The listing criteria for the Nasdaq National Market ("National Market") and The Nasdaq SmallCap Markets ("SmallCap Market") would be substantively improved, and corporate governance requirements applicable to the National Market would, for the first time, be extended to the SmallCap Market. The alternative to the $1 minimum bid price would be eliminated. In addition, 'Nasdaq is evaluating whether to impose a requirement that auditors of Nasdaq-listed companies be subject to peer review.

The Nasdaq Stock Market is soliciting comment from investors, issuers, market participants, and others on the proposed changes and the possible imposition of a peer review requirement.

 Background

Nasdaq qualification requirements for inclusion of securities on the National Market and SmallCap Market were last revised in 1989 and 1991, respectively. Since that time, the Nasdaq Stock Market has witnessed significant growth in the size and number of listings and volume of transactions. Accompanying this growth has been an increase in participation of individual investors and heightened public awareness and expectations for Nasdaq-listed companies.

Nasdaq recognizes that along with this growth and the changes in the market, there is also an obligation to maintain a commensurate level of quality and protection for investors. Nasdaq believes it is extremely important not only to ensure that all Nasdaq companies warrant listing by virtue of their compliance with the applicable qualifications requirements, but also that the qualification requirements themselves are in fact appropriate and designed to foster the protection of investors.

Given Nasdaq's objective of providing necessary safeguards to public investors in Nasdaq securities, the growth and changes in the market, the structural enhancements to the Nasdaq Stock Market now underway, and the time that has passed since the listing standards were last changed, Nasdaq determined to undertake a thorough review of its qualification requirements.

In conducting this review, Nasdaq carefully sought to balance its role in facilitating legitimate capital formation for issuers, with Nasdaq's responsibility to provide the appropriate protection in its markets and to maintain the trust and confidence reposed in The Nasdaq Stock Market generally.

While Nasdaq recognizes that certain companies may not be able to meet the more stringent standards contemplated, it is important to note that companies not in compliance will have the opportunity to initiate appropriate corporate action to rectify their status to remain listed on Nasdaq.

In addition, for those companies that are unable to achieve compliance with the new standards, a meaningful alternative is available through their eligibility for quotation in the 0TC Bulletin Board' ("OTCBB"). The OTCBB is a quotation medium used by NASD members to reflect quotations in non-Nasdaq securities. Securities quoted in the OTCBB are subject to real-time trade reporting and thus have a level of transparency not present when the listing standards were last revised.

After extensive evaluation, on November 6, 1996, the Board of Directors of The Nasdaq Stock Market, Inc., approved the proposed changes, subject to public comment. After a 30-day comment period, the Board will consider any comments, make changes to the proposal if warranted, and file the appropriate rule changes with the Securities and Exchange Commission for final approval.

 Summary of Proposed Changes

 1. Elimination of the Alternative to the $1 Minimum Bid -Price

 Under the existing standards, issuers with securities trading below:; I may remain listed on the Nasdaq National and SmallCap Markets if they meet an alternative test. Elimination of the alternative to the $1 bid price requirement should provide a safeguard against certain market activity associated with low-priced securities, and also enhance the credibility of the market.

2. Corporate Governance Standards for SmallCap Issuers

The National Market corporate governance standards currently require: (1) a minimum of two independent directors; (2) an audit committee, a majority of which are independent directors; (3) an annual shareholder meeting; and (4) shareholder approval for certain corporate actions. It is suggested that these same standards be required of SmallCap issuers, thereby affording investors in this market a means to become more actively involved in corporate affairs. The shareholder approval requirement should serve as a barrier to stock issuances currently being executed in the SmallCap Market without the prior knowledge of investors. The audit committee, independent director, and annual meeting requirements will provide additional safeguards to the investing public.

3. Increase in the Quantitative Standards for both the SmallCap and National Markets

Increases to the quantitative standards are believed to be appropriate given the passage of time since the standards were last adjusted, and the concomitant increases in the growth of the market and the rate of inflation. These increases will strengthen the financial criteria in a manner consistent with the goal of increasing the quality and stability of Nasdaq companies, while preserving the ability of qualified Nasdaq companies to raise capital.

4. Market Capitalization Test for National Market

Consistent with the reputation of Nasdaq for facilitating capital formation for growth companies, it was determined that there was a need for an accommodation for companies that may fail to comply with the National Market net tangible asset test as a result of accounting for goodwill associated with various merger and acquisition activities, or as in the case of the telecommunications industry, significant depreciation charges. The suggested changes provide access for Nasdaq National Market caliber companies that would otherwise not qualify due to accounting conventions associated with certain business combinations and specialized industries.

  Peer Review

In addition, Nasdaq is soliciting comment to further its evaluation of whether to impose a requirement that auditors of Nasdaq-listed companies be subject to peer review. Currently, companies whose shares are publicly traded are not required to have auditors subject to such reviev,. Nasdaq is considering a requirement that auditors for Nasdaq-listed companies be subject to practice monitoring under a program such as the AICPA SEC Practice Section peer review program, which provides that a firm's quality control system be peer-reviewed every three years. After reviewing any comments on this requirement, Nasdaq will consider including this as part of the proposed changes to the listing criteria.

 Request for Comment

Nasdaq believes that the proposed listing standards will further the protection of investors while enhancing the quality of The Nasdaq Stock Market. Nasdaq encourages all investors, issuers, market participants, and other interested parties to comment on the proposed changes. Comments must be received by December 20, 1006. Comments should be forwarded to: Perry Peregoy, Vice President, Listing Qualifications. Via E-Mail:listing.standards@nasdaq.com; Via Fax: 202-496-2698; Via Phone: 202-496-2578; Via Mail: The Nasdaq Stock Market, Inc., 1735 K Street, NW, Washington, DC, 20006-1500.

 The Following Corporate Governance Standards currently exist for the Nasdaq National Market. As reflected below, these standards would be extended to The Nasdaq SmallCap Market.

(a) Applicability

No provisions of this Rule shall be construed to require any foreign issuer to do any act that is contrary to a law, rule or regulation of any public authority exercising jurisdiction over such issuer or that is contrary to generally accepted business practices in the issuer's country of domicile. The Association shall have the ability to provide exemptions from the applicability of these provisions as may be necessary or appropriate to carry out this intent.

 (b) Distribution of Annual and Interim Reports

(1) Each Nasdaq SmallCap Market (SCM) issuer shall distribute to shareholders copies of an annual report containing audited financial statements of the company and its subsidiaries. This report shall be distributed to shareholders a reasonable period of time prior to the company's annual meeting of shareholders and shall be filed with the Association at the time it is distributed to shareholders.

 (2) Each SCM issuer which is subject to SEC Rule l3a-13 shall make available copies of quarterly reports including statements of operating results to shareholders either prior to or as soon as practicable following the company's filing of its Form 10-Q with the Commission. If the form of such quarterly report differs from the Form 10-Q, the issuer shall file one copy of the report with the Association in addition to filing its Form 10-Q pursuant to Rule 4310(c)(14). The statement of operations contained in quarterly reports shall disclose, as a minimum, any substantial items of an unusual or nonrecurrent nature and net income before and after estimated federal income taxes or net income and the amount of estimated federal taxes.

 (3) Each SCM issuer which is not subject to SEC Rulel3a-13 and which is required to file with the Commission, or another federal or state regulatory authority, interim reports relating primarily to operations and financial position, shall make available to shareholders reports which reflect the information contained in those interim reports. Such reports shall be made available to shareholders either before or as soon as practicable following filing with the appropriate regulatory authority. If the form of the interim report provided to shareholders differs from that filed with the regulatory authority, the issuer shall file one copy of the report to shareholders with the Association in addition to the report to the regulatory authority that is filed with the Association pursuant to Rule 4310(c)(14).

 (c) Independent Directors

 Each SCM issuer shall maintain a minimum of two independent directors on its board of directors. For purposes of this section, "independent director" shall mean a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which, in the opinion of the board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

 (d) Audit Committee

 Each SCM issuer shall establish and maintain an Audit Committee, a majority of the members of which shall be independent directors.

 (e) Shareholder Meetings

Each SCM issuer shall hold an annual meeting of shareholders and shall provide notice of such meeting to the Association.

 (f) Quorum

 Each SCM issuer shall provide for a quorum as specified in its by-laws for any meeting of the holders of common stock provided, however, that in no case shall such quorum be less than 33 1/3 percent of the outstanding shares of the company's common voting stock.

 (g) Solicitation of Proxies

 Each SCM issuer shall solicit proxies and provide proxy statements for all meetings of shareholders and shall provide copies of such proxy solicitation to the Association.

 (h) Conflicts of Interest

 Each SCM issuer shall conduct an appropriate review of all related party transactions on an ongoing basis and shall utilize the company's Audit Committee or a comparable body for the reviews of potential conflict of interest situations where appropriate.

 (i) Shareholder Approval

(1) Each SCM issuer shall require shareholder approval of a plan or arrangement under subparagraph (A) below or, prior to the issuance of designated securities under subparagraph (B), (C), or (D) below:

 (A) when a stock option or purchase plan is to be established or other arrangement made pursuant to which stock may be acquired by officers or directors, except for warrants or rights issued generally to security holders of the company or broadly based plans or arrangements including other employees (e.g. ESOPs). In a case where the shares are issued to a person not previously employed by the company, as an inducement essential to the individual's entering into an employment contract with the company, shareholder approval will generally not be required. The establishment of a plan or arrangement under which the amount of securities which may be issued does not exceed the lesser of 1% of the number of shares of common stock, 1% of the voting power outstanding, or 25,000 shares will not generally require shareholder approval;

(B) when the issuance will result in a change of control of the issuer;

 (C) in connection with the acquisition of the stock or assets of another company if;

 (i) any director, officer or substantial shareholder of the issuer has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the company or assets to be acquired or in the consideration to be paid in the transaction or series of related transactions and the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, could result in an increase in outstanding common shares or voting power of 5% or more; or

 (ii) where the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, other than a public offering for cash, if the common stock has or will have upon issuance voting power equal to or in excess of 20% of the voting power outstanding before the issuance of stock or securities convertible into or exercisable for common stock, or the number of shares of common stock to be issued is or will be equal to or in excess of 20% of the number of shares or common stock outstanding before the issuance of the stock or securities or

(D) in connection with a transaction other than a public offering involving:

(i) the sale or issuance by the issuer of common stock (or securities convertible into or exercisable for common stock) at a price less than the greater of book or market value which together with sales by officers, directors or substantial shareholders of the company equals 20% or more of common stock or 20% or more of the voting power outstanding before the issuance; or

(ii) the sale or issuance by the company of common stock (or securities convertible into or exercisable common stock) equal to 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the stock.

(2) Exceptions may be made upon application to the Association when:

(A) the delay in securing stockholder approval would seriously jeopardize the financial viability of the enterprise; and

 (B) reliance by the company on this exception is expressly approved by the Audit Committee of the Board or a comparable body.

 A company relying on this exception must mail to all shareholders no later than ten days before issuance of the securities a letter alerting them to its opinion to seek the shareholder approval that would otherwise be required and indicating that the Audit Committee of the Board or a comparable body has expressly approved the exception.

 (3) Only shares actually issued and outstanding (excluding treasury shares or shares held by a subsidiary) are to be used in making any calculation provided for in this paragraph (i). Unissued shares reserved for issuance upon conversion of securities or upon exercise of options or warrants will not be regarded as outstanding.

 (4) Voting power outstanding as used in this Rule refers to the aggregatee number of votes which may be cast by holders of those securities outstanding which entitle the holders thereof to vote generally on all matters submitted to the company's security holders for a vote.

 (5) An interest consisting of less than either 5% of the number of shares of common stock or 5% of the voting power outstanding of an issuer or party shall not be considered a substantial interest or cause the holder of such an interest to be regarded as a substantial security holder.

 (6) Where shareholder approval is required, the minimum vote which will constitute shareholder approval shall be a majority of the total votes cast m the proposal it - person or by proxy.