PRE 14A 1 pre14a03725_08152007.htm sec document

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  SCHEDULE 14A
                                 (RULE 14a-101)

                     INFORMATION REQUIRED IN PROXY STATEMENT
                            SCHEDULE 14A INFORMATION

           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:

      /X/   Preliminary Proxy Statement

      / /   Confidential, For Use of the Commission Only (as permitted by
            Rule 14a-6(e)(2))

      / /   Definitive Proxy Statement

      / /   Definitive Additional Materials

      / /   Soliciting Material Pursuant to ss. 240.14a-12

                               The LGL Group, Inc.
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                (Name of Registrant as Specified in Its Charter)


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                               THE LGL GROUP, INC.
                          140 GREENWICH AVE, 4TH FLOOR
                          GREENWICH, CONNECTICUT 06830

                NOTICE OF THE 2007 ANNUAL MEETING OF SHAREHOLDERS

                           TO BE HELD AUGUST 15, 2007

                                                                   July 13, 2007

To the Shareholders of The LGL Group, Inc.:

      NOTICE IS HEREBY GIVEN that the 2007 Annual Meeting of  Shareholders  (the
"2007  Annual  Meeting") of The LGL Group,  Inc.,  an Indiana  corporation  (the
"Corporation"),  will be held at The Greenwich Library,  101 West Putnam Avenue,
Greenwich,  Connecticut  on  Wednesday,  August 15,  2007,  at 9:30 a.m. for the
following purposes:

      1.    To elect nine  directors  to serve until the 2008 Annual  Meeting of
            Shareholders  and  until  their  successors  are  duly  elected  and
            qualify;

      2.    To consider and approve a proposal to reincorporate  the Corporation
            in the State of Delaware;

      3.    To ratify the appointment of Ernst & Young LLP as the  Corporation's
            independent  auditors for the fiscal year ending  December 31, 2007;
            and

      4.    To transact such other business as may properly come before the 2007
            Annual Meeting of Shareholders or any adjournments thereof.

      Information  relating  to the above  matters is set forth in the  attached
Proxy Statement.  As determined by the Board of Directors,  only shareholders of
record at the close of business on July 2, 2007 are  entitled to receive  notice
of, and to vote at, the 2007 Annual Meeting and any adjournments thereof.

      THE BOARD OF DIRECTORS  ENCOURAGES ALL  SHAREHOLDERS TO PERSONALLY  ATTEND
THE 2007 ANNUAL MEETING. YOUR VOTE IS VERY IMPORTANT REGARDLESS OF THE NUMBER OF
SHARES  YOU OWN.  WHETHER  OR NOT YOU PLAN TO  ATTEND  THE  ANNUAL  MEETING,  WE
ENCOURAGE  YOU TO READ THIS PROXY  STATEMENT  AND SUBMIT  YOUR PROXY CARD IN THE
ENCLOSED  POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE IN ORDER TO INSURE THAT YOUR
SHARES OF COMMON  STOCK WILL BE  REPRESENTED  AT THE 2007 ANNUAL  MEETING.  YOUR
COOPERATION IS GREATLY APPRECIATED.

                                      By Order of the Board of Directors

                                      /s/ Steve Pegg
                                      ----------------------------------
                                      Steve Pegg
                                      SECRETARY


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                               THE LGL GROUP, INC.
                         140 GREENWICH AVENUE, 4TH FLOOR
                          GREENWICH, CONNECTICUT 06830

                                 PROXY STATEMENT

      This Proxy  Statement  is  furnished  by the Board of Directors of The LGL
Group,  Inc. (the  "Corporation") in connection with the solicitation of proxies
for use at the 2007 Annual Meeting of Shareholders  (the "2007 Annual  Meeting")
to be  held  at  The  Greenwich Library,  101  West  Putnam  Avenue,  Greenwich,
Connecticut  on Wednesday,  August 15, 2007,  at 9:30 a.m. and any  adjournments
thereof.  This Proxy Statement and the accompanying proxy are first being mailed
to shareholders on or about July 13, 2007.

                     SUMMARY OF THE REINCORPORATION PROPOSAL

      The Board of Directors of the Corporation  proposes,  in Proposal 2 below,
to  reincorporate  the  Corporation  in the State of  Delaware.  Currently,  the
Corporation  is  an  Indiana  corporation.   This  summary  highlights  selected
information  about the  reincorporation  proposal and may not contain all of the
information that is important to you. To better  understand the  reincorporation
proposal   and  for  a  complete   description   of  the  legal   terms  of  the
reincorporation,  you should read this entire proxy statement carefully, as well
as those additional documents to which we have referred you.

PRINCIPAL TERMS

      o     In  order  to  reincorporate  as  a  Delaware   corporation,   the
            Corporation will organize a Delaware  corporation and will own all
            of its  stock.  The  Corporation  will  then  merge  into  its new
            Delaware  subsidiary,  and the  Delaware  corporation  will be the
            corporation   that  survives  the  merger  (the   "Reincorporation
            Merger").  The surviving  corporation's  name will remain "The LGL
            Group,  Inc." ("LGL  Delaware").  The form of Merger  Agreement is
            included as EXHIBIT A to this Proxy Statement.

      o     LGL  Delaware  will  succeed to all of the  rights,  properties  and
            assets and assume all of the liabilities of the  Corporation,  which
            will cease to exist as a result of the  Reincorporation  Merger. The
            principal  offices,  business,  management and capitalization of LGL
            Delaware will be the same as those of the Corporation.

      o     Upon the  effectiveness  of the  Reincorporation  Merger,  every one
            share of the common stock of the  Corporation,  par value $0.01 (the
            "Common Stock"),  will  automatically be converted into one share of
            common stock of LGL Delaware. The existing stock certificates of the
            Corporation will serve as valid stock  certificates for LGL Delaware
            until replaced.

      o     As an Indiana  corporation,  the  Corporation  is  governed by the
            Indiana  Business  Corporation  Law  ("IBCL")  and its Articles of
            Incorporation  ("Present Articles of  Incorporation")  and By-Laws
            ("Present  By-Laws").  Following the  Reincorporation  Merger, LGL


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            Delaware will be governed by the Delaware General  Corporation Law
            ("DGCL") and the terms of its Certificate of  Incorporation  ("New
            Certificate of  Incorporation")  and its By-Laws ("New  By-Laws"),
            which  are   attached   hereto  as   EXHIBIT  B  and   EXHIBIT  C,
            respectively.  Because there are differences  between the DGCL and
            the  IBCL  and  corresponding   differences  between  the  Present
            Articles of  Incorporation  and Present By-Laws as compared to the
            New   Certificate   of   Incorporation   and  New   By-Laws,   the
            Reincorporation  Merger  will  result in some  differences  in the
            rights of stockholders.  These differences are discussed below.

      o     Although  your  rights  as a  stockholder  of LGL  Delaware  will be
            governed by the laws of the State of Delaware,  the New  Certificate
            of   Incorporation   and  New  By-Laws  of  LGL  Delaware   will  be
            substantially  the same as the Present Articles of Incorporation and
            Present By-Laws of the Corporation.

RECOMMENDATION OF THE CORPORATION'S BOARD

      o     The  Board  of  Directors  has  unanimously  approved  the  proposed
            reincorporation  of the Corporation in the State of Delaware and has
            determined that the  reincorporation is in the best interests of the
            Corporation's  shareholders.  The  Board  of  Directors  unanimously
            recommends that you vote FOR the reincorporation proposal.

VOTE REQUIRED/CONDITIONS

      o     No action may be taken on any matter to be acted upon at the meeting
            unless a quorum is present  with  respect to that  matter.  For each
            matter  to be acted  upon at the  meeting,  a quorum  consists  of a
            majority  of the votes  entitled  to be cast by the  holders  of all
            shares  of  Common  Stock  outstanding  on the  Record  Date for the
            meeting. The proposed reincorporation must be approved by a majority
            of the outstanding shares of Common Stock.

      o     Notwithstanding  the  above,  before  the  reincorporation   becomes
            effective,  the  Board of  Directors  may  decide  not to cause  the
            reincorporation  to occur if, for any reason, the Board of Directors
            determines  that  the  reincorporation  is no  longer  in  the  best
            interests of the Corporation.

FINANCIAL CONDITION OF LGL DELAWARE

      o     Prior  to  the  consummation  of  the  Reincorporation  Merger,  LGL
            Delaware will have no material assets and no business operations and
            will be formed solely for the purpose of the reincorporation.

      o     Upon consummation of the  Reincorporation  Merger, LGL Delaware will
            succeed to all of the rights,  properties  and assets and assume all
            of the  liabilities of the  Corporation by operation of law, and its
            financial   statements  will  be  substantially   identical  to  the
            Corporation's financial statements,  the only difference being those
            appropriate to reflect the Corporation's new corporate identity.


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DISSENTERS' RIGHTS NOT AVAILABLE

      o     Dissenters' rights will not be available to shareholders who dissent
            from the Reincorporation Merger.

                               GENERAL INFORMATION

HOW TO VOTE

      o     No action may be taken on any matter to be acted upon at the meeting
            unless a quorum is present  with  respect to that  matter.  For each
            matter  to be acted  upon at the  meeting,  a quorum  consists  of a
            majority  of the votes  entitled  to be cast by the  holders  of all
            shares  of  Common  Stock  outstanding  on the  Record  Date for the
            meeting.

      o     Shares held directly in your name as the "Shareholder of Record" may
            be voted in person at the 2007 Annual  Meeting.  If you choose to do
            so, please bring the enclosed proxy card or proof of identification.
            Even if you  currently  plan to attend the 2007 Annual  Meeting,  we
            recommend that you submit your proxy as described below so that your
            vote will be counted if you later  decide not to attend the meeting.
            Shares held in street name may be voted in person by you only if you
            obtain a signed proxy from the record holder giving you the right to
            vote the shares.

      o     Whether you hold shares  directly  as the  shareholder  of record or
            beneficially  in street  name,  you may  direct  your  vote  without
            attending  the  meeting.  You may vote by  granting  a proxy or, for
            shares held in street name, by  submitting  voting  instructions  to
            your broker or nominee. Please refer to the instructions included on
            your  proxy  card or, for  shares  held in street  name,  the voting
            instruction card included by your broker or nominee.

      o     Only shareholders of record at the close of business on July 2, 2007
            are entitled to notice of, and to vote at, the 2007 Annual  Meeting.
            As of the close of business on such date, 2,154,702 shares of Common
            Stock were  outstanding  and eligible to be voted by their  holders.
            Each share of Common  Stock is  entitled  to one vote on each matter
            submitted to shareholders.  Where specific instructions are given in
            the  proxy,  the  proxy  will  be  voted  in  accordance  with  such
            instructions.  If no such  instructions are given, the proxy will be
            voted FOR the nominees for director  named below,  FOR approval of a
            change  of  the  Corporation's  state  of  incorporation,   and  FOR
            ratification  of the  appointment of the  Corporation's  independent
            auditors  and in the  discretion  of the proxies with respect to any
            other  matter  that is  properly  brought  before  the  2007  Annual
            Meeting.


                                       6


      o     Under the laws of  Indiana  (the  Corporation's  current  domicile),
            abstentions  and broker  non-votes  are not counted for  purposes of
            determining  whether  a  proposal  has  been  approved,  but will be
            counted for purposes of determining  whether a quorum is present.  A
            broker non-vote occurs when a bank,  broker or other nominee holding
            shares for a beneficial  owner does not receive voting  instructions
            from the  beneficial  owner on a  particular  matter and the nominee
            cannot vote the shares under American Stock Exchange ("AMEX") rules.

REVOKING YOUR PROXY

      o     You may revoke your proxy at any time before it is voted at the 2007
            Annual  Meeting by any one of the following  actions:  (1) executing
            and  returning  a proxy  bearing a later  date to the  Corporation's
            Secretary at the Corporation's  principal offices; (2) giving notice
            of  such  revocation  to  the  Corporation's  Secretary;  or  (3) by
            attending the 2007 Annual Meeting and voting in person.

                          SECURITY OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT

      The following  table sets forth, as of July 2, 2007,  certain  information
with respect to all persons known to the  Corporation to own  beneficially  more
than 5% of the  Common  Stock,  which is the only  class of voting  stock of the
Corporation  outstanding.  The table also sets forth information with respect to
the Common Stock beneficially owned by each of the Directors and named executive
officers and by all Directors and executive  officers as a group.  The number of
shares  beneficially  owned is  determined  under  rules of the  Securities  and
Exchange Commission (the "SEC"). Under such rules, beneficial ownership includes
any shares as to which a person has sole or shared voting or investment power or
any shares that such person can acquire within 60 days (e.g.,  through  exercise
of stock options or conversion of  securities).  Except as otherwise  indicated,
the shareholders  listed in the table have sole voting and investment power with
respect to the Common Stock indicated. The following information is reflected in
filings with the SEC.


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                                                                Amount and Nature
Name and Address of                                               of Beneficial        Percent of
Beneficial Owner (1)                                                Ownership           Class (2)
-------------------------------------------------------------   -----------------      ----------
Marc Gabelli ................................................       528,383(3)            24.5%
Mario J. Gabelli ............................................       366,874(4)            17.0%
Bulldog Investors, Phillip Goldstein and Andrew Dakos .......       143,199(5)             6.6%
Jeremiah M. Healy ...........................................        10,000(6)            *
Steve Pegg ..................................................        10,000(7)            *
Robert R. Zylstra ...........................................        10,400(8)            *
E. Val Cerutti ..............................................         1,445(9)            *
Peter DaPuzzo ...............................................         9,000               *
Timothy Foufas ..............................................             0               *
Avrum Gray ..................................................        13,385(10)           *
Patrick J. Guarino ..........................................         2,000               *
Kuni Nakamura ...............................................         1,000(11)           *
Anthony R. Pustorino ........................................         3,004               *
Javier Romero ...............................................             0               *
All Directors and executive officers as a
group (11 in total) .........................................       588,617(12)           27.3%

------------
* Represents holdings of less than 1%

(1)   Unless otherwise indicated,  the address of each holder of more than 5% of
      the Common Stock is 401 Theodore Fremd Ave., Rye, New York 10580-1430.

(2)   The applicable  percentage of ownership for each beneficial owner is based
      on 2,154,702 shares of Common Stock outstanding as of July 2, 2007. Shares
      of Common  Stock  issuable  upon  exercise of  options,  warrants or other
      rights  beneficially  owned that are exercisable within 60 days are deemed
      outstanding  for the purpose of computing the percentage  ownership of the
      person holding such  securities and rights but are not deemed  outstanding
      for computing the percentage ownership of any other person.

(3)   Includes (i) 1,504  shares of Common Stock owned  directly by Marc Gabelli
      and (ii)  506,879  shares  beneficially  owned by Venator Fund and Venator
      Global,  LLC  ("Venator  Global")  and  20,000  shares  issuable  upon the
      exercise of options held by Marc  Gabelli at a $13.173 per share  exercise
      price.  Venator Global, which is the sole general partner of Venator Fund,
      is  deemed  to  have   beneficial   ownership  of  the  securities   owned
      beneficially  by Venator  Fund.  Marc Gabelli is the  President of Venator
      Global.

(4)   Includes  (i) 244,396  shares of Common  Stock owned  directly by Mario J.
      Gabelli  (including  8,903 held for the benefit of Mario J. Gabelli  under
      the Lynch Interactive  Corporation 401(k) Savings Plan); (ii) 1,203 shares
      owned by a charitable  foundation  of which Mario J. Gabelli is a trustee;
      (iii)  96,756  shares  owned by a limited  partnership  in which  Mario J.
      Gabelli is the general  partner and has an  approximate  5% interest;  and
      (iv) 24,519 shares owned by Lynch Interactive Corporation,  of which Mario
      J. Gabelli is Chairman and the beneficial  officer of approximately 24% of
      the  outstanding  common  stock.  Mario J.  Gabelli  disclaims  beneficial


                                       8


      ownership  of the shares  owned by such  charitable  foundation,  by Lynch
      Interactive  Corporation  and by such limited  partnership,  except to the
      extent of his 5% interest in such limited partnership.

(5)   Based solely on information  contained in a report on Schedule 13D/A filed
      with the SEC on June 5, 2007 by Bulldog  Investors,  Phillip Goldstein and
      Andrew  Dakos.  Mr.  Goldstein and Mr. Dakos are  investment  advisors and
      principals  of Bulldog  Investors.  The address of Bulldog  Investors  and
      Phillip  Goldstein  is 60 Heritage  Drive,  Pleasantville,  NY 10570.  The
      address of Andrew  Dakos is Park 80 West,  Plaza  Two,  Saddle  Brook,  NJ
      07663.

(6)   Represents   10,000   shares  of   restricted   stock  granted  under  the
      Corporation's 2001 Equity Incentive Plan.

(7)   Represents   10,000   shares  of   restricted   stock  granted  under  the
      Corporation's 2001 Equity Incentive Plan.

(8)   Includes  (i)  10,000  shares  of  restricted   stock  granted  under  the
      Corporation's 2001 Equity Incentive Plan and (ii) 400 shares jointly owned
      with Mr. Zylstra's wife, with whom he shares voting and investment power.

(9)   1,445  shares are  jointly  owned with Mr.  Cerutti's  wife,  with whom he
      shares voting and investment power.

(10)  Includes (i) 5,114  shares  owned by Mr. Gray;  (ii) 751 shares owned by a
      partnership of which Mr. Gray is the general  partner;  (iii) 2,407 shares
      owned by a partnership  of which Mr. Gray is one of the general  partners;
      (iv) 2,105 shares owned by Mr. Gray's wife;  and (v) 3,008 shares owned by
      a partnership of which Mr. Gray's wife is one of the general partners.

(11)  These  shares are jointly  owned with Mr.  Nakamura's  wife,  with whom he
      shares voting and investment power.

(12)  Includes an aggregate of 20,000  shares  issuable upon exercise of options
      held by all Directors and executive officers as a group.

                                 PROPOSAL NO. 1

                              ELECTION OF DIRECTORS

      Nine directors are to be elected at the 2007 Annual Meeting to serve until
the 2008 Annual Meeting and until their successors are duly elected and qualify.
Except where  authority to vote for directors has been withheld,  it is intended
that the proxies received  pursuant to this  solicitation  will be voted FOR the
nominees named below. If for any reason any nominee does not stand for election,
such proxies  will be voted in favor of the  remainder of those named and may be
voted for  substitute  nominees in place of those who do not stand.  Management,
however,  has no reason to expect that any of the nominees will be not stand for
election.  The election of directors  shall be  determined by a plurality of the
votes cast.

      The by-laws of the  Corporation  provide that the Board of Directors shall
consist  of no fewer  than  five and no more than 13  members.  Each of the nine
nominees  currently  serves  as a  director  of  the  Corporation.  Biographical


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summaries and ages of the nominees as of July 2, 2007 are set forth below.  Data
with respect to the number of shares of Common Stock  beneficially owned by each
of the  nominees is set forth under the caption  "Security  Ownership of Certain
Beneficial  Owners  and  Management"  herein.  All  such  information  has  been
furnished to the Corporation by the nominees.

                                                   Offices and Positions Held
                                                     With the Corporation,
                                                    Business Experience and
                                                   Principal Occupation for
                                                      Last Five Years,
                                    Served as      and Directorships in Public
                                     Director          Corporations and
Name                        Age       From           Investment Companies
-------------------------   ---     ---------   --------------------------------
Marc Gabelli                 39       2003      Chairman   of  the   Corporation
                                                (September   2004  to  present);
                                                Managing director (1996 to 2004)
                                                and President (2004 to present),
                                                GGCP,     Inc.,     a    private
                                                corporation      that      makes
                                                investments  for its own account
                                                and the parent  company of GAMCO
                                                Investors,  Inc.,  a NYSE listed
                                                provider of  financial  advisory
                                                services;  President  of  Gemini
                                                Capital      Management     LLC;
                                                President of the general partner
                                                of Venator Merchant Fund, LP.

E. Val Cerutti               66       1990      Business   Consultant  (1992  to
                                                present);     Consulting    Vice
                                                Chairman  (2006 to present)  and
                                                President  and  Chief  Operating
                                                Officer  (1975 to 1992),  Stella
                                                D'Oro    Biscuit   Co.,    Inc.,
                                                producer  of  bakery   products;
                                                Director   or  Trustee  of  four
                                                registered  investment companies
                                                included   within  the   Gabelli
                                                Funds Mutual Fund Complex  (1990
                                                to present); Director, Approach,
                                                Inc.  (1999 to 2005),  a private
                                                company    providing    computer
                                                consulting   services;    former
                                                Chairman  of Board of  Trustees,
                                                Fordham Preparatory School.

Peter DaPuzzo                67       2006      Retired;     Senior     Managing
                                                Director,  Cantor  Fitzgerald LP
                                                (2002 to 2005); Co-President and
                                                CEO,   Cantor   Fitzgerald   and
                                                Company,        the       equity
                                                institutional  sales and trading
                                                division of Cantor Fitzgerald LP
                                                (1993 to 2002); former Chairman,
                                                the  National   Organization  of
                                                Investment   Professionals,    a
                                                professional       group      of
                                                institutional  and broker dealer
                                                senior  managers;   member,  the
                                                Presidential  Advisory Committee
                                                to  the  President  of  Security
                                                Traders Association of New York;
                                                member  and past  Chairman,  the
                                                Securities Industry  Association
                                                -     Institutional      Traders
                                                Committee; member     of     the
                                                Advisory  Committee to the Board
                                                of  Directors,  the  Shelter for
                                                the  Homeless in  Stamford,  CT;
                                                member,       the       National
                                                Italian-American        Business
                                                Council;  member,  the Greenwich
                                                Roundtable.


                                       10


Timothy Foufas               38       2007      Managing Partner, Plato Foufas &
                                                Co.   (2005   to   present),   a
                                                financial    services   company;
                                                President,   Levalon  Properties
                                                (2007 to present), a real estate
                                                property   management   company;
                                                Senior Vice President,  Bayshore
                                                Management  Co.  (2005 to 2006);
                                                Director  of  Investments,  Liam
                                                Ventures   (2000  to  2005),   a
                                                private equity investment firm.

Avrum Gray                   71       1999      Chairman  and  Chief   Executive
                                                Officer,      G-Bar      Limited
                                                Partnership and affiliates (1982
                                                to     present),     proprietary
                                                computer    based     derivative
                                                arbitrage   trading   companies;
                                                Chairman  of  the  Board,  Lynch
                                                Systems,  Inc.,  (1997 to 2001);
                                                Director,  Nashua Corp. (2001 to
                                                present),    a   NASDAQ   listed
                                                manufacturer  of paper  products
                                                and   labels;    Director,    SL
                                                Industries,    Inc.   (2001   to
                                                present),   an  American   Stock
                                                Exchange listed  manufacturer of
                                                power and data quality equipment
                                                and systems; Director,  Material
                                                Sciences  Corporation  (2003  to
                                                present), a NYSE listed provider
                                                of material-based  solutions for
                                                electronic,  acoustical, thermal
                                                and coated  metal  applications;
                                                Director,    Lynch   Interactive
                                                Corporation  (2006 to  present),
                                                an   operator   of   independent
                                                telephone      companies     and
                                                television   stations;   member,
                                                Illinois Institute of Technology
                                                Financial  Markets  and  Trading
                                                Advisory  Board;  former member,
                                                Illinois Institute of Technology
                                                Board of Overseers  MBA Program;
                                                former     Chairman,     Chicago
                                                Presidents Organization;  former
                                                Chairman   of   the   Board   of
                                                Trustees,    Spertus    College;
                                                former Presidential Appointee to
                                                The U.S.  Dept. of Commerce ISAC
                                                16.

Patrick J. Guarino           64       2006      Business   Consultant  (2005  to
                                                present);  Managing  Partner  of
                                                Independent    Board    Advisory
                                                Services,  LLC (2002 to 2005), a
                                                corporate governance  consulting
                                                firm;  Executive Vice President,
                                                Ultramar     Diamond    Shamrock
                                                Corporation  (1996 to  2000),  a
                                                NYSE, Fortune 200, international
                                                petroleum refining and marketing
                                                company;  Senior Vice  President
                                                and  General  Counsel,  Ultramar
                                                Corporation  (1992  to  1996)  a
                                                NYSE, Fortune 200, international
                                                petroleum and marketing company;
                                                Senior   Vice    President   and
                                                General Counsel of Ultramar PLC,
                                                (1986 to 1992),  a London  Stock
                                                Exchange  listed  international,
                                                integrated oil company.


                                       11


Kuni Nakamura                38       2007      President,   Advanced   Polymer,
                                                Inc.   (1990  to   present),   a
                                                privately      held     chemical
                                                manufacturer and distributor.

Anthony R. Pustorino, CPA    81       2002      Retired;   Professor   Emeritus,
                                                Pace    University    (2001   to
                                                present);      Professor      of
                                                Accounting,    Pace   University
                                                (1965 to 2001); former Assistant
                                                Chairman, Accounting Department,
                                                Pace  University;  President and
                                                Shareholder,  Pustorino, Puglisi
                                                &  Co.,  P.C.,   CPAs  (1961  to
                                                1989);    Instructor,    Fordham
                                                University          (1961-1965);
                                                Assistant            Controller,
                                                Olivetti-Underwood   Corporation
                                                (1957  to  1961);   CPA,   Peat,
                                                Marwick,  Mitchell  & Co.,  CPAs
                                                (1953 to 1957); former Chairman,
                                                Board  of  Directors,  New  York
                                                State     Board    for    Public
                                                Accountancy;   former  Chairman,
                                                CPA Examination  Review Board of
                                                National  Association  of  State
                                                Boards  of  Accountancy;  former
                                                member,   Council  of   American
                                                Institute  of  Certified  Public
                                                Accountants;     former     Vice
                                                President,  Treasurer,  Director
                                                and member,  Executive Committee
                                                of New  York  State  Society  of
                                                Certified  Public   Accountants;
                                                current  Director  or Trustee of
                                                fourteen  registered  investment
                                                companies  included  within  the
                                                Gabelli    Funds   Mutual   Fund
                                                Complex.

Javier Romero                34       2007      Head  of  Corporate   Finance  &
                                                Strategy   practice   (2000   to
                                                present),  Arthur D.  Little,  a
                                                consulting  firm;  International
                                                Consultant for the World Bank in
                                                Washington  DC (1999  to  2000);
                                                attorney,  Arthur  Andersen  Law
                                                Firm,   based   in   Spain   and
                                                specializing  in  corporate  law
                                                (1996 to 1998).

TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS

      For the fiscal year ended  December 31, 2006,  there were no  transactions
that  were  required  to be  described  under  Item  404(a)  of  Regulation  S-K
promulgated by the SEC. All transactions  between the Corporation and any of its
officers,   directors,   director  nominees,  principal  stockholders  or  their
immediate family members are to be approved by a majority of its independent and
disinterested  directors, and are to be on terms no less favorable to it than it
could obtain from unaffiliated third parties. Such policy and procedures are set
forth in a resolution of the Board of Directors.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Corporation's directors,  executive officers and holders of more than 10% of
the Corporation's Common Stock to file with the SEC and the AMEX initial reports
of ownership  and reports of changes in the  ownership of Common Stock and other
equity  securities of the Corporation.  Such persons are required to furnish the
Corporation with copies of all Section 16(a) filings.


                                       12


      Based  solely  upon a review of the copies of the forms  furnished  to the
Corporation,  the Corporation  believes that its officers and directors complied
with all applicable filing  requirements  during the 2006 fiscal year, except as
noted below:

      On January 23, 2006,  Anthony R. Pustorino filed a Statement of Changes in
Beneficial  Ownership  of  Securities  on Form 4 covering one  transaction  that
occurred on January 12, 2006.

      On May 1, 2006,  Eugene C. Hynes filed an Annual  Statement  of Changes in
Beneficial  Ownership  of  Securities  on Form 5 covering one stock option grant
that occurred on May 26, 2005.

      On May 1,  2006,  Marc  Gabelli  filed an Annual  Statement  of Changes in
Beneficial  Ownership  of  Securities  on Form 5 covering one stock option grant
that occurred on May 26, 2005.

      On May 1, 2006,  John C. Ferrara  filed an Annual  Statement of Changes in
Beneficial  Ownership  of  Securities  on Form 5 covering one stock option grant
that occurred on May 26, 2005.

VOTES REQUIRED

      Each director  receiving a plurality of affirmative votes will be elected.
You may  withhold  votes  from any or all  nominees.  Except  for the votes that
shareholders of record  withhold from any or all nominees,  the persons named in
the proxy card will vote such proxy FOR the nominees.

RECOMMENDATION OF THE BOARD OF DIRECTORS

      THE  BOARD OF  DIRECTORS  RECOMMENDS  A VOTE  "FOR"  THE  ELECTION  OF ITS
NOMINEES FOR THE BOARD OF  DIRECTORS  TO SERVE UNTIL THE 2008 ANNUAL  MEETING OF
SHAREHOLDERS AND UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFY.


                                       13


                              CORPORATE GOVERNANCE

      The  Board of  Directors  met on four  occasions  during  the  year  ended
December 31, 2006. Each of the directors  attended at least 75% of the aggregate
of (i) the total number of meetings of the Board of  Directors  (held during the
period for which he was a director);  and (ii) the total number of meetings held
by all  committees  of the Board of  Directors  on which he served  (during  the
periods that he served).  All five  members of the Board of Directors  nominated
for reelection at last year's annual meeting of the  Corporation's  shareholders
attended  such  meeting.  The  Board of  Directors  has  three  committees,  the
principal duties of which are described below.

      AUDIT COMMITTEE:  The members of the Audit Committee are Messrs. Pustorino
(Chairman),  Cerutti,  DaPuzzo and Gray.  The Board of Directors has  determined
that all audit committee members are financially  literate and independent under
the current listing  standards of the AMEX. Mr. Pustorino serves as Chairman and
qualifies as an "audit committee financial expert." The Audit Committee met four
times during 2006. The Audit Committee  operates in accordance with its charter,
which is available  on our website at  WWW.LGLGROUP.COM.  The charter  gives the
Audit Committee the authority and responsibility for the appointment, retention,
compensation and oversight of our independent auditors,  including  pre-approval
of all audit and non-audit services to be performed by our independent auditors.
The Audit Committee also reviews the  independence of the independent  auditors,
reviews  with  management  and the  independent  auditors  the annual  financial
statements  prior  to their  filing  with the SEC,  reviews  the  report  by the
independent auditors regarding management procedures and policies and determines
whether  the  independent  auditors  have  received  satisfactory  access to the
Corporation's  financial records and full cooperation of corporate  personnel in
connection with their audit of the  Corporation's  records.  The Audit Committee
also  reviews the  Corporation's  financial  reporting  process on behalf of the
Board of Directors, reviews the financial information issued to shareholders and
others,  including a discussion of the quality,  not just the acceptability,  of
the accounting principles;  the reasonableness of significant judgments; and the
clarity of discussions in the financial statements,  and monitors the systems of
internal  control and the audit process.  Management has primary  responsibility
for the financial statements and the reporting process. See "Report of the Audit
Committee" herein.

      COMPENSATION  COMMITTEE:  The members of the  Compensation  Committee  are
Messrs.  Guarino  (Chairman),  Cerutti,  DaPuzzo  and Gray.  All  members of the
Compensation  Committee are  "independent"  in accordance  with AMEX rules.  The
Compensation  Committee met two times during 2006. The  responsibilities  of the
Compensation  Committee  are to review and  approve  compensation  and  benefits
policies  and  objectives,  determine  whether the  Corporation's  officers  and
directors are  compensated in accordance  with these policies and objectives and
carry out the Board of Directors'  responsibilities  relating to compensation of
the Corporation's executives. The Compensation Committee Charter is available at
WWW.LGLGROUP.COM.

      NOMINATING COMMITTEE:  The members of the Nominating Committee are Messrs.
DaPuzzo (Chairman),  Gray and Pustorino. All members of the Nominating Committee
are  "independent" in accordance with the AMEX rules.  The Nominating  Committee
met one time during 2006. The  responsibilities of the Nominating  Committee are
to identify individuals qualified to become Board members and recommend that the
Board select  director  nominees for the annual  meetings of  shareholders.  The
Nominating Committee Charter is available at www.lglgroup.com.


                                       14


      In  evaluating  and  determining  whether to  nominate a  candidate  for a
position on the Board of Directors,  the Nominating Committee utilizes a variety
of methods and considers  criteria such as high professional  ethics and values,
relevant  management  and/or  manufacturing   experience  and  a  commitment  to
enhancing  shareholder value.  Candidates may be brought to the attention of the
Nominating Committee by current Board members,  shareholders,  officers or other
persons.  The Nominating Committee will review all candidates in the same manner
regardless of the source of the recommendation.

      The   Nominating   Committee   will  consider   nominees   recommended  by
shareholders when properly submitted. Shareholder recommendations should include
the nominee's  name,  the nominee's  business and  professional  experience  and
membership on other boards sufficient to demonstrate  qualifications to serve on
the  Corporation's  Board of Directors and the  shareholder's  name and address.
Shareholder  recommendations should be addressed to Corporate Secretary, The LGL
Group, Inc., 140 Greenwich Ave, 4th Floor, and Greenwich, Connecticut 06830. For
purposes of potential  nominees to be considered  at the 2008 Annual  Meeting of
Shareholders,  the Corporate Secretary must receive this information by February
4, 2008.

      Shareholders  may communicate  with the Board of Directors,  including the
non-management  directors,  by  sending  an e-mail to  SPEGG@LGLGROUP.COM  or by
sending  a  letter  to The LGL  Group,  Inc.,  140  Greenwich  Ave,  4th  Floor,
Greenwich,  Connecticut 06830,  attention:  Corporate  Secretary.  The Corporate
Secretary will submit such correspondence to the Chairman of the Board or to any
specific director to whom the correspondence is directed.

      CODE OF ETHICS:  The  Corporation  has adopted a code of ethics as part of
its Amended and Restated Business Conduct Policy, which applies to all employees
of the Corporation  including its principal executive,  financial and accounting
officers.  The Amended and  Restated  Business  Conduct  Policy is  available at
WWW.LGLGROUP.COM.

                          REPORT OF THE AUDIT COMMITTEE

      The Audit Committee has reviewed and discussed the consolidated  financial
statements for the fiscal year ended December 31, 2006 with both  management and
Ernst & Young LLP, the  Corporation's  independent  auditors for the fiscal year
ended December 31, 2006. In its  discussion,  management has  represented to the
Audit Committee that the Corporation's consolidated financial statements for the
fiscal year ended  December 31, 2006 were prepared in accordance  with generally
accepted accounting principles.

      The Audit Committee meets with our independent auditors,  with and without
management  present,   to  discuss  the  results  of  their  examinations,   the
evaluations of the  Corporation's  internal  controls and the overall quality of
the Corporation's  financial  reporting.  The Audit Committee discussed with the
independent  auditors,  matters  required to be  discussed  by  Codification  of
Statements on Auditing Standards No. 61 (Communication with Audit Committees).


                                       15


      The Corporation's  independent auditors also provided to the Committee the
written  disclosures  and the letter  required by  Independence  Standards Board
Standard No. 1 (Independence  Discussions with Audit Committees),  and the Audit
Committee  has   considered   and  discussed  with  Ernst  &  Young  the  firm's
independence  and the  compatibility of the non-audit  services  provided by the
firm with its independence.

      Based on the Audit Committee's review of the audited financial  statements
and the various  discussions  noted above, the Audit Committee  recommended that
the Board of Directors include the audited consolidated  financial statements in
the  Corporation's  Annual  Report on Form 10-K for the year ended  December 31,
2006, and the Board has approved this recommendation.

                                 AUDIT COMMITTEE

                                 Anthony R. Pustorino (Chairman)
                                 E. Val Cerutti
                                 Peter DaPuzzo
                                 Avrum Gray

                             EXECUTIVE COMPENSATION

                      COMPENSATION DISCUSSION AND ANALYSIS

OVERVIEW

      The  Compensation  Committee of the Board of Directors is responsible  for
developing and determining the Corporation's executive compensation policies and
administering the Corporation's executive compensation plans. Additionally,  the
Compensation  Committee  determines the  compensation  to be paid to each of the
principal   executive  officer  and  the  principal  financial  officer  of  the
Corporation  (such  executives  who served during the fiscal year ended December
31, 2006 are hereinafter referred to as "named executive officers"),  as well as
other key employees.

COMPENSATION PHILOSOPHY AND OBJECTIVES

      The  Compensation   Committee  considers  the  ultimate  objective  of  an
executive  compensation  program to be the  creation of  stockholder  value.  An
effective executive  compensation program pursues this objective by (i) aligning
each executive  officer's interests with those of stockholders by rewarding each
executive officer based on the  Corporation's  performance and (ii) ensuring the
Corporation's  continued  ability to hire and retain  superior  employees in key
positions  by insuring  that  compensation  provided to such  employees  remains
competitive   with   the   compensation   paid   to   employees   with   similar
responsibilities  and  experience  working for  companies  of  comparable  size,
capitalization,  and complexity. The Compensation Committee designs compensation
packages for named  executive  officers  that include both cash and  stock-based
compensation  (some of the latter  vesting  over  time) tied to an  individual's
experience  and  performance  and  the  Corporation's   achievement  of  certain
short-term and long-term goals.


                                       16


DETERMINATION OF COMPENSATION AWARDS

      The  Compensation  Committee  has the primary  authority to determine  the
compensation  awards  available to the named  executive  officers other than the
Corporation's  Chief  Executive  Officer  (with  respect  to  whom  it has  sole
authority).  To assist the Compensation Committee in making such determinations,
the Chief Executive Officer conducts an annual  performance  review with each of
the named  executive  officers  in which each such  officer  provides  the Chief
Executive Officer with input about his or her contributions to the Corporation's
business during the given fiscal year. Subsequently, the Chief Executive Officer
provides  compensation  recommendations to the Compensation  Committee regarding
each of such officers.

      The  Compensation  Committee  conducts  an  annual  review  of  the  Chief
Executive Officer's  performance prior to making its determination.  During this
review, the Compensation  Committee  considers the Corporation's  performance in
the following  categories:  the performance of the Common Stock, the achievement
of agreed upon objectives such as cost reductions and other business performance
improvements.

COMPENSATION BENCHMARKING AND PEER GROUP

      The Corporation  has not retained a compensation  consultant to review its
policies and procedures with respect to the  compensation of the named executive
officers.  The Compensation  Committee  benchmarks the compensation of the named
executive officers against the median compensation paid by comparable  companies
in both related and unrelated  industries such as Frequency  Electronics,  Inc.,
Valpey Fisher Corp.,  American Technical Ceramics Corp., ARC Wireless Solutions,
Inc., and RF Monolithics, Inc. To that end, the Compensation Committee conducted
a benchmark review of the aggregate level of compensation of the named executive
officers as well as the mix of elements used to compensate  the named  executive
officers,   taking  into  account   input  from   independent   members  of  the
Corporation's  Board of Directors  and publicly  available  data relating to the
compensation  practices  and  policies  of  other  comparable  companies.  While
benchmarking may not always be appropriate as a stand-alone tool for setting the
compensation  of  the  named  executive   officers  due  to  the   Corporation's
potentially unique aspects and objectives,  the Compensation Committee generally
believes  that  gathering   such   information  is  an  important  part  of  the
Compensation Committee's decision-making process.

      The Compensation Committee recognizes that in order to attract, retain and
motivate the named executive officers,  the Compensation Committee may determine
that it is in the  Corporation's  best interest to negotiate total  compensation
packages that deviate from the  Compensation  Committee's  general  principal of
benchmarking the compensation of the named executive officers.

ELEMENTS OF COMPENSATION

      BASE SALARY

      Base salary  levels for the  Corporation's  named  executive  officers are
designed to be competitive with those of employees with similar responsibilities
working for companies of comparable  size,  capitalization  and  complexity.  In
determining  base salaries,  the  Compensation  Committee takes into account the
named executive officer's experience and performance, as well as the salaries of
similarly positioned  executives within the Corporation and general compensation
levels in the region in which the named executive officer is based.


                                       17


      ANNUAL PERFORMANCE-BASED CASH INCENTIVE BONUS

      The  Corporation's  bonus plan is  designed  to award the named  executive
officers annually based on objective  measures of the Corporation's  performance
and  subjective  evaluations  of  the  individual's  performance.   Examples  of
individual  evaluation elements are: division EBIT, inventory reduction and days
sales outstanding management,  shipment to plan, cycle time reduction,  customer
lead-times and outgoing  quality,  growth in military and aerospace  revenue and
gross margins.

      In general, the plan provides for an annual bonus pool equal to 20% of the
excess of the  consolidated  pre-tax profits of the Corporation for the calendar
year over 25% of the Corporation's  shareholders equity at the beginning of such
year. The Compensation Committee, in its discretion, may take other factors into
consideration when determining the size of the bonus pool and individual awards,
such as the  Corporation's  progress toward the achievement of strategic  goals.
The  breakdown of the bonus pool is not based on a formula,  but on factors such
as the relative importance of a named executive officer's area of responsibility
and contributions to the Corporation's earnings.

      DISCRETIONARY LONG-TERM EQUITY INCENTIVE AWARDS

      The named executive officers are also eligible for stock option grants and
restricted  stock  awards.  Such stock  options and shares of  restricted  stock
generally  vest over a period of two years in order to provide an incentive  for
continued employment.  Stock options generally expire 10 years after the date of
the grant and are awarded with their exercise price set at the fair market value
of the underlying stock on the date of grant.

      The Compensation Committee uses various factors to determine the amount of
stock  options  and  restricted  stock  it will  award to each  named  executive
officer, including the named executive officer's base salary, evaluations of the
individual's performance and the value of the stock options and restricted stock
at the time of the award.  Consequently,  an individual's  award may increase or
decrease  materially from year to year due to, for example, a significant change
in  the  individual's  responsibilities  or  in  recognition  of  a  significant
achievement.  Additionally, the Compensation Committee has approved the awarding
of stock options or restricted shares to newly hired named executive officers in
order to ensure the Corporation's ability to attract talented candidates.

      THE LGL GROUP, INC. 401(K) SAVINGS PLAN

      The 401(k) Savings Plan,  which is subject to  limitations  imposed by the
Internal Revenue Code, permits the Corporation's employees to defer a portion of
their  compensation  by  making  contributions  to the Plan and  thereby  obtain
certain tax  benefits.  Participating  employees  also  benefit from the Plan by
sharing in contributions  made by the Corporation to the Plan matching a certain
percentage  of  each  employee's  contribution  made  in a  particular  year.  A
participant's interest in his or her individual contributions, the Corporation's
contributions  and  earnings  thereon is fully  vested at all times.  The Plan's
proceeds are invested in guaranteed investment  contracts,  certain mutual funds
or the  Common  Stock  of the  Corporation,  subject  to the  discretion  of the
participants.


                                       18


      The named  executive  officers and all other  employees of the Corporation
and certain of its  subsidiaries  are eligible to  participate in the LGL Group,
Inc.  401(k)  Savings  Plan after having  completed  three months of service and
reached the age of 18. Certain of the named executive  officers  participated in
the 401(k) Savings Plan in 2006.

      OTHER BENEFITS

      The  Corporation  provides  the  named  executive  officers  with  medical
insurance,  life  insurance and  disability  benefits  that are  generally  made
available to Corporation's  employees to ensure that the Corporation's employees
have access to basic  healthcare and income  protection for themselves and their
family members.


                                       19


                             EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

      The following  table sets forth  information  with respect to compensation
earned by the named executive officers:

-------------- ------- --------- ---------- ---------- ---------- ---------------- ---------------- ---------------- ---------
  Name and      Year    Salary     Bonus      Stock      Option     Non-equity        Change in        All Other      Total
  Principal               ($)       ($)      Awards      Awards     Incentive         Pension       Compensation      ($)
  Position                                     ($)        ($)         Plan           Value and           ($)
                                                                   Compensation       Nonquali-
                                                                       ($)          fied Deferred
                                                                                    Compensation
                                                                                      Earnings
                                                                                         ($)
-------------- ------- --------- ---------- ---------- ---------- ---------------- ---------------- ---------------- ---------
Jeremiah        2006     60,280        (*)  82,500(2)        (*)              (*)              (*)              (*)   142,780
Healy(1)        2005        (*)        (*)        (*)        (*)              (*)              (*)              (*)       (*)
                2004        (*)        (*)        (*)        (*)              (*)              (*)              (*)       (*)
-------------- ------- --------- ---------- ---------- ---------- ---------------- ---------------- ---------------- ---------
John C.         2006    250,000        (*)        (*)        (*)              (*)              (*)              (*)   250,000
Ferrara(3)      2005    250,000    100,000        (*)  24,592(4)              (*)              (*)              (*)   374,592
                2004     79,808        (*)        (*)        (*)              (*)              (*)              (*)    79,808
-------------- ------- --------- ---------- ---------- ---------- ---------------- ---------------- ---------------- ---------
Robert          2006    183,750    154,554  82,500(6)        (*)              (*)       164,000(7)              (*)   584,804
Zylstra(5)      2005    183,750     91,175        (*)        (*)              (*)              (*)              (*)   274,925
                2004    183,750     43,609        (*)        (*)              (*)              (*)              (*)   227,359
-------------- ------- --------- ---------- ---------- ---------- ---------------- ---------------- ---------------- ---------
Eugene C.       2006     80,769     50,000        (*)  10,357(9)              (*)              (*)              (*)   141,126
Hynes(8)        2005    150,000     50,000        (*)   8,197(9)              (*)              (*)              (*)   208,197
                2004     43,269        (*)        (*)        (*)              (*)              (*)              (*)    43,269
-------------- ------- --------- ---------- ---------- ---------- ---------------- ---------------- ---------------- ---------

(1)   Mr. Healy has served as the  Corporation's  Chief Executive  Officer since
      January  1,  2007.  Mr.  Healy  also  served  as the  Corporation's  Chief
      Financial Officer from September 5, 2006 to March 19, 2007.

(2)   On September 5, 2006, the  Corporation  granted Mr. Healy 10,000 shares of
      restricted stock under the  Corporation's  2001 Equity Incentive Plan. Mr.
      Healy  currently  exercises  full  voting  rights  with  respect  to  such
      restricted stock,  which shall vest as follows:  5,000 shares on September
      5, 2007 and 1,250 shares on each of December 5, 2007,  March 5, 2008, June
      5, 2008 and September 5, 2008.

(3)   Mr.  Ferrara was elected as President and Chief  Executive  Officer of the
      Corporation on October 1, 2004.  Mr.  Ferrara  resigned from his positions
      with the Corporation effective December 31, 2006.

(4)   On May 26, 2005, the Corporation granted Mr. Ferrara an option to purchase
      75,000 shares of Common Stock at an exercise price of $13.173. Such option
      lapsed  as a  result  of his  resignation  from  his  positions  with  the
      Corporation.

(5)   Mr.  Zylstra was elected as Senior Vice  President  of  Operations  of the
      Corporation  as of  September  5, 2006.  Mr.  Zylstra's  salary is paid by
      M-tron  Industries,  Inc., a subsidiary of the  Corporation,  where he has
      served as the  President  and Chief  Executive  Officer  since January 24,
      2000.

(6)   On September 5, 2006, the Corporation granted Mr. Zylstra 10,000 shares of
      restricted stock under the  Corporation's  2001 Equity Incentive Plan. Mr.
      Zylstra  currently  exercises  full  voting  rights  with  respect to such
      restricted stock,  which shall vest as follows:  5,000 shares on September
      5, 2007 and 1,250 shares on each of December 5, 2007,  March 5, 2008, June
      5, 2008 and September 5, 2008.

(7)   Mr.  Zylstra has an agreement  entitling  him to 3% of the increase in the
      economic value of the Corporation  from January 1, 2000 through the end of
      the last fiscal quarter next preceding termination of his employment.  For
      additional  information  regarding Mr. Zylstra's  potential  payments upon
      termination,  please see "Potential Payments Upon Termination or Change-in
      Control" below.

(8)   Mr. Hynes resigned from his positions with the Corporation  effective July
      7, 2006.


                                       20


(9)   On May 26, 2005, the Corporation  granted Mr. Hynes the option to purchase
      25,000  shares  of  Common  Stock  under  the  Corporation's  2001  Equity
      Incentive Plan. Such option lapsed as a result of his resignation from his
      positions with the Corporation.

GRANT OF PLAN-BASED AWARDS

      The following table sets forth certain  information  regarding grants made
to named executive officers during the fiscal year ended December 31, 2006:

------------- -------- -------------------------------- -------------------------------- --------- ------------ --------- ---------
    Name      Grant       Estimated Future Payouts         Estimated Future Payouts        All       All Other   Exercise  Grant
              Date      Under Non- Equity Incentive      Under Equity Incentive Plan      Other       Option       or       Date
                                 Plan Awards                        Awards                Stock       Awards:     Base      Fair
                        --------------------------------------------------------------    Awards:     Number     Price     Value
                        Threshold   Target    Maximum    Threshold   Target    Maximum    Number        of         of       of
                            ($)      ($)        ($)         (#)       (#)        (#)        of      Securities   Option    Stock
                                                                                          Shares    Underlying   Awards     and
                                                                                            of        Options    ($/Sh)   Option
                                                                                           Stock        (#)               Awards
                                                                                            or                              ($)
                                                                                          Units
                                                                                           (#)
------------- -------- ----------- -------- ----------- ----------- -------- ----------- --------- ------------ --------- ---------
Jeremiah       9/5/06                                                                    10,000(1)                          82,500
Healy
------------- -------- ----------- -------- ----------- ----------- -------- ----------- --------- ------------ --------- ---------
Robert         9/5/06                                                                    10,000(2)                          82,500
Zylstra
------------- -------- ----------- -------- ----------- ----------- -------- ----------- --------- ------------ --------- ---------

(1)   On September 5, 2006, the  Corporation  granted Mr. Healy 10,000 shares of
      restricted stock under the  Corporation's  2001 Equity Incentive Plan. Mr.
      Healy  currently  exercises  full  voting  rights  with  respect  to  such
      restricted stock,  which shall vest as follows:  5,000 shares on September
      5, 2007 and 1,250 shares on each of December 5, 2007,  March 5, 2008, June
      5, 2008 and September 5, 2008.

(2)   On September 5, 2006, the Corporation granted Mr. Zylstra 10,000 shares of
      restricted stock under the  Corporation's  2001 Equity Incentive Plan. Mr.
      Zylstra  currently  exercises  full  voting  rights  with  respect to such
      restricted stock,  which shall vest as follows:  5,000 shares on September
      5, 2007 and 1,250 shares on each of December 5, 2007,  March 5, 2008, June
      5, 2008 and September 5, 2008.

OUTSTANDING EQUITY AWARDS AT FISCAL-YEAR END

      The following table presents  information  regarding  unexercised options,
stock  that has not  vested  and  equity  incentive  plan  awards for each named
executive officer as of the end of the fiscal year ended December 31, 2006:


                                       21


------------- ---------------------------------------------------------------------- ---------------------------------------------
    Name                                  Option Awards                                              Stock Awards
              -------------- --------------- -------------- ---------- ------------- ---------- --------- ------------ -----------
                Number of      Number of        Equity       Option       Option      Number      Market     Equity      Equity
               Securities      Securities      Incentive    Exercise    Expiration     of         Value    Incentive    Incentive
               Underlying      Underlying        Plan       Price ($)      Date       Shares       of        Plan         Plan
               Unexercised    Unexercised       Awards:                                or         Shares    Awards:      Awards:
                 Options        Options        Number of                              Units        or       Number       Market
                   (#)            (#)         Securities                               of         Units       of           or
               Exercisable   Unexercisable    Underlying                              Stock        of      Unearned      Payout
                                              Unexercised                             That        Stock     Shares,     Value of
                                               Unearned                               Have        That     Units or     Unearned
                                                Options                                Not        Have       Other      Shares,
                                                  (#)                                Vested        Not      Rights      Units or
                                                                                       (#)       Vested       That       Other
                                                                                                   ($)     Have Not      Rights
                                                                                                            Vested        That
                                                                                                              (#)         Have
                                                                                                                          Not
                                                                                                                        Vested
                                                                                                                          ($)
------------- -------------- --------------- -------------- ---------- ------------- ---------- --------- ------------ -----------
John              75,000(1)                                    13.173     3/31/07
Ferrara
------------- -------------- --------------- -------------- ---------- ------------- ---------- --------- ------------ -----------
Jeremiah                                                                             10,000(2)    70,000
Healy
------------- -------------- --------------- -------------- ---------- ------------- ---------- --------- ------------ -----------
Robert                                                                               10,000(3)    70,000
Zylstra
------------- -------------- --------------- -------------- ---------- ------------- ---------- --------- ------------ -----------

(1)   Mr.  Ferrara  resigned from his positions with the  Corporation  effective
      December 31, 2006.  Under the 2001 Equity  Incentive  Plan,  the option to
      purchase  75,000  shares of Common  Stock  lapsed  three  months after Mr.
      Ferrara's resignation.

(2)   On September 5, 2006, the  Corporation  granted Mr. Healy 10,000 shares of
      restricted stock under the  Corporation's  2001 Equity Incentive Plan. Mr.
      Healy  currently  exercises  full  voting  rights  with  respect  to  such
      restricted stock,  which shall vest as follows:  5,000 shares on September
      5, 2007 and 1,250 shares on each of December 5, 2007,  March 5, 2008, June
      5, 2008 and September 5, 2008.

(3)   On September 5, 2006, the Corporation granted Mr. Zylstra 10,000 shares of
      restricted stock under the  Corporation's  2001 Equity Incentive Plan. Mr.
      Zylstra  currently  exercises  full  voting  rights  with  respect to such
      restricted stock,  which shall vest as follows:  5,000 shares on September
      5, 2007 and 1,250 shares on each of December 5, 2007,  March 5, 2008, June
      5, 2008 and September 5, 2008.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

      An agreement between Mr. Zylstra and the Corporation entitles him to 3% of
the  increase in the  economic  value of the  Corporation  from  January 1, 2000
through the end of the last fiscal  quarter next  preceding  termination  of his
employment  (the  "Valuation  Date").  The economic value of the Corporation for
January 1, 2000 is deemed to be 7.5 times the earnings before  interest,  taxes,
depreciation  and amortization  ("EBITDA") (plus cash and marketable  securities
and minus debt) of the  Corporation for the year ended December 31, 1999 and the
economic  value of the  Corporation  for the last fiscal  quarter next preceding
termination shall be deemed to be 7.5 times the EBITDA (plus cash and marketable
securities  and minus debt) of the  Corporation  for the 12 months  ended on the
Valuation Date. At the Corporation's  option, the amount of the benefit shall be
payable  either in one lump sum or in three  equal  installments  payable on the
first,  second and third  anniversary  dates of the termination of Mr. Zylstra's
employment.  Any such  deferred  payments  shall bear interest at an annual rate
equal to 8%, which interest shall be payable in arrears on each said anniversary
date,  at the  Corporation's  option,  in cash  or in the  Common  Stock  of the
Corporation,  valued at the  average  closing  market  price  thereof for the 10
trading days on which the stock traded prior to the date of the payment.


                                       22


                              DIRECTOR COMPENSATION

COMPENSATION OF DIRECTORS

      A director who is an employee of the  Corporation is not  compensated  for
services as a member of the Board of  Directors  or any  committee  thereof.  In
2006,  Directors who were not  employees  received (i) a cash retainer of $5,000
per  quarter;  (ii) a fee of $2,000 for each  meeting of the Board of  Directors
attended in person or  telephonically  that had a duration of at least one hour;
(iii) a fee of $1,500 for each Audit  Committee  meeting  attended  in person or
telephonically  that had a duration of at least one hour; and (iv) a fee of $750
for each Compensation  Committee,  each Executive  Committee and each Nominating
Committee meeting attended in person.  The Audit Committee  Chairman receives an
additional  $4,000  annual cash  retainer and the  Nominating  and  Compensation
Committee Chairmen receive additional $2,000 annual retainers.

      Marc Gabelli,  the Chairman,  receives a $100,000  annual fee,  payable in
equal  quarterly  installments.  Mr. Gabelli has elected to defer payment of his
annual fee for fiscal 2006 to a later date.

      The following  table sets forth  information  with respect to compensation
earned by or  awarded to each  Director  of the  Corporation  who is not a named
executive  officer  and who served on the Board of  Directors  during the fiscal
year ended December 31, 2006:

---------------- ------------ ------------- ------------- ---------------- ---------------- ------------------- ------------
     Name           Fees         Stock         Option       Non-equity        Change in         All Other          Total
                   Earned        Awards        Awards        Incentive         Pension         Compensation         ($)
                 or Paid in       ($)           ($)            Plan           Value and            ($)
                    Cash                                   Compensation     Nonqualified
                     ($)                                        ($)           Deferred
                                                                            Compensation
                                                                              Earnings
---------------- ------------ ------------- ------------- ---------------- ---------------- ------------------- ------------
Marc Gabelli       100,000(1)                                                                                       100,000
---------------- ------------ ------------- ------------- ---------------- ---------------- ------------------- ------------
E. Val Cerutti      34,500                                                                                           34,500
---------------- ------------ ------------- ------------- ---------------- ---------------- ------------------- ------------
Peter                9,167                                                                                            9,167
DaPuzzo(2)
---------------- ------------ ------------- ------------- ---------------- ---------------- ------------------- ------------
Avrum Gray          34,000                                                                                           34,000
---------------- ------------ ------------- ------------- ---------------- ---------------- ------------------- ------------
Patrick J.           9,417                                                                                            9,417
Guarino(2)
---------------- ------------ ------------- ------------- ---------------- ---------------- ------------------- ------------
Anthony R.          36,000                                                                                           36,000
Pustorino
---------------- ------------ ------------- ------------- ---------------- ---------------- ------------------- ------------


(1)   Mr.  Gabelli has elected to defer the payment of his annual fee to a later
      date.

(2)   Elected effective  September 2006; paid for one third of the third quarter
      and the entirety of the fourth quarter of the fiscal year ending  December
      31, 2006.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

      During the fiscal year ended December 31, 2006, the Compensation Committee
comprised only non-employee  independent directors.  There were no interlocks or
other  relationships  among the Corporation's  executive  officers and directors
that are  required  to be  disclosed  under  applicable  executive  compensation
disclosure regulations.


                                       23


                          COMPENSATION COMMITTEE REPORT

      The Compensation  Committee of the Board oversees our compensation program
on  behalf  of  the   Board  of   Directors.   In   fulfilling   its   oversight
responsibilities,   the  Compensation  Committee  reviewed  and  discussed  with
management   the   Compensation   Discussion  and  Analysis  set  forth  in  the
Corporation's  Annual Report on Form 10-K, as amended, and this Proxy Statement.
In reliance on the review and discussions  referred to above,  the  Compensation
Committee recommended to the Board of Directors that the Compensation Discussion
and Analysis be included in the  Corporation's  Annual  Report on Form 10-K,  as
amended, and this Proxy Statement.

                                    COMPENSATION COMMITTEE

                                    Patrick J. Guarino (Chairman)
                                    E. Val Cerutti
                                    Peter DaPuzzo
                                    Avrum Gray


                                       24


                                 PROPOSAL NO. 2

           REINCORPORATION OF THE CORPORATION IN THE STATE OF DELAWARE

      The  Board has  unanimously  approved  the  reincorporation  proposal  and
recommends that the Shareholders approve and adopt the reincorporation proposal.
The  reincorporation  proposal will be effected by merging the Corporation  with
and into its wholly-owned subsidiary incorporated in the State of Delaware ("LGL
Delaware")  pursuant to an Agreement and Plan of Merger (the "Merger Agreement")
entered  into  between  the  Corporation  and LGL  Delaware.  The form of Merger
Agreement is included as EXHIBIT A to this Proxy Statement.

      LGL Delaware will be newly incorporated in Delaware solely for the purpose
of effecting the  Reincorporation  Merger,  and the Corporation will be its sole
stockholder.  LGL  Delaware  will  have  no  material  assets  and  no  business
operations prior to the Reincorporation  Merger. In the Reincorporation  Merger,
the Corporation will merge with and into LGL Delaware,  and LGL Delaware will be
the  surviving  entity  and will  maintain  the name "The LGL  Group,  Inc." The
address of the principal  executive  offices of LGL Delaware will be the same as
the current principal executive offices of the Corporation.

REASONS FOR THE REINCORPORATION MERGER

      The Board  believes  that the  Reincorporation  Merger will provide  added
flexibility for both the management and business of the Corporation. Delaware is
recognized  both  domestically  and  internationally  as a  favorable  legal and
regulatory  environment  within  which to operate.  Such an  environment  should
enhance the Corporation's  operations and its ability to effect acquisitions and
other  transactions.   For  many  years,  Delaware  has  followed  a  policy  of
encouraging  incorporation in that state and, in furtherance of that policy, has
adopted   comprehensive,   modern  and  flexible   corporate  laws,   which  are
periodically  updated and revised to meet changing  business needs. In addition,
the  Delaware  courts have  developed  considerable  expertise  in dealing  with
corporate  issues,  and a  substantial  body of case  law has  developed  in the
construction of Delaware law, resulting in greater  predictability  with respect
to corporate  legal affairs.  Consequently,  various major companies have either
incorporated or have subsequently reincorporated in Delaware.

THE REINCORPORATION MERGER

      As a  result  of the  Reincorporation  Merger,  the  Corporation  will  be
reincorporated  as a new  Delaware  corporation  that will succeed to all of the
rights,  properties,  assets and liabilities of the  Corporation.  The terms and
conditions of the Reincorporation  Merger are set forth in the Merger Agreement,
and the  summary of the terms and  conditions  of the Merger set forth  above is
qualified  by  reference  to the full text of the Merger  Agreement  included as
EXHIBIT A to this Proxy Statement.  Following the  Reincorporation  Merger,  the
composition of the Board of Directors of the  Corporation  will remain the same,
and the rights of stockholders and the  Corporation's  corporate affairs will be
governed and controlled by the General  Corporation Law of the State of Delaware
(the "DGCL") and the New  Certificate  of  Incorporation  and New By-Laws of LGL
Delaware,  rather than by the Indiana Business  Corporation Law (the "IBCL") and
the Present  Articles of  Incorporation  and Present  By-Laws.  Set forth below,
under the heading  "Delaware and Indiana Corporate Laws," is a comparison of the


                                       25


material rights of shareholders and other matters of corporate governance before
and after  the  Reincorporation  Merger.  The  forms of the New  Certificate  of
Incorporation  and New  By-Laws of LGL  Delaware  are  included as EXHIBIT B and
EXHIBIT  C to  this  Proxy  Statement,  respectively.  The  summary  of the  New
Certificate of Incorporation and the New By-Laws set forth below is qualified by
reference  to the full  text of the New  Certificate  of  Incorporation  and New
By-Laws.  The Present  Articles  of  Incorporation  and Present  By-Laws and LGL
Delaware's New Certificate of Incorporation and New By-Laws are available,  upon
request by  stockholders  of the  Corporation,  at the principal  offices of the
Corporation  located at 140  Greenwich  Ave, 4th Floor,  Greenwich,  Connecticut
06830.

      Upon the  effectiveness  of the  Reincorporation  Merger,  and without any
action on the part of the  Corporation  or the holder of any  securities  of the
Corporation, every one share outstanding of Common Stock of the Corporation will
be automatically  converted into one share of common stock,  $0.01 par value, of
LGL  Delaware.  Until  replaced  by new  stock  certificates,  each  outstanding
certificate  representing  shares of  Common  Stock of the  Corporation  will be
deemed for all  corporate  purposes  to evidence  ownership  of shares of common
stock of LGL Delaware.

      Consummation of the  Reincorporation  Merger is subject to the approval of
the  Corporation's  shareholders.  The  affirmative  vote  of the  holders  of a
majority of the  outstanding  shares of Common Stock,  whether or not present at
the 2007 Annual Meeting,  who are entitled to vote at the 2007 Annual Meeting is
required  for the approval and  adoption of the  reincorporation  proposal.  The
Reincorporation  Merger is expected to become  effective as soon as  practicable
after  shareholder  approval  is  obtained  and  all  other  conditions  to  the
Reincorporation  Merger  have  been  satisfied,  including  the  receipt  of all
consents, orders and approvals necessary for consummation of the Reincorporation
Merger. Prior to its effectiveness,  however, the Reincorporation  Merger may be
abandoned  by  the  Board  if,  for  any  reason,   the  Board  determines  that
consummation of the Reincorporation Merger is no longer in the best interests of
the Corporation.

      Dissenters'  rights are not available to  shareholders  of the Corporation
with respect to the proposed Reincorporation Merger.

ACCOUNTING TREATMENT OF THE REORGANIZATION

      The  Reincorporation  Merger will have no accounting  implications  on the
historical financial statements of the Corporation.

FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION MERGER

      The  Corporation  intends  the  Reincorporation  Merger  to be a tax  free
"reorganization"  within the meaning of the Internal  Revenue  Code of 1986,  as
amended.  If the  Reincorporation  Merger  qualifies  as a  reorganization,  the
material federal income tax consequences of the  Reincorporation  Merger will be
as follows:

      o     No  gain  or  loss  will  be   recognized   by   holders   of  the
            Corporation's Common Stock;


                                       26


      o     Each shareholder of LGL Delaware will have the same tax basis in his
            LGL  Delaware  common  stock as he had in the  Corporation's  Common
            Stock immediately prior to the Reincorporation Merger;

      o     The holding period of the LGL  Delaware's  common stock will include
            the period during which a shareholder held the Corporation's  Common
            Stock prior to the Reincorporation Merger, provided such shareholder
            held the  Corporation's  Common Stock as a capital asset at the time
            of the Reincorporation Merger;

      o     Neither the  Corporation  nor LGL Delaware will  recognize a gain or
            loss as a result of the Reincorporation Merger; and

      o     LGL Delaware will succeed, without adjustment, to the tax attributes
            of the Corporation.

      The  Corporation  has not  requested  a ruling from the IRS or received an
opinion of counsel with respect to the federal  income tax  consequences  of the
Reincorporation Merger. The foregoing summary of federal income tax consequences
is  included  for general  information  only and does not address all income tax
consequences  to  all  of  the  Corporation's  shareholders.  The  Corporation's
shareholders  are urged to consult their own tax advisors as to the specific tax
consequences of the Reincorporation Merger, including the application and effect
of state, local and foreign income and other tax laws.

COMPARISON OF RIGHTS OF SHAREHOLDERS

      The DGCL differs from the IBCL in many respects.  The material differences
in these  statutes are discussed  below.  The material  differences  between the
Present  Articles of  Incorporation  and Present  By-Laws as compared to the New
Certificate of Incorporation and New By-Laws are also discussed below.

      CAPITAL STOCK

      The  Reincorporation  Merger  will not  affect  the  capital  stock of the
Corporation,  except  to the  extent  that the  rights of  shareholders  will be
governed  by Delaware  law rather than  Indiana  law.  The number of  authorized
shares of common stock will remain at 10,000,000, $0.01 par value per share. The
common stock will remain the only class of capital stock of the Corporation.

      After the  Reincorporation  Merger,  holders of the  Corporation's  Common
Stock  will  continue  to be  entitled  to one  vote per  share  on all  matters
submitted to a vote of the  shareholders,  including  the election of directors.
The holders of the Corporation's Common Stock will be entitled to such dividends
as may be  declared  from  time to time by the  Board of  Directors  from  funds
legally  available  therefor,  and will be entitled to  receive,  pro rata,  all
assets available for distribution to such holders upon liquidation. No shares of
the  Corporation's  Common Stock have any  preemptive,  redemption or conversion
rights,  or the benefits of any sinking  fund.  All of the shares  issued by the
surviving  corporation  in the  Reincorporation  Merger will be validly  issued,
fully paid and nonassessable.


                                       27


      Both  the  IBCL  and the  DGCL  permit  the  certificate  or  articles  of
incorporation to allow the board of directors to issue and fix dividend,  voting
and redemption rights,  liquidation  preferences and other rights and privileges
without further shareholder action.

      SIZE AND CLASSIFICATION OF THE BOARD OF DIRECTORS

      Section  23-1-33-3 of the IBCL  provides that the board of directors of an
Indiana  corporation  must consist of one or more  individuals,  with the number
specified  in or fixed in  accordance  with the  articles  of  incorporation  or
by-laws.  Section  141(b) of the DGCL  provides that the board of directors of a
Delaware  corporation  shall  consist  of one or more  members.  The  number  of
directors  shall be fixed by, or in the manner  provided in, the by-laws  unless
the certificate of incorporation fixes the number of directors,  in which case a
change  in the  number  of  directors  shall be made  only by  amendment  of the
certificate.

      Pursuant to Section  23-1-33-6 of the IBCL, the articles of  incorporation
or the by-laws,  may provide for  staggering  the terms of directors by dividing
the total number of directors into either two or three  classes.  Section 141(d)
of  the  DGCL  provides  that  the  directors   may,  by  the   certificate   of
incorporation,  by an  initial  by-law or by a by-law  adopted  by a vote of the
shareholders,  be divided  into one, two or three  classes.  Neither the Present
Articles of Incorporation nor the New Certificate of Incorporation  provides for
a classified Board of Directors.

      The  Corporation's  Board of Directors  currently  comprises nine members,
which number may be changed by the Board of Directors,  provided that the number
of  directors  must not be less than five or more  than  thirteen.  The Board of
Directors of the Corporation following the Reincorporation  Merger will have the
same number of directors and composition as the  Corporation's  current Board of
Directors.

      REMOVAL OF DIRECTORS

      Under  Section  23-1-33-8  of the IBCL,  directors  may be  removed in any
manner  provided  in the  articles of  incorporation.  In  addition,  unless the
articles of incorporation  provide otherwise,  the shareholders or directors may
remove one or more directors with or without cause. A director may be removed by
the shareholders,  if they are otherwise  authorized to do so, only at a meeting
called for that  purpose  and such  purpose  must be stated in the notice of the
meeting.  A director  elected by a voting group of  shareholders  may be removed
only by that voting group.

      Section  141(k) of the DGCL provides that any director or the entire board
of  directors  may  generally  be removed  with or  without  cause by a majority
stockholder vote.

      NEWLY CREATED DIRECTORSHIPS AND VACANCIES

      Under Section  23-1-33-9 of the IBCL, unless the articles of incorporation
provide  otherwise,  if a vacancy occurs on the board of directors,  including a
vacancy  resulting  from an increase in the number of  directors,  the remaining
directors may fill the vacancy by majority  vote. If the remaining  directors do
not comprise a quorum, the remaining  directors may fill the vacancy by majority
vote of the  remaining  directors.  If the vacant  office was held by a director
elected by a voting  group of  shareholders,  only the holders of shares of that
voting  group may vote to fill the  vacancy if it is filled by  shareholders.  A


                                       28


vacancy that will occur at a specific  later date by reason of  resignation of a
director  effective at a later date may be filled before the vacancy occurs, but
the new director may not take office until the vacancy occurs.

      Under Section 223 of the DGCL,  unless the certificate of incorporation or
the by-laws of a corporation provide otherwise, a majority vote of the directors
then in office may fill vacancies and newly created  directorships,  even if the
number of  directors  then in office is less than a quorum or only one  director
remains.  If the directors filling a vacancy on the board constitute less than a
majority of the whole board (as  measured  before an increase in the size of the
board),  the Delaware Court of Chancery may, upon  application  of  stockholders
holding  at least  10% of the  outstanding  voting  shares,  summarily  order an
election to fill the vacancy or replace  directors  chosen by the directors then
in office.  Unless  otherwise  provided in the certificate of  incorporation  or
by-laws,  when  one or more  directors  resign  effective  at a future  date,  a
majority of directors then in office,  including those who have so resigned, may
vote to fill the vacancy.

      The Present Articles of  Incorporation  permit vacancies and newly created
directorships  to be filled as  provided  by the  Present  By-Laws  or  relevant
corporate law. The New Certificate of Incorporation contains the same provision.

      QUORUM AND VOTE REQUIRED TO TAKE ACTION

      Under Section  23-1-34-5 of the IBCL, unless the articles of incorporation
or  by-laws  require a greater  number,  a majority  of the fixed or  prescribed
number  of  directors  constitutes  a  quorum.  Additionally,  the  articles  of
incorporation  or by-laws may  authorize a quorum of no fewer than  one-third of
the fixed or prescribed number of directors.  If a quorum is present when a vote
is taken, the affirmative vote of a majority of the directors present is the act
of the board of  directors  unless  the  articles  of  incorporation  or by-laws
provide otherwise.

      Section 141(b) of the DGCL provides that a majority of the total number of
directors  shall  constitute a quorum for the transaction of business unless the
certificate of incorporation or by-laws of the  incorporation  require a greater
number. In addition, unless the certificate of incorporation provides otherwise,
the by-laws  may provide for a quorum of less than a majority,  which in no case
shall be less than  one-third  of the total  number of  directors.  The board of
directors  shall act by the vote of a  majority  of the  directors  present at a
meeting at which a quorum is present, unless the certificate of incorporation or
the by-laws require a vote of a greater number.

      The  Present  By-Laws  provide  that a  majority  of the  total  number of
directors  constitutes a quorum for the transaction of business and that, unless
otherwise provided by law, the certificate of incorporation, the Present By-Laws
or any contract or agreement to which the  Corporation is a party,  the act of a
majority of the directors present at any meeting at which there is quorum is the
act of the Board of Directors. The New By-Laws contain the same provision.

      LIMITATION ON DIRECTORS' LIABILITY

      Section  23-1-35-1 of the IBCL  provides that a director is not liable for
any action taken as a director,  or any failure to act,  unless the director has
breached or failed to perform the duties of the director's  office in compliance
with Section 23-1-35-1 and the breach or failure to perform  constitutes willful
misconduct or recklessness.


                                       29


      Section   102(b)(7)  of  the  DGCL  allows  a  corporation,   through  its
certificate of  incorporation,  to limit or eliminate the personal  liability of
directors  to the  corporation  and its  shareholders  for damages for breach of
fiduciary  duty.  However,  this provision  excludes any limitation on liability
for: (i) any breach of the director's  duty of loyalty to the corporation or its
shareholders;  (ii)  acts  or  omissions  not in good  faith  or  which  involve
intentional misconduct or a knowing violation of law; (iii) willful or negligent
violation  of the laws  governing  the payment of  dividends  or the purchase or
redemption of stock; or (iv) any transaction  from which the director derives an
improper personal benefit.

      The  Present  Articles  of  Incorporation  contain  a  provision  limiting
director  liability as permitted by law. The New  Certificate  of  Incorporation
contains the same provision.

      INDEMNIFICATION OF DIRECTORS AND OFFICERS

      Section  23-1-37-8  and  Section  23-1-37-13  of the IBCL  provide  that a
corporation may indemnify any individual made a party to a proceeding (including
a proceeding by or in the right of the corporation) because the individual is or
was a director,  officer, employee or agent of the corporation against liability
incurred in the proceeding if the individual  acted in good faith and reasonably
believed (i) in the case of conduct in the individual's  official  capacity with
the corporation,  that the individual's  conduct was in the  corporation's  best
interests  and (ii) in all other  cases,  that the  individual's  conduct was at
least  not  opposed  to the  corporation's  best  interests.  In the case of any
criminal  proceeding,  the individual must have had either  reasonable  cause to
believe  the conduct was lawful or no  reasonable  cause to believe  that it was
unlawful.  In addition,  Section 23-1-37-9 and Section 23-1-37-13 provide that a
corporation,  unless limited by its articles of incorporation,  must indemnify a
director or officer who was wholly  successful,  on the merits or otherwise,  in
the  defense of any  proceeding  to which the  director  or officer  was a party
because  the  director  or  officer  is or  was a  director  or  officer  of the
corporation  against reasonable  expenses incurred by the director or officer in
connection with the proceeding.

      Section 145 of the DGCL  provides  that a  corporation  may  indemnify any
person made a party or threatened to be made a party to any threatened,  pending
or  completed  proceeding  (other  than  certain  actions  by or in right of the
corporation) because he or she is or was a director,  officer, employee or agent
of the  corporation  or was  serving  at the  request  of the  corporation  as a
director,  officer, employee or agent of another corporation,  against expenses,
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection  with such  proceeding if such person acted in good faith and in a
manner  he or she  reasonably  believed  to be in or  not  opposed  to the  best
interests of the corporation;  or in a criminal proceeding,  if he or she had no
reasonable cause to believe his or her conduct was unlawful.  Expenses  incurred
by an officer or director (or other employees or agents as deemed appropriate by
the  board of  directors)  in  defending  a civil,  criminal  or  administrative
proceeding may be paid by the corporation in advance of the final disposition of
such proceeding upon receipt of an undertaking by or on behalf of such person to
repay  such  amount  if it is  ultimately  determined  that  such  person is not
entitled  to be  indemnified  by the  corporation.  To  indemnify  a party,  the
corporation  must  determine  that the party  met the  applicable  standards  of
conduct.


                                       30


      The  provisions  concerning  indemnification  in the  Present  Articles of
Incorporation  are  substantially  identical  to the  IBCL  provisions.  The New
Certificate of Incorporation  provides for indemnification to the fullest extent
permitted by Delaware law.

      DIVIDENDS

      Section  23-1-28-1  of the  IBCL  allows  a  board  of  directors  to make
distributions  to  shareholders,  unless  otherwise  provided in the articles of
incorporation.   However,   pursuant  to  Section  23-1-28-3  of  the  IBCL,  no
distribution  may be  made  if  after  giving  effect  to the  distribution  the
corporation  would be unable to pay its debts as they become due in the ordinary
course of business or the corporation's assets would be less than the sum of its
liabilities  plus (except as otherwise  specifically  allowed by the articles of
incorporation)  the amount that would be needed,  if the corporation  were to be
dissolved at the time of the  distribution,  to satisfy the preferential  rights
are superior to those receiving the distribution.

      Subject  to  any   restrictions   in  a   corporation's   certificate   of
incorporation,  Section  170 of the DGCL  allows  the  board of  directors  of a
Delaware corporation to declare and pay dividends out of surplus, or if there is
no surplus,  out of its net profits for the fiscal year in which the dividend is
declared and/or the preceding fiscal year.

      ACTION BY SHAREHOLDERS THROUGH WRITTEN CONSENT

      Under Section  23-1-29-4 of the IBCL, any action  required or permitted to
be taken at a meeting  of  shareholders  may be taken  without  a  meeting  if a
written consent thereto is signed by all of the shareholders entitled to vote on
the action.

      Under  Section  228(a)  of  the  DGCL,  unless  otherwise  provided  in  a
corporation's  certificate of incorporation,  any action required to be taken at
an annual or special meeting of the  stockholders may be taken in the absence of
a meeting,  without prior written notice and without a vote.  Such action may be
taken by the written  consent of stockholders in lieu of a meeting setting forth
the action so taken and signed by the holders of outstanding stock  representing
the  number of shares  necessary  to take such  action at a meeting at which all
shares entitled to vote were present and voted.  There is no contrary  provision
in the New Certificate of Incorporation.

      SPECIAL MEETINGS OF SHAREHOLDERS

      Section  23-1-29-2 of the IBCL provides that a corporation  with more than
50  shareholders  must hold a special  meeting of  shareholders on demand of its
board of directors or the person or persons specifically  authorized to do so by
the articles of incorporation or by-laws.

      Under Section 211(d) of the DGCL,  special meetings of stockholders may be
called by the board of  directors  and by such other person or persons as may be
authorized  to  do so by  the  corporation's  certificate  of  incorporation  or
by-laws.

      Under the Present  By-Laws,  special  meetings of the  shareholders may be
called by the Board of  Directors,  the Chairman of the Board or the  President.
The Board of Directors  must call a special  meeting if the  Secretary  receives
appropriate demand for a special meeting from holders of shares  representing at
least  25% of  all  votes  entitled  to be  cast  on any  issue  proposed  to be
considered at the proposed  special  meeting.  The New By-Laws  contain the same
provision.


                                       31


      CUMULATIVE VOTING

      Both  Section  23-1-30-9  of the IBCL and  Section 214 of the DGCL allow a
corporation to provide for cumulative voting in the articles of incorporation or
the certificate of incorporation.  Neither the Present Articles of Incorporation
nor the New Certificate of Incorporation provides for cumulative voting.

      NECESSARY VOTE TO EFFECT MERGER (NOT INVOLVING INTERESTED SHAREHOLDER)

      Section  23-1-40-3  of the IBCL  requires  a  majority  vote of the shares
entitled to vote in order to effectuate a merger or share exchange. However, the
vote of the shareholders of the surviving  corporation under a plan of merger is
not required if: (i) the articles of incorporation of the surviving  corporation
will not differ from its articles of incorporation  before the merger; (ii) each
shareholder  of  the  surviving   corporation   whose  shares  were  outstanding
immediately  before  the  effective  date  of the  merger  will  hold  the  same
proportionate number of shares relative to the number of shares held by all such
shareholders (except for shares of the surviving  corporation received solely as
a  result  of  the  shareholder's   proportionate  shareholdings  in  the  other
corporations  party to the merger),  with identical  designations,  preferences,
limitations and relative rights,  immediately after the merger; (iii) the number
of voting shares  outstanding  immediately after the merger,  plus the number of
voting shares  issuable as a result of the merger  (either by the  conversion of
securities  issued pursuant to the merger or the exercise of rights and warrants
issued  pursuant  to the  merger),  will not  exceed  by more than 20% the total
number of voting shares of the  surviving  corporation  outstanding  immediately
before the  merger;  and (iv) the  number of  participating  shares  outstanding
immediately after the merger,  plus the number of participating  shares issuable
as a result  of the  merger  (either  by the  conversion  of  securities  issued
pursuant to the merger or the exercise of rights and warrants issued pursuant to
the merger),  will not exceed by more than 20% the total number of participating
shares of the surviving corporation outstanding immediately before the merger.

      The DGCL requires a majority vote of the shares  outstanding  and entitled
to vote in order  to  effectuate  a merger  between  two  Delaware  corporations
(Section 251(c)) or between a Delaware  corporation and a corporation  organized
under the laws of another  state (a  "foreign  corporation")  (Section  252(c)).
However,  unless required by the certificate of  incorporation,  Sections 251(f)
and  252(e)  do  not  require  a  vote  of  the  shareholders  of a  constituent
corporation  surviving  the merger if: (i) the merger  agreement  does not amend
that  corporation's  certificate  of  incorporation;  (ii)  each  share  of that
corporation's  stock  outstanding  before  the  effective  date of the merger is
identical to an outstanding or treasury share of the surviving corporation after
the merger;  and (iii) in the event the merger plan provides for the issuance of
common  stock or  securities  convertible  into  common  stock by the  surviving
corporation,  the common  stock  issued  plus the  common  stock  issuable  upon
conversion of the issued securities do not exceed 20% of the shares  outstanding
immediately before the effective date of the merger.


                                       32


      BUSINESS COMBINATIONS INVOLVING INTERESTED SHAREHOLDERS

      Sections  23-1-43-1 to  23-1-43-23  of the IBCL  restrict the ability of a
"resident  domestic  corporation" to engage in any business  combination with an
"interested  shareholder" for five years after the interested shareholder's date
of acquiring shares unless the business combination or the purchase of shares by
the interested  shareholder on the interested  shareholder's  share  acquisition
date is approved by the board of directors of the resident domestic  corporation
before that date. If the combination was not previously approved, the interested
shareholder  may effect a combination  after the  five-year  period only if such
shareholder receives approval from a majority of the disinterested shares or the
offer meets certain fair price criteria.  For purposes of the above  provisions,
"resident  domestic  corporation"  means an Indiana  corporation that has 100 or
more shareholders.  "Interested  shareholder"  means any person,  other than the
resident  domestic  corporation or its  subsidiaries,  who is (i) the beneficial
owner,  directly  or  indirectly,  of 10% or more  of the  voting  power  of the
outstanding  voting  shares  of the  resident  domestic  corporation  or (ii) an
affiliate  or associate of the  resident  domestic  corporation  and at any time
within the  five-year  period  immediately  before the date in question  was the
beneficial owner, directly or indirectly,  of 10% or more of the voting power of
the then  outstanding  shares of the resident  domestic  corporation.  The above
provisions do not apply to corporations  that so elect in its original  articles
of incorporation or in an amendment to its articles of incorporation approved by
a majority of the disinterested  shares. Such an amendment,  however,  would not
become  effective  for 18 months after its passage and would apply only to stock
acquisitions occurring after its effective date.

      Section 203 of the DGCL provides that, with certain exceptions, a Delaware
corporation  may not engage in any of a broad  range of  business  combinations,
such as  mergers,  consolidations  and  sales  of  assets,  with an  "interested
stockholder"  for a period of three years from the date that such person  became
an  interested  stockholder  unless:  (i) the  transaction  that  results in the
person's  becoming an  interested  stockholder  or the business  combination  is
approved by the board of directors of the corporation  before the person becomes
an interested  stockholder;  (ii) upon  consummation  of the  transaction  which
results in the stockholder  becoming an interested  stockholder,  the interested
stockholder owns 85% or more of the voting stock of the corporation  outstanding
at the time the transaction commenced, excluding shares owned by persons who are
directors and also officers and shares owned by certain employee stock plans; or
(iii) on or after the date the person  becomes an  interested  stockholder,  the
business  combination is approved by the corporation's board of directors and by
holders  of at  least 66 2/3% of the  corporation's  outstanding  voting  stock,
excluding  shares  owned  by  the  interested  stockholder,   at  a  meeting  of
stockholders.  Under Section 203, an "interested  stockholder" is defined as any
person,  other than the  corporation  and any direct or indirect  majority-owned
subsidiary, (i) that is the owner of 15% or more of the outstanding voting stock
of the  corporation or (ii) an affiliate or associate of the corporation and was
the owner of 15% or more of the  outstanding  voting stock of the corporation at
any time within the three-year period  immediately prior to the date on which it
is sought to be  determined  whether such person is an  interested  stockholder.
Section 203 does not apply to a corporation  that so provides in an amendment to
its  certificate  of  incorporation  or  by-laws  passed  by a  majority  of its
outstanding  shares  at any  time.  Such  stockholder  action  does  not  become
effective  for 12 months  following  its adoption and would not apply to persons
who were already interested stockholders at the time of the amendment.


                                       33


      Neither the Present Articles of  Incorporation  nor the New Certificate of
Incorporation  excludes the Corporation from restrictions imposed under Sections
23-1-43-1 to 23-1-43-23 of the IBCL or Section 203 of the DGCL.

      CONTROL SHARE ACQUISITIONS

      Pursuant to Sections  23-1-42-1 to  23-1-42-11  of the IBCL,  an acquiring
person  who  makes  a  "control  share   acquisition"   in  an  "issuing  public
corporation"  may not exercise voting rights on any "control shares" unless such
voting rights are conferred by a majority vote of the disinterested shareholders
of  the  issuing  corporation.  Unless  otherwise  provided  in a  corporation's
articles of  incorporation  or by-laws  before a control share  acquisition  has
occurred,  in  the  event  that  control  shares  acquired  in a  control  share
acquisition  are accorded full voting rights and the acquiring  person  acquires
control shares with a majority or more of all voting power,  all shareholders of
the issuing  corporation  have  dissenters'  rights to receive the fair value of
their shares. Under the IBCL, "control shares" means shares acquired by a person
that, when added to all other shares of the issuing public  corporation owned by
that  person or in  respect  of which that  person  may  exercise  or direct the
exercise of voting  power,  would entitle that person  (directly or  indirectly,
alone or as a part of a group) to exercise  voting  power of the issuing  public
corporation in the election of directors  within any of the following  ranges of
voting power:  (i) one-fifth or more but less than one-third;  (ii) one-third or
more but less than a  majority;  or (iii) a  majority  or more.  "Control  share
acquisition" means, subject to certain exceptions, the acquisition,  directly or
indirectly,  by any person of ownership  of, or the power to direct the exercise
of voting power with respect to, issued and outstanding  control shares.  Shares
acquired  within  90  days  or  pursuant  to a  plan  to  make a  control  share
acquisition  are  considered  to have  been  acquired  in the same  acquisition.
"Issuing public  corporation" means a corporation which is organized in Indiana,
has 100 or more shareholders, has its principal place of business, its principal
office or substantial assets within Indiana and has either: (i) more than 10% of
its shareholders  resident in Indiana; (ii) more than 10% of its shares owned by
Indiana residents;  or (iii) 10,000 shareholders  resident in Indiana. The above
provisions  do not apply if,  before a control share  acquisition  is made,  the
corporation's  articles of  incorporation  or by-laws  (including  board adopted
by-laws) provide that they do not apply.

      There is no corresponding provision under the DGCL.

      CONSTITUENT INTERESTS

      Section  23-1-35-1 of the IBCL provides  that the board of  directors,  in
discharging its duties, may consider, in its discretion,  both the long-term and
short-term best interests of the corporation,  taking into account, and weighing
as the directors deem appropriate, the effects of an action on the corporation's
shareholders,  employees,  suppliers and customers and the  communities in which
offices or other facilities of the corporation are located and any other factors
the directors consider pertinent.  Section 23-1-35-1  specifically provides that
certain judicial decisions in Delaware and other  jurisdictions,  which might be
looked upon for guidance in interpreting  Indiana law, including  decisions that
propose a higher or  different  degree of  scrutiny  in  response  to a proposed
acquisition of the corporation,  are inconsistent with the proper application of
that section.


                                       34


      There is no corresponding provision in the DGCL.

      PROCEDURES TO REGULATE CHANGES IN CONTROL

      Section  23-1-22-4  of the IBCL  provides  that,  in addition to any other
provision  authorized  by any  other  section  of the IBCL or  contained  in the
articles of  incorporation  or the by-laws,  a corporation  may establish one or
more procedures to regulate transactions that would, when consummated, result in
a change of "control" of the corporation. Such a procedure may be established in
the  original  articles of  incorporation  or by-laws,  by an  amendment  to the
articles  of  incorporation,  or,  notwithstanding  the fact  that a vote of the
shareholders  would  otherwise be required by any other provision of the IBCL or
the articles of incorporation,  by an amendment to the by-laws. For the purposes
of Section 23-1-22-4,  "control" means, for any corporation that has 100 or more
shareholders,  the  beneficial  ownership,  or the direct or  indirect  power to
direct the voting,  of not less than 10% of the voting shares of a corporation's
outstanding voting shares.

      There is no corresponding provision under the DGCL.

      DISSENTERS' RIGHTS; APPRAISAL RIGHTS

      Both  Section  23-1-44-8  of the IBCL and Section 262 of the DGCL  provide
that shareholders have the right, in some circumstances, to dissent from certain
corporate  reorganizations  and to instead  demand  payment of the fair value of
their shares. Under Section 23-1-44-8 of the IBCL, dissenters do not have rights
of appraisal  with respect to shares of any class or series of stock  registered
on a national  securities  exchange  or traded on the  National  Association  of
Securities   Dealers,   Inc.   Automated   Quotation   System   Over-the-Counter
Markets-National  Market  Issues or a similar  market or unless the  articles of
incorporation,  by-laws or  resolution  of the board of  directors  provide that
non-voting shares are entitled to dissent,  if they were not entitled to vote on
the corporate reorganization.

      Under  Section  262 of the DGCL,  unless a  corporation's  certificate  of
incorporation provides otherwise, dissenting stockholders do not have the rights
of appraisal with respect to a merger or  consolidation  by a  corporation,  the
shares of which are either listed on a national  securities  exchange or held by
more than 2,000  stockholders,  if the  stockholders  receive  (a) shares in the
surviving  corporation,  (b) shares of another  corporation that are listed on a
national securities  exchange or held by more than 2,000 stockholders,  (c) cash
in lieu of fractional  shares  described in (a) and (b) of this paragraph or (d)
any combination of the above.  Further,  dissenters' rights are not available to
stockholders of a corporation  surviving a merger if no vote of the stockholders
of the surviving corporation is required to approve the merger.

      REDEEMABLE SHARES

      Section  23-1-25-1 of the IBCL provides that the articles of incorporation
of a corporation may authorize one or more classes of shares that are redeemable
or  convertible as specified in the articles of  incorporation  at the option of
the  corporation,  the shareholder or another person or upon the occurrence of a
designated event.

      Section 151(b) of the DGCL provides that the certificate of  incorporation
or a resolution of the board of directors  providing for the issuance of a class
of stock may make such class of stock subject to redemption at the option of the


                                       35


corporation or the stockholders,  or upon the happening of a specified event, as
long as immediately  following any such  redemption the corporation has at least
one share of at least one series of stock with full voting powers.

      RIGHTS, WARRANTS OR OPTIONS

      Under Section  23-1-26-5 of the IBCL, a  corporation,  acting  through its
board of  directors,  may create or issue  rights,  options or warrants  for the
purchase of shares or other  securities of the  corporation  or any successor in
interest of the  corporation.  The board of directors is to determine  the terms
upon which the rights,  options or warrants are issued,  their form and content,
and the consideration for which the shares or other securities are to be issued.

      Under Section 157 of the DGCL, rights or options to purchase shares of any
class of stock may be authorized by a corporation's  board of directors  subject
to the provisions of the certificate of incorporation.  The terms of such rights
or options must be fixed and stated in the certificate of  incorporation or in a
resolution or resolutions adopted by the board of directors.

      PREEMPTIVE RIGHTS

      Under  Section  23-1-27-1  of the IBCL and Section  102(b)(3) of the DGCL,
absent an express  provision in a  corporation's  articles of  incorporation  or
certificate  of  incorporation,  a  shareholder  does not, by  operation of law,
possess preemptive rights to subscribe to an additional issue of stock.  Neither
the Present Articles of  Incorporation  nor the New Certificate of Incorporation
provide for preemptive rights.

      AMENDMENT OF CERTIFICATE OR ARTICLES OF INCORPORATION AND BY-LAWS

      Sections  23-1-38-1  -  23-1-38-7  of the IBCL and Section 242 of the DGCL
permit a corporation to amend its  certificate of  incorporation  or articles of
incorporation  in any respect,  provided the amendment  contains only provisions
that would be lawful in an original  certificate of incorporation or articles of
incorporation filed at the time of amendment. To amend articles of incorporation
or a certificate of incorporation,  the board must adopt a resolution presenting
the proposed  amendment.  In addition,  under the DGCL, a majority of the shares
entitled  to vote,  as well as a majority  of shares of each class  entitled  to
vote,  must  approve the  amendment  to make it  effective.  Under the IBCL,  an
amendment to the articles of incorporation of an Indiana  corporation  generally
may be adopted if the votes cast  favoring the  amendment  exceed the votes cast
opposing the amendment,  except that any amendment that would create dissenters'
rights must be approved  by a majority of the votes  entitled to be cast.  Under
the IBCL and the DGCL, when the substantial  rights of a class of shares will be
affected by an amendment,  the holders of those shares are entitled to vote as a
class even if the shares are non-voting shares.  Additionally,  when one or more
series  in a class  of  shares,  and not the  entire  class,  will be  adversely
affected by an amendment, the affected series may vote as a class.

      Under Section  242(b)(2) of the DGCL,  the right to vote as a class may be
limited  in  certain   circumstances.   Any  provision  in  the  certificate  of
incorporation  that  requires  a greater  vote than  required  by law  cannot be
amended or repealed  except by such  greater  vote.  Section  242(c) of the DGCL
provides that, in its resolution proposing an amendment,  the board may insert a
provision  allowing the board to abandon the amendment,  without  concurrence by
shareholders,  after the amendment has received  stockholder approval but before
its filing with the Secretary of State.


                                       36


      Section  23-1-39-1  of the IBCL  provides  that,  unless the  articles  of
incorporation  provide  otherwise,  only the board of directors of a corporation
may amend the by-laws. Section 109 of the DGCL, on the other hand, provides that
the power to amend the  by-laws  rests with the  shareholders  entitled to vote,
although  the  certificate  of  incorporation  may confer the power to amend the
by-laws upon the board of directors.  Section 109 further provides that the fact
that the  certificate  of  incorporation  confers  such  power upon the board of
directors  neither limits nor divests the shareholders of the power to amend the
by-laws. The New Certificate of Incorporation does not provide otherwise.

      The Present Articles of Incorporation and New Certificate of Incorporation
provide  that the  Corporation  reserves  the right to amend,  alter,  change or
repeal any provision  contained in this  Certificate  of  Incorporation,  in the
manner  now or  hereafter  prescribed  by law,  and all  rights  conferred  upon
shareholders herein are granted subject to this reservation.

      The  Present  and New  By-Laws  provide  that the  Board of  Directors  or
stockholders may adopt, alter, amend or repeal them. Such action by the Board of
Directors  requires the affirmative  vote of a majority of the directors then in
office.

      INSPECTION OF BOOKS AND RECORDS

      Section 23-1-52-2 of the IBCL entitles any shareholder of a corporation to
inspect and copy, during regular business hours,  certain  enumerated  corporate
records if the  shareholder  gives the  corporation  at least five days' advance
written notice.  Certain records may be inspected only if: (i) the shareholder's
demand is made in good  faith  and for a proper  purpose,  (ii) the  shareholder
describes with reasonable particularity the shareholder's purpose, and (iii) the
records to be inspected are directly connected with the shareholder's purpose.

      Section  220  of  the  DGCL  entitles  any  stockholder  of  record  of  a
corporation,  in person or by an agent,  upon written  demand under oath stating
the purpose  thereof,  to inspect  during usual business  hours,  for any proper
purpose,  the  corporation's  stock ledger,  a list of its  stockholders and its
other books and  records,  and to make copies or  extracts  therefrom.  A proper
purpose  means a purpose  reasonably  related  to such  person's  interest  as a
stockholder.

VOTES REQUIRED

      The  affirmative  vote of the  holders  of a majority  of the  outstanding
shares of Common  Stock who are  entitled to vote at the 2007 Annual  Meeting is
required for the approval and adoption of the reincorporation proposal.

RECOMMENDATION OF THE BOARD OF DIRECTORS

      THE BOARD  RECOMMENDS  THAT  SHAREHOLDERS  VOTE "FOR" THE  REINCORPORATION
PROPOSAL.


                                       37


                                 PROPOSAL NO. 3

               RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

      The Audit  Committee of the Board of Directors has appointed Ernst & Young
LLP as the  Corporation's  independent  auditors  for  the  fiscal  year  ending
December 31, 2007.  Although the  selection  of  independent  auditors  does not
require  ratification,  the Board of Directors has directed that the appointment
of Ernst & Young LLP be submitted to shareholders  for  ratification  due to the
significance  of their  appointment to the  Corporation.  If shareholders do not
ratify the  appointment  of Ernst & Young LLP as the  Corporation's  independent
auditors,  the Audit  Committee  of the Board of  Directors  will  consider  the
appointment of other certified public  accountants.  A representative of Ernst &
Young LLP will be present  at the 2007  Annual  Meeting,  will be  available  to
respond  to  appropriate  questions  and  will  have the  opportunity  to make a
statement  if he or she  desires.  The  approval  of the  proposal to ratify the
appointment of Ernst & Young LLP requires the affirmative  vote of a majority of
the votes cast by all shareholders represented and entitled to vote thereon.

AUDIT FEES

      The  aggregate  audit fees billed for each of the last two fiscal years by
Ernst & Young LLP were  $436,800  for 2006 and  $392,500  for 2005.  Audit  fees
include  services  relating  to  auditing  the  Corporation's  annual  financial
statements,  reviewing the financial  statements  included in the  Corporation's
quarterly reports on Form 10-Q and certain accounting consultations.

AUDIT RELATED FEES

      The  aggregate  audit  related fees billed for each of the last two fiscal
years by Ernst & Young LLP totaled $24,000 for 2006 and $22,000 for 2005.  Audit
related fees include services relating to employee benefit plans.

TAX FEES

      The  aggregate  tax fees  billed for each of the last two fiscal  years by
Ernst & Young LLP  totaled  $25,000  for 2006 and  $32,000  for  2005.  Tax fees
include services performed relating to tax compliance and customs services.

ALL OTHER FEES

      The Corporation was not billed for any other services by Ernst & Young LLP
during 2006 or 2005.

PRE-APPROVAL POLICIES AND PROCEDURES

      The Audit  Committee  policy and procedures for the  pre-approval of audit
and non-audit services rendered by our independent auditors are reflected in the
Audit Committee  Charter.  The Audit Committee  Charter  provides that the Audit
Committee  shall  pre-approve all audit and non-audit  services  provided by the
independent  auditors and shall not engage the  independent  auditors to perform


                                       38


the specific  non-audit  services  proscribed  by law or  regulation.  The Audit
Committee  may  delegate  pre-approval  authority  to  a  member  of  the  Audit
Committee.  The decisions of any Committee member to whom pre-approval authority
is  delegated  must be presented  to the full  Committee  at its next  scheduled
meeting.

      The Audit  Committee  has  determined  that the  rendering of the services
other than audit services by Ernst & Young LLP was compatible  with  maintaining
Ernst & Young LLP's independence.

      All audit-related and tax services  performed by our independent  auditors
were pre-approved by the Audit Committee.

VOTES REQUIRED

      The  affirmative  vote of a majority of those shares  present in person or
represented  by proxy and entitled to vote on the proposal at the annual meeting
is required to ratify the appointment of Ernst & Young LLP as the  Corporation's
independent  auditors  for the fiscal  year  ending  December  31,  2007.  Thus,
abstentions will not affect the outcome of the vote on the proposal.

RECOMMENDATION OF THE BOARD OF DIRECTORS

      THE BOARD OF  DIRECTORS  RECOMMENDS A VOTE "FOR" THE  RATIFICATION  OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE CORPORATION'S  INDEPENDENT  AUDITORS FOR
THE FISCAL YEAR ENDING DECEMBER 31, 2007.


                                       39


                              SHAREHOLDER PROPOSALS

      Proposals  of  shareholders  intended to be  presented  at the 2008 Annual
Meeting of Shareholders must be received by the Office of the Secretary, The LGL
Group, Inc., 140 Greenwich Avenue, 4th Floor,  Greenwich,  Connecticut 06830, by
no later than  December  16, 2007,  for  inclusion  in the  Corporation's  proxy
statement and form of proxy relating to the 2008 Annual Meeting.

      The date after  which  notice of a  shareholder  proposal  intended  to be
submitted for the 2008 Annual Meeting of  Shareholders  outside the processes of
Rule 14a-8 will be considered  untimely is February 29, 2008. If not received by
that date,  the persons  named in the form of proxy  accompanying  the notice of
meeting may vote on any such proposal in their discretion.

                                  MISCELLANEOUS

      The Board of Directors  knows of no other  matters that are likely to come
before the 2007 Annual Meeting. If any other matters should properly come before
the  2007  Annual  Meeting,  it is the  intention  of the  persons  named in the
accompanying form of proxy to vote on such matters in accordance with their best
judgment.

      The solicitation of proxies is made on behalf of the Board of Directors of
the  Corporation,  and the cost  thereof will be borne by the  Corporation.  The
Corporation  has employed the firm of Morrow & Co.  Inc.,  470 West Avenue,  3rd
Floor, Stamford,  Connecticut, 06902 to assist in this solicitation at a cost of
$4,000,  plus  out-of-pocket  expenses.  The  Corporation  will  also  reimburse
brokerage firms and nominees for their expenses in forwarding  proxy material to
beneficial owners of the Common Stock of the Corporation.  In addition, officers
and  employees of the  Corporation  (none of whom will receive any  compensation
therefor in addition to their regular  compensation)  may solicit  proxies.  The
solicitation  will be made by mail and, in addition,  may be made by  telegrams,
personal interviews and the telephone.

                                  ANNUAL REPORT

      The Corporation's  Annual Report to Shareholders for the fiscal year ended
December  31,  2006 is being sent  herewith  to each  shareholder.  Such  Annual
Report, however, is not to be regarded as part of the proxy soliciting material.


                                       40



                                    THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
                                                       OF THE LGL GROUP, INC.
                                       PROXY -- ANNUAL MEETING OF SHAREHOLDERS AUGUST 15, 2007

                    The  undersigned,  a  shareholder  of The LGL  Group,  Inc.,  an  Indiana  corporation  (the
                    "Corporation"), does hereby appoint Marc Gabelli, Jeremiah Healy and Steve Pegg, and each of
                    them, the true and lawful attorneys and proxies with full power of substitution,  for and in
                    the name, place and stead of the  undersigned,  to vote all of the shares of Common Stock of
                    the Corporation that the undersigned would be entitled to vote if personally  present at the
                    2007 Annual Meeting of Shareholders of the Corporation to be held at The Greenwich  Library,
                    101 West Putnam Avenue, Greenwich,  Connecticut, on Wednesday, August 15, 2007 at 9:30 a.m.,
                    local time, or at any adjournment or adjournments thereof.


                                  (CONTINUED AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)


                  -------------------------------------------------------------------------------------------------
                              ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
                  -------------------------------------------------------------------------------------------------


------------------------------------------------------------------------------------------------------------------------------------



THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS HERE BELOW GIVEN. UNLESS OTHERWISE SPECIFIED,  THIS  Please
PROXY WILL BE VOTED FOR THE ELECTION OF  DIRECTORS,  FOR THE APPROVAL OF THE  REINCORPORATION  IN THE STATE OF  Mark Here    -------
DELAWARE AND FOR RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT AUDITORS.                                   for Address
                                                                                                                Change or
                                                                                                                Comments
                                                                                                                SEE REVERSE SIDE

                           FOR ALL   WITHHOLD AUTHORITY TO
                           NOMINEES  VOTE FOR ALL NOMINEES                                                    FOR   AGAINST  ABSTAIN
                                                             2. APPROVAL OF THE  REINCORPORATION IN THE STATE
1. ELECTION OF DIRECTORS:   ------        ------                OF DELAWARE.                                   ----  ------- -------

The election of

Marc  Gabelli,  E.  Val  Cerutti,  Peter  DaPuzzo,  Timothy  3. RATIFICATION  OF THE  APPOINTMENT  OF ERNST &  FOR   AGAINST ABSTAIN
Foufas,  Avrum Gray,  Patrick J.  Guarino,  Kuni  Nakamura,     YOUNG  AS THE  INDEPENDENT  AUDITORS  FOR THE
Anthony R.  Pustorino   and  Javier  Romero to the Board of     FISCAL YEAR ENDING DECEMBER 31, 2007.          ----  ------- -------
Directors,  to serve  until  the  2008  Annual  Meeting  of
Shareholders  and until  their  respective  successors  are
elected and shall qualify.

To  withhold   authority   to  vote  for  any   individual
nominee(s), print name(s) below.
                                                             The undersigned  hereby revokes any proxy or proxies  heretofore given,
-----------------------------------------------------------  and ratifies and confirms all that the proxies appointed hereby, or any
                                                             of them, or their  substitutes,  may lawfully do or cause to be done by
                                                             virtue hereof.

                                                             NOTE:  PLEASE SIGN  EXACTLY AS YOUR NAME OR NAMES APPEAR  HEREON.  WHEN
                                                             SIGNING AS  ATTORNEY,  EXECUTOR,  ADMINISTRATOR,  TRUSTEE OR  GUARDIAN,
                                                             PLEASE  INDICATE THE CAPACITY IN WHICH  SIGNING.  WHEN SIGNING AS JOINT
                                                             TENANTS,  ALL PARTIES IN THE JOINT  TENANCY MUST SIGN.  WHEN A PROXY IS
                                                             GIVEN BY A CORPORATION, IT SHOULD BE SIGNED WITH FULL CORPORATE NAME BY
                                                             A DULY AUTHORIZED OFFICER.


                                                             Dated: ___________________________________________________________,2007

                                                             _________________________________________________________________(L.S.)
                                                                                  (Signature of Shareholder)

                                                             _________________________________________________________________(L.S.)
                                                                                  (Signature of Shareholder)

------------------------------------------------------------------------------------------------------------------------------------





                                   EXHIBIT A


                          AGREEMENT AND PLAN OF MERGER
                                       OF
                   THE LGL GROUP, INC., A DELAWARE CORPORATION
                                       AND
                   THE LGL GROUP, INC., AN INDIANA CORPORATION

      AGREEMENT AND PLAN OF MERGER (the "Merger Agreement"),  dated as of August
___, 2007, between The LGL Group, Inc. ("LGL Delaware"), and The LGL Group, Inc.
an Indiana corporation ("LGL Indiana"),  pursuant to Section 253 of the Delaware
General  Corporation Law (the "DGCL") and Sections  23-1-38.5-5 and 23-1-40-7 of
the Indiana Business Corporation Law (the "IBCL").

                               W I T N E S S E T H:

      WHEREAS, LGL Delaware is a corporation duly organized and in good standing
under the laws of the State of Delaware;

      WHEREAS,  LGL Indiana is a corporation duly organized and in good standing
under the laws of the State of Indiana;

      WHEREAS, the Board of Directors of LGL Delaware and the Board of Directors
of LGL Indiana have determined that it is advisable and in the best interests of
each of them that LGL Indiana  merge with and into LGL  Delaware  upon the terms
and subject to the conditions herein provided;

      NOW,  THEREFORE,  in consideration of the mutual  agreements and covenants
set forth herein, the parties hereto agree as follows:

      ARTICLE 1:  MERGER.  Upon the filing of a  Certificate  of  Ownership  and
Merger with the  Secretary of State of the State of Delaware and the Articles of
Merger  with the  Secretary  of State of the State of  Indiana  (the  "Effective
Time"),  LGL Indiana shall be merged (the  "Merger") with and into LGL Delaware,
and LGL Delaware  shall be the  corporation  surviving  the Merger  (hereinafter
referred to as the "Surviving Corporation").

      ARTICLE 2: DIRECTORS,  OFFICERS AND GOVERNING DOCUMENTS.  The directors of
the  Surviving  Corporation  from and  after  the  Effective  Time  shall be the
directors of LGL Indiana  immediately  prior to the Effective Time. The officers
of the Surviving  Corporation  immediately after the Effective Time shall be the
officers of LGL Indiana  immediately prior to the Effective Time. These officers
and  directors   shall  hold  office  in  accordance  with  the  Certificate  of
Incorporation  and By-Laws of the  Surviving  Corporation.  After the  Effective
Time, the existing Certificate of Incorporation and By-Laws of LGL Delaware,  in
the forms  attached  hereto as Annex A and B, shall  remain the  Certificate  of
Incorporation and By-Laws of the Surviving Corporation.

      ARTICLE 3: NAME.  The name of the  Surviving  Corporation  shall be: The
LGL Group, Inc.




      ARTICLE  4:  EFFECT OF MERGER  ON SHARES OF STOCK OF LGL  INDIANA.  At the
Effective  Time,  each share of common  stock,  $0.01 par value,  of LGL Indiana
outstanding  immediately prior to the Effective Time shall be converted into and
become one share of common stock, $0.01 par value, of the Surviving Corporation.
At the  Effective  Time,  each  issued  and  outstanding  share  of stock of LGL
Delaware shall be canceled, without the payment of consideration therefor.

      ARTICLE 5:  EFFECT OF THE  MERGER.  The  Merger  shall have the effect set
forth in Section 259 of the DGCL.

      ARTICLE 6: APPROVAL.  The Plan of Merger herein made and approved shall be
submitted to the  shareholders of LGL Indiana and  stockholders of LGL Delaware,
respectively,  for their approval in the manner  prescribed by the provisions of
the IBCL and the provisions of the DGCL.

      ARTICLE 7:  AUTHORIZATION.  The Board of Directors and the proper officers
of LGL  Indiana  and of the  Surviving  Corporation,  respectively,  are  hereby
authorized,  empowered,  and directed to do any and all acts and things,  and to
make, execute, deliver, file, and/or record any and all instruments, papers, and
documents which shall be or become necessary, proper, or convenient to carry out
or put into effect any of the provisions of this Agreement and Plan of Merger or
of the merger provided for herein.

      ARTICLE 8: FURTHER ASSURANCES.  From time to time, as and when required by
the  Surviving  Corporation  or by its  successors  and assigns,  there shall be
executed  and   delivered  on  behalf  of  LGL  Indiana  such  deeds  and  other
instruments,  and there  shall be taken or  caused to be taken by the  Surviving
Corporation  all such  further and other  actions,  as shall be  appropriate  or
necessary in order to vest, perfect or confirm in the Surviving  Corporation the
title to and possession of all property,  interests, assets, rights, privileges,
immunities,  powers and authority of LGL Indiana, and otherwise to carry out the
purposes of this Merger  Agreement.  The officers and directors of the Surviving
Corporation are fully authorized, on behalf of the Surviving Corporation and LGL
Indiana, to take any and all such actions and to execute and deliver any and all
such deeds, documents and other instruments.

             [The remainder of this page intentionally left blank.]




      IN WITNESS WHEREOF, the undersigned have executed this Merger Agreement as
of the date first above written.

                                    THE LGL GROUP, INC.
                                    an Indiana corporation

                                    By:
                                        ----------------------------------------
                                        Name: Jeremiah M. Healy
                                        Title: President and Chief Executive Officer


                                    THE LGL GROUP, INC.
                                    a Delaware corporation

                                    By:
                                        ----------------------------------------
                                        Name: Steve Pegg
                                        Title: Vice President and
                                               Chief Financial Officer




                                   EXHIBIT B


                          CERTIFICATE OF INCORPORATION

                                       OF

                               THE LGL GROUP, INC.
             ------------------------------------------------------

      The undersigned, being the sole incorporator herein named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does hereby certify that:

            FIRST  The  name of the  corporation  is The LGL  Group,  Inc.  (the
"Corporation").

            SECOND The address, including street, number, city and county of the
registered  office  of the  Corporation  in the State of  Delaware  is 615 South
DuPont  Highway,  Dover,  Delaware  19901,  County of Kent;  and the name of the
registered  agent of the Corporation in the State of Delaware at such address is
National Corporate Research, Ltd.

            THIRD The  nature of the  business,  and the  objects  and  purposes
proposed to be transacted,  promoted and carried on, are to do any lawful act or
thing for which a corporation may be organized under the General Corporation Law
of the State of Delaware.

            FOURTH The aggregate  number of shares of stock that the Corporation
shall  have  authority  to issue is Ten  Million  (10,000,000)  shares of Common
Stock, $.01 par value per share.

            FIFTH The name and the mailing  address of the  incorporator  are as
follows:

                     Mark L. Lakin
                     Olshan Grundman Frome Rosenzweig & Wolosky
                     LLP
                     Park Avenue Tower
                     65 East 55th Street
                     New York, New York 10022

            SIXTH The personal  liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by paragraph (7) of subsection
(b) of Section 102 of the General  Corporation Law of the State of Delaware,  as
same may be amended and supplemented. Any repeal or modification of this Article
SIXTH by the  stockholders  of the  Corporation  shall not adversely  affect any
right or  protection  of a director of the  Corporation  with  respect to events
occurring prior to the time of such repeal or modification.

            SEVENTH The Corporation  shall,  to the fullest extent  permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and  supplemented,  indemnify  any and all persons  whom it shall
have power to  indemnify  under said section from and against any and all of the
expenses,  liabilities  or  other  matters  referred  to in or  covered  by said
section,  and the  indemnification  provided  for  herein  shall  not be  deemed


                                      -1-


exclusive of any other rights to which those  indemnified  may be entitled under
any By-Law,  agreement,  vote of  stockholders  or  disinterested  directors  or
otherwise,  both as to action in their  official  capacities and as to action in
another  capacity while holding such offices,  and shall continue as to a person
who has ceased to be a director,  officer,  employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person.

            EIGHTH The Corporation reserves the right to amend, alter, change or
repeal any provision  contained in this  Certificate of  Incorporation,  and any
other provisions  authorized by the laws of the State of Delaware at the time in
force may be added or  inserted,  subject to the  limitations  set forth in this
Certificate of Incorporation and in the manner now or hereafter  provided herein
by statue,  and all rights,  preferences  and  privileges of  whatsoever  nature
conferred upon  stockholders,  directors or any other persons  whomsoever by and
pursuant to this  Certificate of Incorporation in its present form or as amended
are granted subject to the rights reserved in this Article EIGHTH.

            NINTH The  Corporation  hereby confers the power to adopt,  amend or
repeal its By-Laws upon the Board of  Directors.  Notwithstanding  the forgoing,
such  power  shall not  divest or limit  the  power of the  stockholders  of the
Corporation to adopt, amend or repeal the By-Laws of the Corporation.

      IN  WITNESS  WHEREOF,  I have  hereunto  set my hand this ___ day of _____
2007.


                              ----------------------------------------------
                              Mark L. Lakin, Incorporator
                              Olshan Grundman Frome Rosenzweig & Wolosky LLP
                              Park Avenue Tower
                              65 East 55th Street
                              New York, New York 10022


                                      -2-




                                   EXHIBIT C


                               THE LGL GROUP, INC.

                                     BY-LAWS

                                    ARTICLE I

                                  STOCKHOLDERS

            SECTION 1.1. ANNUAL  MEETINGS.  An annual meeting of stockholders to
elect directors and transact such other business as may properly be presented to
the  meeting  shall  be held on such  date  and at such  place  as the  Board of
Directors may from time to time fix, and if that day shall be a legal holiday in
the  jurisdiction in which the meeting is to be held, then on the next day not a
legal holiday or as soon  thereafter  as may be practical,  as determined by the
Board of Directors.

            SECTION 1.2. SPECIAL MEETINGS. A special meeting of stockholders may
be called at any time by the Chairman of the Board, the Chief Executive Officer,
the  President or the Board of Directors  pursuant to a resolution  adopted by a
majority  of the Whole  Board (as  defined  below) and shall be called by any of
them or by the Secretary  upon receipt of a written  request to do so specifying
the matter or matters,  appropriate for action at such a meeting, proposed to be
presented at the meeting and signed by holders of shares  representing  at least
twenty-five  percent  (25%) of all votes  entitled to be voted on such matter or
matters if the meeting  were held on the day such  request is  received  and the
record date for such  meeting were the close of business on the  preceding  day.
Any such meeting shall be held at such time and at such place, within or without
the State of Delaware, as shall be determined by the body or person calling such
meeting  and as shall be stated in the notice of such  meeting.  The Whole Board
shall mean the total  number of  directors  that the  Corporation  would have if
there were no vacancies.

            SECTION 1.3.  NOTICE OF MEETING.  For each meeting of  stockholders,
written notice shall be given stating the place,  date and hour and, in the case
of a special  meeting,  the purpose or purposes  for which the meeting is called
and,  if the list of  stockholders  required by Section 1.9 is not to be at such
place at least 10 days prior to the meeting,  the place where such list will be.
Except as otherwise  provided by Delaware law, the written notice of any meeting
shall be given  not less  than 10 or more  than 60 days  before  the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed,  notice
shall be deemed to be given when  deposited in the United  States mail,  postage
prepaid, directed to the stockholder at his address as it appears on the records
of the Corporation.

            SECTION 1.4. QUORUM. Except as otherwise required by Delaware law or
the  Certificate  of  Incorporation,  the holders of record of a majority of the
shares of stock  entitled to be voted present in person or  represented by proxy
at a meeting shall  constitute a quorum for the  transaction  of business at the
meeting,  but in the  absence  of a quorum  the  holders  of record  present  or
represented  by proxy at such  meeting may vote to adjourn the meeting from time
to time,  without notice other than announcement at the meeting,  until a quorum
is obtained.  At any such adjourned  session of the meeting at which there shall
be present or  represented  the  holders  of record of the  requisite  number of
shares,  any business may be transacted  that might have been  transacted at the
meeting as originally called.


                                      -1-


            SECTION 1.5.  CHAIRMAN AND SECRETARY AT MEETING.  At each meeting of
stockholders  the Chairman,  or in his absence or should the Chairman so direct,
the  President,  or in the absence of the  Chairman  and the  President,  then a
person  designated by the Board of  Directors,  shall preside as chairman of the
meeting; if no person is so designated, then the meeting shall choose a chairman
by plurality vote. The Secretary,  or in his absence a person  designated by the
chairman of the meeting, shall act as secretary of the meeting.

            SECTION  1.6.  VOTING;  PROXIES.  Except as  otherwise  provided  by
Delaware law or the Certificate of Incorporation,  and subject to the provisions
of Section 1.10:

                  (a)   Each   stockholder   shall  at  every   meeting  of  the
stockholders  be  entitled  to one vote for each share of capital  stock held by
him.

                  (b)   Each  stockholder  entitled  to  vote  at a  meeting  of
stockholders  or to express  consent or dissent to  corporate  action in writing
without a meeting  may  authorize  another  person or  persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.

                  (c)   Directors shall be elected by a plurality vote.

                  (d)   Each matter, other than election of directors,  properly
presented to any meeting shall be decided by a majority of the votes cast on the
matter.

                  (e)   Election of  directors  and the vote on any other matter
presented  to a meeting  shall be by  written  ballot  only if so ordered by the
chairman  of the  meeting  or if so  requested  by any  stockholder  present  or
represented by proxy at the meeting entitled to vote in such election or on such
matter, as the case may be.

            SECTION 1.7.  ADJOURNED  MEETINGS.  A meeting of stockholders may be
adjourned to another time or place as provided in Section 1.4.  Unless the Board
of Directors  fixes a new record date,  stockholders  of record for an adjourned
meeting  shall be as  originally  determined  for the  meeting  from  which  the
adjournment  was taken. If the adjournment is for more than 30 days, or if after
the adjournment a new record date is fixed for the adjourned  meeting,  a notice
of the adjourned  meeting shall be given to each  stockholder of record entitled
to vote. At the adjourned meeting any business may be transacted that might have
been transacted at the meeting as originally called.

            SECTION 1.8.  CONSENT OF STOCKHOLDERS IN LIEU OF MEETING.  Except as
may otherwise be provided in the Certificate of  Incorporation,  any action that
may be taken at any  annual or  special  meeting  of  stockholders  may be taken
without a meeting,  without  prior  notice and  without a vote,  if a consent in
writing,  setting  forth the action so taken,  shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary  to  authorize  or take such  action at a meeting  at which all shares
entitled to vote thereon  were  present and voted.  Notice of the taking of such
action shall be given promptly to each stockholder that would have been entitled
to vote thereon at a meeting of stockholders and that did not consent thereto in
writing.


                                      -2-


            SECTION 1.9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. At least 10 days
before  every  meeting  of  stockholders  a  complete  list of the  stockholders
entitled to vote at the meeting,  arranged in alphabetical order and showing the
address of each  stockholder and the number of shares  registered in the name of
each stockholder,  shall be prepared and shall be open to the examination of any
stockholder  for any purpose germane to the meeting,  during  ordinary  business
hours, for a period of at least 10 days prior to the meeting,  at a place within
the city where the meeting is to be held.  Such list shall be produced  and kept
at the time and place of the  meeting  during the whole time  thereof and may be
inspected by any stockholder who is present.

            SECTION 1.10.  FIXING OF RECORD DATE. In order that the  Corporation
may determine the  stockholders  entitled to notice of or to vote at any meeting
of stockholders or any adjournment  thereof,  or to express consent to corporate
action in  writing  without a meeting,  or  entitled  to receive  payment of any
dividend  or other  distribution  or  allotment  of any  rights,  or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful  action,  the Board of Directors may fix, in
advance,  a record  date,  which  shall not be more than 60 or less than 10 days
before  the date of such  meeting,  nor  more  than 60 days  prior to any  other
action. If no record date is fixed, the record date for determining stockholders
entitled  to notice of or to vote at a meeting of  stockholders  shall be at the
close of business on the day next  preceding  the day on which  notice is given,
or, if notice is waived,  at the close of business on the day next preceding the
day on which the meeting is held; the record date for  determining  stockholders
entitled to express  consent to corporate  action in writing  without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed;  and the record date for any other
purpose  shall be at the  close of  business  on the day on which  the  Board of
Directors adopts the resolution relating thereto.

          SECTION 1.11. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.

                  (a)   ANNUAL MEETINGS OF STOCKHOLDERS.

                        (i)  Nominations of persons for election to the Board of
Directors of the  Corporation  and the proposal of business to be  considered by
the  stockholders  may be made at an annual meeting of stockholders (a) pursuant
to the Corporation's  notice of meeting, (b) by or at the direction of the Board
of Directors or (c) by any  stockholder of the Corporation who was a stockholder
of record at the time of giving of notice provided for in this Section 1.11, who
is entitled to vote at the meeting and who complies  with the notice  procedures
set forth in this Section 1.11.

                        (ii) For  nominations  or other  business to be properly
brought  before an annual  meeting by a  stockholder  pursuant  to clause (c) of
paragraph  (a)(i) of this Section 1.11, the  stockholder  must have given timely
notice  thereof in writing to the  Secretary of the  Corporation  and such other
business must otherwise be a proper matter for stockholder action. To be timely,
a  stockholder's  notice shall be delivered  to the  Secretary at the  principal
executive offices of the Corporation not later than the close of business on the
90th day nor  earlier  than the close of  business on the 120th day prior to the
first anniversary of the preceding year's annual meeting; provided,  however, in
the event  that the date of the annual  meeting  is more than 30 days  before or
more than 60 days after such anniversary  date,  notice by the stockholder to be


                                      -3-


timely must be so delivered  not earlier than the close of business on the 120th
day prior to such annual meeting and not later than the close of business on the
later of the 90th day prior to such annual meeting or the 10th day following the
day on which  public  announcement  of the date of such meeting is first made by
the Corporation.  In no event shall the public announcement of an adjournment of
an annual meeting  commence a new time period for the giving of a  stockholder's
notice as described above. Such  stockholder's  notice shall set forth (a) as to
each person whom the stockholder proposes to nominate for election or reelection
as a director  all  information  relating  to such person that is required to be
disclosed in  solicitations  of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A under
the Securities  Exchange Act of 1934, as amended (the "Exchange  Act"),  and the
rules and regulations  thereunder  (including  such person's  written consent to
being named in the proxy  statement as a nominee and to serving as a director if
elected) and any  additional  information  reasonably  requested by the Board of
Directors;  (b) as to any other business that the stockholder  proposes to bring
before the meeting,  a brief  description of the business  desired to be brought
before the meeting,  the reasons for conducting such business at the meeting and
any material  interest in such business of such  stockholder  and the beneficial
owner,  if  any,  on  whose  behalf  the  proposal  is  made;  and (c) as to the
stockholder  giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (i) the name and address of such stockholder,
as they appear on the  Corporation's  books, and of such beneficial  owner, (ii)
the class and number of shares of the  Corporation  that are owned  beneficially
and of  record  by  such  stockholder  and  such  beneficial  owner,  (iii)  all
information  relating  to such  stockholder  and such  beneficial  owner that is
required to be disclosed in  solicitations  of proxies for election of directors
in an election  contest,  or is  otherwise  required,  in each case  pursuant to
Regulation 14A under the Exchange Act, and Rule 11a-11 thereunder,  and (iv) any
additional information reasonably requested by the Board of Directors.

            Notwithstanding anything in the second sentence of paragraph (a)(ii)
of this Section 1.11 to the contrary,  in the event that the number of directors
to be elected to the Board of Directors  of the  Corporation  is  increased  and
there is no public  announcement by the  Corporation  naming all of the nominees
for director or specifying the size of the increased Board of Directors at least
70 days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's  notice  required by this  Section  1.11 shall also be  considered
timely,  but only with respect to nominees for any new positions created by such
increase,  if it shall be delivered to the Secretary at the principal  executive
offices of the  Corporation not later than the close of business on the 10th day
following  the day on  which  such  public  announcement  is  first  made by the
Corporation.

                  (b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall
be conducted  at a special  meeting of  stockholders  as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting.  Nominations
of  persons  for  election  to the Board of  Directors  may be made at a special
meeting of  stockholders  at which  directors are to be elected  pursuant to the
Corporation's  notice  of  meeting  (i) by or at the  direction  of the Board of
Directors or (ii)  provided  that the Board of  Directors  has  determined  that
directors  shall  be  elected  at  such  meeting,  by  any  stockholder  of  the
Corporation  who is a  stockholder  of  record  at the time of  giving of notice
provided  for in this  By-Law,  who shall be entitled to vote at the meeting and
who complies with the notice  procedures  set forth in this Section 1.11. In the
event the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors,  any such  stockholder


                                      -4-


who shall be entitled  to vote at the  meeting may  nominate a person or persons
(as the case may be),  for  election to such  position(s)  as  specified  in the
Corporation's  notice  of  meeting,  if the  stockholder's  notice  required  by
paragraph  (a)(ii) of this Section  1.11 shall be delivered to the  Secretary at
the principal executive offices of the Corporation not earlier than the close of
business on the 120th day prior to such  special  meeting and not later than the
close of business on the later of the 90th day prior to such special  meeting or
the 10th day following the day on which public announcement is first made of the
date of the  special  meeting  and of the  nominees  proposed  by the  Board  of
Directors  to  be  elected  at  such  meeting.  In no  event  shall  the  public
announcement of an adjournment of a special  meeting  commence a new time period
for the giving of a stockholder's notice as described above.

                  (c)   GENERAL.

                        (i) Only such persons who are  nominated  in  accordance
with the procedures set forth in this Section 1.11 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance  with the procedures
set  forth in this  Section  1.11.  Except as  otherwise  provided  by law,  the
Certificate of Incorporation or these By-Laws,  either the Board of Directors or
the Chairman of the meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting was made or
proposed,  as the case may be, in accordance  with the  procedures  set forth in
this  Section  1.11  and,  if any  proposed  nomination  or  business  is not in
compliance  with this Section 1.11, to declare that such  defective  proposal or
nomination shall be disregarded.

                        (ii)  For  purposes  of  this  Section   1.11,   "public
announcement" shall mean disclosure in a press release reported by the Dow Jones
News  Service,  Associated  Press or  comparable  national  news service or in a
document  publicly  filed by the  Corporation  with the  Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

                        (iii)  Notwithstanding the foregoing  provisions of this
Section 1.11, a stockholder  shall also comply with all applicable  requirements
of the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this  Section  1.11.  Nothing in this Section 1.11 shall be
deemed  to affect  any  rights  (A) of  stockholders  to  request  inclusion  of
proposals in the Corporation's  proxy statement pursuant to Rule 14a-8 under the
Exchange  Act or (B) of the  holders of any series of  preferred  stock to elect
directors under specified circumstances.

                                   ARTICLE II

                                    DIRECTORS

            SECTION 2.1. NUMBER; TERM OF OFFICE; QUALIFICATIONS;  VACANCIES. The
number of directors  that shall  constitute  the Whole Board shall be fixed from
time to time as determined by action of the Board of Directors, but no less than
five (5) nor more than thirteen  (13).  Until  otherwise  fixed by action of the
Board of Directors,  the number of directors  constituting the Whole Board shall


                                      -5-


be nine (9). Directors shall be elected at the annual meeting of stockholders to
hold office,  subject to Sections 2.2 and 2.3,  until the next annual meeting of
stockholders  and until their  respective  successors  are elected and  qualify.
Vacancies and newly  created  directorships  resulting  from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office,  although less than a quorum, or by the sole remaining director,  and
the  directors  so chosen  shall hold  office,  subject to Sections 2.2 and 2.3,
until  the next  annual  meeting  of  stockholders  and until  their  respective
successors are elected and qualified.

            SECTION 2.2. RESIGNATION. Any director of the Corporation may resign
at any  time by  giving  written  notice  of such  resignation  to the  Board of
Directors,  the  President  or  the  Secretary  of  the  Corporation.  Any  such
resignation  shall take effect at the time  specified  therein or, if no time be
specified,  upon  receipt  thereof  by  the  Board  of  Directors  or one of the
above-named  officers;  and, unless  specified  therein,  the acceptance of such
resignation  shall  not be  necessary  to make it  effective.  When  one or more
directors shall resign from the Board of Directors effective at a future date, a
majority of the directors then in office,  including those who have so resigned,
shall have power to fill such  vacancy or  vacancies,  the vote  thereon to take
effect when such resignation or resignations  shall become  effective,  and each
director so chosen shall hold office as provided in these By-Laws in the filling
of other vacancies.

            SECTION 2.3.  REMOVAL.  Except for the directors elected pursuant to
and in accordance  with the terms of a certificate  of  designation  filed under
Delaware law, whose removal is governed  thereby,  any one or more directors may
be removed, with or without cause, by the vote or written consent of the holders
of a majority of the shares entitled to vote at an election of directors.

            SECTION 2.4. REGULAR AND ANNUAL MEETINGS;  NOTICE.  Regular meetings
of the Board of Directors  shall be held at such time and at such place,  within
or without the State of  Delaware,  as the Board of  Directors  may from time to
time prescribe. No notice need be given of any regular meeting, and a notice, if
given,  need not  specify  the  purposes  thereof.  A  meeting  of the  Board of
Directors  may be held without  notice  immediately  after an annual  meeting of
stockholders at the same place as that at which such meeting was held.

            SECTION 2.5.  SPECIAL  MEETINGS;  NOTICE.  A special  meeting of the
Board of  Directors  may be called at any time by the  Board of  Directors,  its
Chairman,  the  President or any person acting in the place of the President and
shall be called by any one of them or by the Secretary upon receipt of a written
request to do so  specifying  the matter or matters,  appropriate  for action at
such a meeting,  proposed to be  presented at the meeting and signed by at least
two  directors.  Any such meeting  shall be held at such time and at such place,
within or without the State of Delaware,  as shall be  determined by the body or
person calling such meeting.  Notice of such meeting  stating the time and place
and principal  purpose or purposes  thereof shall be given (a) by deposit of the
notice in the United States mail,  first class,  postage  prepaid,  at least two
days  before the day fixed for the  meeting  addressed  to each  director at his
address as it appears on the  Corporation's  records or at such other address as
the director may have  furnished the  Corporation  for that  purpose,  or (b) by
delivery  of  the  notice   similarly   addressed  for  dispatch  by  electronic
transmission,  telegraph,  cable  or  radio  or by  delivery  of the  notice  by
telephone or in person, in each case at least 24 hours before the time fixed for
the meeting.


                                      -6-


            SECTION 2.6. CHAIRMAN OF THE BOARD;  PRESIDING OFFICER AND SECRETARY
AT MEETINGS. The Board of Directors may elect one of its members to serve at its
pleasure as Chairman of the Board.  Each meeting of the Board of Directors shall
be  presided  over by the  Chairman of the Board or in his absence or should the
Chairman so direct, by the President, if a director, or if neither is present by
such member of the Board of  Directors  as shall be chosen at the  meeting.  The
Secretary,  or in his absence an Assistant Secretary,  shall act as secretary of
the meeting,  or if no such officer is present, a secretary of the meeting shall
be designated by the person presiding over the meeting.

            SECTION 2.7.  QUORUM. A majority of the Whole Board shall constitute
a quorum  for the  transaction  of  business,  but in the  absence of a quorum a
majority of those present (or if only one be present, then that one) may adjourn
the meeting,  without notice other than announcement at the meeting,  until such
time as a quorum is present.  Except as otherwise required by the Certificate of
Incorporation or the By-Laws,  the vote of the majority of the directors present
at a  meeting  at which a quorum  is  present  shall be the act of the  Board of
Directors.

            SECTION 2.8. MEETING BY TELEPHONE. Members of the Board of Directors
or of any  committee  thereof  may  participate  in  meetings  of the  Board  of
Directors  or of such  committee  by means of  conference  telephone  or similar
communications  equipment  by means of which all  persons  participating  in the
meeting can hear each other, and such participation shall constitute presence in
person at such meeting.

            SECTION 2.9. ACTION WITHOUT MEETING.  Unless otherwise restricted by
the Certificate of  Incorporation,  any action required or permitted to be taken
at any meeting of the Board of Directors or any  committee  thereof may be taken
without a meeting if all members of the Board of Directors or of such committee,
as the case may be,  consent  thereto in writing and the writing or writings are
filed  with the  minutes of  proceedings  of the Board of  Directors  or of such
committee.

            SECTION  2.10.    EXECUTIVE AND OTHER COMMITTEES.

                  (a) The Board of  Directors  may,  by  resolution  passed by a
majority of the Whole Board,  designate an Executive  Committee  and one or more
other  committees,   each  such  committee,  except  as  otherwise  required  by
applicable  law,  to  consist  of two or more  directors  (or,  in the case of a
special-purpose  committee, one or more directors) as the Board of Directors may
from time to time determine.  Any such committee, to the extent provided in such
resolution or resolutions or in these By-Laws and not inconsistent  with Section
141 of the Delaware  General  Corporation Law, as from time to time amended (the
"DGCL"),  shall have and may exercise all the powers and  authority of the Board
of Directors in the  management of the business and affairs of the  Corporation,
including  the power to authorize the seal of the  Corporation  to be affixed to
all papers that may require it; and unless the resolution or  resolutions  shall
expressly  so provide,  no such  committee  shall have the power or authority to
declare a dividend or to  authorize  the  issuance  of stock.  In the absence or
disqualification  of a member of a  committee,  the  member or  members  thereof
present at any meeting and not  disqualified  from  voting,  whether or not such
committee member or members or they constitute a quorum, may unanimously appoint
another  member of the Board of  Directors to act at the meeting in the place of


                                      -7-


any such  absent or  disqualified  member.  Each such  committee  other than the
Executive  Committee shall have such name as may be determined from time to time
by the Board of Directors.

                  (b) Unless the Board of  Directors  otherwise  provides,  each
committee designated by the Board of Directors may adopt, amend and repeal rules
for the conduct of its  business.  In the absence of a provision by the Board of
Directors  or a provision  in the rules of such  committee  to the  contrary,  a
majority  of the entire  authorized  number of members of such  committee  shall
constitute a quorum for the  transaction of business,  the vote of a majority of
the  members  present  at a meeting at the time of such vote if a quorum is then
present shall be the act of such committee, and in other respects each committee
shall conduct its business in the same manner as the Board of Directors conducts
its business pursuant to Article II of these By-Laws.

            SECTION  2.11.  COMPENSATION.  No director  shall receive any stated
salary for his  services as a director  or as a member of a committee  but shall
receive such sum, if any, as may from time to time be fixed by the action of the
Board of Directors.

                                   ARTICLE III

                                    OFFICERS

            SECTION 3.1. ELECTION;  QUALIFICATION. The principal officers of the
Corporation shall be the President, one or more Vice Presidents, a Secretary and
a Treasurer,  all of whom shall be elected by the Board of Directors.  The Board
of Directors  may in addition  elect a Chairman of the Board who shall be chosen
from  among  the  Directors.  Any two or more  offices  may be held by the  same
person.

            SECTION 3.2. TERM OF OFFICE. Each officer shall hold office from the
time of his election  and  qualification  to the time at which his  successor is
elected  and  qualified,  unless  he shall  die or  resign  or shall be  removed
pursuant to Section 3.4 at any time sooner.

            SECTION 3.3. RESIGNATION.  Any officer of the Corporation may resign
at any time by giving written notice of such  resignation to the Chairman of the
Board of Directors, the President or the Secretary of the Corporation.  Any such
resignation  shall take effect at the time  specified  therein or, if no time be
specified,  upon  receipt  thereof  by  the  Board  of  Directors  or one of the
above-named  officers;  and, unless  specified  therein,  the acceptance of such
resignation shall not be necessary to make it effective.

            SECTION 3.4.  REMOVAL.  Any officer may be removed at any time, with
or without cause, by the vote of a majority of the Whole Board.

            SECTION 3.5. VACANCIES.  Any vacancy however caused in any office of
the Corporation shall be filled by the Board of Directors.

            SECTION 3.6.  COMPENSATION.  Unless otherwise provided by resolution
passed by a majority of the Whole Board,  and subject to the requirements of any
national securities exchange or automated quotation system on which the stock of
the Corporation is listed,  the salaries of all officers elected by the Board of
Directors shall be fixed by the Board of Directors.


                                      -8-


            SECTION 3.7.  CHAIRMAN OF THE BOARD. The Chairman of the Board shall
be the chairman of all meetings of the Board of Directors,  or in the absence or
in case there  shall be no Chairman of the Board,  the Chief  Executive  Officer
shall be the Chairman of all meetings of the Board of Directors.

            SECTION 3.8. PRESIDENT. The President, if so designated by the Board
of Directors,  shall be the Chief Executive Officer of the Corporation and shall
have  general  charge of the business  and affairs of the  Corporation,  subject
however to the right of the Board of  Directors  to confer  specified  powers on
officers and subject to the control of the Board of Directors  and the Executive
Committee,  if any.  If not  designated  by the  Board  of  Directors  as  Chief
Executive  Officer,  the President shall be the Chief  Operating  Officer of the
Corporation  and shall have general charge of the  day-to-day  operations of the
business  and affairs of the  Corporation,  subject  however to the right of the
Board of  Directors  to confer  specified  powers on officers and subject to the
control of the Board of Directors.  The Chief  Executive  Officer shall keep the
Board of Directors  appropriately informed regarding the business and affairs of
the Corporation.

            SECTION 3.9.  TREASURER.  The Treasurer  shall have charge of and be
responsible  for the  receipt,  disbursement  and  safekeeping  of all funds and
securities of the Corporation. The Treasurer shall deposit all such funds in the
name of the Corporation in such banks,  trust companies or other depositories as
shall be selected in accordance  with the provisions of these bylaws.  From time
to time and whenever  requested to do so, the Treasurer shall render  statements
of the condition of the finances of the  Corporation  to the Board of Directors.
The Treasurer  shall perform all the duties  incident to the office of Treasurer
and such other duties as from time to time may be assigned to him or her.

            SECTION 3.10.  VICE  PRESIDENT.  Each Vice President shall have such
powers and duties as generally  pertain to the office of Vice  President  and as
the Board of Directors or the President may from time to time prescribe.  During
the absence of the president or his inability to act, the Vice President,  or if
there shall be more than one Vice  President,  then that one  designated  by the
Board of  Directors,  shall  exercise the powers and shall perform the duties of
the  President,  subject  to the  direction  of the Board of  Directors  and the
Executive Committee, if any.

            SECTION 3.11. SECRETARY. The Secretary shall keep the minutes of all
meetings of stockholders and of the Board of Directors. He shall be custodian of
the  corporate  seal  and  shall  affix it or  cause  it to be  affixed  to such
instruments  as require  such seal and attest  the same and shall  exercise  the
powers and shall perform the duties incident to the office of Secretary, subject
to the direction of the Board of Directors and the Executive Committee, if any.

            SECTION 3.12. OTHER OFFICERS.  Each other officer of the Corporation
shall  exercise the powers and shall perform the duties  incident to his office,
subject to the direction of the Board of Directors .


                                      -9-


                                   ARTICLE IV

                                  CAPITAL STOCK

            SECTION  4.1.  STOCK  CERTIFICATES.  The  interest of each holder of
stock of the Corporation  shall be evidenced by a certificate or certificates in
such  form as the  Board of  Directors  may from  time to time  prescribe.  Each
certificate  shall  be  signed  by or in  the  name  of the  Corporation  by the
President or a Vice President and by the Treasurer or an Assistant  Treasurer or
the Secretary or an Assistant Secretary.  Any of or all the signatures appearing
on such certificate or certificates may be a facsimile. If any officer, transfer
agent or registrar who has signed or whose  facsimile  signature has been placed
upon a  certificate  shall have  ceased to be such  officer,  transfer  agent or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer,  transfer agent or registrar at
the date of issue.

            SECTION   4.2.   TRANSFER  OF  STOCK.   Shares  of  stock  shall  be
transferable on the books of the Corporation pursuant to applicable law and such
rules  and  regulations  as the  Board  of  Directors  shall  from  time to time
prescribe.

            SECTION  4.3.  HOLDERS  OF  RECORD.  Prior  to due  presentment  for
registration  of transfer  the  Corporation  may treat the holder of record of a
share of its stock as the complete owner thereof  exclusively  entitled to vote,
to receive  notifications and otherwise entitled to all the rights and powers of
a complete owner thereof, notwithstanding notice to the contrary.

            SECTION 4.4. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES.  The
Corporation  shall  issue a new  certificate  of stock to replace a  certificate
theretofore  issued by it  alleged to have been lost,  destroyed  or  wrongfully
taken, if the owner or his legal representative (i) requests replacement, before
the  Corporation  has notice that the stock  certificate  has been acquired by a
bona fide  purchaser;  (ii)  files with the  Corporation  a bond  sufficient  to
indemnify  the  Corporation  against  any claim  that may be made  against it on
account of the alleged loss or destruction of any such stock  certificate or the
issuance of any such new stock certificate; and (iii) satisfies such other terms
and conditions as the Board of Directors may from time to time prescribe.

                                    ARTICLE V

                                  MISCELLANEOUS

            SECTION 5.1. INDEMNITY. (a) The Corporation shall indemnify, subject
to the requirements of subsection (d) of this Section,  any person who was or is
a party  or is  threatened  to be made a party  to any  threatened,  pending  or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative  (other than an action by or in the right of the Corporation),  by
reason of the fact that he is or was a director,  officer,  employee or agent of
the  Corporation,  or is or was serving at the request of the  Corporation  as a
director, officer, employee or agent of another corporation,  partnership, joint
venture,  trust or other  enterprise,  against  expenses  (including  attorneys'
fees),  judgments,  fines and amounts paid in settlement actually and reasonably
incurred by him in connection  with such action,  suit or proceeding if he acted


                                      -10-


in good faith and in a manner he reasonably  believed to be in or not opposed to
the best interests of the  Corporation  and, with respect to any criminal action
or proceeding,  had no reasonable cause to believe his conduct was unlawful. The
termination of any action,  suit or proceeding by judgment,  order,  settlement,
conviction or upon a plea of nolo  contendere or its  equivalent,  shall not, of
itself,  create a presumption that the person did not act in good faith and in a
manner  which  he  reasonably  believed  to be in or not  opposed  to  the  best
interests  of the  Corporation  and,  with  respect  to any  criminal  action or
proceeding, had reasonable cause to believe that his conduct was unlawful.

                  (b)  The   Corporation   shall   indemnify,   subject  to  the
requirements of subsection (d) of this Section, any person who was or is a party
or is  threatened  to be made a party to any  threatened,  pending or  completed
action or suit by or in the right of the  Corporation  to procure a judgment  in
its favor by reason of the fact that he is or was a director,  officer, employee
or  agent  of  the  Corporation  or is or was  serving  at  the  request  of the
Corporation as a director,  officer,  employee or agent of another  corporation,
partnership,   joint  venture,  trust  or  other  enterprise,  against  expenses
(including   attorneys'  fees)  actually  and  reasonably  incurred  by  him  in
connection  with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the  Corporation and except that no  indemnification  shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or  suit  was  brought  shall  determine  upon  application  that,  despite  the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and  reasonably  entitled to indemnity for such expenses  which
the Court of  Chancery  of the State of  Delaware or such other court shall deem
proper.

                  (c) To the extent that a director,  officer, employee or agent
of the  Corporation,  or a person serving in any other enterprise at the request
of the Corporation, has been successful on the merits or otherwise in defense of
any action,  suit or proceeding  referred to in  subsection  (a) and (b) of this
Section,  or in defense of any claim,  issue or matter therein,  the Corporation
shall indemnify him against  expenses  (including  attorneys' fees) actually and
reasonably incurred by him in connection therewith.

                  (d) Any indemnification  under subsections (a) and (b) of this
Section  (unless  ordered by a court) shall be made by the  Corporation  only as
authorized in the specific case upon a determination that indemnification of the
director,  officer,  employee or agent is proper in the circumstances because he
has met the applicable  standard of conduct set forth in subsections (a) and (b)
of this Section.  Such determination shall be made (1) by a majority vote of the
directors  who are not parties to such action,  suit or  proceeding  even though
less than a quorum, or (2) if there are no such directors,  or if such directors
so direct,  by  independent  legal counsel in a written  opinion,  or (3) by the
stockholders.

                  (e)  Expenses  incurred  by a director,  officer,  employee or
agent in defending a civil or criminal action, suit or proceeding may be paid by
the  Corporation  in advance of the final  disposition  of such action,  suit or
proceeding  as  authorized  by  the  Board  of  Directors  upon  receipt  of  an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount if it shall  ultimately be determined  that he is not entitled to be
indemnified by the Corporation as authorized in this Section.


                                      -11-


                  (f) The  indemnification  and advancement of expenses provided
by or granted pursuant to, the other subsections of this Section shall not limit
the  Corporation  from  providing any other  indemnification  or  advancement of
expenses  permitted by law nor shall it be deemed  exclusive of any other rights
to which  those  seeking  indemnification  may be  entitled  under  any  by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official  capacity and as to action in another  capacity  while
holding such office.

                  (g) The  Corporation  may purchase  and maintain  insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation,  or who is or was  serving at the request of the  Corporation  as a
director, officer, employee or agent of another corporation,  partnership, joint
venture,  trust or other enterprise  against any liability  asserted against him
and incurred by him in any such capacity,  or arising out of his status as such,
whether or not the  Corporation  would have the power to  indemnify  him against
such liability under the provisions of this Section.

                  (h) The  indemnification  and advancement of expenses provided
by, or granted pursuant to this section shall,  unless  otherwise  provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer,  employee  or agent  and  shall  inure  to the  benefit  of the  heirs,
executors and administrators of such a person.

                  (i)  For the  purposes  of this  Section,  references  to "the
Corporation"  shall  include,  in addition  to the  resulting  corporation,  any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued,  would
have had power and authority to indemnify its directors,  officers, employees or
agents, so that any person who is or was a director,  officer, employee or agent
of such  constituent  corporation,  or is or was  serving at the request of such
constituent  corporation  as a director,  officer,  employee or agent of another
corporation,  partnership, joint venture, trust or other enterprise, shall stand
in the same  position  under the  provisions of this Section with respect to the
resulting  or  surviving  corporation  as he would  have  with  respect  to such
constituent corporation if its separate existence had continued.

                  (j)  This   Section  5.1  shall  be   construed  to  give  the
Corporation the broadest power  permissible by the DGCL, as it now stands and as
hereafter amended.

            SECTION 5.2.  WAIVER OF NOTICE.  Whenever  notice is required by the
Certificate  of  Incorporation,  the  By-Laws or any  provision  of the DGCL,  a
written waiver thereof,  signed by the person entitled to notice, whether before
or after  the time  required  for such  notice,  shall be deemed  equivalent  to
notice.  Attendance of a person at a meeting shall constitute a waiver of notice
of such  meeting,  except  when the  person  attends a meeting  for the  express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business  because the meeting is not lawfully  called or  convened.  Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the  stockholders,  directors or members of a committee of directors  need be
specified in any written waiver of notice.


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            SECTION 5.3. FISCAL YEAR. The fiscal year of the  Corporation  shall
start on such date as the Board of Directors shall from time to time prescribe.

            SECTION 5.4.  CORPORATE  SEAL.  The corporate  seal shall be in such
form as the Board of Directors may from time to time prescribe, and the same may
be used by causing it or a facsimile  thereof to be  impressed  or affixed or in
any other manner reproduced.

                                   ARTICLE VI

                              AMENDMENT OF BY-LAWS

            SECTION  6.1.     AMENDMENT.  The By-Laws may be altered,  amended
or repealed by the  stockholders  or by the Board of  Directors  by a majority
vote.


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