporarily higher market price. For information with respect to certain rights outstanding to purchase preferred stock, see "Description of Securities - Preferred Stock Purchase Rights." PROPOSAL 2 PROPOSAL TO ADOPT THE COMPANY'S 1994 EQUITY INCENTIVE PLAN On May 17,1994, the Board of Directors adopted the Equity Incentive Plan, subject to the approval of the Plan b) the shareholders of the Company. The rules of the New York Stock Exchange require the approval of the Plan by shareholders. Accordingly, only if shareholder approval is obtained will the Plan become effective. The Board and shareholders of the Company previously approved the 1994 Stock Option Plan for Non-Employee Directors and the reservation of 1,000,000 additional shares of Common Stock for issuance pursuant to the Company's 1972 Stock Option Plan. In approving the 1994 Stock Option Plan for Non-Employee Directors. The Board considered a variety of factors, including the reduction in amount and subsequent suspension of payment of fees payable to non- employee directors of the Company, the significant commitment of time required from members of the Board to address the issues arising out of the financial difficulties experienced by the Company in recent periods and the importance to the Company and its shareholders of attracting and retaining the services of experienced and knowledgeable independent directors. In approving the increase in the number of shares of Common Stock reserved for issuance under the 1972 Stock Option Plan, the Board considered the importance to the Company and its shareholders of the ability to grant stock options as incentives to attract and retain executives and other employees. Since the approval of the 1994 Stock Option Plan for Non-Employee Directors and the amendment to the 1972 Stock Option Plan, the Board has evaluated further the incentives which it believes are important to assure that certain directors, officers, employees and consultants to the Company will devote the time and energy necessary to improve the Company's performance over the long term. As a result of such evaluation, the Board has determined that the Company's ability to recruit, attract, retain and reward directors, officers, employees and consultants would be enhanced by the adoption of a compensation plan which provides for greater flexibility in terms of both the nature of the awards and the persons eligible to receive such awards. The Equity Incentive Plan will provide for the granting of awards ("Awards") to directors (whether or not Employees), officers, employees and consultants in the form of stock options, stock appreciation rights ("SARs"), restricted stock awards ("Restricted Stock Awards") and deferred stock awards ("Deferred Stock Awards"). The variety of awards authorized by the Plan is intended to give the Company flexibility to adapt the Company's compensation practices as the business environment in which it operates changes. The Board of Directors believes that the Equity Incentive Plan will provide a method whereby certain directors; officers, employees and consultants can share in the long-term growth of the Company. In order to encourage participants to contribute to such growth, the Board has included a provision in the Plan which provides that an option granted there under may not be exercised until the expiration date of such option unless prior thereto, the average of the high and low trading prices of the Common Stock equals or exceeds $6.00 per share for ten (10) consecutive trading days following the effective date of the Plan. On May 31, 1994, the last sale price of the Common Stock reported on the New York Stock Exchange was $5. The Board of Directors believes it is in the best interests of the Company and its shareholders that the Equity Incentive Plan be adopted in order to attract and retain the services of experienced and knowledgeable directors, officers, employees and consultants for the benefit of the Company and its shareholders and to provide additional incentives for such directors, officers, employees and consultants to continue to work for the best interests of the Company and its shareholders and achievement of the Company's strategic goals. The aggregate number of shares of Common Stock reserved for issuance under the proposed Equity Incentive Plan is 3,000,000 shares. The summary of the Equity Incentive Plan set forth below is qualified by reference to the full text thereof, which is attached hereto as Appendix 1. Administration . The Equity Incentive Plan will be administered by the Compensation Committee of the Board of Directors (the "Committee"). The Committee determines the recipients of awards under the Plan, the times at which Awards will be made and the terms of each Award. In its discretion, the Board of Directors may elect to administer all or any aspects of the Plan and to perform any of the duties or exercise any of the rights delegated or granted to the Committee under the terms of the Plan; provided, however, that the Board may not make such election if the election would result in the failure of the Plan to comply with Rule 16b-3 promulgated under the Securities Exchange Act of 1934 at a time at which the Plan would otherwise be in compliance with such rule. Any determinations and actions of the Committee (or the Board as the case may be), will be conclusive and binding on all parties. Effective Date and Term of Plan. If approved by the Company's shareholders, the Plan will be deemed effective on May 17, 1994, the date on which it was adopted by the Board of Directors. The Plan will terminate ten (10) years after the effective date of the Plan, subject to earlier termination by the Board. No Award may be granted under the Plan after the termination date, but Awards previously granted may extend beyond such date. Eligibility . All employees of the Company and its subsidiaries and other persons or entities who, in the opinion of the Committee are in a position to make a significant contribution to the success of the Company or its subsidiaries, including non-employee directors of and consultants to the Company or its subsidiaries, are eligible to participate in the Plan. Nature of Options. Both "incentive stock options," as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") (referred to herein as "ISOs") and non- incentive stock options ('-'Non-Qualified Options") may be granted under the Plan. ISOs may be awarded only to employees of the Company or its subsidiaries. Option Price. The exercise price of each option will be determined by the Committee, but in the case of an ISO will not be less than 100% (110% in the case of an ISO granted to a ten (10%) percent shareholder) of the fair market value of the Common Stock on the date the option is granted. Period of Option. The term of an option will not exceed ten (10) years (five (5) years in the case of an ISO granted to a ten (10%) percent shareholder) from the date the option was granted. Exercise or Options. Options will become exercisable at such time or times, and on and subject to such conditions, as the Committee may specify; provided, however, that no option will become exercisable until the expiration date of such option if subsequent to the effectiveness of the Plan, the average of the high and low prices of the Common Stock on the New York Stock Exchange (or such other exchange or quotation system on which the Common Stock is listed or quoted) does not equal or exceed $6.00 for ten (10) consecutive trading days. In addition, no options will be exercisable unless and until the shares underlying such options are listed on the New York Stock Exchange or such other exchange or quotation system on which the Common Stock is then listed or quoted. Subject to the conditions relating to the trading price of the Common Stock and the listing of the Common Stock described above, the Committee may at any time and from time to time accelerate the time at which all or any part of an option may be exercised. Payment. Full payment for shares purchased pursuant to an exercise of an option will be made at the time of the exercise of the option in cash or such other form of consideration as the Committee may approve, including, without limitation, delivery of shares of Common Stock. Stock Appreciation Rights. An SAR is an Award entitling the recipient to receive payment in cash and/or Common Stock, determined in whole or in part by reference to appreciation in the value of a share of Common Stock. In general, an SAR will entitle the recipient to receive, with respect to each share as to which the SAR is exercised, the excess of the fair market value of a share of Common Stock on the date of exercise over the fair market value of a share of Common Stock on the date the SAR was granted. The Committee may, however, provide at the time of grant that the amount the recipient is entitled to receive will be adjusted upward or downward under rules established by the Committee to take into account the performance of the Company's Common Stock in comparison with the performance of other stocks or an index or indices of other stocks. Grant of SARs . SARs may be granted in tandem with, or independently of, options granted under the Plan. An SAR granted in tandem with an option, which is not an ISO, may be granted either at or after the time the option is granted. An SAR granted in tandem with an ISO may be granted only at the time the option is granted. Exercise of SARs . An SAR not granted in tandem with an option will become exercisable at such time or times, and on such conditions, as the Committee may specify. An SAR granted in tandem with an option will be exercisable only at such times, and to the extent, that the related option is exercisable. An SAR granted in tandem with an ISO may be exercised only when the market price of the shares subject to the option exceeds the exercise price of such option. The Committee may at any time and from time to time accelerate the time at which all or part of the SAR may be exercised. Restricted Stock Awards. A Restricted Stock Award entitles the recipient to acquire shares of Common Stock, subject to certain restrictions or conditions, for no cash consideration, if permitted by applicable law, or for such other consideration as determined by the Committee. The Award may be subject to such restrictions, conditions and forfeiture provisions as the Committee may determine, including, but not limited to, restrictions on transfer; continuous service with the Company or any of its subsidiaries; achievement of business objectives, and individual, unit and Company performance. Subject to such restrictions, conditions and forfeiture provisions as may be established by the Committee, any participant receiving an Award will have all the fights of a shareholder of the Company with respect to shares of Restricted Stock, including the fight to vote the shares and the right to receive any dividends thereon. Deferred Stock Awards. A Deferred Stock Award entitles the recipient to receive shares of Common Stock to be delivered in the future. Delivery of the shares will take place at such time or times, and on such conditions, as the Committee may specify. The Committee may at any time accelerate the time at which delivery of all or any part of the shares will take place. Transfers of Awards . No Award (other than an Award in the form of an outright transfer of cash or stock) may be assigned, pledged or transferred other than by will or by the laws of descent and distribution and during a participant's lifetime will be exercisable only by the participant or, in the event of a participant's incapacity, his or her guardian or legal representative. Adjustments. In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company's capitalization, or other distribution to holders of Common Stock other than normal cash dividends, after the effective date of the Equity incentive Plan, the Committee will make any appropriate adjustments to the maximum number of shares that may be delivered under the Plan and to any participant. In the event of any such occurrence, the Committee will also make any appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provision of Awards affected by such change. The Committee may also make adjustments to take into account material changes in law or in accounting practices or principles, mergers, consolidations, acquisitions, dispositions or similar corporate transactions, or any other event, if it is determined by the Committee that adjustments are appropriate to avoid distortion in the operation of the Plan. Mergers, Etc. In the event of any merger or consolidation involving the Company, any sale of substantially all of the Company's assets or any other transaction or series of related transactions as a result of which a single person or several persons acting in concert own a majority of the Company's then outstanding stock (such merger, consolidation, sale or other transaction being hereinafter referred to as a "Transaction"), all outstanding options and SARs will become immediately exercisable and each outstanding share of Restricted Stock and each outstanding Deferred Stock Award shall immediately become free of all restrictions and conditions. Upon consummation of the Transaction, all outstanding options and SARs will terminate and cease to be exercisable. These provisions will not apply, however, to any Transaction. As a result of which (a) the holders of Common Stock prior to the Transaction retain or acquire securities constituting a majority of the outstanding voting common stock of the acquiring or surviving corporation or other entity and (b) no single person owns more than half of the outstanding voting common stock of the acquiring or surviving corporation or other entity. In lieu of the foregoing, if there is an acquiring or surviving corporation or entity, the Committee may by vote of a majority of the members of the Committee who are Continuing Directors (as defined below), arrange to have such acquiring or surviving corporation or entity or an affiliate thereof grant to participants holding outstanding Awards replacement Awards which, in the case of ISGs, satisfy, in the determination of the Committee, the requirements of Section 425(c) of the Code. The term "Continuing Director" means any director of the Company who (i) is not an Acquiring Person (as defined in the Plan) or an affiliate of an Acquiring Person and (ii) either was (a) a member of the Board of Directors on May 17, 1994 or (b) nominated fur his or her initial term of office by a majority of the Continuing Directors at the time of such nomination. Amendments and Termination. The Committee will have the authority to make such amendments to any terms and conditions applicable to outstanding Awards as are consistent with the Plan provided that no such action will modify an Award in a manner adverse to the participant without the participant's consent, except as such modification is provided for or contemplated in the terms of the Award. The Board may amend, suspend or terminate the Plan without shareholder approval. Certain Federal Income Tax Consequences of the Equity Incentive Plan . The following description of certain Federal income tax consequences of the Equity Incentive Plan is based upon current statutes, regulations and interpretations and does not include State or local income tax consequences applicable to a person who receives a stock option under the Equity Incentive Plan. Neither the option holder nor the Company incurs any Federal income tax consequences as a result of the grant of an option under the Equity Incentive Plan. Upon the exercise of a Non-Qualified Option, the difference between the exercise price and the fair market value of the shares on the Income Recognition Date (defined below) will be taxable as ordinary income to the option holder as of such Income Recognition Date. The Income Recognition Date for shares received upon exercise of a Non-Qualified Option under the Equity Incentive Plan is the date of exercise (except in the case of persons subject to Section l6b of the Securities Exchange Act of 1934, in which case the Income Recognition Date will generally be the later of the date of exercise or the date six (6) months after the date of grant, unless the option holder elects to recognize income as of the exercise date). At the time of a subsequent sale of any shares of Common Stock obtained upon the exercise of a Non-Qualified Option under the Equity Incentive Plan, any gain or loss generally will be a capital gain or loss to the option holder. Such capital gain or loss will be long-term gain or loss if the sale occurs more than one (1) year after the Income Recognition Date and short-term capital gain or loss if the sale occurs one (1) year or less after the Income Recognition Date. The Company will be entitled to a deduction for Federal income tax purposes in the same time and in the same amount that the holder of a Non-Qualified Option recognizes ordinary income, to the extent that such income is considered reasonable compensation under the Code, and provided that the Company properly withholds taxes in respect of the exercise. The Company will not, however, be entitled to a deduction with respect to any payment that constitutes an "excess parachute payment" pursuant to Section 280G of the Code and does not qualify as reasonable compensation pursuant to that Section. Such payments will also subject a participant in the Plan to a 20% exercise tax. An option holder will not recognize any income, and the Company will not be entitled to a deduction, upon the exercise of an ISO during the option holder's employment with the Company or within three (3) months after termination of employment (or longer in the event of termination by reason of death or disability); however, in certain circumstances, upon the exercise of an ISO, the option holder may be subject to the alternative minimum tax. Assuming that the option holder does not dispose of the shares received within the "incentive stock option holding period", which is both two (2) years after the ISO was granted and one (1) year after the transfer of shares upon exercise of an ISO, any gain recognized by the option holder on the sale or exchange of the shares will be treated as long-term capital gain and any loss sustained will be a long-term capital loss. If the shares acquired upon exercise of an ISO are disposed of before the end of the incentive stock option holding period, the disposition may cause the option holder to recognize ordinary income.A participant who has been awarded Restricted Stock will not recognize taxable income at the time of the award (except in cases where an award of Common Stock is made without the imposition of transfer or forfeiture restrictions, in which case the recipient will recognize ordinary income and the Company will be entitled to a corresponding deduction as described below). At the time any transfer or forfeiture restrictions, applicable to the Restricted Stock award lapse, the recipient will recognize ordinary income and the Company. A ill be entitled to a corresponding deduction equal to the excess of the fair market value of such stock at such time over the amount paid therefor (if any), provided that the Company properly withholds taxes at that time. Dividends paid to the recipient on the Restricted Stock at or prior to such time will be ordinary compensation income to the recipient and deductible as such by the Company. A participant who is granted a Deferred Stock Award will not recognize ordinary income at the time of the Award. At the time that all of the conditions to the receipt of the Common Stock subject to the Award are satisfied, the recipient will recognize ordinary income and the Company will be entitled to a corresponding deduction equal to the excess of the fair market value of such stock at such time over the amount paid therefore (if any), provided the Company properly withholds taxes at that time. There are no Federal income tax consequences either to the employee or the Company upon the grant of SARs. The amount of any cash (or the fair market value of any Common Stock) received by the holder upon the exercise of SARs under the Plan will be subject to ordinary income tax in the year of receipt and the Company \N ill be entitled to a deduction for such amount, provided that the Company properly withholds taxes in respect of the exercise. In view of the recent changes to existing tax laws, the Company presently is considering that action, if any, it will take with respect to qualifying compensation paid to its executive officers for deductibility under Section 162(m) of the Code. Effective January 1, 1994, Section 162(m) of the Code limits deductions for compensation paid to or accrued for any officer named in the Compensation Table presented in the Company's Proxy Statement to S1, 000,000 per annum. Certain types of compensation, which qualify as performance-based compensation, are not subject to the specified limit on deductibility if the criteria for the awards are approved by an independent committee of the Board and by shareholders. As presently constituted, the Committee does not qualify as an independent committee for purposes of Section 162 (m). As a result, unless the Committee is reconstituted to be an independent committee, Awards to the Company's five most highly compensated executive officers will be subject to the limitation imposed by Section 162 (m). The following table sets forth information as of June 6, 1994, with respect to the number of options granted under the Equity Incentive Plan to the named non-employee directors of the Company, subject to securing the approval of the Equity Incentive Plan by the Company's shareholders. The per share fair market value of the Company's Common Stock on May 17, 1994, the grant date for the options granted to the persons named in the table below, was $4.44, an